UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

x		QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		for the quarterly period ended September 30, 2007

		or

o		TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from to

Commission File No.: 000-51645

GLENROSE INSTRUMENTS INC.

(Exact name of registrant as specified in its charter)

Delaware		20-3521719
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

GlenRose Instruments Inc.

45 First Avenue

Waltham, MA 02451

(Address of principal executive offices)

Registrant’s telephone number, including area code: (781) 622-1120

Securities registered pursuant to Section 12(b) of the Exchange Act: None

Securities registered pursuant to Section 12(g) of the Exchange Act: Common Stock, par value $.001

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 under the Securities Act.

Yes o No x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. Large accelerated filer o Accelerated filer o Non-accelerated filer x

Indicate by check mark whether the registrant is a shell company. Yes o No x

State the aggregate market value of the voting and non-voting common equity held by non-affiliates: Not applicable — the registrant’s Common Stock is not traded on any market.

PART I – FINANCIAL INFORMATION

Item 1 – Financial Statements

GLENROSE INSTRUMENTS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

As of September 30, 2007 and December 31, 2006

	SEPTEMBER 30,		DECEMBER 31,
	2007		2006
	(UNAUDITED)
ASSETS

CURRENT ASSETS
CASH AND CASH EQUIVALENTS	$	1,062,116	$	908,703
ACCOUNTS RECEIVABLE (NET OF ALLOWANCES OF $34,175 AND $62,835 FOR 2007 AND 2006, RESPECTIVELY)	3,784,584		3,150,042
UNBILLED CONTRACT RECEIVABLES	475,503		626,310
INVENTORY	126,243		115,559
PREPAID EXPENSES	657,259		430,109
DUE FROM RELATED PARTIES	503,841		553,636
OTHER RECEIVABLES	19,805		8,540
DEFERRED TAX ASSET	622,165		606,726
TOTAL CURRENT ASSETS	7,251,516		6,399,625

PROPERTY, PLANT AND EQUIPMENT, NET	2,418,909		2,583,424

OTHER ASSETS
RESTRICTED CASH	245,257		433,821
GOODWILL	2,740,913		2,740,913
TOTAL OTHER ASSETS	2,986,170		3,174,734

TOTAL ASSETS	$	12,656,595	$	12,157,783

The accompanying notes are integral part of these condensed consolidated financial statements

GLENROSE INSTRUMENTS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

As of September 30, 2007 and December 31, 2006

	SEPTEMBER 30,			DECEMBER 31,
	2007			2006
	(UNAUDITED)
LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES
ACCOUNTS PAYABLE	$	1,036,682		$	799,283
ACCRUED EXPENSES	260,630			173,708
ACCRUED EMPLOYEE-RELATED COSTS	1,422,263			1,336,050
CURRENT PORTION DUE RELATED PARTY, SENIOR NOTES	—			125,000
ACCRUED INTEREST	829,500			472,000
CAPITAL LEASE OBLIGATIONS	9,498			34,645
INCOME TAXES PAYABLE	209,059			179,620
TOTAL CURRENT LIABILITIES	3,767,632			3,120,306

LONG-TERM LIABILITIES
DUE TO RELATED PARTIES, SENIOR NOTES, NET OF CURRENT PORTION	875,000			875,000
DUE TO RELATED PARTIES, SUBORDINATED NOTES	2,000,000			2,000,000
ACCRUED INTEREST ON SUBORDINATED NOTES	140,884			613,383
CAPITAL LEASE OBLIGATIONS	18,916			25,924
DEFERRED TAX LIABILITY	311,745			321,074
OTHER LONG-TERM LIABILITIES	73,069			26,551

TOTAL LIABILITIES	7,187,246			6,982,238

STOCKHOLDERS’ EQUITY
COMMON STOCK (PAR VALUE $0.01, 10,000,000 SHARES AUTHORIZED; 3,102,647 AND 3,000,000 SHARES ISSUED AND OUTSTANDING AT SEPTEMBER 30, 2007 AND DECEMBER 31, 2006)	31,026			30,000
PAID-IN CAPITAL	7,456,391			6,770,000
ACCUMULATED DEFICIT	(2,018,068		)	(1,624,455		)
TOTAL STOCKHOLDERS’ EQUITY	5,469,349			5,175,545

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	12,656,595		$	12,157,783

The accompanying notes are integral part of these condensed consolidated financial statements

GLENROSE INSTRUMENTS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended September 30, 2007 and October 1, 2006

	THREE MONTHS ENDED
	SEPTEMBER 30,				OCTOBER 1,
	2007				2006
	(UNAUDITED)				(UNAUDITED)

CONTRACT REVENUES	$	8,423,556			$	8,046,749

COST OF SALES	7,679,154				7,168,255

GROSS MARGIN FROM OPERATIONS	744,402				878,494

GENERAL AND ADMINISTRATIVE EXPENSES	738,528				482,084

OPERATING INCOME	5,874				396,410

OTHER INCOME (EXPENSE)
INTEREST AND OTHER INCOME	6,460				14,755
INTEREST EXPENSE	(66,075			)	(82,154			)
TOTAL OTHER INCOME (EXPENSE)	(59,615			)	(67,399			)

