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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-QSB



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(Mark One)

|x | QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------

For the quarterly period ended March 31, 2006



| ̈ | TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT
|- | ---------------------------------------------------------------

For the transition period from  to

Commission file number: 0-04036



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Kreisler Manufacturing Corporation

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



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 22-1047792                          
|(State of other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)

180 Van Riper Avenue, Elmwood Park, New Jersey 07407

(Address of principal executive offices)

(201) 791-0700

(Issuers telephone number)

Not Applicable

(Former name, former address and former fiscal year, if
changed since last report)



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Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.    x  Yes ̈No

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). ̈Yes    x  No

The number of shares outstanding of the issuers common stock, par value $.125 per share, as of May 15, 2006 was 1,830,447 shares.



|Transitional | Small Business Disclosure Format (check one): ̈Yes    x  No
|------------ | ----------------------------------------------------------



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Table of Contents



|        |  |                                                             |  |           
|------- |  | ----------------------------------------------------------- |  | ----------
|        |  |                                                             |  | PageNumber
|PART I  |  | Financial Information                                       |  |           
|        |  |                                                            
|Item 1  |  | Financial Statements                                        |  |           
|        |  | Consolidated Balance Sheets                                 |  | 4         
|        |  | Consolidated Statements of Operations                       |  | 5         
|        |  | Consolidated Statements of Cash Flows                       |  | 6         
|        |  | Notes to the Consolidated Financial Statements              |  | 7         
|        |  |                                                            
|Item 2  |  | Managements Discussion and Analysis or Plan of Operation   |  | 11        
|        |  |                                                            
|Item 3  |  | Controls and Procedures                                     |  | 19        
|        |  |                                                            
|PART II |  | Other Information                                           |  |           
|        |  |                                                            
|Item 1  |  | Legal Proceedings                                           |  | 20        
|        |  |                                                            
|Item 2  |  | Unregistered Sales of Equity Securities and Use of Proceeds |  | 21        
|        |  |                                                            
|Item 3  |  | Defaults Upon Senior Securities                             |  | 21        
|        |  |                                                            
|Item 4  |  | Submission of Matters to a Vote of Security Holders         |  | 21        
|        |  |                                                            
|Item 5  |  | Other Information                                           |  | 21        
|        |  |                                                            
|Item 6  |  | Exhibits                                                    |  | 21        



- 2 -



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Forward-Looking Statements

Certain oral statements made by management of Kreisler Manufacturing Corporation (the Company) from time to time and certain statements contained herein or in other periodic reports filed by the Company
with the Securities and Exchange Commission are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, with
respect to results of operations and the business of the Company. All such statements, other than statements of historical facts, including those regarding market trends, the Companys financial position and results of operations, business
strategy, projected costs, and plans and objectives of management for future operations, are forward-looking statements. In general, such statements are identified by the use of forward-looking words or phrases including, but not limited to,
estimates, intended, will, should, may, believes, expects, expected, anticipates, and anticipated or the negative thereof or
variations thereon or similar terminology. These forward-looking statements are based on the Companys current expectations. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, there
can be no assurance that such expectations will prove to be correct. These forward-looking statements represent the Companys current judgment. The Company disclaims any intent or obligation to update its forward-looking statements. Because
forward-looking statements involve risks and uncertainties, the Companys actual results could differ materially from those set forth in or underlying the forward-looking statements.



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PART I FINANCIAL INFORMATION

Item 1 Financial Statements

Kreisler Manufacturing Corporation and Subsidiaries

Consolidated Balance Sheets



|                                                                                                                                                                     |  |                                  |            |   |                              |   |            |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------- | ---------- | - | ---------------------------- | - | ---------- | -
|                                                                                                                                                                     |  | (Unaudited)QuarterEnded3/31/2006 |            |   | (Audited)Year Ended6/30/2005 |  
|Assets                                                                                                                                                               |  |                                  |            |   |                              |   |            |  
|Cash and cash equivalents                                                                                                                                            |  | $                                | 3,034,905  |   |                              | $ | 3,409,552  |  
|Accounts receivable  trade, net ($10,000 allowance for uncollectible accounts)                                                                                      |  |                                  | 4,182,947  |   |                              |   | 3,201,376  |  
|Inventories:                                                                                                                                                         |  |                                  |            |   |                              |   |            |  
|Raw Materials                                                                                                                                                        |  |                                  | 2,289,194  |   |                              |   | 1,606,347  |  
|Work in Process                                                                                                                                                      |  |                                  | 1,174,897  |   |                              |   | 855,100    |  
|Finished Goods                                                                                                                                                       |  |                                  | 362,239    |   |                              |   | 356,447    |  
|                                                                                                                                                                     |  |                                  |            |   |                              |   |            |  
|Total Inventory                                                                                                                                                      |  |                                  | 3,826,330  |   |                              |   | 2,817,894  |  
|                                                                                                                                                                     |  |                                 
|Deferred tax asset, current                                                                                                                                          |  |                                  | 197,148    |   |                              |   | 166,000    |  
|Other current assets                                                                                                                                                 |  |                                  | 109,164    |   |                              |   | 229,551    |  
|                                                                                                                                                                     |  |                                  |            |   |                              |   |            |  
|Total Current Assets                                                                                                                                                 |  |                                  | 11,350,494 |   |                              |   | 9,824,373  |  
|                                                                                                                                                                     |  |                                  |            |   |                              |   |            |  
|Property, plant and equipment, at cost                                                                                                                               |  |                                  | 6,613,462  |   |                              |   | 6,150,326  |  
|less  accumulated depreciation                                                                                                                                      |  |                                  | (5,009,366 | ) |                              |   | (4,659,160 | )
|                                                                                                                                                                     |  |                                  |            |   |                              |   |            |  
|Property, Plant and Equipment, net                                                                                                                                   |  |                                  | 1,604,096  |   |                              |   | 1,491,166  |  
|                                                                                                                                                                     |  |                                 
|Deferred tax asset, non-current                                                                                                                                      |  |                                  | 181,652    |   |                              |   | 261,800    |  
|                                                                                                                                                                     |  |                                  |            |   |                              |   |            |  
|Total Non-Current Assets                                                                                                                                             |  |                                  | 1,785,748  |   |                              |   | 1,752,966  |  
|                                                                                                                                                                     |  |                                  |            |   |                              |   |            |  
|Total Assets                                                                                                                                                         |  | $                                | 13,136,242 |   |                              | $ | 11,577,339 |  
|                                                                                                                                                                     |  |                                  |            |   |                              |   |            |  
|Liabilities and Stockholders Equity                                                                                                                                 |  |                                  |            |   |                              |   |            |  
|Liabilities                                                                                                                                                          |  |                                  |            |   |                              |   |            |  
|Accounts payable  trade                                                                                                                                             |  | $                                | 1,039,438  |   |                              | $ | 1,049,613  |  
|Accrued expenses                                                                                                                                                     |  |                                  | 406,009    |   |                              |   | 112,837    |  
|Income taxes payable                                                                                                                                                 |  |                                  | 286,352    |   |                              |   |           |  
|Line of credit payable                                                                                                                                               |  |                                  | 76,270     |   |                              |   |           |  
|Obligation under capital leases                                                                                                                                      |  |                                  | 101,897    |   |                              |   | 76,869     |  
|Accrued environmental cost                                                                                                                                           |  |                                  |           |   |                              |   | 426,825    |  
|                                                                                                                                                                     |  |                                  |            |   |                              |   |            |  
|Total Current Liabilities                                                                                                                                            |  |                                  | 1,909,966  |   |                              |   | 1,666,144  |  
|                                                                                                                                                                     |  |                                  |            |   |                              |   |            |  
|Obligation under capital leases                                                                                                                                      |  |                                  | 381,354    |   |                              |   | 345,978    |  
|Accrued environmental cost                                                                                                                                           |  |                                  | 366,890    |   |                              |   | 16,541     |  
|                                                                                                                                                                     |  |                                  |            |   |                              |   |            |  
|Total Long-Term Liabilities                                                                                                                                          |  |                                  | 748,244    |   |                              |   | 362,519    |  
|                                                                                                                                                                     |  |                                  |            |   |                              |   |            |  
|Commitments and contingencies                                                                                                                                        |  |                                  |            |   |                              |   |            |  
|Stockholders Equity                                                                                                                                                 |  |                                  |            |   |                              |   |            |  
|Common stock, $.125 par value - 3,000,000 shares authorized; 1,830,447 and 1,826,447 shares issued and outstanding at March 31, 2006 and
June 30, 2005, respectively |  |                                  | 228,806    |   |                              |   | 228,306    |  
|Additional paid-in capital                                                                                                                                           |  |                                  | 544,716    |   |                              |   | 540,216    |  
|Retained earnings                                                                                                                                                    |  |                                  | 9,726,756  |   |                              |   | 8,805,139  |  
|Accumulated other comprehensive loss                                                                                                                                 |  |                                  | (22,246    | ) |                              |   | (24,985    | )
|                                                                                                                                                                     |  |                                  |            |   |                              |   |            |  
|Total Stockholders Equity                                                                                                                                           |  |                                  | 10,478,032 |   |                              |   | 9,548,676  |  
|                                                                                                                                                                     |  |                                  |            |   |                              |   |            |  
|Total Liabilities and Stockholders Equity                                                                                                                           |  | $                                | 13,136,242 |   |                              | $ | 11,577,339 |  
|                                                                                                                                                                     |  |                                  |            |   |                              |   |            |  

