**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549







**FORM
      10-Q**




**(Mark
      One)**




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


**EXCHANGE
      ACT OF 1934**




**For
      the quarterly period ended June 30, 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 August 7,** **2008, there were outstanding 41,801,380 shares of the registrant’s Common Stock,
      $0.0001 par value.**















**STAMFORD
      INDUSTRIAL GROUP, INC.**


**FORM
      10-Q**


For
      the
      Quarter Ended June 30, 2008




**TABLE
      OF CONTENTS**


**Page****PART
                  I. FINANCIAL INFORMATION**Item
                  1. Financial Statements (Unaudited)Consolidated
                  Balance Sheets as of June 30, 2008 and December 31, 2007
              
              1Consolidated
                  Statements of Income for the three and six months ended June 30,
                  2008 and
                  June 30, 2007
              
              2Consolidated
                  Statements of Cash Flows for the six months ended June 30, 2008
                  and June
                  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
              
              
              25Item
                  4. Submission of Matters to a Vote of Security Holders
              
              
              25Item
                  6. Exhibits
              
              
              25**SIGNATURES**
              
              
              27**EXHIBIT
                  INDEX**
              
              
              28










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




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


**STAMFORD
        INDUSTRIAL GROUP, INC.**
 **CONSOLIDATED
        BALANCE SHEETS (UNAUDITED)**
 **(in
        thousands)**
  **June
                    30,**
                  **2008**
                
                **December
                    31,**
                  **2007****ASSETS**Current
                    assets:Cash
                    and cash equivalents
                
                $
                512
                
                $
                1,236Accounts
                    receivable, net
                
                
                22,463
                
                
                8,341Inventories
                
                
                17,924
                
                
                13,825Deferred
                    tax asset
                
                
                5,505
                
                
                2,684Prepaid
                    expenses and other current assets
                
                
                208
                
                
                496Total
                    current assets
                
                
                46,612
                
                
                26,582Property,
                    plant and equipment, net
                
                
                8,574
                
                
                8,608Deferred
                    financing costs, net
                
                
                568
                
                
                645Intangible
                    assets, net
                
                
                20,000
                
                
                20,524Deferred
                    tax asset
                
                
                33,994
                
                
                5,368Other
                    assets
                
                
                205
                
                
                210Total
                    assets
                
                $
                109,953
                
                $
                61,937**LIABILITIES
                    AND STOCKHOLDERS’ EQUITY**Current
                    liabilities:Notes
                    payable
                
                $
                6,286
                
                $
                5,286Current
                    portion of long-term debt
                
                
                4,000
                
                
                4,000Accounts
                    payable
                
                
                16,366
                
                
                7,768Accrued
                    expenses and other liabilities
                
                
                3,930
                
                
                2,742Income
                    taxes payable
                
                
                740
                
                
                73Total
                    current liabilities
                
                
                31,322
                
                
                19,869Long-term
                    debt, less current portion
                
                
                19,533
                
                
                21,533Other
                    long-term liabilities
                
                
                1,168
                
                
                889Total
                    liabilities
                
                
                52,023
                
                
                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; 41,858 and 41,801
                    shares issued and outstanding at June 30, 2008 and December 31,
                    2007,
                    respectively
                
                
                3
                
                
                3Additional
                    paid-in capital
                
                
                246,569
                
                
                246,346Accumulated
                    deficit
                
                
                (188,642
                )
                
                (226,703
                )Total
                    stockholders’ equity
                
                
                57,930
                
                
                19,646Total
                    liabilities and stockholders’ equity
                
                $
                109,953
                
                $
                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**
                  
                  **Six
                      Months Ended****June
                      30,**
                    **2008**
                  
                  **June
                      30,**
                    **2007**
                  
                  **June
                      30,**
                    **2008**
                  
                  **June
                      30,**
                    **2007**Revenues
                  
                  $
                  42,181
                  
                  $
                  28,281
                  
                  $
                  74,858
                  
                  $
                  56,185Cost
                      of revenues
                  
                  
                  31,116
                  
                  
                  23,872
                  
                  
                  58,228
                  
                  
                  46,438Gross
                      margin
                  
                  
                  11,065
                  
                  
                  4,409
                  
                  
                  16,630
                  
                  
                  9,747Operating
                      expenses:Sales
                      and marketing
                  
                  
                  528
                  
                  
                  303
                  
                  
                  943
                  
                  
                  675General
                      and administrative
                  
                  
                  3,895
                  
                  
                  2,367
                  
                  
                  6,598
                  
                  
                  5,095Related
                      party stock compensation
                  
                  
                  274
                  
                  
                  133
                  
                  
                  451
                  
                  
                  262Total
                      operating expenses
                  
                  
                  4,697
                  
                  
                  2,803
                  
                  
                  7,992
                  
                  
                  6,032Income
                      from operations
                  
                  
                  6,368
                  
                  
                  1,606
                  
                  
                  8,638
                  
                  
                  3,715Other
                      (expense) income:Interest
                      income
                  
