UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 ________________
  FORM
10-K
  
 x    ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 For the
fiscal year ended December 31, 2008
 OR
 
 o    TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 For the
transition period
from            to
 
 Commission
File Number 000-25781
 ________________
  STAMFORD
INDUSTRIAL GROUP, INC.
 (Exact
Name of Registrant as Specified in its Charter)
 ________________
  Delaware
                  41-1844584(State
      or Other Jurisdiction
                  (I.R.S.
      Employer Identification No.)of
      Incorporation or Organization)One
      Landmark Square, Stamford, Connecticut
                  06901(Address
      of Principal Executive Offices)
                  (Zip
      Code)
  (203)
428-2200
 (Registrant’s
telephone number, including area code)
 ________________
  Securities
registered pursuant to Section 12(b) of the Act:
 
 Title
      of each class
              Name
      of each exchange on which registeredNone
              Not
      applicable
 
 Securities
registered Pursuant to Section 12(g) of the Act:
 
 Common Stock, par value
$.0001 per share
 (Title
of class)
 
 Preferred Stock Purchase
Rights
 (Title
of class)
 
  Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. YES o  NO x
 
 Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. 
YES o  NO
x
 
 Indicate
by check mark whether the registrant: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.  YES x  NO o
 
 Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of Registrant's knowledge, in the definitive proxy or information statement
incorporated by reference in Part III of this Form 10-K or any amendment to this Form
10-K.  x
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See definitions of “accelerated filer”, “large accelerated
filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.
  Large
      accelerated filer o
                  Accelerated
      filer xNon-accelerated
      filer o(Do not check
      if a smaller reporting company)
                  Smaller
      reporting company o
  Indicate
by check mark whether the Registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act) YES o  NO x
 
 The
aggregate market value of voting and non-voting stock held by non-affiliates of
the Registrant, based upon the last sale price of the Registrant’s Common Stock,
par value $0.0001 per share, reported on the OTC Pink Sheets Electronic
Quotation Service on June 30, 2008  was $53,225,106.
 
 As of
March 6, 2009, there were outstanding 8,408,787 shares of the Registrant’s
Common Stock, $0.0001 par value.
  
 DOCUMENT
INCORPORATED BY REFERENCE
 Portions
of our Proxy Statement for the 2009 Annual Meeting of Stockholders to be filed
with the Securities and Exchange Commission within 120 days of the Registrant's
2008 fiscal year end are incorporated by reference into Part III of this
report.
 
 
 STAMFORD
INDUSTRIAL GROUP, INC.
 ANNUAL
REPORT ON FORM 10-K
 FOR
THE YEAR ENDED DECEMBER 31, 2008
 
 TABLE
OF CONTENTS
  PagePART
      IITEM
      1.
                  BUSINESS
                  1ITEM
      1A.
                  RISK
      FACTORS
                  7ITEM
      1B.
                  UNRESOLVED
      STAFF COMMENTS
                  15ITEM
      2.
                  PROPERTIES
                  16ITEM
      3.
                  LEGAL
      PROCEEDINGS
                  16ITEM
      4.
                  SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS
                  17PART
      IIITEM
      5.
                  MARKET
      FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
      PURCHASES OF EQUITY SECURITIES
                  18ITEM
      6.
                  SELECTED
      CONSOLIDATED FINANCIAL DATA
                  21ITEM
      7.
                  MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
                  22ITEM
      7A.
                  QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
                  34ITEM
      8.
                  FINANCIAL
      STATEMENTS
                  35ITEM
      9.
                  CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE
                  68ITEM
      9A.
                  CONTROLS
      AND PROCEDURES
                  68PART
      IIIITEM
      10.
                  DIRECTORS,
      EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
                  70ITEM
      11.
                  EXECUTIVE
      COMPENSATION
                  70ITEM
      12.
                  SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS
                  70ITEM
      13.
                  CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE
                  70ITEM
      14.
                  PRINCIPAL
      ACCOUNTANT FEES AND SERVICES
                  70PART
      IVITEM
      15.
                  EXHIBITS,
      FINANCIAL STATEMENT SCHEDULES
                  71SIGNATURES
                  
                  76EXHIBIT  INDEX
                  77
  
 
 FORWARD-LOOKING
STATEMENTS
 
 This
Annual Report on Form 10-K contains certain forward-looking statements,
including information about or related to our future results, certain
projections and business trends.  Assumptions relating to
forward-looking statements involve judgments with respect to, among other
things, future economic, competitive and market conditions and future business
decisions, all of which are difficult or impossible to predict accurately and
many of which are beyond our control.  When used in this report, the
words "estimate," "project," "intend," "believe," "expect" and similar
expressions are intended to identify forward-looking statements. Although we
believe that our assumptions underlying the forward-looking statements are
reasonable, any or all of the assumptions could prove inaccurate, and we may not
realize the results contemplated by the forward-looking statements. Management
decisions are subjective in many respects and susceptible to interpretations and
periodic revisions based upon actual experience and business developments, the
impact of which may cause us to alter our business strategy or capital
expenditure plans that may, in turn, affect our results of
operations.  In light of the significant uncertainties inherent in the
forward-looking information included in this report, you should not regard the
inclusion of such information as our representation that we will achieve any
strategy, objectives or other plans. The forward-looking statements contained in
this report speak only as of the date of this report, and we have no obligation
to update publicly or revise any of these forward-looking
statements.
 
 These
forward-looking and other statements, which are not historical facts, are based
largely upon our current expectations and assumptions and are subject to a
number of risks and uncertainties that could cause actual results to differ
materially from those contemplated by such forward-looking statements. These
risks and uncertainties include, among others, our inability to secure necessary
financing, our inability to continue to comply with the financial covenants
under our credit agreement, our inability to obtain waivers and amendments to
our credit agreement in the event of default, our inability to implement our
acquisition growth strategy and integrate and successfully manage any businesses
that we acquire, our inability to continue to generate revenues at historic
levels in our newly acquired operating divisions, changes in the demand for
counterweights, changes in the elevator or construction industries, changes in
our relationship with our unionized employees, the current economic downturn and
its effect on the credit and capital markets as well as the industries and
customers that utilize our products, declines in the businesses of our
customers, the loss of any of our major customers, reductions to our deferred
tax assets or recognition of such assets and our ability to fully use our net
operating loss carry forward, and the risks and uncertainties set forth in the
section headed “Risk Factors” of Part I, Item 1A of this report and described in
“Management's Discussion and Analysis of Financial Condition and Results of
Operations” of Part II of this report.  The Company cannot guarantee
its future performance.  We cannot assure you that we will be
successful in the implementation of our growth strategy or that any such
strategy will result in the Company’s future profitability.  Our
failure to successfully implement our growth strategy and other factors could
have a material adverse effect on the market price of our common stock and our
business, financial condition and results of operations.
 
 References
in this report to “Stamford Industrial Group,” the “Company,” “we,” “our” and
“us” refer to Stamford Industrial Group, Inc. and, if so indicated or the
context requires, includes our wholly-owned subsidiary, Concord Steel, Inc.
(which is referred to in this report as “Concord”).
 
 
 PART
I
 
 ITEM
1.  BUSINESS
  Overview
 
 Stamford
Industrial Group, through its wholly owned subsidiary Concord Steel, is a
leading independent manufacturer of steel counterweights and structural
weldments.  We sell our products primarily in the United States to
original equipment manufacturers (“OEM”) of certain construction and industrial
related equipment that employ counterweights for stability through counterweight
leverage in the operation of equipment used to hoist heavy loads, such as
elevators and cranes.  The counterweight market we target is primarily
comprised of OEMs within the (i) commercial and industrial construction
equipment industry that manufactures aerial work platforms, telehandlers,
scissor lifts, cranes, and a variety of other construction related equipment and
vehicles; and (ii) the elevator industry, that incorporates counterweights as
part of the overall elevator operating mechanism to balance the weight of the
elevator cab and load.
  1
  Stamford
Industrial Group was initially established in 1996 under the name “Net
Perceptions, Inc.”, as a provider of marketing software solutions.  In
2003, as a result of continuing losses and the decline of its software business,
the Company began exploring various strategic alternatives, including sale or
liquidation and ceased the marketing and development of its marketing solutions
software business in 2004.  On April 21, 2004, the Company announced
an investment into the Company by Olden Acquisition LLC (“Olden”), an affiliate
of Kanders & Company, Inc., an entity owned and controlled by the Company’s
Non-Executive Chairman, Warren B. Kanders, for the purpose of initiating a
strategy to redeploy the Company’s assets and use its cash, cash equivalent
assets and marketable securities to enhance stockholder value.  As
part of this strategy, on October 3, 2006, the Company acquired the assets of
CRC Acquisition Co. LLC (“CRC”), a manufacturer of steel counterweights doing
business as Concord.  With this initial acquisition, management is now
focused on building a diversified global industrial manufacturing group through
both organic and acquisition growth initiatives that are expected to complement
and diversify existing business lines.  The Company’s acquisition
program is focused on building a diversified industrial growth company providing
engineered products and solutions for global niche markets. Our investment
criteria generally includes companies having a transaction value of up to $100
million with annual levels of earnings before interest, taxes, depreciation and
amortization in the range of $5-$15 million.
  On
February 20, 2009, the Company executed a one-for-five reverse stock split of
the outstanding shares of common stock. As a result of the reverse stock split
our common stock is now quoted on the OTC Pink Sheets Electronic Quotation
Service under the symbol “SIDG.PK”.  Except as otherwise noted herein,
all common stock and per share information included in this Form 10-K, financial
statements and related notes have been adjusted to give effect to this
reverse stock split.
  Industry
Overview
 
 Management
believes that the North American counterweight and related steel weldments
industry, including captive in-house and independent operations, is worth over
$350 million.
  We
believe that growth of the construction equipment markets we target will be
driven by demand for construction equipment and by government spending on
infrastructure projects. We believe that more moderate construction spending
levels will drive lower year over year demand for construction related equipment
on which our counterweights are ultimately used.  However, it is
anticipated that as the United States’ highways and infrastructures continue to
grow older, local, state and federal municipalities will be required to increase
spending on repairing, maintaining and rebuilding such highways and
infrastructures.  The Company believes that U.S. federal government
initiatives, such as the renewal of the six-year federal highway-funding plan
and the anticipated 2009 federal stimulus package, continue to provide favorable
conditions for highway and infrastructure construction spending. These federal
programs are expected to increase spending in government related construction
and infrastructure programs which may increase demand for construction related
equipment, which could increase demand for our counterweight
products.
  We
believe that growth of the elevator industry we target will be driven by ongoing
demand for new and upgraded elevator projects.  Slowing growth in the
elevator market is expected to result in flat or decreased growth in
counterweights to that market which could reduce demand for our
products.
  Growth
Strategy
  Acquire Complementary
Businesses.  We are working to build a diversified global
industrial manufacturing company through acquisitions that complement and
diversify our existing business. The Company also intends to continue its
program of targeted acquisitions, subject to the availability of financing, to
gain access to new sales channels, acquire new product lines, increase
penetration of our existing markets, and gain entry into new market
sectors.
  Introduce New Products and Product
Enhancements and Improve Manufacturing Operations.   We are
working to improve our manufacturing processes in an effort to improve cycle
times and production and output consistency, reduce work-in-progress inventory
and lower unit production costs. We believe that new product introductions and
product enhancements and operational manufacturing improvements will further
enhance growth and provide an advantage over our competitors in the
future.
  Gain Access to New Sales Channels
and Leverage Customer Relationships.   We are focused on
expanding our customer base and offering an increasing array of products and
distribution channels to improve profitability. We believe this diversification
will facilitate access to a new customer base for our historical products, as
well as provide the opportunity to offer new products to our existing
customers.
  Competitive
Strengths
  Cost Savings to Customers.Concord has built its core business around being able to demonstrate
manufacturing cost savings to customers that currently manufacture their
counterweights in-house or purchase from less competitive external
suppliers.  In many cases, these manufacturers use less cost effective
materials in their production than are used by Concord in the production of its
counterweights.   Management believes that the cost savings
alternatives offered by Concord have led to increased outsourcing of
counterweights by customers that have traditionally manufactured their
counterweights in-house.
  2
  Leadership Team.  
Our leadership team has been involved in the acquisition and integration of a
substantial number of companies. Our Non-Executive Chairman of the Board of
Directors, Warren B. Kanders, has extensive experience building public companies
through strategic acquisitions to enhance organic growth.  The
Company’s Chief Executive Officer, Al Weggeman, has over 20 years of strategic
and operational leadership experience in multinational industrial manufacturing
companies, such as General Electric, Asea Brown Boveri Ltd., and Saint
Gobain.  Our Chief Financial Officer, Jon LaBarre, has more than 14
years of diverse financial management and executive leadership experience in the
manufacturing, aerospace, specialty manufacturing, construction equipment and
professional services industries.
  Service &
Delivery.   Concord has established itself as a high level
service provider in terms of both service and delivery.  The Company
also works with its customers to develop more cost effective counterweight and
weldment design options for their existing and new products.  We
believe that Concord’s manufacturing locations are also beneficial in terms of
being able to provide its customers with cost effective and timely
deliveries.
 
 Products
and Services
  Concord
primarily produces three styles of counterweights: profile cut, box enclosures,
and stack and weld.  Profile cut is the most prevalent method whereby
the plate is cut into a specified configuration, de-slagged and
staged.  The counterweight can either be shipped in its original form
or may require added processing (i.e. painting, drilling or shot blasting).
Profile cut products are typically individual counterweights or weldment
components that are integrated into aerial work platforms, material
telehandlers, and elevator OEMs.  Box enclosures, mainly sold to crane
OEMs, are fabricated and welded boxes filled with predetermined weights of
material and closed with a welded lid. Stack and weld products involve various
pieces and shapes welded together to create the fabricated
end-product.  Stack and weld products are generally used in crane and
heavy vehicle applications.
  Concord
also manufactures steel weldments in a variety of shapes and sizes as specified
by its customers.  Weldments are typically steel components that serve
as both a counterweight and as part of the structure of an OEMs end
product.  Typical weldments could include vehicle body parts such as
panels, bumpers, beams, and plates.  Since weldments frequently serve
the purpose of providing counterweight to a product, the Company typically
refers to weldments as counterweights.
  The following table showsConcord’s percentage of sales revenue by major
product lines for 2008, 2007and 2006:
  Percentage of RevenueProduct
      Line
                                                          
                                                          2008
                                                          
                                                          
                                                          2007
                                                          
                                                          
                                                          2006Profile Cut
                                                          
                                                          
                                                          55
                                                          %
                                                          
                                                          
                                                          67
                                                          %
                                                          
                                                          
                                                          69
                                                          %Box
    Enclosure
                                                          
                                                          
                                                          36
                                                          
                                                          
                                                          
                                                          22
                                                          
                                                          
                                                          
                                                          18Stack and
    Weld
                                                          
                                                          
                                                          2
                                                          
                                                          
                                                          
                                                          4
                                                          
                                                          
                                                          
                                                          7Other
                                                          
                                                          
                                                          7
                                                          
                                                          
                                                          
                                                          7
                                                          
                                                          
                                                          
                                                          6Total
                                                          
                                                          
                                                          100
                                                          %
                                                          
                                                          
                                                          100
                                                          %
                                                          
                                                          
                                                          100
                                                          %
   The majority of the products sold byConcordare processed. Concord uses techniques
such as cutting to length, leveling, milling, boring, flame and laser cutting,
fabricating, welding, polishing, shearing and grinding to process materials to
specified thickness, length, width, shape and surface quality pursuant to
specific customer orders.
  The plate burning and fabrication
processes are particularly important to theCompany. These processes require
sophisticated and expensive processing equipment. As a result,many OEMshavechosennottomake ongoingsignificantinvestments in such equipmentand haveincreasingly outsourced these processes
tospecialtycompanies such asConcord.
  As part of securing customer orders,Concordalso provides technical services to its
customersdesignedto assure cost effective product
application while maintaining or improving the customer’s product
quality.Concord’s services include: just-in-time
inventory programs, production of kits containing multiple products for ease of
assembly by the customer,and technical assistance.
  3
  Customers
  In 2008,
the Company’s top three customers represented approximately 64% of our net
revenue while our top 10 customers represented approximately 91% of net
revenue.  The loss of these customers, a significant reduction in
purchase volume by these customers or the financial difficulty of such
customers, for any reason, could significantly reduce our revenues which would
have a materially adverse effect on our business, results of operations and
financial condition. While past experience is not a guaranty of future results,
Concord has maintained a consistent customer base, with the average customer
relationship being approximately 10 years in duration for the top 10 customers
and being approximately 15 years in duration for the top three
customers.   Many of Concord’s end customers are dependent on
construction spending and the capital expenditures of national and global
equipment rental companies, who acquire fleets of construction equipment to
either lease or rent to construction companies. The Company has continued its
efforts to develop and enhance its sales and customer service relations
personnel to grow and diversify its business through its sales and marketing
group. In 2008, this group developed new customers within the oil and gas,
scaffold and construction markets.
  The North American equipment rental
industry has been consolidating since the mid-1990s, resulting in a number of
larger national and regional companies. The consolidation in the equipment
rental industry has contributed to a significant reduction in the number of
equipment manufacturers as the larger equipment rental companies have sought to
reduce the number of suppliers from which they purchase equipment. Since 1997,
the number of significant North American and European broad-line aerial work
platform manufacturers and telehandler manufacturers has decreased. Given that
our counterweight products are used on the manufacturers’ end-product,management believes that this
consolidation has significantly contributed to its customer consolidation as
well.Concord’s customer base services a number of
construction related end-markets, most of which are cyclical.See “Risk Factors -The loss of
significant volume from key customers could adversely affect us” for more
information.
  The following table showsConcord’s percentage of sales revenue by class
of customer for 2008, 2007 and 2006:
  Percentage of RevenueClass of
      Customer
                                                      
                                                      2008
                                                      
                                                      
                                                      2007
                                                      
                                                      
                                                      2006Aerial Work Platforms
      (AWP)
                                                      
                                                      
                                                      33
                                                      %
                                                      
                                                      
                                                      47
                                                      %
                                                      
                                                      
                                                      47
                                                      %Cranes
                                                      
                                                      
                                                      36
                                                      
                                                      
                                                      
                                                      22
                                                      
                                                      
                                                      
                                                      19Elevator
                                                      
                                                      
                                                      13
                                                      
                                                      
                                                      
                                                      11
                                                      
                                                      
                                                      
                                                      13Other
                                                      
                                                      
                                                      18
                                                      
                                                      
                                                      
                                                      20
                                                      
                                                      
                                                      
                                                      21Total
                                                      
                                                      
                                                      100
                                                      %
                                                      
                                                      
                                                      100
                                                      %
                                                      
                                                      
                                                      100
                                                      %
   Sales, Marketing and
Distribution
  The Company’ssales, marketing and distributionaremanagedby5sales representatives, which include
technical personnel who are regionally and nationally
based.The
Company’ssalesrepresentatives, who also develop
advertising materials and schedule trade shows targeting industries serviced byConcord, have extensive knowledge of our
product offerings and our customer base.The Companymanagesitssales and marketing efforts in a
unified effort anditplansto leverage relationships to increase
sales and utilize resources most effectively to increase theopportunity and visibilityofitsproductofferings.
 
 Manufacturing
and Sourcing
  The Company manufactures its
products in its manufacturing facilities located in Warren, Ohio, Chicago
Heights, Illinois and Essington, Pennsylvania. The Company is currently in the
process of working toward ISO compliance at these facilities; however, no
assurance can be made that such compliance can be obtained and
maintained.  Concord has on occasion out-sourced select production
operations in order to increase production capacity and maintain
customer-shipping requirements.
 
 Competition
  The Companyoperates in theUnitedStatesas a supplier of counterweights to
multinational construction, maintenance, and industrial equipment OEMs.Itscompetitors are primarily domestic andrange from mid-size steel
processors to small single-product niche manufacturers. Within this market,the Companyfaces competition principally from twomid-sizecounterweight manufacturers, as well as
numerous othersmallerniche manufacturers of
competitive products.Certain of our competitors in the markets we compete in may have more resources
and experience than us which could have a material adverse effect on our
ability to compete within the counterweight market.
  4
  Management
believes that competition from Chinese and other foreign-based competitors is
prevalent for our products sold within their local markets.  However,
given the high costs associated with shipping counterweights, imports to the
United States from these foreign-based manufacturers remains
minimal.
  As
customers continually assess new materials and product designs and
configurations, there is always a risk of counterweight products being developed
by a lower cost domestic or overseas manufacturer.
  Suppliers
  In 2008,the Companypurchased approximately242millionpoundsof materials fromseveralsuppliers, including steel mills
located throughout theUnited StatesandCanada. The Company’s top 10 suppliers
accounted for approximately92%of 2008purchase dollars. No supplier accounted
for30% or more of the 2008purchase dollars.The Company’s primary raw
material is secondary carbon steel plate.  Secondary material is a
steel mill product that typically is either dimensionally or materially
non-conforming so the mill cannot sell it to its customers that require
certified production material.
  The Companypurchases the majority of its
inventories at prevailing market prices from key suppliers with which it has had
long-standing, established relationships. Due
to the competitive nature of the steel business, metal prices may increase as a
result of product demand, mill surcharges, supplier consolidation or other
factors that in turn lead to supply constraints or longer mill lead times,Concordmay not be able to pass its increased
material costs fully to customers.  In recent years, there have been
significant consolidations among suppliers of carbon steel. This trendmaylead to disruptions inthe Company’s ability to meet its material
requirements.The
Companyanticipatesit will be able to meet its material
requirements because it believes it has good relationships with its suppliers
and because it uses many suppliers, there is a substantial overlap of product
offerings from these suppliers, and there are a number of other suppliers able
to provide identical or similar materials.We cannot assure you that we will
continue to maintain satisfactory terms with our suppliers. Our inability to
maintain such terms, the loss of any of our key suppliers, or any other
interruption or delay in the supply of our required materials, or our inability
to obtain these materials at acceptable prices or within a reasonable amount of
time could impair our ability to meet scheduled product deliveries to our
customers and could hurt our reputation and cause customers to cancel orders.
See “Risk Factors –The costs of manufacturing our products and the
ability to supply our customers could be negatively impacted if we experience
interruptions in deliveries of needed raw materials or supplies” for additional
information.
  Environmental, Health and Safety
Matters
  The Company’s operations are subject to many
federal, state and local regulations relating to the protection of the
environment and to workplace health and safety. In particular, its operations
are subject to federal, state and local laws and regulations governing waste
disposal, air and water emissions, the handling of hazardous
substances, environmental protection, remediation,
workplace exposure and other matters.Additional costs and liabilities may be
incurred to comply with future requirements, which costs and liabilities could
have a material adverse effect onthe Company’s results ofoperations, financial condition or cash
flows. Some of the properties owned or leased bythe Companyare located in industrial areas or have
a history of heavy industrial use.The Companymay incur environmental liabilities
with respect to these properties in the future that could have a
material adverse effect on theCompany’s financial condition or results of
operations.See“Risk Factors - The Company could incur substantial costs in order to
comply with, or to address any violations under, environmental laws that could
significantly increase its operating expenses and reduce its operating income”
for additional
information.
  Patents
and Licenses
  The Company does not own any
United States or foreign patents or licenses that are material to its business.
However, it does rely on certain data and processes, including trade secrets and
know-how, and the success of our business depends, to some extent, on such
information remaining confidential. Each of our executive officers is subject to
a non-competition and confidentiality agreement that seeks to protect this
information.  The
Companyprotects its trade
secrets by, among other things, entering into confidentiality agreements withkeyemployees regarding such matters and
implementing measures to restrict access to sensitive data. Whilethe Companyconsiders all of its intellectual
property rights as a whole to be important, it does not consider any single
right to be essential to its operations as a whole.
  Employees
  As of December 31, 2008, the
Company employed approximately 367people in theUnited States, of whom 27were office employees and approximately
340were plant employees. Approximately 30%
of our plant employees are members of the United Steelworkers Union. In August
2008, the Companycommencednegotiations to replace the collective
bargaining agreementwhich
initially expired on August 31, 2008,covering approximately 100 employees atourWarren, Ohio facilitythat are members ofUnited Steelworkers Union(“Local 2243”). On November 1, 2008, Concord Steel, in
order to protect its business and facility, determined to temporarily not have
theWarren,Ohioemployees return to work until the
contract and security issueswereappropriately resolved.On
January 30, 2009, due to the current economic climate and business conditions,
the Company elected to terminate the lockout and place employees who were locked
out on November 1, 2008 on temporary layoff under the terms and conditions of
the expired collective bargaining agreement. Although the Company and the Local
2243 continue to negotiate the terms of a new collective bargaining agreement,
there can be no assurance that
Concord Steel will be able to negotiate a new collective bargaining agreement on
terms satisfactory to it.See “Risk Factors-Our business may
be negatively affected by work stoppages, slowdowns or strikes by our employees”
for additional information.
  5
 
 Seasonal Nature of
Business
  A portion ofthe Company’s customers experience seasonal
slowdowns.The
Company’s revenues in the
months of July, November and December traditionally have been lower than in
other months because of a reduced number of shipping days, plant shutdownsand holiday or vacation closures for
some customers. Consequently,the Company’s sales in thesecond and thirdquarters of thecalendaryear are usually higher than in thefirstand fourth
quarters.
  
 Available Information
 
 Our
Internet address is www.stamfordig.com. We make available free of charge through
our Internet website our annual reports on Form 10-K, quarterly reports on Form
10-Q, current reports on Form 8-K, and amendments to those reports, and the
proxy statement for our annual meeting of stockholders as soon as reasonably
practicable after we electronically file such material with, or furnish it to,
the Securities and Exchange Commission. Forms 3, 4 and 5 filed with respect to
our equity securities under section 16(a) of the Securities Exchange Act of
1934, as amended, are also available on our Internet website. All of the
foregoing materials are located at the ‘‘Investors’’ tab. The information found
on our website shall not be deemed incorporated by reference by any general
statement incorporating by reference this report into any filing under the
Securities Act of 1933, as amended, or under the Securities Exchange Act of
1934, as amended, and shall not otherwise be deemed filed under such
Acts.
 
 We have
adopted a Code of Ethics for Senior Executive Officers and Senior Financial
Officers, a Code of Business Conduct and Ethics for directors, officers,
employees, agents, representatives, subsidiaries and affiliates, an Audit
Committee Charter, Complaint Procedures for Accounting and Auditing Matters, a
Compensation Committee Charter, a Nominating/Corporate Governance Committee
Charter, and Corporate Governance Guidelines, all of which are available at our
Internet website at the tab ‘‘Governance.’’ We will provide to any person
without charge, upon request, a copy of the foregoing materials. We intend to
disclose future amendments to the provisions of the foregoing documents,
policies and guidelines and waivers therefrom, if any, on our Internet website
and/or through the filing of Current Reports on Form 8-K with the Securities and
Exchange Commission.
 
 Materials
we file with the Securities and Exchange Commission may be read and copied at
the Securities and Exchange Commission’s Public Reference Room at 100 F Street,
N.E., Washington, D.C. 20549. You may obtain information on the operation of the
Securities and Exchange Commission’s Public Reference Room by calling the
Securities and Exchange Commission at 1-800-SEC-0330. The Securities and
Exchange Commission also maintains an Internet website that contains reports,
proxy and information statements, and other information regarding issuers that
file electronically with the Securities and Exchange Commission at www.sec.gov.
In addition, you may request a copy of any such materials, without charge, by
submitting a written request to: Stamford Industrial Group, c/o the Secretary,
One Landmark Square, 21st Floor, Stamford, Connecticut 06901.
 
 Information
on our Internet website does not constitute a part of this Annual Report on Form
10-K or any of our other filings made with the Securities and Exchange
Commission.
 
 Executive Officers of the
Registrant
 
 Pursuant
to General Instruction G(3), the information regarding our executive officers
called for by Item 401(b) of Regulation S-K is hereby included in Part I of
this Annual Report on Form 10-K.
 
 The
executive officers of our Company as of March 16, 2009 are as
follows:
  6
  Albert W.
Weggeman,who is45years of age,joinedStamford Industrial Groupin 2006. Mr. Weggemanhas served asPresident and Chief Executive Officer
sinceOctober 3, 2006.From2005until2006, he served asPresident ofTyden Group,Inc.a global manufacturer of cargo security
and product identification and traceability technology.From2001until2005Mr. Weggemanwas Chief Operating Officer for Key
Components,Inc.a company specializing in
the design and manufacture of engineered components for a broad range of OEM
applications and customers.From1999until2001Mr. Weggeman was President of a
GeneralElectric Companysubsidiary focused on the manufacture
and sale of outdoor electricalproducts.Mr.Weggeman also servedin variousleadership roles in M&A, Marketing,
Operations and Strategic Planning functions for multinationalmanufacturing companies.Mr. Weggemangraduated withan Electrical Engineering degree fromNortheasternUniversityin1988and an MBA from Kellogg Graduate
School of Management inChicagoin1992. He is a graduate of GeneralElectric Company’s Manufacturing Management
Program.
 
 Jonathan
LaBarre,who is39years of age,joinedStamford Industrial Groupin 2006. Mr. LaBarre has served as
our Chief FinancialOfficer, Treasurer and
Secretarysince December 1,
2006. Prior toStamford
Industrial Group,
heserved as a Senior Finance Manager and Global SOX Leader
with Terex Corporation, a diversified global manufacturer, where he was
responsible for corporate accounting, mergers and acquisitions due diligence and
integration, financial planning, and internal compliance functions from February
2002 to November 2006. From April 1999 until January 2002, Mr. LaBarre held
various management leadership positions in accounting and finance at Pratt &
Whitney's International Product Center, an operating company of United
Technologies Corporation and The Stanley Works. Before that, Mr. LaBarre served
with the U.S. Army as a Medical Supply Logistics Non-Commissioned Officer, with
eight years of procurement and management of medical supply warehouses located
in Texas, South Korea, and the Middle East. He is a CPA and graduated with a
B.S. in accounting from Central Connecticut State University in 1994 and an MBA
from Western New England College in 2000.
 
 Paul
Vesey,who is53years of age,has served as thePresident of
Concord since October 3, 2006 and previously served as Concord’s Vice President
from 1991 to 2006.  Since 1980 Mr. Vesey has been employed by Concord
in a variety of positions including Plant and General Manager with
responsibilities that have included product development, sales and
marketing.
 
 ITEM
1A.  RISK FACTORS
 
 In
addition to other information in this annual report on Form 10-K, the following
risk factors should be carefully considered in evaluating our business because
such factors may have a significant impact on our business, operating results,
liquidity and financial condition.  However, the risks and
uncertainties described below are not the only ones we face. Additional risks
and uncertainties not presently known to us, or that we currently consider to be
immaterial, may also impact our business, operating results, liquidity and
financial condition. If any of the following risks occur, our business,
operating results, liquidity and financial condition could be materially
adversely affected. In such case, the trading price of our securities could
decline, and you may lose all or part of your investment.
 
 
 RISKS
RELATED TO OUR INDUSTRY
 
 Our
future operating results may be affected by fluctuations in raw material costs
and steel prices or other factors beyond our control.
 
 Our
principal raw material is non-prime (or secondary) carbon steel, which we
purchase from multiple primary steel producers and steel brokers.  A
significant by-product of our manufacturing process is scrap steel that we
resell to scrap brokers and dealers.  The steel and scrap industries
as a whole are very cyclical, and at times availability and pricing can be
volatile due to a number of factors beyond our control. These factors include
general economic conditions, domestic and worldwide demand, curtailed production
at major mills due to factors such as equipment breakdowns, repairs or
catastrophic events, labor costs or problems, competition, import duties,
tariffs, energy costs, availability and cost of steel inputs (e.g. ore, scrap,
coke, energy, etc.), currency exchange rates and those other factors described
under “The costs of manufacturing our products and the ability to supply our
customers could be negatively impacted if we experience interruptions in
deliveries of needed raw materials or supplies.” This volatility can
significantly affect our steel costs and scrap prices. In an environment of
increasing prices for steel and other raw materials, competitive conditions may
impact how much of the price increases we can pass on to our customers and to
the extent we are unable to pass on future price increases in our raw materials
to our customers, our financial results could be adversely affected. Also, if
steel prices in general decrease, competitive conditions may impact how quickly
we must reduce our prices to our customers and we could be forced to use
higher-priced raw materials to complete orders for which the sales prices have
decreased.  If scrap prices in general decrease, we may recoup less
scrap dollars which will have a negative impact on our operating
results.
  7
  The
costs of manufacturing our products and the ability to supply our customers
could be negatively impacted if we experience interruptions in deliveries of
needed raw materials or supplies.
 
 If for
any reason our supply of carbon steel is curtailed or we are otherwise unable to
obtain the quantities we need at competitive prices, our business could suffer
and our financial results could be adversely affected.  Such
interruptions might result from a number of factors including events such as a
shortage of capacity in the supplier base or of the raw materials, energy or the
inputs needed to make steel or other supplies, financial difficulties of
suppliers, significant events affecting their facilities, significant weather
events, or those factors listed under “Our future operating results may be
affected by fluctuations in raw material costs and steel prices or other factors
beyond our control.” Further, the number of suppliers has decreased in recent
years due to industry consolidation and the financial difficulties of certain
suppliers, and consolidation may continue. Accordingly, if there is a loss of
any key supplier, or if delivery from a key supplier is disrupted, it may be
more difficult to obtain an alternative supply than in the past which could have
a material adverse effect on our business, results of operations and financial
condition.
 
 A
continued downturn or weakness in the economy in general or in key industries,
such as commercial, industrial or residential construction or government and
municipal infrastructure projects, may adversely affect our customers, which may
cause the demand for our products and services to decline and adversely affect
our financial results.
 
 Many of
our customers are in industries and businesses that are cyclical in nature and
affected by changes in general economic conditions or conditions specific to
their respective markets and industries. Product demand in our customers’ end
markets is based on numerous factors such as interest rates, general economic
conditions, consumer confidence, and other factors beyond our control. Downturns
in demand in the metal-consuming industries we serve, or a decrease in the
margins that we can realize from sales of our products to customers in any of
these industries, could adversely affect our financial results.
 
 The
loss of significant volume from key customers could adversely affect
us.
 
 In 2008,
our three largest customers accounted for approximately 64% of our net revenue,
with our top customer accounting for a significant portion of that number, and
our ten largest customers accounted for approximately 91% of our net revenue. A
significant loss of or decrease in business from one or more of our largest
customers could have an adverse effect on our sales and financial results if we
cannot obtain replacement business. Also, due to consolidation in the industries
we serve, our gross sales may be increasingly sensitive to deterioration in the
financial condition of, or other adverse developments with respect to, one or
more of our top customers. Although we have long-established relationships with
many of our customers, we do not have any long-term supply or binding contracts
or guarantees of minimum purchases. Purchases by our customers are generally
made using individual purchase orders. As a result, these customers may cancel
their orders, change purchase quantities from forecast volumes, or delay
purchases for a number of reasons beyond our control. The loss of our key
customers, a significant reduction in purchase volume by these customers or the
financial difficulty of such customers, for any reason, could significantly
reduce our revenues which would have a material adverse effect on our business,
results of operations and financial condition.
 
 Our
business could be harmed if we fail to maintain proper inventory levels and if
we are not able to pass on increases in raw material costs to our
customers.
 
 We are
required to maintain substantial inventories to accommodate the needs of our
customers, including in many cases, short lead times and just-in-time delivery
requirements. We purchase raw materials on a regular basis in an effort to
maintain our inventory at levels that we believe are sufficient to satisfy the
anticipated needs of our customers based upon orders, customers volume
expectations, historic buying practices and market conditions. Inventory levels
in excess of customer demand may result in the use of higher-priced inventory to
fill orders reflecting lower sales prices, if steel prices have significantly
decreased. These events could adversely affect our financial results.
Conversely, if we underestimate demand for our products or if our suppliers fail
to supply quality products in a timely manner, we may experience inventory
shortages. Inventory shortages might result in unfilled orders, negatively
impact customer relationships, and result in lost revenues, any of which could
harm our business and adversely affect our financial results.
 
 Our
business is highly competitive, and increased competition could negatively
impact our financial results.
 