The accompanying notes are an integral part of these consolidated financial
statements



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Kreisler Manufacturing Corporation and Subsidiaries

Consolidated Statements of Operations

(Unaudited)



|                                             |  |      |             |   |      |   |            |  
|-------------------------------------------- |  | ---- | ----------- | - | ---- | - | ---------- | -
|Three Months Ended March 31,                 |  | 2006 |             |   | 2005 |  
|Revenues                                     |  | $    | 5,396,317   |   |      | $ | 3,800,795  |  
|                                             |  |      |             |   |      |   |            |  
|Cost of goods sold                           |  |      | 4,379,805   |   |      |   | 3,454,906  |  
|Selling, general and administrative expenses |  |      | 325,618     |   |      |   | 194,989    |  
|                                             |  |      |             |   |      |   |            |  
|Total costs and expenses                     |  |      | 4,705,423   |   |      |   | 3,649,895  |  
|                                             |  |      |             |   |      |   |            |  
|Income from operations                       |  |      | 690,894     |   |      |   | 150,900    |  
|                                             |  |      |             |   |      |   |            |  
|Other income and expense:                    |  |      |             |   |      |   |            |  
|Interest income                              |  |      | 31,970      |   |      |   | 20,278     |  
|Interest expense                             |  |      | (7,375      | ) |      |   | (8,279     | )
|                                             |  |      |             |   |      |   |            |  
|Total interest income and expense            |  |      | 24,595      |   |      |   | 11,999     |  
|                                             |  |      |             |   |      |   |            |  
|Income before income taxes                   |  |      | 715,489     |   |      |   | 162,899    |  
|                                             |  |     
|Income tax expense                           |  |      | (274,261    | ) |      |   | (64,000    | )
|                                             |  |      |             |   |      |   |            |  
|Net income                                   |  | $    | 441,228     |   |      | $ | 98,899     |  
|                                             |  |      |             |   |      |   |            |  
|Net income per share:                        |  |      |             |   |      |   |            |  
|Basic                                        |  | $    | 0.24        |   |      | $ | 0.06       |  
|Diluted                                      |  | $    | 0.24        |   |      | $ | 0.05       |  
|Average common shares  basic                |  |      | 1,827,158   |   |      |   | 1,762,447  |  
|Average common shares  diluted              |  |      | 1,851,664   |   |      |   | 1,835,226  |  
|                                             |  |     
|Nine Months Ended March 31,                  |  | 2006 |             |   | 2005 |  
|Revenues                                     |  | $    | 13,952,824  |   |      | $ | 10,152,483 |  
|                                             |  |      |             |   |      |   |            |  
|Cost of goods sold                           |  |      | 11, 585,220 |   |      |   | 9,389,599  |  
|Selling, general and administrative expenses |  |      | 901,706     |   |      |   | 672,784    |  
|                                             |  |      |             |   |      |   |            |  
|Total costs and expenses                     |  |      | 12, 486,926 |   |      |   | 10,062,383 |  
|                                             |  |      |             |   |      |   |            |  
|Income from operations                       |  |      | 1,465,898   |   |      |   | 90,100     |  
|                                             |  |      |             |   |      |   |            |  
|Other income and expense:                    |  |      |             |   |      |   |            |  
|Interest income                              |  |      | 87,229      |   |      |   | 53,121     |  
|Interest expense                             |  |      | (51,674     | ) |      |   | (20,840    | )
|                                             |  |      |             |   |      |   |            |  
|Total interest income and expense            |  |      | 35,555      |   |      |   | 32,281     |  
|                                             |  |      |             |   |      |   |            |  
|Income before income taxes                   |  |      | 1,501,453   |   |      |   | 122,381    |  
|                                             |  |     
|Income tax expense                           |  |      | (579,836    | ) |      |   | (50,000    | )
|                                             |  |      |             |   |      |   |            |  
|Net income                                   |  | $    | 921,617     |   |      | $ | 72,381     |  
|                                             |  |      |             |   |      |   |            |  
|Net income per share:                        |  |      |             |   |      |   |            |  
|Basic                                        |  | $    | 0.50        |   |      | $ | .04        |  
|Diluted                                      |  | $    | 0.50        |   |      | $ | .04        |  
|Average common shares  basic                |  |      | 1,826,684   |   |      |   | 1,762,447  |  
|Average common shares  diluted              |  |      | 1,847,708   |   |      |   | 1,835,226  |  

The accompanying notes are an integral part of these consolidated financial
statements.



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Kreisler Manufacturing Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)



|                                                                                            |  |      |            |   |      |   |           |  
|------------------------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | --------- | -
|Nine Months Ended March 31,                                                                 |  | 2006 |            |   | 2005 |  
|Cash Flows from Operating Activities:                                                       |  |      |            |   |      |   |           |  
|Net income                                                                                  |  | $    | 921,617    |   |      | $ | 72,381    |  
|Adjustments to reconcile net income to net cash (used in) provided by operating activities: |  |      |            |   |      |   |           |  
|Depreciation and amortization                                                               |  |      | 350,206    |   |      |   | 274,930   |  
|Deferred tax expense                                                                        |  |      | 49,000     |   |      |   | 31,400    |  
|Changes in operating assets and liabilities:                                                |  |      |            |   |      |   |           |  
|Accounts receivable  trade                                                                 |  |      | (978,832   | ) |      |   | (335,413  | )
|Inventories                                                                                 |  |      | (1,008,436 | ) |      |   | (76,268   | )
|Income tax receivable                                                                       |  |      |           |   |      |   | 437,422   |  
|Split dollar life insurance receivable                                                      |  |      |           |   |      |   | 235,450   |  
|Other current assets                                                                        |  |      | 120,387    |   |      |   | 21,146    |  
|Accounts payable  trade                                                                    |  |      | (10,175    | ) |      |   | 356,845   |  
|Accrued expenses                                                                            |  |      | 293,172    |   |      |   | (226,647  | )
|Income taxes payable                                                                        |  |      | 286,352    |   |      |   |          |  
|Accrued environmental costs                                                                 |  |      | (76,476    | ) |      |   | (119,651  | )
|                                                                                            |  |      |            |   |      |   |           |  
|Net Cash Provided by (Used in) Operating Activities                                         |  |      | (53,185    | ) |      |   | 671,595   |  
|                                                                                            |  |      |            |   |      |   |           |  
|Cash Flows from Investing Activities:                                                       |  |      |            |   |      |   |           |  
|Purchase of property and equipment                                                          |  |      | (342,328   | ) |      |   | (328,716  | )
|                                                                                            |  |      |            |   |      |   |           |  
|Net Cash Used in Investing Activities                                                       |  |      | (342,328   | ) |      |   | (328,716  | )
|                                                                                            |  |      |            |   |      |   |           |  
|Cash Flows from Financing Activities:                                                       |  |      |            |   |      |   |           |  
|Proceeds from exercise of stock options                                                     |  |      | 5,000      |   |      |   |          |  
|Net proceeds from line of credit                                                            |  |      | 76,270     |   |      |   |          |  
|Repayment of obligations under capital leases                                               |  |      | (60,404    | ) |      |   | (17,850   | )
|                                                                                            |  |      |            |   |      |   |           |  
|Net Cash Provided by(Used in) Financing Activities                                          |  |      | 20,866     |   |      |   | (17,850   | )
|                                                                                            |  |      |            |   |      |   |           |  
|(Decrease) increase in cash and cash equivalents                                            |  |      | (374,647   | ) |      |   | 325,029   |  
|Cash and cash equivalents at June 30                                                        |  |      | 3,409,552  |   |      |   | 3,367,494 |  
|                                                                                            |  |      |            |   |      |   |           |  
|Cash and cash equivalents at March 31                                                       |  | $    | 3,034,905  |   |      | $ | 3,692,253 |  
|                                                                                            |  |      |            |   |      |   |           |  
|Supplemental Disclosure of Cash Flow Information                                            |  |      |            |   |      |   |           |  
|Interest paid                                                                               |  | $    | 51,674     |   |      | $ | 20,840    |  
|Income taxes paid                                                                           |  |      | 244,484    |   |      |   |          |  
|                                                                                            |  |      |            |   |      |   |           |  
|Non-cash Investing and Financing Activities:                                                |  |      |            |   |      |   |           |  
|Property and equipment purchased under capital leases                                       |  | $    | 122,477    |   |      | $ | 448,070   |  

The accompanying notes are an integral part of these consolidated financial
statements.



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Kreisler Manufacturing Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

(Unaudited)

1. Principles of Consolidation

The consolidated financial statements include the accounts of Kreisler Manufacturing Corporation (the Company) and its wholly-owned
subsidiaries, Kreisler Industrial Corporation (Kreisler Industrial) and Kreisler Polska Sp. z o.o (Kreisler Polska), after the elimination of inter-company transactions and accounts. 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 consolidated financial statements and accompanying notes. Actual results
could differ from those estimates. In the opinion of management, all adjustments necessary for a fair presentation of such consolidated financial statements have been included. Interim results are not necessarily indicative of results for a full
year.

