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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 September 30, 2007



| ̈ | 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 or 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 November 13, 2007, was 1,867,948 shares.

Transitional Small Business Disclosure Format (Check one): ̈Yes    x  No



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##### Table of Contents

Table of Contents



|        |  |                                                                                    |  |            
|------- |  | ---------------------------------------------------------------------------------- |  | -----------
|        |  |                                                                                    |  | Page Number
|PART I  |  | Financial Information                                                              |  |            
|        |  |                                                                                   
|Item 1  |  | Financial Statements                                                               |  |            
|        |  | Consolidated Balance Sheets                                                        |  | 4          
|        |  | Consolidated Statements of Operations                                              |  | 5          
|        |  | Consolidated Statement of Changes in Stockholders Equity and Comprehensive Income |  | 6          
|        |  | Consolidated Statements of Cash Flows                                              |  | 7          
|        |  | Notes to the Interim Consolidated Financial Statements                             |  | 8          
|        |  |                                                                                   
|Item 2  |  | Managements Discussion and Analysis or Plan of Operation                          |  | 13         
|        |  |                                                                                   
|Item 3  |  | Controls and Procedures                                                            |  | 23         
|        |  |                                                                                   
|PART II |  | Other Information                                                                  |  |            
|        |  |                                                                                   
|Item 1  |  | Legal Proceedings                                                                  |  | 24         
|        |  |                                                                                   
|Item 2  |  | Unregistered Sales of Equity Securities and Use of Proceeds                        |  | 24         
|        |  |                                                                                   
|Item 3  |  | Defaults Upon Senior Securities                                                    |  | 24         
|        |  |                                                                                   
|Item 4  |  | Submission of Matters to a Vote of Security Holders                                |  | 24         
|        |  |                                                                                   
|Item 5  |  | Other Information                                                                  |  | 24         
|        |  |                                                                                   
|Item 6  |  | Exhibits                                                                           |  | 24         



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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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##### Table of Contents

PART I FINANCIAL INFORMATION



|Item 1 | Financial Statements
|------ | --------------------

Kreisler Manufacturing Corporation and Subsidiaries

Consolidated Balance Sheets



|                                                                                                                                              |  |                      |            |           |   |           
|--------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------- | ---------- | --------- | - | ----------
|                                                                                                                                              |  | (Unaudited)9/30/2007 |            | 6/30/2007
|Assets                                                                                                                                        |  |                      |            |           |   |           
|Cash and cash equivalents                                                                                                                     |  | $                    | 6,297,104  |           | $ | 5,068,325 
|Short-term investments                                                                                                                        |  |                      | 550,000    |           |   | 550,000   
|Accounts receivable  trade, net (net of $20,000 allowance for uncollectible accounts at September 30, 2007 and June 30, 2007)                |  |                      | 2,778,760  |           |   | 2,366,177 
|Inventories                                                                                                                                   |  |                      | 5,588,985  |           |   | 5,546,983 
|Deferred tax asset                                                                                                                            |  |                      | 9,754      |           |   | 96,312    
|Other current assets                                                                                                                          |  |                      | 337,097    |           |   | 66,200    
|                                                                                                                                              |  |                      |            |           |   |           
|Total current assets                                                                                                                          |  |                      | 15,561,700 |           |   | 13,693,997
|                                                                                                                                              |  |                      |            |           |   |           
|Property, plant and equipment, net                                                                                                            |  |                      | 1,939,473  |           |   | 2,425,098 
|Deferred tax asset                                                                                                                            |  |                      | 123,942    |           |   | 123,942   
|                                                                                                                                              |  |                      |            |           |   |           
|Total non-current assets                                                                                                                      |  |                      | 2,063,415  |           |   | 2,549,040 
|                                                                                                                                              |  |                      |            |           |   |           
|TOTAL ASSETS                                                                                                                                  |  | $                    | 17,625,115 |           | $ | 16,243,037
|                                                                                                                                              |  |                      |            |           |   |           
|                                                                                                                                              |  |                     
|Liabilities and Stockholders Equity                                                                                                          |  |                      |            |           |   |           
|Liabilities                                                                                                                                   |  |                      |            |           |   |           
|Accounts payable  trade                                                                                                                      |  | $                    | 1,312,024  |           | $ | 1,130,990 
|Accrued expenses                                                                                                                              |  |                      | 542,436    |           |   | 520,540   
|Deferred revenue                                                                                                                              |  |                      | 948,000    |           |   | 500,000   
|Product warranties                                                                                                                            |  |                      | 43,391     |           |   | 148,185   
|Income taxes payable                                                                                                                          |  |                      | 266,029    |           |   |          
|Obligations under capital leases, current portion                                                                                             |  |                      | 120,389    |           |   | 115,731   
|                                                                                                                                              |  |                      |            |           |   |           
|Total current liabilities                                                                                                                     |  |                      | 3,232,269  |           |   | 2,415,446 
|                                                                                                                                              |  |                      |            |           |   |           
|Obligations under capital leases, net of current portion                                                                                      |  |                      | 225,044    |           |   | 258,343   
|Accrued environmental cost                                                                                                                    |  |                      | 430,790    |           |   | 426,117   
|Total long-term liabilities                                                                                                                   |  |                      | 655,834    |           |   | 684,460   
|Commitments and contingencies                                                                                                                 |  |                      |            |           |   |           
|Stockholders Equity                                                                                                                          |  |                      |            |           |   |           
|Common stock, $0.125 par value  6,000,000 shares authorized; 1,867,948 shares issued and outstanding at September 30, 2007 and
June 30, 2007 |  |                      | 233,494    |           |   | 233,494   
|Additional paid-in capital                                                                                                                    |  |                      | 949,786    |           |   | 909,625   
|Retained earnings                                                                                                                             |  |                      | 12,415,749 |           |   | 11,928,989
|Accumulated other comprehensive income                                                                                                        |  |                      | 137,983    |           |   | 71,023    
|                                                                                                                                              |  |                      |            |           |   |           
|Total stockholders equity                                                                                                                    |  |                      | 13,737,012 |           |   | 13,143,131
|                                                                                                                                              |  |                      |            |           |   |           
|TOTAL LIABILITIES & STOCKHOLDERS EQUITY                                                                                                      |  | $                    | 17,625,115 |           | $ | 16,243,037
|                                                                                                                                              |  |                      |            |           |   |           

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



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Kreisler Manufacturing Corporation and Subsidiaries

Consolidated Statements of Operations

(Unaudited)



|                                             |  |      |           |   |      |   |           |  
|-------------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | -
|Three Months Ended September 30,             |  | 2007 |           |   | 2006 |  
|Net sales                                    |  | $    | 6,696,947 |   |      | $ | 5,082,985 |  
|                                             |  |      |           |   |      |   |           |  
|Cost of goods sold                           |  |      | 5,448,461 |   |      |   | 4,164,635 |  
|Selling, general and administrative expenses |  |      | 485,144   |   |      |   | 298,596   |  
|                                             |  |      |           |   |      |   |           |  
|Total costs and expenses                     |  |      | 5,933,605 |   |      |   | 4,463,231 |  
|                                             |  |      |           |   |      |   |           |  
|Income from operations                       |  |      | 763,342   |   |      |   | 619,754   |  
|                                             |  |     
|Interest and other income                    |  |      | 63,715    |   |      |   | 48,109    |  
|Interest and other expenses                  |  |      | (12,357   | ) |      |   | (13,559   | )
|                                             |  |      |           |   |      |   |           |  
|Income before income taxes                   |  |      | 814,700   |   |      |   | 654,304   |  
|                                             |  |     
|Income taxes                                 |  |      | (327,940  | ) |      |   | (262,000  | )
|                                             |  |      |           |   |      |   |           |  
|Net income                                   |  | $    | 486,760   |   |      | $ | 392,304   |  
|                                             |  |      |           |   |      |   |           |  
|Net income per common share:                 |  |      |           |   |      |   |           |  
|Net income  basic                           |  | $    | 0.26      |   |      | $ | 0.21      |  
|Net income  diluted                         |  | $    | 0.26      |   |      | $ | 0.21      |  
|Weighted average common shares  basic       |  |      | 1,867,948 |   |      |   | 1,830,447 |  
|Weighted average common shares  diluted     |  |      | 1,900,338 |   |      |   | 1,857,103 |  

