|   | x  | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|   |    | For the quarterly period ended October 4, 2009                                                                                         or |   |
|   | o  | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |

| Indiana                                                        | 20-0995245                           |
|----------------------------------------------------------------|--------------------------------------|
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |

|   |                                                                                    |                        |
|--------|-----------------------------------------------------------------------------------------|-----------------------------|
|   | Large accelerated filer o                                                               | Accelerated filer o         |
|   |                                                                                    |                        |
|   | Non-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 |
|------------------------------------------------------------------------------------------------------------------|--------|------------------------------|

----

| Item                           |                                                                                                                           | Page   |
|--------------------------------|--------------------------------------------------------------------------------------------------------------------------------|--------|
| Number                         |                                                                                                                           | Number |
|                           |                                                                                                                           |   |
| PART I - FINANCIAL INFORMATION |
|                           |                                                                                                                           |   |
| 1.                             | Financial Statements:                                                                                                          | 3      |
|                           |                                                                                                                           |   |
|                           | Condensed Consolidated Balance Sheets October 4, 2009 (Unaudited) and December 31, 2008                                   | 3      |
|                           |                                                                                                                           |   |
|                           | Condensed Consolidated Statements of Operations (Unaudited) Three and Nine Months ended October 4, 2009 and September 28, 2008 | 4      |
|                           |                                                                                                                           |   |
|                           | Condensed Consolidated Statements of Cash Flows (Unaudited) Nine Months ended October 4, 2009 and September 28, 2008           | 5      |
|                           |                                                                                                                           |   |
|                           | Notes to Condensed Consolidated Financial Statements                                                                           | 6      |
|                           |                                                                                                                           |   |
| 2.                             | Management’s Discussion and Analysis of Financial Condition and Results of Operations                                    | 22     |
|                           |                                                                                                                           |   |
| 3.                             | Quantitative and Qualitative Disclosures about Market Risk                                                                     | 28     |
|                           |                                                                                                                           |   |
| 4T.                            | Controls and Procedures                                                                                                        | 29     |
|                           |                                                                                                                           |   |
| PART II - OTHER INFORMATION    |
|                           |                                                                                                                           |   |
| 2.                             | Unregistered Sales of Equity Securities and Use of Proceeds                                                                    | 30     |
|                           |                                                                                                                           |   |
| 6.                             | Exhibits                                                                                                                       | 30     |
|                           |                                                                                                                           |   |
|                           | Signatures                                                                                                                     | 31     |

----

MISCOR GROUP, LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in thousands, except share and per share data)         ASSETS    October 4,  December 31,    2009  2008    (Unaudited)    CURRENT ASSETS      Cash $–  $76 Accounts receivable, net of allowance for doubtful accounts of $943 and $864, respectively  14,388   23,549 Inventories, net  9,620   13,807 Prepaid expenses  807   738 Other current assets  3,097   3,173 Total current assets  27,912   41,343           PROPERTY AND EQUIPMENT, net  12,585   13,812           OTHER ASSETS        Deposits and other assets  199   392 Goodwill  10,466   12,966 Customer relationships, net  8,676   9,059 Other intangible assets, net  994   1,218 Total other assets  20,335   23,635           Total Assets $60,832  $78,790           LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES        Revolving credit line, net of discount of $120 and $117, respectively $5,151  $7,343 Current portion of long-term debt  951   487 Accounts payable  8,775   12,218 Accrued expenses and other current liabilities  5,002   6,180 Total current liabilities  19,879   26,228           LONG TERM LIABILITIES        Long-term debt  4,465   4,805 Long-term debt, Officers  4,550   5,000 Total long-term liabilities  9,015   9,805           Total liabilities  28,894   36,033           Commitments and Contingencies                  STOCKHOLDERS' EQUITY        Preferred stock, no par value; 800,000 shares authorized; no shares issued and outstanding  –   – Common stock, no par value; 30,000,000 shares authorized; 11,804,628 and 11,748,448 shares issued and outstanding, respectively  50,920   50,859 Additional paid in capital  9,107   9,056 Accumulated deficit  (28,089)  (17,158)Total Stockholders' equity  31,938   42,757           Total Liabilities and Stockholders' Equity $60,832  $78,790 The accompanying notes are an integral part of these condensed consolidated financial statements.  3  MISCOR GROUP, LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(Amounts in thousands, except share and per share data)     For the Three Months Ended  For the Nine Months Ended    October 4,  September 28,  October 4,  September 28,    2009  2008  2009  2008    (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited) Revenues            Product Sales $2,799  $6,150  $10,537  $18,771 Service Revenue  17,038   25,353   52,130   73,017 Total Revenues  19,837   31,503   62,667   91,788                                     Cost of Revenues                Cost of Product Sales  2,474   5,656   8,031   15,248 Cost of Service Revenue  15,555   20,834   49,673   61,715 Total Cost of Revenues  18,029   26,490   57,704   76,963                   Gross Profit  1,808   5,013   4,963   14,825                   Selling, General and Administrative Expenses  3,246   4,334   12,585   12,401 Goodwill Impairment  2,500   -   2,500   -                   Income (Loss) From Operations  (3,938)  679   (10,122)  2,424                   Other (Income) Expense                Interest Expense  422   198   912   693 Other (Income) Expense  46   -   (104)  (42)    468   198   808   651                   Income Before Taxes  (4,406)  481   (10,930)  1,773                   Income Tax Expense  -   10   -   236                   NET INCOME (LOSS) $(4,406) $471  $(10,930) $1,537                                                       Basic and Diluted Earnings (Loss) per Common Share $(0.37) $0.04  $(0.93) $0.13                   Weighted Average Number of Common Shares Outstanding         Basic  11,784,490   11,731,394   11,764,823   11,616,370                   Diluted  11,784,490   12,988,391   11,764,823   12,915,610  The accompanying notes are an integral part of these condensed consolidated financial statements.  4    

| MISCOR GROUP, LTD. AND SUBSIDIARIES                           |   |
|---------------------------------------------------------------|--------|
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS               |   |
| (Amounts in thousands, except share and per share data)       |   |
|                                                          |   |   |   |   |   |   |
|                                                          |   | For the Nine Months Ended |   |
|                                                          |   | October 4, |   |   | September 28, |   |
|                                                          |   | 2009 |   |   | 2008 |   |
|                                                          |   | (Unaudited) |   |   | (Unaudited) |   |
| OPERATING ACTIVITIES                                          |   |   |   |   |   |   |
|                                                          |   |   |   |   |   |   |
| Net cash provided (utilized) by operating activities          |   | $ | 2,871 |   |   | $ | (768 | ) |
|                                                          |   |   |   |   |   |   |   |   |
| INVESTING ACTIVITIES                                          |   |   |   |   |   |   |   |   |
|                                                          |   |   |   |   |   |   |   |   |
| Acquisition of business assets, net of cash acquired          |   |   | - |   |   |   | (8,041 | ) |
| Acquisition of property and equipment                         |   |   | (609 | ) |   |   | (1,863 | ) |
| Proceeds from disposal of property and equipment              |   |   | 117 |   |   |   | 143 |   |
| Net cash utilized by investing activities                     |   |   | (492 | ) |   |   | (9,761 | ) |
|                                                          |   |   |   |   |   |   |   |   |
| FINANCING ACTIVITIES                                          |   |   |   |   |   |   |   |   |
|                                                          |   |   |   |   |   |   |   |   |
| Payments on capital lease obligations                         |   |   | (71 | ) |   |   | (39 | ) |
| Short term borrowings (repayments), net                       |   |   | (2,165 | ) |   |   | 5,763 |   |
| Borrowings of long-term debt                                  |   |   | 142 |   |   |   | 2,389 |   |
| Repayments of long-term debt                                  |   |   | (397 | ) |   |   | (440 | ) |
| Proceeds from the issuance of shares and exercise of warrants |   |   | 65 |   |   |   | 94 |   |
| Cash repurchase of restricted stock                           |   |   | (5 | ) |   |   | - |   |
| Debt issuance costs                                           |   |   | (24 | ) |   |   | (45 | ) |
| Net cash provided by (utilized in) financing activities       |   |   | (2,455 | ) |   |   | 7,722 |   |
|                                                          |   |   |   |   |   |   |   |   |
| DECREASE IN CASH                                              |   |   | (76 | ) |   |   | (2,807 | ) |
| Cash, beginning of period                                     |   |   | 76 |   |   |   | 2,807 |   |
|                                                          |   |   |   |   |   |   |   |   |
| Cash, end of period                                           |   | $ | - |   |   | $ | - |   |
|                                                          |   |   |   |   |   |   |   |   |
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:            |   |   |   |   |   |   |   |   |
| Cash paid during the period for:                              |   |   |   |   |   |   |   |   |
| Interest                                                      |   | $ | 596 |   |   | $ | 587 |   |

----

MISCOR GROUP, LTD.