The consolidated financial statements and notes are presented as required by SEC Regulation S-B, and do not contain certain
information included in the Companys annual consolidated financial statements and notes. Accordingly, these statements should be read in conjunction with the consolidated financial statements and notes thereto appearing in the Annual Report on
Form 10-KSB/A (Amendment No. 1) of the Company for the fiscal year ended June 30, 2005.

2. Contingencies

Certain federal and state laws authorize the United States Environmental Protection Agency (EPA) to issue orders and bring enforcement actions
to compel responsible parties to take investigative and remedial actions at any site that is determined to present an imminent and substantial danger to the public or the environment because of an actual or threatened release of one or more
hazardous substances.

These statutory provisions impose joint and several responsibility without regard to fault on all responsible
parties, including the generators of the hazardous substances, for certain investigative and remedial costs at sites where substances that are classified as hazardous are or were produced or handled. The Company generally provides for the disposal
or processing of such substances through licensed, independent contractors.

The Company maintains a sewer use permit issued by the Passaic
Valley Sewerage Commissioners (PVSC) authorizing the Company to discharge industrial effluent from its Kreisler Industrial manufacturing facility located in Elmwood Park, New Jersey into the PVSC Waste Treatment facility. Kreisler
Industrial follows the requirements of Federal Regulation 40 CFR 413 and Section 313.1 of the PVSC Rules and Regulations. On July 1, 2005, the Company was notified by the PVSC that the Company was in violation of the daily maximum limit
for nickel and total metals and, as a result, had incurred a serious violation. These violations occurred during the fiscal year ended June 30, 2005. The Company was also notified that it was in significant non-compliance and subject to
enforcement action. The Company retained the services of an environmental remediation consultant and immediately removed the suspected cause of these violations from its industrial effluent discharge. The Company also retained legal counsel. The
Company has implemented procedures to prevent the re-occurrence of this type of violation. The Company approved and executed a Settlement Agreement with the PVSC in January 2006. Upon receipt of a fully executed Settlement Agreement from the PVSC in
February 2006, the Company paid a settlement amount of $21,500. Based on the previously estimated range of penalties, the Company accrued a charge against earnings of $37,500 for the year ended June 30, 2005. This amount has been adjusted to
the actual settlement amount of $21,500.

In July 1999, the Company became aware of historical releases of hazardous substances at its
leased manufacturing facility located in Elmwood Park, New Jersey. The Company promptly notified the New Jersey Department of Environmental Protection (NJDEP) as required by the New Jersey Spill Compensation and Control Act (Spill
Act), N.J.S.A. 58:10-23.11, and retained the services of environmental remediation consultants to perform a full site characterization in accordance with the NJDEPs Technical Requirements for Site Remediation, N.J.A.C. 7:26E-1.1. The
site characterization was completed and on June 15, 2001 the Company



- 7 -



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entered into an agreement with Resource Control Corporation (RCC) for the site remediation. The remaining cost estimated for remediation of the
site, less unamortized discount, is approximately $367,000 as of March 31, 2006. It is reasonably possible that the Companys recorded estimate of remediation cost may change. With regard to environmental remediation, the assumption has
been made that no new costs, above those identified in the original fixed price agreement, will be incurred as the project continues. The Company assumes that there will be no future discoveries on the site that will require additional remediation.
Based on a schedule provided by RCC in January 2006, the Company currently expects the submittal of the appropriate no further action documentation to NJDEP in June 2009. As a result, all accrued environmental costs on the consolidated balance sheet
are classified as long-term liabilities.

In a letter dated February 23, 2006 the Company received a Notice of Assessment Related to
Final Audit Determination from the New Jersey Division of Taxation that Kreisler Industrials Business Tax Returns for the fiscal years ended June 30, 2001 and June 30, 2002 are subject to additional income tax. The amount of the
final audit determination totaled $89,591 of which $59,493 is additional income tax expense, $5,503 is for penalties and $24,595 is for interest through March 15, 2006. In accordance with the appropriate New Jersey statutes, the Company intends
to protest the final audit determination within the 90 day allowable period (which commenced February 23, 2006) and request an informal administrative conference with the Conference and Appeals Branch. The amount of interest potentially due is
dependent on the final settlement date and is subject to increase. As of the nine months ended March 31, 2006, the Company included a charge against earnings totaling $88,858.

3. Income per Share

Basic net income per share is computed by dividing net income by the
weighted-average common shares outstanding. Diluted net income per share is computed by dividing net income by the weighted-average common shares outstanding plus shares issuable upon the exercise of employee stock options net of shares assumed
purchased with option proceeds.



|                                                      |  |                             |           |                             |   |           |  |      |           |  |   |          
|----------------------------------------------------- |  | --------------------------- | --------- | --------------------------- | - | --------- |  | ---- | --------- |  | - | ---------
|                                                      |  | Three Months EndedMarch 31, |           | Nine Months Ended March 31,
|                                                      |  | 2006                        |           | 2005                        |   | 2006      |  | 2005
|Net income                                            |  | $                           | 441,228   |                             | $ | 98,899    |  | $    | 921,617   |  | $ | 72,381   
|                                                      |  |                             |           |                             |   |           |  |      |           |  |   |          
|Weighted-average shares outstanding                   |  |                             | 1,827,158 |                             |   | 1,762,447 |  |      | 1,826,684 |  |   | 1,762,447
|Dilutive impact of stock options                      |  |                             | 24,506    |                             |   | 72,779    |  |      | 21,024    |  |   | 72,779   
|                                                      |  |                             |           |                             |   |           |  |      |           |  |   |          
|Weighted-average shares outstanding assuming dilution |  |                             | 1,851,664 |                             |   | 1,835,226 |  |      | 1,847,708 |  |   | 1,835,226
|                                                      |  |                             |           |                             |   |           |  |      |           |  |   |          
|Net income per share:                                 |  |                             |           |                             |   |           |  |      |           |  |   |          
|Basic                                                 |  | $                           | 0.24      |                             | $ | 0.06      |  | $    | 0.50      |  | $ | 0.04     
|Diluted                                               |  | $                           | 0.24      |                             | $ | 0.05      |  | $    | 0.50      |  | $ | 0.04     

4. Reclassification

Beginning with the Companys Form 10-QSB for the three months ended September 30, 2005 and Form 10-KSB/A (Amendment No. 1) for the year ended June 30, 2005 filed with the Securities and Exchange
Commission (the SEC), the Company reclassified certain employee payroll and benefit expenses from cost of goods sold to selling, general and administrative expenses. This reclassification incorporated fiscal year 2005 changes in
management positional responsibilities as well as the transition of the duties and responsibilities of the former St. Petersburg, Florida corporate office to the Companys facility in Elmwood Park, New Jersey. Applying this reclassification to
the three and nine months ended March 31, 2005 results in an increase in selling, general and administrative expenses of $124,154 and $375,026, respectively, and a corresponding equal decrease in cost of goods sold. This reclassification has no
effect on the total costs and expenses or the net income of the Company for the three and nine months ended March 31, 2005.



- 8 -



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The Companys report on Form 10-QSB for the three and nine months ended March 31, 2005 included
interest expense as part of Selling, general and administrative expenses. The Companys Form 10-QSB for the three and nine months ended March 31, 2006 separates the interest expense from Selling, general and administrative expenses.
Segregating the interest expense amounts reduces Selling, general and administrative expenses for the three and nine months ended March 31, 2005 a total of $8,279 and $20,840, respectively. This segregation has no effect on the Income before
income taxes of the Company.

Three Months Ended March 31, 2005



|                                                    |  |                                  |           |                                        |   |          |                                 |  |   |                                                |   |  |   |           |  
|--------------------------------------------------- |  | -------------------------------- | --------- | -------------------------------------- | - | -------- | ------------------------------- |  | - | ---------------------------------------------- | - |  | - | --------- | -
|                                                    |  | Three MonthsEnded March 31, 2005 |           | ReclassificationAmount fromCOGS toSG&A |   |          | Interest Expenseincluded inSG&A |  |   | Three MonthsEnded March 31, 2005(Reclassified) |  
|Revenues                                            |  | $                                | 3,800,795 |                                        | $ |         |                                 |  | $ |                                               |   |  | $ | 3,800,795 |  
|                                                    |  |                                  |           |                                       
|Cost of goods sold (COGS)                           |  |                                  | 3,579,060 |                                        |   | (124,154 | )                               |  |   |                                               |   |  |   | 3,454,906 |  
|Selling, general and administrative expenses (SG&A) |  |                                  | 79,114    |                                        |   | 124,154  |                                 |  |   | (8,279                                         | ) |  |   | 194,989   |  
|                                                    |  |                                  |           |                                        |   |          |                                 |  |   |                                                |   |  |   |           |  
|Total Costs and Expenses                            |  |                                  | 3,658,174 |                                        |   |         |                                 |  |   | (8,279                                         | ) |  |   | 3,649,895 |  
|                                                    |  |                                  |           |                                        |   |          |                                 |  |   |                                                |   |  |   |           |  
|Income from operations                              |  |                                  | 142,621   |                                        |   |         |                                 |  |   |                                               |   |  |   | 150,900   |  
|                                                    |  |                                  |           |                                       
|Other income and expense:                           |  |                                  |           |                                        |   |          |                                 |  |   |                                                |   |  |   |           |  
|Interest income                                     |  |                                  | 20,278    |                                        |   |         |                                 |  |   |                                               |   |  |   | 20,278    |  
|Interest expense                                    |  |                                  |          |                                        |   |         |                                 |  |   | (8,279                                         | ) |  |   | (8,279    | )
|                                                    |  |                                  |           |                                        |   |          |                                 |  |   |                                                |   |  |   |           |  
|Total Interest Income and Expense                   |  |                                  | 20,278    |                                        |   |         |                                 |  |   | (8,279                                         | ) |  |   | 11,999    |  
|                                                    |  |                                  |           |                                        |   |          |                                 |  |   |                                                |   |  |   |           |  
|Income before income taxes                          |  | $                                | 162,899   |                                        | $ |         |                                 |  | $ |                                               |   |  | $ | 162,899   |  
|                                                    |  |                                  |           |                                        |   |          |                                 |  |   |                                                |   |  |   |           |  