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



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Kreisler Manufacturing Corporation and Subsidiaries

Consolidated Statement of Changes in Stockholders Equity and
Comprehensive Income

Three months ended September 30, 2007



|                                           |        |                         |         |                          |         |                  |   |                                     |  |                          |            |  |   |         |  |   |           
|------------------------------------------ | ------ | ----------------------- | ------- | ------------------------ | ------- | ---------------- | - | ----------------------------------- |  | ------------------------ | ---------- |  | - | ------- |  | - | ----------
|                                           |        | Common StockOutstanding |         | AdditionalPaid-inCapital |         | RetainedEarnings |   | AccumulatedOtherComprehensiveIncome |  | TotalStockholdersEquity
|                                           | Shares |                         | Amounts |                          |         |                  |  
|Balances, June 30, 2007                    |        | 1,867,948               |         | $                        | 233,494 |                  | $ | 909,625                             |  | $                        | 11,928,989 |  | $ | 71,023  |  | $ | 13,143,131
|Comprehensive income:                      |        |                         |         |                          |         |                  |   |                                     |  |                          |            |  |   |         |  |   |           
|Net income                                 |        |                         |         |                          |         |                  |   |                                     |  |                          | 486,760    |  |   |         |  |   | 486,760   
|Foreign currency translation adjustment(1) |        |                         |         |                          |         |                  |   |                                     |  |                          |            |  |   | 66,960  |  |   | 66,960    
|                                           |        |                         |         |                          |         |                  |   |                                     |  |                          |            |  |   |         |  |   |           
|Total comprehensive income                 |        |                         |         |                          |         |                  |   |                                     |  |                          |            |  |   |         |  |   | 553,720   
|                                           |        |                         |         |                          |         |                  |   |                                     |  |                          |            |  |   |         |  |   |           
|Stock-based compensation                   |        |                         |         |                          |         |                  |   | 40,161                              |  |                          |            |  |   |         |  |   | 40,161    
|                                           |        |                         |         |                          |         |                  |   |                                     |  |                          |            |  |   |         |  |   |           
|Balances, September 30 , 2007 (unaudited)  |        | 1,867,948               |         | $                        | 233,494 |                  | $ | 949,786                             |  | $                        | 12,415,749 |  | $ | 137,983 |  | $ | 13,737,012
|                                           |        |                         |         |                          |         |                  |   |                                     |  |                          |            |  |   |         |  |   |           

---

|(1) | Net of tax expense of
$44,640
|--- | -----------------------------

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



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Kreisler Manufacturing Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)



|                                                                                         |  |      |           |   |      |   |           |  
|---------------------------------------------------------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | -
|Three Months Ended September 30,                                                         |  | 2007 |           |   | 2006 |  
|Cash Flows from Operating Activities:                                                    |  |      |           |   |      |   |           |  
|Net income                                                                               |  | $    | 486,760   |   |      | $ | 392,304   |  
|Adjustments to reconcile net income to net cash provided by operating activities:        |  |      |           |   |      |   |           |  
|Depreciation and amortization                                                            |  |      | 206,164   |   |      |   | 135,932   |  
|Deferred tax asset                                                                       |  |      | 41,918    |   |      |   | 22,590    |  
|Stock-based compensation                                                                 |  |      | 40,161    |   |      |   |          |  
|Increase (decrease) in cash attributable to changes in operating assets and liabilities: |  |      |           |   |      |   |           |  
|Accounts receivable  trade, net                                                         |  |      | (412,583  | ) |      |   | 171,470   |  
|Inventories                                                                              |  |      | (42,002   | ) |      |   | (681,778  | )
|Other current assets                                                                     |  |      | (270,897  | ) |      |   | (26,543   | )
|Accounts payable  trade                                                                 |  |      | 181,034   |   |      |   | 583,483   |  
|Accrued expenses                                                                         |  |      | 21,896    |   |      |   | (250,012  | )
|Deferred revenue                                                                         |  |      | 448,000   |   |      |   |          |  
|Product warranties                                                                       |  |      | (104,794  | ) |      |   |          |  
|Income taxes payable                                                                     |  |      | 266,029   |   |      |   | 247,151   |  
|Accrued environmental costs                                                              |  |      | 4,673     |   |      |   |          |  
|                                                                                         |  |      |           |   |      |   |           |  
|Net Cash Provided by Operating Activities                                                |  |      | 866,359   |   |      |   | 594,597   |  
|                                                                                         |  |      |           |   |      |   |           |  
|                                                                                         |  |     
|Cash Flows from Investing Activities:                                                    |  |      |           |   |      |   |           |  
|Foreign grant for property and equipment placed in service                               |  |      | 448,817   |   |      |   |          |  
|Purchases of property and equipment                                                      |  |      | (169,356  | ) |      |   | (307,971  | )
|                                                                                         |  |      |           |   |      |   |           |  
|Net Cash Provided by (Used in) Investing Activities                                      |  |      | 279,461   |   |      |   | (307,971  | )
|                                                                                         |  |      |           |   |      |   |           |  
|                                                                                         |  |     
|Cash Flows from Financing Activities:                                                    |  |      |           |   |      |   |           |  
|Repayment of obligations under capital leases                                            |  |      | (28,641   | ) |      |   | (26,282   | )
|Repayment of line of credit                                                              |  |      |          |   |      |   | (54,810   | )
|                                                                                         |  |      |           |   |      |   |           |  
|Net Cash (Used in) Financing Activities                                                  |  |      | (28,641   | ) |      |   | (81,092   | )
|                                                                                         |  |      |           |   |      |   |           |  
|Effect of foreign currency translation                                                   |  |      | 111,600   |   |      |   | 7,752     |  
|                                                                                         |  |      |           |   |      |   |           |  
|Increase in cash and cash equivalents                                                    |  |      | 1,228,779 |   |      |   | 213,286   |  
|Cash and cash equivalents, beginning of period                                           |  |      | 5,068,325 |   |      |   | 3,295,947 |  
|                                                                                         |  |      |           |   |      |   |           |  
|Cash and cash equivalents, end of period                                                 |  | $    | 6,297,104 |   |      | $ | 3,509,233 |  
|                                                                                         |  |      |           |   |      |   |           |  
|Supplemental Disclosure of Cash Flow Information                                         |  |      |           |   |      |   |           |  
|Cash paid during the periods for:                                                        |  |      |           |   |      |   |           |  
|Interest                                                                                 |  | $    | 7,253     |   |      | $ | 13,559    |  
|                                                                                         |  |     
|Supplemental Schedule of Non-cash Investing and Financing Activities:                    |  |      |           |   |      |   |           |  
|Equipment acquired under capital leases                                                  |  |      |          |   |      | $ | 67,241    |  
|                                                                                         |  |      |           |   |      |   |           |  

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



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Kreisler Manufacturing Corporation and Subsidiaries

Notes to the Interim Consolidated Financial Statements

(Unaudited)

1. Principles of Consolidation

The interim 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 interim 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 interim consolidated financial statements have been included. Interim results are not necessarily indicative of
results for a full year.

The interim 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 of the Company for the fiscal year ended June 30, 2007.

2. Recently Issued Accounting Pronouncements

Effective July 1, 2007, the Company adopted the provisions of the Financial Accounting Standards Board (FASB)
Interpretation No. 48, Accounting for Uncertainty in Income Taxes  an interpretation of FASB Statement No. 109 (FIN 48). There were no unrecognized tax benefits as of July 1, 2007 and as of
September 30, 2007. FIN 48 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be
recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued
for the payment of interest and penalties at July 1, 2007. There was no change to this balance at September 30, 2007. Management is currently unaware of any issues under review that could result in significant payments, accruals or
material deviations from its position. The adoption of the provisions of FIN 48 did not have a material impact on the Companys financial position, results of operations and cash flows.

3. Contingencies

Certain federal and state laws
authorize the United States Environmental Protection Agency (EPA) and similar state agencies 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.

