UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    Form 10-Q



[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

                  For the quarterly period ended March 31, 2007


[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934



                          Commission File No. 001-14217


                              ENGlobal Corporation
                              --------------------
             (Exact name of registrant as specified in its charter)


                                     Nevada
                                     ------
                         (State or other jurisdiction of
                         incorporation or organization)

                                   88-0322261
                                   ----------
                       (I.R.S Employer Identification No.)



    654 N. Sam Houston Parkway E., Suite 400, Houston, TX   77073-6033
    -----------------------------------------------------   ----------
           (Address of principal executive offices)         (Zip code)

                                 (281) 878-1000
                                 --------------
              (Registrant's telephone number, including area code)



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 shortened 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 [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (check
one):

Large Accelerated Filer [ ]   Accelerated Filer [X]   Non-Accelerated Filer [ ]

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).

                                 Yes [ ] No [X]

Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the close of business of May 1, 2007.

    $0.001 Par Value Common Stock                      26,853,090 shares




 

                                         QUARTERLY REPORT ON FORM 10-Q
                                      FOR THE PERIOD ENDED MARCH 31, 2007

                                               TABLE OF CONTENTS


                                                                                                          Page
                                                                                                          Number
                                                                                                          ------

Part I.           Financial Information

       Item 1.    Financial Statements

                  Condensed Consolidated Statements of Operations for the Three Months Ended
                      March 31, 2007 and March 31, 2006                                                       3

                  Consolidated Statements of Comprehensive Income for the Three Months Ended
                      March 31, 2007 and March 31, 2006                                                       4

                  Condensed Consolidated Balance Sheets at March 31, 2007 and December 31, 2006               5

                  Condensed Consolidated Statements of Cash Flows for the Three Months
                      Ended March 31, 2007 and March 31, 2006                                                 6

                  Notes to Condensed Consolidated Financial Statements                                     7-13

       Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations   14-23

       Item 3.    Quantitative and Qualitative Disclosures About Market Risk                                 24

       Item 4.    Controls and Procedures                                                                    24

Part II.          Other Information

       Item 1.    Legal Proceedings                                                                          27

       Item 1A.   Risk Factors                                                                               27

       Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds                                27

       Item 3.    Defaults Upon Senior Securities                                                            27

       Item 4.    Submission of Matters to a Vote of Security Holders                                        27

       Item 5.    Other Information                                                                          27

       Item 6.    Exhibits                                                                                   27

                   Signatures                                                                                28


                                                       2


                                PART I. - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                                     ENGlobal Corporation
                        Condensed Consolidated Statements Of Operations
                                          (Unaudited)

                                                                      For the Three Months
                                                                         Ended March 31,
                                                                  ----------------------------
                                                                      2007            2006
                                                                  ------------    ------------

Operating Revenue                                                 $ 81,658,632    $ 66,626,836
                                                                  ------------    ------------

Operating Expenses:
     Direct cost                                                    68,380,907      58,405,208
     Selling, general and administrative                             7,743,688       6,100,351
                                                                  ------------    ------------
         Total operating expense                                    76,124,595      64,505,559
                                                                  ------------    ------------

         Operating income                                            5,534,037       2,121,277

Other Income (Expense):
     Other income (expense)                                               (131)         21,752
     Interest income (expense), net                                   (559,843)       (162,146)
                                                                  ------------    ------------
         Total other income (expense)                                 (559,974)       (140,394)
                                                                  ------------    ------------

Income before Provision for Income Taxes                             4,974,063       1,980,883

Provision for Income Taxes                                           1,819,720         746,740
                                                                  ------------    ------------

         Net Income                                               $  3,154,343    $  1,234,143
                                                                  ============    ============

Net Income Per Common Share:
     Basic                                                        $       0.12    $       0.05
     Diluted                                                      $       0.12    $       0.05

Weighted Average Shares Used in Computing Net Income Per Share:
     Basic                                                          26,809,006      26,332,602
     Diluted                                                        27,259,948      27,246,347


        See accompanying notes to interim condensed consolidated financial statements.

                                             3


                              ENGlobal Corporation
                 Consolidated Statements of Comprehensive Income
                                   (Unaudited)

                                                        For the Three Months
                                                           Ended March 31,
                                                     --------------------------
                                                         2007           2006
                                                     -----------    -----------

Net Income                                           $ 3,154,343    $ 1,234,143

     Foreign currency translation adjustment, net           (683)          (433)
                                                     -----------    -----------

Net Comprehensive Income                             $ 3,153,660    $ 1,233,710
                                                     ===========    ===========





 See accompanying notes to interim condensed consolidated financial statements.

                                        4


                                              ENGlobal Corporation
                                      Condensed Consolidated Balance Sheets
                                                   (Unaudited)

                                                     ASSETS
                                                     ------
                                                                                     March 31,       December 31,
                                                                                       2007             2006
                                                                                   -------------    -------------
Current Assets:
     Cash                                                                          $     949,652    $   1,402,880
     Trade receivables, net                                                           64,113,264       60,247,612
     Prepaid expenses and other current assets                                         1,950,000        1,723,907
     Current portion of notes receivable                                                  52,815           52,031
     Costs and estimated earnings in excess of billings on uncompleted contracts       8,068,993        5,390,111
     Deferred tax asset                                                                2,310,106        2,310,106
     Federal income taxes receivable                                                     101,135        1,148,014
                                                                                   -------------    -------------
         Total Current Assets                                                         77,545,965       72,274,661

Property and Equipment, net                                                            8,474,181        8,724,902
Goodwill                                                                              19,688,030       19,202,197
Other Intangible Assets, net                                                           4,747,347        5,426,824
Long term notes receivable, net of current portion                                       120,727          129,105
Other Assets                                                                             624,867          468,864
                                                                                   -------------    -------------

         Total Assets                                                              $ 111,201,117    $ 106,226,553
                                                                                   =============    =============


                                      LIABILITIES AND STOCKHOLDERS' EQUITY
                                      ------------------------------------
Current Liabilities:
     Accounts payable                                                              $  10,636,078    $  14,672,165
     Federal and State Income Taxes                                                    1,159,796          509,748
     Accrued compensation and benefits                                                13,399,534       12,806,919
     Notes payable                                                                       624,978        1,109,772
     Current portion of long-term debt                                                 1,427,352        1,418,029
     Deferred rent                                                                       648,328          678,583
     Billings in excess of costs and estimated earnings on uncompleted contracts       1,697,445          539,910
     Other liabilities                                                                 3,737,345        5,352,886
                                                                                   -------------    -------------
         Total Current Liabilities                                                    33,330,856       37,088,012

Long-Term Debt, net of current portion                                                32,473,627       27,162,263
Deferred Tax Liability                                                                 1,075,716        1,114,224
                                                                                   -------------    -------------

         Total Liabilities                                                            66,880,199       65,364,499
                                                                                   -------------    -------------

Commitments and Contingencies (Note 11)

Stockholders' Equity:
     Common stock - $0.001 par value; 75,000,000 shares authorized; 26,829,090
        and 26,807,460 shares issued and outstanding at March 31, 2007 and
        December 31, 2006, respectively                                                   27,481           27,459
     Additional paid-in capital                                                       31,422,851       31,147,343
     Retained earnings                                                                12,871,696        9,717,354
     Accumulated other comprehensive income (loss)                                        (1,110)         (30,102)
                                                                                   -------------    -------------

         Total Stockholders' Equity                                                   44,320,918       40,862,054
                                                                                   -------------    -------------

         Total Liabilities and Stockholders' Equity                                $ 111,201,117    $ 106,226,553
                                                                                   =============    =============


                 See accompanying notes to interim condensed consolidated financial statements.

                                                     5


                                                ENGlobal Corporation
                                   Condensed Consolidated Statements Of Cash Flows
                                                     (Unaudited)

                                                                                       For the Three Months Ended
                                                                                                March 31,
                                                                                      ----------------------------
                                                                                          2007            2006
                                                                                      ------------    ------------
Cash Flows from Operating Activities:
     Net income                                                                       $  3,154,343    $  1,234,143
     Adjustments to reconcile net income to net cash used in operating activities -
         Depreciation and amortization                                                   1,068,649         648,703
         Share based compensation expense                                                  232,964          85,305
         Gain on disposal of property, plant and equipment                                 (13,561)        (10,000)
         Deferred income tax expense                                                       (38,508)        (15,900)
     Changes in current assets and liabilities, net of acquisitions -
         Trade receivables                                                              (3,865,652)     (2,870,680)
         Inventories                                                                          --           153,968
         Costs and estimated earnings in excess of billings                             (2,678,882)       (381,574)
         Prepaid expenses and other assets                                                (462,064)         54,136
         Accounts payable                                                               (4,036,087)     (3,409,896)
         Accrued compensation and benefits                                                 592,615      (1,083,098)
         Billings in excess of costs and estimated earnings                              1,157,535       1,956,996
         Other liabilities                                                              (1,775,443)       (143,704)
         Income taxes receivable (payable)                                               1,731,914         592,639
                                                                                      ------------    ------------
               Net cash used in operating activities                                    (4,932,177)     (3,188,962)
Cash Flows from Investing Activities:
     Property and equipment acquired                                                      (574,759)       (696,456)
     Proceeds from sale of equipment                                                        48,460          10,000
     Proceeds from note receivable                                                           7,594            --
     Proceeds from sale of other assets                                                     90,204          50,000
     Net cash paid for acquisitions                                                           --          (649,251)
                                                                                      ------------    ------------