Nine Months Ended March 31, 2005



|                                                    |  |                                |            |                                        |   |          |                                 |  |   |                                               |   |  |   |            |  
|--------------------------------------------------- |  | ------------------------------ | ---------- | -------------------------------------- | - | -------- | ------------------------------- |  | - | --------------------------------------------- | - |  | - | ---------- | -
|                                                    |  | Nine MonthsEnded March 31,2005 |            | ReclassificationAmount fromCOGS toSG&A |   |          | Interest Expenseincluded inSG&A |  |   | Nine MonthsEnded March 31, 2005(Reclassified) |  
|Revenues                                            |  | $                              | 10,152,483 |                                        | $ |         |                                 |  | $ |                                              |   |  | $ | 10,152,483 |  
|Cost of goods sold (COGS)                           |  |                                | 9,764,625  |                                        |   | (375,026 | )                               |  |   |                                              |   |  |   | 9,389,599  |  
|Selling, general and administrative expenses (SG&A) |  |                                | 318,598    |                                        |   | 375,026  |                                 |  |   | (20,840                                       | ) |  |   | 672,784    |  
|                                                    |  |                                |            |                                        |   |          |                                 |  |   |                                               |   |  |   |            |  
|Total Costs and Expenses                            |  |                                | 10,083,223 |                                        |   |         |                                 |  |   | (20,840                                       | ) |  |   | 10,062,383 |  
|                                                    |  |                                |            |                                        |   |          |                                 |  |   |                                               |   |  |   |            |  
|Income from operations                              |  |                                | 69,260     |                                        |   |         |                                 |  |   |                                              |   |  |   | 90,100     |  
|Other income and expense:                           |  |                                |            |                                        |   |          |                                 |  |   |                                               |   |  |   |            |  
|Interest income                                     |  |                                | 53,121     |                                        |   |         |                                 |  |   |                                              |   |  |   | 53,121     |  
|Interest expense                                    |  |                                |           |                                        |   |         |                                 |  |   | (20,840                                       | ) |  |   | (20,840    | )
|                                                    |  |                                |            |                                        |   |          |                                 |  |   |                                               |   |  |   |            |  
|Total Interest Income and Expense                   |  |                                | 53,121     |                                        |   |         |                                 |  |   | (20,840                                       | ) |  |   | 32,281     |  
|                                                    |  |                                |            |                                        |   |          |                                 |  |   |                                               |   |  |   |            |  
|Income before income taxes                          |  | $                              | 122,381    |                                        | $ |         |                                 |  | $ |                                              |   |  | $ | 122,381    |  
|                                                    |  |                                |            |                                        |   |          |                                 |  |   |                                               |   |  |   |            |  



- 9 -



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5. Segment Information

The Company has elected to organize its business based principally upon geographic areas. The Company evaluates performance and allocates resources based on revenues, operating income (loss) and net assets employed.
Net sales are attributed to geographic areas based on the location of the assets producing the revenues. Geographic information regarding the Companys net sales and long-lived assets is as follows:

Selected Financial Results by Geographic Segment



|                                        |  |               |            |   |        |   |          |       |  |   |            |  
|--------------------------------------- |  | ------------- | ---------- | - | ------ | - | -------- | ----- |  | - | ---------- | -
|Three Months Ended March 31, 2006       |  | United States |            |   | Poland |   |          | Total | 
|Sales to unaffiliated customers         |  | $             | 5,390,852  |   |        | $ | 5,465    |       |  | $ | 5,396,317  |  
|                                        |  |               |           
|Income from operations                  |  |               | 689,619    |   |        |   | 1,275    |       |  |   | 690,894    |  
|Interest income                         |  |               | 31,850     |   |        |   | 120      |       |  |   | 31,970     |  
|Interest expense                        |  |               | (7,375     | ) |        |   |         |       |  |   | (7,375     | )
|                                        |  |               |            |   |        |   |          |       |  |   |            |  
|Income (loss) before income tax expense |  | $             | 714,094    |   |        | $ | 1,395    |       |  | $ | 715,489    |  
|                                        |  |               |            |   |        |   |          |       |  |   |            |  
|Segment assets                          |  | $             | 12,575,184 |   |        | $ | 561,058  |       |  | $ | 13,136,242 |  
|Depreciation                            |  |               | 110,155    |   |        | $ | (7,352   | )     |  | $ | 102,803    |  
|                                        |  |               |           
|Nine Months Ended March 31, 2006        |  | United States |            |   | Poland |   |          | Total | 
|Sales to unaffiliated customers         |  | $             | 13,942,972 |   |        | $ | 9,852    |       |  | $ | 13,952,824 |  
|                                        |  |               |           
|Income (loss) from operations           |  |               | 1,566,628  |   |        |   | (100,730 | )     |  |   | 1,465,898  |  
|Interest income                         |  |               | 86,213     |   |        |   | 1,016    |       |  |   | 87,229     |  
|Interest expense                        |  |               | (51,674    | ) |        |   |         |       |  |   | (51,674    | )
|                                        |  |               |            |   |        |   |          |       |  |   |            |  
|Income (loss) before income tax expense |  | $             | 1,601,167  |   |        | $ | (99,714  | )     |  | $ | 1,501,453  |  
|                                        |  |               |            |   |        |   |          |       |  |   |            |  
|Segment assets                          |  | $             | 12,575,184 |   |        | $ | 561,058  |       |  | $ | 13,136,242 |  
|Depreciation                            |  | $             | 300,922    |   |        | $ | 49,284   |       |  | $ | 350,206    |  

Starting from Kreisler Polskas inception in March 2005 through March 31, 2006, the
Company has provided Kreisler Polska with equity capital totaling approximately $559,000, a loan of approximately $34,000 and advances for goods and services totaling approximately $83,000. As of March 31, 2005, the Company provided Kreisler
Polska with approximately $198,000 of equity capital and approximately $35,000 of advances for goods and services.



- 10 -



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

Overview

Kreisler Manufacturing Corporation (the Company) is a Delaware business corporation which was incorporated on December 13, 1968. The
Company succeeded a New Jersey business corporation, which was incorporated in New Jersey in 1940, and which succeeded a New York corporation which was incorporated in 1930. The Company and its wholly-owned subsidiaries, Kreisler Industrial
Corporation (Kreisler Industrial), which was incorporated in New Jersey on July 3, 1956, and Kreisler Polska Sp. z o.o (Kreisler Polska), which was incorporated in Krakow, Poland in March 2005, manufacture precision
metal components and assemblies for use in military and commercial aircraft engines and industrial gas turbines. Kreisler Industrials products primarily include tube and manifold assemblies of multiple sizes and configurations and are
typically manufactured in accordance with customer designs and specifications. Kreisler Polska primarily provides machined components to Kreisler Industrial.

The latest financial results continued the Companys positive sales and profit trends that commenced with the quarter ended March 31, 2005. For the three and nine months ended March 31, 2006 compared to
the same periods ended March 31, 2005, the Companys sales increased 42% and 37%, respectively. The Company sells components used in three industry market segments: (i) commercial aircraft engines, (ii) military aircraft engines
and (iii) industrial gas turbines. Sales in all three of the Companys market segments increased. Revenues from the sale of commercial and industrial gas turbine components for the three months ended March 31, 2006 accounted for 43%
and 14% of the Companys sales compared to 36% and 6% of sales for the three months ended March 31, 2005. For the nine months ended March 31, 2006, commercial and industrial gas turbine component sales represented 41% and 11% of
Company sales compared to 40% and 8%, respectively, for the nine months ended March 31, 2005. The Companys industry market segment sales of military aircraft engine components for the three months ended March 31, 2006 represented 43%
of the Companys sales compared to 58% of sales for the three months ended March 31, 2005. Revenues from military engine components for the nine months ended March 31, 2006 and March 31, 2005 represented 48% and 52%,
respectively, of sales. While the markets that the Company operates in continue to be competitive, increasingly global and cyclical, the Company has benefited from increases in customer demand, particularly from the commercial aircraft engine and
industrial gas turbine markets.