INCOME/(LOSS) BEFORE INCOME TAXES	(53,741			)	329,011

PROVISION FOR INCOME TAXES	129,231				2,198

NET INCOME/ (LOSS)	$	(182,972		)	$	326,813

EARNINGS PER SHARE CALCULATIONS
WEIGHTED AVERAGE COMMON SHARES	3,034,588				3,000,000
BASIC AND DILUTIVE NET EARNINGS
(LOSS) PER SHARE		$	(0.06	)		$	0.11

The accompanying notes are integral part of these condensed consolidated financial statements

GLENROSE INSTRUMENTS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Nine Months Ended September 30, 2007 and October 1, 2006

	NINE MONTHS ENDED
	SEPTEMBER 30,			OCTOBER 1,
	2007			2006
	(UNAUDITED)			(UNAUDITED)

CONTRACT REVENUES	$	24,708,899		$	24,206,162

COST OF SALES	22,882,455			21,854,352

GROSS MARGIN FROM OPERATIONS	1,826,444			2,351,810

GENERAL AND ADMINISTRATIVE EXPENSES	2,051,365			1,607,647

OPERATING INCOME / (LOSS)	(224,921		)	744,163

OTHER INCOME (EXPENSE)
INTEREST AND OTHER INCOME	41,584			22,900
INTEREST EXPENSE	(205,605		)	(251,446		)
TOTAL OTHER INCOME (EXPENSE)	(164,021		)	(228,546		)

INCOME/(LOSS) BEFORE INCOME TAXES	(388,942		)	515,617

PROVISION FOR INCOME TAXES	4,671			2,198

NET INCOME/ (LOSS)	$	(393,613	)	$	513,419

EARNINGS PER SHARE CALCULATIONS
WEIGHTED AVERAGE COMMON SHARES	3,011,656			3,000,000
BASIC AND DILUTIVE NET EARNINGS
(LOSS) PER SHARE	$	(0.13	)	$	0.17

The accompanying notes are integral part of these condensed consolidated financial statements

GLENROSE INSTRUMENTS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended September 30, 2007 and October 1, 2006

	NINE MONTHS ENDED
	SEPTEMBER 30,			OCTOBER 1,
	2007			2006
	(UNAUDITED)			(UNAUDITED)

CASH FROM OPERATING ACTIVITIES
NET INCOME (LOSS)	$	(393,613	)	$	513,419

ADJUSTMENTS TO RECONCILE NET INCOME (LOSS)
TO NET CASH PROVIDED BY OPERATIONS:
DEPRECIATION/AMORTIZATION	385,356			430,478
NON-CASH INTEREST EXPENSE	—			158,996
PROVISION (BENEFIT) FOR DEFERRED INCOME TAXES	(24,768		)	—
CHANGES IN OPERATING ASSETS AND LIABILITIES (INCREASE) / DECREASE IN:
RESTRICTED CASH	188,564			(1,762		)
ACCOUNTS RECEIVABLE	(634,542		)	261,418
ACCOUNTS RECEIVABLES RELATED PARTY	49,795			—
OTHER RECEIVABLES	(11,265		)	—
UNBILLED CONTRACT RECEIVABLES	150,807			(94,163		)
PREPAID EXPENSES	(227,150		)	(117,657		)
INVENTORY	(10,684		)	5,594
INCREASE / (DECREASE)
ACCOUNTS PAYABLE	237,399			(250,130		)
ACCRUED INTEREST ON SUBORDINATED NOTES	(114,999		)	—
OTHER LONG-TERM LIABILITIES	46,518			—
OTHER ACCRUED LIABILITIES	202,574			—
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES	(156,008		)	906,193

CASH FROM INVESTING ACTIVITIES
PURCHASE OF PROPERTY AND EQUIPMENT	(220,841		)	(174,052		)
NET CASH USED IN INVESTING ACTIVITIES	(220,841		)	(174,052		)

FINANCING ACTIVITIES
PROCEEDS FROM SALE OF COMMON STOCK	687,418			—
PAYMENTS ON RELATED PARTY SENIOR NOTES	(125,000		)	(380,950		)
PAYMENTS ON CAPITAL LEASE OBLIGATIONS	(32,156		)	—
NET CASH PROVIDED (USED) IN FINANCING ACTIVITIES	530,262			(380,950		)

NET CASH INCREASE / (DECREASE) FOR THE PERIOD	153,413			351,191

CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD	908,703			1,082,750
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD	$	1,062,116		$	1,433,941

SUPPLEMENTAL DISCLOSURE
CASH PAID FOR INTEREST	$	205,605		$	91,441
CASH PAID FOR INCOME TAXES	$	132,725		$	127,338

The accompanying notes are integral part of these condensed consolidated financial statements

Notes to Interim Financial Statements (Unaudited) for the period ending September 30, 2007