----

|   |                                                                                               |   | Three Months Ended |       |   | Nine Months Ended  |   |
|--------|----------------------------------------------------------------------------------------------------|--------|--------------------|------------|--------|--------------------|--------|
|   |                                                                                               |   | October 4, 2009    |       |   | September 28, 2008 |   |   | October 4, 2009 |   |   | September 28, 2008 |   |
|   |                                                                                               |   |               |       |   |               |   |   |   |   |   |   |   |
|   | Net income/(loss) available for common stockholders used in basic earnings per share               |   | $                  | (4,406     | )      |               | $      | 471 |   |   | $ | (10,930 | ) |   | $ | 1,537 |   |
|   |                                                                                               |   |               |       |   |               |   |   |   |   |   |   |   |   |   |   |   |
|   | Interest on convertible debt                                                                       |   |               | -          |   |               |   | 30 |   |   |   | - |   |   |   | 102 |   |
|   |                                                                                               |   |               |       |   |               |   |   |   |   |   |   |   |   |   |   |   |
|   | Net income/(loss) available for common stockholders after assumed conversion of diluted securities |   | $                  | (4,406     | )      |               | $      | 501 |   |   |   | (10,930 | ) |   | $ | 1,639 |   |
|   |                                                                                               |   |               |       |   |               |   |   |   |   |   |   |   |   |   |   |   |
|   | Weighted average outstanding shares of common stock                                                |   |               | 11,784,490 |   |               |   | 11,731,394 |   |   |   | 11,764,823 |   |   |   | 11,616,370 |   |
|   |                                                                                               |   |               |       |   |               |   |   |   |   |   |   |   |   |   |   |   |
|   | Dilutive effect of  stock options and warrants                                           |   |               | -          |   |               |   | 56,997 |   |   |   | - |   |   |   | 99,240 |   |
|   |                                                                                               |   |               |       |   |               |   |   |   |   |   |   |   |   |   |   |   |
|   | Dilutive effect of convertible debt                                                                |   |               | -          |   |               |   | 1,200,000 |   |   |   | - |   |   |   | 1,200,000 |   |
|   |                                                                                               |   |               |       |   |               |   |   |   |   |   |   |   |   |   |   |   |
|   | Weighted average outstanding shares of common stock and common stock equivalents                   |   |               | 11,784,490 |   |               |   | 12,988,391 |   |   |   | 11,764,823 |   |   |   | 12,915,610 |   |
|   |                                                                                               |   |               |       |   |               |   |   |   |   |   |   |   |   |   |   |   |
|   | Earnings/(loss) per share:                                                                         |   |               |       |   |               |   |   |   |   |   |   |   |   |   |   |   |
|   |                                                                                               |   |               |       |   |               |   |   |   |   |   |   |   |   |   |   |   |
|   | Basic                                                                                              |   | $                  | (0.37      | )      |               | $      | 0.04 |   |   |   | (0.93 | ) |   | $ | 0.13 |   |
|   |                                                                                               |   |               |       |   |               |   |   |   |   |   |   |   |   |   |   |   |
|   | Diluted                                                                                            |   | $                  | (0.37      | )      |               | $      | 0.04 |   |   |   | (0.93 | ) |   | $ | 0.13 |   |

|   |                                                     |   | October 4, |   |   | December 31, |   |
|--------|----------------------------------------------------------|--------|------------|--------|--------|--------------|--------|
|   |                                                     |   | 2009       |   |   | 2008         |   |
|   |                                                     |   |       |   |   |         |   |
|   | Raw materials                                            |   | $          | 5,646  |   |         | $      | 6,738 |   |
|   | Work-in-process                                          |   |       | 2,882  |   |         |   | 5,221 |   |
|   | Finished goods                                           |   |       | 2,319  |   |         |   | 2,964 |   |
|   |                                                     |   | $          | 10,847 |   |         | $      | 14,923 |   |
|   | Less: allowance for slow moving and obsolete inventories |   |       | (1,227 | )      |         |   | (1,116 | ) |
|   |                                                     |   | $          | 9,620  |   |         | $      | 13,807 |   |

----

NOTE E – GOODWILL AND OTHER INTANGIBLE ASSETS 

|   |                              |   | Magnetech Industrial Services |   |   | American Motive Power |   |   | Ideal Consolidated |   |   | Total  |   |
|--------|-----------------------------------|--------|-------------------------------|--------|--------|-----------------------|--------|--------|--------------------|--------|--------|--------|--------|
|   |                              |   |                          |   |   |                  |   |   |               |   |   |   |   |   |   |   |   |
|   | Balances as of January 1, 2008    |   | $                             | 7,370  |   |                  | $      | -      |               |   | $      | 633    |   |   | $ | 8,003 |   |
|   | Goodwill Acquired During the Year |   |                          | 461    |   |                  |   | 5,377  |               |   |   | -      |   |   |   | 5,838 |   |
|   | Settlements and Adjustments       |   |                          | -      |   |                  |   | -      |               |   |   | 12     |   |   |   | 12 |   |
|   | Impairment Charge                 |   |                          | -      |   |                  |   | (887   | )                  |   |   | -      |   |   |   | (887 | ) |
|   | Balances as of December 31, 2008  |   |                          | 7,831  |   |                  |   | 4,490  |               |   |   | 645    |   |   |   | 12,966 |   |
|   |                              |   |                          |   |   |                  |   |   |               |   |   |   |   |   |   |   |   |
|   | Impairment Charge                 |   |                          | -      |   |                  |   | (2,500 | )                  |   |   | -      |   |   |   | (2,500 | ) |
|   | Balances as of October 4, 2009    |   | $                             | 7,831  |   |                  | $      | 1,990  |               |   | $      | 645    |   |   | $ | 10,466 |   |

----

NOTE E – GOODWILL AND OTHER INTANGIBLE ASSETS 

|   |                              |   | Industrial Services |   |   | Construction and Engineering Services |   |   | Rail Services |   |   | Total  |   |
|--------|-----------------------------------|--------|---------------------|--------|--------|---------------------------------------|--------|--------|---------------|--------|--------|--------|--------|
|   |                              |   |                |   |   |                                  |   |   |          |   |   |   |   |
|   | Balances as of January 1, 2008    |   | $                   | 7,370  |   |                                  | $      | 633    |          |   | $      | -      |   |   | $ | 8,003 |   |
|   | Goodwill Acquired During the Year |   |                | 461    |   |                                  |   | -      |          |   |   | 5,377  |   |   |   | 5,838 |   |
|   | Settlements and Adjustments       |   |                | -      |   |                                  |   | 12     |          |   |   | -      |   |   |   | 12 |   |
|   | Impairment Charge                 |   |                | -      |   |                                  |   | -      |          |   |   | (887   | )      |   |   | (887 | ) |
|   | Balances as of December 31, 2008  |   |                | 7,831  |   |                                  |   | 645    |          |   |   | 4,490  |   |   |   | 12,966 |   |
|   |                              |   |                |   |   |                                  |   |   |          |   |   |   |   |   |   |   |   |
|   | Impairment Charge                 |   |                | -      |   |                                  |   | -      |          |   |   | (2,500 | )      |   |   | (2,500 | ) |
|   | Balances as of October 4, 2009    |   | $                   | 7,831  |   |                                  | $      | 645    |          |   | $      | 1,990  |   |   | $ | 10,466 |   |