Sales of military aircraft engine components for the three and nine months ended March 31, 2006
increased 5% and 27%, respectively, compared to the three and nine months ended March 31, 2005. The Company continues to manufacture, develop and produce components for the F135 aircraft engine used on the F-35 Joint Strike Fighter. Customer
demand for F135 components fluctuates based on the requirements of the engine development program. Sales of commercial aircraft components for the three and nine months ended March 31, 2006 have increased 70% and 43%, respectively, compared to
the sales for the three and nine months ended March 31, 2005. These commercial sales increases are primarily attributable to increased new engine demand for CF34-8, CF34-10 and V2500 engine components as well as after-market requirements for
PW4000 engine components. The Company continues to support the Rolls-Royce Trent 1000 engine development program for the Boeing 787 Dreamliner through the shipment of fuel manifolds under long-term agreement. Backlog as of March 31, 2006
increased 24% to $20.9 million as compared to $16.8 million as of June 30, 2005.

Demand for components manufactured by the Company
and used in industrial gas turbines has also improved primarily due to continued increases in aftermarket demand for components used in the Siemens 501F turbine generator. The sale of industrial gas turbine components for the nine months ended
March 31, 2005 totaled $857,000, of which $312,000 represented the financial settlement of terminated purchase orders from an industrial gas turbine customer. Excluding that amount from the sales for the nine months ended March 31, 2005,
sales of industrial gas turbine components for the nine months ended March 31, 2006 of $1,535,000 have increased $990,000.

As the
Companys revenues have continued to increase, working capital requirements have also increased contributing to a $375,000 decrease in cash and cash equivalents. In particular, the Companys inventory has increased approximately
$1,008,000, or 36%, since June 30, 2005. A significant portion of the inventory increase is attributable to the detail components needed for the manufacture of F119 and F135 engine components. These detail components include castings, forgings
and proprietary machined components that are typically manufactured



- 11 -



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from titanium. The suppliers of castings, forgings and proprietary machined components tend to be the sole source of supply for a particular component, have
long delivery lead-times and deliver their components in a single shipment rather than on a just in time basis. The inventory of raw materials needed for machined components has also increased due to the growing importance of Kreisler Polska as a
supplier of these components to Kreisler Industrial.

Sales of titanium-based components represented approximately one-third of the
Companys sales for the nine months ended March 31, 2006 and March 31, 2005, respectively. During the past 18 months, the price of titanium has increased significantly as demand has exceeded readily-available supply. For example,
Titanium Metals Corporation, a large supplier of titanium to the aerospace industry, announced in a press release dated March 16, 2006 that their average selling price for titanium products increased 48% during 2005 compared to 2004 while the
amount produced during this same period increased only 6%. The December 31, 2005 Form 10-K of another titanium supplier, Allegheny Technologies Incorporated, stated that their 2005 titanium prices increased 84% compared to 2004 while volume for
the same period increased 13%. While both Titanium Metals Corporation and Allegheny Technologies Incorporated have announced planned increases in titanium production capacity, the Company may be negatively impacted by possible interruptions of
titanium supply which could affect customer deliveries or by price increases that may not be passed through to customers immediately.

The
Companys growth opportunities are potentially limited by its historical reliance on a few significant customers. The Companys largest customer has established manufacturing operations outside of the United States that provide production
capabilities similar to those offered by the Company. In addition, this customer may seek to transfer some of the components presently produced by the Company to these operations. There are presently governmental restrictions on the transfer of
certain military programs for manufacture outside of the United States but there are no assurances that such restrictions will continue. This reliance may have a material adverse effect on the Company and is further exacerbated by the highly
competitive nature of its markets.

Results of Operations

Three Months Ended March 31, 2006 Compared to Three Months ended March 31, 2005

Revenues

Revenues increased $1,595,000, or 42%, to $5,396,000 for the three months ended March 31, 2006 compared with revenues of $3,801,000 for the three
months ended March 31, 2005. The Companys revenues and revenues changes by industry market segment are as follows:



|                        |  |                              |           |      |                    |           |  |          |           |  |      |   |  |      |   |  |     |  
|----------------------- |  | ---------------------------- | --------- | ---- | ------------------ | --------- |  | -------- | --------- |  | ---- | - |  | ---- | - |  | --- | -
|                        |  | Three Months Ended March 31, |          
|                        |  | Revenues                     |           |      | Percent ofRevenues |          
|Industry Market Segment |  | 2006                         |           | 2005 |                    | $ Change  |  | % Change |           |  | 2006 |   |  | 2005 |  
|Commercial              |  | $                            | 2,320,000 |      | $                  | 1,368,000 |  | $        | 952,000   |  | 70   | % |  | 43   | % |  | 36  | %
|Military                |  |                              | 2,320,000 |      |                    | 2,205,000 |  |          | 115,000   |  | 5    | % |  | 43   | % |  | 58  | %
|Industrial Gas Turbine  |  |                              | 756,000   |      |                    | 228,000   |  |          | 528,000   |  | 232  | % |  | 14   | % |  | 6   | %
|                        |  |                              |           |      |                    |           |  |          |           |  |      |   |  |      |   |  |     |  
|Total                   |  | $                            | 5,396,000 |      | $                  | 3,801,000 |  | $        | 1,595,000 |  | 42   | % |  | 100  | % |  | 100 | %
|                        |  |                              |           |      |                    |           |  |          |           |  |      |   |  |      |   |  |     |  

The Companys commercial aero-engine sales of $2,320,000 for the three months ended
March 31, 2006 increased $952,000, or 70%, compared to the three months ended March 31, 2005. The Company benefited from increased demand for virtually all engine programs of which it is a component supplier, including CF34, GP7000, PW4000
and V2500 engines as well as increases in requirements for components used in thrust reverser actuation systems.

The Companys
revenues from the sale of components used in military engine applications totaled $2,320,000 for the three months ended March 31, 2006, an increase of $115,000, or 5%, compared to the three months ended March 31, 2005. The increase is
primarily attributable to an increase in delivery of development engine components for the F135 engine (used on the F-35 Joint Strike Fighter) as well as increased sales for the F100 (used on the F-15 and F-16 aircraft) and F119 aircraft engines.
These revenue increases were partially offset by lower sales of spare parts to the U.S. Government.



- 12 -



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For the three months ended March 31, 2006, the Company experienced an increase of $528,000, or 232%,
in the sale of products to the industrial gas turbine industry as compared to the three months ended March 31, 2005. This increase is primarily the result of continued improvement in the demand for after-market components used in the Siemens
501F heavy industrial gas turbine.

Cost of Goods Sold

Cost of goods sold for the three months ended March 31, 2006 was 81% of revenues, or $4,380,000, compared to 91% of revenues, or $3,455,000, for three months ended March 31, 2005. The net increase in cost of
goods sold for the three months ended March 31, 2006 compared to the three month period ended March 31, 2005 was $925,000 or 27%. The increase in cost of goods sold is primarily attributable to increased purchased material usage due to
higher revenues as well as an increase in employee-related costs and benefits due to an overall increase in the number of employees at Kreisler Industrial and Kreisler Polska. Gross margin for the three months ended March 31, 2006 improved to
$1,017,000, or 18.8% of sales, compared to $346,000, or 9.1% of sales, for the three months ended March 31, 2005. The 9.7 percentage point improvement in gross margin is primarily attributable to a year-over-year sales increase of 42% compared
to an increase in cost of goods sold of 27%.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the three months ended March 31, 2006 were 6% of revenues, or $326,000, compared to 5% of revenues,
or $195,000, for the three months ended March 31, 2005. The increase of $131,000, or 67%, is primarily the result of increases in administrative employee-related costs and benefits and accounting fees.

Income, Interest Expense and Taxes

The income
from operations for the three months ended March 31, 2006 of $691,000 was $540,000 higher than the income from operations for the three months ended March 31, 2005 of $151,000.

Interest income of $32,000 for the three months ended March 31, 2006 was $12,000 higher compared to the three months ended March 31, 2005
primarily attributable to higher interest rates. Interest expense of $7,000 for the three months ended March 31, 2006 was for equipment on capital lease and was $1,000 lower compared to the three months ended March 31, 2005.

Income before income taxes for the three months ended March 31, 2006 was $715,000 compared to the income before income taxes for the three months
ended March 31, 2005 of $163,000.

Income tax expense for the three months ended March 31, 2006 totaled $274,000 compared to an
income tax expense of $64,000 for the three months ended March 31, 2005. The increase in the Companys income tax expense is attributable to the overall increase in profitability.