Note 1 – Organization and Significant Accounting Policies

Organization

GlenRose Instruments Inc., (“GlenRose Instruments”, “GlenRose”, the “Company”, or “we”) was incorporated in September 2005 by the GlenRose Partnership LP, (“GlenRose Partnership”), a private-equity partnership with its headquarters in Waltham, Massachusetts. The Company was organized to serve as a holding company through which the GlenRose Partners would hold the shares of Eberline Services, Inc. (“ESI”) (all of which had previously been held by the GlenRose Partnership). In order to effect such change in structure, in September 2005, the GlenRose Partnership entered into a stock exchange agreement with the company pursuant to which all outstanding shares of Eberline Services, Inc. owned by the GlenRose Partnership were exchanged for 3,000,000 shares of common stock of GlenRose Instruments Inc. As a result of this exchange, the GlenRose Partnership owns 3,000,000 of the outstanding stock of the Company, and the Company owns all of the outstanding stock of its subsidiary, ESI. During the nine months ended September 30, 2007, the Company issued an additional 102,647 shares to a limited number of accredited investors through a private placement of common stock (see Note 6). As of September 30, 2007, ESI which includes in consolidation Eberline Services Hanford, Inc. (“ESHI”), Lionville Labs, Inc. (“Lionville”), Eberline Analytical Corporation, Benchmark Environmental Corp. and TMA Norcal Corporation, together with the corporate office of GlenRose Instruments constituted all of the revenues and expenses of the Company. The Company provides radiological services and operates an analytical laboratory network, as well as provides radiological characterization and analysis, hazardous, radioactive and mixed waste management, and facility, environmental, safety, and health management.

Principles of Consolidation and Basis of Presentation

The accompanying consolidated financial statements include the Company and its subsidiaries. All significant intercompany transactions have been eliminated. In the opinion of management, the unaudited financial statements contain all adjustments (all of which were considered normal and recurring) necessary to present fairly the Company’s financial position at September 30, 2007, the results of operations for the three and nine months ended September 30, 2007 and October 1, 2006, and cash flows for the nine months ended September 30, 2007 and October 1, 2006.

Fiscal Year

The Company’s fiscal year-end is the last Sunday of each calendar year. Each quarter is comprised of two four-week and one five-week period to ensure consistency in prior-year comparative analysis. The Company changed the fiscal year-end to the current format in 2006. The previous fiscal year-end was December 31.

Use of Estimates in Preparation of Statements

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and underlying assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates, and such differences could be material to the financial statements.

Concentration of Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist of highly liquid cash equivalents and trade receivables. The Company’s cash equivalents are placed with high-credit, quality financial institutions and issuers. The Company performs periodic credit evaluations of its customers’ financial condition and generally does not require collateral. The Company provides for an allowance for doubtful accounts on receivable balances based upon the expected collectability of such receivables. One customer represented approximately 64% and 65% of the revenue for the nine month period ended September 30, 2007 and October 1, 2006, respectively. Federal and state governments, including prime contractors, collectively account for approximately 90% of all revenues for both nine month periods ended September 30, 2007 and October 1, 2006. Two customers represented approximately 57% and 56% of trade accounts receivables for the nine month period ended September 30, 2007 and October 1, 2006, respectively.

Fair Value of Financial Instruments

The Company’s financial instruments consist primarily of cash and cash equivalents, receivables, accounts payable and

borrowings. The Company believes all of the financial instruments’ carrying values approximate current market values.

Cash and Cash Equivalents

Cash and cash equivalents primarily consist of cash deposits and liquid investments with original maturities of three months or less when purchased and are stated at cost.

Restricted Cash

Restricted cash includes certificates of deposit set aside in the event of decommissioning activities of certain laboratory operations or to otherwise meet statutory requirements.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Maintenance, repairs and minor renewals are expensed to operations as incurred. Major repairs and betterments, which substantially extend the useful life of the property, are capitalized. Depreciation is provided for principally on a straight-line basis in amounts sufficient to charge the cost of depreciable assets to operations over the estimated service lives of assets as follows:

Buildings & Improvements		12 to 30 years
Computer Equipment		3 years
Plant and Lab Equipment		8 to 10 years

Leasehold improvements are amortized using the straight-line method over the lesser of the estimated useful lives of the assets or the term of the related leases.

Goodwill

Goodwill is the excess of the purchase price over the fair value of identifiable net assets acquired in business combinations. Goodwill is subject to an impairment test in the fourth quarter of each year. Goodwill is also reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. No events occurred or circumstances changed that required the Company to further test goodwill for impairment during either of the nine month periods ending September 30, 2007, or October 1, 2006.

Revenue Recognition

Revenue for lab services, which are generally short-term, is recognized upon completion of the services. Revenue for government service contracts is recognized as the services are performed. Revenues are recognized based upon actual costs incurred plus specified fees or actual time and materials as required. The Company performs certain contracts that are audited by either the Defense Contract Audit Agency (“DCAA”) or Los Alamos National Labs (“LANL”) Internal Audit. Such contracts may be subject to adjustment dependent upon such factors as provisional billing rates or other contract terminology. Calculations of allowable overhead and profit may also change after audits by the DCAA for cost reimbursable type contracts. Contracts are normally settled during the audit year the contract terminates performance and is submitted for closure. The Company is currently audited and settled through December 2004 for all contracts subject to review by DCAA and audited through December 2002 for contracts subject to review by LANL Internal Audit. Contracts performed before either 2004 or 2002 respectively that are either active or have not been submitted for closure may be subject to adjustment during subsequent audits during the year they are closed and audited.