|   |                      |   |                                   |   |   | October 4, 2009       |   |   |                     |   |   | December 31, 2008 |   |   |                  |   |
|--------|---------------------------|--------|----------------------------------------|--------|--------|-----------------------|--------|--------|--------------------------|--------|--------|-------------------|--------|--------|-----------------------|--------|
|   |                      |   | Estimated Useful Lives (in Years) |   |   | Gross Carrying Amount |   |   | Accumulated Amortization |   |   | Net               |   |   | Gross Carrying Amount |   |   | Accumulated Amortization |   |   | Net |   |
|   |                      |   |                                   |   |   |                  |   |   |                     |   |   |              |   |   |                  |   |   |   |   |   |   |   |
|   | Patents and Trademarks    |   |                                   | 10     |   |                  | $      | 4      |                     |   | $      | (3                | )      |   | $                     | 1      |   |   | $ | 4 |   |   | $ | (3 | ) |   | $ | 1 |   |
|   | Mutual Services Agreement |   |                                   | 1      |   |                  |   | 100    |                     |   |   | (100              | )      |   |                  | -      |   |   |   | 100 |   |   |   | (100 | ) |   |   | - |   |
|   | Technical Library         |   |                                   | 20     |   |                  |   | 700    |                     |   |   | (65               | )      |   |                  | 635    |   |   |   | 700 |   |   |   | (38 | ) |   |   | 662 |   |
|   | Customer Relationships    |   |                                   | 15-20  |   |                  |   | 9,592  |                     |   |   | (916              | )      |   |                  | 8,676  |   |   |   | 9,592 |   |   |   | (533 | ) |   |   | 9,059 |   |
|   | Non-Compete Agreements    |   |                                   | 3      |   |                  |   | 807    |                     |   |   | (449              | )      |   |                  | 358    |   |   |   | 807 |   |   |   | (252 | ) |   |   | 555 |   |
|   |                      |   |                                   |   |   |                  |   |   |                     |   |   |              |   |   |                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   | Total                     |   |                                   |   |   |                  | $      | 11,203 |                     |   | $      | (1,533            | )      |   | $                     | 9,670  |   |   | $ | 11,203 |   |   | $ | (926 | ) |   | $ | 10,277 |   |

|   | Years Ending December 31, |   |   |   |
|--------|---------------------------|--------|--------|--------|
|   |                      |   |   |   |   |
|   | 2009                      |   | $      | 202    |   |
|   | 2010                      |   |   | 818    |   |
|   | 2011                      |   |   | 563    |   |
|   | 2012                      |   |   | 546    |   |
|   | 2013                      |   |   | 546    |   |
|   | Thereafter                |   |   | 6,995  |   |
|   |                      |   |   |   |   |
|   | Total                     |   | $      | 9,670  |   |

----

----

|   | · | Waived the Company’s noncompliance with the minimum net income and debt service coverage ratio covenants for the year ended December 31, 2008 |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Eliminated the minimum net income and debt service coverage ratio covenants for the year ending December 31, 2009 |
|--------|--------|-------------------------------------------------------------------------------------------------------------------|

|   | · | Adjusted the minimum book net worth covenant to $38,750 as of December 31, 2009 |
|--------|--------|---------------------------------------------------------------------------------|

----

|   | · | Incorporated a monthly minimum EBITDA covenant commencing in April, 2009 |
|--------|--------|--------------------------------------------------------------------------|

|   | · | Reduced the revolving credit line limit to $11,000 (from $13,750) |
|--------|--------|-------------------------------------------------------------------|

|   | · | Reset the interest rate on the revolving credit line and term notes to the Daily Three Month LIBOR plus 5.25% effective April 14, 2009 |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Suspended interest payments on the Company’s subordinated debt to the Company’s CEO, John A. Martell. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------|

|   | · | Revised the definition of “Borrowing Base”, resulting in lower available borrowings |
|--------|--------|-------------------------------------------------------------------------------------------------|

|   | · | Adjusted the interest rate on the revolving credit line and term notes (defined in the Credit Agreement as the “LIBOR Advance Rate”) to the Daily Three Month LIBOR (0.56% at July 5, 2009) plus 8.25%, effective June 1, 2009 |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Lowered the amount of the minimum EBITDA that the Company is required to achieve in future periods |
|--------|--------|----------------------------------------------------------------------------------------------------|

|   | · | Requires the Company to raise $2,000,000 in additional capital by August 31, 2009 through subordinated debt, asset sales or additional cash equity |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Lowered eligible progress accounts advance rates by $50 per week commencing August 3, 2009. |
|--------|--------|---------------------------------------------------------------------------------------------|

|   | · | Lowered the special accounts advanced rate to 35% effective July 22, 2009 further reducing it to 30% effective August 31, 2009 or such lesser rate the lender may determine |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Added conditions regarding marketing assets, the validation of the Company’s cash flow forecast and future financial projections |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Revised the definition of “Borrowing Base”, resulting in lower available borrowings; and |
|--------|--------|------------------------------------------------------------------------------------------------------|

|   | · | Extended until October 31, 2009 the previously agreed upon requirement for the Company to raise $2,000 in additional capital through subordinated debt, asset sales, or additional cash equity. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

    October 4,  December 31,     2009  2008           Note payable to former  members of 3-D Service, Ltd. (XGen III, Ltd.) due November 30, 2010, plus interest at prime rate (3.25% at October 4, 2009 and December 31, 2008) secured by a subordinated interest in machinery and equipment of 3-D Services, Ltd. $2,000  $2,000             Note payable to former  members of 3-D Service, Ltd. (BDeWees, Inc.) due November 30, 2010, plus interest at prime rate (3.25% at October 4, 2009 and December 31, 2008) secured by a subordinated interest in machinery and equipment of 3-D Services, Ltd.  2,000   2,000             Note payable to Officer, payable in monthly installments of $50 beginning February 1, 2010, plus interest at prime rate (3.25% at October 4, 2009 and December 31, 2008) less 1% through December 31, 2008, interest rate increased to prime plus 1% beginning on January 1, 2009 and was reset to the greater of 5% or prime plus 1% beginning April14, 2009, secured by a subordinated interest in substantially all assets owned by the Company  3,000   3,000             Note payable to bank in monthly installments of $10 through May 2018, plus interest at prime rate (3.25% at December 31, 2008) through December 31, 2008, increased to prime rate plus 3% through April 13, 2009, reset to Daily Three Month LIBOR plus 5.25%  beginning April 14, 2009, increased to Daily Three Month LIBOR (0.28% at October4, 2009) plus 8.25% beginning June 1, 2009, secured by certain real estate (see Note F, Senior Credit Facility)  990   1,177             Note payable to bank in monthly installments of $21 through May 2012, plus interest at prime rate (3.25% at December 31, 2008) through December 31, 2008, increased to prime plus 3% through April 13, 2009, reset to Daily Three Month LIBOR plus 5.25% beginning April 14, 2009, increased to Daily Three Month LIBOR (0.28% at October 4, 2009) plus8.25% beginning June 1, 2009, secured by inventory and substantially all machinery and equipment (see Note F, Senior Credit Facility)  667   854             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  156   173             Notes payable to bank in monthly principal payments of $1 through June 2009, without interest secured by certain vehicles  -   6             Notes payable in monthly installments of $1 through April 2014, without interest, secured by certain equipment.  72   -             Capital lease obligations  1,081   1,082      9,966   10,292  Less: current portion  951   487                $9,015  $9,805   13  

NOTE G - DEBT (CONTINUED) 

Capital Lease Obligations

|   |                              |   | October 4, |   |   | December 31, |   |
|--------|-----------------------------------|--------|------------|--------|--------|--------------|--------|
|   |                              |   | 2009       |   |   | 2008         |   |
|   |                              |   |       |   |   |         |   |   |   |
|   | Machinery & equipment         |   | $          | 805    |   |         | $      | 774 |   |
|   | Vehicles & trailers           |   |       | 84     |   |         |   | 84 |   |
|   | Computer equipment & software |   |       | 240    |   |         |   | 240 |   |
|   | Furniture & office equipment  |   |       | 91     |   |         |   | 84 |   |
|   | Less accumulated depreciation     |   |       | (220   | )      |         |   | (108 | ) |
|   |                              |   | $          | 1,000  |   |         | $      | 1,074 |   |

|   | Years ending December 31,                   |   |   |   |
|--------|---------------------------------------------|--------|--------|--------|
|   |                                        |   |   |   |   |
|   | 2009                                        |   | $      | 52     |   |
|   | 2010                                        |   |   | 199    |   |
|   | 2011                                        |   |   | 178    |   |
|   | 2012                                        |   |   | 178    |   |
|   | 2013 and thereafter                         |   |   | 1,056  |   |
|   |                                        |   | $      | 1,663  |   |
|   |                                        |   |   |   |   |
|   | Less Imputed Interest                       |   |   | (582   | ) |
|   |                                        |   |   |   |   |
|   | Present Value of Net Minimum Lease Payments |   | $      | 1,081  |   |

