**FORM          10-Q**

**x**

**Champion          Industries, Inc.**

| West                    Virginia                                                  |   | 55-0717455                                              |
|-----------------------------------------------------------------------------------|--------|---------------------------------------------------------|
| (State                    or other jurisdiction of incorporation or organization) |   | (I.R.S.                    Employer Identification No.) |

|  Large                      accelerated filer o |  Accelerated                      filer o   |  Non-accelerated                      filer x |
|------------------------------------------------------|------------------------------------------------------------|----------------------------------------------------|

|  Class                                                      |   |  Outstanding                    at July 31, 2006 |
|------------------------------------------------------------------|--------|------------------------------------------------------------|
|  Common                    stock, $1.00 par value per share |   |  9,906,913                    shares                  |

**Champion        Industries, Inc.**

**INDEX**

|                                                                                                                                                                       |  **Page                  No.** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------|
|  Part I.   Financial                Information                                                                                                        |                                |
|       Item                1.    Financial Statements                                                                     |                                |
|          Consolidated                Balance Sheets (Unaudited)                                                               |  3                             |
|          Consolidated                Statements of Operations (Unaudited)                                                |  5                             |
|          Consolidated                Statements of Cash Flows (Unaudited)                                                     |  6                             |
|          Notes                to Consolidated Financial Statements                                                            |  7                             |
|      Item                2.  Management’s Discussion and Analysis of Financial                Condition and Results of Operations | 14                                  |
|      Item                3.  Quantitative                and Qualitative Disclosure About Market Risk                                        |  19                            |
|      Item                4. Controls                and Procedures                                                                           | 19                                  |
|  Part                II. Other                Information                                                                                                        |                                |
|      Item                  6. Exhibits                                                                                                       | 20                                  |
|  Signatures                                                                                                                                                           | 21                                  |

----

**PART        I - FINANCIAL INFORMATION**

**Item        1. Financial Statements**

**Champion        Industries, Inc. and Subsidiaries**

**Consolidated        Balance Sheets**

| **ASSETS**                                                                                               |   | **July 31,**                   |   |   |   | **October                    31,** |        |
|----------------------------------------------------------------------------------------------------------|--------|-------------------------------------|--------|--------|--------|------------------------------------|--------|
|                                                                                                     |   | **2006****(Unaudited)**             |   |   |   | **2005****(Audited)**              |   |
| Current                    assets:                                                                       |   |                                |   |   |   |                               |        |
| Cash                    and cash equivalents                                                             |   | **$                    1,617,942**  |   |   |   | $                    3,661,622     |        |
| Accounts                    receivable, net of allowance of $1,341,000                    and $1,410,000 |   | **21,014,698**                      |   |   |   | 19,300,453                         |        |
| Inventories                                                                                              |   | **11,001,049**                      |   |   |   | 11,079,726                         |        |
| Other                    current assets                                                                  |   | **756,273**                         |   |   |   | 629,381                            |        |
| Deferred                    income tax assets                                                            |   | **1,168,526**                       |   |   |   | 1,168,526                          |        |
| Total                    current assets                                                                  |   | **35,558,488**                      |   |   |   | 35,839,708                         |        |
|                                                                                                     |   |                                |   |   |   |                               |        |
|                                                                                                     |   |                                |   |   |   |                               |        |
| Property                    and equipment, at cost:                                                      |   |                                |   |   |   |                               |        |
| Land                                                                                                     |   | **2,023,375**                       |   |   |   | 2,006,375                          |        |
| Buildings                    and improvements                                                            |   | **8,518,381**                       |   |   |   | 8,368,720                          |        |
| Machinery                    and equipment                                                               |   | **45,497,933**                      |   |   |   | 43,668,900                         |        |
| Equipment                    under capital leases                                                        |   | **-**                               |   |   |   | 426,732                            |        |
| Furniture                    and fixtures                                                                |   | **3,594,922**                       |   |   |   | 3,492,535                          |        |
| Vehicles                                                                                                 |   | **3,444,693**                       |   |   |   | 3,629,268                          |   |
|                                                                                                     |   | **63,079,304**                      |   |   |   | 61,592,530                         |        |
| Less                    accumulated depreciation                                                         |   | **(44,709,659**                     | **)**  |   |   | (42,894,910                        | )      |
|                                                                                                     |   | **18,369,645**                      |   |   |   | 18,697,620                         |        |
|                                                                                                     |   |                                |   |   |   |                               |   |
| Cash                    surrender value of officers’ life insurance                                |   | **1,117,484**                       |   |   |   | 1,117,484                          |        |
| Goodwill                                                                                                 |   | **2,060,786**                       |   |   |   | 2,060,786                          |   |
| Other                    intangibles, net of accumulated amortization                                    |   | **3,426,513**                       |   |   |   | 3,697,368                          |   |
| Other                    assets                                                                          |   | **271,120**                         |   |   |   | 232,204                            |   |
|                                                                                                     |   | **6,875,903**                       |   |   |   | 7,107,842                          |   |
| Total                    assets                                                                          |   | **$                    60,804,036** |   |   |   | $                    61,645,170    |   |

