UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D. C. 20549
 
 FORM
10-Q
 
 x
              Quarterly
      report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934For
      the quarterly period ended June 29, 2008o
              Transition
      Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934
 Commission
file number: 000-52380
 
 MISCOR
GROUP, LTD.
 (Exact
name of registrant as specified in its charter)
 
 Indiana
              20-0995245(State
      or other jurisdiction of incorporation or organization)
              (I.R.S.
      Employer Identification No.)
 
 
 1125
South Walnut Street
 South
Bend, Indiana 46619
 (Address
of principal executive offices/zip code)
  
 Registrant’s
telephone number, including area code:  (574) 234-8131
   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.
  x
Yes   o No
   Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. 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 oNon-accelerated
      filer o   (Do
      not check if a smaller reporting company)
              Smaller
      reporting company x
 
 Indicate
      by check mark whether the registrant is a shell company (as defined in
      Rule 12b-2 of the Exchange Act).
              
              o Yes      x No
  Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date. As of August 6, 2008, there were
11,731,393 shares outstanding of the issuer’s Common Stock, without par
value.
  
  
  MISCOR
GROUP, LTD.
 
 INDEX
TO FORM 10-Q
 
 Item
              
              PageNumber
              
              NumberPART
      I - FINANCIAL INFORMATION1.
              Financial
      Statements:Condensed
      Consolidated Balance Sheets June 29, 2008 (Unaudited) and
      December 31, 2007
              1Condensed
      Consolidated Statements of Operations (Unaudited) Three and Six Months
      ended June 29, 2008 and July 1, 2007
              2Condensed
      Consolidated Statements of Cash Flows (Unaudited) Six Months ended June
      29, 2008 and July 1, 2007
              3Notes
      to Condensed Consolidated Financial Statements
              42.
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
              183.
              Quantitative
      and Qualitative Disclosures about Market Risk
              274T.
              Controls
      and Procedures
              27PART
      II - OTHER INFORMATION2.
              Unregistered
      Sales of Equity Securities and Use of Proceeds
              294.
              Submission
      of Matters to a Vote of Security Holders
              296.
              Exhibits
              30Signatures
              31
 
  i
  PART
I - FINANCIAL INFORMATION
 ITEM
      1.
              FINANCIAL
      STATEMENTS
  MISCOR
      GROUP, LTD. AND SUBSIDIARIES
                  CONDENSED
      CONSOLIDATED BALANCE SHEETS
                  (Amounts
      in thousands, except share and per share data)ASSETSJune
      29,
                  2008
                
                
                December
      31,
                  2007(Unaudited)CURRENT
      ASSETSCash
                
                $
                –
                
                
                $
                2,807Accounts
      receivable, net of allowance for doubtful accounts of $760 and $669,
      respectively
                
                
                20,426
                
                
                
                17,233Inventories,
      net
                
                
                11,422
                
                
                
                10,884Prepaid
      expenses and other current assets
                
                
                4,622
                
                
                
                2,006Total
      current assets
                
                
                36,470
                
                
                
                32,930PROPERTY
      AND EQUIPMENT, net
                
                
                12,981
                
                
                
                10,125OTHER
      ASSETSDeposits
      and other assets
                
                
                225
                
                
                
                182Goodwill
                
                
                13,531
                
                
                
                8,003Debt
      issue costs, net
                
                
                38
                
                
                
                40Customer
      relationships, net
                
                
                9,191
                
                
                
                7,568Other
      intangible assets, net
                
                
                1,451
                
                
                
                699Total
      other assets
                
                
                24,436
                
                
                
                16,492Total
      Assets
                
                $
                73,887
                
                
                $
                59,547
 LIABILITIES
      AND STOCKHOLDERS' EQUITYCURRENT
      LIABILITIESRevolving
      credit line, net of discount of $145 and $-0-,
respectively
                
                $
                3,749
                
                
                $
                –Current
      portion of long-term debt, net of discount of $-0- and $15,
      respectively
                
                
                674
                
                
                
                3,036Accounts
      payable
                
                
                8,236
                
                
                
                7,530Accrued
      expenses and other current liabilities
                
                
                7,352
                
                
                
                4,558Total
      current liabilities
                
                
                20,011
                
                
                
                15,124LONG
      TERM LIABILITIESLong-term
      debt
                
                
                4,010
                
                
                
                2,195Long-term
      debt, Officers
                
                
                4,750
                
                
                
                5,000Total
      long-term liabilities
                
                
                8,760
                
                
                
                7,195Total
      liabilities
                
                
                28,771
                
                
                
                22,319Commitments
      and ContingenciesSTOCKHOLDERS'
      EQUITYPreferred
      stock, no par value; 800,000 shares authorized; no shares issued and
      outstanding
                
                
                –
                
                
                
                –Common
      stock, no par value; 30,000,000 shares authorized; 11,727,209 and
      11,129,012 shares issued and outstanding, respectively
                
                
                50,767
                
                
                
                43,967Additional
      paid in capital
                
                
                9,123
                
                
                
                9,019Deferred
      compensation
                
                
                (137
                )
                
                
                (55
                )Accumulated
      deficit
                
                
                (14,637
                )
                
                
                (15,703
                )Total
      Stockholders' equity
                
                
                45,116
                
                
                
                37,228Total
      Liabilities and Stockholders' Equity
                
                $
                73,887
                
                
                $
                59,547
  The
accompanying notes are an integral part of these condensed consolidated
financial statements.
   1
  MISCOR
      GROUP, LTD. AND SUBSIDIARIES
                CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS
                (Amounts
      in thousands, except share and per share data)For
      the 3 months ended June 29, 2008
              
              
              For
      the 3 months ended July 1, 2007
              
              
              For
      the 6 months ended June 29, 2008
              
              
              For
      the 6 months ended July 1, 2007(Unaudited)
              
              
              (Unaudited)
              
              
              (Unaudited)
              
              
              (Unaudited)REVENUESProduct
      sales
              
              $
              6,399
              
              
              $
              5,797
              
              
              $
              12,620
              
              
              $
              11,023Service
      revenue
              
              
              24,165
              
              
              
              10,967
              
              
              
              47,664
              
              
              
              21,887Total
      revenues
              
              
              30,564
              
              
              
              16,764
              
              
              
              60,284
              
              
              
              32,910COST
      OF REVENUESProduct
      sales
              
              
              4,905
              
              
              
              4,039
              
              
              
              9,592
              
              
              
              8,077Service
      revenue
              
              
              20,590
              
              
              
              9,813
              
              
              
              40,881
              
              
              
              19,074Total
      cost of revenues
              
              
              25,495
              
              
              
              13,852
              
              
              
              50,473
              
              
              
              27,151Gross
      Profit
              
              
              5,069
              
              
              
              2,912
              
              
              
              9,811
              
              
              
              5,759Selling,
      general and administrative
                expenses
              
              
              4,068
              
              
              
              2,449
              
              
              
              8,066
              
              
              
              5,120Operating
      income
              
              
              1,001
              
              
              
              463
              
              
              
              1,745
              
              
              
              639Other
      (income)/expenseLoss
      on debt extinguishment
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              2,300Gain
      on sale of fixed assets
              
              
              (22
              )
              
              
              -
              
              
              
              (42
              )
              
              
              -Interest
      expense
              
              
              187
              
              
              
              250
              
              
              
              495
              
              
              
              715165
              
              
              
              250
              
              
              
              453
              
              
              
              3,015Income
      before taxes
              
              
              836
              
              
              
              213
              
              
              
              1,292
              
              
              
              (2,376
              )Income
      tax expense
              
              
              226
              
              
              
              -
              
              
              
              226
              
              
              
              -NET
      INCOME (LOSS)
              
              $
              610
              
              
              $
              213
              
              
              $
              1,066
              
              
              $
              (2,376
              )Basic
      and diluted earnings (loss) per
                share
              
              $
              0.05
              
              
              $
              0.03
              
              
              $
              0.09
              
              
              $
              (0.33
              )Weighted
      average shares outstanding:Basic
              
              
              11,717,898
              
              
              
              7,496,394
              
              
              
              11,558,540
              
              
              
              7,161,794Diluted
              
              
              13,030,301
              
              
              
              8,840,183
              
              
              
              12,875,897
              
              
              
              7,161,794
 
 
 
 
 The
accompanying notes are an integral part of these condensed consolidated
financial statements.
  
  2
  MISCOR
      GROUP, LTD. AND SUBSIDIARIES
                CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS
                (Amounts
      in thousands, except share and per share data)For
      the 6 months endedJune
      29,
                2008
              
              
              July
      1,
                2007(Unaudited)
              
              
              (Unaudited)OPERATING
      ACTIVITIESNet
      cash utilized by operating activities
              
              $
              (159
              )
              
              $
              (805
              )INVESTING
      ACTIVITIESAcquisition
      of business assets, net of cash acquired
              
              
              (7,192
              )
              
              
              -Acquisition
      of property and equipment
              
              
              (1,188
              )
              
              
              (188
              )Proceeds
      from disposal of property and equipment
              
              
              108
              
              
              
              2Net
      cash utilized by investing activities
              
              
              (8,272
              )
              
              
              (186
              )FINANCING
      ACTIVITIESPayments
      on capital lease obligations
              
              
              (29
              )
              
              
              (19
              )Short
      term borrowings, net
              
              
              3,723
              
              
              
              (6,438
              )Borrowings
      of long-term debt
              
              
              2,250
              
              
              
              -Repayments
      of long-term debt
              
              
              (343
              )
              
              
              (4,040
              )Proceeds
      from the issuance of shares and exercise of warrants
              
              
              68
              
              
              
              12,519Debt
      issuance costs
              
              
              (45
              )
              
              
              -Payment
      of stock issuance costs
              
              
              -
              
              
              
              (75
              )Net
      cash provided by financing activities
              
              
              5,624
              
              
              
              1,947INCREASE
      (DECREASE) IN CASH
              
              
              (2,807
              )
              
              
              956Cash,
      beginning of period
              
              
              2,807
              
              
              
              297Cash,
      end of period
              
              $
              -
              
              
              $
              1,253SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW INFORMATION:Cash
      paid during the period for:Interest
              
              $
              407
              
              
              $
              169
 
 
 The
accompanying notes are an integral part of these condensed consolidated
financial statements.
   3
  MISCOR
GROUP, LTD.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 THREE
AND SIX MONTHS IN THE PERIOD ENDED JUNE 29, 2008
 (Amounts
in thousands, except share and per share data)
 
 NOTE
      A - BASIS OF PRESENTATION
  The
unaudited interim consolidated financial statements of MISCOR Group, Ltd. (the
“Company”) as of and for the three and six months ended June 29, 2008 and July
1, 2007, have been prepared in accordance with generally accepted accounting
principles for interim information and the rules and regulations of the
Securities and Exchange Commission for interim financial information.
Accordingly, they do not contain all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
However, in the opinion of the Company’s management, all adjustments, consisting
of normal, recurring adjustments, considered necessary for a fair statement have
been included. The results for the six months ended June 29, 2008 are not
necessarily indicative of the results to be expected for the year ending
December 31, 2008. Refer to our Annual Report on Form 10-K for the fiscal year
ended December 31, 2007 for the most recent disclosure of the Company’s
accounting policies.
  The
Company completed a 1 for 25 reverse stock split of its common stock effective
January 14, 2008. Accordingly, all shares, share prices and earnings (loss) per
share presented in the interim consolidated financial statements reflect the
effect of the reverse stock split.
  Certain
amounts from the prior year financial statements have been reclassified to
conform to the current year presentation. Long-term debt, Stockholder was
renamed Long-term debt, Officers on the condensed consolidated balance sheets.
In addition, Long-term debt in the amount of $2,000 was reclassified to
Long-term debt, Officers as of December 31, 2007. These reclassifications had no
effect on the Company’s consolidated statements of operations or cash
flows.
  NOTE
      B - RECENT ACCOUNTING
PRONOUNCEMENTS
  SFAS 157
 
 In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurement(“SFAS
157”). SFAS 157 defines fair value, establishes a framework for measuring fair
value and expands disclosures about fair value measurements.  SFAS 157
is effective for financial statements issued for fiscal years beginning after
November 15, 2007 and interim periods within those fiscal years. In
February 2008, the FASB issued FASB Staff Position No. 157-2, which
deferred the effective date of SFAS 157 for all non-financial assets and
non-financial liabilities, except those that are recognized or disclosed at fair
value in the financial statements on a recurring basis (at least annually) until
January 1, 2009. Accordingly, our adoption of this standard on January 1,
2008 was limited to financial assets and liabilities. The adoption of SFAS 157
did not have a material effect on our financial condition or results of
operations. The Company is still in the process of evaluating this standard with
respect to its effect on non-financial assets and liabilities and therefore has
not yet determined the impact that it will have on our financial statements upon
full adoption in 2009. Non-financial assets and liabilities for which we have
not applied the provisions of SFAS 157 include those measured at fair value in
impairment testing and those initially measured at fair value in a business
combination.
 