 

|   | Years Ending December 31, |   | Amount |   |
|--------|---------------------------|--------|--------|--------|
|   |                      |   |   |   |
|   | 2009                      |   | $      | 125    |   |
|   | 2010                      |   |   | 5,046  |   |
|   | 2011                      |   |   | 1,084  |   |
|   | 2012                      |   |   | 946    |   |
|   | 2013                      |   |   | 1,628  |   |
|   | 2014                      |   |   | 754    |   |
|   | Thereafter                |   |   | 383    |   |
|   |                      |   | $      | 9,966  |   |

|   |                                                                   |   | Three Months Ended |   |   | Nine Months Ended |   |
|--------|------------------------------------------------------------------------|--------|--------------------|--------|--------|-------------------|--------|
|   |                                                                   |   | October 4,         |   |   | September 28,     |   |   | October 4, |   |   | September 28, |   |
|   |                                                                   |   | 2009               |   |   | 2008              |   |   | 2009 |   |   | 2008 |   |
|   |                                                                   |   |               |   |   |              |   |   |   |   |   |   |   |
|   | Interest expense on principal                                          |   | $                  | 250    |   |              | $      | 180 |   |   | $ | 704 |   |   | $ | 587 |   |
|   |                                                                   |   |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
|   | Amortization of debt issue costs                                       |   |               | 29     |   |              |   | 4 |   |   |   | 37 |   |   |   | 51 |   |
|   |                                                                   |   |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
|   | Amortization of debt discount - debentures and revolving notes payable |   |               | 143    |   |              |   | 14 |   |   |   | 171 |   |   |   | 55 |   |
|   |                                                                   |   |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
|   |                                                                   |   | $                  | 422    |   |              | $      | 198 |   |   | $ | 912 |   |   | $ | 693 |   |

----

|   |                                   |   | Three Months Ended |   |   | Nine Months Ended  |   |
|--------|----------------------------------------|--------|--------------------|--------|--------|--------------------|--------|
|   |                                   |   | October 4, 2009    |   |   | September 28, 2008 |   |   | October 4, 2009 |   |   | September 28, 2008 |   |
|   |                                   |   |               |   |   |               |   |   |   |   |   |   |   |
|   | Stock options expense                  |   | $                  | 8      |   |               | $      | 13 |   |   | $ | 32 |   |   | $ | 31 |   |
|   | Restricted stock expense               |   |               | 7      |   |               |   | 18 |   |   |   | 20 |   |   |   | 37 |   |
|   | Employee stock purchase plan expense   |   |               | 7      |   |               |   | 4 |   |   |   | 21 |   |   |   | 13 |   |
|   | Total stock-based compensation expense |   | $                  | 22     |   |               | $      | 35 |   |   | $ | 73 |   |   | $ | 81 |   |

|   |                                                      |   | Three Months Ended |   |   | Nine Months Ended  |   |
|--------|-----------------------------------------------------------|--------|--------------------|--------|--------|--------------------|--------|
|   |                                                      |   | October 4, 2009    |   |   | September 28, 2008 |   |   | October 4, 2009 |   |   | September 28, 2008 |   |
|   | Stock options awarded                                     |   |               | -      |   |               |   | 9,000 |   |   |   | 8,000 |   |   |   | 23,200 |   |
|   | Weighted average fair value per option                    |   | $                  | -      |   |               | $      | 3.60 |   |   | $ | 1.23 |   |   | $ | 3.67 |   |
|   | Weighted average exercise price per option                |   | $                  | -      |   |               | $      | 9.99 |   |   | $ | 3.30 |   |   | $ | 10.19 |   |
|   |                                                      |   |               |   |   |               |   |   |   |   |   |   |   |   |   |   |   |
|   | Restricted stock awarded                                  |   |               | -      |   |               |   | 4,000 |   |   |   | 1,500 |   |   |   | 15,000 |   |
|   | Weighted average fair value per share of restricted stock |   | $                  | -      |   |               | $      | 9.89 |   |   | $ | 3.30 |   |   | $ | 10.12 |   |

|   |                        |   | Three Months Ended October 4, 2009 |   | Three Months Ended September 28, 2008 |   | Nine Months Ended October 4, 2009 |   | Nine Months Ended September 28, 2008 |
|--------|-----------------------------|--------|------------------------------------|--------|---------------------------------------|--------|-----------------------------------|--------|--------------------------------------|
|   |                        |   |                               |   |                                  |   |                              |   |                                 |
|   | Expected volatility         |   | -                                  |   | 44.48%                                |   | 47.41%                            |   | 43.57%                               |
|   | Risk free interest rate     |   | -                                  |   | 3.00%                                 |   | 1.55%                             |   | 2.96%                                |
|   | Expected term               |   | -                                  |   | 3.75 years                            |   | 3.75 years                        |   | 3.75 years                           |
|   | Vesting period              |   | -                                  |   | 4 Years                               |   | 4 Years                           |   | 4 Years                              |
|   | Term                        |   | -                                  |   | 5 Years                               |   | 5 Years                           |   | 5 Years                              |
|   | Dividend yield              |   | -                                  |   | 0%                                    |   | 0%                                |   | 0%                                   |
|   | Weighted average fair value |   | $  -                          |   | $3.60                                 |   | $1.23                             |   | $3.67                                |

----

----

----

|                                      |   |     |   |   | Construction      |   |   |          |   |   |      |   |   |         |   |   | Three Months Ended |   |
|-------------------------------------------|--------|----------|--------|--------|-------------------|--------|--------|---------------|--------|--------|-----------|--------|--------|--------------|--------|--------|--------------------|--------|
|                                      |   |     |   |   | & Engineering |   |   |          |   |   |      |   |   | Intersegment |   |   | October 4, 2009    |   |
| 2009                                      |   | Services |   |   | Services          |   |   | Rail Services |   |   | Corporate |   |   | Eliminations |   |   | Consolidated       |   |
|                                      |   |     |   |   |              |   |   |          |   |   |      |   |   |         |   |   |               |   |
| External revenue:                         |   |     |   |   |              |   |   |          |   |   |      |   |   |         |   |   |               |   |
| Product sales                             |   | $        | 963    |   |              | $      | -      |          |   | $      | 1,836     |   |   | $            | -      |   |               | $      | - |   |   | $ | 2,799 |   |
| Service revenue                           |   |     | 6,589  |   |              |   | 8,948  |          |   |   | 1,501     |   |   |         | -      |   |               |   | - |   |   |   | 17,038 |   |
| Intersegment revenue:                     |   |     |   |   |              |   |   |          |   |   |      |   |   |         |   |   |               |   |   |   |   |   |   |   |
| Product sales                             |   |     | -      |   |              |   | -      |          |   |   | -         |   |   |         | -      |   |               |   | - |   |   |   | - |   |
| Service revenue                           |   |     | 19     |   |              |   | 32     |          |   |   | 2         |   |   |         | -      |   |               |   | (53 | ) |   |   | - |   |
| Depreciation Included in Cost of Revenues |   |     | 302    |   |              |   | 26     |          |   |   | 152       |   |   |         | -      |   |               |   | - |   |   |   | 480 |   |
| Gross profit                              |   |     | 631    |   |              |   | 1,193  |          |   |   | (16       | )      |   |         | -      |   |               |   | - |   |   |   | 1,808 |   |
| Other depreciation & amortization     |   |     | 108    |   |              |   | 7      |          |   |   | 113       |   |   |         | 33     |   |               |   | - |   |   |   | 261 |   |
| Interest expense                          |   |     | 54     |   |              |   | -      |          |   |   | 4         |   |   |         | 364    |   |               |   | - |   |   |   | 422 |   |
| Net income (loss)                         |   |     | (770   | )      |              |   | 686    |          |   |   | (3,059    | )      |   |         | (1,263 | )      |               |   | - |   |   |   | (4,406 | ) |
| Total assets                              |   |     | 33,036 |   |              |   | 9,694  |          |   |   | 17,373    |   |   |         | 729    |   |               |   | - |   |   |   | 60,832 |   |
| Capital expenditures                      |   |     | 21     |   |              |   | 109    |          |   |   | 20        |   |   |         | -      |   |               |   |   |   |   |   | 150 |   |