 The
metals processing industry is very fragmented and competitive, consisting of a
large number of small companies and a few relatively large companies.
Competition is based principally on price, service, quality, production
capabilities, inventory ability and timely delivery. Competition in the various
markets in which the Company participates comes from companies of various sizes,
some of which have greater financial resources than the Company and some of
which have more established brand names in the local markets served by the
Company. Increased competition could force the Company to lower its prices or to
offer increased services at a higher cost, which could reduce the Company’s
profitability.
  8
 The
Company could incur substantial costs in order to comply with, or to address any
violations under, environmental laws that could significantly increase its
operating expenses and reduce its operating income.
  The
Company’s operations are subject to various environmental statutes and
regulations, including laws and regulations governing materials it uses. In
addition, certain of its operations are subject to federal, state and local
environmental laws and regulations that impose limitations on the discharge of
pollutants into the air and water and establish standards for the treatment,
storage and disposal of solid and hazardous wastes. Failure to maintain or
achieve compliance with these laws and regulations or with the permits required
for its operations could result in substantial operating costs and capital
expenditures, in addition to fines and civil or criminal sanctions, third party
claims for property damage or personal injury, cleanup costs or temporary or
permanent discontinuance of operations. Certain of its facilities are located in
industrial areas, have a history of heavy industrial use and have been in
operation for many years. Over time, the Company and other predecessor operators
of these facilities have generated, used, handled and disposed of hazardous and
other regulated wastes. Environmental liabilities could exist, including cleanup
obligations at these facilities or at off-site locations where materials from
Company operations were disposed of, which could result in future expenditures
that cannot be currently quantified and which could have a material adverse
effect on its financial position, results of operations or cash
flows.
 
 Disruptions
to our business or the business of our customers or suppliers, could adversely
impact our operations and financial results.
 
 Business
disruptions, including increased costs for or interruptions in the supply of
energy or raw materials, resulting from severe weather events such as
hurricanes, floods, blizzards, from casualty events, such as fires or material
equipment breakdown, from acts of terrorism, or from other events such as work
stoppages or required maintenance shutdowns, can cause interruptions to our
business as well as the operations of our customers and suppliers. Such
interruptions can have an adverse effect on our operations and financial
results.
 
 If
any of the products that the Company sells cause harm to any of its customers,
the Company could be exposed to product liability lawsuits.
 
 If the
Company were found liable under product liability claims, it could be required
to pay substantial monetary damages. We currently maintain product liability
insurance coverage; however, we cannot assure that this coverage would be
sufficient to cover the payment of any potential claim. In addition, we cannot
assure you that this or any other insurance coverage will continue to be
available or, if available, will be obtainable at a reasonable cost. Our
existing product liability insurance coverage may be inadequate to protect us
from any liabilities we might incur, and we will continue to be exposed to the
risk that our claims may be excluded and that our insurers may become insolvent.
A product liability claim or series of claims brought against us for uninsured
liabilities or liabilities in excess of our insurance coverage could have a
material adverse effect on the market price of our common stock and our
business, financial condition and results of operations. In addition, as a
result of a product liability claim, our reputation could be harmed and we may
have to recall some of our products, which could result in significant costs to
us and have a material adverse effect on the market price of our common stock
and our business, financial condition and results of operations.
  
 RISKS
RELATED TO OUR BUSINESS
 
 There
are significant risks associated with our strategy of acquiring and integrating
businesses.
 
 A key
element of our strategy is the acquisition of businesses and assets that will
complement our current business, increase size, expand our geographic scope of
operations, and otherwise offer growth opportunities. We may not be able to
successfully identify attractive acquisition opportunities, obtain financing for
acquisitions, make acquisitions on satisfactory terms, or successfully acquire
and/or integrate identified targets. In identifying, evaluating and selecting a
target business for a potential acquisition, we expect to encounter intense
competition from other entities including blank check companies, private equity
groups, venture capital funds, leveraged buyout funds, and operating businesses
seeking strategic acquisitions. Many of these entities are well-established and
have extensive experience identifying and effecting business combinations
directly or through affiliates. Moreover, many of these competitors possess
greater financial, technical, human and other resources than us which will give
them a competitive advantage in pursuing the acquisition of certain target
businesses.
  9
  Our
ability to implement our acquisition strategy is also subject to other risks and
costs, including:
 
 ·
                loss
      of key employees, customers or suppliers of acquired
      businesses;
 
 ·
                diversion
      of management's time and attention from our core
    businesses;
 
 ·
                adverse
      effects on existing business relationships with suppliers and
      customers;
 
 ·
                our
      ability to secure necessary
financing;
 
 ·
                our
      ability to realize operating efficiencies, synergies, or other benefits
      expected from an acquisition;
 
 ·
                risks
      associated with entering markets in which we have limited or no
      experience;
 
 ·
                risks
      associated with our ability to execute successful due diligence;
      and
 
 ·
                assumption
      of contingent or undisclosed liabilities of acquisition
      targets.
 
 The above
risks could have a material adverse effect on the market price of our common
stock and our business, financial condition and results of
operations.
 
 Our
independent registered public accountants have expressed substantial doubt as to
our ability to continue as a going concern.
 
 As a
result of the continuing global recession as well as distress in the financial
and credit markets, our revenues and earnings are expected to decline throughout
at least the remainder of 2009.  Consequently, the Company believes it
may be in violation of one or more of the financial covenants contained in its
credit agreement at the end of the second quarter 2009, which if not
amended, cured or waived, would result in a default and all amounts outstanding
under the credit agreement to become due and payable.  We cannot
assure you that in the event of default we would have sufficient funds to repay
all of the outstanding amounts due and payable, which could result in the
exercise by the lender under the credit agreement of all of its rights and
remedies available to it, such as seizing any and all collateral pledged under
the credit agreement which, would have a material adverse effect on the
market price of our common stock, our business, financial condition and results
of operations.  As a result of the foregoing, our independent
registered public accounting firm, PricewaterhouseCoopers LLP, indicated in
their report on our 2008 financial statements, that there is substantial doubt
about our ability to continue as a going concern.  See “Liquidity and
Capital Resources” for additional information.
 
 Recent
turmoil across various sectors of the financial markets may negatively impact
the Company’s business, financial condition and/or operating results as well as
our ability to effectively execute our acquisition strategy.
 
 Recently,
the various sectors of the credit markets and the financial services industry
have been experiencing a period of unprecedented turmoil and upheaval
characterized by disruption in the credit markets and availability of credit and
other financing, the failure, bankruptcy, collapse or sale of various financial
institutions and an unprecedented level of intervention from the United States
federal government.  While the ultimate outcome of these events cannot
be predicted, they may have a material adverse effect on our ability to obtain
financing necessary to effectively execute our acquisition strategy, the ability
of our customers and suppliers to continue to operate their businesses or the
demand for our products which could have a material adverse effect on the market
price of our common stock and our business, financial condition and results of
operations.
 
 We
may not be able to adequately manage our growth.
 
 We have
expanded, and are seeking to continue to expand, our business. This growth has
placed significant demands on our management, administrative, operating and
financial resources as well as our manufacturing capacity capabilities. The
continued growth of our customer base, the types of products offered and the
geographic markets served can be expected to continue to place a significant
strain on our resources. Personnel qualified in the production and marketing of
our products are difficult to find and hire, and enhancements of information
technology systems to support growth are difficult to implement. Our future
performance and profitability will depend in large part on our ability to
attract and retain additional management and other key personnel as well as our
ability to increase and maintain our manufacturing capacity capabilities to meet
the needs of our current and future customers. Any failure to adequately manage
our growth could have a material adverse effect on the market price of our
common stock and our business, financial condition and results of
operations.
  10
  We have substantial intangibles on
our balance sheet, and any impairment of our intangibles could adversely affect
our results of operations and financial
position.
 
 At
December 31, 2008, our total assets were approximately $94.0 million, of
which approximately $19.5 million, or approximately 21%, consisted of
identifiable intangible assets. We evaluate on a regular basis whether events
and circumstances have occurred that indicate that all or a portion of the
carrying amount of intangible assets may no longer be recoverable, in which case
an impairment charge to earnings would be required.  Any such
impairment charge could have a material effect on our results of operations and
financial position.
 
 As
a result of an acquisition of a business or assets we may be required to
subsequently take write-downs or write-offs,  similar to
restructuring, and impairment or other charges that could have a significant
negative effect on our financial condition, results of operations and our stock
price, which could cause you to lose some or all of your
investment.
 
 We must
conduct a due diligence investigation of the target businesses we intend to
acquire. Intensive due diligence is time consuming and expensive due to the
operations, accounting, finance and legal professionals who must be involved in
the due diligence process. Even if we conduct extensive due diligence on a
target business with which we acquire, we cannot assure that this diligence will
reveal all material issues that may affect a particular target business, or that
factors outside the control of the target business and outside of our control
will not later arise. If our diligence fails to identify issues specific to a
target business, industry or the environment in which the target business
operates, we may be forced to later write-down or write-off assets, restructure
our operations, or incur impairment or other charges that could result in our
reporting losses. Even though these charges may be non-cash items and not have
an immediate impact on our liquidity, the fact that we report charges of this
nature could contribute to negative market perceptions about us or our common
stock. In addition, charges of this nature may cause us to violate net worth or
other covenants to which we may be subject as a result of assuming pre-existing
debt held by a target business or by virtue of our existing debt
financing.
 
 The
loss of services of the Company's executive management team could harm its
business.
 
 The
success of the Company's business depends on the continued services of its
executive management team. The Company may not be able to retain its executive
management team or attract suitable replacements or additional personnel if
required. The loss of the services of one or more members of its executive
management team could have a material adverse effect on its
business.
 
 We
have a short operating history with respect to our current and proposed
businesses, so it will be difficult for investors to predict our future
success.
 
 The
Company had no active operations between April 11, 2004 and October 3, 2006, the
date on which we acquired assets and certain liabilities of CRC.  As a
result, we have a limited operating history to evaluate in assessing our
business and prospects in light of the risks and difficulties we may encounter
as a company with a limited operating history in our current
business.  If we are unable to successfully address these risks and
difficulties, our business and operating results could be materially adversely
affected.
 
 The
Company’s existing credit agreement contains financial and restrictive
covenants that may limit its ability to operate its business and the Company
believes it may be in violation of one or more of these covenants in the second
quarter of 2009 which would cause all amounts under the credit agreement to
become due and payable.
  The
agreements governing the Company’s credit agreement contain, and any of its
other future debt agreements may contain, covenant restrictions that limit its
ability to operate its business, including restrictions on its ability
to:
  •
                
                incur
      debt (including secured debt) or issue
  guarantees;
  •
                
                grant
      liens on its assets;
  •
                
                make
      certain investments;
  11
  •
                
                enter
      into sale and leaseback
transactions;
  •
                
                enter
      into transactions with its
affiliates;
  •
                
                sell
      certain assets;
  •
                
                repurchase
      capital stock or make other restricted
payments;
  •
                
                declare
      or pay dividends or make other distributions to stockholders;
      and
  •
                
                enter
      into merger or consolidations or make certain
  acquisitions.
  In
addition, the Company’s existing credit agreement contains other
affirmative and negative covenants. The Company’s ability to comply with these
covenants is dependent on its future performance, which will be subject to many
factors, some of which are beyond its control, including prevailing economic
conditions as well as the demand for our products and services.
  As a
result of these covenants, the Company’s ability to respond to changes in
business and economic conditions and to obtain additional financing, if needed,
may be significantly restricted, and the Company may be prevented from engaging
in transactions or making acquisitions of a business as part of our acquisition
strategy. The Company believes it may be in violation of one or more of the
financial covenants contained in its credit agreement in the second quarter
of 2009 which would result in a default under its credit agreement, which if not
amended, cured or waived would cause all amounts outstanding under our credit
agreement to become immediately due and payable. We cannot assure you that in
the event of default we would have sufficient funds to repay all of the
outstanding amounts due and payable, which could result in the exercise by the
lender under the credit agreement of all of its rights and remedies available to
it, such as seizing any and all collateral pledged under the credit agreement
which, would have a material adverse effect on the market price of our common
stock, our business, financial condition and results of operations. See
“Liquidity and Capital Resources” for additional information.
 
 We
may be unable to fully realize the benefits of our net operating loss ("NOL")
and tax credit carryforwards.
 
 NOL’s may
be carried forward to offset federal and state taxable income in future years
and eliminate income taxes otherwise payable on such taxable income, subject to
certain adjustments. Based on current federal corporate income tax rates, our
NOL and other carryforwards, if fully utilized, could provide a benefit to us of
significant future tax savings. However, our ability to use these tax benefits
in future years will depend upon the amount of our otherwise taxable
income.  If we do not have sufficient taxable income in future years
to use the tax benefits before they expire, we will lose the benefit of these
NOL carryforwards permanently. Consequently, our ability to use the tax benefits
associated with our substantial NOL will depend significantly on our success in
operating the Concord business, identifying additional suitable merger partners
and/or acquisition candidates, and, once identified, successfully consummating a
merger with and/or acquisition of these candidates.
 
 If we
undergo an ownership change, the NOL carryforward limitations would impose an
annual limit on the amount of taxable income that may be offset by our NOL
generated prior to the ownership change and, accordingly, we may be unable to
use a significant portion of our NOL to offset taxable income. In general, an
ownership change occurs when, as of any testing date, the aggregate of the
increase in percentage points of the total amount of a corporation's stock owned
by "5-percent stockholders", within the meaning of the NOL carryforward
limitations, whose percentage ownership of the stock has increased as of such
date over the lowest percentage of the stock owned by each such "5-percent
stockholder" at any time during the three-year period preceding such date is
more than 50 percentage points. In general, persons who own 5% or more of a
corporation's stock are "5-percent stockholders," and all other persons who own
less than 5% of a corporation's stock are treated, together, as a single, public
group "5-percent stockholder," regardless of whether they own an aggregate of 5%
of a corporation's stock.
 
 The
amount of NOL and tax credit carryforwards that we have claimed have not been
audited or otherwise validated by the U.S. Internal Revenue Service (“IRS”). The
IRS could challenge our calculation of the amount of our NOL or our
determinations as to when a prior change in ownership occurred and other
provisions of the Internal Revenue Code may limit our ability to carry forward
our NOL to offset taxable income in future years. If the IRS were successful
with respect to any such challenge, the potential tax benefit of the NOL
carryforwards to us could be substantially reduced.
  12
  As
discussed above, the Company believes it may be in violation of one or more of
the financial covenants contained in its credit agreement in the second quarter
of 2009, which would result in a default under its credit agreement, which if
not amended, cured or waived would cause all amounts outstanding under our
credit agreement to become immediately due and payable. We have commenced
discussions with the lender under our credit agreement to seek an amendment of
the credit agreement in the second quarter of 2009.  However, no
assurance can be given that we will be able to successfully amend our credit
agreement and avoid a default.  If we are unsuccessful in obtaining an
amendment to the credit agreement, the Company could be declared in default
under the credit agreement requiring the recording of a full valuation allowance
against the deferred tax asset, which would have a material adverse effect on
the market price of our common stock, our business, financial condition and
results of operations.
 
 Amendments
to our stockholder rights agreement intended to preserve our NOL may not be
effective or may have some unintended negative effects.
 
 We
recently amended our stockholder rights agreement to decrease the trigger
threshold to 4.9%, from 15%, as the amount of the Company’s outstanding common
stock that a person must beneficially own before being deemed to be an
“Acquiring Person” under the stockholder rights agreement.  The
principal purpose of the amendment to the stockholder rights agreement is to
protect the ability of the Company to use its existing NOL’s for federal income
tax purposes by limiting the number of 5% or more owners of our common stock and
thus reduce the risk of a possible “change of ownership” under Section 382 of
the Internal Revenue Code of 1986, as amended.
 
 Although
the amendment to the stockholder rights agreement is intended to reduce the
likelihood of an impermissible ownership change, there is no guarantee that such
restrictions would prevent all transfers that would result in an impermissible
ownership change. The amendment to the stockholder rights agreement will also
require any person attempting to acquire a significant interest in us to seek
the approval of our Board of Directors. This may have an "anti-takeover" effect
because our Board of Directors may be able to prevent any future takeover.
Similarly, any limits on the amount of capital stock that a stockholder may own
could have the effect of making it more difficult for stockholders to replace
current management. Additionally, because the stockholder rights agreement will
have the effect of restricting a stockholder's ability to acquire our common
stock, the liquidity and market value of our common stock might suffer.
 
 Our
business may be negatively affected by work stoppages, slowdowns or strikes by
our employees.
 
 We
recently experienced a material labor disruption at our Warren, Ohio facility by
employees who are members of the United Steelworkers Union. In order to protect
its business and facility, the Company locked out the employees of the Warren,
Ohio facility from November 1, 2008 until January 30, 2009, after which it
placed employees on temporary layoff under the terms and conditions of the
expired collective bargaining agreement. Although the Company and the Local 2243
continue to negotiate the terms of a new collective bargaining agreement, there
can be no assurance that we will be able to negotiate a new collective
bargaining agreement on terms satisfactory to the Company.  Although
we do not expect further material work interruptions or increases in our costs
during the course of the negotiations of a new collective bargaining agreement,
any further material labor disruptions or significantly increased labor costs
could have a materially adverse effect on our business and results of
operations.
 
 If
we acquire a company located outside of the United States, we would be subject
to a variety of additional risks that may negatively impact our
operations.
 
 We may
effect an acquisition or merger with a company located outside of the United
States. If we did, we would be subject to any special considerations or risks
associated with companies operating in the target business’ home jurisdiction,
including any of the following:
 
 • rules
and regulations or currency conversion or corporate withholding taxes on
individuals;
 
 • tariffs
and trade barriers;
 
 •
regulations related to customs and import/export matters;
 
 • longer
payment cycles;
 
 • tax
issues, such as tax law changes and variations in tax laws as compared to the
United States;
  13
  •
currency fluctuations and exchange controls;
 
 •
challenges in collecting accounts receivable;
 
 •
cultural and language differences;
 
 •
employment regulations;
 
 • crime,
strikes, riots, civil disturbances, terrorist attacks and wars; and
 
 •
deterioration of political relations with the United States.
 
 We cannot
assure you that we would be able to adequately address these additional risks.
If we were unable to do so, our operations might suffer.
 
 If
we effect an acquisition or merger with a company located outside of the United
States, the laws applicable to such company will likely govern all of our
material agreements and we may not be able to enforce our legal
rights.
 
 If we
effect an acquisition or merger with a company located outside of the United
States, the laws of the country in which such company operates will govern
almost all of the material agreements relating to its operations. We cannot
assure you that the target business will be able to enforce any of its material
agreements or that remedies will be available in this new jurisdiction. The
system of laws and the enforcement of existing laws in such jurisdiction may not
be as certain in implementation and interpretation as in the United States. The
inability to enforce or obtain a remedy under any of our future agreements could
result in a significant loss of business, business opportunities or capital.
Additionally, if we acquire a company located outside of the United States, it
is likely that substantially all of our assets would be located outside of the
United States and some of our officers and directors might reside outside of the
United States. As a result, it may not be possible for investors in the United
States to enforce their legal rights, to effect service of process upon our
directors or officers or to enforce judgments of United States courts predicated
upon civil liabilities and criminal penalties of our directors and officers
under Federal securities laws.
 
 Compliance
with the Sarbanes-Oxley Act of 2002 will require substantial financial and
management resources and may increase the time as well as costs of
completing an acquisition. Any material weakness in the effectiveness of the
Company's internal control over financial reporting could have a material
adverse effect on the market price of our common stock, our business, financial
condition and results of operations.
 
 Section
404 of the Sarbanes-Oxley Act of 2002 requires that we evaluate and report on
our system of internal controls and requires that we have such system of
internal controls audited.  If we fail to maintain the adequacy of our
internal controls, we could be subject to regulatory scrutiny, civil or criminal
penalties and/or stockholder litigation. Any inability to provide reliable
financial reports could harm our business. Section 404 of the Sarbanes-Oxley Act
also requires that our independent registered public accounting firm audit the
effectiveness of the Company’s internal control over financial reporting. An
acquisition target may not be in compliance with the provisions of the
Sarbanes-Oxley Act regarding adequacy of their internal control. The development
of the internal controls of any such acquisition target to achieve compliance
with the Sarbanes-Oxley Act may increase the time and costs necessary to
complete any such acquisition. Furthermore, any failure to implement required
new or improved controls, or difficulties encountered in the implementation of
adequate controls over our financial processes and reporting in the future,
could harm our operating results or cause us to fail to meet our reporting
obligations. Inferior internal controls could also cause investors to lose
confidence in our reported financial information, which could have a negative
effect on the trading price of our stock. As of December 31, 2008, the Company
did not maintain effective control over the valuation of inventory and cost of
goods sold. Specifically, the Company did not have effective supervisory and
review controls over the valuation of inventory including the average cost
calculation and application of production variances in order to ensure accurate
reporting and disclosure in its interim and annual financial statements. This
control deficiency resulted in material audit adjustments to the fourth quarter
2008 financial statements.
 
 
 RISKS
RELATED TO OUR COMMON STOCK
 
 Our
common stock is no longer listed on the NASDAQ Small Cap Market.
 
 On
September 3, 2004, our common stock was delisted from the NASDAQ Small Cap
Market. The delisting followed a determination by the NASDAQ Listing
Qualifications Panel that the Company was a "public shell" and should be
delisted due to policy concerns raised under NASDAQ Marketplace Rules 4300 and
4300(a)(3). Additional information concerning the delisting is set forth in the
Company's Report on Form 8-K filed with the Securities and Exchange Commission
on September 1, 2004. The Company's common stock is now quoted on the OTC Pink
Sheets Electronic Quotation Service under the symbol "SIDG.PK." As a result of
the delisting, stockholders may find it more difficult to dispose of, or to
obtain accurate quotations as to the price of our common stock, the liquidity of
our stock may be reduced, making it difficult for a stockholder to buy or sell
our stock at competitive market prices or at all, we may lose support from
institutional investors and/or market makers that currently buy and sell our
stock and the price of our common stock could decline.
  14
  We
are vulnerable to volatile market conditions.
 
 The
market prices of our common stock have been highly volatile. The market has from
time to time experienced significant price and volume fluctuations that are
unrelated to the operating performance of particular companies. Please see the
table contained in Part II, Item 5 of this report which sets forth the range of
high and low closing prices of our common stock for the calendar quarters
indicated.
 
 We
do not expect to pay dividends on our common stock in the foreseeable
future.
 
 Although
our stockholders may receive dividends if, as and when declared by our Board of
Directors, we do not intend to pay dividends on our common stock in the
foreseeable future. Therefore, you should not purchase our common stock if you
need immediate or future income by way of dividends from your
investment.
 
 Our
amended and restated certificate of incorporation authorizes the issuance of
shares of preferred stock.
 
 Our
Amended and Restated Certificate of Incorporation provides that our Board of
Directors will be authorized to issue from time to time, without further
stockholder approval, up to 5,000,000 shares of preferred stock in one or more
series and to fix or alter the designations, preferences, rights and any
qualifications, limitations or restrictions of the shares of each series,
including the dividend rights, dividend rates, conversion rights, voting rights,
terms of redemption, including sinking fund provisions, redemption price or
prices, liquidation preferences and the number of shares constituting any series
or designations of any series. Such shares of preferred stock could have
preferences over our common stock with respect to dividends and liquidation
rights. We may issue additional preferred stock in ways which may delay, defer
or prevent a change in control of the Company without further action by our
stockholders. Such shares of preferred stock may be issued with voting rights
that may adversely affect the voting power of the holders of our common stock by
increasing the number of outstanding shares having voting rights, and by the
creation of class or series voting rights.
 
 We
may issue a substantial amount of equity and cash compensation and other shares
of our common stock in the future which could cause dilution to investors and
otherwise adversely affect our stock price.
 
 A key
element of our growth strategy is to make acquisitions. As part of our
acquisition strategy, we may issue additional shares of common stock as
consideration for such acquisitions. In addition, we have limited cash
compensation to management pending consummation of a redeployment transaction
and expect to award cash and equity compensation to management in connection
with such a transaction.  These issuances could be significant. To the
extent that we make acquisitions and issue our shares of common stock as
consideration or as compensation to management, your equity interest in us will
be diluted. Any such issuance will also increase the number of outstanding
shares of common stock that will be eligible for sale in the future. Persons
receiving shares of our common stock in connection with these acquisitions may
be more likely to sell off their common stock, which may influence the price of
our common stock. In addition, the potential issuance of additional shares in
connection with anticipated acquisitions could lessen demand for our common
stock and result in a lower price than might otherwise be obtained. We may issue
common stock in the future for other purposes as well, including in connection
with financings, for compensation purposes, in connection with strategic
transactions or for other purposes.  Cash payments as compensation or
otherwise can also significantly diminish cash that is available to the Company
for working capital and other purposes, which could have a material adverse
effect on the Company.
 
 
 ITEM1B.UNRESOLVED STAFF
COMMENTS
 
 None.
  15
  ITEM 2.
PROPERTIES
 
 The following table lists the principal
manufacturing and office facilities andthe primary useof the propertyat each of the
facilities:
  Location
                                  
                                  Approximate
                                    Square
    Footage
                                  
                                  Owned/Leased
                                  
                                  Use of
    PropertyCorporateStamford, Connecticut(1)
                                  
                                  5,750
                                  
                                  Leased
                                  
                                  Headquarters and
      administrativeConcord
      SteelWarren,
Ohio
                                  
                                  133,000
                                  
                                  Owned
                                  
                                  Manufacturing and
      administrativeWarren,
Ohio
                                  
                                  5,150
                                  
                                  Leased
                                  
                                  AdministrativeChicago Heights,
      Illinois
                                  
                                  187,000
                                  
                                  Leased
                                  
                                  ManufacturingEssington,
      Pennsylvania
                                  
                                  82,800
                                  
                                  Leased
                                  
                                  Manufacturing
  (1) The
Company’s lease provides that in the event of the termination of the lease of
the 5,750 square feet of office space adjacent to the Company’s leased office
space (the “Adjacent Lease”), the Company will be obligated to lease said
premises at the same rate paid by the Company for its office
space.  The tenant under the Adjacent Lease has recently filed for
bankruptcy protection and the Trustee has rejected the Adjacent Lease. To date
the landlord has not formally terminated the Adjacent Lease. The Company is
currently working with the Landlord to either secure a new tenant for the
adjacent space, or upon termination of the Adjacent Lease, for the Company to
sublet the adjacent space.
  The
Company believes that its current manufacturing and office facilities are
suitable and adequate for its present and anticipated near-term
needs.
 
 ITEM
3. LEGAL PROCEEDINGS
 
 Except as
set forth below, we are not a party to nor are any of our properties subject to
any pending legal, administrative or judicial proceedings other than routine
litigation incidental to our business.
 
 Public
Offering Securities Litigation
 
 On
November 2, 2001, Timothy J. Fox filed a purported class action lawsuit against
the Company; FleetBoston Robertson Stephens, Inc., the lead underwriter of the
Company’s April 1999 initial public offering; several other underwriters who
participated in the initial public offering; Steven J. Snyder, the Company’s
then president and chief executive officer; and Thomas M. Donnelly, the
Company’s then chief financial officer. The lawsuit was filed in the United
States District Court for the Southern District of New York and was assigned to
the pretrial coordinating judge for substantially similar lawsuits involving
more than 300 other issuers. An amended class action complaint, captioned In re Net Perceptions, Inc. Initial
Public Offering Securities Litigation,01 Civ. 9675
(SAS), was filed on April 22, 2002, expanding the basis for the action to
include allegations relating to the Company’s March 2000 follow-on public
offering in addition to those relating to its initial public offering.  The
action against the Company was coordinated with the other substantially similar
class actions as In re Initial
Public Offering Securities Litigation, 21 MC (SAS) (the “Coordinated
Class Actions”).
  On August
31, 2005, the Court gave preliminary approval to a settlement reached by the
plaintiffs and issuer defendants in the Coordinated Class Actions. On December
5, 2006, the United States Court of Appeals for the Second Circuit overturned
the District Court's certification of the class of plaintiffs who are pursuing
the claims that would be settled in the settlement against the underwriter
defendants. Plaintiffs filed a Petition for Rehearing with the Second Circuit on
January 5, 2007 in response to the Second Circuit's decision. On April 6, 2007,
the Second Circuit denied plaintiffs' Petition for Rehearing. On June 25, 2007,
the District Court signed an Order terminating the settlement. On November 13,
2007, the issuer defendants in certain designated “focus cases” filed a motion
to dismiss the second consolidated amended class action complaints that were
filed in those cases. On March 26, 2008, the District Court issued an Opinion
and Order denying, in large part, the motions to dismiss the amended complaints
in the “focus cases.” In the opinion of management, the ultimate
disposition of this matter will not have a material effect on the Company’s
financial position, results of operation or cash flows.
  16
  Concord
Steel, Inc. v. Wilmington Steel Processing Co., Inc., et al.
 
 On
November 21, 2007, Concord filed a Verified Complaint in the Delaware Chancery
Court against Wilmington Steel, Kenneth Neary and William Woislaw for violation
of non-compete provisions contained in an Asset Purchase Agreement, dated
September 19, 2006 and certain related agreements, and at the same time moved
for a preliminary injunction to prohibit breaches of those restrictive
covenants.  On January 18, 2008, the defendants in that case served an
Answer denying the material allegations of the Complaint and asserting
counterclaims for tortious interference with business relations and
defamation arising from alleged telephone calls made by Concord to the
customer to which Wilmington was selling. On April 3, 2008, the Court
granted the preliminary injunction sought by the Company and thereafter denied
defendants’ request for a stay and for certification of an interlocutory appeal.
On July 22, 2008, defendants withdrew their counterclaims without prejudice. A
three-day trial was held during the week of October 20, 2008 and the
parties have submitted their post-trial briefs and a post-trial hearing is
scheduled for April 2009.
 
 Terrence
P. Meehan v. Concord Steel, Inc.
 
 On May
30, 2008, the former General Manger at the Company’s Essington, PA facility
commenced a lawsuit against Concord in the United States District Court for the
Eastern District of Pennsylvania. In his complaint, Plaintiff Terrence Meehan
alleges that he was wrongfully terminated by Concord in violation of
Pennsylvania public policy and seeked compensatory damages in excess of
$150,000, punitive damages, interest and cost of suit. Defense of the suit
was assumed by Concord's employment practices liability carrier and the action
was settled on a no-admission basis by the Company during October
2008.
 
 John
F. Steward v. Concord Steel, Inc.
 
 A Former
employee of CRC Acquisition Corp. filed suit against Concord in June 2007 in the
Court of Common Pleas, Trumbull County, Ohio alleging that he was terminated by
Concord in August 2006 (prior to the acquisition on October 3,
2006 by Concord (formerly known as SIG Acquisition Corp.) of the assets of
CRC Acquisition Co. LLC (“CRC”)) in violation of his rights under the federal
Family and Medical Leave Act. Plaintiff John F. Steward seeks compensatory
damages in an unstated amount, liquidated damages, injunctive relief and
reinstatement to his job. Concord is vigorously defending the
action and maintains that CRC is the proper party defendant,
denominated as “Concord Steel.” On August 18, 2008, the Plaintiff served its
amended complaint to add as named defendants in addition to Concord, the
original named defendant, each of Concord, SIG Acquisition Corp., and CRC. CRC
subsequently asserted cross claims against Concord which we intend to defend
vigorously and Concord has asserted cross claims against CRC.  Discovery on
this matter is continuing and the Court has set July 13, 2009 as a trial
date.
  The
Company believes that the outcome of these matters, individually and in the
aggregate, will not have a material adverse effect on the consolidated financial
statements.
 
 ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
 No
matters were submitted to a vote of security holders, through the solicitation
of proxies or otherwise, during the quarter ended December 31,
2008.
  17
  PART
II
 
 ITEM 5. MARKET FOR REGISTRANT’S
COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES
 
 Common
Stock Information
 
 The
Company's common stock is quoted on the OTC Pink Sheets Electronic Quotation
Service under the symbol "SIDG.PK".
 
 The
following table sets forth, for the indicated periods, the high and low closing
sales prices for our common stock as reported by the OTC Pink Sheets Electronic
Quotation Service. The quotes listed below reflect inter-dealer prices or
transactions solely between market-makers, without retail mark-up, mark-down or
commission and may not represent actual transactions. The quotes listed
below  reflect the impact of the one-for-five reverse stock split of
the Company’s common stock on February 20, 2009.
  Price Range of
                                Common
StockHigh
                              
                              
                              Low2009First quarter
                                (through March 06,
      2009)
                              
                              $
                              3.75
                              
                              
                              $
                              1.352008First
    Quarter
                              
                              $
                              8.90
                              
                              
                              $
                              4.60Second
    Quarter
                              
                              $
                              8.55
                              
                              
                              $
                              5.25Third
    Quarter
                              
                              $
                              10.00
                              
                              
                              $
                              5.60Fourth
    Quarter
                              
                              $
                              7.25
                              
                              
                              $
                              2.852007First
    Quarter
                              
                              $
                              14.60
                              
                              
                              $
                              9.60Second
    Quarter
                              
                              $
                              14.90
                              
                              
                              $
                              10.25Third
    Quarter
                              
                              $
                              14.20
                              
                              
                              $
                              8.00Fourth
    Quarter
                              
                              $
                              10.25
                              
                              
                              $
                              5.95
   Recent
Sales of Unregistered Securities
 
 On
September 11, 2008, the Company issued 46,158 shares of common stock to Kanders
& Company in exchange for services provided pursuant to the Consulting
Agreement by and between the Company and Kanders & Company dated September
22, 2006. The issuance did not involve any public offering, general advertising
or solicitation. Such shares were issued pursuant to an exemption from
registration provided by Section 4(2) of the Securities Act of 1933, as amended
(the “Securities Act”) and/or Regulation D promulgated under the Securities Act.
In connection with the issuance, Kanders & Company represented its intention
to acquire the securities for investment purposes only and not with a view to or
for sale in connection with any distribution thereof and the share certificate
representing such shares bears appropriate legends to that effect. These
securities may not be offered or sold in the United States in the absence of an
effective registration statement or exemption from the registration requirements
under the Securities Act.
 
 Recent
Purchases Of Our Registered Equity Securities
 
 We did
not purchase any shares of our common stock during the Company’s fourth quarter
of 2008.
 
 Performance
Graph
 
 Set forth
below is a line graph comparing the yearly percentage change in the cumulative
total stockholder return on our common stock to the cumulative total return of
the NASDAQ National Market Composite and the Russell 2000 Index for the period
commencing on December 31, 2003 and ending December 31, 2008 (the “Measuring
Period”). The graph assumes that the value of the investment in our common stock
and each index was $100 on December 31, 2003. The yearly change in cumulative
total return is measured by dividing (1) the sum of (i) the cumulative amount of
dividends for the Measuring Period, assuming dividend reinvestment, and (ii) the
change in share price between the beginning and end of the Measuring Period, by
(2) the share price at the beginning of the Measuring Period.
  18
  The
Company considered providing a comparison consisting of a group of peer
companies in an industry or line-of business similar to ours, but could not
reasonably identify a group of comparable peer companies that the Company
believed would provide our stockholders with a meaningful comparison. The stock
price performance on the following graph is not necessarily indicative of future
stock price performance.
   Comparison
of five-year cumulative return among STMF, NASDAQ and Russell 2000 Composite
Index
 
 12/31/2003
                              
                              
                              12/31/2004
                              
                              
                              12/31/2005
                              
                              
                              12/31/2006
                              
                              
                              12/31/2007
                              
                              
                              12/31/2008Stamford Industrial
      Group
                              
                              
                              $100.00
                              
                              
                              
                              $185.00
                              
                              
                              
                              $155.00
                              
                              
                              
                              $612.50
                              
                              
                              
                              $312.50
                              
                              
                              
                              $162.50NASDAQ
                              
                              
                              $100.00
                              
                              
                              
                              $108.59
                              
                              
                              
                              $110.09
                              
                              
                              
                              $120.56
                              
                              
                              
                              $132.39
                              
                              
                              
                              $78.72Russell
2000
                              
                              
                              $100.00
                              
                              
                              
                              $117.00
                              
                              
                              
                              $120.88
                              
                              
                              
                              $141.43
                              
                              
                              
                              $137.55
                              
                              
                              
                              $89.68
  
  Stockholders
 
 On March
6, 2009, the last reported sales price for our common stock was $1.90 per share.
As of March 6, 2009, there were 208 beneficial shareholders of record and 4,423
individual shareholders of record of our common stock.
 
