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 SECURITIESEXCHANGE
      ACT OF 1934
   For
the quarterly period ended June 30, 2009
  OR
  o
              TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE
      ACT OF 1934
  
 For
the transition period from  to .
 
 Commission
File Number: 000-25781
 
 STAMFORD
INDUSTRIAL GROUP, INC.
 (Exact
name of registrant as specified in its charter)
  Delaware
              
              41-1844584(State
      or other jurisdiction of
                incorporation
      or organization)
              
              (I.R.S.
      Employer
                Identification
      No.)
 
 One
Landmark Square
 Stamford,
Connecticut 06901
 (Address
of principal executive offices, Zip Code)
  (203)
428-2200
 (Registrant’s
telephone number, including area code)
  (Former
name, former address, and former fiscal year, if changed since last
report)
 
 Indicate
by check mark whether the registrant: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. YES x NO o
 
 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 Regulation 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 o NO o
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
  Large
      accelerated filer  o
              Accelerated
      filer xNon-accelerated
      filer    o
              Smaller
      reporting company o
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act) YES o NO x
 
 As
of August 17, 2009, there were outstanding 8,408,787 shares of the registrant’s
Common Stock, $0.0001 par value.
  
 
 STAMFORD
INDUSTRIAL GROUP, INC.
 FORM
10-Q
 For the
Quarter Ended June 30, 2009
  
 TABLE
OF CONTENTS
 
  PagePART
      I.  FINANCIAL INFORMATIONItem
      1.
              Financial
      Statements (Unaudited)Consolidated
      Balance Sheets as of June 30, 2009 and December 31, 2008
              1Consolidated
      Statements of Operations for the three and six months ended June 30, 2009
      and June 30, 2008
              2Consolidated
      Statements of Cash Flows for the six months ended June 30, 2009 and June
      30, 2008
              3Notes
      to the Consolidated Financial Statements
              4Item
      2.
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
              20Item
      3.
              Quantitative
      and Qualitative Disclosures about Market Risk
              27Item
      4.
              Controls
      and Procedures
              28PART
      II.  OTHER INFORMATIONItem
      1.
              Legal
      Proceedings
              29Item
      1A.
              Risk
      Factors
              30Item
      3.
              Defaults
      Upon Senior Securities
              30Item
      4.
              Submission
      of Matters to a Vote of Security Holders
              31Item
      6.
              Exhibits
              32SIGNATURES
              33EXHIBIT
      INDEX
              34
 
 
 
 PART
I.        FINANCIAL
INFORMATION
  Item
1.           Financial
Statements
  STAMFORD
INDUSTRIAL GROUP, INC.
 CONSOLIDATED
BALANCE SHEETS (UNAUDITED)
 (in
thousands, except per share amounts)
 
 June 30,
                  2009
                
                
                December 31,
                  2008ASSETSCurrent
      assets:Cash
      and cash equivalents
                
                $
                2,509
                
                
                $
                303Accounts
      receivable, net
                
                
                6,475
                
                
                
                9,806Inventories,
      net
                
                
                9,437
                
                
                
                15,748Deferred
      tax asset, net
                
                
                —
                
                
                
                519Prepaid
      expenses and other current assets
                
                
                110
                
                
                
                149Total
      current assets
                
                
                18,531
                
                
                
                26,525Property,
      plant and equipment, net (Note 3)
                
                
                4,537
                
                
                
                8,160Deferred
      financing costs, net
                
                
                416
                
                
                
                493Intangible
      assets, net
                
                
                18,951
                
                
                
                19,476Deferred
      tax asset, net
                
                
                —
                
                
                
                39,188Other
      assets
                
                
                256
                
                
                
                205Total
      assets
                
                $
                42,691
                
                
                $
                94,047LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Notes
      payable
                
                $
                —
                
                
                $
                286Current
      portion of long-term debt (Note 6)
                
                
                18,000
                
                
                
                4,000Accounts
      payable
                
                
                1,842
                
                
                
                6,335Accrued
      expenses and other liabilities
                
                
                2,484
                
                
                
                3,070Total
      current liabilities
                
                
                22,326
                
                
                
                13,691Long-term
      debt, less current portion
                
                
                2,533
                
                
                
                17,533Other
      long-term liabilities
                
                
                267
                
                
                
                242Total
      liabilities
                
                
                25,126
                
                
                
                31,466Commitments
      and contingencies (Note 11)Stockholders’
      equity: (Note 10)Preferred
      stock — $0.0001 par value; 5,000 shares authorized; no shares issued or
      outstanding
                
                
                —
                
                
                
                —Common
      stock — $0.0001 par value; 100,000 shares authorized; 8,420 shares issued
      and outstanding at June 30, 2009 and December 31, 2008
                
                
                3
                
                
                
                3Additional
      paid-in capital
                
                
                248,090
                
                
                
                247,885Accumulated
      deficit
                
                
                (230,528
                )
                
                
                (185,307
                )Total
      stockholders’ equity
                
                
                17,565
                
                
                
                62,581Total
      liabilities and stockholders’ equity
                
                $
                42,691
                
                
                $
                94,047
 
 See
accompanying notes to the consolidated financial statements.
 1
  STAMFORD
INDUSTRIAL GROUP, INC.
 CONSOLIDATED
STATEMENTS OF OPERATIONS (UNAUDITED)
 (in
thousands, except per share amounts)
 
 Three Months Ended
                
                
                Six Months EndedJune 30,
                  2009
                
                
                June 30,
                  2008
                
                
                June 30,
                  2009
                
                
                June 30,
                  2008Revenues
                
                $
                12,246
                
                
                $
                42,181
                
                
                $
                29,360
                
                
                $
                74,858Cost
      of revenues
                
                
                11,189
                
                
                
                31,116
                
                
                
                26,449
                
                
                
                58,228Gross
      margin
                
                
                1,057
                
                
                
                11,065
                
                
                
                2,911
                
                
                
                16,630Operating
      expenses:Sales
      and marketing
                
                
                211
                
                
                
                528
                
                
                
                547
                
                
                
                943General
      and administrative
                
                
                1,630
                
                
                
                3,770
                
                
                
                4,187
                
                
                
                6,348Related
      party cash fee
                
                
                125
                
                
                
                125
                
                
                
                250
                
                
                
                250Related
      party stock compensation
                
                
                (22
                )
                
                
                274
                
                
                
                —
                
                
                
                451Asset
      impairment (Note 3)
                
                
                3,053
                
                
                
                —
                
                
                
                3,053
                
                
                
                —Total
      operating expenses
                
                
                4,997
                
                
                
                4,697
                
                
                
                8,037
                
                
                
                7,992(Loss)
      income from operations
                
                
                (3,940
                )
                
                
                6,368
                
                
                
                (5,126
                )
                
                
                8,638Other
      (expense) income:Interest
      income
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                1Interest
      expense
                
                
                (67
                )
                
                
                (504
                )
                
                
                (354
                )
                
                
                (1,294
                )Other
      income
                
                
                —
                
                
                
                16
                
                
                
                1
                
                
                
                43Total
      other expense, net
                
                
                (67
                )
                
                
                (488
                )
                
                
                (353
                )
                
                
                (1,250
                )(Loss)
      income before taxes
                
                
                (4,007
                )
                
                
                5,880
                
                
                
                (5,479
                )
                
                
                7,388Provision
      (benefit) for income taxes
                
                
                40,246
                
                
                
                (30,762
                )
                
                
                39,742
                
                
                
                (30,673
                )Net
      (loss) income
                
                $
                (44,253
                )
                
                $
                36,642
                
                
                $
                (45,221
                )
                
                $
                38,061Basic
      net (loss) income per share
                
                $
                (5.26
                )
                
                $
                4.38
                
                
                $
                (5.37
                )
                
                $
                4.55Shares
      used in basic calculation (Note 15)
                
                
                8,420
                
                
                
                8,371
                
                
                
                8,420
                
                
                
                8,369Diluted
      net (loss) income per share
                
                $
                (5.26
                )
                
                $
                3.81
                
                
                $
                (5.37
                )
                
                $
                3.97Shares
      used in diluted calculation (Note 15)
                
                
                8,420
                
                
                
                9,616
                
                
                
                8,420
                
                
                
                9,589
 
 See
accompanying notes to the consolidated financial statements.
 2
 STAMFORD
INDUSTRIAL GROUP, INC.
 CONSOLIDATED
STATEMENTS OF CASH FLOWS (UNAUDITED)
 (in
thousands)
 
 Six Months EndedJune 30,
                  2009
                
                
                June 30,
                  2008Cash
      flows from operating activities:Net
      (loss) income
                
                $
                (45,221
                )
                
                $
                38,061Reconciliation
      of net (loss) income to net cash provided by operatingactivities:Provision
      for doubtful accounts
                
                
                6
                
                
                
                290Depreciation
                
                
                575
                
                
                
                518Amortization
      of intangible assets
                
                
                525
                
                
                
                524Amortization
      of deferred financing costs
                
                
                77
                
                
                
                77Deferred
      income taxes
                
                
                39,707
                
                
                
                (31,447
                )Stock-based
      compensation
                
                
                149
                
                
                
                476Related
      party stock compensation
                
                
                —
                
                
                
                451Asset
      impairment
                
                
                3,053
                
                
                
                —Changes
      in assets and liabilities:Accounts
      receivable
                
                
                3,325
                
                
                
                (14,412
                )Inventory
                
                
                6,311
                
                
                
                (4,099
                )Prepaid
      expenses and other current assets
                
                
                39
                
                
                
                288Other
      assets
                
                
                (51
                )
                
                
                5Accounts
      payable
                
                
                (4,493
                )
                
                
                8,598Accrued
      expenses and other liabilities
                
                
                (530
                )
                
                
                1,404Other
      liabilities
                
                
                25
                
                
                
                26Net
      cash provided by operating activities
                
                
                3,497
                
                
                
                760Cash
      flows from investing activities:Capital
      expenditures for property and equipment
                
                
                (5
                )
                
                
                (484
                )Net
      cash (used in) investing activities
                
                
                (5
                )
                
                
                (484
                )Cash
      flows from financing activities:Borrowings
      from revolving credit agreement
                
                
                —
                
                
                
                1,500Payments
      on revolving credit agreement
                
                
                (286
                )
                
                
                (500
                )Principal
      payments on long-term debt
                
                
                (1,000
                )
                
                
                (2,000
                )Net
      cash (used in) financing activities
                
                
                (1,286
                )
                
                
                (1,000
                )Net  increase
      (decrease) in cash and cash equivalents
                
                
                2,206
                
                
                
                (724
                )Cash
      and cash equivalents at beginning of period
                
                
                303
                
                
                
                1,236Cash
      and cash equivalents at end of period
                
                $
                2,509
                
                
                $
                512Supplemental
      cash flow disclosures:Interest
      paid
                
                $
                382
                
                
                $
                944Taxes
      paid
                
                $
                77
                
                
                $
                107
 
 See
accompanying notes to the consolidated financial statements.
 3
  STAMFORD
INDUSTRIAL GROUP, INC.
  NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 (dollars
and shares in thousands, except per share amounts unless otherwise
indicated)
 
 
 Note
1.  Overview and Basis of Presentation
 
 Overview
 
 Stamford
Industrial Group, Inc. (the “Company”, “we”, “our” and “us”), through its
wholly-owned subsidiary Concord Steel, Inc.  (“Concord”), is an
independent manufacturer of steel counterweights and structural
weldments.  The Company sells its products primarily in the United
States to original equipment manufacturers (“OEM”) of certain construction and
industrial related equipment that employ counterweights for stability through
counterweight leverage in the operation of equipment used to hoist heavy loads,
such as elevators and cranes.  The counterweight market the Company
targets is primarily comprised of OEMs within the (i) commercial and industrial
construction equipment industry that manufactures aerial work platforms,
telehandlers, scissor lifts, cranes, and a variety of other construction related
equipment and vehicles; and (ii) the elevator industry, that incorporates
counterweights as part of the overall elevator operating mechanism to balance
the weight of the elevator cab and load.
 
 The
Company was initially established in 1996 under the name “Net Perceptions, Inc.”
as a provider of marketing software solutions.  In 2003, as a result
of continuing losses and the decline of its software business, the Company began
exploring various strategic alternatives, including sale or liquidation, and
ceased the marketing and development of its marketing solutions software
business in 2004.  On April 21, 2004, the Company announced an
investment into the Company by Olden Acquisition LLC (“Olden”), an affiliate of
Kanders & Company, Inc., an entity owned and controlled by the Company’s
Non-Executive Chairman, Warren B. Kanders, for the purpose of initiating a
strategy to redeploy the Company’s assets and use its cash and cash equivalents
and marketable securities to enhance stockholder value.  As part of
this strategy, on October 3, 2006, the Company acquired the assets of CRC
Acquisition Co. LLC (“CRC”), a manufacturer of steel counterweights doing
business as Concord Steel.
 
 On
February 20, 2009, the Company executed a one-for-five reverse stock split of
the outstanding shares of common stock. Our common stock is quoted on the OTC
Pink Sheets Electronic Quotation Service under the symbol
SIDG.PK.  Except as otherwise noted herein, all prior period common
stock and per share information included in this Form 10-Q, financial statements
and related notes have been adjusted to give effect to this reverse stock
split.
 
 Going
Concern
 
 The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 6 to the financial
statements, Concord is the borrower under a senior secured credit agreement with
Bank of America, N.A. (successor to LaSalle Bank National Association), as
administrative agent (the “Administrative Agent”) and the other lenders party
thereto (collectively with the Administrative Agent,  the “Lenders”),
dated October 3, 2006, as amended pursuant to the First Amendment Agreement and
Second Amendment Agreement, dated December 31, 2007 and March 13, 2008,
respectively (as so amended, the “Credit Agreement”).  The Credit
Agreement is guaranteed by the Company and each of the subsidiaries of Concord
(the “Subsidiaries”) and secured by substantially all of the assets of the
Company, Concord and the Subsidiaries.  The Credit Agreement
established a commitment by the Lenders to provide up to $40.0 million in the
aggregate of loans and other financial accommodations consisting of (i) a
five-year senior secured term loan in an aggregate principal amount of $28.0
million (the “Term Loan”), (ii) a five-year senior secured revolving credit
facility in the aggregate principal amount of up to $10.0 million (the “Revolver
Facility”), and (iii) a five-year senior secured capital expenditure facility in
the aggregate principal amount of up to $2.0 million (which expired in
accordance with its terms on March 3, 2007).
  As of
June 30, 2009 the Company’s consolidated leverage ratio was 4.29 and its fixed
charge coverage ratio was 0.61, which is a violation of its financial covenants
under the Credit Agreement. These violations constitute events of default under
the Credit Agreement and the Company has been engaged in discussions with the
Lenders with the objective of amending the Credit Agreement in order to address
the violations. Pending the resolution of its dialogue with the Lenders, the
Company elected not to make a required debt payment on June 30, 2009 to the
Lenders in an amount equal to $1.0 million, representing an amortized payment of
principal together with interest due, even though it had sufficient cash to make
such payment. As a result of default status under the Credit Agreement, the
Company reclassified its loan balance due in the amount of $18.0 million under
the Credit Agreement to current liabilities for the period ended June 30,
2009.
  4
 
 On August
6, 2009, despite continued dialogue with the Lenders, Concord received a written
notice from the Lenders declaring that the principal amount of all obligations
of Concord under the Credit Agreement had been accelerated and were immediately
due and payable as a result of Concord’s previously disclosed default in the
payment of principal and interest in an amount equal to $1.0 million
and  violation of several financial covenants contained in the Credit
Agreement, including its consolidated leverage ratio and consolidated fixed
charge ratio as of June 30, 2009.  In addition, the Lenders exercised
their right to set off such obligations against all funds contained in Concord’s
principal deposit account with the Administrative Agent resulting in Concord
having limited and intermittent access to sufficient funds to support its
business operations causing a substantial doubt about its ability to continue as
a going concern.  On August 12, 2009, in connection with their ongoing
efforts to resolve defaults under the Credit Agreement, Concord, the Company,
the Subsidiaries and the Lenders entered into a letter agreement (the “Letter
Agreement”), which was dated August 10, 2009, and which provided for, among
other things, rescission of the termination of the Revolver Facility, the June
30 payment default being cured, and the application of all existing funds of
Concord and future incoming funds of Concord to repay amounts outstanding under
the Term Loan.  In addition, Concord (i) consented to the Lenders’
previous acceleration of the Term Loan as well the Lenders’ continuing ability
to apply funds of Concord as prepayments against the Term Loan; and (ii) waived
any and all claims it may have against the Lenders.
 
