SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

-------------------------------------------------------------------------------

                                    FORM 10-K

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

For fiscal year ended December 31, 2005        Commission File Number 333-19257

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

           Delaware                                            36-4109641
(State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                            Identification No.)


    ArborLake Centre, Suite 550                                 60015
        1751 Lake Cook Road                                   (Zip Code)
        Deerfield, Illinois
(Address of Principal Executive Offices)


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

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


                                                        Name of Each Exchange
 Title of Each Class                                     On Which Registered
 -------------------                                     -------------------
         None                                                    N/A


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

                                      None

     Indicate by check mark if the registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act. ___Yes _X_ No

     Indicated by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 14(d) of the Act. _X_ Yes ___ No

     Indicate by checkmark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve (12) months (or for such shorter period that
the Registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past ninety (90) days.

                Yes  _X_                No ___


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

     Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, or a non-accelerated filer. See definition of
"accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange
Act. (Check one):

  Large Accelerated Filer ___ Accelerated Filer ___ Non-Accelerated Filer _X_


         Indicate by checkmark whether the Registrant is a shell company (as
defined in Exchange Act Rule 12b-2).

                Yes ___               No   _X_

     The aggregate market value of voting stock held by non-affiliates of the
Registrant is not determinable as such shares were privately placed and there
is currently no public market for such shares. The number of shares
outstanding of Registrant's Common Stock as of March 24, 2006: 100.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      None


<PAGE>





                                TABLE OF CONTENTS


                                                                           Page
Part I
------
Item 1.        Business                                                     3
Item 1A.       Risk Factors                                                 7
Item 1B.       Unresolved Staff Comments                                    10
Item 2.        Properties                                                   10
Item 3.        Legal Proceedings                                            11
Item 4.        Submission of Matters to a Vote of Security
               Holders                                                      11

Part II
-------
Item 5.        Market for the Registrant's Common Equity and
               Related Stockholder Matters                                  11
Item 6.        Selected Financial Data                                      12
Item 7.        Management's Discussion and Analysis of Financial
               Condition and Results of Operations                          13
Item 7A.       Quantitative and Qualitative Disclosures About
               Market Risks                                                 20
Item 8.        Financial Statements and Supplementary Data                  21
Item 9.        Changes in and Disagreements with Accountants on
               Accounting and Financial Disclosure                          45
Item 9A.       Controls and Procedures                                      45
Item 9B.       Other Information                                            45

Part III
--------
Item 10.       Directors and Executive Officers                             45
Item 11.       Executive Compensation                                       48
Item 12.       Security Ownership of Certain Beneficial Owners
               and Management                                               49
Item 13.       Certain Relationships and Related Transactions               50
Item 14.       Principal Accountant Fees and Services                       52

Part IV
-------
Item 15.       Exhibits, Financial Statement Schedules, and Reports
               on Form 8-K                                                  53

               Signatures                                                   54





                                       2
<PAGE>



Part I
------
Item 1.  BUSINESS
         --------
The Company

Kinetek, Inc. (the "Company") was incorporated in the State of Delaware on
October 17, 1996 (The Company was incorporated as Motors and Gears, Inc., and
changed its name to Kinetek, Inc. on December 11, 2000). On November 1, 1996,
the Company effected a reincorporation merger whereby MK Group, Inc., an
Illinois corporation, was merged with and into the Company, with the Company
being the surviving entity. The Company is a direct, wholly-owned subsidiary of
Motors and Gears Holdings, Inc., a Delaware corporation ("Parent"). The Parent
is a majority owned subsidiary of Jordan Industries, Inc. ("JII"), a private
holding company which owns and manages a widely diversified group of operating
companies. The Company was organized by JII to acquire and operate companies in
the motors, gears and motion control industries. The Company and its
subsidiaries are included in JII's consolidated financial statements.

         The Company's principal executive offices are located at ArborLake
Centre, Suite 550, 1751 Lake Cook Road, Deerfield, Illinois 60015, and its
telephone number is (847)945-5591.

Business

         The Company is a manufacturer of specialty purpose electric motors,
gearmotors, gearboxes, gears, transaxles and electronic motion controls for a
wide variety of consumer, commercial and industrial markets. The Company has a
diverse base of customers and its products are used in a broad range of
applications including vending machines, golf carts, lift trucks, industrial
ventilation equipment, and elevators. The Company competes primarily in the
electric motors and electronic motion control systems industries.

Business Segment Information

         The Company operates in two separate business segments; electric motors
("motors") and electronic motion control systems ("controls"). See Note 13 to
the Company's consolidated financial statements for financial segment data.

Products

         The Company has established itself as a reliable niche manufacturer of
high-quality, economical, custom electric motors, gearmotors, gears and
electronic motion control systems used in a wide variety of applications
including vending machines, refrigerator ice dispensers, commercial dishwashers,
commercial floor care equipment, golf carts, lift trucks, and elevators. The
Company's products are custom designed to meet specific application
requirements. Less than 5% of the Company's products are sold as stock products.

         The Company offers a wide variety of options to provide greater
flexibility in its custom designs. These options include thermal protectors,
special mounting brackets, custom leads and terminals, single or double shaft
extensions, brakes, cooling fans, special heavy gearing, custom shaft machining
and custom software solutions. The Company also provides value-added assembly
work, incorporating some of the above options into its final motor and control
products. All of the custom-tailored motors, gearmotors and control systems are
designed for long life, quiet operation, and superior performance.

                                      3
<PAGE>

Electric Motors

         Electric motors are devices that convert electric power into rotating
mechanical energy. The amount of energy delivered is determined by the level of
input power supplied to the electric motor and the size of the motor itself. An
electric motor can be powered by alternating current ("AC") or direct current
("DC"). AC power is generally supplied by power companies directly to homes,
offices and industrial sites whereas DC power is supplied either through the use
of batteries or by converting AC power to DC power. Both AC motors and DC motors
can be used to power most applications; the determination is made through the
consideration of power source availability, speed variability requirements,
torque considerations, and noise constraints.

         The power output of electric motors is measured in horsepower. Motors
are produced in power outputs that range from less than one horsepower up to
thousands of horsepower.

         Subfractional Motors. The Company's subfractional horsepower products
are comprised of motors and gearmotors which power applications up to 30 watts
(1/25 horsepower). These small, "fist-size" AC and DC motors are used in light
duty applications such as snack and beverage vending machines, refrigerator ice
dispensers and photocopy machines.

         Fractional/Integral Motors. The Company's fractional/integral
horsepower products are comprised of AC and DC motors and gearmotors having
power ranges from 1/8 to 100 horsepower. Primary end markets for these motors
include commercial floor care equipment, commercial dishwashers, commercial
sewing machines, industrial ventilation equipment, golf carts, lift trucks and
elevators.

         Gears and Gearboxes. Gears and gearboxes are mechanical components used
to transmit mechanical energy from one source to another source. They are
normally used to change the speed and torque characteristics of a power source
such as an electric motor. Gears and gearboxes come in various configurations
such as helical gears, bevel gears, worm gears, planetary gearboxes, and
right-angle gearboxes. For certain applications, an electric motor and a gear
box are combined to create a gearmotor.

         The Company's precision gear and gearbox products are produced in sizes
of up to 16 inches in diameter and in various customized configurations such as
pump, bevel, worm and helical gears. Primary end markets for these products
include original equipment manufacturers ("OEMs") of motors, commercial floor
care equipment, aerospace and food processing product equipment.

Electronic Motion Control Systems

         Electronic motion control systems are assemblies of electronic and
electromechanical components that are configured in such a manner that the
systems have the capability to control a range of elevators. The components
utilized in an elevator control system are typically electric motor drives
(electronic controls that vary the speed and torque characteristics of electric
motors), programmable logic controls ("PLCs"), transformers, capacitors,
switches and software to configure and control the system.



                                      4
<PAGE>



Acquisitions

         See Note 1 to the notes to consolidated financial statements in Item 8
for a description of acquisitions made during the three year period ended
December 31, 2005.

Backlog

         The Company's approximate backlog of unfilled orders at the dates
specified was as follows:

                                            Backlog
              Year Ended                  (Dollars in
             December 31,                  thousands)
          ------------------            ----------------

                 2005
                 ----
                Motors                      $59,335
               Controls                      35,702
                                           ----------
                                            $95,037
                                           ==========

                 2004
                 ----
                Motors                      $43,514
               Controls                      37,250
                                           ---------
                                            $80,764
                                           =========


         The Company believes it will ship substantially its entire 2005
year-end backlog during 2006.

Marketing and Support Services

         The Company's sales and marketing success is characterized by long-term
customer relationships which are the result of continuity of management,
outstanding delivery records, high-quality products, and competitive pricing.
The Company utilizes a combination of direct sales personnel and manufacturers'
representatives to market the Company's product lines. Generally, the inside
sales organization is compensated through a fixed salary while the
manufacturers' representative organizations receive commissions.

         National account managers serve large national OEMS such as General
Electric, Whirlpool and the Raymond Corporation. More than 95% of the Company's
sales are to OEM customers. However, the Company has a distribution program with
three distributors in its subfractional horsepower product line to increase
coverage and generate more revenue growth.

         The Company's motion control systems business is served primarily
through internal sales and marketing professionals as well as independent
representatives. The Company continues to add sales talent to this product group
in order to expand its presence into additional motion control markets.

         The Company's advertising efforts consist of specific product
literature which is printed and provided to customers as applications are
developed. In addition, the Company attends various trade shows to market
products and to stay abreast of industry trends. It also advertises in trade
magazines on a periodic basis.

                                      5
<PAGE>


International Operations

         The Company currently operates seven manufacturing, research and
development, distribution and warehousing facilities in Europe and one
manufacturing facility in Mexico. In addition, the Company has an 80% ownership
interest in a Chinese joint venture that was formed in April 2002. For financial
information about geographic area, see Note 13 to the Company's consolidated
financial statements.

Employee and Labor Relations

         As of December 31, 2005, the Company employed 2,578 employees, of which
1,927 were non-union and 651 were represented by unions. The Company has
experienced no work stoppages since inception. It considers its relations with
its employees to be good.

Competition

         The electric motor and electronic motion control systems markets are
highly fragmented with a multitude of manufacturing companies servicing numerous
markets. Motor manufacturers range from small local producers serving a specific
application or end user, to high volume manufacturers offering general-purpose
"off the shelf" motors to a wide variety of end users. While there are numerous
manufacturers of gears and gearboxes that service a wide variety of industries
and applications, the Company competes in certain niche markets.

         The Company's motion control systems business competes primarily within
the automated conveyor system controls market and sells to conveyor
manufacturers that serve the automotive manufacturing industry and the elevator
modernization market. These niche markets consist of four to five major
competitors.

         The principal competitive factors in the electric motor and electronic
motion control systems markets include price, quality and service. Major
manufacturers include General Electric, Baldor Electric Company, Emerson
Electric Company and Reliance Electric Company; however, the Company generally
competes with smaller, specialized manufacturers. Many of the major motor
manufacturers have substantially greater assets and financial resources than the
Company does.

Raw Materials and Suppliers

         The primary raw materials used by the Company to produce its products
are steel, copper, and miscellaneous purchased parts such as endshield castings,
powdered metal gears, commutators, electronic components and packaging supplies.
All materials are readily available in the marketplace. The Company is not
dependent upon any single supplier in its operations for any materials essential
to its business or not otherwise commercially available to the Company. The
Company has been able to obtain an adequate supply of raw materials, and no
shortage of raw materials is currently anticipated. Surcharges and/or raw
material price escalation clauses are often used to insulate the Company from
fluctuations in prices.




                                      6
<PAGE>



Intellectual Property

         The Company's patents and trademarks taken individually, and as a
whole, are not critical to the ongoing success of its business. The proprietary
nature of the Company's products is attributable to the custom application
designs for particular customers' needs rather than attributable to proprietary
patented or licensed technology.

