**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549







**FORM
      10-Q**




**(Mark
      One)**




**x  
QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES**


**EXCHANGE
      ACT OF 1934**




**For
      the quarterly period ended September 30, 2008**




**OR**




**o  
TRANSITION
      REPORT PURSUANT
      TO SECTION 13 OR 15(d) OF THE SECURITIES**


**EXCHANGE
      ACT OF 1934** ****





**For
      the transition period from** **________** **to ________** **.**




**Commission
      File Number: 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 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 x  
      Non-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 November 07, 2008, there were
      outstanding 42,043,935** **shares of the registrant’s Common Stock, $0.0001 par
      value.**










**STAMFORD
      INDUSTRIAL GROUP, INC.**


**FORM
      10-Q**


For
      the
      Quarter Ended September 30, 2008









**TABLE
      OF CONTENTS**







******Page****PART
                I. FINANCIAL INFORMATION**Item
                1.
                Financial Statements (Unaudited)Consolidated
                Balance Sheets as of September 30, 2008 and December 31,
                2007
            1Consolidated
                Statements of Income for the three and nine months ended September
                30,
                2008 and September 30, 2007
            2Consolidated
                Statements of Cash Flows for the nine months ended September 30,
                2008 andSeptember
                30, 2007
            3Notes
                to the Consolidated Financial Statements
            4Item
                2.
                Management’s Discussion and Analysis of Financial Condition and Results of
                Operations
            17Item
                3.
                Quantitative and Qualitative Disclosures about Market Risk
            24Item
                4.
                Controls and Procedures
            24**PART
                II. OTHER INFORMATION**Item
                1.
                Legal Proceedings
            25Item
                1A.
                Risk Factors
            26Item
                2. Unregistered Sales of Equity Securities
            26Item
                6. Exhibits
            27**SIGNATURES**
            28**EXHIBIT
                INDEX**
            29











**PART
      I.**  **FINANCIAL
      INFORMATION**




**Item
      1** **.**   **Financial
      Statements**




**STAMFORD
        INDUSTRIAL GROUP, INC.**


**CONSOLIDATED
        BALANCE SHEETS (UNAUDITED)**
 **(in
        thousands)**
  **September
                  30,**
                **2008**
              
              **December
                  31,**
                **2007****ASSETS**Current
                  assets:Cash
                  and cash equivalents
              
              $
              610
              
              $
              1,236Accounts
                  receivable, net
              
              
              18,491
              
              
              8,341Inventories
              
              
              25,367
              
              
              13,825Deferred
                  tax asset
              
              
              5,505
              
              
              2,684Prepaid
                  expenses and other current assets
              
              
              48
              
              
              496Total
                  current assets
              
              
              50,021
              
              
              26,582Property,
                  plant and equipment, net
              
              
              8,397
              
              
              8,608Deferred
                  financing costs, net
              
              
              530
              
              
              645Intangible
                  assets, net
              
              
              19,738
              
              
              20,524Deferred
                  tax asset
              
              
              33,608
              
              
              5,368Other
                  assets
              
              
              205
              
              
              210Total
                  assets
              
              $
              112,499
              
              $
              61,937**LIABILITIES
                  AND STOCKHOLDERS’ EQUITY**Current
                  liabilities:Notes
                  payable
              
              $
              3,786
              
              $
              5,286Current
                  portion of long-term debt
              
              
              4,000
              
              
              4,000Accounts
                  payable
              
              
              17,865
              
              
              7,768Accrued
                  expenses and other liabilities
              
              
              3,583
              
              
              2,742Income
                  taxes payable
              
              
              586
              
              
              73Total
                  current liabilities
              
              
              29,820
              
              
              19,869Long-term
                  debt, less current portion
              
              
              18,533
              
              
              21,533Other
                  long-term liabilities
              
              
              1,308
              
              
              889Total
                  liabilities
              
              
              49,661
              
              
              42,291Commitments
                  and contingencies (Note 12)Stockholders’
                  equity:Preferred
                  stock — $.0001 par value; 5,000 shares authorized; no shares issued or
                  outstanding
              
              
              —
              
              
              —Common
                  stock — $.0001 par value; 100,000 shares authorized; 42,101 and 41,801
                  shares issued and outstanding at September 30, 2008 and December
                  31, 2007,
                  respectively
              
              
              3
              
              
              3Additional
                  paid-in capital
              
              
              247,032
              
              
              246,346Accumulated
                  deficit
              
              
              (184,197
              )
              
              (226,703
              )Total
                  stockholders’ equity
              
              
              62,838
              
              
              19,646Total
                  liabilities and stockholders’ equity
              
              $
              112,499
              
              $
              61,937




See
      accompanying notes to the consolidated financial statements.




1
 
  **STAMFORD
          INDUSTRIAL GROUP, INC.**
 **CONSOLIDATED
          STATEMENTS OF INCOME (UNAUDITED)**
 **(in
          thousands, except per share amounts)**
  **Three
                    Months Ended**
                
                **Nine
                    Months Ended****September
                    30,**
                  **2008**
                
                **September
                    30,**
                  **2007**
                
                **September
                    30,**
                  **2008**
                
                **September
                    30,**
                  **2007**Revenues
                
                $
                41,484
                
                $
                28,197
                
                $
                116,342
                
                $
                84,382Cost
                    of revenues
                
                
                32,366
                
                
                23,102
                
                
                90,594
                
                
                69,540Gross
                    margin
                
                
                9,118
                
                
                5,095
                
                
                25,748
                
                
                14,842Operating
                    expenses:Sales
                    and marketing
                
                
                517
                
                
                368
                
                
                1,460
                
                
                1,043General
                    and administrative
                
                
                2,856
                
                
                2,933
                
                
                9,454
                
                
                8,028Related
                    party stock compensation
                
                
                262
                
                
                132
                
                
                713
                
                
                394Total
                    operating expenses
                
                
                3,635
                
                
                3,433
                
                
                11,627
                
                
                9,465Income
                    from operations
                
                
                5,483
                
                
                1,662
                
                
                14,121
                
                
                5,377Other
                    (expense) income:Interest
                    income
                
                
                —
                
                
                —
                
                
                1
                
                
                6Interest
                    expense
                
                
                (198
                )
                
                (720
                )
                
                (1,492
                )
                
                (1,935
                )Other
                    income (expense)
                
                
                5
                
                
                —
                
                
                48
                
                
                (139
                )Total
                    other expense, net
                
                
                (193
                )
                
                (720
                )
                
                (1,443
                )
                
                (2,068
                )Income
                    before taxes
                
                
                5,290
                
                
                942
                
                
                12,678
                
                
                3,309Provision
                    (benefit) for income taxes
                
                
                845
                
                
                331
                
                
                (29,828
                )
                
                636Net
                    income
                
                $
                4,445
                
                $
                611
                
                $
                42,506
                
                $
                2,673Basic
                    net income per share
                
                $
                0.11
                
                $
                0.01
                
                $
                1.02
                
                $
                0.06Shares
                    used in basic calculation
                
                
                41,904
                
                
                41,717
                
                
                41,866
                
                
                41,690Diluted
                    net income per share
                
                $
                0.09
                
                $
                0.01
                
                $
                0.88
                
                $
                0.06Shares
                    used in diluted calculation
                
                
                48,600
                
                
                48,826
                
                
                48,090
                
                
                48,578
  See
          accompanying notes to the consolidated financial statements.
  2




**STAMFORD
        INDUSTRIAL GROUP, INC.**


**CONSOLIDATED
        STATEMENTS OF CASH FLOWS (UNAUDITED)**
 **(in
        thousands)**
  **Nine
                  Months Ended****September
                  30,**
                **2008**
              