 On August
13, 2009, in connection with their ongoing efforts to resolve defaults under the
Credit Agreement, Concord, the Company, the Subsidiaries and the Lenders entered
into a Third Amendment and Temporary Waiver Agreement (the “Amendment and Waiver
Agreement”).  Pursuant to the Amendment and Waiver Agreement,
Concord’s borrowing access under the Revolver Facility has been reinstated
through and including September 12, 2009, solely for purposes of making payments
pursuant to a weekly budget that has been approved by the Lenders (the
“Reinstated Revolving Facility”).  The Amendment and Waiver Agreement
contains a temporary waiver of certain defaults and event of defaults under the
Credit Agreement and the temporary suspension of certain representations and
warranties under the Credit Agreement to permit Concord to borrow under the
Reinstated Revolving Facility.  In addition, pursuant to the Amendment
and Waiver Agreement, all funds of Concord shall be subject to a secured lock
box and cash management system to be maintained by the Administrative Agent and
interest will accrue on borrowings under the Reinstated Revolving Facility at a
rate equal to, at Concord’s election, either (a) the greater of (i) LIBOR or
(ii) 1%, plus a margin of 6.0%, or (b) the greater of (i) the Federal Funds
Rate, (ii) the prime rate publicly announced by the Administrative Agent as its
prime rate or (iii) 3.25%, plus a margin of 4.5%.
 
 In
connection with the Amendment and Waiver Agreement, Concord has agreed to hire a
financial consultant satisfactory to the Lenders to review Concord’s financial
condition with the Lenders.  Such consultant will have authority to
review and, under certain circumstances confirm, budgeted expenditures during
the last fifteen days of the term of the Reinstated Revolving
Facility.
 
 The
Company and Concord expect to continue negotiations with the Lenders to modify
the Credit Agreement in order to address Concord’s ability to continue to comply
with the Credit Agreement on an ongoing basis after the expiration of the
Reinstated Revolving Facility so that Concord can continue to borrow under the
Credit Agreement beyond September 12, 2009. The Company cannot give any
assurances that it has or can raise sufficient funds to repay all of the
outstanding amounts under the Credit Agreement, that it will be able to
successfully enter into an amendment of the Credit Agreement satisfactory to
Concord, the Company and the Lenders that will be effective after the expiration
of the Reinstated Revolving Facility or that it will be able to otherwise
resolve outstanding matters with the Lenders in a manner satisfactory to Concord
and the Company.  If the Company is unable to enter into a further
amendment of the Credit Agreement in a manner satisfactory to it, the ongoing
defaults under the Credit Agreement and the exercise of the Lenders’ available
remedies under the Credit Agreement may require the Company, Concord and/or the
Subsidiaries to seek reorganization or restructuring, including filing for
protection under bankruptcy laws and/or cease operations, which would have a
material adverse effect on the market price of the Company’s common stock, its
business, financial condition and results of operations.
 
 Basis
of Presentation
 
 The
accompanying unaudited consolidated financial statements of the Company have
been prepared in accordance with accounting principles generally accepted in the
United States of America and instructions to Form 10-Q and Article 10 of
Regulation S-X.  Accordingly, they do not include all of the
information in notes required by accounting principles generally accepted in the
United States of America for complete financial statements.  In the
opinion of management, all adjustments (consisting of normal recurring accruals,
unless otherwise noted) necessary for a fair presentation of the unaudited
consolidated financial statements have been included.  The results of
the three and six months ended June 30, 2009 are not necessarily indicative of
the results to be obtained for the year ending December 31,
2009.  These interim financial statements should be read in
conjunction with the Company’s audited consolidated financial statements and
footnotes thereto included in the Company’s Annual Report on Form 10-K for the
year ended December 31, 2008, filed with the Securities and Exchange Commission
on March 16, 2009.
  5
 
 The
consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiaries.  All inter-company accounts and
transactions have been eliminated.
  Significant
Accounting Policies
  The
Company believes the following accounting policies affect significant judgments
and estimates used in the preparation of its consolidated financial statements.
Events occurring subsequent to the preparation of the consolidated financial
statements may cause the Company to re-evaluate these policies.
 
 Use of estimates.The preparation of
financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and
assumptions that affect the reported amounts therein. Management’s estimates are
based on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances. Estimates inherent in the
preparation of the accompanying consolidated financial statements include the
carrying value of long-lived assets, valuation allowances for receivables,
inventories and deferred income tax assets, liabilities for potential litigation
claims and settlements, and potential liabilities related to tax filings in the
ordinary course of business. Management’s estimates and assumptions are
evaluated on an on-going basis. Due to the inherent uncertainty involved in
making estimates, actual results may differ from those estimates.
 
 Revenue recognition.The
Company’s revenue recognition policy for the sale of steel counterweights or
structural weldments requires evidence of a sales agreement, the delivery of
goods, the sales price is fixed or determinable and the collectability of
revenue is reasonably assured. The Company generally records sales upon shipment
of product to customers and transfer of title under standard commercial
terms.
 
 The
Company recognizes revenue for amounts billed to customers for scrap metal on a
gross basis. Scrap revenues were approximately $0.3 million and $0.7 million for
the three and six months ended June 30, 2009, respectively. Scrap revenues
were approximately $3.5 million and $5.4 million for the three and six months
ended June 30, 2008, respectively.
 
 Shipping and handling.Amounts billed to customers for shipping and handling costs are included
in revenues. Costs incurred for shipping and handling are included in sales and
marketing expense. Shipping and handling costs were approximately $0 and $0.2
million for the three and six months ended June 30, 2009, respectively. Shipping
and handling costs were approximately $0.3 million and $0.5 million for the
three and six months ended June 30, 2008, respectively.
 
 Allowance for doubtful accounts.The Company maintains allowances for doubtful accounts for estimated
losses resulting from the inability of its customers to make required payments.
If the financial condition of our customers deteriorates, resulting in an
impairment of their ability to make payments, additional allowances will be
required. Allowance for doubtful accounts for the six months ended June 30, 2009
and December 31, 2008 were $0.1 million and $0.2 million,
respectively.
  Inventories.Inventories are
stated at the lower of cost or market using the average cost method. Costs
included in inventories consist of materials, labor and manufacturing overhead,
which are related to the purchase and production of inventories.
  Impairment of Long-Lived
Assets. The Company’s policy is to assess the realizability of its
long-lived assets, including intangible assets and to evaluate such assets for
impairment whenever events or changes in circumstances indicate that the
carrying amount of such assets (or group of assets) may not be recoverable.
Impairment is determined to exist if the estimated future undiscounted (or
discounted cash flows for indefinite lived intangible asset) cash flows are less
than the related asset (or asset group) carrying value. Future cash flow
projections may include assumptions regarding future sales levels, the impact of
cost reduction programs, and the  level of working capital needed to
support the business. The Company uses data developed by its business management
as well as macroeconomic data in making these calculations. There are no
assurances that future cash flow assumptions will be achieved. The amount of any
impairment then recognized would be calculated as the difference between
estimated fair value and the carrying value of the asset. The Company performs
an annual evaluation of its indefinite long-lived assets in October of each year
and more frequently if circumstances warrant (See Notes 3 and 4).
   6
  Litigation.The Company is
involved in legal proceedings and claims arising from time to time. Management,
in connection with outside advisors, periodically assesses liabilities and
contingencies in connection with these matters, based on the latest information
available. For those matters where it is probable that a loss has been or will
be incurred, we record the loss, or a reasonable estimate of the loss, in the
consolidated financial statements. As additional information becomes available,
estimates of probable losses are adjusted based on an assessment of the
circumstances.
 
 Income taxes.Deferred income
taxes are evaluated on the asset and liability method whereby deferred tax
assets are recognized for deductible temporary differences and operating loss
and tax credit carryforwards and deferred tax liabilities are recognized for
taxable temporary differences. These temporary differences are the differences
between the reported amounts of assets and liabilities and their income tax
bases. If, in the opinion of management, it becomes more likely than not that
some portion or all of the deferred tax assets will not be realized, deferred
tax assets are reduced by a valuation allowance and any such reduction could be
material. The recognition of a valuation allowance for deferred taxes requires
management to make estimates and judgments about the Company’s future
profitability which are inherently uncertain but are considered critical due to
the gross amount of deferred taxes recorded on the Company’s consolidated
balance sheet.
 
 Derivatives and hedging activities.The Company recognizes all derivatives on the balance sheet as either an
asset or liability measured at fair value. Changes in the derivative’s fair
value are recognized currently in income unless specific hedge accounting
criteria are met. Special accounting for qualifying hedges allows a derivative’s
gains and losses to offset related results on the hedged item in the
consolidated statement of operations and requires the Company to formally
document, designate and assess effectiveness of transactions that receive hedge
accounting. Derivatives that are not hedges are adjusted to fair value through
earnings. If the derivative qualifies as a hedge, depending on the nature of the
hedge, changes in the fair value of derivatives are either offset against the
change in fair value of hedged assets, liabilities, or firm commitments through
earnings, or recognized in other comprehensive income (loss) until the hedged
item is recognized in earnings. The ineffective portion of a derivative’s change
in fair value is immediately recognized in earnings.
 
 During
the six months ended June 30, 2009, there have been no significant changes to
the Company’s significant accounting policies as disclosed in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2008. See Note 8 for
a discussion of a change in management’s estimate related to the valuation
allowance for deferred tax assets during the second quarter of
2009.
  Recent
Accounting Pronouncements
  In June
2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards CodificationTM
and the Hierarchy of Generally Accepted Accounting Principles, a replacement of
FASB Statement No. 162” (“SFAS  168”).  The FASB Accounting
Standards CodificationTM (“Codification”) will be the single source of accounting
principles and the framework for selecting the principles used in the
preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles in the
United States.  Rules and interpretive releases of the SEC under authority
of federal securities laws are also sources of authoritative generally accepted
accounting principles for SEC registrants.  All existing accounting
standards are superseded as described in SFAS 168.  All other accounting
literature not included in the Codification is nonauthoritative.  This
statement is effective for interim and annual periods ending after September 15,
2009.  The Company does not expect that the adoption of SFAS 168 will have
a significant impact on the determination or reporting of its financial
results.
 
 In May
2009, the FASB issued SFAS No. 165, “Subsequent Events” (“SFAS 165”).  This
statement was effective for interim or annual financial periods ending after
June 15, 2009.  SFAS 165 establishes general standards of accounting for
and disclosure of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued.   SFAS 165
also requires the disclosure of the date through which an entity has evaluated
subsequent events and the basis for that date—that is, whether that date
represents the date the financial statements were issued or were available to be
issued.  This disclosure should alert all readers of financial statements
that an entity has not evaluated subsequent events after that date in the set of
financial statements being presented.  Adoption of SFAS 165 did not have a
significant impact on the determination or reporting of the Company’s financial
results.
  7
  On
April 9, 2009, the Financial Accounting Standards Board
(“FASB”) issued Staff Position FAS 107-1 (“FSP FAS 107-1”) and Accounting
Principles Board 28-1 (“APB 28-1”), entitled “Interim Disclosures about Fair
Value of Financial Instruments” which requires disclosures about fair value of
financial instruments within the scope of FAS 107 for interim reporting periods.
FSP FAS 107-1 and APB 28-1 is effective for interim reporting periods ending
after June 15, 2009 with early adoption permitted. The adoption of these
pronouncements did not have a material impact on the Company's financial
position, results of operations and cash flows.
  In March
2008, the FASB issued Statement of Financial Accounting Standards
(“SFAS”)  No. 161, Disclosures about Derivative Instruments and
Hedging Activities - an amendment of FASB Statement No. 133 ("SFAS 161"). SFAS
161 changes the disclosure requirements for derivative instruments and hedging
activities. Under SFAS 161, entities are required to provide enhanced
disclosures about (a) how and why an entity uses derivative instruments, (b) how
derivative instruments and related hedged items are accounted for under
Statement 133 and its related interpretations, and (c) how derivative
instruments and related hedged items affect an entity's financial position,
financial performance, and cash flows. SFAS 161 is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008. SFAS 161 encourages, but does not require, comparative
disclosures for earlier periods at initial adoption. The adoption of SFAS 161
did not have a significant impact on the Company’s financial position, results
of operations or cash flows.
 
 In
June 2008, the FASB issued FSP Emerging Issues Task Force (“EITF”) 03-6-1,
“Determining Whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities” (“FSP EITF 03-6-1”). FSP EITF 03-6-1 clarified that
all outstanding unvested share-based payment awards that contain rights to
nonforfeitable dividends participate in undistributed earnings with common
shareholders. Awards of this nature are considered participating securities and
the two-class method of computing basic and earnings per dilutive share must be
applied. The restricted stock awards the Company has granted to employees and
directors are considered participating securities as they receive rights to
nonforfeitable dividends should they be granted. The Company has adopted FSP
EITF 03-6-1 effective January 1, 2009.  The adoption of FSP EITF
03-6-1 did not have a significant impact on the Company’s financial position,
results of operations or cash flows.
 
 In June
2008, the FASB issued EITF Issue 07-5, “Determining Whether an Instrument (or
Embedded Feature) is Indexed to an Entity’s Own Stock” (“EITF 07-5”). EITF No.
07-5 is effective for financial statements issued for fiscal years beginning
after December 15, 2008, and interim periods within those fiscal years. Early
application is not permitted. Paragraph 11(a) of SFAS No. 133 “Accounting for
Derivatives and Hedging Activities” (“SFAS 133”), specifies that a contract that
would otherwise meet the definition of a derivative but is both (a) indexed to
the Company’s own stock and (b) classified in stockholders’ equity in the
statement of financial position would not be considered a derivative financial
instrument. EITF 07-5 provides a new two-step model to be applied in determining
whether a financial instrument or an embedded feature is indexed to an issuer’s
own stock and thus able to qualify for the SFAS 133 paragraph 11(a) scope
exception. The adoption of EITF 07-5 did not have a significant impact on the
Company’s financial position, results of operations or cash flows.
 
