NOTE 10 - SUBSEQUENT EVENT

6 Months Ended

Jun. 29, 2013

NOTE 10 – SUBSEQUENT EVENT

On July 15, 2013 the Company entered into a definitive agreement under which substantially all of its Gulf Coast engineering and in-plant operations will be sold to Furmanite America, Inc. ("FAI"), a subsidiary of Furmanite Corporation (NYSE:FRM). The total value of the transaction to ENGlobal is expected to be approximately $21.5 million, subject to certain adjustments, consisting primarily of cash at closing and a $3.5 million promissory note issued with a Furmanite Corporation guarantee.

ENGlobal intends to use the net proceeds from this transaction to repay advances under the PNC Credit Facility and for working capital. The transaction has been approved by the boards of directors for both companies, and is expected to close on August 30th, subject to lender approval and the completion of customary conditions. In addition, the companies have agreed to facilitate a smooth transition of corporate service functions and to support each company's business development efforts. Under terms of the agreement, approximately 900 employees will transfer from ENGlobal to Furmanite.

The Company expects that this transaction will substantially complete its review of strategic alternatives, which included selling a portion of the Company's assets, restructuring its operations and resolving its defaults under its credit facilities. Since that time, the Company has discontinued its Electrical Services division and divested its Land/Right of Way and Midstream Inspection divisions.

The effect of the proposed disposition of substantially all of the Gulf Coast engineering and in-plant operations has been recast below on a pro forma basis, presented in a Consolidated Balance Sheet and Consolidated Statements of Operations. Summarized pro forma financial information for these divested operations for the comparable periods if the sale had been consummated as of June 29, 2013 are as follows:

Pro forma Condensed Consolidated Statement of Operations

	For the Six Months Ended June 29, 2013
Operating revenues	$	40,851
Operating costs		34,886
Gross profit		5,965
Selling, general and administrative expenses		10,475
Operating loss		(4,510	)
Other income (expense):
Gain on sale of assets		1,561
Other income (expense), net		211
Interest expense, net		(1,036	)
Loss from continuing operations before income taxes		(3,774	)
Provision (benefit) for federal and state income taxes		192
Loss from continuing operations		(3,966	)
Income (loss) from discontinued operations, net of taxes		5,878
Net income (loss)	$	1,912

Pro forma Condensed Consolidated Balance Sheet

ASSETS	June 29, 2013
Current Assets:
Cash, restricted cash and cash equivalents	$	2,300
Trade receivables, net		20,311
Notes receivable		1,420
Prepaid expenses and other current assets		955
Costs and estimated earnings in excess of billings on uncompleted contracts		1,873
Total Current Assets	$	26,859
Property and equipment, net		1,394
Goodwill and other intangible assets		4,165
Long-term trade, notes receivable and other, net		7,567
Other assets, net		668
Total Assets	$	40,653

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Accounts payable, accrued and other current liabilities	$	5,641
Accrued compensation and benefits		2,765
Deferred rent		477
Billings in excess of costs and estimated earnings on uncompleted contracts		3,299
Other current liabilities		1,173
Total Current Liabilities	$	13,355
Stockholders' Equity:
Common stock -	$	28
Additional paid-in capital		38,570
Accumulated deficit		(8,868	)
Treasury stock at cost		(2,362	)
Accumulated other comprehensive loss		(70	)
Total Stockholders' Equity	$	27,298
Total Liabilities and Stockholders' Equity	$	40,653