              **September
                  30,**
                **2007**Cash
                  flows from operating activities:Net
                  income
              
              $
              42,506
              
              $
              2,673Reconciliation
                  of net income to net cash provided by operating
                  activities:Provision
                  for doubtful accounts
              
              
              289
              
              
              25Depreciation
              
              
              795
              
              
              290Amortization
                  of intangible assets
              
              
              786
              
              
              786Amortization
                  of deferred financing costs
              
              
              115
              
              
              114Deferred
                  tax benefit
              
              
              (31,061
              )
              
              —Stock-based
                  compensation
              
              
              558
              
              
              2,001Changes
                  in assets and liabilities:Accounts
                  receivable
              
              
              (10,439
              )
              
              (3,774
              )Inventories
              
              
              (11,542
              )
              
              (1,773
              )Prepaid
                  expenses and other current assets
              
              
              448
              
              
              521Other
                  assets
              
              
              5
              
              
              56Accounts
                  payable
              
              
              10,097
              
              
              (556
              )Accrued
                  expenses and other liabilities
              
              
              1,862
              
              
              220Other
                  liabilities
              
              
              39
              
              
              —Net
                  cash provided by operating activities
              
              
              4,458
              
              
              583Cash
                  flows from investing activities:Capital
                  expenditures for property and equipment
              
              
              (584
              )
              
              (4,819
              )Net
                  cash used in investing activities
              
              
              (584
              )
              
              (4,819
              )Cash
                  flows from financing activities:Borrowings
                  from revolving credit facility
              
              
              1,500
              
              
              3,500Payments
                  on revolving credit facility
              
              
              (3,000
              )
              
              —Principal
                  payments on long-term debt
              
              
              (3,000
              )
              
              (3,000
              )Proceeds
                  from exercise of stock options
              
              
              —
              
              
              47Net
                  cash (used in) provided by financing activities
              
              
              (4,500
              )
              
              547Net
                  decrease in cash and cash equivalents
              
              
              (626
              )
              
              (3,689
              )Cash
                  and cash equivalents at beginning of period
              
              
              1,236
              
              
              3,703Cash
                  and cash equivalents at end of period
              
              $
              610
              
              $
              14Supplemental
                  cash flow disclosures:Interest
                  paid
              
              $
              1,340
              
              $
              1,895Taxes
                  paid
              
              $
              720
              
              $
              335




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”), through its wholly-owned subsidiary Concord
        Steel, Inc. (“Concord”) ,
        is a
        leading 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.
      With this initial acquisition, management is now focused on building a
      diversified global industrial manufacturing group through both organic and
      acquisition growth initiatives that are expected to complement and diversify
      existing business lines.





***Basis
      of Presentation***





The
      accompanying unaudited consolidated financial statements of the Company have
      been prepared in accordance with generally accepted accounting principles 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 generally accepted accounting principles 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 nine months ended
      September 30, 2008 are not necessarily indicative of the results to be obtained
      for the year ending December 31, 2008. 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, 2007, filed with the Securities and
      Exchange Commission on March 17, 2008.





The
      consolidated financial statements include the accounts of the Company and its
      wholly-owned subsidiaries. All inter-company accounts and transactions have
      been
      eliminated. Certain prior period balances have been reclassified to conform
      to
      current period presentation.




***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.





4


*Use
      of estimates* . ** The
      preparation of financial statements in conformity with generally accepted
      accounting principles 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 the recognition of sales when there is evidence
      of
      a sales agreement, the delivery of goods has occurred, 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.





*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.





*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
        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 would be 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 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 statement of income
      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 income. 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 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 nine months ended September 30, 2008, there have been no significant changes
      to the Company’s significant accounting policies and estimates as disclosed in
      the Company’s Annual Report on Form 10-K for the year ended December 31, 2007,
      other than the change in estimate for deferred tax asset valuation (see Note
      9).




***Recent
      Accounting Pronouncements***




In
      March
      2008 ,
      the
      Financial Accounting Standards Board (“FASB”) issued Statement of Financial
      Accounting Standards 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, with early application encouraged. The SFAS 161 encourages, but does
      not require, comparative disclosures for earlier periods at initial adoption.
      The Company does not anticipate any material impact on its future disclosure
      from the adoption of this standard.





5


In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair
      value, establishes a framework for measuring fair value under generally accepted
      accounting principles, and requires expanded disclosures about fair value
      measurements. SFAS 157 emphasizes that fair value is a market-based measurement,
      not an entity-specific measurement, and states that a fair value measurement
      should be determined based on the assumptions that market participants would
      use
      in pricing the asset or liability. SFAS 157 applies under other accounting
      pronouncements that require or permit fair value measurements, the FASB having
      previously concluded in those accounting pronouncements that fair value is
      the
      relevant measurement attribute. Accordingly, SFAS 157 does not require any
      new
      fair value measurements. In February 2008, the FASB issued Staff Positions
      157-1 and 157-2 which remove certain leasing transactions from the scope of
      SFAS
      157 and partially defer the effective date of SFAS 157 for one year for certain
      nonfinancial assets and liabilities. SFAS 157 is effective for fiscal years
      beginning after November 15, 2007. The adoption of FAS 157 on January 1,
      2008 did not have a material impact on the Company's financial position, results
      of operations and cash flows. The Company is currently assessing the impact
      of
      fully adopting SFAS 157 on its future disclosure for nonfinancial assets and
      liabilities, with no impact on its consolidated financial position and resulting
      operations expected.





In
      December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
      Combinations” (“SFAS 141R”), which replaces SFAS No. 141, “Business
      Combinations (“SFAS 141”).” SFAS 141R retains the underlying concepts of SFAS
      141 in that all business combinations are still required to be accounted for
      at
      fair value under the acquisition method of accounting, but SFAS 141R changes
      the
      application of the acquisition method in a number of significant aspects.
      Acquisition costs will generally be expensed as incurred; non-controlling
      interests will be valued at fair value at the acquisition date; in-process
      research and development will be recorded at fair value as an indefinite-lived
      intangible asset at the acquisition date; restructuring costs associated with
      a
      business combination will generally be expensed subsequent to the acquisition
      date; and changes in deferred tax asset valuation allowances and income tax
      uncertainties after the acquisition date generally will affect income tax
      expense. SFAS 141R is effective on a prospective basis for all business
      combinations for which the acquisition date is on or after the beginning of
      the
      first annual period subsequent to December 15, 2008. Early adoption is not
      permitted. SFAS 141R will only be applicable to future business combinations,
      it
      will not have a significant effect on the Company’s financial statements prior
      to such an acquisition.