The Company is engaged principally in three types of service contracts with the federal government and its contractors:

Cost Reimbursable Contracts. Revenue from “Cost-Plus-Fixed-Fee” (CPFF) contracts is recognized on the basis of reimbursable contract costs incurred during the period plus an earned fee. Costs incurred for services which have been authorized and performed, but may not have been billed, are allocated with operational fringe, overhead, general and administrative expenses and fees, and are presented as Unbilled Contract Receivables on the Balance Sheet.

Time-and-Materials Contracts. Revenue from “time and material” contracts is recognized on the basis of man-hours utilized plus other reimbursable contract costs incurred during the period.

Fixed-Price Contracts. Revenue from “fixed-price” contracts is recognized on the percentage-of-completion method. For

fixed-price contracts, the amount of revenues recognized is that portion of the total contract amount that the actual cost expended bears to the anticipated final total cost based on current estimates of cost to complete the project (cost-to-cost method). However, when it becomes known that the anticipated final total cost will exceed the contract amount, the excess of cost over the contract amount is immediately recognized as a loss on the contract. Recognition of profit commences on an individual project only when cost to complete the project can reasonably be estimated and after there has been some meaningful performance achieved on the project (greater than 10% complete). Changes in job performance, job conditions, and estimated profitability, including those arising from contract penalty provisions (when applicable) and final contract settlements, may result in revisions to costs and income and are recognized in the period in which the revisions are determined.

Direct costs of contracts include direct labor, subcontractors and consultants, materials and travel. The balance of costs, including facilities costs, insurance, administrative costs, overhead labor and fringe costs, are classified as either indirect costs or General and Administrative Expense, and are allocated to jobs as a percentage of each division’s total cost base. Provision for estimated losses on uncompleted contracts is made in the period in which such losses are determined. Claims and change orders are not recorded and recognized until such time as they have been accepted.

Accounts Receivable

Accounts receivable are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts on a monthly basis. Management determines the allowance for doubtful accounts by identifying troubled accounts and by using historical experience applied to an aging of accounts. Accounts receivable are written off when deemed uncollectible. Recoveries of accounts receivable previously written off are recorded in revenue when received.

Unbilled Receivables

Costs related to work that has been completed and performed, for which revenue has been recognized but are not yet fully billed, are classified as “Unbilled Contract Receivables.”

Inventory

Inventories are stated at the lower of cost or market, valued on a first-in, first-out basis and include allocations of overhead and labor. Inventory is reviewed periodically for slow-moving and obsolete items. As of September 30, 2007 and October 1, 2006, there were no reserves or write-downs recorded against inventory.

Income Taxes

Deferred income taxes are recorded in accordance with SFAS No. 109 “Accounting for Income Taxes” using the liability method. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

Earnings per Common Share

The calculation of earnings per common share is based on the weighted-average number of common shares outstanding during the applicable period. There are no potentially dilutive common shares during any periods presented.

Recent Accounting Pronouncements

In June 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109.” This interpretation clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes.” This interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. It also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. This interpretation is effective for the company beginning in fiscal year 2007. The company has adopted this pronouncement and it did not have a significant impact on its consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157 “Fair Value Measures” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. This statement applies

under other accounting pronouncements that require or permit fair value measurements, however it does not apply to SFAS 123R. This Statement shall be effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company is currently evaluating the effect, if any, of SFAS 157 on its financial statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS 159”). SFAS 159 provides companies with an option to report selected financial assets and liabilities at fair value. SFAS 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities and to provide additional information that will help investors and other financial statement users to more easily understand the effect of the company’s choice to use fair value on its earnings. Finally, SFAS 159 requires entities to display the fair value of those assets and liabilities for which the company has chosen to use fair value on the face of the balance sheet. SFAS 159 is effective as of the beginning of an entity’s first fiscal year beginning after November 15, 2007. Early adoption is permitted. The Company is currently assessing the impact of SFAS 159 which it will be required to adopt.

Note 2 – Earnings per Share

Basic and diluted earnings per share are computed by dividing earnings available to common stockholders by the weighted average number of common shares outstanding during the period. There are no dilutive securities as of September 30, 2007 and October 1, 2006. The following reconciles amounts reported in the financial statements:

	Three Months					Nine Months
	September 30,			October 1,		September 30,			October 1,
	2007			2006		2007			2006
Earnings Per Share
Income (Loss) available to stockholders	$	(182,972	)	$	326,813	$	(393,613	)	$	513,419

Weighted average shares outstanding - Basic	3,034,588			3,000,000		3,011,656			3,000,000
Basic Earnings (Loss) per Share	$	(0.06	)	$	0.11	$	(0.13	)	$	0.17