Environmental Regulation

         The Company is subject to a variety of U.S. Federal, state, provincial,
local and foreign governmental regulations related to the storage, use,
emission, discharge and disposal of toxic, volatile or otherwise hazardous
materials used in its manufacturing processes. Moreover, the Company anticipates
that such laws and regulations will become increasingly stringent in the future.
Because of our efforts to monitor and maintain compliance and track changes in
the laws and regulations, the Company does not currently anticipate any material
adverse effect on its business, financial condition or results of operations as
a result of compliance with U.S. Federal, state, provincial, local or foreign
environmental laws or regulations or remediation costs. However, some risk of
environmental liability and other costs is inherent in the nature of the
Company's business. For example, pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, the Company could
be responsible for the necessary costs of responding to any current, or
previously undiscovered, releases of hazardous substances at our facilities or
from those to which we send wastes. In addition, any failure by the Company to
obtain and maintain permits that may be required for manufacturing operations
could subject the Company to suspension of its operations. Such liability or
suspension of manufacturing operations could have a material adverse effect on
the Company's results of operations and financial condition.

         Soils and groundwater contaminated by historic waste handling practices
at the FIR property in Casalmaggiore, Italy is the subject of an investigation
and remediation under the review of government authorities. In connection with
the FIR Acquisition, the Company obtained indemnification from the former owners
for this investigation and remediation.

Item 1A. RISK FACTORS
         ------------
Certain principals, partners, officers, employees and affiliates of The Jordan
Company control all fundamental matters affecting the Company. Certain
principals, partners, officers, employees and affiliates of The Jordan Company
and their respective family members, collectively referred to as the Jordan
Group, own a majority of the outstanding common and other voting stock of the
Company. The Jordan Group has sufficient votes to elect all of the Company's
directors and control the management and financing decisions of the Company. In
addition, as owner of a majority of the outstanding common stock and other
voting stock of the Company, the Jordan Group is able to approve any action
requiring the approval of its shareholders, including the adoption of amendments
to its certificate of incorporation and the approval of mergers or sales of all
or substantially all of its assets.

The Company, through its respective subsidiaries, operate in highly competitive
industries and compete with many larger and better capitalized companies. Each
of the business lines that the Company operates compete with a substantial
number of national, regional and local competitors, many of which have greater
financial and other resources than the Company. Many of these competitors can be
expected to continue to improve the design and performance of their products



                                      7
<PAGE>

and to introduce new products with competitive price and performance
characteristics. Although the Company believes that it has certain advantages
over its competitors, realizing and maintaining those advantages will require
continued investment by it in research and development, quality standards,
marketing and customer service and support. There can be no assurance that the
Company will have sufficient resources to continue to make those investments
or that they will be successful in maintaining those advantages. Failure to
make those investments or to maintain those advantages could have a material
adverse effect on each of its respective businesses, financial conditions and
results of operations and the Company's ability to generate cash flow to
service its obligations.

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

Increases in the prices of raw materials could adversely affect our
subsidiaries' operations.
The Company's subsidiaries purchase most of the raw materials for their products
on the open market, and their sales may be affected by changes in the market
price of such raw materials. We do not generally engage in commodity hedging
transactions for raw materials. Although the Company's subsidiaries attempt to
pass on increases in the price of raw materials to their customers, there have
been delays in the subsidiaries' ability to pass on such increases in the past
and there can be no assurance that they will be able to do so in the future on a
timely basis, or at all. Additionally, significant increases in the prices of
the Company's subsidiaries' products due to increases in the cost of raw
materials could have a negative effect on demand for their respective products
and a material adverse effect on their respective businesses, financial
conditions and results of operations.

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

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


                                      8
<PAGE>


  o     Adverse changes or greater volatility in the economies of those
        countries;
  o     Adverse effects of currency exchange controls;
  o     Adverse changes to the regulatory environment of those countries;
  o     Adverse changes to the tax laws and regulations of those countries;
  o     Restrictions on the withdrawal of foreign investment and earnings;
  o     The nationalization of our businesses;
  o     The potential instability of foreign governments, including from
        domestic insurgency movements; and
  o     The challenge of managing culturally and geographically diverse
        operations.

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


The Company's businesses could be negatively impacted if they fail to maintain
satisfactory labor relations.
Collectively, over 25% of the Company's subsidiaries' employees currently belong
to unions and operate under collective bargaining agreements. There can be no
assurance that future issues with their respective labor unions will be resolved
favorably or that they will not experience a work stoppage that could adversely
affect their respective businesses. The Company's current collective bargaining
agreements are with various unions and generally expire over the next one to
three years. There can be no assurances that new agreements will be reached or
that the Company will be able to negotiate extensions of such agreements on
favorable terms. Any work stoppage could have a material adverse effect on the
Company's business and financial condition and results of operations.

The Company has a substantial amount of debt maturing in 2006.
The Company has Senior Notes with a principal amount of $270 million, maturing
in November of 2006. While the Company is currently evaluating multiple
scenarios for either the repayment or refinancing of that debt prior to its
maturity date, there can be no assurance that the company will complete the
necessary transactions prior to that date. Should the Company be unable to repay
or refinance this debt prior to its maturity date, the Company would risk a
default of its debt covenants and significant stress on its access to cash for
ongoing operations. Such defaults or reduction in available cash could have a
material adverse effect on the Company's business and financial condition and
results of operations.

Item 1A. UNRESOLVED STAFF COMMENTS

         Not applicable.



                                      9
<PAGE>

Item 2.  PROPERTIES
         ----------
         The Company's headquarters are located in an approximately 13,411
square foot office space in Deerfield, Illinois that is provided by JII and for
which we are allocated certain charges. (See Item 13 "Certain Relationships and
Related Transactions").

         The principal properties of the Company, the location, the primary use,
the square feet and the ownership status thereof as of December 31, 2005, are
set forth in the table below:

                                              Square   Owned/       Lease
    Location                  Use             Feet     Leased     Expiration

Des Plaines, IL            Design/            38,000   Leased     March 2007
                           Administration
Darlington, WI             Manufacturing      68,000   Leased     December 2010
Richland Center, WI        Manufacturing      45,000   Leased     September 2006
Des Plaines, IL            Administration/    63,000   Leased     January 2009
                           Manufacturing
San Luis Potosi, Mexico    Manufacturing      70,000   Leased     December 2009
Shunde, Guangdong, PRC     Manufacturing/    926,000   Owned
                           Administration
Akron, OH                  Manufacturing     106,000   Leased     August 2010
Middleport, OH             Manufacturing      85,000   Owned
Alamagordo, NM             Manufacturing      40,200   Leased     February 2006
Grand Rapids, MI           Manufacturing/     45,000   Owned
                           Administration
Perry, OH                  Research &          5,000   Leased     September 2008
                           Development
Solon, OH                  Manufacturing/     66,500   Leased     November 2008
                           Administration
Casalmaggiore via          Manufacturing       4,000   Leased     December 2008
Vanoni, Italy
Casalmaggiore via          Manufacturing      18,000   Owned
Vanoni, Italy
Casalmaggiore via          Administration/   189,000   Owned
Roma, Italy                Manufacturing
Casalmaggiore via          Administration/    52,000   Leased     August 2011
Cazumenta, Italy           Manufacturing
Varano, Italy              Manufacturing      97,000   Owned
Genova, Italy              Research &         34,000   Leased     July 2008
                           Development/
                           Manufacturing
Syracuse, NY               Manufacturing      18,500   Leased     January 2008
Syracuse, NY               Manufacturing      14,000   Leased     December 2009
Syracuse, NY               Manufacturing/     49,600   Owned
                           Administration
Eternoz, France            Manufacturing/     19,000   Leased     December 2011
                           Administration
Putzbrunn, Germany         Warehouse           1,200   Leased     July 2006
Rancho Cordova, CA         Manufacturing/    108,000   Leased     May 2011
                           Administration
Glendale, NY               Manufacturing/     11,200   Leased     March 2008
                           Administration


         The Company believes that its existing leased facilities are adequate
for the operations of the Company and its subsidiaries. The Company does not
believe that any single leased facility is material to its operations and that,
if necessary, it could readily obtain a replacement facility.



                                      10
<PAGE>


Item 3.  LEGAL PROCEEDINGS
         -----------------
         The Company is not a party to any pending legal proceeding the
resolution of which, the management of the Company believes, would have a
material adverse effect on the Company's results of operations or financial
condition, nor to any other pending legal proceedings other than ordinary,
routine litigation incidental to its business.

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
         ---------------------------------------------------
         No matters were submitted to a vote of security holders during the
fiscal year ended December 31, 2005.

PART II


Item 5.   MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
          MATTERS
          -----------------------------------------------------------------
         The only authorized, issued and outstanding class of capital stock of
the Company is common stock. There is no established public trading market for
the Company's common stock. At December 31, 2005, the Parent held all common
stock of the Company.

         The Company has not declared or paid any cash dividends on its common
stock since the Company's formation in September 1995. The Indentures with
respect to the 10 3/4% Senior Notes due 2006, the 5% Senior Secured Notes due
2007, and the 10% Senior Secured Notes due 2007 contain restrictions on the
Company's ability to declare or pay dividends on its common stock. The
Indentures also prohibit the declaration or payment of any dividends or the
making of any distribution by the Company or any Restricted Subsidiary (as
defined in the Indentures).




                                      11
<PAGE>
<TABLE>
<CAPTION>

Item 6.  SELECTED FINANCIAL DATA
         -----------------------
         The following table presents selected financial information derived
from the Company's financial statements.


     (Dollars in thousands)                              Year Ended December 31,
                                     -------------------------------------------------------------------

                                         2005          2004         2003         2002         2001
                                         ----          ----         ----         ----         ----
<S>                                      <C>          <C>          <C>          <C>          <C>
Statement of Operations
Data:
 Net Sales                                $337,524     $313,867     $278,309     $274,818     $278,872
Gross profit, excluding
depreciation                               100,559       99,437       94,245       97,272      100,751

  Depreciation                               5,377        5,487        6,721        6,577        6,023
  Amortization                                 126          134          169          408        8,491
  Operating income                          40,652       34,153       30,048       38,347       37,226
  Interest expense                          35,739       35,592       34,876       35,231       32,173
   Income tax expense                        7,735        6,991        5,721       11,575        4,666
  Income (loss) from
   continuing
   operations                               (3,883)      (7,880)     (10,541)      (7,552)         746

Balance sheet data (at
end of period):
  Working capital (1)                     (206,284)      65,109       70,503       62,260       66,895
  Total assets                             372,072      374,120      362,488      363,506      359,415
  Long-term debt
  including current
  portion                                  319,200      317,068      307,626      309,115      304,905
  Stockholder's equity
  (net capital
  deficiency)                              (32,194)     (25,236)     (15,530)     (14,957)      10,684


(1) During 2005, the majority of our debt became current, causing the working capital to become
negative. See Note 8 to the "Notes to the Consolidated Financial Statements".
</TABLE>


                                      12
<PAGE>



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

Overview

         The following discussion and analysis of the Company's results of
operations and of its liquidity and capital resources should be read in
conjunction with the financial statements and the related notes thereto
appearing elsewhere in this annual report.

Forward-Looking Statements

         This report on Form 10-K contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. The statement regarding the Company in this
document that are not historical in nature, particularly those that utilize
terminology such as "may", "will," "should," "likely," "expects," "anticipates,"
"estimates," "believes" or "plans," or comparable terminology, are
forward-looking statements based on current expectations about future events,
which the Company has derived from information currently available. These
forward-looking statements involve known and unknown risks and uncertainties
that may cause our results to be materially different from results implied in
such forward-looking statements. Those risks include, among others, risks
associated with the industry in which the Company operates, the dependence on
senior management, maintaining sufficient working capital financing, competitive
pressures, general economic conditions and a softening of consumer acceptance of
the Company's products leading to a decrease in anticipated revenue and gross
profit margins.

Acquisitions

         Information regarding acquisitions made by the Company during the three
year period ended December 31, 2005 is included in Note 1 to the Notes to
financial statements. The results of acquired operations are included in the
Company's consolidated results from the respective date of acquisition.

Consolidated Results of Operations

         The following financial information presents the consolidated results
of operations of the Company for the years ended December 31, 2005, 2004 and
2003.