**Note
      2. Inventories**




Inventories,
      net of inventory reserves at September 30, 2008 and December 31, 2007 are as
      follows:


**September
                  30,**
                **2008**
              
              **December
                  31,**
                **2007**Finished
                  goods
              
              $
              1,296
              
              $
              101Work-in-process
              
              
              1,095
              
              
              1,197Raw
                  materials
              
              
              22,976
              
              
              12,527$
              25,367
              
              $
              13,825




6




**Note
      3** **.
      Property, Plant and Equipment**




Property,
      plant and equipment, net, as of September 30, 2008 and December 31, 2007 are
      as
      follows:




**September
                  30,**
                **2008**
              
              **December
                  31,**
                **2007**Land
              
              $
              350
              
              $
              350Building
                  and improvements
              
              
              1,307
              
              
              1,294Leasehold
                  improvements
              
              
              1,238
              
              
              1,275Machinery
                  and equipment
              
              
              5,633
              
              
              5,361Office
                  equipment and furniture
              
              
              1,260
              
              
              985Construction
                  in progress
              
              
              61
              
              
              —9,849
              
              
              9,265Less:
                  Accumulated depreciation
              
              
              (1,452
              )
              
              (657
              )Property,
                  plant and equipment, net
              
              $
              8,397
              
              $
              8,608





**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 September 30, 2008 and December 31, 2007 are
      as
      follows:





**September
                  30, 2008****Gross**
              
              **Accumulated**
                **Amortization**
              
              **Net**
              
              **Life**Intangibles
                  subject to amortization:Customer
                  relationships
              
              $
              12,399
              
              $
              (2,071
              )
              $
              10,328
              
              
              12
                  yrsNon-compete
                  agreements
              
              
              37
              
              
              (24
              )
              
              13
              
              
              3
                  yrsIntangibles
                  not subject to amortization:Trade
                  name
              
              
              9,397
              
              
              —
              
              
              9,397
              
              
              —Intangibles,
                  net
              
              $
              21,833
              
              $
              (2,095
              )
              $
              19,738
  **December
                  31, 2007****Gross**
              
              **Accumulated**
                **Amortization**
              
              **Net**
              
              **Life**Intangibles
                  subject to amortization:Customer
                  relationships
              
              $
              12,399
              
              $
              (1,294
              )
              $
              11,105
              
              
              12
                  yrsNon-compete
                  agreements
              
              
              37
              
              
              (15
              )
              
              22
              
              
              3
                  yrsIntangibles
                  not subject to amortization:Trade
                  name
              
              
              9,397
              
              
              —
              
              
              9,397
              
              
              —Intangibles,
                  net
              
              $
              21,833
              
              $
              (1,309
              )
              $
              20,524




7





**Note
      5. Accrued expenses and other liabilities**





Accrued
      expenses and other liabilities of the Company as of September 30, 2008 and
      December 31, 2007 are
      as
      follows :


**September
                  30,**
                **2008**
              
              **December
                  31,**
                **2007**Accrued
                  compensation, benefits and commissions
              
              $
              1,352
              
              $
              705Accrued
                  interest payable
              
              
              338
              
              
              339Accrued
                  professional services
              
              
              236
              
              
              343Accrued
                  insurance
              
              
              254
              
              
              426Accrued
                  property taxes
              
              
              95
              
              
              33Accrued
                  related party stock fee
              
              
              713
              
              
              507Accrued
                  transaction costs
              
              
              200
              
              
              —Other
                  accrued liabilities
              
              
              395
              
              
              389$
              3,583
              
              $
              2,742





**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.





The
      Credit Agreement establishes 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.





At
      September 30, 2008 and December 31, 2007, the outstanding balance under the
      Revolving Facility was $3.8 million and $5.3 million, respectively. At September
      30, 2008, the Company had $4.6 million available in additional borrowings net
      of
      $1.6 million in outstanding letters of credit which have not been drawn upon.
      The balance under the term loan at September 30, 2008 and December 31, 2007
      was
      $20.0 million and $23.0 million, respectively. At September 30, 2008 and
      December 31, 2007, the Company had $4.0 million, classified as current at both
      dates, and $16.0 million and $19.0 million, respectively, classified as
      long-term. The bank credit facilities have various financial covenants and
      also
      have various non-financial covenants, requiring the Company to refrain from
      taking certain actions and requiring it to take certain actions, such as keeping
      in good standing the corporate existence, maintaining insurance, and providing
      the bank lending group with financial information on a timely
      basis.





8


Borrowings
      under the Credit Agreement bear interest, at the Company’s election, at either
      (i) a rate equal to three month variable London Interbank Offer Rate (“LIBOR”),
      plus an applicable margin ranging from 1.25% to 2.5%, depending on certain
      conditions, or (ii) an alternate base rate which will be the greater of (a)
      the
      Federal Funds rate plus 0.5% or (b) the prime rate publicly announced by the
      Agent as its prime rate, plus, in both cases, an applicable margin ranging
      from
      0% to 1.0%, depending on certain conditions. At September 30, 2008 and December
      31, 2007, the applicable interest rate for the outstanding borrowings under
      the
      Credit Agreement was 4.99% and 7.24%, respectively.





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, LaSalle Bank National
      Association, acting as 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 that currently has approximately $10.8 million of interest
      rate swaps fixing interest rates between 5.0% and 5.8%.





On
      April
      21, 2004, the Company closed on an investment into the Company by
      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 $0.45 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. Because the convertible subordinated note was
      deemed to include a beneficial conversion feature, at the date of issue the
      Company allocated $0.1 million to the beneficial conversion feature and
      amortized the beneficial conversion feature over one year (the period after
      which the note is convertible). As of September 30, 2008 and December 31, 2007,
      the outstanding balance on the note payable amounted to $2.5 million and is
      classified as long-term debt.





**Note
      7. Other long-term liabilities**


**September
                  30,**
                **2008**
              
              **December
                  31,**
                **2007**Deferred
                  compensation
              
              $
              1,079
              
              $
              699Accrued
                  interest payable
              
              
              229
              
              
              190$
              1,308
              
              $
              889





Effective
      December 27, 2007, the Company and Albert Weggeman entered into a deferred
      compensation agreement pursuant to which Mr. Weggeman would be entitled to
      receive deferred compensation of up to $1,519,766, which may be reduced if
      the
      stock price at the time of distribution is less than $1.25. The deferred
      compensation shall vest on the following basis: (i) 19.4% shall be immediately
      vested; (ii) 30.6% shall vest in twenty-two equal monthly consecutive tranches
      commencing on December 27, 2007, subject to Mr. Weggeman being employed by
      the Company on each vesting date; (iii) up to 50.0% shall vest as follows,
      provided that Mr. Weggeman is actively employed as of the applicable vesting
      date: (A) 16.7% shall vest as of March 31, 2008, if the Company’s adjusted
      earnings before interest taxes depreciation and amortization (“Adjusted
      EBITDA”), as more fully described in the agreement, for the year ending December
      31, 2007 (“Year 1”) is not less than $13,800,000 (the “Year 1 Target”); if
      the Year 1 Target is not achieved, and if the sum of the Company’s Adjusted
      EBITDA for the years ending December 31, 2007 and 2008 is not less than the
      sum
      of the Year 1 Target plus the Year 2 Target (as defined below), then such 16.7%
      shall vest as of March 31, 2009; (B) 16.7% shall vest as of March 31, 2009,
      if
      the Company’s Adjusted EBITDA for the year ending December 31, 2008
      (“Year 2”) is not less than $15,700,000 (the “Year 2 Target”); if the Year
      2 Target is not achieved, and if the sum of the Company’s Adjusted EBITDA for
      the years ending December 31, 2008 and 2009 is not less than the sum of the
      Year
      2 Target plus the Year 3 Target (as defined below), then such 16.7% shall vest
      as of March 31, 2010; (C) 16.6% shall vest as of March 31, 2010, if the
      Company’s Adjusted EBITDA for the year ending December 31, 2009 (“Year 3”)
      is not less than $17,200,000 (the “Year 3 Target”); if (i) the Year 3
      Target is not achieved, and (ii) the Company renews the employment
      agreement of Mr. Weggeman for another three-year term, and (iii) the sum of
      the Company’s Adjusted EBITDA for the years ending December 31, 2009 and 2010 is
      not less than the sum of the Year 3 Target plus the Year 4 Target (as defined
      hereinafter), then such 16.6% shall vest as of March 31, 2011. “Year 4 Target”
means an amount of the Company’s Adjusted EBITDA for the year ending December
      31, 2010 that will be agreed upon by the parties in the renewed employment
      agreement, if any.





9


Amounts
      vesting on or before October 1, 2009 shall be payable not later than October
      31,
      2009. Amounts vesting after October 1, 2009 shall be payable promptly after
      vesting. Payments shall be made in cash or in common stock of the Company,
      as
      determined by the Compensation Committee of our Board of Directors in its
      absolute discretion.





