<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON D.C., 20549

                                   ----------

                                    FORM 10-K

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

For fiscal year ended December 31, 2006          Commission File Number 33-24317

                             JORDAN INDUSTRIES, INC.
               (Exact name of registrant as specified in charter)

<TABLE>
<S>                                                          <C>
                 Illinois                                         36-3598114
     (state or other jurisdiction of                           (I.R.S. Employer
      incorporation or organization)                         Identification No.)
</TABLE>

<TABLE>
<S>                                                               <C>
      Arbor Lake Centre, Suite 550
           1751 Lake Cook Road
           Deerfield, Illinois                                       60015
(Address of Principal Executive Offices)                          (Zip Code)
</TABLE>

               Registrant's telephone number, including Area Code:
                                 (847) 945-5591

           Securities registered pursuant to Section 12(b) of the Act:

<TABLE>
<CAPTION>
                                                           Name of Each Exchange
Title of Each Class                                         on Which Registered
-------------------                                        ---------------------
<S>                                                        <C>
        None                                                        N/A
</TABLE>

     Indicate by check mark if the registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act.

                                Yes [ ]   No [X]

     Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 14 (d) of the Act.

                                Yes [X]   No [ ]

          Securities registered pursuant to Section 12 (g) of the Act:
                                      None

     Indicate by checkmark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding twelve (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 ninety (90) days.

                                Yes [X]   No [ ]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of the registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. [X].

     Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer. See definition of


                                       -1-

<PAGE>

"accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange
Act.

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

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

                                Yes [ ]   No [X]

     The aggregate market value of voting stock held by non-affiliates of the
registrant is not determinable as such shares were privately placed and there is
no public market for such shares.

     The number of shares outstanding of Registrant's Common Stock as of March
30, 2007: 100,511.2249.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      None


                                       -2-

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>        <C>                                                              <C>
PART I
Item 1.    Business                                                            4
Item 1A.   Risk Factors                                                       10
Item 1B.   Unresolved Staff Comments                                          11
Item 2.    Properties                                                         12
Item 3.    Legal Proceedings                                                  13
Item 4.    Submission of Matters to a Vote of Security Holders                13

PART II
Item 5.    Market for the Registrant's Common Equity and Related
           Stockholder Matters                                                14
Item 6.    Selected Financial Data                                            15
Item 7.    Management's Discussion and Analysis of Financial Condition
           and Results of Operations                                          16
Item 7A.   Quantitative and Qualitative Disclosures About Market Risks        28
Item 8.    Financial Statements and Supplementary Data                        29
Item 9.    Changes in and Disagreements with Accountants on Accounting
           and Financial Disclosure                                           72
Item 9A.   Controls and Procedures                                            72
Item 9B.   Other Information                                                  72

PART III
Item 10.   Directors and Executive Officers                                   73
Item 11.   Executive Compensation                                             75
Item 12.   Security Ownership of Certain Beneficial Owners and Management     76
Item 13.   Certain Relationships and Related Transactions                     77

PART IV
Item 14.   Principal Accountant Fees and Services                             81
Item 15.   Exhibits and Financial Statement Schedules                         82

           Signatures                                                         83
</TABLE>


                                       -3-

<PAGE>

Item 1. BUSINESS

Jordan Industries, Inc. ("the Company") was organized to acquire and operate a
diverse group of businesses with a corporate staff providing strategic direction
and support. The Company's continuing operations are comprised of four
businesses, Deflecto, Sate-Lite, Beemak and GramTel. The Company manages
Deflecto, Sate-Lite and Beemak as a separate business unit referred to as Jordan
Specialty Plastics.

As of December 31, 2006, the Company also owned two businesses, Valmark and
Welcome Home LLC, which have been classified as discontinued operations in the
Company's financial statements. (See Note 5 to the financial statements).

The Company believes that its businesses are characterized by leading positions
in niche industries, strong management, minimal working capital and capital
expenditure requirements and low sensitivity to technological change and
economic cycles.

The Company's business strategy is to enhance the growth and profitability of
each business, and to build upon the strengths of those businesses through
product line and other strategic acquisitions. Key elements of this strategy
have been the consolidation and reorganization of acquired businesses, increased
focus on international markets, facilities expansion and the acquisition of
complementary product lines. When, through such activities, the Company believes
that critical mass is attained in a particular industry segment, the related
companies are organized as a discreet business unit.

The following chart depicts the operating subsidiaries which comprise the net
sales of continuing operations of the Company for the year ended December 31,
2006.


                                       -4-

<PAGE>

                             Jordan Industries, Inc.
           $256.7 Million of Net Sales from Continuing Operations (1)

JORDAN SPECIALTY PLASTICS       -   Beemak
$135.1 Million of Net Sales     -   Sate-Lite
                                -   Deflecto

GRAMTEL
$2.9 Million of Net Sales

JORDAN AUTO AFTERMARKET (2)     -   Dacco
$118.7 Million of Net Sales     -   Alma
                                -   Atco

(1)  Not included in the net sales from continuing operations were the results
     of Kinetek, Seaboard and Pamco, which were sold during the year, and, due
     to the nature of each transaction, are classified as discontinued
     operations. Also excluded are the operating results of Valmark and Welcome
     Home LLC, which, while still owned at December 31, 2006, qualify for
     treatment as discontinued operations in the Company's financial statements.

(2)  The Jordan Auto Aftermarket group was sold on December 29, 2006. The nature
     of this transaction does not qualify for treatment as discontinued
     operations. Therefore, the results of operations for this segment are
     included in the consolidated results through the date of sale.


                                       -5-

<PAGE>

The Company's continuing operations were conducted through the following
businesses as of December 31, 2006:

JORDAN SPECIALTY PLASTICS

Jordan Specialty Plastics serves a broad range of wholesale and retail markets
within the highly-fragmented specialty plastics industry. The group primarily
designs, manufactures and sells (1) "take-one" point of purchase brochure,
folder and application display holders, (2) plastic injection-molded hardware
and office supply products, (3) extruded vinyl chairmats, and (4) safety
reflectors for bicycles and commercial truck manufacturers. The companies that
are part of Jordan Specialty Plastics have provided their customers with
products and services for an average of over 35 years. For the year ended
December 31, 2006, the Jordan Specialty Plastics subsidiaries generated
consolidated net sales of $135.1 million. Each of the Jordan Specialty Plastics
subsidiaries is discussed below:

Beemak Plastics. Beemak, which was founded in 1951 and acquired by the Company
in July 1989, is a manufacturer and distributor of custom point-of-purchase
displays, brochure holders and sign holders. Beemak sells its proprietary
holders and displays to approximately 3,000 customers around the world. Beemak's
net sales for 2006 were $6.9 million.

Beemak's products are both injection-molded and custom fabricated. Injection
molded products consist primarily of polystyrene plastic with production being
outsourced to affiliated companies. Custom fabrication consists primarily of
heat bent acrylic plastic sheets with processing performed in-house. Beemak also
provides silk screening of decals and logos onto the final product.

Beemak sells its products through a direct sales force and by reputation. Beemak
sells to distributors, major companies, and competitors, which resell the
product under a different name. Beemak has been successful in providing
excellent service on orders of all sizes.

The display holder industry is very fragmented, consisting of a few other known
holder and display firms and regionally-based sheet fabrication shops.

Sate-Lite Manufacturing. Sate-Lite specializes in safety reflectors for bicycles
and heavy duty commercial vehicles. Sate-Lite was founded in 1968 and acquired
by the Company in 1988. Reflectors and plastic bicycle parts accounted for 42%
of Sate-Lite's net sales in 2006. An additional 58% of 2006 net sales were
derived from other miscellaneous plastic injection molded products. Sate-Lite's
net sales for 2006 were $10.3 million, excluding sales to Deflecto and Beemak,
related parties, of $11.9 million and $1.6 million, respectively.

Sate-Lite's bicycle and truck/auto products are sold directly to a number of
OEMs. The two largest OEM customers are Shunliu and Giant Phoenix (China) which
accounted for approximately 14% of Sate-Lite's net sales in 2006.

The markets for bicycle and truck/auto parts are highly competitive. Sate-Lite
competes in these markets by being a low cost producer, offering innovative
products and by relying on its established reputation for producing high quality
plastic components in the industries served. Sate-Lite's principal competitors
in the bicycle parts market consist primarily of foreign companies and Cortina,
James King, and Accutek in the truck/auto markets.


                                       -6-

<PAGE>

Deflecto Corporation. Founded in 1960 and acquired by the Company in 1998,
Deflecto designs, manufactures and markets plastic injection-molded products for
mass merchandisers, major retailers and large wholesalers. Deflecto sells the
majority of its products in four product categories: hardware products, office
supply products, safety reflectors and disposable health care products. Hardware
products, which comprised approximately 52% of Deflecto's net sales in 2006,
include heating and cooling air deflectors, clothes dryer vents and ducts,
kitchen vents and ducts, sheet metal pipes and elbows, exhaust fittings, heating
ventilation and air conditioning registers and other widely recognized products.
Office supply products, many of which have patents and trademarks, represented
approximately 42% of net sales in 2006 and include such items as wall pockets,
literature displays, file and chart holders, business card holders, chairmats
and other top-branded office supply products. The remaining 6% of net sales are
for bicycle reflectors sold directly to a number of OEMs and commercial truck
companies and disposable health care products sold to a single distributor.
Deflecto's consolidated net sales for 2006 were $117.9 million.

Deflecto manufactures approximately 90% of its products in-house, with the
remainder outsourced to other injection molders. Deflecto efficiently manages
the mix of manufactured and outsourced product due to its ability to accurately
project pricing, cost and capacity constraints. This strategy enables Deflecto
to grow without being constrained by capacity issues.

Deflecto sells its products through an in-house salaried sales force and the use
of independent sales representatives. Deflecto has the critical mass to command
strong positions and significant shelf space with the major mass merchandisers
and retailers. In the hardware products line, Deflecto sells to major national
retailers such as Ace Hardware, Wal-Mart, Lowes and Home Depot, as well as to
heating, ventilating and air conditioning ("HVAC") and appliance part
wholesalers. Deflecto sells its office supply products line to major office
supply retailers such as Office Max and Staples, as well as to national
wholesalers, such as United Stationers and S.P. Richards. Deflecto has
established strong relationships with its customers and is known for delivering
high quality, well packaged products in a timely manner.

Competition in the hardware and office supplies business is increasing due to
the consolidation of companies serving the market. The increased competition has
forced manufacturers to improve production efficiency, product quality and
delivery. The Company believes that Deflecto's mix of manufactured and
outsourced product, and its management of this process, allows it to maintain
high production efficiency, keeping costs down and product quality high.

GRAMTEL

Gramtel. GramTel USA, Inc. was started by the Company in December 2000. GramTel
is an information technology infrastructure and disaster recovery company. It
owns and operates a state-of-the-art data center that houses clients'
business-critical computer systems, applications, and data. The facility
provides alternate sites for companies to continue operations in the event of a
disaster or emergency. GramTel leverages its infrastructure and technical staff
to support the data storage needs of businesses at a fraction of the cost that
businesses would incur to perform these tasks in-house or with higher-priced
providers. It provides the facilities, technical personnel and network
connectivity to keep the critical operations of businesses available 24 hours a
day. GramTel had net sales of $2.9 million for the year ended December 31, 2006.


                                       -7-

<PAGE>

BACKLOG

As of December 31, 2006 the Company had a backlog of approximately $4.1 million
compared with a backlog of $7.7 million as of December 31, 2005. The backlog
consists mainly of plastic products at Deflecto which management believes will
ship during 2007.

RESEARCH AND DEVELOPMENT

As a general matter, the Company operates businesses that do not require
substantial capital or research and development expenditures. However,
development efforts are targeted at certain subsidiaries as market opportunities
are identified.

PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES

The Company protects its confidential, proprietary information as trade secrets.
With some exceptions noted in the business descriptions above, the Company's
products are generally not protected by virtue of any proprietary rights such as
patents. There can be no assurance that the steps taken by the Company to
protect its proprietary rights will be adequate to prevent misappropriation of
its technology and know-how or that the Company's competitors will not
independently develop technologies that are substantially equivalent to or
superior to the Company's technology. In addition, the laws of some foreign
countries do not protect the Company's proprietary rights to the same extent as
do the laws of the United States. In the Company's opinion, the loss of any
intellectual property asset would not have a material adverse effect on the
Company's business, financial condition, or results of operations.

The Company is also subject to the risk of adverse claims and litigation
alleging infringement of proprietary rights of others. From time to time, the
Company has received notice of infringement claims from other parties. Although
the Company does not believe it infringes on the valid proprietary rights of
others, there can be no assurance against future infringement claims by third
parties with respect to the Company's current or future products. The resolution
of any such infringement claims may require the Company to enter into license
arrangements or result in protracted and costly litigation, regardless of the
merits of such claims.

EMPLOYEES

As of December 31, 2006, the Company and its subsidiaries employed approximately
1,393 people. The Company believes that its subsidiaries' relations with their
respective employees are good.

ENVIRONMENTAL REGULATIONS

The Company is subject to numerous U.S. and foreign, federal, state, provincial
and local laws and regulations relating to the storage, handling, emissions and
discharge of materials into the environment, including the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), the Clean
Water Act, the Clean Air Act, the Emergency Planning and Community Right-to-Know
Act, and the Resource Conservation and Recovery Act. Under CERCLA and analogous
state laws, a current or previous owner or operator of real property may be
liable for the costs of removal or remediation of hazardous or toxic substances
on, under, or in such property. Such laws frequently impose cleanup liability,
regardless of whether the owner or operator knew of or was responsible for the
presence of such hazardous or toxic substances and regardless of whether the
release or disposal of such substances was legal at the time it occurred.
Regulations of particular significance to the Company's ongoing operations
include those pertaining to handling and disposal of solid and hazardous waste,
discharge of process wastewater and storm water and the


                                       -8-

<PAGE>

handling or release of hazardous chemicals. The Company believes it is in
substantial compliance with such laws and regulations.

The Company generally conducts an assessment of compliance and the equivalent of
a Phase I environmental survey on each acquisition candidate prior to purchasing
a company to assess the potential for the presence of hazardous or toxic
substances that may lead to cleanup liability with respect to such properties.
The Company does not currently anticipate any material adverse effect on its
operations, financial condition or competitive position as a result of
compliance with federal, state, provincial, local or foreign environmental laws
or regulations. However, some risk of environmental liability and other costs is
inherent in the nature of the Company's business, and there can be no assurance
that material environmental costs will not arise. Moreover, it is possible that
future developments such as the obligation to investigate or cleanup hazardous
or toxic substances at the Company's property for which indemnification is not
available, could lead to material costs of environmental compliance and cleanup
by the Company.

In December of 2006, the Company sold its interests in Jordan Auto Aftermarket,
Inc. ("JAAI"). Alma Products I ("Alma"), a subsidiary of JAAI, owns two
properties in Alma, Michigan that are contaminated by chlorinated solvent and
oil contamination, the main plant on Michigan Avenue and a satellite plant on
North Court Street. When Alma acquired the two properties and other assets in
April 1999, the seller, Tracy Industries, retained full responsibility for the
continued investigation and remediation of the contaminated groundwater and soil
at the properties. The Michigan Avenue property has been the subject of
investigation by the Michigan Department of Environmental Quality, ("MDEQ"),
since 1982. By 1985, the former owner had cleaned out, closed and capped the
lagoons that were the source of the contamination and in 1992, installed a
groundwater remediation system which remains in operation. The second property
is contaminated with petroleum constituents and chlorinated solvents and the
former owner, under the supervision of the MDEQ, is investigating the scope and
extent of the contamination. In May 2003, the former owner also submitted a
remediation plan for the removal of contaminated soils deemed to be the source
of contamination. In 2004, contaminated soils were excavated and removed in
accordance with the plan.

Prior to the sale of JAAI, Alma also had received two claims for contribution to
the investigation and cleanup of waste materials at offsite locations. One is
the notice letter from the USEPA regarding the Lake Calumet Cluster site. USEPA
sent a follow-up information request letter in December 2004. The other is a
claim by TPI Petroleum for the removal or remediation of asbestos-containing
clutch plates allegedly discarded in the 1950s or 1960s at TPI's property in
Alma.

In connection with its 1999 acquisition Alma and the Company obtained
indemnification and a $1.5 million environmental escrow from the seller. Claims
for losses against the environmental escrow were to be filed by March 2004.
Prior to the deadline, Alma filed claims for the Michigan Avenue contamination,
the North Court Street contamination, the TPI Petroleum claim and the proposed
Lake Calumet Cluster site. The $1.5 million remains in escrow to cover the
outstanding claims.

Through the agreement through which it sold Alma, the Company indemnified the
new owners for any losses which they may incur for the claims filed against the
environmental escrow which are not reimbursed through the environmental escrow
or by Tracy Industries. The indemnity remains in place through December 29,
2011. The Company does not expect this indemnity to have a material impact on
its results of operations.


                                       -9-

<PAGE>

Item 1A. RISK FACTORS

CERTAIN PRINCIPALS, PARTNERS, OFFICERS, EMPLOYEES AND AFFILIATES OF THE JORDAN
COMPANY CONTROL ALL FUNDAMENTAL MATTERS AFFECTING THE COMPANY.

Certain principals, partners, officers, employees and affiliates of The Jordan
Company and their respective family members, collectively referred to as the
Jordan Group, own a majority of the outstanding common and other voting stock of
the Company. The Jordan Group has sufficient votes to elect all of the Company's
directors and control the management and financing decisions of the Company. In
addition, as owner of a majority of the outstanding common stock and other
voting stock of the Company, the Jordan Group is able to approve any action
requiring the approval of its shareholders, including the adoption of amendments
to its certificate of incorporation and the approval of mergers or sales of all
or substantially all of its assets.

THE COMPANY, THROUGH ITS RESPECTIVE SUBSIDIARIES, OPERATES IN HIGHLY COMPETITIVE
INDUSTRIES AND COMPETES WITH MANY LARGER AND BETTER CAPITALIZED COMPANIES.

Each of the business lines that the Company operates compete with a substantial
number of national, regional and local competitors, many of which have greater
financial and other resources than the Company. Many of these competitors can be
expected to continue to improve the design and performance of their products and
to introduce new products with competitive price and performance
characteristics. Although the Company believes that it has certain advantages
over its competitors, realizing and maintaining those advantages will require
continued investment by it in research and development, quality standards,
marketing and customer service and support. There can be no assurance that the
Company will have sufficient resources to continue to make those investments or
that they will be successful in maintaining those advantages. Failure to make
those investments or to maintain those advantages could have a material adverse
effect on each of its respective businesses, financial conditions and results of
operations and the Company's ability to generate cash flow to service its
obligations.

THE COMPANY'S OPERATIONS ARE SUBJECT TO SUBSTANTIAL ENVIRONMENTAL REGULATION.

The Company and its respective operating subsidiaries are subject to federal,
state, provincial, local and foreign laws, regulations and ordinances related to
the storage, use, discharge and disposal of toxic, volatile or otherwise
hazardous materials used in their respective manufacturing processes. Under
applicable environmental laws, the Company's subsidiaries may be responsible for
the remediation of environmental conditions and may be subject to associated
liabilities relating to the facilities and the land on which their facilities
are situated, regardless of whether they lease or own the facilities in
question, and regardless of whether such environmental conditions were created
by the Company, any of their respective subsidiaries, by a prior owner or tenant
or by any other person. Moreover, we anticipate that such laws and regulations
will become increasingly stringent in the future. We cannot assure you that the
need to comply with environmental laws and regulations or that environmental
conditions relating to prior, existing or future facilities and operations of
the Company's subsidiaries will not have a material adverse effect on their
respective businesses, financial conditions and results of operations.

INCREASES IN THE PRICES OF RAW MATERIALS COULD ADVERSELY AFFECT OUR
SUBSIDIARIES' OPERATIONS.

The Company's subsidiaries purchase most of the raw materials for their products
on the open market, and their sales may be affected by changes in the market
price of such raw materials. We do not generally engage in commodity hedging
transactions for raw materials. Although the Company's subsidiaries attempt to
pass on increases in the price of raw materials to their customers,


                                      -10-

<PAGE>

there have been delays in the subsidiaries' ability to pass on such increases in
the past and there can be no assurance that they will be able to do so in the
future on a timely basis, or at all. Additionally, significant increases in the
prices of the Company's subsidiaries' products due to increases in the cost of
raw materials could have a negative effect on demand for their respective
products and a material adverse effect on their respective businesses, financial
conditions and results of operations.

WE ARE HIGHLY DEPENDENT ON OUR KEY PERSONNEL.

The Company is highly dependent on a small number of executive officers and key
employees, both individually and as a group. The Company's future performance
will be substantially dependent on their ability to retain and motivate these
individuals and to attract and retain additional qualified personnel in the
future. The loss of the services of any of the Company's executive officers or
key employees or the inability to identify, hire and retain other highly
qualified technical and managerial personnel could have a material adverse
effect on their respective businesses, financial conditions and results of
operations.

WE ARE SUBJECT TO THE RISKS OF DOING BUSINESS IN FOREIGN COUNTRIES.

The Company has significant operations outside the United States. The risks of
doing business in foreign countries include:

     -    Adverse changes or greater volatility in the economies of those
          countries;

     -    Adverse effects of currency exchange controls;

     -    Adverse changes to the regulatory environment of those countries;

     -    Adverse changes to the tax laws and regulations of those countries;

     -    Restrictions on the withdrawal of foreign investment and earnings;

     -    The nationalization of our businesses;

     -    The potential instability of foreign governments, including from
          domestic insurgency movements; and

     -    The challenge of managing culturally and geographically diverse
          operations.

Operations in foreign countries are also subject to economic uncertainties,
including, among others, risk or renegotiation or modification of existing
agreements or arrangements with governmental authorities, exportation and
transportation tariffs, foreign exchange restrictions and changes in taxation
structure.

THE COMPANY HAS A SUBSTANTIAL AMOUNT OF DEBT MATURING IN 2007.

The Company has Exchange Notes with a principal amount of $173.3 million,
maturing in April of 2007 and Senior Notes with a principal amount of $27.4
million, maturing in August of 2007. While the Company is currently evaluating
multiple scenarios for either the repayment or refinancing of that debt prior to
its maturity date, there can be no assurance that the Company will complete the
necessary transactions prior to that date. Should the Company be unable to repay
or refinance this debt prior to its maturity date, the Company would risk a
default of its debt covenants and significant stress on its access to cash for
ongoing operations. Such defaults or reduction in available cash could have a
material adverse effect on the Company's business and financial condition and
results of operations.

Item 1B. UNRESOLVED STAFF COMMENTS

Not applicable to the Company.


                                      -11-

<PAGE>

Item 2. Properties

The Company leases approximately 13,411 square feet of office space for its
headquarters in Illinois. The principal properties of each subsidiary of the
Company at December 31, 2006, and the location, the primary use, the capacity,
and ownership status thereof, are set forth in the table below.

<TABLE>
<CAPTION>
                                                                         SQUARE   OWNED/
COMPANY LOCATION          USE                                             FEET    LEASED
----------------          ---                                           -------   ------
<S>                       <C>                                           <C>       <C>
Beemak
   Cerritos, CA           Manufacturing/Administration/Assembly          40,000   Leased

Deflecto
   Indianapolis, IN       Manufacturing/Administration/Assembly/Other   165,000   Leased
   Fishers, IN            Distribution                                  134,000   Leased
   St. Catherines, Ont.   Manufacturing/Administration/Other             53,000   Owned
   St. Catherines, Ont.   Administration/Assembly                        88,700   Leased
   Pearland, TX           Manufacturing/Administration/Assembly          80,000   Leased
   Newport, Wales         Manufacturing/Administration/Assembly/Other    92,000   Owned
   Aurora, Ontario        Manufacturing/Administration/Assembly          33,000   Leased
   Dover, OH              Manufacturing/Administration                   56,000   Leased
   Mira Loma, CA          Administration/Warehouse                       44,000   Leased

Sate-Lite
   Niles, IL              Manufacturing/Administration                   71,000   Leased
   Shunde, Guangdong      Manufacturing/Administration/Assembly         165,800   Leased

GramTel
   South Bend, IN         Sales/Administration/Other                     19,000   Owned

Cape Craftsmen (1)
   Elizabethtown, NC      Warehouse/Administration                      175,000   Leased
   Wilmington, NC         Administration                                  6,250   Leased

Valmark (1)
   Livermore, CA          Manufacturing/Administration                   74,200   Leased

Welcome Home (1)
   Wilmington, NC         Administration/Storage                         10,000   Leased
   Wilmington, NC         Administration/Warehouse                       12,000   Leased
</TABLE>

----------
(1)  These companies have been classified as discontinued operations in our
     financial statements ending December 31, 2006, however at year end, the
     Company still occupied these locations and had remaining lease obligations
     related to these sites.


To the extent that any of the Company's existing leases expire in 2007, the
Company believes that its existing leased facilities are adequate for the
operations of the Company and its subsidiaries.


                                      -12-

<PAGE>

Item 3. LEGAL PROCEEDINGS

The Company's subsidiaries are parties to various legal actions arising in the
normal course of their businesses. The Company believes that the disposition of
such actions individually or in the aggregate will not have a material adverse
effect on the consolidated financial position or results of operations of the
Company.

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

     No matters were submitted to a vote of security holders during the fiscal
year ended December 31, 2006.


                                      -13-
<PAGE>

                                     Part II

Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS

At December 31, 2006, the only authorized, issued and outstanding class of
capital stock of the Company is Common Stock. There is no established public
trading market for the Company's Common Stock.

(a)  At December 31, 2006, there were 22 holders of record of the Company's
     Common Stock.

(b)  The Company has not declared any cash dividends on its Common Stock since
     the Company's formation in May 1988. The Indentures, dated as of February
     18, 2004 and February 16, 2005, by and between the Company and U.S. Bank
     National Association, as Trustee, (the "Trustee") with respect to the 13%
     Senior Secured Notes, the Indentures dated as of July 25, 1997 and March
     22, 1999, by and between the Company and the Trustee with respect to the 10
     3/8% Senior Notes and the Indenture dated as of April 2, 1997, by and
     between the Company and the Trustee with respect to the 11 3/4% Senior
     Subordinated Discount Debentures (collectively the "Indentures") contain
     restrictions on the Company's ability to declare or pay dividends on its
     capital stock. The Indentures each prohibit the declaration or payment of
     any dividends or the making of any distribution by the Company or any
     Restricted Subsidiary (as defined in the Indentures) other than dividends
     or distributions payable in stock of the Company or a Subsidiary and other
     than dividends or distributions payable to the Company.


                                      -14-

<PAGE>

Item 6. SELECTED FINANCIAL DATA

The following table presents selected operating, balance sheet and other data of
the continuing operations of the Company and its subsidiaries as of and for the
five years ended December 31, 2006. The financial data has been derived from the
consolidated financial statements of the Company and its subsidiaries. As a
result of the sale of JII Promotions in January 2004, the sale of Pamco in July
2006, the sale of Seaboard in October 2006 and the Company's intent to sell
Valmark during 2007, the entire Specialty Printing and Labeling segment has been
reported as discontinued operations. Due to the sale of Kinetek in November
2006, this segment has also been reported as discontinued operations. In
December 2006, Welcome Home LLC, a wholly owned subsidiary of the Company, sold
certain assets and ceased all other operations which caused it to also be
reported as a discontinued operation. The guidelines set forth in Statement of
Financial Accounting Standards ("SFAS") No. 144 were used to determine the
proper classification of these entities. All subsidiaries and business segments
classified as discontinued, have been excluded from the information shown below.