 
 Dividends
 
 We
currently anticipate that we will retain our cash and all potential future
earnings for use in our business and do not anticipate that we will pay any cash
dividends in the foreseeable future.  The payment of any future
dividends will be at the discretion of our Board of Directors and will depend
upon, among other things, our results of operations, capital requirements,
general business conditions, contractual restrictions on payment of dividends,
if any, legal and regulatory restrictions on the payment of dividends, and other
factors our Board of Directors deems relevant.
 
 19
 
 Securities
authorized for issuance under equity compensation plans
 
 The
following table sets forth certain information regarding our equity plans as of
December 31, 2008 (see (3) below):
  (A)
                                                      
                                                      
                                                      (B)
                                                      
                                                      
                                                      (C)Plan
    Category
                                                      
                                                      Number of securities to be issued
      upon exercise of outstanding options, warrants and
      rights
                                                      
                                                      
                                                      Weighted average exercise price of
      outstanding options, warrants and rights
                                                      
                                                      
                                                      Number of securities remaining
      available for future issuance under equity compensation plans (excluding
      securities reflected in column(A))Equity compensation plansapproved by security holders (1)(2)
                                                      
                                                      
                                                      608,416
                                                      
                                                      
                                                      $
                                                      6.19
                                                      
                                                      
                                                      
                                                      1,728,763Equity compensation plansnot approved by securityholders
                                                      
                                                      
                                                      —
                                                      
                                                      
                                                      $
                                                      —
                                                      
                                                      
                                                      
                                                      —Total
                                                      
                                                      
                                                      608,416
                                                      
                                                      
                                                      $
                                                      6.19
                                                      
                                                      
                                                      
                                                      1,728,763
 
 (1)
                  On
      June 21, 2007 the Company’s stockholders approved the Company’s 2007 Stock
      Incentive Plan (the “2007 Stock Incentive Plan”).  Under the
      2007 Stock Incentive Plan, 2,000,000 shares of the Company’s common stock
      were initially reserved for issuance and available for awards, subject to
      an automatic annual increase equal to 4% of the total number of shares of
      the Company’s common stock outstanding at the beginning of each fiscal
      year (the “Annual Share Increase”). Awards under the 2007 Stock Incentive
      Plan may include non-qualified stock options, incentive stock options,
      stock appreciation rights, restricted shares of common stock, restricted
      units and performance awards. Awards under the 2007 Stock Incentive Plan
      may be granted to employees, officers, directors, consultants, independent
      contractors and advisors of the Company or any subsidiary of the Company.
      In any calendar year, no participant may receive awards under the 2007
      Stock Incentive Plan for more than 500,000 shares of the Company’s common
      stock. Additionally, no more than 500,000 of the total shares of common
      stock available for issuance under the 2007 Stock Incentive Plan may be
      granted in the form of restricted shares, restricted units or performance
      awards, subject to an automatic annual increase, beginning with January in
      year 2008 and continuing through January in year 2017, equal to 75% of the
      total number of shares of the Company’s common stock increased pursuant to
      the Annual Share Increase. The 2007 Stock Incentive Plan has a term of ten
      years expiring on June 21, 2017. As of December 31, 2007, the total number
      of awards granted under 2007 Plan were 0.6 million stock options which
      represented the replacement of awards granted to management under our
      prior equity compensation plans.

                      
                      During
      the year ended December 31, 2008, the total number of awards granted under
      the 2007 Plan was 6,000 and represented the stock options granted to two
      of our non-employee directors to purchase 3,000 shares each of the
      Company’s common stock under the Company’s 2007 Stock Incentive
      Plan.
 (2)
                  As
      a result of stockholder approval of the 2007 Stock Incentive Plan, the
      Company's 1999 Plan has been frozen and will remain in effect only to the
      extent of awards outstanding under the plan as of June 21, 2007. As of
      December 31, 2008, the total number of awards granted under 1999 Plan were
      14,132.
 
 (3)
                  All
      common share information included in the above table has been restated to
      reflect the Company’s one-for-five reverse stock split of its common stock
      which occurred on February 20,
2009.
 
 20
  ITEM
6. SELECTED CONSOLIDATED FINANCIAL DATA
 
 In 2004,
the Company ceased previous operations as a developer of marketing software
solutions. On October 3, 2006, the Company acquired the assets of CRC
Acquisition Co. LLC (“CRC”), a manufacturer of steel counterweights doing
business as Concord Steel (“Concord”). Because the Company had no operations at
the time of the Concord acquisition, the Concord business is considered to be a
predecessor company (“Predecessor”) from an accounting treatment
perspective.   To assist in the understanding of the results of
operations and balance sheet data of the Company, relevant prior year financial
information regarding the Predecessor is, therefore, presented
herein.
 
 The
statement of operations data for each of the years ended December 31, 2008,
2007, and 2006, and the balance sheet data at December 31, 2008 and 2007, are
derived from the audited financial statements included elsewhere in this
report.  The selected balance sheet data for 2006 was derived from the
audited consolidated financial statements of the Company as of and for the year
ended December 31, 2006 and are not included in this report. The statement of
operations data for the years ended December 31, 2005 and 2004 and the balance
sheet data at December 31, 2005 and 2004 represents the pre-Concord operating
results of Stamford Industrial Group, and are derived from audited financial
statements not included in this report.  The data appearing in the
table below should be read in conjunction with “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” and the consolidated
financial statements and the related notes thereto included elsewhere
herein.
   STAMFORD INDUSTRIAL GROUP,
INC.
 FIVE YEAR CONSOLIDATED FINANCIAL
DATA
 Years Ended December
      31,2008
                                                
                                                
                                                2007
                                                
                                                
                                                2006
                                                
                                                
                                                2005
                                                
                                                
                                                2004(in thousands, except per share
      amounts)Statement of  Operations
      DataRevenues
                                                
                                                $
                                                142,914
                                                
                                                
                                                $
                                                110,743
                                                
                                                
                                                $
                                                24,078
                                                
                                                
                                                $
                                                118
                                                
                                                
                                                $
                                                927Gross
margin
                                                
                                                $
                                                26,962
                                                
                                                
                                                $
                                                17,817
                                                
                                                
                                                $
                                                4,277
                                                
                                                
                                                $
                                                118
                                                
                                                
                                                $
                                                707Operating
      expenses  (1)
                                                
                                                $
                                                14,470
                                                
                                                
                                                $
                                                11,760
                                                
                                                
                                                $
                                                11,576
                                                
                                                
                                                $
                                                553
                                                
                                                
                                                $
                                                2,671Income (loss) from
      operations
                                                
                                                $
                                                12,492
                                                
                                                
                                                $
                                                6,057
                                                
                                                
                                                $
                                                (7,299
                                                )
                                                
                                                $
                                                (435
                                                )
                                                
                                                $
                                                (1,964
                                                )Other (expense) income,
      net
                                                
                                                $
                                                (1,964
                                                )
                                                
                                                $
                                                (2,822
                                                )
                                                
                                                $
                                                (231
                                                )
                                                
                                                $
                                                642
                                                
                                                
                                                $
                                                1,903(Benefit) provision for income
      taxes (2)
                                                
                                                $
                                                (30,868
                                                )
                                                
                                                $
                                                203
                                                
                                                
                                                $
                                                223
                                                
                                                
                                                $
                                                —
                                                
                                                
                                                $
                                                —Net income
      (loss)
                                                
                                                $
                                                41,396
                                                
                                                
                                                $
                                                3,032
                                                
                                                
                                                $
                                                (7,753
                                                )
                                                
                                                $
                                                207
                                                
                                                
                                                $
                                                (61
                                                )Basic net income/(loss) per
      share
                                                
                                                $
                                                4.94
                                                
                                                
                                                $
                                                0.36
                                                
                                                
                                                $
                                                (1.19
                                                )
                                                
                                                $
                                                0.04
                                                
                                                
                                                $
                                                (0.01
                                                )Shares used in basic calculation
      (3)
                                                
                                                
                                                8,385
                                                
                                                
                                                
                                                8,350
                                                
                                                
                                                
                                                6,515
                                                
                                                
                                                
                                                5,784
                                                
                                                
                                                
                                                5,715Diluted net income/(loss) per
      share
                                                
                                                $
                                                4.31
                                                
                                                
                                                $
                                                0.32
                                                
                                                
                                                $
                                                (1.19
                                                )
                                                
                                                $
                                                0.03
                                                
                                                
                                                $
                                                (0.01
                                                )Shares used in diluted calculation
      (3)
                                                
                                                
                                                9,626
                                                
                                                
                                                
                                                9,529
                                                
                                                
                                                
                                                6,515
                                                
                                                
                                                
                                                6,688
                                                
                                                
                                                
                                                5,715Cash distributions
      paid
                                                
                                                $
                                                —
                                                
                                                
                                                $
                                                —
                                                
                                                
                                                $
                                                —
                                                
                                                
                                                $
                                                —
                                                
                                                
                                                $
                                                —Balance Sheet
      DataCash and cash
      equivalents
                                                
                                                $
                                                303
                                                
                                                
                                                $
                                                1,236
                                                
                                                
                                                $
                                                3,703
                                                
                                                
                                                $
                                                203
                                                
                                                
                                                $
                                                14,444Marketable
      securities
                                                
                                                $
                                                —
                                                
                                                
                                                $
                                                —
                                                
                                                
                                                $
                                                —
                                                
                                                
                                                $
                                                14,659
                                                
                                                
                                                $
                                                —Working
    capital
                                                
                                                $
                                                12,834
                                                
                                                
                                                $
                                                6,713
                                                
                                                
                                                $
                                                10,870
                                                
                                                
                                                $
                                                14,631
                                                
                                                
                                                $
                                                14,306Total
assets
                                                
                                                $
                                                94,047
                                                
                                                
                                                $
                                                61,937
                                                
                                                
                                                $
                                                62,125
                                                
                                                
                                                $
                                                15,195
                                                
                                                
                                                $
                                                14,723Long-term liabilities, net of
      current portion
                                                
                                                $
                                                17,775
                                                
                                                
                                                $
                                                22,422
                                                
                                                
                                                $
                                                27,172
                                                
                                                
                                                $
                                                2,533
                                                
                                                
                                                $
                                                2,517Total stockholders’
      equity
                                                
                                                $
                                                62,581
                                                
                                                
                                                $
                                                19,646
                                                
                                                
                                                $
                                                15,505
                                                
                                                
                                                $
                                                12,308
                                                
                                                
                                                $
                                                12,028
 (1)
                    On
      September 30, 2006, the Company recorded a non-cash compensation expense
      of $7.5 million. The expense was for grants of restricted common stock to
      the Company’s board of directors and common stock to Kanders &
      Company. See Note 15 to the consolidated financial
    statements.
 
 (2)
                    During
      the year ended December 31, 2008, based on the Company’s revised
      projections for future taxable income over the periods that the Company's
      deferred tax assets are deductible, the Company determined that it was
      more likely than not that it will have future taxable income sufficient to
      realize an additional portion of the Company’s net deferred tax assets and
      therefore released a significant portion of the remaining valuation
      allowance as a credit to income tax expense. The reversal of the valuation
      allowance resulted in the recognition of $35.2 million of income tax
      benefits during the year ended December 31, 2008. See note 10 to the
      consolidated financial
statements.
  (3)
                    All
      common share and per share information included in the above table have
      been restated to reflect the Company’s one-for-five reverse stock split of
      its common stock which occurred on February 20,
  2009.
  21
  In the
table below, we have provided selected historical financial data of the
Predecessor to assist in the understanding of the results of operations and
balance sheet data of the Company.  The Predecessor’s statement of
operations data for each of the years in the periods ended December 31, 2005 and
2004, respectively and the balance sheet data at December 31, 2005 and 2004 are
derived from audited financial statements not included in this report. The
selected financial data as of October 3, 2006 and for the period January 1, 2006
through October 3, 2006 represents the pre-acquisition financial condition and
operating results of the Predecessor in 2006.
   PREDECESSOR'S SELECTED FINANCIAL
DATA
 Years Ended December
      31,January 1,
2006
                                    to
                                    October 3,
    2006
                                  
                                  
                                  2005
                                  
                                  
                                  2004(in thousands, except per share
      amounts)Statement of  Operations
      DataRevenues
                                  
                                  $
                                  61,625
                                  
                                  
                                  $
                                  64,404
                                  
                                  
                                  $
                                  45,911Gross
margin
                                  
                                  $
                                  13,274
                                  
                                  
                                  $
                                  10,693
                                  
                                  
                                  $
                                  8,204Gross margin
      percentage
                                  
                                  
                                  21.5
                                  %
                                  
                                  
                                  16.6
                                  %
                                  
                                  
                                  17.9
                                  %Operating
      expenses
                                  
                                  $
                                  2,509
                                  
                                  
                                  $
                                  2,816
                                  
                                  
                                  $
                                  2,515Income from
      operations
                                  
                                  $
                                  10,765
                                  
                                  
                                  $
                                  7,877
                                  
                                  
                                  $
                                  5,689Other
    expense
                                  
                                  $
                                  4,043
                                  
                                  
                                  $
                                  593
                                  
                                  
                                  $
                                  512Net income
                                  
                                  $
                                  6,511
                                  
                                  
                                  $
                                  7,228
                                  
                                  
                                  $
                                  5,012Balance Sheet
      DataCash and cash
      equivalents
                                  
                                  $
                                  —
                                  
                                  
                                  $
                                  1,003
                                  
                                  
                                  $
                                  79Working
    capital
                                  
                                  $
                                  2,966
                                  
                                  
                                  $
                                  6,576
                                  
                                  
                                  $
                                  3,943Total
assets
                                  
                                  $
                                  29,103
                                  
                                  
                                  $
                                  20,208
                                  
                                  
                                  $
                                  14,740Long-term liabilities, net of
      current portion
                                  
                                  $
                                  641
                                  
                                  
                                  $
                                  796
                                  
                                  
                                  $
                                  1,095Total stockholders’
      equity
                                  
                                  $
                                  8,976
                                  
                                  
                                  $
                                  9,792
                                  
                                  
                                  $
                                  6,512
 
 ITEM 7. MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
 This
report contains certain forward-looking statements, including information about
or related to our future results, certain projections and business trends.
Assumptions relating to forward-looking statements involve judgments with
respect to, among other things, future economic, competitive and market
conditions and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond our control. When
used in this report, the words "estimate," "project," "intend," "believe,"
"expect" and similar expressions are intended to identify forward-looking
statements. Although we believe that our assumptions underlying the
forward-looking statements are reasonable, any or all of the assumptions could
prove inaccurate, and we may not realize the results contemplated by the
forward-looking statements. Management decisions are subjective in many respects
and susceptible to interpretations and periodic revisions based upon actual
experience and business developments, the impact of which may cause us to alter
our business strategy or capital expenditure plans that may, in turn, affect our
results of operations. In light of the significant uncertainties inherent in the
forward-looking information included in this report, you should not regard the
inclusion of such information as our representation that we will achieve any
strategy, objectives or other plans. The forward-looking statements contained in
this report speak only as of the date of this report, and we have no obligation
to update publicly or revise any of these forward-looking
statements.
 
 
 OVERVIEW
 
 Stamford
Industrial Group, through its wholly owned subsidiary Concord, is a leading
independent manufacturer of steel counterweights and structural
weldments.  We sell our products primarily in the United States to
original equipment manufacturers (“OEM”) of certain construction and industrial
related equipment that employ counterweights for stability through counterweight
leverage in the operation of equipment used to hoist heavy loads, such as
elevators and cranes.  The counterweight market we target is primarily
comprised of OEMs within the (i) commercial and industrial construction
equipment industry that manufactures aerial work platforms, telehandlers,
scissor lifts, cranes, and a variety of other construction related equipment and
vehicles; and (ii) the elevator industry, that incorporates counterweights as
part of the overall elevator operating mechanism to balance the weight of the
elevator cab and load.
  22
  Stamford
Industrial Group, Inc. was initially established in 1996 under the name “Net
Perceptions, Inc.”, as a provider of marketing software solutions.  In
2003, as a result of continuing losses and the decline of its software business,
the Company began exploring various strategic alternatives, including sale or
liquidation and ceased the marketing and development of its marketing solutions
software business in 2004.  On April 21, 2004, the Company announced
an investment into the Company by Olden Acquisition LLC (“Olden”), an affiliate
of Kanders & Company, Inc., an entity owned and controlled by the Company’s
Non-Executive Chairman, Warren B. Kanders, for the purpose of initiating a
strategy to redeploy the Company’s assets and use its cash, cash equivalent
assets and marketable securities to enhance stockholder value.  As
part of this strategy, on October 3, 2006, the Company acquired the assets of
CRC Acquisition Co. LLC (“CRC”), a manufacturer of steel counterweights doing
business as Concord.  With this initial acquisition, management is now
focused on building a diversified global industrial manufacturing group through
both organic and acquisition growth initiatives that are expected to complement
and diversify existing business lines.  The Company’s acquisition
program is focused on building a diversified industrial growth company providing
engineered products and solutions for global niche markets. Our investment
criteria generally includes companies having a transaction value up to $100
million and with annual levels of earnings before interest, taxes, depreciation
and amortization in the range of $5-$15 million. Because the Company had no
operations at the time of the Concord acquisition, the Concord business is
considered to be a predecessor company (“Predecessor”) for accounting purposes.
Accordingly, Stamford Industrial Group’s consolidated results for the year ended
December 31, 2007 have been compared with the combined results of Stamford
Industrial Group’s results for the year ended December 31, 2006 and the
Predecessor’s results for the year ended December 31, 2006 and relevant and
prior year financial information regarding the Predecessor is presented
herein.
 
 The
following management’s discussion and analysis of financial condition and
results of operations of Stamford Industrial Group and its Predecessor should be
read in conjunction with the historical financial statements and footnotes of
Stamford Industrial Group included elsewhere in this report and of Concord as
Predecessor, included in the Company’s amended Current Report on Form 8-K/A
filed with the Securities and Exchange Commission on December 18, 2006. Our
future results of operations may change materially from the historical results
of operations reflected in Stamford Industrial Group, and the Predecessors,
historical financial statements.
 
 Management’s
discussion and analysis of financial condition and results of operations is
based on the historical financial condition and results of operations of Concord
as Predecessor, rather than those of Stamford Industrial Group, prior to October
3, 2006.
    CRITICAL
ACCOUNTING POLICIES AND ESTIMATES
 
 The
Company’s discussion and analysis of financial condition and results of
operations is based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and
liabilities. On an on-going basis, the Company evaluates its estimates,
including those related to bad debts, investments, intangible assets,
restructuring liabilities, contingencies and litigation, as applicable. The
Company bases its estimates on historical experience and on various other
assumptions that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or
conditions.
 
 The
Company believes the following critical accounting policies affect significant
judgments and estimates used in the preparation of its consolidated financial
statements. Events occurring subsequent to the preparation of the consolidated
financial statements may cause the Company to re-evaluate these
policies.
 
 Use of estimates. The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts therein. Management’s
estimates are based on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances. Estimates inherent in the preparation of
the accompanying consolidated financial statements include the carrying value of
long-lived assets, valuation allowances for receivables, inventories and
deferred income tax assets, liabilities for potential litigation claims and
settlements, and potential liabilities related to tax filings in the ordinary
course of business.Management’s estimates and assumptions are evaluated
on an on-going basis. Due to the inherent uncertainty involved in making
estimates, actual results may differ from those estimates.
  23
  InventoriesThe Company’sinventories are stated at the lower of
cost or market using the average cost method. Costs included in inventories
consist of materials, labor and manufacturing overhead, which are related to the
purchase and production of inventories.
  Revenue Recognition.The Company’s revenue recognition policy
requires the recognition of sales when there is evidence of a sales agreement,
the delivery of goods has occurred, the sales price is fixed or determinable and
the collectability of revenue is reasonably assured. The Company records sales
upon shipment of product to customers and transfer of title under standard
commercial terms.
 
 Allowance for doubtful accounts.The Company
maintains allowances for doubtful accounts for estimated losses resulting from
the inability of its customers to make required payments. If the financial
condition of our customers deteriorates, resulting in an impairment of their
ability to make payments, additional allowances will be required.
 
 Litigation.The Company has
not recorded an estimated liability related to the pending class action lawsuits
and other legal proceedings in which it was named. For a discussion of this
matter, see “Legal Proceedings,” in Part I, Item 3 of this report. Due to the
uncertainties related to both the likelihood and the amount of any potential
loss, no estimate was made of the liability that could result from an
unfavorable outcome. As additional information becomes available, the Company
will assess the potential liability and make or revise its estimate(s)
accordingly, which could materially impact its results of operations and
financial position.
 
 Income taxes.Deferred income
taxes are provided on the asset and liability method, using presently enacted
tax rates, whereby deferred tax assets are recognized for deductible temporary
differences and operating loss and tax credit carryforwards and deferred tax
liabilities are recognized for taxable temporary differences. Temporary
differences are the differences between the reported amounts of assets and
liabilities and their income tax bases. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is more likely than
not that some portion or all of the deferred tax assets will not be realized.
The recognition of a valuation allowance for deferred tax assets requires
management to make estimates about the Company’s future profitability. The
estimates associated with the valuation of deferred tax assets are considered
critical due to the amount of deferred tax assets recorded on the consolidated
balance sheet and the judgment required in determining the Company’s future
profitability. We continually review the adequacy of a valuation allowance and
recognize these benefits only as our reassessment indicates that it is more
likely than not that these benefits will be realized. Moreover, because the
majority of the Company’s deferred tax assets consist of net operating loss
carryforwards for federal tax purposes, if change in control events occur which
could limit the availability of the net operating loss carryforwards under
Section 382 of the Internal Revenue Code of 1986, as amended, additions to the
valuation allowance which could reduce the deferred tax assets could also be
recorded.  Any such reduction could have a material adverse effect on
the financial condition of the Company. If we undergo an ownership change, the
NOL carryforward limitations would impose an annual limit on the amount of
taxable income that may be offset by our NOL generated prior to the ownership
change and, accordingly, we may be unable to use a significant portion of our
NOL to offset taxable income. In general, an ownership change occurs when, as of
any testing date, the aggregate of the increase in percentage points of the
total amount of a corporation's stock owned by "5-percent stockholders", within
the meaning of the NOL carryforward limitations, whose percentage ownership of
the stock has increased as of such date over the lowest percentage of the stock
owned by each such "5-percent stockholder" at any time during the three-year
period preceding such date is more than 50 percentage points. In general,
persons who own 5% or more of a corporation's stock are "5-percent
stockholders," and all other persons who own less than 5% of a corporation's
stock are treated, together, as a single, public group "5-percent stockholder,"
regardless of whether they own an aggregate of 5% of a corporation's
stock.  The Company believes it may be in violation of one or more of
the financial covenants contained in its credit agreement in the second quarter
of 2009, which would result in a default under its credit agreement, which if
not amended, cured or waived would cause all amounts outstanding under our
credit agreement to become immediately due and payable. We have commenced
discussions with the lender under our credit agreement to seek an amendment
of the credit agreement in the second quarter of 2009.  However, no
assurance can be given that we will be able to successfully amend our credit
agreement and avoid a default.  If we are unsuccessful in obtaining an
amendment to the credit agreement , the Company could be declared in default
under the credit agreement requiring the recording of a full valuation allowance
against the deferred tax asset, which would have a material adverse effect on
the market price of our common stock, our business, financial condition and
results of operations.  See “Liquidity and Capital Resources” for
additional information.
 
 Net
deferred tax assets were $39.7 million and $8.1 million at December 31, 2008 and
2007, respectively. In addition, we continually evaluate our contingencies in
accordance with Financial Accounting Standards Board Interpretation No. 48
“Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement
No. 109” (“FIN 48”).
  24
  Impairment of Long Lived Assets.The Company’s policy is to assess the realizability of its long-lived
assets, including intangible assets, and to evaluate such assets for impairment
whenever events or changes in circumstances indicate that the carrying amount of
such assets (or group of assets) may not be recoverable. Impairment is
determined to exist if the estimated future undiscounted cash flows are less
than their carrying value. Future cash flow projections include assumptions
regarding future sales levels, the impact of cost reduction programs, and the
level of working capital needed to support the business. The Company uses data
developed by its business management as well as macroeconomic data in making
these calculations. There are no assurances that future cash flow assumptions
will be achieved. The amount of any impairment then recognized would be
calculated as the difference between estimated fair value and the carrying value
of the asset. The Company performed an evaluation of its long-lived assets as of
December 31, 2008. The Company did not have any impairment for the years ended
December 31, 2008, 2007 and 2006.
   COMPARISON
OF RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND
2006
 
 Operating
Results for the Year Ended December 31, 2008 compared to the Year Ended December
31, 2007
 
 REVENUES
 
 Revenue
increased $32.2 million or 29.1% to $142.9 million for the year ended December
31, 2008, as compared to $110.7 million for the year ended December 31, 2007.
The increase of $32.2 million is primarily due to higher sales volume resulting
from increased demand for our products from existing customers as a result of
increased spending in commercial and industrial construction, and infrastructure
building end markets, price increases to customers, and an increase in average
scrap selling prices.
 
 GROSS
MARGIN
  Gross
margin was $27.0 million or 18.9% of sales for the year ended December 31, 2008,
as compared to $17.8 million or 16.1% of sales for the year ended December 31,
2007. The 17.4% increase in gross margin percentage was due to favorable product
mix, lower scrap material rates, higher sales volume and price increases,
partially offset by higher cost of raw material, and an increase in direct labor
cost due to higher volume.
 
 OPERATING
EXPENSES
 
 Operating
expenses for the year ended December 31, 2008, increased $2.7 million or 22.9%
to $14.5 million as compared to $11.8 million for the year ended December 31,
2007.
 
 Sales and marketing. Sales and marketing
expenses consisted primarily of freight costs, salaries, other employee-related
costs, commissions and other incentive compensation, travel and entertainment
and expenditures for marketing programs such as collateral materials, trade
shows, public relations and creative services. For the year ended December 31,
2008, sales and marketing expenses increased $0.6 million or 46.2% to $1.9
million as compared to $1.3 million for the year ended December 31, 2007. The
increase was primarily due to increased freight cost of $0.3 million, increased
travel expenses of $0.2 million and employee related costs of $0.1
million.
 
 General and administrative and related party cash
fee. General and administrative expenses consist primarily of employee
compensation, insurance, legal, accounting and other professional fees as well
as public company expenses such as transfer agent expenses. For the year ended
December 31, 2008, general and administrative expenses and related party cash
fee was $11.7 million as compared to $9.9 million for the year ended December
31, 2007. Stock-based compensation expense decreased by $1.2 million as a result
of mark to market adjustment in the fourth quarter of 2008 and stock option
modifications made in the fourth quarter of 2007, offset by an increase in
employee related expenses of $1.1 million due to the transition of temporary
employees to full-time and an increase in incentive-based compensation, legal
fees of $0.8 million, transaction costs of $0.6 million, depreciation expense of
$0.3 million related to capital expenditures associated with the establishment
of the Company’s corporate office, leasing expense of $0.1 million for the
corporate office, and an increase in utilities and other overhead expenses of
$0.1 million.
 
 Related party stock compensation. For the year
ended December 31, 2008, the Company had related party stock compensation
expense of $0.8 million associated with the consulting agreement with Kanders
& Company as compared to $0.5 million for the year ended December 31, 2007.
The increase of $0.3 million is the result of increased revenues for the period.
(See Note 15 to the consolidated financial statements.)
  25
  Interest expense. Interest expense was $2.0
million for the year ended December 31, 2008 compared to interest expense of
$2.7 million for the year ended December 31, 2007. The primary reason for the
decrease in interest expense is due to the overall reduction in the Company’s
revolving credit facility and term loan debt balances, partially offset by
higher mark to market adjustments of $0.1 million on interest rate swap
agreements and higher temporary interest rates associated with the second
amendment to the credit facility. (See Note 7 to the consolidated financial
statements.)
 
 PROVISION
FOR INCOME TAXES
 
 For
federal income tax purposes, the Company has available net operating loss
carry-forwards of approximately $112.9 million and research and development
credit carry-forwards of $0.4 million at December 31, 2008. The net operating
loss and research and development credit carry-forwards expire in 2011 through
2026 if not previously utilized. The utilization of these carry-forwards may be
subject to limitations based on past and future changes in ownership of the
Company pursuant to Section 382 of the Internal Revenue Code of 1986, as
amended.
 
 During
the year ended December 31, 2008, based on the Company’s revised projections for
future taxable income over the periods that the Company's deferred tax assets
are deductible, the Company determined that it was more likely than not that it
will have future taxable income sufficient to realize an additional portion of
the Company’s net deferred tax assets and therefore released a significant
portion of the remaining valuation allowance via a credit to income tax expense.
The reversal of the valuation allowance resulted in the recognition of $35.2
million of net deferred income tax benefits for the year ended December 31,
2008.
 
 Deferred
tax assets were $39.7 million at December 31, 2008 and $8.1 million at December
31, 2007, respectively, net of a valuation allowance of $0.3 and $35.4 million,
respectively.
 
 The
recognition of a valuation allowance for deferred taxes requires management to
make estimates and judgments about the Company’s future profitability which are
inherently uncertain. Deferred tax assets are reduced by valuation allowance
when, in the opinion of management, it is more likely than not that some portion
or all of the deferred tax assets will not be realized. The estimates and
judgments associated with the Company’s valuation of deferred taxes are
considered critical due to the amount of deferred taxes recorded by the Company
on its consolidated balance sheet and the judgment required in determining the
Company’s future profitability.  If, in the opinion of management, it
becomes more likely than not that some portion or all of the deferred tax assets
will not be realized, deferred tax assets would be reduced by a valuation
allowance and any such reduction could have a material adverse effect on the
financial condition of the Company.
 
 The
Company’s conclusion, based upon applicable accounting guidelines, that the
additional portion of the deferred tax assets noted above is more likely than
not to be realized reflects, among other things, its ability to generate taxable
income and its projections of future taxable income and includes future years
that the Company estimates it would have available net operating loss
carryforwards.  While the Company believes that its estimate of future
taxable income is reasonable, it is inherently uncertain. If the Company
realizes unforeseen material losses in the future, or its ability to generate
future taxable income necessary to realize a portion of the deferred tax assets
is materially reduced, additions to the valuation allowance which reduce the
deferred tax assets could be recorded. Moreover, because the majority of the
Company’s deferred tax assets consist of net operating loss carryforwards for
federal tax purposes, if change in control events occur which could limit the
availability of the net operating loss carryforwards under Section 382 of the
Internal Revenue Code of 1986, as amended, additions to the valuation allowance
which could reduce the deferred tax assets could also be
recorded.  Any such reduction could have a material adverse effect on
the financial condition of the Company.
 
 The
Company has an effective tax rate benefit of 293.2% for the year ended December
31, 2008 which consists of the significant release of the deferred tax asset
valuation allowance, partially offset by state taxes. The Company has an
effective tax rate of 6.3% for the year ended December 31, 2007 which consists
of state taxes.
 
 Operating
Results for the Year Ended December 31, 2007 compared to the Year Ended December
31, 2006
 
 For the
purpose of management’s discussion and analysis of financial condition and
results of operations, we have compared the Company’s consolidated results of
operations for the year ended December 31, 2007 to the Company’s results of
operations for the year ended December 31, 2006 combined with that of the
Predecessor for the period January 1, 2006 to October 3, 2006 (“Combined”).
Management believes that this provides the most meaningful analysis of the
Company’s results for the year ended December 31, 2007. No pro forma adjustments
have been included in the table below (amounts shown in thousands). Our future
operating results may change materially from the historical results of
operations reflected in the Company’s and the Predecessor’s historical financial
statements.
  26
 Stamford
      Industrial
                                                  Group
                                                  Year Ended
                                                  December 31,
                                                  2007
                                                
                                                
                                                Stamford
      Industrial
                                                  Group
                                                  Year Ended
                                                  December 31,
                                                  2006
                                                
                                                
                                                Predecessor
      Company
                                                  January 1,
2006
                                                  to
                                                  October 3,
    2006
                                                
                                                
                                                Combined Total
                                                  Year Ended
                                                  December 31,
                                                  2006
                                                
                                                
                                                Variance(1)Revenues
                                                
                                                $
                                                110,743
                                                
                                                
                                                $
                                                24,078
                                                
                                                
                                                $
                                                61,625
                                                
                                                
                                                $
                                                85,703
                                                
                                                
                                                $
                                                25,040Cost of
      revenues
                                                
                                                
                                                92,926
                                                
                                                
                                                
                                                19,801
                                                
                                                
                                                
                                                48,351
                                                
                                                
                                                
                                                68,152
                                                
                                                
                                                
                                                24,774Gross
margin
                                                
                                                
                                                17,817
                                                
                                                
                                                
                                                4,277
                                                
                                                
                                                
                                                13,274
                                                
                                                
                                                
                                                17,551
                                                
                                                
                                                
                                                266Operating
      expenses:Sales and
      marketing
                                                
                                                
                                                1,315
                                                
                                                
                                                
                                                322
                                                
                                                
                                                
                                                912
                                                
                                                
                                                
                                                1,234
                                                
                                                
                                                
                                                81General and
      administrative
                                                
                                                
                                                9,438
                                                
                                                
                                                
                                                3,491
                                                
                                                
                                                
                                                1,597
                                                
                                                
                                                
                                                5,088
                                                
                                                
                                                
                                                4,350Related party cash
      fee
                                                
                                                
                                                500
                                                
                                                
                                                
                                                125
                                                
                                                
                                                
                                                —
                                                
                                                
                                                
                                                125
                                                
                                                
                                                
                                                375Related party stock
      compensation
                                                
                                                
                                                507
                                                
                                                
                                                
                                                7,638
                                                
                                                
                                                
                                                —
                                                
                                                
                                                
                                                7,638
                                                
                                                
                                                
                                                (7,131
                                                )Total operating
      expenses
                                                
                                                
                                                11,760
                                                
                                                
                                                
                                                11,576
                                                
                                                
                                                
                                                2,509
                                                
                                                
                                                
                                                14,085
                                                
                                                
                                                
                                                (2,325
                                                )Income (loss) from
      operations
                                                
                                                
                                                6,057
                                                
                                                
                                                
                                                (7,299
                                                )
                                                
                                                
                                                10,765
                                                
                                                
                                                
                                                3,466
                                                
                                                
                                                
                                                2,591Other (expense)
      income:Interest
    income
                                                
                                                
                                                6
                                                
                                                
                                                
                                                566
                                                
                                                
                                                
                                                —
                                                
                                                
                                                
                                                566
                                                
                                                
                                                
                                                (560
                                                )Interest
      expense
                                                
                                                
                                                (2,691
                                                )
                                                
                                                
                                                (775
                                                )
                                                
                                                
                                                (507
                                                )
                                                
                                                
                                                (1,282
                                                )
                                                
                                                
                                                (1,409
                                                )Management and loan guaranty
      fees
                                                
                                                
                                                —
                                                
                                                
                                                
                                                —
                                                
                                                
                                                
                                                (710
                                                )
                                                
                                                
                                                (710
                                                )
                                                
                                                
                                                710Other
    (expense)
                                                
                                                
                                                (137
                                                )
                                                
                                                
                                                (22
                                                )
                                                
                                                
                                                (2,826
                                                )
                                                
                                                
                                                (2,848
                                                )
                                                
                                                
                                                2,711Total other (expense) income,
      net
                                                
                                                
                                                (2,822
                                                )
                                                
                                                
                                                (231
                                                )
                                                
                                                
                                                (4,043
                                                )
                                                
                                                
                                                (4,274
                                                )
                                                
                                                
                                                1,452Income (loss) before
      taxes
                                                
                                                
                                                3,235
                                                
                                                
                                                
                                                (7,530
                                                )
                                                
                                                
                                                6,722
                                                
                                                
                                                
                                                (808
                                                )
                                                
                                                
                                                4,043Provision for income
      taxes
                                                
                                                
                                                203
                                                
                                                
                                                
                                                223
                                                
                                                
                                                
                                                211
                                                
                                                
                                                
                                                434
                                                
                                                
                                                
                                                (231
                                                )Net income
      (loss)
                                                
                                                $
                                                3,032
                                                
                                                
                                                $
                                                (7,753
                                                )
                                                
                                                $
                                                6,511
                                                
                                                
                                                $
                                                (1,242
                                                )
                                                
                                                $
                                                4,274
  (1)
Variance represents the difference between Combined Total and the Company at
December 31, 2007 and has been presented to assist in evaluating our financial
statements.
 