Accrued
      interest payable represents interest on the Olden note. Interest on the note
      accrues semi-annually on the last day of June and December in each year and
      is
      payable, together with the principal sum of the note, on the maturity date
      of
      such note (see Note 6 for further details).





**Note
      8. 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 months ended September 30, 2008 exclude the impact of 2,676 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 nine months ended September
        30,
        2008, exclude the impact of 2,993 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 three and nine months ended
        September 30, 2007, exclude the impact of 250 of potential shares of common
        stock issuable upon the exercise of stock options, which
        were anti-dilutive .




**Three
                  Months Ended**
                **September
                  30,**
              
              **Nine
                  Months Ended**
                **September
                  30,****2008**
              
              **2007**
              
              **2008**
              
              **2007****Basic
                  net income per share calculation:**Net
                  income
              
              $
              4,445
              
              $
              611
              
              $
              42,506
              
              $
              2,673Weighted
                  average common shares - basic
              
              
              41,904
              
              
              41,717
              
              
              41,866
              
              
              41,690**Basic
                  net income per share**
              
              $
              0.11
              
              $
              0.01
              
              $
              1.02
              
              $
              0.06**Diluted
                  net income per share calculation:**Net
                  income as reported
              
              $
              4,445
              
              $
              611
              
              $
              42,506
              
              $
              2,673Add:
                  convertible debt interest
              
              
              13
              
              
              13
              
              
              39
              
              
              39Adjusted
                  net income
              
              $
              4,458
              
              $
              624
              
              $
              42,545
              
              $
              2,712Weighted
                  average common shares - basic
              
              
              41,904
              
              
              41,717
              
              
              41,866
              
              
              41,690Effect
                  of dilutive stock options
              
              
              366
              
              
              1,277
              
              
              49
              
              
              1,039Effect
                  of restricted stock awards
              
              
              —
              
              
              —
              
              
              —
              
              
              73Effect
                  of convertible note
              
              
              5,628
              
              
              5,628
              
              
              5,628
              
              
              5,628Effect
                  of stock fee
              
              
              702
              
              
              204
              
              
              547
              
              
              148Weighted
                  average common shares - diluted
              
              
              48,600
              
              
              48,826
              
              
              48,090
              
              
              48,578**Diluted
                  net income per share**
              
              $
              0.09
              
              $
              0.01
              
              $
              0.88
              
              $
              0.06




10





**Note
      9. Income Taxes**





For
      federal income tax purposes, the Company has available net operating loss
      carry-forwards of approximately $110.8 million and research and development
      credit carry-forwards of $0.2 million at September 30, 2008. 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.





During
        the second quarter of 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
        will
        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 third quarter of 2008, the Company released an additional portion
        of
        the valuation allowance to income tax expense. The reversal of the valuation
        allowance resulted in the recognition of $0.9 million and $32.3 million of
        income tax benefits in the three and nine months ended September 30, 2008,
        respectively. The Company has a remaining $0.9 million valuation allowance
        as of
        September 30, 2008 and anticipates releasing the remaining allowance in the
        fourth quarter of 2008.





Deferred
      tax assets were $39.1 million at September 30, 2008 and $8.1 million at December
      31, 2007, respectively, net of a valuation allowance of $0.9 and $35.4 million,
      respectively.





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 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’s conclusion, based upon applicable accounting guidelines, that the
        additional portion of the deferred tax assets noted above is more likely
        than
        not to be realized reflects, among other things, its ability to generate
        taxable
        income and its projections of future taxable income and includes future years
        that the Company estimates it would have available net operating loss
        carryforwards. While the Company believes that its estimate of future taxable
        income is reasonable, it is inherently uncertain. If the Company realizes
        unforeseen material losses in the future, or its ability to generate future
        taxable income necessary to realize a portion of the deferred tax assets
        is
        materially reduced, additions to the valuation allowance which reduce the
        deferred tax assets could be recorded. Moreover, because the majority of
        the
        Company’s deferred tax assets consist of net operating loss carryforwards for
        federal tax purposes, if change in control events occur which could limit
        the
        availability of the net operating loss carryforwards under Section 382 of
        the
        Internal Revenue Code of 1986, as amended, additions to the valuation allowance
        which would reduce the deferred tax assets could also be recorded. Any such
        reduction could have a material adverse effect on the financial condition
        of the
        Company.





The
      Company has an effective tax rate of 16.0% for the three months ended September
      30, 2008. The effective tax rate consists of the release of a portion of the
      deferred tax asset valuation allowance, offset by a federal alternative minimum
      tax, state tax and deferred federal income tax due to the utilization of a
      portion of the Company’s net operating loss carry-forward. The Company has an
      effective tax rate benefit of 235.3% for the nine months ended September 30,
      2008. The effective tax rate benefit consists primarily of the reversal of
      a
      significant portion of the deferred tax asset valuation allowance, offset by
      federal alternative minimum tax, state tax and deferred federal income tax
      due
      to the utilization of a portion of the Company’s net operating loss
      carry-forward




The
      Company files income tax returns in the U.S. federal jurisdiction and various
      state jurisdictions.





**Note
      10. 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 September 30, 2008 and
      2007
      the Company made matching contributions of approximately $45 thousand and $52
      thousand, respectively. For the nine months ended September 30, 2008 and 2007
      the Company made matching contributions of approximately $127 thousand and
      $106
      thousand, respectively.





11





**Note
      11. 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 binomial 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 nine months
      ended September 30, 2008 was $0.1 million and $0.6 million, respectively. Total
      share-based compensation expense for the three and nine months ended September
      30, 2007 was $0.6 million and $2.0 million, respectively.




On
      September 24, 2008, 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 $1.40 per share, under the
      Company’s 2007 Stock Incentive Plan (“The 2007 Stock Option Plan”). These stock
      options will vest and become exercisable in four equal consecutive quarterly
      tranches commencing on September 30, 2008.





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,
      10,000,000 shares of the Company’s common stock will be initially 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 2,500,000 shares of the Company’s common stock. Additionally,
      no more than 2,500,000 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 will have a term of ten years expiring on June 21, 2017.
      For the three and nine months ended September 30, 2008 the Company recorded
      $0.1
      million and $0.6 million, respectively, of compensation expense relating to
      these awards.





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, 2008, 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.





12





A
      summary
      of option activity ,
      excluding performance-based awards, under
      the
      Plans for the nine months ended September 30, 2008, is presented
      below:


**Options**
              
              **Shares**
                **(000)**
              
              **Weighted-Average
                  Exercise Price**
              
              **Weighted-Average
                  Remaining Contractual Term (years)**
              
              **Aggregate
                  Intrinsic Value**Outstanding
                  at January 1, 2008
              
              
              1,541
              
              $
              1.22Granted
              
              
              30
              
              
              1.40Exercised
              
              
              —
              
              
              —Forfeited
                  or expired
              
              
              —
              
              
              —Outstanding
                  at September 30, 2008
              
              
              1,571
              
              $
              1.23
              
              
              8.0
              
              $
              270Vested
                  or expected to vest at September 30, 2008
              
              
              1,571
              
              $
              1.23
              
              
              8.0
              
              $
              270Exercisable
                  at September 30, 2008
              
              
              908
              
              $
              1.21
              
              
              7.3
              
              $
              175





A
      summary
      of the option activity under the performance-based awards for the nine months
      ended September 30, 2008, is presented below:


**Performance
                  Options**
              
              **Shares**
                **(000)**
              
              **Weighted
                  Average Exercise Price**
              
              **Remaining
                  Contractual Term (years)**
              
              **Aggregate
                  Intrinsic Value**Outstanding
                  at January 1, 2008
              
              
              1,471
              
              $
              1.25Granted
              
              
              —
              
              
              —Exercised
              
              
              —
              
              
              —Forfeited
                  or expired
              
              
              —
              
              
              —Outstanding
                  at September 30, 2008
              
              
              1,471
              
              $
              1.25
              
              
              9.24
              
              $
              221Vested
                  or expected to vest at September 30, 2008
              
              
              —
              
              $
              —
              
              
              —
              
              $
              —Exercisable
                  at September 30, 2008
              
              
              —
              
              $
              —
              
              
              —
              
              $
              —





Effective
      February 6, 2008, the Company issued to Albert W. Weggeman, the Company's
      President and Chief Executive Officer, a restricted stock award of 56,818 shares
      of common stock pursuant to the 2007 Stock Incentive Plan. The terms of the
      award provide that the award would vest and Mr. Weggeman would be entitled
      to
      receive the common stock on the earliest to occur of (i) a
      Change-of-Control Event as defined in the 2007 Stock Incentive Plan,
      (ii) the termination of his employment by the Company without "cause" as
      defined in the 2007 Stock Incentive Plan and his employment agreement, or
      (iii) the third anniversary of the grant of the restricted stock award,
      provided that he is then employed by the Company as its President and Chief
      Executive Officer. The restricted stock award will become fully vested on the
      occurrence of the earliest of the aforementioned events.





**Note
      12. Commitments and Contingencies**





Except
      as
      set forth below, t he
      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
      (SAS) (the “Coordinated Class Actions”).





13


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.” In the opinion of management, the ultimate
      disposition of this matter will not have a material effect on the Company’s
      financial position, results of operation or cash flows.





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 and a decision
      from the Court is expected in the first quarter of next year.





Terrence
      P. Meehan v. Concord Steel, Inc.





On
      May
      30, 2008, the former General Manger at the Company’s Essington, PA facility
      commenced a lawsuit against Concord in the United States District Court for
      the
      Eastern District of Pennsylvania. In his complaint, Plaintiff Terrence Meehan
      alleges that he was wrongfully terminated by Concord in violation of
      Pennsylvania public policy and seeks compensatory damages in excess of $150,000,
      punitive damages, interest and cost of suit. Defense of the suit has been
      assumed by Concord's employment practices liability carrier and the action
      is
      being defended vigorously. On August 12, 2008, the District Court denied
      Concord’s motion to dismiss the complaint for legal insufficiency. In the
      opinion of management, the ultimate disposition of this matter will not have
      a
      material effect on the Company’s financial position, results of operation or
      cash flows.





John
      F. Steward v. Concord Steel, Inc.





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 resisting the action and
      maintains that CRC is the proper party defendant, denominated as “Concord
      Steel.” In June 2008, Concord served CRC with a claim notification
      under the Asset Purchase Agreement between CRC, Net Perceptions, Inc and SIG
      Acquisition Corp. dated September 22, 2006, in order to obtain indemnification
      and defense of the case and to reserve its rights in this matter. On August
      18, 2008, the Plaintiff served its amended complaint to add as named as
      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. Discovery on this matter
      is continuing and the Court has set January 12, 2009 as a trial
      date.





The
      Company believes that the outcome of these matters, individually and in the
      aggregate, will not have a material adverse effect on the consolidated financial
      statements.





14


**Note
      13. 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 September 30, 2008 and 2007, the
      Company recorded consulting fees of $0.4 million and $0.2 million, respectively,
      related to the Consulting Agreement. For the nine months ended September 30,
      2008 and 2007, the Company recorded consulting fees of $1.1 million and $0.8
      million, respectively, related to the Consulting Agreement. As of September
      30,
      2008 and December 31, 2007, the accrued balance due to Kanders & Company
      under this agreement amounted to $0.7 million and $0.5 million,
      respectively.





During
      2008 and 2007, Kanders & Company was issued 231 shares and 41
      shares, respectively, of the Company’s common stock representing
      the Stock Fee for services provided under the Consulting
      Agreement.





For
      the
      three months ended September 30, 2008 and 2007, the Company reimbursed Clarus
      Corporation (“Clarus”) an entity it shared office space with until October 1,
      2007, an aggregate of $11 thousand and $18 thousand, respectively; and for
      the
      nine months ended September 30, 2008 and 2007, the Company reimbursed Clarus
      $29
      thousand and $101 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.





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 $0.45 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 on the last day of June and December in each year and is payable,
      together with the principal sum of the note, on the maturity date of the note.
      The note matures on April 21, 2014 unless accelerated earlier as provided by
      the
      note. Because the convertible subordinated note was deemed to include a
      beneficial conversion feature, at the date of issuance the Company allocated
      $0.1 million to the beneficial conversion feature and amortized the beneficial
      conversion feature over one year (the period after which the note is
      convertible). As of December 31, 2006, zero remains to be amortized of the
      note
      discount due to the beneficial conversion feature. Also in connection with
      this
      transaction, the Company entered into a Registration Rights Agreement, which
      requires the Company, upon request of the purchaser of the note or its assignee,
      to register under the Securities Act of 1933, as amended, the resale of the
      shares of common stock into which the note is convertible. As of September
      30,
      2008 and
      December 31, 2007, the outstanding balance on the note payable amounted to
      $2.5
      million and is classified as long-term debt.





**Note
      14. Fair Value Measurements**





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. 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.





15


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
      September 30, 2008, the Company has interest rate swap contracts that are
      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 September 30, 2008, were as
      follows:




**Fair
                  Value Measurements at Reporting Date Using****Description**
              
              **9/30/2008**
              
              **Quoted**
                **Prices
                  in**
                **Active**
                **Markets
                  for**
                **Identical**
                **Liabilities**
                **(Level
                  1)**
              
              **Significant**
                **Other**
                **Observable**
                **Inputs**
                **(Level
                  2)**
              
              **Significant**
                **Unobservable**
                **Inputs**
                **(Level
                  3)**Interest
                  rate derivatives
              
              $
              209
              
              $
              —
              
              $
              209
              
              $
              —Total
                  liabilities measured at fair value
              
              $
              209
              
              $
              —
              
              $
              209
              
              $
              —





**Note
      15. Rights Agreement**





On
        February 11, 2008, the Company entered into an
        amendment to its shareholder rights agreement (the “Rights Agreement”)
        that decreases 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 guaranty 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.





16


**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 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, decline in the business of our 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,
        2007
        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
        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.





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. With this initial acquisition, management is now focused on
      building a diversified global industrial manufacturing group through both
      organic and acquisition growth initiatives that are expected to complement
      and
      diversify existing business lines. The Company’s acquisition program is focused
      on building a diversified industrial growth company providing engineered
      products and solutions for global niche markets. The Company seeks acquisitions
      with transactions valued up to $150 million and having an EBITDA range of $5-$25
      million.





17


Our
        subsidiary, Concord Steel, has been engaged in negotiations to replace our
        collective bargaining agreement covering approximately 100 employees at its
        Warren, Ohio facility which initially expired on August 31, 2008. On November
        1,
        2008, Concord Steel, in order to protect its business and facility, determined
        to temporarily not have the Warren, Ohio employees return to work until the
        contract and security issues are appropriately resolved. As previously
        disclosed, a work stoppage or any strike or slowdown could significantly
        disrupt
        our operations at our Warren, Ohio facility and materially adversely affect
        our
        business, results of operations and financial condition. Moreover, there
        can be
        no assurance that Concord Steel will be able to negotiate a new collective
        bargaining agreement on terms satisfactory to it .