- 13 -



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Nine Months Ended March 31, 2006 Compared to Nine Months Ended March 31, 2005

Revenues

Revenues increased $3,801,000, or
37%, to $13,953,000 for the nine months ended March 31, 2006 compared with $10,152,000 for the nine months ended March 31, 2005. The Companys revenues and revenue changes by industry market segment are as follows:



|                        |  |                             |            |      |                    |            |  |          |           |  |      |   |  |      |   |  |     |  
|----------------------- |  | --------------------------- | ---------- | ---- | ------------------ | ---------- |  | -------- | --------- |  | ---- | - |  | ---- | - |  | --- | -
|                        |  | Nine Months Ended March 31, |           
|                        |  | Revenues                    |            |      | Percent ofRevenues |           
|Industry Market Segment |  | 2006                        |            | 2005 |                    | $ Change   |  | % Change |           |  | 2006 |   |  | 2005 |  
|Commercial              |  | $                           | 5,721,000  |      | $                  | 4,011,000  |  | $        | 1,710,000 |  | 43   | % |  | 41   | % |  | 40  | %
|Military                |  |                             | 6,697,000  |      |                    | 5,284,000  |  |          | 1,413,000 |  | 27   | % |  | 48   | % |  | 52  | %
|Industrial Gas Turbine  |  |                             | 1,535,000  |      |                    | 857,000    |  |          | 678,000   |  | 79   | % |  | 11   | % |  | 8   | %
|                        |  |                             |            |      |                    |            |  |          |           |  |      |   |  |      |   |  |     |  
|Total                   |  | $                           | 13,953,000 |      | $                  | 10,152,000 |  | $        | 3,801,000 |  | 37   | % |  | 100  | % |  | 100 | %
|                        |  |                             |            |      |                    |            |  |          |           |  |      |   |  |      |   |  |     |  

The Companys commercial aero-engine sales of $5,721,000 increased $1,710,000, or 43%,
compared to the nine months ended March 31, 2005. The sales increase is attributable to increased demand for CF34, GP7000, PW4000 and V2500 engine components as well as thrust reverser actuation system components.

The Companys sales of components used in military engine applications during the nine months ended March 31, 2006 totaled $6,697,000 compared
to $5,284,000 for the nine months ended March 31, 2005. The increase of $1,413,000, or 27%, is primarily attributable to an increase in delivery of development engine components for the F119, F135 and F100 engines as well as an increase in
spare parts sales to the U.S. Government.

For the nine months ended March 31, 2006, the Company had an increase of $678,000, or 79%,
to $1,535,000 in the sale of products to the industrial gas turbine industry as compared to the nine months ended March 31, 2005. This increase is primarily the result of continued improvement in the demand for after-market components used in
the Siemens 501F heavy industrial gas turbine and for aero-derivative industrial gas turbine components. Approximately $312,000, or 36%, of industrial gas turbine sales for the nine months ended March 31, 2005 was attributable to the settlement
of and payment receipt for terminated purchase orders.

Cost of Goods Sold

Cost of goods sold for the nine months ended March 31, 2006 was 83% of sales, or $11,585,000 compared to 92% of revenues, or $9,390,000 for nine
months ended March 31, 2005. The increase in cost of goods sold is primarily attributable to increased purchased material usage due to higher revenues as well as an increase in employee-related costs and benefits due to an overall increase in
the number of employees at Kreisler Industrial and Kreisler Polska. Gross margin for the nine months ended March 31, 2006 improved to $2,368,000, or 17.0% of revenues, compared to $763,000, or 7.5% of revenues, for the nine months ended
March 31, 2005. The 9.5 percentage point improvement in gross margin is primarily attributable to a year-over-year revenue increase of 37% compared to an increase in cost of goods sold of 23%.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the nine months ended March 31, 2006 were 6% of revenues, or $902,000, compared to 7% of revenues, or $673,000, for the nine months ended March 31, 2005. The increase of $229,000,
or 34%, is primarily the result of increases in accounting fees, including accounting fee accruals, and administrative employee-related costs and benefits partially offset by decreases in sales commissions and legal fees.



- 14 -



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Income, Interest Expense and Taxes

The income from operations for the nine months ended March 31, 2006 of $1,466,000 was $1,376,000 higher than the income from operations as of
March 31, 2005 of $90,000.

Interest income of $87,000 for the nine months ended March 31, 2006 was $34,000 higher compared to
the nine months ended March 31, 2005 and is primarily attributable to higher interest rates. Interest expense of $52,000 for the nine months ended March 31, 2006 was $31,000 higher compared to the nine months ended March 31, 2005
primarily due to interest of $25,000 accrued on the New Jersey tax assessment as well as interest expense on capital lease obligations.

Income before income taxes for the nine months ended March 31, 2006 was $1,501,000 compared to the income before income taxes for the same period in 2005 of $122,000.

Income tax expense for the nine months ended March 31, 2006 totaled $580,000 compared to an income tax expense of $50,000 for the same period in
2005. The increase in the Companys income tax expense is attributable to the overall increase in profitability.

Backlog

Backlog as of March 31, 2006 was approximately $20.9 million compared to $15.4 million as of March 31,
2005. The backlog increased $5.5 million, or 36%. Backlog as of June 30, 2005 was $16.8 million. Backlog is subject to change with reduced purchase order duration and terminations. Based on customer discussions, a portion of the $1.1 million in
PW4000 commercial aircraft engine orders that has been under consideration by a customer for possible termination due to declines in market demand for the components is likely to remain as a viable order with deliveries scheduled between 2007 and
2009. This order is included in the backlog as of March 31, 2006. Orders that have already been terminated by a customer are excluded from the backlog even if the amount owed by a customer to the Company for the termination has not been paid.

Liquidity and Capital Resources

The
Company has historically been able to use operating cash flow and cash on-hand to cover most capital expenditures and working capital requirements. The Company has also used capital leases to acquire capital equipment. The Company anticipates using
operating cash flow, cash on-hand and external financial sources for future capital expenditures and working capital requirements.

Cash
and cash equivalents at March 31, 2006 decreased $375,000, or 11%, to $3,035,000 compared to cash and cash equivalents of $3,410,000 at June 30, 2005. The decrease in cash is primarily attributable to an increase in working capital
requirements.

Cash used in operating activities for the period ended March 31, 2006 was $53,000 compared to cash provided by
operating activities of $672,000 at March 31, 2005. The decline was primary attributable to funding growth with an increase in accounts receivable - trade of $979,000 and inventories of $1,008,000, offsetting the net income of $922,000 and
depreciation of $350,000.

Cash used in investing activities for the period ended March 31, 2006 amounted to $342,000 and is
attributable to the purchase of capital equipment by the Company. Cash provided by financing activities totaled $21,000 and is attributable to proceeds from a line of credit totaling $76,000 and exercised stock options totaling $5,000 offset by
capital lease payments for machining equipment totaling $60,000.

Kreisler Polska is eligible for certain European Union financial grants
targeted towards small and medium-sized business. These grants reimburse Kreisler Polska a maximum of approximately $400,000, or 40%, of the cost of eligible capital equipment. As a condition of applying for such a grant, Kreisler Polska established
a line of credit with a bank located in Poland. As of March 31, 2006, the amount owed against the line of credit totaled $76,000. This amount is fully secured through an interest bearing deposit placed by Kreisler Polska with the Polish bank
totaling $111,000. Kreisler Polska will repay the line of credit in equivalent monthly amounts with the final payment scheduled for January 27, 2007.



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The Company believes that operating cash flow, on-hand cash and cash equivalents and external financial
sources will be sufficient to cover anticipated capital expenditures of approximately $500,000 for the 12 months ending March 31, 2007. Capital expenditures for the nine months ended March 31, 2006 totaled $342,000 compared to $329,000 for
the nine months ended March 31, 2005.

The creation of Kreisler Polska exposes the Company to gains and losses due to fluctuations of
a foreign currency. As of March 31, 2006 the foreign currency translation adjustment amounted to $37,000. The net effect after adjusting for a tax benefit of $15,000 is a reduction in stockholders equity of $22,000. Current period
realized foreign currency gains and losses are included as part of selling, general and administrative expenses. As of March 31, 2006, this loss amounted to $8,000.

Reclassification

Beginning with the Companys Form 10-QSB for the three months ended
September 30, 2005 and Form 10-KSB/A (Amendment No. 1) for the year ended June 30, 2005 filed with the Securities and Exchange Commission (the SEC), the Company reclassified certain employee payroll and benefit expenses
from Cost of goods sold to Selling, general and administrative expenses. This reclassification incorporated fiscal year 2005 changes in management positional responsibilities as well as the transition of the duties and responsibilities of the former
St. Petersburg, Florida corporate office to the Companys facility in Elmwood Park, New Jersey. Applying this reclassification to the three and nine months ended March 31, 2005 results in an increase in Selling, general and administrative
expenses of $124,154 and $375,026, respectively, and a corresponding equal decrease in Cost of goods sold. This reclassification has no effect on the Total Costs and Expenses or the Net Income of the Company for the three and nine months ended
March 31, 2005.

Company reports on Form 10-QSB for the three and nine months ended March 31, 2005 included interest expense as
part of Selling, general and administrative expenses. The Companys Form 10-QSB for the three and nine months ended March 31, 2006 separates the interest expense from Selling, general and administrative expenses. Segregating the interest
expense amounts reduces Selling, general and administrative expenses for the three and six months ended March 31, 2005 a total of $8,279 and $20,840, respectively. This segregation has no effect on the Income before income taxes of the Company.