----

**Champion        Industries, Inc. and Subsidiaries**

**Consolidated        Balance Sheets (continued)**

| **LIABILITIES                  AND SHAREHOLDERS’ EQUITY**                                                                                  | **July                  31,** |                              | **October                  31,** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------|-----------------------------------|----------------------------------|--------|
|                                                                                                                                             | **2006****(Unaudited)**       |                              | **2005****(Audited)**            |   |
| Current                  liabilities:                                                                                                            |                          |                              |                             |   |   |   |
| Accounts                  payable                                                                                                                |                          | **$                  2,765,280**  |                             |   | $                  3,584,323 |   |
| Accrued                  payroll                                                                                                                 |                          | **1,986,522**                     |                             |   | 1,714,078 |   |
| Taxes                  accrued and withheld                                                                                                      |                          | **1,447,319**                     |                             |   | 1,106,910 |   |
| Accrued                  income taxes                                                                                                            |                          | **481,292**                       |                             |   | 681,763 |   |
| Accrued                  expenses                                                                                                                |                          | **948,298**                       |                             |   | 987,228 |   |
| Current                  portion of long-term debt:                                                                                              |                          |                              |                             |   |   |   |
| Notes                  payable                                                                                                                   |                          | **1,840,117**                     |                             |   | 1,667,797 |   |
| Capital                  lease obligations                                                                                                       |                          | **-**                             |                             |   | 16,483 |   |
| Total                  current liabilities                                                                                                       |                          | **9,468,828**                     |                             |   | 9,758,582 |   |
|                                                                                                                                             |                          |                              |                             |   |   |   |
| Long-term                  debt, net of current portion:                                                                                         |                          |                              |                             |   |   |   |
| Notes                  payable, line of credit                                                                                                   |                          | **-**                             |                             |   | 1,612,000 |   |
| Notes                  payable, term                                                                                                             |                          | **3,973,542**                     |                             |   | 5,148,503 |   |
| Other                  liabilities                                                                                                               |                          | **388,525**                       |                             |   | 388,930 |   |
| Deferred                  income tax liabilities                                                                                                 |                          | **3,714,351**                     |                             |   | 3,984,934 |   |
| Total                  liabilities                                                                                                               |                          | **17,545,246**                    |                             |   | 20,892,949 |   |
| Shareholders’                  equity:                                                                                                     |                          |                              |                             |   |   |   |
| Common                  stock, $1 par value, 20,000,000 shares authorized;9,906,913                  and 9,745,913 shares issued and outstanding |                          | **9,906,913**                     |                             |   | 9,745,913 |   |
| Additional                  paid-in capital                                                                                                      |                          | **22,611,940**                    |                             |   | 22,297,670 |   |
| Retained                  earnings                                                                                                               |                          | **10,739,937**                    |                             |   | 8,708,638 |   |
| Total                  shareholders’ equity                                                                                                |                          | **43,258,790**                    |                             |   | 40,752,221 |   |
| Total                  liabilities and shareholders’ equity                                                                                |                          | **$                  60,804,036** |                             |   | $                  61,645,170 |   |