                  
                  —
                  
                  
                  —
                  
                  
                  1
                  
                  
                  6Interest
                      expense
                  
                  
                  (504
                  )
                  
                  (544
                  )
                  
                  (1,294
                  )
                  
                  (1,215
                  )Other
                      income (expense)
                  
                  
                  16
                  
                  
                  (17
                  )
                  
                  43
                  
                  
                  (139
                  )Total
                      other expense, net
                  
                  
                  (488
                  )
                  
                  (561
                  )
                  
                  (1,250
                  )
                  
                  (1,348
                  )Income
                      before taxes
                  
                  
                  5,880
                  
                  
                  1,045
                  
                  
                  7,388
                  
                  
                  2,367(Benefit)
                      provision for income taxes
                  
                  
                  (30,762
                  )
                  
                  (265
                  )
                  
                  (30,673
                  )
                  
                  305Net
                      income
                  
                  $
                  36,642
                  
                  $
                  1,310
                  
                  $
                  38,061
                  
                  $
                  2,062Basic
                      net income per share
                  
                  $
                  0.88
                  
                  $
                  0.03
                  
                  $
                  0.91
                  
                  $
                  0.05Shares
                      used in basic calculation
                  
                  
                  41,853
                  
                  
                  41,676
                  
                  
                  41,847
                  
                  
                  41,676Diluted
                      net income per share
                  
                  $
                  0.76
                  
                  $
                  0.03
                  
                  $
                  0.79
                  
                  $
                  0.04Shares
                      used in diluted calculation
                  
                  
                  48,080
                  
                  
                  49,566
                  
                  
                  47,944
                  
                  
                  49,560


See
        accompanying notes to the consolidated financial
        statements.


2


**STAMFORD
          INDUSTRIAL GROUP, INC.**
 **CONSOLIDATED
          STATEMENTS OF CASH FLOWS (UNAUDITED)**
 **(in
          thousands)**
  **Six
                    Months Ended****June
                    30,**
                  **2008**
                
                **June
                    30,**
                  **2007**Cash
                    flows from operating activities:Net
                    income
                
                $
                38,061
                
                $
                2,062Reconciliation
                    of net income to net cash provided by operating
                    activities:Provision
                    for doubtful accounts
                
                
                290
                
                
                9Depreciation
                
                
                518
                
                
                166Amortization
                    of intangible assets
                
                
                524
                
                
                955Amortization
                    of deferred financing costs
                
                
                77
                
                
                76Deferred
                    tax assets
                
                
                (31,447
                )
                
                —Stock-based
                    compensation
                
                
                476
                
                
                1,426Changes
                    in assets and liabilities:Accounts
                    receivable
                
                
                (14,412
                )
                
                (2,910
                )Inventories
                
                
                (4,099
                )
                
                (1,393
                )Prepaid
                    expenses and other current assets
                
                
                288
                
                
                344Other
                    assets
                
                
                5
                
                
                14Accounts
                    payable
                
                
                8,598
                
                
                1,117Accrued
                    expenses and other liabilities
                
                
                1,855
                
                
                (1,137
                )Other
                    liabilities
                
                
                26
                
                
                —Net
                    cash provided by operating activities
                
                
                760
                
                
                729Cash
                    flows from investing activities:Capital
                    expenditures for property and equipment
                
                
                (484
                )
                
                (2,324
                )Net
                    cash used in investing activities
                
                
                (484
                )
                
                (2,324
                )Cash
                    flows from financing activities:Borrowings
                    from revolving credit facility
                
                
                1,500
                
                
                —Payments
                    on revolving credit facility
                
                
                (500
                )
                
                —Principal
                    payments on long-term debt
                
                
                (2,000
                )
                
                (2,000
                )Net
                    cash used in financing activities
                
                
                (1,000
                )
                
                (2,000
                )Net
                    decrease in cash and cash equivalents
                
                
                (724
                )
                
                (3,595
                )Cash
                    and cash equivalents at beginning of period
                
                
                1,236
                
                
                3,703Cash
                    and cash equivalents at end of period
                
                $
                512
                
                $
                108Supplemental
                    cash flow disclosures:Interest
                    paid
                
                $
                944
                
                $
                1,303Taxes
                    paid
                
                $
                107
                
                $
                326
  See
          accompanying notes to the consolidated financial
          statements.




3





STAMFORD
      INDUSTRIAL GROUP, INC.