 REVENUES
 
 Revenues
increased $25.0 million or 29.2% to $110.7 million for the year ended December
31, 2007 as compared to combined revenue of $85.7 million for the year ended
December 31, 2006. The increase of $25.0 million was primarily due to price
increases as a result of increased material costs and higher sales volume due to
increased demand for our products from existing customers of approximately $21.5
million, as a result of increased spending in the commercial and industrial
construction and infrastructure building end markets, the addition of several
new customers within the aircraft ground equipment and
construction  markets of $1.1 million and an increase in scrap metal
sales of $2.4 million.
 
 GROSS
MARGIN
 
 Gross
margin was $17.8 million or 16.1% of sales for the year ended December 31, 2007
as compared to $17.6 million or 20.5% of sales for the Combined year ended
December 31, 2006. The 21.4% decrease in margin percentage was primarily a
result of significantly higher costs for raw material, a one time increase in
scrap related to lean manufacturing initiatives, increase in manufacturing
overhead costs associated with the ramp up of the Essington, Pennsylvania
manufacturing facility, additional expenses related to repairs and maintenance
and additional outside fabrication costs partially offset by sales volume and
price increases.
 
 27
 
 OPERATING
EXPENSES
 
 Operating
expenses for the year ended December 31, 2007 decreased $2.3 million or 16.3% to
$11.8 million as compared to the Combined operating expenses of $14.1 million
for the year ended December 31, 2006.
 
 Sales and marketing. Sales
and marketing expenses consisted primarily of salaries, other employee-related
costs, commissions and other incentive compensation, travel and entertainment
and expenditures for marketing programs such as collateral materials, trade
shows, public relations and creative services. For the year ended December 31,
2007, sales and marketing expenses increased $0.1 million or 8.3% to $1.3
million as compared to $1.2 million for the Combined year ended December 31,
2006. The increase was primarily the result of increased revenues discussed
above.
 
 General and administrative and
related party cash fee. General and administrative expenses consist
primarily of employee compensation, insurance, legal, accounting and other
professional fees as well as public company expenses such as transfer agent
expenses and costs related to the transition of the Company in October 2006. For
the year ended December 31, 2007, general and administrative expense and related
cash fee increased $4.7 million or 90.4% to $9.9 million as compared to $5.2
million for the Combined year ended December 31, 2006. The increase was
primarily the result of increases in deferred compensation expenses of $1.3
million, employee related expenses of $0.2 million, professional fees of $1.1
million, consulting expenses of $0.4 million which relate to the Kanders &
Company consulting agreement fee (see Note 15 to the consolidated financial
statements for further discussion), one time first year Sarbanes-Oxley
implementation of $0.3 million, increase in amortization expense of $0.8 million
related to intangible assets acquired as part of the Concord acquisition and
other general expenses of $0.6 million.
 
 Related party stock
compensation.For the year ended December 31, 2007, the
Company had related party stock compensation expense of $0.5 million associated
with the stock consulting agreement with Kanders & Company (see Note 15 to
the consolidated financial statements). The related party stock compensation
expense for the year ended December 31, 2006 was primarily due to non-cash
compensation expense incurred for the grants of restricted common stock to
members of the Company’s Board of Directors and a one time common stock grant to
Kanders & Company, as discussed in Note 15 to the consolidated financial
statements.
 
 Interest expense.
Interest expense was $2.7 million for the year ended December 31, 2007 as
compared to Combined interest expense of $1.3 million for the year ended
December 31, 2006. The expense was primarily from the issuance of long-term debt
used to finance the purchase of Concord. The increase in interest expense was
the result of debt outstanding for the full year ended December 31,
2007.
 
 Other expense.  For
the year ended December 31, 2007, the Company had other expense of $0.1 million
compared to $2.8 million for the year ended December 31, 2006. The variance of
$2.7 million was primarily related to transaction costs incurred by the
Predecessor related to the sale of CRC.
 
 PROVISION
FOR INCOME TAXES
 
 For
federal income tax purposes, the Company had available federal net operating
loss carryforwards of approximately $122.6 million and research and development
credit carryforwards of approximately $0.2 million at December 31, 2007. The net
operating loss and research and development credit carryforwards expire in 2011
through 2026 if not previously utilized. The utilization of these carry-forwards
may be subject to limitations based on past and future changes in ownership of
the Company pursuant to Internal Revenue Code Section 382. If the Company were
to be acquired at its recent stock value such that Section 382 is applicable,
this would eliminate the ability to use a substantial amount of these
carryforwards. The recognition of a valuation allowance for deferred tax assets
requires management to make estimates about the Company’s future profitability.
The estimates associated with the valuation of deferred tax assets are
considered critical due to the amount of deferred tax assets recorded on the
consolidated balance sheet and the judgment required in determining the
Company’s future profitability. We continually review the adequacy of the
valuation allowance and recognize these benefits only as our reassessment
indicates that it is more likely than not that these benefits will be realized.
Net deferred tax assets were $8.1 million at both December 31, 2007 and 2006,
net of a valuation allowance of $35.4 million and $36.3 million, respectively.
We continually evaluate our contingencies in accordance with Financial
Accounting Standards Board Interpretation No. 48 “Accounting for Uncertainty in
Income Taxes, an interpretation of FASB Statement No. 109” (“FIN 48”). The
Company had an effective tax rate of 6.3% for 2007 and 3.0% for 2006 which
consists of a federal alternative tax and state tax offset by a state tax
credit. The Predecessor is treated as a partnership, which is not a taxpaying
entity for federal income tax purposes. Therefore, no federal income tax expense
has been recorded in the financial statements, as such income is taxed to the
partners on their individual tax returns. There is no current or deferred
federal income tax provision due to the availability of net operating loss
carry-forwards and the maintenance of a deferred tax valuation allowance at
consistent levels.
  28
 
 SELECTED
CONSOLIDATED QUARTERLY OPERATING RESULTS
 
 The
following table sets forth quarterly unaudited financial data for 2008 and 2007
for Stamford Industrial Group. In the opinion of management, this unaudited
financial data has been prepared on the same basis as the audited financial
statements included in this report and includes all adjustments, consisting only
of normal recurring accruals that are considered necessary for a fair
presentation of such information when read in conjunction with our audited
financial statements and notes thereto appearing elsewhere in this report. The
information appearing below is not indicative of the results that may be
expected for any subsequent period.
  STAMFORD INDUSTRIAL GROUP,
      INC.
                                                                                                                                                                THREE MONTHS
      ENDED2008
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              2007Dec. 31
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              Sep. 30
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              Jun. 30
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              Mar. 31
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              Dec. 31
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              Sep. 30
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              Jun. 30
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              Mar. 31(Amounts in thousands, except per
      share amounts)(Unaudited)Results of
      Operations:Revenues
                                                                                                                                                              
                                                                                                                                                              $
                                                                                                                                                              26,572
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              $
                                                                                                                                                              41,484
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              $
                                                                                                                                                              42,181
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              $
                                                                                                                                                              32,677
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              $
                                                                                                                                                              26,361
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              $
                                                                                                                                                              28,197
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              $
                                                                                                                                                              28,281
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              $
                                                                                                                                                              27,904Cost of
      revenues
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              25,358
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              32,366
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              31,116
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              27,112
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              23,386
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              23,102
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              23,872
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              22,566Gross
margin
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              1,214
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              9,118
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              11,065
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              5,565
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              2,975
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              5,095
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              4,409
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              5,338Gross margin
      percentage
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              4.6
                                                                                                                                                              %
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              22.0
                                                                                                                                                              %
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              26.2
                                                                                                                                                              %
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              17.0
                                                                                                                                                              %
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              11.3
                                                                                                                                                              %
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              18.1
                                                                                                                                                              %
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              15.6
                                                                                                                                                              %
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              19.1
                                                                                                                                                              %Operating
      expenses:Sales and
      marketing
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              481
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              517
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              528
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              415
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              272
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              368
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              303
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              372General and
      administrative
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              2,246
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              2,856
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              3,895
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              2,703
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              1,910
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              2,933
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              2,367
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              2,728Related party stock
      compensation
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              116
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              262
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              274
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              177
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              113
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              132
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              133
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              129Total operating
      expenses
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              2,843
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              3,635
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              4,697
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              3,295
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              2,295
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              3,433
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              2,803
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              3,229(Loss) income from
      operations
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              (1,629
                                                                                                                                                              )
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              5,483
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              6,368
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              2,270
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              680
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              1,662
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              1,606
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              2,109Interest
    income
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              —
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              —
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              —
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              1
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              —
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              —
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              —
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              6Interest
      expense
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              (493
                                                                                                                                                              )
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              (198
                                                                                                                                                              )
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              (504
                                                                                                                                                              )
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              (790
                                                                                                                                                              )
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              (756
                                                                                                                                                              )
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              (720
                                                                                                                                                              )
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              (544
                                                                                                                                                              )
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              (671
                                                                                                                                                              )Other (expense) income,
      net
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              (28
                                                                                                                                                              )
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              5
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              16
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              27
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              2
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              —
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              (17
                                                                                                                                                              )
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              (122
                                                                                                                                                              )(Loss) income before income
      taxes
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              (2,150
                                                                                                                                                              )
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              5,290
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              5,880
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              1,508
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              (74
                                                                                                                                                              )
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              942
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              1,045
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              1,322(Benefit)
      provision for income taxes(1)
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              (1,040
                                                                                                                                                              )
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              845
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              (30,762
                                                                                                                                                              )
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              89
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              (433
                                                                                                                                                              )
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              331
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              (265
                                                                                                                                                              )
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              570Net (loss)
      income
                                                                                                                                                              
                                                                                                                                                              $
                                                                                                                                                              (1,110
                                                                                                                                                              )
                                                                                                                                                              
                                                                                                                                                              $
                                                                                                                                                              4,445
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              $
                                                                                                                                                              36,642
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              $
                                                                                                                                                              1,419
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              $
                                                                                                                                                              359
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              $
                                                                                                                                                              611
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              $
                                                                                                                                                              1,310
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              $
                                                                                                                                                              752Basic net (loss)/income per
      share
                                                                                                                                                              
                                                                                                                                                              $
                                                                                                                                                              (0.13
                                                                                                                                                              )
                                                                                                                                                              
                                                                                                                                                              $
                                                                                                                                                              0.53
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              $
                                                                                                                                                              4.38
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              $
                                                                                                                                                              0.17
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              $
                                                                                                                                                              0.04
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              $
                                                                                                                                                              0.07
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              $
                                                                                                                                                              0.16
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              $
                                                                                                                                                              0.09Shares used in basic
      calculation
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              8,420
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              8,381
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              8,371
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              8,367
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              8,360
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              8,343
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              8,335
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              8,335Diluted net (loss)/income per
      share
                                                                                                                                                              
                                                                                                                                                              $
                                                                                                                                                              (0.13
                                                                                                                                                              )
                                                                                                                                                              
                                                                                                                                                              $
                                                                                                                                                              0.46
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              $
                                                                                                                                                              3.81
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              $
                                                                                                                                                              0.15
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              $
                                                                                                                                                              0.04
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              $
                                                                                                                                                              0.06
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              $
                                                                                                                                                              0.13
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              $
                                                                                                                                                              0.08Shares used in diluted
      calculation
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              8,420
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              9,720
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              9,616
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              9,566
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              9,532
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              9,765
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              9,913
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              
                                                                                                                                                              9,911
 (1)
                    During
      the year ended December 31, 2008, based on the Company’s revised
      projections for future taxable income over the periods that the Company's
      deferred tax assets are deductible, the Company determined that it was
      more likely than not that it will have future taxable income sufficient to
      realize an additional portion of the Company’s net deferred tax assets and
      therefore released a significant portion of the remaining valuation
      allowance as a credit to income tax expense. The reversal of the valuation
      allowance resulted in the recognition of $35.2 million of income tax
      benefits during the year ended December 31, 2008. See note 10 to the
      consolidated financial
statements.
 
 (2)
                    All
      common share and per share information included in the above table have
      been restated to reflect the Company’s one-for-five reverse stock split
      which occurred on February 20,
2009.
  29
  LIQUIDITY
AND CAPITAL RESOURCES
 
 Liquidity
 
 In
connection with the Company’s acquisition of Concord, Concord entered into a senior secured credit
facility (the“Credit
Agreement”) with LaSalle Bank National Association, as administrative agent (the
“Agent”) and the lenders party thereto.
 
 The Credit Agreement establishes a
commitmentby the lenderstoConcordto provide up to $40.0 millionin the aggregate of loans and other
financial accommodations consisting of (i) a five-year senior secured term loan in an
aggregate principal amount of $28.0 million, (ii) a five-year senior secured revolving credit
facility in the aggregate principal amount of $10.0 million(the “Revolving Facility”) and (iii) a
five-year senior secured capital expenditure
facility in the aggregate principal amount of $2.0 million. The Revolving Facility is further
subject to a borrowing base consisting of up to 85% of eligible accounts
receivable and up to 55% of eligible inventory. The Revolving Facility includes
a sublimit of up to an aggregate amount of $5.0 millionin letters of credit and a sublimit of
up to an aggregate amount of $2.5 millionin swing line loans. The capital
expenditure facility permittedthe Company to draw funds for the
purchase of machinery and equipment during the 6-month period endedMarch 3, 2007, and then
convertedinto a 4.5-year term loan. Immediately following
the closing of the Concord Acquisition, the Company drew down approximately
$31.3 millionand had additional availability under
the Revolving Facility of approximately $6.7 million. There were no amounts drawn under the
capital expenditure facility at the time of closing of the credit
facilitynor were there any
amounts drawn down prior to March 3, 2007, the datethe capital expenditure facility
expired.On March
13, 2008, we entered into a second amendment to the Credit Agreement to provide
for, among other things, revisions to certain of the financial covenants under
the bank credit facilities discussed above.
  At
December 31, 2008 and 2007, the outstanding balance from the Revolving Facility
amounted to $0.3 and $5.3 million, respectively. At December 31, 2008, the
Company had $8.1 million available in additional borrowings net of $1.6 million
in outstanding letters of credit which have not been drawn upon. The balance
under the term loan at December 31, 2008 and December 31, 2007 was $19.0 million
and $23.0 million, respectively. At December 31, 2008 and December 31, 2007, the
Company had $4.0 million and $4.0 million, respectively, classified as the
current portion of long-term debt and $15.0 million and $19.0 million,
respectively, classified as long-term. During the year ended December 31, 2008,
the Company was in compliance with all of our financial covenants under the bank
credit facilities. These covenants require us to meet certain financial tests,
namely (a) to maintain a consolidated leverage ratio not in excess of 2.75 to
1.00 on the last day of any fiscal quarter, and (b) to maintain a consolidated
fixed charge coverage ratio of not less than 1.35 to 1.00 for the period of four
consecutive fiscal quarters ending on December 31, 2008 and a consolidated fixed
charge coverage ratio of not less than 1.50 to 1.00 for the period of four
consecutive fiscal quarters ending on or after March 31, 2009. As of December
31, 2008 our consolidated leverage ratio was 1.22 and our fixed charge coverage
ratio was 2.50. Our future compliance with our financial covenants under the
bank credit facilities will depend on our ability to generate earnings and
manage our assets effectively. Our bank credit facilities also have various
non-financial covenants, requiring us to refrain from taking certain actions and
requiring us to take certain actions, such as keeping in good standing our
corporate existence, maintaining insurance, and providing our bank lending group
with financial information on a timely basis. Our failure to comply with these
financial covenants could result in a default which if not cured or waived could
cause all amounts outstanding under our bank credit facilities to become
immediately due and payable.
  A
continuing recession which started in the U.S. and is spreading across the
globe, as well as the distress in the financial and credit markets, has resulted
in declining revenues and earnings in our business, and has put additional
pressure on our ability to remain in compliance with the financial covenant
ratios contained in our Credit Agreement. These downward trends in our revenues
and earnings are expected to continue to adversely affect our financial results
causing us to lower our expectations for at least the remainder of
2009.
 
 Consequently,
the Company believes it may be in violation of one or more of the financial
covenants under its Credit Agreement at the end of the second quarter of fiscal
2009, which would result in a default under its Credit Agreement, which if not
amended, cured or waived would cause all amounts outstanding under our Credit
Agreement to become immediately due and payable.  In the event of a
default, we cannot assure you that we would have sufficient funds to repay all
of the outstanding amounts, which could result in the exercise by the Agent of
all of its rights and remedies available to it, such as seizing any and all
collateral pledged under the Credit Agreement which would have a material
adverse effect on the market price of our common stock, our business, financial
condition and results of operations.  We have commenced discussions
with the Agent under our Credit Agreement to seek an amendment of the Credit
Agreement in the second quarter of 2009.  However, no assurance can be
given that we will be able to successfully amend our Credit Agreement and avoid
a default.  The Company expects to incur upfront fees and higher
interest costs as a result of any such amendment. An amendment could also
involve other changes to the Credit Agreement not directly related to changing
the relevant financial covenant measures that could restrict the Company’s
operations.
  30
  Borrowings under the Credit Agreement
bear interest, at the Company’s election, at either (i) a rate equal tothree month variableLondon Interbank Offer Rate (“LIBOR”), plus an applicable margin ranging from
1.25% to 2.5%, depending on certain conditions, or (ii) an alternate base rate
which will be the greater of (a) the Federal Funds rate plus 0.5% or (b) the
prime rate publicly announced by the Agent as its prime rate, plus, in both
cases, an applicable margin ranging from 0% to 1.0%, depending on certain
conditions.At December 31,
2008 and 2007, the
applicable interest rate for the outstanding borrowings under the Credit
Agreementwas3.79% and 7.24%,
respectively.
 
 The Credit Agreement is guaranteed by
the Company and its direct and indirect subsidiaries and is secured by, among
other things, (a) (i) all of the equity interests ofConcord’ssubsidiaries and (ii) a pledgeby the Companyof all of the issued and outstanding
shares of stock ofConcordbythe Companyand (b) a first priority perfected
security interest on substantially all the assets of the Company and its direct
and indirect subsidiaries pursuant to a guaranty and collateral agreement dated
October 3, 2006 and delivered in connection with the Credit Agreement (the
“Guaranty Agreement”). In addition, LaSalle Bank acting as the Agent, for the
benefit of the lenders, has a mortgage on all owned real estate of the Company
and its direct and indirect subsidiaries, as well as deposit account control
agreements with respect to funds on deposit in bank accounts of the Company and
its direct and indirect subsidiaries.
 
 The
Company is exposed to interest rate volatility with regard to existing issuances
of variable rate debt. Primary exposure includes movements in the U.S. prime
rate and LIBOR. The Company uses interest rate swaps to reduce interest rate
volatility. On January 2, 2007, the Company entered into an interest rate
protection agreement with a notional amount of approximately $10.3 million of
interest rate swaps fixing interest rates between 5.0% and 5.8%.
 
 Market
volatility in LIBOR has recently exposed the Company to fluctuations in
decreased interest rates on outstanding borrowings provided under the Credit
Agreement. Based on available information, we believe the financial institutions
syndicated under our Credit Agreement are able to fulfill their commitments as
of the date of this filing, however, there can be no assurance that one or more
financial institutions will be able to fulfill their funding
obligations.
 
 On April 21, 2004, the Company closed on
an investment into the Company by Olden Acquisition LLC (“Olden”), an affiliate of Kanders &
Company, Inc., for the purpose of
initiating a strategyto
redeploy the Company’s assets and use the Company’s cash, cash equivalent assets and
marketable securities to enhance stockholder value.The Companyissued and sold to Olden a 2% ten-year
Convertible Subordinated Note, which is convertible after one year(or earlier upon a call by the
Company and in certain other circumstances) at a conversion price of $2.25per share of Company common stock into
approximately 19.9% of the outstanding common equity of the Company as of the
closing date.  Proceeds to theCompany from this transaction totaled
approximately $2.5
millionbefore transaction
costs of $0.3
million.  The
transaction costs are being amortized over ten years, the term of the
debt.  Interest on the note accrues semi-annually but is not payable
currently or upon
conversion of the note.  The note matures on April 21, 2014. As of
December 31, 2008and 2007, the outstanding balance on the note
payable amounted to $2.5
millionand is classified
as long-term debt.
 
 Operating
Activities
 
 Net cash
provided by operating activities was $8.7 million for the year ended December
31, 2008, reflecting net income of $41.4 million, depreciation and amortization
of $2.3 million, non-cash stock-based compensation expense of $0.4 million,
provision for doubtful accounts of $0.3 million, non-cash related party stock
compensation of $0.8 million offset by the impact of the change in deferred tax
assets of $31.7 million and the changes in working capital of $4.8 million. The
change in working capital is primarily due to the timing of price increases to
customers, tight credit markets experienced by our vendors and the timing
difference between increased revenues generated and cash collections.Net cash provided by
operating activities was $5.9 million for the year ended December 31, 2007,
reflecting net income of $3.0 million, depreciation and amortization of $1.8
million, non-cash stock-based compensation expense of $1.7 million offset by the
impact of changes in working capital of $1.1 million. The change in working
capital is primarily due to the timing difference between increased revenues
generated and cash collections in 2007 versus 2006, in addition to one time
finders fees of $1.0 million related to the acquisition of Concord in 2006.Net cash provided by
operating activities was $1.1 million for the year ended December 31, 2006,
reflecting the net loss of $7.8 million, which includes non-cash related party
stock compensation expenses of $7.5 million.
  31
  Investing
Activities
 
 Net cash
used in investing activities was $0.7 million for the year ended December 31,
2008, primarily resulting from implementation of Concord’s new information
technology platform and the purchase of machinery and equipment.Net cash used in investing
activities was $5.4 million for the year ended December 31, 2007, primarily
resulting from the purchase of machinery and equipment and leasehold
improvements.Net
cash used in investing activities was $31.3 million for the year ended December
31, 2006. Cash paid for acquisitions and related costs were $45.3 million
partially offset by $14.7 million of proceeds from the sale of marketable
securities used to purchase Concord. Capital expenditures were $0.6
million.
 
 Financing
Activities
 
 Net cash
used in financing activities was $9.0 million for the year ended December 31,
2008. The net cash used in financing activities resulted from an increase in the
Company’s line of credit facility of $1.5 million which was used for working
capital expansion and capital expenditures, offset by cash used to pay down a
portion of the Company’s line of credit facility in the amount of $6.5 million
and to pay down long-term debt in the amount of $4.0 million.Net cash used in financing
activities was $3.0 million for the year ended December 31, 2007. The net cash
used in financing activities was primarily from an increase in the Company’s
line of credit facility of $2.0 million which was used for working capital
expansion and capital expenditures, offset by cash used to pay down long-term
debt in the amount of $5.0 million.Net cash provided by
financing activities was $33.7 million for the year ended December 31, 2006. The
net proceeds were from the issuance of long-term debt of $28.0 million, $3.3
million of borrowings under the short-term revolving facility as a result of the
acquisition of Concord Steel, $3.0 million investment from CRC Acquisition Co.
LLC offset by debt issuance costs of $0.6 million.
 
 We
believe that the Company’s Revolving Facility and cash from operations will be
sufficient to meet our expected working capital needs for at least the next
twelve months. However, the various sectors of the credit markets and financial
services industry have been experiencing a period of unprecedented turmoil and
upheaval characterized by disruption in the credit markets and availability of
credit and other financing, the failure, bankruptcy, collapse or sale of various
financial institutions and an unprecedented level of intervention from the
United States federal government. While the ultimate outcome of these events
cannot be predicted, they may have a material adverse effect on our ability to
obtain financing necessary to effectively execute our acquisition strategy, the
ability of our customers and suppliers to continue to operate their businesses
or the demand for our products which could have a material adverse effect on the
market price of our common stock and our business, financial condition and
results of operations. If the Company has a need for funding, we believe our
liquidity requirements can be satisfied by drawing upon our contractually
committed Credit Agreement, but under extreme market conditions, there can be no
assurance that this agreement would be available or sufficient. See “Risk
Factors - The Company’s existing credit facility contains financial and
restrictive covenants that may limit its ability to operate its business and the
Company believes it may be in violation of one or more of these covenants in the
second quarter of 2009 which would cause all amounts under the credit facility
to become due and payable” for more information.
 
 Recent
distress in the financial markets has had an adverse impact on financial market
activities including among other things, extreme volatility in security prices,
severely diminished liquidity and credit availability, rating downgrades of
certain investments and declining valuations of others. The Company has assessed
the implication of these factors on our current business and determined that
there has not been a significant impact on our financial position, results of
operations or liquidity during the year ended December 31, 2008. However, there
can be no assurance that as a result of these conditions there will not be an
impact on our future financial position, results of operations or liquidity.
Based on available information, we believe the financial institutions syndicated
under our Credit Agreement are able to fulfill their commitments as of the date
of this filing; however, there can be no assurance that one or more financial
institutions will be able to fulfill their funding obligations.
 
 Capital
Expenditures
 
 The Company anticipates capital
expenditures, excluding acquisitions, of approximately $0.7 million for fiscal
2009. The Company expects capital expenditures will be funded from cash
generated by operations. The primary driver of capital expenditures in 2009 is
related to the purchase of machinery and equipment.
 
 
 CONTRACTUAL
OBLIGATIONS
 
 In
addition to our scheduled maturities of debt, we have future cash obligations
under various types of contracts. We lease office space, manufacturing
facilities and equipment under long-term operating leases. We have also entered
into long-term employment agreements with certain of our executives and other
key employees. These contracts typically contain provisions that allow us to
terminate the contract with good cause.
 
 32
 
 The
following summarizes the Company's contractual obligations and commercial
commitments at December 31, 2008, and the effect such obligations are expected
to have on our liquidity and cash flow in future periods:
  Contractual
      Obligations
                                  
                                  Total
                                  
                                  
                                  Less than
                                    1
year
                                  
                                  
                                  1 - 3
                                    years
                                  
                                  
                                  3 - 5
                                    years
                                  
                                  
                                  More Than
                                    5 yearsLong-term debt and notes
      payable
                                  
                                  $
                                  21,819
                                  
                                  
                                  $
                                  4,286
                                  
                                  
                                  $
                                  15,000
                                  
                                  
                                  $
                                  —
                                  
                                  
                                  $
                                  2,533Estimated interest on long-term
      debt (1)
      (2)
                                  
                                  
                                  1,662
                                  
                                  
                                  
                                  723
                                  
                                  
                                  
                                  821
                                  
                                  
                                  
                                  102
                                  
                                  
                                  
                                  16Non-cancelable operating leases
      (3)
                                  
                                  
                                  7,917
                                  
                                  
                                  
                                  1,245
                                  
                                  
                                  
                                  2,479
                                  
                                  
                                  
                                  1,985
                                  
                                  
                                  
                                  2,208Total
                                  
                                  $
                                  31,398
                                  
                                  
                                  $
                                  6,254
                                  
                                  
                                  $
                                  18,300
                                  
                                  
                                  $
                                  2,087
                                  
                                  
                                  $
                                  4,757
 
 (1)
                Variable
      rates used were those in effect at December 31,
  2008.
 (2)
                Interest
      payments related to our short-term debt are not included in the table as
      they do not represent a significant obligation as of December 31,
      2008.
 (3)
                The
      Company’s lease provides that in the event of the termination of the lease
      of the 5,750 square feet of office space adjacent to the Company’s leased
      office space (the “Adjacent Lease”), the Company will be obligated to
      lease said premises at the same rate paid by the Company for its office
      space.  The tenant under the Adjacent Lease has recently filed
      for bankruptcy protection and the Trustee has rejected the Adjacent Lease.
      To date the landlord has not formally terminated the Adjacent Lease. The
      Company is currently working with the Landlord to either secure a new
      tenant for the adjacent space, or upon termination of the Adjacent Lease,
      for the Company to sublet the adjacent
space.
 
 The
Company does not engage in any transactions or have relationships or other
arrangements with unconsolidated entities. These include special purpose and
similar entities or other off-balance sheet arrangements. The Company also does
not engage in the trading of energy, weather or other commodity-based
contracts.
 
 RECENTLY
ISSUED ACCOUNTING PRONOUNCEMENTS
 
 In April 2008, the FASB issued FSP No.
142-3, “Determination of the Useful Life of Intangible Assets” (“FSP No.
142-3”).  FSP No. 142-3 amends the factors that should be considered in
developing renewal or extension assumptions used to determine the useful life of
a recognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible
Assets.”  FSP No. 142-3 is effective on a prospective basis to all
intangible assets acquired and for disclosures on all intangible assets
recognized on or after the beginning of the first annual period subsequent to
December 15, 2008.  Early adoption is prohibited.  We have
evaluated the new statement and have determined that it will not have a
significant impact on the determination or reporting of our financial
results.
 
 In March
2008, the Financial Accounting Standards Board (“FASB”) issued Statement of
Financial Accounting Standards No. 161, Disclosures about Derivative Instruments
and Hedging Activities - an amendment of FASB Statement No. 133 ("SFAS 161").
SFAS 161 changes the disclosure requirements for derivative instruments and
hedging activities. Under SFAS 161, entities are required to provide enhanced
disclosures about (a) how and why an entity uses derivative instruments, (b) how
derivative instruments and related hedged items are accounted for under
Statement 133 and its related interpretations, and (c) how derivative
instruments and related hedged items affect an entity's financial position,
financial performance, and cash flows. SFAS 161 is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008, with early application encouraged. The Statement encourages, but does
not require, comparative disclosures for earlier periods at initial adoption.
The Company does not anticipate any material impact on its future disclosures
from the adoption of this standard.
 
 In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
Combinations” (“SFAS 141R”), which replaces SFAS No. 141, “Business
Combinations (“SFAS 141”).” SFAS 141R retains the underlying concepts of SFAS
No. 141 in that all business combinations are still required to be accounted for
at fair value under the acquisition method of accounting, but SFAS 141R changes
the application of the acquisition method in a number of significant aspects.
Acquisition costs will generally be expensed as incurred; noncontrolling
interests will be valued at fair value at the acquisition date; in-process
research and development will be recorded at fair value as an indefinite-lived
intangible asset at the acquisition date; restructuring costs associated with a
business combination will generally be expensed subsequent to the acquisition
date; and changes in deferred tax asset valuation allowances and income tax
uncertainties after the acquisition date generally will affect income tax
expense. SFAS 141R is effective on a prospective basis for all business
combinations for which the acquisition date is on or after the beginning of the
first annual period subsequent to December 15, 2008. Early adoption is not
permitted. SFAS 141R will only be applicable to future business combinations and
will not have a significant effect on the Company’s financial statements prior
to such an acquisition.
  33
  In
September 2006, FASB issued Statement of Financial Accounting Standards No. 157,
“Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes
a framework for measuring fair value under generally accepted accounting
principles, and requires expanded disclosures about fair value measurements.
SFAS 157 emphasizes that fair value is a market-based measurement, not an
entity-specific measurement, and states that a fair value measurement should be
determined based on the assumptions that market participants would use in
pricing the asset or liability. SFAS 157 applies under other accounting
pronouncements that require or permit fair value measurements, the FASB having
previously concluded in those accounting pronouncements that fair value is the
relevant measurement attribute. Accordingly, SFAS 157 does not require any new
fair value measurements. In February 2008, the FASB issued Staff Positions 157-1
and 157-2 which remove certain leasing transactions from the scope of SFAS 157
and partially defer the effective date of SFAS 157 for one year for certain
nonfinancial assets and liabilities. SFAS 157 is effective for fiscal years
beginning after November 15, 2007. The adoption of FAS 157 did not have a
material impact on the Company's financial position, results of operations and
cash flows. The Company is currently assessing the impact of fully adopting SFAS
157 on its future disclosures for nonfinancial assets and
liabilities.
 
 
 ITEM 7A. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
 
 Through
December 31, 2008, the majority of our recognized revenues were denominated in
United States dollars and were primarily from customers in the United States,
and our exposure to foreign currency exchange rate changes has been immaterial.
Accordingly, we do not consider significant our exposure to foreign currency
exchange rate changes arising from revenues or expenses being denominated in
foreign currencies.
 
 Interest
Rate Risk
 
 The
Company’s primary exposure to market risk is interest rate risk associated with
our senior credit facilities. The
Company has a long-term credit facility thatbearsinterest, at the Company’s election, at
either (i) a rate equal tothree month variableLondon
Interbank Offer Rate (“LIBOR”),
plus an applicable margin ranging from 1.25% to 2.5%, depending on certain
conditions, or (ii) an alternate base rate which will be the greater of (a) the
Federal Funds rate plus 0.5% or (b) the prime rate publicly announced by the
Agent as its prime rate, plus, in both cases, an applicable margin ranging from
0% to 1.0%, depending on certain conditions.At December 31, 2008 and 2007,
the applicable interest
rate for the outstanding borrowings under the Credit Agreementwas3.79%and 7.24%, respectively.
 
 The
Company is exposed to interest rate volatility with regard to existing issuances
of variable rate debt. Primary exposure includes movements in the United States
prime rate and LIBOR. The Company uses interest rate swaps to reduce interest
rate volatility. On January 2, 2007, the Company entered into an interest rate
protection agreement with a notional amount of approximately $10.3 million of
interest rate swaps fixing interest rates between 5.0% and 5.8%. At December 31,
2008, the net loss of $0.1 million on the interest rate swap is reported in the
statement of operations as a component of interest expense.
 
 34
 
 ITEM
8. FINANCIAL STATEMENTS
 
 
 STAMFORD
INDUSTRIAL GROUP, INC.
 
 Index
to Consolidated Financial Statements
 
 
 PageReports
      of Independent Registered Public Accounting Firms
                              36Consolidated
      Balance Sheets – December 31, 2008 and 2007
                              40Consolidated
      Statements of Operations – Years ended December 31, 2008,
                                2007
      and 2006, the period January 1, 2006  to October 3, 2006
      (Predecessor)
                              41Consolidated
      Statement of Stockholders’ Equity and Comprehensive Income
                                (Loss)
      – Years Ended December 31, 2008, 2007 and 2006
                              42Consolidated
      Statements of Cash Flows – Years Ended December 31, 2008,
                                2007
      and 2006, the period January 1, 2006  to October 3, 2006
      (Predecessor)
                              43Notes
      to the Consolidated Financial Statements
                              44
  35
  REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the
Board of Directors and Stockholders
 Stamford
Industrial Group, Inc:
 
 In our
opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, stockholders' equity and comprehensive
income (loss), and cash flows present fairly, in all material respects, the
financial position of Stamford Industrial Group, Inc. and its subsidiaries at
December 31, 2008, and the results of their operations and their cash flows for
the period ended December 31, 2008 in conformity with accounting principles
generally accepted in the United States of America.  In addition, in
our opinion, the financial statement schedule for the year ended December 31,
2008 listed in the index appearing under Item 15(a)(2), presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.  Also in our
opinion, the Company did not maintain, in all material respects, effective
internal control over financial reporting as of December 31, 2008, based on
criteria established in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) because a material weakness in internal control over
financial reporting related to failure to maintain effective supervisory and
review controls over the valuation of inventory including the average cost
calculation and application of production variances existed as of that
date.  A material weakness is a deficiency, or a combination of
deficiencies, in internal control over financial reporting, such that there is a
reasonable possibility that a material misstatement of the annual or interim
financial statements will not be prevented or detected on a timely basis. The
material weakness referred to above is described in Management's Annual Report
on Internal Control over Financial Reporting appearing on page 68 of this 2008
Annual Report on Form 10-K.  We considered this material weakness in
determining the nature, timing, and extent of audit tests applied in our audit
of the 2008 consolidated financial statements, and our opinion regarding the
effectiveness of the Company’s internal control over financial reporting does
not affect our opinion on those consolidated financial
statements.  The Company's management is responsible for these
financial statements, financial statement schedule, for maintaining effective
internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting included in
management's report referred to above.  Our responsibility is to
express opinions on these financial statements, financial statement schedule,
and on the Company's internal control over financial reporting based on our
integrated audit.  We conducted our audit in accordance with the
standards of the Public Company Accounting Oversight Board (United
States).  Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement and whether effective internal control over financial
reporting was maintained in all material respects.  Our audit of the
financial statements included examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation.  Our audit of
internal control over financial reporting included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk.  Our
audit also included performing such other procedures as we considered necessary
in the circumstances. We believe that our audit provides a reasonable basis for
our opinion.
 