Three Months Ended March 31, 2005



|                                                    |  |                                 |           |                                        |   |          |                                 |  |   |                                                |   |  |   |           |  
|--------------------------------------------------- |  | ------------------------------- | --------- | -------------------------------------- | - | -------- | ------------------------------- |  | - | ---------------------------------------------- | - |  | - | --------- | -
|                                                    |  | Three MonthsEnded March 31,2005 |           | ReclassificationAmount fromCOGS toSG&A |   |          | Interest Expenseincluded inSG&A |  |   | Three MonthsEnded March 31, 2005(Reclassified) |  
|Revenues                                            |  | $                               | 3,800,795 |                                        | $ |         |                                 |  | $ |                                               |   |  | $ | 3,800,795 |  
|                                                    |  |                                 |           |                                       
|Cost of goods sold (COGS)                           |  |                                 | 3,579,060 |                                        |   | (124,154 | )                               |  |   |                                               |   |  |   | 3,454,906 |  
|Selling, general and administrative expenses (SG&A) |  |                                 | 79,114    |                                        |   | 124,154  |                                 |  |   | (8,279                                         | ) |  |   | 194,989   |  
|                                                    |  |                                 |           |                                        |   |          |                                 |  |   |                                                |   |  |   |           |  
|Total Costs and Expenses                            |  |                                 | 3,658,174 |                                        |   |         |                                 |  |   | (8,279                                         | ) |  |   | 3,649,895 |  
|                                                    |  |                                 |           |                                        |   |          |                                 |  |   |                                                |   |  |   |           |  
|Income from operations                              |  |                                 | 142,621   |                                        |   |         |                                 |  |   |                                               |   |  |   | 150,900   |  
|                                                    |  |                                 |           |                                       
|Other income and expense:                           |  |                                 |           |                                        |   |          |                                 |  |   |                                                |   |  |   |           |  
|Interest income                                     |  |                                 | 20,278    |                                        |   |         |                                 |  |   |                                               |   |  |   | 20,278    |  
|Interest expense                                    |  |                                 |          |                                        |   |         |                                 |  |   | (8,279                                         | ) |  |   | (8,279    | )
|                                                    |  |                                 |           |                                        |   |          |                                 |  |   |                                                |   |  |   |           |  
|Total Interest Income and Expense                   |  |                                 | 20,278    |                                        |   |         |                                 |  |   | (8,279                                         | ) |  |   | 11,999    |  
|                                                    |  |                                 |           |                                        |   |          |                                 |  |   |                                                |   |  |   |           |  
|Income before income taxes                          |  | $                               | 162,899   |                                        | $ |         |                                 |  | $ |                                               |   |  | $ | 162,899   |  
|                                                    |  |                                 |           |                                        |   |          |                                 |  |   |                                                |   |  |   |           |  



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Nine Months Ended March 31, 2005



|                                                    |  |                                |            |                                        |   |          |                                 |  |   |                                               |   |  |   |            |  
|--------------------------------------------------- |  | ------------------------------ | ---------- | -------------------------------------- | - | -------- | ------------------------------- |  | - | --------------------------------------------- | - |  | - | ---------- | -
|                                                    |  | Nine MonthsEnded March 31,2005 |            | ReclassificationAmount fromCOGS toSG&A |   |          | Interest Expenseincluded inSG&A |  |   | Nine MonthsEnded March 31, 2005(Reclassified) |  
|Revenues                                            |  | $                              | 10,152,483 |                                        | $ |         |                                 |  | $ |                                              |   |  | $ | 10,152,483 |  
|                                                    |  |                                |            |                                       
|Cost of goods sold (COGS)                           |  |                                | 9,764,625  |                                        |   | (375,026 | )                               |  |   |                                              |   |  |   | 9,389,599  |  
|Selling, general and administrative expenses (SG&A) |  |                                | 318,598    |                                        |   | 375,026  |                                 |  |   | (20,840                                       | ) |  |   | 672,784    |  
|                                                    |  |                                |            |                                        |   |          |                                 |  |   |                                               |   |  |   |            |  
|Total Costs and Expenses                            |  |                                | 10,083,223 |                                        |   |         |                                 |  |   | (20,840                                       | ) |  |   | 10,062,383 |  
|                                                    |  |                                |            |                                        |   |          |                                 |  |   |                                               |   |  |   |            |  
|Income from operations                              |  |                                | 69,260     |                                        |   |         |                                 |  |   |                                              |   |  |   | 90,100     |  
|                                                    |  |                                |            |                                       
|Other income and expense:                           |  |                                |            |                                        |   |          |                                 |  |   |                                               |   |  |   |            |  
|Interest income                                     |  |                                | 53,121     |                                        |   |         |                                 |  |   |                                              |   |  |   | 53,121     |  
|Interest expense                                    |  |                                |           |                                        |   |         |                                 |  |   | (20,840                                       | ) |  |   | (20,840    | )
|                                                    |  |                                |            |                                        |   |          |                                 |  |   |                                               |   |  |   |            |  
|Total Interest Income and Expense                   |  |                                | 53,121     |                                        |   |         |                                 |  |   | (20,840                                       | ) |  |   | 32,281     |  
|                                                    |  |                                |            |                                        |   |          |                                 |  |   |                                               |   |  |   |            |  
|Income before income taxes                          |  | $                              | 122,381    |                                        | $ |         |                                 |  | $ |                                              |   |  | $ | 122,381    |  
|                                                    |  |                                |            |                                        |   |          |                                 |  |   |                                               |   |  |   |            |  

Contingencies

In a letter dated February 23, 2006 the Company received a Notice of Assessment Related to Final Audit Determination from the New Jersey Division of Taxation that Kreisler Industrials Business Tax Returns
for the fiscal years ended June 30, 2001 and June 30, 2002 are subject to additional income tax. The amount of the final audit determination totaled $89,591 of which $59,493 is additional income tax expense, $5,503 is for penalties and
$24,595 is for interest through March 15, 2006. In accordance with the appropriate New Jersey statutes, the Company intends to protest the final audit determination within the 90 day allowable period (which commenced February 23, 2006) and
request an informal administrative conference with the Conference and Appeals Branch. The amount of interest potentially due is dependent on the final settlement date and is subject to increase. As of the nine months ended March 31, 2006, the
Company included a charge against earnings totaling $88,858.

The Company maintains a sewer use permit issued by the Passaic Valley
Sewerage Commissioners (PVSC) authorizing the Company to discharge industrial effluent from its Kreisler Industrial manufacturing facility located at 180 Van Riper Avenue, Elmwood Park, New Jersey into the PVSC Waste Treatment facility.
Kreisler Industrial follows the requirements of Federal Regulation 40 CFR 413 and Section 313.1 of the PVSC Rules and Regulations. On July 1, 2005, the Company was notified by the PVSC that the Company was in violation of the daily maximum
limit for nickel and total metals and, as a result, had incurred a Serious Violation. These violations occurred during the fiscal year ended June 30, 2005. The Company was also notified that it was in Significant Non-Compliance and subject to
enforcement action. The Company retained the services of an environmental remediation consultant and immediately removed the suspected cause of these violations from its industrial effluent discharge. The Company also retained legal counsel. The
Company has implemented procedures to prevent the re-occurrence of this type of violation. The Company approved and executed a Settlement Agreement with the PVSC in January 2006. Upon receipt of a fully executed Settlement Agreement from the PVSC in
February 2006, the Company paid a settlement amount of $21,500. Based on the previously estimated range of penalties, the Company accrued a charge against earnings of $37,500 for the year ended June 30, 2005. This amount has been adjusted to
the actual settlement amount of $21,500.

Critical Accounting Policies and Estimates

The Companys critical accounting policies and estimates require significant accounting judgments to be made by management. Note A in the Notes
to the Consolidated Financial Statements in the Companys Annual Report on Form 10-KSB/A (Amendment No. 1) for fiscal year ended June 30, 2005 filed with the SEC provides additional details regarding all of the Companys
critical and significant accounting policies.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned. Inter-company transactions
and accounts have been eliminated.



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Revenue Recognition

Revenue from sales of products is recognized at the time title and the risks and rewards of ownership pass. This is when the products are shipped per customers instructions, the sales price is fixed and
determinable, and collections are reasonably assured.

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less at the date of acquisition to be cash equivalents.

Accounts Receivable-Trade and Allowance for Uncollectible Accounts

Accounts receivable-trade represents uncollateralized customer obligations due under normal trade terms generally requiring payment within 30-90 days from the invoice date. Follow-up correspondence is made if unpaid
accounts receivable go beyond the invoice due date. Payments of accounts receivable are allocated to the specific invoices identified on the customers remittance advice.

Accounts receivable-trade (net) are stated at the amount management expects to collect from outstanding balances. The carrying amounts of accounts
receivable-trade is reduced by a valuation allowance that reflects managements best estimate of the amounts that will not be collected. Management individually reviews all accounts receivable balances that exceed the due date and estimates the
portion, if any, of the balance that will not be collected. Management provides for probable uncollectible amounts through a charge to earnings and a credit to a valuation allowance based on its assessment of the current status of individual
accounts. Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable-trade.

Accounts receivable-trade is net of an allowance for estimated uncollectible accounts of $10,000 as of March 31, 2006 and June 30, 2005.

Property, Plant, and Equipment

Property, plant, and equipment are recorded at cost less accumulated depreciation. Maintenance and repairs, which do not improve efficiency or extend the useful life, are charged to operations as incurred. Asset and related accumulated
depreciation amounts are relieved from the accounts for retirements or dispositions. Resulting gains or losses are reflected in earnings. Depreciation is computed using accelerated methods over the estimated useful lives of three to ten years for
machinery and equipment, while the straight line method is used over the term of leases for building improvements.