NOTES
      TO
      THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


(dollars
      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 six months ended
      June 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’s discussion and analysis of financial condition and results of
      operations is based upon our consolidated financial statements, which have
      been
      prepared in accordance with accounting principles generally accepted in the
      United States of America. The preparation of these financial statements requires
      us to make estimates and judgments that affect the reported amounts of assets,
      liabilities, revenues and expenses, and related disclosure of contingent assets
      and liabilities. On an on-going basis, the Company evaluates its estimates,
      including, but not limited to, those related to bad debts, investments,
      intangible assets, contingencies and litigation.




4




The
      Company bases its estimates on historical experience and on various other
      assumptions that are believed to be reasonable under the circumstances, the
      results of which form the basis for making judgments about the carrying values
      of assets and liabilities that are not readily apparent from other sources.
      Actual results may differ from these estimates under different assumptions
      or
      conditions.




The
      Company believes the following critical accounting policies affect significant
      judgments and estimates used in the preparation of its consolidated financial
      statements. Events occurring subsequent to the preparation of the consolidated
      financial statements may cause the Company to re-evaluate these
      policies.





*Use
      of estimates* . ** The
      preparation of financial statements in conformity with 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 has not recorded an estimated liability related to the pending class
      action lawsuit in which it was named. For a discussion of this matter, see
      Note
      12. Due to the uncertainties related to both the likelihood and the amount
      of
      any potential loss, no estimate was made of the liability that could result
      from
      an unfavorable outcome. As additional information becomes available, the Company
      will assess the potential liability and make or revise its estimate(s)
      accordingly, which could materially impact its results of operations and
      financial position.





*Income
      taxes.* Deferred
      tax assets were $39.5 million at June 30, 2008 and $8.1 million at December
      31,
      2007, respectively, net of a valuation allowance of $1.9 million and $35.4
      million, respectively.  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.




5





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




***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 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, 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.





In
      December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
      Combinations” (“SFAS No. 141R”), which replaces SFAS No. 141, “Business
      Combinations.” SFAS No. 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 No. 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 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.





**Note
      2. Inventories**




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


**June
                  30,**
                **2008**
              
              **December
                  31,**
                **2007**Finished
                  goods
              
              $
              254
              
              $
              101Work-in-process
              
              
              700
              
              
              1,197Raw
                  materials
              
              
              16,970
              
              
              12,527$
              17,924
              
              $
              13,825




6




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




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


**June
                  30,**
                **2008**
              
              **December
                  31,**
                **2007**Land
              
              $
              350
              
              $
              350Building
                  and improvements
              
              
              1,307
              
              
              1,294Leasehold
                  improvements
              
              
              1,238
              
              
              1,275Machinery
                  and equipment
              
              
              5,500
              
              
              5,361Office
                  equipment and furniture
              
              
              1,161
              
              
              985Construction
                  in progress
              
              
              193
              
              
              —9,749
              
              
              9,265Less:
                  Accumulated depreciation
              
              
              (1,175
              )
              
              (657
              )Property,
                  plant and equipment, net
              
              $
              8,574
              
              $
              8,608





**Note
      4. Intangible assets**





As
      part
      of the acquisition of Concord, the Company allocated a portion of the purchase
      cost to intangible assets consisting of trade names, customer relationships
      and
      non-compete agreements. These intangible assets are amortized over their
      expected useful lives which are between 3 and 12 years using the straight-line
      method.





Intangible
      assets, net of amortization at June 30, 2008 and December 31, 2007 are as
      follows:


**June
                  30, 2008****Gross**
              
              **Accumulated**
                **Amortization**
              
              **Net**
              
              **Life**Intangibles
                  subject to amortization:Customer
                  relationships
              
              $
              12,399
              
              $
              (1,812
              )
              $
              10,587
              
              
              12
                  yrsNon-compete
                  agreements
              
              
              37
              
              
              (21
              )
              
              16
              
              
              3
                  yrsIntangibles
                  not subject to amortization:Trade
                  name
              
              
              9,397
              
              
              —
              
              
              9,397
              
              
              —Intangibles,
                  net
              
              $
              21,833
              
              $
              (1,833
              )
              $
              20,000


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


**June
                  30,**
                **2008**
              
              **December
                  31,**
                **2007**Accrued
                  compensation, benefits andcommissions
              
              $
              999
              
              $
              705Accrued
                  interest payable
              
              
              588
              
              
              339Accrued
                  professional services
              
              
              236
              
              
              343Accrued
                  insurance
              
              
              199
              
              
              426Accrued
                  property taxes
              
              
              70
              
              
              33Accrued
                  related party stock fee
              
              
              959
              
              
              507Accrued
                  transaction costs
              
              
              487
              
              
              —Other
                  accrued liabilities
              
              
              392
              
              
              389$
              3,930
              
              $
              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”) with LaSalle Bank
      National Association, 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
      June
      30, 2008 and December 31, 2007, the outstanding balance from the revolving
      credit facility was $6.3 million and $5.3 million, respectively. At June 30,
      2008, the Company had $2.1 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 June 30, 2008 and December 31, 2007 was
      $21.0
      million and $23.0 million, respectively. At June 30, 2008 and December 31,
      2007,
      the Company had $4.0 million, classified as current at both dates, and $17.0
      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.





