----

----

| Delaware                                                            |   | 75-1277589                                |
|---------------------------------------------------------------------|--------|-------------------------------------------|
| (State      or other jurisdiction of incorporation or organization) |   | (I.R.S.      Employer Identification No.) |

|   | Yes  x |   | No o |   |
|--------|------------------|--------|-----------|--------|

| Large      accelerated filer  o                                                  | Accelerated      filer  o |
|--------------------------------------------------------------------------------------------|-------------------------------------|
| Non-accelerated      filer o  (Do      not check if a smaller reporting company) | Smaller      reporting company x    |

|   | Yes  o |   | No x |   |
|--------|------------------|--------|-----------|--------|

| Class                           |   | Outstanding      at April 30, 2008 |
|---------------------------------|--------|------------------------------------|
| Common      Stock, $1 Par Value |   | 7,951,176      Shares              |

----

|         |                       |                                                                  | Page    |
|--------------|----------------------------|-----------------------------------------------------------------------|---------|
| PART      I  | FINANCIAL      INFORMATION |                                                                  |
|         |                       |                                                                  |    |
|         | Item      1.               | Financial      Statements:                                            |    |
|         |                       |                                                                  |    |
|         |                       | Condensed      Consolidated Balance Sheets                            |    |
|         |                       | March      31, 2008 (unaudited) and December 31, 2007                 | 3,4     |
|         |                       |                                                                  |    |
|         |                       | Condensed      Consolidated Statements of Operations                  |    |
|         |                       | Three      Months Ended March 31, 2008 and 2007 (unaudited)           |  5 |
|         |                       |                                                                  |    |
|         |                       | Condensed      Consolidated Statements of Cash Flows                  |    |
|         |                       | Three      Months Ended March 31, 2008 and 2007 (unaudited)           | 6       |
|         |                       |                                                                  |    |
|         |                       | Notes      to Condensed Consolidated Financial Statements (unaudited) | 7       |
|         |                       |                                                                  |    |
|         | Item      2.               | Management's      Discussion and Analysis of Financial Condition and  |    |
|         |                       | Results      of Operations                                            | 21      |
|         |                       |                                                                  |    |
|         | Item      3.               | Quantitative      and Qualitative Disclosures About Market Risk       | 29      |
|         |                       |                                                                  |    |
|         | Item      4T.              | Controls      and Procedures                                          | 30      |
|         |                       |                                                                  |    |
|         |                       |                                                                  |    |
| PART      II | OTHER      INFORMATION     | 31                                                                    |
|         |                       |                                                                  |    |
|         | Item      1.               | Legal      Proceedings                                                | 31      |
|         |                       |                                                                  |    |
|         | Item      1A.              | Risk      Factors                                                     | 31      |
|         |                       |                                                                  |    |
|         | Item      2.               | Unregistered      Sales of Equity Securities and Use of Proceeds      | 31      |
|         |                       |                                                                  |    |
|         | Item      3.               | Defaults      Upon Senior Securities                                  | 31      |
|         |                       |                                                                  |    |
|         | Item      4.               | Submission      of Matters to a Vote of Security Holders              | 31      |
|         |                       |                                                                  |    |
|         | Item      5.               | Other      Information                                                | 31      |
|         |                       |                                                                  |    |
|         | Item      6.               | Exhibits                                                              | 31      |
|         |                       |                                                                  |    |
|         | Signatures                 |                                                                  | 32      |
|         |                       |                                                                  |    |

----

|                                                           |   | March      31, |    |   | December      31, |   |
|----------------------------------------------------------------|--------|----------------|---------|--------|-------------------|--------|
|                                                           |   | 2008           |    |   | 2007              |   |
| CURRENT      ASSETS:                                           |   |           |    |   |              |   |
|                                                           |   |           |    |   |              |   |
| Cash      and cash equivalents                                 |   | $              | 618     |   |              | $      | 2,015 |   |
| Accounts      receivable, net                                  |   |           | 19,868  |   |              |   | 18,077 |   |
| Inventories,      net                                          |   |           | 25,150  |   |              |   | 26,160 |   |
| Receivable      from disposition                               |   |           | 3,553   |   |              |   | 6,799 |   |
| Other      current assets                                      |   |           | 2,064   |   |              |   | 2,520 |   |
|                                                           |   |           |    |   |              |   |   |   |
| Total      current assets                                      |   |           | 51,253  |   |              |   | 55,571 |   |
|                                                           |   |           |    |   |              |   |   |   |
|                                                           |   |           |    |   |              |   |   |   |
| OTHER      ASSETS:                                             |   |           |    |   |              |   |   |   |
|                                                           |   |           |    |   |              |   |   |   |
| Goodwill                                                       |   |           | 665     |   |              |   | 665 |   |
| Intangibles,      net                                          |   |           | 4,733   |   |              |   | 4,853 |   |
| Other                                                          |   |           | 2,959   |   |              |   | 3,470 |   |
|                                                           |   |           |    |   |              |   |   |   |
| Total      other assets                                        |   |           | 8,357   |   |              |   | 8,988 |   |
|                                                           |   |           |    |   |              |   |   |   |
|                                                           |   |           |    |   |              |   |   |   |
| PROPERTY      AND EQUIPMENT:                                   |   |           |    |   |              |   |   |   |
| Land      and improvements                                     |   |           | 336     |   |              |   | 336 |   |
| Buildings      and improvements                                |   |           | 9,697   |   |              |   | 9,666 |   |
| Machinery      and equipment                                   |   |           | 95,801  |   |              |   | 96,650 |   |
|                                                           |   |           |    |   |              |   |   |   |
|                                                           |   |           | 105,834 |   |              |   | 106,652 |   |
| Less      - Accumulated depreciation                           |   |           | (73,090 | )      |              |   | (72,647 | ) |
|                                                           |   |           |    |   |              |   |   |   |
| Property      and equipment, net                               |   |           | 32,744  |   |              |   | 34,005 |   |
|                                                           |   |           |    |   |              |   |   |   |
| Total      assets                                              |   | $              | 92,354  |   |              | $      | 98,564 |   |
|                                                           |   |           |    |   |              |   |   |   |
| See      Notes to Condensed Consolidated Financial Statements. |   |           |    |   |              |   |   |   |