 Note
2.  Inventories
 
 Inventories,
net of inventory reserves at June 30, 2009 and December 31, 2008 are as
follows:
  June 30,
                  2009
                
                
                December 31,
                  2008Finished
      goods
                
                $
                571
                
                
                $
                832Work-in-process
                
                
                477
                
                
                
                800Raw
      materials
                
                
                8,389
                
                
                
                14,116Total
      inventories, net
                
                $
                9,437
                
                
                $
                15,748
  Inventory
reserves, which are primarily for scrap inventory, were $0.3 million and
$0.1 million at June 30, 2009 and December 31, 2008, respectively.
  8
  Note
3. Property, Plant and Equipment
  Property,
plant and equipment, net, as of June 30, 2009 and December 31, 2008 are as
follows:
  June 30,
                  2009
                
                
                December 31,
                  2008Land
                
                $
                350
                
                
                $
                350Building
      and improvements
                
                
                1,397
                
                
                
                1,397Leasehold
      improvements
                
                
                1,238
                
                
                
                1,238Machinery
      and equipment
                
                
                5,683
                
                
                
                5,682Office
      equipment and furniture
                
                
                1,227
                
                
                
                1,2249,895
                
                
                
                9,891Less:
      Accumulated depreciation
                
                
                (2,305
                )
                
                
                (1,731
                )Less:
      Impairment of fixed assets
                
                
                (3,053
                )
                
                
                —Property,
      plant and equipment, net
                
                $
                4,537
                
                
                $
                8,160
 Concord
continues to be adversely affected by the steep drop off in purchasing for the
global infrastructure, construction, and residential markets as a result of the
global financial crisis. Customers have recently and unexpectedly announced
closing or suspending operations at their fabrication facilities. As a result of
these recent and unexpected business reductions, Concord has announced the
closure of their Essington, Pennsylvania facility by August 31, 2009 and expects
to further reduce its work force levels and extend previous temporary layoffs at
its Warren, Ohio and Chicago Heights, Illinois manufacturing
facilities.
 
 In
addition, the Company intends to relocate its Stamford, Connecticut corporate
headquarters by the end of August 2009, in efforts to continue to attempt to
reduce its fixed cost structure.
 
 In
connection with the above noted closure and relocation, the Company recorded an
impairment loss on fixed assets for the three months ended June 30, 2009 in the
amount of $3.1 million (excluding lease cancellation charges, if any). The
impairment charges at gross value include building and improvements of $0.3
million, leasehold improvements of $1.2 million, machinery and equipment of $2.2
million and office equipment of $0.4.
 
 Note
4. Intangible Assets
 
 As part
of the acquisition of Concord on October 3, 2006, the Company allocated a
portion of the purchase cost to intangible assets consisting of trade names,
customer relationships and non-compete agreements. These intangible assets are
amortized over their expected useful lives which are between 3 and 12 years
using the straight-line method.
 
 Intangible
assets, net of amortization at June 30, 2009 and December 31, 2008 are as
follows:
 
 June
      30, 2009Gross
                
                
                Accumulated
                  Amortization
                
                
                Net
                
                
                LifeIntangibles
      subject to amortization:Customer
      relationships
                
                $
                12,399
                
                
                $
                (2,848
                )
                
                $
                9,551
                
                
                12
      yrsNon-compete
      agreements
                
                
                37
                
                
                
                (34
                )
                
                
                3
                
                
                3
      yrsIntangibles
      not subject to amortization:Trade
      name
                
                
                9,397
                
                
                
                —
                
                
                
                9,397
                
                
                
                —Intangibles,
      net
                
                $
                21,833
                
                
                $
                (2,882
                )
                
                $
                18,951
  9
 December
      31, 2008Gross
                  
                  
                  Accumulated
                    Amortization
                  
                  
                  Net
                  
                  
                  LifeIntangibles
      subject to amortization:Customer
      relationships
                  
                  $
                  12,399
                  
                  
                  $
                  (2,330
                  )
                  
                  $
                  10,069
                  
                  
                  12
      yrsNon-compete
      agreements
                  
                  
                  37
                  
                  
                  
                  (27
                  )
                  
                  
                  10
                  
                  
                  3
      yrsIntangibles
      not subject to amortization:Trade
      name
                  
                  
                  9,397
                  
                  
                  
                  —
                  
                  
                  
                  9,397
                  
                  
                  
                  —Intangibles,
      net
                  
                  $
                  21,833
                  
                  
                  $
                  (2,357
                  )
                  
                  $
                  19,476
 
 The
Company completed its annual impairment testing of the trade name in the fourth
quarter of 2008. However, due to operating results and revenues being below
previously forecasted expectations, the Company performed impairment testing
again in the second quarter of 2009. This recent evaluation indicated that the
trade name is not impaired at this time. As a result of the global recession and
its impact on our industry, revenues have fallen significantly in recent months.
The Company expects results to improve as general economic conditions improve.
If our assessment of relevant facts and circumstances changes, economic
conditions fail to improve, or actual performance falls short of expected
results, a noncash impairment charge may be required, which could have a
material adverse effect on the market price of our common stock, our business,
financial condition and results of operations.
  
  Note
5. Accrued Expenses and Other Liabilities
 
 Accrued
expenses and other liabilities of the Company as of June 30, 2009 and December
31, 2008 are as follows:
 
 June 30,
                  2009
                
                
                December 31,
                  2008Accrued
      compensation, benefits andcommissions
                
                $
                485
                
                
                $
                983Accrued
      interest payable
                
                
                228
                
                
                
                357Accrued
      professional services
                
                
                208
                
                
                
                233Accrued
      insurance
                
                
                81
                
                
                
                273Accrued
      property taxes
                
                
                64
                
                
                
                119Accrued
      related party stock fee
                
                
                829
                
                
                
                829Other
      accrued liabilities
                
                
                589
                
                
                
                276Total
      Accrued Expenses and Other Liabilities
                
                $
                2,484
                
                
                $
                3,070
  Note
6. Long-Term Debt and Notes Payable
 
 In
connection with the Company’s acquisition of the assets of Concord, Concord
entered into a senior secured credit facility (the “Credit Agreement”) dated
October 3, 2006 with LaSalle Bank National Association which was acquired by
Bank of America on October 1, 2007, as administrative agent (the “Agent”) and
the lenders party thereto, (collectively, the “Lenders”).
  10
  The
Credit Agreement established a commitment by the Lenders to Concord to provide
up to $40.0 million in the aggregate of loans and other financial accommodations
consisting of (i) a five-year senior secured term loan in an aggregate principal
amount of $28.0 million, (ii) a five-year senior secured revolving credit
facility in the aggregate principal amount of $10.0 million (the “Revolving
Facility”) and (iii) a five-year senior secured capital expenditure facility in
the aggregate principal amount of $2.0 million. The Revolving Facility is
further subject to a borrowing base consisting of up to 85% of eligible accounts
receivable and up to 55% of eligible inventory. The Revolving Facility includes
a sublimit of up to an aggregate amount of $5.0 million in letters of credit and
a sublimit of up to an aggregate amount of $2.5 million in swing line
loans. The capital expenditure facility permitted the Company to draw funds for
the purchase of machinery and equipment during the 6-month period ended March 3,
2007, and then converted into a 4.5-year term loan. Immediately following the
closing of the Concord acquisition, the Company drew down approximately
$31.3 million and had additional availability under the Revolving Facility of
approximately $6.7 million. There were no amounts drawn under the capital
expenditure facility at the time of closing of the credit facility nor were
there any amounts drawn down prior to March 3, 2007, the date the capital
expenditure facility expired. On March 13, 2008, the Company entered into a
second amendment to the Credit Agreement to provide for, among other things,
revisions to certain of the financial covenants under the bank credit facilities
discussed above.  These covenants require the Company to meet certain
financial tests, namely (a) to maintain a consolidated leverage ratio not in
excess of 2.75 to 1.00 on the last day of any fiscal quarter, and (b) to
maintain a consolidated fixed charge coverage ratio of not less than 1.50 to
1.00 for the period of four consecutive fiscal quarters ending on or after March
31, 2009.
  AtJune30, 2009and December 31, 2008, the outstanding balanceundertheRevolvingFacilitywas$0and $0.3 million, respectively. AtJune30, 2009, the Company had $0available in additional borrowings net
of $1.6million in outstanding letters of
credit whichcannot be drawn upondue to the Company’s defaultunder the Credit Agreement.
The balance under the term loan atJune30, 2009and December 31, 2008was $18.0 million and $19.0 million,
respectively.
 
 As of
June 30, 2009 the Company’s consolidated leverage ratio was 4.29 and its fixed
charge coverage ratio was 0.61, which is a violation of its financial covenants
under the Credit Agreement. These violations constitute events of default under
the Credit Agreement and the Company has been engaged in discussions with the
Lenders with the objective of amending the Credit Agreement in order to address
the violations. Pending the resolution of its dialogue with the Lenders, the
Company elected not to make a required debt payment on June 30, 2009 to the
Lenders in an amount equal to $1.0 million, representing an amortized payment of
principal together with interest due, even though it had sufficient cash to make
such payment. As a result of default status under the Credit Agreement, the
Company reclassified its loan balance due in the amount of $18.0 million under
the Credit Agreement to current liabilities for the period ended June 30,
2009.
 
 On August
6, 2009, despite continued dialogue with the Lenders, Concord received a written
notice from the Lenders declaring that the principal amount of all obligations
of Concord under the Credit Agreement had been accelerated and were immediately
due and payable as a result of Concord’s previously disclosed default in the
payment of principal and interest in an amount equal to $1.0 million and
violation of several financial covenants contained in the Credit Agreement,
including its consolidated leverage ratio and consolidated fixed charge ratio as
of June 30, 2009.  In addition, the Lenders exercised their right to
set off such obligations against all funds contained in Concord’s principal
deposit account with the Administrative Agent resulting in Concord having
limited and intermittent access to sufficient funds to support its business
operations causing a substantial doubt about its ability to continue as a going
concern.
 
 Upon the
occurrence and during the continuation of an event of default under the Credit
Agreement, the Administrative Agent, with the consent of the Lenders, could,
without limitation, take the following actions: (i) terminate all of the
commitments to loan money or issue letters of credit under the Credit Agreement,
(ii) declare all amounts due under the Credit Agreement immediately due and
payable, (iii) increase the rate of interest on the outstanding loans by two
percent per annum, and/or (iv) exercise all of its rights and remedies under the
Credit Agreement and related security documents and applicable law, including
any rights to seize substantially all of the Company’s assets, which could
adversely affect the Company’s ability to continue to operate as a going
concern. The Lenders have, however, informed the Company that, while they will
not make any further loans under the Credit Agreement until the defaults are
cured, they are not currently planning to declare the loans under the Credit
Agreement due and payable subject to continuing discussions.
 
 On August
12, 2009, in connection with their ongoing efforts to resolve defaults under the
Credit Agreement, Concord, the Company, the Subsidiaries and the Lenders entered
into a letter agreement (the “Letter Agreement”), which was dated August 10,
2009, and which provided for, among other things, rescission of the termination
of the Revolver Facility, the June 30 payment default being cured, and the
application of all existing funds of Concord and future incoming funds of
Concord to repay amounts outstanding under the Term Loan.  In
addition, Concord (i) consented to the Lenders’ previous acceleration of the
Term Loan as well the Lenders’ continuing ability to apply funds of Concord as
prepayments against the Term Loan; and (ii) waived any and all claims it may
have against the Lenders.
 11
  On August
13, 2009, in connection with their ongoing efforts to resolve defaults under the
Credit Agreement, Concord, the Company, the Subsidiaries and the Lenders entered
into a Third Amendment and Temporary Waiver Agreement (the “Amendment and Waiver
Agreement”).  Pursuant to the Amendment and Waiver Agreement,
Concord’s borrowing access under the Revolver Facility has been reinstated
through and including September 12, 2009, solely for purposes of making payments
pursuant to a weekly budget that has been approved by the Lenders (the
“Reinstated Revolving Facility”).  The Amendment and Waiver Agreement
contains a temporary waiver of certain defaults and event of defaults under the
Credit Agreement and the temporary suspension of certain representations and
warranties under the Credit Agreement to permit Concord to borrow under the
Reinstated Revolving Facility.  In addition, pursuant to the Amendment
and Waiver Agreement, all funds of Concord shall be subject to a secured lock
box and cash management system to be maintained by the Administrative Agent and
interest will accrue on borrowings under the Reinstated Revolving Facility at a
rate equal to, at Concord’s election, either (a) the greater of (i) LIBOR or
(ii) 1%, plus a margin of 6.0%, or (b) the greater of (i) the Federal Funds
Rate, (ii) the prime rate publicly announced by the Administrative Agent as its
prime rate or (iii) 3.25%, plus a margin of 4.5%.
  In
connection with the Amendment and Waiver Agreement, Concord has agreed to hire a
financial consultant satisfactory to the Lenders to review Concord’s financial
condition with the Lenders.  Such consultant will have authority to
review and, under certain circumstances confirm, budgeted expenditures during
the last fifteen days of the term of the Reinstated Revolving
Facility.
 
 The
Company and Concord expect to continue negotiations with the Lenders to modify
the Credit Agreement in order to address Concord’s ability to continue to comply
with the Credit Agreement on an ongoing basis after the expiration of the
Reinstated Revolving Facility so that Concord can continue to borrow under the
Credit Agreement beyond September 12, 2009. The Company cannot give any
assurances that it has or can raise sufficient funds to repay all of the
outstanding amounts under the Credit Agreement, that it will be able to
successfully enter into an amendment of the Credit Agreement satisfactory to
Concord, the Company and the Lenders that will be effective after the expiration
of the Reinstated Revolving Facility or that it will be able to otherwise
resolve outstanding matters with the Lenders in a manner satisfactory to Concord
and the Company.  If the Company is unable to enter into a further
amendment of the Credit Agreement in a manner satisfactory to it, the ongoing
defaults under the Credit Agreement and the exercise of the Lenders’ available
remedies under the Credit Agreement may require the Company, Concord and/or the
Subsidiaries to seek reorganization or restructuring, including filing for
protection under bankruptcy laws and/or cease operations, which would have a
material adverse effect on the market price of the Company’s common stock, its
business, financial condition and results of operations.
 
 The
Credit Agreement is guaranteed by the Company and its direct and indirect
subsidiaries and is secured by, among other things, (a) (i) all of the equity
interests of Concord’s subsidiaries and (ii) a pledge by the Company of all of
the issued and outstanding shares of stock of Concord by the Company and (b) a
first priority perfected security interest on substantially all the assets of
the Company and its direct and indirect subsidiaries pursuant to a guaranty and
collateral agreement dated October 3, 2006 and delivered in connection with the
Credit Agreement (the “Guaranty Agreement”). In addition, the Agent for the
benefit of the Lenders, has a mortgage on all owned real estate of the Company
and its direct and indirect subsidiaries, as well as deposit account control
agreements with respect to funds on deposit in bank accounts of the Company and
its direct and indirect subsidiaries. The Credit Agreement expires on October 2,
2011.
 
 The
Company is exposed to interest rate volatility with regard to existing issuances
of variable rate debt. Primary exposure includes movements in the U.S. prime
rate and LIBOR. The Company uses interest rate swaps to reduce interest rate
volatility. On January 2, 2007, the Company entered into an interest rate
protection agreement. As of June 30, 2009, the notional amount was approximately
$9.3 million of interest rate swaps fixing interest rates between 5.0% and
5.8%.
 
 Market
volatility in LIBOR has recently exposed the Company to fluctuations in interest
rates on outstanding borrowings provided under the Credit Agreement. Based on
available information, we believe the financial institutions syndicated under
our Credit Agreement are able to fulfill their commitments as of the date of
this filing, however, there can be no assurance that one or more financial
institutions will be able to fulfill their funding obligations.
 