| 2008                                      |   | Industrial Services |   |   | Construction & Engineering Services |   |   | Rail Services |   |   | Corporate |   |   | Intersegment Eliminations |   |   | Three Months Ended September 28, 2008 Consolidated |   |
|-------------------------------------------|--------|---------------------|--------|--------|-----------------------------------------|--------|--------|---------------|--------|--------|-----------|--------|--------|---------------------------|--------|--------|---------------------------------------------------------|--------|
|                                      |   |                |   |   |                                    |   |   |          |   |   |      |   |   |                      |   |   |                                                    |   |
| External revenue:                         |   |                |   |   |                                    |   |   |          |   |   |      |   |   |                      |   |   |                                                    |   |
| Product sales                             |   | $                   | 3,302  |   |                                    | $      | -      |          |   | $      | 2,848     |   |   | $                         | -      |   |                                                    | $      | - |   |   | $ | 6,150 |   |
| Service revenue                           |   |                | 11,534 |   |                                    |   | 9,331  |          |   |   | 4,488     |   |   |                      | -      |   |                                                    |   | - |   |   |   | 25,353 |   |
| Intersegment revenue:                     |   |                |   |   |                                    |   |   |          |   |   |      |   |   |                      |   |   |                                                    |   |   |   |   |   |   |   |
| Product sales                             |   |                | -      |   |                                    |   | -      |          |   |   | -         |   |   |                      | -      |   |                                                    |   | - |   |   |   | - |   |
| Service revenue                           |   |                | 468    |   |                                    |   | 15     |          |   |   | 534       |   |   |                      | -      |   |                                                    |   | (1,017 | ) |   |   | - |   |
| Depreciation Included in Cost of Revenues |   |                | 289    |   |                                    |   | 21     |          |   |   | 153       |   |   |                      | -      |   |                                                    |   | - |   |   |   | 463 |   |
| Gross profit                              |   |                | 3,023  |   |                                    |   | 1,378  |          |   |   | 612       |   |   |                      | -      |   |                                                    |   | - |   |   |   | 5,013 |   |
| Other depreciation & amortization     |   |                | 151    |   |                                    |   | 6      |          |   |   | 110       |   |   |                      | 14     |   |                                                    |   | - |   |   |   | 281 |   |
| Interest expense                          |   |                | 82     |   |                                    |   | -      |          |   |   | 3         |   |   |                      | 113    |   |                                                    |   | - |   |   |   | 198 |   |
| Net income (loss)                         |   |                | 1,114  |   |                                    |   | 1,031  |          |   |   | (329      | )      |   |                      | (1,345 | )      |                                                    |   | - |   |   |   | 471 |   |
| Total assets                              |   |                | 41,657 |   |                                    |   | 12,086 |          |   |   | 23,656    |   |   |                      | 1,138  |   |                                                    |   | - |   |   |   | 78,537 |   |
| Capital expenditures                      |   |                | 58     |   |                                    |   | 9      |          |   |   | 520       |   |   |                      | 88     |   |                                                    |   | - |   |   |   | 675 |   |