Assumed exercise of dilutive stock options and warrants	—			—		—			—
Weighted average shares outstanding - Diluted	3,034,588			3,000,000		3,011,656			3,000,000
Diluted Earnings (Loss) per Share	$	(0.06	)	$	0.11	$	(0.13	)	$	0.17

Anti-Dilutive Options	—			—		—			—

Note 3 – Long-Term Debt

Long term debt consists of the following:

	September 30,		December 31,
Debt Instrument	2007		2006

Due to related parties, Senior Notes. Two (2) notes in amount of $1,000,000 each. Interest at Prime + 1%, currently 8.75%, due December 31, 2011.	$	875,000	$	1,000,000

Due to related parties, Subordinated Notes. Four (4) notes in the amount of $500,000 each, principal, and accrued interest at 8.5%. Due December 31, 2011	2,000,000		2,000,000

Total Long-Term Debt	2,875,000		3,000,000

Less: Current Portion of Long-Term Debt	—		(125,000		)

Total Long-Term Debt	$	2,875,000	$	2,875,000

In 2006, the Company restructured the terms of the related-party debt retroactively to January 1, 2004. Repayment terms were extended, as was the payment of interest. Additionally, the four subordinated notes were structured such that repayment of the accrued interest would begin in 2007. In December 2006, both holders of the Senior notes signed an amendment to the note agreements allowing the company to postpone the principal payment of the notes between June 30, 2007 and December 31, 2008. Repayment of the principal on the two Senior notes was extended to 2011. The restructure did not result in a change in interest expense for prior years, or total amount due.

Future debt payments, including accrued interest, at September 30, 2007 as restructured are as follows:

	Principal		Principal
Period Ending	Senior		Subordinated		Accrued
September 30,	Debt		Debt		Interest		Total

2007	$	—	$	—	$	357,000	$	357,000
2008	—		—		613,384		613,384
2009	300,000		666,667		—		966,667
2010	300,000		666,667		—		966,667
2011	275,000		666,667		—		941,667
	$	875,000	$	2,000,000	$	970,384	$	3,845,384

Note 4 - Commitments

The Company and its subsidiaries lease facilities and equipment under various operating leases. Future minimum rental commitments for long-term, non-cancelable operating leases at September 30, 2007 are as follows:

Summary of Lease Obligations:

	September 30, 2007		2008		2009		Totals

Facilities	$	28,357	$	80,547	$	16,800	$	125,704
Equipment	18,989		75,957		75,957		170,903
	$	47,346	$	156,504	$	92,757	$	296,607

At September 30, 2007, the company had not renewed the lease at the Lionville facility. The Company was operating on a month-to-month arrangement pending final negotiations with the landlord. For the three and nine months ending September 30, 2007 rent expense was $110,769 and $334,738 respectively and for the three and nine months ending October 1, 2006 rent expense was $110,022 and $321,931 respectively.

Note 5 – Related Party Transactions

The Company performs administrative services for the benefit of the GlenRose Partnership. The Company invoices the GlenRose Partnership for such services (including fringe benefits and general and administrative) at actual cost. Since December 31, 2005, the Company has not provided any services on behalf of the Partnership.

Amounts due from the GlenRose Partnership:

	September 30,		October 1,
	2007		2006

ESI	$	503,841	$	503,841
Lionville	—		49,795
	$	503,841	$	553,636

The GlenRose Partnership is responsible for paying Eberline Services for the expenses incurred for these services. At September 30, 2007, the total amount due was $503,841. In September 2005, the Company announced its intent to issue a one-time dividend in the amount of $503,841 to satisfy the Eberline Services portion of the related-party transaction. The Company anticipates, that before its common stock becomes publicly traded, will issue a one-time $503,841 cash dividend to the GlenRose Partnership. Immediately upon receipt of such a dividend, the GlenRose Partnership will remit $503,841 to the company as full payment of the

sums due for such administrative and professional services. At September 30, 2007, the dividend had not been declared or otherwise paid, however the company expects that the dividend will be paid in 2007.

In July 2007 the GlenRose Partnership paid the remaining balance due to Lionville.

Note 6 – Sale of Common Stock

During the nine months ended September 30, 2007, the company issued 102,647 shares to a limited number of accredited investors through a private placement of common stock at a price per share of $7.00 resulting in proceeds net of costs to the company of $687,418.

Note 7 – Segment Data

The Company’s executive officers include Arvin Smith, Dr. Richard Chapman, and Dr. Shelton Clark. Collectively, they are the Chief Operating Decision Maker (CODM) as defined by SFAS No. 131 “Disclosures about Segments of an Enterprise and Related Information”. The office of the CODM is responsible for assessing the performance of each segment, as well as the allocation of company resources. Other than General and Administrative services incurred at GlenRose, ESI currently constitutes 100% of the activity of the Company. Costs incurred by GlenRose are aggregated and reported separately from the Eberline activity.