         Net cash used in investing activities                                            (428,501)     (1,285,707)
                                                                                      ------------    ------------
Cash Flows from Financing Activities:
     Borrowings on line of credit                                                       39,411,802      32,604,288
     Payments on line of credit                                                        (33,758,819)    (28,278,338)
     Proceeds from issuance of common stock                                                 42,565         212,361
     Long-term debt repayments                                                            (817,090)       (205,971)
                                                                                      ------------    ------------

         Net cash provided by financing activities                                       4,878,458       4,332,340
                                                                                      ------------    ------------
Effect of Exchange Rate Changes on Cash                                                     28,992           2,928
                                                                                      ------------    ------------
         Net change in cash                                                               (453,228)       (139,401)
Cash, at beginning of period                                                             1,402,880         159,414
                                                                                      ------------    ------------
Cash, at end of period                                                                $    949,652    $     20,013
                                                                                      ============    ============

Supplemental Disclosures:
         Interest paid                                                                $    353,549    $     90,254
                                                                                      ------------    ------------
         Income taxes paid                                                            $   (134,912)   $    248,867
                                                                                      ------------    ------------
Non-Cash:
         Issuance of note for ATI assets                                              $       --      $  1,000,000
                                                                                      ------------    ------------
         Acceptance of note for Constant Power assets                                 $       --      $    216,000
                                                                                      ============    ============


                   See accompanying notes to interim condensed consolidated financial statements.

                                                        6



              Notes to Condensed Consolidated Financial Statements
              ----------------------------------------------------


NOTE 1 - BASIS OF PRESENTATION

     The condensed consolidated financial statements of ENGlobal Corporation
     (which may be referred to as "ENGlobal", the "Company", "we", "us", or
     "our") included herein, are un-audited for the three-month periods ended
     March 31, 2007 and 2006. These financial statements reflect all adjustments
     (consisting of normal recurring adjustments), which are, in the opinion of
     management, necessary to fairly present 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 that these condensed financial statements be
     read in conjunction with the Company's audited financial statements for the
     year ended December 31, 2006, included in the Company's Annual Report on
     Form 10-K filed with the Securities and Exchange Commission on March 16,
     2007 and Form 10K/A filed on March 29, 2007. The Company believes that the
     disclosures made herein are adequate to make the information presented not
     misleading.

NOTE 2 - CRITICAL ACCOUNTING POLICIES

     A summary of critical accounting policies is disclosed in Note 2 to the
     Consolidated Financial Statements included in our 2006 Annual Report on
     Form 10-K. Our critical accounting policies are further described under the
     caption "Critical Accounting Policies" in Management's Discussion and
     Analysis of Financial Condition and Results of Operation in our 2006 Annual
     Report on Form 10-K.

     The Company's adoption of SFAS No. 123(R), "Share-Based Payment," became
     effective January 1, 2006 and is further described in Note 3, below.

     On July 13, 2006, the FASB issued FIN 48, "Accounting for Uncertainty in
     Income Taxes, and Related Implementation Issues," which provides guidance
     on the financial statement recognition, measurement, presentation and
     disclosure of uncertain tax positions that a company has taken or expects
     to take on a tax return. Under FIN 48, financial statements should reflect
     expected future tax consequences of such positions presuming the taxing
     authorities have full knowledge of the position and all relevant facts.
     This interpretation also revises the disclosure requirements and was
     adopted by the Company effective as of January 1, 2007. There are currently
     no material tax positions identified as uncertain for the Company or its'
     subsidiaries.

     We recognize interest related to uncertain tax positions in interest
     expense and penalties related to uncertain tax positions in governmental
     penalties. As of March 31, 2007, we have not recognized interest or
     penalties relating to any uncertain tax positions.

     The Company is subject to federal and state income tax audits from time to
     time that could result in proposed assessments. The Company cannot predict
     with certainty the timing of such audits, how these audits would be
     resolved and whether the Company would be required to make additional tax
     payments, which may or may not include penalties and interest. The Company
     was subject to a Federal tax audit for the years 2002 and 2003. That
     examination has been closed.

     As of March 31, 2007, the Company has been notified that its' recently
     acquired subsidiary, WRC Corporation is subject to an audit for the
     pre-acquisition fiscal year ending September 30, 2005. The Company does not
     have any other examination on-going by the Internal Revenue Service, and
     the open years subject to audit are currently tax years 2004-2006. For most
     states where the Company conducts business, the Company is subject to
     examination for the preceding three to six years.

NOTE 3 - SHARE BASED COMPENSATION

     The Company currently sponsors a stock-based compensation plan as described
     below. Effective January 1, 2006, the Company adopted the provisions of
     Statement of Financial Accounting Standards ("SFAS") No. 123 (Revised),
     "Share-Based Payment" ("SFAS No. 123(R)"). Under the fair value recognition
     provisions of SFAS No. 123(R), stock-based compensation is measured at the
     grant date based on the value of the awards and is recognized as expense

                                       7


              Notes to Condensed Consolidated Financial Statements
              ----------------------------------------------------


     over the requisite service period (usually a vesting period). The Company
     selected the modified prospective method of adoption described in SFAS No.
     123(R). The fair values of the stock awards recognized under SFAS No.
     123(R) are determined based on the vested portion of the awards; however,
     the total compensation expense is recognized on a straight-line basis over
     the vesting period.

     In accordance with the provisions of SFAS No. 123(R), total stock-based
     compensation expense in the amount of $232,964 and $85,366 was recorded in
     the three months ended March 31, 2007, and March 31, 2006, respectively.
     The total stock-based compensation expense was recorded in selling, general
     and administrative expense. The total income tax benefit recognized in the
     condensed consolidated statements of income for the share-based
     arrangements for the three months ended March 31, 2007 was $38,509.

     Prior to January 1, 2006, the Company accounted for stock-based
     compensation using the intrinsic value method prescribed in Accounting
     Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to
     Employees," and related interpretations. Under APB Opinion No. 25, no
     compensation expense was recognized for stock options issued to employees
     because the grant price equaled or was above the market price on the date
     of grant for options issued by the Company.

     The total fair value of vested options during the three months ended March
     31, 2007 and 2006 was $6.5 million and $10.7 million, respectively. The
     average price per share for the three months ended March 31, 2007 and 2006
     was $6.00 per share and $11.14 per share, respectively.

     Stock Option and Incentive Plans

     The Company maintains a stock option plan (the "Option Plan") under which
     the Company may issue incentive stock options to employees and non-employee
     directors. Under the Option Plan, a maximum of 2,650,000 shares of our
     common stock was approved to be issued or transferred to certain
     non-employee directors, officers and employees pursuant to stock based
     awards granted. As of March 31, 2007, 150,806 shares remain available for
     grant under the Option Plan.

     On March 30, 2007, the Board of Directors approved, subject to stockholder
     approval on June 14, 2007, an amendment to the Option Plan. The proposed
     amendment would increase the number of shares available for issuance under
     the Plan from 2,650,000 to 3,250,000 in order to enhance the ability of
     ENGlobal to compensate its non-employee directors and to attract employees
     of outstanding ability.

     The Company's policy regarding share issuance upon option exercise takes
     into consideration the optionee's eligibility and vesting status. Upon
     receipt of an optionee's exercise notice and payment, and the Company's
     subsequent determination of eligibility, the Company's Chief Governance
     Officer or the Chairman of the Compensation Committee instructs our
     transfer agent to issue shares of our Common Stock to the optionee.

     Stock options have been granted with exercise prices at or above the market
     price on the date of grant. The granted options have vested generally over
     one year for non-employee directors and ratably over four years for
     officers and employees. The granted options generally have ten year
     contractual terms.

     Compensation expense of $1,480,583 related to previously granted stock
     option awards which are non-vested had not yet been recognized at March 31,
     2007. This compensation expense is expected to be recognized over a
     weighted-average period of approximately 20 months.

                                       8



    

              Notes to Condensed Consolidated Financial Statements
              ----------------------------------------------------


     The following summarizes stock option activity for the first quarter of 2007.

                                                                  Weighted
                                                     Weighted     Average
                                                     Average     Remaining       Aggregate
                                         Number of   Exercise   Contractual     Intrinsic *
                                          Options      Price    Term (Years)   Value (000's)
                                        -----------  ---------  -------------  -------------
     Balance at December 31, 2006        1,422,494   $    5.16      7.9 years   $    2,871
         Granted                                 -           -              -            -
         Exercised                          21,630        1.97              -           77
         Canceled or expired                     -           -              -            -
                                        -----------  ---------  -------------   ----------

     Balance at March 31, 2007           1,400,864   $    5.21            7.7   $    2,948
                                        ===========  =========  =============   ==========

     Exercisable at March 31, 2007       1,088,164   $    4.66            7.7   $    2,504
                                        ===========  =========  =============   ==========


     *Based on average stock price for the first quarter 2007 of $6.00 per
     share. The average stock price for the same period in 2006 was $11.14 per
     share.