----

|                                                             |   | March      31, |    |   | December      31, |   |
|------------------------------------------------------------------|--------|----------------|---------|--------|-------------------|--------|
|                                                             |   | 2008           |    |   | 2007              |   |
|                                                             |   |           |    |   |              |   |
| CURRENT      LIABILITIES:                                        |   |           |    |   |              |   |
|                                                             |   |           |    |   |              |   |
| Accounts      payable                                            |   | $              | 11,340  |   |              | $      | 14,995 |   |
| Accrued      compensation                                        |   |           | 2,725   |   |              |   | 2,629 |   |
| Accrued      expenses                                            |   |           | 21,159  |   |              |   | 22,325 |   |
| Current      maturities of long-term debt                        |   |           | 1,500   |   |              |   | 1,500 |   |
| Revolving      credit agreement                                  |   |           | 5,794   |   |              |   | 2,853 |   |
|                                                             |   |           |    |   |              |   |   |   |
| Total      current liabilities                                   |   |           | 42,518  |   |              |   | 44,302 |   |
|                                                             |   |           |    |   |              |   |   |   |
| LONG-TERM      DEBT, less current maturities                     |   |           | 8,701   |   |              |   | 9,100 |   |
|                                                             |   |           |    |   |              |   |   |   |
| OTHER      LIABILITIES                                           |   |           | 8,241   |   |              |   | 8,706 |   |
|                                                             |   |           |    |   |              |   |   |   |
| Total      liabilities                                           |   |           | 59,460  |   |              |   | 62,108 |   |
|                                                             |   |           |    |   |              |   |   |   |
| COMMITMENTS      AND CONTINGENCIES (Note 9)                      |   |           | 0       |   |              |   | 0 |   |
|                                                             |   |           |    |   |              |   |   |   |
| STOCKHOLDERS’      EQUITY:                                 |   |           |    |   |              |   |   |   |
| 15%      Convertible preferred stock, $100 par value, authorized |   |           |    |   |              |   |   |   |
| 1,200,000      shares, issued and outstanding 1,131,551 shares,  |   |           |    |   |              |   |   |   |
|  liquidation      value $113,155                            |   |           | 108,256 |   |              |   | 108,256 |   |
| Common      stock, $1 par value; authorized 35,000,000 shares;   |   |           |    |   |              |   |   |   |
| issued      9,822,304 shares                                     |   |           | 9,822   |   |              |   | 9,822 |   |
| Additional      paid-in capital                                  |   |           | 27,375  |   |              |   | 27,338 |   |
| Accumulated      other comprehensive loss                        |   |           | (1,277  | )      |              |   | (1,112 | ) |
| Accumulated      deficit                                         |   |           | (89,349 | )      |              |   | (85,915 | ) |
| Treasury      stock, at cost, 1,871,128 shares                   |   |           | (21,933 | )      |              |   | (21,933 | ) |
|                                                             |   |           |    |   |              |   |   |   |
| Total      stockholders' equity                                  |   |           | 32,894  |   |              |   | 36,456 |   |
|                                                             |   |           |    |   |              |   |   |   |
| Total      liabilities and stockholders' equity                  |   | $              | 92,354  |   |              | $      | 98,564 |   |
|                                                             |   |           |    |   |              |   |   |   |
| See      Notes to Condensed Consolidated Financial Statements.   |   |           |    |   |              |   |   |   |

----

|                                                                         |   | 2008   |   |   | 2007   |   |
|------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
|                                                                         |   |   |   |   |   |   |
| Net      sales                                                               |   | $      | 41,691 |   |   | $      | 45,552 |   |
| Cost      of goods sold                                                      |   |   | 37,863 |   |   |   | 39,956 |   |
| Gross      profit                                                            |   |   | 3,828  |   |   |   | 5,596 |   |
| Selling,      general and administrative expenses                            |   |   | 6,737  |   |   |   | 7,574 |   |
| Severance,      restructuring and related charges                            |   |   | 138    |   |   |   | 208 |   |
| Loss      (gain) on sale of assets                                           |   |   | 533    |   |   |   | (120 | ) |
| Operating      loss                                                          |   |   | (3,580 | )      |   |   | (2,066 | ) |
| Interest      expense                                                        |   |   | (483   | )      |   |   | (1,195 | ) |
| Other,      net                                                              |   |   | (14    | )      |   |   | 32 |   |
|                                                                         |   |   |   |   |   |   |   |   |
| Loss      from continuing operations before benefit from (provision    for)  |   |   |   |   |   |   |   |   |
| income      taxes                                                            |   |   | (4,077 | )      |   |   | (3,229 | ) |
| Benefit      from (provision for) income taxes from continuing    operations |   |   | 352    |   |   |   | (89 | ) |
|                                                                         |   |   |   |   |   |   |   |   |
| Loss      from continuing operations                                         |   |   | (3,725 | )      |   |   | (3,318 | ) |
| Loss      from operations of discontinued businesses (net of tax)            |   |   | (252   | )      |   |   | (2,127 | ) |
| Gain      on sale of discontinued businesses (net of tax)                    |   |   | 543    |   |   |   | 1,666 |   |
|                                                                         |   |   |   |   |   |   |   |   |
| Net      loss                                                                |   | $      | (3,434 | )      |   | $      | (3,779 | ) |
|                                                                         |   |   |   |   |   |   |   |   |
| Loss      per share of common stock - Basic and diluted                      |   |   |   |   |   |   |   |   |
| Loss      from continuing operations                                         |   | $      | (0.47  | )      |   | $      | (0.42 | ) |
| Discontinued      operations                                                 |   |   | 0.04   |   |   |   | (0.06 | ) |
| Net      loss                                                                |   | $      | (0.43  | )      |   | $      | (0.48 | ) |
|                                                                         |   |   |   |   |   |   |   |   |
| Weighted      average common shares outstanding (thousands):                 |   |   |   |   |   |   |   |   |
| Basic      and diluted                                                       |   |   | 7,951  |   |   |   | 7,951 |   |
|                                                                         |   |   |   |   |   |   |   |   |
| See      Notes to Condensed Consolidated Financial Statements.               |   |   |   |   |   |   |   |   |