The Company currently operates three business segments: Environmental Services, Analytical Laboratories and Instruments. ESI maintains separate general and administrative functions consisting of all executive management, business development, accounting & finance, and human resource personnel that support the entire business. The Environmental Services provide engineering and technical support to Los Alamos National Lab, the Department of Energy’s Hanford Site, as well as other government and commercial agencies. The Analytical Laboratories consist of four separate labs serving a wide variety of federal, state and local governments. The labs are located in Richmond, CA, Albuquerque, NM, Oak Ridge, TN, and Exton, PA. A dedicated lab manger is responsible for the operation of each lab. Management monitors the performance of each lab separately. Intercompany costs and sales are eliminated in the consolidated financial statements.

Prior to December 31, 2005, the Company kept separate profit and loss statements for every activity, but managed purchasing, payroll administration, cash management, bank accounts, accounts payable, and accounts receivable across the entire business and kept balance sheet accounts for ESI only. Therefore, prior to December 31, 2005, the Company did not separate fixed assets, capital expenditures, depreciation expense and operating income.

The Instruments segment was formed in 2006 with the intent to include the Company’s future instrument related acquisitions. Analytical instruments use a variety of highly sophisticated measurement technologies and are used by the scientific community, the government and industry to perform basic research, applied research and development, process monitoring and control, and many other applications. The Company’s strategy will be to acquire instrument companies, which have well-established and proven technology and increase their operating margins and revenues using techniques developed by the Company’s management team during the course of their careers in the analytical instruments industry. The Company has identified a number of companies with revenues of between $10-35 million as potential acquisition targets for the Instruments segment, however, as of the date of this report the Company has not made any commitments, nor has it acquired any instrument businesses. The Company’s segment data show all general and administrative costs related to the Instruments segment captured during the period.

Segment data for the periods ending September 30, 2007 and October 1, 2006 are included below:

	THREE MONTHS ENDED						NINE MONTHS ENDED
	SEPTEMBER 30,			OCTOBER 1,			SEPTEMBER 30,			OCTOBER 1,
	2007			2006			2007			2006
	(UNAUDITED)			(UNAUDITED)			(UNAUDITED)			(UNAUDITED)
Revenues
Environmental Services	$	6,251,402		$	5,174,555		$	19,002,634		$	16,021,835
Analytical Laboratories	2,172,154			2,872,194			5,706,265			8,184,327
Instruments	—			—			—			—
	8,423,556			8,046,749			24,708,899			24,206,162
Cost of Sales
Environmental Services	5,680,540			4,806,374			16,960,990			14,539,451
Analytical Laboratories	1,998,614			2,361,881			5,921,465			7,314,901
Instruments	—			—			—			—
	7,679,154			7,168,255			22,882,455			21,854,352
Gross Profit
Environmental Services	570,862			368,181			2,041,644			1,482,384
Analytical Laboratories	173,540			510,313			(215,200		)	869,426
Instruments	—			—			—			—
	744,402			878,494			1,826,444			2,351,810
Operating Income (Loss)
Environmental Services	289,894			256,781			1,263,780			951,778
Analytical Laboratories	(91,798		)	211,350			(1,043,851		)	(19,256		)
Instruments	(192,222		)	(71,721		)	(444,850		)	(188,359		)
	5,874			396,410			(224,921		)	744,163
Supplemental Disclosure

Depreciation Expense
Environmental Services	56,618			46,146			163,817			145,760
Analytical Laboratories	74,901			82,470			221,539			284,718
Instruments	—			—			—			—
	131,519			128,616			385,356			430,478
Capital Expenditures
Environmental Services	24,303			49,563			149,991			49,563
Analytical Laboratories	28,627			73,935			70,850			124,489
Instruments	—			—			—			—
	52,930			123,498			220,841			174,052
Fixed Assets				—
Environmental Services	608,136			681,105			608,136			681,105
Analytical Laboratories	1,810,773			1,975,584			1,810,773			1,975,584
Instruments	—			—			—			—
	$	2,418,909		$	2,656,689		$	2,418,909		$	2,656,689

Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following information should be read in conjunction with the unaudited condensed consolidated financial information and the notes thereto included in this Quarterly Report on Form 10-Q. In addition to historical information, the following discussion and other parts of this Quarterly Report contain forward-looking statements that involve risks and uncertainties. You should not place undue reliance on these forward-looking statements. Actual events or results may differ materially due to competitive factors and other factors discussed or referred to in Item1A, Risk Factors, and elsewhere in this Quarterly Report. These factors may cause our actual results to differ materially from any forward-looking statement.

Third quarter 2007 compared with Third Quarter 2006

Revenues

Revenues for the third quarter of 2007 were $8,423,556 as compared to $8,046,749 for the same period in 2006, an increase of $376,807 or 4.7%. The increase in revenues was primarily due to a contract for soil remediation using our proprietary Segmented Gate System and new contract activity at the Los Alamos National Laboratory, as well as an increase in scope of our existing River Corridor Contract and our existing contract with KSL Services JV. These increases were partially offset by a decrease in our Analytical Laboratory business due to decrease in sample flow from our Department of Energy customers.