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 June 30, 2008 and December
      31,
      2007, the applicable interest rate for the outstanding borrowings under the
      Credit Agreement was 5.20% and 7.24%, respectively.




8





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
      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 $11.3 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
      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 June 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**


**June
                  30,**
                **2008**
              
              **December
                  31,**
                **2007**Deferred
                  compensation
              
              $
              952
              
              $
              699Accrued
                  interest payable
              
              
              216
              
              
              190$
              1,168
              
              $
              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 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
      the 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 June 30, 2008, exclude the impact of 2,985 potential
      shares of common stock issuable upon the exercise of stock options, which
      were anti-dilutive .
      Shares
      used in the diluted net income per share for the six months ended June 30,
      2008,
      exclude the impact of 3,012 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 six months ended
      June
      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**
                **June
                  30,**
              
              **Six
                  Months Ended**
                **June
                  30,****2008**
              
              **2007**
              
              **2008**
              
              **2007****Basic
                  net income per share calculation:**Net
                  income
              
              $
              36,642
              
              $
              1,310
              
              $
              38,061
              
              $
              2,062Weighted
                  average common shares - basic
              
              
              41,853
              
              
              41,676
              
              
              41,847
              
              
              41,676**Basic
                  net income per share**
              
              $
              0.88
              
              $
              0.03
              
              $
              0.91
              
              $
              0.05**Diluted
                  net income per share calculation:**Net
                  income
              
              $
              36,642
              
              $
              1,310
              
              $
              38,061
              
              $
              2,062Weighted
                  average common shares - basic
              
              
              41,853
              
              
              41,676
              
              
              41,847
              
              
              41,676Effect
                  of dilutive stock options
              
              
              27
              
              
              2,035
              
              
              —
              
              
              2,026Effect
                  of restricted stock awards
              
              
              —
              
              
              81
              
              
              —
              
              
              110Effect
                  of convertible note
              
              
              5,628
              
              
              5,628
              
              
              5,628
              
              
              5,628Effect
                  of stock fee
              
              
              572
              
              
              146
              
              
              469
              
              
              120Weighted
                  average common shares - diluted
              
              
              48,080
              
              
              49,566
              
              
              47,944
              
              
              49,560**Diluted
                  net income per share**
              
              $
              0.76
              
              $
              0.03
              
              $
              0.79
              
              $
              0.04





**Note
      9. Income Taxes**





For
      federal income tax purposes, the Company has available net operating loss
      carry-forwards of approximately $114.5 million and research and development
      credit carry-forwards of $0.2 million at June 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.





10





At
      June
      30, 2008, based on the Company’s revised projections for future taxable income
      over the periods that the Company's deferred tax assets are deductible, the
      Company determined that it was more likely than not that it
      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 current quarter via a credit
      to
      income tax expense. The reversal of the valuation allowance resulted in the
      recognition of $31.4 million of income tax benefits in the three and six months
      ended June 30, 2008. The Company has remaining $1.9 million valuation allowance
      as of June 30, 2008 and anticipates releasing the remaining allowance in the
      third and fourth quarters of 2008.





Deferred
      tax assets were $39.5 million at June 30, 2008 and $8.1 million at December
      31,
      2007, respectively, net of a valuation allowance of $1.9 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.





In
      2006,
      the Company reduced $8.1 million of valuation allowance as a reduction of
      goodwill and intangible assets acquired from the Concord acquisition, based
      on
      the expectation that these deferred tax assets are more likely than not to
      be
      realized.





The
      Company has an effective tax rate benefit of 523.2% and 415.2% for the three
      and
      six months ended June 30, 2008, respectively. The effective tax rate excluding
      the reversal of the valuation allowance of $31.4 million was 11.6% and 10.5%
      for
      the three and six months ended June 30, 2008, respectively, which results from
      a
      federal alternative minimum tax and state tax. The change in the Company’s
      effective tax rate is due to Concord’s taxable income within its relevant
      states.




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 June 30, 2008 and 2007
      the
      Company made matching contributions of approximately $42 thousand and $26
      thousand, respectively. For the six months ended June 30, 2008 and 2007 the
      Company made matching contributions of approximately $82 thousand and $54
      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 statement 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 six months
      ended June 30, 2008 was $0.3 million and $0.5 million, respectively. Total
      share-based compensation expense for the three and six months ended June 30,
      2007 was $0.7 million and $1.4 million, respectively.