<TABLE>
<CAPTION>

(Dollars in thousands)                                       Year Ended December 31,
                                            ----------------------------------------------
                                               2005              2004           2003
                                               ----              ----           ----
<S>                                          <C>              <C>            <C>
Motors                                        $252,128         $230,372       $201,654
Controls                                        85,396           83,495         76,655
Net sales                                     $337,524         $313,867       $278,309

Motors                                         $67,665          $66,421        $63,601
Controls                                        32,894           33,016         30,644
Gross profit (excluding depreciation)         $100,559          $99,437         94,245

Motors                                         $40,495          $36,291        $35,458
Controls                                        13,326           10,571          8,686
Corporate expenses                             (13,169)         (12,709)       (14,096)
Operating income                               $40,652          $34,153         30,048

Interest expense                                35,739           35,592         34,876

Gross profit (excluding depreciation) (1)       29.8%            31.7%          33.9%
Operating margin (1)                            12.0             10.9           10.8

(1) All margins are calculated as a percentage of net sales.

</TABLE>




                                      13
<PAGE>



Year ended December 31, 2005 compared to year ended December 31, 2004

Consolidated net sales increased $23.6 million, from $313.9 million in 2004 to
$337.5 million, an increase of 7.5%. The increased net sales were driven by
$10.6 million in sales of new products and net gains in market share compared to
the prior year. The full year impact of the Company's 2004 acquisition of O.
Thompson (see Note 1 to "Notes to Consolidated Financial Statements")
contributed $5.4 million in higher sales. The net impact of improved markets in
the Company's principal markets in North America and China, partially offset by
weaker markets in Europe, contributed approximately $4.2 million in higher
sales. The net impact of price increases and decreases charged to customers
added $1.9 million in increased sales. The continued revaluation of the Euro
against the dollar during 2005 caused a $1.5 million improvement in sales due to
the favorable translation impact on the Company's European business.

Sales in the Company's Motors segment increased from $230.4 million in 2004 to
$252.1 million in 2005, a gain of $21.7 million, or 9.4%. Sales of Subfractional
motor products were virtually identical with the prior year, as generally
improved markets for the Company's main products, the full year impact of an ice
crusher product first sold to a major appliance customer in 2004, sales of
various new products and the impact of general price increases offset losses of
share of vending and refrigeration products and price decreases to refrigeration
customers. Both the share losses and price decreases were driven by global
competition from the Company's principal rival in these markets. Sales of
fractional and integral motors increased $21.7 million, driven by significant
gains in share of the North American market for electric golf car motors and
gains in the Chinese elevator motor market. General improvement in the Company's
North American and Chinese markets, selective price increases passed to
customers, and the aforementioned improvement of the Euro all further
contributed to the sales increases. These gains were partially offset by
weakness in the Company's markets in Europe and share losses in those markets.

Sales in the Company's Controls segment increased from $83.5 million in 2004 to
$85.4 million in 2005, an increase of $1.9 million, or 2.3%. The sales growth
was driven by the aforementioned full year impact of the Company's 2004
acquisition of O. Thompson (see Note 1 to "Notes to Consolidated Financial
Statements"), which contributed $5.4 million in higher sales than in 2004. The
ramp up of the Company's recently introduced "I" family of control products
added higher sales in the form of higher prices per controller sold in
comparison with traditional controller products. These increases were partially
offset by a generally weaker market for elevator controllers.

Consolidated operating income increased 19.0%, from $34.2 million in 2004 to
$40.7 million for 2005. Consolidated operating income increased from 10.9% of
sales in 2004 to 12.0% of sales in 2005. Gross profit increased to $100.6
million in 2005, an increase of 1.1% from $99.4 million achieved in 2004. Gross
profit as a percentage of net sales decreased from 31.7% in 2004 to 29.8% in
2005. The increase in gross profit is the result of the sales increases
described earlier, partly offset by a number of factors, the most significant of
which is inflation. Over the past two years, the Company has experienced severe
increases in market prices paid for parts used in the assembly of motors,
especially copper, steel, and zinc, and increases in the prices of plastic
components and freight and transportation associated with rising global oil
prices. Gross margin and gross margin as a percentage of sales are also
negatively affected by shifts of product mix, as gains in market share reflected
in net sales growth are frequently achieved by competing aggressively on price,
diluting the Company's total margin as a percentage of sales.


                                      14
<PAGE>

Selling, general, and administrative expenses decreased by $5.4 million, from
$56.5 million in 2004 to $51.0 million in 2005. This decrease reflects the
Company's continued cost reduction activities across its business units; the
impact of costs incurred in 2004 associated with the relocation of operations of
the Grand Rapids, MI, Des Plaines, IL, and Oakwood Village, OH facilities; the
capitalization of certain costs in 2005 for development of software that is
central to the Company's "I" family of elevator control products (see Note 2 to
"Notes to Consolidated Financial Statements"); and to a reduction of $1.2
million of charges for corporate overhead under the Transition Agreement (see
Item 13. "Certain Relationships and Related Transactions").


Year ended December 31, 2004 compared to year ended December 31, 2003

Consolidated net sales increased $35.6 million, from $278.3 million in 2003 to
$313.9 million in 2004, a gain of 12.8 %. The increased sales were driven by the
introduction of new products and net gains in market share, which contributed
approximately $20.0 million, and improvements in the Company's principal markets
in North America and Europe, which account for approximately $8.4 million in
increased sales. The continued revaluation of the Euro against the dollar during
2004 caused a $4.5 million improvement in sales due to the favorable translation
impact on the Company's European businesses. The acquisition of O. Thompson (see
Note 1 to "Notes to Consolidated Financial Statements") contributed $4.3 million
in sales since the acquisition date. The net impact of increases and decreases
in selling prices is estimated to reduce sales from the prior year by
approximately $1.6 million, reflecting the competitive global market for the
Company's core products.

Sales in the Company's Motors segment increased from $201.7 million in 2003 to
$230.4 million in 2004, a gain of $28.7 million, or 14.2%. Subfractional motor
sales increased $3.7 million on the strength of an improved market for products
used in consumer refrigeration appliances, the partial year impact of a new ice
crusher product sold to a major appliance manufacturer, and numerous share gains
in smaller product categories. These gains were partly offset by the loss of
"value-added subassembly" ice crusher products sold to several key refrigeration
customers, for whom the Company continues to supply the ice crusher motor. Sales
of fractional and integral motors increased $25.0 million on significant gains
in market share and the sale of new products used in commercial floor care, and
recovery in the markets for material handling and golf car motor products. The
Company's European markets remained difficult during 2004, with sales down 4.6%
from 2003, due to general market conditions and the impact of net share losses.
The European sales declines were more than offset by the aforementioned increase
in sales due to favorable Euro translation. Sales of the Company's products in
China have benefited from that country's overall market strength and from share
gains in elevator motors as the Company expands its market presence
geographically.

Sales in the Company's Controls segment increased $6.8 million, to $83.5 million
in 2004, an increase of 8.9% from $76.7 million in the prior year. The increase
in sales was led by the inclusion of the partial year sales of O. Thompson (see
Note 1 to "Notes to Consolidated Financial Statements"), which contributed $4.3
million in sales. Sales of elevator controls and accessory products increased
$2.5 million, led by higher sales of the "I" family of control products, the
SmarTraq door operator system, and other non-controller products.

Consolidated operating income increased to $34.2 million in 2004, an increase of
$4.1 million, or 13.7%, from $30.0 million in 2003. Gross profit increased to
$99.4 million (31.7% of net sales), from the prior year level of $94.2 million,
(33.9% of net sales). The increase in gross profit is mainly attributable to the


                                      15
<PAGE>

increases in sales described above. The impact of higher sales is partly offset
by the unfavorable impact of net reductions in selling prices resulting from
global market competition (approximately $1.6 million) and higher prices for
purchased components and services, particularly steel, copper, zinc, aluminum,
and freight. Gross margin as a percentage of sales declined in 2004 due to the
impacts of net selling price reductions, purchase cost inflation, and the
introduction of certain new products and share gains at competitive margins
which are lower than the Company's historical average. Selling, general, and
administrative expenses ("SG&A") increased from $54.4 million in 2003 to $56.5
million. SG&A increased modestly in line with the increases in sales, and from
costs associated with the relocation of operations of the Grand Rapids, MI, Des
Plaines, IL, and Oakwood Village, OH facilities. These increases were offset in
part by a $1.3 million reduction of charges under the Transition Agreement (see
Item 13 "Certain Relationships and Related Transactions"), and a one-time charge
of $1.0 million in 2003 for excess medical claims incurred by the Company's
subsidiaries during 2001 and 2002.

Liquidity and Capital Resources

         In general, the Company requires liquidity for working capital, capital
expenditures, interest, taxes, debt repayment and its acquisition strategy. Of
primary importance are the Company's working capital requirements, which
increase whenever the Company experiences strong incremental demand or
geographical expansion. In the short term, the Company expects to satisfy its
liquidity requirements through a combination of funds generated from operating
activities and the funds available under the Credit Agreement. As our 10 3/4%
Senior Notes mature on November 15, 2006, and the Credit Agreement expires on
December 18, 2006, the Company is actively pursuing alternative financing which
would satisfy our existing creditors while providing working capital necessary
to support ongoing operations and the Company's acquisition strategy. If the
Company is unable to refinance or enter into a transaction that allows it to pay
off this debt, then there is substantial doubt about the Company's ability to
continue as a going concern.

         Operating activities. Net cash provided by operating activities for the
year ended December 31, 2005 was $5.3 million, compared to $3.3 million used
during the year ended December 31, 2004. The improvement in cash from operating
activities is mainly a result of the Company's higher operating performance
discussed above. In addition, a lesser amount of cash was used in 2005 compared
to 2004 for increases in accounts receivable and inventory. These improvements
were offset in part by a smaller increase in accounts payable and accrued
expenses and other liabilities in 2005 compared to 2004, as well as less cash
provided by net change in assets and liabilities from discontinued operations.

         Investing activities. Net cash used in investing activities was $4.6,
$4.4 and $4.0 million in 2005, 2004 and 2003, respectively. Cash used in
investing activities in 2005 and 2004 included $562 and $372, respectively, for
the acquisition of the significant net assets of O. Thompson, which is detailed
in Note 1 to the Consolidated Financial Statements. The remaining use of cash is
related to capital expenditures.

         Financing activities. Net cash provided by (used in) financing
activities was $1.4, $8.9 and ($1.9) million in 2005, 2004 and 2003
respectively.


         The Company's annual cash interest expense on the 10 3/4% Senior Notes,
which are due November 15, 2006, is approximately $29.0 million. Interest on the
Senior Notes is payable semi-annually on May 15 and November 15 of each year.


                                      16
<PAGE>

         The Company's Loan and Security Agreement "Credit Agreement", is in the
form of a revolving credit facility and provides for borrowings of up to $35.0
million to fund acquisitions and provide working capital, and for other general
corporate purposes. Borrowings are limited by a borrowing base formula
consisting of accounts receivable, inventory, machinery and equipment and real
estate. Borrowings bear interest at a rate of prime plus 1.35% (8.4% at December
31, 2005), subject to change based on the Company's interest coverage ratio, as
defined. Unused commitments under the revolving credit facility are subject to
an availability fee of 0.375% per annum subject to change based on the Company's
interest coverage ratio, as defined. Borrowings are secured by the stock and
substantially all of the assets of the Company. The Company had $6.1 million of
borrowing capacity under the Credit Agreement as of December 31, 2005. The
Credit Agreement expires December 18, 2006. The Company intends to replace the
credit facility made under the Credit Agreement in 2006, in conjunction with the
refinancing of its 10 3/4% Senior Notes, which mature on November 15, 2006.
Management is confident such refinancing can be obtained under favorable terms
to the Company, however, such terms will be subject to market conditions which
may change significantly.

         In the short term, the Company expects its principal sources of
liquidity to be from funds generated from operating activities and funds
available under the Credit Agreement. As our 10 3/4% Senior Notes mature on
November 15, 2006, and the Credit Agreement expires on December 18, 2006, the
Company is actively pursuing alternative financing which would satisfy our
existing creditors while providing working capital necessary to support ongoing
operations and the Company's acquisition strategy.