 SFAS 159
 
 In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities—including an amendment of FASB Statement No.
115(“SFAS 159”). SFAS 159 permits entities to choose to measure many
financial instruments and certain other items at fair value. Entities that elect
the fair value option will report unrealized gains and losses in earnings at
each subsequent reporting date. The fair value option may be elected on an
instrument-by-instrument basis, with few exceptions. SFAS 159 also establishes
presentation and disclosure requirements to facilitate comparisons between
companies that choose different measurement attributes for similar assets and
liabilities. The adoption of SFAS 159 did not have an effect on our financial
condition or results of operations as we did not elect this fair value option,
nor is it expected to have a material impact on future periods as the election
of this option for our financial instruments is expected to be
limited.
  4
  NOTE
B - RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)
  SFAS141(R)
 
 In
December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations(“SFAS No. 141(R)”). In SFAS No. 141(R), the FASB
retained the fundamental requirements of SFAS No. 141 to account for
all business combinations using the acquisition method (formerly the
purchase method) and for an acquiring entity to be identified in all
business combinations. However, the new standard requires the acquiring entity
in a business combination to recognize all (and only) the assets acquired and
liabilities assumed in the transaction; establishes the acquisition-date fair
value as the measurement objective for all assets acquired and liabilities
assumed; requires transaction costs to be expensed as incurred; and requires the
acquirer to disclose to investors and other users all of the information they
need to evaluate and understand the nature and financial effect of the business
combination. SFAS No. 141(R) is effective for annual periods beginning
on or after December 15, 2008. Accordingly, any business combinations will
be recorded and disclosed following existing GAAP until January 1, 2009.
The Company expects that SFAS No. 141(R) will have an impact on its
consolidated financial statements when effective, but the nature and magnitude
of the specific effects will depend upon the nature, terms and size of the
acquisitions consummated after the effective date.
 
 SFAS 160
 
 In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements — an amendment of Accounting Research Bulletin
No. 51” (“SFAS 160”). SFAS 160 establishes accounting and reporting
standards for ownership interests in subsidiaries held by parties other than the
parent, the amount of consolidated net income attributable to the parent and to
the noncontrolling interest, changes in a parent’s ownership interest, and the
valuation of retained noncontrolling equity investments when a subsidiary is
deconsolidated. SFAS 160 also establishes disclosure requirements that clearly
identify and distinguish between the interests of the parent and the interests
of the noncontrolling owners. SFAS 160 is effective for fiscal years beginning
after December 15, 2008. The Company does not expect the adoption of this
standard on January 1, 2009 to have a material impact on its consolidated
financial statements.
 
 SFAS 161
 
 In
March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative
Instruments and Hedging Activities” (“SFAS 161”). SFAS No. 161 changes
the disclosure requirements for derivative instruments and hedging activities.
The Company will be required to provide enhanced disclosures about
(a) how and why derivative instruments are used, (b) how derivative
instruments and related hedged items are accounted for under Statement of
Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Certain Hedging Activities (“SFAS 133”), and its related
interpretations, and (c) how derivative instruments and related hedged
items affects our financial position, financial performance, and cash flows.
This statement is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008. The Company is currently
evaluating the impact of the adoption of SFAS 160 on its consolidated financial
statements.
 
 SFAS 162
 
 In May
2008, the FASB issuedSFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles”(“SFAS 162”). SFAS 162 identifies the
sources of accounting principles and the framework for selecting the principles
to be used in the preparation of financial statements of nongovernmental
entities that are presented in conformity with U.S. GAAP. SFAS 162 will become
effective 60 days following the SEC’s approval of the Public Company Accounting
Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles.”  The
Company does not expect the adoption of this standard to have a material impact
on its consolidated financial statements.
  5
  NOTE
C - EARNINGS PER SHARE
  The
Company accounts for earnings/loss per common share under the provisions of SFAS
No. 128, Earnings Per
Share, which requires a dual presentation of basic and diluted
earnings/loss per common share. Basic earnings/loss per common share excludes
dilution and is computed by dividing income available to common stockholders by
the weighted average number of common shares outstanding for the year. Diluted
earnings per common share is computed assuming the conversion of common stock
equivalents, when dilutive.
  Components
of basic and diluted earnings per share were as follows:
  Three
      Months Ended
              
              
              Six
      Months EndedJune
      29,
              
              
              July
      1,
              
              
              June
      29,
              
              
              July
      1,2008
              
              
              2007
              
              
              2008
              
              
              2007Net
      income available for common stockholders used in basic earnings per
      share
              
              $
              610
              
              
              $
              213
              
              
              $
              1,066
              
              
              $
              (2,376
              )Interest
      on convertible debt
              
              
              31
              
              
              
              54
              
              
              
              72
              
              
              
              -Net
      income available for common stockholders after assumed conversion of
      diluted securities
              
              $
              641
              
              
              $
              267
              
              
              $
              1,138
              
              
              $
              (2,376
              )Weighted
      average outstanding shares of common stock
              
              
              11,717,898
              
              
              
              7,496,394
              
              
              
              11,558,540
              
              
              
              7,161,794Dilutive
      effect of  stock options and warrants
              
              
              112,403
              
              
              
              143,789
              
              
              
              117,357
              
              
              
              -Dilutive
      effect of convertible debt
              
              
              1,200,000
              
              
              
              1,200,000
              
              
              
              1,200,000
              
              
              
              -Weighted
      average outstanding shares of common stock and common stock
      equivalents
              
              
              13,030,301
              
              
              
              8,840,183
              
              
              
              12,875,897
              
              
              
              7,161,794Earnings
      (loss) per share:Basic
              
              $
              0.05
              
              
              $
              0.03
              
              
              $
              0.09
              
              
              $
              (0.33
              )Diluted
              
              $
              0.05
              
              
              $
              0.03
              
              
              $
              0.09
              
              
              $
              (0.33
              )
  For the
three months ended July 1, 2007, the Company’s common stock equivalents,
consisting of subordinated debt convertible into 350,081 common shares, were not
included in computing diluted loss per share because their effects were
anti-dilutive. For the six months ended July 1, 2007, the Company’s common stock
equivalents, consisting of warrants to purchase 372,382 shares of common stock,
subordinated debt convertible into 1,550,081 common shares, and options to
purchase 61,200 shares of common stock issued to employees under the 2005 Stock
Option Plan, were not included in computing diluted loss per share because their
effects were anti-dilutive. Basic and diluted loss per share were the same for
the six months ended July 1, 2007, as there were no potentially dilutive
securities outstanding.
  
  NOTE
      D - ACQUISITION
  On
January 16, 2008, the Company acquired 100% of the outstanding shares of common
stock of American Motive Power, Inc. (“AMP”) in a transaction accounted for
using the purchase method of accounting. Accordingly, the results of operations
are included in the Company’s consolidated financial statements from that date
forward. AMP is engaged in the business of repairing, remanufacturing, and
rebuilding locomotives and locomotive engines and providing related goods and
services to the railroad industry.
  6
  NOTE
      D – ACQUISITION (CONTINUED)
  The
aggregate purchase price was $10,977, including $7,365 paid in cash at closing,
costs of acquisition of $112, and 253,623 shares of MISCOR common stock
valued at $13.80 per share, or $3,500. The purchase price was allocated to
assets acquired and liabilities assumed based on their estimated fair value at
the date of acquisition. The excess purchase price over those fair values was
recorded as goodwill. The fair value assigned to assets acquired and liabilities
assumed are based on valuations using management’s estimates and assumptions as
of January 1, 2008, the effective date of the acquisition, and an independent
valuation of the property, plant and equipment and intangible
assets.
 
 The
preliminary allocation of the purchase price based on the independent valuation
is as follows:
 
 Current
      assets
              
              $
              2,481Property,
      plant and equipment
              
              
              2,758Goodwill
              
              
              5,527Customer
      relationships
              
              
              1,870Non-compete
      agreements
              
              
              790Mutual
      services agreement
              
              
              100Current
      liabilities
              
              
              (2,549
              )$
              10,977
 
  The
intangible assets have an 11-year weighted average useful life comprised of
customer relationships (15-years), non-compete agreements (3-years) and mutual
services agreement (3-years). The $5,527 of goodwill was assigned to the repair,
remanufacturing and manufacturing segment. No portion of the goodwill is
expected to be deductible for income tax purposes.
  The
following table presents the unaudited results of operations of the Company as
if the acquisition had been consummated as of January 1, 2007, and includes
certain proforma adjustments, including depreciation and amortization on the
assets acquired.
  Six
      months endedJune
      29, 2008
              
              
              July
      1, 2007Revenues
              
              $
              60,284
              
              
              $
              35,495Net
      earnings (loss)
              
              $
              1,066
              
              
              $
              (3,195
              )Basic
      and diluted earnings (loss) per share
              
              $
              0.09
              
              
              $
              (0.43
              )
 
  NOTE
      E - INVENTORY
  Inventory
consists of the following:
 
 June
      29,
              
              
              December
      31,2008
              
              
              2007Raw
      materials
              
              $
              6,797
              
              
              $
              5,197Work-in-process
              
              
              4,276
              
              
              
              4,846Finished
      goods
              
              
              1,239
              
              
              
              1,60812,312
              
              
              
              11,651Less:
      allowance for slow moving and obsolete inventories
              
              
              (890
              )
              
              
              (767
              )$
              11,422
              
              
              $
              10,884
 
  
  7
  NOTE
      F – INTANGIBLE ASSETS
  Intangible
assets consist of the following:
 
 June
      29, 2008
              
              
              December
      31, 2007Accumulated
              
              
              
              
              
              
              
              
              AccumulatedGross
              
              
              Amortization
              
              
              Net
              
              
              Gross
              
              
              Amortization
              
              
              NetPatents
      and trademarks
              
              $
              4
              
              
              $
              (2
              )
              
              $
              2
              
              
              $
              4
              
              
              $
              (2
              )
              
              $
              2Technical
      library
              
              
              700
              
              
              
              (20
              )
              
              
              680
              
              
              
              700
              
              
              
              (3
              )
              
              
              697Non-compete
      agreements
              
              
              790
              
              
              
              (121
              )
              
              
              669
              
              
              
              -
              
              
              
              -
              
              
              
              -Mutual
      services agreement
              
              
              100
              
              
              
              -
              
              
              
              100
              
              
              
              -
              
              
              
              -
              
              
              
              -Customer
      relationships
              
              
              9,470
              
              
              
              (279
              )
              
              
              9,191
              
              
              
              7,600
              
              
              
              (32
              )
              
              
              7,568$
              11,064
              
              
              $
              (422
              )
              
              $
              10,642
              
              
              $
              8,304
              
              
              $
              (37
              )
              
              $
              8,267
  
  The
      estimated future amortization expense related to intangible assets for the
      periods subsequent to June 29, 2008 on a calendar year basis is as
      follows:
  Years
      Ending December 31,
              
              Amount2008
              
              $
              4192009
              
              
              8052010
              
              
              8052011
              
              
              5202012
              
              
              509Thereafter
              
              
              7,583$
              10,642
  
  NOTE G – REVOLVING CREDIT
      LINE
  On
January 14, 2008, the Company entered into a credit facility with Wells Fargo
Bank, National Association (“Wells Fargo”).  The credit facility is
comprised of a $1,250 real estate term note and a $13,750 revolving
note.  On January 16, 2008, MISCOR borrowed $7,500 under the revolving
note and used the net proceeds of the loan for working capital and to acquire
all of the outstanding shares of common stock of American Motive Power, Inc.
(Note D).  The original maturity date of the notes is January 1, 2011,
at which time the notes will automatically renew for one-year periods until
terminated.  The notes are secured by (1) a first priority lien on the
assets of the Company; (2) a mortgage on certain real property; and (3) the
pledge of the equity interests in MISCOR’s subsidiaries.  The real
estate term note bears interest at an annual rate equal to the rate of interest
most recently announced by Wells Fargo at its principal office as its prime rate
(the “Prime Rate”), subject to certain minimum annual interest
payments.  The revolving note bears interest at an annual rate of
either (i) the Prime Rate, or (ii) Wells Fargo’s LIBOR rate plus 2.8%, depending
on the nature of the advance.  Interest is payable monthly, in
arrears, under the revolving note beginning on February 1, 2008.  The
outstanding balance on the revolving note was $3,894 at June 29, 2008. At
June 29, 2008 there was $5,200 available under the revolving credit line. The
real estate term note requires monthly principal payments of $10, plus interest,
beginning on June 1, 2008, the first day of the month following receipt of the
advance. The outstanding balance under the real estate term note as of June 29,
2008 was $1,240.
 