<TABLE>
<CAPTION>
                                                     Year Ended December 31,
                                                     (Dollars in thousands)
                                    --------------------------------------------------------
                                      2006        2005        2004        2003        2002
                                    --------   ---------   ---------   ---------   ---------
                                                Restated    Restated    Restated    Restated
<S>                                 <C>        <C>         <C>         <C>         <C>
OPERATING DATA:
Net sales .......................   $256,678   $ 278,856   $ 293,359   $ 274,008   $ 275,473
Cost of sales, excluding
   depreciation .................    206,373     217,319     224,681     205,006     191,434
                                    --------   ---------   ---------   ---------   ---------
Gross profit, excluding
   depreciation .................     50,305      61,537      68,678      69,002      84,039
Selling, general and
   administrative expense,
   excluding depreciation .......     51,080      52,318      52,085      54,950      64,014
Operating (loss) income .........     (2,544)      8,129      15,411       1,285      (2,756)
Interest expense (1) ............     16,005      18,644      30,008      47,936      53,445
Interest income .................       (111)       (111)     (2,098)     (1,212)       (843)
(Loss) income from continuing
   operations before income
   taxes (2) ....................    (10,473)    (10,917)    (11,378)    (41,347)     32,524
(Loss) income from continuing
   operations ...................    (12,529)    (12,459)    (12,970)    (43,018)     30,989

BALANCE SHEET DATA (AT END
   OF PERIOD):
Cash and cash equivalents .......    177,677      15,699      15,412      15,517      19,717
Working capital (4) .............    (31,400)     34,668      26,908      29,320      34,369
Total assets ....................    311,729     611,367     662,406     690,632     703,510
Long-term debt (less
   current portion) .............     97,987     333,198     390,826     427,907     416,314
Net capital deficiency (3) ......    (91,553)   (251,361)   (242,981)   (227,363)   (201,558)
</TABLE>

(1)  Interest expense decreased in 2004, 2005 and 2006 primarily due to the
     treatment of the Company's Exchange Offer as a troubled debt restructuring
     pursuant to SFAS No. 15. In addition, certain of the Company's 2009
     Debenture note holders entered into Modification and Waiver Agreements
     which provide for either a reduction in their stated maturity value and a
     reduction of their applicable interest rate or a waiver of their right to
     receive current interest payments. See Note 12 to the financial statements.

(2)  Income from continuing operations before income taxes in 2002 includes a
     gain on the extinguishment of long-term debt of $88,882, a gain on the
     liquidation of a subsidiary of $1,888, a gain on the sale of a facility of
     $1,431, and the write-down of certain assets held for sale of $1,800. Loss
     from continuing operations before income taxes in 2003 includes a loss on
     the sale of a division of a subsidiary of $401. Loss from continuing
     operations before income taxes in 2004 includes income from the sale of
     three affiliates of $7,954. Loss from continuing operations before income
     taxes in 2005 includes income from the sale of an affiliate of $4,410,
     income from the refinancing of an affiliate of $8,584, gain on sale of a
     subsidiary of $251, and $14,727 of income related to the sale of
     affiliates. Offsetting these gains was a goodwill impairment loss of
     $20,862. Loss from continuing operations before income taxes in 2006
     includes income from the sale of fixed assets of $8,863.

(3)  No cash dividends on the Company's Common Stock have been declared or paid.

(4)  The negative working capital in 2006 is the result of the reclassification
     of $27.4 million of Jordan Industries' Senior Notes and $179.0 million of
     JII Holdings Exchange Notes from long-term to current based on their
     maturity date. Working capital excludes the assets and liabilities of
     discontinued operations.


                                      -15-

<PAGE>

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
     OF OPERATIONS

     HISTORICAL RESULTS OF OPERATIONS

Summarized below are the historical net sales, operating income and operating
margin (as defined below) for each of the Company's businesses and business
units for the fiscal years ended December 31, 2006, 2005, and 2004. As a result
of the sale of JII Promotions in January 2004, the sale of Pamco in July 2006,
the sale of Seaboard in October 2006 and the Company's intent to sell Valmark
during 2007, the entire Specialty Printing and Labeling segment has been
reported as discontinued operations. Due to the sale of Kinetek in November
2006, this segment has also been reported as discontinued. In December 2006,
Welcome Home LLC, a wholly owned subsidiary of the Company, sold certain assets
and ceased all other operations which caused it to also be reported as a
discontinued operation. The guidelines set forth in Statement of Financial
Accounting Standards ("SFAS") No. 144 were used to determine the proper
classification of these entities. All subsidiaries and business segments
classified as discontinued, have been excluded from the information shown below.
This discussion should be read in conjunction with the historical consolidated
financial statements and the related notes thereto contained elsewhere in this
Annual Report.

<TABLE>
<CAPTION>
                                                               Year ended December 31,
                                                          --------------------------------
                                                            2006        2005        2004
                                                          --------    --------    --------
                                                               (Dollars in thousands)
<S>                                                       <C>         <C>         <C>
NET SALES FROM CONTINUING OPERATIONS:
Jordan Specialty Plastics                                 $135,128    $156,593    $147,665
Jordan Auto Aftermarket (3)                                118,655     119,171     141,862
GramTel                                                      2,895       3,092       3,832
                                                          --------    --------    --------
   Total                                                  $256,678    $278,856    $293,359
                                                          ========    ========    ========
OPERATING (LOSS) INCOME FROM CONTINUING OPERATIONS (1):
Jordan Specialty Plastics                                 $  2,790    $  2,662    $  9,832
Jordan Auto Aftermarket(3)                                  (8,598)    (24,101)      3,783
GramTel                                                         29        (158)       (101)
                                                          --------    --------    --------
   Total                                                  $ (5,779)   $(21,597)   $ 13,514
                                                          ========    ========    ========
OPERATING MARGIN OF CONTINUING OPERATIONS (2):
Jordan Specialty Plastics                                      2.1%        1.7%        6.7%
Jordan Auto Aftermarket(3)                                    (7.2%)     (20.2%)       2.7%
GramTel                                                        1.0%       (5.1%)      (2.6%)
Combined                                                      (2.3%)      (7.7%)       4.6%
</TABLE>

(1)  Before corporate income of $3,235, $29,726, and $1,897 for the years ended
     December 31, 2006, 2005, and 2004, respectively.

(2)  Operating margin is operating income divided by net sales.

(3)  The Jordan Auto Aftermarket group was sold on December 29, 2006. The nature
     of this transaction does not qualify for treatment as discontinued
     operations. Therefore, the results of operations for this segment are
     included in the consolidated results of continuing operations.


                                      -16-

<PAGE>

CONSOLIDATED OPERATING RESULTS. (See Consolidated Statements of Operations).

For the purpose of discussing the continuing consolidated results of operations,
the following businesses are included in the Company's income statement during
2006. Jordan Specialty Plastics includes Deflecto, Sate-Lite and Beemak and is
included in continuing operations for all periods presented. Jordan Automotive
Aftermarket was sold on December 29, 2006 and does not meet the qualifications
of a discontinued business segment under Statement of Financial Accounting
Standards ("SFAS") No. 144, therefore, the results of operations for the three
operating companies in this segment, Dacco, Alma and Atco, are included in the
Company's results from continuing operations in all periods presented up to
their sale date of December 29, 2006. GramTel is included in continuing
operations for all periods presented.

2006 Compared to 2005. Net sales from continuing operations decreased $22.2
million or 8.0%, to $256.7 million for 2006 from $278.9 million for 2005. The
decrease in sales was primarily due to reduced sales in the Jordan Specialty
Plastics segment and to a lesser extent, declines in the Jordan Auto Aftermarket
segment. The sales decline at Jordan Specialty Plastics was driven by reduced
sales of certain hardware products to the wholesale distribution channel due to
the limited availability of insulation material used in the products, offset
partially by sales growth in office products and reflector products. Jordan
Specialty Plastics had improved success with passing along raw material
inflation through increased selling prices, most of which did not become
effective until the second half of the year. Sales decline at Jordan Automotive
Aftermarket is primarily the result of a 27% decrease in the sales of torque
converters to original equipment manufacturers. In addition, better warranty
experience on new vehicles has also reduced demand for torque converter
replacements.

Operating income from continuing operations decreased $10.6 million, to a loss
of $2.5 million for 2006 from income of $8.1 million for 2005. The most
significant decrease in operating income was due to income related to the
refinancing of an affiliate of $8.0 million in 2005 and income of $14.7 million
in 2005 from the reversal of reserves previously recorded against the
receivables from JIR Broadcast and JIR Paging which were recorded in previous
years and were no longer necessary at December 31, 2005 as these receivables
were deemed fully collectible. This decrease was offset by increased operating
income at Jordan Automotive Aftermarket due to improved results at Alma Products
operations, the impact of Atco's Coolstar acquisition and a non-cash charge of
$8.0 million in 2006 related to the write down of certain air conditioning
compressor inventory due to the company's decision to exit this product line
compared to the goodwill impairment charge of $20.9 million in 2005. The
increased operating income at Jordan Auto Aftermarket was partially offset by
increased operating costs associated with recently opened DACCO stores and
charges associated with the closing of DACCO's Huntland facility. In addition,
increased operating income at Jordan Specialty Plastics benefited from selling
price increases and charges of approximately $1.0 million recorded in the second
quarter of 2005 for increased accruals and reserves in foreign operations. These
increases in operating income at Jordan Specialty Plastics were offset by the
reduced operating income associated with lower hardware product sales.

2005 Compared to 2004. Net sales from continuing operations decreased $14.5
million, or 4.9%, to $278.9 million for 2005 from $293.4 million for 2004. The
decrease in sales was primarily due to a 16.0% decline in the Jordan Automotive
Aftermarket segment. The discontinuation of business with a large customer in
the Automotive Aftermarket segment represented $18.3 million of the sales
decrease and was the primary reason for the precipitous sales decline in this
segment. The decrease in sales was partially offset by solid growth at Jordan
Specialty Plastics, which grew 6.0%. The improved economy helped the Jordan
Specialty Plastics segment, but most of the growth in this segment continues to


                                      -17-

<PAGE>

come from the introduction of new products and market share gains in several
niche markets.

Operating income from continuing operations decreased $7.3 million, or 47.3%, to
$8.1 million for 2005 from $15.4 million for 2004. Operating income, excluding
the impact of the goodwill impairment charges of $20.9 million for 2005, income
from the sale of affiliates of $4.4 million for 2005 and $8.0 million for 2004,
proceeds from the refinancing of an affiliate of $8.6 million for 2005 and
income in 2005 of $14.7 million from the reversal of reserves previously
recorded against the receivables from JIR Broadcast and JIR Paging would have
decreased $6.1 million to $1.3 million in 2005 compared with similarly adjusted
operating income of $7.4 million for 2004.

The decrease in operating income, excluding goodwill impairment charges and
income from affiliate transactions, was primarily due to decreases at Jordan
Auto Aftermarket and Jordan Specialty Plastics. Raw material inflation continued
to challenge product margins at Jordan Specialty Plastics although to a lesser
degree than in the prior year. The operating income related to the Jordan Auto
Aftermarket climate control product line was adversely impacted by the much
lower sales volume described above. The Automotive Aftermarket segment
management team worked diligently to reduce the cost structure in the climate
control product lines in response to significantly lower sales volume. Operating
income for 2005 was also adversely impacted by costs associated with product
transitions and plant rationalizations at Jordan Specialty Plastics.

Income taxes - See Note 14 of to the financial statements.

JORDAN SPECIALTY PLASTICS. As of December 31, 2006 the Jordan Specialty Plastics
group consisted of Sate-Lite, Beemak, and Deflecto.

2006 Compared to 2005. Net sales decreased $21.5 million, or 13.7%, to $135.1
million for 2006 from $156.6 million for 2005. The decrease in sales was driven
by reduced sales of hardware products through the wholesale distribution channel
due to the limited availability of insulation material used in its products.
This decline was partially offset by the impact of a stronger economy, the
introduction of several new products, market share gains, and selling price
increases. Sales were up significantly at several of the large office products
distributors. Continued sales growth in Asia also contributed to the increased
sales of office products. Sales of bike related products and safety reflectors
for commercial trucks also increased from prior year. Throughout the year,
Jordan Specialty Plastics has experienced improved success with passing along
raw material inflation through increased selling prices, particularly in the
second half of the year.

Operating income increased $0.1 million, or 4.8%, to $2.8 million for 2006 from
$2.7 million for 2005. Operating income increased as a result of increased
selling prices and improved operational performance. Also reflected in the
improved operating income are charges recorded in the second quarter of 2005 of
approximately $1.0 million for increased accruals and reserves in foreign
operations. Inefficiencies associated with the transition of the Niles
manufacturing operations to Indianapolis and China continued through most of the
first quarter and negatively impacted 2006 results. The Company continues to
pursue cost reduction initiatives and price increases to overcome the increased
raw material costs.

2005 Compared to 2004. Net sales increased $8.9 million, or 6.0%, to $156.6
million for 2005 from $147.7 million for 2004. The increased sales were the
result of a stronger economy, the introduction of several new products, market
share gains, and selling price increases which only partially offset the
increase in raw material costs. Increased sales of Office Products, Reflectors
and Hardware Products were the largest contributors to the 2005 sales increase.


                                      -18-

<PAGE>

Revenues were up significantly at several of the superstore retailers for both
hardware and office products as a result of market share gains and the
introduction of several new products. Chairmat sales increased over 16% for 2005
with increased market shares at superstores, distributors, and international
distributors. Increased sales of bike related products and safety reflectors for
commercial trucks also contributed to the overall sales growth. Sales of certain
hardware products to the wholesale distribution channel were negatively impacted
by the limited availability of insulation material used in the product. The
increased sales of office products continue to be partially offset by lower
selling prices of private label office products as super stores migrate to
private labeling strategies. JSP was successful in passing along a much greater
percentage of the raw material price increases in 2005 as compared with 2004,
largely offsetting the carry-over effect of the significant inflation
experienced in the second half of 2004.

Operating income decreased $7.2 million, or 72.9%, to $2.7 million for 2005 from
$9.8 million for 2004. The customer sales mix and to a lesser extent raw
material inflation experienced in 2005 both contributed to the decrease in
operating income. In addition, costs incurred in 2005 include expenses
associated with the closing of the Niles manufacturing operations and start up
costs in Indianapolis associated with the transferred products. Costs associated
with other product transitions and business reorganizations were also expensed
in 2005 and negatively impacted operating income. JSP recorded expenses of
approximately $1.0 million in the second quarter of 2005 primarily due to
increased accruals and reserves in foreign operations. The Company continues to
pursue cost reduction initiatives and price increases to overcome the increased
raw material costs.

JORDAN AUTO AFTERMARKET. The Jordan Auto Aftermarket group was sold on December
29, 2006. Operations for this group are included in the financial results of the
Company through the date of sale. As of the date of sale, the Jordan Auto
Aftermarket group consisted of Dacco, Alma, and Atco.

2006 Compared to 2005. Net sales decreased $0.5 million, or 0.4%, to $118.7
million for 2006 from $119.2 million for 2005. The primary reason for the
decrease in sales was a 27% decrease in sales of torque converters to original
equipment manufacturers. Special sales incentives offered by our largest
customer to their customers in the fourth quarter of 2005 negatively impacted
2006 sales by increasing demand abnormally in 2005. Better warranty experience
on new vehicles has also reduced demand for torque converter replacements. In
addition, Dacco continues to open new stores in selected geographic regions
which have offset a general market decline for 2006. Offsetting these decreases
was increased sales of the evaporator product line acquired from Coolstar at the
end of the third quarter of 2005. Sales of air compressors increased 9.4% in
2006 primarily as a result of share gains with targeted wholesale distributors.
Sales of tubing assemblies and fittings for the truck market were up
approximately 27% from prior year due to a stronger economy and many companies
updating their fleets in advance of the new emissions standards set to become
effective in 2007. Hose assemblies and AC fittings sales were also stronger than
prior year due to share gains and a special military order.

Operating income increased $15.5 million to a loss of $8.6 million for 2006 from
a loss of $24.1 million for 2005. The most significant reason for the increase
in operating income was the result of a non-cash pretax goodwill impairment
charge of $20.9 million recorded in 2005. Operating income excluding the impact
of the goodwill impairment charge would have decreased $5.4 million to an
operating loss of $8.6 million in 2006 compared to an operating loss of $3.2
million in 2005. The decrease from prior year is primarily attributable to a
non-cash charge of $8.0 million to write down the value of inventory associated
with the remanufacture and production of air conditioning compressor components.
The Company decided to exit this line of business due to low profitability
margins in the product segment.


                                      -19-

<PAGE>

2005 Compared to 2004. Net sales decreased $22.7 million, or 16.0%, to $119.2
million for 2005 from $141.9 million for 2004. Alma's discontinuation of
business with a large customer in the climate control market represented $18.3
million of the sales decrease and was the primary reason for the precipitous
sales decline. Sales of torque converters to original equipment manufacturers
decreased only slightly in 2005 as compared with the prior year and were
significantly higher in the fourth quarter of 2005 compared with the prior year.
Sales of air compressors decreased only slightly as compared with the prior year
after excluding the impact of the discontinuation of business with the large
retailer as described above. Sales of torque converters to the non-OEM
automotive aftermarket declined $3.3 million or 5.8% in 2005 compared with the
prior year. The prolific hurricane season and special new car incentive programs
from the domestic automotive manufacturers partially drove lower sales of torque
converters in the non-OEM aftermarket segment. This decrease was partially
offset by the introduction of new torque converter and transmission products and
the continued expansion of new DACCO retail distribution centers in targeted
locations. Sales of tubing assemblies and fittings for the truck market were up
over 30% for 2005 due to a stronger economy and many companies updating their
fleets in advance of the new emissions standards set to become effective in
2007.

Operating income decreased $27.9 million to an operating loss of $24.1 million
for 2005 from operating income of $3.8 million for 2004. The most significant
decrease in operating income was the result of a non-cash pretax goodwill
impairment charge of $20.9 million recorded in 2005. Operating income, excluding
the impact of the goodwill impairment charge, would have decreased $7.0 million
to an operating loss of $3.2 million in 2005 compared with operating income of
$3.8 million for 2004.

The sales decline in the torque converter non-OEM aftermarket segment had a
significant impact on the decline in operating income specifically due to the
high fixed cost nature of the business. In addition, operating income was
negatively impacted by a contractual price reduction for a large customer and
production inefficiencies resulting from consigned parts shortages in the torque
converter business earlier in the year. The operating income related to the
climate control product line was adversely impacted by the much lower sales
volume described above. Partially in response to the reduced sales volume,
management initiated cost reductions through lean manufacturing, headcount
reductions and other cost reduction initiatives, positioning the business to
pursue growth opportunities. The decreases in operating income for the OE torque
converter and climate control segments were nominally offset by increased
operating income associated with the sales of tubing assemblies and fittings in
the truck market.

GRAMTEL. As of December 31, 2006, GramTel is the only business remaining in what
was previously referred to as the Consumer and Industrial Products segment.
Cho-Pat was a business previously included in this segment until its sale date
in March of 2005. Welcome Home LLC, which was also a business included in this
segment, was wound down as of December 31, 2006. The circumstances surrounding
the shut down of Welcome Home LLC qualifies for classification as a discontinued
operation and has therefore been removed from the Company's continuing
operations for all periods presented.

2006 Compared to 2005. Net sales decreased $0.2 million, or 6.4%, to $2.9
million for 2006 from $3.1 million for 2005. Cho-Pat was sold in March of 2005
and represents $0.4 million of the sales decrease. Sales at GramTel increased
$0.2 million due to the acquisition of several new customers.


                                      -20-

<PAGE>

Operating income increased $0.2 million, to break even for 2006 from an
operating loss of $0.2 million in 2005. Increased operating income at GramTel of
$0.3 million is the result of higher sales volumes and various cost containment
measures. Partially offsetting this increase was the loss of $0.1 million of
operating income at Cho-Pat in 2005 prior to its sale.

2005 Compared to 2004. Net sales decreased $0.7 million, or 19.3%, to $3.1
million for 2005 from $3.8 million for 2004. Cho-Pat was sold in March of 2005
and represents $1.3 million of the sales decrease in 2005 as compared with prior
year. GramTel's sales increased $0.6 million due to new customer contracts for
data warehousing services.

Operating income decreased $0.1 million to a loss of $0.2 million for 2005 from
an operating loss of $0.1 million for 2004. The sale of Cho-Pat in March of 2005
attributed to the entire decrease of $0.1 million.

LIQUIDITY AND CAPITAL RESOURCES

The Company had negative working capital of $31.4 million at the end of 2006
compared to positive working capital of $34.7 million at the end of 2005. The
negative working capital in 2006 is the result of the reclassification of $27.4
million of Jordan Industries' Senior Notes and $179.0 million of JII Holdings
Exchange Notes from long-term to current based on their maturity date.
Currently, the Company is contemplating various avenues of repaying and/or
refinancing this debt, and management is confident that it will do so prior to
its maturity. If the Company is unable to refinance or enter into a transaction
that allows it to pay off this debt then there is substantial doubt about the
Company's ability to continue as a going concern.

The Company has acquired businesses through leveraged buyouts, and, as a result,
has significant debt in relation to total capitalization. See "Item 1 -
Business." See Note 12 to the Consolidated Financial Statements.

Management expects modest growth in net sales and operating income of its
remaining businesses in 2007. Capital spending levels in 2007 are anticipated to
be consistent with 2006 levels and, along with working capital requirements,
will be financed internally from operating cash flow. Operating margins and
operating cash flow are expected to be favorably impacted by ongoing cost
reduction programs, price increases and sales growth. Management believes that
the Company's cash on hand and anticipated funds from operations in conjunction
with opportunistic sales of assets, refinancings or market transactions will be
sufficient to cover its working capital, capital expenditures, debt service
requirements and other fixed charge obligations for at least the next 12 months.

The Company is, and expects to continue to be, in compliance with the provisions
of its Indentures.

None of the subsidiaries require significant amounts of capital spending to
sustain their current operations or to achieve projected growth.

Net cash provided by operating activities for the year ended December 31, 2006
was $17.7 million compared to $14.8 million provided by operating activities in
2005.

Net cash provided by investing activities for the year ended December 31, 2006
was $538.6 million compared to $25.1 million provided by investing activities in
2005. In 2006, net cash provided by investing activities primarily includes
$464.3 million of proceeds from sales of discontinued operations, $42.8 million
from the sale of a subsidiary, $29.6 million from the sale of


                                      -21-

<PAGE>

affiliates and $11.4 million from the sale of certain assets, of which $8.9
million related to the sale of non-operating assets. This is compared to $1.0
million of proceeds from the sale of discontinued operations, $6.6 million from
the sale of an affiliate, $1.2 million in proceeds from the sale of a
subsidiary, $9.4 million from sale of an affiliate promissory note and $15.0
million in proceeds from a refinancing transaction executed by an affiliate in
2005.

Net cash used in financing activities for the year ended December 31, 2006 is
$393.7 million compared to $38.0 million used in financing activities in 2005.
The increase in cash used in financing activities is primarily due to higher
repayments of long-term debt, including $296.9 million of debt related to
Kinetek, and net repayments under revolving credit facilities in 2006.

On December 29, 2006, the Company and its subsidiaries extended its credit
agreement with Wachovia Capital Finance ("Wachovia"), under which the Company is
able to borrow up to $35.0 million, restricted by the value of certain assets,
to fund acquisitions, provide working capital and for other general corporate
purposes. The credit agreement matures in 2009. The agreement is secured by a
first priority security interest in substantially all of the Company's assets.
As of December 31, 2006, the Company had approximately $13.7 million of
available funds under this arrangement. (See Note 12 to the consolidated
financial statements.)

The Company may, from time to time, use cash, including borrowings under its
credit agreements, to purchase either its 11 3/4% Senior Subordinated Discount
Debentures due 2009, its 10 3/8% Senior Notes due 2007, or its 13% Exchange
Notes due 2007, or any combination thereof, through open market purchases,
privately negotiated purchases or exchanges, tender offers, redemptions or
otherwise. Additionally, the Company may, from time to time, pursue various
refinancing or financial restructurings, including pursuant to current
solicitations and waivers involving those securities, in each case, without
public announcement or prior notice to the holders thereof, and if initiated or
commenced, such purchases or offers to purchase may be discontinued at any time.
On January 12, 2007, the Company, pursuant to a voluntary redemption,
repurchased $125.0 million face value of its 13% Exchange Notes due 2007. The
proceeds from the Company's sale of Kinetek in November 2006 was the primary
source of funding for this redemption. The Company will record a gain of $4.1
million during the first quarter of 2007 related to this transaction.

The Company has experienced operating losses in recent years and has used cash
in operating activities. Additionally, at December 31, 2006, the Company has
negative working capital of $31.4 million. This has caused the Company's
executive management to evaluate various options to improve the Company's
liquidity. To this end, the Company has restructured some of its outstanding
debt through the Exchange Offer discussed below and in Note 12 to the financial
statements and the Modification and Waiver Agreements also discussed below and
in Note 12 to the financial statements. The effect of these transactions has
been to reduce cash paid for interest in the current year as well as to provide
for further reductions in debt maturity payments if certain financial
performance is not achieved. In addition, the Company expects improved operating
performance in all remaining businesses as compared to the prior year.
Specifically, new product development and the continued shift of manufacturing
to China in the Jordan Specialty Plastics group are expected to improve results.
Further, the Company has evaluated its holdings of investments in affiliates
(See Note 8) and, when appropriate, will sell certain investments, similar to
the sale of the Company's investments in DMS Holdings Inc, Mabis Healthcare
Holdings Inc., Flavor and Fragrance Holdings Inc. and JIR Broadcast, Inc. as
described in Note 16 to the financial statements. The


                                      -22-

<PAGE>

Company believes that through its efforts discussed above, in conjunction with
opportunistic sales of assets, refinancings or market transactions, the Company
will have sufficient liquidity to meet its obligations in the coming year.

On February 18, 2004, the Company completed an Exchange Offer, whereby it
exchanged $173.3 million of new Senior Notes (the "Exchange Notes") for $104.8
million of 2007 Seniors and $142.8 million of New 2007 Seniors (collectively,
"Old Senior Notes"). The Exchange Notes were co-issued by JII Holdings LLC, a
wholly owned subsidiary of the Company, and its wholly owned subsidiary, JII
Holdings Finance Corporation. The Exchange Notes bear interest at 13% per annum
which is payable semi annually on February 1 and August 1 of each year, and
mature on April 1, 2007. As discussed above, $125.0 million of these notes were
redeemed at their full face value on January 12, 2007. The notes that were
exchanged bore interest at 10 3/8% per annum and paid interest semi annually on
February 1 and August 1. The remaining Old Senior Notes mature on August 1,
2007.

The Exchange Offer was accounted for as a troubled debt restructuring in
conformity with Statement of Financial Accounting Standards No. 15 "Accounting
by Debtors and Creditors for Troubled Debt Restructurings" (SFAS No. 15). SFAS
No. 15 requires that, when there is a modification of terms such as this, if the
total debt service of the new debt is less than the carrying amount on the
balance sheet of the old debt, the carrying amount should be reduced to the
total debt service amount. This reduction resulted in a gain of $2.0 million,
which was required by SFAS No. 15 to be offset by fees incurred on the
transaction. Fees of $7.5 million which were in excess of the gain were recorded
as interest expense during 2004. There will be no interest expense recognized on
the Exchange Notes, and the cash interest payments made will be accounted for as
a reduction of the carrying amount of the Exchange Notes. During 2006, the
reduction in interest expense attributable to this treatment was $22.5 million.