Foreign Currency Impact

         The functional currencies of the Company's foreign operations are the
local currencies. Accordingly, assets and liabilities of the
Company's foreign operations are translated from foreign currencies into U.S.
dollars at the exchange rates in effect at the balance sheet date while income
and expenses are translated at the weighted-average exchange rates for the year.
Adjustments resulting from translation are classified as a component of other
comprehensive income, while the remeasurement of intercompany notes receivable
denominated in Euros from the Company's Italian operation, are classified as a
part of miscellaneous non-operating income/expense.


Seasonality and Inflation

         The Company's net sales typically show no significant seasonal
variations.

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




                                      17
<PAGE>


Adoption of Accounting Principles

         In May 2005, the FASB issued FASB Statement No. 154, Accounting Changes
and Error Corrections ("FAS 154"), a replacement of APB Opinion No. 20,
Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes in
Interim Financial Statements ("FAS 3"). FAS 154 replaces the provisions of FAS 3
with respect to reporting accounting changes in interim financial statements.
FAS 154 is effective for accounting changes and corrections of errors made in
fiscal years beginning after December 15, 2005. Early adoption is permitted for
accounting changes and corrections of errors made in fiscal years beginning
after June 1, 2005. The Company does not expect SFAS 154 will significantly
impact its financial statements upon its adoption on January 1, 2006.


Critical Accounting Policies and Estimates

         The Company's significant accounting policies are described in Note 2
to the consolidated financial statements included in Item 8 of this Form 10-K.
The Company's discussion and analysis of financial condition and results from
operations are based upon the Company's consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States. The preparation of the financial statements requires the
Company's to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues, and expenses. On an on-going basis, the Company
evaluates the estimates that it has made. These estimates have been based upon
historical experience and on various other assumptions that the Company believes
to be reasonable under the circumstances. However, actual results may differ
from these estimates under different assumptions or conditions.

         The Company believes the following critical accounting policies affect
the more significant judgments and estimates the Company's has used in the
preparation of the consolidated financial statements.

Goodwill

         In accordance with SFAS No. 142, the Company discontinued recording
goodwill amortization effective January 1, 2002. SFAS No. 142 prescribes a
two-step process for impairment testing goodwill. The first step is to identify
when goodwill impairment has occurred by comparing the fair value of a reporting
unit with its carrying amount, including goodwill. If the fair value of a
reporting unit exceeds its carrying value, the second step of the goodwill test
should be performed to measure the amount of the impairment loss, if any. In
this second step, the implied fair value of the reporting unit's goodwill is
compared with the carrying amount of the goodwill. If the carrying amount of the
reporting unit's goodwill exceeds the implied fair value of that goodwill, an
impairment loss should be recognized in an amount equal to that excess, not to
exceed the carrying amount of the goodwill. If there is a decrease in product
demand, market conditions or any condition that changes the assumptions used to
measure fair value it could result in requiring material impairment charge in
the future.

Investment in Affiliate

         The Company has made a strategic investment in the Preferred Units of
JZ International, LLC, an affiliated company. See Note 11 to the consolidated
financial statements for details of this investment. These debt securities are
not publicly traded on any major exchange. The cost method of accounting is used
to account for this investment. The Company will record an impairment charge


                                      18
<PAGE>

when it believes the investment has experienced a decline in value below its
current carrying amount that is other than temporary. Future adverse changes in
market conditions or poor operating results could result in losses and/or an
inability to recover the carrying value of this investment that may not be
reflected in the investment's current carrying value, thereby possibly requiring
an impairment charge in the future.

Allowance for Doubtful Accounts

         Allowances for doubtful accounts are estimated at the individual
operating companies based on estimates of losses on customer receivable
balances. Estimates are developed by using standard quantitative measures based
on historical losses, adjusting for current economic conditions and, in some
cases, evaluating specific customer accounts for risk of loss. The establishment
of reserves requires the use of judgment and assumptions regarding the potential
for losses on receivable balances. Though the Company considers its allowance
for doubtful accounts balance to be adequate, changes in economic conditions in
specific markets in which the Company operates could have a material effect on
future reserve balances required.

Excess and Obsolete Inventory

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

Income Taxes

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





                                      19
<PAGE>
<TABLE>
<CAPTION>


Contractual Obligations

The following table summarizes the Company's contractual obligations as of
December 31, 2005 (in thousands):

                                                    Payments by Period
             -------------------------------------------------------------------------------------------
                Total         2006          2007         2008         2009       2010     Thereafter
             -------------------------------------------------------------------------------------------
<S>           <C>          <C>          <C>          <C>          <C>        <C>          <C>
  Long-term
       debt    $318,749     $293,078     $ 25,671           -           -          -
Interest on
  Long-term
       Debt      29,469       28,830          636            2           1         -           -
    Capital
     leases         451          276          148           13          13          1          -
  Operating
     leases
                 13,733        3,168        2,968        2,818       2,273      1,806         700
             -------------------------------------------------------------------------------------------
       Total   $362,402     $325,352     $ 29,423      $ 2,833      $2,287     $1,807       $ 700
             -------------------------------------------------------------------------------------------
</TABLE>

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
         -----------------------------------------------------------
         The Company's debt obligations are primarily fixed-rate in nature and,
as such, are not sensitive to changes in interest rates. At December 31, 2005
the Company had no variable rate debt outstanding.

         The Company is exposed to market risk from changes in foreign currency
exchange rates, including fluctuations in the functional currency of foreign
operations. The functional currency of operations outside the United States is
the respective local currency. Foreign currency translation effects are included
in accumulated other comprehensive income in shareholder's equity (net capital
deficiency).




                                      20
<PAGE>



Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
         -------------------------------------------

                                                                       PAGE NO.
                                                                       --------

Report of Independent Registered Public Accounting Firm                   22

Consolidated Balance Sheets as of December 31, 2005 and 2004              23

Consolidated Statements of Operations for the years ended
December 31, 2005, 2004 and 2003                                          24

Consolidated Statements of Changes in Shareholder's Equity
(Net Capital Deficiency) for the years ended December 31, 2005,
2004 and 2003                                                             25

Consolidated Statements of Cash Flows for the years ended
December 31, 2005, 2004 and 2003                                          26

Notes to Consolidated Financial Statements                                27





                                      21
<PAGE>



            REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


The Board of Directors and Shareholder
Kinetek, Inc.


We have audited the accompanying consolidated balance sheets of Kinetek, Inc. as
of December 31, 2005 and 2004 and the related consolidated statements of
operations, shareholder's equity (net capital deficiency), and cash flows for
each of the three years in the period ended December 31, 2005. Our audits also
included the financial statement schedule listed in the Index at Item 15(a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Kinetek, Inc. at
December 31, 2005 and 2004, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended December 31,
2005, in conformity with U.S. generally accepted accounting principles. Also, in
our opinion, the related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.

The accompanying financial statements have been prepared assuming that Kinetek,
Inc. will continue as a going concern. As more fully described in Note 8, the
Company has substantial debt maturing within the next year, which raises
substantial doubt about the Company's ability to continue as a going concern.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.


ERNST & YOUNG LLP


Chicago, Illinois
March 15, 2006









                                      22
<PAGE>
<TABLE>
<CAPTION>



KINETEK, INC.

                                    CONSOLIDATED BALANCE SHEETS
                                 (ALL DOLLAR AMOUNTS IN THOUSANDS)


                                                                                December 31,
                                                                        -------------------------

                                                                           2005           2004
                                                                           ----           ----
<S>                                                                    <C>            <C>
ASSETS
Current Assets
     Cash and cash equivalents                                            $11,676        $10,863
     Accounts receivable, net of allowance of $2,437 and
     $4,110 at December 31, 2005 and 2004, respectively                    65,485         62,379
     Inventories                                                           54,252         53,658
     Prepaid expenses and other current assets                              3,650          4,373
     Taxes receivable                                                       1,926          3,631
     Assets from discontinued operation                                       415          2,024
                                                                        ---------       --------
          Total current assets                                            137,404        136,928

Property, plant and equipment, net                                         28,754         29,753
Goodwill                                                                  180,736        181,141
Deferred financing costs, net                                               1,999          4,646
Due from affiliated company                                                 8,504          8,415
Investment in affiliate                                                    12,344         12,344
Other non-current assets                                                    2,331            893
                                                                       ----------       --------
          Total assets                                                   $372,072       $374,120
                                                                       ==========       ========

LIABILITIES AND SHAREHOLDER'S EQUITY (NET CAPITAL
DEFICIENCY)
Current liabilities:
     Accounts payable                                                     $33,715        $33,262
     Accrued interest payable                                               4,337          4,109
     Accrued expenses and other current liabilities                        12,282         12,941
     Current portion of long term debt                                    293,354         20,959
     Liabilities from discontinued operation                                   -             548
                                                                       ----------       --------
          Total current liabilities                                       343,688         71,819

Long term debt                                                             25,846        296,109
Deferred income taxes                                                      29,529         25,801
Other non-current liabilities                                               5,203          5,627

Shareholder's equity (net capital deficiency):
     Common stock, $1 par value: authorized - 10,000
      shares; issued and outstanding - 100 shares                              -              -
     Additional paid-in capital                                            50,006         50,006
     Accumulated deficit                                                  (85,455)       (80,238)
     Accumulated other comprehensive income                                 3,255          4,996
                                                                       ----------       --------
     Total shareholder's equity (net capital deficiency)                  (32,194)       (25,236)
                                                                       ----------       --------

     Total liabilities and shareholder's equity (net
     capital deficiency)                                                 $372,072       $374,120
                                                                       ==========      =========





                   See accompanying notes to consolidated financial statements.





                                                23
<PAGE>
<CAPTION>



                                           KINETEK, INC.
                               CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (ALL DOLLAR AMOUNTS IN THOUSANDS)



                                                                 Year Ended December 31,
                                                    --------------------------------------------

                                                       2005             2004            2003
                                                       ----             ----            ----
<S>                                                 <C>              <C>             <C>
Net sales                                            $337,524         $313,867        $278,309
Cost of sales, excluding depreciation                 236,965          214,430         184,064
Selling, general and administrative
 expenses, excluding depreciation                      51,038           56,470          54,391
Depreciation and amortization                           5,503            5,621           6,890
Management fees and other                               3,366            3,193           2,916
                                                    ----------       ----------      ----------
Operating income                                       40,652           34,153          30,048

Other (income) / expense:
      Interest expense                                 35,739           35,592          34,876
      Interest income                                    (129)            (169)           (140)
      Miscellaneous, net                                1,190             (381)            132
                                                    ----------       ----------      ----------
Income (loss) from continuing operations
 before income taxes                                    3,852             (889)         (4,820)

Income tax provision                                    7,735            6,991           5,721
                                                    ----------       ----------      ----------

Loss from continuing operations                       $(3,883)         $(7,880)       $(10,541)

Income (loss) from discontinued operations,
 net of tax                                            (1,334)          (5,856)          1,787
                                                    ----------       ----------      ----------

Net loss                                             $ (5,217)        $(13,736)        $(8,754)
                                                    ==========       ==========      ==========












                   See accompanying notes to consolidated financial statements.