In July 1999, the Company
became aware of historical releases of hazardous substances at its manufacturing facility located at 180 Van Riper Avenue, 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 Requirement for Site Remediation, N.J.A.C. 7:26E-1.1. In June 2001, the Company entered into a Fixed Price Remediation Agreement (FPRA) with Resource Control Corporation (RCC). At
September 30, 2007, the remaining cost estimated for remediation of the site under the FPRA with RCC was approximately $431,000 (the present value at an interest rate of 6.16%, per annum), virtually all of which is expected to be paid by
the Company in fiscal 2010, provided that RCC achieves specific milestones contained in the FPRA. On October 18, 2007, the Company received an updated remediation status report from RCC indicating that



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##### Table of Contents

the original remediation cost of $2,115,122, as specified in the FPRA, will be exceeded by approximately $381,000. The Company purchased a Remediation Stop
Loss insurance policy in 2001 in order to further protect the Company against remediation cost overruns. The insurance policy provided coverage for cost overruns in excess of $3,002,654 incurred during the term of the insurance policy. The
difference between remediation costs of $3,002,654, which are not covered by the insurance policy, and $2,115,122 under the FPRA, represented a self-insured retention amount which is the responsibility of RCC, and not the Company. The Remediation
Stop Loss insurance policy expired on July 2, 2007 and was not renewed. However, even in the absence of the Remedial Stop Loss insurance policy and in accordance with the terms of the FPRA, RCC, not the Company, is responsible for any
unexpected or unanticipated remediation cost increases. The Company monitors the project status and believes that RCC is capable of meeting RCCs contractual obligations under the FPRA.

At September 30, 2007, estimated remediation payments are as follows:



|                                                        |  |   |         |  
|------------------------------------------------------- |  | - | ------- | -
|Estimated Remediation Payments as of September 30, 2007 | 
|2008                                                    |  | $ |        |  
|2009                                                    |  |   |        |  
|2010                                                    |  |   | 467,630 |  
|2011                                                    |  |   | 14,700  |  
|                                                        |  |   |         |  
|                                                        |  |   | 482,330 |  
|Unamortized discount                                    |  |   | (51,540 | )
|                                                        |  |   |         |  
|                                                        |  | $ | 430,790 |  
|                                                        |  |   |         |  

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, 2002 and June 30, 2001 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
protested the final audit determination and requested an informal administrative conference with the Conference and Appeals Branch. While the Companys tax counsel was informally advised by the Conference and Appeals Branch that the
Companys appeal was likely to be presented in the fall of 2007, as of November 13, 2007, the Company received no additional information. The amount of interest potentially due is dependent on the final settlement date and is subject to
increase.

4. Inventories

At
September 30, 2007 and June 30, 2007, inventories consisted of the following:



|                |  |                               |           |               |   |          
|--------------- |  | ----------------------------- | --------- | ------------- | - | ---------
|                |  | (unaudited)September 30, 2007 |           | June 30, 2007
|Raw materials   |  | $                             | 3,730,109 |               | $ | 3,463,696
|Work in process |  |                               | 1,673,746 |               |   | 1,567,170
|Finished goods  |  |                               | 185,130   |               |   | 516,117  
|                |  |                               |           |               |   |          
|                |  | $                             | 5,588,985 |               | $ | 5,546,983
|                |  |                               |           |               |   |          

The Company periodically evaluates inventory to determine the likely future usage of those items
in inventory. As a result, the Company will typically record a charge against inventory that has historical limited usage. The Company also makes judgments as to future demand requirements based upon customer orders in backlog or the propensity of a
customer to order a component from the Company. If such future demand requirements are unlikely, the Company will record a charge against inventory.



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5. Net Income per Common Share

Basic net income per common share is computed by dividing net income by the weighted-average common shares outstanding. Diluted net income per common 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.



|                                                      |      |                                 |           |  |   |          
|----------------------------------------------------- | ---- | ------------------------------- | --------- |  | - | ---------
|(Unaudited)                                           |      | Three Months EndedSeptember 30,
|                                                      | 2007 |                                 | 2006     
|Net income                                            |      | $                               | 486,760   |  | $ | 392,304  
|                                                      |      |                                 |           |  |   |          
|Weighted-average shares outstanding                   |      |                                 | 1,867,948 |  |   | 1,830,447
|Dilutive impact of stock options                      |      |                                 | 32,390    |  |   | 26,656   
|                                                      |      |                                 |           |  |   |          
|Weighted-average shares outstanding assuming dilution |      |                                 | 1,900,338 |  |   | 1,857,103
|                                                      |      |                                 |           |  |   |          
|Net income per common share:                          |      |                                 |           |  |   |          
|Basic                                                 |      | $                               | 0.26      |  | $ | 0.21     
|Diluted                                               |      | $                               | 0.26      |  | $ | 0.21     
|                                                      |      |                                 |           |  |   |          

6. Segment Information

The Company manages its business based principally upon geographic areas. The Company evaluates performance and allocates resources based on net sales, operating income (loss) and net assets employed. Net sales are
attributed to geographic areas based on the location of the assets producing the sales.

Geographic information regarding the
Companys net sales and long-lived assets for the three months ended September 30, 2007 and 2006 is as follows:

Selected Financial Results by
Geographic Segment (unaudited)



|                                      |  |               |            |   |        |   |           |       |  |   |            |  
|------------------------------------- |  | ------------- | ---------- | - | ------ | - | --------- | ----- |  | - | ---------- | -
|Three Months Ended September 30, 2007 |  | United States |            |   | Poland |   |           | Total | 
|Sales to unaffiliated customers       |  | $             | 6,664,023  |   |        | $ | 32,924    |       |  | $ | 6,696,947  |  
|                                      |  |               |           
|Income from operations                |  |               | 787,504    |   |        |   | (24,162   | )     |  |   | 763,342    |  
|Interest and other income             |  |               | 62,556     |   |        |   | 1,159     |       |  |   | 63,715     |  
|Interest and other expense            |  |               | (7,253     | ) |        |   | (5,104    | )     |  |   | (12,357    | )
|                                      |  |               |            |   |        |   |           |       |  |   |            |  
|Income before income tax expense      |  | $             | 842,807    |   |        | $ | (28,107   | )     |  | $ | 814,700    |  
|                                      |  |               |            |   |        |   |           |       |  |   |            |  
|Segment assets                        |  | $             | 15,315,313 |   |        | $ | 2,309,802 |       |  | $ | 17,625,115 |  
|Depreciation                          |  | $             | 87,831     |   |        | $ | 118,333   |       |  | $ | 206,164    |  
|                                      |  |               |            |   |        |   |           |       |  |   |            |  



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##### Table of Contents

|                                      |  |               |            |   |        |   |         |       |  |   |            |  
|------------------------------------- |  | ------------- | ---------- | - | ------ | - | ------- | ----- |  | - | ---------- | -
|Three Months Ended September 30, 2006 |  | United States |            |   | Poland |   |         | Total | 
|Sales to unaffiliated customers       |  | $             | 5,077,787  |   |        | $ | 5,198   |       |  | $ | 5,082,985  |  
|                                      |  |               |           
|Income from operations                |  |               | 640,562    |   |        |   | (20,808 | )     |  |   | 619,754    |  
|Interest and other income             |  |               | 47,176     |   |        |   | 933     |       |  |   | 48,109     |  
|Interest and other expense            |  |               | (13,559    | ) |        |   |        |       |  |   | (13,559    | )
|                                      |  |               |            |   |        |   |         |       |  |   |            |  
|Income before income tax expense      |  | $             | 674,179    |   |        | $ | (19,875 | )     |  | $ | 654,304    |  
|                                      |  |               |            |   |        |   |         |       |  |   |            |  
|Segment assets                        |  | $             | 13,123,829 |   |        | $ | 854,993 |       |  | $ | 13,978,822 |  
|Depreciation                          |  | $             | 105,015    |   |        | $ | 30,917  |       |  | $ | 135,932    |  
|                                      |  |               |            |   |        |   |         |       |  |   |            |  

7. Significant Customers and Suppliers

Sales to the Companys largest customer (a commercial customer) were 58% and 53% of total sales for the three month periods ended September 30,
2007 and 2006, respectively. Sales to the United States Government were 6% and 2% of total sales for the three months ended September 30, 2007 and 2006, respectively.