On January 31, 2004, the Company and holders of $89.9 million of the Company's
2009 Debentures and $0.2 million of the Company's Discount Debentures
(collectively, the "Waived Debentures") entered into a Waiver Agreement which
provides that the participating note holders waive any rights to claim an event
of default if the Company does not make the scheduled interest payments as
required in the applicable indenture. The Company may pay interest on these
Waived Debentures only if such payment complies with the restricted payments
covenant in the indenture governing the Exchange Notes. Should the Company be
prohibited from or elect not to make interest payments on these notes, the
interest will continue to accrue on the Waived Debentures at the original rate
of 11 3/4% per year and will be due and payable to the holders at the maturity
date of the notes. Pursuant to the Waiver Agreement, the maturity date of the
participating notes is the earlier of (1) the date on which all of the
outstanding principal and interest on the Exchange Notes and the 2009 and
Discount Debentures not participating in the Waiver Agreement have been paid in
full, (2) the date six months after the original maturity of the participating
notes, or (3) the date on which the Company enters into a bankruptcy proceeding.

On February 18, 2004, certain of the Company's 2009 Debenture note holders
entered into a Modification Agreement which provides for a reduction in their
stated maturity value and a reduction of their applicable interest rate. The
aggregate maturity value of the notes held by the parties to the Modification
Agreement is $23.0 million which has been reduced to $6.9 million. The interest
rate on these notes has been reduced to a stated rate of 1.61% from 11 3/4%. On
April 1, 2004 certain holders of an additional $1.7 million of the Company's
2009 Debentures elected to participate in the Modification Agreement.


                                      -23-

<PAGE>

The maturity value of these notes has been reduced to $0.5 million. The holders
of these modified notes retain the right to collect the original maturity value
and interest thereon at the original interest rate if the Company meets certain
financial tests and ratios including the Available Cash requirements (as defined
in the Modification Agreement) and the Fixed Charge Coverage Ratio (as defined
in the Indenture to the Exchange Notes). The Available Cash requirements states
that the Company must have at least $20 million in cash on hand or available
under any credit agreements of the Company or certain subsidiaries after giving
effect to a pro forma payment of the interest on the Debentures at the original
interest rate, and that cash availability must have existed for all days since
the last interest payment date on the Exchange Notes. The Fixed Charge Coverage
Ratio measures the ratio between Consolidated Cash Flow (as defined) and Fixed
Charges (as defined) and must have been at least 2.0 to 1 for the twelve month
period preceding the payment of any contingent principal or contingent interest.
Since entering into the Modification Agreement, the Company has not met the
Available Cash requirement or the Fixed Charge Ratio as described above. At this
time we can not estimate when and if these targets will be met.

Under the Modification Agreement, the modified 2009 Debentures mature on the
earlier of (1) the date that all other 2009 Debenture note holders have been
paid in full, (2) the date that is six months after the original maturity date,
or (3) the date on which the Company enters into a bankruptcy proceeding.

The Company has accounted for this as a troubled debt restructuring as required
by SFAS No. 15. The effect of this accounting treatment will not reduce the
carrying value of the modified notes; however, the interest expense associated
with the modified notes will be calculated using the modified stated interest
rate of 1.61% per annum and the reduced maturity amount.

The remaining 2009 and Discount Debentures that are not party to the
Modification Agreement will continue to accrue interest at 11 3/4% and represent
$70.1 million of the total outstanding principal amount of $94.8 million.

FOREIGN CURRENCY IMPACT

The Company is exposed to fluctuations in foreign currency exchange rates.
Decreases in the value of foreign currencies relative to the U.S. dollar have
not resulted in significant losses from foreign currency translation. However,
there can be no assurance that foreign currency fluctuations in the future would
not have an adverse effect on the Company's business, financial condition or
results of operations.

IMPACT OF INFLATION

The Company purchases certain raw materials for use in the manufacture of its
products, including steel, aluminum, copper, and resin which are generally
available from multiple sources with adequate supply. While certain commodities
have experienced greater pricing volatility in the past year, the Company has
used a number of programs to address this risk such as entering into longer term
purchase contracts with suppliers of certain commodities and implementing
selling price adjustments over time. The Company believes it is not
significantly dependent on a limited number of suppliers and that practices are
in place to ensure an adequate supply of raw materials in the future.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our significant accounting policies are described in Note 2 to the consolidated
financial statements included in Item 8 of this Form 10-K. Our discussion and
analysis of financial condition and results from operations are based upon our
consolidated financial statements, which have been prepared in accordance with


                                      -24-

<PAGE>

accounting principles generally accepted in the United States. The preparation
of the financial statements requires us to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues, and expenses. On
an on-going basis, we evaluate the estimates that we have made. These estimates
have been based upon historical experience and on various other assumptions that
we believe to be reasonable under the circumstances. However, actual results may
differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies affect the more
significant judgments and estimates we have used in the preparation of the
consolidated financial statements.

     Goodwill

Goodwill represents the excess of cost over fair value of identifiable net
assets acquired through business purchases. In accordance with Statement of
Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets
("SFAS 142"), goodwill is reviewed for impairment on at least an annual basis by
applying a fair-value-based test. In evaluating the recoverability of the
carrying value of goodwill and other indefinite-lived intangible assets, we must
estimate the fair values of our reporting units, as defined under SFAS 142. Our
estimate of the fair value of each of our reporting units was based primarily on
projected future operating results and cash flows, and other assumptions.
Although we believe our projections and resulting fair values are reasonable,
our past projections have not always been achieved. The failure of a reporting
unit to achieve projected future operating results and cash flows, or
adjustments to other valuation assumptions, could change our estimate of
reporting unit fair value, in which case we may be required to record an
impairment charge related to goodwill and other indefinite-lived intangible
assets.

     Investments in Affiliates

Periodically, we make strategic investments in debt and/or equity securities of
affiliated companies. See Note 8 to the consolidated financial statements for
details of these investments. These debt and/or equity securities are not
currently publicly traded on any major exchange. Either the cost method or
equity method of accounting is used to account for these investments depending
on the level of the Company's ownership in these affiliates. Each quarter, we
review the carrying amount of these investments and record an impairment charge
when we believe an investment has experienced a decline in value below its
carrying amount that is other than temporary. Annual review of previously
recorded impairment charges may result in a reversal of those charges if the
Company has substantial evidence that the value of the investment has increased.
Future adverse changes in market conditions or poor operating results of
underlying investments could result in losses or an inability to recover the
carrying value of the investments that may not be reflected in an investment's
current carrying value, thereby possibly requiring an impairment charge in the
future.

     Allowance for Doubtful Accounts

Allowances for doubtful accounts are estimated at the individual operating
companies based on estimates of losses on customer receivable balances.
Estimates are developed by using standard quantitative measures based on
historical losses, adjusting for current economic conditions and, in some cases,
evaluating specific customer accounts for risk of loss. The establishment of
reserves requires the use of judgment and assumptions regarding the potential
for losses on receivable balances. Though we consider


                                      -25-

<PAGE>

our allowance for doubtful accounts balance to be adequate, changes in economic
conditions in specific markets in which we operate could have a material effect
on future reserve balances required.

     Excess and Obsolete Inventory

We record reserves for excess and obsolete inventory equal to the difference
between the cost of inventory and its estimated market value using assumptions
about future product life-cycles, product demand and market conditions. If
actual product life-cycles, product demand and market conditions are less
favorable than those projected by management, additional inventory reserves may
be required.

     Income Taxes

As part of the process of preparing our consolidated financial statements, we
are required to estimate our income taxes in each of the jurisdictions in which
we operate. This process involves estimating our actual current tax expense
together with assessing temporary differences resulting from differing treatment
of items for tax and accounting purposes. These differences result in deferred
tax assets and liabilities, which are included within our consolidated balance
sheet. We must then assess the likelihood that our deferred tax assets will be
recovered from future taxable income and to the extent we believe that recovery
is not likely, we must establish a valuation allowance. Increases (decreases) in
the valuation allowance are included as an increase (decrease) to our
consolidated income tax provision in the statement of operations.


                                      -26-

<PAGE>

CONTRACTUAL OBLIGATIONS

The following table summarizes our contractual obligations as of December 31,
2006 (in thousands):

<TABLE>
<CAPTION>
                                              Payments by Period
                   -----------------------------------------------------------------------
                     Total      2007       2008      2009      2010     2011    Thereafter
                   --------   --------   -------   --------   ------   ------   ----------
<S>                <C>        <C>        <C>       <C>        <C>      <C>      <C>
Long-term debt     $301,035   $203,267   $   635   $ 95,322   $  338   $  317     $1,156
Interest             32,527     19,457     9,584      2,826      128      115        417
Capital leases          408        190       139         78        1       --         --
Operating leases     13,466      3,172     2,665      2,056    1,667    1,843      2,063
                   --------   --------   -------   --------   ------   ------     ------
Total              $347,436   $226,086   $13,023   $100,282   $2,134   $2,275     $3,636
                   --------   --------   -------   --------   ------   ------     ------
</TABLE>


                                      -27-

<PAGE>

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

The Company's debt obligations are primarily fixed-rate in nature and, as such,
are not sensitive to changes in interest rates. At December 31, 2006, the
Company had $0.2 million of variable rate debt outstanding. A one percentage
point increase in interest rates would increase the annual amount of interest
paid by approximately $0.02 million. The Company does not believe that its
market risk financial instruments on December 31, 2006 would have a material
effect on future operations or cash flows.

The Company is exposed to market risk from changes in foreign currency exchange
rates, including fluctuations in the functional currency of foreign operations.
The functional currency of operations outside the United States is the
respective local currency. Foreign currency translation effects are included in
accumulated other comprehensive income in shareholders' deficit.


                                      -28-
<PAGE>

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

<TABLE>
<CAPTION>
                                                                        Page No.
                                                                        --------
<S>                                                                     <C>
Report of Independent Registered Public Accounting Firm .............      30

Consolidated Balance Sheets as of December 31, 2006 and 2005 ........      31

Consolidated Statements of Operations for the years ended December
   31, 2006, 2005, and 2004 .........................................      32

Consolidated Statements of Changes in Shareholders' Deficit for the
   years ended December 31, 2006, 2005 and 2004 .....................      33

Consolidated Statements of Cash Flows for the years ended
   December 31, 2006, 2005, and 2004 ................................      34

Notes to Consolidated Financial Statements ..........................      36
</TABLE>


                                      -29-

<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders
Jordan Industries, Inc.

We have audited the accompanying consolidated balance sheets of Jordan
Industries, Inc. as of December 31, 2006 and 2005 and the related consolidated
statements of operations, shareholders' deficit, and cash flows for each of the
three years in the period ended December 31, 2006. Our audits also included the
financial statement schedule listed in the Index at Item 15. These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. We were not engaged to perform an
audit of the Company's internal control over financial reporting. Our audit
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Company's internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Jordan Industries,
Inc. at December 31, 2006 and 2005, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2006, in conformity with U.S. generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

As discussed in Note 2 to the Consolidated Financial statements, in 2006 the
Company adopted the provisions of Staff Accounting Bulletin No. 108, Considering
the Effects of Prior Year Misstatements when Quantifying Misstatements in
Current Year Financial Statements.

The accompanying financial statements have been prepared assuming that Jordan
Industries, Inc. will continue as a going concern. As more fully described in
Note 12, the Company has substantial debt maturing within the next year, which
raises substantial doubt about the Company's ability to continue as a going
concern. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.


/s/ ERNST & YOUNG LLP

Chicago, Illinois
March 16, 2007


                                      -30-

<PAGE>

                             JORDAN INDUSTRIES, INC.
                           CONSOLIDATED BALANCE SHEETS
                             (dollars in thousands)

<TABLE>
<CAPTION>
                                                          December 31,
                                                      --------------------
                                                        2006        2005
                                                      --------   ---------
                                                                  Restated
<S>                                                   <C>        <C>
ASSETS
Current assets:
   Cash and cash equivalents                          $177,677   $  15,699
   Accounts receivable, net of allowance of
      $725 and $1,417 in 2006 and 2005,
      respectively                                      23,897      36,256
   Inventories                                          17,929      52,412
   Assets of discontinued operations                    10,144     377,946
   Deferred tax asset                                      521          --
   Investment in and advances to affiliates              8,500      23,015
   Prepaid expenses and other current assets             5,320       6,647
                                                      --------   ---------
      Total current assets                             243,988     511,975

Property, plant and equipment, net                      20,918      42,376
Investments in and advances to affiliates                2,006      14,044
Goodwill, net                                           37,694      37,694
Other assets                                             7,123       5,278
                                                      --------   ---------
   Total Assets                                       $311,729   $ 611,367
                                                      ========   =========

LIABILITIES AND SHAREHOLDERS' DEFICIT

Current liabilities:
   Accounts payable                                   $ 10,797   $  21,185
   Accrued liabilities                                  45,386      52,773
   Liabilities of discontinued operations               12,592     404,667
   Current portion of long-term debt                   209,061      25,403
                                                      --------   ---------
      Total current liabilities                        277,836     504,028

Long-term debt                                          97,987     333,198
Other non-current liabilities                           26,367      25,032
Deferred income taxes                                    1,092         470

Shareholders' deficit:
Common stock $.01 par value: authorized - 110,000
   shares; issued and outstanding - 100,511 shares
   and 98,501 shares in 2006 and 2005, respectively          1           1
Additional paid-in capital                               2,120       2,116
Accumulated other comprehensive income                   2,188       1,542
Accumulated deficit                                    (95,858)   (255,020)
Note receivable from shareholder                            (4)         --
                                                      --------   ---------
Total shareholders' deficit                            (91,553)   (251,361)
                                                      --------   ---------
   Total Liabilities and Shareholders' Deficit        $311,729   $ 611,367
                                                      ========   =========
</TABLE>

                             See accompanying notes.


                                      -31-

<PAGE>
                             JORDAN INDUSTRIES, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                             (dollars in thousands)

<TABLE>
<CAPTION>
                                                           Year ended December 31,
                                                       ------------------------------
                                                         2006       2005       2004
                                                       --------   --------   --------
                                                                  Restated   Restated
<S>                                                    <C>        <C>        <C>
Net sales                                              $256,678   $278,856   $293,359
Cost of sales, excluding depreciation                   206,373    217,319    224,681
Selling, general, and administrative
   expense, excluding depreciation                       51,080     52,318     52,085
Depreciation                                              6,203      6,987      8,746
Amortization                                                 46         46         24
Goodwill impairment loss                                     --     20,862         --
Income from sale and refinancing of affiliates
   (See Notes 8 and 16)                                  (4,620)   (12,994)    (7,954)
Management fees and other                                   140    (13,811)       366
                                                       --------   --------   --------
      Operating (loss) income                            (2,544)     8,129     15,411

Other (income) and expenses:
   Interest expense                                      16,005     18,644     30,008
   Interest income                                         (111)      (111)    (2,098)
   Gain on sale of assets (See Note 17)                  (8,863)        --         --
   Gain on sale of subsidiary (See Note 15)                  --       (251)        --
   Other, net                                               898        764     (1,121)
                                                       --------   --------   --------
                                                          7,929     19,046     26,789
                                                       --------   --------   --------
Loss from continuing operations before
   income taxes                                         (10,473)   (10,917)   (11,378)

Provision (benefit) for income taxes                      2,056      1,542      1,592
                                                       --------   --------   --------
Loss from continuing operations                         (12,529)   (12,459)   (12,970)
Discontinued Operations:
   Income (loss) from discontinued operations, net
      of tax(See Note 5)                                175,932      6,448     (7,136)
                                                       --------   --------   --------
      Net income (loss)                                $163,403   $ (6,011)  $(20,106)
                                                       ========   ========   ========
</TABLE>

                             See accompanying notes.


                                      -32-

<PAGE>

                             JORDAN INDUSTRIES, INC.
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT
                             (dollars in thousands)

<TABLE>
<CAPTION>
                                     Common Stock
                                   ---------------               Accumulated                    Note
                                    Number          Additional      Other                    Receivable
                                      of              Paid-in   Comprehensive  Accumulated      from
                                    Shares  Amount    Capital   Income (Loss)    Deficit    Shareholder    Total
                                   -------  ------  ----------  -------------  -----------  -----------  ---------
<S>                                <C>      <C>     <C>         <C>            <C>          <C>          <C>
Balance at December 31, 2003        98,501      1      2,116        (1,012)      (228,468)       --       (227,363)
Non-cash dividends on
   preferred stock of subsidiary        --     --         --            --           (209)       --           (209)
Comprehensive income(loss):
   Translation                          --     --         --         5,463             --        --          5,463
   Minimum pension
      liability adjustment,
      net of tax                        --     --         --          (766)            --        --           (766)
   Net loss                             --     --         --            --        (20,106)       --        (20,106)
                                                                                                ---      ---------
Total comprehensive loss                                                                         --        (15,409)
                                   -------    ---     ------       -------      ---------       ---      ---------
Balance at December 31, 2004        98,501    $ 1     $2,116       $ 3,685      $(248,783)      $--      $(242,981)
Non-cash dividends on
   preferred stock of
   subsidiary                           --     --         --            --           (226)       --           (226)
Comprehensive income(loss):
   Translation                          --     --         --        (1,386)            --        --         (1,386)
   Minimum pension
      liability adjustment,
      net of tax                        --     --         --          (757)            --        --           (757)
   Net income                           --     --         --            --         (6,011)       --         (6,011)
                                                                                                         ---------
Total comprehensive loss                --     --         --            --             --        --         (8,154)
                                   -------    ---     ------       -------      ---------       ---      ---------
Balance at December 31, 2005        98,501    $ 1     $2,116       $ 1,542      $(255,020)      $--      $(251,361)
                                   =======    ===     ======       =======      =========       ===      =========
Common stock issuance                2,010     --          4            --             --        (4)            --
Cumulative effect of adoption of
   SAB 108                              --     --         --            --         (4,250)       --         (4,250)
Other                                   --     --         --            --              9        --              9
Comprehensive income(loss):
   Translation                          --     --         --        (2,986)            --        --         (2,986)
   Minimum pension
      liability adjustment,
      net of tax (including
      sale of subsidiary)               --     --         --         3,632             --        --          3,632
   Net income                           --     --         --            --        163,403        --        163,403
                                                                                                         ---------
Total comprehensive income              --     --         --            --             --        --        164,049
                                   -------    ---     ------       -------      ---------       ---      ---------
Balance at December 31, 2006       100,511    $ 1     $2,120       $ 2,188      $ (95,858)      $(4)     $ (91,553)
                                   =======    ===     ======       =======      =========       ===      =========
</TABLE>

                             See accompanying notes.


                                      -33-

<PAGE>

                             JORDAN INDUSTRIES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (dollars in thousands)

<TABLE>
<CAPTION>
                                                   Year ended December 31,
                                               -------------------------------
                                                  2006       2005       2004
                                               ---------   --------   --------
                                                           Restated   Restated
<S>                                            <C>         <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income (loss)                           $ 163,403   $ (6,011)  $(20,106)
Adjustments to reconcile net income (loss)
   to net cash provided by operating
   activities:
   (Gain)/loss on sale of discontinued
      operations (See Note 5)                   (176,661)    (1,502)     1,171
   Gain on sale and refinancing of affiliate      (4,620)   (12,994)    (7,954)
   Income from reversal of reserves related
      to sale of affiliates                           --    (14,727)        --
   Gain on sale of subsidiary                         --       (251)        --
   Loss/(gain) on disposal of fixed assets        (7,876)       428       (158)
   Goodwill impairment loss                           --     20,862         --
   Amortization of deferred financing costs        3,518      3,804      5,711
   Depreciation and amortization                   6,249      7,034      8,770
   Deferred income taxes                             100         50        160
   Non-cash interest expense                       7,740      7,847     10,740
   Cash flows from operating activities of
      discontinued operations                     17,933     14,617     21,801
Changes in operating assets and
   liabilities (net of acquisitions and
   dispositions):
   Accounts receivable                             4,915      1,847     (7,867)
   Inventories                                     7,578      5,069     (1,199)
   Prepaid expenses and other current
      assets                                        (137)         1     (4,782)
   Non-current assets                                (13)     2,891        220
   Accounts payable and accrued
      liabilities                                 (5,618)   (13,425)     1,001
   Non-current liabilities                         1,549       (225)      (183)
   Other                                            (354)      (527)    (1,144)
                                               ---------   --------   --------
Net cash provided by operating
   activities                                     17,706     14,788      6,181

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of fixed assets                11,419        658        856
Capital expenditures                              (5,507)    (3,251)    (3,141)
Acquisitions of subsidiaries                          --       (393)        --
Net proceeds from sale of subsidiaries            42,778      1,209         --
Net proceeds from sales of discontinued
   operations (See Note 15)                      464,342      1,002      6,155
Net proceeds from sales of affiliates             29,565      6,600     27,207
Net proceeds from sales of affiliated
   promissory notes                                   --      9,449         --
Net proceeds from refinancing by an
   affiliate                                          --     15,000         --
Cash flows from investing activities of
   discontinued operations                        (3,983)    (5,201)    (4,994)
                                               ---------   --------   --------
Net cash provided by investing activities        538,614     25,073     26,083
</TABLE>

                         (Continued on following page.)


                                      -34-

<PAGE>

                             JORDAN INDUSTRIES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (dollars in thousands)
                                   (continued)

<TABLE>
<CAPTION>
                                             Year ended December 31,
                                         -------------------------------
                                            2006       2005       2004
                                         ---------   --------   --------
                                                     Restated   Restated
<S>                                      <C>         <C>        <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on revolving  credit
   facilities, net                         (33,337)   (13,540)   (15,286)
Payment of deferred financing costs             --         --     (3,942)
Payment of long-term debt                 (328,831)   (24,935)   (23,794)
Proceeds from other borrowings               1,181        521      1,078
Cash flows from financing activities
   of discontinued operations              (32,728)       (37)     6,625
                                         ---------   --------   --------
Net cash used in financing activities     (393,715)   (37,991)   (35,319)
Effect of exchange rate changes on
   cash of continuing operations              (845)      (944)     4,398
Effect of exchange rate changes on
   cash of discontinued operations             218       (639)    (1,448)
                                         ---------   --------   --------
Net increase/(decrease) in cash and
   cash equivalents                        161,978        287       (105)
Cash and cash equivalents at beginning
   of year                                  15,699     15,412     15,517
                                         ---------   --------   --------
Cash and cash equivalents at end of
   year                                  $ 177,677   $ 15,699   $ 15,412
                                         =========   ========   ========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW
   INFORMATION:
   Cash paid during the year for:
      Interest                           $  44,829   $ 61,895   $ 63,296
      Income taxes, net                  $   6,899   $  6,968   $  2,328
   Non-cash investing activities:
      Capital leases                     $   2,164   $    898   $  1,404
</TABLE>

                             See accompanying notes.


                                      -35-

<PAGE>

                             JORDAN INDUSTRIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             (dollars in thousands)

NOTE 1 - ORGANIZATION

At December 31, 2006, the Company's continuing operations are comprised of the
following operating subsidiaries: Beemak Plastics, Inc. ("Beemak"), Sate-Lite
Manufacturing Company ("Sate-Lite"), Deflecto Corporation ("Deflecto") and
GramTel Communications, Inc. ("GramTel"). Also owned by the Company at December
31, 2006 were Valmark Industries ("Valmark") and Welcome Home LLC ("Welcome
Home"). These two subsidiaries are reflected as discontinued operations in the
Company's December 31, 2006 financial statements. Beemak, Sate-Lite and Deflecto
are collectively referred to as the Jordan Specialty Plastics Group and all of
the foregoing corporations are collectively referred to herein as the
"Subsidiaries", and individually as a "Subsidiary."

All of the Subsidiaries are classified as Restricted Subsidiaries ("Restricted
Subsidiaries") for purposes of certain of the Company's debt instruments.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

     Principles of consolidation
     ---------------------------

The consolidated financial statements include the accounts of the Company and
the Subsidiaries. All significant intercompany balances and transactions have
been eliminated.

     Cash and cash equivalents
     -------------------------

The Company considers all highly liquid investments purchased with an initial
maturity of three months or less to be cash equivalents.

     Accounts Receivable and Allowance for Doubtful Accounts
     -------------------------------------------------------

The Company carries its accounts receivable at their face amounts less an
allowance for doubtful accounts. Allowances for doubtful accounts are estimated
at the individual operating companies based on estimates of losses on customer
receivable balances. Estimates are developed by using standard quantitative
measures based on historical losses, adjusting for current economic conditions
and, in some cases, evaluating specific customer accounts for risk of loss. A
receivable is considered past due if payments have not been received within
agreed upon invoice terms. Uncollectible receivables are charged against the
allowance for doubtful accounts when approved by operating company management
after all collection efforts have been exhausted.

     Inventories
     -----------

Inventories are stated at lower of cost or market. Inventories are primarily
valued at either average or first-in, first-out (FIFO) cost.

     Goodwill and Other Long-Lived Assets
     ------------------------------------

Goodwill represents the excess of cost over fair value of identifiable net
assets acquired through business purchases. In accordance with Statement of
Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets
("SFAS 142"), goodwill is reviewed for impairment on at least an annual basis by
applying a fair-value-based test. In evaluating the recoverability of the
carrying value of goodwill and other indefinite-lived intangible assets, we must
estimate the fair values of our reporting units, as defined under SFAS 142. Our
estimate of the fair value of each of our reporting units was


                                      -36-

<PAGE>

based primarily on projected future operating results and cash flows, and other
assumptions. Although we believe our projections and resulting fair values are
reasonable, our past projections have not always been achieved. The failure of a
reporting unit to achieve projected future operating results and cash flows, or
adjustments to other valuation assumptions, could change our estimate of
reporting unit fair value, in which case we may be required to record an
impairment charge related to goodwill and other indefinite-lived intangible
assets. See Note 3 for additional details.

Other long-lived assets are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of the related asset may not
be recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of the asset to future undiscounted cash flows
expected to be generated by the asset. If the asset is determined to be
impaired, the impairment recognized is measured by the amount by which the
carrying value of the asset exceeds its fair value.

     Property, Plant and Equipment
     -----------------------------

Property, plant and equipment are stated at cost, less accumulated depreciation.
Depreciation and amortization of property, plant and equipment is calculated
over the estimated useful lives, or over the lives of the underlying leases, if
less, using the straight-line method. Amortization of leasehold improvements and
assets under capital leases is included in depreciation expense.

The useful lives of plant and equipment for the purpose of computing book
depreciation are as follows:

<TABLE>
<S>                          <C>
Machinery and equipment      3-10 years
Buildings and improvements   5-35 years
Furniture and fixtures       3-10 years
</TABLE>

     Income taxes
     ------------

Deferred tax assets and liabilities are determined based on differences between
the financial reporting and tax basis of assets and liabilities and are measured
using the enacted tax rates and laws that are expected to be in effect when the
differences reverse. The Company has not determined the U.S. Federal and State
income tax liability on undistributed earnings of foreign subsidiaries to the
extent the undistributed earnings are considered to be permanently reinvested
($6,596 at December 31, 2006), as such determination is not practical.

     Deferred Financing Fees
     -----------------------

Deferred financing costs amounting to $846 and $4,365 net of accumulated
amortization of $27,593 and $24,074 at December 31, 2006 and 2005, respectively,
are amortized using the straight-line method, over the terms of the loans or, if
shorter, the period such loans are expected to be outstanding. Deferred
financing costs are included in "other assets" on the balance sheet.