Revenues from our Environmental Services in the third quarter of 2007 were $6,251,402, an increase of $1,076,847 or 20.8%, as compared to $5,174,555 in the third quarter of 2006. Our Environmental Services contributed 74.2% to total revenues in the third quarter of 2007 versus 64.3% for the same period of 2006. Revenues from our Analytical Laboratories in the third quarter of 2007 were $2,172,154, a decrease of $700,040 or 24.4%, as compared to $2,872,194 in the third quarter of 2006 primarily due to decrease in sample flow from our Department of Energy customers. The Department of Energy samplers constitute a significant portion of laboratory business. Sample flow can vary substantially during any given quarter.

Cost of Sales

The cost of sales in the third quarter of 2007 was $7,679,154, an increase of $510,899, as compared to $7,168,255 for the same period of 2006. Our costs of sales increased due to additional labor and subcontract costs associated with the increased work scope in the Environmental Services segment. The cost of sales for our Environmental Services was $5,680,540 in the third quarter of 2007, an increase of $874,166 or 18.2% as compared to $4,806,374 for the same period of 2006.

The cost of sales for our Analytical Laboratories was $1,998,614 in the third quarter of 2007, a decrease of $363,267 or 15.4% as compared to $2,361,881 for the same period of 2006. Our laboratories reduced their costs but infrastructure and key personnel costs could not be reduced fast enough to offset the decrease in revenues.

Gross Profit – Segment Income

Gross profit for the third quarter of 2007 was $744,402, a decrease of $134,092 or 15.3%, as compared to $878,494 for the same period in 2006. The gross profit margin decreased to 8.8% in the third quarter of 2007 from 10.9% in the third quarter of 2006. The decrease in the quarterly gross profit was due to the decrease in the Analytical Laboratories revenues. Although Environmental Services increased its gross profit, it was not sufficient to offset the laboratory decrease.

Gross profit or segment income for our Environmental Services was $570,862 in the third quarter of 2007, an increase of $202,681 or 55.0% as compared to $368,181 for the same period in 2006. Our Analytical Laboratories in the third quarter of 2007 reported a segment income of $173,540 as compared to a gross profit or segment income of $510,313 for the same period in 2006.

Operating Expenses

General and administrative expenses in the third quarter of 2007 were $738,528, an increase of $256,444 or 53.2%, as compared to $482,084 for the same period in 2006. The general and administrative cost increase was due to an increase in our business development expenses, and costs associated with audit, consulting and legal fees for the Environmental Services segment and a general increase in GlenRose corporate expenses including corporate legal fees associated with SEC filings.

Operating Income

Our operating income in the third quarter of 2007 was $5,874, as compared with an operating income of $396,410 over the same period in 2006. The operating income decrease in the third quarter of 2007 was primarily due to lower than forecasted performance at our Analytical Laboratories and due to increased corporate expenses.

Other Income (Expense)

Other expenses in the third quarter of 2007 decreased $7,784 or 11.5% to $59,615, as compared to $67,399 for the same period last year. Our interest expense decreased by 19.6% as we further reduced our debt obligations. Interest and other income decreased to $6,460 from $14,755 as a result of lower level of cash on hand.

Provision for Income Taxes

We recorded a tax provision of $129,231 in the third quarter of 2007, as compared to a tax provision of $2,198 for the third quarter of 2006. The provision was recorded in accordance with FAS 109 and reflects an adjustment associated with the reversal of tax benefit taken during the previous two quarters.

Net Loss (Income)

We incurred a net loss in the third quarter of 2007 of $182,972, as compared with a net income of $326,813 in the third quarter of 2006.

First Nine Months 2007 compared with First Nine Months 2006

Revenues

Revenues for the first nine months of 2007 were $24,708,899 as compared to $24,206,162 for the same period in 2006, an increase of $502,737 or 2.1%. The increase in revenues was primarily due to a contract for soil remediation using our proprietary Segmented Gate System and new contract activity at the Los Alamos National Laboratory, as well as an increase in scope of our existing River Corridor Contract and our existing contract with KSL Services JV. These increases were largely offset by a substantial decrease in our Analytical Laboratory business due to decrease in sample flow from our Department of Energy customers. Sample flow usually varies from quarter to quarter, however, the sample flow during the first nine months was at historically low levels.

Revenues from our Environmental Services for the first nine months of 2007 were $19,002,634, an increase of $2,980,799 or 18.6%, as compared to $16,021,835 in the first nine months of 2006. Our Environmental Services contributed 76.9% of total revenues in the first nine months of 2007 versus 66.2% for the same period of 2006. Revenues from our Analytical Laboratories for the first nine months of 2007 were $5,706,265, a decrease of $2,478,062 or 30.3%, as compared to $8,184,327 in the first nine months of 2006 due to decrease in sample flow from our Department of Energy customers.

Cost of Sales

The cost of sales in the first nine months 2007 was $22,882,455, an increase of $1,028,103, as compared to $21,854,352 for the same period of 2006. Our costs of sales increased due to additional labor and subcontract costs associated with the increased work scope in the Environmental Services segment. The cost of Environmental Services sales was $16,960,990 in the first nine months of 2007, an increase of $2,421,539 or 16.7% as compared to $14,539,451 for the same period of 2006.