 On April
21, 2004, the Company closed on an investment into the Company by Olden
Acquisition LLC (“Olden”), an affiliate of Kanders & Company, Inc., for the
purpose of initiating a strategy to redeploy the Company’s assets and use the
Company’s cash, cash equivalent assets and marketable securities to enhance
stockholder value. The Company issued and sold to Olden a 2% ten-year
Convertible Subordinated Note, which is presently convertible (and subject to a
call by the Company under certain circumstances) at a conversion price of $2.25
per share of Company common stock into approximately 19.9% of the outstanding
common equity of the Company as of the closing date.  Proceeds to the
Company from this transaction totaled approximately $2.5 million before
transaction costs of $0.3 million.  The transaction costs are being
amortized over ten years, the term of the debt.  Interest on the note
accrues semi-annually but is not payable currently or upon conversion of the
note.  The note matures on April 21, 2014.  As of June 30,
2009 and December 31, 2008, the outstanding balance on the note payable amounted
to $2.5 million and is classified as long-term debt. As of June 30, 2009 and
December 31, 2008, accrued interest on the note was $0.3 million and $0.2
million, respectively and is classified as other long-term liabilities on the
accompanying consolidated balance sheets.
  12
  Note
7.  Per Share Data
 
 Basic earnings
per share is computed using net income and the weighted average number of shares
of common stock outstanding.  Diluted earnings per share reflects the
weighted average number of shares of common stock outstanding plus any
potentially dilutive shares outstanding during the period. Potentially dilutive
shares consist of shares issuable upon the exercise of stock options,
convertible notes and restricted stock awards. Shares used in the diluted net
income per share for the three and six months ended June 30, 2009, exclude the
impact of 1,126 potential shares of common stock issuable upon the conversion of
the convertible note (see note 6), 141 potential shares of common stock issuable
pursuant to the consulting agreement between the Company and Kanders &
Company (see note 12) and 638 potential shares of common stock issuable upon the
exercise of stock options, all of which were anti-dilutive. Shares used in the
diluted net income per share for the three months ended June 30, 2008, exclude
the impact of 597 potential shares of common stock issuable upon the exercise of
stock options, which were anti-dilutive. Shares used in the diluted net income
per share for the six months ended June 30, 2008, exclude the impact of 602
potential shares of common stock issuable upon the exercise of stock options,
which were anti-dilutive.
  The
following table shows the computation of the Company’s basic and diluted
earnings per share, as adjusted for the Company’s February 20, 2009 one-for-five
reverse stock split, for the three and six months ended June 30, 2009 and 2008,
respectively (in thousands, except per share data).
  Three Months Ended
                  June 30,
                
                
                Six Months Ended
                  June 30,2009
                
                
                2008
                
                
                2009
                
                
                2008Basic
      net (loss) income per share calculation:Net
      (loss) income
                
                $
                (44,253
                )
                
                $
                36,642
                
                
                $
                (45,221
                )
                
                $
                38,061Weighted
      average common shares - basic
                
                
                8,420
                
                
                
                8,371
                
                
                
                8,420
                
                
                
                8,369Basic
      net (loss) income per share
                
                $
                (5.26
                )
                
                $
                4.38
                
                
                $
                (5.37
                )
                
                $
                4.55Diluted
      net (loss) income per share calculation:Net
      (loss) income
                
                $
                (44,253
                )
                
                $
                36,642
                
                
                $
                (45,221
                )
                
                $
                38,061Weighted
      average common shares - basic
                
                
                8,420
                
                
                
                8,371
                
                
                
                8,420
                
                
                
                8,369Effect
      of dilutive stock options
                
                
                —
                
                
                
                5
                
                
                
                —
                
                
                
                —Effect
      of convertible note  (see Note 6)
                
                
                —
                
                
                
                1,126
                
                
                
                —
                
                
                
                1,126Effect
      of stock fee  (see Note 12)
                
                
                —
                
                
                
                114
                
                
                
                —
                
                
                
                94Weighted
      average common shares - diluted
                
                
                8,420
                
                
                
                9,616
                
                
                
                8,420
                
                
                
                9,589Diluted
      net  (loss) income per share
                
                $
                (5.26
                )
                
                $
                3.81
                
                
                $
                (5.37
                )
                
                $
                3.97
 Note
8.  Income Taxes
 
 For
federal income tax purposes, the Company has available net operating loss
carry-forwards of approximately $118.4 million and research and development
credit carry-forwards of $0.4 million at June 30, 2009. The net operating loss
and research and development credit carry-forwards expire in 2011 through 2026,
if not previously utilized. The utilization of these carry-forwards may be
subject to limitations based on past and future changes in ownership of the
Company pursuant to Section 382 of the Internal Revenue Code, as amended.
 
 Deferred
tax assets were $0 at June 30, 2009 and $39.7 million at December 31, 2008,
respectively, net of valuation allowances of $41.6 million and $0.3 million,
respectively.
  13
  The
recognition of a valuation allowance for deferred taxes requires management to
make estimates and judgments about the Company’s future profitability which are
inherently uncertain. Deferred tax assets are reduced by a valuation allowance
when, in the opinion of management, it is more likely than not that some portion
or all of the deferred tax assets will not be realized. The estimates and
judgments associated with the Company’s valuation of deferred taxes are
considered critical due to the amount of deferred taxes recorded by the Company
on its consolidated balance sheet and the judgment required in determining the
Company’s future profitability.  If, in the opinion of management, it
becomes more likely than not that some portion or all of the deferred tax assets
will not be realized, deferred tax assets would be reduced by a valuation
allowance and any such reduction could have a material adverse effect on the
financial condition of the Company.
  The
Company has updated its assessment of the realizability of its deferred tax
assets in connection with, among other things, Concord’s steep drop off in
sales, continued poor economic conditions, the Company’s previously disclosed
violations of its senior secured credit facility as of June 30, 2009, ongoing
discussions with its senior secured Lenders with the
Lenders under its Credit Agreement so that Concord can continue to borrow under
the Credit Agreement beyond
September 12, 2009, recent events and related concerns of whether
it will be able to continue as a going concern. Based on management’s assessment
of these factors and its current belief that the Company will not likely realize
sufficient taxable income in future years to utilize its deferred tax assets,
the Company has recorded a full valuation allowance of approximately $41.6
million against its deferred tax assets in the quarter ended June 30,
2009.
 
 During
the three months ended June 30, 2008, based on the Company’s revised projections
for future taxable income over the periods that the Company's deferred tax
assets are deductible, the Company determined that it was more likely than not
that it would have future taxable income sufficient to realize an additional
portion of the Company’s net deferred tax assets and therefore released a
significant portion of the remaining valuation allowance as a discrete item via
a credit to income tax expense. During the remainder of 2008, the Company
released an additional portion of the valuation allowance to income tax
expense.
 
 The
Company has an effective tax rate provision of 1004.4% and 725.4% for the three
and six months ended June 30, 2009, respectively, which includes the impact of a
full valuation allowance against deferred tax assets of $41.6 million recorded
in the quarter ended June 30, 2009, federal alternative minimum tax and state
taxes. The Company has an effective tax rate benefit of 523.2% and 415.2% for
the three and six months ended June 30, 2008, respectively. The significant
change in the Company’s effective tax rate is primarily due to the reversal of
the previously recorded valuation allowance in the second quarter of 2008 and
the increase of the valuation allowance in the second quarter of 2009 resulting
from revised forecasts.
 
 The
Company files income tax returns in the U.S. federal jurisdiction and various
state jurisdictions.
 
 Note
9. Employee Benefit Plan
 
 The
Company sponsors a 401(k) Plan (the "Plan"), covering substantially all
employees of the Company. Under the Plan, eligible employees who elect to
participate in the Plan may contribute between 2% and 20% of eligible
compensation to the Plan. For the three months ended June 30, 2009 and 2008 the
Company made matching contributions of approximately $24 thousand and $42
thousand, respectively. For the six months ended June 30, 2009 and 2008 the
Company made matching contributions of approximately $53 thousand and $82
thousand, respectively.
 
 Note
10. Stockholders’ Equity
 
 The
Company measures compensation costs for all share-based payments (including
employee stock options) at fair value and recognizes such costs in the
consolidated statements of income. The Company estimates the fair value of
share-based payments using the Black-Scholes stock option valuation model and
the market price of the Company’s common stock at date of award for restricted
stock awards. Total share-based compensation expense for the three and six
months ended June 30, 2009 was $0 and $0.1 million, respectively. Total
share-based compensation expense for the three and six months ended June 30,
2008 was $0.3 million and $0.5 million, respectively.
  14
  On June
21, 2007, the Company’s stockholders approved the Company’s 2007 Stock Incentive
Plan (the “2007 Stock Incentive Plan”).  Under the 2007 Stock
Incentive Plan, 2,000,000 shares of the Company’s common stock have been
reserved for issuance and available for awards, subject to an automatic annual
increase equal to 4% of the total number of shares of the Company’s common stock
outstanding at the beginning of each fiscal year (the “Annual Share Increase”).
Awards under the 2007 Stock Incentive Plan may include non-qualified stock
options, incentive stock options, stock appreciation rights, restricted shares
of common stock, restricted units and performance awards. Awards under the 2007
Stock Incentive Plan may be granted to employees, officers, directors,
consultants, independent contractors and advisors of the Company or any
subsidiary of the Company. In any calendar year, no participant may receive
awards under the 2007 Stock Incentive Plan for more than 500,000 shares of the
Company’s common stock. Additionally, no more than 1,500,000 of the total shares
of common stock available for issuance under the 2007 Stock Incentive Plan may
be granted in the form of restricted shares, restricted units or performance
awards, subject to an automatic annual increase, beginning with January in year
2008 and continuing through January in year 2017, equal to 75% of the total
number of shares of the Company’s common stock increased pursuant to the Annual
Share Increase. The 2007 Stock Incentive Plan expires on June 21, 2017. For the
three and six months ended June 30, 2009 and 2008, the Company recorded $0 and
$0.1 million, respectively, of compensation expense relating to these
awards.
  On June
30, 2009, the Company’s Board of Directors granted a stock option award to each
of our non-employee directors to purchase 15,000 shares of the Company’s common
stock with an exercise price of $1.65 per share, under the 2007 Stock Incentive
Plan. These stock options will vest and become exercisable in four equal
consecutive quarterly tranches commencing on September 30,
2009.
 
 On June
21, 2007, the Company’s stockholders approved the Company’s 2007 Annual
Incentive Plan (the “2007 Annual Incentive Plan”).  The 2007 Annual
Incentive Plan allows the Company to award certain executive officers of the
Company or any subsidiary of the Company, with “performance-based compensation”
as defined under Section 162(m) of the Internal Revenue Code of 1986, as
amended, which enables the Company to deduct such compensation from its taxable
income. As of June 30, 2009, no awards have been issued under this
plan.
 
 In April
2000, the Company’s Board of Directors adopted the 2000 Stock Plan (the “2000
Plan”), which provides for the issuance of non-qualified stock options to
employees who are not officers. The options allow the holder to purchase shares
of the Company’s common stock at fair market value on the date of the
grant.  Stock options granted under the 2000 Plan typically vest over
three years and generally expire ten years from the date of grant. As a result
of shareholder approval of the 2007 Stock Incentive Plan, the Company's 2000
Plan has been frozen and will remain in effect only to the extent of awards
outstanding under the plan as of June 21, 2007.
 
 In
February 1999, the Company’s Board of Directors adopted the 1999 Equity
Incentive Plan (the “1999 Plan”), which provides for the issuance of both
incentive and non-qualified stock options. The options allow the holder to
purchase shares of the Company’s common stock at fair market value on the date
of the grant. For options granted to holders of more than 10% of the outstanding
common stock, the option price at the date of the grant must be at least equal
to 110% of the fair market value of the stock. Stock options granted under the
1999 Plan typically vest when performance conditions are met or over three years
and generally expire ten years from the date of grant. As a result of
shareholder approval of the 2007 Stock Incentive Plan, the Company's 1999 Plan
has been frozen and will remain in effect only to the extent of awards
outstanding under the plan as of June 21, 2007.
 
 A summary
of option activity, excluding performance-based awards, under the Plans for the
six months ended June 30, 2009, is presented below:
 
 Options
                
                Shares
                  (000)
                
                
                Weighted-Average
      Exercise Price
                
                
                Weighted-Average
      Remaining Contractual Term (years)
                
                
                Aggregate
      Intrinsic ValueOutstanding
      at January 1, 2009
                
                
                314
                
                
                $
                6.14Granted
                
                
                30
                
                
                
                1.65Exercised
                
                
                —
                
                
                
                —Forfeited
      or expired
                
                
                —
                
                
                
                —Outstanding
      at June 30, 2009
                
                
                344
                
                
                $
                5.75
                
                
                
                7.8
                
                
                $
                1Vested
      or expected to vest at June 30, 2009
                
                
                344
                
                
                $
                5.75
                
                
                
                7.8
                
                
                $
                1Exercisable
      at June 30, 2009
                
                
                262
                
                
                $
                6.11
                
                
                
                7.4
                
                
                $
                —
 
 15
 
 A summary
of the option activity under the performance-based awards for the six months
ended June 30, 2009, is presented below:
  Performance
      Options
                
                Shares
                  (000)
                
                
                Weighted
      Average Exercise Price
                
                
                Remaining
      Contractual Term (years)
                
                
                Aggregate
                  Intrinsic
                  ValueOutstanding
      at January 1, 2009
                
                
                294
                
                
                $
                6.25Granted
                
                
                —
                
                
                
                —Exercised
                
                
                —
                
                
                
                —Forfeited
      or expired
                
                
                —
                
                
                
                —Outstanding
      at June 30, 2009
                
                
                294
                
                
                $
                6.25
                
                
                
                8.50
                
                
                $
                —Vested
      or expected to vest at June 30, 2009
                
                
                —
                
                
                $
                —
                
                
                
                —
                
                
                $
                —Exercisable
      at June 30, 2009
                
                
                —
                
                
                $
                —
                
                
                
                —
                
                
                $
                —
 
 Note
11.  Commitments and Contingencies
 
 Except as
set forth below, the
Company is not a party to, nor are any of its properties, subject to any
pending legal, administrative or judicial proceedings other than routine
litigation incidental to our business.
 
 Public
Offering Securities Litigation
 
 On
November 2, 2001, Timothy J. Fox filed a purported class action lawsuit against
the Company; FleetBoston Robertson Stephens, Inc., the lead underwriter of the
Company’s April 1999 initial public offering; several other underwriters who
participated in the initial public offering; Steven J. Snyder, the Company’s
then president and chief executive officer; and Thomas M. Donnelly, the
Company’s then chief financial officer. The lawsuit was filed in the United
States District Court for the Southern District of New York and was assigned to
the pretrial coordinating judge for substantially similar lawsuits involving
more than 300 other issuers. An amended class action complaint, captioned In re Net Perceptions, Inc. Initial
Public Offering Securities Litigation,01 Civ. 9675
(SAS), was filed on April 22, 2002, expanding the basis for the action to
include allegations relating to the Company’s March 2000 follow-on public
offering in addition to those relating to its initial public offering.  The
action against the Company was coordinated with the other substantially similar
class actions as In re Initial
Public Offering Securities Litigation, 21 MC 92 (SAS) (the “Coordinated
Class Actions”).
  On August
31, 2005, the Court gave preliminary approval to a settlement reached by the
plaintiffs and issuer defendants in the Coordinated Class Actions. On December
5, 2006, the United States Court of Appeals for the Second Circuit overturned
the District Court's certification of the class of plaintiffs who are pursuing
the claims that would be settled in the settlement against the underwriter
defendants. Plaintiffs filed a Petition for Rehearing with the Second Circuit on
January 5, 2007 in response to the Second Circuit's decision. On April 6, 2007,
the Second Circuit denied plaintiffs' Petition for Rehearing. On June 25, 2007,
the District Court signed an Order terminating the settlement. On November 13,
2007, the issuer defendants in certain designated “focus cases” filed a motion
to dismiss the second consolidated amended class action complaints that were
filed in those cases. On March 26, 2008, the District Court issued an Opinion
and Order denying, in large part, the motions to dismiss the amended complaints
in the “focus cases.” On April 2, 2009, the plaintiffs filed a motion for
preliminary approval of a new proposed settlement between plaintiffs, the
underwriter defendants, the issuer defendants and the insurers for the issuer
defendants.On June
10, 2009, the Court issued an opinion preliminarily approving the proposed
settlement, and scheduling a settlement fairness hearing for September 10,
2009.
 