     Revenue recognition
     -------------------

The Company's revenue is derived primarily from product sales. Revenue is
recognized in accordance with the terms of the sale, primarily upon shipment to
customers, once the sales price is fixed or determinable, and collectibility is
reasonably assured. Estimated discounts and rebates are recorded as a reduction
of sales in the same period revenue is recognized. Sales returns and allowances
are estimated and recorded based upon historical experience. If actual future
sales returns and allowances are higher than


                                      -37-

<PAGE>

past experience, additional accruals may be required. If any significant
obligations to the customer with respect to such sale remain to be fulfilled
following shipment, typically involving obligations relating to installation and
acceptance by the buyer, revenue recognition is deferred until such obligations
have been fulfilled.

     Shipping and Handling Costs
     ---------------------------

Shipping and handling costs are classified in cost of sales in the statement of
operations.

     Use of estimates
     ----------------

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

     Concentration of credit risk
     ----------------------------

Financial instruments which potentially subject the Company to a concentration
of credit risk consist principally of cash and cash equivalents and accounts
receivable. The Company deposits cash and cash equivalents with high quality
financial institutions, and is restricted by its revolving credit facilities as
to its investment instruments. Concentration of credit risk relating to accounts
receivable is limited due to the large number of customers from many different
industries and locations. The Company believes that its allowance for doubtful
accounts is adequate to cover potential credit risk.

At December 31, 2006 and 2005 the Company had approximately $0 and $23,015,
respectively, of investments in Russia and Austria related to unsecured
advances, including net interest receivables, made to two affiliates (see Note
8). In 2006, the Company's investments in Russia and Austria were sold to third
parties. All amounts invested by the Company were fully recovered.

     Foreign currency translation
     ----------------------------

The functional currencies of the Company's foreign operations are the local
currencies. Accordingly, assets and liabilities of the Company's foreign
operations are translated from foreign currencies into U.S. dollars at the
exchange rates in effect at the balance sheet date while income and expenses are
translated at the weighted-average exchange rates for the year. Adjustments
resulting from the translation of foreign currency financial statements are
classified as a separate component of shareholders' deficit. The accumulated
balance in other comprehensive income pertaining to foreign currency translation
was $2,967 and $5,953 as of December 31, 2006 and 2005, respectively.

     Fair Value of Financial Instruments
     -----------------------------------

The Company's financial instruments include cash and cash equivalents, accounts
receivable, investments in and advances to affiliates and long-term debt. The
carrying values of such financial instruments approximate their estimated fair
value, except for long-term debt for which the fair value is disclosed in
footnote 12.

     New Accounting Pronouncements
     -----------------------------

In June 2006, FASB issued Interpretation No. 48, Accounting for Uncertainty in
Income Taxes, and Interpretation of FASB Statement No. 109, or FIN 48. FIN 48
clarifies the accounting for uncertainty in income taxes recognized in


                                      -38-

<PAGE>

a company's financial statements and prescribes a recognition threshold and
measurement attribute for the financial statement recognition and measurement of
a tax position taken or expected to be taken in a tax return. FIN 48 also
provides guidance on description, classification, interest and penalties,
accounting in interim periods, disclosure and transition. The Company is
required to adopt FIN 48 effective at the beginning of 2007. The Company is
currently evaluating the impact of adopting FIN 48 on its future results of
operations and financial condition.

In September 2006, FASB issued Statement of Financial Accounting Standards No.
158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement
Plans--an amendment of FASB Statements No. 87, 88, 106, and 132(R)" ("SFAS
158"). SFAS 158 requires an employer to recognize the over-funded or
under-funded status of a defined benefit postretirement plan as an asset or
liability in its statement of financial position and to recognize changes in
that funded status in the year in which the changes occur through comprehensive
income. SFAS 158 also requires the measurement of defined benefit plan assets
and obligations as of the date of the employer's fiscal year-end statement of
financial position effective for the Company on December 31, 2007. Under SFAS
158, the Company will be required to recognize the funded status of its defined
benefit postretirement plan and to provide the required disclosures commencing
December 31, 2007. The Company is currently evaluating the impact that SFAS 158
will have on its consolidated financial position and results of operations, but
does not believe the effect will be material.

In September 2006, the SEC staff published Staff Accounting Bulletin No. 108,
Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements ("SAB 108"). SAB 108
addresses quantifying the financial statement effects of misstatements,
specifically, how the effects of prior year uncorrected errors must be
considered in quantifying misstatements in the current year financial
statements. SAB 108 offers a special "one-time" transition provision for
correcting certain prior year misstatements that were uncorrected as of the
beginning of the fiscal year of adoption. SAB 108 is effective for fiscal years
ending after November 15, 2006. The Company adopted the provisions of SAB 108
for the year ended December 31, 2006. Pursuant to the provisions of SAB 108, the
Company recorded a charge directly to retained earnings of $4.2 million as a
cumulative effect of adopting SAB 108 at January 1, 2006. The charge was the
result of the correction of an error in the Company's previously issued
financial statements. The error was the result of under depreciated fixed assets
at Dacco, a subsidiary of the Company sold in 2006. The fixed assets were
acquired in a 1988 business acquisition accounted for under the purchase method
of accounting. Depreciation of the fixed assets in 1988 to 1993 did not include
the increase (step up) to the previous historical carrying amount due to
purchase accounting. The fixed asset step up should have been depreciated over
the years 1988 to 1993 and the Company determined the impact of not depreciating
such fixed assets in those years was not material to any given year's results of
operations based on the rollover method of analyzing misstatements. However,
recording the cumulative catch up in depreciation expense based on the iron
curtain method of analyzing misstatements is material as of the adoption date of
SAB 108 at January 1, 2006, and therefore the Company recorded the amount as a
cumulative effect of adopting SAB 108.


                                      -39-
<PAGE>

NOTE 3 - GOODWILL

The Company adopted SFAS No. 142, Goodwill and Other Intangible Assets, on
January 1, 2002 and completed the transitional impairment review of its
reporting units during the second quarter of 2002.

The Company determines the fair value of each reporting unit using a discounted
cash flow approach taking into consideration projections based on the individual
characteristics of the reporting units, historical trends and market multiples
for comparable businesses. The Company is required to complete impairment
reviews of its subsidiaries on at least an annual basis. In the fourth quarter
of 2005, the annual impairment review resulted in a non-cash pre-tax charge of
$20,862. These charges are included in "goodwill impairment loss" in the
Company's statement of operations.

The changes in the carrying amount of goodwill by operating segment for the year
ended December 31, 2006 were as follows:

<TABLE>
<CAPTION>
                                  Jordan                  Consumer &
                                Specialty   Jordan Auto   Industrial
                                 Plastics   Aftermarket    Products    Consolidated
                                ---------   -----------   ----------   ------------
<S>                             <C>         <C>           <C>          <C>
Balance as of January 1, 2005    $37,479     $ 20,862       $ 328        $ 58,669
Sale of subsidiary                    --           --        (328)           (328)
Goodwill impairment loss              --      (20,862)         --         (20,862)
Currency translation impact          215           --          --             215
                                 -------     --------       -----        --------
Balance at December 31, 2005      37,694           --          --          37,694

Balance at December 31, 2006     $37,694     $     --       $  --        $ 37,694
                                 =======     ========       =====        ========
</TABLE>

Goodwill included in the gains and losses on sales of subsidiaries in 2006 were
as follows: Pamco Printed Tape and Label Company, $1,990, Seaboard Folding Box
Corporation, $2,355 and Kinetek, Inc., $179,077. The results of operations and
related financial positions for these companies have been classified as
discontinued operations in all periods presented.

NOTE 4 -INVESTMENTS IN JSP

JSP

During 1998, the Company recapitalized Jordan Specialty Plastics, Inc. ("JSP").
As a result of the recapitalization, certain of the Company's affiliates and JSP
management own substantially all of the JSP common stock and the Company's
investment in JSP was represented solely by the Cumulative Preferred Stock of
JSP. The JSP Cumulative Preferred Stock controlled over 97.5% of the combined
voting power of JSP capital stock outstanding and accreted at plus or minus
97.5% of the cumulative JSP net income or net loss, as the case may be, through
the earlier of an Early Redemption Event (as defined) or the fifth anniversary
of issuance (unless redemption is prohibited by a JSP or Company debt covenant).

In December 2004, the Company participated in another recapitalization of JSP.
As part of this recapitalization, the JSP Cumulative Preferred Stock discussed
above and $33,089 of intercompany debt was exchanged for 388,050 shares of Class
A Common Stock. The initial liquidation value of each Class A common share was
$85.81. In addition, each Class A share is entitled to a 6.0% cumulative
preferred return. Thereafter, each Class A share


                                      -40-

<PAGE>

participates on an equal basis with each Class B share. The Class A shares hold
100% of the voting rights. In addition, 99,500 of pre-recapitalization common
shares were exchanged for 9,950 shares of Class B common stock. The Class B
common shares carry no voting rights.

The Company continues to consolidate JSP and its subsidiaries, for financial
reporting purposes, as subsidiaries of the Company.

NOTE 5 - DISCONTINUED OPERATIONS

In January 2004, the Company sold the remaining operations of JII Promotions and
agreed to wind down all remaining activities of the Company. In July 2006 the
Company sold Pamco Printed Tape and Label Company and in October 2006 the
Company sold Seaboard Folding Box Company. In addition, as of December 31, 2006,
the Company has definitively decided to sell Valmark Industries. Historically,
these four subsidiaries were the operating components of the Specialty Printing
and Labeling Group. Due to the sale, or the decision to sell, all of the
companies in the group, the Specialty Printing and Labeling Group has been
classified as discontinued operations in the Company's financial statements in
all periods presented.

In November 2006, the Company's wholly owned subsidiary, Motors and Gears
Holdings, Inc. sold the operating subsidiaries of its wholly-owned subsidiary,
Kinetek, Inc. Kinetek, Inc. was comprised of 6 operating companies in the motors
and controls industries. The Kinetek, Inc. operating subsidiaries were sold to
the Resolute Fund, a related party for cash proceeds of $445.4 million prior to
certain fees and expenses. As the Company has no continuing involvement in
Kinetek, Inc., the financials have been classified as discontinued operations in
all periods presented. Motors and Gears Holdings, Inc. remained in tact after
the sale of Kinetek, Inc., and was liquidated in January of 2007. As a result,
the financial statements of Motors and Gears Holdings are included as
discontinued operations in the Company's financial statements in all periods
presented.

In December of 2006, Welcome Home LLC, a wholly owned subsidiary of the Company
sold certain assets including the trade name of Cape Craftsmen ("Cape"), its
wholesale division, to Evergreen Enterprises, Inc. for a purchase price of up to
$0.75 million. Welcome Home ceased operations under the Cape Craftsmen name and
retained certain accounts receivable and real estate obligations related to
Cape. As of December 31, 2006, Welcome Home LLC closed all of its retail
locations and ceased operations. All retail employees were terminated and
remaining fixed assets and other salable assets will be sold or disposed of
during the first quarter of 2007. Due to the above factors, Welcome Home LLC and
its wholesale division, Cape Craftsmen, have been classified as a discontinued
operation in the Company's financial statements in all periods presented.

Each of the above transactions was evaluated using the guidance in Statement of
Financial Accounting Standards ("SFAS") No. 144 and in each case was found to
meet the criteria of a discontinued operation. As such, prior period amounts
have been restated to reflect the above as discontinued operations.

Summarized selected financial information for the combined discontinued
operations is as follows (see Note 15 for gain/loss on sale of subsidiaries):

<TABLE>
<CAPTION>
                                    2006       2005       2004
                                  --------   --------   --------
<S>                               <C>        <C>        <C>
Revenues                          $429,064   $450,629   $429,920
Income (loss) from discontinued
   operations (net of tax of
   $(3,867), $2,060 and $1,381 in
   2006, 2005 and 2004,
   respectively)                   175,932      6,448     (7,136)
</TABLE>


                                      -41-

<PAGE>

The major classes of assets and liabilities of the combined discontinued
operations are as follows:

<TABLE>
<CAPTION>
                                              2006      2005
                                            -------   --------
<S>                                         <C>       <C>
Current assets                              $ 8,637   $152,471
Property, plant and equipment, net            1,470     37,263
Goodwill                                         --    182,820
Other long-term assets                           37      5,392
                                            -------   --------
   Assets of discontinued operations         10,144    377,946

Current portion of long-term debt               168    293,686
Other current liabilities                     8,179     57,416
Long-term debt                                  164     28,475
Other non-current liabilities                 4,081     25,090
                                            -------   --------
   Liabilities of discontinued operations   $12,592   $404,667

</TABLE>

NOTE 6 - INVENTORIES

Inventories consist of:

<TABLE>
<CAPTION>
                  Dec. 31, 2006   Dec. 31, 2005
                  -------------   -------------
<S>               <C>             <C>
Raw Materials        $ 6,010         $22,936
Work-in-process          629           1,499
Finished goods        11,290          27,977
                     -------         -------
                     $17,929         $52,412
                     =======         =======
</TABLE>

NOTE 7- PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment, at cost, consists of:

<TABLE>
<CAPTION>
                             Dec. 31, 2006   Dec. 31, 2005
                             -------------   -------------
<S>                          <C>             <C>
Land                           $  1,898        $  4,860
Machinery and equipment          44,030          84,150
Buildings and improvements        7,305          16,708
Furniture and fixtures           10,617          14,325
                               --------        --------
                                 63,850         120,043
Accumulated depreciation
   and amortization             (42,932)        (77,667)
                               --------        --------
                               $ 20,918        $ 42,376
                               ========        ========
</TABLE>

NOTE 8 - INVESTMENTS IN AND ADVANCES TO AFFILIATES

As of December 31, 2006 and 2005 the Company had $0 and $23,015, respectively,
of unsecured advances, including net interest receivable, due from JIR
Broadcast, Inc. and JIR Paging, Inc. In February and March 2006, the Company
sold, to a third party, 100% of its investment in JIR Broadcast, Inc. and JIR
Paging, Inc.

On May 18, 2005, JIR Paging, Inc. repurchased from the Company its promissory
note in the amount of $9,200. The proceeds to the Company were $9,449 and
consisted of the principal amount of the note plus accrued and unpaid interest
of $249. As discussed above, JIR Paging was subsequently sold in March 2006 to a
third party. At closing, the Company received net cash proceeds of $274 for
amounts previously invested in JIR Paging. The Company recorded income of $274
in 2005 as a result of reversing reserves previously recorded against the
receivable from JIR Paging.


                                      -42-

<PAGE>
JIR Broadcast, Inc. was sold on February 28, 2006 and resulted in cash proceeds
to the Company of $30,250. The proceeds included repayment of amounts previously
loaned to, and paid on behalf of, JIR Broadcast of $15,610, accrued interest of
$9,187, accrued and unpaid management fees of $1,679, a fee for the termination
of the management fee agreement of $3,400, and reimbursement of expenses
incurred by the Company during the sale process of $374. Income of $14,453 was
recorded in the Company's financial statements during 2005 related to the JIR
Broadcast sale in 2006 due to the reversal of reserves previously recorded by
the Company against the loans, interest on its loans, and the recognition of
management fee income from JIR Broadcast which was not previously accrued. In
2006, the Company recorded income of $4,620 related to the termination of
management fee agreement, interest income and management fees earned by the
Company up to the date of sale, and other closing amounts. In March 2007, an
escrow, which was established upon the closing of the JIR Broadcast transaction,
matured and all funds were disbursed. The Company received an additional $3,000
of proceeds upon final settlement of this escrow. The Company will record income
of $3,000 in the first quarter of 2007 related to this transaction.

The Company, through Motors and Gears Holdings, has an investment in the Class A
and Class B Preferred Units of JZ International, LLC. These debt securities are
not publicly traded and do not have a determinable fair value. The cost method
of accounting is used to account for this investment. The Preferred Units have a
cumulative 5% annual return. The Class A Preferred Units may be redeemed at any
time at the discretion of the Board of Directors of JZ International, but no
later than December 31, 2017, whereas the Class B Preferred Units may be
redeemed at any time at the discretion of the Board of Directors of JZ
International, but no later than December 31, 2018. As a component of the plan
to sell Kinetek, Inc. in 2006 and liquidate Motors and Gears Holdings in 2007,
the Company has entered into negotiations to sell its investment in JZ
International for $8,500. Accordingly, the Company has taken an impairment
charge of $3,800 in 2006 to record this investment at its net realizable value
of $8,500, and has recorded the investment as a current asset in the Company's
balance sheet. JZ International's Chief Executive Officer is David W. Zalaznick,
and its members include Messrs. Jordan, Quinn, Zalaznick and Boucher, who are
directors and stockholders of the Company. JZ International and its subsidiaries
are focused on making European and other international investments. The Company
is accounting for this investment under the cost method.

As of December 31, 2006 and 2005, the Company had $66 and $1,700, respectively,
of net unsecured advances due from Healthcare Products Holdings, Inc. Healthcare
Products Holdings' Chief Executive Officer is Mr. Quinn, and its stockholders
include Messrs. Jordan, Quinn, Zalaznick and Boucher, who are the Company's
directors and stockholders, as well as other partners, principals and associates
of The Jordan Company who are also the Company's stockholders.

The Company has a 20% limited partnership interest in a partnership that was
formed during 2000 for the purpose of making equity investments primarily in
datacom/telecom infrastructure and software, e-commerce products and services,
and other Internet-related companies. The Company has a $10,000 capital
commitment, of which $3,110 was contributed as of December 31, 2006 and 2005. In
addition, the Company funded $80 in promissory notes to the partnership during
2004 for working capital needs. The Company is accounting for this investment
using the equity method of accounting. The Company and certain stockholders of
the Company are also members in the general partner of the partnership. The
Company has an agreement with the partnership to


                                      -43-

<PAGE>

provide management services to the partnership for annual fees of 1.25% of total
partnership committed capital of $50,000 for 2006 and 2005. The entire 2006 and
2005 management fees were waived by the general partner of JZVP.

Management routinely reviews the realizability of these investments, and when
necessary, reserves all or a portion of their value.

See Notes 16 and 18 for additional discussion of affiliated and related party
transactions.

NOTE 9 - ACCRUED LIABILITIES

Accrued liabilities consist of:

<TABLE>
<CAPTION>
                                          Dec. 31, 2006   Dec. 31, 2005
                                          -------------   -------------
<S>                                       <C>             <C>
Accrued interest payable                     $11,247         $11,546
Accrued income taxes                           4,618            (145)
Accrued rebates                                3,307           3,636
Accrued medical & worker's compensation        8,899          13,114
Accrued management fees                        9,652           9,652
Accrued other expenses                         7,663          14,970
                                             -------         -------
                                             $45,386         $52,773
                                             =======         =======
</TABLE>

NOTE 10 - OPERATING LEASES

Certain subsidiaries lease land, buildings, and equipment under non-cancelable
operating leases.

Total minimum rental commitments under non-cancelable operating leases at
December 31, 2006 are:

<TABLE>
<S>          <C>
   2007      $ 3,172
   2008        2,665
   2009        2,056
   2010        1,667
   2011        1,843
Thereafter     2,063
             -------
             $13,466
             =======
</TABLE>

Rental expense amounted to $4,285, $5,525, and $5,163 for 2006, 2005, and 2004,
respectively.

NOTE 11- BENEFIT PLANS AND PENSION PLANS

Substantially all of the Company's subsidiaries participate in the JII 401(k)
Savings Plan (the "Plan"), a defined-contribution plan for salaried and hourly
employees. In order to participate in the Plan, employees must be at least 21
years old and have worked at least 1,000 hours during the first 12 months of
employment. Each eligible employee may contribute from 1% to 15% of his or her
before-tax wages into the Plan. In addition to the JII 401(k) Plan, certain
subsidiaries have additional defined contribution plans in which employees may
participate. The Company made contributions to these plans totaling
approximately $315, $328 and $239 for the years ended December 31, 2006, 2005
and 2004, respectively.

The Company retains a defined benefit pension plan related to JII Promotions
(see Note 5) that covers substantially all of the former employees of that
subsidiary. Due to the shutdown of JII Promotions during 2004, all active
employees were terminated as of February 13, 2004 and curtailment accounting was
performed as of that date. In addition, settlement accounting was performed as
of July 31, 2004 and again as of December 31, 2005 as a result of the large
amount of lump sums paid during both years. One-time charges of


                                      -44-

<PAGE>

$558 and $53 were recognized immediately due to the settlement accounting in
2004 and 2005, respectively. The following table sets forth the change in
benefit obligations, change in plan assets and net amount recognized for this
plan as of the measurement dates of December 31, 2006 and 2005.

PENSION PLANS

The funded status of the defined benefit plan was as follows:

<TABLE>
<CAPTION>
                                             2006     2005
                                            ------   ------
<S>                                         <C>      <C>
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation at beginning of period   $1,904   $1,704
   Interest cost                                96      105
   Actuarial loss                              (16)     219
   Benefits paid                              (280)    (142)
   Settlements                                  40       18
                                            ------   ------
Benefit obligations at end of period        $1,744   $1,904
                                            ------   ------

CHANGE IN PLAN ASSETS:
Fair value at beginning of year             $1,335   $1,049
   Actual return on assets                     114       53
   Contributions received                       --      375
   Benefits paid                               (34)     (33)
   Settlements paid                           (246)    (109)
                                            ------   ------
Fair value at end of year                    1,169    1,335
                                            ------   ------
   Unrecognized net actuarial loss            (575)    (569)
   Unrecognized prior service cost             779      919
                                            ------   ------
   Accrued benefit cost                     $  204   $  350
                                            ======   ======
</TABLE>

The following table provides amounts recognized in the balance sheet as of
December 31:

<TABLE>
<CAPTION>
                                       Year ended December 31,
                                       -----------------------
<S>                                    <C>          <C>
                                             2006    2005
                                            -----   -----
Accumulated other comprehensive loss          779     919
Accrued benefit liability                    (575)   (569)
                                            -----   -----
Net amount recognized                       $ 204   $ 350
                                            =====   =====
</TABLE>

The total accumulated benefit obligation for the defined benefit pension plan
was $1,744 and $1,904 at December 31, 2006 and 2005, respectively.

The plan's expected long-term rate of return on plan assets is 7.5% and is based
on the aggregate historical returns of the investments that comprise the defined
benefit plan portfolio.

The components of net pension costs are as follows:

<TABLE>
<CAPTION>
                                 Year ended December 31,
                                 -----------------------
                                   2006   2005   2004
                                   ----   ----   ----
<S>                              <C>      <C>    <C>
Service cost                       $ --   $ --   $  8
Interest cost                        96    105    134
Expected return on plan assets      (84)   (91)   (80)
Recognized net actuarial loss        25     18     17
                                   ----   ----   ----
Net periodic benefit cost          $ 37   $ 32   $ 79
                                   ====   ====   ====
</TABLE>


                                      -45-

<PAGE>

Assumptions used to determine benefit obligations at the end of the year for the
defined benefit plan is as follows:

<TABLE>
<CAPTION>
                                          Year ended December 31,
                                          -----------------------
                                               2006   2005
                                               ----   ----
<S>                                       <C>         <C>
Discount rate                                  5.75%  5.50%
Rate of increase in compensation levels         N/A    N/A
</TABLE>

Assumptions used to determine net costs for the defined benefit plan is as
follows:

<TABLE>
<CAPTION>
                                          Year ended December 31,
                                          -----------------------
                                             2006   2005   2004
                                             ----   ----   ----
<S>                                       <C>       <C>    <C>
Discount rate                                5.5%   6.0%   6.5%
Long-term rate of return on plan assets      7.5%   7.5%   7.5%
Rate of increase in compensation levels      N/A    N/A    3.0%
</TABLE>

The Company's strategy is to fund its defined benefit plan obligations. The need
for further contributions will be based on changes in the value of plan assets
and the movements of interest rates during the year.

The Company's actual pension plan asset allocation, which approximates the
target plan allocation, at December 31, 2006 and 2005 by asset category are as
follows:

<TABLE>
<CAPTION>
     Asset Category       Percentage of Plan Assets
     --------------       -------------------------
                              2006    2005
                             -----   -----
<S>                       <C>        <C>
Cash and equivalents           1.0%   26.0%
Fixed income securities       49.0%   36.0%
Equity securities             50.0%   38.0%
                             -----   -----
                             100.0%  100.0%
</TABLE>

The Company's estimated future benefit payments related to this pension plan are
as follows:

<TABLE>
<S>         <C>
2007        $108
2008         175
2009         298
2010         123
2011         221
2012-2016    671
</TABLE>

As a result of the sale of the Auto Aftermarket Group in December of 2006, the
Company does not include the pension related liabilities of Alma (a subsidiary
of the group) in its December 31, 2006 balance sheet. However, the operating
results of Alma, and the entire Auto Aftermarket group are included in the
Company's operating results until their date of sale. Accordingly, the
components of Alma's pension cost that is included in the Company's results of
operations are outlined below.

The Company had two defined benefit plans at Alma. During the second quarter of
2005, Alma negotiated and approved certain changes to its retirement plan for
hourly employees. The effect of these changes resulted in a one-time curtailment
charge of $355 to cost of sales in the financial statements as calculated


                                      -46-

<PAGE>
pursuant to FAS88. The components of Alma's net pension cost are described
below:

<TABLE>
<CAPTION>
                                   Year ended December 31,
                                 ---------------------------
                                   2006      2005      2004
                                 -------   -------   -------
<S>                              <C>       <C>       <C>
Service cost                     $   507   $   732   $   698
Interest cost                      1,255     1,193     1,125
Expected return on plan assets    (1,375)   (1,247)   (1,104)
Prior service cost recognized         25        42        59
Recognized net actuarial loss        157       180       111
                                 -------   -------   -------
Net periodic benefit cost        $   569   $   900   $   889
                                 =======   =======   =======
</TABLE>

Assumptions used to determine net costs for Alma's defined benefit plans were as
follows:

<TABLE>
<CAPTION>
                                          Year ended December 31,
                                          -----------------------
                                            2006   2005   2004
                                            ----   ----   ----
<S>                                       <C>      <C>    <C>
Discount rates                              6.00%  6.25%  6.50%
Long-term rate of return on plan assets     8.50%  8.50%  8.50%
Rate of increase in compensation levels     4.00%  4.00%  4.00%
</TABLE>

OTHER POST-RETIREMENT BENEFIT PLANS

The Company had one retiree health care plan at Alma that covered substantially
all of the employees of this subsidiary. The plan provided for certain medical
and prescription drug benefits for those individuals that choose to participate
in the plan. As a result of the sale of the Auto Aftermarket Group in December
of 2006, the Company does not include the post retirement related liabilities of
Alma (a subsidiary of the group) in its December 31, 2006 balance sheet.
However, the operating results of Alma are included in the Company's operating
results until their date of sale. Accordingly, the components of Alma's post
retirement cost that is included in the Company's results of operations are
outlined as follows:

<TABLE>
<CAPTION>
                                Year ended December 31,
                                -----------------------
                                   2006   2005   2004
                                   ----   ----   ----
<S>                             <C>       <C>    <C>
Service cost                       $183   $164   $147
Interest cost                       320    275    218
Prior service cost recognized        13      8     --
Recognized net actuarial loss       114     93     19
                                   ----   ----   ----
Net periodic benefit cost          $630   $540   $384
                                   ====   ====   ====
</TABLE>

Assumptions used to determine net costs for the Company's post-retirement
benefit plans are as follows:

<TABLE>
<CAPTION>
                                Year ended December 31,
                                -----------------------
                                  2006   2005   2004
                                  ----   ----   ----
<S>                             <C>      <C>    <C>
Discount rates                    6.00%  6.25%  6.50%
</TABLE>

A 7.4% annual rate of increase for medical and a 9.0% annual rate of increase
for prescription drugs in the per capita cost of covered post-retirement
benefits was assumed for 2006. The rate was assumed to decrease gradually to 5%
for 2015 and remain at that level thereafter.