|                    |  |               |           |               |   |          
|------------------- |  | ------------- | --------- | ------------- | - | ---------
|Sales (unaudited)   |  |               |           |               |   |          
|                    |  |              
|Three Months Ended  |  | Sep. 30, 2007 |           | Sep. 30, 2006
|Commercial Customer |  | $             | 3,879,000 |               | $ | 2,676,000
|U.S. Government     |  | $             | 390,000   |               | $ | 90,000   

Accounts receivable from the Companys significant commercial customer and the United States
Government at September 30, 2007 and 2006, respectively, were as follows:



|                                |  |               |         |               |   |          
|------------------------------- |  | ------------- | ------- | ------------- | - | ---------
|Accounts Receivable (unaudited) |  |               |         |               |   |          
|                                |  |              
|                                |  | Sep. 30, 2007 |         | Sep. 30, 2006
|Commercial Customer             |  | $             | 450,000 |               | $ | 2,199,000
|U.S. Government                 |  | $             | 213,000 |               | $ | 80,000   

The Company purchased more than 10% of detail components used in the products manufactured by the
Company from two suppliers during each of the periods ended September 30, 2007 and 2006, respectively. Alternative suppliers of these components are available to the Company and the loss of this supplier would not have a long-term material
impact on the Companys operations.

The Company does not have any long-term or fixed purchase agreements with its suppliers.
Materials used in the Companys products are purchased, as required, from various suppliers. While one supplier represented approximately 13% of the Companys purchased materials, the Company believes that alternative suppliers of these
components are available such that the loss of this supplier would not have a long-term material impact on the Company. At times, the Companys customers require raw materials or components to be purchased from designated suppliers. The Company
procures approximately 13% of its purchased material components from a designated supplier of proprietary components. Should this supplier no longer be able to provide proprietary components, an alternative supplier of these proprietary components
is available to the Company which may have longer delivery lead-times and higher prices. The Company also uses a variety of raw materials in the manufacture of its products. Increased delivery lead-times for some raw materials, particularly titanium
and nickel-based alloys, have been experienced along with significant price increases in the cost of those alloys. Smaller cost increases were also experienced in stainless steel alloys used by the Company. We were able to mitigate some of the
effects of longer lead-times and rising raw material costs through an increase in quoted lead-times, forward planning and a partial pass through of cost increases to customers. Future shortages or price fluctuations in raw materials could have a
material adverse effect on the Companys operations.



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##### Table of Contents

8. Product Warranty Expense

During April 2007, Kreisler Industrial was informed by a customer that discrepant industrial gas turbine components provided by Kreisler Industrial during fiscal 2006 needed to be replaced due to a quality discrepancy
that was rectified. The customer had initially anticipated accepting the discrepant components as manufactured by Kreisler Industrial. As a result, the Company incurred a charge for the three months ended March 31, 2007 of $235,000 which is the
estimated replacement cost of the components. Kreisler Industrial shipped $191,609 of replacement components, at no cost to the customer, during the three months ended September 30, 2007 and completed shipment of replacement components as of
October 22, 2007.



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##### Table of Contents

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

Overview

Kreisler Manufacturing Corporation (the Company) is a Delaware corporation which was
incorporated on December 13, 1968. The Company succeeded a New Jersey 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 registered in the National Judicial
Register in Krakow, Poland on March 17, 2005, manufacture precision metal components and assemblies for use in military and commercial aircraft engines and industrial gas turbines. The use of we, us or our in
this Form 10-QSB refers to the Company and its wholly-owned subsidiaries unless the content indicates otherwise.

We manufacture precision
metal components and assemblies primarily for use in military and commercial aircraft engines and in industrial gas turbines. Our products include tube assemblies of multiple sizes and configurations as well as machined components and are typically
manufactured to the designs and specifications of the particular customer. Assemblies may be made of various materials, including titanium, nickel and stainless steel. These high quality engineered tube assemblies transfer fuel, oil, water, air and
hydraulic fluids. Orders are received through competitive proposals, which are made in response to requests for bids from contractors who supply engines or engine components to various branches of the United States Department of Defense or to
commercial businesses.

We continued to benefit from strong aerospace market demand as our income from operations increased $143,000, or
23%, to $763,000 for the three months ended September 30, 2007 compared to the same period in the prior year. Our sales for the three months ended September 30, 2007 were $6,697,000 compared to our sales for the three months ended
September 30, 2006 of $5,083,000. The sales increase of $1,614,000, or 32%, for the three months ended September 30, 2007 was primarily attributable to increased market demand for commercial and military aircraft engine components and
sales of industrial gas turbine components:



|                                            |  |              |          
|------------------------------------------- |  | ------------ | ---------
|                                            |  | Three Months
|Net Sales  Period ended September 30, 2006 |  | $            | 5,083,000
|                                            |  |              |          
|Net Sales Increase by Industry Market Area: |  |              |          
|Commercial                                  |  |              | 359,000  
|Military1                                   |  |              | 1,111,000
|Industrial Gas Turbine                      |  |              | 144,000  
|                                            |  |              |          
|Total Sales Increase                        |  |              | 1,614,000
|                                            |  |              |          
|Net Sales  Period ended September 30, 2007 |  | $            | 6,697,000
|                                            |  |              |          

---

|1 | The military market area includes the sale of components used in military
applications to both the U.S Government and to non-governmental defense contractors.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------

Our increased sales of
commercial aircraft engine components for the three months ended September 30, 2007 was primarily due to higher demand for V2500 engine components used on the Airbus A320 and components we manufacture for the CF34-8 and CF34-10 aircraft engines
used on 70 to 122 seat regional jet aircraft. These increased sales were partially offset by lower sales of engine components used in various other commercial applications.

For the three months ended September 30, 2007, approximately 73% of our sales of military aircraft engine components were attributable to the sale
of components used on the F119 (used on the F-22 Raptor) and F135 (used on the F-35 Lightening II also known as the Joint Strike Fighter). Aftermarket part sales to the U.S. Government for the three months ended September 30, 2007 were
significantly higher than the previous year and accounted for approximately 27% of the increase in military aircraft engine component sales. Our sales of F135 military aircraft engine components will continue to fluctuate due to the development
status of that program. All military programs are subject to Congressional funding authorizations which may alter the amount or timing of available funding.



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##### Table of Contents

Our increase in the sale of industrial gas turbine components is primarily attributable to an increase in
aftermarket demand for components used in the GT-24 and GT-26 turbine generators as well as the aero-derivative GG-8 industrial gas turbine which offset lower sales of components used in the Siemens 501F turbine generator. As a result, our
industrial gas turbine sales for the three months ended September 30, 2007 increased $144,000, or 22%, to $804,000 compared to sales for the three months ended September 30, 2006 of $660,000.

We are currently the primary provider of tube and manifold components used on the F119 engine (2 engines per F-22 aircraft) which is the only engine
currently certified for use on the F-22. On April 20, 2007, Kreisler Industrial entered into a Memorandum of Understanding (MOU) with United Technologies Corporation (UTC) for the delivery of F119 engine components.
Under the MOU, we expect to provide an estimated $12,000,000 of F119 engine components to UTC between calendar years 2008 through 2010. UTC will provide a $2,000,000 advance payment against future deliveries of F119 engine components and in return
Kreisler Industrial agreed to lower current unit prices. As of September 30, 2007, we received $948,000 of the $2,000,000 advance payments ($448,000 during the three months ended September 30, 2007 and $500,000 during the three months
ended June 30, 2007). These advance payments have not been recognized in our sales. We will begin to recognize sales associated with the advance payments starting January 1, 2008. We are currently in negotiations with UTC to enter into a
long-term Agreement incorporating the terms of the MOU as well as other terms and conditions. If the long-term agreement is not finalized by December 31, 2007, the MOU will be binding on both parties.