----

|                                                              |   | 2008   |   |   | 2007   |   |
|-------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
|                                                              |   |   |   |   |   |   |
| Cash      flows from operating activities:                        |   |   |   |   |   |   |
| Net      loss                                                     |   | $      | (3,434 | )      |   | $      | (3,779 | ) |
| (Income)      loss from discontinued operations                   |   |   | (291   | )      |   |   | 461 |   |
| Loss      from continuing operations                              |   |   | (3,725 | )      |   |   | (3,318 | ) |
| Depreciation      and amortization                                |   |   | 1,823  |   |   |   | 1,865 |   |
| Write-off      and amortization of debt issuance costs            |   |   | 96     |   |   |   | 619 |   |
| Stock      option expense                                         |   |   | 37     |   |   |   | 94 |   |
| Loss      (gain) on sale of assets                                |   |   | 533    |   |   |   | (120 | ) |
| Deferred      income taxes                                        |   |   | -      |   |   |   | (94 | ) |
|                                                              |   |   | (1,236 | )      |   |   | (954 | ) |
| Changes      in operating assets and liabilities:                 |   |   |   |   |   |   |   |   |
| Accounts      receivable                                          |   |   | (1,833 | )      |   |   | (2,075 | ) |
| Inventories                                                       |   |   | 928    |   |   |   | (807 | ) |
| Other      assets                                                 |   |   | 134    |   |   |   | 77 |   |
| Accounts      payable                                             |   |   | (1,489 | )      |   |   | 261 |   |
| Accrued      expenses                                             |   |   | (1,017 | )      |   |   | (1,995 | ) |
| Other,      net                                                   |   |   | (363   | )      |   |   | 843 |   |
|                                                              |   |   | (3,640 | )      |   |   | (3,696 | ) |
|                                                              |   |   |   |   |   |   |   |   |
| Net      cash used in continuing operations                       |   |   | (4,876 | )      |   |   | (4,650 | ) |
| Net      cash used in discontinued operations                     |   |   | (320   | )      |   |   | (195 | ) |
| Net      cash used in operating activities                        |   |   | (5,196 | )      |   |   | (4,845 | ) |
|                                                              |   |   |   |   |   |   |   |   |
| Cash      flows from investing activities:                        |   |   |   |   |   |   |   |   |
| Capital      expenditures of continuing operations                |   |   | (1,037 | )      |   |   | (979 | ) |
| Proceeds      from sale of assets, net                            |   |   | 35     |   |   |   | 120 |   |
| Net      cash used in continuing operations                       |   |   | (1,002 | )      |   |   | (859 | ) |
| Net      cash provided by discontinued operations                 |   |   | 4,424  |   |   |   | 5,995 |   |
| Net      cash provided by investing activities                    |   |   | 3,422  |   |   |   | 5,136 |   |
|                                                              |   |   |   |   |   |   |   |   |
| Cash      flows from financing activities:                        |   |   |   |   |   |   |   |   |
| Net      borrowings (repayments) on revolving loans               |   |   | 2,940  |   |   |   | (2,388 | ) |
| Decrease      in book overdraft                                   |   |   | (2,110 | )      |   |   | (2,123 | ) |
| Repayments      of term loans                                     |   |   | (399   | )      |   |   | (24 | ) |
| Direct      costs associated with debt facilities                 |   |   | -      |   |   |   | (125 | ) |
| Repurchases      of common stock                                  |   |   | -      |   |   |   | (3 | ) |
| Net      cash provided by (used in) continuing operations         |   |   | 431    |   |   |   | (4,663 | ) |
| Net      cash used in discontinued operations                     |   |   | -      |   |   |   | (97 | ) |
| Net      cash provided by (used in) financing activities          |   |   | 431    |   |   |   | (4,760 | ) |
|                                                              |   |   |   |   |   |   |   |   |
| Effect      of exchange rate changes on cash and cash equivalents |   |   | (54    | )      |   |   | (4 | ) |
| Net      decrease in cash and cash equivalents                    |   |   | (1,397 | )      |   |   | (4,473 | ) |
| Cash      and cash equivalents, beginning of period               |   |   | 2,015  |   |   |   | 7,392 |   |
| Cash      and cash equivalents, end of period                     |   | $      | 618    |   |   | $      | 2,919 |   |
|                                                              |   |   |   |   |   |   |   |   |
| See      Notes to Condensed Consolidated Financial Statements.    |   |   |   |   |   |   |   |   |

----

|                    |   | March      31, |   |   | December      31, |   |
|-------------------------|--------|----------------|--------|--------|-------------------|--------|
|                    |   | 2008           |   |   | 2007              |   |
|                    |   |           |   |   |              |   |
| Raw      materials      |   | $              | 14,997 |   |              | $      | 17,022 |   |
| Work      in process    |   |           | 762    |   |              |   | 763 |   |
| Finished      goods     |   |           | 15,088 |   |              |   | 13,762 |   |
| Inventory      reserves |   |           | (1,340 | )      |              |   | (1,376 | ) |
| LIFO      reserve       |   |           | (4,357 | )      |              |   | (4,011 | ) |
|                    |   | $              | 25,150 |   |              | $      | 26,160 |   |
|                    |   |           |   |   |              |   |   |   |