                                                24

<PAGE>
<CAPTION>

                                          KINETEK, INC.
       CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY (Net Capital Deficiency)
                                (ALL DOLLAR AMOUNTS IN THOUSANDS)


                                       Common Stock
                                 ----------------------                        Accumulated                        Total
                                                              Additional          Other                       Shareholder's
                                  Number of                    Paid-In        Comprehensive     Accumulated    Equity (net
                                   Shares       Amount         Capital        (Loss) Income       Deficit        capital)
                                 ----------   ---------      ------------     -------------    ------------   -------------
<S>                                <C>         <C>           <C>              <C>              <C>            <C>
Balance at December 31, 2002          100       $  -          $50,006          $ (7,215)        $ (57,748)     $ (14,957)

  Foreign Currency
  translation adjustments               -          -                -             8,181                 -          8,181

  Net loss                              -          -                -                 -            (8,754)        (8,754)
                                                                                                              -------------
  Comprehensive loss                    -          -                -                 -                 -           (573)
                                 ----------   ---------      ------------     -------------    ------------   -------------


Balance at December 31, 2003          100       $  -          $50,006          $    966         $ (66,502)     $ (15,530)

  Foreign currency
  translation adjustments               -          -                -             4,030                 -          4,030

  Net loss                              -          -                -                 -           (13,736)       (13,736)
                                                                                                              -------------
  Comprehensive loss                    -          -                -                 -                 -         (9,706)
                                 ----------   ---------      ------------     -------------    ------------   -------------

Balance at December 31, 2004          100       $  -          $50,006          $  4,996         $ (80,238)     $ (15,530)

  Foreign currency
  translation adjustments               -          -                -            (1,741)                -         (1,741)

  Net loss                              -          -                -                 -            (5,217)        (5,217)
                                                                                                              -------------
  Comprehensive loss                    -          -                -                 -                 -         (6,958)
                                 ----------   ---------      ------------     -------------    ------------   -------------

Balance at December 31, 2005          100       $  -          $50,006          $  3,255         $ (85,455)     $ (32,194)
                                 ==========   =========      ============     =============    ===========    =============

See accompanying notes to consolidated financial statements.



                                                25

<PAGE>
<CAPTION>


                                                    KINETEK, INC.
                                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                                          (ALL DOLLAR AMOUNTS IN THOUSANDS)


                                                                                    Year Ended December 31,
                                                                       ------------------------------------------------

                                                                             2005             2004          2003
                                                                             ----             ----          ----
<S>                                                                       <C>             <C>             <C>
Cash flows from operating activities:
        Net loss                                                           $(5,217)        $(13,736)       $(8,754)
Adjustments to reconcile net loss to net cash
 provided by (used in) operating activities:
        Depreciation and amortization                                        5,503            5,621          6,890
        Amortization of deferred financing fees
         and bond premium                                                    3,167            3,079          2,953
        Deferred income taxes                                                3,728            5,249          4,366

Changes in operating assets and liabilities (net
 of effects from acquisitions):
        Accounts receivable                                                 (3,106)          (7,482)        (3,121)
        Inventories                                                           (628)          (5,495)        (4,626)
        Prepaid expenses and other current assets                            2,428            2,128         (1,405)
        Accounts payable                                                       453            6,518            353
        Accrued expenses and other current liabilities                          84           (1,687)         1,069
        Net change in assets and liabilities from
         discontinued operation                                              1,061            4,749         (5,181)
        Non-current assets and liabilities                                  (2,055)            (346)           698
        Due from affiliated company                                            (89)          (1,916)           (84)
                                                                          ---------       ----------      ---------
        Net cash provided by(used in) operating activities                   5,329           (3,318)        (6,842)

Cash flows from investing activities:
        Capital expenditures, net                                           (4,067)          (3,998)        (4,033)
        Acquisition of subsidiaries, net of cash acquired                     (562)            (372)            -
                                                                          ---------       ----------      ---------
        Net cash used in investing activities                               (4,629)          (4,370)        (4,033)

Cash flows from financing activities:
        Borrowings  on revolving credit  facility, net                       4,728           12,244             -
        Repayment of long-term debt                                        (11,848)         (10,818)        (2,811)
        Proceeds from issuance of long term debt                             8,556            7,505            874
                                                                          ---------     --------------------------
        Net cash provided by (used in)financing activities                   1,436            8,931         (1,937)

Effect of exchange rate changes on cash                                     (1,323)           2,661          5,329
                                                                          ---------       ----------      ---------

Net increase (decrease) in cash and cash equivalents                           813            3,904         (7,483)

Cash and cash equivalents at beginning of year                              10,863            6,959         14,442
                                                                          ---------       ----------      ---------
Cash and cash equivalents at end of year                                   $11,676         $ 10,863        $ 6,959
                                                                          =========       ==========      =========


Supplemental disclosures of cash flow information:
Cash paid during the period for:
        Interest                                                           $32,534          $31,871        $32,023
        Income taxes                                                         3,766            1,081          2,837
Non cash investing and financing activities:
        Capital leases                                                          67               -             142


                            See accompanying notes to consolidated financial statements.
</TABLE>

                                                26
<PAGE>



                                  KINETEK, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        (ALL DOLLAR AMOUNTS IN THOUSANDS)


1.       Description of Business and Acquisitions

         Kinetek, Inc. "Company", a wholly-owned  subsidiary of Motors and
Gears Holdings,  Inc. (Parent), a majority-owned  subsidiary of Jordan
Industries, Inc. (JII), operates in the motion control industry.

         On September 21, 2004, the Company acquired substantially all of the
net assets of O. Thompson, a New York City-based elevator control company. The
total acquisition cost was originally $887 which was subsequently adjusted to
$853 during the first quarter of 2005. Of the total acquisition price, $372 was
paid in cash during the third and fourth quarters of 2004 and the remaining $481
was paid during the first quarter of 2005. Also during 2005, the Company paid an
additional $81 in acquisition costs and charged to goodwill. The acquisition has
been accounted for using the purchase method of accounting. Accordingly, the
operating results of the acquired business have been included in the
consolidated operating results of Kinetek since September 1, 2004, the effective
date of the acquisition. The operating results of O. Thompson are included with
those of Kinetek's wholly-owned subsidiary, Motion Control Engineering, within
the "Controls" segment.

2.       Summary of Significant Accounting Policies

Principles of Consolidation

         The consolidated financial statements include the accounts of the
Company and its majority-owned subsidiaries. All significant intercompany
transactions and accounts have been eliminated. Operations of certain
subsidiaries outside the United States are included for periods ending two
months prior to the Company's year-end and interim periods to ensure the timely
preparation of the Company's consolidated financial statements.

Reclassifications

         Certain amounts in the prior years' financial statements have been
reclassified to conform to the 2005 presentation.

Cash and Cash Equivalents

         Cash equivalents consist of highly liquid investments with an initial
maturity of three months or less at the time of purchase.

Accounts Receivable and Allowance for Doubtful Accounts

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




                                      27
<PAGE>


Inventories

         Inventories are stated at the lower of cost or market. Inventories,
which are valued at either average or first-in, first-out (FIFO) cost, accounted
for approximately 80% and 78% of the Company's inventories at December 31, 2005
and 2004, respectively. All other inventories are valued using last-in,
first-out (LIFO) cost, which approximated current cost at December 31, 2005 and
2004.

Property, Plant, and Equipment

         Property, plant, and equipment are stated at cost, less accumulated
depreciation. Depreciation is provided using the straight-line method over the
estimated useful lives of the assets. Leasehold improvements and assets under
capital leases are amortized using the straight-line method over the shorter of
the lease term or their estimated productive lives. Amortization of leasehold
improvements and assets under capital leases is included in depreciation
expense.

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


      Buildings                                 5 to 33 years
      Machinery and equipment                   3 to 10 years
      Dies and tooling                          2 to 5  years
      Furniture and fixtures                    3 to 7  years
      Vehicles                                  3 to 5  years


Foreign Currency Translation

         The functional currencies of the Company's foreign operations are the
local currencies. Accordingly, assets and liabilities of the Company's foreign
operations are translated from foreign currencies into U.S. dollars at the
exchange rates in effect at the balance sheet date while income and expenses are
translated at the weighted-average exchange rates for the year. Adjustments
resulting from translation are classified as a component of other comprehensive
income, while the remeasurement of intercompany notes receivable denominated
in Euros from the Company's Italian operation, are classified as a part of
miscellaneous non-operating income/expense.

Goodwill and Other Long-Lived Assets

         Goodwill represents the excess of the purchase price and related costs
over the value assigned to net tangible and identifiable assets of businesses
acquired and accounted for under the purchase method. Accounting rules require
that we test at least annually for possible goodwill impairment. We perform our
test in the fourth quarter of each year. The Company determined the fair value
of each reporting unit using a discounted cash flow approach taking into
consideration projections based on the individual characteristics of the
reporting units, historical trends and market multiples for comparable
businesses. The cash flow estimates incorporate assumptions on future cash flow
growth, terminal values and discount rates. Any such valuation is sensitive to
these assumptions.



                                      28
<PAGE>



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

Deferred Financing Costs

         Deferred financing costs are amortized using the straight line method,
which approximates the interest method, over the terms of the related loans.
Deferred financing costs at December 31, 2005 and 2004 are net of accumulated
amortization of $18,939 and $16,292, respectively. Amortization of deferred
financing costs is included in interest expense.

Income Taxes

         Deferred tax assets and liabilities are determined based on differences
between the financial reporting and tax basis of assets and liabilities and are
measured using the enacted tax rates and laws that are expected to be in effect
when the differences reverse. The operating results of the Company and its
subsidiaries are included in the consolidated federal income tax return of JII.
In addition, the Company and its subsidiaries are party to a tax-sharing
agreement with JII. The Company's income tax provision (benefit) has been
calculated as if the Company would have filed a separate federal income tax
return, except that the Company's net operating losses are eliminated if
absorbed in the JII consolidated federal income tax return.

Revenue Recognition

         The Company's revenue is derived primarily from product sales. Revenue
is recognized in accordance with the terms of the sale, primarily upon shipment
to customers, once the sales price is fixed or determinable, and collectibility
is reasonably assured. Estimated discounts and rebates are recorded as a
reduction of sales in the same period revenue is recognized. Sales returns and
allowances are estimated and recorded based upon historical experience. If
actual future sales returns and allowances are higher than past experience,
additional accruals may be required. If any significant obligations to the
customer with respect to such sale remain to be fulfilled following shipment,
typically involving obligations relating to installation and acceptance by the
buyer, revenue recognition is deferred until such obligations have been
fulfilled.


Product Development and Enhancements

         Our Controls Group accounts for product development and enhancements in
accordance with SFAS No. 86, "Accounting for the Costs of Computer Software to
be Sold, Leased, or Otherwise Marketed." SFAS No. 86 specifies that costs
incurred internally in researching and developing a computer software product
should be charged to expense until technological feasibility has been
established for the product. Once technological feasibility is established, all
software costs are capitalized until the product is available for general
release to customers. Judgment is required in determining when technological
feasibility of a product is established and assumptions are used that reflect
our best estimates. Unamortized product development costs were $1,255 and $0 as
of December 31, 2005 and 2004, respectively.




                                      29
<PAGE>



Shipping and Handling Costs

         Shipping and Handling Costs are included in cost of sales in the
statement of operations.

Use of Estimates

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

Financial Instruments

         The Company's financial instruments include cash equivalents, trade
accounts receivable, accounts payable, accrued expenses, the Senior Notes, the
Senior Secured Notes, the Subordinated Notes, and the revolving credit facility.
Other than the Senior Notes (see Note 8), the fair values of the Company's
financial instruments are not materially different from their carrying values at
December 31, 2005 and 2004.

Concentration of Credit Risk

         Financial instruments which potentially subject the Company to
concentration of credit risk consist principally of cash and cash equivalents,
accounts receivable and the investment in affiliate (see Note 11). The Company
deposits cash and cash equivalents with high-quality financial institutions,
which are federally insured up to prescribed limits. Cash balances may exceed
these limits at any given time.

         The Company closely monitors the credit quality of its customers and
maintains allowances for potential credit losses which, historically, have not
been significant and have been within the range of management's expectations.
The Company generally does not require collateral or other security on trade
receivables.

Derivative Financial Instruments

         The Company recognizes derivative instruments as either assets or
liabilities in the balance sheet at fair value. The accounting for changes in
fair value (i.e., gains or losses) of a derivative financial instrument depends
on whether it has been designated and whether it qualifies as part of an
effective hedging relationship and, further, on the type of hedging
relationship. The fair value of derivative financial instruments was not
significant as of December 31, 2005 and 2004.

New Accounting Pronouncements

         In May 2005, the FASB issued FASB Statement No. 154, Accounting Changes
and Error Corrections ("FAS 154"), a replacement of APB Opinion No. 20,
Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes in
Interim Financial Statements ("FAS 3"). FAS 154 replaces the provisions of FAS 3
with respect to reporting accounting changes in interim financial statements.
FAS 154 is effective for accounting changes and corrections of errors made in
fiscal years beginning after December 15, 2005. Early adoption is permitted for
accounting changes and corrections of errors made in fiscal years beginning
after June 1, 2005. The Company does not expect SFAS 154 will significantly
impact its financial statements upon its adoption on January 1, 2006.