 The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 2 and Note 7 to the
financial statements, the Company believes it may be in violation of one or more
of the financial covenants contained in its credit agreement in the second
quarter of 2009, which would result in a default under its credit agreement,
which if not amended, cured or waived would cause all amounts outstanding under
the Company’s credit agreement to become immediately due and payable. As a
result, a substantial doubt is raised about the Company’s ability to continue as
a going concern.  Management's plans in regard to these matters are
also described in Note 2 and Note 7. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
 
 A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles.  A company’s internal
control over financial reporting includes those policies and procedures that
(i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of
the company; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and
(iii) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
  36
  Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.  Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.  We do not
express an opinion or any other form of assurance on management's statement
referring to Management's Remediation Initiatives.
 
 /s/ PricewaterhouseCoopers
LLP
 Charlotte,
North Carolina
 March 16, 2009
 
 
 37
 
 REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 To the Board of Directors and
Stockholders
 Stamford Industrial Group,
Inc.
 
 We have audited the accompanying
consolidated balance sheet of Stamford Industrial Group, Inc. and subsidiaries
as of December 31, 2007, and the related consolidated statements of operations,
stockholders' equity and comprehensive income (loss), and cash flows for each of
the two years in the period ended December 31, 2007.Our audits also included the financial
statement schedule for the years ended December 31, 2007 and 2006 of Stamford
Industrial Group, Inc. listed in Item 15(a)2.These financial statementsand financial statement
scheduleare the
responsibility of the Company's management.  Our responsibility is to
express an opinion on these financial statements based on our
audits.
 
 We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board
(United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable basis
for our opinion. Also, in our opinion, the related
financial statement schedule for the years ended December 31, 2007 and 2006,
when considered in relation to the basic consolidated financial statements taken
as a whole presents fairly in all material respects the information set forth
therein.
  In our opinion, the consolidated
financial statements referred to above present fairly, in all material respects,
the financial position of Stamford Industrial Group, Inc. and subsidiaries as of
December 31, 2007, and the results of their operations and their cash flows for
each of the two years in the period ended December 31, 2007, in conformity with
U.S. generally accepted accounting principles.
 
 
 /s/
McGladrey & Pullen, LLP
 McGladrey
& Pullen, LLP
 Stamford,
CT
 March 17,
2008
  38
  REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 To the Board of Directors and
Stockholders
 Stamford Industrial Group, Inc.
 
 We have audited thestatements of operations and cash
flowsof CRC Acquisition
Co., LLC (the “predecessor company”-see Note 1 to the consolidated financial
statements)for the period
from January 1, 2006 to October 3, 2006.These financial statements are the
responsibility of the Company's management.  Our responsibility is to
express an opinion on these financial statements based on our
audit.
 
 We conducted our audit in accordance
with the standards of the Public Company Accounting Oversight Board
(United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audit providesa reasonable basis for our
opinion.
 
 In our opinion, the financial statements
referred to above present fairly, in all materialrespects, the results of operations and
cash flowsof CRC
Acquisition Co., LLCfor the period from January
1, 2006 to October 3, 2006,in conformity withU.S.generally accepted accounting
principles.
 
 
 /s/
McGladrey & Pullen, LLP
 McGladrey
& Pullen, LLP
 Stamford,
Connecticut
 March 29,
2007
 
 
 39
  STAMFORD INDUSTRIAL GROUP,
INC.
 CONSOLIDATED BALANCE
SHEETS
 (in thousands, except per share
amounts)
 December 31,
                                                  2008
                                                
                                                
                                                December 31,
                                                  2007ASSETSCurrent
    assets:Cash and cash
      equivalents
                                                
                                                $
                                                303
                                                
                                                
                                                $
                                                1,236Accounts receivable,
      net
                                                
                                                
                                                9,806
                                                
                                                
                                                
                                                8,341Inventories
                                                
                                                
                                                15,748
                                                
                                                
                                                
                                                13,825Deferred tax asset,
      net
                                                
                                                
                                                519
                                                
                                                
                                                
                                                2,684Prepaid expenses and other current
      assets
                                                
                                                
                                                149
                                                
                                                
                                                
                                                496Total current
      assets
                                                
                                                
                                                26,525
                                                
                                                
                                                
                                                26,582Property, plant and equipment,
      net
                                                
                                                
                                                8,160
                                                
                                                
                                                
                                                8,608Deferred financing costs,
      net
                                                
                                                
                                                493
                                                
                                                
                                                
                                                645Intangible assets,
      net
                                                
                                                
                                                19,476
                                                
                                                
                                                
                                                20,524Deferred tax asset,
      net
                                                
                                                
                                                39,188
                                                
                                                
                                                
                                                5,368Other
assets
                                                
                                                
                                                205
                                                
                                                
                                                
                                                210Total
assets
                                                
                                                $
                                                94,047
                                                
                                                
                                                $
                                                61,937LIABILITIES AND STOCKHOLDERS’
      EQUITYCurrent
      liabilities:Notes
    payable
                                                
                                                $
                                                286
                                                
                                                
                                                $
                                                5,286Current portion of long-term
      debt
                                                
                                                
                                                4,000
                                                
                                                
                                                
                                                4,000Accounts
      payable
                                                
                                                
                                                6,335
                                                
                                                
                                                
                                                7,768Accrued expenses and other
      liabilities
                                                
                                                
                                                3,062
                                                
                                                
                                                
                                                2,742Income taxes
      payable
                                                
                                                
                                                8
                                                
                                                
                                                
                                                73Total current
      liabilities
                                                
                                                
                                                13,691
                                                
                                                
                                                
                                                19,869Long-term debt, less current
      portion
                                                
                                                
                                                17,533
                                                
                                                
                                                
                                                21,533Other long-term
      liabilities
                                                
                                                
                                                242
                                                
                                                
                                                
                                                889Total
      liabilities
                                                
                                                
                                                31,466
                                                
                                                
                                                
                                                42,291Commitments and contingencies
      (Note 13)Stockholders’ equity (Note
      18):Preferred stock — $.0001 par
      value; 5,000 shares authorized; no shares issued or
      outstanding
                                                
                                                
                                                —
                                                
                                                
                                                
                                                —Common stock — $.0001 par value;
      100,000 shares authorized; 8,420 and 8,360 shares issued and outstanding
      at December 31, 2008 and 2007, respectively
                                                
                                                
                                                3
                                                
                                                
                                                
                                                3Additional paid-in
      capital
                                                
                                                
                                                247,885
                                                
                                                
                                                
                                                246,346Accumulated
      deficit
                                                
                                                
                                                (185,307
                                                )
                                                
                                                
                                                (226,703
                                                )Total stockholders’
      equity
                                                
                                                
                                                62,581
                                                
                                                
                                                
                                                19,646Total liabilities and
      stockholders’ equity
                                                
                                                $
                                                94,047
                                                
                                                
                                                $
                                                61,937
  See accompanying notes to the
consolidated financial statements.
  40
  STAMFORD INDUSTRIAL GROUP,
INC.
 CONSOLIDATED STATEMENTS OF
OPERATIONS
 (in thousands, except per share
amounts)
  Years Ended
                                                                                            
                                                                                            
                                                                                            Predecessor
                                                                                              Company (1)December 31,
                                                                                              2008
                                                                                            
                                                                                            
                                                                                            December 31,
                                                                                              2007
                                                                                            
                                                                                            
                                                                                            December 31,
                                                                                              2006
                                                                                            
                                                                                            
                                                                                            January 1,
2006
                                                                                              to
                                                                                              October 3,
    2006Revenues
                                                                                            
                                                                                            $
                                                                                            142,914
                                                                                            
                                                                                            
                                                                                            $
                                                                                            110,743
                                                                                            
                                                                                            
                                                                                            $
                                                                                            24,078
                                                                                            
                                                                                            
                                                                                            $
                                                                                            61,625Cost of
      revenues
                                                                                            
                                                                                            
                                                                                            115,952
                                                                                            
                                                                                            
                                                                                            
                                                                                            92,926
                                                                                            
                                                                                            
                                                                                            
                                                                                            19,801
                                                                                            
                                                                                            
                                                                                            
                                                                                            48,351Gross
margin
                                                                                            
                                                                                            
                                                                                            26,962
                                                                                            
                                                                                            
                                                                                            
                                                                                            17,817
                                                                                            
                                                                                            
                                                                                            
                                                                                            4,277
                                                                                            
                                                                                            
                                                                                            
                                                                                            13,274Operating
      expenses:Sales and
      marketing
                                                                                            
                                                                                            
                                                                                            1,941
                                                                                            
                                                                                            
                                                                                            
                                                                                            1,315
                                                                                            
                                                                                            
                                                                                            
                                                                                            322
                                                                                            
                                                                                            
                                                                                            
                                                                                            912General and
      administrative
                                                                                            
                                                                                            
                                                                                            11,200
                                                                                            
                                                                                            
                                                                                            
                                                                                            9,438
                                                                                            
                                                                                            
                                                                                            
                                                                                            3,491
                                                                                            
                                                                                            
                                                                                            
                                                                                            1,597Related party cash
      fee
                                                                                            
                                                                                            
                                                                                            500
                                                                                            
                                                                                            
                                                                                            
                                                                                            500
                                                                                            
                                                                                            
                                                                                            
                                                                                            125
                                                                                            
                                                                                            
                                                                                            
                                                                                            —Related party stock
      compensation
                                                                                            
                                                                                            
                                                                                            829
                                                                                            
                                                                                            
                                                                                            
                                                                                            507
                                                                                            
                                                                                            
                                                                                            
                                                                                            7,638
                                                                                            
                                                                                            
                                                                                            
                                                                                            —Total operating
      expenses
                                                                                            
                                                                                            
                                                                                            14,470
                                                                                            
                                                                                            
                                                                                            
                                                                                            11,760
                                                                                            
                                                                                            
                                                                                            
                                                                                            11,576
                                                                                            
                                                                                            
                                                                                            
                                                                                            2,509Income (loss) from
      operations
                                                                                            
                                                                                            
                                                                                            12,492
                                                                                            
                                                                                            
                                                                                            
                                                                                            6,057
                                                                                            
                                                                                            
                                                                                            
                                                                                            (7,299
                                                                                            )
                                                                                            
                                                                                            
                                                                                            10,765Other (expense)
      income:Interest
    income
                                                                                            
                                                                                            
                                                                                            1
                                                                                            
                                                                                            
                                                                                            
                                                                                            6
                                                                                            
                                                                                            
                                                                                            
                                                                                            566
                                                                                            
                                                                                            
                                                                                            
                                                                                            —Interest
      expense
                                                                                            
                                                                                            
                                                                                            (1,985
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (2,691
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (775
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (507
                                                                                            )Management and loan guaranty
      fees
                                                                                            
                                                                                            
                                                                                            —
                                                                                            
                                                                                            
                                                                                            
                                                                                            —
                                                                                            
                                                                                            
                                                                                            
                                                                                            —
                                                                                            
                                                                                            
                                                                                            
                                                                                            (710
                                                                                            )Other income (expense),
      net
                                                                                            
                                                                                            
                                                                                            20
                                                                                            
                                                                                            
                                                                                            
                                                                                            (137
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (22
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (2,826
                                                                                            )Total other (expense),
      net
                                                                                            
                                                                                            
                                                                                            (1,964
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (2,822
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (231
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (4,043
                                                                                            )Income (loss) before
      taxes
                                                                                            
                                                                                            
                                                                                            10,528
                                                                                            
                                                                                            
                                                                                            
                                                                                            3,235
                                                                                            
                                                                                            
                                                                                            
                                                                                            (7,530
                                                                                            )
                                                                                            
                                                                                            
                                                                                            6,722(Benefit) provision for income
      taxes
                                                                                            
                                                                                            
                                                                                            (30,868
                                                                                            )
                                                                                            
                                                                                            
                                                                                            203
                                                                                            
                                                                                            
                                                                                            
                                                                                            223
                                                                                            
                                                                                            
                                                                                            
                                                                                            211Net income
      (loss)
                                                                                            
                                                                                            $
                                                                                            41,396
                                                                                            
                                                                                            
                                                                                            $
                                                                                            3,032
                                                                                            
                                                                                            
                                                                                            $
                                                                                            (7,753
                                                                                            )
                                                                                            
                                                                                            $
                                                                                            6,511Basic net income (loss) per
      share
                                                                                            
                                                                                            $
                                                                                            4.94
                                                                                            
                                                                                            
                                                                                            $
                                                                                            0.36
                                                                                            
                                                                                            
                                                                                            $
                                                                                            (1.19
                                                                                            )Shares used in basic calculation
      (Note 18)
                                                                                            
                                                                                            
                                                                                            8,385
                                                                                            
                                                                                            
                                                                                            
                                                                                            8,350
                                                                                            
                                                                                            
                                                                                            
                                                                                            6,515Diluted net income (loss) per
      share
                                                                                            
                                                                                            $
                                                                                            4.31
                                                                                            
                                                                                            
                                                                                            $
                                                                                            0.32
                                                                                            
                                                                                            
                                                                                            $
                                                                                            (1.19
                                                                                            )Shares used in diluted calculation
      (Note 18)
                                                                                            
                                                                                            
                                                                                            9,626
                                                                                            
                                                                                            
                                                                                            
                                                                                            9,529
                                                                                            
                                                                                            
                                                                                            
                                                                                            6,515
  (1)  Because the Company had
no operations at the time of the Concord Steel acquisition (see Note 1 and 17),
Concord Steel is considered to be the “Predecessor” of the Company for
accounting purposes and, therefore relevant prior year financial information
regarding the Predecessor has been presented herein.
 See accompanying notes to the
consolidated financial statements.
  41
  STAMFORD INDUSTRIAL GROUP,
INC.
 CONSOLIDATED STATEMENT OF STOCKHOLDERS’
EQUITY AND COMPREHENSIVE INCOME (LOSS)
 Years Ended December 31, 2008, 2007 and
2006
 (in
thousands)
 AccumulatedCommon Stock
                                      
                                      
                                      Additional
                                      
                                      
                                      Other
                                      
                                      
                                      Unearned
                                      
                                      
                                      
                                      
                                      
                                      Total(see Note
      18)
                                      
                                      
                                      Paid-in
                                      
                                      
                                      Comprehensive
                                      
                                      
                                      Stock
                                      
                                      
                                      Accumulated
                                      
                                      
                                      Stockholders'
                                      
                                      
                                      ComprehensiveShares
                                      
                                      
                                      Amount
                                      
                                      
                                      Capital
                                      
                                      
                                      Income
    (Loss)
                                      
                                      
                                      Compensation
                                      
                                      
                                      Deficit
                                      
                                      
                                      Equity
                                      
                                      
                                      Income
    (Loss)Balance, December 31,
      2005
                                      
                                      
                                      5,870
                                      
                                      
                                      $
                                      2
                                      
                                      
                                      $
                                      234,400
                                      
                                      
                                      $
                                      (4
                                      )
                                      
                                      $
                                      (108
                                      )
                                      
                                      $
                                      (221,982
                                      )
                                      
                                      $
                                      12,308
                                      
                                      
                                      $
                                      203Exercise of stock
      options
                                      
                                      
                                      20
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      74
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      74Restricted stock grant
      and
                                        related
      compensation
                                      
                                      
                                      85
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      399
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      108
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      507Registered stock issued to
      CRC
                                      
                                      
                                      705
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      3,000
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      3,000Unregistered stock
      issued
                                      
                                      
                                      1,655
                                      
                                      
                                      
                                      1
                                      
                                      
                                      
                                      7,364
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      7,365Change in unrealized
      loss
                                        on
      available-for-sale
                                        securities
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      4
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      4
                                      
                                      
                                      $
                                      4Net loss
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      (7,753
                                      )
                                      
                                      
                                      (7,753
                                      )
                                      
                                      
                                      (7,753
                                      )Balance, December 31,
      2006
                                      
                                      
                                      8,335
                                      
                                      
                                      $
                                      3
                                      
                                      
                                      $
                                      245,237
                                      
                                      
                                      $
                                      —
                                      
                                      
                                      $
                                      —
                                      
                                      
                                      $
                                      (229,735
                                      )
                                      
                                      $
                                      15,505
                                      
                                      
                                      $
                                      (7,749
                                      )Exercise of stock
      options
                                      
                                      
                                      17
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      47
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      47Stock based
      compensation
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      1,264
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      1,264Reclassification of
      paid-in
                                        capital to long-term
      liability
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      (298
                                      )
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      (298
                                      )Related party
      stock
                                        compensation
                                      
                                      
                                      8
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      96
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      96Net income
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      3,032
                                      
                                      
                                      
                                      3,032
                                      
                                      
                                      $
                                      3,032Balance, December 31,
      2007
                                      
                                      
                                      8,360
                                      
                                      
                                      $
                                      3
                                      
                                      
                                      $
                                      246,346
                                      
                                      
                                      $
                                      —
                                      
                                      
                                      $
                                      —
                                      
                                      
                                      $
                                      (226,703
                                      )
                                      
                                      $
                                      19,646
                                      
                                      
                                      $
                                      3,032Restricted stock
      grant
                                      
                                      
                                      14
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      44
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      44Stock based
      compensation
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      404
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      404Reclassification of
      paid-in
                                        capital from
      long-termliability
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      584
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      584Related party
      stock
                                        compensation
                                      
                                      
                                      46
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      507
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      507Net income
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      41,396
                                      
                                      
                                      
                                      41,396
                                      
                                      
                                      $
                                      41,396Balance, December 31,
      2008
                                      
                                      
                                      8,420
                                      
                                      
                                      $
                                      3
                                      
                                      
                                      $
                                      247,885
                                      
                                      
                                      $
                                      —
                                      
                                      
                                      $
                                      —
                                      
                                      
                                      $
                                      (185,307
                                      )
                                      
                                      $
                                      62,581
                                      
                                      
                                      $
                                      41,396
  See accompanying notes to the
consolidated financial statements.
  42
  STAMFORD INDUSTRIAL GROUP,
INC.
 CONSOLIDATED STATEMENTS OF CASH
FLOWS
 (in
thousands)
 Years Ended
                                                                
                                                                
                                                                Predecessor
                                                                  Company (1)December 31,
                                                                  2008
                                                                
                                                                
                                                                December 31,
                                                                  2007
                                                                
                                                                
                                                                December 31,
                                                                  2006
                                                                
                                                                
                                                                January 1,
2006
                                                                  to
                                                                  October 3,
    2006Cash flows from operating
      activities:Net income
      (loss)
                                                                
                                                                $
                                                                41,396
                                                                
                                                                
                                                                $
                                                                3,032
                                                                
                                                                
                                                                $
                                                                (7,753
                                                                )
                                                                
                                                                $
                                                                6,511Reconciliation of net income
      (loss) to net cash provided by operating
activities:Provision for doubtful
      accounts
                                                                
                                                                
                                                                256
                                                                
                                                                
                                                                
                                                                2
                                                                
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                13Depreciation
                                                                
                                                                
                                                                1,082
                                                                
                                                                
                                                                
                                                                586
                                                                
                                                                
                                                                
                                                                71
                                                                
                                                                
                                                                
                                                                414Amortization of intangible
      assets
                                                                
                                                                
                                                                1,048
                                                                
                                                                
                                                                
                                                                1,048
                                                                
                                                                
                                                                
                                                                261
                                                                
                                                                
                                                                
                                                                3Amortization of deferred financing
      costs
                                                                
                                                                
                                                                152
                                                                
                                                                
                                                                
                                                                152
                                                                
                                                                
                                                                
                                                                60
                                                                
                                                                
                                                                
                                                                —Deferred tax
      benefit
                                                                
                                                                
                                                                (31,656
                                                                )
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                —Stock-based
      compensation
                                                                
                                                                
                                                                448
                                                                
                                                                
                                                                
                                                                1,665
                                                                
                                                                
                                                                
                                                                330
                                                                
                                                                
                                                                
                                                                —Related party stock
      compensation
                                                                
                                                                
                                                                829
                                                                
                                                                
                                                                
                                                                507
                                                                
                                                                
                                                                
                                                                7,542
                                                                
                                                                
                                                                
                                                                —Loss on disposition of property,
      plant & equipment
                                                                
                                                                
                                                                29
                                                                
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                —Changes in assets and
      liabilities:Accounts
      receivable
                                                                
                                                                
                                                                (1,721
                                                                )
                                                                
                                                                
                                                                933
                                                                
                                                                
                                                                
                                                                955
                                                                
                                                                
                                                                
                                                                (5,930
                                                                )Inventories
                                                                
                                                                
                                                                (1,923
                                                                )
                                                                
                                                                
                                                                269
                                                                
                                                                
                                                                
                                                                (1,945
                                                                )
                                                                
                                                                
                                                                312Prepaid expenses and other current
      assets
                                                                
                                                                
                                                                347
                                                                
                                                                
                                                                
                                                                65
                                                                
                                                                
                                                                
                                                                (343
                                                                )
                                                                
                                                                
                                                                122Other
assets
                                                                
                                                                
                                                                5
                                                                
                                                                
                                                                
                                                                87
                                                                
                                                                
                                                                
                                                                (172
                                                                )
                                                                
                                                                
                                                                —Accounts
      payable
                                                                
                                                                
                                                                (1,433
                                                                )
                                                                
                                                                
                                                                (1,828
                                                                )
                                                                
                                                                
                                                                2,846
                                                                
                                                                
                                                                
                                                                3,408Accrued expenses and other
      liabilities
                                                                
                                                                
                                                                (181
                                                                )
                                                                
                                                                
                                                                (662
                                                                )
                                                                
                                                                
                                                                (798
                                                                )
                                                                
                                                                
                                                                51Other
      liabilities
                                                                
                                                                
                                                                52
                                                                
                                                                
                                                                
                                                                51
                                                                
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                —Net cash provided by operating
      activities
                                                                
                                                                
                                                                8,730
                                                                
                                                                
                                                                
                                                                5,907
                                                                
                                                                
                                                                
                                                                1,054
                                                                
                                                                
                                                                
                                                                4,904Cash flows from investing
      activities:Acquisition of Concord Steel, net
      of cash acquired
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                (45,335
                                                                )
                                                                
                                                                
                                                                —Purchases of short-term
      investments and marketable securities
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                (3,312
                                                                )Sales and maturities of short-term
      investments and marketable securities
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                14,663
                                                                
                                                                
                                                                
                                                                —Capital expenditures for property
      and equipment
                                                                
                                                                
                                                                (663
                                                                )
                                                                
                                                                
                                                                (5,421
                                                                )
                                                                
                                                                
                                                                (624
                                                                )
                                                                
                                                                
                                                                (570
                                                                )Net cash used in investing
      activities
                                                                
                                                                
                                                                (663
                                                                )
                                                                
                                                                
                                                                (5,421
                                                                )
                                                                
                                                                
                                                                (31,296
                                                                )
                                                                
                                                                
                                                                (3,882
                                                                )Cash flows from financing
      activities:Borrowings from revolving credit
      facility
                                                                
                                                                
                                                                1,500
                                                                
                                                                
                                                                
                                                                2,000
                                                                
                                                                
                                                                
                                                                3,286
                                                                
                                                                
                                                                
                                                                6,613Payments on revolving credit
      facility
                                                                
                                                                
                                                                (6,500
                                                                )
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                —Proceeds from long-term
      debt
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                28,000
                                                                
                                                                
                                                                
                                                                —Debt issuance
      costs
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                (618
                                                                )
                                                                
                                                                
                                                                —Principal payments on long-term
      debt
                                                                
                                                                
                                                                (4,000
                                                                )
                                                                
                                                                
                                                                (5,000
                                                                )
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                (208
                                                                )Distributions to
      members
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                (8,430
                                                                )Proceeds from sale of common
      stock
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                3,000
                                                                
                                                                
                                                                
                                                                —Proceeds from exercise of stock
      options and warrants
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                47
                                                                
                                                                
                                                                
                                                                74
                                                                
                                                                
                                                                
                                                                —Net cash  (used in)
      provided by financing activities
                                                                
                                                                
                                                                (9,000
                                                                )
                                                                
                                                                
                                                                (2,953
                                                                )
                                                                
                                                                
                                                                33,742
                                                                
                                                                
                                                                
                                                                (2,025
                                                                )Net  (decrease) increase
      in cash and cash equivalents
                                                                
                                                                
                                                                (933
                                                                )
                                                                
                                                                
                                                                (2,467
                                                                )
                                                                
                                                                
                                                                3,500
                                                                
                                                                
                                                                
                                                                (1,003
                                                                )Cash and cash equivalents at
      beginning of year
                                                                
                                                                
                                                                1,236
                                                                
                                                                
                                                                
                                                                3,703
                                                                
                                                                
                                                                
                                                                203
                                                                
                                                                
                                                                
                                                                1,003Cash and cash equivalents at end
      of year
                                                                
                                                                $
                                                                303
                                                                
                                                                
                                                                $
                                                                1,236
                                                                
                                                                
                                                                $
                                                                3,703
                                                                
                                                                
                                                                $
                                                                —Supplemental cash flow
      disclosure:Interest
    paid
                                                                
                                                                $
                                                                1,763
                                                                
                                                                
                                                                $
                                                                2,825
                                                                
                                                                
                                                                $
                                                                73
                                                                
                                                                
                                                                $
                                                                —Taxes paid
                                                                
                                                                $
                                                                870
                                                                
                                                                
                                                                $
                                                                306
                                                                
                                                                
                                                                $
                                                                132
                                                                
                                                                
                                                                $
                                                                —(Decrease) increase in other
      long-term liabilities and (increase) decrease in paid-in capital (see Note
      8)
                                                                
                                                                $
                                                                (584
                                                                )
                                                                
                                                                $
                                                                298
                                                                
                                                                
                                                                $
                                                                —
                                                                
                                                                
                                                                $
                                                                —Payment of Kanders & Company
      stock fee
                                                                
                                                                $
                                                                507
                                                                
                                                                
                                                                $
                                                                96
                                                                
                                                                
                                                                $
                                                                —
                                                                
                                                                
                                                                $
                                                                —
  (1)  Because the Company had
no operations at the time of the Concord Steel acquisition (see Notes 1 and 17),
Concord Steel is considered to be the “Predecessor” of the Company for accounting purposes and,
therefore relevant prior year financial information regarding the Predecessor
has been presented herein.
  See accompanying notes to the
consolidated financial statements
  43
  STAMFORD
INDUSTRIAL GROUP, INC.
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2008, 2007 and 2006
 (in
thousands, unless otherwise indicated)
 
 1.
Organization
 
 Stamford
Industrial Group, Inc. (the “Company”), through its wholly owned subsidiary
Concord Steel, Inc., is a manufacturer of steel counterweights and structural
weldments.  The Company sells its products primarily in the United
States to original equipment manufacturers (“OEM”) of certain construction and
industrial related equipment that employ counterweights for stability through
counterweight leverage in the operation of equipment used to hoist heavy loads,
such as elevators and cranes.  The counterweight market the Company
targets is primarily comprised of OEMs within the (i) commercial and industrial
construction equipment industry that manufactures aerial work platforms,
telehandlers, scissor lifts, cranes, and a variety of other construction related
equipment and vehicles; and (ii) the elevator industry, that incorporates
counterweights as part of the overall elevator operating mechanism to balance
the weight of the elevator cab and load.
 
 The
Company was initially established in 1996 under the name “Net Perceptions,
Inc.”, as a provider of marketing software solutions.  In 2003, as a
result of continuing losses and the decline of its software business, the
Company began exploring various strategic alternatives, including sale or
liquidation, and ceased the marketing and development of its marketing solutions
software business in 2004.  On April 21, 2004, the Company announced
an investment into the Company by Olden Acquisition LLC (“Olden”), an affiliate
of Kanders & Company, Inc., an entity owned and controlled by the Company’s
Non-Executive Chairman, Warren B. Kanders, for the purpose of initiating a
strategy to redeploy the Company’s assets and use its cash, cash equivalent
assets and marketable securities to enhance stockholder value.  As
part of this strategy, on October 3, 2006, the Company acquired the assets of
CRC Acquisition Co. LLC (“CRC”), a manufacturer of steel counterweights doing
business as Concord Steel (“Concord”).  With this initial acquisition,
management is now focused on building a diversified global industrial
manufacturing group through both organic and acquisition growth initiatives that
are expected to complement and diversify existing business lines. Because the
Company had no operations at the time of the acquisition of the assets of
Concord, the Concord business is considered to be a predecessor company
(“Predecessor”). Accordingly, statements of operations and cash flows of the
Predecessor for the period from January 1, 2006 through October 3, 2006 have
been presented (see Note 17 for a more detailed explanation of the
acquisition).
 
 On
February 20, 2009, the Company executed a one-for-five reverse stock split of
the outstanding shares of common stock. As a result of the reverse stock split
our common stock is now quoted on the OTC Pink Sheets Electronic Quotation
Service under the symbol “SIDG.PK”.  Except as otherwise noted herein,
all common stock and per share information included in this Form 10-K, financial
statements and related notes have been adjusted to give effect to this
reverse stock split.
  2.
Summary of significant accounting policies
 
 Basis
of presentation
 
 The
consolidated financial statements include accounts of the Company and its
wholly-owned subsidiaries. All inter-company accounts and transactions have been
eliminated.
 
 Going
Concern
 
 The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 7 to the financial
statements, the Company believes it may be in violation of one or more of the
financial covenants contained in its credit agreement in the second quarter
of 2009, which would result in a default under its credit agreement, which if
not amended, cured or waived would cause all amounts outstanding under our
credit agreement to become immediately due and payable. As a result of the
foregoing, our independent registered public accounting firm,
PricewaterhouseCoopers LLP, indicated in their report on our 2008 financial
statements, that there is substantial doubt about our ability to continue as a
going concern. Management's plans in regard to these matters are also described
in Note 7. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.  We have commenced
discussions with the lender under our credit agreement to seek an amendment of
the credit agreement in the second quarter of 2009.  However, no
assurance can be given that we will be able to successfully amend our credit
agreement and avoid a default.  The Company expects to incur upfront
fees and higher interest costs as a result of any such amendment. An amendment
could also involve other changes to the credit agreement not directly related to
changing the relevant financial covenant measures that could restrict the
Company’s operations.
 
 44
 
 Use
of estimates
 
 The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts therein. Management’s
estimates are based on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances. Estimates inherent in the preparation of
the accompanying consolidated financial statements include the carrying value of
long-lived assets, valuation allowances for receivables, inventories and
deferred income tax assets, liabilities for potential litigation claims and
settlements, and potential liabilities related to tax filings in the ordinary
course of business.Management’s estimates and assumptions are evaluated
on an on-going basis. Due to the inherent uncertainty involved in making
estimates, actual results may differ from those estimates.
 
 Revenue
recognition
 
 The Company’s revenue recognition policy
for the sale of steel counterweights or structural weldments requires evidence
of a sales agreement, the delivery of goods, the sales price is fixed or
determinable and the collectability of revenue is reasonably assured. The
Company generally records sales upon shipment of product to customers and
transfer of title under standard commercial terms.
 
 The Company recognizes revenue for
amounts billed to customers for scrap metal on a gross basis. Scrap revenues
were approximately $9.4 million, $7.1 million and $4.9 million for the years
ended December 31, 2008, 2007 and 2006, respectively.
 
 Concentrations
of credit risk and significant customers
 
 Financial
instruments that potentially subject the Company to credit risk consist
primarily of accounts receivable. The Company grants credit to customers in the
ordinary course of business. Revenues for 2008 were primarily from three major
customers accounted for 29%, 23% and 12% of total revenues, respectively.
Revenues for 2007 were primarily from three major customers accounted for 38%,
13% and 9% of total revenues, respectively. Revenues for 2006 were primarily
from three major customers accounting for 38%, 10% and 9% of total revenues,
respectively. Revenues for the Predecessor for the period January 1, 2006 thru
October 3, 2006 were primarily from three major customers accounting for 39%, 9%
and 8% of total revenues, respectively. At December 31, 2008 and 2007,
outstanding accounts receivable from these customers were $7.1 million and $4.0
million, respectively.
 
 Shipping
and handling
 
 Amounts
billed to customers for shipping and handling costs are included in revenues.
Costs incurred for shipping and handling are included in sales and marketing.
Shipping and handling costs were approximately $1.1 million, $0.8 million and
$0.8 million for the years ended December 31, 2008, 2007 and 2006,
respectively.
 
 Cash
and cash equivalents
 
 The
Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
 
 Accounts
Receivable
 
 Accounts
receivable consist of amounts billed and currently due from customers. The
Company extends credit to customers in the normal course of business and
maintains an allowance for estimated losses resulting from the inability or
unwillingness of customers to make required payments. The accrual for estimated
losses is based on its historical experience, existing economic conditions and
any specific customer collection issues the Company has identified. The
allowance for doubtful accounts amounted to $0.2 million and $0 at December 31,
2008 and 2007, respectively.
 
 Inventories
  Inventories
are stated at the lower of cost or market using the average cost method. Costs included in inventories consist of
materials, labor and manufacturing overhead, which are related to
thepurchase and production of
inventories.
  45
  Property,
Plant and Equipment
  Property,
plant and equipment are recorded at cost and depreciated over their estimated
useful lives utilizing the straight-line method. The estimated useful lives
range from 39 years for buildings and improvements, 10 years for machinery and
equipment, 7 years for office equipment and furniture and 5 years for
transportation equipment. Depreciation expense was $1.1 million, $0.6 million
and $0.1 million for the years ended December 31, 2008, 2007 and 2006,
respectively. Depreciation expense for the Predecessor for the period January 1,
2006 thru October 3, 2006 was $0.4 million.
  Impairment of Long-Lived
Assets
  The
Company’s policy is to assess the realizability on its long-lived assets,
including intangible assets, and to evaluate such assets for impairment whenever
events or changes in circumstances indicate that the carrying amount of such
assets (or group of assets) may not be recoverable. Impairment is determined to
exist if the estimated future undiscounted cash flows are less than its carrying
value. Future cash flow projections include assumptions regarding future sales
levels, the impact of cost reduction programs, and the level of working capital
needed to support the business. The Company uses data developed by its business
management as well as macroeconomic data in making these calculations. There are
no assurances that future cash flow assumptions will be achieved. The amount of
any impairment then recognized would be calculated as the difference between
estimated fair value and the carrying value of the asset. The Company performed
an evaluation of its long-lived assets as of December 31, 2008. The Company did
not have any impairment for the years ended December 31, 2008, 2007 and
2006.
 
 Fair
value of financial instruments
 
 The
carrying amounts of the Company’s financial instruments, which include cash and
cash equivalents, long-term debt and interest rate swap approximate their fair
values at December 31, 2008 and 2007.
  Deferred
financing costs
 
 Deferred
financing costs are primarily related to the acquisition by the Company of
Concord Steel in the fourth quarter of 2006 and costs associated with the
issuance of long-term debt related to the investment in the Company by Olden
Acquisition LLC in the second quarter of 2004. Deferred financing costs are
amortized using the interest method over the term of the debt. Amortization
expense was $0.2 million, $0.2 million and $0.1 million, for the years ended
December 31, 2008, 2007 and 2006, respectively. Amortization expense for the
Predecessor was $0 for the period January 1, 2006 thru October 3,
2006.
 
 Environmental
Remediation Costs
  The
Company accrues for losses associated with environmental remediation obligations
when such losses are probable and reasonably estimable. The liabilities are
developed based on currently available information and reflect the participation
of other potentially responsible parties, depending on the parties’ financial
condition and probable contribution. The accruals are recorded at undiscounted
amounts unless the amount and timing of cash (SOP 96-1) payments are fixed or
readily determinable and are reflected as liabilities on the accompanying
consolidated balance sheets. Recoveries of environmental remediation costs from
other parties are recorded as assets when their receipt is deemed probable. The
accruals are adjusted as further information develops or circumstances change.
There are no amounts accrued by the Company with respect to environmental
remediation costs at December 31, 2008 and 2007.
 