     The total intrinsic value of options exercised was $77,000 and $488,000 for
     the three months ended March 31, 2007 and 2006, respectively.

NOTE 4 - FIXED FEE CONTRACTS

     Costs, estimated earnings and billings on uncompleted contracts consisted
     of the following at March 31, 2007 and December 31, 2006:
                                                                                   March 31,  December 31,
                                                                                     2007        2006
                                                                                   --------------------
                                                                                      (in thousands)
                                                                                   --------------------

     Costs incurred on uncompleted contracts                                       $ 72,600    $ 75,317
     Estimated earnings (losses) on uncompleted contracts                            (7,792)     (7,390)
                                                                                   --------    --------
         Earned revenues                                                             64,808      67,927
     Less: Billings to date                                                          58,438      63,077
                                                                                   --------    --------
         Net costs and estimated earnings in excess of billings                    $  6,370    $  4,850
            on uncompleted contracts
                                                                                   ========    ========

     Costs and estimated earnings in excess of billings on uncompleted contracts   $  8,068    $  5,390
     Billings and estimated earnings in excess of cost on uncompleted contracts      (1,698)       (540)
                                                                                   --------    --------
         Net costs and estimated earnings in excess of billings
            on uncompleted contracts                                               $  6,370    $  4,850
                                                                                   ========    ========


NOTE 5 - COMPREHENSIVE INCOME (LOSS)

     Comprehensive income (loss) represents net earnings and any revenue,
     expenses, gains and losses that, under accounting principles generally
     accepted in the United States of America, are excluded from net earnings
     and recognized directly as a component of stockholders' equity. At March
     31, 2007, comprehensive income included a loss of $683 from foreign
     currency translation adjustments.

NOTE 6 - GOODWILL

     In accordance with SFAS No. 142, "Goodwill and Other Intangible Assets,"
     goodwill is no longer amortized over its estimated useful life, but rather
     is subject to at least an annual assessment for impairment. SFAS 142 also
     requires that intangible assets with estimable useful lives be amortized
     over their respective estimated useful lives to their estimated residual
     values and reviewed for impairment in accordance with SFAS No. 144,

                                       9


              Notes to Condensed Consolidated Financial Statements
              ----------------------------------------------------


     "Accounting for the Impairment or Disposal of Long-Lived Assets." Goodwill
     has been allocated to the Company's two reportable segments. The test for
     impairment is made on each of these reporting segments. No impairment of
     goodwill has been incurred to date.

     Reference is made to NOTE 16 - ACQUISITIONS, in the Company's Report to
     Shareholders on Form 10K for the period ending December 31, 2006. A
     third-party valuation of intangible assets was received relating to the
     Company's acquisition of WRC Corporation. A portion of the goodwill was
     allocated to intangible assets based on the value and nature of the
     agreements and is being amortized accordingly over the term of the
     agreements. During the three month period ending March 31, 2007, the
     Company consulted with the third-party valuation provider and revised the
     allocation to intangible assets resulting in approximately $669,000 being
     re-allocated back to goodwill. This caused an additional $70,000 of
     amortization of intangibles during 2006 than would have been recognized
     given the final analysis of the WRC acquisition. The Company's amortization
     of the affected intangible assets will be adjusted over the remaining five
     year term of those assets and will not have a material effect on the
     current or future period financial results.

NOTE 7 - LINE OF CREDIT AND DEBT

     Effective March 30, 2007, the Company and Comerica Bank ("Comerica")
     entered into an amendment to the Company's existing Credit Facility (the
     "Comerica Credit Facility") whereby the limit on the revolving credit note
     was increased from $30 million to $35 million, subject to loan covenant
     restrictions. The maturity date of the Comerica Credit Facility will remain
     at July 26, 2009. The loan agreement positions Comerica as senior to all
     other debt and the Comerica Credit Facility is collateralized by
     substantially all the assets of the Company. The outstanding balance on the
     line of credit as of March 31, 2007 was $29.6 million. The remaining
     borrowings available under the line of credit as of March 31, 2007 were
     $5.4 million as loan covenant restrictions did not limit the available
     borrowings.

     The Comerica Credit Facility contains covenants requiring the Company, as
     of the end of each calendar month, to maintain certain ratios, including
     total funded debt to EBITDA; total funded debt to total liabilities, plus
     net worth; and total funded debt to accounts/unbilled receivables. The
     Company is also required, as of the end of each quarter, to maintain
     minimum levels of net worth, plus the Company must comply with an annual
     limitation on capital expenditures. The Company was in compliance with all
     covenants under the Comerica Credit Facility as of March 31, 2007 and had
     no standby letters of credit outstanding. Standby letters of credit
     previously issued to a refining client expired in August 2006.




                                       10


              Notes to Condensed Consolidated Financial Statements
              ----------------------------------------------------


                                                                                               March 31, December 31,
                                                                                                 2007       2006
                                                                                               --------------------
                                                                                                  (in thousands)
                                                                                               --------------------
     Schedule of Long-Term Debt:

         Comerica Credit Facility - Line of credit, prime (8.25% at March 31, 2007),
            maturing in July 2009                                                              $ 29,616    $ 23,963
         Sterling Planet and EDGI - Notes payable, interest at 5%, principal payments in
            installments of $15,000 plus interest due quarterly, maturing in December 2008          105         120
         Cleveland Inspection Services, Inc., CIS Technical Services and F.D. Curtis - Notes
            payable, discounted at 5% interest, principal in installments of $100,000 due
            quarterly, maturing in October 2009                                                   1,023       1,109
         InfoTech Engineering, Inc. - Note payable, interest at 5%, principal payments in
            installments of $65,000 plus interest due annually, maturing in December 2007            75          75
         A.T.I. Inc. - Note payable, interest at 6%, principal payments in installments of
            $30,422 including interest due monthly, maturing in January 2009                        632         713
         Michael Lee - Note payable, interest at 5%, principal payments in installments of
            $150,000 plus interest due quarterly, maturing in July 2010                           1,950       2,100
         Watco Management, Inc. - Note payable, interest at 4%, principal payments in
            installments of $137,745 including interest annually, maturing in October 2010          500         500
         Miscellaneous                                                                             --          --
                                                                                               --------    --------

              Total long-term debt                                                               33,901      28,580
              Less: Current maturities                                                           (1,427)     (1,418)
                                                                                               --------    --------

              Long-term debt, net of current portion                                           $ 32,474    $ 27,162
                                                                                               ========    ========

NOTE 8 - SEGMENT INFORMATION

     The Company operates in two business segments: (1) engineering, providing
     services primarily to major companies involved in the hydrocarbon and
     chemical processing industries, pipelines, oil and gas development, and
     cogeneration units that, for the most part, are located in the United
     States; and (2) systems, providing design and implementation of control
     systems for specific applications primarily in the energy and process
     industries, and uninterruptible power systems and battery chargers to
     customers that, for the most part, are located in the United States.

     Revenue and operating income for each segment are set forth in the
     following table. The amount under Corporate includes those activities that
     are not allocated to the operating segments and include costs related to
     business development, executive function, finance, accounting, investor
     relations/governance, project controls, information technology, legal,
     safety and human resources that are not specifically identifiable with the
     two segments. Inter-company elimination includes the amount of
     administrative costs allocated to the segments. Corporate functions support
     both business segments and therefore cannot be specifically assigned to
     either. Significant portions of Corporate cost are allocated to each
     segment based on each segment's revenues and eliminated in consolidation.


                                       11



              Notes to Condensed Consolidated Financial Statements
              ----------------------------------------------------


                                                      Three Months Ended
                                                          March 31,
                                                    ----------------------
                                                      2007          2006
                                                    --------      --------
                                                        (in thousands)
     Revenue:
          Engineering                               $ 76,149      $ 62,587
          Systems                                      5,510         4,040
                                                    --------      --------
                    Total revenue                   $ 81,659      $ 66,627
                                                    ========      ========

     Operating income (loss):
          Engineering                               $  9,501      $  4,890
          Systems                                       (180)         (182)
          Corporate                                      683           129
         Inter-company eliminations                   (4,470)       (2,716)
                                                    --------      --------
                    Total operating income          $  5,534      $  2,121
                                                    ========      ========


     Financial information about geographic areas
     --------------------------------------------

     Revenue from the Company's non-U.S. operations is currently not material.
     Long-lived assets (principally leasehold improvements and computer
     equipment) outside the United States were $76,741 as of March 31, 2007, net
     of accumulated depreciation.