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 six months ended June 30, 2008 the Company recorded $0.3
      million and $0.5 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 six months ended June 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
              
              
              —
              
              
              —Exercised
              
              
              —
              
              
              —Forfeited
                  or expired
              
              
              —
              
              
              —Outstanding
                  at June 30, 2008
              
              
              1,541
              
              $
              1.22
              
              
              7.7
              
              $
              655Vested
                  or expected to vest at June 30, 2008
              
              
              1,541
              
              $
              1.22
              
              
              7.7
              
              $
              655Exercisable
                  at June 30, 2008
              
              
              804
              
              $
              1.20
              
              
              6.5
              
              $
              361





A
      summary
      of the option activity under the performance-based awards for the six months
      ended June 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 June 30, 2008
              
              
              1,471
              
              $
              1.25
              
              
              9.50
              
              $
              588Vested
                  or expected to vest at June 30, 2008
              
              
              1,471
              
              $
              1.25
              
              
              9.50
              
              $
              588Exercisable
                  at June 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 Company's 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 award will become fully vested on the occurrence of
      the
      earliest of the aforementioned events.





**Note
      12. Commitments and Contingencies**





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 thereafter 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 but clarified
      that
      the plaintiffs may seek to certify a more limited class in the District Court.
      On June 25, 2007, the District Court signed an Order terminating the settlement.
      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.
      Trial is scheduled for October 2008. The Company believes that it has valid
      claims and defenses and the defendants have agreed to withdraw their
      counterclaims without prejudice.


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. Concord has moved for the District Court to dismiss
        the complaint for legal insufficiency and that motion is presently pending
        before the Court.
  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
        1, 2008, Plaintiff filed a motion in the Court of Common Pleas seeking to
        amend
        his complaint to add as named parties defendant in addition to Concord, the
        original named defendant, Concord, SIG Acquisition Corp., and CRC. The motion
        is
        pending with the Court and has not been decided.




**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 June 30, 2008 and 2007, the Company
      recorded consulting fees of $0.4 million and $0.3 million, respectively, related
      to the Consulting Agreement. For the six months ended June 30, 2008 and 2007,
      the Company recorded consulting fees of $0.7 million and $0.6 million,
      respectively, related to the Consulting Agreement. As of June 30, 2008 and
      December 31, 2007, the accrued balance due to Kanders & Company under this
      agreement amounted to $1.0 million and $0.5 million, respectively.





For
      the
      three months ended June 30, 2008 and 2007, the Company reimbursed Clarus
      Corporation (“Clarus”) an entity it shared office space with until October 1,
      2007, an aggregate of $8 thousand and $38 thousand, respectively; and for the
      six months ended June 30, 2008 and 2007, the Company reimbursed Clarus $18
      thousand and $83 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.




14





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 June 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.





SFAS
      157
      establishes a three-tier fair value hierarchy, which prioritizes the inputs
      used
      in measuring fair value.  These tiers include: Level 1, defined as
      observable inputs such as quoted prices in active markets; Level 2, defined
      as
      inputs other than quoted prices in active markets that are either directly
      or
      indirectly observable; and Level 3, defined as unobservable inputs in which
      little or no market data exists, therefore requiring an entity to develop its
      own assumptions.





As
      of
      June 30, 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 obtained
      in
      quoted public markets. The Company has consistently applied these valuation
      techniques in all periods presented.





The
      Company’s liabilities measured at fair value on a recurring basis subject to the
      disclosure requirements of SFAS 157 at June 30, 2008, were as
      follows:


**Fair
                  Value Measurements at Reporting Date Using****Description**
              
              **6/30/2008**
              
              **Quoted**
                **Prices
                  in**
                **Active**
                **Markets
                  for**
                **Identical**
                **Liabilities**
                **(Level
                  1)**
              
              **Significant**
                **Other**
                **Observable**
                **Inputs**
                **(Level
                  2)**
              
              **Significant**
                **Unobservable**
                **Inputs**
                **(Level
                  3)**Interest
                  rate derivatives
              
              $
              262
              
              $
              —
              
              $
              262
              
              $
              —Total
                  liabilities measured at fair value
              
              $
              262
              
              $
              —
              
              $
              262
              
              $
              —


15





**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, 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





We
      have
      recently entered into negotiations to replace our collective bargaining
      agreement covering approximately 100 employees at our Warren, Ohio facility
      which expires on August 31, 2008. There can be no assurance that we will be
      able
      to negotiate a new collective bargaining agreement on terms satisfactory to
      the
      Company. A strike, work stoppage or other slowdown could significantly disrupt
      our operations at our Warren, Ohio facility and materially adversely affect
      our
      business, results of operations and financial condition.