 Concord
Steel, Inc. v. Wilmington Steel Processing Co., Inc., et al.
 
 On
November 21, 2007, Concord filed a Verified Complaint in the Delaware Chancery
Court against Wilmington Steel, Kenneth Neary and William Woislaw for violation
of non-compete provisions contained in an Asset Purchase Agreement, dated
September 19, 2006 and certain related agreements, and at the same time moved
for a preliminary injunction to prohibit breaches of those restrictive
covenants.  On January 18, 2008, the defendants in that case served an
Answer denying the material allegations of the Complaint and asserting
counterclaims for tortious interference with business relations and
defamation arising from alleged telephone calls made by Concord to the
customer to which Wilmington was selling. On April 3, 2008, the Court
granted the preliminary injunction sought by the Company and thereafter denied
defendants’ request for a stay and for certification of an interlocutory appeal.
On July 22, 2008, defendants withdrew their counterclaims without prejudice. A
three-day trial was held during the week of October 20, 2008, post-trial briefs
have been submitted and final arguments were held on April 17, 2009. A decision
from the Court is expected during the third quarter of 2009.
  16
 
 John
F. Steward v. Concord Steel, Inc.
 
 A former
employee of CRC Acquisition Corp. filed suit against Concord in June 2007 in the
Court of Common Pleas, Trumbull County, Ohio alleging that he was terminated by
Concord in August 2006 (prior to the acquisition on October 3,
2006 by Concord (formerly known as SIG Acquisition Corp.) of the assets of
CRC Acquisition Co. LLC (“CRC”)) in violation of his rights under the federal
Family and Medical Leave Act. Plaintiff John F. Steward seeks compensatory
damages in an unstated amount, liquidated damages, injunctive relief and
reinstatement to his job. Concord is vigorously defending the
action and maintains that CRC is the proper party defendant,
denominated as “Concord Steel.” On August 18, 2008, the Plaintiff served its
amended complaint to add as named defendants in addition to Concord, the
original named defendant, each of Concord, SIG Acquisition Corp., and CRC. CRC
subsequently asserted cross claims against Concord which we intend to defend
vigorously and Concord has asserted cross claims against CRC.  The action
was settled on a no-admission basis by the Company during April
2009.
 
 Note
12.  Related Party Transactions
 
 On
September 22, 2006, the Company entered into a five-year consulting agreement
(the “Consulting Agreement”) with Kanders & Company, Inc. (“Kanders &
Company”). The Consulting Agreement provides that Kanders & Company will
render investment banking and financial advisory services to the Company on a
non-exclusive basis, including strategic planning, assisting in the development
and structuring of corporate debt and equity financings, introductions to
sources of capital, guidance and advice as to (i) potential targets for mergers
and acquisitions, joint ventures, and strategic alliances, including
facilitating the negotiations in connection with such transactions, (ii) capital
and operational restructuring, and (iii) shareholder
relations.
 
 The
Consulting Agreement provides for Kanders & Company to receive a fee equal
to (i) $0.5 million in cash per year during the term of the Consulting
Agreement, payable monthly, and (ii) 1% of the amount by which the Company’s
revenues as reported in the Company’s Form 10-K, or if no such report is filed
by the Company, as reflected in the Company’s audited financial statements for
the applicable fiscal year, exceeds $60.0 million, payable in shares of common
stock of the Company (the “Stock Fee”) valued at the weighted average price of
the Company’s common stock for the applicable fiscal year. Upon a
“change-in-control” (as defined in the Consulting Agreement), Kanders &
Company will be entitled to a one-time lump sum cash payment equal to three
times the average amount Kanders & Company received during each of the two
fiscal years preceding such “change-in-control,” subject to certain limitations
as set forth in the Consulting Agreement. Upon the death or permanent disability
of Mr. Kanders, the Company has agreed to make a one-time lump sum cash payment
to Kanders & Company equal to that amount Kanders & Company would be
entitled to receive upon a “change-in-control.” Upon payment of the amounts due
to Kanders & Company either upon the occurrence of a “change-in-control,” or
upon the death or permanent disability of Mr. Kanders, the Consulting Agreement
will terminate. For the three months ended June 30, 2009 and 2008, the Company
recorded consulting fees of $0.1 million and $0.4 million, respectively, related
to the Consulting Agreement. For the six months ended June 30, 2009 and 2008,
the Company recorded consulting fees of $0.2 million and $0.7 million,
respectively, related to the Consulting Agreement. As of June 30, 2009 and
December 31, 2008, the accrued balance due to Kanders & Company under this
agreement amounted to $0.8 million.
 
 During
2009 and 2008, Kanders & Company was issued 0 and 46 shares, respectively of
the Company’s common stock as a stock fee for services provided under the
Consulting Agreement.
 
 For the
three months ended June 30, 2009 and 2008, the Company reimbursed Clarus
Corporation (“Clarus”) an entity it shared office space with until October 1,
2007, an aggregate of $12 thousand and $8 thousand, respectively; and for the
six months ended June 30, 2009 and 2008, the Company reimbursed Clarus $20
thousand and $18 thousand, respectively, for telecommunication, professional and
general office expenses which Clarus incurred on behalf of the Company. Warren
B. Kanders, the Company’s Non-Executive Chairman, also serves as the Executive
Chairman of Clarus.
  17
  On April
21, 2004, the Company closed on an investment into the Company by Olden for the
purpose of initiating a strategy to redeploy the Company’s assets and use the
Company’s cash, cash equivalent assets and marketable securities to enhance
stockholder value (see Note 6). The Company issued and sold to Olden a 2%
ten-year Convertible Subordinated Note, which is presently convertible (and
subject to a call by the Company under certain circumstances) at a conversion
price of $2.25 per share of Company common stock into approximately 19.9% of the
outstanding common equity of the Company as of the closing
date.  Proceeds to the Company from this transaction totaled
approximately $2.5 million before transaction costs of $0.3 million. The
transaction costs are being amortized over ten years, the term of the
debt.  Interest on the note accrues semi-annually but is not payable
currently or upon conversion of the note. The note matures on April 21, 2014
unless accelerated earlier as provided by the note.  As of
June 30, 2009 and December 31, 2008, the outstanding balance on the
note payable amounted to $2.5 million and is classified as long-term
debt.
  Note
13.  Derivative Financial Instruments
 
 On
January 2, 2007, the Company entered into a derivative or interest rate swap
agreement with fair value exposure to reduce interest rate
volatility.
 
 The
Company recognizes the derivative at fair value within the Consolidated Balance
Sheet as other assets or accrued liabilities. As of June 30, 2009, the fair
value of the derivative was $0.2 million and is reported as a component of
accrued liabilities.  Changes in the derivative’s fair value are
recognized currently in the Consolidated Statement of Operations as interest
expense.  As of June 30, 2009, the change in fair value for the period
was $0.2 million.
 
 SFAS 157
defines fair value, establishes a framework for measuring fair value in
accordance with accounting principles generally accepted in the United States of
America, and expands disclosures about fair value measurements. The Company has
adopted the provisions of SFAS 157 as of January 1, 2008 for its financial
instruments and for non-financial instruments as of January 1, 2009. Although
the adoption of SFAS 157 did not materially impact its financial condition,
results of operations, or cash flows, the Company is now required to provide
additional disclosures as part of its financial statements.
 
 SFAS 157
establishes a three-tier fair value hierarchy, which prioritizes the inputs used
in measuring fair value.  These tiers include: Level 1, defined as
observable inputs such as quoted prices in active markets; Level 2, defined as
inputs other than quoted prices in active markets that are either directly or
indirectly observable; and Level 3, defined as unobservable inputs in which
little or no market data exists, therefore requiring an entity to develop its
own assumptions.
 
 As of
June 30, 2009, the Company’s interest rate swap contract is required to be
measured at fair value on a recurring basis.
 
 The
inputs utilized to determine the fair values of these contracts are determined
using published market prices or estimates based on observable inputs such as
interest rates, yield curves, and spot rates. The Company has consistently
applied these valuation techniques in all periods presented.
 
 The
Company’s liabilities measured at fair value on a recurring basis subject to the
disclosure requirements of SFAS 157 at June 30, 2009, were as
follows:
 
 Fair Value Measurements at Reporting Date
      UsingDescription
                
                June 30,
                  2009
                
                
                Quoted
                  Prices in
                  Active
                  Markets for
                  Identical
                  Liabilities
                  (Level 1)
                
                
                Significant
                  Other
                  Observable
                  Inputs
                  (Level 2)
                
                
                Significant
                  Unobservable
                  Inputs
                  (Level 3)Interest
      rate derivative
                
                $
                199
                
                
                $
                —
                
                
                $
                —
                
                
                $
                199Total
      liabilities measured at fair value
                
                $
                199
                
                
                $
                —
                
                
                $
                —
                
                
                $
                199
  The
carrying value of cash and cash equivalents, trade accounts and notes
receivables, accounts payable, accrued liabilities and short-term borrowings
contained in the consolidated balance sheet approximates fair value due to their
short-term nature.
  18
 
 The
following table sets forth the Company’s financial assets and liabilities that
were not carried at fair value:
 
 June 30, 2009
                
                
                December 31, 2008Description
                
                Carrying
                  Amount
                
                
                Fair
                  Value
                
                
                Carrying
                  Amount
                
                
                Fair
                  ValueBank
      debt
                
                $
                18.0
                
                
                $
                16.9
                
                
                $
                19.0
                
                
                $
                18.8
  Note
14.  Reverse Stock Split
 
 On
February 20, 2009, a reverse stock split of the Company’s outstanding shares of
common stock at an exchange ratio of one-for-five became effective after the
Company filed an Amendment to its Amended and Restated Certificate of
Incorporation. As a result of the reverse stock split, the number of outstanding
shares of the Company’s common stock was reduced from 42,043,935 shares to
approximately 8,408,787. Our common stock is quoted on the OTC Pink
Sheets Electronic Quotation Service under the symbol “SIDG.PK”. All previously
reported share and per share amounts have been restated in the accompanying
financial statements and related notes to reflect the reverse stock
split.
 
 The
reverse stock split was approved by the Company’s stockholders at its annual
meeting of stockholders held on June 2, 2008, at which time the Board of
Directors was authorized, at its discretion, to amend the Company’s Amended and
Restated Certificate of Incorporation to effect a reverse split of the Company’s
issued and outstanding shares of common stock at an exchange ratio ranging
from one-to-two to one-to-five, at any time before the first anniversary of the
annual meeting.
 
 Note
15.  Subsequent Event
 
 The
Company has evaluated subsequent events through August 17, 2009, the date these
financial statements were issued and filed on edgar.
 
 Concord
continues to be adversely affected by the steep drop off in purchasing for the
global infrastructure, construction, and residential markets as a result of the
global financial crisis. Customers have recently and unexpectedly announced
closing or suspending operations at their fabrication facilities. As a result of
these recent and unexpected business reductions, Concord has announced the
closure of their Essington, Pennsylvania facility by August 31, 2009 and expects
to further reduce its work force levels and extend previous temporary layoffs at
its Warren, Ohio and Chicago Heights, Illinois manufacturing
facilities.
 In
addition, the Company intends to relocate its Stamford, Connecticut corporate
headquarters by the end of August 2009, in efforts to continue to reduce its
fixed cost structure.
 
 As a
result of management’s decision in the second quarter of 2009 regarding the
actions listed above, the Company recorded an estimated pre-tax non-cash charge
for fixed asset impairments in the quarter ended June 30, 2009 of $3.1 million
(excluding lease cancellation charges, if any).  The Company is
evaluating its lease obligations to determine and estimate future lease
termination payments, if any, however it is presently unable in good faith to
make such estimates at the time of this filing.
 
 The
Company does not expect the Essington closing or the extension of temporary work
force reductions to affect Concord’s ability to continue to serve its customers
for counterweights and weldment products from its manufacturing facilities
located in Chicago Heights, Illinois and Warren, Ohio.
  On February 11, 2008, the Company
entered intoan amendment
to its shareholder rights agreement (the “Rights Agreement”) thatdecreases the trigger threshold to
4.9%, from 15%, as the amount of the Company’s outstanding common stock that a
person must beneficially own before being deemed to be an “Acquiring Person”
under the Rights Agreement. Stockholders who own 4.9% or more of the Company’s
outstanding common stock as of the effective date of the amendment would not
trigger the Rights Agreement so long as they do not subsequently increase their
ownership of the Company’s common stock. The amendment also provides that if a
person inadvertently becomes an Acquiring Person by acquiring shares of the
Company’s common stock, and thereafter promptly disposes of shares to bring its
ownership of shares below 4.9% of the common stock, such person shall not be
deemed an Acquiring Person. The Company’s Board of Directors determined that the
amendment would be in the best interests of the Company and its stockholders,
because it is expected to assist in limiting the number of 5% or more owners and
thus is expected to reduce the risk of a possible “change of ownership” as
defined under Section 382 of the Internal Revenue Code of 1986, as amended. Any
such “change of ownership” under these rules would limit or eliminate the
ability of the Company to use its existing NOL’s for federal income tax
purposes. There is no guarantee that the objective of the amendment of
preserving the value of NOL’s will be achieved. There is a possibility that
certain stock transactions may be completed by stockholders or prospective
stockholders that could trigger a “change of ownership,” and there are other
limitations on the use of NOL’s set forth in the Internal Revenue Code of 1986,
as amended.
 19
  Item
2.  Management’s Discussion and Analysis of Financial Condition and
Results of Operations
  Forward-Looking
Statements
 
 This
report on Form 10-Q contains certain forward-looking statements, including
information about or related to our future results, certain projections and
business trends.  Assumptions relating to forward-looking statements
involve judgments with respect to, among other things, future economic,
competitive and market conditions and future business decisions, all of which
are difficult or impossible to predict accurately and many of which are beyond
our control.  When used in this report, the words "estimate,"
"project," "intend," "believe," "expect" and similar expressions are intended to
identify forward-looking statements. Although we believe that our assumptions
underlying the forward-looking statements are reasonable, any or all of the
assumptions could prove inaccurate, and we may not realize the results
contemplated by the forward-looking statements. Management decisions are
subjective in many respects and susceptible to interpretations and periodic
revisions based upon actual experience and business developments, the impact of
which may cause us to alter our business strategy or capital expenditure plans
that may, in turn, affect our results of operations.  In light of the
significant uncertainties inherent in the forward-looking information included
in this report, you should not regard the inclusion of such information as our
representation that we will achieve any strategy, objectives or other plans. The
forward-looking statements contained in this report speak only as of the date of
this report, and we have no obligation to update publicly or revise any of these
forward-looking statements.
 