Kreisler Polskas operating loss before income taxes for the three months ended September 30, 2007 totaled $28,000 compared to an operating
loss of $20,000 for the three months ended September 30, 2006. As of September 30, 2007, Kreisler Polskas backlog from an unaffiliated customer totaled $900,000. This backlog did not exist as of September 30, 2006. Kreisler
Polskas sales to this customer for the three months ended September 30, 2007 totaled approximately $13,000. Sales to this customer are expected to increase as Kreisler Polska receives the appropriate quality approvals for each component
or components are transitioned into Kreisler Polska from other suppliers.

As part of our expansion at Kreisler Polska, approximately
$101,000 of capital equipment was acquired and leasehold improvement made during the three months ended September 30, 2007. Kreisler Polska also received approximately $449,000 of the cost of prior capital equipment expenditure costs under an
Additional Project Funding Contract (APFC) between Kreisler Polska and the Polish Enterprise Development Agency (PEDA). The APFC allowed Kreisler Polska to receive additional funding from PEDA based on qualified capital
expenditures. We received approximately 1,191,000 Polish zloty (approximately $449,000 at the exchange rate as of September 30, 2007) of the total qualified capital expenditure cost of 2,988,000 Polish zloty (approximately $1,127,000 at the
exchange rate as of September 30, 2007). During the next 12 months we expect to make additional capital equipment expenditures and leasehold improvements of approximately $850,000 to increase our manufacturing capability at Kreisler Polska.

Our $486,000 reduction in property, plant and equipment, net from $2,425,000 at June 30, 2007 to $1,939,000 at September 30,
2007 is primarily attributable to our receipt of the $449,000 additional funding under the APFC.

Our inventory as of September 30,
2007 increased $42,000, or 1%, to $5,589,000 compared to our June 30, 2007 inventory of $5,547,000. Approximately 91% of our increase in raw materials and work in process inventories was offset by an approximately 64% reduction in our finished
goods inventory at September 30, 2007 compared to June 30, 2007. This reduction in finished goods inventory also had a negative effect on our cost of goods sold and lowered our gross margin for the quarter approximately 2.2 percentage
points.

Our inventory increases during fiscal 2007 are attributable to the types of products we manufacture which, for the F119 and F135
engine programs, include a significant number of titanium-based and proprietary components which are more costly than stainless steel components. In addition, the growth of Kreisler Polska requires the purchase of additional raw materials to support
the machining requirements. We are working to minimize our future inventory growth through improvements in our manufacturing cycle time. However, the benefit of these improvements may be offset by the longer lead-times and higher costs of nickel and
titanium-based raw materials. We have been able to limit any supply chain disruptions through increasing our quoted lead-times as well as increased forward planning for long lead-time raw materials. We have also been able to pass through to our
customers most cost increases attributable to specific raw materials and proprietary components though such cost adjustments are achieved either on an annual basis, in the case of a long-term agreement, or at the time we provide a new price
quotation to a customer, in the case of a sales order that has been completed.



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##### Table of Contents

Our total working capital at September 30, 2007 was $12,329,000, an increase of $1,050,000, or 9%,
compared to our working capital at June 30, 2007 of $11,279,000. This increase is attributable to higher cash on-hand and reduced receivables offset by increased inventories. Our increase in cash on-hand and lower receivables was attributable
to the February 8, 2007 Supplier Agreement between Kreisler Industrial and Citibank which provides customer payments in 10 days rather than 60 days. Our obligations under capital leases decreased $29,000 from $345,000 at September 30, 2007
as compared to $374,000 at June 30, 2007.

Our growth opportunities are potentially limited by our historical reliance on a few
significant customers. Our largest customer has established manufacturing operations outside the United States that provide similar and, in some cases, greater capabilities than we offer. We expect this customer to consider transferring components
manufactured by us to these operations. We will seek to accommodate our customers needs through our Kreisler Polska subsidiary or through lower costs achieved through cost reduction initiatives at Kreisler Industrial.

Results of Operations

Three Months Ended September 30,
2007 Compared to Three Months Ended September 30, 2006

Sales

Sales increased $1,614,000, or 32%, to $6,697,000 for the three months ended September 30, 2007 compared with sales of $5,083,000 for the three
months ended September 30, 2006. Our sales and sales changes by industry market area are as follows:



|                       |      |       |           |  |                  |           |          |   |           |      |    |   |      |     |   |  |     |  
|---------------------- | ---- | ----- | --------- |  | ---------------- | --------- | -------- | - | --------- | ---- | -- | - | ---- | --- | - |  | --- | -
|Industry Market Area   |      | Sales |           |  | Percent of Sales |          
|                       | 2007 |       | 2006      |  | $ Change         |           | % Change |   |           | 2007 |    |   | 2006 |    
|Commercial             |      | $     | 2,545,000 |  | $                | 2,186,000 |          | $ | 359,000   |      | 16 | % |      | 38  | % |  | 43  | %
|Military               |      |       | 3,348,000 |  |                  | 2,237,000 |          |   | 1,111,000 |      | 50 | % |      | 50  | % |  | 44  | %
|Industrial Gas Turbine |      |       | 804,000   |  |                  | 660,000   |          |   | 144,000   |      | 22 | % |      | 12  | % |  | 13  | %
|Total                  |      | $     | 6,697,000 |  | $                | 5,083,000 |          | $ | 1,614,000 |      | 32 | % |      | 100 | % |  | 100 | %

Our commercial aircraft engine sales of $2,545,000 for the three months ended September 30,
2007 increased $359,000, or 16%, compared to our sales for the three months ended September 30, 2006. Our sales growth continues to be primarily attributable to an increased need for components used in the V2500 aircraft engine as well as
increased customer requirements for CF34 aircraft engine components. These increases were partially offset by reduced requirements for the various other commercial engine programs.

Our sales of components used in military engine applications of $3,348,000 for the three months ended September 30, 2007 increased $1,111,000, or
50%, compared to our sales of $2,237,000 for the three months ended September 30, 2006. We experienced increased sales of components for the F119 and F135 aircraft engines aswell as increased sales of spare parts to the U.S Government.

For the three months ended September 30, 2007, our sale of products to the industrial gas turbine industry increased to $804,000
compared to sales of $660,000 for the three months ended September 30, 2006. This $144,000, or 22%, increase is primarily attributable to increased demand for components used in the aero-derivative and large industrial gas turbines.



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##### Table of Contents

Cost of Goods Sold

Cost of goods sold for the three months ended September 30, 2007 was 81% of sales, or $5,448,000, compared to 82% of sales, or $4,165,000, for the three months ended September 30, 2006.

The Companys cost of goods sold and gross margins were as follows:



|                            |  |               |           |   |               |   |           |          |  |          |           |  |      |   
|--------------------------- |  | ------------- | --------- | - | ------------- | - | --------- | -------- |  | -------- | --------- |  | ---- | --
|                            |  | Sep. 30, 2007 |           |   | Sep. 30, 2006 |   |           | $ Change |  | % Change |          
|Sales                       |  | $             | 6,697,000 |   |               | $ | 5,083,000 |          |  | $        | 1,614,000 |  | 32   | % 
|                            |  |               |           |  
|Cost of goods sold (COGS) |  |               | 5,448,000 |   |               |   | 4,165,000 |          |  |          | 1,283,000 |  | 31   | % 
|COGS percentage of sales    |  |               | 81.3      | % |               |   | 81.9      | %        |  |          |          |  | (0.7 | )%
|                            |  |               |           |  
|Gross margin                |  | $             | 1,249,000 |   |               | $ | 918,000   |          |  | $        | 331,000   |  | 36   | % 
|Gross margin percent        |  |               | 18.7      | % |               |   | 18.1      | %        |  |          |          |  | 3    | % 
|                            |  |               |           |   |               |   |           |          |  |          |           |  |      |   

Our increase in cost of goods sold was primarily attributable to an increase in purchased material
usage due to higher sales 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. Our gross margin improved 3% to 18.7% for the three months
ended September 30, 2007 compared to a gross margin of 18.1% for the three months ended September 30, 2006. While the individual components of our cost of goods sold typically increased in absolute dollar amounts, the overall rate of
increase of 31% for these costs was slightly lower than our 32% sales growth. Our gross margin was impacted by an increase in our purchased material content compared to the purchased material content for the three months ended September 30,
2006. Approximately 73% (or 2.2 percentage point of our gross margin) of the increase was attributable to a reduction in our finished goods inventory.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the three months ended
September 30, 2007 were 7.2% of sales, or $485,000, compared to 5.9% of sales, or $299,000, for the three months ended September 30, 2006. Selling, general and administrative expenses for three months ended September 30, 2007
increased $186,000, or 62%, compared to the three months ended September 30, 2006.