                                      -47-

<PAGE>

Increasing or decreasing the health care trend rates by one percentage point
each year would have the following effect:

<TABLE>
<CAPTION>
                                                          1% Increase   1% Decrease
                                                          -----------   -----------
<S>                                                       <C>           <C>
Effect on total of service and interest cost components       $57          $(51)
</TABLE>

NOTE 12 - DEBT

Long-term debt consists of:

<TABLE>
<CAPTION>
                                              December 31, 2006   December 31, 2005
                                              -----------------   -----------------
<S>                                           <C>                 <C>
Revolving Credit Facilities (A)                   $     175           $  20,211
Bank Term Loans (B)                                   2,569               3,845
Capital lease obligations (C)                           408               5,930
Senior Notes (D)                                    206,319             228,803
Senior Subordinated Discount Debentures (D)          94,786              94,786
Subordinated promissory notes (E)                     1,332               3,949
Other                                                 1,459               1,077
                                                  ---------           ---------
                                                    307,048             358,601
Less current portion                               (209,061)            (25,403)
                                                  ---------           ---------
                                                  $  97,987           $ 333,198
                                                  =========           =========
</TABLE>

The components of the senior note balance above consist of the following at
carrying value:

<TABLE>
<CAPTION>
                     Description                         2006       2005
                     -----------                       --------   -------
<C>                                                    <C>        <C>
10.375% Series B Senior Notes                            15,219    15,219
10.375% Series D Senior Notes (including unamortized
   discount of $29 for 2006 and $78 for 2005)            12,133    12,084
13% Exchange Notes                                      178,967   201,500
                                                       --------   -------
Total                                                  $206,319   228,803
                                                       ========   =======
</TABLE>

The net amount of amortization of debt discount included in the Company's income
statement for the year ended December 31, 2006 and December 31, 2005 was $49.

Aggregate maturities of long-term debt at December 31, 2006, excluding
unamortized premiums and discounts, are as follows:

<TABLE>
<S>          <C>
2007         203,457
2008             774
2009          95,400
2010             339
2011             317
Thereafter     1,156
             -------
             301,443
             =======
</TABLE>

As noted above, 68% of the Company's long-term debt matures within the next
year. Currently, the Company is contemplating various avenues of refinancing or
repaying this debt and Management is confident that it will do so prior to the
maturity.

A.   On December 29, 2006, the Company entered into an extension of its Loan and
     Security Agreement ("JII Agreement") with Wachovia Capital Finance
     ("Wachovia"). The JII Agreement provides for borrowings of up to $35,000,
     restricted by the value of certain assets, including inventory, accounts
     receivable and fixed assets. Interest on borrowings is at the Prime Rate
     plus an applicable margin, or at the Company's option, the Eurodollar Rate
     plus an applicable margin (8.5%


                                      -48-

<PAGE>

     and 7.3%), respectively, at December 31, 2006. At December 31, 2006, the
     Company had outstanding borrowings of $175, outstanding letters of credit
     of $8,621, and excess availability of $13,689. The JII Agreement is secured
     by the assets of substantially all of the Company's domestic Subsidiaries.
     The JII Agreement expires on August 16, 2009.

B.   Bank term loans consist of a mortgage on the Deflecto facility, which bears
     interest at .25% below the prime rate and is due in 2015. The carrying
     value of the mortgaged facility is $3,569.

     The Company, through its wholly owned subsidiary GramTel, has a term loan
     with 1st Source Bank. The balance on this loan was $889 at December 31,
     2006 and bears interest at a rate of 6.6% per year. The term loan matures
     in 2008.

C.   Interest rates on capital leases range from 5.9% to 8.3% and mature in
     installments through 2010.

     The future minimum lease payments as of December 31, 2006 under capital
     leases consist of the following:

<TABLE>
<S>                                     <C>
2007                                     212
2008                                     149
2009                                      81
2010                                       1
                                        ----
   Total                                 443
Less amount representing interest        (35)
                                        ----
Present value of future minimum lease
   payments                             $408
                                        ====
</TABLE>

     The present value of the future minimum lease payments approximates the
     book value of property, plant and equipment under capital leases at
     December 31, 2006.

D.   In July 1997, the Company issued $120,000 of 10 3/8% Senior Notes due 2007
     ("2007 Seniors"). These notes bear interest at a rate of 10 3/8% per annum,
     payable semi-annually in cash on February 1 and August 1 of each year and
     mature on August 1, 2007. The 2007 Seniors are redeemable for 100% of the
     principal amount from August 1, 2004 and thereafter plus any accrued and
     unpaid interest to the date of redemption. The 2007 Seniors are unsecured
     obligations of the parent Company.

     In March 1999, the Company issued $155,000 of 10 3/8% Senior Notes due 2007
     ("New 2007 Seniors"). These notes have the identical interest and
     redemption terms as the 2007 Seniors. The New 2007 Seniors are unsecured
     obligations of the parent Company.

     On February 18, 2004, the Company completed an Exchange Offer, whereby it
     exchanged $173,333 of new Senior Notes (the "Exchange Notes") for $104,781
     of 2007 Seniors and $142,838 of New 2007 Seniors (collectively, "Old Senior
     Notes"). The Exchange Notes were co-issued by JII Holdings LLC, a wholly
     owned subsidiary of the Company, and its wholly owned subsidiary, JII
     Holdings Finance Corporation. The Exchange Notes bear interest at 13% per
     annum which is payable semi annually on February 1 and August 1 of each
     year, and mature on April 1, 2007. The remaining Old Senior Notes have a
     fair value of approximately $15,060 at December 31, 2006. The fair value of
     the Exchange Notes was approximately $173,333 at December 31, 2006. The
     fair value was calculated using the Old Senior Notes' and Exchange


                                      -49-

<PAGE>

     Notes' respective December 31, 2006 market prices multiplied by the
     respective face amounts.

     The Exchange Offer was accounted for as a troubled debt restructuring in
     conformity with Statement of Financial Accounting Standards No. 15,
     "Accounting by Debtors and Creditors for Troubled Debt Restructurings"
     (SFAS No. 15). SFAS No. 15 requires that, when there is a modification of
     terms such as this, if the total debt service of the new debt is less than
     the carrying amount on the balance sheet of the old debt, the carrying
     amount should be reduced to the total debt service amount. This reduction
     resulted in a gain of $2,015 at the time of the Exchange, which was
     required by SFAS No. 15 to be offset by fees incurred on the transaction.
     Fees of $7,505, which were in excess of the gain, were recorded as interest
     expense during 2004. There will be no interest expense recognized on the
     Exchange Notes, and the cash interest payments made will be accounted for
     as a reduction of the carrying amount of the Exchange Notes.

     In January 2007, $125,000 of Exchange Notes were redeemed at face value.
     The remaining outstanding notes of $48,333 retain their original interest
     rate and maturity characteristics. The Company will record a gain of $4,063
     in the first quarter of 2007 as a result of this transaction.

     In July 1993, the Company issued $133,075 of 11 3/4% Senior Subordinated
     Discount Debentures ("Discount Debentures") due August 1, 2005. In April
     1997, the Company refinanced substantially all of the Discount Debentures
     and issued the 2009 Debentures. At December 31, 2006, $150 of the Discount
     Debentures were still outstanding and party to the Waiver Agreement
     discussed below. As a result of their inclusion in this agreement, the
     interest and principal payments on the outstanding Discount Debentures are
     subject to the payment limitations discussed in the following paragraph.

     In April 1997, the Company issued $213,636 aggregate principal amount of 11
     3/4% Senior Subordinated Discount Debentures due 2009 ("2009 Debentures").
     The 2009 Debentures were issued at a substantial discount from the
     principal amount. Interest on the 2009 Debentures is payable in cash
     semi-annually on April 1 and October 1 of each year beginning October 1,
     2002. The 2009 Debentures are redeemable for 100% of the accreted value
     from April 1, 2004 and thereafter plus any accrued and unpaid interest. The
     2009 Debentures are unsecured obligations of the Company.

     Between May 29, 2002 and June 5, 2002, the Company repurchased $119,000
     principal amount of its 2009 Debentures, for total consideration of
     $31,360, including expenses. After the purchase, $94,636 principal amount
     of 2009 Debentures were outstanding. The Company reported a gain of
     $52,518, net of taxes of $36,364 in the 2002 statement of operations
     related to this purchase. The fair value of the remaining 2009 Debentures
     was approximately $18,957 at December 31, 2006. The fair value was
     calculated using the 2009 Debentures' December 31, 2006 market price
     multiplied by the face amount.

     On January 31, 2004, the Company and holders of $89,917 of the Company's
     2009 Debentures and $150 of the Company's Discount Debentures
     (collectively, the "Waived Debentures") entered into a Waiver Agreement
     which provides that the participating note holders waive any rights to
     claim an event of default if the Company does not make the scheduled
     interest payments as required in the applicable indenture. The Company


                                      -50-

<PAGE>

     may pay interest on these Waived Debentures only if such payment complies
     with the restricted payments covenant in the indenture governing the
     Exchange Notes. Should the Company be prohibited from or elect not to make
     interest payments on these notes, the interest will continue to accrue on
     the Waived Debentures at the original rate of 11 3/4% per year and will be
     due and payable to the holders at the maturity date of the notes. Pursuant
     to the Waiver Agreement, the maturity date of the participating notes is
     the earlier of (1) the date on which all of the outstanding principal and
     interest on the Exchange Notes and the 2009 and Discount Debentures not
     participating in the Waiver Agreement have been paid in full, (2) the date
     six months after the original maturity of the participating notes, or (3)
     the date on which the Company enters into a bankruptcy proceeding.

     On February 18, 2004, certain of the Company's 2009 Debenture note holders
     entered into a Modification Agreement which provides for a reduction in
     their stated maturity value and a reduction of their applicable interest
     rate. The aggregate maturity value of the notes held by the parties to the
     Modification Agreement was $22,978 which was reduced to $6,893. The
     interest rate on these notes was reduced to a stated rate of 1.61% from 11
     3/4%. On April 1, 2004 certain holders of an additional $1,745 of the
     Company's 2009 Debentures elected to participate in the Modification
     Agreement. The maturity value of these notes was reduced to $524. The
     holders of these modified notes retain the right to collect the original
     maturity value and interest thereon at the original interest rate if the
     Company meets certain financial tests and ratios. Under the terms of the
     Modification Agreement, the holders of the modified notes retain the right
     to collect the original maturity value and interest thereon at the original
     interest rate if the Company meets the Available Cash requirements (as
     defined in the Modification Agreement) and the Fixed Charge Coverage Ratio
     (as defined in the Indenture to the Exchange Notes). The Available Cash
     requirement states that the Company must have at least $20 million in cash
     on hand or available under any credit agreements of the Company or certain
     subsidiaries after giving effect to a pro forma payment of the interest on
     the Debentures at the original interest rate, and that cash availability
     must have existed since the last interest payment date on the Exchange
     Notes. The Fixed Charge Coverage Ratio measures the ratio between
     Consolidated Cash Flow and Fixed Charges and must have been at least 2.0 to
     1 for the twelve month period preceding the payment of any contingent
     principal or contingent interest. At no time since entering into the
     Modification Agreement, has the Company met the Available Cash requirement
     or the Fixed Charge Coverage Ratio as described above. At this time we
     cannot estimate when and if these targets will be met.

     Under the Modification Agreement, these notes mature on the earlier of (1)
     the date that all other 2009 Debenture note holders have been paid in full,
     (2) the date that is six months after the original maturity date, or (3)
     the date on which the Company enters into a bankruptcy proceeding.

     The Company accounted for this modification as a troubled debt
     restructuring as required by SFAS No. 15. The effect of this accounting
     treatment will not reduce the carrying value of the modified notes;
     however, the interest expense associated with the modified notes will be
     calculated using the modified stated interest rate of 1.61% per annum and
     the reduced maturity amount.


                                      -51-
<PAGE>

     The remaining 2009 and Discount Debentures that are not party to the
     Modification Agreement will continue to accrue interest at 11 3/4% and
     represent $70,062 of the total outstanding principal amount of $94,786.

     The Indentures relating to the 2009 Debentures, the Discount Debentures,
     the 2007 Seniors, the New 2007 Seniors, and the Exchange Notes
     (collectively the "JII Notes") restrict the ability of the Company to incur
     additional indebtedness at its Restricted Subsidiaries. The Indentures also
     restrict: the payment of dividends, the repurchase of stock and the making
     of certain other restricted payments; certain dividend payments to the
     Company by its subsidiaries; significant acquisitions; and certain mergers
     or consolidations. The Indentures also require the Company to redeem the
     JII Notes upon a change of control and to offer to purchase a specified
     percentage of the JII Notes if the Company fails to maintain a minimum
     level of capital funds (as defined).

     The Company is, and expects to continue to be, in compliance with the
     provisions of these Indentures.

E.   Subordinated promissory notes payable are due to former shareholders of
     certain subsidiaries in installments through 2007, and bear interest
     ranging from 8% to 9%. The loans are unsecured.

     Interest expense includes $3,519, $3,804 and $11,282 of amortization of
     debt issuance costs for the years ended December 31, 2006, 2005, and 2004,
     respectively.

NOTE 13 - ACCUMULATED OTHER COMPREHENSIVE INCOME

Accumulated other comprehensive income consists of:

<TABLE>
<CAPTION>
                               Year ended
                              December 31,
                            ----------------
                             2006      2005
                            ------   -------
<S>                         <C>      <C>
Minimum pension liability   $ (779)  $(4,411)
Translation                  2,967     5,953
                            ------   -------
                            $2,188   $ 1,542
                            ======   =======
</TABLE>

NOTE 14 - INCOME TAXES

Loss from continuing operations before income taxes is as follows:

<TABLE>
<CAPTION>
               Year ended December 31,
           ------------------------------
             2006       2005       2004
           --------   --------   --------
<S>        <C>        <C>        <C>
Domestic   $(17,575)  $(15,966)  $(16,260)
Foreign       7,102      5,049      4,882
           --------   --------   --------
   Total   $(10,473)  $(10,917)  $(11,378)
           ========   ========   ========
</TABLE>

The provision (benefit) for income taxes from continuing operations consists of
the following:

<TABLE>
<CAPTION>
                    Year ended December 31,
                  --------------------------
                   2006      2005      2004
                  ------   -------   -------
<S>               <C>      <C>       <C>
Current:
Federal           $   --   $    --   $    --
Foreign            1,596     1,450     1,305
State and Local      360        42       127
                  ------   -------   -------
                   1,956     1,492     1,432
Deferred:
Federal               --        --        --
Foreign              100        50       160
State and Local       --        --        --
                  ------   -------   -------
                     100        50       160
                  ------   -------   -------
Total             $2,056   $ 1,542   $ 1,592
                  ======   =======   =======
</TABLE>


                                      -52-
<PAGE>
Significant components of the Company's deferred tax liabilities and assets are
as follows:

<TABLE>
<CAPTION>
                                           December 31,   December 31,
                                               2006           2005
                                           ------------   ------------
<S>                                        <C>            <C>
DEFERRED TAX LIABILITIES:
Goodwill                                     $  1,042       $     --
Property, plant and equipment                      --          2,336
Foreign deferred tax liabilities                1,092            904
                                             --------       --------
   Total deferred tax liabilities            $  2,134       $  3,240
                                             ========       ========
DEFERRED TAX ASSETS:
NOL carryforwards                            $  3,322       $ 27,411
AMT credit carryforwards                        3,889          2,889
Deferred interest                               9,623         19,485
Accrued interest on discount debentures         6,977          6,977
Goodwill                                           --         13,258
Property, plant and equipment                   1,771             --
Foreign deferred tax assets                       521            433
Pension obligation                                 --            519
Vacation accrual                                   --            313
Uniform capitalization of inventory               201          1,281
Allowance for doubtful accounts                   167            425
Deferred financing fees                           167            241
Intangibles other than goodwill                   677            809
Medical claims reserve                          1,160          2,711
Accrued commissions and bonuses                   594          1,188
Deferred gain on JAAI                           2,212             --
Inventory reserves                                213          1,245
Other accrued liabilities                          92          4,509
                                             --------       --------
   Total deferred tax assets                 $ 31,586       $ 83,694
Valuation allowance                           (30,022)       (80,924)
                                             --------       --------
   Total deferred tax assets                 $  1,564       $  2,770
                                             --------       --------
   Net deferred tax liabilities              $    570       $    470
                                             ========       ========
</TABLE>

During 2004, the Company realized $90,404 of cancellation of indebtedness income
for federal income tax purposes as a result of modifications to certain of its
outstanding debt obligations. Such cancellation of indebtedness income was
offset by the consolidated group's net operating losses.


                                      -53-

<PAGE>
The provision for income taxes from continuing operations differs from the
amount of income tax benefit computed by applying the United States federal
income tax rate to loss before income taxes. A reconciliation of the differences
is as follows:

<TABLE>
<CAPTION>
                                               Year ended December 31,
                                             ---------------------------
                                               2006      2005      2004
                                             -------   -------   -------
<S>                                          <C>       <C>       <C>
Computed statutory tax (benefit) provision   $(3,666)  $(3,821)  $(3,982)
   (Increase) decrease resulting from:
   Taxable/(non-taxable) income and other       (523)       --      (904)
   Non-deductible expenses                       525       352       210
   State and local tax, net                      360        50       160
   Valuation allowance on net loss             6,151     7,342    11,941
   Reserve decrease                               --    (2,114)   (5,589)
   Foreign tax rate differential                (791)     (267)     (244)
                                             -------   -------   -------
Provision for income taxes                   $ 2,056   $ 1,542   $ 1,592
                                             =======   =======   =======
</TABLE>

As of December 31, 2006, total consolidated federal net operating loss
carryforwards are approximately $8,401 for regular tax purposes and expire in
2025. There are various state net operating loss carryforwards that expire
between 2015 and 2025. There is also an AMT credit carryforward of $3,889 which
does not expire. A full valuation allowance has been provided against the net
operating loss and credit carryforwards.

NOTE 15 - SALE OF SUBSIDIARIES

On March 24, 2005, the Company sold the assets of Cho-Pat, Inc. ("Cho-Pat") to
Cho-Pat's management team for proceeds of $1,075. Cho-Pat is a designer and
manufacturer of orthopedic related sports medicine devices and was part of the
Consumer and Industrial Products segment. The Company recognized a gain of $251
related to the sale of Cho-Pat. In July 2005, the Company received additional
purchase price of $134. These additional funds did not alter the amount of the
gain recorded on the sale.

On July 31, 2006, the Company sold Pamco Printed Tape & Label Company ("Pamco")
to Pamco's management team for net cash proceeds of $19,199. Pamco was a member
of the Specialty Printing and Labeling Group and is a manufacturer and
distributor of a wide variety of printed tapes and labels. The Company
recognized a gain of $14,693, net of tax, related to the sale of Pamco during
the third quarter of 2006. The operating results and the gain on the sale of
Pamco have been classified as discontinued operations in the Company's financial
statements.

On October 2, 2006, the Company sold its ownership in Seaboard Folding Box
Corporation ("Seaboard") for net proceeds of $6,750. Seaboard was a member of
the Specialty Printing and Labeling group and is a manufacturer of printed
folding cartons and boxes, insert packaging and blister pack cards. The Company
recognized a loss of $3,165, net of tax, related to the sale of Seaboard during
the fourth quarter of 2006. The operating results and the loss on the sale of
Seaboard have been classified as discontinued operations in the Company's
financial statements.

On November 10, 2006, the Company completed the sale of the operating
subsidiaries of Kinetek, Inc. ("Kinetek") to Kinetek Acquisition Corp., a
subsidiary of The Resolute Fund, L.P., a related party. The sale price was
$445,407 prior to certain fees and expenses. The Resolute Fund is managed and
operated by The Jordan Company in New York. The Company recorded a gain on this
transaction of $165,134, net of tax, in the fourth quarter of 2006.


                                      -54-

<PAGE>
The results of operations and the gain on the sale of Kinetek has been
classified as discontinued operations in the Company's financial statements.

On December 1, 2006, the Company sold certain operating assets and the trade
name of Cape Craftsmen, a division of the Company's wholly owned subsidiary,
Welcome Home LLC. The assets were sold to a third party for a final purchase
price of up to $750 based on future orders and collections from a previous
customer of Cape Craftsmen. The Company received $500 at the time of closing.
Based on current estimates, the Company expects to collect an additional $110 in
purchase price during the first half of 2007. The sale of Cape Craftsmen, and
the subsequent wind down of the retail division of Welcome Home LLC met the
criteria of discontinued operations based on the guidance under SFAS No. 144.
The results of operations for Welcome Home LLC are included in discontinued
operations in the Company's financial statements for all periods presented.

On December 29, 2006, the Company sold the Automotive Aftermarket Group to ETX
Holdings, Inc. for $44,000. ETX Holdings, Inc. is owned by The Edgewater Funds;
a group of certain shareholders of the Company and management. The operating
subsidiaries included in the sale were Dacco, Alma and Atco. According to the
provisions of SFAS No. 144, the transaction did not qualify for treatment as a
discontinued operation. Therefore, the operating results of the group are
included in the Company's results of operations up to the date of sale. The
purchase price was comprised of $30,700 in cash, an $11,300 seller subordinated
note due on December 29, 2010 and retained liabilities from Alma to the Company
of $2,000. This transaction resulted in a gain of $5,594, which has been
deferred and has been recorded as an offset to the seller subordinated note
receivable. This deferral was recorded due to the uncertainty of improved
operating results and sufficient future cash flows to fully service this seller
subordinated note by its stated due date.

NOTE 16 - AFFILIATE TRANSACTIONS

On May 4, 2004, two of the Company's affiliates, DMS Holdings, Inc. and Mabis
Healthcare Holdings, Inc., ("DMS/Mabis") were sold to a third party. A portion
of the proceeds from the sale was used to repay the Company for unsecured
advances and operating expenses which the Company paid on behalf of DMS/Mabis in
prior periods, as well as accrued and unpaid management fees due the Company.
These repayments totaled $806 and $1,069, respectively. Also as a result of the
sale, the Company was paid a fee of $1,725 for the termination of its management
fee arrangement with DMS/Mabis, and a fee of $1,600 pursuant to certain advisory
agreements. The Company recorded income of approximately $4,309 in the second
quarter of 2004 as a result of this transaction.

On May 13, 2004, one of the Company's affiliates, Flavor and Fragrance Holdings,
Inc., ("FFG") was sold to a third party. A portion of the proceeds was used to
repay the principal and accrued interest on the note the Company received when
the net assets of Flavorsource were sold to FFG on January 1, 2002. This
principal and accrued interest totaled $12,181. In addition, a portion of the
proceeds from the sale was used to repay the Company for unsecured advances and
operating expenses which the Company paid on behalf of FFG in prior periods, as
well as accrued and unpaid management fees due the Company. These repayments
totaled $4,509 and $1,672, respectively. Also as a result of the sale, the
Company was paid a fee of $1,705 for the termination of its management fee
arrangement with FFG, and a fee of $1,940 pursuant to certain advisory
agreements. The Company recorded income of approximately $3,645 in the second
quarter of 2004 as a result of this transaction.

On May 18, 2005, JIR Paging, Inc. repurchased from the Company its promissory
note in the amount of $9,200. The proceeds to the Company were $9,449 and


                                      -55-

<PAGE>
consisted of the principal amount of the note plus accrued and unpaid interest
since the last interest payment date of $249. JIR Paging was subsequently sold
in March 2006 to a third party. At closing, the Company received net cash
proceeds of $274 for amounts previously invested in JIR Paging. The Company
recorded a gain of $274 in 2005 as a result of reversing reserves previously
recorded against the receivable from JIR Paging.

On June 10, 2005, the Company's affiliate, Fleet Graphics Holdings, was sold to
management of that Company for $6,600. A portion of the proceeds from the sale
was used to pay the Company accrued and unpaid management fees and operating
expenses which were paid by the Company on behalf of Fleet Graphics Holdings.
These repayments totaled $1,577 and $613; respectively. Also as a result of the
sale, the Company was paid $1,400 for the termination of its management fee
arrangement with Fleet Graphics Holdings and a fee of $1,160 pursuant to certain
advisory agreements. The Company also received $1,850 for various fees and
charges associated with the transaction. The Company recorded income of $4,410
in the second quarter of 2005 as a result of this transaction.

On July 29, 2005, Healthcare Products Holdings, Inc. ("HPI"), an affiliate of
the Company based on partial common ownership, and its operating subsidiary
Hoveround, undertook an independent refinancing of its obligations with several
new third party lenders. A portion of the proceeds from the refinancing was used
to repay obligations to the Company. The Company received proceeds of $15,000
for payment of notes, accrued interest, accrued and unpaid management fees,
amounts previously paid by the Company on behalf of HPI and accrued and unpaid
financing fees. Due to previous concerns regarding the collectibility of these
amounts the Company had reserved against these receivables leaving an unreserved
amount of $7,034. As a result, the Company recorded a gain of $7,966 on the
transaction. In the fourth quarter of 2005, the Company reversed additional
reserves related to HPI resulting in an addition to the previously recorded gain
of $618. This gain was recorded as a component of operating income because the
original reserves taken by the Company were charged to operating income. At
December 31, 2006, the Company was owed $66 from HPI for management fees.

JIR Broadcast was sold on February 28, 2006 and resulted in cash proceeds to the
Company of $30,250. The purchase price included repayment of amounts previously
loaned to and paid on behalf of, JIR Broadcast of $15,610, accrued interest of
$9,187, accrued and unpaid management fees of $1,679, a fee for the termination
of the management fee agreement of $3,400, and reimbursement of expenses
incurred by the Company during the sale process of $374. Income of $14,453 was
recorded in the Company's financial statements during 2005 related to the JIR
Broadcast sale due to the reversal of reserves previously recorded by the
Company against the loans, interest on its loans, and the recognition of
management fee income from JIR Broadcast which was not previously accrued. In
2006, the Company recorded income of $4,620 related to the termination of
management fee agreement, interest income, management fees earned by the Company
up to the date of sale, and other closing amounts. In March of 2007, the Company
received an additional $3,000 of proceeds upon final settlement of an escrow
established at the closing of this transaction. The Company will record income
of $3,000 in the first quarter of 2007.

The Company, through its wholly owned subsidiary Motors and Gears Holdings, Inc.
has an investment in JZ International (See Note 8). During the fourth quarter of
2006, the Company recorded an impairment charge of $3,800 on this investment,
which reduced its recorded value from $12,344 to $8,500. This impairment charge
was deemed appropriate based on current negotiations involving the sale of this
investment and the contemplated sales price.


                                      -56-

<PAGE>

NOTE 17 - SALE OF ASSETS

In March 2006, the Company sold certain fully depreciated non-operating assets
for $6,405 to related parties. The sales price was determined by an independent
third party. The proceeds were used to repay long-term debt on these assets of
$3,834. After giving consideration to fees associated with the transaction, the
Company recorded a gain of $6,306 in the first quarter of 2006.