 These
forward-looking and other statements, which are not historical facts, are based
largely upon our current expectations and assumptions and are subject to a
number of risks and uncertainties that could cause actual results to differ
materially from those contemplated by such forward-looking statements. These
risks and uncertainties include, among others, our inability to secure necessary
financing, our  inability to satisfactorily cure existing defaults
under our credit agreement and continue to comply with the financial covenants
and other obligations under our credit agreement or otherwise continue to
operate as a going concern, our ability to restore borrowings under our credit
agreement beyond
September 12, 2009, our inability to implement our acquisition growth
strategy and integrate and successfully manage any businesses that we acquire,
our inability to continue to generate revenues at historic levels in our newly
acquired operating divisions, changes in the demand for counterweights, changes
in the elevator or construction industries, changes in our relationship with our
unionized employees, the current economic downturn and its effect on the credit
and capital markets as well as the industries and customers that utilize our
products, declines in the businesses of our customers, the loss of any of our
major customers, reductions to our deferred tax assets or recognition of such
assets and our ability to fully use our net operating loss carry forward, and
the risks and uncertainties set forth in the section headed “Risk Factors” of
Part I, Item 1A of our Annual Report on Form 10-K, for the fiscal year ended
December 31, 2008 and described below.  The Company cannot guarantee
its future performance.  We cannot assure you that we will be
successful in the implementation of our growth strategy or that any such
strategy will result in the Company’s future profitability.  Our
failure to successfully implement our growth strategy could have a material
adverse effect on the market price of our common stock and our business,
financial condition and results of operations.
 
 References
in this report to “Stamford Industrial Group,” the “Company,” “we,” “our” and
“us” refer to Stamford Industrial Group, Inc. (formerly known as “Net
Perceptions, Inc.”) and, if so indicated or the context requires, includes our
wholly-owned subsidiary, Concord Steel, Inc. (formerly known as “SIG Acquisition
Corp., Inc.”) (which is doing business as Concord Steel and is referred to in
this report as “Concord”).
 
 OVERVIEW
 
 Stamford
Industrial Group, through its wholly-owned subsidiary Concord, is a leading
independent manufacturer of steel counterweights and structural
weldments.  We sell our products primarily in the United States to
original equipment manufacturers (“OEM”) of certain construction and industrial
related equipment that employ counterweights for stability through counterweight
leverage in the operation of equipment used to hoist heavy loads, such as aerial
work platforms, elevators and cranes.  The counterweight market we
target is primarily comprised of OEMs within the (i) commercial and industrial
construction equipment industry that manufactures aerial work platforms,
telehandlers, scissor lifts, cranes, and a variety of other construction related
equipment and vehicles; and (ii) the elevator industry, that incorporates
counterweights as part of the overall elevator operating mechanism to balance
the weight of the elevator cab and load.
  20
 
 Stamford
Industrial Group was initially established in 1996 under the name “Net
Perceptions, Inc.” as a provider of marketing software solutions.  In
2003, as a result of continuing losses and the decline of its software business,
the Company began exploring various strategic alternatives, including sale or
liquidation, and ceased the marketing and development of its marketing solutions
software business in 2004.  On April 21, 2004, the Company announced
an investment into the Company by Olden Acquisition LLC (“Olden”), an affiliate
of Kanders & Company, Inc., an entity owned and controlled by the Company’s
Non-Executive Chairman, Warren B. Kanders, for the purpose of initiating a
strategy to redeploy the Company’s assets and use its cash, cash equivalent
assets and marketable securities to enhance stockholder value.  As
part of this strategy, on October 3, 2006, the Company acquired the assets of
CRC Acquisition Co. LLC (“CRC”), a manufacturer of steel counterweights doing
business as Concord Steel.
 
 During
the three months ended March 31, 2009, Concord, our wholly-owned subsidiary,
entered into a new collective bargaining agreement with employees at its Warren,
Ohio facility that are members of the United Steelworkers Union ("Local 2243").
The new collective bargaining agreement, which expires on August 31, 2012,
replaces the previous agreement between Concord and Local 2243 that expired on
August 31, 2008.
  The
following management’s discussion and analysis of financial condition and
results of operations of Stamford Industrial Group, Inc. should be read in
conjunction with the historical financial statements and footnotes of Stamford
Industrial Group included elsewhere in this report and in the Company’s 2008
Annual Report on Form 10-K filed with the Securities and Exchange Commission.
Our future results of operations may change materially from the historical
results of operations reflected in Stamford Industrial Group’s historical
financial statements.
 
 Consolidated
Operating Results for the Three Months Ended June 30, 2009 Compared to the Three
Months Ended June 30, 2008
 
 REVENUES
 
 Revenues
decreased $30.0 million or 71.1% to $12.2 million for the three months ended
June 30, 2009 as compared to $42.2 million for the three months ended June 30,
2008. The decrease of $30.0 million is primarily due to lower sales volume and
price reductions resulting from decreased demand for our products from existing
customers, as a result of decreased spending in commercial and industrial
construction end markets.
 
 GROSS
MARGIN
 
 Gross
margin was $1.1 million or 9.0% of sales for the three months ended June 30,
2009 as compared to $11.1 million or 26.3% of sales for the three months ended
June 30, 2008. The 65.8% decrease in gross margin percentage was due to lower
sales volume and the related under absorption of fixed costs and higher raw
material costs, partially offset by lower operating expenses as a result of cost
reduction initiatives.
 
 OPERATING
EXPENSES
 
 Operating
expenses for the three months ended June 30, 2009 increased $0.3 million or 6.4%
to $5.0 million as compared to $4.7 million for the three months ended June 30,
2008. Excluding the asset impairment charge of $3.1 million, operating expenses
for the three months ended June 30, 2009 decreased $2.8 million or 59.6% as
compared to the prior period.
 
 Sales and marketing. Sales
and marketing expenses consisted primarily of freight costs, salaries, other
employee-related costs, commissions and other incentive compensation, travel and
entertainment and expenditures for marketing programs such as collateral
materials, trade shows, public relations and creative services. For the three
months ended June 30, 2009, sales and marketing expenses decreased to $0.2
million compared to $0.5 million for the three months ended June 30, 2008 due to
lower freight and employee related expenses.
 
 General and administrative and
related party cash fee.General and administrative expenses consist
primarily of employee compensation, insurance, legal, accounting and other
professional fees as well as public company expenses such as transfer agent
expenses. For the three months ended June 30, 2009, general and administrative
expenses and related party cash fee were $1.8 million as compared to $3.9
million for the three months ended June 30, 2008. Accounting fees increased by
$0.1 million offset by a decrease in legal expense of $0.6 million, reduction in
stock based compensation expense of $0.2 million, a decrease in employee related
expenses of $0.6 million due to a reduction in work force and a 10% salary
reduction affecting certain officers and higher salaried employees, transaction
costs of $0.5 million and bad debt costs of $0.3 million.
  21
 
 Related party stock compensation.For the three months ended June 30, 2009, the Company had related party
stock compensation expense of $0 associated with the stock consulting agreement
with Kanders & Company as compared to $0.3 million for the three months
ended June 30, 2008.
 
 Asset impairment.Asset
impairment charges for the three months ended June 30, 2009 were $3.1 million
and primarily consisted of fixed asset impairment loss associated with the
planned closure of our Essington, Pennsylvania facility and the planned
relocation of our Corporate office. There were no asset impairment charges for
the three months ended June 30, 2008.
 
 Interest expense.Interest
expense was $0.1 million for the three months ended June 30, 2009 compared to
interest expense of $0.5 million for the three months ended June 30, 2008. The
primary reason for the decrease in interest expense is due to the overall
reduction in the Company’s revolving credit agreement and term loan, and a
favorable mark to market adjustment of $0.1 million on interest rate swap
agreements.
 
 PROVISION
FOR INCOME TAXES
 
 For
income tax purposes, the Company has available federal net operating loss
carry-forwards of approximately $118.4 million and research and development
credit carry-forwards of approximately $0.2 million at June 30, 2009. The net
operating loss and research and development credit carry-forwards expire in 2011
through 2027 if not previously utilized. The utilization of these carry-forwards
may be subject to limitations based on past and future changes in ownership of
the Company pursuant to Internal Revenue Code Section 382, as amended. If the
Company were to be acquired at its recent stock value such that Section 382 is
applicable, this would eliminate the ability to use a substantial majority of
these carry-forwards. The recognition of a valuation allowance for deferred
taxes requires management to make estimates about the Company’s future
profitability. The estimates associated with the valuation of deferred taxes are
considered critical due to the amount of deferred taxes recorded on the
consolidated balance sheet and the judgment required in determining the
Company’s future profitability. Deferred tax assets were $0 and $39.7 million at
June 30, 2009 and December 31, 2008, net of valuation allowances of $41.6
million and $0.3 million, respectively.
 
 The
Company had an effective tax rate provision of 1,004.4% for the three months
ended June 30, 2009, which includes the impact of a full valuation allowance
against deferred tax assets of $41.6 million recorded in the quarter ended June
30, 2009, federal alternative minimum tax and state taxes. The Company has an
effective tax rate benefit of 415.2% for the six months ended June 30, 2008. The
significant change in the Company’s effective tax rate is primarily due to the
reversal of the previously recorded valuation allowance in the second quarter of
2008 and the increase of the valuation allowance in the second quarter of 2009
resulting from revised forecasts.
 Consolidated
Operating Results for the Six Months Ended June 30, 2009 Compared to the Six
Months Ended June 30, 2008
 
 REVENUES
 
 Revenues
decreased $45.5 million or 60.7% to $29.4 million for the six months ended June
30, 2009 as compared to $74.9 million for the six months ended June 30, 2008.
The decrease of $45.5 million is primarily due to lower sales volume and price
reductions resulting from decreased demand for our products from existing
customers, as a result of decreased spending in commercial and industrial
construction end markets.
 
 GROSS
MARGIN
 
 Gross
margin was $2.9 million or 9.9% of sales for the six months ended June 30, 2009
as compared to $16.6 million or 22.2% of sales for the six months ended June 30,
2008. The 55.4% decrease in gross margin percentage was due to price reductions
and lower sales volume and the related under absorption of fixed costs and
higher raw material costs, partially offset by lower operating expenses as a
result of cost reduction initiatives.
 
 OPERATING
EXPENSES
 
 Operating
expenses for the six months ended June 30, 2009 remained constant at $8.0
million compared to the six months ended June 30, 2008. Excluding the asset
impairment charge of $3.1 million, operating expenses for the six months ended
June 30, 2009 decreased $3.1 million or 38.8% as compared to the six months
ended June 30, 2008.
  22
 
 Sales and marketing. Sales
and marketing expenses consisted primarily of freight costs, salaries, other
employee-related costs, commissions and other incentive compensation, travel and
entertainment and expenditures for marketing programs such as collateral
materials, trade shows, public relations and creative services. For the six
months ended June 30, 2009, sales and marketing expenses decreased to $0.5
million compared to $0.9 million for the six months ended June 30, 2008 due to a
decrease in freight costs of $0.3 million and a reduction in travel and other
expenses of $0.1 million.
 
 General and administrative and
related party cash fee.General and administrative expenses consist
primarily of employee compensation, insurance, legal, accounting and other
professional fees as well as public company expenses such as transfer agent
expenses. For the six months ended June 30, 2009, general and administrative
expenses were $4.4 million as compared to $6.6 million for the six months ended
June 30, 2008. Accounting fees increased by $0.2 million offset by a decrease in
legal expense of $0.3 million, reduction in stock based compensation expense of
$0.3 million, a decrease in employee related expenses of $0.9 million due to a
reduction in work force and a 10% salary reduction affecting certain officers
and higher salaried employees, transaction costs of $0.5 million, bad debt costs
of $0.3 million and a decrease in other overhead expenses of $0.1
million.
 
 Related party stock compensation.For the six months ended June 30, 2009, the Company had no related party
stock compensation expense associated with the stock consulting agreement with
Kanders & Company as compared to $0.5 million for the six months ended June
30, 2008.
 
 Asset impairment.Asset
impairment charges for the six months ended June 30, 2009 were $3.1 million and
primarily consisted of fixed asset impairment loss associated with the closure
of our Essington, Pennsylvania facility and the relocation of our Corporate
office. There were no asset impairment charges for the six months ended June 30,
2008.
 
 Interest expense.Interest
expense was $0.4 million for the six months ended June 30, 2009 compared to
interest expense of $1.3 million for the six months ended June 30, 2008. The
primary reason for the decrease in interest expense is due to the overall
reduction in the Company’s revolving credit agreement and term loan, and a
favorable mark to market adjustment of $0.2 million on interest rate swap
agreements.
 
 PROVISION
FOR INCOME TAXES
 
 For
income tax purposes, the Company has available federal net operating loss
carry-forwards of approximately $118.4 million and research and development
credit carry-forwards of approximately $0.2 million at June 30, 2009. The net
operating loss and research and development credit carry-forwards expire in 2011
through 2027 if not previously utilized. The utilization of these carry-forwards
may be subject to limitations based on past and future changes in ownership of
the Company pursuant to Internal Revenue Code Section 382, as amended. If the
Company were to be acquired at its recent stock value such that Section 382 is
applicable, this would eliminate the ability to use a substantial majority of
these carry-forwards. The recognition of a valuation allowance for deferred
taxes requires management to make estimates about the Company’s future
profitability. The estimates associated with the valuation of deferred taxes are
considered critical due to the amount of deferred taxes recorded on the
consolidated balance sheet and the judgment required in determining the
Company’s future profitability. Deferred tax assets were $0 and $39.7 million at
June 30, 2009 and December 31, 2008, net of valuation allowances of $41.6
million and $0.3 million, respectively.
  The
Company has an effective tax rate provision of 725.4% for the six months ended
June 30, 2009, which includes the impact of a full valuation allowance against
deferred tax assets of $41.6 million recorded in the quarter ended June 30,
2009, federal alternative minimum tax and state taxes. The Company has an
effective tax rate benefit of 415.2% for the six months ended June 30, 2008. The
significant change in the Company’s effective tax rate is primarily due to the
reversal of the previously recorded valuation allowance in the second quarter of
2008 and the increase of the valuation allowance in the second quarter of 2009
resulting from revised forecasts.
 LIQUIDITY
AND CAPITAL RESOURCES
 
 Liquidity
 
 In
connection with the Company’s acquisition of the assets of Concord, Concord
entered into a senior secured credit facility (the “Credit Agreement”) dated
October 3, 2006 with LaSalle Bank National Association which was acquired by
Bank of America on October 1, 2007, as administrative agent (the “Agent”) and
the lenders party thereto, (collectively, the “Lenders”).
  23
 
 The
Credit Agreement established a commitment by the Lenders to Concord to provide
up to $40.0 million in the aggregate of loans and other financial accommodations
consisting of (i) a five-year senior secured term loan in an aggregate principal
amount of $28.0 million, (ii) a five-year senior secured revolving credit
facility in the aggregate principal amount of $10.0 million (the “Revolving
Facility”) and (iii) a five-year senior secured capital expenditure facility in
the aggregate principal amount of $2.0 million. The Revolving Facility is
further subject to a borrowing base consisting of up to 85% of eligible accounts
receivable and up to 55% of eligible inventory. The Revolving Facility includes
a sublimit of up to an aggregate amount of $5.0 million in letters of credit and
a sublimit of up to an aggregate amount of $2.5 million in swing line
loans. The capital expenditure facility permitted the Company to draw funds for
the purchase of machinery and equipment during the 6-month period ended March 3,
2007, and then converted into a 4.5-year term loan. Immediately following the
closing of the Concord acquisition, the Company drew down approximately
$31.3 million and had additional availability under the Revolving Facility of
approximately $6.7 million. There were no amounts drawn under the capital
expenditure facility at the time of closing of the credit facility nor were
there any amounts drawn down prior to March 3, 2007, the date the capital
expenditure facility expired. On March 13, 2008, the Company entered into a
second amendment to the Credit Agreement to provide for, among other things,
revisions to certain of the financial covenants under the bank credit facilities
discussed above.  These covenants require the Company to meet certain
financial tests, namely (a) to maintain a consolidated leverage ratio not in
excess of 2.75 to 1.00 on the last day of any fiscal quarter, and (b) to
maintain a consolidated fixed charge coverage ratio of not less than 1.50 to
1.00 for the period of four consecutive fiscal quarters ending on or after March
31, 2009.
 