Foreign Currency Translation

Balance sheet accounts are translated at the exchange rate in effect at each balance sheet date; income accounts are translated at the
average rates of exchange prevailing during the period. Gains and losses on foreign currency translations are reflected in the cumulative translation adjustments component of shareholders equity. The national currency of the foreign company is
the functional currency.

Income Taxes

Income tax expense is recognized at applicable U.S. or international tax rates. Certain revenue and expense items may be recognized in one period for financial statement purposes and in a different period for income tax reporting. The tax
effects of such differences are reported as deferred income taxes.

Essentially all earnings of the Companys foreign subsidiary
 Kreisler Polska - are expected to be reinvested in overseas expansion. Since no foreign earnings currently exist, an incremental U.S. or foreign tax on repatriation of such earnings cannot be estimated.

Earnings Per Share

During 1998, the Company adopted
SFAS No. 128, Earnings Per Share which requires disclosure of basic and diluted earnings per share. Under SFAS No. 128, basic earnings per share is computed as earnings divided by weighted average shares outstanding. Diluted earnings per
share includes the dilutive effects of stock options and other potentially dilutive securities.



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Inventory Valuation

Inventory valuation for the three months ending December 31 and June 30 is based on actual physical inventory counts. For the three months ending September 30 and March 31 inventory valuation is
based on internal perpetual inventory records. The Company compares the physical inventory valuation for the periods ending December 31 and June 30 with the perpetual inventory record valuation. At December 31, 2005, the comparison
resulted in a valuation difference of 4%, a difference which the Company believes is primarily attributable to fluctuations of the material scrap rate percentage. Any substantial variance in the actual material scrap rate percentage could
significantly increase or decrease profits due to changes in the costs of goods sold. For the two quarters in which internal perpetual records are used to value the inventory, raw materials, work in process and finished goods inventories are
allocated based on the same percentage of total inventory that existed at the time of the most recent physical inventory valuation.

Certain
Relationships and Related-Party Transactions

On July 1, 2005, the Company and Wallace N. Kelly, Chairman of the Board of the
Company, entered into a letter agreement (the Consulting Agreement) setting forth the terms of the Companys engagement of Mr. Kelly to render technical advisory services to the Company in the areas of process engineering,
product development, strategic planning, customer and marketing support, as directed by the Chief Executive Officer of the Company.

The
Company agreed to pay Mr. Kelly $1,000 for each full (eight hours or greater) day that he performs such services during the term of the Consulting Agreement. For days that Mr. Kelly performs the services during less than eight hours, the
fee will be based on the fraction of actual hours during which the services were performed to eight hours.

The Company will also reimburse
Mr. Kelly for all reasonable out-of-pocket expenses incurred during the term of the Consulting Agreement, including, but not limited to, Mr. Kellys commute to or from his home residence, living expenses while on site in New Jersey
and certain business travel and entertainment expenses. The Consulting Agreement became effective on July 1, 2005 and continues until thirty days following a written termination notice by either party to the Consulting Agreement.

For the three and nine months ended March 31, 2006, the Company paid to Mr. Kelly $35,400 and $111,900, respectively, for technical advisory
services and reimbursed Mr. Kelly for his reasonable out-of-pocket expenses totaling $5,600 and $22,000, respectively.

Change of Independent
Registered Public Accounting Firm

On March 20, 2005, the Companys Audit Committee of the Board of Directors engaged
Rothstein, Kass & Company, P.C. to serve as the Companys independent registered public accounting firm for the fiscal year ending June 30, 2006, following the dismissal of Gregory, Sharer & Stuart, P.A., the
Companys prior independent registered public accounting firm. In accordance with SEC regulations, the Company filed Amendment No. 1 to Form 8-K with the SEC.

Item 3 Controls and Procedures

The Company periodically reviews the design and effectiveness of its
disclosure controls and procedures. The Company makes modifications to improve the design and effectiveness of its disclosure controls and procedures and may take corrective action if its reviews identify a need for such modifications or actions.

The Companys management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), does
not expect that its disclosure controls and procedures or its internal control over financial reporting will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met. Further, the design of a



- 19 -



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control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of
the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities
that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake.

Additionally, controls
can be circumvented by the individual acts of some persons or by collusion of two or more people. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may
deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

An evaluation was carried out under the supervision and with the participation of the Companys management, including the CEO and CFO, of the effectiveness of the Companys disclosure controls and
procedures. Based on that evaluation, the CEO and CFO have concluded that as of the end of the period covered by this report, the Companys disclosure controls and procedures are effective to provide reasonable assurance that material
information required to be disclosed in reports that are filed or submitted under the Securities Exchange Act of 1934, as amended, is accumulated, recorded, processed, summarized and communicated to the Companys management, including the CEO
and CFO, to allow timely decisions regarding the required disclosure, and reported on a timely basis as provided in the SEC rules and forms. There have been no changes in the Companys internal control over financial reporting during the
Companys last fiscal quarter (or the Companys fourth fiscal quarter in the case of an annual report) that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

PART II OTHER INFORMATION

Item 1 Legal Proceedings

The Company was subject to legal proceedings related to an environmental matter.
The Company maintains a sewer use permit issued by the PVSC authorizing the Company to discharge industrial effluent from its location at 180 Van Riper Avenue, Elmwood Park, New Jersey into the PVSC Waste Treatment facility. On July 1, 2005,
the Company was notified by the PVSC that the Company was in violation of the daily maximum limit for nickel and total metals and, as a result, had incurred a Serious Violation. These violations occurred during the fiscal year ended June 30,
2005. The Company was also notified that it is in Significant Non-Compliance and subject to enforcement action. The Company retained the services of an environmental remediation consultant and immediately removed the suspected cause of these
violations from its industrial effluent discharge. The Company has implemented procedures to prevent the re-occurrence of this type of violation. The Company approved and executed a Settlement Agreement with the PVSC in January 2006. The Company
received an approved and fully executed Settlement Agreement from the PVSC in February 2006. Following the receipt of the fully executed Settlement Agreement from the PVSC, the Company paid the settlement amount of $21,500.

In a letter dated February 23, 2006 the Company received a Notice of Assessment Related to Final Audit Determination from the New Jersey Division of
Taxation that Kreisler Industrials Corporation Business Tax Returns for the fiscal years ended June 30, 2001 and June 30, 2002 are subject to additional income tax. The amount of the final audit determination totaled $89,591 of which
$59,493 is additional income tax expense, $5,503 is for penalties and $24,595 is for interest through March 15, 2006. In accordance with the appropriate New Jersey statutes, the Company intends to protest the final audit determination within
the 90 day allowable period (which commenced February 23, 2006) and request an informal administrative conference with the Conference and Appeals Branch. The amount of interest potentially due is dependent on the final settlement date and is
subject to increase. As of the nine months ended March 31, 2006, the Company included a charge against earnings totaling $88,858.



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Item 2 Unregistered Sales of Equity Securities and Use of Proceeds

Harry S. Mueller, General Manager of
the Companys Kreisler Industrial subsidiary, exercised all of his outstanding incentive stock options granted under the Companys 1997 stock option plan and was issued a total of 4,000 shares of Company common stock on March 16,
2006. The Company received cash proceeds for the exercise of the stock options totaling $5,000. This issuance was exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, based upon a determination that the
investor was sophisticated, had access to, and was provided with, information that would otherwise be contained in a registration statement and there was no general solicitation.

Item 3 Defaults Upon Senior Securities

None

Item 4 Submission of Matters to a Vote of Security Holders

None

Item 5 Other Information

On October 14, 2005, the Company adopted procedures by which
its stockholders may recommend nominees to the Companys board of directors as required by Item 7(d)(2)(ii)(G) of Schedule 14A under the Securities Exchange Act of 1934, as amended. Information regarding these
procedures was previously disclosed in the Companys definitive proxy statement filed with the SEC on October 28, 2005.

Item 6 Exhibits

(a) Exhibits



|     |  |                                                                                                                                                                               
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|11   |  | Statement regarding computation of per share earnings incorporated by reference to Note 4 to Consolidated Financial Statements included in this Quarterly Report on Form-10QSB
|     | 
|31.1 |  | Certification of Chief Executive Officer pursuant to Rule 13a-14 under the Securities Exchange Act of 1934                                                                    
|     | 
|31.2 |  | Certification of Chief Financial Officer pursuant to Rule 13a-14 under the Securities Exchange Act of 1934                                                                    
|     | 
|32.1 |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350                                                                       



- 21 -



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SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, as amended, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



KREISLER MANUFACTURING CORPORATIONBy:

/s/ Michael D. SternMichael D. Stern,Co-President & Chief Executive Officer/s/ Edward A. SternEdward A. Stern,Co-President & Chief Financial Officer


Date: May 15, 2006



- 22 -



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EXHIBIT INDEX



|     |  |                                                                                                                                                                               
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|11   |  | Statement regarding computation of per share earnings incorporated by reference to Note 4 to Consolidated Financial Statements included in this Quarterly Report on Form-10QSB
|     | 
|31.1 |  | Certification of Chief Executive Officer pursuant to Rule 13a-14 under the Securities Exchange Act of 1934                                                                    
|     | 
|31.2 |  | Certification of Chief Financial Officer pursuant to Rule 13a-14 under the Securities Exchange Act of 1934                                                                    
|     | 
|32.1 |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350                                                                       



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