----

**Champion        Industries, Inc. and Subsidiaries**

**Consolidated        Statements of Operations **

|                                                            |   | **Three                    Months Ended****July                    31,** | **Nine                    Months Ended****July                      31,** |
|----------------------------------------------------------------------|--------|--------------------------------------------------------------------------|---------------------------------------------------------------------------|
|                                                                 |   |                                                                     | **2006**                                                                  |   |   | **2005** |   |   | **2006** |   |   | **2005** |   |
| Revenues:                                                            |   |                                                                     |                                                                      |   |   |   |   |   |   |   |   |   |   |
| Printing                                                             |   | **$**                                                                    | **25,152,367**                                                            |   | **$** | **23,769,526** |   | **$** | **79,159,693** |   | **$** | **72,591,117** |   |
| Office                    products and office furniture              |   |                                                                     | **9,357,973**                                                             |   |   | **8,485,145** |   |   | **29,062,924** |   |   | **27,655,827** |   |
| Total                    revenues                                    |   |                                                                     | **34,510,340**                                                            |   |   | **32,254,671** |   |   | **108,222,617** |   |   | **100,246,944** |   |
|                                                                 |   |                                                                     |                                                                      |   |   |   |   |   |   |   |   |   |   |
| Cost                    of sales:                                    |   |                                                                     |                                                                      |   |   |   |   |   |   |   |   |   |   |
| Printing                                                             |   |                                                                     | **18,259,210**                                                            |   |   | **16,965,434** |   |   | **55,964,784** |   |   | **52,602,808** |   |
| Office                    products and office furniture              |   |                                                                     | **6,493,508**                                                             |   |   | **6,031,285** |   |   | **20,390,685** |   |   | **19,667,757** |   |
| Total                    cost of sales                               |   |                                                                     | **24,752,718**                                                            |   |   | **22,996,719** |   |   | **76,355,469** |   |   | **72,270,565** |   |
| Gross                    profit                                      |   |                                                                     | **9,757,622**                                                             |   |   | **9,257,952** |   |   | **31,867,148** |   |   | **27,976,379** |   |
|                                                                 |   |                                                                     |                                                                      |   |   |   |   |   |   |   |   |   |   |
| Selling,                    general and administrative expenses      |   |                                                                     | **8,341,628**                                                             |   |   | **8,437,318** |   |   | **25,783,239** |   |   | **26,675,091** |   |
| Hurricane                    and relocation costs, net of recoveries |   |                                                                     | **-**                                                                     |   |   | **-** |   |   | **(301,693** | **)**  |   | **-** |   |
|                                                                 |   |                                                                     |                                                                      |   |   |   |   |   |   |   |   |   |   |
| Income                    from operations                            |   |                                                                     | **1,415,994**                                                             |   |   |  **820,634** |   |   |  **6****,385,602** |   |   | **1,301,288** |   |
|                                                                 |   |                                                                     |                                                                      |   |   |   |   |   |   |   |   |   |   |
| Other                    income (expense):                           |   |                                                                     |                                                                      |   |   |   |   |   |   |   |   |   |   |
| Interest                    income                                   |   |                                                                     | **10,074**                                                                |   |   | **3,152** |   |   | **24,200** |   |   | **12,791** |   |
| Interest                    expense                                  |   |                                                                     | **(153,057**                                                              | **)** |   | **(149,488** | **)** |   | **(493,627** | **)** |   | **(420,791** | **)** |
| Other                                                                |   |                                                                     | **23,129**                                                                |   |   | **(7,203** | **) ** |   | **26,057** |   |   | **68,481** |   |
|                                                                 |   |                                                                     | **(119,854**                                                              | **)** |   | **(153,539** | **)** |   | **(443,370** | **)** |   | **(339,519** | **)** |
|                                                                 |   |                                                                     |                                                                      |   |   |   |   |   |   |   |   |   |   |
| Income                    before income taxes                        |   |                                                                     | **1,296,140**                                                             |   |   | **667,095** |   |   | **5,942,232** |   |   | **961,769** |   |
| Income                    tax expense                                |   |                                                                     | **(519,398**                                                              | **)**  |   | **(285,622** | **)** |   | **(2,441,398** | **)** |   | **(414,470** | **)** |
| Net                    income                                        |   | **$**                                                                    | **776,742**                                                               |   | **$** | **381,473** |   | **$** | **3,500,834** |   | **$** | **547,299** |   |
|                                                                 |   |                                                                     |                                                                      |   |   |   |   |   |   |   |   |   |   |
| Earnings                    per share                                |   |                                                                     |                                                                      |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                |   | **$**                                                                    | **0.08**                                                                  |   | **$** | **0.04** |   | **$** | **0.36** |   | **$** | **0.06** |   |
| Diluted                                                              |   | **$**                                                                    | **0.08**                                                                  |   | **$** | **0.04** |   | **$** | **0.35** |   | **$** | **0.06** |   |
|                                                                 |   |                                                                     |                                                                      |   |   |   |   |   |   |   |   |   |   |
| Weighted                    average shares outstanding:              |   |                                                                     |                                                                      |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                |   |                                                                     | **9,865,000**                                                             |   |   | **9,734,000** |   |   | **9,786,000** |   |   | **9,734,000** |   |
| Diluted                                                              |   |                                                                     | **10,089,000**                                                            |  |   | **9,812,000** |   |   | **9,956,000** |   |   | **9,806,000** |   |
| Dividends                    per share                               |   | **$**                                                                    | **0.05**                                                                  |   | **$** | **0.05** |   | **$** | **0.15** |   | **$** | **0.15** |   |