 At June
30, 2009 and December 31, 2008, the outstanding balance under the Revolving
Facility was $0 and $0.3 million, respectively. At June 30, 2009, the Company
had $0 available in additional borrowings net of $1.6 million in outstanding
letters of credit which cannot be drawn upon due to the Company’s default under
the Credit Agreement. The balance under the term loan at June 30, 2009 and
December 31, 2008 was $18.0 million and $19.0 million,
respectively.
  As of
June 30, 2009, the Company’s consolidated leverage ratio was 4.29 and its fixed
charge coverage ratio was 0.61, which is a violation of its financial covenants
under the Credit Agreement. These violations constitute events of default under
the Credit Agreement and the Company has been engaged in discussions with the
Lenders with the objective of amending the Credit Agreement in order to address
the violations. Pending the resolution of its dialogue with the Lenders, the
Company elected not to make a required debt payment on June 30, 2009 to the
Lenders in an amount equal to $1.0 million, representing an amortized payment of
principal together with interest due, even though it had sufficient cash to make
such payment. As a result of default status under the Credit Agreement, the
Company reclassified its loan balance due in the amount of $18.0 million under
the Credit Agreement to current liabilities for the period ended June 30,
2009.
 On August
6, 2009, despite continued dialogue with the Lenders, Concord received a written
notice from the Lenders declaring that the principal amount of all obligations
of Concord under the Credit Agreement had been accelerated and were immediately
due and payable as a result of Concord’s previously disclosed default in the
payment of principal and interest in an amount equal to $1.0 million and
violation of several financial covenants contained in the Credit Agreement,
including its consolidated leverage ratio and consolidated fixed charge ratio as
of June 30, 2009.  In addition, the Lenders exercised their right to
set off such obligations against all funds contained in Concord’s principal
deposit account with the Administrative Agent resulting in Concord having
limited and intermittent access to sufficient funds to support its business
operations causing a substantial doubt about its ability to continue as a going
concern.
 
 Upon the
occurrence and during the continuation of an event of default under the Credit
Agreement, the Administrative Agent, with the consent of the Lenders, could,
without limitation, take the following actions: (i) terminate all of the
commitments to loan money or issue letters of credit under the Credit Agreement,
(ii) declare all amounts due under the Credit Agreement immediately due and
payable, (iii) increase the rate of interest on the outstanding loans by two
percent per annum, and/or (iv) exercise all of its rights and remedies under the
Credit Agreement and related security documents and applicable law, including
any rights to seize substantially all of the Company’s assets, which could
adversely affect the Company’s ability to continue to operate as a going
concern. The Lenders have, however, informed the Company that, while they will
not make any further loans under the Credit Agreement until the defaults are
cured, they are not currently planning to declare the loans under the Credit
Agreement due and payable subject to continuing discussions.
 
 On August
12, 2009, in connection with their ongoing efforts to resolve defaults under the
Credit Agreement, Concord, the Company, the Subsidiaries and the Lenders entered
into a letter agreement (the “Letter Agreement”), which was dated August 10,
2009, and which provided for, among other things, rescission of the termination
of the Revolver Facility, the June 30 payment default being cured, and the
application of all existing funds of Concord and future incoming funds of
Concord to repay amounts outstanding under the Term Loan.  In
addition, Concord (i) consented to the Lenders’ previous acceleration of the
Term Loan as well the Lenders’ continuing ability to apply funds of Concord as
prepayments against the Term Loan; and (ii) waived any and all claims it may
have against the Lenders.
  24
 
 On August
13, 2009, in connection with their ongoing efforts to resolve defaults under the
Credit Agreement, Concord, the Company, the Subsidiaries and the Lenders entered
into a Third Amendment and Temporary Waiver Agreement (the “Amendment and Waiver
Agreement”).  Pursuant to the Amendment and Waiver Agreement,
Concord’s borrowing access under the Revolver Facility has been reinstated
through and including September 12, 2009, solely for purposes of making payments
pursuant to a weekly budget that has been approved by the Lenders (the
“Reinstated Revolving Facility”).  The Amendment and Waiver Agreement
contains a temporary waiver of certain defaults and event of defaults under the
Credit Agreement and the temporary suspension of certain representations and
warranties under the Credit Agreement to permit Concord to borrow under the
Reinstated Revolving Facility.  In addition, pursuant to the Amendment
and Waiver Agreement, all funds of Concord shall be subject to a secured lock
box and cash management system to be maintained by the Administrative Agent and
interest will accrue on borrowings under the Reinstated Revolving Facility at a
rate equal to, at Concord’s election, either (a) the greater of (i) LIBOR or
(ii) 1%, plus a margin of 6.0%, or (b) the greater of (i) the Federal Funds
Rate, (ii) the prime rate publicly announced by the Administrative Agent as its
prime rate or (iii) 3.25%, plus a margin of 4.5%.
 
 In
connection with the Amendment and Waiver Agreement, Concord has agreed to hire a
financial consultant satisfactory to the Lenders to review Concord’s financial
condition with the Lenders.  Such consultant will have authority to
review and, under certain circumstances confirm, budgeted expenditures during
the last fifteen days of the term of the Reinstated Revolving
Facility.
 
 The
Company and Concord expect to continue negotiations with the Lenders to modify
the Credit Agreement in order to address Concord’s ability to continue to comply
with the Credit Agreement on an ongoing basis after the expiration of the
Reinstated Revolving Facility so that Concord can continue to borrow under the
Credit Agreement beyond September 12, 2009. The Company cannot give any
assurances that it has or can raise sufficient funds to repay all of the
outstanding amounts under the Credit Agreement, that it will be able to
successfully enter into an amendment of the Credit Agreement satisfactory to
Concord, the Company and the Lenders that will be effective after the expiration
of the Reinstated Revolving Facility or that it will be able to otherwise
resolve outstanding matters with the Lenders in a manner satisfactory to Concord
and the Company.  If the Company is unable to enter into a further
amendment of the Credit Agreement in a manner satisfactory to it, the ongoing
defaults under the Credit Agreement and the exercise of the Lenders’ available
remedies under the Credit Agreement may require the Company, Concord and/or the
Subsidiaries to seek reorganization or restructuring, including filing for
protection under bankruptcy laws and/or cease operations, which would have a
material adverse effect on the market price of the Company’s common stock, its
business, financial condition and results of operations.
 
 The
Credit Agreement is guaranteed by the Company and its direct and indirect
subsidiaries and is secured by, among other things, (a) (i) all of the equity
interests of Concord’s subsidiaries and (ii) a pledge by the Company of all of
the issued and outstanding shares of stock of Concord by the Company and (b) a
first priority perfected security interest on substantially all the assets of
the Company and its direct and indirect subsidiaries pursuant to a guaranty and
collateral agreement dated October 3, 2006 and delivered in connection with the
Credit Agreement (the “Guaranty Agreement”). In addition, the Agent for the
benefit of the Lenders, has a mortgage on all owned real estate of the Company
and its direct and indirect subsidiaries, as well as deposit account control
agreements with respect to funds on deposit in bank accounts of the Company and
its direct and indirect subsidiaries. The Credit Agreement expires on October 2,
2011.
 
 The
Company is exposed to interest rate volatility with regard to existing issuances
of variable rate debt. Primary exposure includes movements in the U.S. prime
rate and LIBOR. The Company uses interest rate swaps to reduce interest rate
volatility. On January 2, 2007, the Company entered into an interest rate
protection agreement. As of June 30, 2009, the notional amount was approximately
$9.3 million of interest rate swaps fixing interest rates between 5.0% and
5.8%.
 
 Market
volatility in LIBOR has recently exposed the Company to fluctuations in interest
rates on outstanding borrowings provided under the Credit Agreement. Based on
available information, we believe the financial institutions syndicated under
our Credit Agreement are able to fulfill their commitments as of the date of
this filing, however, there can be no assurance that one or more financial
institutions will be able to fulfill their funding obligations.
  25
  On April
21, 2004, the Company closed on an investment into the Company by Olden
Acquisition LLC (“Olden”), an affiliate of Kanders & Company, Inc., for the
purpose of initiating a strategy to redeploy the Company’s assets and use the
Company’s cash, cash equivalent assets and marketable securities to enhance
stockholder value. The Company issued and sold to Olden a 2% ten-year
Convertible Subordinated Note, which is presently convertible and (subject to a
call by the Company under certain circumstances) at a conversion price of $2.25
per share of Company common stock into approximately 19.9% of the outstanding
common equity of the Company as of the closing date.  Proceeds to the
Company from this transaction totaled approximately $2.5 million before
transaction costs of $0.3 million.  The transaction costs are being
amortized over ten years, the term of the debt.  Interest on the note
accrues semi-annually but is not payable currently or upon conversion of the
note.  The note matures on April 21, 2014.  As of June 30,
2009 and December 31, 2008, the outstanding balance on the note payable amounted
to $2.5 million and is classified as long-term debt. As of June 30, 2009
and December 31, 2008, accrued interest on the note was $0.3 million and
$0.2 million, respectively and is classified as other long-term liabilities on
the accompanying consolidated balance sheets.
  Operating
Activities
 
 Net cash
provided by operating activities was $3.5 million for the six months ended June
30, 2009, reflecting a net loss of $45.2 million offset by the change in
deferred tax assets, net of valuation allowance, of $39.7 million, depreciation
and amortization of $1.2 million, non-cash deferred stock-based compensation
expense of $0.1 million, asset impairment of $3.1 million and a reduction in
working capital of $4.6 million. The reduction in working capital is primarily
due to lower inventory, lower average cost of inventory, and the timing of
greater cash collections against lower revenues. Net cash provided by operating
activities was $0.8 million for the six months ended June 30, 2008, reflecting
net income of $38.1 million, depreciation and amortization of $1.1 million,
non-cash deferred stock-based compensation expenses of $0.5 million, provision
for doubtful accounts of $0.3 million offset by the impact of the change in
deferred tax assets of $31.4 million and the changes in working capital of $7.8
million. The change in working capital is primarily due to the timing of price
increases to customers, tight credit markets experienced by our vendors and the
timing difference between increased revenues generated and cash
collections.
 
 Investing
Activities
 
 Investing
activities were $0 for the six months ended June 30, 2009. Net cash used in
investing activities was $0.5 million for the six months ended June 30, 2008,
primarily resulting from implementation of Concord’s new information technology
platform and the purchase of machinery and equipment.
 
 Financing
Activities
 
 Net cash
used in financing activities was $1.3 million for the six months ended June 30,
2009. The net cash used in financing activities was primarily used to pay down a
portion of the Company’s line of credit facility in the amount of $0.3 million
and to pay down long-term debt in the amount of $1.0 million. Net cash used in
financing activities was $1.0 million for the six months ended June 30, 2008.
The net cash used in financing activities was primarily from an increase in the
Company’s line of credit facility of $1.0 million which was used for working
capital expansion and capital expenditures, offset by cash used to pay down
long-term debt in the amount of $2.0 million.
 
 Our
primary liquidity needs are to service indebtedness and support working capital
requirements.  As further discussed above, on August 13, 2009, in
connection with their ongoing efforts to resolve defaults under the Credit
Agreement, Concord, the Company, the Subsidiaries and the Lenders entered into
the Amendment and Waiver Agreement, which contains, among other things, a
temporary waiver of certain defaults and event of defaults under the Credit
Agreement and the temporary suspension of certain representations and warranties
under the Credit Agreement to permit Concord to borrow under the Reinstated
Revolving Facility through September 12, 2009, solely for purposes of making
payments pursuant to a weekly budget that has been approved by the Lenders. As a
result, we are dependent on the earnings and cash flow from Concord to meet our
future liquidity needs.  However, the various sectors of the credit
markets and financial services industry have been experiencing a period of
unprecedented turmoil and upheaval characterized by disruption in the credit
markets and availability of credit and other financing, the failure, bankruptcy,
collapse or sale of various financial institutions and an unprecedented level of
intervention from the United States federal government. While the ultimate
outcome of these events cannot be predicted, they may have a material adverse
effect on our ability to successfully enter into an amendment of the Credit
Agreement that will be effective after the expiration of the Reinstated
Revolving Facility on September 12, 2009, the ability of our customers and
suppliers to continue to operate their businesses or the demand for our products
which could have a material adverse effect on the market price of our common
stock and our business, financial condition and results of operations. See also
Part II, Item 1A of this Form 10-Q and  Part I, Item 1A of the
Company’s Annual Report on Form 10-K for the year ended December 31, 2008, for
more information.
  Recent
distress in the financial markets has had an adverse impact on financial market
activities including among other things, extreme volatility in security prices,
severely diminished liquidity and credit availability, rating downgrades of
certain investments and declining valuations of others. However, there can be no
assurance that as a result of these conditions there will not be an impact on
our future financial position, results of operations or liquidity. Based on
available information, we believe the financial institutions syndicated under
our Credit Agreement are able to fulfill their commitments as of the date of
this filing; however, there can be no assurance that one or more financial
institutions will be able to fulfill their funding obligations.
  26
 
 Capital
Expenditures
 
 The
Company anticipates capital expenditures, excluding acquisitions, of $0 for
fiscal 2009.
 
 RECENTLY
ISSUED ACCOUNTING PRONOUNCEMENTS
 
 In June
2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards CodificationTM
and the Hierarchy of Generally Accepted Accounting Principles, a replacement of
FASB Statement No. 162” (“SFAS  168”).  The FASB Accounting
Standards CodificationTM (“Codification”) will be the single source of accounting
principles and the framework for selecting the principles used in the
preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles in the
United States.  Rules and interpretive releases of the SEC under authority
of federal securities laws are also sources of authoritative generally accepted
accounting principles for SEC registrants.  All existing accounting
standards are superseded as described in SFAS 168.  All other accounting
literature not included in the Codification is nonauthoritative.  This
statement is effective for interim and annual periods ending after September 15,
2009.  The Company does not expect that the adoption of SFAS 168 will have
a significant impact on the determination or reporting of its financial
results.
 
 In May
2009, the FASB issued SFAS No. 165, “Subsequent Events” (“SFAS 165”).  This
statement was effective for interim or annual financial periods ending after
June 15, 2009.  SFAS 165 establishes general standards of accounting for
and disclosure of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued.   SFAS 165
also requires the disclosure of the date through which an entity has evaluated
subsequent events and the basis for that date—that is, whether that date
represents the date the financial statements were issued or were available to be
issued.  This disclosure should alert all readers of financial statements
that an entity has not evaluated subsequent events after that date in the set of
financial statements being presented.  Adoption of SFAS 165 did not have a
significant impact on the determination or reporting of the Company’s financial
results.
 
 On
April 9, 2009, the Financial Accounting Standards Board
(“FASB”) issued Staff Position FAS 107-1 (“FSP FAS 107-1”) and Accounting
Principles Board 28-1 (“APB 28-1”), entitled “Interim Disclosures about Fair
Value of Financial Instruments” which requires disclosures about fair value of
financial instruments within the scope of FAS 107 for interim reporting periods.
FSP FAS 107-1 and APB 28-1 is effective for interim reporting periods ending
after June 15, 2009 with early adoption permitted. The adoption of these
pronouncements did not have a material impact on the Company's financial
position, results of operations and cash flows.
 