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





REVENUES





Revenue
      increased $13.9 million or 49.1% to $42.2 million for the three months ended
      June 30, 2008, as compared to $28.3 million for the three months ended June
      30,
      2007. The increase of $13.9 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 $11.1 million or 26.3% of sales for the three months ended June
      30,
      2008, as compared to $4.4 million or 15.5% of sales for the three months ended
      June 31, 2007. The 69.7% increase in gross margin percentage was due to
      favorable product mix, lower scrap material rates, 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 June 30, 2008 increased $1.9 million or
      67.9% to $4.7 million as compared to $2.8 million for
      the
      three months ended June 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 June 30, 2008, sales and marketing expenses increased $0.2 million
      or 66.6% to $0.5 million as compared to $0.3 million for the three months ended
      June 30, 2007. The increase was primarily due to increased freight costs of
      $0.1
      million and travel expenses 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 June 30, 2008, general and administrative
      expenses was $3.9 million as compared to $2.4 million for the three months
      ended
      June 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 $0.4 million due to the
      transition of temporary employees to full-time and an increase in
      incentive-based compensation, legal fees of $0.6 million, transaction costs
      of
      $0.5 million, depreciation expense of $0.1 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 $0.3 million.




18




*Related
      party stock compensation.* For
      the
      three months ended June 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 June 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 $0.5 million for the three months ended June 30, 2008, compared
      to
      interest expense of $0.5 million for the three months ended June 30, 2007.
      Interest expense remained flat for the quarter due to the mark to market benefit
      adjustment of $0.2 million on interest rate swap agreements. (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 $114.5 million and research and development
      credit carry-forwards of $0.2 million at June 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.





At
      June
      30, 2008, based on the Company’s revised projections for future taxable income
      over the periods that the Company's deferred tax assets are deductible, the
      Company determined that it was more likely than not that it
      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 current quarter via a credit
      to
      income tax expense. The reversal of the valuation allowance resulted in the
      recognition of $31.4 million of income tax benefits in the three and six
      months ended June 30, 2008. The Company has remaining $1.9 million valuation
      allowance as of June 30, 2008 and anticipates releasing the remaining allowance
      in the third and fourth quarters of 2008.





Deferred
      tax assets were $39.5 million at June 30, 2008 and $8.1 million at December
      31,
      2007, respectively, net of a valuation allowance of $1.9 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.





In
      2006,
      the Company reduced $8.1 million of valuation allowance as a reduction of
      goodwill and intangible assets acquired from the Concord acquisition, based
      on
      the expectation that these deferred tax assets are more likely than not to
      be
      realized .




19





The
      Company has an effective tax rate benefit of 523.2% for the three months ended
      June 30, 2008. The effective tax rate excluding the reversal of the valuation
      allowance of $31.4 million was 11.6% for the three months ended June 30, 2008
      which results from a federal alternative minimum tax and state tax. For the
      three months end June 30, 2007, the Company had an effective tax rate benefit
      of
      25.4%.





**Consolidated
      Operating Results for the Six Months Ended June 30, 2008 Compared to the Six
      Months Ended June 30, 2007**





REVENUES





Revenue
      increased $18.7 million or 33.3% to $74.9 million for the six months ended
      June
      30, 2008, as compared to $56.2 million for the six months ended June 30, 2007.
      The increase of $18.7 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 $16.6 million or 22.2% of sales for the six months ended June 30,
      2008, as compared to $9.7 million or 17.3% of sales for the six months ended
      June 30, 2007. The 28.3% 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 six months ended June 30, 2008, increased $2.0 million or
      33.3%
      to $8.0 million as compared to $6.0 million for the six months ended June 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 six
      months ended June 30, 2008, sales and marketing expenses increased $0.3 million
      or 42.9% to $1.0 million as compared to $0.7 million for the six months ended
      June 30, 2007. The increase was primarily due to increased freight cost of
      $0.1
      million, increased travel expenses of $0.1 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 six months ended
      June
      30, 2008, general and administrative expenses was $6.6 million as compared
      to
      $5.1 million for the six months ended June 30, 2007. Stock-based compensation
      expense decreased by $0.9 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 $0.6 million due to the transition of temporary employees to
      full-time and an increase in incentive-based compensation, legal fees of
      $0.6 million, transaction costs of $0.5 million, depreciation expense of $0.2
      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 $0.4
      million.





*Related
      party stock compensation.* For
      the
      six months ended June 30, 2008, the Company had related party stock compensation
      expense of $0.5 million associated with the consulting agreement with Kanders
      & Company as compared to $0.3 million for the six months ended June 30,
      2007. The increase of $0.2 million is the result of increased revenues for
      the
      period. (See Note 13 to the consolidated financial statements.)





*Interest
      expense.* Interest
      expense was $1.3 million for the six months ended June 30, 2008 compared to
      interest expense of $1.2 million for the six months ended June 30, 2007. The
      primary reason for the increase in interest expense is due to higher debt
      balance on the company’s revolving credit facility and higher temporary interest
      rates associated with the second amendment to the credit facility, offset by
      the
      mark to market adjustment of $0.2 million on interest rate swap agreements.
      (See
      Note 6 to the consolidated financial statements.)