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 2007
      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 September 30, 2008 Compared to
      the
      Three Months Ended September 30, 2007**





REVENUES





Revenue
      increased $13.3 million or 47.2% to $41.5 million for the three months ended
      September 30, 2008, as compared to $28.2 million for the three months ended
      September 30, 2007. The increase of $13.3 million is primarily due to higher
      sales volume resulting from increased demand for our products from existing
      customers, as a result of increased spending in commercial and industrial
      construction, and infrastructure building end markets, price increases to
      customers, and an increase in average scrap selling prices.





GROSS
      MARGIN





Gross
      margin was $9.1 million or 21.9% of sales for the three months ended September
      30, 2008, as compared to $5.1 million or 18.1% of sales for the three months
      ended September 30, 2007. The 21.0% increase in gross margin percentage was
      due
      to favorable product mix, lower scrap material rates, higher scrap sales price,
      higher sales volume and price increases to customers, partially offset by higher
      cost of raw material, and an increase in direct labor cost associated with
      the
      ramp up of our Essington, Pennsylvania manufacturing facility.





OPERATING
      EXPENSES





Operating
      expenses for the three months ended September 30, 2008 increased $0.2 million
      or
      5.9% to $3.6 million as compared to $3.4 million for
      the
      three months ended September 30, 2007 .





*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 September 30, 2008, sales and marketing expenses increased $0.1
      million or 25.0% to $0.5 million as compared to $0.4 million for the three
      months ended September 30, 2007. The increase was primarily due to increased
      freight costs of $0.1 million.





*General
      and administrative* *.* General
      and administrative expenses consist primarily of employee compensation,
      insurance, legal, accounting, other professional fees and public reporting
      expenses. For the three months ended September 30, 2008, general and
      administrative expenses was $2.9 million as compared to $2.9 million for the
      three months ended September 30, 2007. Stock-based compensation expense
      decreased by $0.5 million as a result of a stock option modifications made
      in
      the fourth quarter of 2007, offset by an increase in employee-related expenses
      of $0.2 million due to the transition of temporary employees to full-time and
      an
      increase in incentive-based compensation, transaction costs of $0.1 million,
      depreciation expense of $0.1 million related to capital expenditures associated
      with the establishment of the Company’s corporate office, and an increase in
      professional fees of $0.1 million.




18


*Related
      party stock compensation.* For
      the
      three months ended September 30, 2008, the Company had related party stock
      compensation expense of $0.3 million associated with the Consulting Agreement
      with Kanders & Company as compared to $0.1 million for the three months
      ended September 30, 2007. The increase of $0.2 million is the result of
      increased revenues for the quarter. (See Note 13 to the consolidated financial
      statements.)





*Interest
      expense.* Interest
      expense was $0.2 million for the three months ended September 30, 2008, compared
      to interest expense of $0.7 million for the three months ended September 30,
      2007. Interest expense was down for the quarter due to the reduction in our
      outstanding debt balance. (See Note 6 to the financial statements.)





PROVISION
      FOR INCOME TAXES





For
      federal income tax purposes, the Company has available net operating loss
      carry-forwards of approximately $110.8 million and research and development
      credit carry-forwards of $0.2 million at September 30, 2008. 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 of 1986, as
      amended.





During
      the second quarter of 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
      will
      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 in the quarter via a credit to income
      tax
      expense. During the third quarter of 2008 the Company released an additional
      amount to income tax expense. The reversal of the valuation allowance resulted
      in the recognition of $0.9 million and $32.3 million of income tax benefits
      in
      the three and nine months ended September 30, 2008, respectively. The Company
      has remaining $0.9 million valuation allowance as of September 30, 2008 and
      anticipates releasing the remaining allowance in the fourth quarter of
      2008.





Deferred
      tax assets were $39.1 million at September 30, 2008 and $8.1 million at December
      31, 2007, respectively, net of a valuation allowance of $0.9 and $35.4 million,
      respectively.





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 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’s conclusion, based upon applicable accounting guidelines, that the
        additional portion of the deferred tax assets noted above is more likely
        than
        not to be realized reflects, among other things, its ability to generate
        taxable
        income and its projections of future taxable income and includes future years
        that the Company estimates it would have available net operating loss
        carryforwards. While the Company believes that its estimate of future taxable
        income is reasonable, it is inherently uncertain. If the Company realizes
        unforeseen material losses in the future, or its ability to generate future
        taxable income necessary to realize a portion of the deferred tax assets
        is
        materially reduced, additions to the valuation allowance which reduce the
        deferred tax assets could be recorded. Moreover, because the majority of
        the
        Company’s deferred tax assets consist of net operating loss carryforwards for
        federal tax purposes, if change in control events occur which could limit
        the
        availability of the net operating loss carryforwards under Section 382 of
        the
        Internal Revenue Code of 1986, as amended, additions to the valuation allowance
        which could reduce the deferred tax assets could also be recorded. Any such
        reduction could have a material adverse effect on the financial condition
        of the
        Company.





The
      Company has an effective tax rate of 16.0% for the three months ended September
      30, 2008 which consists of the release of a portion of the deferred tax asset
      valuation allowance, offset by a federal alternative minimum tax, state tax
      and
      deferred federal income tax due to the utilization of a portion of the Company’s
      net operating loss carry-forward. For the three months end September 30, 2007,
      the Company had an effective tax rate of 35.1%.





19


**Consolidated
      Operating Results for the Nine Months Ended September 30, 2008 Compared to
      the
      Nine Months Ended September 30, 2007**





REVENUES





Revenue
      increased $31.9 million or 37.8% to $116.3 million for the nine months ended
      September 30, 2008, as compared to $84.4 million for the nine months ended
      September 30, 2007. The increase of $31.9 million is primarily due to higher
      sales volume resulting from increased demand for our products from existing
      customers, as a result of increased spending in commercial and industrial
      construction, and infrastructure building end markets, price increases to
      customers, and an increase in average scrap selling prices.





GROSS
      MARGIN





Gross
      margin was $25.7 million or 22.1% of sales for the nine months ended September
      30, 2008, as compared to $14.8 million or 17.5% of sales for the nine months
      ended September 30, 2007. The 26.3% increase in gross margin percentage was
      due
      to favorable product mix, lower scrap material rates, higher sales volume and
      price increases, partially offset by higher cost of raw material, and an
      increase in direct labor cost associated with the ramp up of our Essington,
      Pennsylvania manufacturing facility.





OPERATING
      EXPENSES





Operating
      expenses for the nine months ended September 30, 2008, increased $2.1 million
      or
      22.1% to $11.6 million as compared to $9.5 million for the nine months ended
      September 30, 2007.





*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 nine
      months ended September 30, 2008, sales and marketing expenses increased $0.5
      million or 50.0% to $1.5 million as compared to $1.0 million for the nine months
      ended September 30, 2007. The increase was primarily due to increased freight
      cost of $0.2 million, increased travel expenses of $0.2 million and employee
      related costs of $0.1 million.





*General
      and administrative* *.* 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 nine months ended
      September 30, 2008, general and administrative expenses was $9.5 million as
      compared to $8.0 million for the nine months ended September 30, 2007.
      Stock-based compensation expense decreased by $1.4 million as a result of a
      stock option modifications made in the fourth quarter of 2007, offset by an
      increase in employee related expenses of $0.8 million due to the transition
      of
      temporary employees to full-time and an increase in incentive-based
      compensation, legal fees of $0.5 million, transaction costs of $0.6 million,
      depreciation expense of $0.3 million related to capital expenditures associated
      with the establishment of the Company’s corporate office, leasing expense of
      $0.1 million for the corporate office, and an increase in utilities and other
      overhead expenses of $0.6 million.