 Income
taxes
 
 The
Company calculates income taxes in accordance with the provisions of SFAS No.
109, “Accounting for Income Taxes,” which requires the use of the asset and
liability method of accounting for income taxes. Income taxes are deferred for
all temporary differences between the financial statement and income tax basis
of assets and liabilities. Further, deferred tax amounts are recognized for the
expected benefits of available net operating loss carryforwards and tax credit
carryforwards. Deferred taxes are recorded using the enacted tax rates scheduled
by tax law to be in effect when the temporary differences are expected to settle
or be realized. Deferred tax assets are reduced by a valuation allowance to the
extent that utilization is considered uncertain.
  The Company adopted the provisions of
FASB Interpretation No. 48, “Accounting for Uncertainty in Income
Taxes,an interpretation of
FASB Statement No. 109” (“FIN 48”),on January 1, 2007. Upon the adoption
of FIN 48, the Company commenced a review of all open tax years in all
jurisdictions. The Company does not believe it has included any “uncertain tax
positions” in its federal income tax return or any of the state income tax
returns it is currently filing, and has no significant unrecognized tax benefits
recordedas of December 31,
2008 and 2007. The Company
has made an evaluation of the potential impact of additional state taxes being
assessed by jurisdictions in which the Company does not currently consider
itself liable. The Company does not anticipate that such additional taxes, if
any, would result in a material change to its financial position. Should
the Company have any uncertain tax positions it will include interest and
penalties related for uncertain tax positions as a component of its provision
for income taxes.
  46
  Income
per share
 
 Basic
income per share is computed using net income (loss) and the weighted average
number of common shares outstanding. Diluted income per share reflects the
weighted average number of common shares outstanding plus any potentially
dilutive shares outstanding during the period. Potentially dilutive shares
consist of shares issuable upon the exercise of stock options, stock fee,
convertible notes, and restricted stock awards.
 
 Comprehensive
income (loss)
 
 Comprehensive
income (loss), as defined by SFAS No. 130, “Reporting Comprehensive Income,”
includes net income (loss) and items defined as other comprehensive income. SFAS
No. 130 requires that items defined as other comprehensive income (loss) be
separately classified in the financial statements. Such disclosures are included
in the accompanying consolidated statements of stockholders’ equity and
comprehensive income (loss).
 
 Stock-based
compensation
 
 On
January 1, 2006, the Company adopted Statement of Financial Accounting Standards
No. 123 (revised 2004), “Share-Based Payment” (“FAS 123R”), requiring
recognition of expense related to the fair value of stock option
awards.  The Company recognizes the cost of the share-based awards on
a straight-line basis over the requisite service period of the award, which is
usually the vesting period.  The Company adopted the fair value
provisions of FAS 123R, using the modified prospective transition
method.  Under this transition method, compensation cost recognized
during the periods presented include compensation cost for all share-based
payments granted prior to, but not yet vested as of January 1, 2006, based on
the grant date fair value estimated in accordance with the original provisions
of SFAS 123.
 
 Derivatives and hedging
activities.
 
 The
Company recognizes all derivatives on the balance sheet as either an asset or
liability measured at fair value. Changes in the derivative’s fair value are
recognized currently in income unless specific hedge accounting criteria are
met. Special accounting for qualifying hedges allows a derivative’s gains and
losses to offset related results on the hedged item in the consolidated
statement of operations and requires the Company to formally document, designate
and assess effectiveness of transactions that receive hedge accounting.
Derivatives that are not hedges are adjusted to fair value through earnings. If
the derivative qualifies as a hedge, depending on the nature of the hedge,
changes in the fair value of derivatives are either offset against the change in
fair value of hedged assets, liabilities, or firm commitments through earnings,
or recognized in other comprehensive income (loss) until the hedged item is
recognized in earnings. The ineffective portion of a derivative’s change in fair
value is immediately recognized in earnings.
 
 Recently
issued accounting pronouncements
 
 In April 2008, the FASB issued FSP No.
142-3, “Determination of the Useful Life of Intangible Assets” (“FSP No.
142-3”).  FSP No. 142-3 amends the factors that should be considered in
developing renewal or extension assumptions used to determine the useful life of
a recognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible
Assets.”  FSP No. 142-3 is effective on a prospective basis to all
intangible assets acquired and for disclosures on all intangible assets
recognized on or after the beginning of the first annual period subsequent to
December 15, 2008.  Early adoption is prohibited.  We have
evaluated the new statement and have determined that it will not have a
significant impact on the determination or reporting of our financial
results.
 
 In March
2008, the Financial Accounting Standards Board (“FASB”) issued Statement of
Financial Accounting Standards No. 161, Disclosures about Derivative Instruments
and Hedging Activities - an amendment of FASB Statement No. 133 ("SFAS 161").
SFAS 161 changes the disclosure requirements for derivative instruments and
hedging activities. Under SFAS 161, entities are required to provide enhanced
disclosures about (a) how and why an entity uses derivative instruments, (b) how
derivative instruments and related hedged items are accounted for under
Statement 133 and its related interpretations, and (c) how derivative
instruments and related hedged items affect an entity's financial position,
financial performance, and cash flows. SFAS 161 is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008, with early application encouraged. The Statement encourages, but does
not require, comparative disclosures for earlier periods at initial adoption.
The Company does not anticipate any material impact on its future disclosures
from the adoption of this standard.
  47
  In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
Combinations” (“SFAS 141R”), which replaces SFAS No. 141, “Business
Combinations (“SFAS 141”).” SFAS 141R retains the underlying concepts of SFAS
No. 141 in that all business combinations are still required to be accounted for
at fair value under the acquisition method of accounting, but SFAS 141R changes
the application of the acquisition method in a number of significant aspects.
Acquisition costs will generally be expensed as incurred; noncontrolling
interests will be valued at fair value at the acquisition date; in-process
research and development will be recorded at fair value as an indefinite-lived
intangible asset at the acquisition date; restructuring costs associated with a
business combination will generally be expensed subsequent to the acquisition
date; and changes in deferred tax asset valuation allowances and income tax
uncertainties after the acquisition date generally will affect income tax
expense. SFAS 141R is effective on a prospective basis for all business
combinations for which the acquisition date is on or after the beginning of the
first annual period subsequent to December 15, 2008. Early adoption is not
permitted as SFAS 141R will generally be applicable to future business
combinations and will not have a significant effect on the Company’s financial
statements prior to such an acquisition.
 
 In
September 2006, the FASB issued Statement of Financial Accounting Standards No.
157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value,
establishes a framework for measuring fair value under generally accepted
accounting principles, and requires expanded disclosures about fair value
measurements. SFAS 157 emphasizes that fair value is a market-based measurement,
not an entity-specific measurement, and states that a fair value measurement
should be determined based on the assumptions that market participants would use
in pricing the asset or liability. SFAS 157 applies under other accounting
pronouncements that require or permit fair value measurements, the FASB having
previously concluded in those accounting pronouncements that fair value is the
relevant measurement attribute. Accordingly, SFAS 157 does not require any new
fair value measurements. In February 2008, the FASB issued Staff Positions 157-1
and 157-2 which remove certain leasing transactions from the scope of SFAS 157
and partially defer the effective date of SFAS 157 for one year for certain
nonfinancial assets and liabilities. SFAS 157 is effective for fiscal years
beginning after November 15, 2007. The adoption of FAS 157-2 did not have a
material impact on the Company's financial position, results of operations and
cash flows. The Company is currently assessing the impact of fully adopting SFAS
157 on its future disclosures for nonfinancial assets and liabilities, with no
impact on its consolidated financial position results of operations or cash
flows.
 
 
 3.  Inventories
 
 Inventories
as of December 31, 2008 and 2007are as
follows:
  December 31,
                                      2008
                                    
                                    
                                    December 31,
                                      2007Finished
    goods
                                    
                                    $
                                    832
                                    
                                    
                                    $
                                    101Work-in-process
                                    
                                    
                                    800
                                    
                                    
                                    
                                    1,197Raw
    materials
                                    
                                    
                                    14,116
                                    
                                    
                                    
                                    12,527$
                                    15,748
                                    
                                    
                                    $
                                    13,825
    48
  4.
Property, Plant and Equipment
  Property, plant and equipment,net as of December 31, 2008
and 2007 are as follows:
  December 31,
                                  2008
                                
                                
                                December 31,
                                  2007Land
                                
                                $
                                350
                                
                                
                                $
                                350Building and
      improvements
                                
                                
                                1,397
                                
                                
                                
                                1,294Leasehold
      improvements
                                
                                
                                1,238
                                
                                
                                
                                1,275Machinery and
      equipment
                                
                                
                                5,682
                                
                                
                                
                                5,361Office equipment and
      furniture
                                
                                
                                1,224
                                
                                
                                
                                9859,891
                                
                                
                                
                                9,265Less: Accumulated
      depreciation
                                
                                
                                (1,731
                                )
                                
                                
                                (657
                                )Property, plant and equipment,
      net
                                
                                $
                                8,160
                                
                                
                                $
                                8,608
   5.
Intangible assets
 
 As part
of the acquisition of Concord, the Company allocated a portion of the purchase
cost to intangible assets consisting of trade names, customer relationships and
non-compete agreements. These intangible assets are amortized over their
expected useful lives which are between 3 and 12 years using the straight-line
method unless considered to have an indefinite life (see Note 17 for further
explanation of the acquisition).
 
 Intangible
assets, net of amortization at December 31, 2008 and 2007 are as
follows:
  December 31,
      2008Gross
                                                            
                                                            
                                                            Accumulated
                                                              Amortization
                                                            
                                                            
                                                            Net
                                                            
                                                            
                                                            LifeIntangibles subject to
      amortization:Customer
      relationships
                                                            
                                                            $
                                                            12,399
                                                            
                                                            
                                                            $
                                                            (2,330
                                                            )
                                                            
                                                            $
                                                            10,069
                                                            
                                                            
                                                            12
      yrsNon-compete
      agreements
                                                            
                                                            
                                                            37
                                                            
                                                            
                                                            
                                                            (27
                                                            )
                                                            
                                                            
                                                            10
                                                            
                                                            
                                                            3
      yrsIntangibles not subject to
      amortization:Trade name
                                                            
                                                            
                                                            9,397
                                                            
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            
                                                            9,397
                                                            
                                                            
                                                            
                                                            —Intangibles,
      net
                                                            
                                                            $
                                                            21,833
                                                            
                                                            
                                                            $
                                                            (2,357
                                                            )
                                                            
                                                            $
                                                            19,476
   December 31,
      2007Gross
                                                      
                                                      
                                                      Accumulated
                                                        Amortization
                                                      
                                                      
                                                      Net
                                                      
                                                      
                                                      LifeIntangibles subject to
      amortization:Customer
      relationships
                                                      
                                                      $
                                                      12,399
                                                      
                                                      
                                                      $
                                                      (1,294
                                                      )
                                                      
                                                      $
                                                      11,105
                                                      
                                                      
                                                      12
      yrsNon-compete
      agreements
                                                      
                                                      
                                                      37
                                                      
                                                      
                                                      
                                                      (15
                                                      )
                                                      
                                                      
                                                      22
                                                      
                                                      
                                                      3
      yrsIntangibles not subject to
      amortization:Trade name
                                                      
                                                      
                                                      9,397
                                                      
                                                      
                                                      
                                                      —
                                                      
                                                      
                                                      
                                                      9,397
                                                      
                                                      
                                                      
                                                      —Intangibles,
      net
                                                      
                                                      $
                                                      21,833
                                                      
                                                      
                                                      $
                                                      (1,309
                                                      )
                                                      
                                                      $
                                                      20,524
  49
  The
following table shows the expected amortization of intangible assets over the
next five years:
  2009
                              
                              
                              2010
                              
                              
                              2011
                              
                              
                              2012
                              
                              
                              2013Intangibles subject to
      amortization:Customer
      relationships
                              
                              $
                              1,033
                              
                              
                              $
                              1,033
                              
                              
                              $
                              1,033
                              
                              
                              $
                              1,033
                              
                              
                              $
                              1,033Non-compete
      agreements
                              
                              
                              10
                              
                              
                              
                              —
                              
                              
                              
                              —
                              
                              
                              
                              —
                              
                              
                              
                              —$
                              1,043
                              
                              
                              $
                              1,033
                              
                              
                              $
                              1,033
                              
                              
                              $
                              1,033
                              
                              
                              $
                              1,033
   6.
Accrued expenses and other liabilities
 
 Accrued
expenses and other liabilities of the Company as of December 31, 2008 and
2007are as
follows:
  December 31,
                                    2008
                                  
                                  
                                  December 31,
                                    2007Accrued compensation, benefits
      and
                                    commissions
                                  
                                  $
                                  983
                                  
                                  
                                  $
                                  705Accrued interest
      payable
                                  
                                  
                                  357
                                  
                                  
                                  
                                  339Accrued professional
      services
                                  
                                  
                                  233
                                  
                                  
                                  
                                  343Accrued
      insurance
                                  
                                  
                                  273
                                  
                                  
                                  
                                  426Accrued property
      taxes
                                  
                                  
                                  119
                                  
                                  
                                  
                                  33Accrued related party stock
      fee
                                  
                                  
                                  829
                                  
                                  
                                  
                                  507Other accrued
      liabilities
                                  
                                  
                                  268
                                  
                                  
                                  
                                  389$
                                  3,062
                                  
                                  
                                  $
                                  2,742
  
 7.
Long-term Debt and Notes Payable
 
 In
connection with the Company’s acquisition of Concord, Concord entered into a senior secured credit
facility (the“Credit
Agreement”) with LaSalle Bank National Association, as administrative agent (the
“Agent”) and the lenders party thereto.
 
 The Credit Agreement establishes a
commitmentby the lenderstoConcordto provide up to $40.0 millionin the aggregate of loans and other
financial accommodations consisting of (i) a five-year senior secured term loan in an
aggregate principal amount of $28.0 million, (ii) a five-year senior secured revolving credit
facility in the aggregate principal amount of $10.0 million(the “Revolving Facility”) and (iii) a
five-year senior secured capital expenditure
facility in the aggregate principal amount of $2.0 million. The Revolving Facility is further
subject to a borrowing base consisting of up to 85% of eligible accounts
receivable and up to 55% of eligible inventory. The Revolving Facility includes
a sublimit of up to an aggregate amount of $5.0 millionin letters of credit and a sublimit of
up to an aggregate amount of $2.5 millionin swing line loans. The capital
expenditure facility permittedthe Company to draw funds for the
purchase of machinery and equipment during the 6-month period endedMarch 3, 2007, and then
convertedinto a 4.5-year term loan. Immediately following
the closing of the Concord Acquisition, the Company drew down approximately
$31.3 millionand had additional availability under
the Revolving Facility of approximately $6.7 million. There were no amounts drawn under the
capital expenditure facility at the time of closing of the credit
facilitynor were there any
amounts drawn down prior to March 3, 2007, the datethe capital expenditure facility
expired.On March
13, 2008, we entered into a second amendment to the Credit Agreement to provide
for, among other things, revisions to certain of the financial covenants under
the bank credit facilities discussed above.
 
 At
December 31, 2008 and 2007, the outstanding balance from the Revolving Facility
amounted to $0.3 and $5.3 million, respectively. At December 31, 2008, the
Company had $8.1 million available in additional borrowings net of $1.6 million
in outstanding letters of credit which have not been drawn upon. The balance
under the term loan at December 31, 2008 and December 31, 2007 was $19.0 million
and $23.0 million, respectively.  At December 31, 2008 and December
31, 2007, the Company had $4.0 million and $4.0 million, respectively,
classified as the current portion of long-term debt and $15.0 million and $19.0
million, respectively, classified as long-term.During the year ended December 31,
2008, the Company was in compliance withall of our financial covenants
under the bank credit facilities. These covenants require us to meet certain
financial tests, namely (a) to maintain a consolidated leverage ratio not in
excess of 2.75 to 1.00 on the last day of any fiscal quarter, and (b) to
maintain a consolidated fixed charge coverage ratio of not less than 1.35 to
1.00 for the period of four consecutive fiscal quarters ending on December
31, 2008 and a consolidated fixed charge coverage ratio of not less than 1.50 to
1.00 for the period of four consecutive fiscal quarters ending on or after March
31, 2009.  As of December 31, 2008 our consolidated leverage ratio was 1.22
and our fixed charge coverage ratio was 2.50. Our future compliance with our
financial covenants under the bank credit facilities will depend on our ability
to generate earnings and manage our assets effectively. Our bank credit
facilities also have various non-financial covenants, requiring us to refrain
from taking certain actions and requiring us to take certain actions, such as
keeping in good standing our corporate existence, maintaining insurance, and
providing our bank lending group with financial information on a timely basis.
Our failure to comply with these financial covenants could result in a default
which if not cured or waived could cause all amounts outstanding under our bank
credit facilities to become immediately due and payable.
  50
  A
continuing recession which started in the U.S. and is spreading across the
globe, as well as the distress in the financial and credit markets, has resulted
in declining revenues and earnings in our business, and has put additional
pressure on our ability to remain in compliance with the financial covenant
ratios contained in our Credit Agreement. These downward trends in our revenues
and earnings are expected to continue to adversely affect our financial results
causing us to lower our expectations for at least the remainder of
2009.
 
 Consequently,
the Company believes it may be in violation of one or more of the financial
covenants under its Credit Agreement at the end of the second quarter of fiscal
2009, which would result in a default under its Credit Agreement, which if not
amended, cured or waived would cause all amounts outstanding under our Credit
Agreement to become immediately due and payable.  In the event of a
default, we cannot assure you that we would have sufficient funds to repay all
of the outstanding amounts, which could result in the exercise by the Agent of
all of its rights and remedies available to it, such as seizing any and all
collateral pledged under the Credit Agreement which would have a material
adverse effect on the market price of our common stock, our business, financial
condition and results of operations.  We have commenced discussions
with the Agent under our Credit Agreement to seek an amendment of the Credit
Agreement in the second quarter of 2009.  However, no assurance can be
given that we will be able to successfully amend our Credit Agreement and avoid
a default.  The Company expects to incur upfront fees and higher
interest costs as a result of any such amendment. An amendment could also
involve other changes to the Credit Agreement not directly related to changing
the relevant financial covenant measures that could restrict the Company’s
operations.
 
 Borrowings under the Credit Agreement
bear interest, at the Company’s election, at either (i) a rate equal tothree month variableLondon Interbank Offer Rate (“LIBOR”), plus an applicable margin ranging from
1.25% to 2.5%, depending on certain conditions, or (ii) an alternate base rate
which will be the greater of (a) the Federal Funds rate plus 0.5% or (b) the
prime rate publicly announced by the Agent as its prime rate, plus, in both
cases, an applicable margin ranging from 0% to 1.0%, depending on certain
conditions.At December 31,
2008 and 2007, the
applicable interest rate for the outstanding borrowings under the Credit
Agreementwas3.79% and 7.24%,
respectively.
 
 The Credit Agreement is guaranteed by
the Company and its direct and indirect subsidiaries and is secured by, among
other things, (a) (i) all of the equity interests ofConcord’ssubsidiaries and (ii) a pledgeby the Companyof all of the issued and outstanding
shares of stock ofConcordbythe Companyand (b) a first priority perfected
security interest on substantially all the assets of the Company and its direct
and indirect subsidiaries pursuant to a guaranty and collateral agreement dated
October 3, 2006 and delivered in connection with the Credit Agreement (the
“Guaranty Agreement”). In addition, LaSalle Bank acting as the Agent, for the
benefit of the lenders, has a mortgage on all owned real estate of the Company
and its direct and indirect subsidiaries, as well as deposit account control
agreements with respect to funds on deposit in bank accounts of the Company and
its direct and indirect subsidiaries.
 
 The
Company is exposed to interest rate volatility with regard to existing issuances
of variable rate debt. Primary exposure includes movements in the U.S. prime
rate and LIBOR. The Company uses interest rate swaps to reduce interest rate
volatility. On January 2, 2007, the Company entered into an interest rate
protection agreement with a notional amount of approximately $10.3 million of
interest rate swaps fixing interest rates between 5.0% and 5.8%.
 
 Market
volatility in LIBOR has recently exposed the Company to fluctuations in
decreased interest rates on outstanding borrowings provided under the Credit
Agreement. Based on available information, we believe the financial institutions
syndicated under our Credit Agreement are able to fulfill their commitments as
of the date of this filing, however, there can be no assurance that one or more
financial institutions will be able to fulfill their funding
obligations.
 
 On April 21, 2004, the Company closed on
an investment into the Company by Olden Acquisition LLC (“Olden”), an affiliate of Kanders &
Company, Inc., for the purpose of
initiating a strategy to redeploy the Company’s assets and use the Company’s cash, cash equivalent assets and
marketable securities to enhance stockholder value.The Companyissued and sold to Olden a 2% ten-year
Convertible Subordinated
Note, which is convertible after one year(or earlier upon a call by the
Company and in certain other circumstances) at a conversion price of $2.25 per share
of Company common stock into approximately 19.9% of the outstanding common
equity of the Company as of
the closing date.  Proceeds to the Company from this transaction
totaled approximately $2.5 million before transaction costs of $0.3
million.  The transaction costs are being amortized over ten years,
the term of the debt.  Interest on the noteaccrues semi-annually but is not
payable currently or upon conversion of the note.  The note matures on
April 21, 2014. As of December 31, 2008 and 2007, the outstanding balance on the
note payable amounted to $2.5 million and is classified as long-termdebt.
  The
carrying amount reported in the consolidated balance sheet as of December 31,
2008 for note payable and long-term debt is $21.8 million. Using a discounted
cash flow technique that incorporates market interest rates, adjustments for
duration, and risk profile, the Company has determined the fair value of its
note payable long-term debt to be $21.4 million.
  51
 
 As of
December 31, 2008 and 2007, the Company had long-term debt consisting of the
following:
  December
31,2008
                                    
                                    
                                    2007Five-Year Senior Secured Term Loan
      Due June 30, 2011
                                    
                                    $
                                    19,000
                                    
                                    
                                    $
                                    23,0002% Convertible Note Due April 21,
      2014
                                    
                                    
                                    2,533
                                    
                                    
                                    
                                    2,533Total long-term debt and notes
      payable
                                    
                                    $
                                    21,533
                                    
                                    
                                    $
                                    25,533Less: Current portion of long-term
      debt
                                    
                                    
                                    (4,000
                                    )
                                    
                                    
                                    (4,000
                                    )Long-term debt and notes payable,
      less current portion
                                    
                                    $
                                    17,533
                                    
                                    
                                    $
                                    21,533
  
 Aggregate
maturities of long-term debt at December 31, 2008 are summarized
below:
  2009
                              
                              $
                              4,0002010
                              
                              
                              4,0002011
                              
                              
                              11,0002012
                              
                              
                              —2013
                              
                              
                              —Thereafter
                              
                              
                              2,533Total
                              
                              $
                              21,533
  
 8.
Other long-term liabilities
  December 31,
                                2008
                              
                              
                              December 31,
                                2007Deferred
      compensation
                              
                              $
                              —
                              
                              
                              $
                              699Accrued interest
      payable
                              
                              
                              242
                              
                              
                              
                              190$
                              242
                              
                              
                              $
                              889
  
 Effective
December 27, 2007, the Company and Albert Weggeman entered into a deferred
compensation agreement pursuant to which Mr. Weggeman would be entitled to
receive deferred compensation of up to $1,519,766, which may be reduced if the
stock price at the time of distribution is less than $6.25. The deferred
compensation shall vest on the following basis: (i) 19.4% shall be immediately
vested; (ii) 30.6% shall vest in twenty-two equal monthly consecutive tranches
commencing on December 27, 2007, subject to Mr. Weggeman being employed by
the Company on each vesting date; (iii) up to 50.0% shall vest as follows,
provided that Mr. Weggeman is actively employed as of the vesting date: (A)
16.7% shall vest as of March 31, 2008, if the Company’s Adjusted Earnings Before
Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”), as more
fully described in the agreement,  for the year ending December 31,
2007 (“Year 1”) is not less than $13,800,000 (the “Year 1 Target”); if the
Year 1 Target is not achieved, and if the sum of the Company’s Adjusted EBITDA
for the years ending December 31, 2007 and 2008 is not less than the sum of the
Year 1 Target plus the Year 2 Target (as defined below), then such 16.7% shall
vest as of March 31, 2009; (B) 16.7% shall vest as of March 31, 2009, if the
Company’s Adjusted EBITDA for the year ending December 31, 2008 (“Year 2”)
is not less than $15,700,000 (the “Year 2 Target”); if the Year 2 Target is not
achieved, and if the sum of the Company’s Adjusted EBITDA for the years ending
December 31, 2008 and 2009 is not less than the sum of the Year 2 Target plus
the Year 3 Target (as defined below), then such 16.7% shall vest as of March 31,
2010; (C) 16.6% shall vest as of March 31, 2010, if the Company’s Adjusted
EBITDA for the year ending December 31, 2009 (“Year 3”) is not less than
$17,200,000 (the “Year 3 Target”); if (i) the Year 3 Target is not
achieved, and (ii) the Company renews the employment agreement of Mr.
Weggeman for another three-year term, and (iii) the sum of the Company’s
Adjusted EBITDA for the years ending December 31, 2009 and 2010 is not less than
the sum of the Year 3 Target plus the Year 4 Target (as defined hereinafter),
then such 16.6% shall vest as of March 31, 2011. “Year 4 Target” means an amount
of the Company’s Adjusted EBITDA for the year ending December 31, 2010 that will
be agreed upon by the parties in the renewed employment agreement, if
any.
  52
  Amounts
vesting on or before October 1, 2009, shall be payable not later than October
31, 2009. Amounts vesting after October 1, 2009, shall be payable promptly after
vesting. Payments shall be made in cash or in common stock of the Company, as
determined by the Compensation Committee in its absolute
discretion.
 
 This
deferred compensation agreement resulted from the modification of stock options
described in Note 12. In accordance with Internal Revenue Code Section 409A and
Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based
Payment” (“FAS 123R”).
 
 During
the period ended December 31, 2008, the Company recorded $0.3 million benefit as
a result of the change in fair value of its long-term deferred compensation
liability and was recorded as a reduction in general and administrative expense.
  Accrued
interest payable represents interest on the Olden note. Interest on the note
accrues semi-annually on the last day of June and December in each year and is
payable, together with the principal sum of the note, on the maturity date of
such note (see Note 7 for further details).
 
 9.
Per Share Data
 
 Basicnet income (loss)per share is computed using net income
(loss) and the weighted average number of common shares
outstanding.  Dilutedincomeper share reflects the weighted average
number of common shares outstanding plus any potentially dilutive shares
outstanding during the period. Potentially dilutive shares consist of shares
issuable upon the exercise of stock options, convertible notes and restricted
stock awards.For the year
ended December 31, 2008, excluded from the calculation of diluted net income per
share was 19 potential common shares from the exercise of stock options as a
result of them being anti-dilutive.  For the year ended December 31,
2006, diluted net loss per
share does not differ from basic net loss per share since potentially dilutiveshareswereanti-dilutive.Shares used in the diluted
net loss per share for theperiodendedDecember31, 2006 exclude the impact of103common shares issuable upon the
exercise of stock options,1,126common shares issuable upon the
conversion of the convertible note and28common shares issuable pursuant to
restricted stock awards.
  The following table shows the
computation of the Company’s basic and diluted earnings per share, as adjusted
for the Company’s February 20, 2009 one-for-five reverse stock split, for the
years ended December 31, 2008, 2007 and 2006.
 
 December
31,2008
                                                          
                                                          
                                                          2007
                                                          
                                                          
                                                          2006Basic net income (loss) per share
      calculation:Net income
      (loss)
                                                          
                                                          $
                                                          41,396
                                                          
                                                          
                                                          $
                                                          3,032
                                                          
                                                          
                                                          $
                                                          (7,753
                                                          )Weighted average common shares -
      basic
                                                          
                                                          
                                                          8,385
                                                          
                                                          
                                                          
                                                          8,350
                                                          
                                                          
                                                          
                                                          6,515Basic net income (loss) per
      share
                                                          
                                                          $
                                                          4.94
                                                          
                                                          
                                                          $
                                                          0.36
                                                          
                                                          
                                                          $
                                                          (1.19
                                                          )Diluted net income (loss) per
      share calculation:Net income as
      reported
                                                          
                                                          $
                                                          41,396
                                                          
                                                          
                                                          $
                                                          3,032
                                                          
                                                          
                                                          $
                                                          (7,753
                                                          )Add: convertible debt
      interest
                                                          
                                                          
                                                          52
                                                          
                                                          
                                                          
                                                          52
                                                          
                                                          
                                                          
                                                          —Adjusted net income
      (loss)
                                                          
                                                          $
                                                          41,448
                                                          
                                                          
                                                          $
                                                          3,084
                                                          
                                                          
                                                          $
                                                          (7,753
                                                          )Weighted average common shares -
      basic
                                                          
                                                          
                                                          8,385
                                                          
                                                          
                                                          
                                                          8,350
                                                          
                                                          
                                                          
                                                          6,515Effect of dilutive stock
      options
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          
                                                          15
                                                          
                                                          
                                                          
                                                          —Effect of restricted stock
      awards
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          
                                                          11
                                                          
                                                          
                                                          
                                                          —Effect of convertible
      note  (see Note 7)
                                                          
                                                          
                                                          1,126
                                                          
                                                          
                                                          
                                                          1,126
                                                          
                                                          
                                                          
                                                          —Effect of stock
      fee  (see Note 15)
                                                          
                                                          
                                                          115
                                                          
                                                          
                                                          
                                                          27
                                                          
                                                          
                                                          
                                                          —Weighted average common shares -
      diluted
                                                          
                                                          
                                                          9,626
                                                          
                                                          
                                                          
                                                          9,529
                                                          
                                                          
                                                          
                                                          6,515Diluted net  income
      (loss) per share
                                                          
                                                          $
                                                          4.31
                                                          
                                                          
                                                          $
                                                          0.32
                                                          
                                                          
                                                          $
                                                          (1.19
                                                          )
 
 53
 
 10.
Income taxes
 
 The
Company files a consolidated federal income tax return with its wholly-owned
subsidiaries. The components of income tax (benefit) expense are as
follows:
  Predecessor
                                                                      CompanyFor
      the Years Ended
                                                                    
                                                                    
                                                                    January
      1, 2006December
      31,
                                                                    
                                                                    
                                                                    to2008
                                                                    
                                                                    
                                                                    2007
                                                                    
                                                                    
                                                                    2006
                                                                    
                                                                    
                                                                    October
      3, 2006Current:Federal
                                                                    
                                                                    $
                                                                    176
                                                                    
                                                                    
                                                                    $
                                                                    60
                                                                    
                                                                    
                                                                    $
                                                                    —
                                                                    
                                                                    
                                                                    $
                                                                    —State
                                                                    
                                                                    
                                                                    612
                                                                    
                                                                    
                                                                    
                                                                    143
                                                                    
                                                                    
                                                                    
                                                                    223
                                                                    
                                                                    
                                                                    
                                                                    211788
                                                                    
                                                                    
                                                                    
                                                                    203
                                                                    
                                                                    
                                                                    
                                                                    223
                                                                    
                                                                    
                                                                    
                                                                    211Deferred:Federal
                                                                    
                                                                    
                                                                    (31,660
                                                                    )
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    —State
                                                                    
                                                                    
                                                                    4
                                                                    
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    —(31,656
                                                                    )
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    —
                                                                    
                                                                    
                                                                    
                                                                    —(Benefit)
      provision for income taxes
                                                                    
                                                                    $
                                                                    (30,868
                                                                    )
                                                                    
                                                                    $
                                                                    203
                                                                    
                                                                    
                                                                    $
                                                                    223
                                                                    
                                                                    
                                                                    $
                                                                    211
 
 
 Deferred
income taxes reflect the tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes. Significant components of the
Company’s deferred tax assets are as follows:
 
 December
31,2008
                                      
                                      
                                      2007Deferred tax
      assets:Net operating loss
      carry-forwards
                                      
                                      $
                                      38,625
                                      
                                      
                                      $
                                      42,394Research and development credit
      carry-forwards
                                      
                                      
                                      151
                                      
                                      
                                      
                                      151Property, plant and
      equipment
                                      
                                      
                                      (702
                                      )
                                      
                                      
                                      (358
                                      )Intangible assets and other
      accrued / current
                                        liabilities
                                      
                                      
                                      1,650
                                      
                                      
                                      
                                      1,251AMT credit
                                      
                                      
                                      247
                                      
                                      
                                      
                                      60Total deferred tax
      assets
                                      
                                      
                                      39,971
                                      
                                      
                                      
                                      43,498Valuation
      allowance
                                      
                                      
                                      (264
                                      )
                                      
                                      
                                      (35,446
                                      )Total net deferred income
      taxes
                                      
                                      $
                                      39,707
                                      
                                      
                                      $
                                      8,052
 
 For
federal income tax purposes, the Company has available net operating loss
carryforwards of approximately $112.9 million and research and development
credit carryforwards of $0.4 million at December 31, 2008. The net operating
loss and research and development credit carryforwards expire in 2011 through
2026, if not previously utilized. The utilization of these carryforwards may be
subject to limitations based on past and future changes in ownership of the
Company pursuant to Section 382 of the Internal Revenue Code. The recognition of
a valuation allowance for deferred taxes requires management to make estimates
about the Company’s future profitability which are inherently uncertain.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all of the deferred
tax assets will not be realized. The estimates and judgments associated with the
valuation of deferred tax assets are considered critical due to the amount of
deferred tax assets recorded by the Company on its consolidated balance sheet
and the judgment required in determining the Company’s future
profitability.
 
 During
the year ended December 31, 2008, based on the Company’s revised projections for
future taxable income over the periods that the Company's deferred tax assets
are deductible, the Company determined that it was more likely than not that it
will have future taxable income sufficient to realize an additional portion of
the Company’s net deferred tax assets and therefore released a significant
portion of the remaining valuation allowance via a credit to income tax expense.
The reversal of the valuation allowance resulted in the recognition of $35.2
million of net deferred income tax benefits for the year ended December 31,
2008.
 
 Deferred
tax assets were $39.7 million and $8.1 million at December 31, 2008 and 2007,
respectively, net of a valuation allowance of $0.3 million and $35.4 million,
respectively.
 .
 The
Company has an effective tax rate benefit of 293.2% for the year ended December
31, 2008 which consists of the significant release of the deferred tax asset
valuation allowance, partially offset by state taxes. The Company had an
effective tax rate of 6.3% for the year ended December 31, 2007 which consists
of state taxes.
 
 The Company files income tax returns in
theU.S.federal jurisdiction and various state
jurisdictions.
  54
 The
following is a summary of the items that caused recorded income taxes to differ
from income taxes computed using the statutory federal income tax
rate:
  December
31,2008
                                              
                                              
                                              2007
                                              
                                              
                                              2006Computed "expected" income tax
      expense (benefit)
                                              
                                              
                                              34.0
                                              %
                                              
                                              
                                              34.0
                                              %
                                              
                                              
                                              (34.0
                                              )%Increase (decrease) in income
      taxes resulting from:State income taxes, net of federal
      income taxes and credits
                                              
                                              
                                              4.7
                                              
                                              
                                              
                                              2.5
                                              
                                              
                                              
                                              —Non-cash stock
      compensation
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              12.7Other
                                              
                                              
                                              2.3
                                              
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —Change in valuation allowance and
      other items
                                              
                                              
                                              (334.2
                                              )
                                              
                                              
                                              (30.2
                                              )
                                              
                                              
                                              24.3Income tax
      expense
                                              
                                              
                                              (293.2
                                              )%
                                              
                                              
                                              6.3
                                              %
                                              
                                              
                                              3.0
                                              %
 
 The Company adopted the provisions of
FASB Interpretation No. 48, “Accounting for Uncertainty in Income
Taxes,an interpretation of
FASB Statement No. 109” (“FIN 48”),on January 1, 2007. Upon the adoption
of FIN 48, the Company commenced a review of all open tax years in all
jurisdictions.The Company
presently has three tax years open based on the statutory three year look back
provision in various jurisdictions.The Company does not believe it has
included any “uncertain tax positions” in its federal income tax return or any
of the state income tax returns it is currently filing, and has no significant
unrecognized tax benefits recordedas of December 31, 2008 and
2007.The Company has made an evaluation of the
potential impact of additional state taxes being assessed by jurisdictions in
which the Company does not currently consider itself liable. The Company does
not anticipate that such additional taxes, if any, would result in a material
change to its financial position.
 