 The
provisions of the revolving note include a lock-box agreement and also allow
Wells Fargo, in its reasonable credit judgment, to assess additional reserves
against, or reduce the advance rate against accounts receivable used in the
borrowing base calculation. These provisions satisfy the requirements for
consideration of EITF Issue No. 95-22, Balance Sheet Classification of
Borrowings Outstanding under Revolving Credit Agreements that include both a Subjective
Acceleration Clause and a Lock-Box Arrangement(“EITF 95-22”). Based
on
  8
  NOTE G – REVOLVING CREDIT
      LINE(CONTINUED)
  further
analysis of the terms of the revolving note, there are certain provisions that
could potentially be interpreted as a subjective acceleration clause. More
specifically, Wells Fargo, in its reasonable credit judgment, can assess
additional reserves to the borrowing base calculation or reduce the advance rate
against accounts receivable to account for changes in the nature of the
Company’s business that alters the underlying value of the collateral. The
reserve requirements may result in an overadvance borrowing position that could
require an accelerated repayment of the overadvance portion. Since the inception
of the revolving note, Wells Fargo has not applied any additional reserves to
the borrowing base calculation. The Company does not anticipate any changes in
its business practices that would result in any material adjustments to the
borrowing base calculation. However, management cannot be certain that
additional reserves will not be assessed by Wells Fargo to the borrowing base
calculation. As a result, the Company classifies borrowings under the revolving
note as a short-term obligation.
 
 The
Company has promissory notes outstanding to BDeWees, Inc., XGen III, Ltd., and
John A. Martell, in the original principal amounts of $2,000, $2,000 and $3,000,
respectively (together, the “Subordinated Indebtedness”) (Note
H).  Subordination agreements have been executed that subordinate the
obligations of the Company under the Subordinated Indebtedness to the Wells
Fargo credit facility.
 
 If the
Company defaults under its obligations to Wells Fargo, then the interest on the
outstanding principal balance of each note will increase by 3% until the default
is cured or waived.  Other remedies available to Wells Fargo upon an
event of default include the right to accelerate the maturity of all
obligations, the right to foreclose on the assets securing the obligations, all
rights of a secured creditor under applicable law, and other rights set forth in
the loan documents. There are certain financial covenants including minimum book
net worth and net income, maximum capital expenditures and debt service coverage
ratios. The Company was not in compliance with one of its financial covenants at
June 29, 2008; however, the Company received a waiver for the covenant violation
from the lender.
 
 The
Company may prepay the term note at any time, subject to certain prepayment
penalties.  With respect to the revolving note, the Borrowers may
borrow, pay down and re-borrow under the note until the maturity
date.  The maximum aggregate principal amount that may be borrowed
under the revolving note is the lesser of (1) the sum of 40% of the Company’s
eligible construction related trade receivables up to $2,000 and 85% of certain
remaining eligible trade accounts receivable less any reserves established by
Wells Fargo from time to time and (2) $13,750 less any reserves established by
Wells Fargo. In April 2008, the Company and Wells Fargo amended the credited
facility entered into in January 2008. The amendment revised the formula for the
maximum aggregate principal amount that may be borrowed under the revolving
note. Specifically, the percentage of a portion of the Company’s eligible
construction related trade receivables resulting from time and material services
and completed contracts was increased from 40% to 85% and the related borrowings
were removed from the $2,000 limitation.
 
 As part
of the financing, the Company paid debt issue costs of $45 and is amortizing
these costs to interest expense over the three year term of the
financing.  Interest expense was $4 and $7 for the three and six
months ended June 29, 2008, respectively. Net debt issue cost at June 29, 2008
was $38. The Company also paid fees to Wells Fargo as part of the financing in
the amount of $171. These fees were recorded as a debt discount. The Company is
accreting this debt discount to interest expense over the term of the credit
facility. Interest expense was $16 and $26 for the three and six months ended
June 29, 2008, respectively. Net debt discount at June 29, 2008 related to this
instrument was $145.
  The April
2008 amendment also provided a four year equipment term note in the amount of
$1,000, secured by substantially all of the machinery and equipment of the
Company. The note matures June 1, 2012 and is payable in monthly installments of
$21 plus interest at the bank’s prime rate beginning June 1, 2008. The
outstanding balance under the equipment term note as of June 29, 2008 was
$979.
 
 Interest
expense under the Wells Fargo Credit facility, excluding amortization of debt
issue costs and debt discount, for the three and six months ended June 29, 2008
was $80 and $158, respectively.
 
   9
  NOTE
H - DEBT
  Long-term
debt
  Long-term
debt consists of the following:
  June
      29,
              
              
              December
      31,2008
              
              
              2007Note
      payable to officer, due December 2008, plus interest at prime rate less 1%
      (4.00% at June 29, 2008 and 6.25% at December 31, 2007, respectively)
      secured by a subordinated interest in substantially all assets owned by
      the Company
              
              $
              3,000
              
              
              $
              3,000Long-term
      debt, debentures (net of discount of $-0- and $15 at June 29, 2008 and
      December 31, 2007, respectively)
              
              
              -
              
              
              
              2,965Note
      payable to former employee in annual principal payments of
      $10,  unsecured and without interest, paid of March 7,
      2008
              
              
              -
              
              
              
              10Notes
      payable to former  stockholders of 3-D Service, Ltd. due
      November 30, 2010, plus interest at prime rate (5.00% at June 29, 2008 and
      7.25% at December 31, 2007, respectively) secured by a subordinated
      interest in machinery and equipment of 3-D Service, Ltd.
              
              
              4,000
              
              
              
              4,000Note
      payable to bank in monthly installments of $10 through May 2012, plus
      interest at prime rate (5.00% at June 29, 2008) secured by certain real
      estate
              
              
              1,240
              
              
              
              -Note
      payable to bank in monthly installments of $21 through May 2018, plus
      interest at prime rate (5.00% at June 29, 2008) secured by inventory and
      substantially all machinery and equipment
              
              
              979
              
              
              
              -Note
      payable to bank in monthly installments of $3 through November 16, 2014,
      plus interest at 8% secured by a security interest in certain
      equipment
              
              
              185
              
              
              
              197Notes
      payable to bank in monthly principal payments of $1 through June 2009,
      without interest secured by certain vehicles paid off in January
      2008
              
              
              -
              
              
              
              15Notes
      payable to bank in monthly principal payments of $1 through June 2009,
      without interest secured by certain vehicles
              
              
              12
              
              
              
              18Capital
      lease obligations
              
              
              18
              
              
              
              269,434
              
              
              
              10,231Less:
      current portion
              
              
              674
              
              
              
              3,036$
              8,760
              
              
              $
              7,195
 
  10
  NOTE
      H - DEBT (CONTINUED)
  Notes payable to
officers
  The
Company is indebted to its CEO for a note payable with a balance of $3,000 at
June 29, 2008 (see Note J).  Interest is payable monthly at prime less
1%. The note is convertible into 1,200,000 shares of common stock at a price of
$2.50 per share. The loan matures on December 31, 2008, except that the Company
can extend the maturity for five years upon 60 days’ prior written notice at an
interest rate of prime plus 1%.  If the Company elects to extend the
maturity, it must begin making principal payments of $50, plus interest,
beginning February 1, 2009. It is the Company’s intention to extend the maturity
in the event the note is not converted into shares of MISCOR common stock.
Accordingly, the note, less the current portion, has been classified as
long-term debt. Interest expense on the note was $31 and $54 for the three
months, and $72 and $109 for the six months ended June 29, 2008 and July 1,
2007, respectively.
  The
Company is indebted to the former shareholders of 3-D, one of whom is President
of MIS, for a note payable with a balance of $2,000 at December 31,
2007.  Interest is payable monthly at prime. The loan matures on
November 30, 2010.  Interest expense for the three and six months ended
June 29, 2008 was $27 and $63, respectively.
 
 Long-term debt,
debentures
  In
January 2005, the Company commenced a private offering (the “Debenture
Offering”) of a maximum of $4,025 principal amount of subordinated secured
convertible debentures. The Company issued the maximum $4,025 principal amount
of debentures as of May 5, 2005. The debentures, which were payable on February
28, 2008, bore interest at the rate of 6% per year, which were payable upon
conversion, redemption or maturity.
  The
Company reserved 472,844 shares of common stock for issuance upon conversion of
the debentures. During the six months ended July 1, 2007, certain debenture
holders converted $1,045 of the aggregate principal amount of the debentures
into 122,763 shares of common stock. During the six months ended June 29, 2008,
certain debenture holders converted $2,690 of the aggregate principal amount of
debentures into 316,017 shares of common stock. As a result, $544 of accrued
interest was forfeited and written off against common stock in conjunction with
the conversion of $2,690 of the aggregate principal amount of the debentures. In
addition, the Company redeemed debentures in the amount of $342, including
interest of $52.
  Each
purchaser of debentures received common stock purchase warrants for no
additional consideration. Each warrant entitled its holder to purchase one share
of common stock for a five year period at an exercise price of $0.025 per share.
The Company has allocated warrants to purchase 170,224 shares of common stock
among all purchasers of the debentures. The Company used the Black-Scholes
valuation model in estimating the fair value of the common stock purchase
warrants. The following assumptions were used for such estimates: no dividend
yield, no expected volatility, risk-free interest rate of 3.3% and an expected
life of the common stock purchase warrants of one year. The estimated fair value
of these warrants is $836. This debt discount is amortized to interest expense
over the term of the debentures. Interest expense was $15 and $87 for the six
months ended June 29, 2008 and July 1, 2007, respectively. In addition, for the
six months ended July 1, 2007, $50 in debt discount was written off against
common stock in conjunction with the conversion of $1,045 of the aggregate
principal amount of the debentures. As of June 29, 2008, warrants to purchase
167,052 shares had been exercised.
  The
Company issued to its placement agent in the Debenture Offering, as compensation
for its services, ten-year warrants to purchase 247,320 shares of the Company’s
common stock at an exercise price of $0.025 per share. The Company used the
Black-Scholes valuation model in estimating the fair value of common stock
purchase warrants. The following assumptions were used for such estimates: no
dividend yield, no expected volatility, risk-free interest rate of 3.3% and an
expected life of the common stock purchase warrants of one year. The estimated
fair value of the warrants issued to the placement agent was $1,546. As of June
29, 2008, warrants to purchase 246,320 shares had been exercised.
     11
  NOTE
      H - DEBT (CONTINUED)
  The
Company also paid the placement agent a fee of 10% of the amount raised in the
offerings, or $403. In addition, the Company issued to its securities counsel in
the Debenture Offering, as compensation for its services, 2,000 shares of the
Company’s common stock, the fair value of which was $12. The summation of these
debt issue costs was $2,095. Interest expense was $40 and $236 for the six
months ended June 29, 2008 and July 1, 2007, respectively.  In
addition, $137 in debt issue costs was written off against common stock in
conjunction with the conversion of $1,045 of the aggregate principal amount of
the debentures in the six months ended July 1, 2007.
  Senior Debt
Financing
  On
January 18, 2007, the Company paid off all senior debt financing, accrued
interest and prepayment penalties of $9,921, $42, and $517, respectively, upon
the issuance of 2,500,000 shares of its common stock at a price of $5.00 per
share for a total of $12,500. The remaining proceeds of $2,020 were used to pay
for related legal costs, for general working capital purposes and to reduce
accounts payable. The Company recorded a loss on the extinguishment of debt of
$2,300 for the six months ended July 1, 2007.
  On March
9, 2007, the Company obtained financing from MFB Financial in the form of a $5
million revolving credit facility, secured by accounts receivable. Borrowings
under the note was used for capital expenditures and working capital purposes.
Interest was payable monthly at 1⁄2% over prime, as published in the Wall Street
Journal. Interest expense was $8 for the three and six months ended July 1,
2007. The revolving credit agreement was canceled in December 2007.
  Aggregate
maturities of long-term debt for the periods subsequent to June 29, 2008 on a
calendar year basis are as follows:
  Year ending December 31,2008
              
              $
              2152009
              
              
              9642010
              
              
              5,0012011
              
              
              1,0042012
              
              
              860Thereafter
              
              
              1,390
  
 Following
is a summary of interest expense for the three and six months ended June 29,
2008 and July 1, 2007:
  Three
      months ended
              
              
              Six
      months endedJune
      29,
              
              
              July
      1,
              
              
              June
      29,
              
              
              July
      1,2008
              
              
              2007
              
              
              2008
              
              
              2007Interest
      expense on principal
              
              $
              167
              
              
              $
              107
              
              
              $
              407
              
              
              $
              342Amortization
      of debt issue costs
              
              
              4
              
              
              