----

 NOTE M – SEGMENT INFORMATION (CONTINUED) 2009 IndustrialServices  Construction & EngineeringServices  Rail Services  Corporate  IntersegmentEliminations  Nine Months EndedOctober 4, 2009Consolidated                     External revenue:                  Product sales $3,211  $-  $7,326  $-  $-  $10,537 Service revenue  21,551   24,292   6,287   -   -   52,130 Intersegment revenue:                        Product sales  -   -   -   -   -   - Service revenue  100   78   2   -   (180)  - Depreciation Included in Cost of Revenues  1,016   66   437   -   -   1,519 Gross profit  1,972   2,239   752   -   -   4,963 Other depreciation & amortization  336   21   341   99   -   797 Interest expense  191   -   13   708   -   912 Net income (loss)  (3,273)  590   (4,051)  (4,196)  -   (10,930)Total assets  33,036   9,694   17,373   729   -   60,832 Capital expenditures  93   219   280   17       609   2008 Industrial Services  Construction & EngineeringServices  Rail Services  Corporate   IntersegmentEliminations  Nine Months EndedSeptember 28, 2008Consolidated                     External revenue:                  Product sales $8,370  $-  $10,401  $-  $-  $18,771 Service revenue  35,752   26,011   11,254   -   -   73,017 Intersegment revenue:                        Product sales  -   -   -   -   -   - Service revenue  1,483   65   916   -   (2,464)  - Depreciation Included in Cost of Revenues  874   64   409   -   -   1,347 Gross profit  9,232   3,469   2,124   -   -   14,825 Other depreciation & amortization  444   16   313   35   -   808 Interest expense  280   -   28   385   -   693 Net income (loss)  3,441   2,364   (192)  (4,076)  -   1,537 Total assets  41,657   12,086   23,656   1,138   -   78,537 Capital expenditures  274   19   1,297   412   -   2,002   19  NOTE N - SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES    Nine Months Ended    October 4,  September 28,    2009  2008        Conversion of subordinated debentures $-  $3,234           Issuance of restricted stock $5  $152           Assumption 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           Equipment acquired through capital lease obligation $146  $864  NOTE O – SUBSEQUENT EVENTSThe Company has evaluated the period subsequent to October 4, 2009 and through November 23, 2009, the date the financial statements were filed with the SEC, for events that did not exist at the balance sheet date, but arose after that date.  Credit Facility As discussed in Note F – Senior Credit Facility, on September 16, 2009 the Company and Wells Fargo executed a Fifth Amendment to the Credit Agreement (the “Fifth Amendment”).  The Fifth Amendment amended the Credit Agreement to, among other things, extend until October 31, 2009 the previously agreed upon requirement for the Company to raise $2,000 in additional capital through subordinated debt, asset sales, or additional cash equity.  As of November 23,2009, the Company has not succeeded in raising all of the $2,000 of additional capital that the Credit Agreement, as amended by the Fifth Amendment, required the Company to raise by October 31, 2009.  Wells Fargo has not declared an event of default under the Credit Agreement as a result of the failure to raise all of the additional required capital.  The Company is continuing discussions with Wells Fargo regarding an extension of the requirement to raise additional capital or other arrangementsunder which Wells Fargo would refrain from exercising their rights under the bank credit facilities as a result of the above-mentioned failure to raise additional capital.  While the Company is optimistic that an agreement can be reached to extend the due date of the requirement to raise additional capital, there can be no assurances that the Company will be able to obtain an extension or obtain other relief from Wells Fargo.  If Wells Fargo demands immediate repayment of the Company’soutstanding borrowings under the bank credit facilities, the Company does not currently have means to repay or refinance the amounts that would be due.  If demanded and if the Company was unable to repay or refinance the amounts due under the bank credit facilities, Wells Fargo could exercise its remedies under the bank credit facilities, including foreclosing on substantially all the Company’s assets, which the Company pledged as collateral to secure its obligations under the bank credit facilities.  IfWells Fargo were to exercise its remedies and foreclose on the Company’s assets, there would be substantial doubt about the Company’s ability to continue as a going concern.  The accompanying consolidated financial statements have been prepared assuming the Company is a going concern and do not reflect any adjustments that may arise from this uncertainty.  20 NOTE O – SUBSEQUENT EVENTS (CONTINUED) Discontinued OperationsIn November 2009 the Company formulated a plan to sell its AMP Rail Services Canada, ULC (“AMP Canada”) subsidiary in order to raise additional operating capital.  The Company is currently in negotiations to sell AMP Canada, and expects the sale to be completed during the fourth quarter of 2009.  The carryingamount of the major classes of AMP Canada are shown below.     October 4, 2009  December 31, 2008          Accounts receivable $1,022  $308  Inventory  187   116  Property, plant and equipment (net of accumulated depreciation of $113 and $21)  485   655  Deposits and other assets  1,468   1,171  Assets of discontinued operations $3,162  $2,250                        Accounts payable $834  $576  Accrued expenses and other current liabilities  267   231  Other long term liabilities  -   21  Liabilities of discontinued operations $1,101  $828   21  ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSOverviewWe provide electrical and mechanical solutions to industrial, commercial and institutional customers primarily in the UnitedStates. We currently operate in three business segments:    ·Industrial Services – We provide maintenance and repair services to several industries including electric motor and wind power; repairing, manufacturing, and remanufacturing industrial lifting magnets for the steel and scrap industries.   ·Construction and Engineering Services – We provide a wide range of electrical and mechanical contracting services, mainly to industrial, commercial, and institutional customers.   ·Rail Services – We manufacture and rebuild power assemblies, engine parts, and other components related to large diesel engines and provide locomotive maintenance, remanufacturing, and repair services for the rail industry. 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 DevelopmentsOn September 16, 2009, the Company and Wells Fargo executed a Fifth Amendment to the Credit Agreement (the “Fifth Amendment”).  The Fifth Amendment amends the Credit Agreement in the following respects:  ·Revised the definition of “Borrowing Base,” resulting in lower available borrowings; and   ·Extended until October 31, 2009, the requirement to raise $2,000,000 of additional capital through subordinated debt or equity contributions. Under the Fifth Amendment, we agreed to pay Wells Fargo an accommodation fee equal to $25,000, payable on the date of execution of the Fifth Amendment. As of November 23, 2009, we have not succeeded in raising all of the $2,000,000 of additional capital that the Credit Agreement, as amended by the Fifth Amendment, required us to raise by October 31, 2009.  Wells Fargo has not declared an event of default under the Credit Agreement as a result of the failure to raise all ofthe additional required capital.  We are continuing discussions with Wells Fargo regarding an extension of the requirement to raise additional capital or other arrangements under which Wells Fargo would refrain from exercising their rights under the bank credit facilities as a result of the above-mentioned failure to raise additional capital.  While we are optimistic that an agreement can be reached with Wells Fargo to extend the due date of the requirement to raise additional capital,there can be no assurances that we will be able to obtain an extension or obtain other relief from Wells Fargo.  If Wells Fargo demands immediate repayment of our outstanding borrowings under the bank credit facilities, we do not currently have means to repay or refinance the amounts that would be due.  If demanded, and if we were unable to repay or refinance the amounts due under the bank credit facilities, Wells Fargo could exercise its remedies under the bank credit facilities, includingforeclosing on substantially all of our assets, which we pledged as collateral to secure its obligations under the bank credit facilities.  If Wells Fargo were to exercise its remedies and foreclose on our assets, there would be substantial doubt about our ability to continue as a going concern.  Our consolidated financial statements acompanying this quarterly report on Form 10-Q have been prepared assuming the Company is a going concern and do not reflect any adjustments that may arise fromthis uncertainty. While we explore asset sales, divestitures and other types of capital raising alternatives in order to reduce indebtedness under the Credit Agreement, there can be no assurance that such activities will be successful or generate cash resources adequate to retire or sufficiently reduce this indebtedness.Revenues in the quarter were consistent with the prior quarter, with modest improvement realized in our Construction and Engineering Segment.   Initiatives undertaken to mitigate the impact on the Company of the unprecedented deterioration of market conditions realized improved margins and improvement in operating cash flow.   Indirectexpenses and SG&A were reduced, not at the same rate as the decline in revenue.  Improving operating results is imperative to realizing needed cash flow.  Working capital management mitigated liquidity pressures  with improved collections of accounts receivable and reductions in inventory.  Wells Fargo imposed reductions in advance rates and line limits reduces the Company’s ability to meet supplier payment commitments.  Supplier payment requirementscannot always be met directly impacting sales and gross margins. We are continuing to assess the strategic fit of our various businesses and are considering additional divestitures where businesses do not align with our long-term vision.  We will explore a number of strategic alternatives for under-performing or non-strategic businesses including possible divestures.  We generally announcepublicly divesture and acquisition transactions only when we have entered into definitive agreements relative to those transactions. On November 23, 2009, the Company received a notice from the Financial Industry Regulatory Authority ("FINRA") stating that the Company is not current in its SEC reporting obligations because it did not file its Current Report on Form 10-Q for the third quarter of 2009 by the prescribed due date.  The notice also stated that, asa result of that failure, under NASD Rule 6530 the securities of the Company will not be eligible for quotation on the OTC Bulletin Board unless the delinquent filing is received by the SEC by December 18, 2009.  The notice further stated that because of the delinquency, a fifth character "E" was appended to the Company's trading symbol.  The Company believes, however, that because it timely filed with the SEC a Form 12b-25, Notification of Late Filing, with regard to its third quarter Form10-Q, the Company is current in its SEC reporting obligations. The Company advised the FINRA staff to that effect and requested the staff to remove the fifth character "E" from its trading symbol.  In any event, the Company believes this matter should be resolved with the filing of this Current Report on Form 10-Q on November 23, 2009 with the SEC.  22  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 nine months ended October 4, 2009 and September 28, 2008 include our accounts and those of our wholly-owned subsidiaries, Magnetech Industrial Services, Inc., Martell Electric, LLC, Ideal Consolidated,Inc.,  HK Engine Components, LLC, American Motive Power, Inc. (“AMP”) and Magnetech Power Services LLC.  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 ofcontingent 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. Revenue in our Industrial Services segment consists primarily of product sales and service of industrial magnets, and electric motors. Product sales revenue is recognized when products are shipped and both title and risk of loss transfer to the customer. Servicerevenue 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 on specific identificationof customer accounts deemed to be uncollectible and historical experience. Revenues from the Rail Services and Construction and Engineering Services segments are recognized on the percentage-of-completion method, 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 currentassets. Amounts billed to customers in excess of costs incurred on contracts are recorded as part of other current liabilities. Cash Equivalents.  The Company considers all highly liquid investments with maturities of three months or less from the purchase date to be cash equivalents. Concentration of credit risk.  