                                      30
<PAGE>

3.       Inventories

         Inventories consist of the following:

                                                          December 31,
                                                  -----------------------------
                                                      2005             2004
                                                      ----             ----

         Raw materials                              $30,163          $30,509
         Work in process                             12,062           11,507
         Finished goods                              12,027           11,642
                                                   ---------        ---------
                                                    $54,252          $53,658
                                                   =========        =========


4.       Property, Plant, and Equipment

         Property, plant, and equipment consist of the following:

                                                           December 31,
                                                   ---------------------------
                                                      2005            2004
                                                      ----            ----

         Land, buildings and
          leasehold improvements                    $21,905         $21,735
         Machinery and equipment                     43,992          40,840
         Furniture and fixtures                      13,050          14,094
         Other (vehicles, dies
          and tooling)                                7,557           7,603
                                                   ---------       ---------
                                                     86,504          84,272

         Less:  Accumulated depreciation
          and amortization                          (57,750)        (54,519)
                                                   ---------       ---------

                                                   $ 28,754        $ 29,753
                                                   =========       =========

5.       Short Term Notes Payable

         FIR Group Holdings Italia and its subsidiaries, have a number of
short-term borrowing facilities available from various banks. The total amount
available under these facilities is approximately $15,607 at an average
interest rate of 4.0% for the year ending December 31, 2005. There were no
outstanding borrowings under these arrangements at December 31, 2005 and 2004.
A portion of these facilities are secured by FIR's assets and a portion are in
the form of overdraft coverage.



                                      31
<PAGE>

6.       Discontinued Operation

         During 2004, the Company undertook a plan to sell Electrical Design and
Control ("ED&C"), a wholly-owned subsidiary.

         Summarized selected financial information for the discontinued
operation as restated is as follows:

                                          2005          2004          2003
                                          ----          ----          ----
Revenues                               $  1,079      $  4,640      $  6,358

(Loss)/income from
discontinued operations                  (1,334)       (5,856)        1,787


The major classes of assets and liabilities of the discontinued operation is as
follows:

                                             2005           2004
                                             ----           ----
Current assets                               $415         $1,978
Property, plant and equipment                   -             14
Other long term assets                          -             32
                                           -------        -------
Total assets                                  415          2,024
Current liabilities                             -            548
                                           -------        -------
Net assets of discontinued
operations                                 $  415         $1,476
                                           -------        -------


On May 2, 2005, the Company sold certain inventory, equipment, intellectual
property assets and contracts of ED&C. The sales price was $93.7, which was
offset by a $150 payment to the buyer to complete those contracts which were not
sold. Therefore, the net proceeds from the sale were ($56.3). The Company no
longer has any ownership interest in ED&C, however it will continue to collect
on the outstanding receivables which were not sold.

7.       Income Taxes

Income from continuing operations before income taxes and cumulative effect of
accounting change was comprised of the following:

                                                    Year Ended December 31,
                                       -----------------------------------------
                                           2005          2004          2003
                                           ----          ----          ----

         Domestic                        $  (983)      $ (3,447)      $(6,637)
         Foreign                           4,835          2,558         1,817
                                       ----------    -----------    ----------

                                         $ 3,852       $   (889)      $(4,820)
                                       ==========    ===========    ==========




                                      32
<PAGE>



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

                                                 Year Ended December 31,
                                     -----------------------------------------
                                         2005           2004          2003
                                         ----           ----          ----

Current:
       Federal                          $    -         $    -        $    -
       State                                678            610           644
       Foreign                            3,311          1,148           593
                                       ---------      ---------     ---------

       Total current                      3,989          1,758         1,237

Deferred:
       Federal                            3,086          3,085         3,151
       State                                928            927           867
       Foreign                             (268)         1,221           466
                                       ---------      ---------     ---------

       Total deferred                     3,746          5,233         4,484
                                       ---------      ---------     ---------

Income tax provision                    $ 7,735        $ 6,991       $ 5,721
                                       =========      =========     =========

         The provision (benefit) for income taxes differs from the amount of
income tax provision (benefit) computed by applying the U.S. federal income tax
rate to income before income taxes and cumulative effect of change in accounting
principle. A reconciliation of the differences is as follows:

                                                   Year Ended December 31,
                                            ------------------------------------
                                              2005          2004        2003
                                              ----          ----        ----

Computed statutory tax provision            $ 1,348      $  (311)     $(1,687)
  Increase/(decrease) resulting from:
     State and local taxes, net of
     federal benefit                          1,044          999        1,006
     Differential in foreign tax
     rates and tax credits                      834           49         (481)
     Change in valuation allowance           (8,301)       4,772        5,589
     Net operating loss reduction             9,349           -            -
     Amortization of goodwill                 3,410        3,410        3,414
     Other                                       51       (1,928)      (2,120)
                                           ---------    ---------    ---------

Income tax provision                        $ 7,735      $ 6,991      $ 5,721
                                           =========    =========    =========




                                      33
<PAGE>


Deferred tax liabilities and assets are comprised of the following:

                                                     December 31,
                                           --------------------------------
                                               2005               2004
                                               ----               ----
Deferred tax liabilities:
     Goodwill                               $(26,060)         $(22,064)
     Foreign deferred taxes                   (3,469)           (3,737)
                                           ----------        ----------

Total deferred tax liabilities               (29,529)          (25,801)

Deferred tax assets:
     Net operating losses                      7,996            14,584
     Property, plant and equipment             4,395             3,925
     Intangibles other than goodwill           2,717             3,212
     Vacation accrual                            432               531
     Employee benefits                           614               848
     Uniform capitalization                      423               506
     Allowance for doubtful accounts             554               707
     Inventory obsolescence reserve              516               459
     Warranty reserve                            443               627
  Other                                          528             1,520
                                           ----------        ----------

Total deferred tax assets                     18,618            26,919
Valuation allowance                          (18,618)          (26,919)
                                           ----------        ----------
Net deferred tax liabilities                $(29,529)         $(25,801)
                                           ==========        ==========

As of December 31, 2005 there was $22,125 of accumulated unremitted earnings
from the Company's foreign subsidiaries on which deferred taxes have not been
provided as undistributed earnings on foreign subsidiaries are considered to be
indefinitely reinvested.

In 2002, the Company adopted SFAS No. 142, which provides that goodwill no
longer be amortized. For tax purposes, goodwill continues to be amortized over a
fifteen-year life. As such, the tax amortization generates a temporary
difference and a corresponding deferred tax liability arises for financial
statement purposes. Because goodwill is no longer amortized for book purposes,
the Company cannot determine when the resulting deferred tax liabilities will
reverse. Therefore, the Company is not able to utilize any future reversal of
the deferred tax liability related to goodwill to support the realization of the
deferred tax assets.

         As previously noted, the Company and its domestic subsidiaries (Kinetek
Group) join in the annual filing of a U.S. federal consolidated income tax
return with their ultimate parent company, Jordan Industries, Inc. (Parent).
During 2004, Parent realized $90.4 million of cancellation of indebtedness
income as a result of modifications to certain of its outstanding debt. However,
the Internal Revenue Code provides exceptions to the recognition of certain
types of cancellation of indebtedness income for U.S. federal income tax
purposes. These exceptions required the Parent and certain subsidiaries,
including members of the Kinetek Group, to reduce net operating loss
carryforwards. The gross net operating loss carryforward of Kinetek was reduced
by $26.7 million.




                                      34
<PAGE>

9.       Long-Term Debt

         Long-term debt consists of the following:

                                                              December 31,
                                                     --------------------------
                                                       2005             2004
                                                       ----             ----
         10.75% Senior Notes,
           including $666 and $1,327
           of unamortized premium at
           December 31, 2005 and 2004,
           respectively (A)                         $270,666         $271,326
         Revolving Credit Facility (B)                16,972           12,244
         Subordinated Notes Payable (C)                1,500            1,500
         Capital leases (D)                              451              615
         5.0% Secured Senior Notes,
           including $1,433 and $2,358 of
           unamortized discount at
           December 31, 2005 and 2004,
           respectively (E)                           13,567           12,642
         10.0% Secured Senior Notes,
           including $396 and $652 of
           unamortized discount at
           December 31, 2005 and 2004,
           respectively (E)                           10,604           10,348
         Bank loans of foreign subsidiary (F)          4,820            7,506
         Loan payable to JV partner (G)                  620              887
                                                  -----------      -----------
                                                     319,200          317,068
         Current Portion                            (293,354)         (20,959)
                                                  -----------      -----------
                                                     $25,846         $296,109
                                                  -----------      -----------

(A)      Interest on the Senior Notes is payable in arrears on May 15 and
         November 15 of each year. The Senior Notes are unsecured obligations of
         the Company and mature on November 15, 2006. The Senior Notes are
         redeemable at the option of the Company, in whole or in part, at any
         time on or after November 15, 2001. The Indenture relating to the
         Senior Notes contains certain covenants which, among other things,
         restrict the ability of the Company to incur additional indebtedness,
         to pay dividends or make other restricted payments, engage in
         transactions with affiliates, to complete certain mergers or
         consolidations, or to enter into certain guarantees of indebtedness.

         The fair value of the Senior Notes was approximately $253,800 at
         December 31, 2005. The fair value was calculated by multiplying the
         face amount by the market price at December 31, 2005.

(B)      The Company's Loan and Security Agreement (Credit Agreement),
         expiring the earlier of December 18, 2006, or 30 days prior to
         the maturity date of the Senior Notes, is in the form of a revolving
         credit facility and provides for borrowings of up to $35,000 to fund
         acquisitions and provide working capital, and for other general
         corporate purposes. Borrowings are limited by a borrowing base
         formula consisting of accounts receivable, inventory, machinery and
         equipment and real estate. Borrowings bear interest at a rate of
         prime plus 1.35% (8.4% at December 31, 2005), subject to change based
         on the Company's interest coverage ratio, as defined. Unused
         commitments under the revolving credit facility are subject to an
         availability fee of 0.375% per annum subject to change based on the
         Company's interest coverage ratio, as defined. Borrowings are secured
         by the stock and substantially all of the assets of the Company. The
         Company had $6,118 of borrowing capacity under the Credit Agreement
         as of December 31, 2005.


                                      35
<PAGE>

         The Credit Agreement contains covenants which, among other things,
         provide for a minimum level of interest coverage, as defined, and limit
         the Company's ability to incur additional indebtedness, create liens,
         make restricted payments, engage in affiliate transactions or mergers
         and consolidations, and make asset sales.

         The Credit Agreement expires December 18, 2006. The Company intends to
         replace the credit facility made under the Credit Agreement in 2006.
         Management is confident such refinancing can be obtained under
         favorable terms to the Company, however, such terms will be subject to
         market conditions which may change significantly.

(C)      The Subordinated Notes Payable at December 31, 2005 consists of a
         $1,500 note payable to the former shareholder of Merkle-Korff, a
         subsidiary of the Company, and is due on January 1, 2007 and bears
         interest at 9% per annum.

(D)      Interest rates on capital leases range from 6.4% to 7.6% and mature
         in installments through 2010.

         The future minimum lease payments as of December 31, 2005 under capital
         leases consist of the following:

         2006                                                       $336
         2007                                                        143
         2008                                                         14
         2009                                                         14
         2010                                                          1
                                                                --------
            Total                                                    508
         Less amount representing interest                           (57)
                                                                --------
         Present value of future minimum lease payments             $451
                                                                ========

         The present value of the future minimum lease payments approximates the
         book value of property, plant and equipment under capital leases at
         December 31, 2005.

(E)      Interest on the Secured Senior Notes is payable in arrears on May 1 and
         November 1 of each year. The Secured Senior Notes are secured
         obligations of the Company and mature on April 30, 2007. The Indenture
         relating to the Senior Notes contains certain covenants which, among
         other things, restricts the ability of the Company to incur additional
         indebtedness, to pay dividends or make other restricted payments,
         engage in transactions with affiliates, to complete certain mergers or
         consolidations, or to enter into certain guarantees of indebtedness.