              105
              
              
              
              47
              
              
              
              277Amortization
      of debt discount -debentures and revolving notes payable
              
              
              16
              
              
              
              38
              
              
              
              41
              
              
              
              96Total
      interest expense
              
              $
              187
              
              
              $
              250
              
              
              $
              495
              
              
              $
              715
 
 
  12
  NOTE
I - STOCKHOLDERS’ EQUITY
  Equity Incentive
Plans
  2005 Stock Option
Plan
  On May
15, 2008 the Company granted stock options to one executive and certain key
employees to acquire 12,200 shares of the Company’s common stock at an exercise
price of $10.25 per share under the 2005 Stock Option Plan.  These
options, which expire in five years, are exercisable in 25% cumulative
increments on and after the first four anniversaries of their grant date. At the
time of issuance of the stock options, the estimated fair value of the Company’s
common stock was $10.25 per share. The fair value of the Company’s common stock
was determined based upon the average of the high and low sale prices of the
Company’s common stock on the date of grant.
  The fair
value of the options was estimated using the Black-Scholes valuation model and
the following assumptions:  expected term of 3.75 years, risk-free
interest rate of 2.90%, volatility of 43.0% and no dividend
yield.  The Company recorded compensation cost based on the grant date
fair value of the award of 12,200 shares at $10.25 per share. The total cost of
the grant in the amount of $45 will be recognized over the four year period
during which the employees are required to provide services in exchange for the
award - the requisite service period. The Company recorded compensation expense
related to all stock options of $11 and $7 for the three months and $18 and $15
for the six months ended June 29, 2008 and July 1, 2007,
respectively.
  2005 Restricted Stock
Purchase Plan
  On May
15, 2008 the Company issued offers to purchase 10,000 shares of common stock at
a nominal price of $0.025 per share to one executive and certain key
employees.  The Company recorded deferred compensation (reflected as a
contra-equity account) and credited additional paid-in capital in the amount of
$102.  The issuance of the restricted stock was intended to lock-up
key employees for a three year period.  As a result, the Company is
recording compensation expense over the three year restriction period by
amortizing deferred compensation on a straight-line basis over the three year
period commencing May 2008. The Company recorded compensation expense related to
all restricted stock of $9 and $8 for the three months and $19 and $16 for the
six months ended June 29, 2008 and July 1, 2007, respectively.
  Employee Stock Purchase
Plan
 
 In
December 2006, the Corporation's Board of Directors and stockholders approved
the MISCOR Group, Ltd. Employee Stock Purchase Plan (the “ESPP”) under which
eligible employees may purchase the Company's common stock at a price per share
equal to 90% of the lower of the fair market value of the common stock at the
beginning or end of each offering period. Each offering period of the ESPP lasts
three months, with the first offering period commencing on April 1, 2007.
Participation in the offering may range from 2% to 8% of an employee's base
salary (not to exceed $5,000 annually or amounts otherwise allowed under Section
423 of the Internal Revenue Code). Participation may be terminated at any time
by the employee, and automatically ends on termination of employment with the
Company. A total of 640,000 shares of common stock have been reserved for
issuance under the ESPP. The common stock to satisfy the stock purchases under
the ESPP will be newly issued shares of common stock. During the quarter ended
June 29, 2008, 2,183 shares were purchased under the ESPP. As of June 29, 2008
there were 627,646 shares available for future offerings. The Company recorded
compensation expense of $8 for the three and six months ended June 29, 2008 and
$2 for the three and six months ended July 1, 2007, respectively.
 
  NOTE
      J - RELATED PARTY TRANSACTIONS
  Long-term debt,
other
  The
Company was indebted to the estate of a former employee for an unsecured,
non-interest bearing note payable with a balance of $10 at December 31, 2007.
The Company paid off the note in March 2008.
   13
  NOTE
      J - RELATED PARTY TRANSACTIONS
(CONTINUED)
  Long-term debt,
officers
  The
Company is indebted to its Chief Executive Officer and stockholder for a note
payable with a balance of $3,000 at June 29, 2008 (see Notes G and H). Interest
is payable monthly at prime less 1%. The loan matures on December 31, 2008,
except that the Company can extend the maturity for five years upon 60 days
prior written notice at an interest rate of prime plus 1%. Interest expense on
the note was $31 and $54 for the three months and $72 and $109 for the six
months ended June 29, 2008 and June 1, 2007, respectively.
  The
Company is indebted to the former stockholders of 3-D, one of whom is President
of Magnetech Industrial Services, Inc. (“MIS”), for a note payable with a
balance of $2,000 at June 29, 2008 (see Note G and H). Interest is payable
monthly at prime. Interest expense on that note was $27 and $63 for the three
and six months ended June 29, 2008.  The note matures on November 30,
2010.
  Leases
  The
Company leases its South Bend, Indiana; Hammond, Indiana; Mobile, Alabama; and
Boardman, Ohio facilities from its Chief Executive Officer and stockholder.
Total rent expense under these agreements was approximately $83 and $82 for the
three months and $167 and $164 for the six months ended June 29, 2008 and July
1, 2007, respectively.
  The
Company leases its Hagerstown, Maryland facility from a partnership of which an
officer of the Company’s subsidiary, HK Engine Components, LLC, is a partner.
Rent expense under this agreement was $39 and $38 for the three months and $78
and $76 for the six months ended June 29, 2008 and July 1, 2007,
respectively.
  In
January 2007, the Company began leasing a new facility in South Bend for the
electrical contracting business from a limited liability company owned by the
adult children of its Chief Executive Officer and stockholder. Rent expense
under this agreement was $22 for the three months and $45 for the six months
ended June 29, 2008 and July 1, 2007, respectively.
  In
November 2007, The Company began leasing a facility in Massillon, Ohio from a
partnership, one partner of which is an officer of MIS, under an agreement
expiring in November 2017. Rent expense under the lease was $135 and $270 for
the three and six months ended June 29, 2008, respectively.
   NOTE
      K - CONCENTRATIONS OF CREDIT RISK
  The
Company grants credit, generally without collateral, to its customers, which are
primarily in the steel, metal working, and scrap industries. Consequently, the
Company is subject to potential credit risk related to changes in economic
conditions within those industries. However, management believes that its
billing and collection policies are adequate to minimize the potential credit
risk. At June 29, 2008 and December 31, 2007, approximately 18% and 14% of gross
accounts receivable were due from entities in the steel, metal working and scrap
industries, and 23% and 18%, respectively, of gross receivables were due from
entities in the railroad industry. One customer accounted for 13% of gross
accounts receivable at June 29, 2008. No single customer accounted for more than
10% of gross accounts receivable at December 31, 2007. Additionally, no single
customer accounted for more than 10% of sales for the three and six months ended
June 29, 2008 and July 1, 2007.
  
   14
  NOTE
      L - COMMITMENTS AND CONTINGENCIES
  Leases
  In
January 2008, as part of the AMP acquisition, the Company entered into a seven
year lease agreement with Dansville Properties, LLC, which is controlled by
AMP’s former majority shareholder.  Rent expense under the lease was
$96 and $176 for the three and six months ended June 29, 2008.
  Collective bargaining
agreements
  At June
29, 2008 and December 31, 2007, approximately 32% and 37%, respectively, of the
Company’s employees were covered by collective bargaining
agreements.
  Potential
lawsuits
  The
Company is involved in disputes or legal actions arising in the ordinary course
of business. Management does not believe the outcome of such legal actions will
have a material adverse effect on the Company’s financial position or results of
operations.
   NOTE
      M - FAIR VALUE OF FINANCIAL
INSTRUMENTS
  The
following methods and assumptions were used to estimate the fair value of each
class of financial instrument:
  Cash, accounts receivable,
accounts payable and accrued expenses
  The
carrying amounts of these items are a reasonable estimate of their fair values
because of the current maturities of these instruments.
  Debt
  The fair
value of debt differs from the carrying amount due to favorable interest terms
on debt with its Chief Executive Officer and stockholder. June 29, 2008 and
December 31, 2007, the aggregate fair value of debt, with an aggregate carrying
value of $13,183 and $10,231, respectively, is estimated at $13,258 and $11,336,
respectively, and is based on the estimated future cash flows discounted at
terms at which the Company estimates it could borrow such funds from unrelated
parties.
   NOTE
      N - SEGMENT INFORMATION
  The
Company reports segment information in accordance with SFAS No. 131, Disclosures about Segments of an
Enterprise. The Company operates primarily in two segments: repair,
remanufacturing and manufacturing and construction and engineering
services.
  The
repair, remanufacturing and manufacturing segment is primarily engaged in
providing maintenance and repair services to the electric motor industry,
repairing, remanufacturing and manufacturing industrial lifting magnets for the
steel and scrap industries, locomotives and locomotive engines for the rail
industry, and power assemblies, engine parts, and other components related to
large diesel engines for the rail, utilities and offshore drilling industries.
The construction and engineering services segment provides a wide range of
electrical and mechanical contracting services, mainly to industrial, commercial
and institutional customers
  The
Company evaluates the performance of its business segments based on net income
or loss. Corporate administrative and support services for the Company are not
allocated to the segments but are presented separately.
   15
  NOTE
N – SEGMENT INFORMATION (CONTINUED)
  Summarized
financial information concerning the Company’s reportable segments as of and for
the three and six months ended June 29, 2008 and July 1, 2007 is shown in the
following tables:
  2008
              
              Repair,
      Manufacturing & Remanufacturing
              
              
              Construction
      & Engineering Services
              
              
              Corporate
              
              
              Intersegment
      Eliminations
              
              
              Three
      MonthsJune 29, 2008 ConsolidatedExternal
      revenue:Product
      sales
              
              $
              6,399
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              6,399Service
      revenue
              
              
              14,402
              
              
              
              9,763
              
              
              
              -
              
              
              
              -
              
              
              
              24,165Intersegment
      revenue:Product
      sales
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Service
      revenue
              
              
              1,152
              
              
              
              282
              
              
              
              -
              
              
              
              (1,434
              )
              
              
              -Depreciation
      - cost of revenues
              
              
              394
              
              
              
              31
              
              
              
              -
              
              
              
              -
              
              
              
              425Gross
      profit
              
              
              3,658
              
              
              
              1,411
              
              
              
              -
              
              
              
              -
              
              
              
              5,069Other
      depreciation & amortization
              
              
              335
              
              
              
              6
              
              
              
              12
              
              
              
              -
              
              
              
              353Interest
      expense
              
              
              88
              
              
              
              -
              
              
              
              99
              
              
              
              -
              
              
              
              187Net
      income (loss)
              
              
              1,114
              
              
              
              869
              
              
              
              (1,373
              )
              
              
              -
              
              
              
              610Total
      assets
              
              
              61,399
              
              
              
              12,008
              
              
              
              480
              
              
              
              -
              
              
              
              73,887Capital
      expenditures
              
              
              587
              
              
              
              8
              
              
              
              275
              
              
              
              -
              
              
              
              870
 
  2007
              
              Repair,
      Manufacturing & Remanufacturing
              
              
              Construction
      & Engineering Services
              
              
              Corporate
              
              
              Intersegment
      Eliminations
              
              
              Three
      MonthsJuly 1, 2007 ConsolidatedExternal
      revenue:Product sales
              
              $
              5,797
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              5,797Service revenue
              
              
              6,351
              
              
              
              4,616
              
              
              
              -
              
              
              
              -
              
              
              
              10,967Intersegment
      revenue:Product sales
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Service revenue
              
              
              -
              
              
              
              29
              
              
              
              -
              
              
              
              (29
              )
              
              
              -Depreciation
      - cost of revenues
              
              
              194
              
              
              
              29
              
              
              
              -
              
              
              
              -
              
              
              
              223Gross
      profit
              
              
              2,413
              
              
              
              499
              
              
              
              -
              
              
              
              -
              
              
              
              2,912Other
      depreciation & amortization
              
              
              6
              
              
              
              6
              
              
              
              (2
              )
              
              
              -
              
              
              
              10Interest
      expense
              
              
              54
              
              
              
              -
              
              
              
              196
              
              
              
              -
              
              
              
              250Net
      income (loss)
              
              
              989
              
              
              
              126
              
              
              
              (902
              )
              
              
              -
              
              
              
              213Total
      assets
              
              
              20,699
              
              
              
              5,866
              
              
              
              2,346
              
              
              
              -
              
              
              
              28,911Capital
      expenditures
              
              
              41
              
              
              
              83
              
              
              
              11
              
              
              
              -
              
              
              