----

|                                 |   | Three      Months Ended March 31, |   |
|--------------------------------------|--------|-----------------------------------|--------|
|                                 |   | 2008                              |   |   | 2007 |   |
|                                 |   |                              |   |   |   |   |
| Stock      option expense            |   | $                                 | 37     |   |   | $ | 94 |   |
| Stock      appreciation right income |   |                              | (164   | ) |   |   | (179 | ) |
|                                 |   | $                                 | (127   | ) |   | $ | (85 | ) |
|                                 |   |                              |   |   |   |   |   |   |

| Expected      term (years) | 5.3      - 6.5     |
|----------------------------|--------------------|
| Volatility                 | 53.8%      - 57.6% |
| Risk-free      rate        | 3.98%      - 4.48% |

----

|                       | March      31,      |   | March      31,     |
|----------------------------|---------------------|--------|--------------------|
|                       | 2008                |   | 2007               |
|                       |                |   |               |
| Expected      term (years) | 3.0      - 4.5      |   | 3.0      - 5.3     |
| Volatility                 | 92.3%      - 105.1% |   | 53.7%      - 58.6% |
| Risk-free      rate        | 1.79%      - 2.13%  |   | 4.54%              |

|                                           |   | Three      Months Ended |   |
|------------------------------------------------|--------|-------------------------|--------|
|                                           |   | March      31,          |   |
|                                           |   | 2008                    |   |   | 2007 |   |
|                                           |   |                    |   |   |   |   |   |   |
| Net      loss                                  |   | $                       | (3,434 | ) |   | $ | (3,779 | ) |
| Foreign      currency translation losses       |   |                    | (165   | ) |   |   | (334 | ) |
| Unrealized      losses on interest rate swap   |   |                    | -      |   |   |   | (29 | ) |
| Pension      and other postretirement benefits |   |                    | -      |   |   |   | (17 | ) |
|                                           |   |                    | (165   | ) |   |   | (380 | ) |
| Comprehensive      loss                        |   | $                       | (3,599 | ) |   | $ | (4,159 | ) |
|                                           |   |                    |   |   |   |   |   |   |

----

|                      |   | March      31, |   |   | December      31, |   |
|---------------------------|--------|----------------|--------|--------|-------------------|--------|
|                      |   | 2008           |   |   | 2007              |   |
|                      |   | Gross          |   |   | Accumulated       |   |   | Net      Carrying |   |   | Gross |   |   | Accumulated |   |   | Net      Carrying |   |
|                      |   | Amount         |   |   | Amortization      |   |   | Amount |   |   | Amount |   |   | Amortization |   |   | Amount |   |
|  Patents             |   | $              | 1,044  |   |              | $      | (770 | ) |   | $ | 274 |   |   | $ | 1,031 |   |   | $ | (734 | ) |   | $ | 297 |   |
|  Customer      lists |   |           | 10,231 |   |              |   | (8,282 | ) |   |   | 1,949 |   |   |   | 10,231 |   |   |   | (8,240 | ) |   |   | 1,991 |   |
|  Tradenames          |   |           | 5,054  |   |              |   | (2,544 | ) |   |   | 2,510 |   |   |   | 5,054 |   |   |   | (2,489 | ) |   |   | 2,565 |   |
|  Other               |   |           | 441    |   |              |   | (441 | ) |   |   | - |   |   |   | 441 |   |   |   | (441 | ) |   |   | - |   |
|  Total               |   | $              | 16,770 |   |              | $      | (12,037 | ) |   | $ | 4,733 |   |   | $ | 16,757 |   |   | $ | (11,904 | ) |   | $ | 4,853 |   |
|                      |   |           |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

| 2008      (remainder) |   | $      | 384    |   |
|-----------------------|--------|--------|--------|--------|
| 2009                  |   |   | 476    |   |
| 2010                  |   |   | 472    |   |
| 2011                  |   |   | 445    |   |
| 2012                  |   |   | 420    |   |
| Thereafter            |   |   | 2,536  |   |
|                  |   | $      | 4,733  |   |
|                  |   |   |   |   |

|                                                                             |   | March      31, |   |   | December      31, |   |
|----------------------------------------------------------------------------------|--------|----------------|--------|--------|-------------------|--------|
|                                                                             |   | 2008           |   |   | 2007              |   |
|                                                                             |   |           |   |   |              |   |
| Term      loan payable under the Bank of America Credit Agreement,      interest |   |           |   |   |              |   |
| based      on LIBOR and Prime Rates (5.38% - 6.25%), due through 2010            |   | $              | 10,201 |   |              | $      | 10,600 |   |
| Revolving      loans payable under the Bank of America Credit Agreement,         |   |           |   |   |              |   |   |   |
| interest      based on LIBOR and Prime Rates (5.13% - 6.00%)                     |   |           | 5,794  |   |              |   | 2,853 |   |
| Total      debt                                                                  |   |           | 15,995 |   |              |   | 13,453 |   |
| Less      revolving loans, classified as current (see below)                     |   |           | (5,794 | )      |              |   | (2,853 | ) |
| Less      current maturities                                                     |   |           | (1,500 | )      |              |   | (1,500 | ) |
| Long-term      debt                                                              |   | $              | 8,701  |   |              | $      | 9,100 |   |
|                                                                             |   |           |   |   |              |   |   |   |

| 2008   |   | $      | 1,125  |   |
|--------|--------|--------|--------|--------|
| 2009   |   |   | 1,500  |   |
| 2010   |   |   | 7,576  |   |
|   |   | $      | 10,201 |   |
|   |   |   |   |   |

