UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

For the quarterly period ended September 30, 2002March 31, 2003

Commission File Number: 001-14217

ENGLOBAL CORPORATIONENGlobal Corporation

(Exact name of registrant as specified in its charter)

Nevada

88-0322261

(281) 821-3200

Yesx            No¨

Yes¨            Nox

QUARTERLY REPORT ON FORM 10-Q

FOR THE PERIOD ENDED SEPTEMBER 30, 2002MARCH 31, 2003

TABLE OF CONTENTS

ENGLOBAL CORPORATIONENGlobal Corporation

CONDENSED CONSOLIDATED BALANCE SHEETSCondensed Consolidated Statements Of Income

ENGLOBAL CORPORATIONENGlobal Corporation

CONDENSED CONSOLIDATED STATEMENTS OF INCOMECondensed Consolidated Balance Sheets

ENGLOBAL CORPORATIONENGlobal Corporation

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSCondensed Consolidated Statements Of Cash Flows

(UNAUDITED)(Unaudited)

ENGLOBAL CORPORATIONNotes To Condensed Consolidated Financial Statements

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS1.    BASIS OF PRESENTATION

The condensed consolidated financial statements of ENGlobal Corporation, formerly known as Industrial Data Systems Corporation (“ENGlobal” or the “Company”), included herein, are unaudited for the nine month periodsthree-month period ended September 30, 2002March 31, 2003 and 2001.2002. These financial statements reflect all adjustments (consisting of normal recurring adjustments), which are, in the opinion of management, necessary to fairly depict the results for the periods presented. Certain information and note disclosures, normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America, have been condensed or omitted pursuant to rules and regulations of the Securities and Exchange Commission. It is suggested these condensed financial statements be read in conjunction with the Company’s audited financial statements for the years ended December 31, 20012002 and 2000,2001, which are included in the Company’s annual report on Form 10-K. The Company believes that the disclosures made herein are adequate to make the information presented not misleading.

2.    NAME CHANGE

On June 6, 2002, the stockholders voted on a proposal to amend the Articles of Incorporation to change the name of the Company from Industrial Data Systems Corporation to ENGlobal Corporation. The Company believes the new name reflects its broader capabilities and vision for future growth, providing a common identity, which will build name recognition and credibility among existing and potential customers.

The ENGlobal name change has been adopted by the Merger, ENGlobal entered intoCompany’s operating subsidiaries effective January 25, 2003.

3.    LINEOF CREDITAND DEBT

The Company has a financing arrangementCredit Facility with Fleet Capital Corporation (“Fleet”) whereby all of Petrocon’s outstanding debt, the “Credit Facility”, (comprisedthat consists of a line of credit and a term loan) was refinanced.credit. The new loan agreement positions the Fleet debt as senior to all other debt and includes a $15,000,000debt. The line of credit is limited to $15,000,000, subject to borrowing base restrictions, and a $500,000 term loan.restrictions. The Credit Facility is collateralized by substantially all the assets of the Company. At September 30, 2002, $7,786,000March 31, 2003, $7,807,000 was outstanding on the line of credit. The line of credit and the term loan was paid off in full.matures on June 30, 2005. The interest rate on the line of credit is one-quarter of one percent plus prime (5.0(4.50 percent at September 30, 2002)March 31, 2003), and the commitment fee on the unused line of credit is 0.375 percent. Monthly principal payments on the term loan plus interest commenced January 1, 2002 and continued until maturity. The remaining borrowings available under the line of credit as of September 30, 2002,March 31, 2003, were $2,788,000$3,694,000 after consideration of the borrowing base limitations. The Company’s Credit Facility contains covenants which require the maintenance of certain ratios, including cumulative fixed charge coverage and debt coverages and specified levels of certain other items. This Credit Facility

ENGLOBAL CORPORATIONNotes To Condensed Consolidated Financial Statements

Current notes payable include a revolving credit note that was collateralizedwhich finances commercial insurance on a short-term basis, with accounts receivablea balance of $279,000 and inventory$485,000 as of the Company.

4.    PREFERRED STOCK DIVIDENDS

One stockholder, Equus II Incorporated, holds the maturity date of the line of credit and the term loan was extended to June 30, 2005. The amendment also includes more favorable advance rates on eligible accounts, increased sub-limits on fixed price contracts and foreign receivables and an interest rate reduction if certain fixed charge ratios are maintained.

5.    ALLOCATIONOF GOODWILL

The Company’s plan to pursue potential acquisitions of complementary businesses was realized on December 21, 2001 through its Merger with Petrocon. The Company entered into a letter of intent on April 3, 2001 to acquire, through Mergermerger with a wholly owned subsidiary, Petrocon Engineering, Inc., an engineering support services company, with offices along the Texas and Louisiana gulf coast, in exchange for 9,800,000 shares of the Company, valued at $0.71 per share. The purchase price totaled $23,806,000. The transaction was financed by issuance of common stock valued at $6,637,000, net of registration costs, issuance of preferred stock with a liquidation value of $2,500,000 and assumption of debt totaling $13,737,000. The purchase resulted in the recognition of an intangible, goodwill, of $13,121,000$13,211,000, and deferred tax assets (see Note 8).