----

**Champion        Industries, Inc. and Subsidiaries**

**Consolidated        Statements of Cash Flows**

|                                                                                                            |   | **Nine                  Months Ended July 31,** |            |
|-----------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------|-----------------|
|                                                                                                            |   | **2006**                                             |            | **2005** |   |
| **Cash                  flows from operating activities:**                                                      |   |                                                 |            |   |   |
| Net                  income                                                                                     |   | **$**                                                | **3,500,834**   |   | $ | 547,299 |   |
| Adjustments                  to reconcile net income to cash provided                  by operating activities: |   |                                                 |            |   |   |   |   |
| Depreciation                  and amortization                                                                  |   |                                                 | **3,104,526**   |   |   | 3,536,056 |   |
| Loss (gain)                  on sale of assets                                                             |   |                                                 | **5,274**       |   |   | (11,406 | ) |
|                        Deferred income taxes                                 |   |                                                 | **(270,583**    | **)**  |   | (120,674 | )  |
| Increase                  in deferred compensation                                                              |   |                                                 | **2,681**       |   |   | 5,362 |   |
| Bad                  debt expense                                                                               |   |                                                 | **512,429**     |   |   | 394,160 |   |
|        Hurricane                and relocation costs, net of recoveries      |   |                                                 | (301,693        | ) |   | -  |   |
| Changes                  in assets and liabilities:                                                             |   |                                                 |                 |   |   |   |   |
| Accounts                  receivable                                                                            |   |                                                 | **(2,148,997**  | **)** |   | 2,607,204 |   |
| Inventories                                                                                                     |   |                                                 | **(115,496**    | **)**  |   | 290,260 |   |
| Other                  current assets                                                                           |   |                                                 | **(126,892**    | **)** |   | 95,531 |   |
| Accounts                  payable                                                                               |   |                                                 | **(400,853**    | **)**  |   | (1,181,876 | ) |
| Accrued                  payroll                                                                                |   |                                                 | **272,444**     |   |   | (409,250 | ) |
| Taxes                  accrued and withheld                                                                     |   |                                                 | **340,409**     |   |   | 536,367 |   |
| Income                  taxes                                                                                   |   |                                                 | **(200,471**    | **)**  |   | (36,884 | ) |
| Accrued                  expenses                                                                               |   |                                                 | **(38,930**     | **)**  |   | (44,565 | ) |
| Other                  liabilities                                                                              |   |                                                 | **(3,086**      | **)** |   | (31,259 | ) |
| Net                  cash provided by operating activities                                                      |   |                                                 | **4,131,596**   |   |   | 6,176,325 |   |
|                                                                                                            |   |                                                 |            |   |   |   |   |
| **Cash                  flows from investing activities:**                                                      |   |                                                 |            |   |   |   |   |
| Purchases                  of property and equipment                                                            |   |                                                 | **(1,397,118**  | **)** |   | (2,043,395 | ) |
| Proceeds                  from sales of property                                                                |   |                                                 | **95,146**      |   |   | 155,481 |   |
| Goodwill                additions                                                                               |   |                                                 | -          |   |   | (34,685 | )  |
| Other                  assets                                                                                   |   |                                                 | **(47,916**     | **)**  |   | 97,590 |   |
| Net                  cash used in investing activities                                                          |   |                                                 | **(1,349,888**  | **)** |   | (1,825,009 | ) |
|                                                                                                            |   |                                                 |            |   |   |   |   |
| **Cash                  flows from financing activities:**                                                      |   |                                                 |            |   |   |   |   |
| Borrowings                  on line of credit                                                                   |   |                                                 | **9,097,000**   |   |   | 5,024,000 |   |
| Payments                  on line of credit                                                                     |   |                                                 | **(10,709,000** | **)** |   | (6,324,000 | ) |
| Proceeds                from term debt                                                                          |   |                                                 | **80,010**      |   |   | 605,000 |   |
| Principal                  payments on long-term debt                                                           |   |                                                 | **(2,299,133**  | **)** |   | (1,260,610 | ) |
| Proceeds                  from exercise of stock options                                                        |   |                                                 | **475,270**     |   |   | -  |   |
| Dividends                  paid                                                                                 |   |                                                 | **(1,469,535**  | **)** |   | (1,460,087 | ) |
| Net                  cash used in financing activities                                                          |   |                                                 | **(4,825,388**  | **)** |   | (3,415,697 | ) |
| Net                  (decrease) increase in cash and cash equivalents                                           |   |                                                 | **(2,043,680**  | **)**  |   | 935,619 |   |
| Cash                  and cash equivalents, beginning of period                                                 |   |                                                 | **3,661,622**   |   |   | 1,745,457 |   |
| Cash                  and cash equivalents, end of period                                                       |   | **$**                                                | **1,617,942**   |   | $ | 2,681,076 |   |

----

**Champion              Industries, Inc. and Subsidiaries**

**Notes              to Consolidated Financial Statements (Unaudited)**

**July              31, 2006**

**1.        Basis of Presentation and Business Operations**

**2.        Earnings per Share**

**3.        Inventories**

|                                                  |   | **July                  31,** |           | **October                  31,** |   |
|-------------------------------------------------------|--------|-------------------------------|----------------|----------------------------------|--------|
|                                                  |   | **2006**                      |           | **2005**                         |   |
| Printing:                                             |   |                          |           |                             |   |
| Raw                  materials                        |   | **$**                         | **2,200,094**  |                             | $      | 2,198,882 |   |
| Work                  in process                      |   |                          | **1,767,836**  |                             |   | 1,766,862 |   |
| Finished                  goods                       |   |                          | **4,015,253**  |                             |   | 4,013,041 |   |
| Office                  products and office furniture |   |                          | **3,017,866**  |                             |   | 3,100,941 |   |
|                                                  |   | **$**                         | **11,001,049** |                             | $      | 11,079,726 |   |

----

**Champion              Industries, Inc. and Subsidiaries**

**Notes              to Consolidated Financial Statements (Unaudited)              (continued)**

**4.        Long-Term Debt**

|                                                                                           |   | **July                  31,** |                                                              | **October                  31,** |    |
|------------------------------------------------------------------------------------------------|--------|-------------------------------|-------------------------------------------------------------------|----------------------------------|---------|
|                                                                                           |   | **2006**                      |                                                              | **2005**                         |    |
|      Secured                term note                payable          |   |  **$**                   | **                      1,315,142** |                             |  $ | 3,024,861 |   |
|                          Installment notes payable to banks |   |                          | **4,498,517**                                                     |                             |    | 3,791,439 |   |
| Capital                  lease obligations                                                     |   |                          | **-**                                                             |                             |    | 16,483 |   |
|                                                                                           |   |                          | **5,813,659**                                                     |                             |    | 6,832,783 |   |
| Less                  current portion                                                          |   |                          | **1,840,117**                                                     |                             |    | 1,684,280 |   |
| Long-term                  debt, net of current portion                                        |   | **$**                         | **3,973,542**                                                     |                             | $       | 5,148,503 |   |