NOTE 9 - FEDERAL INCOME TAXES

     The components of income tax expense (benefit) for the periods ended March
     31, 2007 and 2006 were as follows:

                                                      Three Months Ended
                                                           March 31,
                                                    ----------------------
                                                     2007           2006
                                                    -------        -------
                                                        (in thousands)

     Current                                        $ 1,820        $   763
     Deferred                                           (39)           (16)
                                                    -------        -------

            Total tax provision                     $ 1,781        $   747
                                                    =======        =======


                                       12


              Notes to Condensed Consolidated Financial Statements
              ----------------------------------------------------


NOTE 10 - EARNINGS PER SHARE

     The following table reconciles the denominator used to compute basic
     earnings per share to the denominator used to compute diluted earnings per
     share ("EPS").

                                                           Three Months Ended
                                                                March 31,
                                                             ---------------
                                                              2007     2006
                                                             ------   ------
                                                              (in thousands)
     Weighted average shares outstanding
              (denominator used to compute basic EPS)        26,809   26,333
     Effect of employee and outside director stock options      451      913
                                                             ------   ------

     Denominator used to compute diluted EPS                 27,260   27,246
                                                             ======   ======

NOTE 11 - CONTINGENCIES

     Employment Agreements

     The Company has employment agreements with certain of its executive
     officers and certain other officers, the terms of which expire in January
     2009. Such agreements provide for minimum salary levels. If the Company
     terminates the employment of the employee for any reason other than 1)
     termination for cause, 2) voluntary resignation, or 3) employee's death,
     the Company is obligated to provide a severance benefit equal to six months
     of the employee's salary, and, at its option, an additional six months at
     50% to 100% of the employee's salary in exchange for an extension of the
     non-compete. These agreements are renewable for one year at the Company's
     option.

     Litigation

     From time to time, the Company is involved in various legal proceedings
     arising in the ordinary course of business alleging, among other things,
     breach of contract or tort in connection with the performance of
     professional services, the outcome of which cannot be predicted with
     certainty. As of the date of this filing, we are party to several legal
     proceedings that have been reserved for or are covered by insurance, or
     that, if determined adversely to us individually or in the aggregate, would
     not have a material adverse effect on our results of operations or
     financial position.

     Insurance

     The Company carries a broad range of insurance coverage, including general
     and business automobile liability, commercial property, professional errors
     and omissions, workers' compensation insurance and a general umbrella
     policy. The Company is not aware of any claims in excess of insurance
     recoveries. ENGlobal is partially self-funded for health insurance claims.
     Provisions for expected future payments are accrued based on the Company's
     experience. Specific stop loss levels provide protection for the Company
     with $175,000 per occurrence and approximately $12.1 million in aggregate
     in each policy year being covered by a separate insurance policy.


                                       13


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

   Forward-Looking Statements
   --------------------------

     Certain information contained in this Form 10-Q, the Company's Annual
     Report on Form 10-K, as well as other written and oral statements made or
     incorporated by reference from time to time by the Company and its
     representatives in other reports, filings with the Securities and Exchange
     Commission, press releases, conferences, or otherwise, may be deemed to be
     forward-looking statements with the meaning of Section 21E of the
     Securities Exchange Act of 1934. This information includes, without
     limitation, statements concerning the Company's future financial position
     and results of operations; planned capital expenditures; business strategy
     and other plans for future operations; the future mix of revenues and
     business; customer retention; project reversals; commitments and contingent
     liabilities; and future demand and industry conditions. Although the
     Company believes that the expectations reflected in such forward-looking
     statements are reasonable, it can give no assurance that such expectations
     will prove to have been correct. We undertake no obligation to publicly
     update or revise any forward-looking statements, whether as a result of new
     information, future events or otherwise. Generally, the words "anticipate,"
     "believe," "estimate," "expect," "may," and similar expressions, identify
     forward-looking statements, which generally are not historical in nature.
     Actual results could differ materially from the results described in the
     forward-looking statements due to the risks and uncertainties set forth in
     this Form 10-Q, the specific risk factors identified in the Company's
     Annual Report on Form 10-K for the year ended December 31, 2006 and those
     described from time to time in our future reports filed with the Securities
     and Exchange Commission.

     The following discussion is qualified in its entirety by, and should be
     read in conjunction with, the Company's Consolidated Financial Statements,
     including the notes thereto, included in this Form 10-Q and the Company's
     Annual Report on Form 10-K for the year ended December 31, 2006.

   MD&A Overview
   -------------

     The following list sets forth a general overview of the more significant
     changes in the Company's financial condition and results of operations for
     the three month period ended March 31, 2007, compared to the corresponding
     period in 2006.

                                During the three month period
                                     ended March 31, 2007
                                -----------------------------
          Revenue                      Increased 23%

          Gross profit                 Increased 62%

          Operating income             Increased 161%

          SG&A expense                 Increased 27%

          Net income                   Increased 156%


     Long-term debt, net of current portion, increased 19.6%, or $5.3 million,
     from $27.2 million at December 31, 2006 to $32.5 million at March 31, 2007,
     and as a percentage of stockholders' equity, long-term debt increased to
     73.3% from 66.5% at these same dates. The primary reason for the increase
     in long-term debt is the timing difference related to meeting short-term
     bi-weekly payroll obligations from our growth and longer collection periods
     on receipts from our clients. On average, our accounts receivable days
     outstanding has increased to 71 days for the three month period ended March
     31, 2007, from 66 days for the comparable period in 2006. The Company
     continues to work toward improving billing and collection processes.

     Total stockholders' equity increased 8.5%, or $3.4 million, from $40.9
     million as of December 31, 2006 to $44.3 million as of March 31, 2007.

                                       14



  

MD&A/Results of Operations (continued)
--------------------------------------

                     Consolidated Results of Operations for the Three Months
                                  Ended March 31, 2007 and 2006
                                           (Unaudited)


                                                                 Three Months Ended
                                                                      March 31,
                                                   ---------------------------------------------
                                                             2007                  2006
                                                   ---------------------------------------------
                                                                   (In thousands)
                                                   ---------------------------------------------

     Revenue:
              Engineering                          $    69,262    84.8 %   $    62,587    93.9 %
              Systems                                    5,510     6.8 %         4,040     6.1 %
              Acquisition                                6,887     8.4 %             -       - %
                                                   ------------            ------------
                  Total revenue                    $    81,659   100.0 %   $    66,627   100.0 %
                                                   ============            ============

     Gross profit:
              Engineering                          $    11,779    17.0 %   $     7,796    12.5 %
              Systems                                      249     4.5 %           426    10.6 %
              Acquisition                                1,250    18.2 %             -       - %
                                                   ------------            ------------
                  Total gross profit                    13,278    16.3 %         8,222    12.3 %
                                                   ------------            ------------

     SG&A expense:
              Engineering                                2,946     4.3 %         2,906     4.6 %
              Systems                                      429     7.8 %           608    15.1 %
              Corporate                                  3,787     4.6 %         2,587     3.9 %
              Acquisition                                  582     8.5 %             -       - %
                                                   ------------            ------------
                  Total SG&A expense                     7,744     9.5 %         6,101     9.2 %
                                                   ------------            ------------

     Operating income:
              Engineering                                8,832    12.8 %         4,890     7.8 %
              Systems                                     (180)   (3.3)%          (182)   (4.5)%
              Corporate                                 (3,787)   (4.6)%        (2,587)   (3.9)%
              Acquisition                                  669     9.7 %             -       - %
                                                   ------------            ------------
                  Total operating income                 5,534     6.8 %         2,121     3.2 %
                                                   ------------            ------------

     Other income (expense), net                          (560)   (0.7)%          (140)   (0.2)%
              Tax provision                             (1,820)   (2.2)%          (747)   (1.1)%
                                                   ------------            ------------

                  Net income                       $     3,154     3.9 %   $     1,234     1.9 %
                                                   ============            ============


Other financial comparisons:
----------------------------

                                              March 31,  March 31,
                                                2007       2006
                                              -------------------
                                                (In thousands)
                                              -------------------

     Working capital                          $ 44,215   $ 26,062

     Total assets                             $111,201   $ 80,474

     Long-term debt, net of current portion   $ 32,474   $  9,910

     Stockholders' equity                     $ 44,321   $ 41,314

                                       15



MD&A/Results of Operations (continued)
--------------------------------------

     We recorded net income of $3.2 million, or $0.12 per diluted share for the
     three months ended March 31, 2007, compared to net income of $1.2 million,
     or $0.05 per diluted share for the corresponding period last year.

     The following table presents, for the periods indicated, the approximate
     percentage of total revenues and operating income or loss attributable to
     our reportable segments:

                                                  Three Months Ended
                                                       March 31,
                                                  2007           2006
                                                 ------         ------
          Revenue:
                  Engineering                    93.2 %         93.9 %
                  Systems                         6.8 %          6.1 %

          Operating income (loss):
                  Engineering                    12.5 %          7.8 %
                  Systems                        (3.3)%         (4.5)%


     The Company's revenue is composed of engineering, construction and
     procurement service revenue, systems, land/management and related product
     sales. The Company recognizes service revenue as soon as the services are
     performed. The majority of the Company's engineering services have
     historically been provided through cost-plus contracts whereas a majority
     of the Company's product sales are earned on fixed-price contracts.
     However, our engineering segment recognized approximately $3.8 million in
     fixed-price revenue in the three month period ended March 31, 2007,
     compared to less than $4.7 million of similar revenue in the same period in
     2006. Of the fixed price revenue, $1.8 million and $2.7 million for the
     three month period ending March 31, 2007 and March 31, 2006, respectively,
     were related to the two projects with recorded losses during 2006.