In accordance with Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” goodwill is no longer amortized over its estimated useful life, but rather will be subject to at least an annual assessment for impairment. The initial test for impairment, as of January 1, 2002, must bewas completed by the end of the second quarter of 2002. The Company has completed such valuation2002 and no impairment has been incurred. Goodwill amortizationoccurred. The second annual test for the Company for the nine months ended September 30, 2001impairment was $6,000. Net income for the third quarter of 2001completed effective January 1, 2003 and the nine months ended September 30, 2001, adjusted to exclude goodwill amortization, would have changed to $309,000 and $944,000, respectively ($0.02 per share and $0.07 per share, respectively, would have remained the same).

ENGLOBAL CORPORATIONNotes To Condensed Consolidated Financial Statements

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS6.    FIXED FEE CONTRACTS

Costs, estimated earnings and billings on uncompleted contracts consisted of the following at September 30, 2002March 31, 2003 and December 31, 20012002 (in thousands):

7.    TAXES

The Company benefited from Petrocon’s net operating loss carryforwards at the time of approximately $1,000,000 in the calculation of current tax expense as of December 31, 2001. The Company had additional net operating loss carryforwards of approximately $3,530,000 subject to limitations on utilization due to prior ownership changes. The Company had established a valuation allowance on the entire net operating loss due to tax code ambiguity until further research was completed regarding the realization of this asset.

8.    STOCK OPTION PLANS

The Company accounts for $224,000 by reallocatingits nonqualified incentive stock option plan under the goodwill balance that was created atrecognition and measurement principles of Accounting Principles Board (APB) Opinion No. 25,Accounting for Stock Issued to Employees and related interpretations. Accordingly, no stock-based compensation cost is reflected in the timenet income, as all options granted under those plans were equal to the market value of the Merger. Previously recognized current year tax liability has been reclassified to offsetCompany’s stock on the current deferred asset account reducingdate of grant. The following table illustrates the balance to $634,000.

ENGLOBAL CORPORATIONNotes To Condensed Consolidated Financial Statements

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  9.    SEGMENT INFORMATION

The Company operates in three business segments: (1) engineering consulting services primarily to major integrated oil and gas companies; (2) engineered systems, providing design and implementation of control systems for specific applications primarily in the energy and process industries, uninterruptible power systems and battery chargers; and (3) manufacturing of air handling equipment for commercial heating, ventilation and cooling systems. Sales and operating income set forth in the following table are the results of these segments. Segment operating profit (loss) is defined as profit (loss) before interest and income taxes. The amounts reported in the corporate segment include those activities that are allocated to the operating segments.

Segment information for the three months ended September 30,March 31, 2003 and 2002, and 2001, respectively, iswas as follows (in thousands)

Total Revenue. Total revenue increased by $17,754,000$2,900,000 or 308% from $5,755,00014% for the three months ended September 30, 2001,March 31, 2003 compared to $23,509,000the three months ended March 31, 2002. All segments reported an increase in 2002. Revenuesales

during the period. Engineering services segment increased from $17,875,000 in 2002 to $18,316,000 in 2003 or $441,000, a 2% increase. The revenue increase in engineering services resulted primarily from the engineering servicescontinuation of a large EPC project (engineering, procurement, and construction) in the Beaumont office. The engineered systems segment, which comprised 84.0%represents 20% of total revenuerevenues increased by $2,403,000 or 105% from $2,287,000 for the three months, ended September 30,March 31, 2002 increased by $15,895,000 or 413%. Of thisto $4,690,000 for the same period in 2003. This increase $16,850,000 or 106% was derived from Petrocon operations acquired in the Merger. Revenue of the pre-merger operations decreased from $3,517,000 to $2,943,000 or 16%occurred at ENGlobal Systems resulting from the completionlarge fixed price sales of a large lump-sum turnkey project in Houston and depressed economic conditions in Tulsa.

Net income. Net income after taxes increased by $154,000$242,000 or 50%91% from $307,000$266,000 to $508,000 for the three months ended September 30, 2001 to $462,000 for the same period in 2002.

As reportedEngineered Carbons, Inc. filed a claim in the Company’s Form 10-Q for the quarterly periods ended March 31, 2002 and June 30, 2002 claims were filed2000 against the Company in the 60th60^th District Court of Jefferson County, Texas, in May, 1999 and in the 14^th District Court of Parish of Calcasieu, Louisiana in December, 1998. Both claims involve allegedalleging failure of contractual performance purportedly caused by faulty design. If the CompanyThe claim is found to have any liability, it believes that such liability would be covered by itsthe Company’s errors and omissions insurance, except forinsurance. The Company has further reserved $100,000, the amount of its deductible which was accrued in a prior period. Both of these cases remainunder such insurance. This litigation remains pending and is in the discovery phase. Engineered Carbons has yet to specify the relief that it is seeking in the litigation.

The Company believesrecently resolved a prior claim filed in 2000 by Arch Chemicals, Inc. in the 14^th District Court of the Parish of Calcasieu, Louisiana, alleging failure of contractual performance purportedly by faulty design. On April 26, 2003 a jury found that these lawsuits are without meritboth Arch and plansthe Company were concurrently negligent and required that the Company pay $17,740 to vigorously defend itself inArch, including interest. The jury verdict is subject to appeal by both lawsuits.the Company and Arch.

b. Form 8-K

None.

c.    SignatureSIGNATURE