**5.        Shareholders’ Equity**

----

**Champion              Industries, Inc. and Subsidiaries**

**Notes              to Consolidated Financial Statements (Unaudited)              (continued)**

**6.          **
**Commitments          and Contingencies**

|                                                |   | **Payments                  Due by Fiscal Year** |                |
|-----------------------------------------------------|--------|--------------------------------------------------|---------------------|
| **Contractual                  Obligations**        |   | **2006**                                         |                | **2007** |   | **2008** |   | **2009** |   | **2010** |   | **Residual** |   | **Total** |   |
|                                                |   |                                             |                |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-cancelable                  operating leases    |   | $                                                | 304,391             |   | $ | 1,138,554 |   | $ | 936,651 |   | $ | 552,766 |   | $ | 299,426 |   | $ | 186,622 |   | $ | 3,418,410 |   |
|                                                |   |                                             |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                |   |                                             |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Term                  debt                          |   |                                             | 625,783             |   |   | 2,038,735 |   |   | 921,653 |   |   | 729,038 |   |   | 1,290,036 |   |   | 208,414 |   |   | 5,813,659 |   |
|                                                |   |                                             |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Equipment                purchase obligations |   |                                             |   512,000 |   |   | -  |   |   | -  |   |   | -  |   |   |  - |   |   | -  |   |   | 512,000 |   |
|                                                |   |                                             |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                |   | $                                                | 1,442,174           |   | $ | 3,177,289 |   | $ | 1,858,304 |   | $ | 1,281,804 |   | $ | 1,589,462 |   | $ | 395,036 |   | $ | 9,744,069 |   |

**7.        **
**Accounting        for Stock-Based Compensation**

*Share-Based          Payment*
*Accounting          for Stock-Based Compensation*

----

**Champion              Industries, Inc. and Subsidiaries**

**Notes              to Consolidated Financial Statements (Unaudited)              (continued)**

|                                                                                                                                                                                           |   |  **Three                    Months Ended****July                    31,** | **Nine                    Months Ended****July                    31,** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------|-------------------------------------------------------------------------|
|                                                                                                                                                                                           |   |                                                                           | **2006**                                                                |   |   | **2005** |   |   | **2006** |   |   | **2005** |   |
|                                                                                                                                                                                           |   |                                                                           |                                                                    |   |   |   |   |   |   |   |   |   |   |
| Net                    income, as reported                                                                                                                                                     |   | $                                                                              | 776,742                                                                 |   | $ | 381,473 |   | $ | 3,500,834 |   | $ | 547,299 |   |
| Deduct:                    Total stock-based employee compensation expense determined under                    fair                    value method for all awards, net of related tax effects |   |                                                                           | **—**                                                             |   |   | **—** |   |   | **—** |   |   | — |   |
|                                                                                                                                                                                           |   |                                                                           |                                                                    |   |   |   |   |   |   |   |   |   |   |
| Pro                    forma net income                                                                                                                                                        |   | $                                                                              | 776,742                                                                 |   | $ | 381,473 |   | $ | 3,500,834 |   | $ | 547,299 |   |
|                                                                                                                                                                                           |   |                                                                           |                                                                    |   |   |   |   |   |   |   |   |   |   |
| Earnings                    per share:                                                                                                                                                         |   |                                                                           |                                                                    |   |   |   |   |   |   |   |   |   |   |
| Basic,                    as reported                                                                                                                                                          |   | $                                                                              | 0.08                                                                    |   | $ | 0.04 |   | $ | 0.36 |   | $ | 0.06 |   |
| Basic,                    pro forma                                                                                                                                                            |   |                                                                           | 0.08                                                                    |   |   | 0.04 |   |   | 0.36 |   |   | 0.06 |   |
|                                                                                                                                                                                           |   |                                                                           |                                                                    |  |   |   |   |   |   |   |   |   |   |
| Diluted,                    as reported                                                                                                                                                        |   | $                                                                              | 0.08                                                                    |   | $ | 0.04 |   | $ | 0.35 |   | $ | 0.06 |   |
| Diluted,                    pro forma                                                                                                                                                          |   |                                                                           | 0.08                                                                    |   |   | 0.04 |   |   | 0.35 |   |   | 0.06 |   |

**8.        Acquisitions**

**9.        Accounting for Costs Associated with        Exit or Disposal Activities and Impact of Hurricane        Katrina**

----

**Champion              Industries, Inc. and Subsidiaries**

**Notes              to Consolidated Financial Statements (Unaudited)              (continued)**

| Personnel                                                        |   | $      | 88,423    |   |
|------------------------------------------------------------------|--------|--------|-----------|--------|
| Plant                                                            |   |   | 745,035   |   |
| Allowance                      for doubtful accounts             |   |   | 208,310   |   |
| Moving                      and relocation costs                 |   |   | 255,215   |   |
|                                                             |   |   |           |   |
| Total                      pre-tax hurricane expense             |   |   | 1,296,983 |   |
|                                                             |   |   |           |   |
| Insurance                      recoveries                        |   |   | 577,677   |   |
|                                                             |   |   |           |   |
| Cumulative                      impact of Hurricane Katrina, net |   | $      | 719,306   |   |