              135
 
   16
  NOTE
N – SEGMENT INFORMATION (CONTINUED)
  2008
              
              Repair,
      Manufacturing & Remanufacturing
              
              
              Construction
      & Engineering Services
              
              
              Corporate
              
              
              Intersegment
      Eliminations
              
              
              Six
      MonthsJune 29, 2008 ConsolidatedExternal
      revenue:Product sales
              
              $
              12,620
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              12,620Service revenue
              
              
              29,389
              
              
              
              18,275
              
              
              
              -
              
              
              
              -
              
              
              
              47,664Intersegment
      revenue:Product sales
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Service revenue
              
              
              1,152
              
              
              
              295
              
              
              
              -
              
              
              
              (1,447
              )
              
              
              -Depreciation
      - cost of revenues
              
              
              824
              
              
              
              60
              
              
              
              -
              
              
              
              -
              
              
              
              884Gross
      profit
              
              
              7,381
              
              
              
              2,430
              
              
              
              -
              
              
              
              -
              
              
              
              9,811Other
      depreciation & amortization
              
              
              495
              
              
              
              11
              
              
              
              21
              
              
              
              -
              
              
              
              527Interest
      expense
              
              
              224
              
              
              
              -
              
              
              
              271
              
              
              
              -
              
              
              
              495Net
      income (loss)
              
              
              2,424
              
              
              
              1,373
              
              
              
              (2,731
              )
              
              
              -
              
              
              
              1,066Total
      assets
              
              
              61,399
              
              
              
              12,008
              
              
              
              480
              
              
              
              -
              
              
              
              73,887Capital
      expenditures
              
              
              854
              
              
              
              9
              
              
              
              325
              
              
              
              -
              
              
              
              1,188
 
 2007
              
              Repair,
      Manufacturing & Remanufacturing
              
              
              Construction
      & Engineering Services
              
              
              Corporate
              
              
              Intersegment
      Eliminations
              
              
              Six
      MonthsJuly 1, 2007ConsolidatedExternal
      revenue:Product sales
              
              $
              11,023
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              11,023Service revenue
              
              
              13,256
              
              
              
              8,631
              
              
              
              -
              
              
              
              -
              
              
              
              21,887Intersegment
      revenue:Product sales
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Service revenue
              
              
              -
              
              
              
              45
              
              
              
              -
              
              
              
              (45
              )
              
              
              -Depreciation
      - cost of revenues
              
              
              358
              
              
              
              61
              
              
              
              -
              
              
              
              -
              
              
              
              419Gross
      profit
              
              
              4,645
              
              
              
              1,114
              
              
              
              -
              
              
              
              -
              
              
              
              5,759Other
      depreciation & amortization
              
              
              16
              
              
              
              13
              
              
              
              18
              
              
              
              -
              
              
              
              47Interest
      expense
              
              
              124
              
              
              
              -
              
              
              
              591
              
              
              
              -
              
              
              
              715Net
      income (loss)
              
              
              1,598
              
              
              
              332
              
              
              
              (4,306
              )
              
              
              -
              
              
              
              (2,376
              )Total
      assets
              
              
              20,699
              
              
              
              5,866
              
              
              
              2,346
              
              
              
              -
              
              
              
              28,911Capital
      expenditures
              
              
              85
              
              
              
              84
              
              
              
              19
              
              
              
              -
              
              
              
              188
 
 
 NOTE
O - SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCING ACTIVITIES
  Six
      months endedJune
      29,
              
              
              July
      1,2008
              
              
              2007Conversion
      of subordinated debentures
              
              $
              3,234
              
              
              $
              979Issuance
      of restricted stock
              
              
              102
              
              
              
              22Assumption
      of accounts payable and accrued liabilities in conjunction with asset
      acquisition
              
              
              2,549
              
              
              
              -Issuance
      of common stock in conjunction with acquisition
              
              
              3,500
              
              
              
              -Cashless
      exercise of warrants
              
              
              16
              
              
              
              -
 
 
 
  17
   ITEM
      2.
              MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
  Overview
  We
operate in two segments: repair, remanufacturing and manufacturing, and
construction and engineering services.
  The
repair, remanufacturing and manufacturing segment is primarily engaged in
providing maintenance and repair services to the electric motor industry,
repairing, remanufacturing and manufacturing industrial lifting magnets for the
steel and scrap industries, locomotives and locomotive engines for the rail
industry and power assemblies, engine parts, and other components related to
large diesel engines for the rail, utilities and offshore drilling industries.
The construction and engineering services segment provides a wide range of
electrical contracting services, mainly to industrial, commercial and
institutional customers.
  We
evaluate the performance of our business segments based on net income or loss.
Corporate administrative and support services for MISCOR are not allocated to
the segments but are presented separately.
  Recent
Developments
  On
January 14, 2008, we entered into a credit facility with Wells Fargo Bank,
National Association (“Wells Fargo”).  The credit facility is
comprised of a $1,250,000 real estate term note and a $13,750,000 revolving
note.  On January 16, 2008, we borrowed $7,500,000 under the revolving
note and used the net proceeds of the loans for working capital and to acquire
all of the outstanding shares of common stock of American Motive Power, Inc.
discussed below.  The original maturity date of the notes is January
1, 2011, at which time the notes will automatically renew for one-year periods
until terminated.  The notes are secured by (1) a first priority lien
on the assets of the Company; (2) a mortgage on certain real property; and (3)
the pledge of the equity interests in MISCOR’s subsidiaries.  The term
note bears interest at an annual rate equal to the rate of interest most
recently announced by Wells Fargo at its principal office as its prime rate (the
“Prime Rate”), subject to certain minimum annual interest
payments.  The revolving note bears interest at an annual rate of
either (i) the Prime Rate, or (ii) Wells Fargo’s LIBOR rate plus 2.8%, depending
on the nature of the advance.  Interest is payable monthly, in
arrears, under the revolving note beginning on February 1, 2008.  The
term note requires monthly principal payments of $10,000, plus interest,
beginning on June 1, 2008, the first day of the month following receipt of the
advance. The term note was funded in April 2008.
 
 On
January 14, 2008, we amended our Amended and Restated Articles of Incorporation
to effect a 1-for-25 reverse stock split of our issued and outstanding and
authorized but unissued shares of common stock (the “Reverse Stock Split”).
Pursuant to the Reverse Stock Split, each 25 shares of our common stock, whether
issued and outstanding, held by MISCOR as treasury stock, or authorized but
unissued, was combined into one share of common stock.  Any
shareholder who held a fractional share of common stock after giving effect to
the Reverse Stock Split received in cash, in lieu of such fractional share, an
amount equal to the product of (i) $0.566, which was the mean of the average of
the closing bid and ask prices of our common stock as quoted on the OTC Bulletin
Board for the five business days before the effective date of the Reverse Stock
Split, multiplied by (ii) 25, multiplied by (iii) the fractional share. As a
result of the Reverse Stock Split, the symbol assigned to MISCOR’s common stock
for quotation on the OTC Bulletin Board was changed from “MCGL” to “MIGL”. The
Reverse Stock Split was approved by our Board of Directors on November 30, 2007
and became effective on January 14, 2008 by the filing of articles of amendment
to our Amended and Restated Articles of Incorporation with the Indiana Secretary
of State. Under Indiana law, the Reverse Stock Split did not require
shareholder approval.
 
 On
January 16, 2008, we acquired 100% of the outstanding shares of common stock of
American Motive Power, Inc. (“AMP”). Accordingly, the results of operations are
included in the Company’s consolidated financial statements from that date
forward. AMP is engaged in the business of repairing, remanufacturing, and
rebuilding locomotives and locomotive engines and providing related goods and
services to the railroad industry.
 
 On
February 8, 2008, we amended our Amended and Restated Articles of Incorporation
to increase the number of authorized shares of common stock from 12,000,000 to
20,000,000 shares (the “First Stock Increase”). The First
  18
  Stock
Increase was approved by our shareholders at a special meeting on February 7,
2008, and became effective on February 8, 2008, by the filing of articles of
amendment to our Amended and Restated Articles of Incorporation with the Indiana
Secretary of State.
 
 In
February 2008, certain debenture holders exercised their options under the
debenture offering to convert $2,690,000 into 316,013 shares of our common stock
at a price of $8.512316 per share (see Note G). In accordance with the
provisions of the debenture offering, the debenture holders did not receive any
payment of accrued interest. In 2008, we redeemed the remaining outstanding
debentures in the amount of $342,000 including interest of $52,000.
 
 On May
20, 2008, we amended our Amended and Restated Articles of Incorporation to
further increase the number of authorized shares of our common stock from
20,000,000 to 30,000,000 shares (the “Second Stock Increase”). The Second Stock
Increase was approved by our shareholders at the annual meeting of shareholders
on May 15, 2008, and became effective on May 20, 2008, by the filing of articles
of amendment to our Amended and Restated Articles of Incorporation with the
Indiana Secretary of State.
 
 Critical
Accounting Policies and Estimates
  We
believe the following critical accounting policies affect our more significant
judgments and estimates used in the preparation of our consolidated financial
statements.
  Principles of consolidation.The consolidated financial statements for the three and six months ended
June 29, 2008 and July 1, 2007 include our accounts and those of our
wholly-owned subsidiaries, Magnetech Industrial Services, Inc., Martell
Electric, LLC, HK Engine Components, LLC, and Magnetech Power Services LLC. The
consolidated financial statements for the three and six months ended June 29,
2008 also include the accounts of Ideal Consolidated, Inc. (“Ideal”), 3-D
Service, Ltd. (“3-D”), and AMP. All significant intercompany balances and
transactions have been eliminated.
  Use of estimates.The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires our management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as of the date
of the financial statements, and the reported amounts of revenue and expenses
during the reporting period. Significant estimates are required in accounting
for inventory costing, asset valuations, costs to complete and depreciation.
Actual results could differ from those estimates.
  Revenue recognition. Revenues
in our repair, remanufacturing and manufacturing segment consist primarily of
product sales and service of industrial magnets, electric motors, and diesel
power assemblies. Product sales revenue is recognized when products are shipped
and both title and risk of loss transfer to the customer. Service revenue is
recognized when all work is completed and the customer’s property is returned.
For services to a customer’s property provided at our site, property is
considered returned when the customer’s property is shipped back to the customer
and risk of loss transfers to the customer. For services to a customer’s
property provided at the customer’s site, property is considered returned upon
completion of work. We provide for an estimate of doubtful accounts based
specific identification of customer accounts deemed to be uncollectible and on
historical experience. Our revenue recognition policies are in accordance with
Staff Accounting Bulletins No. 101 and No. 104.
  Revenues
from Martell Electric, LLC’s electrical contracting business, Ideal’s mechanical
contracting business, and long term contracts from the remanufacturing and
rebuilding of locomotives and locomotive engines at AMP are recognized on the
percentage-of-completion method in accordance with Statement of Position No.
81-1, Accounting for
Performance of Construction-Type and Certain Production-Type Contracts,
measured by the percentage of costs incurred to date to estimated total costs to
complete for each contract. Costs incurred on contracts in excess of customer
billings are recorded as part of other current assets. Amounts billed to
customers in excess of costs incurred on contracts are recorded as part of other
current liabilities.
   19
  Earnings per share.We
account for earnings (loss) per common share under the provisions of SFAS No.
128, Earnings Per
Share, which requires a dual presentation of basic and diluted earnings
(loss) per common share. Basic earnings (loss) per common share excludes
dilution and is computed by dividing income available to common stockholders by
the weighted average number of common shares outstanding for the year. Diluted
earnings (loss) per common share is computed assuming the conversion of common
stock equivalents, when dilutive.
  Segment information. We
report segment information in accordance with Statement of Financial Accounting
Standards (“SFAS”) No. 131, Disclosures about Segments of an
Enterprise.
  Inventory. We value inventory
at the lower of cost or market. Cost is determined by the first-in, first-out
method. We periodically review our inventories and make adjustments as necessary
for estimated obsolescence and slow-moving goods. The amount of any markdown is
equal to the difference between cost of inventory and the estimated market value
based upon assumptions about future demands, selling prices and market
conditions.
  Property, plant and
equipment. Property, plant and equipment are stated at cost less
accumulated depreciation. Depreciation is computed over the estimated useful
lives of the related assets using the straight-line method. Useful lives of
property, plant and equipment are as follows:
 
 Buildings
              
              30
      yearsLeasehold
      improvements
              
              Shorter
      of lease term or useful lifeMachinery
      and equipment
              
              5
      to 10 yearsVehicles
              
              3
      to 5 yearsOffice
      and computer equipment
              
              3
      to 10 years
 
 Long-lived assets. We assess
long-lived assets for impairment whenever events or changes in circumstances
indicate that an asset’s carrying amount may not be recoverable.
  Goodwill and other intangible
assets.In accordance with Statement of Financial Accounting Standards
(“SFAS”) No. 142, Goodwill and
Other Intangible Assets, intangible assets other than goodwill are
amortized over their useful lives, unless the useful lives are determined to be
indefinite.
 