 During 2008, the Companyhasa tax deduction for the amortization ofgoodwillthat will exceed the book
amortization.  The tax benefit for this excess tax deduction is typically
recorded as a decreasein
the book basis of goodwill.  However, because the Company is
in a net operating loss position for tax purposes the Company has not recorded
the tax benefit of this deduction in 2008, and will not record such benefit until
the Company’s net operating losses are utilized.  At December 31,
2008, approximately $0.4 million of net
operating losses resulting from this deduction, and related tax benefit of
approximately $0.1million, have been excluded from the
calculation of deferred tax assets. This amount represents the cumulative total
since the acquisition of Concord Steel on October 3, 2006.
  11.
Employee benefit plan
 The
Company sponsors a 401(k) Plan (the "Plan"), covering substantially all
employees of the Company. Under this Plan, eligible employees who elect to
participate in the Plan may contribute between 2% and 20% of eligible
compensation to the Plan. The Company made matching contributions during the
years ended December 31, 2008, 2007 and 2006 of approximately $0.2 million, $0.1
million and $0.1 million, respectively. Matching contributions for the
Predecessor was $0 for the period January 1, 2006 thru October 3,
2006.
  12.
Stockholders’ equity
 The
Company is authorized to issue two classes of stock designated as common and
preferred. As of December 31, 2008, the total number of shares that the Company
was authorized to issue was 105,000,000 shares, of which 100,000,000 were common
stock and 5,000,000 were preferred stock.
 
 Stock
compensation plans
 
 On June
21, 2007 the Company’s stockholders approved the Company’s 2007 Stock Incentive
Plan (the “2007 Stock Incentive Plan”).  Under the 2007 Stock
Incentive Plan, 2,000,000 shares of the Company’s common stock were initially
reserved for issuance and available for awards, subject to an automatic annual
increase equal to 4% of the total number of shares of the Company’s common stock
outstanding at the beginning of each fiscal year (the “Annual Share Increase”).
Awards under the 2007 Stock Incentive Plan may include non-qualified stock
options, incentive stock options, stock appreciation rights, restricted shares
of common stock, restricted units and performance awards. Awards under the 2007
Stock Incentive Plan may be granted to employees, officers, directors,
consultants, independent contractors and advisors of the Company or any
subsidiary of the Company. In any calendar year, no participant may receive
awards under the 2007 Stock Incentive Plan for more than 500,000 shares of the
Company’s common stock. Additionally, no more than 1,500,000 of the total shares
of common stock available for issuance under the 2007 Stock Incentive Plan may
be granted in the form of restricted shares, restricted units or performance
awards, subject to an automatic annual increase, beginning with January in year
2008 and continuing through January in year 2017, equal to 75% of the total
number of shares of the Company’s common stock increased pursuant to the Annual
Share Increase. The 2007 Stock Incentive Plan has a term of ten years expiring
on June 21, 2017. As of December 31, 2007 the total number of options issued
under 2007 Plan was 594,283 and primarily represented replacement options issued
to management (see below for further discussion).
  55
  During
the year ended December 31, 2008, the total number of shares granted under the
2007 Plan was 17,364 and represented stock option awards granted to each of our
non-employee directors to purchase 3,000 shares of the Company’s common stock,
and 11,364 of restricted stock awards issued to Albert W. Weggeman, the
Company’s President and Chief Executive Officer.
 
 On June
21, 2007, the Company’s stockholders approved the Company’s 2007 Annual
Incentive Plan (the “2007 Annual Incentive Plan”).  The 2007 Annual
Incentive Plan will enable the Company to award certain executive officers of
the Company or any subsidiary of the Company, with “performance-based
compensation” under Section 162(m) of the Internal Revenue Code of 1986, as
amended, which will enable the Company to deduct such compensation from its
taxable income. As of December 31, 2008, no awards have been issued under this
plan.
 
 In April
2000, the Company’s Board of Directors adopted the 2000 Stock Plan (the “2000
Plan”), which provides for the issuance of non-qualified stock options to
employees who are not officers. The options allow the holder to purchase shares
of the Company’s common stock at fair market value on the date of the
grant.  Stock options granted under the 2000 Plan typically vest over
three years and generally expire ten years from the date of grant. As a result
of shareholder approval of the 2007 Stock Incentive Plan, the Company's 2000
Plan has been frozen and will remain in effect only to the extent of awards
outstanding under the plan as of June 21, 2007.
 
 In
February 1999, the Company’s Board of Directors adopted the 1999 Equity
Incentive Plan (the “1999 Plan”), which provides for the issuance of both
incentive and non-qualified stock options. The options allow the holder to
purchase shares of the Company’s common stock at fair market value on the date
of the grant. For options granted to holders of more than 10% of the outstanding
common stock, the option price at the date of the grant must be at least equal
to 110% of the fair market value of the stock. Stock options granted under the
1999 Plan typically vest when performance conditions are met or over three years
and generally expire ten years from the date of grant. As a result of
shareholder approval of the 2007 Stock Incentive Plan, the Company's 1999 Plan
has been frozen and will remain in effect only to the extent of awards
outstanding under the plan as of June 21, 2007.
 
 Outstanding
options, consisting of incentive and non-qualified stock options, generally vest
and become exercisable over a one to three year period from the date of grant.
The outstanding options generally expire ten years from date of grant or upon
retirement from the Company and are contingent upon continued employment during
the applicable ten-year period.
 
 Stock
compensation expense related to all plans was recorded as a component of general
and administrative expense and amounted to $0.4 million, $1.7 million and $0.3
million for the years ended December 31, 2008, 2007 and 2006,
respectively.
 
 Prior to
January 1, 2007, the Company estimated the fair value of our option awards
granted using the Black-Scholes option pricing model.  Beginning in
2007, the Company has used the binomial valuation model. The binomial valuation
model considers certain characteristics of fair value option pricing that are
not considered under the Black-Scholes model. Similar to the Black-Scholes
model, the binomial valuation model takes into account variables such as
volatility, dividend yield, and the risk-free interest rate. However, the
binomial valuation model also considers the expected exercise multiple (the
multiple of exercise price to grant price at which exercises are expected to
occur on average) and the termination rate (the probability of a vested option
being cancelled due to the termination of the option holder) in computing the
value of the option. Accordingly, the Company believes that the binomial
valuation model should produce a fair value that is more representative of the
value of an employee option.
  The
expected term of stock options is the period of time the stock options are
expected to be outstanding.  Estimated future exercise behavior is
based upon the Company’s historical patterns of exercise data or estimate of
excercise behavior.  Expected volatility is based on the historical
price volatility of the Company’s common stock over the expected life of the
option.  The risk-free interest rate represents the U.S. Treasury
security yields at the time of grant for the expected life of the related stock
options.  No dividend yield was incorporated in the calculation of
fair value as the Company has not historically paid dividends and, at the time
of the grant for the options currently outstanding, dividends were not expected
to be paid over the life of the options granted.
 
 The
expected term may be influenced by the Company’s future stock performance, stock
price volatility, and employee turnover rates.
  56
  Effective
December 27, 2007, the Company’s Board of Directors and Albert W. Weggeman, the
President and Chief Executive Officer of the Company, agreed to cancel non-plan
options to purchase 498,284 shares of the Company's common stock at an exercise
price of $3.20 per share, which were granted to Mr. Weggeman pursuant to the
terms of his employment agreement dated as of September 22, 2006, and award to
Mr. Weggeman options under the Company's 2007 Stock Incentive Plan to purchase
498,284 shares of common stock at an exercise price of $6.25 per share, which
was the closing price of the common stock as reported by the OTC Pink
Sheet Electronic Quotation Service on December 27, 2007. Options to
purchase (i) 96,888 shares are immediately vested and exercisable,
(ii) 152,254 shares shall vest and become exercisable in 22 equal
consecutive monthly tranches commencing on January 3, 2008; provided, that, upon
the occurrence of a Change-of-Control Event as defined in the 2007 Stock
Incentive Plan, the vesting of such 152,254 shares shall accelerate and they
shall automatically vest, to the extent not previously vested, immediately prior
to the effective time of such Change-of-Control Event, and (iii) 249,142
shares shall vest and become exercisable upon the occurrence of both of the
following events: (A) the Company's common stock reaching a price of
at least $25.60 per share (subject to adjustment for stock splits and similar
events) for 20 consecutive trading days, and (B) the aggregate amount of
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization
(“Adjusted EBITDA”) for any four consecutive calendar quarters, commencing with
the calendar quarter beginning January 1, 2008, being not less than $70,000,000;
provided, that, if the conditions specified in clauses (A) and (B) of this
clause (iii) have not been satisfied on or before the fourth anniversary of the
date of grant of such options, then the options described in this clause (iii)
shall have lapsed without vesting. The 249,142 shares acquirable
under clause (iii) described above may not be sold or otherwise
transferred (except on the death of Mr. Weggeman) prior to December 27,
2011.
  Also
effective December 27, 2007, the Company’s Board of Directors and Jonathan
LaBarre, Chief Financial Officer of the Company, agreed to cancel options
awarded to Mr. LaBarre under the Company's 1999 Equity Incentive Plan and
pursuant to the terms of his employment agreement dated as of December 1, 2006,
to purchase 50,000 shares of the Company's common stock at an exercise price of
$12.80 per share and award to Mr. LaBarre options under the Company’s 2007 Stock
Incentive Plan to purchase 50,000 shares of stock at an exercise price of $6.25
per share, which was the closing price of the common stock as reported by the
OTC Pink Sheet Electronic Quotation Service on December 27, 2007. Options to
purchase 25,000 shares vest and become exercisable as follows: 8,333 options
vest immediately; 8,333 options vest on December 1, 2008; and 8,334 options vest
on December 1, 2009; provided, that upon the occurrence of a Change-of-Control
Event as defined in the 2007 Stock Incentive Plan, the vesting of such 16,667
options shall accelerate, and they shall automatically vest, to the extent not
previously vested, immediately prior to the effective time of such
Change-of-Control Event. The other 25,000 options vest and become exercisable
upon the occurrence of both of the following events: (A) the Company's common
stock reaching a price of at least $25.60 per share (subject to adjustment for
stock splits and similar events) for 20 consecutive trading days, and (B) the
aggregate amount of Adjusted EBITDA for any four consecutive calendar quarters,
commencing with the calendar quarter beginning January 1, 2008, being not less
than $70,000,000; provided, that if the conditions specified in clauses (A) and
(B) above have not been satisfied on or before the fourth anniversary of the
date of grant of such options, the options described in this sentence shall have
lapsed without vesting. The shares of common stock acquirable on exercise of
these options may not be sold or otherwise transferred (except on the death of
Mr. LaBarre) prior to December 27, 2011.
  The
cancellation and award of new stock option awards to Albert Weggeman and
Jonathan LaBarre as described above resulted in a stock option modification. The
effect of the modification and change in management’s estimates resulted in a
reduction in stock compensation expense of $1.0 million and was recorded in
operating expenses for the year ended December 31, 2007.
  The fair
value of the options granted during the years ended December 31, 2008, 2007 and
2006 was estimated at the date of grant using the following
assumptions:
  2008
                                    
                                    
                                    2007
                                    
                                    
                                    2006Expected
      volatility
                                    
                                    
                                    81.3
                                    %
                                    
                                    
                                    46.0% - 51.9
                                    %
                                    
                                    
                                    50.0
                                    %Expected
      dividends
                                    
                                    
                                    0.0
                                    %
                                    
                                    
                                    0.0
                                    %
                                    
                                    
                                    0.0
                                    %Expected term (in
      years)
                                    
                                    
                                    2
                                    
                                    
                                    
                                    4
                                    
                                    
                                    
                                    5Risk free
    rate
                                    
                                    
                                    3.2
                                    %
                                    
                                    
                                    4.4
                                    %
                                    
                                    
                                    4.7
                                    %Weighted-average fair value of
      options granted
                                    
                                    
                                    $3.17
                                    
                                    
                                    
                                    $2.90
                                    
                                    
                                    
                                    $4.00
  57
  A summary
of option activity under the Plans as of December 31, 2008 and 2007 and changes
during the years ended is presented below:
  Options
                                        
                                        Shares
                                          (000)
                                        
                                        
                                        Weighted-Average Exercise
      Price
                                        
                                        
                                        Weighted-Average Remaining
      Contractual Term (years)
                                        
                                        
                                        Aggregate Intrinsic
      ValueOutstanding at January 1,
      2007
                                        
                                        
                                        318
                                        
                                        
                                        $
                                        4.00Granted
                                        
                                        
                                        307
                                        
                                        
                                        $
                                        6.45Exercised
                                        
                                        
                                        (17
                                        )
                                        
                                        $
                                        2.85Forfeited or
      expired
                                        
                                        
                                        (300
                                        )
                                        
                                        $
                                        4.35Outstanding at December 31,
      2007
                                        
                                        
                                        308
                                        
                                        
                                        $
                                        6.10
                                        
                                        
                                        
                                        6.4
                                        
                                        
                                        $
                                        39Vested or expected to vest at
      December 31, 2007
                                        
                                        
                                        308
                                        
                                        
                                        $
                                        6.10
                                        
                                        
                                        
                                        6.4
                                        
                                        
                                        $
                                        39Exercisable at December 31,
      2007
                                        
                                        
                                        115
                                        
                                        
                                        $
                                        6.00
                                        
                                        
                                        
                                        7.0
                                        
                                        
                                        $
                                        28
   Options
                                      
                                      Shares
                                        (000)
                                      
                                      
                                      Weighted-Average Exercise
      Price
                                      
                                      
                                      Weighted-Average Remaining
      Contractual Term (years)
                                      
                                      
                                      Aggregate Intrinsic
      ValueOutstanding at January 1,
      2008
                                      
                                      
                                      308
                                      
                                      
                                      $
                                      6.10Granted
                                      
                                      
                                      6
                                      
                                      
                                      $
                                      7.00Exercised
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —Forfeited or
      expired
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —Outstanding at December 31,
      2008
                                      
                                      
                                      314
                                      
                                      
                                      $
                                      6.07
                                      
                                      
                                      
                                      7.7
                                      
                                      
                                      $
                                      2Vested or expected to vest at
      December 31, 2008
                                      
                                      
                                      314
                                      
                                      
                                      $
                                      6.07
                                      
                                      
                                      
                                      7.7
                                      
                                      
                                      $
                                      2Exercisable at December 31,
      2008
                                      
                                      
                                      216
                                      
                                      
                                      $
                                      5.97
                                      
                                      
                                      
                                      7.6
                                      
                                      
                                      $
                                      —
   The
weighted-average grant-date fair value of options granted during the years 2008,
2007, and 2006 was $7.00, $6.45, and $4.00, respectively. The total intrinsic
value of options exercised during the years ended December 31, 2008, 2007, and
2006, was $0, $0.1 million, and $0.2 million, respectively. Unrecognized
compensation cost at December 31, 2008 was $0.2 million and is expected to be
fully expensed by December 31, 2009.
 
 A summary
of the status of the Company’s nonvested restricted share awards as of December
31, 2008 and 2007, and changes during the years ended is presented
below:
  Nonvested Restricted
      Shares
                                    
                                    Shares
                                      (000)
                                    
                                    
                                    Weighted-Average
                                      Grant
      Date
                                      Fair
      ValueNonvested at January 1,
      2007
                                    
                                    
                                    92
                                    
                                    
                                    $
                                    6.75Granted
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —Vested
                                    
                                    
                                    (92
                                    )
                                    
                                    $
                                    6.75Forfeited
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —Nonvested at December 31,
      2007
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —
  Nonvested Restricted
      Shares
                                      
                                      Shares
                                        (000)
                                      
                                      
                                      Weighted-Average
                                        Grant
      Date
                                        Fair
      ValueNonvested at January 1,
      2008
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —Granted
                                      
                                      
                                      11
                                      
                                      
                                      $
                                      6.60Vested
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —Forfeited
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —Nonvested at December 31,
      2008
                                      
                                      
                                      11
                                      
                                      
                                      $
                                      6.60
 58
  As of
December 31, 2008, there was $0 of unrecognized compensation cost related to
nonvested restricted share-based compensation arrangements granted under the
Plans, the unrecognized compensation cost is expected to be fully expensed by
December 31, 2009. The total fair value of the shares vested during the years
ended December 31, 2008, 2007 and 2006 was $0, $0.6 million, and $7.7 million,
respectively.
 
 A summary
of the activity under the performance plans as of December 31, 2008 and 2007,
and changes during the years then ended is presented below:
   Performance
      Options
                                    
                                    Shares
                                      (000)
                                    
                                    
                                    Weighted Average Exercise
      Price
                                    
                                    
                                    Remaining Contractual Term
      (years)
                                    
                                    
                                    Aggregate Intrinsic
      ValueOutstanding at January 1,
      2007
                                    
                                    
                                    274
                                    
                                    
                                    $
                                    4.05Granted
                                    
                                    
                                    307
                                    
                                    
                                    $
                                    6.45Exercised
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —Forfeited or
      expired
                                    
                                    
                                    (287
                                    )
                                    
                                    $
                                    4.40Outstanding at December 31,
      2007
                                    
                                    
                                    294
                                    
                                    
                                    $
                                    6.25
                                    
                                    
                                    
                                    9.99
                                    
                                    
                                    $
                                    —Vested or expected to vest at
      December 31, 2007
                                    
                                    
                                    294
                                    
                                    
                                    $
                                    6.25
                                    
                                    
                                    
                                    9.99
                                    
                                    
                                    $
                                    —Exercisable at December 31,
      2007
                                    
                                    
                                    —
                                    
                                    
                                    $
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    $
                                    —
   Performance
      Options
                                    
                                    Shares
                                      (000)
                                    
                                    
                                    Weighted Average Exercise
      Price
                                    
                                    
                                    Remaining Contractual Term
      (years)
                                    
                                    
                                    Aggregate Intrinsic
      ValueOutstanding at January 1,
      2008
                                    
                                    
                                    294
                                    
                                    
                                    $
                                    6.25Granted
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —Exercised
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —Forfeited or
      expired
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —Outstanding at December 31,
      2008
                                    
                                    
                                    294
                                    
                                    
                                    $
                                    6.25
                                    
                                    
                                    
                                    8.99
                                    
                                    
                                    $
                                    —Vested or expected to vest at
      December 31, 2008
                                    
                                    
                                    —
                                    
                                    
                                    $
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    $
                                    —Exercisable at December 31,
      2008
                                    
                                    
                                    —
                                    
                                    
                                    $
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    $
                                    —
 
 The
weighted-average grant-date fair value of performance options granted during the
years 2008, 2007 and 2006 was $0, $6.45, and $4.05, respectively. The total
intrinsic value of options exercised during the years ended December 31, 2008,
2007, and 2006 was $0 for all three years. As of December 31, 2008, there was
$0.9 million of total unrecognized compensation cost related to nonvested
share-based compensation arrangements granted under the performance plans that
may be recognized over a period of three years if performance conditions are
met.
 
 Cash
received from exercises under all stock-based compensation arrangements for the
year ended December 31, 2007 was approximately $47 thousand. The Company did not
realize any windfall tax benefits for the tax deductions resulting from option
exercises during the year ended December 31, 2007. The Company issues newly
certificated shares upon exercise of options granted under stock-based
compensation arrangements.
  59
  The
Company did not capitalize stock-based compensation expense as part of the cost
of an asset for any period presented.
 
 Restricted stock
 
 Effective
February 6, 2008, the Company issued to Albert W. Weggeman, the Company's
President and Chief Executive Officer, a restricted stock award of 11,364 shares
of common stock pursuant to the Company's 2007 Stock Incentive Plan. The terms
of the award provide that the award would vest and Mr. Weggeman would be
entitled to receive the common stock on the earliest to occur of (i) a
Change-of-Control Event as defined in the 2007 Stock Incentive Plan,
(ii) the termination of his employment by the Company without "cause" as
defined in the 2007 Stock Incentive Plan and his employment agreement, or
(iii) the third anniversary of the grant of the restricted stock award,
provided that he is then employed by the Company as its President and Chief
Executive Officer. The restricted stock award will become fully vested on the
occurrence of the earliest of the aforementioned events.
 
 Effective
December 27, 2007, the Company’s Board of Directors and Albert Weggeman agreed
to cancel the restricted stock award that was granted to Mr. Weggeman pursuant
to the terms of his employment agreement dated as of September 22, 2006, and to
issue to Mr. Weggeman a new restricted stock award pursuant to the 2007 Stock
Incentive Plan. Under the new award, Mr. Weggeman shall earn shares of
restricted common stock on the following basis: (i) $1,000,000 of
Restricted Stock upon the Company achieving annual earnings before interest,
taxes, depreciation and amortization, and excluding capital gains ("Adjusted
EBITDA" as defined in the Plan) as computed by the Company on or prior to its
filing of its annual report on Form 10-K, on a consistent basis, of at least
$25,000,000 in a fiscal year of the Company commencing after fiscal year ended
December 31, 2007; (ii) $1,000,000 of Restricted Stock upon the Company
achieving annual Adjusted EBITDA as computed by the Company on or prior to its
filing of its annual report on Form 10-K, on a consistent basis, of at least
$50,000,000 in a subsequent fiscal year of the Company; and
(iii) $1,000,000 of Restricted Stock upon the Company achieving annual
Adjusted EBITDA as computed by the Company on or prior to its filing of its
annual report on Form 10-K, on a consistent basis, of at least $75,000,000 in a
subsequent fiscal year of the Company. Each of the grants specified in (i)-(iii)
above are one-time grants which vest on the date on which the Company’s Form
10-K is filed in respect of the fiscal year for which the grant is being made
and the grant price will be the closing price of the Common Stock of the Company
on the principal exchange on which it is traded on such date. The right Mr.
Weggeman has to receive the shares of common stock underlying this restricted
stock award shall expire upon the earlier to occur of: (i) termination of his
employment agreement with the Company or (ii) the fifth anniversary of the grant
date of the award.
 
 On October 3, 2006, in connection with
the acquisition of the assets ofConcord, the Company entered into an employment
agreement with Mr. Paul Vesey, who serves as president ofConcord, the Company's wholly-owned subsidiary
which was acquired in 2006. Under the employment agreement, Mr. Vesey received a
restricted stock award under the Company's 1999 Equity Incentive Plan, of which
2,353 shares are fully vested, and 29,412 shares will vest if the Company
achieves, in the fiscal year ending December 31, 2007, (i) revenue of $90.0
million, or (ii) gross profit of at least $18.6 million, or
(iii) EBITDA of at least $14.8 million.The aggregate value of the award was
$0.3 million, which was based upon the
Company’s closing stock price of $9.00per share onOctober 3, 2006, the date of the
grant.As of
December 31, 2007 Mr. Vesey is fully vested in his shares.
 
 OnSeptember 22, 2006, the Company entered
into a Restricted StockAward Agreement witheach
ofMr. David A.
JonesandMr. Nicholas Sokolow,
directorsof the Company. Under each agreement,
the directors have been awarded20,000shares of restricted stock under the
Company's 1999 Equity Incentive Plan, which vested immediately but are subject to prohibitions on
transfer which expire in eight consecutive quarterly tranches of2,500shares, commencing September 30, 2006
and expiring June 30, 2008.  The aggregate value of the awards was
$0.2 million, which was based upon theclosing priceof the Company’s common stockof $4.45on September 22, 2006, the date of the
grant.  The Company recorded compensation expense of $0.2 millionrelating to theserestricted stockawards for the yearendedDecember 31, 2006.
 
 See Note
15 regarding the Equity Compensation Agreement with Kanders & Company, Inc.
and Note 17 for CRC’s investment in the Company.
 
 Stockholders’ rights
plan
 
 In June
2001, the Company entered into a Rights Agreement (the “Rights Agreement”),
commonly known as a “poison pill.” Under the Rights Agreement, stockholders of
record on June 14, 2001 were distributed Rights (the “Rights”) to acquire one
one-thousandth of a share of the Company’s Series A Junior Participating
Preferred Stock (the “Preferred Stock”), at a rate of five Rights (after giving
effect to the Company’s one-to-five reverse stock split of its common stock) for
each share of the Company’s common stock held by stockholders on such date. Each
share of common stock issued after the June 14, 2001 record date has an attached
Right. The Rights trade together with the common stock and generally become
exercisable on the tenth day after a person or group (i) acquires 15% of more of
the outstanding common stock or (ii) commences a tender offer or exchange offer
that would result in such a person or group owning 15% or more of the common
stock. In the event that a person or group acquires 15% or more of the Common
Stock (a “Stock Acquisition”), each Right not owned by the 15% or more
stockholder (the “Acquiring Person”) and its affiliates would become exercisable
for, upon payment of the exercise price of the Right (currently, $15), either
Preferred Stock or common stock in an amount equal to the then current exercise
price of the Right divided by one half the then current market price of the
common stock. Alternatively, in the event of certain business combinations
following a Stock Acquisition, each Right not owned by the Acquiring Person and
its affiliates would become exercisable for, upon payment of the exercise price
of the Right, common stock of the Acquiring Person in an amount equal to the
then current exercise price of the Right divided by one half the market price of
the Acquiring Person’s common stock. At any time until ten days following a
Stock Acquisition, the Rights are redeemable by the Company’s board of directors
at a price of $.01 per Right. The Rights have no voting privileges. The Rights
will terminate upon the earlier of the date of their redemption or ten years
from the date of issuance.
  60
  On
December 22, 2003, the Company’s Board of Directors adopted an amendment to the
Rights Agreement. The amendment provides, in effect, that the rights issued
under the Rights Agreement will not be separately distributed to the Company’s
stockholders and become exercisable solely as a result of the commencement of a
tender offer or exchange offer for all outstanding shares of the Company’s
common stock. In addition, the amendment provides that the rights will not
“flip-in” and entitle a holder to purchase shares of the Company’s common stock
at a discount upon consummation of such an offer that results in the bidder
beneficially owning at least 85% of the outstanding shares of the Company’s
common stock, excluding for purposes of determining the number of shares of
common stock outstanding those shares owned by directors who are also officers
of the Company and shares owned by stock plans sponsored by the Company in which
Company employee participants do not have the right to determine confidentially
whether shares of Company common stock held subject to such stock plan(s) will
be tendered in a tender offer or exchange offer. Also, pursuant to the
amendment, the rights will not be triggered by a subsequent merger of the
Company with such a bidder in which the Company’s stockholders receive the same
consideration as was paid or issued in the tender offer or exchange offer. The
amendment was intended to remove the Rights Agreement as an impediment to a
bidder completing its offer and a subsequent merger, while also affording
protection to stockholders who did not tender their shares in the bidder’s
first-step tender or exchange offer, if the holders of a substantial majority of
the Company’s stock elected to accept the bidder’s offer. The amendment also
clarified that stockholders who entered into voting agreements or understandings
solely regarding voting on the plan of liquidation would not be deemed, for
purposes of the Rights Agreement, to beneficially own the shares owned by the
other parties to such agreements or understandings. This aspect of the amendment
was intended to allow stockholders to freely consult with one another, form
groups, and enter into agreements, with respect to voting at the special meeting
on the plan of liquidation, without triggering the rights under the Rights
Agreement. However, since the plan of liquidation did not receive the requisite
stockholder vote required for approval, this aspect of the amendment is no
longer applicable.
 
 On April 21, 2004, in connection with
closing of the Olden investment, the Company’s Board of Directors adopted an
amendment to the Company’s Rights Agreement such that the transaction would not
trigger the rights thereunder.  Additionally, on September 22,
2006, in connection with the Company entering into an equity compensation
agreement with Kanders & Company, Inc., the Company’s Board of Directors adopted
an amendment to the Company’s Rights Agreement such that the transaction would
not trigger the rights thereunder.
 
 On
February 11, 2008, the Company entered into an amendment to the Rights Agreement
that decreases the trigger threshold to 4.9%, from 15%, as the amount of the
Company’s outstanding Common Stock that a person must beneficially own before
being deemed to be an “Acquiring Person” under the Rights Agreement.
Stockholders who own 4.9% or more of the Company’s outstanding common stock as
of the effective date of the amendment would not trigger the Rights Agreement so
long as they do not subsequently increase their ownership of the Company’s
common stock. The amendment also provides that if a person inadvertently becomes
an Acquiring Person by acquiring shares of the Company’s common stock, and
thereafter promptly disposes of shares to bring its ownership of shares below
4.9% of the common stock, such person shall not be deemed an Acquiring Person.
The Company’s Board of Directors determined that the amendment would be in the
best interests of the Company and its stockholders, because it is expected to
assist in limiting the number of 5% or more owners and thus is expected to
reduce the risk of a possible “change of ownership” under Section 382 of the
Internal Revenue Code of 1986 as amended. Any such “change of ownership” under
these rules would limit or eliminate the ability of the Company to use its
existing NOL’s for federal income tax purposes. There is no guaranty that the
objective of the amendment of preserving the value of NOL’s will be achieved.
There is a possibility that certain stock transactions may be completed by
stockholders or prospective stockholders that could trigger a “change of
ownership,” and there are other limitations on the use of NOL’s set forth in the
Internal Revenue Code.
 
 61
 
 13. Commitments and contingencies
 
 Operating
leases
 
 The
Company has lease obligations for facilities and equipment that expire at
various dates through 2017.
 
 As of
December 31, 2008, future minimum lease payments under non-cancelable operating
leases are as follow:
  Operating
                                Leases2009
                              
                              $
                              1,2452010
                              
                              
                              1,2452011
                              
                              
                              1,2342012
                              
                              
                              1,1202013
                              
                              
                              865Thereafter
                              
                              
                              2,208$
                              7,917
 
 Rent
expense for the years ended December 31, 2008, 2007 and 2006 was $1.4 million,
$1.2 million and $0.2 million, respectively.
 
 Contingencies
 
 Except as
set forth below, the
Company is not a party to nor are any of its properties subject to any
pending legal, administrative or judicial proceedings other than routine
litigation incidental to our business.
 
 Public
Offering Securities Litigation
 
 On
November 2, 2001, Timothy J. Fox filed a purported class action lawsuit against
the Company; FleetBoston Robertson Stephens, Inc., the lead underwriter of the
Company’s April 1999 initial public offering; several other underwriters who
participated in the initial public offering; Steven J. Snyder, the Company’s
then president and chief executive officer; and Thomas M. Donnelly, the
Company’s then chief financial officer. The lawsuit was filed in the United
States District Court for the Southern District of New York and was assigned to
the pretrial coordinating judge for substantially similar lawsuits involving
more than 300 other issuers. An amended class action complaint, captioned In re Net Perceptions, Inc. Initial
Public Offering Securities Litigation,01 Civ. 9675
(SAS), was filed on April 22, 2002, expanding the basis for the action to
include allegations relating to the Company’s March 2000 follow-on public
offering in addition to those relating to its initial public offering.  The
action against the Company was coordinated with the other substantially similar
class actions as In re Initial
Public Offering Securities Litigation, 21 MC (SAS) (the “Coordinated
Class Actions”).
  On August
31, 2005, the Court gave preliminary approval to a settlement reached by the
plaintiffs and issuer defendants in the Coordinated Class Actions. On December
5, 2006, the United States Court of Appeals for the Second Circuit overturned
the District Court's certification of the class of plaintiffs who are pursuing
the claims that would be settled in the settlement against the underwriter
defendants. Plaintiffs filed a Petition for Rehearing with the Second Circuit on
January 5, 2007 in response to the Second Circuit's decision. On April 6, 2007,
the Second Circuit denied plaintiffs' Petition for Rehearing. On June 25, 2007,
the District Court signed an Order terminating the settlement. On November 13,
2007, the issuer defendants in certain designated “focus cases” filed a motion
to dismiss the second consolidated amended class action complaints that were
filed in those cases. On March 26, 2008, the District Court issued an Opinion
and Order denying, in large part, the motions to dismiss the amended complaints
in the “focus cases.” In the opinion of management, the ultimate
disposition of this matter will not have a material effect on the Company’s
financial position, results of operation or cash flows.
  62
  Concord
Steel, Inc. v. Wilmington Steel Processing Co., Inc., et al.
 
 On
November 21, 2007, Concord filed a Verified Complaint in the Delaware Chancery
Court against Wilmington Steel, Kenneth Neary and William Woislaw for violation
of non-compete provisions contained in an Asset Purchase Agreement, dated
September 19, 2006 and certain related agreements, and at the same time moved
for a preliminary injunction to prohibit breaches of those restrictive
covenants.  On January 18, 2008, the defendants in that case served an
Answer denying the material allegations of the Complaint and asserting
counterclaims for tortious interference with business relations and
defamation arising from alleged telephone calls made by Concord to the
customer to which Wilmington was selling. On April 3, 2008, the Court
granted the preliminary injunction sought by the Company and thereafter denied
defendants’ request for a stay and for certification of an interlocutory appeal.
On July 22, 2008, defendants withdrew their counterclaims without prejudice. A
three-day trial was held during the week of October 20, 2008 and the
parties have submitted their post-trial briefs and a post-trial hearing is
scheduled for April 2009.
 
 Terrence
P. Meehan v. Concord Steel, Inc.
 
 On May
30, 2008, the former General Manger at the Company’s Essington, PA facility
commenced a lawsuit against Concord in the United States District Court for the
Eastern District of Pennsylvania. In his complaint, Plaintiff Terrence Meehan
alleges that he was wrongfully terminated by Concord in violation of
Pennsylvania public policy and seeks compensatory damages in excess of $150,000,
punitive damages, interest and cost of suit. Defense of the suit was
assumed by Concord's employment practices liability carrier and the action was
settled on a no-admission basis by the Company during October 2008.
 
 John
F. Steward v. Concord Steel, Inc.
 
 A Former
employee of CRC Acquisition Corp. filed suit against Concord in June 2007 in the
Court of Common Pleas, Trumbull County, Ohio alleging that he was terminated by
Concord in August 2006 (prior to the acquisition on October 3,
2006 by Concord (formerly known as SIG Acquisition Corp.) of the assets of
CRC Acquisition Co. LLC (“CRC”)) in violation of his rights under the federal
Family and Medical Leave Act. Plaintiff John F. Steward seeks compensatory
damages in an unstated amount, liquidated damages, injunctive relief and
reinstatement to his job. Concord is vigorously defending the
action and maintains that CRC is the proper party defendant,
denominated as “Concord Steel.” On August 18, 2008, the Plaintiff served its
amended complaint to add as named defendants in addition to Concord, the
original named defendant, each of Concord, SIG Acquisition Corp., and CRC. CRC
subsequently asserted cross claims against Concord which we intend to defend
vigorously and Concord has asserted cross claims against CRC.  Discovery on
this matter is continuing and the Court has set  July 13, 2009 as a trial
date.
  The
Company believes that the outcome of these matters, individually and in the
aggregate, will not have a material adverse effect on the consolidated financial
statements.
 
 14.
Segment data
 
 The
Company views its operations and manages its business as one segment. Factors
used to identify the Company’s single operating segment include the
organizational structure of the Company and the financial information available
for evaluation by the chief operating decision maker in making decisions about
how to allocate resources and assess performance.
 
 15.
Related Party Transactions
 
 The
Company occupied space made available to it at no cost by Kanders & Company,
Inc., an entity owned and controlled by the Company's Non-Executive Chairman,
Warren B. Kanders until October 2007 at which time the Company relocated to its
new offices.
 
 On September 22, 2006, the Company
entered into an Equity Compensation Agreement (the “Compensation Agreement”)
with Kanders & Company, Inc. (“Kanders & Company”), the sole stockholder
of which is Warren B. Kanders, who was then the Company’s Executive Chairman of
the Board of Directors, for prior strategic, consulting, investment banking and
advisory services to the Company in connection with Company’s asset redeployment
strategy. As compensation for such past services, the Company agreed to issue to
Kanders & Company1,654,800shares of its common stock. Kanders
& Company will receive no cash payment for its services pursuant to the
Compensation Agreement. Pursuant to the terms and conditions of the Compensation
Agreement, the Company granted “demand” and “piggyback” registration rights to
Kanders & Company with respect to the shares ofcommonstock that are issuable under the
Compensation Agreement.  The aggregate value of the award was
$7.4 million, which was based upon the closing priceof the Company’s common
stockof $4.45on September 22, 2006, the date of the
grant.  The Company recorded compensation expense of $7.4 millionrelating to the grant of stock during
thefourth quarter of the
year ended December31,
2006.
  63
  On
September 22, 2006, the Company entered into a five-year consulting agreement
(the “Consulting Agreement”) with Kanders & Company, which became effective
as of the closing of the Concord Acquisition (as described in Note 17) on
October 3, 2006. In addition, effective with the closing of the Concord
Acquisition, Mr. Kanders resigned as Executive Chairman of the Company’s Board
of Directors upon being nominated and elected to the position of Non-Executive
Chairman of the Board of Directors. The Consulting Agreement provides that
Kanders & Company will render investment banking and financial advisory
services to the Company on a non-exclusive basis, including strategic planning,
assisting in the development and structuring of corporate debt and equity
financings, introductions to sources of capital, guidance and advice as to (i)
potential targets for mergers and acquisitions, joint ventures, and strategic
alliances, including facilitating the negotiations in connection with such
transactions, (ii) capital and operational restructuring, and
(iii) shareholder relations.
 