----

**Champion              Industries, Inc. and Subsidiaries**

**Notes              to Consolidated Financial Statements (Unaudited)              (continued)**

**10.        Industry Segment Information**

|                                                 |   |  **Office                  Products** |       |
|------------------------------------------------------|--------|--------------------------------------------|------------|
| **2006                  Quarter 3**                  |   | **Printing**                               |       | **&                  Furniture** |   | **Total** |   |
|                                                 |   |                                       |       |   |   |   |   |
| Revenues                                             |   | $                                          | 28,430,713 |   | $ | 11,523,272 |   | $ | 39,953,985 |   |
| Elimination                  of intersegment revenue |   |                                       | (3,278,346 | ) |   | (2,165,299 | ) |   | (5,443,645 | ) |
| Consolidated                  revenues               |   | $                                          | 25,152,367 |   | $ | 9,357,973 |   | $ | 34,510,340 |   |
|                                                 |   |                                       |       |   |   |   |   |   |   |   |
| Operating                  income                    |   |                                       | 775,321    |   |   | 640,673 |   |   | 1,415,994 |   |
| Depreciation                  & amortization     |   |                                       | 986,691    |   |   | 48,158 |   |   | 1,034,849 |   |
| Capital                  expenditures                |   |                                       | 1,416,391  |   |   | 71,189 |   |   | 1,487,580 |   |
| Identifiable                  assets                 |   |                                       | 50,608,573 |   |   | 10,195,463 |   |   | 60,804,036 |   |
| Goodwill                                             |   |                                       | 1,774,344  |   |   | 286,442 |   |   | 2,060,786 |   |
|                                                 |   |                                       |       |   |   |   |   |   |   |   |
|                                                 |   |  **Office                  Products** |       |
| **2005                  Quarter 3**                  |   |  **Printing**                         |       | **&                  Furniture** |   | **Total** |   |
|                                                 |   |                                       |       |   |   |   |   |   |   |   |
| Revenues                                             |   | $                                          | 27,073,545 |   | $ | 10,862,695 |   | $ | 37,936,240 |   |
| Elimination                  of intersegment revenue |   |                                       | (3,304,019 | ) |   | (2,377,550 | ) |   | (5,681,569 | ) |
| Consolidated                  revenues               |   | $                                          | 23,769,526 |   | $ | 8,485,145 |   | $ | 32,254,671 |   |
|                                                 |   |                                       |       |   |   |   |   |   |   |   |
| Operating                  income                    |   |                                       | 708,280    |   |   | 112,354 |   |   | 820,634 |   |
| Depreciation                  & amortization     |   |                                       | 1,096,947  |   |   | 79,223 |   |   | 1,176,170 |   |
| Capital                  expenditures                |   |                                       | 720,282    |   |   | 11,750 |   |   | 732,032 |   |
| Identifiable                  assets                 |   |                                       | 50,579,411 |   |   | 9,727,134 |   |   | 60,306,545 |   |
| Goodwill                                             |   |                                       | 1,774,344  |   |   | 286,442 |   |   | 2,060,786 |   |

|                                                 |   |                                       |        |
|------------------------------------------------------|--------|--------------------------------------------|-------------|
|                                                 |   |  **Office                  Products** |        |
| **2006                  Year to Date**               |   |  **Printing**                         |        | **&                  Furniture** |   | **Total** |   |
|                                                 |   |                                       |        |   |   |   |   |   |   |   |
| Revenues                                             |   | $                                          | 90,132,905  |   | $ | 35,823,711 |   | $ | 125,956,616 |   |
| Elimination                  of intersegment revenue |   |                                       | (10,973,212 | ) |   | (6,760,787 | ) |   | (17,733,999 | ) |
| Consolidated                  revenues               |   | $                                          | 79,159,693  |   | $ | 29,062,924 |   | $ | 108,222,617 |   |
|                                                 |   |                                       |        |   |   |   |   |   |   |   |
| Operating                  income                    |   |                                       | 4,444,034   |   |   | 1,941,568 |   |   | 6,385,602 |   |
| Depreciation                  & amortization     |   |                                       | 2,981,653   |   |   | 122,873 |   |   | 3,104,526 |   |
| Capital                  expenditures                |   |                                       | 2,421,831   |   |   | 175,287 |  |   | 2,597,118 |   |
| Identifiable                  assets                 |   |                                       | 50,608,573  |   |   | 10,195,463 |   |   | 60,804,036 |   |
| Goodwill                                             |   |                                       | 1,774,344   |   |   | 286,442 |   |   | 2,060,786 |   |

----

**Champion              Industries, Inc. and Subsidiaries**

**Notes              to Consolidated Financial Statements (Unaudited)              (continued)**

|                                                 |   |  **Office                  Products** |        |
|------------------------------------------------------|--------|--------------------------------------------|-------------|
| **2005                  Year to Date**               |   |  **Printing**                         |        | **&                  Furniture** |   | **Total** |   |
|                                                 |   |                                       |        |   |   |   |   |   |   |   |
| Revenues                                             |   | $                                          | 82,971,580  |   | $ | 33,667,921 |   | $ | 116,639,501 |   |
| Elimination                  of intersegment revenue |   |                                       | (10,380,463 | ) |   | (6,012,094 | ) |   | (16,392,557 | ) |
| Consolidated                  revenues               |   | $                                          | 72,591,117  |   | $ | 27,655,827 |   | $ | 100,246,944 |   |
|                                                 |   |                                       |        |   |   |   |   |   |   |   |
| Operating                  income                    |   |                                       | 738,149     |   |   | 563,139 |   |   | 1,301,288 |   |
| Depreciation                  & amortization     |   |                                       | 3,302,189   |   |   | 233,867 |   |   | 3,536,056 |   |
| Capital                  expenditures                |   |                                       | 2,187,115   |   |   | 133,305 |   |   | 2,320,420 |   |
| Identifiable                  assets                 |   |                                       | 50,579,411  |   |   | 9,727,134 |   |   | 60,306,545 |   |
| Goodwill                                             |   |                                       | 1,774,344   |   |   | 286,442 |   |   | 2,060,786 |   |

|                                                        |   | **Three                      months** | **Nine                    months** |
|-------------------------------------------------------------|--------|---------------------------------------|------------------------------------|
|                                                        |   |                                  | **2006**                           |   |   | **2005** |   |   | **2006** |   |   | **2005** |   |
| Revenues:                                                   |   |                                  |                               |   |   |   |   |   |   |   |   |   |   |
| Total                    segment revenues                   |   | **$**                                 | **39,953,985**                     |   | **$** | **37,936,240** |   | **$** | **125,956,616** |   | **$** | **116,639,501** |   |
| Elimination                    of intersegment revenue      |   |                                  | **(5,443,645**                     | **)** |   | **(5,681,569** | **)** |   | **(17,733,999** | **)** |   | **(16,392,557** | **)** |
| Consolidated                    revenue                     |   | **$**                                 | **34,510,340**                     |   | **$** | **32,254,671** |   | **$** | **108,222,617** |   | **$** | **100,246,944** |   |
|                                                        |   |                                  |                               |   |   |   |   |   |   |   |   |   |   |
| Operating                    income:                        |   |                                  |                               |   |   |   |   |   |   |   |   |   |   |
| ** **Total                    segment operating income |   | **$**                                 | **1,415,994**                      |   | **$** | **820,634** |   | **$** | **6,385,602** |   | **$** | **1,301,288** |   |
| ** **Interest                    income                |   |                                  | **10,074**                         |   |   | **3,152** |   |   | **24,200** |   |   | **12,791** |   |
| Interest                    expense                         |   |                                  | **(153,057**                       | **)** |   | **(149,488** | **)** |   | **(493,627** | **)** |   | **(420,791** | **)** |
| Other                    income                             |   |                                  | **23,129**                         |   |   | **(7,203** | ) |   | **26,057** |   |   | **68,481** |   |
| Consolidated                    income before income taxes  |   | **$**                                 | **1,296,140**                      |   | **$** | **667,095** |   | **$** | **5,942,232** |   | **$** | **961,769** |   |
|                                                        |   |                                  |                               |   |   |   |   |   |   |   |   |   |   |
| Identifiable                    assets:                     |   |                                  |                               |   |   |   |   |   |   |   |   |   |   |
| Total                    segment identifiable assets        |   | **$**                                 | **60,804,036**                     |   | **$** | **60,306,545** |   | **$** | **60,804,036** |   | **$** | **60,306,545** |   |
| Elimination                    of intersegment assets       |   |                                  | —                            |   |   | — |   |   | — |   |   | — |   |
| Total                    consolidated assets                |   | **$**                                 | **60,804,036**                     |   | **$** | **60,306,545** |   | **$** | **60,804,036** |   | **$** | **60,306,545** |   |

**11.        Commitments and Contingencies**

----

**Champion              Industries, Inc. and Subsidiaries**

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

**Results        of Operations**

|                                                                     |   |  **Percentage                    of Total Revenues**                      |
|--------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------|
|                                                                     |   |  **Three                    Months Ended****July                    31,** | **Nine                    Months Ended****July                    31,** |
|                                                                     |   |                                                                           | **2006** |   |   | **2005** |   |   | **2006** |   |   | **2005** |   |
| Revenues:                                                                |   |                                                                           |   |   |   |   |   |   |   |   |   |   |   |
| Printing                                                                 |   |                                                                           | **72.9** | **%** |   | **73.7** | **%** |   | **73.1** | **%** |   | **72.4** | **%** |
| Office                    products and office furniture                  |   |                                                                           | **27.1** |   |   | **26.3** |   |   | **26.9** |   |   | **27.6** |   |
| Total                    revenues                                        |   |                                                                           | **100.0** |   |   | **100.0** |   |   | **100.0** |   |   | **100.0** |   |
|                                                                     |   |                                                                           |   |   |   |   |   |   |   |   |   |   |   |
| Cost                    of sales:                                        |   |                                                                           |   |   |   |   |   |   |   |   |   |   |   |
| Printing                                                                 |   |                                                                           | **52.9** |   |   | **52.6** |   |   | **51.7** |   |   | **52.5** |   |
| Office                    products and office furniture                  |   |                                                                           | **18.8** |   |   | **18.7** |   |   | **18.9** |   |   | **19.6** |   |
| Total                    cost of sales                                   |   |                                                                           | **71.7** |   |   | **71.3** |   |   | **70.6** |   |   | **72.1** |   |
| Gross                    profit                                          |   |                                                                           | **28.3** |   |   | **28.7** |   |   | **29.4** |   |   | **27.9** |   |
| Selling,                    general and administrative expenses          |   |                                                                           | **24.2** |   |   | **26.2** |   |   | **23.8** |   |   | **26.6** |   |
| Hurricane                  and relocation costs, net of recoveries  |   |                                                                           | ** 0.0** | ** ** | ** ** | **0.0** | ** ** | ** ** | **(0.3** | **) ** | ** ** | **0.0** |   |
| Income                    from operations                                |   |                                                                           | **4.1** |   |   | **2.5** |   |   | **5.9** |   |   | **1.3** |   |
| Interest                    income                                       |   |                                                                           | **0.0** |   |   | **0.0** |   |   | **0.0** |   |   | **0.0** |   |
| Interest                    expense                                      |   |                                                                           | **(0.4** | **)** |   | **(0.4** | **)** |   | **(0.4** | **)** |   | **(0.4** | **)** |
| Other                    income                                          |   |                                                                           | **0.1** |   |   | **0.0** |   |   | **0.0** |   |   | **0.1** |   |
| Income                    before taxes                                   |   |                                                                           | **3.8** |   |   | **2.1** | ** ** |   | **5.5** |   |   | **1.0** |   |
| Income                    tax expense                                    |   |                                                                           | **(1.5** | **)**  |   | **(0.9** | ) |   | **(2.3** | **)** |   | **(0.4** | **)** |
| Net                    income                                            |   |                                                                           | **2.3** | **%** |   | **1.2** | **%** |   | **3.2** | **%** |   | **0.6** | **%** |

|                                                                   |   | **Three                              Months Ended July                              31, **  | ****Nine                              Months Ended July 31,**** |
|------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------|
|                                                                   |   |                                                                                                  | **2006**                                                        |   |   | **2005** |   |   | **2006** |   |   | **2005** |   |
| Net                              income                                |   | **$**                                                                                                 | 777,000                                                         |   | **$** | 381,000 |   | **$** | 3,501,000 |   | **$** | 547,000 |   |
| Insurance                            recoveries, net of expenses  |   |                                                                                                  | -                                                               |   |   | - |   |   | 176,000 |   |   | - |   |
| Core                            net income                             |   | **$**                                                                                                 | 777,000                                                         |   | **$** | 381,000 |   | **$** | 3,325,000 |   | **$** | 547,000 |   |

----

**Champion              Industries, Inc. and Subsidiaries**

**Management’s              Discussion and Analysis of Financial Condition **

**and              Results of Operations (continued)**

**Three          Months Ended July 31, 2006 Compared to Three Months Ended July 31,          2005**

*Revenues*

*Cost        of Sales*

*Operating        Expenses*

----

**Champion              Industries, Inc. and Subsidiaries**

**Management’s              Discussion and Analysis of Financial Condition **

**and              Results of Operations (continued)**

*Income            from Operations and Other Income and Expenses*

*Income          Taxes*

*Net          Income*

**Nine          Months Ended July 31, 2006 Compared to Nine Months Ended July 31,          2005**

*Revenues*

*Cost          of Sales*

*Operating          Expenses*

----

**Champion                Industries, Inc. and Subsidiaries**

**Management’s                Discussion and Analysis of Financial Condition **

**and                Results of Operations (continued)**

*Income            from Operations and Other Income and Expenses*

*Income          Taxes*

*Net          Income*

**Inflation          and Economic Conditions**

----

**Champion              Industries, Inc. and Subsidiaries**

**Management’s              Discussion and Analysis of Financial Condition **

**and              Results of Operations (continued)**

**Seasonality**

**Liquidity            and Capital Resources**

----

**Champion              Industries, Inc. and Subsidiaries**

**Management’s              Discussion and Analysis of Financial Condition **

**and              Results of Operations (continued)**

**Environmental            Regulation**

**Special          Note Regarding Forward-Looking Statements**

**ITEM          3. Quantitative and Qualitative Disclosure About Market          Risk**

**ITEM          4. Controls and Procedures**

----

**PART        II - OTHER INFORMATION**

**Item        6. Exhibits **

|   | a) | Exhibits: |
|--------|----|-----------|

|   |   |   |
|--------|--------|--------|

|  (10.1)       |  $1.2                  million term promissory note with commercial security agreement                  and business loan agreement between Champion Industries, Inc.                  and Community Trust Bank, Inc. dated as of July 28, 2006  |                      Exhibit 10.1 Page Exhibit 10.1-p1 |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------|
|  (31.1)  | Principal                  Executive Officer Certification Pursuant to Section 302 of the                  Sarbanes-Oxley act of 2002 - Marshall T. Reynolds                                                                                                         | Exhibit                    31.1 Page Exhibit 31.1-p1                  |
|  (31.2)       | Principal                  Financial Officer Certification Pursuant to Section 302 of the                  Sarbanes-Oxley act of 2002 - Todd R. Fry                                                                                                                  | Exhibit                  31.2 Page Exhibit 31.2-p1                    |
|  (31.3)       | Principal                  Operating Officer Certification Pursuant to Section 302 of the                  Sarbanes-Oxley act of 2002 - Toney K. Adkins                                                                                                              | Exhibit                  31.3 Page Exhibit 31.3-p1                    |
|  (32)         | Marshall                  T. Reynolds, Todd R. Fry and Toney K. Adkins Certification Pursuant                  to 18                  U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the                  Sarbanes-Oxley act of 2002                           | Exhibit                  32 Page Exhibit 32-p1                        |

----

**Signatures**

| Date:                  August 31,                  2006 | /s/                  Marshall T. Reynolds                                           |
|---------------------------------------------------------|-------------------------------------------------------------------------------------|
|                                                    | Marshall                  T. Reynolds                                               |
|                                                    | Chief                  Executive Officer                                            |
|                                                    |                                                                                |
|                                                    |                                                                                |
| Date:                  August 31,                  2006 | /s/                  Toney K. Adkins                                                |
|                                                    | Toney                  K. Adkins                                                    |
|                                                    | President                  and Chief Operating Officer                              |
|                                                    |                                                                                |
|                                                    |                                                                                |
| Date:                  August 31,                  2006 | /s/                  Todd R. Fry                                                    |
|                                                    | Todd                  R. Fry                                                        |
|                                                    | Senior                  Vice President and Chief Financial                  Officer |