20




PROVISION
      FOR INCOME TAXES





For
      income tax purposes, the Company has available federal net operating loss
      carry-forwards of approximately $114.5 million and research and development
      credit carry-forwards of approximately $0.2 million at June 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. If the Company were to be acquired at its recent stock value such
      that Section 382 is applicable, this would eliminate the ability to use a
      substantial majority of these carry-forwards. The recognition of a valuation
      allowance for deferred taxes requires management to make estimates about the
      Company’s future profitability. The estimates associated with the valuation of
      deferred taxes are considered critical due to the amount of deferred taxes
      recorded on the consolidated balance sheet and the judgment required in
      determining the Company’s future profitability.





At
      June
      30, 2008, based on the level of historical taxable income and 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
      certain of its deferred tax assets were expected to be realized and therefore
      released the remaining valuation allowance. The reversal of the valuation
      allowance resulted in the recognition of $31.4 million of income tax benefits
      in
      the three and six months ended June 30, 2008. The
      Company anticipates releasing the remaining $1.9 million valuation
      allowance in the third and fourth quarters of 2008.





Deferred
      tax assets were $39.5 million at June 30, 2008 and $8.1 million at December
      31,
      2007, respectively, net of a valuation allowance of $1.9 and $35.4 million,
      respectively.





Because
      the majority of the Company’s deferred tax assets consists of net operating loss
      carryforwards for federal tax purposes, the key to the Company’s ability to
      realize the deferred tax assets will be to generate sufficient income in future
      years to utilize the loss carryforwards prior to expiration. The amount of
      the
      deferred tax assets considered realizable, however, could be reduced in the
      near
      term if estimates of future taxable income during the carryforward period are
      reduced or if change in control events occur which could limit the availability
      of the NOL under Section 382 of the Internal Revenue Code of 1986, as amended.
      Any such reduction could have a material adverse effect on the financial
      condition of the Company.





The
      Company has an effective tax rate benefit of 415.2% for the six months ended
      June 30, 2008. The effective tax rate excluding the reversal of the valuation
      allowance of $31.4 million was 10.5% for the six months ended June 30, 2008,
      which results from a federal alternative minimum tax and state tax. For the
      six
      months ended June 30, 2007, the Company had an effective tax rate of
      12.9%.




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”) with LaSalle Bank
      National Association, 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.




21





At
      June
      30, 2008 and December 31, 2007, the outstanding balance from the revolving
      credit facility was $6.3 million and $5.3 million, respectively. At June 30,
      2008, the Company had $2.1 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 June 30, 2008 and December 31, 2007 was
      $21.0
      million and $23.0 million, respectively. At June 30, 2008 and December 31,
      2007,
      the Company had $4.0 million, respectively, classified as current and $17.0
      million and $19.0 million, respectively classified as long-term. During the
      three-month and six-month periods ended June 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 June 30, 2008 and December
      31,
      2007, the applicable interest rate for the outstanding borrowings under the
      Credit Agreement was 5.20% 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
      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 $11.3 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
      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 June 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 $0.8 million for the six months ended
      June
      30, 2008, reflecting net income of $38.1 million, depreciation and amortization
      of $1.1 million, non-cash deferred stock-based compensation expenses of $0.5
      million, provision for doubtful accounts of $0.3 million offset by the impact
      of
      the change in deferred tax assets of $31.4 million and the changes in working
      capital of $7.8 million. The change in working capital is primarily due to
      the
      timing of price increases to customers, tight credit markets experienced by
      our
      vendors and the timing difference between increased revenues generated and
      cash
      collections. Net cash provided by operating activities was $0.7 million for
      the
      six months ended June 30, 2007, reflecting net income of $2.1 million,
      depreciation and amortization of $1.2 million, non-cash deferred stock-based
      compensation expenses of $1.4 million offset by the impact of changes in working
      capital of $4.0 million. The change in working capital is primarily due to
      the
      timing difference between increased revenues generated and cash
      collections.




22





**Investing
      Activities**





Net
      cash
      used in investing activities was $0.5 million for the six months ended June
      30,
      2008, primarily resulting from implementation of Concord’s new information
      technology platform and the purchase of machinery and equipment. Net cash used
      in investing activities was $2.3 million for the six months ended June 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 $1.0 million for the six months ended June
      30,
      2008. The net cash used in financing activities was primarily from an increase
      in the Company’s line of credit facility of $1.0 million which was used for
      working capital expansion and capital expenditures, offset by cash used to
      paydown long-term debt in the amount of $2.0 million. Net cash used in financing
      activities was $2.0 million for the six months ended June 30, 2007. The net
      cash
      was used to pay down long-term debt of $2.0 million.





We
      believe that the Company’s revolving credit facility and cash from operations
      will be sufficient to meet our expected working capital needs for at least
      the
      next twelve months.