In October 2006, the Company sold certain fully depreciated non-operating assets
for $1,995. The Company recorded a gain of this amount during the fourth quarter
of 2006.

In December 2006, the Company sold additional non-operating assets for proceeds
of $618. A gain of $562 was recorded in the fourth quarter of 2006 after taking
into consideration the asset's net book value at the date of sale of $56.

NOTE 18 - RELATED PARTY TRANSACTIONS

Transaction Advisory Agreement. Each of the Company's subsidiaries are parties
to an advisory agreement with the Company, referred to as the Transaction
Advisory Agreement, pursuant to which, such subsidiaries pay to the Company (i)
investment banking and sponsorship fees of up to 2.0% of the aggregate
consideration paid in connection with acquisitions, joint ventures, minority
investments or sales by each such subsidiary of all or substantially all of its
or its subsidiaries capital stock, businesses or properties; (ii) financial
advisory fees of up to 1.0% of the amount obtained or made available pursuant to
any debt, equity or other financing or refinancing involving such subsidiary, in
each case, arranged with the assistance of the Company or its affiliates; and
(iii) reimbursement for the Company's out-of-pocket costs in connection with
providing such services. Each Transaction Advisory Agreement contains
indemnities in favor of the Company and its affiliates, and The Jordan Company
and certain of its affiliates, including TJC Management Corporation, in
connection with the Transaction Advisory Agreement and such services. The
Transaction Advisory Agreement will expire in December 2007, but is
automatically renewed after such date for successive one-year terms, unless any
party provides written notice of termination 60 days prior to the scheduled
renewal date. The Company recorded fees pursuant to the Transaction Advisory
Agreement of $0, $0 and $73 for the years 2006, 2005 and 2004, respectively.

TJC Management Consulting Agreement. JII has entered into a consulting services
agreement with TJC Management Corporation, an affiliate of The Jordan Company,
referred to as the TJC Management Consulting Agreement, pursuant to which the
Company will in turn pay to TJC Management Corporation (i) one-half of the
investment banking, sponsorship and financing advisory fees paid to the Company
pursuant to the Transaction Advisory Agreement, unless otherwise determined by
our Board of Directors; (ii) (A) investment banking and sponsorship fees of up
to 2.0% of the purchase price of acquisitions, joint ventures and minority
investments or sales involving the Company or its other subsidiaries and (B)
financial advisory fees of up to one-half of 1.0% of any debt, equity or other
financing or refinancing involving the Company or such subsidiaries, in each
case, arranged with the assistance of TJC Management Corporation or its
affiliates, unless otherwise


                                      -57-

<PAGE>

determined by the Company's Board of Directors; and (iii) reimbursement for TJC
Management Corporation's and The Jordan Company's out-of-pocket costs incurred
in connection with such services. The TJC Management Consulting Agreement also
contains indemnities in favor of TJC Management Corporation and its affiliates
and The Jordan Company and its affiliates in connection with such services. In
consideration for these fees, the services of Mr. Jordan and the investment
banking, sponsorship and advisory services of TJC Management Corporation will be
provided to the Company. The TJC Management Consulting Agreement will expire in
December 2007, but is automatically renewed after such date for successive
one-year terms, unless either party provides written notice of termination 60
days prior to the scheduled renewal date. The Company did not pay to TJC
Management Corporation or The Jordan Company any fees or cost reimbursements for
the years 2006, 2005, and 2004 under this agreement. Approximately, $9,652 of
such fees and cost reimbursements are accrued and unpaid under this agreement as
of December 31, 2006 and December 31, 2005.

Service and Fee Agreements. Two companies that are not subsidiaries - Healthcare
Products Holdings, Inc. and Staffing Consulting Holdings, Inc., - are parties to
service and fee agreements or arrangements with the Company and/or TJC
Management Corporation, pursuant to which such companies will pay to the Company
and/or TJC Management Corporation (i) investment banking and sponsorship fees of
up to 2.0% of the aggregate consideration paid in connection with acquisitions,
joint ventures, minority investments or sales by such companies of all or
substantially all of their or their subsidiaries' capital stock, businesses or
properties; (ii) financial advisory fees of up to 1.0% of any amount obtained or
made available pursuant to debt, equity or other financing or refinancing
involving such company, in each case, arranged with the Company's assistance or
that of its affiliates; (iii) fees based upon a percentage of net EBITDA (as
defined) or net sales; and (iv) reimbursement for the Company's and/or TJC
Management Corporation's out of pocket costs in connection with providing such
services. These fee agreements or arrangements contain indemnities in favor of
the Company and its affiliates, including TJC Management Corporation, in
connection with such services. Pursuant to the TJC Management Consulting
Agreement, the Company, in turn, will also pay to TJC Management Corporation
one-half of such investment banking, sponsorship and financial advisory fees and
its portion of such cost reimbursements, unless otherwise determined by the
Company's Board of Directors. These fee agreements or arrangements will expire
at various times from 2007 through 2009, but are automatically renewed after
such date for successive one year terms, unless any party provides written
notice of termination 60 days prior to the scheduled renewal date. Pursuant to
these services and fee arrangements the Company received approximately $613,
$5,378 and $6,648 for the years ended December 31, 2006, 2005 and 2004
respectively, which includes funds received from companies no longer under these
agreements.

Legal Counsel. Mr. G. Robert Fisher, a director of, and secretary to, the
Company, is a partner of Sonnenschein, Nath & Rosenthal LLP. Mr. Steven L. Rist,
the general counsel and assistant secretary to the Company, is also a partner of
Sonnenschein, Nath & Rosenthal LLP. Mr. Fisher, Mr. Rist and their law firm have
represented the Company and The Jordan Company in the past, and expect to
continue representing them in the future. Sonnenschein, Nath & Rosenthal LLP was
paid approximately $1,234, $587 and $1,040 in fees and expenses by the Company
in 2006, 2005 and 2004, respectively. The Company believes that the fees paid
were equivalent to what it would have paid to an unaffiliated third party law
firm for similar services.


                                      -58-

<PAGE>

NOTE 19 - BUSINESS SEGMENT INFORMATION

The Company's continuing business operations are comprised of four operating
subsidiaries. Deflecto, Beemak and Sate-Lite which are grouped together and
referred to as the Jordan Specialty Plastics group, and GramTel.

Jordan Specialty Plastics includes the manufacturing of point-of-purchase
advertising displays by Beemak; manufacture and marketing of safety reflectors,
lamp components, bicycle reflector kits, modular storage units, and emergency
warning triangles by Sate-Lite; and design, manufacture, and marketing of
plastic injection-molded products for mass merchandisers, major retailers, and
large wholesalers and manufacture of extruded vinyl chairmats for the office
products industry by Deflecto.

GramTel provides data storage services and access to dedicated Internet
connectivity.

The results of the Jordan Auto Aftermarket group are included in continuing
operations through their date of sale of December 29, 2006 (See Note 15). Their
assets and liabilities are not included in the Company's balance sheet as of
December 31, 2006. The Jordan Auto Aftermarket group consisted of Alma, Dacco
and Atco and focused primarily on the remanufacture and supply of torque
converters to the automotive aftermarket parts industry. These operating
subsidiaries also produced newly manufactured torque converters, air
conditioning compressors and clutch and disc assemblies for major automotive and
equipment OEM's.

Measurement of Segment Operating Income and Segment Assets

The Company evaluates performance and allocates resources based on operating
income. The accounting policies of the reportable segments are the same as those
described in Note 2 - Significant Accounting Policies.

Intra-segment sales exist between Sate-Lite, Beemak and Deflecto. These sales
were eliminated in consolidation and are not presented in segment disclosures.
There is one customer that accounts for more than 10% of the JSP segment net
sales. This customer accounted for $20,377 of Deflecto's net sales. No other
single customer accounts for 10% or more of segment or consolidated net sales.

Operating income by business segment is defined as net sales less operating
costs and expenses, excluding interest and corporate expenses.

Identifiable assets are those used by each segment in its operations. Included
in identifiable assets of discontinued operations are assets of the Specialty
Printing and Labeling group, Welcome Home LLC and Motors and Gears Holdings.
Corporate assets consist primarily of cash and cash equivalents, equipment,
notes receivable from affiliates and deferred financing costs.

Factors Used to Identify the Enterprise's Reportable Segments

The Company's reportable segments are business units that offer different
products. The reportable segments are each managed separately because they
manufacture and distribute distinct products with different production
processes.


                                      -59-

<PAGE>
Summary financial information by business segment is as follows:

<TABLE>
<CAPTION>
                                                                 Year ended December 31,
                                                             ------------------------------
                                                               2006       2005       2004
                                                             --------   --------   --------
<S>                                                          <C>        <C>        <C>
NET SALES:
   Jordan Specialty Plastics                                 $135,128   $156,593   $147,665
   Jordan Auto Aftermarket                                    118,655    119,171    141,862
   GramTel                                                      2,895      3,092      3,832
                                                             --------   --------   --------
      Total                                                  $256,678   $278,856   $293,359
                                                             ========   ========   ========
OPERATING INCOME (LOSS):
   Jordan Specialty Plastics                                 $  2,790   $  2,662   $  9,832
   Jordan Auto Aftermarket                                     (8,598)   (24,101)     3,783
   GramTel                                                         29       (158)      (101)
                                                             --------   --------   --------
      Total business segment operating income                  (5,779)   (21,597)    13,514
   Corporate (expense)/income                                   3,235     29,726      1,897
                                                             --------   --------   --------
      Total consolidated operating income                    $ (2,544)  $  8,129   $ 15,411
                                                             ========   ========   ========
DEPRECIATION AND AMORTIZATION:
   Jordan Specialty Plastics                                 $  2,906   $  3,339   $  4,624
   Jordan Auto Aftermarket                                      2,460      2,488      2,545
   GramTel                                                        424        444        471
                                                             --------   --------   --------
      Total business segment amortization and depreciation      5,790      6,271      7,640
   Corporate                                                      459        763      1,130
                                                             --------   --------   --------
      Total consolidated depreciation and amortization       $  6,249   $  7,034   $  8,770
                                                             ========   ========   ========
CAPITAL EXPENDITURES:
   Jordan Specialty Plastics                                 $  3,125   $  2,406   $  1,905
   Jordan Auto Aftermarket                                      1,372        636        826
   GramTel                                                      1,003        164        109
                                                             --------   --------   --------
      Total business segment capital expenditures               5,500      3,206      2,840
   Corporate                                                        7         45        301
                                                             --------   --------   --------
      Total capital expenditures                             $  5,507   $  3,251   $  3,141
                                                             ========   ========   ========
</TABLE>

<TABLE>
<CAPTION>
                                                        December 31,
                                                    -------------------
                                                      2006       2005
                                                    --------   --------
<S>                                                 <C>         <C>
IDENTIFIABLE ASSETS (END OF YEAR):
   Jordan Specialty Plastics                        $109,696    113,403
   Jordan Auto Aftermarket                                --     69,312
   GramTel                                             2,891      2,224
                                                    --------   --------
      Total consolidated business segment assets     112,587    184,939

   Identifiable assets of discontinued operations     10,144    377,946
   Corporate assets                                  188,998     48,482
                                                    --------   --------
      Total consolidated identifiable assets        $311,729   $611,367
                                                    ========   ========
</TABLE>

SUMMARY FINANCIAL INFORMATION BY GEOGRAPHIC AREA IS AS FOLLOWS:

<TABLE>
<CAPTION>
                                           Year ended December 31,
                                       ------------------------------
                                         2006       2005       2004
                                       --------   --------   --------
<S>                                    <C>        <C>        <C>
NET SALES TO UNAFFILIATED CUSTOMERS:
United States                          $210,326   $241,780   $250,531
Foreign                                  46,352     37,076     42,828
                                       --------   --------   --------
   Total                               $256,678   $278,856   $293,359
                                       ========   ========   ========
IDENTIFIABLE ASSETS (END OF YEAR):
United States                          $270,797   $490,626   $536,957
Foreign                                  40,932    120,741    125,449
                                       --------   --------   --------
   Total                               $311,729   $611,367   $662,406
                                       ========   ========   ========
</TABLE>



                                      -60-

<PAGE>
NOTE 20 - ACQUISITION AND FORMATION OF SUBSIDIARIES

On September 28, 2005, the Company, through its previously wholly owned
subsidiary, Atco, acquired certain assets including inventory and machinery of
Coolstar, Inc. for $393 including fees. Coolstar is a manufacturer of
evaporators for the automotive climate control market and its operations were
fully integrated into Atco.

NOTE 21 - ADDITIONAL PURCHASE PRICE AGREEMENTS/DEFERRED PURCHASE PRICE
AGREEMENTS

The Company has a contingent purchase price agreement relating to its
acquisition of Deflecto in 1998. The agreement is based on Deflecto achieving
certain earnings before interest and taxes and is payable on April 30, 2008. If
Deflecto is sold prior to April 30, 2008, the agreement is payable 120 days
after the transaction.

The Company also had a deferred purchase price agreement relating to its
acquisition of Teleflow in July 1999. This agreement was based upon Teleflow
achieving certain agreed upon earnings before interest, taxes, depreciation, and
amortization for each year through the year ended December 31, 2003. The Company
paid $750 and $328 in 2003 and 2002, respectively, related to this agreement. In
2004, the Company and previous management of Teleflow reached an agreement
whereby the recipients of the above payments agreed to repay $950 to the Company
over time. The final payment in the repayment schedule was made in December
2005. No other amounts are due by either party in connection with this
agreement.

NOTE 22 - CONTINGENCIES

The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. The Company believes that the final disposition
of such matters will not have a material adverse effect on the financial
position or results of operations of the Company.

NOTE 23 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

<TABLE>
<CAPTION>
                                                                Three Months Ended
                                            ----------------------------------------------------------
                                            December 31(4)   September 30(3)   June 30(2)  March 31(1)
                                            --------------   ---------------   ---------   -----------
                                                                 Restated       Restated     Restated
<S>                                         <C>              <C>               <C>         <C>
2006:
Net sales                                      $ 55,186          $64,570        $69,815      $67,107
Cost of sales, excluding depreciation            52,002           49,852         52,754       51,765
(Loss) income  from continuing operations       (11,654)          (4,338)        (2,011)       5,474
Net income                                      144,133           12,889          2,036        4,345

2005:
Net sales                                      $ 63,774          $72,195        $72,965      $69,922
Cost of sales, excluding depreciation            48,923           56,197         57,948       54,251
(Loss) income  from continuing operations       (11.784)           3,625            500       (4,800)
Net (loss) income                                (3,391)           4,123          2,773       (9,516)
</TABLE>

(1)  Income from continuing operations for the first quarter of 2006 includes
     income from the sale of an affiliate of $4,612 and gain on sale of fixed
     assets of $6,306.

(2)  Income from continuing operations for the second quarter of 2005 includes
     income from the sale of an affiliate of $4,410.

(3)  Net income for the third quarter of 2006 includes income from the sale of
     Pamco of $14,693. Income from continuing operations for the third quarter
     of 2005 includes income from the refinancing of an affiliate for $7,966.

(4)  Net income for the fourth quarter of 2006 includes income related to the
     sale of Kinetek, Inc. of $165,134 partially offset by the loss on the sale
     of Seaboard of $3,165. Loss from continuing operations for the fourth
     quarter of 2005 includes income related to the sale of an affiliate of
     $14,727 offset by a goodwill impairment loss of $20,862.



                                      -61-

<PAGE>
NOTE 24 - RESEARCH AND DEVELOPMENT COSTS

The Company incurred $146, $292 and $276 of research and development costs
during 2006, 2005 and 2004, respectively.

NOTE 25 - MANAGEMENT DISCUSSION OF LIQUIDITY

The Company has experienced operating losses in recent years and has used cash
in operating activities. Additionally, at December 31, 2006, the Company had
negative working capital of $31.4 million. These factors have caused the
Company's executive management to evaluate various options to improve the
Company's liquidity. During 2004, the Company restructured some of its
outstanding debt through the Exchange Offer discussed in Note 12 to the
financial statements and the Modification and Waiver Agreements also discussed
in Note 12 to the financial statements. The effect of these transactions has
been to reduce cash paid for interest in the current year as well as to provide
for further reductions in debt maturity payments if certain financial
performance is not achieved. In addition, the Company expects improved operating
performance in all segments over the prior year. Specifically, new product
development and the continued shift of manufacturing to China in the Jordan
Specialty Plastics group is expected to improve results. Further, the Company
has evaluated its holdings of investments in affiliates (See Note 8) and, when
appropriate, will sell certain investments, similar to the sale of the Company's
investments in DMS Holdings Inc, Mabis Healthcare Holdings Inc., Flavor and
Fragrance Holdings Inc. and JIR Broadcast, Inc. as described in Note 16 to the
financial statements. The Company believes that through its efforts discussed
above, in conjunction with opportunistic sales of assets, refinancings or market
transactions, the Company will have sufficient liquidity to meet its obligations
in the coming year. As noted, the Company has long-term debt that matures within
the year. Currently, the Company is contemplating various avenues of repaying or
refinancing this debt, and management is confident that it will do so prior to
the maturity. If the Company is unable to refinance or enter into a transaction
that allows it to pay off this debt, then there is substantial doubt about the
Company's ability to continue as a going concern.

NOTE 26 - ISSUANCE OF COMMON STOCK

On December 15, 2006, the Company issued 2,010 shares of $0.01 par common stock
to Youming Ye, an employee of an affiliate of the Company. Mr. Ye paid $4 for
the shares during the first quarter of 2007.

NOTE 27 - SUBSEQUENT EVENTS

On January 11, 2007, the Company liquidated its wholly-owned subsidiary, Motors
and Gears Holdings, Inc. Motors and Gears Holdings, Inc. is the parent of
Kinetek, Inc. which sold its operating subsidiaries in November of 2006 (See
Note 15). Upon liquidation, cash of $132,482 and an investment in JZ
International valued at $8,500 were transferred to the Company in full
settlement of all intercompany amounts owed.

On November 16, 2006, the Board of Directors of the Company agreed to amend the
Articles of Incorporation to allow for the issuance of additional common stock
and a new class of preferred stock of the Company. On January 11, 2007, the
amended articles of incorporation were filed and the Company was


                                      -62-

<PAGE>

authorized to issue up to 110,000 shares of Common Stock having a par value of
$0.01 per share and 100,000 shares of preferred stock having a par value of
$0.01 per share. On January 11, 2007 52,177.6 shares of preferred stock were
issued in exchange for certain Non-Voting Preferred Stock and Class B Common
Stock of Motors and Gears Holdings, Inc.

On January 12, 2007, the Company voluntarily redeemed $125,000 of 13% Exchange
Notes due April 2007. The notes were redeemed at face value plus accrued
interest to the date of redemption. The Company will record a gain of $4,063
during the first quarter of 2007 as a result of this transaction.

On March 13, 2007, the Company received $3,000 of additional proceeds upon final
settlement of an escrow established at the time of sale of JIR Broadcast in
March of 2006.

NOTE 28 - CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

Pursuant to the Exchange Offer described in Note 12, wholly owned subsidiaries
of the Company, JII Holdings LLC and JII Holdings Finance Corporation, issued
senior secured notes which have been guaranteed by the Company and certain of
the Company's subsidiaries. Each of the subsidiary guarantors is "100% owned"
(as defined in Rule 3-10 of Regulation S-X) by the Company, and in all cases,
the guarantees are full and unconditional and joint and several. The following
condensed consolidating financial information is provided in lieu of separate
financial statements for the issuers of these notes.


                                      -63-

<PAGE>

Year ended December 31, 2006

<TABLE>
<CAPTION>
                                 Jordan        JII        JII                     Non-
                               Industries    Holdings   Finance   Guarantors   Guarantors   Eliminations   Consolidated
                               ----------   ---------   -------   ----------   ----------   ------------   ------------
<S>                            <C>          <C>         <C>       <C>          <C>          <C>            <C>
Net Sales                      $      --    $      --     $--     $ 226,210     $ 30,468     $      --       $256,678
Cost of sales,
   excluding depreciation             --           --      --       183,317       23,056            --        206,373
Selling, general, and
   administrative expenses,
   excluding depreciation           (737)          --      --        45,537        6,118           162         51,080
Depreciation                         416           --      --         5,020          767            --          6,203
Amortization of goodwill
   and other intangibles               5           --      --            41           --            --             46
Income from sale of
   affiliates                     (4,620)          --      --            --           --            --         (4,620)
Management fees and other            140           --      --          (208)         208            --            140
                               ---------    ---------     ---     ---------     --------     ---------       --------
Operating income (loss)            4,796           --      --        (7,497)         319          (162)        (2,544)

Other (income) and expenses:
   Interest expense               11,282        2,838      --         1,611          274            --         16,005
   Intercompany interest
      (income) expense            (7,716)     (22,654)     --        22,265        8,105            --             --
   Interest income                  (104)          --      --            --           (7)           --           (111)
   Intercompany management
      fee (income) expense        (3,192)      (3,230)     --         3,164        3,258            --             --
   Gain on sale of assets             --           --      --            --       (8,863)           --         (8,863)
   Loss/(gain) on sale of
      subsidiaries                    --      198,006      --      (200,402)          --         2,396             --
   Equity in earnings of
      subsidiaries              (162,885)    (169,529)     --            --           --       332,414             --
   Other, net                      4,008           --      --           729       (3,839)           --            898
                               ---------    ---------     ---     ---------     --------     ---------       --------
                                (158,607)       5,431      --      (172,633)      (1,072)      334,810          7,929
Income (loss) from
   continuing operations
   before taxes                  163,403       (5,431)     --       165,136        1,391      (334,972)       (10,473)
Provision for income taxes            --           --      --         1,691          365            --          2,056
                               ---------    ---------     ---     ---------     --------     ---------       --------
Income(loss) from
   continuing operations         163,403       (5,431)     --       163,445        1,026      (334,972)       (12,529)

Discontinued Operations:
   Income (loss) from
   discontinued operations,
   net of tax                         --           --      --         6,084      169,848            --        175,932
                               ---------    ---------     ---     ---------     --------     ---------       --------
Net (loss) income              $ 163,403    $  (5,431)    $--     $ 169,529     $170,874     $(334,972)      $163,403
                               =========    =========     ===     =========     ========     =========       ========
</TABLE>


                                      -64-

<PAGE>

Year ended December 31, 2005 (Restated)

<TABLE>
<CAPTION>
                                 Jordan        JII        JII                     Non-
                               Industries    Holdings   Finance   Guarantors   Guarantors   Eliminations   Consolidated
                               ----------   ---------   -------   ----------   ----------   ------------   ------------
<S>                            <C>          <C>         <C>       <C>          <C>          <C>            <C>
Net Sales                       $     --    $     --      $--      $253,210     $ 25,646      $     --       $278,856
Cost of sales, excluding
   depreciation                       --          --       --       196,626       20,693            --        217,319
Selling, general, and
   administrative expenses,
   excluding depreciation         (3,676)         64       --        48,231        7,852          (153)        52,318
Depreciation                         721          --       --         5,397          869            --          6,987
Amortization of goodwill and
   other intangibles                   5          --       --            41           --            --             46
Goodwill impairment loss              --          --       --        23,312           --        (2,450)        20,862
Income from sale of
   affiliates                    (12,994)         --       --            --           --            --        (12,994)
Management fees and other        (14,592)         --       --         1,765         (984)           --        (13,811)
                                --------    --------      ---      --------     --------      --------       --------
Operating income                  30,536         (64)      --       (22,162)      (2,784)        2,603          8,129

Other (income) and expenses:
   Interest expense               11,288       2,838       --         4,117          401            --         18,644
   Intercompany interest
      (income) expense            (6,758)    (22,026)      --        21,636        7,147             1             --
   Interest income                   (44)         --       --           (61)          (6)           --           (111)
   Intercompany management
      fee (income) expense        (3,366)     (3,745)      --         3,179        3,932            --             --
   (Gain) loss on sale of
      subsidiary                    (273)         --       --            22           --            --           (251)
   Equity in losses of
      subsidiaries                32,424      51,629       --            --           --       (84,053)            --
   Other, net                      5,442          --       --           366       (5,044)           --            764
                                --------    --------      ---      --------     --------      --------       --------
                                  38,713      28,696       --        29,259        6,430       (84,052)        19,046
(Loss) income from
   continuing operations
   before taxes                   (8,177)    (28,760)      --       (51,421)      (9,214)       86,655        (10,917)
(Benefit) provision for
   income taxes                   (2,166)         --       --         3,623           85            --          1,542
                                --------    --------      ---      --------     --------      --------       --------
(Loss) income from
   continuing operations          (6,011)    (28,760)      --       (55,044)      (9,299)       86,655        (12,459)

Discontinued Operations:
Income (loss) from
   discontinued operations,
   net of tax                         --          --       --         3,415        3,055           (22)         6,448
                                --------    --------      ---      --------     --------      --------       --------
Net (loss) income               $ (6,011)   $(28,760)     $--      $(51,629)    $ (6,244)     $ 86,633       $ (6,011)
                                ========    ========      ===      ========     ========      ========       ========
</TABLE>


                                      -65-

<PAGE>

Year ended December 31, 2004 (Restated)

<TABLE>
<CAPTION>
                                 Jordan        JII        JII                     Non-
                               Industries    Holdings   Finance   Guarantors   Guarantors   Eliminations   Consolidated
                               ----------   ---------   -------   ----------   ----------   ------------   ------------
<S>                            <C>          <C>         <C>       <C>          <C>          <C>            <C>
Net Sales                       $     --    $     --      $--      $272,228     $ 21,131      $     --       $293,359
Cost of sales, excluding
   depreciation                       --          --       --       209,074       15,607            --        224,681
Selling, general, and
   administrative expenses,
   excluding depreciation          1,947          --       --        42,254        7,884            --         52,085
Depreciation                        (413)         --       --         6,851        2,308            --          8,746
Amortization of goodwill and
   other intangibles                   5          --       --            19           --            --             24
Income from sale of
   affiliate                      (7,954)         --       --            --           --            --         (7,954)
Management fees and other            365        (375)      --           299           77            --            366
                                --------    --------      ---      --------     --------      --------       --------
Operating income(loss)             6,050         375       --        13,731       (4,745)           --         15,411

Other (income) and expenses:
   Interest expense               15,612       9,871       --         4,161          364            --         30,008
   Intercompany
      interest (income)
      expense                    (11,840)    (20,764)      --        24,444        8,159             1             --
   Interest income                (2,095)         --       --            (1)          (2)           --         (2,098)
   Intercompany management
      fee (income) expense        (3,762)     (3,229)      --         2,984        4,007            --             --
   Equity in losses of
      subsidiaries                28,622      28,361       --            --           --       (56,983)            --
   Other, net                      5,596          --       --           484       (7,200)           (1)        (1,121)
                                --------    --------      ---      --------     --------      --------       --------
                                  32,133      14,239       --        32,072        5,328       (56,983)        26,789
(Loss) income from
   continuing operations
   before taxes                  (26,083)    (13,864)      --       (18,341)     (10,073)       56,983        (11,378)
Provision for income taxes        (5,977)         --       --         7,916         (347)           --          1,592
                                --------    --------      ---      --------     --------      --------       --------
(Loss) income from
   continuing operations         (20,106)    (13,864)      --       (26,257)      (9,726)       56,983        (12,970)

Discontinued Operations:
Income (loss) from
   discontinued
   operations, net of tax             --          --       --        (2,104)      (5,032)           --         (7,136)
                                --------    --------      ---      --------     --------      --------       --------
Net (loss) income               $(20,106)   $(13,864)     $--      $(28,361)    $(14,758)     $ 56,983       $(20,106)
                                ========    ========      ===      ========     ========      ========       ========
</TABLE>