----

----

|                                          |   | Pension      Benefits |   |   | Other      Benefits |   |
|-----------------------------------------------|--------|-----------------------|--------|--------|---------------------|--------|
|                                          |   | March      31,        |   |   | March      31,      |   |
|                                          |   | 2008                  |   |   | 2007                |   |   | 2008 |   |   | 2007 |   |
|                                          |   |                  |   |   |                |   |   |   |   |   |   |   |
| Components      of net periodic benefit cost: |   |                  |   |   |                |   |   |   |   |   |   |   |
| Service      cost                             |   | $                     | 3      |   |                | $      | 2 |   |   | $ | - |   |   | $ | - |   |
| Interest      cost                            |   |                  | 23     |   |                |   | 23 |   |   |   | 37 |   |   |   | 51 |   |
| Expected      return on plan assets           |   |                  | (25    | )      |                |   | (24 | ) |   |   | - |   |   |   | - |   |
| Amortization      of prior service cost       |   |                  | -      |   |                |   | - |   |   |   | - |   |   |   | 22 |   |
| Amortization      of net loss                 |   |                  | 11     |   |                |   | 13 |   |   |   | 8 |   |   |   | 4 |   |
| Net      periodic benefit cost                |   | $                     | 12     |   |                | $      | 14 |   |   | $ | 45 |   |   | $ | 77 |   |
|                                          |   |                  |   |   |                |   |   |   |   |   |   |   |   |   |   |   |

----

|                                          |   |    |      |   |     |   | Weighted    |   |            |   |
|-----------------------------------------------|--------|---------|-----------|--------|----------|--------|-------------|--------|-----------------|--------|
|                                          |   |    |      |   | Weighted |   | Average     |   | Aggregate       |   |
|                                          |   |    |      |   | Average  |   | Remaining   |   | Intrinsic       |   |
|                                          |   |    |      |   | Exercise |   | Contractual |   | Value           |   |
|                                          |   | Options |      |   | Price    |   | Life        |   | (in thousands)  |   |
|                                          |   |    |      |   |     |   |        |   |            |   |
| Outstanding      at December 31, 2007         |   |    | 1,632,200 |   |     | $      | 3.59        |   |            |   |   |   |
|                                          |   |    |      |   |     |   |        |   |            |   |   |   |
| Granted                                       |   |    | -         |   |     | $      | 0.00        |   |            |   |   |   |
| Exercised                                     |   |    | -         |   |     | $      | 0.00        |   |            |   |   |   |
| Cancelled                                     |   |    | -         |   |     | $      | 0.00        |   |            |   |   |   |
|                                          |   |    |      |   |     |   |        |   |            |   |   |   |
| Outstanding      at March 31, 2008            |   |    | 1,632,200 |   |     | $      | 3.59        |   | 5.56      years |   | $ | - |   |
|                                          |   |    |      |   |     |   |        |   |            |   |   |   |   |
| Vested      and Exercisable at March 31, 2008 |   |    | 1,322,200 |   |     | $      | 3.80        |   | 5.16      years |   | $ | - |   |
|                                          |   |    |      |   |     |   |        |   |            |   |   |   |   |

| Non-Vested      at December 31, 2007     |            13,333                                                        |
|------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|
|                                     |                                                                                                                            |
| Granted                                  |                      - |
| Vested                                   |            (6,667)                                                       |
|                                     |                                                                                                                            |
| Non-Vested      at March 31, 2008        |              6,666                                             |
|                                     |                                                                                                                            |
| Total      Outstanding at March 31, 2008 |          660,882                                                                   |
|                                     |                                                                                                                            |

----

----

----

----

----

|                                                             |   |   |   |   |                                              | Three      months ended March 31, |           |
|------------------------------------------------------------------|--------|--------|--------|--------|---------------------------------------------------|-----------------------------------|----------------|
|                                                             |   |   |   |   |                                              | 2008                              |           |   | 2007 |   |
| Maintenance Products Group                                       |   |   |   |   |                                              |                              |           |   |   |   |
|      Net      external sales            |   |   |   |   |                                              | $                                 | 41,691         |   |   | $ | 45,552 |   |
|      Operating      (loss) income       |   |   |   |   |                                              |                              | (875           | ) |   |   | 688 |   |
|      Operating      (deficit) margin    |   |   |   |   |                                              |                              | (2.1           | %) |   |   | 1.5 | % |
|      Depreciation      and amortization |   |   |   |   |                                              |                              | 1,798          |   |   |   | 1,832 |   |
|      Capital      expenditures          |   |   |   |   |                                              |                              | 1,037          |   |   |   | 979 |   |
|                                                             |   |   |   |   |                                              |                              |           |   |   |   |   |   |
| Total                                                            |   |   |   |   |                                              |                              |           |   |   |   |   |   |
|      Net      external sales            |   |   | -      |   | Segment                                           |                              | $              | 41,691 |   |   | $ | 45,552 |   |
|                                                             |   |   |   |   | Total                                             |                              | $              | 41,691 |   |   | $ | 45,552 |   |
|                                                             |   |   |   |   |                                              |                              |           |   |   |   |   |   |   |
|      Operating      loss                |   |   | -      |   | Segment                                           |                              | $              | (875 | ) |   | $ | 688 |   |
|                                                             |   |   | -      |   | Unallocated      corporate                        |                              |           | (2,034 | ) |   |   | (2,666 | ) |
|                                                             |   |   | -      |   | Severance,      restructuring and related charges |                              |           | (138 | ) |   |   | (208 | ) |
|                                                             |   |   | -      |   | (Loss)      gain on sale of assets                |                              |           | (533 | ) |   |   | 120 |   |
|                                                             |   |   |   |   | Total                                             |                              | $              | (3,580 | ) |   | $ | (2,066 | ) |
|                                                             |   |   |   |   |                                              |                              |           |   |   |   |   |   |   |
|      Depreciation      and amortization |   |   | -      |   | Segment                                           |                              | $              | 1,798 |   |   | $ | 1,832 |   |
|                                                             |   |   | -      |   | Unallocated      corporate                        |                              |           | 25 |   |   |   | 33 |   |
|                                                             |   |   |   |   | Total                                             |                              | $              | 1,823 |   |   | $ | 1,865 |   |
|                                                             |   |   |   |   |                                              |                              |           |   |   |   |   |   |   |
|      Capital      expenditures          |   |   | -      |   | Segment                                           |                              | $              | 1,037 |   |   | $ | 979 |   |
|                                                             |   |   | -      |   | Discontinued      operations                      |                              |           | - |   |   |   | 151 |   |
|                                                             |   |   |   |   | Total                                             |                              | $              | 1,037 |   |   | $ | 1,130 |   |
|                                                             |   |   |   |   |                                              |                              |           |   |   |   |   |   |   |
|                                                             |   |   |   |   |                                              |                              | March      31, |   |   | December      31, |   |
|                                                             |   |   |   |   |                                              |                              | 2008           |   |   | 2007 |   |
|      Total      assets                  |   |   | -      |   | Segment                                           |                              | $              | 84,397 |   |   | $ | 85,124 |   |
|                                                             |   |   | -      |   | Other      [a]                                    |                              |           | 4,753 |   |   |   | 8,634 |   |
|                                                             |   |   | -      |   | Unallocated      corporate                        |                              |           | 3,204 |   |   |   | 4,806 |   |
|                                                             |   |   |   |   | Total                                             |                              | $              | 92,354 |   |   | $ | 98,564 |   |
|                                                             |   |   |   |   |                                              |                              |           |   |   |   |   |   |   |