(F)      One of the Company's foreign subsidiaries has bank loans of $4,820 and
         $7,506 as of December 31, 2005 and 2004, respectively. Interest rates
         on these loans range from 5.6% to 6.1% and mature in 2006. The Company
         plans to renew these loans as they mature.


                                      36
<PAGE>


(G)      The Company has a loan due to a joint venture partner of one of its
         foreign subsidiaries of $620 and $887 as of December 31, 2005 and 2004,
         respectively. The interest rate on the loan is 5.6% and matures in
         April of 2006.

         Aggregate maturities of long-term debt at December 31, 2005 are as
         follows:

          2006            $293,354
          2007              25,819
          2008                  13
          2009                  13
          2010                   1
                        -----------
                          $319,200
                        ===========


As noted above, 92% of the Company's long-term debt matures within the next
year. Currently, the Company is contemplating various avenues of refinancing
this debt, and Management is confident that it will do so prior to the maturity.
If the Company is unable to refinance or enter into a transaction that allows it
to pay off this debt, then there is substantial doubt about the Company's
ability to continue as a going concern.


10.      Operating Leases

         The Company leases certain land, buildings, and equipment under
noncancellable operating lease agreements expiring in various years through
2011. Minimum future lease payments, by year, under noncancellable operating
leases, including those with related parties (Note 10), are as follows at
December 31, 2005:

                2006                      $ 3,168
                2007                        2,968
                2008                        2,818
                2009                        2,273
                2010                        1,806
                Thereafter                    700
                                        ----------
                                          $13,733
                                        ==========

         Total rent expense was $3,397, $3,305 and $3,041 for the years ended
December 31, 2005, 2004 and 2003, respectively.

11.     Benefit Plans

         Certain of the Company's subsidiaries participate in the JII 401(k)
Savings Plan (the "Plan"), a defined contribution plan for salaried and hourly
employees. In order to participate in the Plan, employees must be at least 21
years old and have worked at least 1,000 hours during the first 12 months of
employment. Each eligible employee may contribute from 1% to 15% of their
before-tax wages into the Plan. In addition to the JII 401(k) Plan, certain
subsidiaries have additional defined contribution plans in which employees may
participate. The Company made contributions to these plans totaling
approximately $1,293, $1,068 and $1,324 for the years ended December 31, 2005,
2004 and 2003, respectively.

         FIR provides for a severance liability for all employees at 7.8% of
each respective employee's annual salary. In addition, the amount accrued is
adjusted each year according to an official index (equivalent to 0.75% of the
retail price index). This obligation is payable to employees when they leave the


                                      37
<PAGE>

Company and approximated $3,007 and $3,358 at December 31, 2005 and 2004,
respectively, which is included in other non-current liabilities in the
Company's balance sheets.

12.      Related Party Transactions

Services Agreements.  The Company and each of its subsidiaries are subject to
the following four agreements and arrangements with JII:

         First, the Company and each of its subsidiaries are parties to a
transaction advisory agreement (the "Subsidiary Advisory Agreement") with JII,
pursuant to which the Company and its subsidiaries are charged by JII (i)
investment banking and sponsorship fees of up to 2.0% of the purchase price of
acquisitions, joint ventures, minority investments or sales involving the
Company and its subsidiaries or their respective businesses or properties (which
were $0, $73 and $0 in 2005, 2004, and 2003, respectively); (ii) financial
advisory fees of up to 1.0% of debt, equity, or other financing or refinancing
involving the Company or such subsidiary, in each case, arranged with the
assistance of JII or its affiliates (which was $0 in 2005, 2004 and 2003,
respectively); and (iii) reimbursement for JII's out-of-pocket costs in
connection with providing such services (which was $0 in 2005, 2004 and 2003).
Mssrs. Jordan, Quinn, Boucher and Zalaznick, directors of Parent, are directors
and shareholders of JII.

         Second, the Company and each of its subsidiaries are parties to a
management consulting agreement (the "Subsidiary Consulting Agreement") with
JII, pursuant to which the Company and its subsidiaries pay JII annual
consulting fees of the greater of (i) 3.0% of the Company's net income before
interest, tax, depreciation and amortization and other non-cash charges, or (ii)
1.0% of the Company's net sales for such services and are required to reimburse
JII for its out-of-pocket costs related to its services. Pursuant to the
Subsidiary Consulting Agreement, JII (but not JII's affiliates) is obligated to
present all acquisition, business and investment opportunities that relate to
manufacturing, assembly, distribution or marketing of products and services in
the motors, gears and motion control industries to the Company, and JII is not
permitted to pursue such opportunities or present them to third parties unless
the Company determines not to pursue such opportunities or consents thereto. In
accordance with this agreement, the Company paid approximately $3,366, $3,193
and $2,916 for the years ended December 31, 2005, 2004 and 2003, respectively,
which are reflected as Management Fees and Other in the Consolidated Statement
of Operations.

         Third, the Company and each of its subsidiaries are parties to a
services agreement (the "JI Properties Services Agreement") with JI Properties,
Inc. ("JI Properties"), a subsidiary of JII, pursuant to which JI Properties
provides certain real estate and other assets, transportation and related
services to the Company. Pursuant to the JI Properties Services Agreement, the
Company is charged for its allocable portion of such services based upon its
usage of such services and its relative revenues, as compared to JII and its
other subsidiaries.

         Fourth, the Company and JII are parties to a transition agreement (the
"Transition Agreement") pursuant to which JII provides office space and certain
administrative and accounting services to the Company to facilitate the
operations of the Company. Also, JII allocates its overhead, general and
administrative charges and expense among JII and its subsidiaries, including the
Company, based on the respective revenues and usage of corporate overhead by JII
and its subsidiaries. The Company reimburses JII for services provided pursuant
to the Transition Agreement on an allocated cost basis.


                                      38
<PAGE>

         In accordance with the JI Properties Services Agreement and the
Transition Agreement, such combined charges were $4,634, $5,807 and $7,084 for
the years ended December 31, 2005, 2004 and 2003, respectively, and are
reflected within Selling, General, and Administrative expenses in the
Consolidated Statement of Operations.

         The above agreements expire in December 2011, but are automatically
renewed for successive one-year terms, unless either party provides written
notice of termination 60 days prior to the scheduled renewal date.

         Tax Sharing Agreement. The Company and each of its subsidiaries are
parties to a Tax Sharing Agreement (the "Tax Sharing Agreement") between JII and
each of its consolidated subsidiaries for U.S. federal income tax purposes.
Pursuant to the Tax Sharing Agreement, the Company and each of its consolidated
subsidiaries owes to JII an amount determined by reference to each entity's
separate return tax liability as defined in Treasury Regulation Section 1.1552-
1(a)(2) (ii). For the years ended December 31, 2005, 2004 and 2003, income tax
payments made by the Company to JII under the Tax Sharing Agreement were $0.

         Related Party Leases. The Company leases certain plants, warehouses,
and offices under leases with affiliated entities. Rent expense, including real
estate taxes attributable to these leases, amounted to $1,511, $1,614 and $1,653
for the years ended December 31, 2005, 2004 and 2003, respectively. Future
minimum rental payments required under these leases are as follows:

                    2006                     $1,589
                    2007                      1,364
                    2008                      1,220
                    2009                      1,184
                    2010                      1,184
                    Thereafter               $  493


     Investment in Affiliate. The Company has a $12,344 investment in the Class
A and Class B Preferred Units of JZ International, LLC. These debt securities
are not publicly traded and do not have a determinable fair value. The cost
method of accounting is used to account for this investment. The Preferred Units
have a cumulative 5% annual return. The Class A Preferred Units may be redeemed
at any time at the discretion of the Board of Directors of JZ International, but
no later than December 31, 2017, whereas the Class B Preferred Units may be
redeemed at any time at the discretion of the Board of Directors of JZ
International, but no later than December 31, 2018. We will record an impairment
charge when we believe the investment has experienced a decline in value below
its current carrying amount that is other than temporary. JZ International's
Chief Executive Officer is David W. Zalaznick, and its members include Messrs.
Jordan, Quinn, Zalaznick and Boucher, who are the Company's and/or Parent's
directors and stockholders. JZ International and its subsidiaries are focused on
making European and other international investments. The Company is accounting
for this investment under the cost method.




                                      39
<PAGE>



         Legal Fees. An individual who is a shareholder, General Counsel and
Assistant Secretary of the Parent is also a partner in a law firm used by the
Company. The firm was paid $174, $174 and $277 in fees and expenses during the
years ended December 31, 2005, 2004 and 2003, respectively. The rates charged to
the Company were at arms-length.

         Due from Affiliate. The Company has a net receivable from JII of $8,504
and $8,415 at December 31, 2005 and 2004, respectively, that is reflected in the
consolidated balance sheets as "due from affiliated company".

13.      Additional Purchase Price Arrangements

      Kinetek has a contingent purchase price agreement relating to its
acquisition of Motion Control Engineering on December 18, 1997. The terms of
this agreement provide for additional consideration to be paid to the sellers.
The agreement is exercisable at the sellers' option during a five year period
that began in 2003. When exercised, the additional consideration will be based
on Motion Control Engineering's operating results over the two preceding fiscal
years. Payments, if any, under the contingent agreement will be placed in a
trust and paid out in cash over a three or four-year period, in annual
installments according to a schedule, which is included in the agreement.
Additional consideration, if any, will be recorded as an addition to goodwill.

14.      Segment Data

Description of Segments

         The Company operates in two separate business segments; electric motors
("Motors") and electronic motion control systems ("Controls"). The Motors
segment consists of subfractional motors, fractional/integral motors, and gears
and gearboxes. The Controls segment consists of motion control systems.

         The Company's subfractional horsepower products are comprised of motors
and gearmotors which power applications up to 30 watts (1/25 horsepower). These
small, "fist-size" AC and DC motors are used in light duty applications such as
snack and beverage vending machines, refrigerator ice dispensers and photocopy
machines.

         The Company's fractional/integral horsepower products are comprised of
AC and DC motors and gearmotors having power ranges from 1/8 to 300 horsepower.
Primary end markets for these motors include commercial floor care equipment,
commercial dishwashers, commercial sewing machines, industrial ventilation
equipment, golf carts, lift trucks and elevators.

         The Company's precision gear and gearbox products are produced in sizes
of up to 16 inches in diameter and in various customized configurations such as
pump, bevel, worm and helical gears. Primary end markets for these products
include original equipment manufacturers ("OEMs") of motors, commercial floor
care equipment, aerospace and food processing product equipment.

         The Company's motion control systems are used primarily in the elevator
modernization market. The systems typically control several components such as
electric motors, hydraulic or pneumatic valves, actuators and switches that are
required for the elevator systems to function properly.





                                      40
<PAGE>



Measurement of Segment Operating Income and Segment Assets

         The Company evaluates performance and allocates resources based on
operating income. The accounting policies of the reportable segments are the
same as those described in Note 2, "Summary of Significant Accounting Policies".
No single customer accounts for 10% or more of consolidated net sales.
Identifiable assets are those used by each segment in its operations. Corporate
assets consist primarily of cash, due from affiliate, investment in affiliate
and deferred financing fees.

