                                      -66-
<PAGE>

Balance Sheet as of December 31, 2006

<TABLE>
<CAPTION>
                                  Jordan        JII        JII
                                Industries    Holdings   Finance   Guarantors   Non-Guarantors   Eliminations   Consolidated
                                ----------   ---------   -------   ----------   --------------   ------------   ------------
<S>                             <C>          <C>         <C>       <C>          <C>              <C>            <C>
Current assets:
   Cash and equivalents         $  39,915    $      --     $--      $  2,816       $134,946       $      --       $177,677
   Intercompany receivables        76,066     (107,060)     --        (7,802)        25,231          13,565             --
   Accounts receivable, net            --           --      --        20,353          3,544              --         23,897
   Inventories                         --           --      --        15,130          2,799              --         17,929
   Assets of discontinued
      operations                       --           --      --        10,144             --              --         10,144
   Deferred tax asset                  --           --      --           521             --              --            521
   Investment in and
      advances to affiliates           --           --      --            --          8,500              --          8,500
   Prepaids and other
      current assets                4,065           --      --         1,827            612          (1,184)         5,320
                                ---------    ---------     ---      --------       --------       ---------       --------
   Total current assets           120,046     (107,060)     --        42,989        175,632          12,381        243,988

Property, plant and
   equipment, net                     825           --      --        12,424          7,669              --         20,918
Investments and advances to
   affiliates                       2,534           --      --            --             --            (528)         2,006
Investments in subsidiaries        58,032      139,050      --            --             --        (197,082)            --
Equity in earnings of
   subsidiaries                  (164,340)     (23,986)     --            --             --         188,326             --
Goodwill, net                          --           --      --        45,976          1,244          (9,526)        37,694
Intercompany notes
   receivable                      (1,000)     109,359      --            --          1,000        (109,359)            --
Other assets                        5,784          710      --           476            153              --          7,123
                                ---------    ---------     ---      --------       --------       ---------       --------
   Total assets                 $  21,881    $ 118,073     $--      $101,865       $185,698       $(115,788)      $311,729
                                =========    =========     ===      ========       ========       =========       ========

Current liabilities:
   Accounts payable             $      --    $      --     $--      $  7,621       $  3,176       $      --       $ 10,797
   Accrued liabilities             28,334        9,388      --         8,167            797          (1,300)        45,386
   Liabilities of
      discontinued operations          --           --      --        10,176            399           2,017         12,592
   Intercompany payables               --           --      --       (55,105)        33,371          21,734             --
   Current portion of long
      term debt                    27,352      178,967      --         1,817            925              --        209,061
                                ---------    ---------     ---      --------       --------       ---------       --------
   Total current liabilities       55,686      188,355      --       (27,324)        38,668          22,451        277,836

Long term debt                     94,786           --      --         1,480          1,721              --         97,987
Other non current
   liabilities                     26,367           --      --            --             --              --         26,367
Intercompany note payables        (63,405)          --      --       107,832         64,932        (109,359)            --
Deferred income taxes                  --           --      --         1,092             --              --          1,092
Preferred stock of a
   subsidiary                          --           --      --        42,771          2,720         (45,491)            --
Shareholders' equity (deficit)    (91,553)     (70,282)     --       (23,986)        77,657          16,611        (91,553)
                                ---------    ---------     ---      --------       --------       ---------       --------
   Total liabilities and
      shareholders deficit      $  21,881    $ 118,073     $--      $101,865       $185,698       $(115,788)      $311,729
                                =========    =========     ===      ========       ========       =========       ========
</TABLE>


                                      -67-

<PAGE>

Balance Sheet as of December 31, 2005 (Restated)

<TABLE>
<CAPTION>
                                  Jordan        JII        JII
                                Industries    Holdings   Finance   Guarantors   Non-Guarantors   Eliminations   Consolidated
                                ----------   ---------   -------   ----------   --------------   ------------   ------------
<S>                             <C>          <C>         <C>       <C>          <C>              <C>            <C>
Current assets:
   Cash and equivalents         $   2,135    $      --     $--     $   1,315       $ 12,249       $      --      $  15,699
   Intercompany receivables        38,896      (38,516)     --        (4,364)        16,803         (12,819)            --
   Accounts receivable, net            --           --      --        32,922          3,334              --         36,256
   Inventories                         --           --      --        49,938          2,474              --         52,412
   Assets of discontinued
      operations                       --           --      --        44,749        339,548          (6,351)       377,946
   Income tax receivable               --           --      --            --             --              --             --
   Investments in affiliates       23,015           --      --            --             --              --         23,015
   Prepaids and other
      current assets                2,890           --      --         5,519            429          (2,191)         6,647
                                ---------    ---------     ---     ---------       --------       ---------      ---------
   Total current assets            66,936      (38,516)     --       130,079        374,837         (21,361)       511,975

Property, plant and
   equipment, net                   1,045           --      --        34,379          6,952              --         42,376
Investments and advances to
   affiliates                       1,700           --      --            --         12,344              --         14,044
Investments in subsidiaries        55,476      211,890      --            --             --        (267,366)            --
Equity in earnings of
   subsidiaries                  (259,593)    (114,472)     --            --             --         374,065             --
Goodwill, net                          --           --      --        45,976          1,244          (9,526)        37,694
Intercompany notes
   receivable                      (1,000)     206,345      --            --          1,000        (206,345)            --
Other assets                          140        3,548      --         1,112            478              --          5,278
                                ---------    ---------     ---     ---------       --------       ---------      ---------
      Total assets              $(135,296)   $ 268,795     $--     $ 211,546       $396,855       $(130,533)     $ 611,367
                                =========    =========     ===     =========       ========       =========      =========

Current liabilities:
   Accounts payable             $      --    $      --     $--     $  17,662       $  3,523       $      --      $  21,185
   Accrued liabilities             27,775        9,389      --        17,288            823          (2,502)        52,773
   Liabilities of
      discontinued operations      (1,653)          --      --        (1,680)       410,730          (2,730)       404,667
   Intercompany payables               --           --      --       (10,087)        13,189          (3,102)            --
   Current portion of long
      term debt                       530           --      --        24,266            607              --         25,403
                                ---------    ---------     ---     ---------       --------       ---------      ---------
   Total current liabilities       26,652        9,389      --        47,449        428,872          (8,334)       504,028

Long term debt                    121,559      201,500      --         4,772          5,367              --        333,198
Other non current
   liabilities                     18,628           --      --         6,404             --              --         25,032
Intercompany note payables        (50,424)          --      --       226,596         31,722        (207,894)            --
Deferred income taxes                  --           --      --           470             --              --            470
Preferred stock of a
   subsidiary                        (350)          --      --        40,327             --         (39,977)            --
Shareholders' equity (deficit)   (251,361)      57,906      --      (114,472)       (69,106)        125,672       (251,361)
                                ---------    ---------     ---     ---------       --------       ---------      ---------
   Total liabilities and
      Shareholders' deficit     $(135,296)   $ 268,795     $--     $ 211,546       $396,855       $(130,533)     $ 611,367
                                =========    =========     ===     =========       ========       =========      =========
</TABLE>


                                      -68-

<PAGE>

Year ended December 31, 2006

<TABLE>
<CAPTION>
                                 Jordan       JII        JII
                               Industries   Holdings   Finance   Guarantors   Non-Guarantors   Eliminations   Consolidated
                               ----------   --------   -------   ----------   --------------   ------------   ------------
<S>                            <C>          <C>        <C>       <C>          <C>              <C>            <C>
Net cash provided by (used
   in) operating activities     $(8,762)    $     --     $--      $ 13,070      $  13,398           $--        $  17,706
Cash flows from investing
   activities:
   Proceeds from sales of
      fixed assets                   --           --      --         2,494          8,925            --           11,419
   Capital expenditures              (7)          --      --        (4,897)          (603)           --           (5,507)
   Intercompany transfers        16,984       22,533      --       (39,517)            --            --               --
   Net proceeds from sale
      of subsidiaries                --           --      --        42,778             --            --           42,778
   Net proceeds from sales
      of discontinued
      operations                     --           --      --        26,304        438,038            --          464,342
   Net proceeds from sale
      of affiliates              29,565           --      --            --             --            --           29,565
   Cash flows from
      investing activities
      of discontinued
      operations                     --           --      --          (419)        (3,564)           --           (3,983)
                                -------     --------     ---      --------      ---------           ---        ---------
Net cash (used in) provided
   by investing activities       46,542       22,533      --        26,743        442,796            --          538,614

Cash flows from financing
   activities:
   Payments on revolving
      credit facility                --           --      --       (33,337)            --            --          (33,337)
   Payment of long term debt         --      (22,533)     --        (5,550)      (300,748)           --         (328,831)
   Proceeds from other
      borrowings                     --           --      --           807            374            --            1,181
   Cash flows from
      financing activities
      of discontinued
      operations                     --           --      --          (232)       (32,496)           --          (32,728)
                                -------     --------     ---      --------      ---------           ---        ---------
Net cash (used in) provided
   by financing activities           --      (22,533)     --       (38,312)      (332,870)           --         (393,715)
Effect of exchange rate
   changes on cash of
   continuing operations             --           --      --            --           (845)           --             (845)
Effect of exchange rate
   changes on cash of
   discontinued operations           --           --      --            --            218            --              218
                                -------     --------     ---      --------      ---------           ---        ---------
Net increase in cash and
   equivalents                   37,780           --      --         1,501        122,697            --          161,978
Cash and equivalents at
   beginning of year              2,135           --      --         1,315         12,249            --           15,699
                                -------     --------     ---      --------      ---------           ---        ---------
Cash and equivalents at end
   of year                      $39,915     $     --     $--      $  2,816      $ 134,946           $--        $ 177,677
                                =======     ========     ===      ========      =========           ===        =========
</TABLE>


                                      -69-
<PAGE>

Year ended December 31, 2005 (Restated)

<TABLE>
<CAPTION>
                                     Jordan        JII        JII
                                   Industries    Holdings   Finance   Guarantors   Non-Guarantors   Eliminations   Consolidated
                                   ----------   ---------   -------   ----------   --------------   ------------   ------------
<S>                                <C>          <C>         <C>       <C>          <C>              <C>            <C>
Net cash (used in) provided
   by operating activities          $(10,599)    $     --     $--      $ 18,502       $ 6,885            $--         $ 14,788
Cash flows from investing
   activities
   Proceeds from sales of
      fixed assets                        --           --      --           639            19             --              658
   Capital expenditures                  (45)          --      --        (2,762)         (444)            --           (3,251)
   Intercompany transfers            (22,533)      22,533      --            --            --             --               --
   Acquisition of
      subsidiary                          --           --      --          (393)           --             --             (393)
   Net proceeds from sale
      of subsidiary                    1,209           --      --            --            --             --            1,209
   Net proceeds from sale
      of discontinued
      operations                       1,002           --      --            --            --             --            1,002
   Net proceeds from sale
      of affiliates                    6,600           --      --            --            --             --            6,600
   Net proceeds from sale
      of affiliated promissory
      notes                            9,449           --      --            --            --             --            9,449
   Net proceeds from refinancing
      by an affiliate                 15,000           --      --            --            --             --           15,000
   Cash flows from
      investing activities of
      discontinued operations             --           --      --          (714)       (4,487)            --           (5,201)
                                    --------     --------     ---      --------       -------            ---         --------
Net cash provided by (used
   in) investing activities           10,682       22,533      --        (3,230)       (4,912)            --           25,073
Cash flows from financing
   activities
      Payments on revolving
         credit facility                  --           --      --       (13,540)           --             --          (13,540)
      Payment of long term debt         (100)     (22,533)     --        (1,224)       (1,078)            --          (24,935)
      Proceeds from other
         borrowings                       --           --      --           521            --             --              521
      Cash flows from investing
         activities of
         discontinued operations          --           --      --        (1,407)        1,370             --              (37)
                                    --------     --------     ---      --------       -------            ---         --------
Net cash (used in) provided
   by financing activities              (100)     (22,533)     --       (15,650)          292             --          (37,991)
Effect of exchange rate changes
   on cash of continuing
   operations                             --           --      --            --          (944)            --             (944)
Effect of exchange rate
   changes on cash of
   discontinued operations                --           --      --            --          (639)            --             (639)
                                    --------     --------     ---      --------       -------            ---         --------
Net (decrease) increase in
   cash and equivalents                  (17)          --      --          (378)          682             --              287
Cash and equivalents at
   beginning of year                   2,152           --      --         1,693        11,567             --           15,412
                                    --------     --------     ---      --------       -------            ---         --------
Cash and equivalents at end of
   year                             $  2,135     $     --     $--      $  1,315       $12,249            $--         $ 15,699
                                    ========     ========     ===      ========       =======            ===         ========
</TABLE>


                                      -70-

<PAGE>

Year ended December 31, 2004 (Restated)

<TABLE>
<CAPTION>
                                     Jordan        JII        JII
                                   Industries    Holdings   Finance   Guarantors   Non-Guarantors   Eliminations   Consolidated
                                   ----------   ---------   -------   ----------   --------------   ------------   ------------
<S>                                <C>          <C>         <C>       <C>          <C>              <C>            <C>
Net cash (used in) provided by
   operating activities             $(13,835)   $     --      $--      $ 23,396       $(3,380)           $--         $  6,181
Cash flows from investing
   activities
   Proceeds from sales of
      fixed assets                        --          --       --           361           495             --              856
   Capital expenditures                 (115)         --       --        (2,685)         (341)            --           (3,141)
   Intercompany transfers            (23,533)     23,533       --            --            --             --               --
   Acquisitions of
      subsidiaries                        --          --       --            --            --             --               --
   Net proceeds from sale of
      discontinued operations          6,155          --       --            --            --             --            6,155
   Net proceeds from sales of
      affiliates                      27,207          --       --            --            --             --           27,207
   Cash flows from investing
      activities of
      discontinued operations             --          --       --          (866)       (4,128)            --           (4,994)
                                    --------    --------      ---      --------       -------            ---         --------
Net cash provided by (used in)
   investing activities                9,714      23,533       --        (3,190)       (3,974)            --           26,083
Cash flows from financing
   activities
   Proceeds from revolving
      credit facility                     --          --       --       (15,286)           --             --          (15,286)
   Payment of financing fees              --      (3,942)      --            --            --             --           (3,942)
   Payment of long term debt             (28)    (19,591)      --        (3,159)       (1,016)            --          (23,794)
   Proceeds from other
      borrowings                          --          --       --           500           578             --            1,078
   Cash flows from financing
      activities of
      discontinued operations             --          --       --        (2,306)        8,931             --            6,625
                                    --------    --------      ---      --------       -------            ---         --------
Net cash (used in) provided by
   financing activities                  (28)    (23,533)      --       (20,251)        8,493             --          (35,319)
Effect of exchange rate changes
   on cash of continuing
   operations                             --          --       --            --         4,398             --            4,398
Effect of exchange rate changes
   on cash of discontinued
   operations                             --          --       --            --        (1,448)            --           (1,448)
                                    --------    --------      ---      --------       -------            ---         --------
Net (decrease) increase in cash
   and equivalents                    (4,149)         --       --           (45)        4,089             --             (105)
Cash and equivalents at
   beginning of year                   6,301          --       --         1,738         7,478             --           15,517
                                    --------    --------      ---      --------       -------            ---         --------
Cash and equivalents at end of
   year                             $  2,152    $     --      $--      $  1,693       $11,567            $--         $ 15,412
                                    ========    ========      ===      ========       =======            ===         ========
</TABLE>


                                      -71-

<PAGE>

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
     FINANCIAL DISCLOSURE

     None.

Item 9A. Controls and Procedures

Pursuant to Section 302 of the Sarbanes-Oxley Act and Rule 13a-15 of the
Securities Exchange Act of 1934 ("Exchange Act") promulgated thereunder, we,
with the participation of our chairman and our chief financial officer, have
evaluated the effectiveness of our disclosure controls and procedures as of
December 31, 2006. Based on such evaluation, our chairman and our chief
financial officer have concluded that our disclosure controls and procedures
were effective as of such time.

Since December 31, 2006, there have been no changes in the internal control over
financial reporting that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.

Item 9B. Other Information

     None.


                                      -72-

<PAGE>

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

The following sets forth the names and ages of each of the Company's directors
and executive officers and the positions they hold at the Company:

<TABLE>
<CAPTION>
Name                          Age   Position with the Company
----                          ---   -------------------------
<S>                           <C>   <C>
John W. Jordan II              59   Chairman of the Board of Directors and Chief
                                    Executive Officer.
Thomas H. Quinn                59   Director, President and Chief Operating
                                    Officer.
Gordon L. Nelson               49   Senior Vice President and Treasurer.
Lisa M. Ondrula                37   Chief Financial Officer, Senior Vice
                                    President and Assistant Secretary.
Joseph S. Steinberg            63   Director.
David W. Zalaznick             51   Director.
G. Robert Fisher               67   Director and Secretary.
Steven L. Rist                 48   General Counsel and Assistant Secretary
Jesse Clyde Nichols III        67   Director.
</TABLE>

Each of the directors and executive officers of the Company will serve until the
next annual meeting of the stockholders or until their death, resignation or
removal, whichever is earlier. Directors are elected annually and executive
officers for such terms as may be determined by the Company's board of directors
(the "Board of Directors").

Set forth below is a brief description of the business experience of each
director and executive officer of the Company.

MR. JORDAN has served as Chairman of the Board of Directors and Chief Executive
Officer of the Company since 1988. Mr. Jordan is a managing principal of The
Jordan Company, a private merchant banking firm which he founded in 1982. Mr.
Jordan is also President of Jordan Zalaznick Advisors, Inc. and TJC Management
Corporation, Manager of JZ International, LLC, Managing Partner of Jordan
Zalaznick Capital Company and Managing Member of Resolute Fund Partners, LLC.
Mr. Jordan is also a director of Sensus Metering Systems, Inc., TAL
International Group, Inc. and Kinetek, Inc. as well as other privately held
companies.

MR. QUINN has served as a director, President and Chief Operating Officer of the
Company since 1988. From November 1985 to December 1987, Mr. Quinn was a Group
Vice President for Baxter International, Inc. ("Baxter"). From September 1970
through 1985, Mr. Quinn was employed by American Hospital Supply Corporation
("American Hospital") in a variety of management capacities, where he was a
Group Vice President of the Hospital Group and a corporate officer when American
Hospital was acquired by Baxter. Mr. Quinn is also Chairman and a member of the
board of directors of a number of privately held companies. He is also a
Managing Principal of The Jordan Company LP.

MR. NELSON has served as the Company's Senior Vice President and Treasurer since
he joined the Company in 1996.

MS. ONDRULA has served as the Company's Chief Financial Officer since 2006.
Previously, Ms. Ondrula was the Company's Vice President and Controller. She
joined the Company in 1994.

MR. STEINBERG has served as a Director of the Company since 1988. Since 1979,
Mr. Steinberg has been the President and a Director of Leucadia


                                      -73-

<PAGE>

National Corporation, a holding company. He is also a Director of Fortescue
Metals Group Ltd. and Finova Group, Inc. Mr. Steinberg is also Chairman of the
Board of Home Fed Corporation.

MR. ZALAZNICK has served as a director of the Company since 1988. Since 1982,
Mr. Zalaznick has been a Partner and Managing Principal of The Jordan Company.
Since 2002, Mr. Zalaznick is also a Managing Member of Resolute Fund Partners,
LLC. Mr. Zalaznick is a director of Cequel Communications Holdings, LLC, Sensus
Metering Systems, Inc., as well as other privately held companies. Mr. Zalaznick
received a BA in Economics from Cornell University and a MBA from Columbia
University.

MR. FISHER has served as a director and Secretary of the Company since 1988. Mr.
Fisher also served as General Counsel of the Company from 1988 until 1996. Since
February 1999, Mr. Fisher has been a member of the law firm of Sonnenschein,
Nath & Rosenthal LLP, a firm that represents the Company in various legal
matters. From June 1995 until February 1999, Mr. Fisher was a member of the law
firm of Bryan Cave LLP. For the prior 27 years, Mr. Fisher was a member of the
law firm of Smith, Gill, Fisher & Butts, P.C., which combined with Bryan Cave
LLP in June 1995.

MR. RIST has served as General Counsel of the Company since 1996 and as an
Assistant Secretary of the Company since 1998. Since January 1999, Mr. Rist has
been a member of the law firm of Sonnenschein, Nath & Rosenthal LLP, a firm that
represents the Company in various legal matters. From June 1995 until January
1999, Mr. Rist was a member of the law firm of Bryan Cave LLP. For the prior 12
years, Mr. Rist was a member of the law firm of Smith, Gill, Fisher & Butts.
P.C., which combined with Bryan Cave LLP in June 1995.

MR. NICHOLS has served as a director since 2005. Mr. Nichols is a private
investor and from May 1974 through 2000, he was President of Nichols Industries,
Inc. Mr. Nichols is also a director of Leucadia National Corporation, a holding
company.

Code of Ethics. The Board of Directors has adopted a Code of Ethics for the
Chief Executive Officer, the Chief Financial Officer, the Chief Operating
Officer, and other senior financial personnel. A copy of the Code is available
from the Company upon request. The Company will update the Code of Ethics for
any amendments or waivers.

Audit Committee. The Company is not a "listed company" under SEC rules and is
therefore not required to have an audit committee comprised of independent
directors. The Company does not currently have an audit committee and does not
have an audit committee financial expert. The Board of Directors has determined
that each of its members is able to read and understand fundamental financial
statements and has substantial business experience that results in that member's
financial sophistication. Accordingly, the Board of Directors believes that each
of its members have the sufficient knowledge and experience necessary to fulfill
the duties and obligations that an audit committee would have.


                                      -74-

<PAGE>

Item 11. EXECUTIVE COMPENSATION

The following table shows the cash compensation paid by the Company, for the
three years ended December 31, 2006, for services in all capacities to the Chief
Executive Officer, President and Chief Operating Officer, and Chief Financial
Officer of the Company.

                           Summary Compensation Table

<TABLE>
<CAPTION>
                                                   Annual Compensation
                                       -------------------------------------------
                                                                          Other
Name and Principal Position            Year     Salary       Bonus    Compensation
---------------------------            ----   ----------   --------   ------------
<S>                                    <C>    <C>          <C>        <C>
John W. Jordan II, Chief Executive
   Officer(1)                          2006   $       --   $     --      $    --
                                       2005   $       --   $     --      $    --
                                       2004   $       --   $     --      $    --
Thomas H. Quinn, President and Chief
   Operating Officer                   2006      422,000         --       13,800
                                       2005      500,000         --       13,800
                                       2004    1,000,000    825,000       13,800
Lisa M. Ondrula, Chief Financial
   Officer                             2006      206,300    260,000           --
</TABLE>

----------
(1)  Mr. Jordan derived his compensation from The Jordan Company for his
     services to the Company and its subsidiaries. He received no compensation
     from the Company or its subsidiaries for his services as Chief Executive
     Officer.

     Employment Agreement. Mr. Quinn has entered into an employment agreement
with the Company which provides for his employment as President and Chief
Operating Officer of the Company. The employment agreement can be terminated at
any time by the Company. His base salary is $1,000,000 per year, and he is
provided with a guaranteed bonus of $100,000 per year, which amounts are
inclusive of any compensation, fees, salary, bonuses or other payments to Mr.
Quinn by any of the subsidiaries or affiliates of The Jordan Company. In 2005,
Mr. Quinn, waived $500,000 of his base salary and in 2006 he waived $578,000 of
his base salary. All provisions of his employment contract remain in force in
2006 and through the termination date of his contract. Under the employment
agreement, if Mr. Quinn's employment is terminated for reasons other than
voluntary termination, cause, disability or death, he will be paid a severance
equal to the greater of $350,000 or the sum of his most recent base annual
salary plus $100,000. If employment is terminated for reasons of cause or
voluntary termination, no severance payment is made.

     Directors Compensation. The Company compensates its directors quarterly at
$20,000 per year for each director. The Indenture permits directors fees of up
to $250,000 per year in the aggregate. In addition, the Company reimburses
directors for their travel and other expenses incurred in connection with
attending Board meetings (and committees thereof) and otherwise performing their
duties as directors of the Company.


                                      -75-

<PAGE>

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table furnishes information, as of March 30, 2007, as to the
beneficial ownership of the Company's Common Stock by (i) each person known by
the Company to beneficially own more than 5% of the outstanding shares of Common
Stock (ii) each director and executive officer of the Company, and (iii) all
officers and directors of the Company as a group.

<TABLE>
<CAPTION>
                                          Amount of Beneficial
                                                Ownership
                                        ------------------------
                                         Number of    Percentage
                                           Shares      Owned(1)
                                        -----------   ----------
<S>                                     <C>           <C>
EXECUTIVE OFFICERS AND DIRECTORS
John W. Jordan, II (2) (3) (4) (5)      17,772.9119      17.7%
David W. Zalaznick (3) (6)              19,965.0000      19.9%
Thomas H. Quinn (7)                          0.0000       0.0%
Leucadia Investors, Inc. (3)             9,969.9999       9.9%
Jonathan F. Boucher                      5,533.8386       5.5%
G. Robert Fisher (4) (8)                   624.3496       0.6%
Joseph S. Steinberg (9)                      0.0000       0.0%
Jesse Clyde Nichols III                      0.0000       0.0%
Lisa M. Ondrula                              0.0000       0.0%
Gordon L. Nelson                             0.0000       0.0%
Steven L. Rist                               0.0000       0.0%
All directors and officers as a group
   (5 persons) (3)                      53,866.1000      53.6%
University of Notre Dame                 8,547.9968       8.5%
</TABLE>

----------
(1)  Calculated pursuant to Rule 13d-3 (d) under the Exchange Act. Under Rule
     13d-3 (d), shares not outstanding which are subject to options, warrants,
     and rights of conversion privileges exercisable within 60 days are deemed
     outstanding for the purpose of calculating the number and percentage owned
     by such person, but not deemed outstanding for the purpose of calculating
     the percentages owned by each other person listed. As of December 31, 2006,
     there were 100,511.2249 shares of Common Stock issued and outstanding.

(2)  Includes 1 share held personally and 17,771.9119 shares held by the John W.
     Jordan II Revocable Trust. Does not include 309.2933 shares held by Daly
     Jordan O'Brien, a sister of Mr. Jordan, 309.2933 shares held by Elizabeth
     O'Brien Jordan, also a sister of Mr. Jordan, or 309.2933 shares held by
     George Cook Jordan, Jr., the brother of Mr. Jordan.

(3)  Does not include 100 shares held by The Jordan/Zalaznick Capital Company
     ("JZCC") or 3,500 shares held by JZ Equity Partners PLC ("JZEP"), a
     publicly traded U.K. investment trust advised by an Affiliate of The Jordan
     Company (controlled by Messrs. Jordan and Zalaznick). Mr. Jordan, Mr.
     Zalaznick and Leucadia, Inc. are the sole partners of JZCC. Mr. Jordan and
     Mr. Zalaznick own and manage the advisor to JZEP.

(4)  Does not include 3,248.3332 shares held by the Jordan Family Trust, of
     which John W. Jordan II, George Cook Jordan, Jr., and G. Robert Fisher are
     the trustees.

(5)  Does not include 12,000 shares held by the John W. Jordan II Family Limited
     Liability Company of which John W. Jordan II is a Manager.