|                                                                  |   | Three      Months Ended March 31, |   |
|-----------------------------------------------------------------------|--------|-----------------------------------|--------|
|                                                                  |   | 2008                              |   |   | 2007 |   |
|                                                                  |   |                              |   |   |   |   |   |   |
| Consolidation      of St. Louis manufacturing/distribution facilities |   | $                                 | 138    |   |   | $ | 189 |   |
| Consolidation      of Glit facilities                                 |   |                              | -      |   |   |   | 19 |   |
| Total      severance, restructuring and related charges               |   | $                                 | 138    |   |   | $ | 208 |   |
|                                                                  |   |                              |   |   |   |   |   |   |

----

|                                                |   | Contract    |   |
|-----------------------------------------------------|--------|-------------|--------|
|                                                |   | Termination |   |
|                                                |   | Costs       |   |
| Restructuring      liabilities at December 31, 2007 |   | $           | 827    |   |
| Additions                                           |   |        | 138    |   |
| Payments                                            |   |        | (70    | ) |
| Restructuring      liabilities at March 31, 2008    |   | $           | 895    |   |
|                                                |   |        |   |   |

|                                                |   | Contract    |   |
|-----------------------------------------------------|--------|-------------|--------|
|                                                |   | Termination |   |
|                                                |   | Costs       |   |
| Restructuring      liabilities at December 31, 2007 |   | $           | 626    |   |
| Additions                                           |   |        | -      |   |
| Payments                                            |   |        | (27    | ) |
| Restructuring      liabilities at March 31, 2008    |   | $           | 599    |   |
|                                                |   |        |   |   |

|                                                |   | Contract    |   |
|-----------------------------------------------------|--------|-------------|--------|
|                                                |   | Termination |   |
|                                                |   | Costs       |   |
| Restructuring      liabilities at December 31, 2007 |   | $           | 1,453  |   |
|    Additions                         |   |        | 138    |   |
|    Payments                          |   |        | (97    | ) |
| Restructuring      liabilities at March 31, 2008    |   | $           | 1,494  |   |
|                                                |   |        |   |   |

|                                                |   | Maintenance |   |
|-----------------------------------------------------|--------|-------------|--------|
|                                                |   | Products    |   |
|                                                |   | Group       |   |
| Restructuring      liabilities at December 31, 2007 |   | $           | 1,453  |   |
|    Additions                         |   |        | 138    |   |
|    Payments                          |   |        | (97    | ) |
| Restructuring      liabilities at March 31, 2008    |   | $           | 1,494  |   |
|                                                |   |        |   |   |

----

|       |   | Maintenance |   |
|------------|--------|-------------|--------|
|       |   | Products    |   |
|       |   | Group       |   |
| 2008       |   | $           | 281    |   |
| 2009       |   |        | 274    |   |
| 2010       |   |        | 299    |   |
| 2011       |   |        | 324    |   |
| 2012       |   |        | 83     |   |
| Thereafter |   |        | 233    |   |
|       |   | $           | 1,494  |   |
|       |   |        |   |   |

----

|                             |   | March      31, |   |   | December      31, |   |
|----------------------------------|--------|----------------|--------|--------|-------------------|--------|
|                             |   | 2008           |   |   | 2007              |   |
|                             |   |           |   |   |              |   |
| Current      assets:             |   |           |   |   |              |   |
| Receivable      from disposition |   | $              | 3,553  |   |              | $      | 6,799 |   |
| Other      current assets        |   |           | 900    |   |              |   | 1,235 |   |
|                             |   | $              | 4,453  |   |              | $      | 8,034 |   |
|                             |   |           |   |   |              |   |   |   |
| Non-current      assets:         |   |           |   |   |              |   |   |   |
| Other                            |   | $              | 300    |   |              | $      | 600 |   |
|                             |   |           |   |   |              |   |   |   |
| Current      liabilities:        |   |           |   |   |              |   |   |   |
| Accounts      payable            |   | $              | -      |   |              | $      | 30 |   |
| Accrued      expenses            |   |           | 110    |   |              |   | 148 |   |
|                             |   | $              | 110    |   |              | $      | 178 |   |
|                             |   |           |   |   |              |   |   |   |

|                                                 |   | Three      months ended |   |
|------------------------------------------------------|--------|-------------------------|--------|
|                                                 |   | March      31,          |   |
|                                                 |   | 2008                    |   |   | 2007 |   |
|                                                 |   |                    |   |   |   |   |
| Net      sales                                       |   | $                       | -      |   |   | $ | 49,251 |   |
| Pre-tax      operating loss                          |   | $                       | (130   | ) |   | $ | (1,757 | ) |
| Pre-tax      gain on sale of discontinued businesses |   | $                       | 543    |   |   | $ | 1,666 |   |
|                                                 |   |                    |   |   |   |   |   |   |