The Companys selling, general and
administrative expenses were as follows:



|                                                      |  |               |           |   |               |   |           |          |  |          |           |  |    |  
|----------------------------------------------------- |  | ------------- | --------- | - | ------------- | - | --------- | -------- |  | -------- | --------- |  | -- | -
|                                                      |  | Sep. 30, 2007 |           |   | Sep. 30, 2006 |   |           | $ Change |  | % Change |          
|Sales                                                 |  | $             | 6,697,000 |   |               | $ | 5,083,000 |          |  | $        | 1,614,000 |  | 32 | %
|                                                      |  |               |           |  
|Selling, general and administrative expenses (SG&A) |  |               | 485,000   |   |               |   | 299,000   |          |  |          | 186,000   |  | 62 | %
|SG&A percentage of sales                              |  |               | 7.2       | % |               |   | 5.9       | %        |  |          |          |  | 22 | %
|                                                      |  |               |           |   |               |   |           |          |  |          |           |  |    |  

Our increase in selling, general and administrative expenses was primarily the result of higher
employee-related costs and benefits at Kreisler Industrial and Kreisler Polska, including stock based compensation expenses in accordance with SFAS No. 123R totaling $35,000. These cost increases were partially offset by lower professional
fees.



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##### Table of Contents

Income, Interest Expense and Taxes



|                           |  |                   |           |   |                   |   |           |          |  |          |           |  |    |  
|-------------------------- |  | ----------------- | --------- | - | ----------------- | - | --------- | -------- |  | -------- | --------- |  | -- | -
|                           |  | September 30,2007 |           |   | September 30,2006 |   |           | $ Change |  | % Change |          
|Sales                      |  | $                 | 6,697,000 |   |                   | $ | 5,083,000 |          |  | $        | 1,614,000 |  | 32 | %
|Total costs and expenses   |  |                   | 5,934,000 |   |                   |   | 4,463,000 |          |  |          | 1,471,000 |  | 33 | %
|                           |  |                   |           |   |                   |   |           |          |  |          |           |  |    |  
|Income from operations     |  |                   | 763,000   |   |                   |   | 620,000   |          |  |          | 143,000   |  | 23 | %
|                           |  |                   |           |  
|Interest & other income    |  |                   | 64,000    |   |                   |   | 48,000    |          |  |          | 16,000    |  | 33 | %
|Interest & other expense   |  |                   | (12,000   | ) |                   |   | (14,000   | )        |  |          | 2,000     |  | 14 | %
|                           |  |                   |           |   |                   |   |           |          |  |          |           |  |    |  
|Income before income taxes |  |                   | 815,000   |   |                   |   | 654,000   |          |  |          | 161,000   |  | 25 | %
|                           |  |                   |           |  
|Income tax expense         |  |                   | 328,000   |   |                   |   | 262,000   |          |  |          | 66,000    |  | 25 | %
|                           |  |                   |           |   |                   |   |           |          |  |          |           |  |    |  
|Net income                 |  | $                 | 487,000   |   |                   | $ | 392,000   |          |  | $        | 95,000    |  | 24 | %
|                           |  |                   |           |   |                   |   |           |          |  |          |           |  |    |  

The income from operations for the three months ended September 30, 2007 was $763,000, an
increase of $143,000, or 23%, compared to $620,000 for the three months ended September 30, 2006 for the reasons noted in the Overview and Results of Operations sections of this Management Discussion and Analysis.

Interest and other income of $64,000 for the three months ended September 30, 2007 was $16,000 higher, or 33%, compared to the three months ended
September 30, 2006 and was primarily attributable to higher cash balances due to faster customer payments in accordance with the Kreisler Industrial and Citibank Supplier Agreement and the advance payments under the MOU between Kreisler
Industrial and UTC.

Income before income taxes for the three months ended September 30, 2007 of $815,000 was $161,000 higher, or 25%,
compared to income before income taxes for the three months ended September 30, 2006 of $654,000.

Income tax expense for the three
months ended September 30, 2007 of $328,000 was $66,000 higher, or 25%, compared to income tax expense for the three months ended September 30, 2006 of $262,000.

Net income for the three months ended September 30, 2007 was $487,000, an increase of $95,000, or 24%, compared to net income for the three months
ended September 30, 2006 of $392,000.

Backlog

Our total backlog as of September 30, 2007 was $29,800,000 compared to $23,800,000 at September 30, 2006. As of September 30, 2007, the backlog increased $6,000,000, or 25%, from September 30,
2006. Up to approximately 70% of the current backlog is scheduled for delivery over the next 12 months. There can be no assurances, however, that the current backlog will be delivered during that time or at all. Backlog as of June 30, 2007 was
$29,876,000. Backlog is subject to change with reduced purchase order duration and terminations. Orders that have already been terminated by a customer are excluded from the backlog even if the amount owed by a customer to us for the termination has
not been paid.



|                    |  |               |            |               |   |            |  |          |           |  |    |  
|------------------- |  | ------------- | ---------- | ------------- | - | ---------- |  | -------- | --------- |  | -- | -
|                    |  | Sep. 30, 2007 |            | Sep. 30, 2006 |   | $ Change   |  | % Change |          
|Kreisler Industrial |  | $             | 28,900,000 |               | $ | 23,800,000 |  | $        | 5,100,000 |  | 21 | %
|Kreisler Polska     |  |               | 900,000    |               |   |           |  |          | 900,000   |  | NA |  
|                    |  |               |            |               |   |            |  |          |           |  |    |  
|Total Backlog       |  | $             | 29,800,000 |               | $ | 23,800,000 |  | $        | 6,000,000 |  | 25 | %
|                    |  |               |            |               |   |            |  |          |           |  |    |  

Kreisler Polska backlog of 2,435,000 Polish zloty converted at the exchange rate at
September 30, 2007



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##### Table of Contents

Liquidity and Capital Resources

During the three months ended September 30, 2007, we relied on our operating cash flow and cash on-hand to fund most capital expenditures and working capital requirements. We anticipate using operating cash flow,
cash on-hand, special funding programs (as available), and external financing sources such as bank debt and lines of credit for future capital expenditures, acquisitions and working capital requirements. As a result, we believe that sufficient
liquidity is available from operating cash flow as well as cash on-hand to cover anticipated capital expenditures of approximately $1,000,000 for the period ending September 30, 2008.

Three programs that have contributed to our increased liquidity are (i) the Additional Project Funding Contract (APFC) between Kreisler
Polska and the Polish Enterprise Development Agency (PEDA); (ii) the Supplier Agreement between Kreisler Industrial and Citibank N.A. and (iii) the advance payments under the MOU between Kreisler Industrial and UTC. These three
agreement are described in more detail below:

Additional Project Funding Contract

The APFC between Kreisler Polska and PEDA allowed Kreisler Polska to receive additional funding from the PEDA based on completed capital expenditures. The
program contributed approximately 40% or 1,191,000 Polish zloty (approximately $449,000 at the exchange rate as of September 30, 2007) of the total qualified capital expenditure cost of 2,988,000 Polish zloty (approximately $1,127,000 at the
exchange rate as of September 30, 2007). The funding was received by Kreisler Polska in September 2007. This amount will be used by Kreisler Polska to fund either its working capital requirements or to purchase additional capital equipment.

Kreisler Polska entered into a Declaration of Blank Bill Issuer (also known as a Bill of Exchange) as part of the APFC between Kreisler
Polska and the PEDA. The Declaration of a Blank Bill Issuer is provided as security for the execution of the APFC and authorizes the PEDA to reclaim its funding portion should Kreisler Polska violate the terms of the APFC. The primary ongoing
contractual requirements under the APFC, include, but are not limited to: (i) providing information on Kreisler Polskas investment program status to various Polish governmental entities and (ii) maintaining the investment in capital
equipment for a period of 5 years from the date Kreisler Polska submits a project completion report to the appropriate Polish government entity. Under certain circumstances, as specified in the APFC, such APFC may be terminated by the PEDA and
Kreisler Polska would be obligated to repay any additional funding received from the PEDA and/or will not be eligible to receive additional funding from the PEDA for a period of 3 years after the termination of the contract.