 Goodwill
represents the excess cost of companies acquired over the fair value of their
net assets at the dates of acquisition.  Goodwill, which is not
subject to amortization, is required to be tested for impairment, at least
annually, and written down when impaired.  In accordance with SFAS No.
142, goodwill is tested for impairment using a two-step process.  The
first step is to identify a potential impairment and the second step measures
the amount of the impairment loss, if any.  Goodwill is deemed to be
impaired if the carrying amount of the asset exceeds its estimated fair
value.
 
 Debt issue costs.We
capitalize and amortize costs incurred to secure senior debt financing over the
term of the senior debt financing. We also capitalize and amortize costs
incurred to secure subordinated debenture financing over the term of the
subordinated debentures, which initially was two years. However, in April 2006,
the debenture holders agreed to extend the maturity of the debentures from
February 28, 2007 to February 28, 2008. Beginning in April 2006, the unamortized
costs related to the debenture financing were amortized through the extended
maturity date.
 
 Warranty costs. We warrant
workmanship after the sale of our products. We record an accrual for warranty
costs based upon the historical level of warranty claims and our management’s
estimates of future costs.
  Income taxes. We account for
income taxes in accordance with SFAS No. 109, Accounting for Income Taxesand FASB Interpretation No. 48.
   20
  Stock-based compensation.Effective January 1, 2006, we adopted SFAS No. 123R, Share-Based Payments (revised
2004), using the Modified Prospective Approach. SFAS 123R revises SFAS No. 123,
Accounting for Stock-Based
Compensation and supersedes Accounting Principles Opinion (“APB”) No. 25,
Accounting for Stock Issued to
Employees. SFAS No. 123R requires the cost of all share-based payments to
employees, including grants of employee stock options, to be recognized in the
financial statements based upon their fair values at grant date, or the date of
later modification, over the requisite service period. In addition, SFAS No.
123R requires unrecognized cost (based on the amounts previously disclosed in
our pro forma footnote disclosure) related to options vesting after the initial
adoption to be recognized in the financial statements over the remaining
requisite service period.
  Under the
Modified Prospective Approach, the amount of compensation cost recognized
includes (a) compensation cost for all share-based payments granted prior to,
but not yet vested as of January 1, 2006, based on the grant date fair value
estimated in accordance with the provisions of SFAS No. 123, and (b)
compensation cost for all share-based payments granted subsequent to January 1,
2006, based on the grant date fair value estimated in accordance with the
provisions of SFAS No. 123R. Prior to the adoption of SFAS No. 123R, we
accounted for our stock-based compensation plans under the recognition and
measurement provisions of APB No. 25.
  New Accounting
Standards.  In September 2006, the FASB issued SFAS No. 157,
Fair Value Measurement(“SFAS 157”). SFAS 157 defines fair value, establishes a framework for
measuring fair value and expands disclosures about fair value
measurements.  SFAS 157 is effective for financial statements issued
for fiscal years beginning after November 15, 2007 and interim periods
within those fiscal years. In February 2008, the FASB issued FASB Staff
Position No. 157-2, which deferred the effective date of SFAS 157 for
all non-financial assets and non-financial liabilities, except those that are
recognized or disclosed at fair value in the financial statements on a recurring
basis (at least annually) until January 1, 2009. Accordingly, our adoption
of this standard on January 1, 2008 was limited to financial assets and
liabilities. The adoption of SFAS 157 did not have a material effect on our
financial condition or results of operations. We are still in the process of
evaluating this standard with respect to its effect on non-financial assets and
liabilities and therefore has not yet determined the impact that it will have on
our financial statements upon full adoption in 2009. Non-financial assets and
liabilities for which we have not applied the provisions of SFAS 157 include
those measured at fair value in impairment testing and those initially measured
at fair value in a business combination.
  In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities—including an amendment of FASB Statement No.
115(“SFAS 159”). SFAS 159
permits entities to choose to measure many financial instruments and certain
other items at fair value. Entities that elect the fair value option will report
unrealized gains and losses in earnings at each subsequent reporting date. The
fair value option may be elected on an instrument-by-instrument basis, with few
exceptions. SFAS 159 also establishes presentation and disclosure requirements
to facilitate comparisons between companies that choose different measurement
attributes for similar assets and liabilities. The adoption of SFAS 159 did not
have an effect on our financial condition or results of operations as we did not
elect this fair value option, nor is it expected to have a material impact on
future periods as the election of this option for our financial instruments is
expected to be limited.
 
 In
December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations(“SFAS No. 141(R)”).
In SFAS No. 141(R), the FASB retained the fundamental requirements of
SFAS No. 141 to account for all business combinations using the
acquisition method (formerly the purchase method) and for an acquiring entity to
be identified in all business combinations. However, the new standard requires
the acquiring entity in a business combination to recognize all (and only) the
assets acquired and liabilities assumed in the transaction; establishes the
acquisition-date fair value as the measurement objective for all assets acquired
and liabilities assumed; requires transaction costs to be expensed as incurred;
and requires the acquirer to disclose to investors and other users all of the
information they need to evaluate and understand the nature and financial effect
of the business combination. SFAS No. 141(R) is effective for annual
periods beginning on or after December 15, 2008. Accordingly, any business
combinations will be recorded and disclosed following existing GAAP until
January 1, 2009. We expect that SFAS No. 141(R) will have an
impact on our consolidated financial statements when effective, but the nature
and magnitude of the specific effects will depend upon the nature, terms and
size of the acquisitions consummated after the effective date.
 
 In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements — an amendment of Accounting Research Bulletin
No. 51” (“SFAS 160”). SFAS 160 establishes accounting and reporting
standards for ownership interests in subsidiaries held by parties other than the
parent, the amount of consolidated net income attributable to the parent and to
the noncontrolling interest, changes in a parent’s
  21
  ownership
interest, and the valuation of retained noncontrolling equity investments when a
subsidiary is deconsolidated. SFAS 160 also establishes disclosure requirements
that clearly identify and distinguish between the interests of the parent and
the interests of the noncontrolling owners. SFAS 160 is effective for fiscal
years beginning after December 15, 2008. We do not expect the adoption of
this standard on January 1, 2009 to have a material impact on our
consolidated financial statements.
 
 In
March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative
Instruments and Hedging Activities” (“SFAS 161”). SFAS No. 161 changes
the disclosure requirements for derivative instruments and hedging activities.
We will be required to provide enhanced disclosures about (a) how and why
derivative instruments are used, (b) how derivative instruments and related
hedged items are accounted for under Statement of Financial Accounting Standards
No. 133, Accounting for Derivative Instruments and Certain Hedging
Activities (“SFAS 133”), and its related interpretations, and (c) how
derivative instruments and related hedged items affects our financial position,
financial performance, and cash flows. This statement is effective for financial
statements issued for fiscal years and interim periods beginning after
November 15, 2008. We are currently evaluating the impact of the adoption
of SFAS 161 on our consolidated financial statements.
 
 In April
2008, the FASB issued FSP FAS 142-3, “Determination of the Useful Life of
Intangible Assets”, (“FSP 142-3”). FSP 142-3 amends the factors that
should be considered in developing renewal or extension assumptions used to
determine the useful life of a recognized intangible asset under SFAS No. 142,
“Goodwill and Other Intangible
Assets”. FSP 142-3 is effective for fiscal years beginning after December
15, 2008. We are currently evaluating the impact of FSP 142-3 on our
consolidated financial statements.
 
 In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles” (“SFAS 162”). SFAS 162 identifies the sources of
accounting principles and the framework for selecting the principles used in the
preparation of financial statements. SFAS 162 is effective 60 days following the
SEC’s approval of the Public Company Accounting Oversight Board amendments to AU
Section 411, “The Meaning of
Present Fairly in Conformity with Generally Accepted Accounting
Principles”. The adoption of this standard is not expected to have a
material impact on our consolidated financial statements.
 