*Related
      party stock compensation.* For
      the
      nine months ended September 30, 2008, the Company had related party stock
      compensation expense of $0.7 million associated with the Consulting Agreement
      with Kanders & Company as compared to $0.4 million for the nine months ended
      September 30, 2007. The increase of $0.3 million is the result of increased
      revenues for the period. (See Note 13 to the consolidated financial
      statements.)





*Interest
      expense.* Interest
      expense was $1.5 million for the nine months ended September 30, 2008 compared
      to interest expense of $1.9 million for the nine months ended September 30,
      2007. The primary reason for the decrease in interest expense is due to the
      overall reduction in the company’s revolving credit facility and term loan, the
      mark to market adjustment of $0.2 million on interest rate swap agreements,
      offset by higher temporary interest rates associated with the second amendment
      to the credit facility. (See Note 6 to the consolidated financial
      statements.)





20





PROVISION
      FOR INCOME TAXES





The
      Company has an effective tax rate benefit of 235.3% for the nine months ended
      September 30, 2008. The effective tax rate benefit consists primarily of the
      reversal of a significant portion of the deferred tax asset valuation allowance,
      offset by federal alternative minimum tax, state tax and deferred federal income
      tax due to the utilization of a portion of the Company’s net operating loss
      carry-forward. For the nine months ended September 30, 2007, the Company had
      an
      effective tax rate of 19.2%. See Note 9 for further discussion of the valuation
      allowance.





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.





The
      Credit Agreement establishes 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, we 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.





At September 30, 2008
      and December 31, 2007, the outstanding balance from the revolving credit
      facility was $3.8 million and $5.3 million, respectively. At September 30,
      2008, the Company had $4.6 million available in additional borrowings net of
      $1.6 million in outstanding letters of credit which have not been drawn upon.
      The balance under the term loan at September 30, 2008
      and December 31, 2007 was $20.0 million and $23.0 million, respectively. At September 30, 2008
      and December 31, 2007, the Company had $4.0 million, respectively, classified
      as
      current and $16.0 million and $19.0 million, respectively classified as
      long-term. During the three month and nine month periods ended September 30,
      2008, the Company was in compliance with all financial covenants under the
      bank
      credit facilities. The Company’s future compliance with its financial covenants
      under the bank credit facilities will depend on its ability to generate earnings
      and manage its assets effectively. The bank credit facilities also have various
      non-financial covenants, requiring the Company to refrain from taking certain
      actions and requiring it to take certain actions, such as keeping in good
      standing the corporate existence, maintaining insurance, and providing the
      bank
      lending group with financial information on a timely basis.





Borrowings
      under the Credit Agreement bear interest, at the Company’s election, at either
      (i) a rate equal to three month variable London Interbank Offer Rate (“LIBOR”),
      plus an applicable margin ranging from 1.25% to 2.5%, depending on certain
      conditions, or (ii) an alternate base rate which will be the greater of (a)
      the
      Federal Funds rate plus 0.5% or (b) the prime rate publicly announced by the
      Agent as its prime rate, plus, in both cases, an applicable margin ranging
      from
      0% to 1.0%, depending on certain conditions. At September 30, 2008
      and December 31, 2007, the applicable interest rate for the outstanding
      borrowings under the Credit Agreement was 4.99% and 7.24%,
      respectively.





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, LaSalle Bank National
      Association, acting as 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.





21


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 that currently has approximately $10.8 million of interest
      rate swaps fixing interest rates between 5.0% and 5.8%.





Market
      volatility in LIBOR has recently exposed the Company to higher pricing for
      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 our filing date, however,
      there can be no assurance that one or more financial institutions may not cease
      to 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 $0.45 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. Because the convertible subordinated note was
      deemed to include a beneficial conversion feature at the date of issue the
      Company allocated $0.1 million to the beneficial conversion feature and
      amortized the beneficial conversion feature over one year (the period after
      which the note is convertible). As of September 30, 2008
      and December 31, 2007, the outstanding balance on the note payable amounted
      to
      $2.5 million and is classified as long-term debt.





**Operating
      Activities**





Net
      cash
      provided by operating activities was $4.5 million for the nine months ended
      September 30, 2008, reflecting net income of $42.5 million, depreciation and
      amortization of $1.7 million, non-cash deferred stock-based compensation
      expenses of $0.6 million, provision for doubtful accounts of $0.3 million offset
      by the impact of the change in deferred tax assets of $31.1 million and the
      changes in working capital of $9.5 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. Net cash provided by operating
      activities was $0.6 million for the nine months ended September 30, 2007,
      reflecting net income of $2.7 million, depreciation and amortization of $1.2
      million, non-cash deferred stock-based compensation expenses of $2.0 million
      offset by the impact of changes in working capital of $5.3 million. The change
      in working capital is primarily due to the timing difference between increased
      revenues generated and cash collections.





**Investing
      Activities**





Net
      cash
      used in investing activities was $0.6 million for the nine months ended
      September 30, 2008, primarily resulting from implementation of Concord’s new
      information technology platform and the purchase of machinery and equipment.
      Net
      cash used in investing activities was $4.8 million for the nine months ended
      September 30, 2007, primarily resulting from the purchase of machinery and
      equipment and the ramp-up of Essington, PA.





**Financing
      Activities**





Net
      cash
      used in financing activities was $4.5 million for the nine months ended
      September 30, 2008. The net cash used in financing activities was primarily
      from
      an increase in the Company’s line of credit facility of $1.5 million which was
      used for working capital expansion and capital expenditures, offset by cash
      used
      to paydown a portion of the Company’s line of credit facility in the amount of
      $3.0 million and to paydown long-term debt in the amount of $3.0 million. Net
      cash provided by financing activities was $0.5 million for the nine months
      ended
      September 30, 2007. The net cash provided by financing activities was primarily
      from an increase in the Company’s line of credit facility of $3.5 million which
      was used for working capital expansion and capital expenditures, offset by
      cash
      used to paydown long-term debt in the amount of $3.0 million.





We
      believe that the Company’s Revolving Facility and cash from operations will be
      sufficient to meet our expected working capital needs for at least the next
      twelve months. 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
      obtain financing necessary to effectively execute our acquisition strategy,
      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. If the Company has a need for funding, we believe our
      liquidity requirements can be satisfied by drawing upon our contractually
      committed credit facility, but under extreme market conditions, there can be
      no
      assurance that this agreement would be available or sufficient. Based on
      available information, we believe the financial institutions syndicated under
      our Credit Agreement are able to fulfill their commitments as of our filing
      date, however, there can be no assurance that one or more financial institutions
      may not cease to be able to fulfill their funding obligations.




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. The Company has assessed
      the implication of these factors on our current business and determined that
      there has not been a significant impact to our financial position, results
      of
      operations or liquidity during the nine months ended September 30,
      2008.




22


**Capital
      Expenditures**





The
      Company anticipates capital expenditures, excluding acquisitions, of $0.3
      million for the remainder of fiscal 2008. The Company expects capital
      expenditures will be funded from cash generated by operations and its revolving
      credit facility.





RECENTLY
      ISSUED ACCOUNTING PRONOUNCEMENTS





In
      March
      2008 ,
      the
      Financial Accounting Standards Board (“FASB”) issued Statement of Financial
      Accounting Standards 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, with early application encouraged. The Statement encourages, but
      does
      not require, comparative disclosures for earlier periods at initial adoption.
      The Company does not anticipate any material impact on its future disclosure
      from the adoption of this standard.