 The
Consulting Agreement provides for Kanders & Company to receive a fee equal
of (i) $0.5 million in cash per year during the term of the Consulting
Agreement, payable monthly, and (ii) 1% of the amount by which the Company’s
revenues as reported in the Company’s Form 10-K, or if no such report is filed
by the Company, as reflected in the Company’s audited financial statements for
the applicable fiscal year, exceeds $60.0 million, payable in shares of common
stock of the Company (the “Stock Fee”) valued at the weighted average price of
the Company’s Common Stock for the applicable fiscal year. Upon a
“change-in-control” (as defined in the Consulting Agreement), Kanders &
Company will be entitled to a one-time lump sum cash payment equal to three
times the average amount Kanders & Company received during each of the two
fiscal years preceding such “change-in-control,” subject to certain limitations
as set forth in the Consulting Agreement. Upon the death or permanent disability
of Mr. Kanders, the Company has agreed to make a one-time lump sum cash payment
to Kanders & Company equal to that amount Kanders & Company would be
entitled to receive upon a “change-in-control”. Upon payment of the amounts due
to Kanders & Company either upon the occurrence of a “change-in-control”, or
upon the death or permanent disability of Mr. Kanders, the Consulting Agreement
will terminate. For the years ended December 31, 2008, 2007 and 2006, the
Company paid cash to Kanders and Company of $0.5 million, $0.5 million, $0.1
million respectively. At December 31, 2008, 2007 and 2006, the Company had
accrued liabilities of $0.8 million, $0.5 million and $0.1 million,
respectively, related to the Kanders and Company consulting
agreement.
 
 During
both of the years ended December 31, 2008 and 2007, the Company reimbursed
Clarus Corporation (“Clarus”) an aggregate of less than $0.1 million and $0.1
million for telecommunication, professional and general office expenses which
Clarus incurred on behalf of the Company.  Warren B. Kanders, our
Non-Executive Chairman, also serves as the Executive Chairman of
Clarus.
 
 On April 21, 2004, the Company closed on
an investment into the
Company by Olden Acquisition LLC (“Olden”), an affiliate of Kanders & Company,
Inc.,for the purpose of
initiating a strategy to redeploy the Company’s assets and use the Company’s cash, cash equivalent assets and
marketable securities to enhance stockholder value.The Companyissued and sold to Olden a 2% ten-year
Convertible Subordinated Note, which is convertible after one year(or
earlier upon a call by the Company and in certain other circumstances) at a conversion price of $2.25per share of Company common stock into approximately
19.9% of the outstanding common equity of the Company as of the closing
date.  Proceeds to the Company from this transaction totaled
approximately $2.5 million before transaction costs of $0.3
million.  The transactioncosts are being amortized over ten
years, the term of the debt.  Interest on the note accrues
semi-annually but is not payable currently or upon conversion of the
note.  The note matures on April 21, 2014. As of December 31,
2008 and2007, the outstanding balance on the note payable amounted to
$2.5 million and is classified as long-term debt.As of December 31, 2008 and 2007
accrued interest on the note was $0.2 million and $0.2 million, respectively. As
of December 31, 2008, 2007 and 2006, interest expense was $0.1 million, $0.1 million and $0.1
million respectively.
 
 16.  Fair
Value Measurements
 
 SFAS 157 defines fair value, establishes
a framework for measuring fair value in accordance with accounting principles
generally accepted in theUnited States of America, and expands disclosures about fair
value measurements. The Company has adopted the provisions of SFAS 157 as of
January 1, 2008 for its financial instruments. Although the adoption of SFAS 157
did not materially impact its financial condition, results of operations, or cash flows, the
Company is now required to provide additional disclosures as part of its
financial statements.
 
 SFAS 157 establishes a three-tier fair
value hierarchy, which prioritizes the inputs used in measuring fair
value.  These tiers include: Level 1, defined as
observable inputs such as quoted prices in active markets; Level 2, defined as
inputs other than quoted prices in active markets that are either directly or
indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data
exists, therefore requiring an entity to develop its own
assumptions.
 
 As ofDecember31, 2008, the Company has interest rate
swap contracts that are required to be measured at fair value on a recurring
basis.
  64
  The inputs utilized to determine the fair values
of these contracts are determined using published market prices or estimates
based on observable inputs such as interest rates, yield curves, and spot rates.
The Company has consistently applied these valuation techniques in all periods
presented.
 
 The Company’s liabilities measured at fair value on
a recurring basis subject to the disclosure requirements of SFAS 157 atDecember 31, 2008, were as
follows:
  Fair Value Measurements at
      Reporting Date UsingDescription
                                                
                                                December 31,
      2008
                                                
                                                
                                                Quoted
                                                  Prices in
                                                  Active
                                                  Markets for
                                                  Identical
                                                  Liabilities
                                                  (Level 1)
                                                
                                                
                                                Significant
                                                  Other
                                                  Observable
                                                  Inputs
                                                  (Level 2)
                                                
                                                
                                                Significant
                                                  Unobservable
                                                  Inputs
                                                  (Level 3)Interest rate
      derivatives
                                                
                                                $
                                                357
                                                
                                                
                                                $
                                                —
                                                
                                                
                                                $
                                                357
                                                
                                                
                                                $
                                                —Total liabilities measured at fair
      value
                                                
                                                $
                                                357
                                                
                                                
                                                $
                                                —
                                                
                                                
                                                $
                                                357
                                                
                                                
                                                $
                                                —
 
 17.
Acquisition
 
 On
October 3, 2006, the Company acquired the assets of CRC Acquisition Co. LLC
(“CRC”), a manufacturer of steel counterweights doing business as Concord Steel
(“Concord”). Concord is one of the nation’s leading independent manufacturers of
steel counterweights that are incorporated into a variety of industrial
equipment including aerial work platforms, cranes, elevators and material
handling equipment.
 
 The
acquisition was accounted for under the purchase method of accounting with
assets acquired and liabilities assumed recorded at their estimated fair values.
Accordingly, the results of operations of Concord are included in the Company’s
statement of operations since the date of acquisition. Goodwill was generated to
the extent that the purchase price consideration exceeded the fair value of net
assets acquired.
 
 The total
purchase price of the acquisition was $45.3 million, including transaction costs
of approximately $3 million. In addition, CRC invested $3.0 million of their
proceeds from the sale of CRC to purchase 705,882 unregistered shares of the
common stock of the Company at the closing price per share of $4.25. Such shares
are subject to a six-month lock-up agreement and a registration rights agreement
containing customary “demand” and “piggyback” registration rights. In addition,
pursuant to the purchase agreement, a final working capital adjustment of $0.5
million was returned to the Company as the opening balance sheet working capital
was reconciled with CRC.
 
 The
funding of the consideration paid for the acquisition was as
follows:
  Cash, net
                                    
                                    $
                                    10,981Notes payable from
      bank
                                    
                                    
                                    31,286Transaction
      costs
                                    
                                    
                                    3,068Purchase
    price
                                    
                                    $
                                    45,335
 
 65
 
 The total
purchase price of $45.3 million was initially allocated as follows:
  Assets
      acquired:Accounts
      receivable
                                      
                                      $
                                      10,231Inventory
                                      
                                      
                                      12,149Property, plant and
      equipment
                                      
                                      
                                      3,220Goodwill
                                      
                                      
                                      3,154Intangible
      assets
                                      
                                      
                                      24,516Other
assets
                                      
                                      
                                      86854,138Liabilities
      assumed:Accounts
      payable
                                      
                                      
                                      (6,704
                                      )Accrued expenses and other
      liabilities
                                      
                                      
                                      (1,034
                                      )Other current
      liabilities
                                      
                                      
                                      (1,065
                                      )(8,803
                                      )Net purchase
      price
                                      
                                      $
                                      45,335
  
 As a
result of this business combination, the Company assessed the impact of
Concord’s operations in the determination of its required valuation allowance
for deferred tax assets. As a result of this assessment, the Company reduced its
deferred tax valuation allowance by approximately $8 million. As a result of the
Company’s estimated deferred tax asset valuation, goodwill was eliminated and
intangible assets were reduced by $2.6 million.
 
 The
following unaudited pro forma consolidated results are presented to show the
results on a pro forma basis as if the 2006 acquisition of Concord had been
completed as of January 1, 2006.
  Year Ended
                                    December 31,
      2006Net loss
                                  
                                  $
                                  (1,461
                                  )Basic net loss per
      share:
                                  
                                  $
                                  (0.20
                                  )Diluted net loss per
      share:
                                  
                                  $
                                  (0.20
                                  )
 
 66
 18.
Reverse Stock Split
 
 On
February 20, 2009, a reverse stock split of the Company’s outstanding shares of
common stock at an exchange ratio of one-for-five became effective after the
Company filed an Amendment to its Amended and Restated Certificate of
Incorporation. As a result of the reverse stock split, the number of outstanding
shares of the Company’s common stock was reduced from 42,043,935 shares to
approximately 8,408,787 and our common stock is now quoted on the OTC Pink
Sheets Electronic Quotation Service under the symbol “SIDG.PK”.
  The
reverse stock split was approved by the Company’s stockholders at its annual
meeting of stockholders held on June 2, 2008, at which time the Board of
Directors was authorized, at its discretion, to amend the Company’s Amended and
Restated Certificate of Incorporation to effect a reverse split of the Company’s
issued and outstanding shares of common stock at an exchange ratio ranging
from one-to-two to one-to-five, at any time before the first anniversary of the
annual meeting.
   67
 
 ITEM 9. CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
 
 None
  
 ITEM 9A. CONTROLS AND
PROCEDURES
 
 Evaluation
of Disclosure Controls and Procedures
 
 The
Company maintains disclosure controls and procedures that are designed to ensure
that information required to be disclosed in the reports the Company files under
the Securities Exchange Act of 1934, as amended (“the Exchange Act”) are
recorded, processed, summarized and reported within the time periods specified
in the SEC's rules and forms, and that such information is accumulated and
communicated to the Company's management, including its Chief Executive Officer
("CEO") and Chief Financial Officer ("CFO") its principal executive officer and
principal financial officer respectively, as appropriate, to allow timely
decisions regarding required financial disclosure. In connection with the
preparation of this Annual Report on Form 10-K, the Company's management carried
out an evaluation, under the supervision and with the participation of the
Company's management, including the CEO and CFO, as of December 31, 2008, of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures, as such term is defined under Rule 13a-15(e) and 15d-15(e) under
the Exchange Act. Based upon this evaluation and as described below under
“Management’s Annual Report on Internal Control over Financial Reporting,” the
Company’s CEO and CFO have identified a material weakness in our internal
control over financial reporting (as defined in Exchange Act
Rules 13a-15(f)).  Solely as a result of this material weakness,
the Company’s management, including the CEO and CFO, concluded that the
Company’s disclosure controls and procedures were not effective as of
December 31, 2008.
 
 Management’s
Annual Report on Internal Control over Financial Reporting
 
 The
Company’s management is responsible for establishing and maintaining effective
internal control over financial reporting for the Company, as such term is
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Under the
supervision and with the participation of our management, including our CEO and
CFO, the Company conducted an evaluation of the effectiveness of our internal
control over financial reporting based on the framework in Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission. Based on that evaluation, our management concluded that,
due to the material weakness described below, our internal control over
financial reporting was not effective as of December 31, 2008.
 
 A
material weakness is a deficiency, or combination of deficiencies, in internal
control over financial reporting such that there is a reasonable possibility
that a material misstatement of the Company’s annual or interim financial
statements would not be prevented or detected on a timely basis.
 
 The
Company's Management identified a material weakness in its assessment of
the effectiveness of the Company's internal control over financial
reporting.
 
 As of
December 31, 2008, the Company did not maintain effective control over the
valuation of inventory and cost of goods sold. Specifically, the Company did not
have effective supervisory and review controls over the valuation of inventory
including the average cost calculation and application of production variances
in order to ensure accurate reporting and disclosure in its interim and annual
financial statements. This control deficiency resulted in material audit
adjustments to the fourth quarter 2008 financial statements. Additionally,
this control deficiency could result in a misstatement of the aforementioned
account balances or disclosures that would result in a misstatement of the
consolidated financial statements that would not be prevented or detected on a
timely basis. Accordingly, management has determined that this control
deficiency represents a material weakness.
   Management’s
Remediation Initiatives
 
 In
response to the material weakness identified, the Company has taken actions and
plans to continue to take further steps to strengthen its control processes and
procedures in order to remediate the material weakness. The Company will
continue to evaluate the effectiveness of its internal controls and procedures
on an ongoing basis and will take further action as appropriate.
  68
  Such
actions taken to remediate the material weakness included:
 
 ·
                Providing
      additional training to our employees as it relates to inventory valuation
      and the financial reporting requirements required by generally accepted
      accounting principles; and
  ·
                Reviewing
      the qualifications and assessment of the Company’s needs with respect to
      personnel in areas related to inventory, and making appropriate personnel
      changes and increasing supervision and training to effectuate the
      foregoing changes.
 
 The
Company plans to continue to develop new policies and procedures and educate and
train its employees on its existing policies and procedures in a continual
effort to improve its internal control over financial reporting, and plans to
take further actions as appropriate.
 
 Changes
in Internal Control over Financial Reporting
 
 There
were changes in the Company's internal control over financial reporting during
the quarter ended December 31, 2008, as described above, and subsequently
that have materially affected, or are reasonably likely to materially affect,
the Company's internal control over financial reporting.
  
 69
 
 PART
III
 
 ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 
 Information
regarding executive officers is included in Part I of this Form 10-K as
permitted by General Instruction G (3).
 
 The
Company has adopted a code of ethics that applies to its principal executive
officer and principal financial officer, and to all of its other officers,
directors and employees.  The code of ethics may be accessed at www.stamfordig.com,
our Internet website, at the tab “Governance”.  The Company intends to
disclose future amendments to, or waivers from, certain provisions of its code
of ethics, if any, on the above website within four business days following the
date of such amendment or waiver.
 
 Other
information required by Item 10, including information regarding directors,
membership and function of the audit committee, including the financial
expertise of its members, and Section 16(a) compliance, appearing under the
captions “Election of Directors”, “Information Regarding Board of Directors and
Committees” and “Other Matters” Security Ownership of Certain Beneficial Owners
and Management in our Proxy Statement used in connection with the 2009 Annual
Meeting of Stockholders, is incorporated herein by reference.
 
 ITEM
11. EXECUTIVE COMPENSATION
 
 The
information set forth under the caption "Executive Compensation" in our Proxy
Statement used in connection with our 2009 Annual Meeting of Stockholders, is
incorporated herein by reference.
 
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
 
 The
information set forth under the caption "Principal Stockholders" in our Proxy
Statement used in connection with our 2009 Annual Meeting of Stockholders, is
incorporated herein by reference.
 
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS, AND DIRECTOR INDEPENDENCE
 
 The
information set forth under the caption "Certain Relationships and Related
Transactions" in our Proxy Statement used in connection with our 2009 Annual
Meeting of Stockholders, is incorporated herein by reference.
  ITEM
14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES
  The
information set forth under the caption “Principal Accountant Fees and Services”
in our Proxy Statement used in connection with our 2009 Annual Meeting of
Stockholders, is incorporated herein by reference.
  70
  PART
IV
 
 ITEM
15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
 
 (a)
                Financial
      Statements
  1.
                  The
      financial statements filed as part of this report are listed on the Index
      to Consolidated Financial Statements under Item 8 of Part II of this Form
      10-K.
 
 2.
                  Schedule
      II – Valuation and Qualifying Accounts and Reserves for the years
      ended December 31, 2008, 2007 and
2006.
  3.
                  The following Exhibits are hereby
      filed as part of this Annual Report on Form
  10-K:
   71
    Exhibit
                              Number
                            
                            Description2.1
                            
                            Patent Purchase Agreement, dated
      December 30, 2003, between Thalveg Data Flow LLC and Net Perceptions,
      Inc., as amended on March 31, 2004 (filed as Exhibit 2.1 to our Current
      Report on Form 8-K filed with the Securities and Exchange Commission on
      April 1, 2004).3.1
                            
                            Amended and Restated Certificate
      of Incorporation (filed as Exhibit 3.1 to our Registration Statement on
      Form S-1) (Registration No. 333-71919).3.2
                            
                            Certificate of Amendment to the
      Amended and Restated Certificate of Incorporation (filed as Exhibit 3.1(b)
      to our Annual Report on Form 10-K for the Fiscal Year Ended December 31,
      2002 filed with the Securities and Exchange Commission on March 26,
      2003).3.3
                            
                            Certificate of Amendment to the
      Amended and Restated Certificate of Incorporation (filed as Appendix A of
      the Net Perceptions, Inc. Definitive Proxy Statement filed with the
      Securities and Exchange Commission on May 11,
  2007).3.4
                            
                            Certificate of Amendment to the
      Amended and Restated Certificate of Incorporation (filed as Exhibit 3.1 to
      our Current Report on form 8-K filed with the Securities and Exchange
      Commission on February 2009).3.5
                            
                            Amended and Restated Bylaws as
      amended through August 5, 2003 (filed as Exhibit 3.2 to our Quarterly
      Report on Form 10-Q for the Quarter Ended June 30, 2003 filed with the
      Securities and Exchange Commission on August 14,
    2003).4.1
                            
                            Specimen common stock certificate
      (filed as Exhibit 4.2 to our Registration Statement on Form S-1/A)
      (Registration No. 333-71919).4.2
                            
                            Specimen common stock certificate
      (including Rights Agreement Legend) (filed as Exhibit 4.4 to our Quarterly
      Report on Form 10-Q for the Quarter Ended June 30, 2001 filed with the
      Securities and Exchange Commission on August 14,
    2001).4.3
                            
                            Rights Agreement between Net
      Perceptions, Inc. and Wells Fargo Bank Minnesota, as Rights Agent (filed
      as Exhibit 1 to our Registration Statement on Form 8-A12G filed with the
      Securities and Exchange Commission on June 6,
  2001).4.4
                            
                            Amendment No. 1 to Rights
      Agreement between Net Perceptions, Inc. and Wells Fargo Bank Minnesota, as
      Rights Agent dated as of December 22, 2003 (filed as Exhibit 2 to our
      Registration Statement on Form 8-A12G/A filed with the Securities and
      Exchange Commission on December 24, 2003).4.5
                            
                            Amendment No. 2 to Rights
      Agreement between Net Perceptions, Inc. and Wells Fargo Bank Minnesota, as
      Rights Agent dated as of April 21, 2004 (filed as Exhibit 3 to our
      Registration Statement on Form 8-A12G/A filed with the Securities and
      Exchange Commission on April 22, 2004).4.6
                            
                            Amendment No. 3 to Rights
      Agreement between Net Perceptions, Inc. and Wells Fargo Bank Minnesota, as
      Rights Agent dated as of September 22, 2006 (filed as Exhibit 4.1 to our
      Current Report on Form 8-K filed with the Securities and Exchange
      Commission on September 28, 2006).4.7
                            
                            Amendment No. 4 to Rights
      Agreement between Stamford Industrial Group, Inc. and American Stock
      Transfer & Trust Company, as Rights Agent dated as of February 11,
      2008 (filed as Exhibit 4.1 to our Current Report on Form 8-K filed with
      the Securities and Exchange Commission on February 12,
      2008).4.8
                            
                            Form of Certificate of Designation
      of Series A Junior Participating Preferred Stock (filed as
      Exhibit  1 to our  Registration Statement on Form
      8-A12G filed with the Securities and Exchange Commission on June 6,
      2001).4.9
                            
                            Form of Rights Certificate (filed
      as Exhibit 1 to our Registration Statement on Form 8-A12G filed with the
      Securities and Exchange Commission on June 6,
  2001).10.1*
                            
                            1999 Equity Incentive Plan (filed
      as Exhibit 10.3 to our Registration Statement on Form S-1) (Registration
      No. 333-71919).10.2*
                            
                            Amended and Restated 1999
      Non-Employee Director Option Plan, as amended through April 2, 2001 (filed
      as Exhibit 10.4 to our Quarterly Report on Form 10-Q for the Quarter Ended
      March 31, 2001 filed with the Securities and Exchange Commission on May
      15, 2001).10.3
                            
                            2% Convertible Subordinated Note
      Due April 21, 2014 (filed as Exhibit 4.9 to our Quarterly Report on Form
      10-Q for the Quarter Ended March 31, 2004 filed with the Securities and
      Exchange Commission on May 11, 2004).10.4*
                            
                            Form of Net Perceptions, Inc. 1999
      Equity Incentive Plan Stock Option Agreement (filed as Exhibit 10.1 to our
      Quarterly Report on Form 10-Q for the Quarter Ended September 30,
      2005  filed with the Securities and Exchange Commission on
      November 9, 2005).10.5*
                            
                            Employment Agreement dated as of
      May 1, 2006, between Net Perceptions, Inc. and Nigel P. Ekern, (filed as
      Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities
      and Exchange Commission on May 4,
2006).
  72
  10.6*
                                                                                                                                  
                                                                                                                                  Equity compensation Agreement by
      and between Net Perceptions, Inc. and Kanders & Company, Inc., dated
      as of September 22, 2006 (filed as Exhibit 10.1 to our Current Report on
      Form 8-K filed with the Securities and Exchange Commission on September
      28, 2006).10.7*
                                                                                                                                  
                                                                                                                                  Consulting Agreement by and
      between Net Perceptions, Inc. and Kanders & Company Inc., dated as of
      September 22, 2006 (filed as Exhibit 10.2 to our Current Report on Form
      8-K filed with the Securities and Exchange Commission on September 28,
      2006).10.8*
                                                                                                                                  
                                                                                                                                  Employment Agreement by and
      between Net Perceptions, Inc. and Albert W. Weggeman,
      Jr.,  dated as of September 22, 2006 (filed as Exhibit 10.3 to
      our Current Report on Form 8-K filed with the Securities and Exchange
      Commission on September 28, 2006).10.9*
                                                                                                                                  
                                                                                                                                  Stock Option Agreement between Net
      Perceptions, Inc. and Albert W. Weggeman, Jr., dated as of October 3, 2006
      (filed as Exhibit 10.13 to our Current Report on Form 8-K filed with the
      Securities and Exchange Commission on October 10,
      2006).10.10*
                                                                                                                                  
                                                                                                                                  Restricted Stock Award Agreement
      dated as of September 22, 2006, between Net Perceptions, Inc., and Mr.
      David A. Jones re Restricted Stock Award under 1999 Equity Incentive Plan
      (filed as Exhibit 10.4 to our Current Report on Form 8-K  filed
      with the Securities and Exchange Commission on September 28,
      2006).10.11*
                                                                                                                                  
                                                                                                                                  Restricted Stock Award Agreement
      dated as of September 22, 2006, between Net Perceptions, Inc., and Mr.
      Nicholas Sokolow re Restricted Stock Award under 1999 Equity Incentive
      Plan (filed as Exhibit 10.5 to our Current Report on Form
      8-K  filed with the Securities and Exchange Commission on
      September 28, 2006).10.12
                                                                                                                                  
                                                                                                                                  Credit Agreement dated October 3,
      2006, between the SIG Acquisition Corp. and LaSalle Bank National
      Association, as agent, and the lenders named therein (filed as Exhibit
      10.1 to our Current Report on Form 8-K filed with the Securities and
      Exchange Commission on October 10, 2006).10.13
                                                                                                                                  
                                                                                                                                  Second Amendment dated March 13,
      2008 to Credit Agreement between Concord Steel, Inc. and LaSalle Bank
      National Association (filed as Exhibit 10.13 to our Annual Report on Form
      10-K filed with the Securities and Exchange Commission on March 17,
      2008).10.14
                                                                                                                                  
                                                                                                                                  Guaranty and Security Agreement
      dated October 3, 2006, among Net Perceptions, Inc., SIG Acquisition Corp.,
      and Lasalle Bank National Association, as agent, and the lenders named
      therein (filed as Exhibit 10.2 to our Current Report on Form 8-K filed
      with the Securities and Exchange Commission on October 10,
      2006).10.15
                                                                                                                                  
                                                                                                                                  Form of Revolving Note (filed as
      Exhibit 10.3 to our Current Report on Form 8-K filed with the Securities
      and Exchange Commission on October 10, 2006).10.16
                                                                                                                                  
                                                                                                                                  Form of Term Note (filed as
      Exhibit 10.4 to our Current Report on Form 8-K filed with the Securities
      and Exchange Commission on October 10, 2006).10.17
                                                                                                                                  
                                                                                                                                  Form of Capital Expenditures Note
      (filed as Exhibit 10.5 to our Current Report on Form 8-K filed with the
      Securities and Exchange Commission on October 10,
      2006).10.18
                                                                                                                                  
                                                                                                                                  Form of Swing Loan Note (filed as
      Exhibit 10.6 to our Current Report on Form 8-K filed with the Securities
      and Exchange Commission on October 10, 2006).10.19*
                                                                                                                                  
                                                                                                                                  Employment Agreement dated as of
      October 3, 2006, between the Company and Paul Vesey (filed as Exhibit 10.7
      to our Current Report on Form 8-K filed with the Securities and Exchange
      Commission on October 10, 2006).10.20
                                                                                                                                  
                                                                                                                                  Asset Purchase Agreement among the
      Company, SIG Acquisition Corp. and CRC Acquisition Co. LLC dated as of
      September 22, 2006 (without exhibits) (filed as Exhibit 10.8 to our
      Current Report on Form 8-K filed with the Securities and Exchange
      Commission on October 10, 2006).10.21
                                                                                                                                  
                                                                                                                                  Stock Purchase Agreement between
      the Company and CRC Acquisition Co. LLC dated as of October 3, 2006
      (without exhibits) (filed as Exhibit 10.9 to our Current Report on Form
      8-K filed with the Securities and Exchange Commission on October 10,
      2006).10.22
                                                                                                                                  
                                                                                                                                  Form of Lock-up Agreement between
      the Company and certain directors and officers (filed as Exhibit 10.1 to
      our Current Report on Form 8-K filed with the Securities and Exchange
      Commission on October 17, 2006).10.23*
                                                                                                                                  
                                                                                                                                  Employment Agreement dated as of
      December 1, 2006 between Net Perceptions, Inc. and Jonathan LaBarre (filed
      as Exhibit 10.1 to our Current Report on Form 8-K filed with the
      Securities and Exchange Commission on December 5,
      2006).
  73
 10.24
                                                                                                                                    
                                                                                                                                    Lease dated as of November 30,
      2006, between SIG Acquisition Corp., and Castleway Properties, LLC (filed
      as Exhibit 10.32 to our Annual Report on Form 10-K filed with the
      Securities and Exchange Commission on April 2,
    2007).10.25*
                                                                                                                                    
                                                                                                                                    2007 Stock Incentive Plan
      (incorporated herein by reference to Appendix B of the Net Perceptions,
      Inc. Definitive Proxy Statement filed with the Securities and Exchange
      Commission on May 11, 2007).10.26*
                                                                                                                                    
                                                                                                                                    2007 Annual Incentive Plan
      (incorporated herein by reference to Appendix C of the Net Perceptions,
      Inc. Definitive Proxy Statement filed with the Securities and Exchange
      Commission on May 11, 2007).10.27*
                                                                                                                                    
                                                                                                                                    Form of Restricted Stock Award
      Agreement dated as of December 27, 2007, between Stamford Industrial
      Group, Inc. and Albert W. Weggeman (filed as Exhibit 10.1 to our Current
      Report on Form 8-K filed with the Securities and Exchange Commission on
      January 3, 2008).10.28*
                                                                                                                                    
                                                                                                                                    Form of Stock Option Agreement
      dated as of December 27, 2007, between Stamford Industrial Group, Inc. and
      Albert W. Weggeman (filed as Exhibit 10.2 to our Current Report on Form
      8-K filed with the Securities and Exchange Commission on January 3,
      2008).10.29*
                                                                                                                                    
                                                                                                                                    Form of Deferred Compensation
      Agreement dated as of December 27, 2007, between Stamford Industrial
      Group, Inc. and Albert W. Weggeman (filed as Exhibit 10.3 to our Current
      Report on Form 8-K filed with the Securities and Exchange Commission on
      January 3, 2008).10.30*
                                                                                                                                    
                                                                                                                                    Form of Stock Option Agreement
      dated as of December 27, 2007, between Stamford Industrial Group, Inc. and
      Jonathan LaBarre (filed as Exhibit 10.4 to our Current Report on Form 8-K
      filed with the Securities and Exchange Commission on January 3,
      2008).10.31*
                                                                                                                                    
                                                                                                                                    Form of Stamford Industrial Group,
      Inc. 2007 Stock Incentive Plan Stock Option Agreement (filed as Exhibit
      10.34 to our Annual Report on Form 10-K filed with the Securities and
      Exchange Commission on March 17, 2008).10.32*
                                                                                                                                    
                                                                                                                                    Form of Stamford Industrial Group,
      Inc. 2007 Stock Incentive Plan Stock Bonus Award Agreement (filed as
      Exhibit 10.35 to our Annual Report on Form 10-K filed with the Securities
      and Exchange Commission on March 17, 2008).10.33
                                                                                                                                    
                                                                                                                                    Form of Indemnification Agreement
      for Directors (filed as Exhibit 10.36 to our Annual Report on Form 10-K
      filed with the Securities and Exchange Commission on March 17,
      2008).16.1
                                                                                                                                    
                                                                                                                                    Letter dated July 8, 2008, from
      McGladrey & Pullen, LLP to the Securities and Exchange Commission
      regarding change in certifying accountants (filed as Exhibit 16.1 to the
      Current Report on Form 8-K/A filed with the Securities and Exchange
      Commission on July 9, 2008).21.1**
                                                                                                                                    
                                                                                                                                    Subsidiaries of the
      Registrant.23.1**
                                                                                                                                    
                                                                                                                                    Consent of McGladrey & Pullen,
      LLP, independent registered public accounting
  firm.23.2**
                                                                                                                                    
                                                                                                                                    Consent of PricewaterhouseCoopers
      LLP, independent registered public accounting
  firm.
  ________________
 *
                      Represents
      a management contract or compensatory plan or
  arrangement.**
                      filed
      herewith.
  (1)
                        Incorporated
      by reference to Net Perceptions’ Current Report on Form 8-K filed April 1,
      2004.(2)
                        Incorporated
      by reference to Net Perceptions’ Registration Statement on Form S-1
      (Registration No. 333-71919).(3)
                        Incorporated
      by reference to Net Perceptions’ Annual Report on Form 10-K for the Fiscal
      Year Ended December 31, 2002.(4)
                        Incorporated
      by reference to Net Perceptions’ Quarterly Report on Form 10-Q for the
      Quarter Ended June 30, 2003.(5)
                        Incorporated
      by reference to Net Perceptions’ Quarterly Report on Form 10-Q for the
      Quarter Ended June 30, 2001.(6)
                        Incorporated
      by reference to Net Perceptions’ Registration Statement on Form 8-A filed
      June 6, 2001.(7)
                        Incorporated
      by reference to Net Perceptions’ Current Report on Form 8-K filed December
      23, 2003.(8)
                        Incorporated
      by reference to Net Perceptions’ Quarterly Report on Form 10-Q for the
      Quarter Ended March 31, 2001.(9)
                        Incorporated
      by reference to Net Perceptions’ Quarterly Report on Form 10-Q for the
      Quarter Ended June 30, 2000.(10)
                        Incorporated
      by reference to Net Perceptions’ Quarterly Report on Form 10-Q for the
      Quarter Ended March 31, 2004.(11)
                        Incorporated
      by reference to Net Perceptions’ Quarterly Report on Form 10-Q for the
      Quarter Ended September 30,
2005.
  (b)
                The
      exhibits are listed in Item 15. (a)(3)
  above.
 
 (c)
                Schedule
      II Valuation and Qualifying Accounts and
  Reserves.
  74
  SCHEDULE II - VALUATION AND QUALIFYING
ACCOUNTS AND RESERVES
  AdditionsBalance at
                                                              Beginning of
      Year
                                                            
                                                            
                                                            Charges to
      Earnings
                                                            
                                                            
                                                            Deductions
                                                            
                                                            
                                                            Balance at
                                                              End of YearYear ended December 31,
      2008Deducted from asset
      accounts:Allowance for doubtful
      accounts
                                                            
                                                            $
                                                            4
                                                            
                                                            
                                                            $
                                                            256
                                                            
                                                            
                                                            $
                                                            (86
                                                            )
                                                            
                                                            $
                                                            174Reserve for excess and obsolete
      inventory
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            
                                                            83
                                                            
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            
                                                            83Valuation allowances for deferred
      tax assets(1)
                                                            
                                                            
                                                            35,446
                                                            
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            
                                                            (35,182
                                                            )
                                                            
                                                            
                                                            264Year ended December 31,
      2007Deducted from asset
      accounts:Allowance for doubtful
      accounts
                                                            
                                                            
                                                            2
                                                            
                                                            
                                                            
                                                            45
                                                            
                                                            
                                                            
                                                            (43
                                                            )
                                                            
                                                            
                                                            4Valuation allowances for deferred
      tax assets
                                                            
                                                            
                                                            36,301
                                                            
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            
                                                            (855
                                                            )
                                                            
                                                            
                                                            35,446Year ended December 31,
      2006Deducted from asset
      accounts:Allowance for doubtful
      accounts
                                                            
                                                            
                                                            1
                                                            
                                                            
                                                            
                                                            1
                                                            
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            
                                                            2Valuation allowances for deferred
      tax assets
                                                            
                                                            
                                                            43,776
                                                            
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            
                                                            (7,475
                                                            )
                                                            
                                                            
                                                            36,301
   1.
                      During
      the year ended December 31, 2008, based on the Company’s revised
      projections for future taxable income over the periods that the Company's
      deferred tax assets are deductible, the Company determined that it was
      more likely than not that it will have future taxable income sufficient to
      realize an additional portion of the Company’s net deferred tax assets and
      therefore released a significant portion of the remaining valuation
      allowance as a credit to income tax expense. The reversal of the valuation
      allowance resulted in the recognition of $35.2 million of income tax
      benefits during the year ended December 31, 2008. See note 10 to the
      consolidated financial
statements.
  75
   SIGNATURES
 
 Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended, the registrant has caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
    STAMFORD
      INDUSTRIAL GROUP, INC.By:
                  /s/ ALBERT W. WEGGEMAN,
      JRAlbert
      W. Weggeman, JrPresident
      and Chief Executive Officer
 Date:
March 16, 2009
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, this
report has been signed below by the following persons on behalf of the
registrant in the capacities indicated on March 16, 2009.
 
 Signature
                                            
                                            Title/s/ ALBERT W. WEGGEMAN, JR
                                            
                                            President
      and Chief Executive OfficerAlbert
      W. Weggeman, Jr/s/ JONATHAN LABARRE
                                            
                                            Chief
      Financial Officer, Treasurer and SecretaryJonathan
      LaBarre/s/ WARREN B. KANDERS
                                            
                                            Non-Executive
      Chairman of the Board of DirectorsWarren
      B. Kanders/s/ DAVID A. JONES
                                            
                                            DirectorDavid
      A. Jones/s/ NICHOLAS SOKOLOW
                                            
                                            DirectorNicholas
      Sokolow
   76
 
 EXHIBIT
INDEX
 
 ExhibitNumber
                          
                          DESCRIPTION21.1
                          
                          Subsidiaries
      of the Registrant23.1
                          
                          Consent
      of McGladrey & Pullen, LLP, independent registered public accounting
      firm.23.2
                          
                          Consent
      of PricewaterhouseCoopers LLP, independent registered public accounting
      firm.31.1
                          
                          Certification
      of principal executive officer pursuant to Exchange Act Rules Rule
      13(a)-14(a) and15(a)-14(a), as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200231.2
                          
                          Certification
      of principal financial officer pursuant to Exchange Act Rules Rule
      13(a)-14(a) and15(a)-14(a), as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200232.1
                          
                          Certification
      of principal executive officer pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.32.2
                          
                          Certification
      of principal financial officer pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.
 
  77