     Revenue is recorded primarily using the percentage-of-completion
     (cost-to-cost) method. Under this method, revenue on long-term contracts is
     recognized in the ratio that contract costs incurred bear to total
     estimated contract costs. Revenue and gross margin on contracts are subject
     to revision throughout the lives of the contracts and any required
     adjustments are made in the period in which the revisions become known.
     Losses on contracts are recorded in full as they are identified.

     In the course of providing our services, we routinely provide engineering,
     materials, and equipment and may provide construction services on a
     subcontractor basis. Generally, these materials, equipment and
     subcontractor costs are passed through to our clients and reimbursed, along
     with fees, which in total are at margins lower than those of our normal
     core business. In accordance with industry practice and generally accepted
     accounting principles, all costs and fees are included in revenue. The use
     of subcontractor services can change significantly from project to project;
     therefore, changes in revenue may not be indicative of business trends.

     For analytical purposes only, we segregate from our total revenue the
     revenues derived from material assets or companies acquired during the
     first 12 months following their respective dates of acquisition and refer
     to such revenue as "Acquisition" revenue. We also segregate gross profits
     and SG&A expenses derived from material assets or company acquisitions on
     the same basis as we segregate revenues.

     Operating SG&A expense includes management and staff compensation, office
     costs such as rents and utilities, depreciation, amortization, travel and
     other expenses generally unrelated to specific client contracts, but
     directly related to the support of a segment's operation.

     Corporate SG&A expense is comprised primarily of marketing costs, as well
     as costs related to the executive, investor relations/governance, finance,
     accounting, safety, human resources, project controls, legal and
     information technology departments and other costs generally unrelated to
     specific client projects, but which are incurred to support corporate
     activities and initiatives.

                                       16


MD&A/Results of Operations (continued)
--------------------------------------

   Industry Overview:

     Many ENGlobal offices have benefited from the strong refinery market. We
     expect significant capital projects to be generated by refinery operations
     over the next several years and we will continue to research other markets
     that value our services. Overall, projects related to refining capacity and
     environmental mandates have trended upward. Given that global demand for
     oil products has tightened the supply of both crude oil as well as refinery
     products, we believe each of ENGlobal's business segments is well
     positioned within the industry should refinery capacity be added in the
     United States of America and the overseas markets continue to rise.

     The petrochemical industry has recently been a good source of projects for
     ENGlobal. We have seen an increase in both maintenance and capital spending
     after several years of relative inactivity. The petrochemical industry
     along the Gulf Coast continues to struggle with the aftermath of Hurricane
     Katrina and Hurricane Rita. Although it will take several years to rebuild,
     we expect that we will assist our clients with repairs to regional
     petrochemical facilities in order to resolve current supply limitations.

     Despite past downturns in the industry, pipeline projects have remained
     constant for the most part, and we have recently seen an increase in
     project activity. Pipeline projects tend to require less engineering man
     hours as the scope of engineering work is typically smaller than for
     similar sized downstream projects. In addition, the project awards in the
     pipeline segment are smaller in nature than those in other industries.

   Revenue:

     Revenue increased $15.0 million, or 22.5%, to $81.7 million for the three
     months ended March 31, 2007 from $66.7 million for the comparable prior
     year period with approximately $6.6 million of the increase coming from our
     engineering segment, $6.9 million attributable to the acquisition of WRC,
     and $1.5 attributable to our systems segment. This is discussed further in
     our segment information.

   Gross Profit:

     Gross profit increased $5.1 million, or 62.0%, to $13.3 million for the
     three months ended March 31, 2007 from $8.2 million for the comparable
     prior year period. As a percentage of revenue, gross profit increased 4.0%
     from 12.3% for the three months ended March 31, 2006 to 16.3% for the
     quarter ended March 31, 2007. Of the overall $5.1 million increase in gross
     profit, approximately $1.9 million was primarily due to the $15.0 million
     increase in revenue plus approximately $3.2 million in equivalent lower
     costs.

   Selling, General, and Administrative:

     As a percentage of revenue, SG&A expense remained relatively level
     increasing 0.3% to 9.5% for the three months ended March 31, 2007 from 9.2%
     for the comparable period in 2006. Total expense for SG&A increased $1.6
     million, or 26.2%, to $7.7 million for the three months ended March 31,
     2007 from $6.1 million for the comparable prior year period.

     As a percentage of revenue, Corporate SG&A expense increased 0.7% to 4.6%
     for the three months ended March 31, 2007 from 3.9% for the comparable
     prior year period. Corporate SG&A expense increased approximately $1.2
     million, or 46.4%, to $3.8 million for the three months ended March 31,
     2007 from $2.6 million for the comparable prior year period. The increase
     over prior year in Corporate SG&A was related to $243,000 in costs incurred
     on the continuing preparation and review related to SOX compliance;
     $264,000 in accrued management incentives; $148,000 related to increased
     stock compensation expense; $244,000 related to additional salaries and
     related expenses for business development; $200,000 related to the new
     Corporate Services and Legal departments and $149,000 for increases in cost
     for other support services. The increase in business development costs was
     due to a change in reporting of our systems' sales personnel from
     operations to corporate, and the addition of personnel to support our
     growth, including the WRC acquisition.

   Operating Income:

     Operating income increased approximately $3.4 million, or 160.3%, to $5.5
     million for the three months ended March 31, 2007 from $2.1 million
     compared to the same period in 2006. As a percentage of revenue, operating
     income increased 3.6% to 6.8% for the three months ended March 31, 2007
     from 3.2% for the comparable prior year period.

                                       17


MD&A/Results of Operations (continued)
--------------------------------------

   Other Expense, net:

     Other expense increased $ 420,000, to $560,000 for the three month period
     ended March 31, 2007 from $140,000 for the comparable prior year period,
     primarily due to higher net interest expense related to an increased
     outstanding balance on our line of credit.

    Tax Provision:

     Income tax expense increased $1.1 million, or 143.6%, to $1.8 million for
     the three months ended March 31, 2007 from $0.7 million for the comparable
     prior year period. The estimated effective tax rate was 36.6% for the
     three-month period ended March 31, 2007 compared to 37.7% for the
     comparable prior year period. The change in the effective tax rate is the
     result of utilization of net operating loss for the 2006 year.

     The estimated effective tax rates are based on estimates using historical
     rates adjusted by recurring and non-recurring book to tax differences.
     Estimates at March 31, 2006 included the effect of non-recurring
     differences in tax estimates from the 2005 year-end. Estimates at March 31,
     2007 are based on results of the 2006 year-end and adjusted for estimates
     of non-recurring differences from the prior year, as well as anticipated
     book to tax differences for 2007.

   Net Income:

     Net income for the three months ended March 31, 2007 increased $2.0
     million, or 166.7%, to $3.2 million from $1.2 for the comparable prior year
     period. As a percentage of revenue, net income increased 2.0% to 3.9% for
     the three month period ended March 31, 2007 from 1.9% for the period ended
     March 31, 2006.

   Liquidity and Capital Resources
   -------------------------------

     Historically, cash requirements have been satisfied through operations and
     borrowings under a revolving line of credit, which is currently in effect
     with Comerica Bank (the "Comerica Credit Facility"). As of March 31, 2007,
     we had working capital of $44.2 million. Long-term debt, net of current
     portion, was $32.5 million as of March 31, 2007, including $29.6 million
     outstanding under the Comerica Credit Facility.

     The Comerica Credit Facility is senior to all other debt, and the line of
     credit is limited to $35.0 million, after consideration of loan covenant
     restrictions.. The Comerica Credit Facility is collateralized by
     substantially all of the assets of the Company. The Comerica Credit
     Facility contains covenants requiring the Company, as of the end of each
     calendar month, to maintain certain ratios, including total funded debt to
     EBITDA; total funded debt to total liabilities, plus net worth; and total
     funded debt to accounts/unbilled receivables. The Company is also required,
     as of the end of the most recent quarter then ended, to maintain minimum
     levels of net worth, and must comply with an annual limitation on capital
     expenditures. The Company is currently in compliance with all loan
     covenants, although no assurances can be given regarding such compliance in
     the future. We are not currently subject to any obligations under standby
     letters of credit, guarantees, repurchase obligations or other commitments.
     We have no off-balance sheet arrangements.

     As of March 31, 2007, management believes the Company's cash position is
     sufficient to meet its working capital requirements. Any future decrease in
     demand for the Company's services or products would reduce the availability
     of funds through operations.