In
      September 2006, FASB issued Statement of Financial Accounting Standards
      No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair
      value, establishes a framework for measuring fair value under generally accepted
      accounting principles, and requires expanded disclosures about fair value
      measurements. SFAS 157 emphasizes that fair value is a market-based measurement,
      not an entity-specific measurement, and states that a fair value measurement
      should be determined based on the assumptions that market participants would
      use
      in pricing the asset or liability. SFAS 157 applies under other accounting
      pronouncements that require or permit fair value measurements, the FASB having
      previously concluded in those accounting pronouncements that fair value is
      the
      relevant measurement attribute. Accordingly, SFAS 157 does not require any
      new
      fair value measurements. In February 2008, the FASB issued Staff Positions
      157-1 and 157-2 which remove certain leasing transactions from the scope of
      SFAS
      157 and partially defer the effective date of SFAS 157 for one year for certain
      nonfinancial assets and liabilities. SFAS 157 is effective for fiscal years
      beginning after November 15, 2007. The adoption of FAS 157 did not have a
      material impact on the Company's financial position, results of operations
      and
      cash flows. The Company is currently assessing the impact of fully adopting
      SFAS
      157 on its future disclosure for nonfinancial assets and liabilities, with
      no
      impact on its consolidated financial position and resulting
      operations.





In
      December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
      Combinations” (“SFAS 141R”), which replaces SFAS No. 141, “Business
      Combinations.” SFAS 141R retains the underlying concepts of SFAS No. 141 in that
      all business combinations are still required to be accounted for at fair value
      under the acquisition method of accounting, but SFAS 141R changes the
      application of the acquisition method in a number of significant aspects.
      Acquisition costs will generally be expensed as incurred; noncontrolling
      interests will be valued at fair value at the acquisition date; in-process
      research and development will be recorded at fair value as an indefinite-lived
      intangible asset at the acquisition date; restructuring costs associated with
      a
      business combination will generally be expensed subsequent to the acquisition
      date; and changes in deferred tax asset valuation allowances and income tax
      uncertainties after the acquisition date generally will affect income tax
      expense. SFAS No. 141R is effective on a prospective basis for all business
      combinations for which the acquisition date is on or after the beginning of
      the
      first annual period subsequent to December 15, 2008. Early adoption is not
      permitted. SFAS No. 141R will only be applicable to future business
      combinations, it will not have a significant effect on the Company’s financial
      statements prior to such an acquisition.





23


**Item
      3** **.
      Quantitative and Qualitative Disclosures about Market Risk**





Through
      September 30, 2008, the majority of our recognized revenues were denominated
      in
      United States dollars and were primarily from customers in the United States,
      and our exposure to foreign currency exchange rate changes has been immaterial.
      Accordingly, we do not consider our exposure to foreign currency exchange rate
      changes arising from revenues being denominated in foreign currencies to be
      significant.





The
      Company’s primary exposure to market risk is interest rate risk associated with
      our senior credit facilities under our Credit Agreement. The
      Company has a long-term credit facility that bears interest, at the Company’s
      election, at either (i) a rate equal to three month variable LIBOR ,
      plus an
      applicable margin ranging from 1.25% to 2.5%, depending on certain conditions,
      or (ii) an alternate base rate which will be the greater of (a) the Federal
      Funds rate plus 0.5% or (b) the prime rate publicly announced by the Agent
      as
      its prime rate, plus, in both cases, an applicable margin ranging from 0% to
      1.0%, depending on certain conditions. At September 30, 2008, the applicable
      interest rate for the outstanding borrowings under the Credit Agreement was
      4.99%.





The
      Company is exposed to interest rate volatility with regard to existing issuances
      of variable rate debt. Primary exposure includes movements in the United States
      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 that has approximately $10.8 million of interest rate
      swaps
      fixing interest rates between 5.0% and 5.8%. At September 30, 2008, the net
      benefit of $0.2 million on the interest rate swap is reported in the statement
      of operations as a reduction of interest expense.





Market
      volatility in LIBOR has recently exposed the Company to higher pricing for
      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 our filing date, however,
      there can be no assurance that one or more financial institutions may not cease
      to be able to fulfill their funding obligations.





**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 September 30, 2008, pursuant to Exchange Act Rule 13a-15.
      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 September 30, 2008 are effective.





**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 September 30, 2008 that have materially
      affected, or are reasonably likely to materially affect the Company’s internal
      control over financial reporting.


24


**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.” In the opinion of management, the ultimate
      disposition of this matter will not have a material effect on the Company’s
      financial position, results of operation or cash flows.





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 and a decision
      from the Court is expected in the first quarter of next year.





Terrence
      P. Meehan v. Concord Steel, Inc.





On
      May
      30, 2008, the former General Manger at the Company’s Essington, PA facility
      commenced a lawsuit against Concord in the United States District Court for
      the
      Eastern District of Pennsylvania. In his complaint, Plaintiff Terrence Meehan
      alleges that he was wrongfully terminated by Concord in violation of
      Pennsylvania public policy and seeks compensatory damages in excess of $150,000,
      punitive damages, interest and cost of suit. Defense of the suit has been
      assumed by Concord's employment practices liability carrier and the action
      is
      being defended vigorously. On August 12, 2008, the District Court denied
      Concord’s motion to dismiss the complaint for legal insufficiency. In the
      opinion of management, the ultimate disposition of this matter will not have
      a
      material effect on the Company’s financial position, results of operation or
      cash flows.





25





John
      F. Steward v. Concord Steel, Inc.





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 resisting the action and
      maintains that CRC is the proper party defendant, denominated as “Concord
      Steel.” In June 2008, Concord served CRC with a claim notification
      under the Asset Purchase Agreement between CRC, Net Perceptions, Inc and SIG
      Acquisition Corp. dated September 22, 2006, in order to obtain indemnification
      and defense of the case and to reserve its rights in this matter. On August
      18, 2008, the Plaintiff served its amended complaint to add as named as
      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. Discovery on this matter
      is continuing and the Court has set January 12, 2009 as a trial
      date.





The
      Company believes that the outcome of these matters, individually and in the
      aggregate, will not have a material adverse effect on the consolidated financial
      statements.




**Item
      1A** **.**  **Risk
      Factors**




**Recent
      turmoil across various sectors of the financial markets may negatively impact
      the Company’s business, financial condition and/or operating
      results.**





Recently,
      the various sectors of the credit markets and the 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 obtain
      financing necessary to effectively execute our acquisition strategy, 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.





Except
      as
      discussed above, 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, 2007, 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.




**Item
        2. Unregistered Sales of Equity Securities.**
 
 On
        September 11, 2008, the Company issued 230,790 shares of common stock to
        Kanders
& Company in exchange for services provided pursuant to the Consulting
        Agreement by and between the Company and Kanders & Company dated September
        22, 2006. The issuance did not involve any public offering, general advertising
        or solicitation. Such shares were issued pursuant to an exemption from
        registration provided by Section 4(2) of the Securities Act of 1933, as amended
        (the “Securities Act”) and/or Regulation D promulgated under the Securities Act.
        In connection with the issuance, Kanders & Company represented its intention
        to acquire the securities for investment purposes only and not with a view
        to or
        for sale in connection with any distribution thereof and the share certificates
        representing such shares will bear appropriate legends to that effect. These
        securities may not be offered or sold in the United States in the absence
        of an
        effective registration statement or exemption from the registration requirements
        under the Securities Act.




26


**Item
      6** **.
      Exhibits**


**Exhibit**
                **Number**
              
              **Description**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





27




**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:
              November 10, 2008
            By:
            /s/
              Albert W. Weggeman Jr.Albert
              W. Weggeman, Jr.*President
              and
              Chief Executive Officer*


By:
              /s/
                Jonathan LaBarreJonathan
                  LaBarre**
              *Chief
                  Financial Officer, Secretary and
                  Treasurer*




28





**EXHIBIT
      INDEX**


**Exhibit**
                  **Number**
                
                **Description**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
 
 29