**Capital
      Expenditures**





The
      Company anticipates capital expenditures, excluding acquisitions, of $0.6
      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, the Financial Accounting Standards Board (“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.




23





In
      December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
      Combinations” (“SFAS No. 141R”), which replaces SFAS No. 141, “Business
      Combinations.” SFAS No. 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 No. 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.





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





Through
      June 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 significant our exposure to foreign currency
      exchange rate changes arising from revenues being denominated in foreign
      currencies.





The
      Company’s primary exposure to market risk is interest rate risk associated with
      our senior credit facilities. 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 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 June 30, 2008, the applicable interest
      rate for the outstanding borrowings under the Credit Agreement was
      5.20%.





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 $11.3 million of interest rate
      swaps
      fixing interest rates between 5.0% and 5.8%. At June 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.





The
      Company’s exposure to market risk is limited to interest income sensitivity,
      which is affected by changes in the general level of United States interest
      rates because all of our investments are in debt securities issued by the United
      States government. The Company’s investments consist of United States Government
      Agency and Treasury Securities in order to preserve principal, liquidity and
      stabilize interest income. Therefore, due to the conservative nature of our
      investments, our future interest income sensitivity and risk are
      limited.





**Item
      4** **.
      Controls and Procedures**





**Evaluation
      of Disclosure Controls and Procedures**





The
      Company’s Chief Executive Officer and Chief Financial Officer, its principal
      executive officer and principal financial officer, respectively, carried out
      an
      evaluation of the effectiveness of the design and operation of the Company’s
      disclosure controls and procedures (as such term is defined in Rules 13a-15(e)
      and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)) as of June 30, 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 June 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 June 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.




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.
      Trial is scheduled for October 2008. The Company believes that it has valid
      claims and defenses and the defendants have agreed to withdraw their
      counterclaims without prejudice.


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. Concord has moved for the District Court to dismiss
        the complaint for legal insufficiency and that motion is presently pending
        before the Court.
  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
        1, 2008, Plaintiff filed a motion in the Court of Common Pleas seeking to
        amend
        his complaint to add as named parties defendant in addition to Concord, the
        original named defendant, Concord, SIG Acquisition Corp., and CRC. The motion
        is
        pending with the Court and has not been decided.




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




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 Annual Report on Form 10-K 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
      4** **.
      Submission of Matters to a Vote of Security Holders**




Two
      proposals were submitted to a vote of, and approved by, the Company’s
      stockholders at its Annual Meeting of Stockholders held on June 2, 2008. Each
      proposal is further described in the Company’s Definitive Proxy Statement on
      Schedule 14A (the “Proxy Statement”), filed with the Securities and Exchange
      Commission on April 25, 2008.





Of
      the
      41,801,380 shares of common stock entitled to vote at the annual meeting,
      39,163,460 shares were represented in person or by proxy, which constitutes
      approximately 93.68% of the total votes entitled to be cast at the meeting.
      Each
      share of the Company’s outstanding common stock is entitled to one
      vote.





The
      votes
      for each proposal were cast as follows:





Proposal
      1. Election of Directors:




**Number
                  of Shares Voted For**
              
              **Number
                  of Shares Withheld**Warren
                  B. Kanders
              
              
              34,943,539
              
              
              4,219,921Nicholas
                  Sokolow
              
              
              34,960,974
              
              
              4,202,486David
                  A. Jones
              
              
              34,985,324
              
              
              4,178,136




Proposal
      2. Amendment to the Amended and Restated Certificate of Incorporation to effect
      a reverse stock split of the Company’s common stock:




**FOR**
              
              **AGAINST**
              
              **ABSTAIN**34,760,596
              
              
              4,397,463
              
              
              5,400




As
      described in the Proxy Statement, notwithstanding the approval of the reverse
      stock split by the Company’s stockholders, the Board may, in its sole
      discretion, abandon the proposed amendment and determine prior to the
      effectiveness of any filing with the Secretary of State of the State of Delaware
      not to effect the reverse stock split prior to the one-year anniversary of
      the
      June 2, 2008 meeting, as permitted under Section 242(c) of the Delaware General
      Corporation Law. The determination by the Board as to whether the reverse split
      will be effected, if at all, will be based upon certain factors, including
      meeting applicable listing requirements, existing and expected marketability
      and
      liquidity of our common stock, prevailing market conditions and the likely
      effect on the market price of our common stock. If the Board fails to implement
      the reverse stock split prior to the one-year anniversary of the June 2, 2008
      meeting, stockholder approval again would be required prior to implementing
      any
      reverse stock split.




25




**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
 26




**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.


**S****TAMFORD****I****NDUSTRIAL****G****ROUP,****I****NC.**Date:
              August 11, 2008
            By:
            /s/
              Albert W. Weggeman Jr.Albert
              W. Weggeman, Jr.
              *President
                and Chief Executive Officer*




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




27





**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
 28