----

|                                                                         |   |                                              |   |
|------------------------------------------------------------------------------|--------|---------------------------------------------------|--------|
|                                                                         |   | 2008                                              |   |   | 2007 |   |
|                                                                         |   | (Amounts      in Millions, Except Per Share Data) |   |
|                                                                         |   |                                              |   |   |   |   |   |   |   |   |   |   |
|                                                                         |   | $                                                 |   |   | % to      Sales |   |   | $ |   |   | % to      Sales |   |
|                                                                         |   |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      sales                                                               |   | $                                                 | 41.7   |   |   |   | 100.0 |   |   | $ | 45.6 |   |   |   | 100.0 |   |
| Cost      of goods sold                                                      |   |                                              | 37.9   |   |   |   | 90.8 |   |   |   | 40.0 |   |   |   | 87.7 |   |
|           Gross profit                                   |   |                                              | 3.8    |   |   |   | 9.2 |   |   |   | 5.6 |   |   |   | 12.3 |   |
| Selling,      general and administrative expenses                            |   |                                              | 6.8    |   |   |   | 16.2 |   |   |   | 7.6 |   |   |   | 16.6 |   |
| Severance,      restructuring and related charges                            |   |                                              | 0.1    |   |   |   | 0.3 |   |   |   | 0.2 |   |   |   | 0.5 |   |
| Loss      (gain) on sale of assets                                           |   |                                              | 0.5    |   |   |   | 1.3 |   |   |   | (0.1 | ) |   |   | (0.3 | ) |
|           Operating loss                                 |   |                                              | (3.6   | ) |   |   | (8.6 | ) |   |   | (2.1 | ) |   |   | (4.5 | ) |
|                                                                         |   |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      expense                                                        |   |                                              | (0.5   | ) |   |   |   |   |   |   | (1.2 | ) |   |   |   |   |
| Other,      net                                                              |   |                                              | -      |   |   |   |   |   |   |   | 0.1 |   |   |   |   |   |
|                                                                         |   |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss      from continuing operations before benefit from (provision    for)  |   |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|           income taxes                                   |   |                                              | (4.1   | ) |   |   |   |   |   |   | (3.2 | ) |   |   |   |   |
| Benefit      from (provision for) income taxes from continuing    operations |   |                                              | 0.4    |   |   |   |   |   |   |   | (0.1 | ) |   |   |   |   |
|                                                                         |   |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss      from continuing operations                                         |   |                                              | (3.7   | ) |   |   |   |   |   |   | (3.3 | ) |   |   |   |   |
| Loss      from operations of discontinued businesses (net of tax)            |   |                                              | (0.2   | ) |   |   |   |   |   |   | (2.2 | ) |   |   |   |   |
| Gain      on sale of discontinued businesses (net of tax)                    |   |                                              | 0.5    |   |   |   |   |   |   |   | 1.7 |   |   |   |   |   |
|                                                                         |   |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      loss                                                                |   | $                                                 | (3.4   | ) |   |   |   |   |   | $ | (3.8 | ) |   |   |   |   |
|                                                                         |   |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss      per share of common stock - basic and diluted:                     |   |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                         |   |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss      from continuing operations                                         |   | $                                                 | (0.47  | ) |   |   |   |   |   | $ | (0.42 | ) |   |   |   |   |
| Discontinued      operations                                                 |   |                                              | 0.04   |   |   |   |   |   |   |   | (0.06 | ) |   |   |   |   |
|           Net loss                                       |   | $                                                 | (0.43  | ) |   |   |   |   |   | $ | (0.48 | ) |   |   |   |   |
|                                                                         |   |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

----

----

| Contractual CashObligations          |   | Total  |   |   | Due      in less than 1 year |   |   | Due      in 1-3 years  |   |   | Due      in 3-5 years       |   |   | Due      after 5 years |   |
|--------------------------------------|--------|--------|--------|--------|------------------------------|--------|--------|----------------------------------|--------|--------|----------------------------------|--------|--------|-----------------------------|--------|
| Revolving      Credit Facility [a]   |   | $      | 5,794  |   |                         | $      | 5,794  |                             |   | $      | -                                |   |   | $                           | -      |   |   | $ | - |   |
| Term      Loan                       |   |   | 10,201 |   |                         |   | 1,500  |                             |   |   | 8,701                            |   |   |                        | -      |   |   |   | - |   |
| Interest      on debt [b]            |   |   | 1,978  |   |                         |   | 808    |                             |   |   | 1,170                            |   |   |                        | -      |   |   |   | - |   |
| Operating      leases [c]            |   |   | 10,900 |   |                         |   | 5,423  |                             |   |   | 4,221                            |   |   |                        | 976    |   |   |   | 280 |   |
| Severance      and restructuring [c] |   |   | 577    |   |                         |   | 79     |                             |   |   | 274                              |   |   |                        | 153    |   |   |   | 71 |   |
| Postretirement      benefits [d]     |   |   | 4,507  |   |                         |   | 456    |                             |   |   | 1,239                            |   |   |                        | 817    |   |   |   | 1,995 |   |
| Total      Contractual Obligations   |   | $      | 33,957 |   |                         | $      | 14,060 |                             |   | $      | 15,605                           |   |   | $                           | 1,946  |   |   | $ | 2,346 |   |
|                                 |   |   |   |   |                         |   |   |                             |   |   |                             |   |   |                        |   |   |   |   |   |   |
|                                 |   |   |   |   |                         |   |   |                             |   |   |                             |   |   |                        |   |   |   |   |   |   |
| Other CommercialCommitments          |   | Total  |   |   | Due      in less than 1 year |   |   | Due      in 1-3 years       |   |   |  Due      in 3-5 years |   |   | Due      after 5 years |   |
| Commercial      letters of credit    |   | $      | 391    |   |                         | $      | 391    |                             |   | $      | -                                |   |   | $                           | -      |   |   | $ | - |   |
| Stand-by      letters of credit      |   |   | 5,099  |   |                         |   | 5,099  |                             |   |   | -                                |   |   |                        | -      |   |   |   | - |   |
| Total      Commercial Commitments    |   | $      | 5,490  |   |                         | $      | 5,490  |                             |   | $      | -                                |   |   | $                           | -      |   |   | $ | - |   |
|                                 |   |   |   |   |                         |   |   |                             |   |   |                             |   |   |                        |   |   |   |   |   |   |

