**FORM      10-Q**

|                                                                                                                                                                                                                                                                                                                                                                                                                                                               | QUARTERLY                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                ACT OF                1934  |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                  |
|  x                                                                                                                                                                                                                                                                                                                                                                                                                                                            | For                the quarterly period ended                                                                                         | September                29, 2007 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                  |
| OR                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                               | TRANSITION                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                ACT OF                1934 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                  |
|  o                                                                                                                                                                                                                                                                                                                                                                                                                                                            | For                the transition period from                                                                                         |   | to |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                               | Commission                file number                                                                                                 | 1-367 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| **THE                L. S. STARRETT COMPANY**                                                                                                                                                                                                                                                                                                                                                                                                                      |
| (Exact                name of registrant as specified in its charter)                                                                                                                                                                                                                                                                                                                                                                                              |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| MASSACHUSETTS                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                                                                                                                  | 04-1866480 |
| (State                or other jurisdiction of incorporation or organization)                                                                                                                                                                                                                                                                                                                                                                                      |                                                                                                                                  | (I.R.S.                Employer Identification No.) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 121                CRESCENT STREET, ATHOL, MASSACHUSETTS                                                                                                                                                                                                                                                                                                                                                                                                           | 01331-1915                                                                                                                            |
| (Address                of principal executive offices)                                                                                                                                                                                                                                                                                                                                                                                                            | (Zip                Code)                                                                                                             |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| Registrant's                telephone number, including area code                                                                                                                                                                                                                                                                                                                                                                                                  | 978-249-3551                                                                                                                          |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| Former                name, address and fiscal year, if changed since last                report                                                                                                                                                                                                                                                                                                                                                                   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 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 shorter 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  o                                                                                                                                                                                                                                                                                                                                                                                                        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 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  o    Accelerated                Filer x    Non-Accelerated                Filer  o                                                                                                                                                                                                                                                                             |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| Indicate                by check mark whether the registrant is a shell company (as defined                in                Rule 12b-2 of the Exchange Act).                                                                                                                                                                                                                                                                                                      |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| YES                x    NO  o                                                                                                                                                                                                                                                                                                                                                                                                        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| Common                Shares outstanding as of                                                                                                                                                                                                                                                                                                                                                                                                                     | October                31, 2007                                                                                                       |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                  |
| Class                A Common Shares                                                                                                                                                                                                                                                                                                                                                                                                                               | 5,641,381                                                                                                                             |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                  |
| Class                B Common Shares                                                                                                                                                                                                                                                                                                                                                                                                                               | 944,208                                                                                                                               |   |

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|                                                                                                                                                                                            |   | Page                No. |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|
|                                                                                                                                                                                            |   |                    |
| Part                I.                      Financial                Information: |   |                    |
|                                                                                                                                                                                            |   |                    |
| Item                1.  Financial                Statements                                                                                                                           |   |                    |
|                                                                                                                                                                                            |   |                    |
| Consolidated                Statements of Operations –thirteen                weeks ended September 29, 2007 and September 23, 2006                (unaudited)                            |   | 3                       |
|                                                                                                                                                                                            |   |                    |
| Consolidated                Statements of Cash Flows –thirteen                weeks ended September 29, 2007 and September 23, 2006                (unaudited)                            |   | 4                       |
|                                                                                                                                                                                            |   |                    |
| Consolidated                Balance Sheets –September                29, 2007 (unaudited) and June 30, 2007                                                                               |   | 5                       |
|                                                                                                                                                                                            |   |                    |
| Consolidated                Statements of Stockholders' Equity -thirteen                weeks ended September 29, 2007 and September 23, 2006                (unaudited)                        |   | 6                       |
|                                                                                                                                                                                            |   |                    |
| Notes                to Consolidated Financial Statements                                                                                                                                       |   | 7-9                     |
|                                                                                                                                                                                            |   |                    |
| Item                2.  Management's                Discussion and                Analysis of Financial Condition and Results of Operations                                           |   | 9-12                    |
|                                                                                                                                                                                            |   |                    |
| Item                3.  Quantitative                and                Qualitative Disclosures About Market Risk                                                                      |   | 12                      |
|                                                                                                                                                                                            |   |                    |
| Item                4.  Controls                and Procedures                                                                                                                        |   | 12                      |
|                                                                                                                                                                                            |   |                    |
| Part                II.  Other information:                                                                                                                                           |   |                    |
|  Item                1A.Risk Factors                                                                                                                                                  |   | 13                      |
| Item                2.  Unregistered                Sales of                Equity in Securities and Use of Proceeds                                                                  |   | 14                      |
|                                                                                                                                                                                            |   |                    |
| Item                6.  Exhibits                                                                                                                                                      |   | 14                      |
|                                                                                                                                                                                            |   |                    |
| SIGNATURES                                                                                                                                                                                      |   | 15                      |

----

|                                                                                                    |   | 13                Weeks Ended |    |
|---------------------------------------------------------------------------------------------------------|--------|-------------------------------|---------|
|                                                                                                    |   | 9/29/07                       |    |   | 9/23/06 |   |
|                                                                                                    |   |                          |    |   |   |   |
| Net                sales                                                                                |   | $                             | 59,550  |   |   | $ | 51,092 |   |
| Cost                of goods sold                                                                       |   |                          | (40,996 | ) |   |   | (37,524 | ) |
| Selling                and general expense                                                              |   |                          | (14,703 | ) |   |   | (13,328 | ) |
| Other                income (expense)                                                                   |   |                          | (266    | ) |   |   | 55 |   |
|                                                                                                    |   |                          |    |   |   |   |   |   |
| Earnings                before income taxes                                                             |   |                          | 3,585   |   |   |   | 295 |   |
| Income                tax expense                                                                       |   |                          | 1,255   |   |   |   | 74 |   |
|                                                                                                    |   |                          |    |   |   |   |   |   |
| Net                earnings                                                                             |   | $                             | 2,330   |   |   | $ | 221 |   |
|                                                                                                    |   |                          |    |   |   |   |   |   |
|                                                                                                    |   |                          |    |   |   |   |   |   |
|                                                                                                    |   |                          |    |   |   |   |   |   |
| Basic                and diluted earnings per share                                                     |   | $                             | 0.35    |   |   | $ | 0.03 |   |
|                                                                                                    |   |                          |    |   |   |   |   |   |
| Average                outstanding shares used in per share calculations (in                thousands): |   |                          |    |   |   |   |   |   |
| Basic                                                                                                   |   |                          | 6,596   |   |   |   | 6,671 |   |
| Diluted                                                                                                 |   |                          | 6,605   |   |   |   | 6,678 |   |
|                                                                                                    |   |                          |    |   |   |   |   |   |
|                                                                                                    |   |                          |    |   |   |   |   |   |
|                                                                                                    |   |                          |    |   |   |   |   |   |
| Dividends                per share                                                                      |   | $                             | 0.10    |   |   | $ | 0.10 |   |
|                                                                                                    |   |                          |    |   |   |   |   |   |

----

|                                                                |   | 13                Weeks Ended |   |
|---------------------------------------------------------------------|--------|-------------------------------|--------|
|                                                                |   | 9/29/07                       |   |   | 9/23/06 |   |
|                                                                |   |                          |   |   |   |   |
| Cash                flows from operating activities:                |   |                          |   |   |   |   |
| Net                earnings                                         |   | $                             | 2,330  |   |   | $ | 221 |   |
| Non-cash                items                included:              |   |                          |   |   |   |   |   |   |
| Gain                from sale of real                estate         |   |                          | -      |   |   |   | (299 | ) |
| Depreciation                                                        |   |                          | 2,374  |   |   |   | 2,508 |   |
| Amortization                                                        |   |                          | 295    |   |   |   | 308 |   |
| Deferred                taxes                                       |   |                          | 447    |   |   |   | (174 | ) |
| Unrealized                transaction (gains)                losses |   |                          | 202    |   |   |   | (155 | ) |
| Retirement                benefits                                  |   |                          | (821   | ) |   |   | (292 | ) |
| Cumulative                effect of adopting FIN                48  |   |                          | (312   | ) |   |   | - |   |
| Working                capital                changes:              |   |                          |   |   |   |   |   |   |
| Receivables                                                         |   |                          | (3,115 | ) |   |   | (243 | ) |
| Inventories                                                         |   |                          | 2,184  |   |   |   | 1,595 |   |
| Other                current                assets                  |   |                          | 907    |   |   |   | 1,192 |   |
| Other                current                liabilities             |   |                          | (73    | ) |   |   | (1,264 | ) |
| Prepaid                pension cost and                other        |   |                          | 345    |   |   |   | 55 |   |
| Net                cash from operating                activities    |   |                          | 4,763  |   |   |   | 3,452 |   |
|                                                                |   |                          |   |   |   |   |   |   |
| Cash                flows from investing activities:                |   |                          |   |   |   |   |   |   |
| Additions                to plant and                equipment      |   |                          | (2,397 | ) |   |   | (1,455 | ) |
| Proceeds                from sale of real                estate     |   |                          | -      |   |   |   | 394 |   |
| (Increase)                decrease in                investments    |   |                          | (760   | ) |   |   | 808 |   |
| Purchase                of                Kinemetric                |   |                          | (2,060 | ) |   |   | - |   |
| Net                cash used in investing                activities |   |                          | (5,217 | ) |   |   | (253 | ) |
|                                                                |   |                          |   |   |   |   |   |   |
| Cash                flows from financing activities:                |   |                          |   |   |   |   |   |   |
| Proceeds                from short-term                borrowings   |   |                          | 2,216  |   |   |   | 240 |   |
| Short-term                debt                repayments            |   |                          | (2,144 | ) |   |   | (1,868 | ) |
| Proceeds                from long-term                borrowings    |   |                          | -      |   |   |   | 171 |   |
| Long-term                debt                repayments             |   |                          | (115   | ) |   |   | - |   |
| Common                stock                issued                   |   |                          | 111    |   |   |   | 108 |   |
| Treasury                shares                purchased             |   |                          | (317   | ) |   |   | (35 | ) |
| Dividends                                                           |   |                          | (660   | ) |   |   | (669 | ) |
| Net                cash used in financing                activities |   |                          | (909   | ) |   |   | (2,053 | ) |
|                                                                |   |                          |   |   |   |   |   |   |
| Effect                of exchange rate changes on cash              |   |                          | 30     |   |   |   | 85 |   |
|                                                                |   |                          |   |   |   |   |   |   |
| Net                (decrease) increase in cash                      |   |                          | (1,333 | ) |   |   | 1,231 |   |
| Cash,                beginning of period                            |   |                          | 7,708  |   |   |   | 3,976 |   |
| Cash,                end of period                                  |   | $                             | 6,375  |   |   | $ | 5,207 |   |
|                                                                |   |                          |   |   |   |   |   |   |

----

|                                                                                                                                                              |   | Sept.                292007(unaudited) |    |   | June                30 2007 |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------|---------|--------|-----------------------------|--------|
|                                                                                                                                                              |   |                                   |    |   |                        |   |
| **ASSETS**                                                                                                                                                        |   |                                   |    |   |                        |   |
| Current                assets:                                                                                                                                    |   |                                   |    |   |                        |   |
| Cash                                                                                                                                                              |   | $                                      | 6,375   |   |                        | $      | 7,708 |   |
| Investments                                                                                                                                                       |   |                                   | 15,373  |   |                        |   | 14,503 |   |
| Accounts                receivable (less                allowance for doubtful accounts of $1,291 and $1,623)                                                     |   |                                   | 40,738  |   |                        |   | 37,314 |   |
| Inventories:                                                                                                                                                      |   |                                   |    |   |                        |   |   |   |
| Raw                materials and                supplies                                                                                                          |   |                                   | 16,442  |   |                        |   | 17,130 |   |
| Goods                in process and finished                parts                                                                                                 |   |                                   | 16,201  |   |                        |   | 17,442 |   |
| Finished                goods                                                                                                                                     |   |                                   | 22,805  |   |                        |   | 22,744 |   |
|                                                                                                                                                              |   |                                   | 55,448  |   |                        |   | 57,316 |   |
| Current                deferred income tax                asset                                                                                                   |   |                                   | 3,708   |   |                        |   | 3,866 |   |
| Prepaid                expenses, taxes and other                current assets                                                                                    |   |                                   | 3,992   |   |                        |   | 4,920 |   |
| Total                current                assets                                                                                                                |   |                                   | 125,634 |   |                        |   | 125,627 |   |
|                                                                                                                                                              |   |                                   |    |   |                        |   |   |   |
| Property,                plant and equipment, at cost (less accumulated depreciation of $125,491                and $124,549)                                     |   |                                   | 61,456  |   |                        |   | 61,536 |   |
| Intangible                assets (less accumulated amortization of $1,532 and                $1,237)                                                              |   |                                   | 4,482   |   |                        |   | 4,063 |   |
| Goodwill                                                                                                                                                          |   |                                   | 6,253   |   |                        |   | 5,260 |   |
| Pension                asset                                                                                                                                      |   |                                   | 37,114  |   |                        |   | 36,656 |   |
| Other                assets                                                                                                                                       |   |                                   | 913     |   |                        |   | 869 |   |
| Long-term                taxes receivable                                                                                                                         |   |                                   | 1,799   |   |                        |   | - |   |
| Total                assets                                                                                                                                       |   | $                                      | 237,651 |   |                        | $      | 234,011 |   |
|                                                                                                                                                              |   |                                   |    |   |                        |   |   |   |
|                                                                                                                                                              |   |                                   |    |   |                        |   |   |   |
| **LIABILITIES                AND STOCKHOLDERS' EQUITY**                                                                                                           |   |                                   |    |   |                        |   |   |   |
| Current                liabilities:                                                                                                                               |   |                                   |    |   |                        |   |   |   |
| Notes                payable and current                maturities                                                                                                |   | $                                      | 4,802   |   |                        | $      | 4,737 |   |
| Accounts                payable and accrued                expenses                                                                                               |   |                                   | 16,776  |   |                        |   | 16,674 |   |
| Accrued                salaries and                wages                                                                                                          |   |                                   | 5,025   |   |                        |   | 4,869 |   |
| Total                current                liabilities                                                                                                           |   |                                   | 26,603  |   |                        |   | 26,280 |   |
|                                                                                                                                                              |   |                                   |    |   |                        |   |   |   |
| Long-term                taxes payable                                                                                                                            |   |                                   | 6,964   |   |                        |   | 4,852 |   |
| Deferred                income taxes                                                                                                                              |   |                                   | 5,338   |   |                        |   | 5,125 |   |
| Long-term                debt                                                                                                                                     |   |                                   | 8,390   |   |                        |   | 8,520 |   |
| Postretirement                benefit liability                                                                                                                   |   |                                   | 10,930  |   |                        |   | 11,241 |   |
| Total                liabilities                                                                                                                                  |   |                                   | 58,225  |   |                        |   | 56,018 |   |
|                                                                                                                                                              |   |                                   |    |   |                        |   |   |   |
| Stockholders'                equity:                                                                                                                              |   |                                   |    |   |                        |   |   |   |
| Class                A Common $1 par (20,000,000 shrs. authorized)5,637,102                outstanding on 9/29/07,5,632,017                outstanding on 6/30/07 |   |                                   | 5,637   |   |                        |   | 5,632 |   |
| Class                B Common $1 par (10,000,000 shrs. authorized)944,208                outstanding on 9/29/07,962,758                outstanding on 6/30/07     |   |                                   | 944     |   |                        |   | 963 |   |
| Additional                paid-in                capital                                                                                                          |   |                                   | 49,101  |   |                        |   | 49,282 |   |
| Retained                earnings reinvested                and employed in the business                                                                           |   |                                   | 129,260 |   |                        |   | 127,902 |   |
| Accumulated                other comprehensive                loss                                                                                                |   |                                   | (5,516  | )      |                        |   | (5,786 | ) |
| Total                stockholders'                equity                                                                                                          |   |                                   | 179,426 |   |                        |   | 177,993 |   |
| Total                liabilities and                stockholders’ equity                                                                                    |   | $                                      | 237,651 |   |                        | $      | 234,011 |   |

----

|                                                                                             |   | **Common                Stock ****Out-standing****($1                Par)** |   |   |                       |   |   |                                      |   |   |                     |   |   |                                                                           |    |
|--------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------|--------|--------|----------------------------|--------|--------|-------------------------------------------|--------|--------|--------------------------|--------|--------|--------------------------------------------------------------------------------|---------|
|                                                                                             |   | **Class                A**                                                       |   |   | **Class                B** |   |   | **Addi-****tional****Paid-in****Capital** |   |   | **Retained****Earnings** |   |   | **Accumulated****Other                Com-****prehensive                Loss** |    |   | **Total** |   |
|                                                                                             |   |                                                                             |   |   |                       |   |   |                                      |   |   |                     |   |   |                                                                           |    |   |   |   |
| Balance                June 24, 2006                                                             |   | $                                                                                | 5,629  |   |                       | $      | 1,040  |                                      |   | $      | 50,569                   |   |   | $                                                                              | 123,913 |   |   | $ | (15,909 | ) |   | $ | 165,242 |   |
| Comprehensive                income (loss):                                                      |   |                                                                             |   |   |                       |   |   |                                      |   |   |                     |   |   |                                                                           |    |   |   |   |   |   |   |   |   |   |
| Net                earnings                                                                      |   |                                                                             |   |   |                       |   |   |                                      |   |   |                     |   |   |                                                                           | 221     |   |   |   |   |   |   |   | 221 |   |
| Unrealized                net gain (loss)                oninvestments and swap agreement        |   |                                                                             |   |   |                       |   |   |                                      |   |   |                     |   |   |                                                                           |    |   |   |   | (76 | ) |   |   | (76 | ) |
| Translation                gain,                net                                              |   |                                                                             |   |   |                       |   |   |                                      |   |   |                     |   |   |                                                                           |    |   |   |   | 2,605 |   |   |   | 2,605 |   |
| Total                comprehensive income                                                        |   |                                                                             |   |   |                       |   |   |                                      |   |   |                     |   |   |                                                                           |    |   |   |   |   |   |   |   | 2,750 |   |
| Dividends                ($.10 per share)                                                        |   |                                                                             |   |   |                       |   |   |                                      |   |   |                     |   |   |                                                                           | (669    | ) |   |   |   |   |   |   | (669 | ) |
| Treasury                shares:                                                                  |   |                                                                             |   |   |                       |   |   |                                      |   |   |                     |   |   |                                                                           |    |   |   |   |   |   |   |   |   |   |
| Purchased                                                                                        |   |                                                                             | (3     | )      |                       |   |   |                                      |   |   | (32                      | )      |   |                                                                           |    |   |   |   |   |   |   |   | (35 | ) |
| Issued                                                                                           |   |                                                                             | 8      |   |                       |   |   |                                      |   |   | 100                      |   |   |                                                                           |    |   |   |   |   |   |   |   | 108 |   |
| Issuance                of stock under ESPP                                                      |   |                                                                             |   |   |                       |   |   |                                      |   |   | 16                       |   |   |                                                                           |    |   |   |   |   |   |   |   | 16 |   |
| Conversion                                                                                       |   |                                                                             | 40     |   |                       |   | (40    | )                                         |   |   |                     |   |   |                                                                           |    |   |   |   |   |   |   |   |   |   |
|                                                                                             |   |                                                                             |   |   |                       |   |   |                                      |   |   |                     |   |   |                                                                           |    |   |   |   |   |   |   |   |   |   |
| Balance                September 23, 2006                                                        |   | $                                                                                | 5,674  |   |                       | $      | 1,000  |                                      |   | $      | 50,653                   |   |   | $                                                                              | 123,465 |   |   | $ | (13,380 | ) |   | $ | 167,412 |   |
|                                                                                             |   |                                                                             |   |   |                       |   |   |                                      |   |   |                     |   |   |                                                                           |    |   |   |   |   |   |   |   |   |   |
|                                                                                             |   |                                                                             |   |   |                       |   |   |                                      |   |   |                     |   |   |                                                                           |    |   |   |   |   |   |   |   |   |   |
| Balance                June 30, 2007                                                             |   | $                                                                                | 5,632  |   |                       | $      | 963    |                                      |   | $      | 49,282                   |   |   | $                                                                              | 127,902 |   |   | $ | (5,786 | ) |   | $ | 177,993 |   |
| Comprehensive                income (loss):                                                      |   |                                                                             |   |   |                       |   |   |                                      |   |   |                     |   |   |                                                                           |    |   |   |   |   |   |   |   |   |   |
| Net                earnings                                                                      |   |                                                                             |   |   |                       |   |   |                                      |   |   |                     |   |   |                                                                           | 2,330   |   |   |   |   |   |   |   | 2,330 |   |
| Unrealized                net gain (loss)                oninvestments and swap agreement        |   |                                                                             |   |   |                       |   |   |                                      |   |   |                     |   |   |                                                                           |    |   |   |   | (45 | ) |   |   | (45 | ) |
| Translation                gain,                net                                              |   |                                                                             |   |   |                       |   |   |                                      |   |   |                     |   |   |                                                                           |    |   |   |   | 315 |   |   |   | 315 |   |
| Total                comprehensive income                                                        |   |                                                                             |   |   |                       |   |   |                                      |   |   |                     |   |   |                                                                           |    |   |   |   |   |   |   |   | 2,600 |   |
| Tax                adjustment for FIN                48                                          |   |                                                                             |   |   |                       |   |   |                                      |   |   |                     |   |   |                                                                           | (312    | ) |   |   |   |   |   |   | (312 | ) |
| Dividends                ($.10 per share)                                                        |   |                                                                             |   |   |                       |   |   |                                      |   |   |                     |   |   |                                                                           | (660    | ) |   |   |   |   |   |   | (660 | ) |
| Treasury                shares:                                                                  |   |                                                                             |   |   |                       |   |   |                                      |   |   |                     |   |   |                                                                           |    |   |   |   |   |   |   |   |   |   |
| Purchased                                                                                        |   |                                                                             | (20    | )      |                       |   |   |                                      |   |   | (297                     | )      |   |                                                                           |    |   |   |   |   |   |   |   | (317 | ) |
| Issued                                                                                           |   |                                                                             | 6      |   |                       |   |   |                                      |   |   | 105                      |   |   |                                                                           |    |   |   |   |   |   |   |   | 111 |   |
| Issuance                of stock under ESPP                                                      |   |                                                                             |   |   |                       |   |   |                                      |   |   | 11                       |   |   |                                                                           |    |   |   |   |   |   |   |   | 11 |   |
| Conversion                                                                                       |   |                                                                             | 19     |   |                       |   | (19    | )                                         |   |   |                     |   |   |                                                                           |    |   |   |   |   |   |   |   | - |   |
|                                                                                             |   |                                                                             |   |   |                       |   |   |                                      |   |   |                     |   |   |                                                                           |    |   |   |   |   |   |   |   |   |   |
| Balance                September 29, 2007                                                        |   | $                                                                                | 5,637  |   |                       | $      | 944    |                                      |   | $      | 49,101                   |   |   | $                                                                              | 129,260 |   |   | $ | (5,516 | ) |   | $ | 179,426 |   |
|                                                                                             |   |                                                                             |   |   |                       |   |   |                                      |   |   |                     |   |   |                                                                           |    |   |   |   |   |   |   |   |   |   |
| Cumulative                Balance:                                                               |   |                                                                             |   |   |                       |   |   |                                      |   |   |                     |   |   |                                                                           |    |   |   |   |   |   |   |   |   |   |
| Translation                loss                                                                  |   |                                                                             |   |   |                       |   |   |                                      |   |   |                     |   |   |                                                                           |    |   |   | $ | (6,495 | ) |   |   |   |   |
| Unrealized                loss on                investments                                     |   |                                                                             |   |   |                       |   |   |                                      |   |   |                     |   |   |                                                                           |    |   |   |   | (104 | ) |   |   |   |   |
| Amounts                not recognized as a                component of net periodic benefit cost |   |                                                                             |   |   |                       |   |   |                                      |   |   |                     |   |   |                                                                           |    |   |   |   | 1,083 |   |   |   |   |   |
|                                                                                             |   |                                                                             |   |   |                       |   |   |                                      |   |   |                     |   |   |                                                                           |    |   |   | $ | (5,516 | ) |   |   |   |   |

----

|                                                                               |   | Thirteen                WeeksEnded                September |   |
|------------------------------------------------------------------------------------|--------|-------------------------------------------------------------|--------|
|                                                                               |   | 2007                                                        |   |   | 2006 |   |
|                                                                               |   |                                                        |   |   |   |   |
| Interest                income                                                     |   | $                                                           | 311    |   |   | $ | 308 |   |
| Interest                expense and commitment                fees                 |   |                                                        | (255   | ) |   |   | (450 | ) |
| Realized                and unrealized exchange                gains (losses), net |   |                                                        | (199   | ) |   |   | (37 | ) |
| Gain                on sale of real                estate                          |   |                                                        | -      |   |   |   | 299 |   |
| Other                                                                              |   |                                                        | (123   | ) |   |   | (65 | ) |
| Other                (expense)                income                               |   | $                                                           | (266   | ) |   | $ | 55 |   |
|                                                                               |   |                                                        |   |   |   |   |   |   |

----

|                                                             |   | Thirteen                WeeksEnded                September |   |
|------------------------------------------------------------------|--------|-------------------------------------------------------------|--------|
|                                                             |   | 2007                                                        |   |   | 2006 |   |
|                                                             |   |                                                        |   |   |   |   |
| Service                cost                                      |   | $                                                           | 931    |   |   | $ | 765 |   |
| Interest                cost                                     |   |                                                        | 2,965  |   |   |   | 1,701 |   |
| Expected                return on plan                assets     |   |                                                        | (4,227 | ) |   |   | (2,584 | ) |
| Amort.                of transition                obligation    |   |                                                        | -      |   |   |   | - |   |
| Amort.                of prior service                cost       |   |                                                        | 198    |   |   |   | 109 |   |
| Amort.                of unrecognized (gain)                loss |   |                                                        | (2     | ) |   |   | 38 |   |
|                                                             |   | $                                                           | (135   | ) |   | $ | 29 |   |
|                                                             |   |                                                        |   |   |   |   |   |   |

|                                                       |   | Thirteen                WeeksEnded                September |   |
|------------------------------------------------------------|--------|-------------------------------------------------------------|--------|
|                                                       |   | 2007                                                        |   |   | 2006 |   |
|                                                       |   |                                                        |   |   |   |   |
| Service                cost                                |   | $                                                           | 99     |   |   | $ | 102 |   |
| Interest                cost                               |   |                                                        | 180    |   |   |   | 177 |   |
| Amort.                of prior service                cost |   |                                                        | (226   | ) |   |   | (214 | ) |
| Amort.                of unrecognized                loss  |   |                                                        | 22     |   |   |   | 12 |   |
|                                                       |   | $                                                           | 75     |   |   | $ | 77 |   |
|                                                       |   |                                                        |   |   |   |   |   |   |

|                                                                                                                 |   | Sept.                29,2007 |   |   | June                30,2007 |   |
|----------------------------------------------------------------------------------------------------------------------|--------|------------------------------|--------|--------|-----------------------------|--------|
|                                                                                                                 |   |                         |   |   |                        |   |
| Reducing                revolver                                                                                     |   | $                            | 9,600  |   |                        | $      | 9,600 |   |
| Capitalized                lease obligations payable in Brazilian currency due 2007-2011,                13.3%-23.1% |   |                         | 1,629  |   |                        |   | 1,768 |   |
|                                                                                                                 |   |                         | 11,229 |   |                        |   | 11,368 |   |
| Less                current                portion                                                                   |   |                         | 2,839  |   |                        |   | 2,848 |   |
|                                                                                                                 |   | $                            | 8,390  |   |                        | $      | 8,520 |   |

----

----

**LIQUIDITY      AND CAPITAL RESOURCES**

| Cash                flows (in thousands)                                        |   | 13                Weeks Ended |   |
|---------------------------------------------------------------------------------|--------|-------------------------------|--------|
|                                                                            |   | 9/29/07                       |   |   | 9/23/06 |   |
|                                                                            |   |                          |   |   |   |   |
| Cash                provided by                operations                       |   | $                             | 4,763  |   |   | $ | 3,452 |   |
| Cash                provided from (used in)                investing activities |   |                          | (5,217 | ) |   |   | (253 | ) |
| Cash                used in financing                activities                 |   |                          | (909   | ) |   |   | (2,053 | ) |
|                                                                            |   |                          |   |   |   |   |   |   |

**Liquidity      and credit arrangements**

**REORGANIZATION      PLANS**

----

**OFF-BALANCE      SHEET ARRANGEMENTS**

**INFLATION**

**CRITICAL      ACCOUNTING POLICIES**

----

----

**SAFE      HARBOR STATEMENT**

**UNDER      THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995**

**Risks      Related to Reorganization:**

**Risks      Related to **
**Technology**
**:**

**Risks      Related to **
**Foreign**
** Operations:**

**Risks      Related to Industrial Manufacturing Sector:**

**Risks      Related **
**to**
** Competition:**

**Risks      Related to Customer Concentration:**

----

**Risks      Related to **
**Insurance**
** Coverage:**

**Risks      Related to Raw **
**Material**
** and Energy      Costs:**

**Risks      Related to Stock Market Performance:**

**Risks      Related to Acquisitions: **

| ISSUER                PURCHASES OF EQUITY SECURITIES |
|------------------------------------------------------|
| Period                                               | Shares                Purchased | Average                Price | Shares                Purchased Under Announced Programs | Shares                yet to be Purchased Under Announced Programs |
| 6/30/2007                - 8/3/2007                  | none | - | - | none |
| 8/4/2007                - 8/31/2007                  | none | - | - | none |
| 9/1/2007                - 9/29/2007                  | 20,000 | $15.85 | - | none |

|   | 31a | Certification                of Chief Executive Officer Pursuant to Rules 13a-15(e)/15(d)-15(e)                and                13a-15(f)/15(d)-15(f), filed                herewith. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | 31b | Certification                of Chief Financial Officer Pursuant to Rules 13a-15(e)/15(d)-15(e)                and                13a-15(f)/15(d)-15(f), filed                herewith. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 32 | Certification                of Chief Executive Officer and Chief Financial Officer Pursuant to                Rule                13a-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002 (subsections                (a) and (b) of Section 1350, Chapter 63 of Title 18, United States                Code),                filed herewith. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |                            |   | THE                L. S. STARRETT COMPANY(Registrant)              |
|--------|---------------------------------|--------|--------------------------------------------------------------------|
|   |                            |   |                                                               |
|   |                            |   |                                                               |
| Date   | November                8, 2007 |   | R.                J. Hylek                                         |
|   |                            |   | R.                J. Hylek (Treasurer and Chief Financial Officer) |
|   |                            |   |                                                               |
| Date   | November                8, 2007 |   | R.                J. Simkevich                                     |
|   |                            |   | R.                J. Simkevich (Corporate Controller)              |

----