   Cash Flow
   ---------

     The Company believes that it has available the necessary cash required for
     operations for the next 12 months. Cash and the availability of cash could
     be materially restricted if circumstances prevent the timely internal
     processing of invoices, if amounts billed are not collected, if project mix
     shifts from cost reimbursable to fixed cost contracts during significant
     periods of growth, if the Company was to lose one or more of its major
     customers, or if the Company is not able to meet the covenants of the
     Comerica Credit Facility. If any such event occurs, the Company would be
     forced to consider alternative financing options.

     Operating activities:

     Net cash used in operating activities was $4.9 million for the three-month
     period ended March 31, 2007, compared with net cash used of $3.2 million in
     the same period in 2006. Changes in working capital due to the timing of

                                       18


MD&A/Results of Operations (continued)
--------------------------------------

     collections of trade receivables and payments for trade payables and
     accruals, contributed to the negative cash flows from operations in the
     first quarter of 2007. During the quarter, the line of credit increased
     from $24.0 million as of December 31, 2006 to $29.6 million as of March 31,
     2007.

     Our average days sales outstanding ("DSO") was 71 days for the three month
     period ended March 31, 2007 compared to 66 days for the comparable period
     in 2006 and 69 days for the period ended December 31, 2006. We have revised
     the method used for calculating DOS changing from annualized average
     revenue and accounts receivable totals to quarterly revenue and accounts
     receivable balances. The average DSO for all periods referenced herein and
     for all future periods have been and will be calculated under the new
     method.

     The primary factors impacting the increase in our need for cash and the
     increases in average DSO during the three month period ending March 31,
     2007 were:

          1)   a decrease in accounts payable of approximately $4 million
               primarily related to contractor payments on the two fixed-price
               EPC projects;
          2)   an increase in accounts receivable of approximately $4 million
               primarily due to delays in processing billings within the
               Engineering segment, particularly in getting the WRC acquisition
               billings current following its conversion to the ENGlobal
               financial accounting system on December 31, 2006; and
          3)   an increase in costs and estimated earnings-in-excess of billings
               from approximately $5.4 million as of December 31, 2006 to $8.1
               million for the three month period ended March 30, 2007 primarily
               related to extended payment terms and milestones on fixed price
               contracts within our Systems segment.

     Accounts payable are not expected to materially impact cash during the
     second quarter as the two fixed-price EPC projects are scheduled to be
     completed during that period with final billings and retention collections
     expected to have a positive cash impact. Also, the Company expects to have
     Engineering segment billings current before the end of the three month
     period ending June 30, 2007.

     A continued increase in costs and estimated earnings-in-excess of billings
     is not expected during the second quarter even though improvements can only
     be made with more favorable contractual terms.

     Investing activities:

     Net cash used in investing activities was $429,000 for the three-month
     period ended March 31, 2007, compared with net cash provided of $1.3
     million in the same period in 2006. In the first quarter of 2006, the
     Company acquired the assets of ATI, Inc. for $750,000 cash and a note
     payable. The Company also used cash for capital expenditures in the first
     three months of 2007 and 2006.

     Financing activities:

     Net cash provided by financing activities was $4.9 million for the
     three-month period ended March 31, 2007, compared with net cash provided of
     $4.3 million in the same period in 2006. In the first quarter of 2007, the
     Company increased its outstanding line of credit by $5.7 million for
     working capital needs compared to an increase in the outstanding line of
     credit of $4.3 million in the same period in 2006.

   Asset Management
   ----------------

     The Company's cash flow from operations has been affected primarily by the
     timing of its collection of trade accounts receivable. The Company
     typically sells its products and services on short-term credit terms and
     seeks to minimize its credit risk by performing credit checks and
     conducting its own collection efforts. The Company had net trade accounts
     receivable of $64.1 million and $60.2 million at March 31, 2007 and
     December 31, 2006, respectively. The number of days sales outstanding in
     trade accounts receivables was 71 days and 69 days at March 31, 2007 and
     December 31, 2006, respectively.

                                       19



  

Engineering Segment Results
---------------------------

                                                           Three Months Ended
                                                                March 31,
                                            -------------------------------------------------
                                                      2007                       2006
                                            -------------------------------------------------
                                                              (In thousands)
                                            -------------------------------------------------

     Revenue:
        Engineering                         $     69,262    91.0 %      $    62,587   100.0 %
        Acquisition                                6,887     9.0 %                -       - %
                                            -------------               ------------
            Total revenue                   $     76,149   100.0 %      $    62,587   100.0 %
                                            =============               ============

     Gross profit:
        Engineering                         $     11,779    17.0 %      $     7,796    12.5 %
        Acquisition                                1,250    18.2 %                -       - %
                                            -------------               ------------
            Total gross profit                    13,029    17.1 %            7,796    12.5 %
                                            -------------               ------------

     Operating SG&A expense:
        Engineering                                2,946     4.3 %            2,906     4.6 %
        Acquisition                                  582     8.5 %                -       - %
                                            -------------               ------------
            Total SG&A expense                     3,528     4.6 %            2,906     4.6 %
                                            -------------               ------------

     Operating income:
        Engineering                                8,832    12.8 %            4,890     7.8 %
        Acquisition                                  669     9.7 %                -       - %
                                            -------------               ------------
            Total operating income          $      9,501    12.5 %      $     4,890     7.8 %
                                            -------------               ------------


   Overview of Engineering Segment:

     Our engineering segment continues to benefit from a large project load
     generated primarily by its downstream clients and to a lesser extent by its
     midstream clients. The industry's refining segment continues to be very
     active, supplying a large percentage of the Company's backlog. ENGlobal is
     benefiting from the renewed interest of its chemical/petrochemical clients
     in maintenance and retrofit projects as product margins in this marketplace
     improve.

     Acquisition totals for the three months ended March 31, 2007 are from the
     results of operations related to the acquisition of WRC Corporation. There
     were no acquisition totals for the engineering segment for the three months
     ended March 31, 2006, as all previous acquisitions had been fully
     integrated.



                                       20


Engineering Segment Results (continued)
---------------------------------------

   Revenue:

     Revenue increased $13.5 million, or 21.6%, to $76.1 million for the three
     months ended March 31, 2007 from $62.6 million for the comparable prior
     year period. The following table illustrates the composition of the
     Company's revenue mix quarter over quarter for the three month periods
     ended March 31, 2007 and 2006, and provides a comparison of the changes in
     revenue (in thousands) and revenue trends period over period:

                                   2007    % rev      2006    % rev    $ change   % change
                                  ------   ------    ------   ------   --------   --------

     Detail-design                  35.8       47%    27.6        44%      8.2        30%
     Field services & inspection    35.2       46%    19.6        31%     15.6        80%
     Procurement & construction      1.3        2%    10.6        17%     (9.3)      (88)%
     Design-build fixed price        3.8        5%     4.7         8%      (.9)      (19)%
                                  ------   ------    ------   ------   -------    -------
                                    76.1      100%    62.5       100%     13.6        22%


     The increase in engineering revenue was primarily brought about by
     increased activity in the engineering and construction markets. Refining
     related activity has been particularly strong, including projects to
     satisfy environmental mandates, expand existing facilities and utilize
     heavier sour crude. Capital spending in the pipeline area is also trending
     higher, with numerous projects in North America currently underway to
     deliver crude oil, natural gas, petrochemicals and refined products.
     Renewable energy appears to be an emerging area of activity and potential
     growth, with the Company currently performing a variety of services for
     ethanol, biodiesel, coal to liquids, petroleum coke to ammonia, and other
     biomass processes. The acquisition of WRC in May 2006, together with our
     clients' increased demand for in-plant and inspection resources, stimulated
     growth in our staffing services division.

     The largest increase in revenue came from field services and inspection
     activity that increased $15.6 million, or approximately 80%, to $35.2
     million for the first quarter of 2007 from $19.6 million for the comparable
     period in 2006. Approximately $6.9 million of the increase in field
     services revenue is directly related to the acquisition of WRC in May of
     2006 which provides integrated land management, engineering, and related
     services (Reference is made to NOTE 16 - ACQUISITIONS, in the Company's
     Report to Shareholders on Form 10K for the period ending December 31,
     2006).

     On a combined basis, with the increase in detail-design services of $8.2
     million, or approximately 30%, our core engineering segment's activities
     accounted for approximately 93% of engineering's total revenue mix during
     the three month period ended March 31, 2007 compared to approximately 75%
     for the comparable period of 2006.

     Revenue from non-labor procurement and construction activity decreased $9.3
     million from $10.6 million during the three months ended March 31, 2006 to
     $1.3 million for the first quarter of 2007.