 Results
of Operations
  Three
Months Ended June 29, 2008 Compared to Three Months Ended July 1,
2007
  Revenues. Total revenues
increased by $13.8 million or 82% to $30.6 million in 2008 from $16.8 million in
2007. The increase in revenues resulted from increases in repair,
remanufacturing and manufacturing segment revenue of $8.7 million or 71% and
construction and engineering services segment revenues of $5.1 million or
111%.
  The
increase in repair, remanufacturing and manufacturing segment revenue of $8.7
million in 2008 resulted from an increase in revenue from sales of motors,
magnets and other industrial products and services of $1.1 million or 13% due to
increased market share and an increase in revenue of diesel engine components of
$0.3 million or 7%. Increases in service revenues of $4.6 million and $3.9
million, respectively, from the acquisition of 3-D in November 2007 and AMP in
January 2008, less intercompany sales of $1.2 million, accounted for the balance
of the increase in sales in repair, remanufacturing and manufacturing segment
revenue. The increase in construction and engineering services revenue of $5.1
million in 2008 resulted from an increase in electrical contracting services of
$2.2 million or 55% due to continued market penetration, a strong local
construction market, and an increase in power services of $0.2 million or 41%,
less intercompany sales of $0.3 million. Increases in service revenues of $3.0
million from the acquisition of Ideal in October 2007 accounted for the balance
of the increase in construction and engineering services revenue.
  Cost of Revenues. Total cost
of revenues in 2008 was $25.5 million or 83% of total revenues compared to $13.9
million or 83% of total revenues in 2007. The increase of $11.6 million in cost
of revenues was due primarily to the overall increase in our total
revenue.
   22
  Gross Profit. Total gross
profit in 2008 was $5.1 million or 17% of total revenues compared to $2.9
million or 17% of total revenues in 2007. The increase of $2.2 million was due
to increased consolidated revenues. Although gross profit as a percentage of
total revenue was the same in 2008 and 2007, gross profit on repair,
remanufacturing and manufacturing segment revenue declined 2% and gross profit
on construction and engineering services revenue increased 4%. Gross profit on
repair, remanufacturing and manufacturing revenues declined due to unabsorbed
overhead at AMP due to initial overcapacity. Gross profit on construction and
engineering services revenue increased due to improved gross profit on a few
larger electrical contracts.
  Selling, General and Administrative
Expenses. Selling, general and administrative expenses were $4.1 million
in 2008 compared to $2.5 million in 2007. The increase of $1.6 million was due
to increases in selling expenses of $0.3 million and general and administrative
expenses of $1.3 million. Selling expenses increased 27% to $1.4 million in 2008
from $1.1 million in 2007 primarily due to the acquisitions of Ideal, 3-D and
AMP. General and administrative expenses increased 93% to $2.7 million in 2008
from $1.4 million in 2007, due to the aforementioned acquisitions, and higher
salaries and professional fees.
  Interest Expense and Other
Income. Interest expense decreased in 2008 to $0.2 million from $0.3
million in 2007 as a result of the payoff of the remaining subordinated
debentures and lower interest rates, partially offset by higher principal
outstanding related to the notes payable to former 3-D stockholders. Interest on
principal debt increased to $0.2 million from $0.1 million. Interest related to
the amortization of debt issue costs and debt discount costs on subordinated
debentures and senior secured debt decreased $0.2 million in 2008 compared to
2007.
  Provision for Income Taxes.
Income tax expense was $0.2 million in 2008 compared to $0 in 2007. Prior to
2008, we have experienced net operating losses in each year since we commenced
operations. In January 2007, an ownership change occurred that will limit the
amount of the net operating loss that we will be able to use in future periods
in accordance with Section 382 of the Internal Revenue Code, as amended. 
Accordingly, a provision for income taxes was recorded for the three months
ended June 29, 2008 as a result of the limitation on the use of the net
operating losses.  We are uncertain as to whether we will be able to
utilize these tax losses before they expire. Accordingly, we have provided a
valuation allowance for the income tax benefits associated with these net future
tax assets which primarily relates to cumulative net operating losses, until
such time profitability is reasonably assured and it becomes more likely than
not that we will be able to utilize such tax benefits.
  Net Income. Net income in
2008 was $0.6 million compared to $0.2 million in 2007. The $0.4 million
improvement was due to the increase in revenues described above.
  Six
Months Ended June 29, 2008 Compared to Six Months Ended July 1,
2007
  Revenues. Total revenues
increased by $27.4 million or 83% to $60.3 million in 2008 from $32.9 million in
2007. The increase in revenues resulted from increases in repair,
remanufacturing and manufacturing segment revenue of $17.7 million or 73% and
construction and engineering services segment revenues of $9.7 million or
112%.
  The
increase in repair, remanufacturing and manufacturing segment revenue of $17.7
million in 2008 resulted from an increase in revenue from sales of motors,
magnets and other industrial products and services of $1.1 million or 6% and an
increase in revenue of diesel engine components of $1.0 million or 14% due to
increased market share. Increases in service revenues of $10.0 million and $6.8
million, respectively from the acquisition of 3-D and AMP, less intercompany
sales of $1.2 million, accounted for the balance of the increase in sales
in repair, remanufacturing and manufacturing segment revenue.  The
increase in construction and engineering services revenue of $9.7 million in
2008 resulted from an increase in electrical contracting services of $4.0
million or 53% due to continued market penetration and a strong local
construction market, an increase in power services of $0.7 million or 58% and
$5.2 million from the acquisition of Ideal.
  Cost of Revenues. Total cost
of revenues in 2008 was $50.5 million or 84% of total revenues compared to $27.2
million or 83% of total revenues in 2007. The increase of $23.3 million in cost
of revenues was due primarily to the overall increase in our total
revenue.
  Gross Profit. Total gross
profit in 2008 was $9.8 million or 16% of total revenues compared to $5.8
million or 17% of total revenues in 2007. The increase in gross profit of $4.0
million was due to increased revenues. The 1% decrease as a percentage of sales
in gross profit in 2008 was due to a 2% decrease in gross profit on repair,
remanufacturing and manufacturing segment revenue offset by a 1% increase in
gross profit on construction and engineering services revenue. Gross profit on
repair, remanufacturing and manufacturing segment revenue
   23
  decreased
due to unabsorbed overhead at AMP due to initial overcapacity. Gross profit on
construction and engineering services revenue increased due to improved gross
profit on a few larger electrical contracts.
  Selling, General and Administrative
Expenses. Selling, general and administrative expenses increased $3.0
million to $8.1 million in 2008 from $5.1 million in 2007. Selling expenses
increased 23% to $2.7 million in 2008 from $2.2 million in 2007 primarily due to
the acquisitions of Ideal, 3-D and AMP. General and administrative expenses
increased 86% to $5.4 million in 2008 from $2.9 million in 2007, due to the
aforementioned acquisitions, and higher salaries and professional
fees.
  Loss on Debt Extinguishment.
We incurred a loss on extinguishment of debt of $2.3 million in the six months
ended July 1, 2007 related to the payoff of all Laurus senior secured debt in
January 2007.
  Interest Expense and Other
Income. Interest expense decreased in 2008 to $0.5 million from $0.7
million in 2007 as a result of the payoff of the remaining subordinated
debentures and lower interest rates, partially offset by higher principal
outstanding related to the notes payable to former 3-D
stockholders.  Interest on principal debt increased to $0.4 million
from $0.3 million. Interest related to the amortization of debt issue costs and
debt discount costs on subordinated debentures and senior secured debt decreased
to $0.1 million from $0.4 million.
  Provision for Income Taxes.
Income tax expense was $0.2 million in 2008 compared to $0 in 2007. Prior to
2008, we have experienced net operating losses in each year since we commenced
operations. In January 2007, an ownership change occurred that will limit the
amount of the net operating loss that we will be able to use in future periods
in accordance with Section 382 of the Internal Revenue Code, as amended. 
Accordingly, a provision for income taxes was recorded for the six months ended
June 29, 2008 as a result of the limitation on the use of the net operating
losses.  We are uncertain as to whether we will be able to utilize these
tax losses before they expire. Accordingly, we have provided a valuation
allowance for the income tax benefits associated with these net future tax
assets which primarily relates to cumulative net operating losses, until such
time profitability is reasonably assured and it becomes more likely than not
that we will be able to utilize such tax benefits.
  Net Income/Loss. Net income
in 2008 was $1.1 million compared to a net loss of $2.4 million in 2007. The
$3.5 million improvement was due to higher operating income from increased sales
and lower interest expense. In addition, the aforementioned loss on debt
extinguishment of $2.3 million contributed to the net loss in 2007.
  Liquidity
and Capital Resources
  At June
29, 2008, we had approximately $16.5 million of working
capital.   Working capital decreased approximately $1.3 million
from approximately $17.8 million at December 31, 2007. The decrease in working
capital was due mainly to cash consideration paid for the acquisition of AMP in
January 2008, less the redemption of the convertible debentures of $2.9 million.
Our total debt to equity ratio increased slightly from approximately .60:1 to
..64:1 from December 31, 2007 to June 29, 2008.
  Through
December 31, 2007, we incurred operating losses since we began operations in
2000. The operating losses were due to start up costs, including start up costs
associated with acquisitions, underutilized operating capacity and costs
incurred to build a corporate infrastructure sufficient to support increasing
sales from existing operations and acquisitions for the foreseeable future. We
funded these accumulated operating losses, increases in working capital,
contractual obligations, acquisitions and capital expenditures with investments
and advances from our Chief Executive Officer and stockholder ($7.2 million), a
private debt offering ($4.0 million), private equity offerings ($35.2 million),
trade credit and bank loans.
  We
recorded net income of $1.1 million for the six months ended June 29, 2008. Our
net loss for the six months ended July 1, 2007 of $2.4 million included non-cash
expenditures of depreciation and amortization of $0.5 million and loss on debt
extinguishment of $1.8 million.
  Net cash
utilized by operating activities was $0.2 million and $0.8 million for the six
months ended June 29, 2008 and 2007, respectively. For the six months ended June
29, 2008, net cash provided by operations resulted from net income of $1.1
million and depreciation and amortization of $1.5 million, reduced by net
increases in working capital of $2.8 million.  For the six months
ended July 1, 2007, net cash utilized by operating activities was due to the net
loss of $2.4 million and net increases in working capital of $1.1 million, less
depreciation of $0.5 million and amortization of debt issuance costs of $2.2
million.
   24
  Accounts
receivable and inventory may increase if sales increase. In the past, certain of
our trade accounts payable have extended beyond the terms allowed by the
applicable vendors. As a result, certain vendors have placed us on credit hold
or cash in advance which has resulted in delays in receipt of necessary
materials and parts. Further, in January 2008 we acquired 100% of the common
stock of AMP for $7.4 million in cash and $3.5 million in common stock. AMP had
incurred operating losses from inception in 2005 through 2007 and into 2008 and
may continue to incur losses and utilize cash for the balance of 2008. This may
result in the increase in past due accounts payable and further delays in
receipt of necessary materials and parts. Disruptions of this nature have
resulted in delayed shipments and service to our customers and may continue to
result in such delays in the future. We do not believe that these delays have
resulted in the loss of any material amount of sales orders, although future
delays might have an adverse affect on our business.
  During
the six months ended June 29, 2008 and July 1, 2007, net cash utilized in
investing activities was $8.3 million and $0.2 million, respectively. In 2008,
net cash utilized consisted of the acquisition of AMP of $7.2 million, net of
cash acquired, and capital expenditures of $1.1 million. In 2007 net cash
utilized in investing activities consisted of capital expenditures.
  We
generated approximately $5.6 million from financing activities during the six
months ended June 29, 2008, primarily from borrowings under the Wells Fargo
credit facility of $6.0 million, less the payoff of convertible debentures of
$0.3 million. We generated approximately $1.9 million from financing activities
during the six months ended July 1, 2007, primarily from advances on our
revolving line of credit of $0.5 million, the sale of our common stock of
approximately $12.4 million, less the payoff of all senior secured debt due to
Laurus of approximately $11.0 million.
 
 We are
undertaking various activities to improve our future cash flows. These
activities include efforts to collect accounts receivable at a faster rate,
modify credit limits and terms when necessary, and to decrease inventory levels
by improving controls over purchasing and more aggressive selling efforts. In
that regard, we do not expect our accounts receivable to become more difficult
or unlikely to collect, and we feel our inventory levels are consistent with
anticipated future sales and not excessive.
  From
March through May of 2005, we issued $4.0 million aggregate principal amount of
subordinated convertible debentures. The debentures originally were scheduled to
mature on February 28, 2007; however, in April 2006, the debenture holders
agreed to extend the maturity date to February 28, 2008. The debentures bore
interest at a fixed annual rate of 6%, payable in cash upon redemption or at
maturity if the holders did not elect to convert their debentures. Each
debenture holder had the option to convert principal and accrued interest under
the debentures into the number of shares of our common stock determined by
dividing the principal amount by a fixed conversion price of $8.5123, subject to
certain anti-dilution adjustments.
  During
the six months ended June 29, 2008 and July 1, 2007, debenture holders converted
approximately $2.7 million and $1.0 million, respectively, of the aggregate
principal amount of the subordinated debt. During the six months ended June 29,
2008, the remaining debenture holders were paid off with interest. As of June
29, 2008 no convertible debentures were outstanding.
  In August
2005, we entered into a $10.0 million credit facility with Laurus. In May 2006,
we entered into an additional $3.7 million credit facility with Laurus. In
January 2007, we paid off all amounts due Laurus with proceeds from the Tontine
equity financing described below.
  On
January 18, 2007, we sold 2,000,000 shares of common stock to Tontine Capital
Partners, L.P. (“TCP”) and 500,000 shares of common stock to Tontine Capital
Overseas Master Fund, L.P. (“TCOMF”, and collectively with TCP, “Tontine”) for
$5.00 per share or $12.5 million (amounts stated after giving effect to the
Reverse Stock Split). Proceeds were used to retire all of the outstanding senior
debt due to Laurus as of that date in the amount of approximately $10.0 million,
including interest, plus approximately $0.5 million in prepayment penalties. We
used the balance of the proceeds for working capital and to reduce past due
accounts payable.
  On March
9, 2007, we obtained financing from MFB Financial in the form of a $5 million
revolving credit facility, secured by accounts receivable. We used the
borrowings under the note for capital expenditures, working capital purposes and
the acquisition of Ideal. The revolving credit facility was paid off in full in
December 2007 with proceeds from the November 30, 2007 equity financing
described below.
   25
  On
November 30, 2007, we sold 2,666,667 shares of common stock to TCP and 666,666
shares of common stock to TCOMF for $6.00 per share or $20.0 million (amounts
stated after giving effect to the Reverse Stock Split). Proceeds were used to
fund the acquisition of 3-D for $16.7 million and to retire all amounts due to
our senior lender under a revolving credit facility as of that date in the
amount of $2.02 million including interest of $5,000. We used the balance of the
proceeds for working capital.
  On
January 14, 2008, we entered into a credit facility with Wells Fargo. The
credit facility is comprised of a $1.25 million real estate term note and a
$13.75 million revolving note. On January 16, 2008, we borrowed $7.5
million under the revolving note and used the net proceeds of the loans for
working capital and to acquire all of the outstanding shares of common stock of
AMP.
 
 The
original maturity date of the notes is January 1, 2011, at which time the notes
will automatically renew for one-year periods until terminated.  The
notes are secured by (1) a first priority lien on our assets; (2) a mortgage on
certain real property; and (3) the pledge of the equity interests in our
subsidiaries. The term note bears interest at an annual rate equal to the
rate of interest most recently announced by Wells Fargo at its principal office
as the Prime Rate, subject to certain minimum annual interest payments. The
revolving note bears interest at an annual rate of either (i) the Prime Rate, or
(ii) Wells Fargo’s LIBOR rate plus 2.8%, depending on the nature of the
advance.  Interest is payable monthly, in arrears, under the revolving
note beginning on February 1, 2008.  The term note requires monthly
principal payments of $10,000, plus interest, beginning on the first day of the
month following receipt of the advance. The $1.25 million real estate term note
was funded in April 2008.
 
 We have
promissory notes outstanding to BDeWees, Inc., XGen III, Ltd., and John A.
Martell in the original principal amounts of $2.0 million, $2.0 million and $3.0
million, respectively (together, the “Subordinated Indebtedness”). Subordination
agreements have been executed that subordinate our obligations under the
Subordinated Indebtedness to the Wells Fargo credit facility.
 
 If we
default under our obligations to Wells Fargo, then the interest on the
outstanding principal balance of each note will increase by 3% until the default
is cured or waived.  Other remedies available to Wells Fargo upon an
event of default include the right to accelerate the maturity of all
obligations, the right to foreclose on the assets securing the obligations, all
rights of a secured creditor under applicable law, and other rights set forth in
the loan documents.
 
 We may
prepay the term note at any time, subject to certain prepayment
penalties.  With respect to the revolving note, we may borrow, pay
down and re-borrow under the note until the maturity date.  The
maximum aggregate principal amount that may be borrowed under the revolving note
is the lesser of (1) the sum of 40% of our eligible construction related trade
receivables up to $2 million and 85% of certain remaining eligible trade
accounts receivable less any reserves established by Wells Fargo from time to
time and (2) $13.75 million less any reserves established by Wells
Fargo.
 