The cost of sales for our Analytical Laboratories was $5,921,465 in the first nine months of 2007, a decrease of $1,393,436 or 19.0% as compared to $7,314,901 for the same period of 2006. Our laboratories reduced their costs but infrastructure and key personnel costs could not be reduced fast enough to offset the decrease in revenues.

Gross Profit – Segment Income

Gross profit for the first nine months of 2007 was $1,826,444, a decrease of $525,336 or 22.3%, as compared to $2,351,810 for the same period in 2006. The gross profit margin decreased to 7.4% in the first nine months of 2007 from 9.7% in the first nine months of 2006. The decrease in the quarterly gross profit was due to the decrease in the Analytical Laboratories revenues. Although Environmental Services increased its gross profit, it was not sufficient to offset the laboratory decrease.

Gross profit or segment income for our Environmental Services was $2,041,644 in the first nine months of 2007, an increase of $559,260 or 37.7% as compared to $1,482,384 for the same period in 2006. Our Analytical Laboratories in the first nine months of 2006 reported a segment loss of $215,200 as compared to a gross profit or segment income of $869,426 for the same period in 2006.

Operating Expenses

General and administrative expenses in the first nine months of 2007 were $2,051,365, an increase of $443,718 or 27.6%, as compared to $1,607,647 for the same period in 2006. The general and administrative cost increase was due to an increase in our business development expenses, and costs associated with audit, consulting and legal fees for the Environmental Services segment and a general increase in GlenRose corporate expenses including corporate legal fees associated with SEC filings.

Operating Income

We incurred an operating loss in the first nine months of 2007 of $224,921, as compared with an operating income of $744,163 over the same period in 2006. The operating income decrease in the third quarter of 2007 was primarily due to lower than forecasted performance at our Analytical Laboratories and due to increased corporate expenses.

Other Income (Expense)

Other expenses in the first nine months of 2007 decreased $64,525 or 28.2% to $164,021, as compared to $228,546 for the same period last year. Our interest expense decreased by 18.2% as we further reduced our debt obligations. Interest and other income increased to $41,584 from $22,900 as a result of an increase in overall interest rates and a greater average level of cash on hand for the nine month period.

Provision for Income Taxes

We recorded a tax provision of $4,671 in the first nine months of 2007, as compared with a tax provision of $2,198 for the first nine months of 2006. The provision was recorded in accordance with FAS 109 and reflects management’s belief that realization of the tax benefit of the loss incurred through the nine months is uncertain.

Net Loss (Income)

We incurred a net loss in the first nine months of 2007 of $393,613, as compared with a net income of $513,419 in the first nine months of 2006.

Liquidity and Capital Resources

First Nine Months 2007

Consolidated working capital at September 30, 2007 was $3,483,884, as compared with $3,279,319 at December 31, 2006. Included in working capital were cash and cash equivalents of $1,062,116 in the first nine months of 2007, compared with $908,703 at December 31, 2006. The increase in working capital was primarily due to funds raised in a private placement offering of common stock, offset by an increase in accrued interest payable associated with our subordinated notes and an increase in accounts payable.

Cash used by operating activities was $156,008 in the first nine months of 2007, as compared with cash provided of $906,193 for the first nine months of 2006. Our net receivables balance increased to $3,784,584 at the end of the first nine months of 2007 from $3,150,042 at December 31, 2006, resulting in a decrease in cash of $634,542. Net related party receivables decreased by $49,795 due to payment received from the GlenRose Partnership. Our unbilled contract receivables decreased to $475,503 in the first nine months of 2007 from $626,310 at December 31, 2006, resulting in an increase in cash of $150,807. The decrease in the unbilled contract receivables is primarily due to the timing of our billing of our RCC contract, offset by the increase in unbilled contract receivables with the Los Alamos contract. Our prepaid expenses used $227,150 of cash as they increased to $657,259 in the first nine months of 2007 from $430,109 at December 31, 2006, due to payments of income taxes. During the first nine months of 2007 our other accrued liabilities, including accrued expenses, accrued employee-related costs and income taxes payable, increased to $1,891,952, compared with $1,689,378 at December 31, 2006, resulting in an increase in cash of $202,574. The increase is due to an accrual associated with one of our contract agreements.

PART I – FINANCIAL INFORMATION

Item 1:	Financial Statements

Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3:	Quantitative and Qualitative Disclosures About Market Risk

Item 4:	Controls and Procedures

PART II - OTHER INFORMATION

Item 1A:	Risk Factors

Item 5:	Other Information

Item 6:	Exhibits

	GLENROSE INSTRUMENTS INC.
	(Registrant)


	By:	/s/ ARVIN H. SMITH
		Chief Executive Officer
		(Principal Executive Officer)


	By:	/s/ ANTHONY S. LOUMIDIS
		Chief Financial Officer
		(Principal Financial Officer)

Exhibit Number		Description of Exhibit

31.1*	–	Rule 13a-14(a) Certification of Chief Executive Officer

31.2*	–	Rule 13a-14(a) Certification of Chief Financial Officer

32.1*	–	Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer