UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



FORM 10-QSB





[x]

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

For the quarterly period ended March 31, 2006



[  ]

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



For the transition period from ______ to _______



Commission file number 0-18785

_________





STEN CORPORATION

(Exact name of small business issuer as specified in its charter)



Minnesota                                                                                   41-1391803

(State or other jurisdiction of incorporation                               (IRS Employer Identification No.)

or organization)





10275 Wayzata Blvd, Suite 310, Minnetonka, MN 55305(Address of principal executive offices)





(952) 545-2776(Issuers telephone number)







Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 [  ]



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

[  ]   YES      [X]   NO



At May 9, 2006, 2,064,139 shares of the issuers Common Stock were outstanding.



Page F- 1



---

STEN CORPORATION
INDEX TO FORM 10-QSB





|PART I - FINANCIAL INFORMATION:
|-------------------------------
|                               
|Item 1                         
|                               
|                               
|                               
|                               
|                               
|                               
|                               
|                               
|                               
|                               
|                               
|                               
|Item 2                         
|                               
|Item 3                         
|                               
|PART II - OTHER INFORMATION:   
|                               
|Item 1                         
|Item 2                         
|Item 4                         
|Item 6                         
|                               
|SIGNATURES                     
|                               



Page F- 2



---



STEN CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS





ASSETS

|                                                 |   | March 31,
2006
(unaudited) |   | September 30, 2005
(audited)
|------------------------------------------------ | - | -------------------------- | - | ----------------------------
|CURRENT ASSETS                                   |   |                            |   |                             
|Cash and cash equivalents                        | $ | 2,635,613                  | $ | 2,648,044                   
|Certificates of deposit                          |   | 930,006                    |   | 912,609                     
|Accounts receivable, net                         |   | 418,168                    |   | 377,327                     
|Inventories                                      |   | 550,576                    |   | 563,579                     
|Deferred income taxes                            |   | 46,000                     |   | 46,000                      
|Current portion of note receivable               |   | 272,889                    |   | 370,708                     
|Other current assets                             |   | 135,568                    |   | 94,624                      
|Total Current Assets                             |   | 4,988,820                  |   | 5,012,891                   
|PROPERTY AND EQUIPMENT, NET                      |   | 4,267,553                  |   | 3,730,190                   
|OTHER ASSETS                                     |   |                            |   |                             
|Intangible assets, net                           |   | 84,720                     |   | 90,041                      
|Note receivable, net of current portion          |   | 590,769                    |   | 665,000                     
|Note receivable from Site Equities International |   | 1,056,062                  |   | 0                           
|Prepaid mortgage costs                           |   | 90,499                     |   | 93,678                      
|Assets of discontinued business held for sale    |   | 0                          |   | 728,680                     
|Deferred income taxes                            |   | 0                          |   | 53,000                      
|Net cash surrender value of life insurance       |   | 35,046                     |   | 46,749                      
|Other assets                                     |   | 23,057                     |   | 0                           
|Total Other Assets                               |   | 1,880,153                  |   | 1,677,148                   
|TOTAL ASSETS                                     | $ | 11,136,526                 | $ | 10,420,229                  



LIABILITIES AND STOCKHOLDERS EQUITY

|CURRENT LIABILITIES                                                                                                                        |   |            |   |           
|------------------------------------------------------------------------------------------------------------------------------------------ | - | ---------- | - | ----------
|Current portion of long-term debt                                                                                                          | $ | 89,524     | $ | 121,037   
|Accounts payable                                                                                                                           |   | 370,470    |   | 440,493   
|Accrued payroll and related taxes                                                                                                          |   | 150,268    |   | 228,136   
|Other accrued expenses                                                                                                                     |   | 373        |   | 88,438    
|Accrued income taxes including those related to discontinued operations                                                                    |   | 0          |   | 266,160   
|Liabilities of discontinued businesses                                                                                                     |   | 20,096     |   | 69,069    
|Total Current Liabilities                                                                                                                  |   | 630,731    |   | 1,213,333 
|LONG-TERM LIABILITIES                                                                                                                      |   |            |   |           
|Long-term debt, net of current portion                                                                                                     |   | 1,901,903  |   | 2,679,732 
|Deferred income taxes                                                                                                                      |   | 166,838    |   | 0         
|Total Liabilities                                                                                                                          |   | 2,699,472  |   | 3,893,065 
|STOCKHOLDERS EQUITY                                                                                                                       |   |            |   |           
|Capital stock, $.01 par value, 20,000,000 common shares                                                                                    |   | 20,641     |   | 16,843    
|authorized, 5,000,000 undesignated shares authorized, 2,065,439 and 1,697,583 common shares issued and
2,064,139 and 1,684,283 outstanding |   |            |   |           
|Additional paid-in capital                                                                                                                 |   | 4,761,559  |   | 3,070,531 
|Retained earnings                                                                                                                          |   | 3,654,854  |   | 3,439,790 
|Total Stockholders Equity                                                                                                                 |   | 8,437,054  |   | 6,527,164 
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                 | $ | 11,136,526 | $ | 10,420,229





See accompanying notes to consolidated financial statements.

Page F- 3



---



STEN CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)



|                                                                  |   | For the Three Months Ended |   | For the Six Months Ended
|----------------------------------------------------------------- | - | -------------------------- | - | ------------------------
|                                                                  |   | March 31,                  |   | March 31,               
|                                                                  |   | 2006                       |   | 2005                    
|Sales, net                                                        | $ | 2,104,092                  | $ | 2,147,222               
|Cost of goods sold                                                |   | 1,958,296                  |   | 1,906,214               
|Gross profit                                                      |   | 145,796                    |   | 241,008                 
|Selling, general and administrative costs                         |   | 358,848                    |   | 193,942                 
|Income (loss) from operations                                     |   | (213,052)                  |   | 47,066                  
|Other income (expense)                                            |   |                            |   |                         
|Interest income                                                   |   | 53,561                     |   | 13,864                  
|Interest expense                                                  |   | (32,930)                   |   | (3,058)                 
|Net other income (expense)                                        |   | 20,631                     |   | 10,806                  
|Income (loss) from continuing operations before income taxes      |   | (192,421)                  |   | 57,872                  
|Provision for (benefit of ) income taxes                          |   | (67,250)                   |   | 21,500                  
|Income (loss) from continuing operations                          |   | (125,171)                  |   | 36,372                  
|Income (loss) from discontinued operations                        |   | 628,110                    |   | (19)                    
|Provision for income taxes from discontinued operations           |   | 219,838                    |   | 0                       
|Net income (loss) from discontinued operations                    |   | 408,272                    |   | (19)                    
|NET INCOME                                                        | $ | 283,101                    | $ | 36,353                  
|INCOME (LOSS) PER SHARE FROM CONTINUING OPERATIONS:               |   |                            |   |                         
|Basic                                                             | $ | (0.06)                     | $ | 0.02                    
|Diluted                                                           | $ | (0.06)                     | $ | 0.02                    
|INCOME (LOSS) PER SHARE FROM DISCONTINUED OPERATIONS:             |   |                            |   |                         
|Basic                                                             | $ | 0.19                       | $ | 0.00                    
|Diluted                                                           | $ | 0.19                       | $ | 0.00                    
|NET INCOME PER SHARE:                                             |   |                            |   |                         
|Basic                                                             | $ | 0.13                       | $ | 0.02                    
|Diluted                                                           | $ | 0.13                       | $ | 0.02                    
|WEIGHTED AVERAGE COMMON AND COMMON  EQUIVALENT SHARES OUTSTANDING |   |                            |   |                         
|Basic                                                             |   | 2,121,652                  |   | 1,726,598               
|Diluted                                                           |   | 2,177,664                  |   | 1,839,739               



See accompanying notes to consolidated financial statements.













Page F- 4



---



STEN CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)



|                                                                                        | For the Six Months Ended
|--------------------------------------------------------------------------------------- | ------------------------
|                                                                                        | March 31,               
|                                                                                        | 2006                    
|Cash flows from operation activities:                                                   |                         
|Net Income                                                                              | $     215,064           
|Adjustments to reconcile net income (loss) to net cash flows
from operating activities: |                         
|Depreciation and amortization                                                           | 233,134                 
|Provision for deferred taxes                                                            | 219,838                 
|Compensation related to non-employee stock option                                       | 0                       
|Changes in certain assets and liabilities:                                              |                         
|Accounts  receivables, net                                                              | (40,841)                
|Inventories                                                                             | 13,003                  
|Other current assets                                                                    | (40,944)                
|Other assets                                                                            | (23,057)                
|Accounts payable                                                                        | (70,023)                
|Accrued payroll and related taxes                                                       | (77,868)                
|Accrued income taxes                                                                    | (266,160)               
|Other accrued expenses                                                                  | (88,066)                
|Net Cash flows from operating activities-continuing operations                          | 74,080                  
|Net cash used in discontinued operations                                                | (269,903)               
|Loss from operations of discontinued operations                                         | 0                       
|Gain on sale of assets of discontinued business held for sale                           | (628,110)               
|Net Cash flows from operating activities-discontinued operations                        | (898,013)               
|Net Cash flows from operating activities                                                | (823,933)               
|                                                                                        |                         
|Cash flows from investing activities:                                                   |                         
|Gain on investments in certificate of deposit                                           | (17,397)                
|Purchase of franchise license of Hot N Now                                             | 0                       
|Advance to Site Equities                                                                | (1,056,062)             
|Purchase of property and equipment                                                      | (784,276)               
|Purchases of intangibles                                                                | 0                       
|Payments received on notes receivable                                                   | 172,050                 
|Decrease (increase) in loans on cash surrender value of life insurance                  | 11,703                  
|Net Cash flows from investing activities-continuing operations                          | (1,673,982)             
|Proceeds from sale of Ham Lake property                                                 | 1,600,000               
|Proceeds from sale of Medical Products Group                                            | 0                       
|Purchase of Barry Medical Products- discontinued operations                             | 0                       
|Purchase of intangibles-discontinued operations                                         | 0                       
|Purchases of property and equipment- discontinued operations                            | 0                       
|Net Cash flows from investing activities-discontinued operations                        | 1,600,000               
|Net Cash flows from investing activities                                                | (73,982)                
|                                                                                        |                         
|Cash flows from financing activities:                                                   |                         
|Net increase (decrease)  in line of credit, bank                                        | 0                       
|Payments on long-term debt                                                              | (809,342)               
|Repurchase of common shares                                                             | (305,172)               
|Proceeds from sale of common stock                                                      | 1,999,998               
|Proceeds from exercise of stock warrants or stock options                               | 0                       
|Net Cash flows from financing activities-continuing operations                          | 885,484                 
|Payments on long-term debt-discontinued operations                                      | 0                       
|Net Cash flows from financing activities-discontinued operations                        | 0                       
|Net Cash flows from financing activities                                                | 885,484                 
|                                                                                        |                         
|Net increase (decrease) in cash and cash equivalents                                    | (12,431)                
|                                                                                        |                         
|Cash and cash equivalents - beginning of period                                         | 2,648,044               
|Cash and cash equivalents - end of period                                               | 2,635,613               
|                                                                                        |                         
|Supplemental cash flow information:                                                     |                         
|Cash paid for interest                                                                  | $      66,192           
|                                                                                        |                         
|Noncash investing and financing activities:                                             |                         
|Note Receivable in connection with sale of discontinues business                        | $              0        





See accompanying notes to consolidated financial statements.

Page F- 5



---

STEN CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2006 AND 2005



Note 1.  Basis of Financial Statement Presentation



The accompanying unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been consolidated or omitted pursuant to such rules and regulations, although we believe that the disclosures are adequate to make the information presented not misleading.



In the opinion of management, the unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position and results of operations.  Results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year or of the results for any future periods.



In preparation of our consolidated financial statements, we are required to make estimates and assumptions that affect reported amounts of assets and liabilities and related revenues and expenses. Actual results could differ from the estimates used by management.



Discontinued Operations  On November 8, 2004, we sold substantially all of the assets relating to our medical products manufacturing and distribution business, our Medical Products Group, to Aspen Surgical Products, Inc. (Aspen).  On June 30, 2005, we sold substantially all of the assets relating to our emergency oxygen service business (the Emergency Oxygen Service Business) to Life Safe Services, LLC. On January 11, 2006 we sold the property at 13828 Lincoln Street NE, Ham Lake, Minnesota to OLD Holdings, LLC. This property formerly held the medical products group and corporate headquarters. In accordance with appropriate accounting rules, we have reclassified our previously reported financial results to exclude the results of the Medical Products Group, the Emergency Oxygen Service Business and the sale of the property in Ham Lake and these results are presented on a historical basis as a separate line in our income statements and balance sheets entitled Discontinued Businesses or Discontinued Operations. All of the financial information in the financial statements and notes to the financial statements has been revised to reflect only the results of our continuing operations. See Note 15 in the Notes to Unaudited Consolidated Financial Statements.



Note 2.  Restatement



In 2005, the Company has separately disclosed the operating, investing and financing portions of the cash flows attributable to its discontinued operations (see Note 15), which in prior periods were reported on a combined basis as a single amount.



Note 3.  Significant Accounting Policies



Principles of Consolidation Effective February 2, 2005, we changed our name to STEN Corporation (STEN) from Sterion Incorporated (Sterion). The consolidated financial statements include the accounts of STEN Corporation and its subsidiaries, Oxboro, Inc. (formerly known as Oxboro Medical, Inc.), LifeSafe Services, Inc. (LifeSafe), as of November 26, 2003, Burger Time Acquisition Corporation (BTAC), as of July 1, 2004 and BTAC Properties, Inc (BTAC Properties), as of May 1, 2005. All significant intercompany transactions and balances have been eliminated in consolidation.



Accounts ReceivableAccounts receivable are shown net of an allowance for doubtful accounts of approximately $4,000 at both March 31, 2006 and September 30, 2005.



Amortization Intangible assets are being amortized over their estimated useful lives using the straight-line method.



Notes Receivable Notes receivable consists of $167,887 due from Aspen related to the sale of our Medical Products Group.  The note is unsecured and bears interest at 4.75% per annum.  Aspen is obligated to repay the note in six equal quarterly installments of $83,333 beginning on May 8, 2005 until August 8, 2006. Notes receivable also includes $695,771 due from Life Safe Services, LLC related to the sale of our Emergency Oxygen Service Business, which is in the form of a subordinated promissory note personally guaranteed by the owners of Life Safe Services, LLC. The Life Safe Note bears interest at a rate of 7.25% per annum. The Life Safe Note calls for payments of interest only for the first twelve months, interest and principal based upon a sixty month amortization schedule for months 13 to 41 and a balloon payment

Page F- 6



---

of all remaining outstanding interest and principal at the end of month 42. Our rights under the LifeSafe Note are subordinate to those of the Buyers senior lender.



Prepaid Mortgage Costs Debt issuance costs are amortized over the life of the loan using the straight-line method.  On May 10, 2005, we completed a mortgage financing relating to real estate used by our subsidiary, Burger Time Acquisition Corporation. In the course of closing the mortgages, we incurred costs of $96,290. These mortgage costs are being amortized over of the life of the notes (15 years), we expensed $1,589 for the three months ended March 31, 2006 and $3,179 for six months ended March 31, 2006.



Income Taxes We have adopted Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes, under which deferred income tax assets and liabilities are recognized for the temporary differences between the financial statement and income tax reporting bases of assets and liabilities based on currently enacted rates and laws.  These temporary differences include depreciation and accruals. Accrued income taxes related to the sale of our discounted businesses are reflected as a liability of discontinued business.



Research and Development We expense all costs related to product research and development as incurred.  Research and development expense was $0 for the three months ended March 31, 2006 and 2005, respectively and $0 and $769 for the six months ended March 31, 2006 and 2005.



Assets of Discontinued Business Held For Sale  As a part of the sale of our Medical Products Group in November 2004, we held for sale our former headquarters and operations facility located in Ham Lake, Minnesota.  Accordingly, we have reflected the carrying value of the building as an asset of discontinued business held for sale as of September 30, 2005. As a result, we discontinued recording depreciation on the building. The building was sold on January 11, 2006 and as a result, we recognized a pre tax gain of $628,110 for the quarter ended March 31, 2006 (see Note 15).



Common Stock Purchase Warrants - In connection with a registered offering that was completed in October 2000, we issued warrants to purchase common stock. At March 31, 2006, there were outstanding common stock purchase warrants to purchase 369,793 shares at $4.00 per share.  On May 11, 2005, our Board of Directors extended the expiration date of the outstanding common stock purchase warrants to September 30, 2008. There was no accounting charge related to the extension of the warrants.



Stock-Based CompensationWe use the intrinsic value-based method prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations in accounting for employee stock options and stock based compensation.  Under the intrinsic value method, compensation expense is recorded only to the extent that the market price of common stock exceeds the exercise price of the stock option on the date of grant.



We have adopted the disclosure-only provisions of SFAS No. 123, Accounting for Stock-Based Compensation. Accordingly, no compensation cost has been recognized with respect to stock options. Had compensation cost for our stock options been determined based on fair value at the grant dates consistent with the method as defined under SFAS No. 123, our net income would have changed to the pro forma amounts indicated below:





|                              | Three Months Ended March 31, |  | Six Months Ended March 31,
|----------------------------- | ---------------------------- |  | --------------------------
|                              | 2006                         |  | 2005                      
|Net Income:                   |                              |  |                           
|As reported                   | $  283,101                   |  | $   36,353                
|Pro forma                     | $  267,845                   |  | $   20,520                
|Net Income per share basic:   |                              |  |                           
|As reported                   | $       0.13                 |  | $      0.02               
|Pro forma                     | $       0.13                 |  | $      0.01               
|Net Income per share diluted: |                              |  |                           
|As reported                   | $       0.13                 |  | $     .02                 
|Pro forma                     | $       0.12                 |  | $     .01                 
|                              |                              |  |                           
|Stock based compensation:     |                              |  |                           
|As reported                   | $             0              |  | $           0             
|Pro forma                     | $    15,256                  |  | $  15,833                 



Page F- 7



---



The pro forma amounts may not be representative of the effects on reported net loss for future years. The per share, weighed-average fair value of each option granted is calculated using the Black-Scholes pricing model with the following weighted-average assumptions used for grants in the following years:





|                                 | Three months ended March 31, |  | Six months ended March 31,
|-------------------------------- | ---------------------------- |  | --------------------------
|                                 | 2006                         |  | 2005                      
|Risk free interest rate          | 5.75%                        |  | 5.00%                     
|Expected life of options granted | 5 years                      |  | 3-5 years                 
|Expected volatility range        | 50.0%                        |  | 50.0%                     
|Expected dividend yield          | 0%                           |  | 0%                        





Recent Accounting Pronouncements  In November 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS) No. 151  Inventory Costs, an amendment of ARB No. 43, Chapter 4, which clarifies the types of costs that should be expensed rather than capitalized as inventory.  This statement also clarifies the circumstances under which fixed overhead costs associated with operating facilities involved in inventory processing should be capitalized. The provisions of SFAS No. 151 are effective for fiscal years beginning after June 15, 2005 and we will adopt this standard in our fiscal year 2006.  No material impact on our consolidated financial statements was incurred from the adoption of this standard.



The FASB issued SFAS No. 123 (Revised 2004) (SFAS No. 123R), Share-Based Payment, in December 2004.  SFAS No. 123R is a revision of FASB Statement 123, Accounting for Stock-Based Compensation and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and its related implementation guidance. The FASB statement focuses primarily on accounting for transactions in which an entity obtains employee services through share-based payment transactions.  SFAS No. 123R requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions).  That cost will be recognized over the period during which an employee is required to provide services in exchange for the award. The SEC recently amended its compliance to be effective at the beginning of the next fiscal year that begins after June 15, 2005 for large public companies and after December 15, 2005 for small business filers. We are required to adopt this statement in the first quarter of our fiscal 2007 and we are currently analyzing the impact of its adoption on our consolidated financial statements.



In June 2005, FASB issued SFAS No. 154, Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3. The statement applies to all voluntary changes in accounting principle, and changes the requirements for accounting for and reporting of a change in accounting principle.  SFAS No. 154 requires retrospective application to prior periods financial statements of a voluntary change in accounting principle unless it is impracticable. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005.  Earlier application is permitted for accounting changes and corrections of errors made occurring in fiscal years beginning after June 1, 2005. The statement does not change the transition provisions of any existing accounting pronouncements, including those that are in a transition phase as of the effective date of this statement. The Company does not expect the adoption of SFAS No. 154 to have a material effect on its consolidated financial statements.



Reclassifications  In addition to the adjustment to accounts to properly reflect discontinued operations, certain accounts in the prior years quarterly consolidated financial statements have been reclassified for comparative purposes to conform to the presentation in the current quarters consolidated financial statements. The reclassifications had no effect on consolidated net income or stockholders equity.

Page F- 8



---



Note 4.  Inventories



Inventories consist of products related to our contract manufacturing operations, restaurant food and paper supplies and are valued at lower of cost using the first-in, first-out (FIFO) method or market.



Inventories consisted of the following at:



|                  | March 31,
2006 |  | September 30,
2005
|----------------- | -------------- |  | ------------------
|                  |                |  |                   
|Raw materials     | $ 385,514      |  | $ 363,276         
|Work in process   | 97,328         |  | 121,010           
|Finished goods    | 67,734         |  | 79,293            
|Total Inventories | $ 550,576      |  | $ 563,579         





Note 5.  Net Income Per Share



Basic income per share is computed by dividing the net income by the weighted average number of shares outstanding for the reporting period. Our diluted net income per share is computed by dividing net income by the weighted average number of common shares outstanding and common share equivalents, when dilutive, for the reporting period.  Options totaling 285,000 and 293,500 shares were excluded from the computation of diluted earnings per share for the three and six months ended March 31, 2006 and 2005 as their effect was anti-dilutive.  For the three months ended March 31, 2006 and 2005, options reflecting 56,012 and 113,141 shares of common stock, respectively, were included in the weighted average share calculation.





|                                           | Three months ended March 31, |  | Six months ended March 31,
|------------------------------------------ | ---------------------------- |  | --------------------------
|                                           | 2006                         |  | 2005                      
|Income (loss) from continuing operations   | $  (125,171)                 |  | $  36,372                 
|Income (loss) from discontinued operations | 408,272                      |  | (19)                      
|Net income                                 | 283,101                      |  | 36,353                    
|Net income per share   basic              |                              |  |                           
|Weighted average shares outstanding        | 2,121,652                    |  | 1,726,598                 
|                                           |                              |  |                           
|Net income per share  basic               | $    0.13                    |  | $     0.02                
|Net income per share  diluted             |                              |  |                           
|Weighted average shares outstanding        | 2,121,652                    |  | 1,726,598                 
|Effect of diluted securities               | 56,012                       |  | 113,141                   
|Weighted average shares outstanding        | 2,177,664                    |  | 1,839,739                 
|                                           |                              |  |                           
|Net income per share  diluted             | $       0.13                 |  | $      0.02               



Note 6.  Income Taxes



The Company recorded a tax benefit from income tax of $67,250 and $103,750 relating to a loss from continuing operations for the three and six months ended March 31, 2006, respectively. We recorded a provision for income tax of $21,500 and $1,734 relating to income (loss) from continuing operations for the three and six months ended March 31, 2005. The Company recorded a provision for income taxes of $219,838 and $0 relating to the discontinued operations for the three months ended March 31, 2006 and 2005, respectively. We recorded a provision for income taxes of $219,838 and $608,047 relating to the discontinued operations for the six months ended March 31, 2006 and 2005, respectively.





Note 7.  Deferred Income Taxes



Our deferred income tax assets and liabilities are recognized for the differences between the financial statement and income tax reporting basis of assets and liabilities based on currently enacted rates and laws. These differences include depreciation, net operating loss carryforwards, capital loss carryforwards, allowance for accounts receivable, inventory valuation adjustments and accrued liabilities.

Page F- 9



---



Our current deferred tax asset as of March 31, 2006 and September 30, 2005 was $46,000. The long term deferred tax liability as of March 31, 2006 was $166,838. The deferred tax liability represents the deferred income tax on the sale of the Companys Ham Lake property. At September 30, 2005 we had a deferred tax asset of $53,000 (see Note 15).



Note 8.  Intangible Assets



|Intangible assets  subject to amortization consist of the following:
|--------------------------------------------------------------------
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Covenants not to compete                                            
|Franchise Agreements                                                
|Other intangibles                                                   
|                                                                    
|Total                                                               





Intangible assets are being amortized over their estimated useful lives ranging from 60 months to 120 months (weighted average life of 7.98 years). Amortization of intangible assets was $441 and $3,332 for the three months ended March 31, 2006 and 2005, respectively. Amortization of intangible assets was $5,321 and $4,998 for the six months ended March 31, 2006 and 2005, respectively. Estimated amortization expense of intangible assets for the years ending September 30, 2006, 2007, 2008, 2009, and 2010 is $10,634 per year. In September 2005, we determined that the HotN Now Franchise Agreements were impaired and accordingly we established a valuation reserve to fully reserve for the net book value of $172,329.



Note 9.  Line of Credit, Bank



During January 2005, we entered into a $750,000 line of credit agreement with Citizens Independent Bank.  The line of credit is subject to a defined borrowing base. Amounts outstanding bear interest at prime plus .5% (8.25% at March 31, 2006). The line of credit is collateralized by our receivables and inventory. At March 31, 2006 and September 30, 2005, there were no borrowings outstanding under this agreement and we had the entire amount available under the borrowing base formula. On April 20, 2006 the Company and Citizens Independent Bank, through an amendment to the original agreement, extended the agreement through January 2, 2007. All other terms and conditions of the original agreement remain in full force and shall continue to be binding to the Company.



Note 10.  Long-term Debt



On May 9, 2005 and May 10, 2005, we completed a mortgage financing relating to eight parcels of real estate used by our subsidiary, Burger Time Acquisition Corporation, in BTACs operation of a chain of fast-food, drive-thru restaurants under the Burger Time name.



To facilitate the mortgage financing, we created a wholly-owned subsidiary, BTAC Properties, Inc., a Minnesota corporation and transferred to BTAC Properties eight parcels of real estate located in Minnesota and North Dakota.



On May 9, 2005, BTAC Properties received $995,000 relating to the North Dakota properties and on May 10, 2005, BTAC Properties received $1,060,000 relating to the Minnesota properties from StanCorp Mortgage. In consideration of these loans, BTAC Properties issued two promissory notes to the Lender, one in the amount of $995,000 and one in the amount of $1,060,000. Kenneth W. Brimmer, our Chief Executive Officer and a director, and Gary Copperud, our director, are also joint and several borrowers with BTAC Properties on the Notes. Messrs. Brimmer and Copperud did not receive any compensation for joining as borrowers on the Notes. The participation of Messrs. Brimmer and Copperud in the Notes transaction was approved by our Audit Committee. To facilitate the payment by BTAC Properties of the obligations under the Notes, BTAC and BTAC Properties have entered into lease for each of the eight properties.  The rent amounts to be paid by BTAC to BTAC Properties under the leases have been assigned to the Lender for repayment of amounts owed under the Notes.

Page F- 10



---



The Notes accrue interest at a rate of 6.25% per annum and are payable in 180 equal monthly installments of an aggregate of $17,621, with the final payment due June 1, 2020. The obligations of the Notes are secured by a mortgage, assignment of rents, security agreement and fixture filing in favor of the Lender on each of the eight properties.



Long-term debt consisted of the following:





|                                                                                                                                                                                                                                              | March 31,
2006    |  | September 30,
2005
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------- |  | ------------------
|Mortgage note payable to StanCorp Mortgage Investors, LLC. With monthly installments of $8,175 including interest at 8.5%, due February 2011, collateralized by building and land held for sale.                                              | $               0 |  | $   766,631       
|Mortgage note payable to StanCorp Mortgage Investors, LLC. With monthly installments of $9,089 including interest at 6.25%, due June 2020, collateralized by buildings and land located at Elk River, Waite Park, Moorhead and Detroit Lakes. | 1,027,209         |  | 1,049,240         
|Mortgage note payable to StanCorp Mortgage Investors, LLC.  With monthly installments of $8,532 including interest at 6.25%, due June 2020, collateralized by buildings and land located at Minot, Grand Forks, Bismarck and Fargo.           | 964,218           |  | 984,898           
|Totals                                                                                                                                                                                                                                        | 1,991,427         |  | 2,800,769         
|Less current portion                                                                                                                                                                                                                          | (89,524)          |  | (121,037)         
|Long-term portion                                                                                                                                                                                                                             | $ 1,901,903       |  | $ 2,679,732       





Note 11.  Segment Reporting



We report our results in two business segments: Corporate and Contract Manufacturing, and Burger Time Acquisition Corporation (BTAC). The Corporate and Contract Manufacturing segment includes our manufacturing operations related to the production of sterilization containers and filters and sale to a single customer. The BTAC business segment is a chain of fast food restaurants that we acquired effective July 1, 2004. We have identified these business segments based on the fact that each segment is involved in a different type of industry, sells different types of products or services and each segment has distinct customers.

Page F- 11



---



The following table set forth certain financial information for each of our business segments described above for the three and six months ended March 31, 2006 and 2005. (Corporate and contract manufacturing identifiable assets also includes the identifiable assets related to discontinued businesses.)



|                                | Corporate and Contract Manufacturing |  | BTAC         |  | Total       
|------------------------------- | ------------------------------------ |  | ------------ |  | ------------
|                                |                                      |  |              |  |             
|Quarter ended March 31, 2006    |                                      |  |              |  |             
|Revenues                        | $ 599,283                            |  | $ 1,504,809  |  | $ 2,104,092 
|Income (loss) from operations   | (91,447)                             |  | (121,605)    |  | (213,052)   
|Identifiable assets             | 7,209,833                            |  | 3,926,693    |  | 11,136,526  
|Depreciation and amortization   | 18,862                               |  | 96,826       |  | 115,688     
|Capital Expenditures            | 703,076                              |  | 26,046       |  | 729,122     
|                                |                                      |  |              |  |             
|Quarter ended March 31, 2005    |                                      |  |              |  |             
|Revenues                        | $ 866,196                            |  | $  1,281,026 |  | $  2,147,222
|Income (loss) from operations   | 64,449                               |  | (17,383)     |  | 47,066      
|Identifiable assets             | 3,034,531                            |  | 3,889,884    |  | 6,924,415   
|Depreciation and amortization   | (17,930)                             |  | 69,496       |  | 51,566      
|Capital Expenditures            | 1,573                                |  | 653,184      |  | 654,757     
|                                |                                      |  |              |  |             
|Six months ended March 31, 2006 |                                      |  |              |  |             
|Revenues                        | $ 1,150,200                          |  | $2,977,620   |  | $4,127,820  
|Income (loss) from operations   | (215,952)                            |  | (119,554)    |  | (335,506)   
|Identifiable assets             | 7,209,833                            |  | 3,926,693    |  | 11,136,526  
|Depreciation and amortization   | 40,022                               |  | 193,112      |  | 233,134     
|Capital Expenditures            | 740,647                              |  | 43,629       |  | 784,276     
|                                |                                      |  |              |  |             
|Six months ended March 31, 2005 |                                      |  |              |  |             
|Revenues                        | $ 1,291,942                          |  | $  2,517,726 |  | $  3,809,668
|Income (loss) from operations   | 61,744                               |  | (54,758)     |  | 6,986       
|Identifiable assets             | 3,034,531                            |  | 3,889,884    |  | 6,924,415   
|Depreciation and amortization   | 34,523                               |  | 127,094      |  | 161,617     
|Capital Expenditures            | (268,311)                            |  | 713,259      |  | 444,948     





Note 12.  Commitments and Contingencies



Stock Repurchase Program -On November 8, 2004, our Board of Directors authorized a repurchase program in the amount of 175,000 shares replacing a repurchase program originally adopted in September 2001. The Company purchased a total of 62,488 shares of common stock for a cost of $301,740 during the three months ended March 31, 2006, 63,788 shares of common stock for a cost of $305,172 during the six months ended March 31, 2006, and have repurchased a total of 112,123 shares for a cost of $531,259 under the Companys current program.



Legal Proceedings - On May 9, 2005, the former Chairman and CEO of the Company, Larry Rasmusson, filed suit against the Company and Aspen Surgical Products, Inc. in the Hennepin County District Court of Minnesota.  In his complaint, Mr. Rasmusson seeks damages in excess of $600,000 relating to claims that the Company has breached a License Agreement dated April 1, 1990 between the Company and Mr. Rasmusson in connection with the sale by the Company on November 8, 2004 of its Medical Products Group to Aspen Surgical Products, Inc.  The Company does not believe that Mr. Rasmusson's claims have merit and intends to vigorously defend against them.  However, the Company cannot be sure that it will prevail in this action and any adverse outcome could require the Company, among other things, to pay damages to Mr. Rasmusson.  The Company does not believe it is currently possible to calculate the potential for, or the extent of, any liabilities resulting from this claim, if any.



Note 13.  Sale of Securities



Private Placement -On November 15, 2005, we entered into a subscription agreement with two private investors for the sale of 222,222 shares of our common stock to each investor for cash consideration of $4.50 per share. The closing dates for the subscription agreements were November 25, 2005 and November 30, 2005. At the closing, each investor delivered the purchase price of $999,999 for the 222,222 shares issued.

Page F- 12



---





Note 14.  Acquisitions and Disposition of Assets



Purchase Jacksonville, Texas Facility- On December 19, 2005, we entered into a Commercial Real Property Sales Contract with Robert Nichols Enterprises, Inc. for the purchase by the Company of certain real property located in Jacksonville, Texas for $675,000 in cash. At the time of the agreement the Company leased the property from Nichols Enterprises. The property consists of 13.7 acres of land and an approximately 30,000 square foot steel manufacturing facility used in our contract manufacturing operations. The Company, using the proceeds from the 1031 exchange, completed the purchase of the Jacksonville, Texas facility on January 20, 2006 for total consideration including closing fees of $684,800.  Under Section 1031 of the Internal Revenue Code, a real property owner can sell its property and then reinvest the proceeds in ownership of like-kind property and defer taxes on the gain on the sale of the property.

Site Equities/Paycenters On November 22, 2005, the Company, through its wholly-owned subsidiary, STEN Acquisition Corporation, entered into a Loan and Merger Option Agreement with Site Equities International, Inc. (Site Equities) and its wholly-owned subsidiary, Paycenters, LLC (Paycenters).  Paycenters is engaged in placing kiosks in retail locations that are used to facilitate bill payment and other financial transactions.

Under the Agreement, we originally agreed to loan up to an aggregate amount of $2,000,000 to Site Equities. The original agreement contemplated funding in three separate installments.  An initial $800,000 was advanced on the date of the agreement. The loan is evidenced by a promissory note. The original agreement contemplated additional funding of $600,000 on January 15, 2006 and $600,000 on March 16, 2006, respectively, provided that certain conditions were met.  This funding was not made because the conditions were not met. Interest accrues on the outstanding and unpaid principal amount of the loan at a rate of 8% per annum.  Site Equities is required to make interest only payments beginning on December 15, 2006 and continuing on June 15 and December 15 of each year thereafter until December 15, 2010, at which time the outstanding principal and accrued and unpaid interest under the loan is due and payable. The November 22, 2005 agreement includes a merger option for STEN and in the event that STEN concluded to exercise its merger option, interest payments will be suspended for certain periods. If the merger becomes effective, the note evidencing the loan will be cancelled and all outstanding principal and interest owed under the loan will be deemed to have been paid in full as of the effective date of the merger. The loan is guaranteed by Paycenters pursuant to a guaranty and collateralized by all of the assets of Paycenters.  Site Equities has also pledged the membership interest in Paycenters to the Company as collateral for the loan.  Amounts under the loan are senior to certain other debt of Site Equities.



On March 9, 2006, the parties entered into an Amendment to the Loan and Merger Option Agreement. The Amendment provides that the remaining $1,200,000 potentially be in four additional installments, the first two of which will be in the amount of $100,000 and the last two of which will be in the amount of $500,000. We disbursed the second installment of $100,000 concurrent with the signing of this Amendment. Each of the installments is subject to various conditions and the failure by Site Equities to satisfy any of the conditions as to a particular installment relieves the Company of the obligation to make such loan installment. Among the conditions Site Equities must meet for the disbursement of the fourth installment of the loan is a requirement that the Site Equities obtain a loan from a third party investor (the New Investor), with $500,000 disbursed by the New Investor concurrently with the fourth installment and $500,000 additional disbursed by the New Investor concurrently with the fifth installment. The conditions to the Companys disbursement of the fifth installment also include delivery by Site Equities of certain financial statements and evidence of meeting certain business goals, including installment of kiosks, minimum per kiosk revenue and development of additional kiosk services. Further, the Amendment provides that the expiration date of the merger option is the earlier of 270 days following disbursement of the last installment under the Companys loan or 90 days after Site Equities provides the Company written evidence that Site Equities has met certain goals relating to installment of its kiosks and per kiosk monthly revenue.  The investment in Site Equities at March 31, 2006 was $1,056,062 which includes transaction costs of $56,062 which is to be reimbursed to the Company by Site Equities. As of May 9, 2006 Site Equities did not meet the requirement for the fourth installment and, therefore, STEN is not obligated to advance additional funds under its agreements.



The Amendment also amends the terms of the plan of merger between the parties. Pursuant to the plan of merger, as amended by the Amendment, the shareholders of Site Equities and the New Investor will receive common stock of the Company as merger consideration and to discharge the debt of Site Equities to the New Investor. The number of shares of common stock to be received by the Site Equities shareholders and the New Investor will be such that the Companys shareholders immediately prior to the merger will own 50.25% of the Companys common stock outstanding after the merger, the Site Equities shareholders immediately prior to the merger will own approximately 39.75% of the Companys common stock outstanding after the merger and the New Investor will own approximately 10% of the Companys common stock outstanding after the merger. The percentage ownership of the Companys shareholders and the Site Equities

Page F- 13



---

shareholders will be determined on a fully diluted basis, and are subject to adjustment, as described below, for cash contribution by the Company to Site Equities. Under the Agreement, immediately prior to the effective date of the merger, the Company will pay at least $3,000,000 in cash to Site Equities. The Company may, in its sole discretion, pay an amount greater than $3,000,000, with any such additional payments to Site Equities made in increments of $1,000,000 and not exceeding a maximum of $15,000,000. For each $1,000,000 in excess of $3,000,000 paid by the Company, the Amendment provides that the percentage ownership of the Company owned by the Site Equities shareholders and the New Investor immediately after the merger will decrease by 125 basis points.



While the Company continues to evaluate the issue, it is the conclusion of management that the financial statements of Site Equities do not qualify for consolidation under the provisions of FASB Interpretation 46, Consolidation of Variable Interest Entities, and an Interpretation of ARB No. 51 (FIN 46).  Our conclusion is that the current loan to Site Equities is more appropriately characterized as a secured loan transaction given our position as a secured lender, the limited obligation to make future loans and the stated intention of Site Equities to raise additional funds from parties unrelated to STEN.



Certain financial information relating to Site Equities is not available to STEN.



FIN 46 provides a framework for identifying variable interest entities (VIEs) and determining when a company should include the assets, liabilities, non-controlling interests and results of activities of a VIE in its consolidated financial statements.



In general, a VIE is a corporation, partnership, limited-liability corporation, trust, or any other legal structure used to conduct activities or hold assets that either (1) has an insufficient amount of equity to carry out its principal activities without additional subordinated financial support, (2) has a group of equity owners that are unable to make significant decisions about its activities, or (3) has a group of equity owners that do not have the obligation not absorb losses or the right to receive returns generated by its operations.



FIN 46 requires a VIE to be consolidated if a party with an ownership, contractual or other financial interest in the VIE (a variable interest holder) is obligated to absorb a majority of the risk of loss from the VIEs activities, is entitled to receive a majority of the VIEs residual returns (if no party absorbs a majority of the VIEs losses), or both. A variable interest holder that consolidates the VIE is called the primary beneficiary. Upon consolidation, the primary beneficiary generally must initially record all of the VIEs assets, liabilities and non-controlling interests at fair value and subsequently account for the VIE as if it were consolidated based on majority voting interest. FIN 46 also required disclosures about VIEs that the variable interest holder is not required to consolidate but in which it has a significant variable interest.



Hot N Now  On March 3, 2005, our Burger Time Acquisition Corporation completed the purchase of certain assets of the former franchisor of Hot N Now restaurants in a transaction approved by the United States Bankruptcy Court for the Western District of Michigan. The assets acquired include the Hot N Now franchise, all Hot N Now franchise agreements and all royalties and other franchise fees now due and owing. Among other things, the acquired rights also include the Hot N Now name and tradename. There are currently 14 franchisee locations of Hot N Now all operating in the State of Michigan. The purchase price paid was $175,000 for the franchise license.  We are in the process of negotiating new agreements with the Hot N Now locations. As of March 31, 2006 the Company has entered into new agreements with 7 of the 14 locations.  Revenue generated from these new agreements was $17,625 for the quarter ended March 31, 2006 and $0 for the corresponding period in Fiscal 2005.  The purchase price of $175,000 was initially allocated to the franchise license acquired based on the estimated fair value as of the acquisition date and was deemed to be impaired and was fully written-off in the period ended September 30, 2005.



Note 15.  Discontinued Operations



On August 10, 2005, we entered into a Purchase Agreement with OLD Holdings, LLC (Holdings) for the sale by the Company to Holdings of its property located at 13828 Lincoln Street NE, Ham Lake, Minnesota.  In connection with the Agreement, the Company and Holdings also entered into a lease agreement dated October 15, 2005 relating to the lease to OLD Holdings of the Ham Lake facilities pending the closing of the sale. Other than in respect of the transactions contemplated by the Agreement, there are no relationships between Holdings and the Company, or any director or officer of the Company.



On January 11, 2006, the Company closed the transactions contemplated by the Agreement and sold its Ham Lake property to Holdings for $1,600,000 in cash, of which $25,000 was previously paid as earnest money. The consideration for the sale was determined through arms-length negotiations between STEN and Holdings. In connection with the sale, the Lease Agreement was merged as a matter of law when ownership of the property was transferred. Concurrently with the

Page F- 14



---

sale, we applied $786,474 of the purchase price to pay in full its mortgage relating to the Ham Lake property plus an early payment penalty of $27,973. The Company set up and executed a 1031 exchange. Under Section 1031 of the Internal

Revenue Code, a real property owner can sell its property and then reinvest the proceeds in ownership of like-kind property and defer the income tax related to the gain on the sale.

We recorded $220,930 of estimated expenses for accrued payables, early payment penalties, closing fees and other exit costs as a part of the sale of the building and discontinued operations. We made $200,834 in payments for the quarter ended March 31, 2006 and the accrued amounts are summarized as follows:

|Accrued Payable       |                  
|--------------------- | -----------------
|Beginning balance     | $               0
|Estimated Expenses    | 82,500           
|Payments              | 82,500           
|Ending balance        | $              0 
|                      |                  
|                      |                  
|Other Exit Costs      |                  
|Beginning balance     | $               0
|Early payment penalty | 27,973           
|Closing fees          | 6,690            
|Other exit costs      | 103,767          
|Payments              | 118,334          
|Ending balance        | $    20,096      



In accordance with the provisions of SFAS 144, we have not included the sale of our Ham Lake property to OLD Holdings in the results from continuing operations. The results of this sale have been reflected as discontinued operations. The income from discontinued operations for the three and six months ended March 31, 2006, consist of the following:





|                                                        | For  the Three Months Ended March 31, 2006 |  | For  the Three Months Ended March 31, 2005 |  | For  the Six Months Ended March 31, 2006 |  | For  the Six
Months Ended March 31, 2005
|------------------------------------------------------- | ------------------------------------------ |  | ------------------------------------------ |  | ---------------------------------------- |  | ----------------------------------------
|Gain on sale of assets:                                 |                                            |  |                                            |  |                                          |  |                                         
|Sale Price                                              | $    1,600,000                             |  | $            0                             |  | $     1,600,000                          |  | $            0                          
|Less costs and expenses                                 |                                            |  |                                            |  |                                          |  |                                         
|Property and Equipment, net                             | 750,960                                    |  |                                            |  | 750,960                                  |  |                                         
|Accrued Payable                                         | 82,500                                     |  |                                            |  | 82,500                                   |  |                                         
|Transaction, Legal,  Transition
and other               | 138,430                                    |  |                                            |  | 138,430                                  |  |                                         
|Total costs of sale                                     | 971,890                                    |  | 0                                          |  | 971,890                                  |  | 0                                       
|Net gain on sale before taxes                           | 628,110                                    |  |                                            |  | 628,110                                  |  |                                         
|Income from discontinued operations before income taxes | $       628,110                            |  | $             0                            |  | $       628,110                          |  | $           0                           



On June 30, 2005, we and our wholly-owned subsidiary, LifeSafe Services, Inc. completed the sale to Life Safe Services, LLC (the Buyer) of assets related to our Emergency Oxygen Service Business including the LifeSafe and LifeKit product lines. Life Safe Services, LLC is controlled by Patrick Hoene and Christine Hoene. The sale was made pursuant to an Asset Purchase Agreement dated June 30, 2005 by and among STEN, LifeSafe and the Buyer.

The purchase price for the assets was $3,150,000 plus the assumption by the Buyer of certain liabilities, subject to downward adjustment if the working capital, as defined, of the transferred business is determined to be less than $730,000 on June 30, 2005.  Of the purchase price, $2,450,000 was paid in cash at closing and $700,000 was paid by delivery of a subordinated promissory note personally guaranteed by Patrick Hoene and Christine Hoene. The Note bears interest at a rate of 7.25% per annum. The Note calls for payments of interest only for the first twelve months, interest and principal based upon a sixty month amortization schedule for months 13 to 41 and a balloon payment of all remaining outstanding interest and principal at the end of month 42. Our rights under the Note are subordinate to those of the Buyers senior lender.



Additionally, in connection with the closing of the sale, each of STEN and LifeSafe entered into a Non-Competition and Non-Solicitation Agreement, prohibiting either of them from competing with the Business during the period the Note remains current and outstanding, plus a period of two years following the final payment of the Note.

Page F- 15



---



We recorded $193,141 of estimated expenses for severance and other exit costs as a part of the sale of the Emergency Oxygen Service Business. We made no payments for the three months ended March 31, 2006 and the accrued amounts are summarized as follows:



|Accrued Severance Costs                 |                  
|--------------------------------------- | -----------------
|Beginning balance                       | $               0
|Estimated Expenses                      | 35,000           
|Payments                                | 35,000           
|Ending balance                          | $              0 
|                                        |                  
|                                        |                  
|Other Exit Costs                        |                  
|Beginning balance                       | $               0
|Estimated transition expenses           | 8,141            
|Reserve for working capital
requirement | 150,000          
|Payments                                | (158,141)        
|Ending balance                          | $               0



In accordance with the provisions of SFAS 144, we have not included the results of operations of our Emergency Oxygen Service Business in the results from continuing operations. The results of operations for this business have been reflected as discontinued operations. The income (loss) from discontinued operations for the three and six months ended March 31, 2006 and 2005, consist of the following:





|                                                               | For  the Three Months Ended March 31, 2006 |  | For  the Three Months Ended March 31, 2005 |  | For  the Six Months Ended March 31, 2006 |  | For  the Six
Months Ended March 31, 2005
|-------------------------------------------------------------- | ------------------------------------------ |  | ------------------------------------------ |  | ---------------------------------------- |  | ----------------------------------------
|                                                               |                                            |  |                                            |  |                                          |  |                                         
|Revenue, Net                                                   | $               0                          |  | $    716,699                               |  | $               0                        |  | $  1,487,443                            
|                                                               |                                            |  |                                            |  |                                          |  |                                         
|Cost of Goods Sold                                             | 0                                          |  | 405,423                                    |  | 0                                        |  | 805,227                                 
|                                                               |                                            |  |                                            |  |                                          |  |                                         
|Gross Profit                                                   | 0                                          |  | 311,276                                    |  | 0                                        |  | 682,216                                 
|                                                               |                                            |  |                                            |  |                                          |  |                                         
|Total operating expenses                                       | 0                                          |  | 311,295                                    |  | 0                                        |  | 627,636                                 
|                                                               |                                            |  |                                            |  |                                          |  |                                         
|Net (loss) income operations                                   | 0                                          |  | (19)                                       |  | 0                                        |  | 54,580                                  
|                                                               |                                            |  |                                            |  |                                          |  |                                         
|Income (loss) from discontinued operations before income taxes | $               0                          |  | $           (19)                           |  | $               0                        |  | $     54,580                            





On November 8, 2004, we completed the sale of certain assets and certain liabilities comprising our Medical Products Group to Aspen Surgical Products, Inc., a Michigan corporation.



The consideration for the sale transaction consisted of $6 million in cash paid at closing and $500,000 in the form of a promissory note.  We recorded a gain on the sale of the assets of $1,504,258 ($951,484 net of tax). The gain was calculated as the proceeds less $4,472,951 in net assets, $589,650 in transaction and shut down expenses (including employee severance costs, legal fees and other professional fees).  Net assets were comprised of inventory, fixed assets, prepaid expenses, intangibles, goodwill and certain liabilities consisting primarily of accounts payable.

Page F- 16



---

We recorded $589,650 of expenses for ­­severance and other exit costs as a part of the sale of the Medical Products Group.  We made payments totaling $69,069 for the three months ended March 31, 2006 and total $589,650 are summarized as follows:



|Accrued Severance Costs     |                  
|--------------------------- | -----------------
|Beginning balance           | $               0
|Estimated expenses          | 100,000          
|Payments                    | (100,000)        
|Ending balance              | $              0 
|                            |                  
|                            |                  
|Other Exit Costs            |                  
|Beginning balance           | $               0
|Estimate shut down expenses | 50,000           
|Accrued legal, audit        | 116,859          
|Other expenses              | 322,791          
|Payments                    | (489,650)        
|Ending balance              | $               0





In connection with the Purchase Agreement, we also entered into a Transitional Services Agreement with Aspen.  Also in connection with the Purchase Agreement transactions, Mr. Kenneth Brimmer and Mr. Gary Copperud are providing Aspen certain services pursuant to an eighteen-month consulting agreement.  Mr. Brimmer is our Chief Executive Officer and a director and Mr. Copperud is our director. We and Messrs. Brimmer and Copperud also entered into a non-competition agreement with Aspen. Messrs. Brimmer and Copperud were each paid $250,000 by Aspen in connection with these agreements.  These payments were approved by our Audit Committee and our Board of Directors.



In accordance with the provisions of SFAS 144, we have not included the results of operations of our former Medical Products Group in the results from continuing operations. The results of operations for this business have been reflected as discontinued operations.  The income from discontinued operations for the three and six months ended March 31, 2006 and 2005, consist of the following:



|                                                        | For  the Three Months Ended March 31, 2006 |  | For  the Three Months Ended March 31, 2005 |  | For  the Six Months Ended March 31, 2006 |  | For  the Six
Months Ended March 31, 2005
|------------------------------------------------------- | ------------------------------------------ |  | ------------------------------------------ |  | ---------------------------------------- |  | ----------------------------------------
|                                                        |                                            |  |                                            |  |                                          |  |                                         
|Revenue, Net                                            | $               0                          |  | $               0                          |  | $               0                        |  | $   710,575                             
|                                                        |                                            |  |                                            |  |                                          |  |                                         
|Cost of Goods Sold                                      | 0                                          |  | 0                                          |  | 0                                        |  | 453,606                                 
|                                                        |                                            |  |                                            |  |                                          |  |                                         
|Gross Profit                                            | 0                                          |  | 0                                          |  | 0                                        |  | 256,968                                 
|                                                        |                                            |  |                                            |  |                                          |  |                                         
|Total operating expenses                                | 0                                          |  | 0                                          |  | 0                                        |  | 436,067                                 
|                                                        |                                            |  |                                            |  |                                          |  |                                         
|Net (loss) income operations                            | 0                                          |  | 0                                          |  | 0                                        |  | (179,098)                               
|                                                        |                                            |  |                                            |  |                                          |  |                                         
|Gain on sale of assets:                                 |                                            |  |                                            |  |                                          |  |                                         
|Sale Price                                              |                                            |  |                                            |  |                                          |  | 6,500,000                               
|Less costs and expenses                                 |                                            |  |                                            |  |                                          |  |                                         
|Accounts Receivable                                     |                                            |  |                                            |  |                                          |  | 927,376                                 
|Inventories                                             |                                            |  |                                            |  |                                          |  | 2,434,690                               
|Prepaids                                                |                                            |  |                                            |  |                                          |  | 156,056                                 
|Property and Equipment, net                             |                                            |  |                                            |  |                                          |  | 648,086                                 
|Intangibles, net                                        |                                            |  |                                            |  |                                          |  | 151,203                                 
|Deferred Debt issuance Costs                            |                                            |  |                                            |  |                                          |  | 142,236                                 
|Goodwill                                                |                                            |  |                                            |  |                                          |  | 355,563                                 
|Accounts Payable                                        |                                            |  |                                            |  |                                          |  | (342,259)                               
|Severance                                               |                                            |  |                                            |  |                                          |  | 100,000                                 
|Transaction, Legal,  Transition
and other               |                                            |  |                                            |  |                                          |  | 322,791                                 
|Total costs of sale                                     |                                            |  |                                            |  |                                          |  | 4,895,742                               
|Net gain on sale before taxes                           |                                            |  |                                            |  |                                          |  | 1,604,258                               
|Income from discontinued operations before income taxes | $               0                          |  | $               0                          |  | $               0                        |  | $ 1,425,160                             



Page F- 17



---



The table below is a consolidation of the sale of the Companys property at 13828 Lincoln Street NE, Ham Lake, Minnesota, the Emergency Oxygen Service Business and the Medical Product Groups.  In accordance with the provisions of SFAS 144, we have not included the results of operations of our former Medical Products Group and Emergency Oxygen Service Business in the results from continuing operations. The results of operations for this business have been reflected as discontinued operations. The income (loss) from discontinued operations for the three and six months ended March 31, 2006 and 2005, consist of the following:





|                                                               | For  the Three Months Ended March 31, 2006 |  | For  the Three Months Ended March 31, 2005 |  | For  the Six Months Ended March 31, 2006 |  | For  the Six
Months Ended March 31, 2005
|-------------------------------------------------------------- | ------------------------------------------ |  | ------------------------------------------ |  | ---------------------------------------- |  | ----------------------------------------
|                                                               |                                            |  |                                            |  |                                          |  |                                         
|Revenue, Net                                                   | $               0                          |  | $   716,699                                |  | $               0                        |  | $   2,198,018                           
|                                                               |                                            |  |                                            |  |                                          |  |                                         
|Cost of Goods Sold                                             | 0                                          |  | 405,423                                    |  | 0                                        |  | 1,258,833                               
|                                                               |                                            |  |                                            |  |                                          |  |                                         
|Gross Profit                                                   | 0                                          |  | 311,276                                    |  | 0                                        |  | 939,185                                 
|                                                               |                                            |  |                                            |  |                                          |  |                                         
|Total operating expenses                                       | 0                                          |  | 311,295                                    |  | 0                                        |  | 1,063,703                               
|                                                               |                                            |  |                                            |  |                                          |  |                                         
|Net (loss) income operations                                   | 0                                          |  | (19)                                       |  | 0                                        |  | (124,518)                               
|                                                               |                                            |  |                                            |  |                                          |  |                                         
|Gain on sale of assets:                                        |                                            |  |                                            |  |                                          |  |                                         
|Sale Price                                                     | 1,600,000                                  |  |                                            |  | 1,600,000                                |  | 6,500,000                               
|Less costs and expenses                                        |                                            |  |                                            |  |                                          |  |                                         
|Accounts Receivable                                            |                                            |  |                                            |  |                                          |  | 927,376                                 
|Inventories                                                    |                                            |  |                                            |  |                                          |  | 2,434,690                               
|Prepaids                                                       |                                            |  |                                            |  |                                          |  | 156,056                                 
|Property and Equipment, net                                    | 750,960                                    |  | -                                          |  | 750,960                                  |  | 648,086                                 
|Intangibles, net                                               |                                            |  |                                            |  |                                          |  | 151,203                                 
|Deferred Debt issuance Costs                                   |                                            |  |                                            |  |                                          |  | 142,236                                 
|Goodwill                                                       |                                            |  |                                            |  |                                          |  | 355,563                                 
|Accounts Payable                                               | 82,500                                     |  | -                                          |  | 82,500                                   |  | (342,259)                               
|Severance                                                      |                                            |  |                                            |  |                                          |  | 100,000                                 
|Transaction, Legal,  Transition
and other                      | 138,430                                    |  | -                                          |  | 138,430                                  |  | 322,791                                 
|Total costs of sale                                            | 971,890                                    |  | -                                          |  | 971,890                                  |  | 4,895,742                               
|Net gain on sale before taxes                                  | 628,110                                    |  | (19)                                       |  | 628,110                                  |  | 1,604,258                               
|Income (loss) from discontinued operations before income taxes | $ 628,110                                  |  | $          (19)                            |  | $ 628,110                                |  | $ 1,479,740                             







Item 2.  Managements Discussion and Analysis or Plan of Operation



Overview



STEN Corporation (STEN or we) was known as Sterion Incorporated until January 31, 2005 and prior to January 2002, we were known as Oxboro Medical, Inc.  We are a diversified business and our results reflect the impact of recent acquisitions and significant divestitures. Historically, our principal business was manufacturing and marketing medical products, the Medical Products Group. During the quarter ended December 31, 2004, we sold assets and certain liabilities relating to the Medical Products Business to Grand Rapids, Michigan-based Aspen Surgical Products, Inc. (Aspen) for $6 million in cash and a $500,000 note receivable. During the quarter ended June 30, 2005, we sold our Emergency Oxygen Service Business also referred to as our LifeSafe business to private investor for $2.45 million in cash and a $700,000 note receivable. The asset sales reflects our strategic decision to focus our management attention and resources on businesses we believe will provide better opportunities to grow value for our shareholders. Our former businesses are being accounted for in the accompanying unaudited consolidated financial statements as discontinued operations  See Note 15. We continue to manufacture the products for STERIS Corporation under a manufacturing agreement and this comprises our Contract Manufacturing Business. On July 1, 2004, our Burger Time Acquisition Corporation subsidiary completed the purchase of the assets and business operations of Burger Time. BTAC operates Burger Time, a chain of drive-thru, quick-service restaurants that focus on high-quality hamburgers offered at competitive prices.

Page F- 18



---



Results of Operations



For the Three Month Period Ended March 31, 2006 and March 31, 2005



Net sales from continuing operations consisting of BTAC and our contract manufacturing businesses for the three months ended March 31, 2006 decreased 2% to $2,104,092 from $2,147,222 in the same period of the prior year. This decrease, of $41,130, is due to lower sales in our contract manufacturing business, $599,282 as compared to $866,196 for the second quarter of fiscal 2005 and an increase in our Burger Time business, $1,504,803 as compared to $1,281,026 for the second quarter of fiscal 2005. Second quarter sales for fiscal 2006 in our contract manufacturing business were above plan but significantly lower than the corresponding quarter in fiscal 2005 due to a sales promotion run by STERIS in March of 2005 and not in 2006. The Burger Time sales increase was due to increases in same store sales of $77,569 to $1,294,154 from $1,216,585 for the second quarter of fiscal 2005 and new restaurant sales from our Watertown location which only included 2 months sales in fiscal 2005 and our Fergus Falls location which was not in our second quarter sales of fiscal 2005.



For the three months ended March 31, 2006, our gross profit was $145,796 compared to $241,008 for the corresponding period in fiscal 2005. During the three months ended March 31, 2006, Burger Time had a loss of $19,996 in gross profits or a loss of 1.32% compared to the corresponding period in 2005 and the contract manufacturing contributed $165,790 in gross profit dollars earning a 27.66% gross profit. Our gross profit percentage decreased to 6.92% for the three months ended March 31, 2006 from 11.22% in the same quarter of 2005. This decrease, of 4.30%, is attributed to Burger Times increased percentage of overall sales as compared to the corresponding period in 2005.



Selling, general and administrative expenses for the three months ended March 31, 2006 increased $164,906 to $358,848 from the three months ended March 31, 2005. During the three months ended March 31, 2006, the primary reason for the increase, as compared to the same time in fiscal 2005, was the $219,622 of additional expense related to the costs of being a public company. Some of the larger costs were the Companys annual NASDAQ fee, printing and mailing of the Companys annual report and proxy.  The Company continues to monitor these costs and will try to mitigate these expenses, as best it can, in the future.



The loss from Continuing Operations for the three-month period ended March 31, 2006 was $125,171 as compared to income from continuing operations of $36,372 for the same period in fiscal 2005.  As stated previously, the net loss is primarily the result of costs related to being a public company and Burger Time operating in its seasonally slow period.



For the Six Month Period Ended March 31, 2006 and March 31, 2005



Net sales from continuing operations consisting of BTAC and our contract manufacturing businesses for the six months ended March 31, 2006 increased 8.36% to $4,127,820 from $3,809,668 in the same period of the prior year. This increase, of $318,152, is due to better than expected sales in our Burger Time business, $2,977,620 as compared to $2,517,726 for the first six months of fiscal 2005. Our contract manufacturing business sales were $1,150,200 as compared to $1,291,942 for the corresponding six month period in fiscal 2005. The Burger Time sales increase was due to increases in same store sales of $125,966 to $2,579,251 from $2,453,285 for the second quarter of fiscal 2005 and new restaurant sales from our Watertown location which included only 2 months sales in fiscal 2005 and our Fergus Falls location which was not in our first six months sales of fiscal 2005.



For the six months ended March 31, 2006, our gross profit was $318,501 compared to $321,065 for the corresponding period in fiscal 2005. During the six months ended March 31, 2006, Burger Time contributed $55,182 in gross profits earning a 1.85% gross profit and the contract manufacturing contributed $263,319 in gross profit dollars earning a 22.89% gross profit. Our gross profit percentage decreased to 7.71% for the six months ended March 31, 2006 from 8.42% in the same period of 2005. This decrease, of 0.71%, was primarily the effect of Burger Time being a greater percentage of overall sales.



Selling, general and administrative expenses for the six months ended March 31, 2006 increased $339,928 to $654,007 from the six months ended March 31, 2005.  During the six months ended March 31, 2006, the primary reason for the increase, as compared to the same time in fiscal 2005, was the $393,487 of additional expense related to the costs of being a public company. As previously stated the Company continues to monitor these costs and will try to mitigate these expenses, as best it can, in the future.

Page F- 19



---



The loss from continuing operations for the six-month period ended March 31, 2006 was $193,208 as compared to income from continuing operations of $2,891 for the same period in fiscal 2005. The loss increase is primarily due to the added selling, general and administrative expenses. Interest income and interest expense for the six-month period ended March 31, 2006 was $104,740 and $66,192 as compared to $13,864 and $16,225 for the same period in fiscal 2005. Interest income was generated from the Companys money market and short term investments. The increase in interest expense, $49,967 was due to the mortgaging of eight Burger Time properties. See  Note 10.



Liquidity and Capital Resources



On November 15, 2005, we entered into a subscription agreement with two private investors for the sale of 222,222 shares of our common stock to each investor for cash consideration of $4.50 per share. The closing dates for the agreements were November 25, 2005 and November 30, 2005. At the closing, each investor delivered the purchase price of $999,999 for the 222,222 shares issued.  The proceeds will be used for growth opportunities.



We have typically financed our operations through internal working capital and a bank line of credit.  On May 10, 2005 we completed a permanent mortgage for several of our owned Burger Time properties during our third fiscal quarter in the total loan amount of $2,055,000 million. We believe that we have adequate capital to meet our cash requirements for the next twelve months from our internal working capital and bank line of credit.  As of March 31, 2006, we had working capital of $4,358,089 as compared to $3,799,558 at September 30, 2005, and term debt of $1,901,903 at March 31, 2006 compared to $2,679,732 at September 30, 2005. As of March 31, 2006, we had $3,565,619 in cash, cash equivalents and certificates of deposit, as compared to $3,560,653 at September 30, 2005. The increase in working capital at March 31, 2006 compared to September 30, 2005 was primarily the result of the sale of the Ham Lake property, paying down accounts payable and accrued income taxes, an advance to Site Equities International and cash proceeds from the private placement. The $750,000 line of credit, as of March 31, 2006, is available and remains unused.



In January of 2006 we used the proceeds from the sale of our Ham Lake property to repay in full its mortgage and using a tax deferral strategy we purchased our leased property in Jacksonville Texas -See Note 14.



During fiscal 2006, the Company has advanced $1,000,000 to Site Equities in the form of a note receivable.



The restaurant industry, in general, operates with a working capital deficit because most investments are in long-term restaurant operating assets.  The operation of our Burger Time business does not normally require large amounts of working capital to maintain operations since sales are for cash, purchases are on open accounts and meat and produce inventories are limited to a three-to-five day supply to assure freshness.  BTAC does not have significant levels of accounts receivable or inventory, and it receives credit from our trade suppliers.  Funds available from cash sales are not needed immediately to pay our trade suppliers and as we continue to grow our Burger Time business the cash from sales may be used for non-current capital expenditures.



Critical Accounting Policies and Estimates



Our significant accounting policies are described in Note 1 to the consolidated unaudited financial statements.  Our critical accounting policies and estimates are those both having the most impact to the reporting of our financial condition and results, and requiring significant judgments and estimates.  Our critical accounting policies include those related to (a) revenue recognition, (b) allowance for uncollectible accounts receivable, (c) inventories, (d) goodwill, intangible and other long-lived assets and (e) accounting for business combinations.



(a) Revenue Recognition and Shipping and Handling Costs  We recognize revenue in accordance with Staff Accounting bulletin No. 104 (SAB 104), Revenue Recognition. SAB 104 required revenue to be recognized when all of the following are met: a) persuasive evidence of an arrangement exists; b) delivery has occurred or services have been rendered; c) the sellers price to the buyer is fixed or determinable; and d) collectibility is reasonable assured.



We record sales revenue for the Contract Manufacturing business segment at the time all merchandise is shipped, contractual obligations have been substantially met and title and risk of loss have passed to the customer.  Revenues from the Burger Time business segment is recognized at the time the food is served.



We record amounts being charged to customers for shipping and handling as sales in accordance with Emerging Issues Task Force (EITF) Issue 00-10, Accounting for Shipping and Handling Fees and Costs.  Shipping and handling costs incurred by us related to the Medical Products Group are included in cost of goods sold.

Page F- 20



---



(b) Allowance for Uncollectible Accounts Receivable -Accounts receivable is reduced by an allowance for amounts that may become uncollectible in the future.  The estimated allowance for uncollectible amounts is based primarily on managements evaluation of the financial condition of the customer.  Future changes in the financial condition of a customer may require an adjustment to the allowance for uncollectible accounts receivable.



(c) Inventories and Related Allowance for Obsolete and Excess Inventory - Inventories are valued at the lower of cost (first-in, first-out method) or market value and have been reduced by an allowance for obsolete and excess inventories.  The estimated allowance is based on managements review of inventories on hand compared to estimated future usage and sales.



(d) Intangible and Other Long-Lived Assets -Property, equipment and intangible assets are amortized over their useful lives.  Useful lives are based on managements estimates of the period that the assets will generate revenue.  Property and equipment and intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  We believe no impairment charges need to be recorded as of March 31, 2006.  Certain assumptions and estimates are employed by management in determining the fair value of assets acquired, including goodwill and other intangible assets, and in determining whether the fair values of the applicable reporting units exceed their carrying values. The evaluation of fair value requires the use of projections, estimates and assumptions as to the future performance of the operations in performing a discounted cash flow analysis as well as assumptions regarding sales and earnings multiples that would be applied in comparable acquisitions in the industry.  Actual results could differ from these assumptions and projections resulting in us revising our assumptions and, if required, recognizing an impairment loss.



Special Note Regarding Forward-Looking Statements



Certain statements in this Form 10-QSB under Part I, Item 2., Managements Discussion and Analysis or Plan of Operation, and elsewhere in this Form 10-QSB constitute forward-looking statements which we believe are within the meaning of the Securities Act of 1933, as amended and the Securities Exchange Act of 1934, as amended.  Also, when we use words such as believes, expects, anticipates or similar expressions, we are making forward-looking statements.  Such forward-looking statements involve known and unknown risks, uncertainties, and other factors which may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements.  Some of the risks that should be considered include the following factors:



(i) We compete with numerous well established competitors in our Burger Time business having substantially greater financial resources and longer operating histories than us, which enables them to engage in substantial discounting as well as significant promotions.  While this competition is already intense, if it increases, it could have an even greater adverse impact on our revenues and profitability.



(ii) We need to continue to improve sales in all of our businesses if we are to achieve improved profitability.  Sales increases will depend, among other things, on the success of our promotion efforts and the success of other operating, sales and training initiatives, all of which are speculative.



(iii) Our Burger Time business may also be negatively impacted by other factors common to the restaurant industry such as changes in consumer tastes away from red meat and fried foods; consumer acceptance of new products; consumer frequency; increases in the costs of food, paper, labor, health care, workers compensation or energy; an inadequate number of available hourly paid employees; decreases in the availability of affordable capital resources; and/or development and operating costs.  In addition, while certain of our management has experience in the restaurant industry, we have little experience as an entity in operating restaurants.



Other factors which may negatively impact our business include, among others, adverse publicity; general economic and business conditions; availability, locations, and terms of sites for restaurant development; changes in business strategy or development plans; quality of management; availability, terms and deployment of capital; the results of financing efforts; business abilities and judgment of personnel; availability of qualified personnel; changes in, or failure to comply with, government regulations; continued NASDAQ listing; weather conditions; construction schedules; uninterrupted product supply; results of existing and future litigation and other risk factors referenced in this Form 10-QSB and in our annual report on Form 10-KSB for the year ended September 30, 2005.

Page F- 21



---



Item 3.  Controls and Procedures



(a) Disclosure Controls and Procedures.  The Companys Chief Executive Officer, Kenneth W. Brimmer, and Chief Financial Officer, Mark F. Buckrey, have evaluated the Companys disclosure controls and procedures as of the end of the period covered by this report.  Based upon this review, they have concluded that these controls and procedures are effective.



(b) Internal Control Over Financing Reporting.There have been no changes in internal control financial reporting that occurred during the fiscal period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.



We are in the process of complying with the mandates of Section 404 of the Sarbanes-Oxley Act of 2002.  The Securities and Exchange Commission recently adopted rules that delay our schedule for compliance with Section 404 until our fiscal year beginning October 1, 2005.  The regulatory agencies are continuing to study the issues surrounding compliance, particularly as it relates to smaller public companies.  We have done due diligence to understand the requirements and corresponding work necessary to successfully document our system of internal controls to the standards and satisfaction of third parties.  The potential cost of compliance with Section 404 to our shareholders in relation to the benefits, may be significant.  In considering our compliance efforts, we believe that these additional costs and expenses will confirm the existence of an effective and functioning control system.



We intend to diligently pursue implementation and compliance with the Section 404 requirements.  We do not believe it is in our shareholders best interests to incur unnecessary outsized costs in this effort as we have an existing system of centralized review and controls.  We also have an involved, hands-on senior management group with significant equity ownership in our company.  Consequently, we will make every effort to comply with the Section 404 requirements but also will attempt to minimize the expense of this effort.  As a result of this cautioned approach and the complexity of compliance, there is a risk that, notwithstanding our best efforts, we may fail to demonstrate a compliance program that fully meets the standards of Section 404 as interpreted by our independent accountants.



PART II

OTHER INFORMATION

Item 1. Legal Proceedings



On May 9, 2005, the former Chairman and CEO of the Company, Larry Rasmusson, filed suit against the Company and Aspen Surgical Products, Inc. in the Hennepin County District Court of Minnesota.  In his complaint, Mr. Rasmusson seeks damages in excess of $600,000 relating to claims that the Company has breached a License Agreement dated April 1, 1990 between the Company and Mr. Rasmusson in connection with the sale by the Company on November 8, 2004 of its Medical Products Group to Aspen Surgical Products, Inc.  The Company does not believe that Mr. Rasmusson's claims have merit and intends to vigorously defend against them.  However, the Company cannot be sure that it will prevail in this action and any adverse outcome could require the Company, among other things, to pay damages to Mr. Rasmusson.  The Company does not believe it is currently possible to calculate the potential for, or the extent of, any liabilities resulting from this claim, if any.

Page F- 22



---



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



The following table provides certain information regarding purchases made by the Company of its equity securities in the quarter covered by this report:



Issuer Purchases of Equity Securities

|Period               | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plan or Program | Maximum Number (or Approximate Dollar Value) of Shares that may yet be Purchased Under the Plans or Programs
|-------------------- | -------------------------------- | ---------------------------- | ------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------
|Jan 1  Jan 31, 2006 | 0                                | 0                            | 0                                                                              | 0                                                                                                           
|Feb 1  Feb 28, 2006 | 1,070                            | 4.80                         | 1,070                                                                          | 5,141                                                                                                       
|Mar 1  Mar 31, 2006 | 62,718                           | 4.73                         | 62,718                                                                         | 296,599                                                                                                     
|Total                | 63,788                           | 4.73                         | 63,788                                                                         | 301,740                                                                                                     



(1)

On November 8, 2004, the Company announced that its board of directors had approved a stock repurchase program authorizing the Company to repurchase up to 175,000 shares of the Companys common stock from time to time in open market transactions or in privately negotiated transactions.



Item 4. Submission Of Matters To A Vote Of Security Holders



The Companys Annual Meeting of Shareholders was held on April 6, 2006. Of the 2,128,727 shares of common stock outstanding and entitled to vote at the meeting, 2,006,184 shares were present, either in person or by proxy. The following describes the matters considered by the Companys shareholders at the Annual Meeting, as well as the results of the votes cast at the Annual Meeting.



1.

To elect one director to hold office as Class II director for a three-year term or until their respective successors have been elected and shall qualify.



Nominee

Votes





Gervaise Wilhelm

For:

1,988,840

Withheld:

17,344



Kenneth W. Brimmer, Gary Copperud, Allan D. Anderson and Jeffrey A. Zinnecker continued their respective terms as directors after the Annual Meeting.



Item 6.  Exhibits:



(a)

Exhibits:



31.1

Certification of Chief Executive Officer pursuant to Rules 13a-14 and 15d-14 of the Exchange Act.



31.2

Certification of Chief Financial Officer pursuant to Rules 13a-14 and 15d-14 of the Exchange Act.



32

Certification pursuant to 18 U.S.C. §1350.









Page F- 23



---

SIGNATURES



In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



|                   | STEN CORPORATION                                                                                        
|------------------ | --------------------------------------------------------------------------------------------------------
|Date: May 10, 2006 | By: /s/ Kenneth W. Brimmer

Kenneth W. Brimmer, Chief Executive Officer
(Principal Executive Officer)   
|Date: May 10, 2006 | By: /s/ Mark Buckrey

Mark Buckrey, Chief Financial Officer
(Principal Financial and Accounting Officer)





Page F- 24