     The design-build fixed price revenue decreased approximately $900,000, or
     (19)%, from $4.7 million for the three month period ended March 31, 2006 to
     $3.8 million for the same period in 2007 and accounted for approximately 5%
     of engineering's total revenue. If the revenue from the two fixed-price EPC
     projects that recorded losses in 2006, which totaled $1.8 and $2.7 million
     during the three month periods ending March 31, 2007 and March 31, 2006,
     respectively, were eliminated for comparison purposes, fixed price revenue
     would have remained the same at $2.0 million for the comparable periods,
     but would have decreased as a percentage of revenue by 0.5% from 3.2% in
     2006 to 2.7% in 2007. Approximately $900,000 of the total fixed-price
     revenue during the three month period ending March 31, 2007 came from one
     fixed-price, engineering-only project with a contract value of
     approximately $6.9 million, but also includes reimbursable material and
     construction costs estimated to be approximately $34 million. The project
     is scheduled to be completed during the first quarter of 2008.

   Gross Profit:

     Gross profit increased $5.2 million, or 66.7%, to $13.0 million for the
     three months ended March 31, 2007 from $7.8 million for the comparable
     period in 2006. As a percentage of revenue, gross profit increased by 4.6%
     to 17.1% from 12.5% for the three-month periods ended March 31, 2007 and
     2006, respectively. Of the overall $5.2 million increase in gross profit,
     approximately $1.7 million was attributable to the $13.5 million increase
     in total revenue, plus approximately $3.5 million in improved margins. The
     increase in margins can be attributed to the reduced activity in low
     margin/high dollar procurement projects being replaced with higher margin
     core revenue derived from labor activity.

                                       21


Engineering Segment Results (continued)
---------------------------------------

     At March 31, 2007, we had outstanding unapproved change orders/claims of
     approximately $17.4 million, net of reserves of $1.2 million associated
     with ongoing fixed-price EPC projects. If in the future we determine
     collection of the unapproved change orders/claims is not probable, it will
     result in a charge to earnings in the period such determination is made for
     the reserves of $1.2 million.

   Selling, General, and Administrative:

     As a percentage of revenue, SG&A expense was 4.6% for both the three-month
     periods ended March 31, 2007 and March 31, 2006. SG&A expense increased
     $0.6 million, or 20.6%, to $3.5 million for the three months ended March
     31, 2007 from $2.9 million for the comparable prior year period. The
     increase in SG&A expense included $68,000 attributable to the support of
     expanded facilities and supplies as offices in Tulsa, Houston, and Beaumont
     were expanded to meet both current and projected growth requirements.
     Additional increases came from salaries, burdens and benefits of $194,000,
     amortization and depreciation expense of $169,000 primarily related to
     amortization of intangible assets from the acquisition of WRC (reference is
     made to NOTE 5 - GOODWILL, page 9), and $69,000 in other charges. An
     additional bad debt expense of $135,000 was also recorded during the period
     to increase the allowance for doubtful accounts primarily related to
     changes in client mix.

   Operating Income:

     Operating income increased $4.6 million, or 94.1%, to $9.5 million for the
     three months ended March 31, 2007 from $4.9 million for the comparable
     prior year period. As a percentage of revenue, operating income increased
     to 12.5% for the three months ended March 31, 2007 from 7.8% for the
     comparable prior year period.










                                       22


Systems Segment Results
-----------------------

                                                Three Months Ended
                                                     March 31,
                                    -------------------------------------------
                                            2007                   2006
                                    ---------------------  --------------------
                                                   (In thousands)
                                    -------------------------------------------
                                    $    5,510   100.0 %   $    4,040   100.0 %
      Revenue:
                                    ===========            ===========

      Gross profit:                 $      249     4.5 %   $      426    10.6 %
                                    -----------            -----------

      Operating SG&A expense:              429     7.8 %          608    15.1 %
                                    -----------            -----------

      Operating income:                   (180)   (3.3)%         (182)   (4.5)%
                                    ===========            ===========

   Overview of Systems Segment:

     The systems segment began a detailed review process in the fourth quarter
     of 2006. Continuing on this trend of self-improvement in the first quarter
     of 2007, project cost control/forecasting was initiated on all active lump
     sum projects in order to identify potential areas of remediation and
     improve financial results. Going into 2007, the systems segment had record
     backlog of $17.7 million with several large projects being booked in April.
     In addition, the systems segment is planning to reduce overhead costs to
     drive efficiency and profitability upwards.

   Revenue:

     Revenue increased approximately $1.5 million, or 37.1%, to $5.5 million for
     the three month period ended March 31, 2007 from $4.0 million for the
     comparable prior year period.

     A general turnaround in the oil and gas industry, together with the
     acquisition of Analyzer Technology International, Inc. ("ATI") in January
     2006 has increased the demand for systems services. Another factor
     positively affecting systems business is that the computer-based
     distributed control systems equipment used for facility plant automation
     becomes technologically obsolete over time, which supports ongoing
     replacement of these systems.

   Gross profit:

     Gross profit decreased approximately $177,000, or 41.5%, to $249,000 for
     the three months ended March 31, 2007 from $426,000 for the comparable
     prior year period and, as a percentage of revenue, gross profit decreased
     to 4.5% from 10.6% for the respective periods. The decrease in gross profit
     was attributable to lower margins of fixed price work accounting for 3% of
     the margin changes. The remainder was increased variable costs associated
     with labor to perform proposals and increased project management.

   Selling, General, and Administrative:

     SG&A expense decreased approximately $179,000, or 29.4%, to $429,000 for
     the three months ended March 31, 2007 from $608,000 for the same period in
     2006 and, as a percentage of revenue, SG&A expense decreased to 7.8% from
     15.0% for the respective periods. Salaries and related expenses decreased
     by $288,000 due to the fact the expenses of four sales persons were moved
     to Corporate SG&A from Operations; some salaries were moved to direct costs
     variable; and the Company's personnel decreased. Amortization expense
     increased by $138,000 in relation to the non-compete intangible that was
     created with the purchase price analysis related to the ATI acquisition.
     Facilities and related expenses decreased by $27,000 as a result of moving
     the office for the ATI acquisition into the existing Systems office.

   Operating Income:

     The systems segment recorded an operating loss of $180,000 for the three
     months ended March 31, 2007 compared to an operating loss of $182,000 for
     the three month period ended March 31, 2006.

                                       23


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Our financial instruments include cash and cash equivalents, accounts
     receivable, accounts payable, notes and capital leases payable, and debt
     obligations. The book value of cash and cash equivalents, accounts
     receivable, accounts payable and short-term notes payable are considered to
     be representative of fair value because of the short maturity of these
     instruments.

     We do not utilize financial instruments for trading purposes and we do not
     hold any derivative financial instruments that could expose us to
     significant market risk. In the normal course of business, our results of
     operations are exposed to risks associated with fluctuations in interest
     rates and currency exchange rates.

     Our exposure to market risk for changes in interest rates relates primarily
     to our obligations under the Comerica Credit Facility. As of March 31,
     2007, $29.6 million had been borrowed under the Credit Facility, accruing
     interest at 8.25% per year, excluding amortization of prepaid financing
     costs. A 10% increase in the short-term borrowing rates on the Credit
     Facility outstanding as of March 31, 2007 would be 83 basis points. Such an
     increase in interest rates would increase our annual interest expense by
     approximately $244,000, assuming the amount of debt outstanding remains
     constant.

     In general, our exposure to fluctuating exchange rates relates to the
     effects of translating the financial statements of our Canadian subsidiary
     from the Canadian dollar to the U.S. dollar. We follow the provisions of
     SFAS No. 52 - "Foreign Currency Translation" in preparing our consolidated
     financial statements. Currently, we do not engage in foreign currency
     hedging activities.


ITEM 4.  CONTROLS AND PROCEDURES

     a.   Evaluation of Disclosure Controls and Procedures

     Our management is responsible for establishing and maintaining our
     disclosure controls and procedures. As of March 31, 2007, we carried out an
     evaluation, under the supervision and with the participation of our
     management, including our Chief Executive Officer and Chief Financial
     Officer, of the effectiveness of the design and operation of our disclosure
     controls and procedures or "disclosure controls." Disclosure controls are
     controls and procedures designed to ensure that information required to be
     disclosed in our reports filed under the Securities Exchange Act of 1934 is
     properly recorded, processed, summarized, and reported within the time
     periods specified in the U.S. Securities and Exchange Commission's rules
     and forms. Disclosure controls include processes to accumulate and evaluate
     relevant information and communicate such information to management,
     including the CEO and CFO, as appropriate to allow timely decisions
     regarding required disclosure. In designing and evaluating the disclosure
     controls and procedures, management recognizes that any controls and
     procedures, no matter how well designed and operated, can provide only
     reasonable assurance of achieving the desired control objectives, and
     management is required to apply its judgment in evaluating the cost-benefit
     relationship of possible controls and procedures.

     Based on the controls evaluation, our CEO and CFO have concluded that, as a
     result of the matters discussed below with respect to our internal control
     over financial reporting, our disclosure controls as of March 31, 2007,
     were not effective.