 In
April 2008, we amended the Wells Fargo credit facility entered into in January
2008. The amendment revised the formula for the maximum aggregate principal
amount that may be borrowed under the revolving note. Specifically, the
percentage of a portion of the Company’s eligible construction related trade
receivables resulting from time and material services and completed contracts
was increased from 40% to 85% and the related borrowings were removed from the
$2 million limitation. The amendment also provided a four year term note in the
amount of $1 million, secured by substantially all of the machinery and
equipment of the Company. The note matures June 1, 2012 and is payable in
monthly installments of $21,000 plus interest at the bank’s prime rate beginning
June 1, 2008.
 
 We
believe that our existing working capital, cash provided by operations and our
existing credit facility with Wells Fargo, under which we had $5.2 million
available as of June 29, 2008, should be sufficient to fund our working capital
needs, capital requirements and contractual obligations for at least the next 12
months. We also believe that we will continue to improve relationships with our
vendors and ensure a more steady supply of parts and materials. We may, however,
need to raise additional debt or equity capital to fund certain future business
acquisitions. As of June 29, 2008, we did not have any material commitments for
capital expenditures.
   26
  Our
future working capital needs and capital-expenditure requirements will depend on
many factors, including our rate of revenue growth, the rate and size of future
business acquisitions, the expansion of our marketing and sales activities, and
the rate of development of new products and services. To the extent that funds
from the sources described above are not sufficient to finance our future
activities, we will need to improve future cash flows and/or raise additional
capital through debt or equity financing or by entering into strategic
relationships or making other arrangements. Any effort to improve cash flows,
whether by increasing sales, reducing operating costs, collecting accounts
receivable at a faster rate, reducing inventory and other means, may not be
successful. Further, any additional capital we seek to raise might not be
available on terms acceptable to us, or at all.
  Discussion
of Forward-Looking Statements
  Certain
matters described in the foregoing “Management’s Discussion and Analysis of
Financial Condition and Results of Operations,” as well as other statements
contained in this Quarterly Report on Form 10-Q are forward-looking statements,
which include any statement that is not an historical fact, such as statements
regarding our future operations, future financial position, business strategy,
plans and objectives. Without limiting the generality of the foregoing, words
such as “may,” “intend,” “expect,” “believe,” “anticipate,” “could,” “estimate”
or “plan” or the negative variations of those words or comparable terminology
are intended to identify forward-looking statements. A “safe harbor” for
forward-looking statements is provided by the Private Securities Litigation
Reform Act of 1995 (Reform Act of 1995). The Reform Act of 1995 was adopted to
encourage such forward-looking statements without the threat of litigation,
provided those statements are identified as forward-looking and are accompanied
by meaningful cautionary statements identifying important factors that could
cause the actual results to differ materially from those projected in the
statement.
  Management
has based the forward-looking statements largely on its current expectations and
perspectives about future events and financial trends that management believes
may affect our financial condition, results of operations, business strategies,
short-term and long-term business objectives, and financial needs. These
forward-looking statements are subject to a number of risks, uncertainties and
assumptions, that may cause actual results to differ materially from those
indicated in the forward-looking statements, due to, among other things, factors
identified in this report, including those identified in our Annual Report on
Form 10-K for the fiscal year ended December 31, 2007.
   ITEM
      3.  QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Not
Applicable.
   ITEM
      4T.  CONTROLS
      AND PROCEDURES
  Evaluation
of Effectiveness of Disclosure Controls and Procedures
  Our
disclosure controls and procedures (as defined in Rules13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934 (the “Exchange Act”)) are designed to
ensure that information we are required to disclose in our reports filed under
the Exchange Act, such as this Quarterly Report on Form 10-Q, is recorded,
processed, summarized and reported within the time periods specified in the
rules of the Securities and Exchange Commission. Our disclosure controls and
procedures also are designed to ensure that such information is accumulated and
communicated to our management, including our Chief Executive Officer and Chief
Financial Officer, as appropriate to allow timely decisions regarding required
disclosures.
  In order
to monitor compliance with this system of controls, our Board of Directors,
which performs the audit committee function for the company, oversees
management’s discharge of its financial reporting responsibilities. The Board of
Directors meets regularly with MISCOR’s independent registered public accounting
firm, Asher & Company, Ltd., and representatives of management to review
accounting, auditing, internal control, and financial reporting matters. The
Board of Directors is responsible for the engagement of our independent
registered public accounting firm.
   27
  Our
management, under the supervision and with the participation of our Chief
Executive Officer and Chief Financial Officer, evaluated the effectiveness of
our disclosure controls and procedures in effect as of June 29, 2008. Based on
this evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that, as of June 29, 2008, our disclosure controls and procedures were
effective to provide reasonable assurance that material information relating to
MISCOR and its consolidated subsidiaries required to be included in our Exchange
Act reports, including this Quarterly Report on Form 10-Q, is recorded,
processed, summarized, and reported as required, and is made known to
management, including the Chief Executive Officer and Chief Financial Officer,
on a timely basis.
  Changes
in Internal Control Over Financial Reporting
  There
were no changes in our internal control over financial reporting that occurred
during the quarter ended June 29, 2008, that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
   28
 PART
II - OTHER INFORMATION
 ITEM
      2.  UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  Use of
Proceeds
  Our
Registration Statement on Form S-1 (Reg. No. 333-129354) was declared effective
by the Securities and Exchange Commission on May 12, 2006. The registration
statement relates to shares of our common stock that may be offered and sold
from time to time by the selling shareholders named in the related prospectus
and to certain shares issuable upon exercise of warrants and conversion of debt
securities. We will not receive any of the proceeds from the sale of the common
stock, but we have agreed to bear all expenses (other than direct expenses
incurred by the selling shareholders, such as selling commissions, brokerage
fees and expenses and transfer taxes) associated with registering such shares
under federal and state securities laws. We will receive the exercise price upon
exercise of the warrants held by selling shareholders. As of June 29, 2008, we
have issued 15,357,310 shares upon the exercise of warrants, and we have
received proceeds of $131,514 that were used for general working capital
purposes. Based on information provided by our transfer agent, we believe that
some selling shareholders have sold shares pursuant to the offering. However,
because many shares are held in “street” name, we are unable to determine the
number of shares sold or the identity of the selling shareholders. We have
incurred total expenses in connection with the offering of approximately $0.7
million and have received no offering proceeds other than the proceeds received
upon the exercise of warrants.
   ITEM
      4.  SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS
  The
Company held its annual meeting of shareholders on May 15, 2008.  At
this meeting, the Company’s shareholders voted on the following five
proposals:
  1.
              The
      election to the Board of Directors of the following individual to hold
      office for a three-year term expiring in
2011:
  Number
      of VotesDirector
              
              For
              
              
              Withheld
              
              
              AgainstRichard
      A. Tamborski
              
              
              8,714,355
              
              
              
              4,400
              
              
              
              -0-
 
  2.
              A
      proposal to approve an amendment to the Company’s Amended and Restated
      Articles of Incorporation to increase the number of authorized shares of
      common stock, without par value, from   20,000,000 to
      30,000,000. The Company’s shareholders approved this proposal by the
      following votes:
  Number
      of VotesFor
              
              
              Withheld
              
              
              Against8,710,735
              
              
              
              -0-
              
              
              
              8,020
 
  3.
              A
      proposal to approve and amendment to the MISCOR Group, Ltd. 2005 Stock
      Option Plan to increase the number of shares of common stock
      available for issuance under the plan from 80,000 to
      200,000. The Company’s shareholders approved this proposal by the
      following votes:
  Number
      of VotesFor
              
              
              Withheld
              
              
              Against8,711,239
              
              
              
              -0-
              
              
              
              7,516
  
 29
  4.
              A
      proposal to approve amendments to our Employee Stock Purchase Plan to
      amend the definitions of “Committee” and “Eligible Employee”. The
      Company’s shareholders approved this proposal by the following
      votes:
  Number
      of VotesFor
              
              
              Withheld
              
              
              Against8,711,415
              
              
              
              -0-
              
              
              
              7,340
 
  5.
              The
      ratification of the reappointment of Asher & Company, Ltd. (“Asher”)
      as the independent registered public accounting firm for the Company for
      2008.  The Company’s shareholders approved Asher as the
      independent accountants  by the following
  votes:
  Number
      of VotesFor
              
              
              Withheld
              
              
              Against8,710,355
              
              
              
              4,600
              
              
              
              3,800
 
  ITEM
      6.
              EXHIBITS
  The
following documents are included or incorporated by reference in this Quarterly
Report on Form 10-Q:
  Exhibit No.
              
              Description3.1a
              
              Amended
      and Restated Articles of Incorporation of the registrant (incorporated by
      reference to Exhibit 3.1 to the registrant’s Registration Statement on
      Form S-1 (Reg No. 333-129354))3.1b
              
              Articles
      of Amendment to the registrant’s Amended and Restated Articles of
      Incorporation, effective January 14, 2008 (incorporated by reference to
      Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed by the
      registrant on January 14, 2008)3.1c
              
              Articles
      of Amendment to the registrant’s Amended and Restated Articles of
      Incorporation, effective February 8, 2008 (incorporated by reference to
      Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed by the
      registrant on February 13, 2008)3.1d
              
              Articles
      of Amendment to the registrant’s Amended and Restated Articles of
      Incorporation, effective May 20, 2008 (incorporated by reference to
      Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed by the
      registrant on May 27, 2008)10.1a@
              
              2005
      Stock Option Plan of the registrant (incorporated by reference to Exhibit
      10.18 to the registrant’s Registration Statement on Form S-1 (Reg. No.
      333-129354))10.1b@
              
              Amendment
      to the MISCOR 2005 Stock Option Plan, effective May 15,
    200810.2a@
              
              MISCOR
      Group, Ltd. Employee Stock Purchase Plan (incorporated by reference to
      Exhibit 4.1 to the registrant’s Registration Statement on Form S-8 (Reg.
      No. 333-141537))10.2b@
              
              Amendment
      to the MISCOR Group, Ltd. Employee Stock Purchase Plan, effective May 15,
      200831.1
              
              Certification
      by Chief Executive Officer required by Rule 13a-14(a) or 15d-14(a) of the
      Exchange Act31.2
              
              Certification
      by Chief Financial Officer required by Rule 13a-14(a) or 15d-14(a) of the
      Exchange Act32
              
              Section
      1350 Certifications
   
 @
              Denotes
      a management contract or compensatory
plan.
 
  30
  SIGNATURES
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
  MISCOR
      GROUP, LTD.August
      13, 2008
              By:
              /s/
      Richard J. MullinRichard
      J. MullinChief
      Financial Officer(Signing
      on behalf of the registrant as Principal Financial
  Officer)
 
  31
  EXHIBIT
INDEX
 
 Exhibit
      No.
              
              Description3.1a
              
              Amended
      and Restated Articles of Incorporation of the registrant (incorporated by
      reference to Exhibit 3.1 to the registrant’s Registration Statement on
      Form S-1 (Reg No. 333-129354))3.1b
              
              Articles
      of Amendment to the registrant’s Amended and Restated Articles of
      Incorporation, effective January 14, 2008 (incorporated by reference to
      Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed by the
      registrant on January 14, 2008)3.1c
              
              Articles
      of Amendment to the registrant’s Amended and Restated Articles of
      Incorporation, effective February 8, 2008 (incorporated by reference to
      Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed by the
      registrant on February 13, 2008)3.1d
              
              Articles
      of Amendment to the registrant’s Amended and Restated Articles of
      Incorporation, effective May 20, 2008 (incorporated by reference to
      Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed by the
      registrant on May 27, 2008)10.1a@
              
              2005
      Stock Option Plan of the registrant (incorporated by reference to Exhibit
      10.18 to the registrant’s Registration Statement on Form S-1 (Reg. No.
      333-129354))10.1b@
              
              Amendment
      to the MISCOR 2005 Stock Option Plan, effective May 15,
    200810.2a@
              
              MISCOR
      Group, Ltd. Employee Stock Purchase Plan (incorporated by reference to
      Exhibit 4.1 to the registrant’s Registration Statement on Form S-8 (Reg.
      No. 333-141537))10.2b@
              
              Amendment
      to the MISCOR Group, Ltd. Employee Stock Purchase Plan, effective May 15,
      200831.1
              
              Certification
      by Chief Executive Officer required by Rule 13a-14(a) or 15d-14(a) of the
      Exchange Act31.2
              
              Certification
      by Chief Financial Officer required by Rule 13a-14(a) or 15d-14(a) of the
      Exchange Act32
              
              Section
      1350 Certifications
 
 @
              Denotes
      a management contract or compensatory
plan.








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