The Company maintains its cash and cash equivalents primarily in bank deposit accounts.  The Federal Deposit Insurance Corporation insures these balances up to $250,000 per bank. The Company has not experienced any losses on itsbank deposits and management believes these deposits do not expose the Company to any significant credit risk. Earnings per share.  We account for earnings (loss) per common share with 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 stockholdersby 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. Foreign Currency Translation.  The assets and liabilities of the Company’s Canadian operations are translated into U.S. dollars at the rate of exchange in effect at the balance sheet date, except for non-monetary assets and liabilities, which are translated usingthe historical exchange rate. Income and expense accounts are translated into U.S. dollars at the year-to-date average rate of exchange, except for expenses related to those balance sheet accounts that are translated using historical exchange rates.  The impact of foreign currency translation on the Company’s financial statements was not material for the three and nine months ended October 4, 2009 and September 28, 2008. Segment information.  We report our results using three segments. Goodwill and Intangibles.  Goodwill represents the excess of the cost of acquired businesses over the fair market value of their net assets at the dates of acquisition. Goodwill, which is not subject to amortization, is tested for impairment annually during the fourth quarter.  Wetest goodwill and other intangible assets for impairment on an interim basis if an event occurs that might reduce the fair value of a reporting unit below its carrying value. Recoverability of goodwill is evaluated using a two-step process.  The first step involves a comparison of the fair value of a reporting unit with its carrying value. If the carrying amount of the reporting unit exceeds its fair value, then the second step of the process involves a comparison of the implied fair value and carryingvalue of the goodwill of that reporting unit. If the carrying value of the goodwill of a reporting unit exceeds the fair value of that goodwill, an impairment loss is recognized in an amount equal to the excess.  Reporting units are determined based on our operating segments.  The AMP, MIS, and Ideal operating segments, which were also determined to be reporting units, contain goodwill and are thus tested for impairment.  We re-evaluate our reporting units and the goodwill and intangibleassets assigned to the reporting units annually, prior to the completion of the impairment testing.  The fair value of our reporting units is determined based upon management’s estimate of future discounted cash flows and other factors. Management’s estimates of future cash flows include assumptions concerning future operating performance and economic conditions and may differ from actual future cash flows. Other intangible assets consisting mainly of customer relationships, a technical library, and non-compete agreements were all determined to have a definite life and are amortized over the shorter of the estimated useful life or contractual life of the these assets, which range from 1 to 20 years.  Intangible assets with definiteuseful lives are periodically reviewed to determine if facts and circumstances indicate that the useful life is shorter than originally estimated or that the carrying amount of assets may not be recoverable. If such facts and circumstances do exist, the recoverability of intangible assets is assessed by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over their remaining lives against their respective carrying amounts. Impairments, if any, are based onthe excess of the carrying amount over the fair value of those assets (See Note E, Goodwill and Other Intangible Assets).  23  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 excess goods. The amountof 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 areas follows:  Buildings                                               30 years Leasehold improvements                                               Shorter of lease term or useful life Machinery and equipment                                               5 to 10 years Vehicles                                               3 to 5 years Office 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. Debt issue costs. We capitalize and amortize costs incurred to secure senior debt financing and revolving notes over the term of the financing, which is three years.   If modifications related to the Company’s revolving note and term notes are made, then the appropriatechanges are made to the related debt issue costs.  Advertising costs.  Advertising costs consist mainly of product advertisements and announcements published in trade publications, and are expensed when incurred. 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.  Stock-based compensation.  The cost of all share-based payments to employees, including grants of employee stock options, are recognized in the financial statements based upon their fair values at grant date, or the date of later modification, over the requisite serviceperiod. Unrecognized cost (based on the amounts previously disclosed in our pro forma footnote disclosure) related to options vesting after the initial adoption are recognized in the financial statements over the remaining requisite service period.  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, and (b) compensation cost for all share-based payments granted subsequent to January 1, 2006, based on the grant date fair value.  Results of OperationsThree Months Ended October 4, 2009 Compared to Three Months Ended September 28, 2008Revenues. Total revenues decreased by $11.7 million or 37% to $19.8 million for the three months ended October 4, 2009 from $31.5 million for the three months ended September 28, 2008. The decrease in revenues resulted from decreases in the Industrial Services (“IS”) segmentrevenue of $7.3 million or 50%, the Construction and Engineering Services (“CES”) segment revenues of $.4 million or 4%, and the Rail Services (“RS”) segment revenue of $4.0 million or 55%.The decline in revenue is generally related to the ongoing challenging global economic conditions as well as our continuing liquidity pressures (see liquidity and capital resources section below).   Specifically, the decrease in IS segment revenue resulted from decline in the steel industry and the decrease in RS segment revenueresulted from the decline in the railroad industry.Gross Profit. Total gross profit for the three months ended October 4, 2009 was $1.8 million or 9.1% of total revenues compared to $5.0 million or 15.9% of total revenues for the three months ended September 28, 2008.  The decrease of $3.2 million or 64% was due to decreasedconsolidated revenues and the company’s level of fixed costs.  Gross profit on IS segment revenue declined 79%, due mainly to unabsorbed overhead costs.   Gross profit on CES revenue declined 13%, due to and unabsorbed overhead costs.  Gross profit on RS segment revenue declined 102% due to unabsorbed overhead costs.Selling, General and Administrative Expenses.  Selling, general and administrative expenses were $3.2 million for the three months ended October 4, 2009 compared to $4.3 million for the three months ended September 28, 2008 reflecting cost reduction efforts.Interest Expense and Other Income.  Interest expense increased $224 from the three months ended September  28, 2008 to the three months ended October 4, 2009 due to the Wells Fargo amended interest rates.   24   Provision for Income Taxes.  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 net operating loss that we will be able to use in future periods in accordance withSection 382 of the Internal Revenue Code, as amended. We are uncertain as to whether we will be able to utilize these tax losses before they expire. Accordingly, we provided a valuation allowance for the income tax benefits associated with these net future tax assets that primarily relate 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 loss for the three months ended October 4, 2009 was $4.4 million compared to net income of $0.5 million for the three months ended September 28, 2008. The $4.9 million decrease was due to the decline in revenues and cost levels as discussed in the revenue, gross profitand selling, general, and administrative sections above, along with a goodwill impairment charge of $2.5 million, discussed in Note E to the condensed consolidated financial statements.Nine Months Ended October 4, 2009 Compared to Nine Months Ended September 28, 2008Revenues. Total revenues decreased by $29.1 million or 32% to $62.7 million for the nine months ended October 4, 2009 from $91.8 million for the nine months ended September 28, 2008. The decrease in revenues resulted from decreases in the Industrial Services (“IS”) segmentrevenue of $19.4 million or 44%, the Construction and Engineering Services (“CES”) segment revenues of $1.7 million or 7%, and the Rail Services (“RS”) segment revenue of $8.0 million or 37%.The decline in revenue is generally related to the ongoing challenging global economic conditions as well as our continuing liquidity pressures (see liquidity and capital resources section below).   Specifically, the decrease in IS segment revenue resulted from decline in the steel industry and the decrease in RS segment revenueresulted from the decline in the railroad industry.Gross Profit. Total gross profit in the nine months ended October 4, 2009 was $5.0 million or 7.9% of total revenues compared to $14.8 million or 16.2% of total revenues in the nine months ended September 28, 2008.  The decrease of $9.9 million or 66.7% was due to decreasedconsolidated revenues and the level of fixed costs.  Gross profit on IS segment revenue declined 79%, due mainly to unabsorbed overhead costs.   Gross profit on CES revenue declined 35%, due to unabsorbed overhead costs.  Gross profit on RS segment revenue declined 65% due to unabsorbed overhead costs.Selling, General and Administrative Expenses.  Selling, general and administrative expenses were $12.6 million in the nine months ended October 4, 2009 compared to $12.4 million in the nine months ended September 28, 2008. Costs have been reduced during the nine months endedOctober 4, 2009; however, the reductions have been offset by fees related to Wells Fargo, a non recurring fee for AMP NY and operations that didn’t exist during the nine months ended September 28, 2008 (AMP Montreal and the Traffic division of Martell Electric, LLC).Interest Expense and Other Income.  Interest expense and other income increased from the nine months ended September 28, 2008 to the nine months ended October 4, 2009 by $0.2 million due to the Wells Fargo amended interest rates.Provision for Income Taxes.  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 net operating loss that we will be able to use in future periods in accordance withSection 382 of the Internal Revenue Code, as amended. We are uncertain as to whether we will be able to utilize these tax losses before they expire. Accordingly, we provided a valuation allowance for the income tax benefits associated with these net future tax assets that primarily relate 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 loss in the nine months ended October 4, 2009 was $10.9 million compared to net income of $1.5 million in the nine months ended September 28, 2008. The $12.4 million decrease was due to the decline in revenues and cost levels as discussed in the revenue, gross profitand selling, general, and administrative sections above, as well as a goodwill impairment charge of $2.5 million discussed in Note E to the condensed consolidated financial statements.Liquidity and Capital ResourcesAt October 4, 2009, we had approximately $8.0 million of working capital.  Working capital decreased approximately $7.1 million from approximately $15.1 million at December 31, 2008. The decrease in working capital was due mainly to the decrease in accounts receivable, which also resulted in a reduction in the availability of ourrevolving credit line.  The revolving credit line is an asset-based lending agreement with the availability driven by our accounts receivable balance.  The decrease in accounts receivable resulted mainly from the decline in revenue and improved collection efforts.Net cash provided by operating activities was $2.9 million for the nine months ended October 4, 2009 and net cash used by operations was $0.8 million for the nine months ended September 28, 2008.  For the nine months ended October 4, 2009, net cash provided by operations resulted from a net loss of $10.9 million, increase in baddebt and inventory reserves of $0.4 million, depreciation and amortization of $4.8 million, decrease in accounts receivable and inventories of $12.7 million, offset by a net decrease in accounts payable and accrued expenses of $4.6 million.  