----

|                                                                  |   | Three      Months Ended March 31, |   |
|-----------------------------------------------------------------------|--------|-----------------------------------|--------|
|                                                                  |   | 2008                              |   |   | 2007 |   |
| Consolidation      of St. Louis manufacturing/distribution facilities |   | $                                 | 138    |   |   | $ | 189 |   |
| Consolidation      of Glit facilities                                 |   |                              | -      |   |   |   | 19 |   |
| Total      severance, restructuring and related charges               |   | $                                 | 138    |   |   | $ | 208 |   |
|                                                                  |   |                              |   |   |   |   |   |   |

----

|                                                |   | Contract    |   |
|-----------------------------------------------------|--------|-------------|--------|
|                                                |   | Termination |   |
|                                                |   | Costs       |   |
| Restructuring      liabilities at December 31, 2007 |   | $           | 1,453  |   |
|           Additions             |   |        | 138    |   |
|           Payments              |   |        | (97    | ) |
| Restructuring      liabilities at March 31, 2008    |   | $           | 1,494  |   |
|                                                |   |        |   |   |

----

| -   | Increases      in the cost of, or in some cases continuation of, the current price levels      of thermoplastic resins, paper board packaging, and other raw      materials. |
|---------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| -   | Our      inability to reduce product costs, including manufacturing, sourcing,      freight, and other product costs. |
|---------------|-----------------------------------------------------------------------------------------------------------------------|

| -   | Our      inability to reduce administrative costs through consolidation of      functions and systems improvements. |
|---------------|---------------------------------------------------------------------------------------------------------------------|

| -   | Our      inability to protect our intellectual property rights      adequately. |
|---------------|---------------------------------------------------------------------------------|

----

| -   | Our      inability to reduce our raw materialscosts. |
|---------------|------------------------------------------------------|

| -   | Our      inability to grow our revenue. |
|---------------|-----------------------------------------|

| -   | Our      inability to achieve product price increases, especially as they relate to      potentially higher raw materialcosts. |
|---------------|--------------------------------------------------------------------------------------------------------------------------------|

| -   | Competition      from foreign competitors. |
|---------------|--------------------------------------------|

| -   | The      potential impact of rising interest rates on our LIBOR-based Bank of      America Credit Agreement. |
|---------------|--------------------------------------------------------------------------------------------------------------|

| -   | Our      inability to meet covenants associated with the Bank of America Credit      Agreement. |
|---------------|-------------------------------------------------------------------------------------------------|

| -   | Our      failure to identify, and promptly and effectively remediate, any material      weaknesses or significant deficiencies in our internal controls over      financial reporting. |
|---------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| -   | The      potential impact of rising costs for insurance for properties and various      forms of liabilities. |
|---------------|---------------------------------------------------------------------------------------------------------------|

| -   | The      potential impact of changes in foreign currency exchange rates related to      our foreign operations. |
|---------------|-----------------------------------------------------------------------------------------------------------------|

| -   | Labor      issues, including union activities that require an increase in production      costs or lead to a strike, thus impairing production and decreasing      sales.  We are also subject to labor relations issues at      entities involved in our supply chain, including both suppliers and those      involved in transportation andshipping. |
|---------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| -   | Changes      in significant laws and government regulations affecting environmental      compliance and income taxes. |
|---------------|-----------------------------------------------------------------------------------------------------------------------|

----

----

| ExhibitNumber |   |  Exhibit Title                                                                                                                                |   |     |
|---------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|
|          |   |                                                                                                                                               |   |     |
| 10.1          |   | Employment      Agreement dated as of April 21, 2008 between the Company and David J.      Feldman.                                                |   | *        |
| 10.2          |   | Katy      Industries, Inc. 2008 Chief Executive Officer's Plan.                                                                                    |   | *        |
| 31.1          |   | CEO      Certification pursuant to Securities Exchange Act Rule 13a-14, as adopted      pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |   | *        |
| 31.2          |   | CFO      Certification pursuant to Securities Exchange Act Rule 13a-14, as adopted      pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |   | *        |
| 32.1          |   | CEO      Certification required by 18 U.S.C. Section 1350, as adopted pursuant to      Section 906 of the Sarbanes-Oxley Act of 2002.              |   | *      # |
| 32.2          |   | CFO      Certification required by 18 U.S.C. Section 1350, as adopted pursuant to      Section 906 of the Sarbanes-Oxley Act of 2002.              |   | *      # |

----

----