     A material weakness in internal control over financial reporting is a
     significant deficiency, or combination of significant deficiencies, that
     results in more than a remote likelihood that a material misstatement of
     the annual or interim financial statements will not be prevented or
     detected. Management's assessment identified the following material
     weaknesses in our internal control over financial reporting as of December
     31, 2006, which remained outstanding as of March 31, 2007:

     o    Deficiencies in the Company's Control Environment. Our control
          environment did not sufficiently promote effective internal control
          over financial reporting throughout the organization. Specifically, we
          had a shortage of support and resources in our accounting department,
          which resulted in insufficient: (i) documentation and communication of
          our accounting policies and procedures; and (ii) internal audit
          processes of our accounting policies and procedures.

                                       24


     o    Deficiencies in the Company's Information Technology Access Controls.
          We did not maintain effective controls over preventing access by
          unauthorized personnel to end-user spreadsheets and other information
          technology programs and systems.

     o    Deficiencies in the Company's Accounting System Controls. We did not
          effectively and accurately close the general ledger in a timely manner
          and we did not provide complete and accurate disclosure in our notes
          to financial statements, as required by generally accepted accounting
          principles.

     o    Deficiencies in the Company's Controls Regarding Purchases and
          Expenditures. We did not maintain effective controls over the tracking
          of our commitments and actual expenditures with third-party
          subsidiaries on a timely basis.

     o    Deficiencies in the Company's Controls Regarding Fixed-Price Contract
          Information. We did not maintain effective controls over the complete,
          accurate, and timely processing of information relating to the
          estimated cost of fixed-price contracts.

     o    Deficiencies in the Company's Revenue Recognition Controls. We did not
          maintain effective policies and procedures relating to revenue
          recognition of fixed price contracts, which accounted for
          approximately 11% of the Company's revenues in 2006.

     o    Deficiencies in the Company's Controls over Income Taxes. We did not
          maintain sufficient internal controls to ensure that amounts provided
          for in our financial statements for income taxes accurately reflected
          our income tax position as of December 31, 2006.

     o    Management assessed the effectiveness of our internal control over
          financial reporting as of December 31, 2006, but management did not
          complete its assessment until March 2, 2007. Due to the lack of
          adequate time to permit Hein to audit management's assessment, Hein
          was unable to render an opinion on our assessment of the effectiveness
          of our internal control over financial reporting as of December 31,
          2006. Accordingly, management identified this as a material weakness.
          Management's assessment process did not conclude in adequate time to
          permit Hein to audit management's assessment due to a number of
          factors, including: (i) our failure to prepare and plan for a timely
          completion of management's assessment, including adding the resources
          necessary to do so; and (ii) our failure to ensure that our accounting
          department was adequately staffed and sufficiently trained to meet
          deadlines.

     Except as noted below under the heading "Remediation Initiatives," no
     change in our internal control over financial reporting (as defined in Rule
     13a-15(f) under the Securities Exchange Act of 1934) occurred during the
     quarter ended March 31, 2007, that has materially affected, or is
     reasonably likely to materially affect, our internal control over financial
     reporting.

     b.   Remediation Initiatives

     Management, with oversight from the Audit Committee of the Board of
     Directors, has been addressing the material weakness disclosed in its 2006
     Annual Report on Form 10-K and is committed to effectively remediating
     known weaknesses as expeditiously as possible. Due to the fact that these
     remedial steps have not been completed, the Company performed additional
     analysis and procedures in order to ensure that the consolidated financial
     statements contained in this Form 10-Q were prepared in accordance with
     generally accepted accounting principles in the United States of America.
     Although the Company's remediation efforts are well underway, control
     weaknesses will not be considered remediated until new internal controls
     over financial reporting are implemented and operational for a sufficient
     period of time to allow for effective testing and are tested, and
     management and its independent registered certified public accounting firm
     conclude that these controls are operating effectively. Management and the
     Audit Committee of the Company's Board of Directors have begun working with
     the Company's auditors to determine the most effective way to implement the
     remedial measures listed below, and, if necessary, to develop additional
     remedial measures to address the internal control deficiencies identified

                                       25


     above. The Company will monitor the effectiveness of planned actions and
     will make any other changes and take such other actions as management or
     the Audit Committee determines to be appropriate. The Company's remediation
     plans include:

     o    We plan to hire additional personnel to assist us with documenting and
          communicating our accounting policies and procedures to ensure the
          proper and consistent application of those policies and procedures
          throughout the Company. Recruitment for this position(s) has begun and
          the selection process is expected to be completed during the second
          quarter of 2007.

     o    We plan to implement formal processes requiring periodic
          self-assessments, independent tests, and reporting of our personnel's
          adherence to our accounting policies and procedures.

     o    We plan to design effective policies and procedures to control
          security of and access to spreadsheet information. If necessary, we
          will also consider implementing a software solution with automatic
          control checkpoints for day-to-day business processes.

     o    We plan to (i) require additional training for our current accounting
          personnel; (ii) to hire additional accounting personnel to enable the
          allocation of job functions among a larger group of accounting staff;
          (iii) to engage outside consultants with technical accounting
          expertise, as needed; and (iv) to consider restructuring our
          accounting department, each to increase the likelihood that our
          accounting personnel will have the resources, experience, skills, and
          knowledge necessary to effectively perform the accounting system
          functions assigned to them. The Company currently has three days of
          in-house training scheduled for the accounting staff at the end of May
          2007, to improve our accounting functions as we prepare to report the
          second quarter, as well as to improve the remainder of the year.

     o    We plan to improve procurement and operational efficiencies by
          implementing a software system and a matrix organization to more
          completely, accurately, and timely track commitments on Company-wide
          purchase and expenditure transactions.

     o    We plan to improve revenue recognition policies and procedures
          relating to fixed-price contracts by evaluating the level of economic
          success achieved by past fixed-price contracts and by stressing
          throughout the Company the importance of (i) accurately estimating
          costs, (ii) timely updating cost estimates to reflect the accuracy of
          the cost savings, (iii) accurately estimating expected profit, (iv)
          timely identifying when a project's scope changes, (v) promptly
          reporting man hours and costs in excess of those originally estimated;
          and (vi) closely scrutinizing the bid process.

     o    We plan to train personnel to effectively implement and evaluate the
          overall design of the Company's fixed-price project control processes.
          Specifically, we plan to enhance and tighten controls as they relate
          to the initial bid process and the attendant recognition and
          management of risk by only bidding on large procurement and
          construction activities on a cost plus basis.

     Management recognizes that many of these enhancements require continual
     monitoring and evaluation for effectiveness. The development of these
     actions is an iterative process and will evolve as the Company continues to
     evaluate and improve our internal controls over financial reporting.
     Management will review progress on these activities on a consistent and
     ongoing basis at the Chief Executive Officer and senior management level in
     conjunction with our Audit Committee. We also plan to take additional steps
     to elevate Company awareness about and communication of these important
     issues through formal channels such as Company meetings, departmental
     meetings, and training.

     During the second quarter, the Company will begin its 2007 internal
     controls audit and the Investor Relations/Governance department expects to
     hire a third-party consultant to oversee the testing of its internal
     financial and information technology controls. A quarterly review by
     consultants will assist the Company and its independent auditors in
     preparing for the final assessment in September 2007, allowing for any
     remediation by December 31, 2007.

                                       26


                          PART II. - OTHER INFORMATION
                          ----------------------------

ITEM 1.  LEGAL PROCEEDINGS

     From time to time, the Company and its subsidiaries become parties to
     various legal proceedings arising in the ordinary course of normal business
     activities. While we cannot predict the outcome of these proceedings, in
     our opinion and based on reports of counsel, any liability arising from
     such matters, individually or in the aggregate, is not expected to have a
     material effect upon the consolidated financial position or operations of
     the Company.


ITEM 1A.  RISK FACTORS

     In addition to the other information set forth in this report, you should
     carefully consider the factors discussed in Part I, "Item 1A. Risk Factors"
     in our Annual Report on Form 10-K for the year ended December 31, 2006,
     which could materially affect our business, financial condition or future
     results. The risks described in our Annual Report on Form 10-K are not the
     only risks facing our Company. Additional risks and uncertainties not
     currently known to us or that we currently deem to be immaterial also may
     materially adversely affect our business, financial conditions or operating
     results.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

     None.


ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

     None.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     None.


ITEM 5.  OTHER INFORMATION

     None.


ITEM 6.  EXHIBITS

     10.1      Seventh Amendment to Credit Agreement by and among Comerica Bank
               and ENGlobal Corporation and its subsidiaries dated April 18,
               2007, effective retroactive to March 30, 2007.

     31.1      Certifications Pursuant to Rule 13a - 14(a) of the Exchange Act
               of 2002 for the First Quarter 2007

     31.2      Certifications Pursuant to Rule 13a - 14(a) of the Exchange Act
               of 2002 for the First Quarter 2007

     32        Certification Pursuant to Rule 13a - 14(b) of the Exchange Act
               and 18U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
               the Sarbanes-Oxley Act of 2002 for the First Quarter 2007


                                       27





SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.


ENGlobal Corporation

Dated:   May 9, 2007

                            By: /s/ Robert W. Raiford
                                -------------------------
                                Robert W. Raiford
                                Chief Financial Officer and Treasurer








                                       28