For the nine months ended September 28, 2008, net cash utilized by operations resulted from net income of $1.5 million, increase in bad debt and inventory reserves of $0.5 million and depreciationand amortization of $2.3 million, reduced by net increases in working capital of $5.1 million.Cash used for investing activities of $0.5 million for the nine months ended October 4, 2009 consisted of acquisitions of fixed assets offset by proceeds from disposal of fixed assets approximating $.1 million.  During the nine months ended September 28, 2008 we used approximately $9.8 million for investing activities, $8.0 millionof which was used for our investment in AMP.  The remainder was used for acquisitions of fixed assets.  25  We used approximately $2.5 million for financing activities during the nine months ended October 4, 2009, consisting primarily of repayments related to the Wells Fargo credit facility. We generated approximately $7.7 million from financing activities during the nine months ended September 28, 2008, primarily from advances on the Wells Fargocredit facility.We continue our efforts to improve our processes to enhance our future cash flows. These improvements include efforts to collect accounts receivable at a faster rate, decrease inventory levels, review alternative financing sources, and negotiating extended terms with our vendors.  Certain of our trade accounts payable are extendedbeyond the terms allowed by the applicable vendors. As a result, certain vendors have placed us on credit hold or require cash in advance which has resulted in delays in the receipt of necessary materials and parts.  Disruptions of this nature have on occasion resulted in delayed shipments and service to our customers and may continue to result in such delays in the future.  These delays may have resulted in the loss of sales orders, and future delays may have an adverse affect on our business.On January 14, 2008, we entered into a credit facility with Wells Fargo. The credit facility was originally  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 capitaland to acquire all of the outstanding shares of common stock of AMP.The original maturity date of the Wells Fargo 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. Theterm note originally bore 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 originally bore 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.  Theterm 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, our CEO 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 obligationsunder the Subordinated Indebtedness to the Wells Fargo credit facility.If we default under our obligations to Wells Fargo, 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 onthe 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 Wells Fargo term note at any time, subject to certain prepayment penalties.  With respect to the Wells Fargo 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 lesserof (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. This first 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 resultingfrom 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.In September 2008, we further amended our credit facility with Wells Fargo. The second amendment revised a financial covenant which increased the maximum amount of capital expenditures for 2008 to $2 million, no more than $1.25 million of which could be paid from our working capital. The amendment also limited the investment and loans fromAMP to AMP Canada to $1 million.During the fourth quarter of 2008, the Company signed a waiver agreement with Wells Fargo in regards to the Company’s maximum allowable capital spending for 2008.  The agreement increased the amount of allowable capital expenditures during 2008 to $2.75 million, of which no more than $2.25 million could be from workingcapital.  This amendment also removed the limit on investment and loans from AMP to AMP Canada included in the second amendment signed in September, 2008.On March 5, 2009, we received a default notification from Wells Fargo, due to the violation of a financial covenant regarding minimum net income for the year ended December 31, 2008.  Additionally, we were in default of the debt service coverage ratio covenant.  The defaults resulted in an increase in the interestrate on the revolving note, the real estate term note and the machinery and equipment note to the Prime rate plus 3%.  In addition, due to the covenant violation, Wells Fargo reduced the loan availability on the revolving note related to certain receivable accounts held by Martell Electric and Ideal.  The interest rate increase was made effective retroactively to January 1, 2009 and remained in effect until the default was subsequently waived on April 14, 2009.  26  On April 14, 2009, the Company and Wells Fargo signed a first Fourth Amendment to the Credit Facility and waiver of the default notification received on March 5, 2009.  The amendment and waiver amended the credit facility as follows:   ·Waived our noncompliance with the minimum net income and debt service coverage ratio covenants for the year ending December 31, 2008  ·Eliminated the minimum net income and debt service coverage ratio covenants for the year ending December 31, 2009  ·Adjusted the minimum book net worth covenant to $38.75 million as of December 31, 2009  ·Incorporated a monthly minimum EBITDA covenant commencing in April, 2009  ·Reduced the revolving credit line limit to $11 million (from $13.75 million)  ·Reset the interest rate on the revolving credit line and term notes to the Daily Three Month LIBOR plus 5.25% effective April 14, 2009  ·Suspended interest and principal payments on our subordinated debt to our CEO, John A. Martell.In connection with the first Fourth Amendment signed on April 14, 2009, the Company agreed to pay Wells Fargo an accommodation fee equal to $100,000, payable in installments of $50,000 on the date of the execution of the first Fourth Amendment and $50,000 in June 2009.On April 14, 2009, our $3.0 million note payable to the CEO was amended whereby monthly principal and interest payments under the note were suspended until February 1, 2010.  Interest will continue to accrue at the new rate of the greater of 5% or the prime rate plus 1%.  All accrued interest on the note will be paid onFebruary 1, 2010, and interest will be paid monthly thereafter.  Monthly principal payments in the amount of $50,000 will commence on February 1, 2010.On July 22, 2009, the Company and Wells Fargo executed a second Fourth Amendment to the Credit Agreement (the “second Fourth Amendment”).  The second Fourth Amendment amended the Credit Agreement in the following respects:  ·Revised the definition of “Borrowing Base”, resulting in lower available borrowings  ·Adjusted the interest rate on the revolving credit line and term notes (defined in the Credit Agreement as the “LIBOR Advance Rate”) to the Daily Three Month LIBOR (0.56% at July 5, 2009) plus 8.25%, effective June 1, 2009  ·Lowered the amount of the minimum EBITDA that the Company is required to achieve in future periods  ·Requires the Company to raise $2 million in additional capital by August 31, 2009 through subordinated debt, asset sales or additional cash equity  ·Lowered eligible progress accounts advance rates by $50 per week commencing August 3, 2009.  ·Lowered the special accounts advanced rate to 35% effective July 22, 2009 further reducing it to 30% effective August 31, 2009 or such lesser rate the lender may determine  ·Added conditions regarding marketing assets, the validation of the Company’s cash flow forecast, and future financial projections In connection with the second Fourth Amendment, the Company agreed to pay Wells Fargo an accommodation fee equal to $50,000, payable on the date of execution of the second Fourth Amendment.  On September 16, 2009, the Company and Wells Fargo executed a Fifth Amendment to the Credit Agreement (the “Fifth Amendment”).  The Fifth Amendment amends the Credit Agreement in the following respects:   ··Revised the definition of “Borrowing Base,” resulting in lower available borrowings; andExtended until October 31, 2009, the requirement to raise $2,000,000 of additional capital through subordinated debt or equity contributions.  Under the Fifth Amendment, we agreed to pay Wells Fargo an accommodation fee equal to $25,000, payable on the date of execution of the Fifth Amendment.   27    As of November 23, 2009, we have not succeeded in raising all of the $2,000,000 of additional capital that the Credit Agreement, as amended by the Fifth Amendment, required us to raise by October 31, 2009.  Wells Fargo has not declared an event of default under the Credit Agreement as a result of the failure to raise all ofthe additional required capital.  We are continuing discussions with Wells Fargo regarding an extension of the requirement to raise additional capital or other arrangements under which Wells Fargo would refrain from exercising their rights under the bank credit facilities as a result of the above-mentioned failure to raise additional capital.  While we are optimistic that an agreement can be reached with Wells Fargo to extend the due date of the requirement to raise additional capital,there can be no assurances that we will be able to obtain an extension or obtain other relief from Wells Fargo.  If Wells Fargo demands immediate repayment of our outstanding borrowings under the bank credit facilities, we do not currently have means to repay or refinance the amounts that would be due.  If demanded, and if we were unable to repay or refinance the amounts due under the bank credit facilities, Wells Fargo could exercise its remedies under the bank credit facilities, includingforeclosing on substantially all of our assets, which we pledged as collateral to secure its obligations under the bank credit facilities.  If Wells Fargo were to exercise its remedies and foreclose on our assets, there would be substantial doubt about our ability to continue as a going concern.  Our consolidated financial statements acompanying this quarterly report on Form 10-Q have been prepared assuming the Company is a going concern and do not reflect any adjustments that may arise fromthis uncertainty. While the Company explores asset sales, divestitures and other types of capital raising alternatives in order to reduce indebtedness under the Credit Agreement prior to expiration of the Amendment, there can be no assurance that such activities will be successful or generate cash resources adequateto retire or sufficiently reduce this indebtedness. As of October 4, 2009, we did not have any material commitments for capital expenditures.  Discussion of Forward-Looking StatementsCertain 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 regardingour 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 isprovided 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 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 statementsare 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, 2008. ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKNot Applicable.   28  ITEM 4T.   CONTROLS AND PROCEDURESEvaluation of Effectiveness of Disclosure Controls and ProceduresOur 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 Accounting 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 the Company’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.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 October 4, 2009. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of October4, 2009, our disclosure controls and procedures were effective to provide reasonable assurance that material information relating to the Company 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 ReportingThere were no changes in our internal control over financial reporting that occurred during the quarter ended October 4, 2009, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.  29  PART II - OTHER INFORMATION  ITEM 2.   UNREGISTERED SALES OF EQUITY SECURITIES AND 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 issuableupon 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 October 4, 2009,we have issued 616,408 shares upon the exercise of warrants, and we have received proceeds of $131,567 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 theoffering of approximately $0.8 million and have received no offering proceeds other than the proceeds received upon the exercise of warrants.ITEM 6.   EXHIBITSThe following documents are included or incorporated by reference in this Quarterly Report on Form 10-Q: Exhibit No.  Description   31.1  Certification by Chief Executive Officer required by Rule 13a-14(a) or 15d-14(a) of the Exchange Act   31.2  Certification by Chief Financial Officer required by Rule 13a-14(a) or 15d-14(a) of the Exchange Act   32  Section 1350 Certifications  30    SIGNATURESPursuant 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.            November 23, 2009By:/s/ Michael Topa    Michael Topa    Chief Financial Officer    (Signing on behalf of the registrant as Principal Financial and Accounting Officer)  31    EXHIBIT INDEXExhibit No. Description   31.1 Certification by Chief Executive Officer required by Rule 13a-14(a) or 15d-14(a) of the Exchange Act   31.2 Certification by Chief Financial Officer required by Rule 13a-14(a) or 15d-14(a) of the Exchange Act   32 Section 1350 Certifications