Should Kreisler Polska be unable to meet the requirements of the APFC, Kreisler Polska will be obligated to repay the PEDA the total amount of the
funding of 1,191,000 Polish zloty (approximately $449,000 at the exchange rate as of September 30, 2007) plus interest. If Kreisler Polska meets all requirements set forth in the APFC, the PEDA will return, without interest, the Declaration of
a Blank Bill Issuer to Kreisler Polska after a period of 5 years has elapsed from the completion of the Project.

Citibank Supplier Agreement

On February 8, 2007, Kreisler Industrial entered into a Supplier Agreement (Supplier Agreement) with Citibank, N.A.
(Citibank). Pursuant to the Supplier Agreement, Citibank provides payment to Kreisler Industrial for accounts receivable owed Kreisler Industrial from customers which are subsidiaries of United Technologies Corporation (UTC).
The sale of the accounts receivable by Kreisler Industrial to Citibank is made without recourse to Kreisler Industrial. The primary effect of the Supplier Agreement is to accelerate the payment of outstanding accounts receivable from approximately
60 days to approximately 10 days. All payments from Citibank to Kreisler Industrial are subject to a discount charge. The discount rate used to calculate the discount charge is the 60 day LIBOR rate plus 1.25%. The discount charge during the three
months ended September 30, 2007 averaged approximately 1% of the invoice amount.

The Supplier Agreement can be terminated at any time
and with immediate effect upon 30 days prior written notice by either party to the other party. Either Kreisler Industrial or Citibank may terminate the Supplier Agreement with immediate effect upon 5 days prior written notice if the other party is
in breach or fails to perform any of its material obligations under the Supplier Agreement.



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##### Table of Contents

UTC MOU

On April 20, 2007, Kreisler Industrial entered into a Memorandum of Understanding (MOU) with United Technologies Corporation (UTC) for the delivery of F119 engine components. The estimated 2008 to 2010 sales
value of components included in the MOU is approximately $12,000,000. The F119 engine is the sole source engine used on the F-22 Raptor aircraft. Under the MOU, UTC will provide a $2,000,000 advance payment against future deliveries of F119 engine
components from Kreisler Industrial. The Company expects to use the $2,000,000 advance payment to increase its global production capacity and capabilities, including equipment and working capital, of aircraft engine components. In addition,
component selling prices under the MOU will be adjusted, either up or down, based on increases or decreases in the market prices paid by Kreisler Industrial for raw materials, castings, forgings and proprietary fittings. Other summary material terms
of the MOU are as follows:



| |  |  | Three year agreement from January 1, 2008 through December 31, 2010
| | - |  | -------------------------------------------------------------------



| |  |  | Advance payment amounts of $448,000 to $552,000 to be paid quarterly beginning April 1, 2007 through March 31, 2008
| | - |  | -------------------------------------------------------------------------------------------------------------------



| |  |  | Kreisler Industrial will lower current unit prices, starting January 1, 2008, in order to provide UTC with $1,000,000 in incremental cost savings over the term
of the agreement
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | If Kreisler Industrial is unable to deliver components to UTC due to financial difficulties or quality discrepancies solely attributable to Kreisler Industrial, UTC
will be permitted to recover any remaining portion of the $2,000,000 of advance payment along with the incremental cost savings of $1,000,000
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | If Kreisler Industrial and UTC do not enter into the long-term agreement by December 31, 2007, the MOU will be binding on both parties.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------

As of September 30, 2007, we have received advance payments totaling $948,000.

As a result of MOU, we expect sales of F119 engine components to be a significant portion of our future military sales.

General Information

Our cash and cash equivalents at
September 30, 2007 of $6,297,000 increased $1,229,000 or 24%, compared to cash and cash equivalents of $5,068,000 at June 30, 2007. Our increase in cash and cash equivalents was attributable to our receipts of $449,000 (approximately
1,200,000 Polish zloty at the September 30, 2007 exchange rate) by Kreisler Polska under the APFC and $448,000 from UTC under the MOU. This increase is also attributable to faster collection of accounts receivable as part of a February 2007
Supplier Agreement between Kreisler Industrial and Citibank. As of September 30, 2007, $550,000 was also held in short-term investments.

Cash provided by operating activities for the three months ended September 30, 2007 was $866,000 compared to $595,000 for the three months ended September 30, 2006. This increase was primarily attributable to increases in our net
income, depreciation, deferred revenue and an increase in accounts payable. These inflows were partially offset by increases in accounts receivable and other current assets.

Cash provided by investing activities for the three months ended September 30, 2007 was $279,000 and was primarily attributable to $449,000 received
from the PEDA offset by $169,000 used for the purchase of capital equipment.

The creation of Kreisler Polska exposes the Company to gains
and losses due to fluctuations of a foreign currency. As of September 30, 2007, the translation adjustment amounted to $138,000. The net effect after adjusting for a tax expense of $45,000 resulted in an increase in stockholders equity of
$67,000 at September 30, 2007.

Cash flows used in financing activities totaled $29,000 for the three months ended September 30,
2007 and consisted of the payment of obligations under capital leases.



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##### Table of Contents

Working capital at September 30, 2007 totaled $12,329,000. We believe this level is sufficient to
support our working capital needs during the next 12 months. Our long-term liabilities at September 30, 2007 were comprised of obligations under capital leases and accrued environmental expenses totaling $225,000 and $431,000, respectively.

Contingencies

In July 1999, the
Company became aware of historical releases of hazardous substances at its manufacturing facility located at 180 Van Riper Avenue, 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 Requirement for Site Remediation, N.J.A.C. 7:26E-1.1. In June 2001, the Company entered into a Fixed Price Remediation Agreement (FPRA) with Resource Control Corporation (RCC). At
September 30, 2007, the remaining cost estimated for remediation of the site under the FPRA with RCC was approximately $431,000 (the present value at an interest rate of 6.16%, per annum), virtually all of which is expected to be paid by
the Company in fiscal 2010, provided that RCC achieves specific milestones contained in the FPRA. On October 18,, 2007, the Company received an updated remediation status report from RCC indicating that the original remediation cost of
$2,115,122, as specified in the FPRA, will be exceeded by approximately $381,000. The Company purchased a Remediation Stop Loss insurance policy in 2001 in order to further protect the Company against remediation cost overruns. The insurance policy
provided coverage for cost overruns in excess of $3,002,654 incurred during the term of the insurance policy. The difference between remediation costs of $3,002,654, which are not covered by the insurance policy, and $2,115,122 under the FPRA,
represented a self-insured retention amount which is the responsibility of RCC, and not the Company. The Remediation Stop Loss insurance policy expired on July 2, 2007 and was not renewed. However, even in the absence of the Remedial Stop Loss
insurance policy and in accordance with the terms of the FPRA, RCC, not the Company, is responsible for any unexpected or unanticipated remediation cost increases. The Company monitors the project status and believes that RCC is capable of meeting
RCCs contractual obligations under the FPRA.

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, 2002 and June 30, 2001 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
protested the final audit determination and requested an informal administrative conference with the Conference and Appeals Branch. While the Companys tax counsel was been informally advised by the Conference and Appeals Branch that the
Companys appeal is likely to be presented in the fall of 2007, as of November 13, 2007 the Company has received no additional information. The amount of interest potentially due is dependent on the final settlement date and is subject to
increase.

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 for fiscal year ended June 30, 2007 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 Kreisler Manufacturing Corporation and its subsidiaries, all of which are wholly-owned. All intercompany transactions and accounts have been eliminated in consolidation.



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##### Table of Contents

Revenue Recognition

Revenue from the sale of products is recognized at the time title and the risks and rewards of ownership pass to the customer. This is typically when the products are shipped per the customers instructions, the
sales price is fixed and determinable, and collections are reasonably assured. In those instances in which customer quality and product acceptance are performed at the customers location, the Company has a high degree of certainty, based on
historical performance, that the product will be accepted by the customer. The Companys manufacturing cycle time is typically between two and four weeks.