(6)  Does not include 82.1697 shares held by Bruce Zalaznick, the brother of Mr.
     Zalaznick.

(7)  Excludes 13,000 shares held by TQF, LLC of which Thomas H. Quinn is the
     Manager.

(8)  Includes 624.3496 shares held by G. Robert Fisher, as trustee of the G.
     Robert Fisher Irrevocable Gift Trust, U.T.I., dated December 26, 1990.

(9)  Excludes 9,969.9999 shares held by Leucadia Investors, Inc., of which
     Joseph S. Steinberg is President and a director.


                                      -76-

<PAGE>

     Stockholder Agreement. Each holder of outstanding shares of Common Stock of
the Company is a party to a Stockholder Agreement, dated as of June 1, 1988 (the
"Stockholder Agreement"), by and among the Company and such stockholders. The
Stockholder Agreement subjects the transfer of shares of Common Stock by such
stockholders to a right of first refusal in favor of the Company and "co-sale"
rights in favor of the other stockholders, subject to certain restrictions.
Under certain circumstances, stockholders holding 60% or more of the outstanding
shares of Common Stock, on a fully diluted basis, have certain rights to require
the other stockholders to sell their shares of Common Stock.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Employment Agreements; Stock Transactions. On February 25, 1988, the Company
entered into an employment agreement with Thomas H. Quinn, pursuant to which Mr.
Quinn became the President and Chief Operating Officer of the Company, effective
January 1, 1988. See "Item 11-Employment Agreement".

JZ International, LLC. The Company, through Motors and Gears Holdings, has an
investment in the Class A and Class B Preferred Units of JZ International, LLC.
These debt securities are not publicly traded and do not have a determinable
fair value. The cost method of accounting is used to account for this
investment. The Preferred Units have a cumulative 5% annual return. The Class A
Preferred Units may be redeemed at any time at the discretion of the Board of
Directors of JZ International, but no later than December 31, 2017, whereas the
Class B Preferred Units may be redeemed at any time at the discretion of the
Board of Directors of JZ International, but no later than December 31, 2018. As
a component of the plan to sell Kinetek, Inc. in 2006 and liquidate Motors and
Gears Holdings, Inc. in 2007, the Company has entered into negotiations to sell
its investment in JZ International for $8.5 million. Accordingly, the Company
has taken an impairment charge of $3.8 million in 2006 to record this investment
at its net realizable value of $8.5 million. JZ International's Chief Executive
Officer is David W. Zalaznick, and its members include Messrs. Jordan, Quinn,
Zalaznick and Boucher, who are directors and stockholders of the Company. JZ
International and its subsidiaries are focused on making European and other
international investments. The Company is accounting for this investment under
the cost method.

Healthcare Products Holdings, Inc. As of December 31, 2004, 2005 and 2006, the
Company had $2.5 million, $1.7 million and $0.1 million, respectively, of net
unsecured advances due from Healthcare Products Holdings, Inc. Healthcare
Products Holdings' Chief Executive Officer is Mr. Quinn, and its stockholders
include Messrs. Jordan, Quinn, Zalaznick and Boucher, who are the Company's
directors and stockholders, as well as other partners, principals and associates
of The Jordan Company who are also the Company's stockholders.

Transaction Advisory Agreement. Each of the Company's subsidiaries are parties
to an advisory agreement with the Company, referred to as the Transaction
Advisory Agreement, pursuant to which, such subsidiaries pay to the Company (i)
investment banking and sponsorship fees of up to 2.0% of the aggregate
consideration paid in connection with acquisitions, joint ventures, minority
investments or sales by each such subsidiary of all or substantially all of its
or its subsidiaries capital stock, businesses or properties; (ii) financial
advisory fees of up to 1.0% of the amount obtained or made


                                      -77-

<PAGE>

available pursuant to any debt, equity or other financing or refinancing
involving such subsidiary, in each case, arranged with the assistance of the
Company or its affiliates; and (iii) reimbursement for the Company's
out-of-pocket costs in connection with providing such services. Each Transaction
Advisory Agreement contains indemnities in favor of the Company and its
affiliates, and The Jordan Company and certain of its affiliates, including TJC
Management Corporation, in connection with the Transaction Advisory Agreement
and such services. The Transaction Advisory Agreement will expire in December
2007, but is automatically renewed after such date for successive one-year
terms, unless any party provides written notice of termination 60 days prior to
the scheduled renewal date. The Company recorded fees pursuant to the
Transaction Advisory Agreement of $0.1 million, $0 and $0 for the years 2004,
2005 and 2006, respectively.

TJC Management Consulting Agreement. JII has entered into a consulting services
agreement with TJC Management Corporation, an affiliate of The Jordan Company,
referred to as the TJC Management Consulting Agreement, pursuant to which the
Company will in turn pay to TJC Management Corporation (i) one-half of the
investment banking, sponsorship and financing advisory fees paid to the Company
pursuant to the Transaction Advisory Agreement, unless otherwise determined by
our Board of Directors; (ii) (A) investment banking and sponsorship fees of up
to 2.0% of the purchase price of acquisitions, joint ventures and minority
investments or sales involving the Company or its other subsidiaries and (B)
financial advisory fees of up to one-half of 1.0% of any debt, equity or other
financing or refinancing involving the Company or such subsidiaries, in each
case, arranged with the assistance of TJC Management Corporation or its
affiliates, unless otherwise determined by the Company's Board of Directors; and
(iii) reimbursement for TJC Management Corporation's and The Jordan Company's
out-of-pocket costs incurred in connection with such services. The TJC
Management Consulting Agreement also contains indemnities in favor of TJC
Management Corporation and its affiliates and The Jordan Company and its
affiliates in connection with such services. In consideration for these fees,
the services of Mr. Jordan and the investment banking, sponsorship and advisory
services of TJC Management Corporation will be provided to the Company. The TJC
Management Consulting Agreement will expire in December 2007, but is
automatically renewed after such date for successive one-year terms, unless
either party provides written notice of termination 60 days prior to the
scheduled renewal date. The Company did not pay TJC Management Corporation or
The Jordan Company any fees or cost reimbursements for the years 2003, 2004 or
2005 under this agreement. Approximately, $9.7 million of such fees and cost
reimbursements are accrued and unpaid under this agreement as of December 31,
2006.

Management Consulting Agreement. Each of the Company's subsidiaries are party to
a consulting agreement with the Company, referred to as the Management
Consulting Agreement, pursuant to which they pay to the Company annual
consulting fees of up to the greater of (i) 3% of the net EBITDA (as defined)
and other non-cash charges of each such subsidiary in each case, charged,
expensed or accrued against such net income or (ii) 1.0% of such subsidiary's
net sales for such services, payable quarterly, and will reimburse the Company
for its out-of-pocket costs related to its services. The Management Consulting
Agreement expires in December 2007, but is automatically renewed for successive
one year terms, unless either party to the agreement provides written notice of
termination 60 days prior to the scheduled renewal date.


                                      -78-

<PAGE>

JI Properties Services Agreement. The Company's nonrestricted subsidiary, JI
Properties, Inc., entered into a services agreement, referred to as the JI
Properties Services Agreement, with the Company and each of its other
subsidiaries, pursuant to which JI Properties grants to the Company the right to
use certain of its assets and provides certain services to the Company and such
subsidiaries in connection with the use and/or operation of such assets.
Pursuant to the JI Properties Services Agreement, the Company's subsidiaries
will be charged the costs incurred in the use and/or operation of such assets
used or operated by the Company and their allocable portion of costs associated
with owning such assets which are not directly attributable to the operation or
use of such assets and their relative revenues as compared with other
subsidiaries. The JI Properties Services Agreement will expire in December 2007,
but is automatically renewed for successive one year terms, unless either party
provides written notice of termination 60 days prior to the scheduled renewal
date. None of the Company's subsidiaries paid any fees to JI Properties under
the JI Properties Service Agreement for the years 2004, 2005 or 2006.

The Company also allocates overhead, general and administrative charges and
expenses among the Company's subsidiaries based on the respective revenues and
usage of corporate overhead by its subsidiaries. The Company received
approximately $5.8 million, $4.6 million and $3.5 million for the years ended
December 31, 2004, 2005 and 2006, respectively, in respect of overhead
allocation reimbursement.

Service and Fee Agreements. Two companies that are not subsidiaries - Healthcare
Products Holdings, Inc. and Staffing Consulting Holdings, Inc. - are parties to
service and fee agreements or arrangements with the Company and/or TJC
Management Corporation, pursuant to which such companies will pay to the Company
and/or TJC Management Corporation (i) investment banking and sponsorship fees of
up to 2.0% of the aggregate consideration paid in connection with acquisitions,
joint ventures, minority investments or sales by such companies of all or
substantially all of their or their subsidiaries' capital stock, businesses or
properties; (ii) financial advisory fees of up to 1.0% of any amount obtained or
made available pursuant to debt, equity or other financing or refinancing
involving such company, in each case, arranged with the Company's assistance or
that of its affiliates; (iii) fees based upon a percentage of net EBITDA (as
defined) or net sales; and (iv) reimbursement for the Company's and/or TJC
Management Corporation's out of pocket costs in connection with providing such
services. These fee agreements or arrangements contain indemnities in favor of
the Company and its affiliates, including TJC Management Corporation, in
connection with such services. Pursuant to the TJC Management Consulting
Agreement, the Company, in turn, will also pay to TJC Management Corporation
one-half of such investment banking, sponsorship and financial advisory fees and
its portion of such cost reimbursements, unless otherwise determined by the
Company's Board of Directors. These fee agreements or arrangements will expire
at various times from 2007 through 2009, but are automatically renewed after
such date for successive one year terms, unless any party provides written
notice of termination 60 days prior to the scheduled renewal date. Pursuant to
these services and fee arrangements, the Company received approximately $6.6
million, $5.4 million, and $0.6 million for the years ended December 31, 2004,
2005 and 2006 respectively, which includes companies no longer under these
agreements.

Tax Sharing Agreements. Each of the Company's subsidiaries and the Company are
parties to a tax sharing agreement. Pursuant to the tax sharing agreement, each
of the Company's consolidated subsidiaries owes to the


                                      -79-

<PAGE>
Company, on an annual basis, an amount determined by reference to the separate
return tax liability of the subsidiary as defined in Treasury Regulation Section
1.1552-1(a)(2)(ii).

Legal Counsel. Mr. G. Robert Fisher, a director of, and secretary to, the
Company, is a partner of Sonnenschein, Nath & Rosenthal LLP. Mr. Steven L. Rist,
the general counsel and assistant secretary to the Company, is also a partner of
Sonnenschein, Nath & Rosenthal LLP. Mr. Fisher, Mr. Rist and their law firm have
represented the Company and The Jordan Company in the past, and expect to
continue representing them in the future. In 2006, Sonnenschein, Nath &
Rosenthal LLP was paid approximately $1.2 million in fees and expenses by the
Company. The Company believes that the fees paid were equivalent to what it
would have paid to an unaffiliated third party law firm for similar services.

Directors and Officers Indemnification. The Company has entered into
indemnification agreements with certain members of the Company's Board of
Directors whereby the Company has agreed, subject to certain exceptions, to
indemnify and hold harmless each director from liabilities incurred as a result
of such persons status as director of the Company.

Future Agreements. The Company has adopted a policy that future transactions
between it and its officers, directors and other affiliates (including the
Kinetek subsidiaries) must (i) be approved by a majority of the members of the
Company's Board of Directors and by a majority of the disinterested members of
the Company's Board of Directors and (ii) be on terms no less favorable to the
Company than could be obtained from unaffiliated third-parties.


                                      -80-

<PAGE>

Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table presents fees for professional services rendered by Ernst &
Young LLP for the audit of the Company's annual financial statements for the
years ended December 31, 2006 and 2005, and fees billed for other services
rendered by Ernst & Young during those periods.

<TABLE>
<CAPTION>
                   Year Ended
                  December 31,
                ---------------
                  2006    2005
                ------   ------
<S>             <C>      <C>
Audit           $  935   $1,392
Audit related      125       23
Tax                 --      352
                ------   ------
   Total        $1,060   $1,767
                ======   ======
</TABLE>


                                      -81-

<PAGE>

                                     Part IV

Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(1)  Financial Statements

     Reference is made to the Index to Consolidated Financial Statements
     appearing at Item 8, which is incorporated herein by reference.

(2)  Financial Statement Schedule

     The following financial statement schedule for the years ended December 31,
     2006, 2005, and 2004 is submitted herewith:

<TABLE>
<CAPTION>
Item                                              Page Number
----                                              -----------
<S>                                               <C>
Schedule II - Valuation and qualifying accounts        85
</TABLE>

     All other schedules for which provision is made in the applicable
     accounting regulations of the Securities and Exchange Commission are not
     required under the related instructions, are not applicable and therefore
     have been omitted, or the information has been included in the consolidated
     financial statements.

(3)  Exhibits

     An index to the exhibits required to be listed under this Item 15(a) (3)
     follows the "Signatures" section hereof and is incorporated herein by
     reference.


                                      -82-

<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                        JORDAN INDUSTRIES, INC.


                                        By /s/ John W. Jordan II
                                           -------------------------------------
                                           John W. Jordan II
Dated: March 30, 2007                      Chief Executive Officer

     Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.


                                        By /s/ John W. Jordan II
                                           -------------------------------------
                                           John W. Jordan, II
Dated: March 30, 2007                      Chairman of the Board of
                                           Directors and Chief
                                           Executive Officer


                                        By /s/ Thomas H. Quinn
                                           -------------------------------------
                                           Thomas H. Quinn
Dated: March 30, 2007                      Director, President and
                                           Chief Operating Officer


                                        By /s/ G. Robert Fisher
                                           -------------------------------------
                                           G. Robert Fisher
Dated: March 30, 2007                      Director, General Counsel
                                           and Secretary


                                      -83-

<PAGE>


                                        By /s/ David W. Zalaznick
                                           -------------------------------------
                                           David W. Zalaznick
Dated: March 30, 2007                      Director


                                        By /s/ Joseph S. Steinberg
                                           -------------------------------------
                                           Joseph S. Steinberg
Dated: March 30, 2007                      Director


                                        By /s/ Lisa M. Ondrula
                                           -------------------------------------
                                           Lisa M. Ondrula
Dated: March 30, 2007                      Vice President,
                                           Chief Financial Officer


                                      -84-

<PAGE>
                                                                     Schedule II

                             JORDAN INDUSTRIES, INC.
                        VALUATION AND QUALIFYING ACCOUNTS
                             (dollars in thousands)

<TABLE>
<CAPTION>
                                                                         Uncollectible
                                       Balance at       Additions      balances written                Balance at
                                      beginning of   charged to cost      off net of        Sale of      end of
                                         period        and expenses       recoveries      Subsidiary     period
                                      ------------   ---------------   ----------------   ----------   ----------
<S>                                   <C>            <C>               <C>                <C>          <C>
December 31, 2004:
(Restated)
Allowance for doubtful accounts           1,275           1,066               (416)             --        1,925
December 31, 2005:
(Restated)
Allowance for doubtful accounts           1,925           1,059             (1,567)             --        1,417
December 31, 2006:
Allowance for doubtful accounts           1,417             418               (397)           (713)         725
December 31, 2004:
Valuation allowance                      61,641          11,941                 --              --       73,582
December 31, 2005:
Valuation allowance                      73,582           7,342                 --              --       80,924
December 31, 2006:
Valuation allowance                      80,924           6,151                 --         (57,053)      30,022
</TABLE>


                                      -85-

<PAGE>

                                  EXHIBIT INDEX

2(a)(4)     -- Agreement and Plan of Merger between Thos. D. Murphy Company and
               Shaw-Barton, Inc.

2(b)(5)     -- Asset Purchase Agreement between Alma Piston Company and Alma
               Products Holdings, Inc. dated as of February 26, 1999.

3(a)(1)     -- Articles of Incorporation of the Registrant.

3(b)(1)     -- By-Laws of the Registrant.

4(a)(8)     -- Series C and Series D 10 3/8% Senior Notes Indenture, dated March
               22, 1999, between Jordan Industries, Inc. and U.S. Bank Trust
               National Association.

4(b)(7)     -- Series A and Series B 10 3/8% Senior Notes Indenture, dated July
               25, 1997, between Jordan Industries, Inc. and First Trust
               National Association, as Trustee.

4(c)(8)     -- First Supplemental Indenture, dated March 9, 1999, between Jordan
               Industries, Inc. and U.S. Bank & Trust Company f/k/a First Trust
               National Association, as Trustee, to the 10 3/8% Senior Notes
               Indenture, dated July 25, 1997.

4(d)(7)     -- Series A and Series B 11 3/4% Senior Subordinated Discount
               Debentures Indenture, dated April 2, 1997, between Jordan
               Industries, Inc. and First Trust National Association, as
               Trustee.

4(e)(7)     -- First Supplemental Indenture, dated as of July 25, 1997, between
               Jordan Industries, Inc. and First Trust National Association, as
               Trustee, to the 11 3/4% Senior Subordinated Discount Debentures
               Indenture, dated as of April 2, 1997.

4(f)(8)     -- Second Supplemental Indenture, dated as of March 9, 1999, between
               Jordan Industries, Inc. and First Trust National Association, as
               Trustee, to the 11 3/4% Senior Subordinated Discount Debentures
               Indenture, dated as of April 2, 1997.

4(g)(8)     -- Global Series D Senior Note.

4(h)(7)     -- Global Series B Senior Note.

4(i)(7)     -- Global Series B Senior Subordinated Discount Debenture.

4(j)(11)    -- Indenture, dated November 7, 1996, between Kinetek, Inc. and
               Fleet National Bank.

4(k)(12)    -- First Supplemental Indenture, dated December 17, 1997, between
               Kinetek, Inc. and State Street Bank and Trust Company, as
               Trustee.

4(l)(12)    -- Indenture, dated December 17, 1997, between Kinetek, Inc. and
               State Street Bank and Trust Company, as Trustee.

4(m)(13)    -- 5% Indenture, dated as of April 12, 2002, among Kinetek
               Industries, Inc., U.S. Bank National Association, as Trustee and
               the Guarantors listed therein.

4(n)(16)    -- 13% Senior Secured Notes Indenture, dated February 18, 2004, by
               and among JII Holdings, LLC, JII Holdings Finance Corporation,
               Jordan Industries, Inc. and U.S. Bank National Association, as
               Trustee.

4(o)(16)    -- 13% Senior Secured Notes issued by JII Holdings, LLC and JII
               Holdings Finance Corporation (included in Exhibit 4(n)).

10(a)(1)    -- Stockholders Agreement, dated as of June 1, 1988, by and among
               the Registrant's holders of Common Stock.

10(b)(1)    -- Employment Agreement, dated as of February 25, 1988, between the
               Registrant and Thomas H. Quinn.

10(c)(1)    -- Restricted Stock Agreement, dated February 25, 1988, between the
               Registrant and Jonathan F. Boucher.

10(d)(1)    -- Restricted Stock Agreement, dated February 25, 1988, between the
               Registrant and Jack R. Lowden.

10(e)(1)    -- Restricted Stock Agreement, dated February 25, 1988, between the
               Registrant and Thomas H. Quinn.

10(f)(1)    -- Stock Purchase Agreement, dated June 1, 1988, between Leucadia
               Investors, Inc. and John W. Jordan, II.

10(g)(1)    -- Zero Coupon Note, dated June 1, 1988, issued by John W. Jordan,
               II to Leucadia Investors, Inc.

10(h)(1)    -- Pledge, Security and Assignment Agreement, dated June 1, 1988 by
               John W. Jordan, II.

10(i)       -- Amended and Restated Non-Negotiable Subordinated Note, dated as
               of June 30, 2002, issued by Pamco Printed Tape and Label (f/k/a
               Pamco Holdings, Inc.) in the initial principal amount of
               $6,112,501.

10(j)(2,14) -- Tax Sharing Agreement, dated as of June 29, 1994, among the
               Company and the


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<PAGE>

               subsidiaries signatory thereto.

10(k)(7,2)  -- Properties Services Agreement, dated as of July 25, 1997, between
               Jordan Industries, Inc. and its subsidiaries.

10(l)(7,2)  -- Transition Agreement, dated as of July 25, 1997, between Jordan
               Industries, Inc. and Motors & Gears, Inc.

10(m)(7)    -- New TJC Management Consulting Agreement, dated as of July 25,
               1997, between TJC Management Corp. and Jordan Industries, Inc.

10(n)(7)    -- Termination Agreement, dated as of July 25, 1997, between Jordan
               Industries, Inc. and its subsidiaries.

10(o)(7,15) -- Form of Indemnification Agreement between Jordan Industries, Inc.
               and its subsidiaries and their directors.

10(p)(14)   -- Non-Negotiable Subordinated Note, dated as of February 11, 1998,
               issued by Deflecto (f/k/a Deflecto Holdings, Inc.) in the initial
               principal amount of $5,000,000.

10(q)(14)   -- Non-Negotiable Subordinated Note, dated as of February 27, 1998,
               issued by Rolite (f/k/a Rolite Holdings, Inc.) in the initial
               principal amount of $900,000.

10(r)(14)   -- Non-Negotiable Subordinated Note, dated as of June 2, 2000,
               issued by Instachange (f/k/a IDL Holdings Limited) in the initial
               principal amount of $3,714,285 (Canadian Dollars).

10(s)(2,14) -- Management Consulting Agreement, dated as of August 10, 2001,
               among JII, Inc. and the subsidiaries signatory thereto.

10(t)(2,14) -- Transaction Advisory Agreement, dated as of August 10, 2001,
               among JII, Inc. and the subsidiaries signatory thereto.

10(u)(9)    -- Loan and Security Agreement, dated as of August 16, 2001, among
               JII, Inc. as borrower, the Company as parent guarantor, the
               subsidiaries signatory thereto as subsidiary guarantors, Congress
               Financial Corporation (Central) as agent and First Union Bank as
               lender.

10(v)(2,14) -- Intercompany Loan Agreement, dated as of August 16, 2001, among
               JII, Inc. and the subsidiaries signatory thereto, and
               accompanying Demand Notes.

10(w)(10)   -- Loan and Security Agreement, dated as of December 18, 2001, among
               Kinetek Industries, Inc. as borrower, Kinetek, Inc. as parent
               guarantor, the subsidiaries signatory thereto as borrowers or
               subsidiary guarantors and Fleet Capital Corporation as agent.

10(x)(10)   -- Management Consulting Agreement, dated as of December 14, 2001,
               among the Company, Motors and Gears Holdings, Inc. and the
               subsidiaries signatory thereto.

10(y)(10)   -- Transaction Advisory Agreement, dated as of December 14, 2001,
               among the Company, Motors and Gears Holdings, Inc. and the
               subsidiaries signatory thereto.

10(z)(10)   -- Properties Services Agreement, dated as of December 14, 2001,
               among JI Properties, Inc., Motors and Gears Holdings, Inc. and
               the subsidiaries signatory thereto.

10(aa)(10)  -- Agreement to Join in the Filing of Consolidated Income Tax
               Returns, dated as of December 14, 2001, among the Company, Motors
               and Gears Holdings, Inc. and the subsidiaries signatory thereto.

10(bb)(11)  -- Merkle-Korff Industries, Inc. Non-Negotiable Subordinated Note in
               the principal aggregate amount of $5,000,000 payable to John D.
               Simms Revocable Trust Under Agreement.

10(cc)(12)  -- Electrical Design and Control Company, Inc. Non-Negotiable
               Subordinated Note in the principal aggregate amount of $1,333,333
               payable to Tina Levire.

10(dd)(12)  -- Electrical Design and Control Company, Inc. Non-Negotiable
               Subordinated Note in the principal aggregate amount of $1,333,333
               payable to Marta Monson.

10(ee)(12)  -- Electrical Design and Control Company, Inc. Non-Negotiable
               Subordinated Note in the principal aggregate amount of $1,333,334
               payable to Eric Monson.

10(ff)(16)  -- Amendment No. 5 to Loan and Security Agreement, dated as of
               February 18, 2004 by and among the financial institutions listed
               on the signature pages thereto, Congress Financial Corporation
               (Central), as agent for the lenders, and JII LLC.

10(gg)(16)  -- Intercreditor Agreement, dated as of February 18, 2004, by and
               between U.S. Bank National Association, as Collateral Agent, and
               Congress Financial Corporation (Central), as Administrative
               Agent.

10(hh)(16)  -- Waiver Agreement, dated as of January 31, 2004, by and between
               Jordan Industries, Inc. and the other persons signatory thereto.

10(ii)(16)  -- Modification Agreement, dated as of February 18, 2004, by and
               among Jordan Industries, Inc. and those holders of Jordan
               Industries' 11 3/4% Senior Subordinated Discount Debentures due
               2009 identified on Schedule A attached thereto, including
               Addendum thereto dated April 1, 2004.

12          -- Statements re. Computation of Ratios.


                                      -87-

<PAGE>

21          -- Subsidiaries of the Registrant.

31(a)       -- Certification of John W. Jordan II

31(b)       -- Certification of Lisa M. Ondrula

32(a)       -- Certification of John W. Jordan II pursuant to Section 906 of The
               Sarbanes-Oxley Act of 2002.

32(b)       -- Certification of Lisa M. Ondrula pursuant to Section 906 of The
               Sarbanes-Oxley Act of 2002.

(1)            Incorporated by reference to the Company's Registration Statement
               on Form S-1 (no. 33-24317)

(2)            The Company entered into Inter-company Demand Notes,
               Inter-company Management Consulting Agreements, Inter-company
               Transaction Advisory Agreements, Inter-company Properties
               Services Agreements and Inter-company Tax Sharing Agreements with
               each subsidiary not a signatory to the agreements incorporated by
               reference in this report, which are identical in all material
               respects with the notes and agreements incorporated by reference
               in this Report. Copies of such additional notes and agreements
               have therefore not been included as exhibits to this filing, in
               accordance with Instruction 2 to Item 601 of Regulation S-K.

(3)            Incorporated by reference to the Company's 1988 Form 10-K.

(4)            Incorporated by reference to the Company's 1989 First Quarter
               Form 10-Q.

(5)            Incorporated by reference to the Company's Form 8-K filed April
               1, 1999.

(6)            Incorporated by reference to the Company's 1990 Third Quarter
               Form 10-Q.

(7)            Incorporated by reference to the Company's Registration Statement
               on Form S-4 (No. 333-34529) filed September 9, 1997.

(8)            Incorporated by reference to the Company's Registration Statement
               on Form S-4 (No. 333-77667) filed May 4, 1999.

(9)            Incorporated by reference to the Company's Form 8-K filed August
               31, 2001.

(10)           Incorporated by reference to the 2001 Form 10-K of Kinetek, Inc.
               filed March 28, 2002.

(11)           Incorporated by reference to the 1996 Form S-4 Registration
               Statement of Kinetek, Inc.

(12)           Incorporated by reference to the 1998 Form S-4 Registration
               Statement of Kinetek, Inc.

(13)           Incorporated by reference to the 8-K of Kinetek, Inc., dated May
               8, 2002.

(14)           Incorporated by reference to the Company's 2001 Form 10-K.

(15)           The form of indemnification agreement was entered into with all
               of the Company's directors and is identical in all material
               respects with the form included. Copies of the additional
               indemnification agreements have therefore not been included as
               exhibits to this filing, in accordance with Instruction 2 to Item
               601 of Regulation S-K.

(16)           Incorporated by reference to the 2004 Form S-4 Registration
               Statement (File No. 333-116554) of Jordan Industries, Inc.


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