 In March
2008, the FASB issued Statement of Financial Accounting Standards
(“SFAS”)  No. 161, Disclosures about Derivative Instruments and
Hedging Activities - an amendment of FASB Statement No. 133 ("SFAS 161"). SFAS
161 changes the disclosure requirements for derivative instruments and hedging
activities. Under SFAS 161, entities are required to provide enhanced
disclosures about (a) how and why an entity uses derivative instruments, (b) how
derivative instruments and related hedged items are accounted for under
Statement 133 and its related interpretations, and (c) how derivative
instruments and related hedged items affect an entity's financial position,
financial performance, and cash flows. SFAS 161 is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008. SFAS 161 encourages, but does not require, comparative
disclosures for earlier periods at initial adoption. The adoption of SFAS 161
did not have a significant impact on the Company’s financial position, results
of operations or cash flows.
 
 In
June 2008, the FASB issued FSP Emerging Issues Task Force (“EITF”) 03-6-1,
“Determining Whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities” (“FSP EITF 03-6-1”). FSP EITF 03-6-1 clarified that
all outstanding unvested share-based payment awards that contain rights to
nonforfeitable dividends participate in undistributed earnings with common
shareholders. Awards of this nature are considered participating securities and
the two-class method of computing basic and earnings per dilutive share must be
applied. The restricted stock awards the Company has granted to employees and
directors are considered participating securities as they receive rights to
nonforfeitable dividends should they be granted. The Company has adopted FSP
EITF 03-6-1 effective January 1, 2009.  The adoption of FSP EITF
03-6-1 did not have a significant impact on the Company’s financial position,
results of operations or cash flows.
 
 Item
3.  Quantitative and Qualitative Disclosures about Market
Risk
 
 There
have been no material changes to our exposure to market risk since December 31,
2008.
  27
 
 Item
4.  Controls and Procedures
 
 Evaluation
of Disclosure Controls and Procedures
 
 The
Company’s Chief Executive Officer and Chief Financial Officer, its principal
executive officer and principal financial officer, respectively, carried out an
evaluation of the effectiveness of the design and operation of the Company’s
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 June 30, 2009, pursuant to Exchange Act Rule
13a-15(a).  Based upon that evaluation, the Company’s Chief Executive
Officer and Chief Financial Officer concluded that the Company’s disclosure
controls and procedures as of June 30, 2009 are not effective, because of the
material weakness described in the Form 10-K for the period ended December 31,
2008, and as described below.
 
 Changes
in Internal Control over Financial Reporting
 
 There
have not been any changes in the Company’s internal control over financial
reporting during the three months ended June 30, 2009 that have materially
affected, or are reasonably likely to materially affect the Company’s internal
control over financial reporting.
 
 
 Remediation
Efforts in the First and Second Quarters 2009 on Previously Identified Material
Weakness
 
 The
following material weakness was disclosed in Item 9A of the Companies Form 10-K
for the period ended December 31, 2008:
 
 As of
December 31, 2008, the Company did not maintain effective control over the
valuation of inventory and cost of goods sold. Specifically, the Company did not
have effective supervisory and review controls over the valuation of inventory
including the average cost calculation and application of production variances
in order to ensure accurate reporting and disclosure in its interim and annual
financial statements. This control deficiency resulted in material audit
adjustments to the fourth quarter 2008 financial statements.
 
 In
response to the material weakness identified in the fourth quarter 2008, the
Company has taken actions to strengthen its control processes and procedures in
order to remediate the material weakness as described below. The Company will
continue to evaluate the effectiveness of its internal controls and procedures
on an ongoing basis and will take further action as appropriate.
 
 ·
              The
      Company engaged an outside professional service provider to review the
      Company’s existing set of internal controls and procedures associated with
      its physical inventory observation and reconciliation process and make
      recommended improvements;
 
 ·
              The
      Company has taken disciplinary actions and/or made changes with respect to
      certain personnel as a result of the errors in accounting and failure to
      account in accordance with generally accepted accounting
      principles;
 
 ·
              The
      Company has made appropriate personnel changes to improve the inventory
      valuation and the financial reporting requirements required by generally
      accepted accounting principles;
 
 ·
              The
      Company has and will continue to provide additional training to our
      employees as it relates to inventory valuation and the financial reporting
      requirements required by generally accepted accounting principles;
      and
 
 ·
              The
      Company has and will continue to review the qualifications and assessment
      of the Company’s needs with respect to personnel in areas related to
      inventory, and make appropriate personnel changes and increase supervision
      and training to effectuate the foregoing
  changes.
 
 The
Company expects to continue to develop new policies and procedures and educate
and train its employees on its existing policies and procedures in a continual
effort to improve its internal control over financial reporting, and expects to
take further actions as appropriate.
  28
  PART
II.  OTHER INFORMATION
  Item
1.      Legal Proceedings
 
 Except as
set forth below, there have been no material changes to the legal proceedings
described in the Company’s Annual Report Form 10-K for the year ended December
31, 2008.
 
 Public
Offering Securities Litigation
 
 On
November 2, 2001, Timothy J. Fox filed a purported class action lawsuit against
the Company; FleetBoston Robertson Stephens, Inc., the lead underwriter of the
Company’s April 1999 initial public offering; several other underwriters who
participated in the initial public offering; Steven J. Snyder, the Company’s
then president and chief executive officer; and Thomas M. Donnelly, the
Company’s then chief financial officer. The lawsuit was filed in the United
States District Court for the Southern District of New York and was assigned to
the pretrial coordinating judge for substantially similar lawsuits involving
more than 300 other issuers. An amended class action complaint, captioned In re Net Perceptions, Inc. Initial
Public Offering Securities Litigation,01 Civ. 9675
(SAS), was filed on April 22, 2002, expanding the basis for the action to
include allegations relating to the Company’s March 2000 follow-on public
offering in addition to those relating to its initial public offering.  The
action against the Company was coordinated with the other substantially similar
class actions as In re Initial
Public Offering Securities Litigation, 21 MC (SAS) (the “Coordinated
Class Actions”).
  On August
31, 2005, the Court gave preliminary approval to a settlement reached by the
plaintiffs and issuer defendants in the Coordinated Class Actions. On December
5, 2006, the United States Court of Appeals for the Second Circuit overturned
the District Court's certification of the class of plaintiffs who are pursuing
the claims that would be settled in the settlement against the underwriter
defendants. Plaintiffs filed a Petition for Rehearing with the Second Circuit on
January 5, 2007 in response to the Second Circuit's decision. On April 6, 2007,
the Second Circuit denied plaintiffs' Petition for Rehearing. On June 25, 2007,
the District Court signed an Order terminating the settlement. On November 13,
2007, the issuer defendants in certain designated “focus cases” filed a motion
to dismiss the second consolidated amended class action complaints that were
filed in those cases. On March 26, 2008, the District Court issued an Opinion
and Order denying, in large part, the motions to dismiss the amended complaints
in the “focus cases.” On April 2, 2009, the plaintiffs filed a motion for
preliminary approval of a new proposed settlement between plaintiffs, the
underwriter defendants, the issuer defendants and the insurers for the issuer
defendants. On June 10, 2009, the Court issued an opinion preliminarily
approving the proposed settlement, and scheduling a settlement fairness hearing
for September 10, 2009.
 
 Concord
Steel, Inc. v. Wilmington Steel Processing Co., Inc., et al.
 
 On
November 21, 2007, Concord filed a Verified Complaint in the Delaware Chancery
Court against Wilmington Steel, Kenneth Neary and William Woislaw for violation
of non-compete provisions contained in an Asset Purchase Agreement, dated
September 19, 2006 and certain related agreements, and at the same time moved
for a preliminary injunction to prohibit breaches of those restrictive
covenants.  On January 18, 2008, the defendants in that case served an
Answer denying the material allegations of the Complaint and asserting
counterclaims for tortious interference with business relations and
defamation arising from alleged telephone calls made by Concord to the
customer to which Wilmington was selling. On April 3, 2008, the Court
granted the preliminary injunction sought by the Company and thereafter denied
defendants’ request for a stay and for certification of an interlocutory appeal.
On July 22, 2008, defendants withdrew their counterclaims without prejudice. A
three-day trial was held during the week of October 20, 2008, post-trial briefs
have been submitted and final arguments were held on April 17, 2009. A decision
from the Court is expected during the third quarter of 2009.
 
 John
F. Steward v. Concord Steel, Inc.
 
 A former
employee of CRC Acquisition Corp. filed suit against Concord in June 2007 in the
Court of Common Pleas, Trumbull County, Ohio alleging that he was terminated by
Concord in August 2006 (prior to the acquisition on October 3,
2006 by Concord (formerly known as SIG Acquisition Corp.) of the assets of
CRC Acquisition Co. LLC (“CRC”)) in violation of his rights under the federal
Family and Medical Leave Act. Plaintiff John F. Steward seeks compensatory
damages in an unstated amount, liquidated damages, injunctive relief and
reinstatement to his job. Concord is vigorously defending the
action and maintains that CRC is the proper party defendant,
denominated as “Concord Steel.” On August 18, 2008, the Plaintiff served its
amended complaint to add as named defendants in addition to Concord, the
original named defendant, each of Concord, SIG Acquisition Corp., and CRC. CRC
subsequently asserted cross claims against Concord which we intend to defend
vigorously and Concord has asserted cross claims against CRC.  The action
was settled on a no-admission basis by the Company during April
2009.
  29
  Item
1A.      Risk Factors
  Except as
discussed below, there are no material changes to the risk factors disclosed in
the factors discussed in “Risk Factors” in Part I, Item 1A of the Company’s
Annual Report on Form 10-K for the year ended December 31, 2008, which
could materially affect the Company’s business, financial condition or future
results. The risks described in the Company’s filings with the Securities and
Exchange Commission are not the only risks facing the Company. Additional risks
and uncertainties not currently known to the Company or that the Company
currently deems to be immaterial also may materially adversely affect the
Company’s business, financial condition and/or operating results.
 
 Concord
will have limited access to funds to support its business operations through
September 12, 2009, and if Concord is unable to enter into a further amendment
of the Credit Agreement in a manner satisfactory to it, Concord and the Company
may not be able to continue to access funds under its revolving credit facility
or continue as a going concern and may be forced to seek reorganization or
restructuring, including filing for protection under bankruptcy laws and/or
cease operations.
 
 Although
the financial statements included in this Quarterly Report on Form 10-Q have
been prepared assuming we will continue as a going concern, Concord’s borrowing
access under its Credit Agreement has been reinstated on a limited basis through
and including September 12, 2009, solely for purposes of making payments
pursuant to a weekly budget that has been approved by the Lenders. In addition,
all existing funds of Concord and future incoming funds of Concord must be
applied to repay amounts outstanding under the Credit
Agreement.  Concord’s limited and intermittent access to sufficient
funds to support its business operations, as well as other events and
uncertainties related to the Credit Agreement, raise substantial doubt about our
ability to continue as a going concern.
 
 The
Company and Concord expect to continue negotiations with the Lenders to modify
the Credit Agreement in order to address Concord’s ability to continue to comply
with the Credit Agreement on an ongoing basis after the expiration of the
Reinstated Revolving Facility so that Concord can continue to borrow under the
Credit Agreement beyond September 12, 2009. The Company cannot give any
assurances that it has or can raise sufficient funds to repay all of the
outstanding amounts under the Credit Agreement, that it will be able to
successfully enter into an amendment of the Credit Agreement satisfactory to
Concord, the Company and the Lenders that will be effective after the September
12, 2009 expiration of the Reinstated Revolving Facility or that it will be able
to otherwise resolve outstanding matters with the Lenders in a manner
satisfactory to Concord and the Company.  If the Company is unable to
enter into a further amendment of the Credit Agreement in a manner satisfactory
to it, the ongoing defaults under the Credit Agreement and the exercise of the
Lenders’ available remedies under the Credit Agreement may require the Company,
Concord and/or its subsidiaries to seek reorganization or restructuring,
including filing for protection under bankruptcy laws and/or cease operations,
which would have a material adverse effect on the market price of the Company’s
common stock, its business, financial condition and results of
operations.
 
 Item
3.      Defaults Upon Senior
Securities
  Our
Current Reports on Form 8-K filed with the Securities and Exchange Commission on
July 2, 2009, August 12, 2009 and August 13, 2009 are incorporated by reference
herein in their entirety.
  30
 
 Item
4.     Submission of Matters to a Vote of Security
Holders
  One
proposal was submitted to a vote of, and approved by, the Company’s stockholders
at its Annual Meeting of Stockholders' held on June 23, 2009. The proposal is
described in the Company’s Definitive Proxy Statement on Schedule 14A (the
“Proxy Statement”), filed with the Securities and Exchange Commission on April
30, 2009.
 
 Of the
8,646,912 shares of common stock entitled to vote at the annual meeting,
7,872,767 shares were represented in person or by proxy, which constitutes
approximately 91.0% of the total votes entitled to be cast at the meeting. Each
share of the Company’s outstanding common stock is entitled to one
vote.
 
 The vote
for this proposal was cast as follows:
 
 Proposal
1. Election of Directors:
 
 Number of Shares
                  Voted For
                
                
                Number of Shares WithheldDirectors
                Warren
      B. Kanders
                
                
                7,485,881
                
                
                
                386,886Nicholas
      Sokolow
                
                
                6,713,548
                
                
                
                1,159,219David
      A. Jones
                
                
                6,713,721
                
                
                
                1,159,046
 31
  Item
6.   Exhibits
  ExhibitNumber
                  
                  Description10.1
                  
                  Letter Agreement dated August 10,
      2009 (filed as Exhibit 10.1 to our Current Report on Form 8-K Filed with
      the Securities and Exchange Commission on August 12,
      2009)10.2
                  
                  Third Amendment and Temporary
      Waiver Agreement dated August 13, 2009 (filed as Exhibit 10.2 to our
      Current Report on Form 8-K filed with the Securities and Exchange
      Commission on August 13, 2009)31.1
                  
                  Certification of Principal
      Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
      200231.2
                  
                  Certification of Principal
      Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
      200232.1
                  
                  Certification of Principal
      Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
      200232.2
                  
                  Certification of Principal
      Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002
 32
  SIGNATURES
  Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
   STAMFORD INDUSTRIAL
      GROUP,
      INC.Date:
      August 17, 2009
                By:
                /s/
      Albert W. Weggeman Jr.Albert W.
      Weggeman, Jr.President and Chief Executive
      Officer

                  (Principal
      Executive Officer)By:
                /s/
      Jonathan LaBarreJonathan
      LaBarreChief
      Financial Officer, Secretary and Treasurer
                  (Principal
      Financial Officer)
  33
 
  EXHIBIT
INDEX
  ExhibitNumber
                
                Description10.1
                
                Letter Agreement dated August 10,
      2009 (filed as Exhibit 10.1 to our Current Report on Form 8-K Filed with
      the Securities and Exchange Commission on August 12,
      2009)10.2
                
                Third Amendment and Temporary
      Waiver Agreement dated August 13, 2009 (filed as Exhibit 10.2 to our
      Current Report on Form 8-K filed with the Securities and Exchange
      Commission on August 13, 2009)31.1
                
                Certification of Principal
      Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
      200231.2
                
                Certification of Principal
      Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
      200232.1
                
                Certification of Principal
      Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
      200232.2
                
                Certification of Principal
      Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002
  34