Kreisler Industrial entered into a Memorandum of Understanding (MOU) with United Technologies Corporation (UTC) for the delivery of F119 engine components. Under the MOU, UTC will provide a
$2,000,000 advance payment against future deliveries of F119 engine components. As of September 30, 2007, Kreisler Industrial received $948,000 of the $2,000,000 in advance payments. This advance payment was not recognized in sales for the
three months ended September 30, 2007 or fiscal 2007 sales. The Company expects to begin to recognize sales associated with the advance payment starting January 1, 2008. Deferred sales will be recognized based on the difference between the
baseline selling price and the actual selling price. The baseline selling price is defined as the price in effect prior to any discounts agreed to in the MOU.

Cash, Cash Equivalents and Short-Term Investments

All investments purchased with an original maturity of three months or
less are considered to be cash equivalents. All of the Companys short-term investments are classified as available-for-sale at the respective balance sheet dates. The Company accounts for its investment portfolio at fair value. The investments
classified as available-for-sale are recorded at fair value based upon quoted market prices, and any material temporary differences between the cost and fair value of an investment is presented as a separate component of accumulated other
comprehensive income. The specific identification method is used to determine the realized gains and losses on investments. Gross unrealized gains and losses on short-term investments were not material at September 30, 2007.

Investments at September 30, 2007 and June 30, 2007, respectively, consisted of the following:



|                                                  |  |               |           |               |   |          
|------------------------------------------------- |  | ------------- | --------- | ------------- | - | ---------
|Cash, cash equivalents and short-term investments |  |               |           |               |   |          
|                                                  |  |              
|                                                  |  | Sep. 30, 2007 |           | June 30, 2007
|Money market and bank deposits                    |  | $             | 5,199,590 |               | $ | 5,068,325
|Corporate fixed income                            |  |               | 1,097,514 |               |   |         
|Corporate and municipal bonds                     |  |               | 550,000   |               |   | 550,000  
|                                                  |  |               |           |               |   |          
|Cash, cash equivalents and short-term investments |  | $             | 6,847,104 |               | $ | 5,618,325
|                                                  |  |               |           |               |   |          

Accounts Receivable-Trade

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 is stated at the amount management expects to collect from outstanding balances. The carrying amounts of accounts receivable
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.



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##### Table of Contents

Accounts receivable - trade is presented net of an allowance for estimated uncollectible accounts of
$20,000 and $40,000 at September 30, 2007 and 2006, respectively. The decrease of $20,000 is the result of a determination during fiscal 2007 of the status of uncollectible accounts that are unlikely to be collected by the Company. Management
may adjust the allowance, either up or down, as necessary to adjust for estimated uncollectible accounts.

Property, Plant, and Equipment

Property, plant, and equipment are recorded at cost less accumulated depreciation and amortization. Maintenance and repairs are charged
to operations as incurred. Asset and related accumulated depreciation amounts are relieved from the accounts for retirements or dispositions. Depreciation on machinery and equipment is computed using the double-declining method. Estimated useful
lives of three to ten years are used for machinery and equipment, while leasehold improvements are amortized, using the straight line method, over the shorter of either their economic useful lives or the term of the leases.

Property, plant and equipment as of September 30, 2007 were as follows:



|                                       |  |   |            |  
|-------------------------------------- |  | - | ---------- | -
|Property, plant and equipment, at cost |  | $ | 7,963,758  |  
|Less  accumulated depreciation        |  |   | (6,024,285 | )
|                                       |  |   |            |  
|Property, Plant and Equipment, net     |  | $ | 1,939,473  |  
|                                       |  |   |            |  

Foreign Currency Translation

The Company complies with SFAS No. 52, Foreign Currency Translation, accordingly balance sheet accounts are translated at the exchange rate in effect at each balance sheet date; income and expense
accounts are translated at the average rates of exchange prevailing during the period. Gains and losses on foreign currency transactions denominated in a currency other than the functional currency are included in the statement of operations within
selling, general and administrative expenses. Adjustments related to foreign currency translations are reflected in the accumulated other comprehensive income (loss) component of the statement of changes in stockholders equity and
comprehensive income in accordance with Statement of Financial Accounting Standard (SFAS) No. 130, Reporting Comprehensive Income. The national currency of the foreign subsidiary is the functional currency.

Inventories

Inventories are stated at the lower
of cost or market. Raw materials cost is determined on a first-in, first-out basis. Work in process and finished goods are determined on an average cost basis which is not materially different from a first-in, first-out basis.

The Company periodically evaluates inventory to determine the likely future usage of those items in inventory. As a result, the Company will typically
record a charge against inventory that has historical limited usage. The Company also makes judgments as to future demand requirements based upon customer orders in backlog or the propensity of a customer to order a component from the Company. If
such future demand requirements are unlikely, the Company will record a charge against inventory.

Income Taxes

The Company complies with SFAS No. 109, Accounting for Income Taxes, which requires an asset and liability approach to financial
reporting of income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future, based on
enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce the deferred income tax assets to the amount expected to be
realized.



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##### Table of Contents

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 Common Share

The Company complies with SFAS No. 128, Earnings Per
Share. SFAS No. 128 requires dual presentation of basic and diluted income per common share for all periods presented. Basic income per common share excludes dilution and is computed by dividing income available to common stockholders by
the weighted average number of common shares outstanding for the period. Diluted income per common share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common
stock or resulted in the issuance of common stock that then share in the income of the Company. The difference between the number of shares used to compute basic income per common share and diluted income per common share relates to additional
shares to be issued upon the assumed exercise of stock options and warrants, net of shares hypothetically repurchased at the average market price with the proceeds of exercise.

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 services of
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 months ended September 30, 2007, the Company paid Mr. Kelly $28,500 for technical advisory services and Mr. Kelly reimbursed the Company $279 for his out-of-pocket expenses. For the three months ended September 30,
2006, the Company paid Mr. Kelly $38,500 for technical advisory services and $6,500 in out of pocket expenses.



|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 errors 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 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 a simple error or mistake.



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##### Table of Contents

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 as of the end of the period covered by this report. 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 were effective to provide reasonable assurance that information required to be disclosed in reports that are filed or
submitted under the Securities Exchange Act of 1934, as amended, is (i) recorded, processed, summarized and reported, within the time periods specified in the Commissions rules and forms and (ii) accumulated and communicated to the
Companys management, including its CEO (i.e., the principal executive officer) and CFO (i.e., the principal financial officer), or persons performing similar functions, as appropriate to allow timely decisions regarding the required
disclosure.

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
|------ | -----------------

None



|Item 2 | Unregistered Sales of Equity Securities and Use of Proceeds
|------ | -----------------------------------------------------------

None



|Item 3 | Defaults Upon Senior Securities
|------ | -------------------------------

None



|Item 4 | Submission of Matters to a Vote of Security Holders
|------ | ---------------------------------------------------

None



|Item 5 | Other Information
|------ | -----------------

None



|Item 6 | Exhibits
|------ | --------



| | (a) | Exhibits
| | --- | --------



| | 10.1 | Description of Bonuses for Executive Officers under Fiscal 2007 Bonus Plan
| | ---- | --------------------------------------------------------------------------



| | 11 | Statement regarding computation of per share earnings incorporated by reference to Note 5 to Interim Consolidated Financial Statements included in this Quarterly Report on Form
10-QSB
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 31.1 | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
| | ---- | -------------------------------------------------------------------------------------------------------------



24



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##### Table of Contents

| | 31.2 | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) 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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##### Table of Contents

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: November 14, 2007



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##### Table of Contents

EXHIBIT INDEX



|10.1 | Description of Bonuses for Executive Officers under Fiscal 2007 Bonus Plan
|---- | --------------------------------------------------------------------------



|11 | Statement regarding computation of per share earnings incorporated by reference to Note 5 to Interim Consolidated Financial Statements included in this Quarterly Report on Form
10-QSB
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|31.1 | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
|---- | -------------------------------------------------------------------------------------------------------------



|31.2 | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) 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
|---- | -------------------------------------------------------------------------------------------------------



27