                                      41
<PAGE>
<TABLE>
<CAPTION>


Factors Used to Identify the Enterprise's Reportable Segments

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

   Summary financial information by business segment is as follows:

                                                                      Year Ended
                                                                     December 31,
                                             -----------------------------------------------------
                                                 2005                2004              2003
                                                 ----                ----              ----
<S>                                           <C>               <C>               <C>
Net Sales
Motors                                          $252,128           $230,372          $201,654
Controls                                          85,396             83,495            76,655
                                               ----------         ----------        ----------
                                                $337,524           $313,867          $278,309
                                               ==========         ==========        ==========

Operating Income and Income
(Loss) before Income Tax
Motors                                          $ 40,495           $ 36,291          $ 35,458
Controls                                          13,326             10,571             8,686
Corporate Expenses (1)                           (13,169)           (12,709)          (14,096)
                                               ----------         ----------        ----------
   Total Operating Income                         40,652             34,153            30,048
Interest Expense                                 (35,739)           (35,592)          (34,876)
Interest Income                                      129                169               140
Miscellaneous, net                                (1,190)               381              (132)
                                               ----------         ----------        ----------
   Income (loss)
    before Income Tax                           $  3,852           $   (889)         $ (4,820)
                                               ==========         ==========        ==========


Identifiable Assets
Motors                                          $274,814           $276,007          $263,411
Controls                                          70,573             67,441            65,675
Corporate                                         26,270             28,648            22,651
                                               ----------         ----------        ----------
                                                $371,657           $372,096          $351,737
                                               ==========         ==========        ==========

Capital Expenditures
Motors                                          $  3,757           $  3,516          $  3,240
Controls                                             310                482               793
                                               ----------         ----------        ----------
                                                $  4,067           $  3,998          $  4,033
                                               ==========         ==========        ==========

Depreciation
Motors                                          $  4,448           $  4,281          $  5,235
Controls                                             929              1,206             1,486
                                               ----------         ----------        ----------
                                                $  5,377           $  5,487          $  6,721
                                               ==========         ==========        ==========

Amortization of Intangibles
Motors                                          $    126           $    134          $    169
Controls                                              -                  -                 -
                                               ----------         ----------        ----------
                                                $    126           $    134          $    169
                                               ==========         ==========        ==========



(1) Fees paid to JII under the Services Agreements (Note 11) are included in corporate expenses.



                                      42
<PAGE>
<CAPTION>



        Summary financial information by geographic area is as follows:

                                                              Year Ended
                                                             December 31,
                                          -----------------------------------------------
                                               2005             2004             2003
                                               ----             ----             ----
<S>                                     <C>              <C>               <C>
Net sales to
unaffiliated customers
North America                               $267,867         $246,865         $229,011
Europe                                        52,948           50,982           42,138
Asia                                          16,709           16,020            7,160
                                          -----------      -----------      -----------
                                            $337,524         $313,867         $278,309
                                          ===========      ===========      ===========

Identifiable long-lived assets
(including intangible assets)
North America                               $193,588         $193,021         $193,589
Europe                                        14,388           15,500           14,497
Asia                                          16,189           15,610           15,900
                                          -----------      -----------      -----------
                                            $224,165         $224,131         $223,986
                                          ===========      ===========      ===========

15.      Goodwill

On January 1, 2002, the Company adopted Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets".

During the fourth quarter of 2005, 2004 and 2003, the Company performed its
annual impairment review, all of which resulted in no impairment.

The Company determined the fair value of each reporting unit using a discounted
cash flow approach taking into consideration projections based on the individual
characteristics of the reporting units, historical trends and market multiples
for comparable businesses. The cash flow estimates incorporate assumptions on
future cash flow growth, terminal values and discount rates. Any such valuation
is sensitive to these assumptions.

The changes in the carrying amount of goodwill for the year ended December 31,
2005 were as follows:

<CAPTION>
                                              Motors          Controls       Consolidated
                                          --------------   --------------   --------------
<S>                                        <C>             <C>               <C>
Balance as of January 1, 2004                $144,491         $ 35,870         $180,361
 Impact of foreign exchange
  fluctuations                                    780               -               780
                                            ----------       ----------       ----------
Balance as of January 1, 2005                $145,271         $ 35,870         $181,141

Purchase price adjustment                          -                81               81
 Impact of foreign exchange
  fluctuations                                   (486)              -              (486)
                                            ----------       ----------       ----------
Balance at December 31, 2005                 $144,785         $ 35,951         $180,736
                                            ==========       ==========       ==========


</TABLE>





                                      43
<PAGE>



16.      Legal Proceedings

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

17.      Settlement of Litigation

         In June 2003, the Company reached a settlement with the former
shareholders of ED&C in which the Company received $1,150 cash, and $3,850 in
Subordinated Notes Payable to the ED&C shareholders plus $693 of accrued and
unpaid interest was extinguished. The settlement is recognized as income on the
Consolidated Statements of Operations within Income (Loss) from discontinued
operations, net.

18.      Warranties

         The Company provides warranties on certain products for varying lengths
of time. The Company estimates the costs that may be incurred and records a
liability in the amount of such costs at the time product revenue is recognized.
Changes to the Company's product warranty accrual during the year are as
follows:

                                                   2005        2004
                                                ---------    ---------
       Balance, beginning of year                $ 1,934      $ 1,615
       Warranties issued                             213          572
       Change in estimate                           (537)          -
       Settlements                                  (409)        (253)
                                                ---------    ---------
       Balance, end of year                      $ 1,201      $ 1,934
                                                ---------    ---------

19.      Research and Development Costs

         The Company incurred $4,603, $4,542 and $4,084 of research and
development costs during 2005, 2004 and 2003, respectively.










                                      44
<PAGE>



Item 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE
         ---------------------------------------------------------------
         None.


Item 9A. CONTROLS AND PROCEDURES
         -----------------------
         Pursuant to Section 302 of the Sarbanes-Oxley Act and Rule 13a-15 of
the Securities Exchange Act of 1934 ("Exchange Act") promulgated thereunder, we,
with the participation of our chairman and our chief financial officer have
evaluated the effectiveness of our disclosure controls and procedures as of
December 31, 2005. Based on such evaluation, our chairman and our chief
financial officer have concluded that our disclosure controls and procedures
were effective.

         Since December 31, 2005, there have been no changes in the internal
control over financial reporting that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.

Item 9B. OTHER INFORMATION
         -----------------
         None.


      Part III
      --------
Item 10. DIRECTORS AND EXECUTIVE OFFICERS
         --------------------------------
         The following sets forth the names and ages of the Company's directors,
executive officers (and those of our Parent) and other key employees and the
positions they hold as of the date of this annual report:

       Name                     Age           Position with Company
     Thomas H. Quinn            58       Chairman of Company and Parent
     D. Randall Bays            50       President and Chief Operating Officer
                                         of Company and Director of Parent
     Daniel D. Drury            44       Chief Financial Officer of Company
                                         and Parent
     Richard D. Meyer           57       President, Merkle-Korff Industries
     Paolo Bergamaschi          36       President, FIR Group
     James M. Jackson           46       President, Advanced DC Motors
     Jonathan F. Boucher        49       Director of Parent
     John W. Jordan, II         58       Director of Company and Parent
     David W. Zalaznick         51       Director of Parent
     John D. Simms, Sr.         78       Director of Parent

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

   Mr. Quinn has served as Chairman of the Company since its inception and
President from November 15, 2002 through November 2004. Since 1988, Mr. Quinn is
also President, Chief Operating Officer and a director of JII. From November
1985 to December 1987, Mr. Quinn was a Group Vice President for Baxter
International, Inc. ("Baxter"). From September 1970 through 1985, Mr. Quinn was
employed by American Hospital Supply Corporation ("American Hospital") in a
variety of management capacities, where he was a Group Vice President of the
Hospital Group and a corporate officer when American Hospital was acquired by
Baxter. Mr. Quinn is also Chairman and a member of the board of directors of a
number of privately held companies. He is also a senior principal of The Jordan
Company.


                                      45
<PAGE>

   Mr. Bays was appointed President and Chief Operating Officer of Kinetek, Inc.
in November 2004. As President, Mr. Bays succeeds Thomas H. Quinn, who will
continue to be the Company's Chief Executive Officer and a Director. Chief
Operating Officer is a newly created post. Since April 1997, Mr. Bays has been
President of the Company's Imperial Electric subsidiary, and in January 2003 he
was appointed President of the Company's Fractional/Integral Products Group,
which is comprised of Imperial Electric, Euclid Universal, Gear Research,
Advanced DC Motors, FIR Group, and Kinetek De Sheng. Before joining the Company,
Mr. Bays held several senior management positions in General Electric's motor
and control business from 1991 to 1997. Prior to that, Mr. Bays held senior
management positions in Bomar Aerospace, Inc.

   Mr. Drury has served as Chief Financial Officer since April 2000. Prior to
joining the Company, Mr. Drury held a succession of financial management
positions with various divisions of General Electric from 1982 to 2000, most
recently as Finance Manager - Control Products at GE Industrial Systems.

   Mr. Meyer joined Merkle-Korff Industries in March 2004 as President and COO
and was named President and CEO in November 2004. Prior to joining Merkle-Korff
Industries, Mr. Meyer held senior management positions at Regal-Beloit in its
Electrical Group from 1998-2004 and at MagneTek from 1981-1997 in its Motor
Group. Prior to that Mr. Meyer held various management positions with Franklin
Electric and General Electric.

   Mr. Bergamaschi has served as the President of FIR since 1998. Prior to that,
Mr. Bergamaschi held several management positions within FIR.

   Mr. Jackson has served as President of ADC since July 2000. From 1995 until
joining ADC, Mr. Jackson held several senior management positions with VAPOR, a
division of WABTEC. Prior to that, Mr. Jackson held various management positions
at GE, Square D, and a variety of other companies.

   Mr. Boucher has served as a director of the Parent since its inception. Since
1983, Mr. Boucher has been a partner of The Jordan Company, a private merchant
banking firm. Mr. Boucher is also a director of JII and Jackson Products, Inc.
as well as other privately held companies.

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

   Mr. Zalaznick has served as a director of the Parent since June 1997. Since
1982, Mr. Zalaznick has been a managing partner of The Jordan Company. Mr.
Zalaznick is also the Managing Member, Chairman of the Management Board and
Chief Executive Officer of JZ International, LLC, Managing Member of Resolute
Fund Partners, LLC, President of TJC Management Corporation and Chairman of
Jordan/Zalaznick Advisors, Inc. and President of Jordan/Zalaznick Capital
Company. Mr. Zalaznick is also a director of Sensus Metering Systems, Inc., TAL
International Group, Inc., Marisa Christina, Inc. as well as other privately
held companies.


                                      46
<PAGE>

   Mr. Simms has served as a director of the Parent since 1998. Mr. Simms was
the owner of Merkle-Korff from 1966 until September 22, 1995 when Merkle-Korff
was purchased by the Company. Mr. Simms has nearly fifty years of experience in
the electric motor business.





Board of Directors

      Liability Limitation. The Certificate of Incorporation provides that a
director of the Company shall not be personally liable to it or its stockholders
for monetary damages to the fullest extent permitted by Delaware Corporation
Law. In accordance with Delaware Corporation Law, the Certificate of
Incorporation does not eliminate or limit the liability of a director for acts
or omissions that involve intentional misconduct by a director or a knowing
violation of law by a director for voting or assenting to an unlawful
distribution, or for any transaction from which the director will personally
receive a benefit in money, property, or services to which the director is not
legally entitled. Delaware Corporation Law does not affect the availability of
equitable remedies such as an injunction or rescission based upon a director's
breach of his duty of care. Any amendment to these provisions of the Delaware
Corporation Law will automatically be incorporated by reference into the
Certificate of Incorporation and the Bylaws, without any vote on the part of its
stockholders, unless otherwise required.

      Indemnification Agreements. The Company and each of its directors and
certain executive officers have entered into indemnification agreements. The
indemnification agreements provide that the Company will indemnify the directors
against certain liabilities (including settlements) and expenses actually and
reasonably incurred by them in connection with any threatened or pending legal
action, proceeding or investigation (other than actions brought by or in the
right of the Company) to which any of them is, or is threatened to be, made a
party by reason of their status as a director, officer or agent of the Company,
or serving at the request of the Company in any other capacity for or on behalf
of the Company; provided that (i) such director acted in good faith and in a
manner not opposed to the best interest of the Company, (ii) with respect to any
criminal proceedings had no reasonable cause to believe his or her conduct was
unlawful, (iii) such director is not finally adjudged to be liable for
negligence or misconduct in the performance of his or her duty to the Company,
unless the court views in light of the circumstances the director is
nevertheless entitled to indemnification, and (iv) the indemnification does not
relate to any liability arising under Section 16(b) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), or the rules or regulations
promulgated thereunder. With respect to any action brought by or in the right of
the Company, directors are also indemnified to the extent not prohibited by
applicable laws or as determined by a court of competent jurisdiction, against
expenses actually and reasonably incurred by them in connection with such action
if they acted in good faith and in a manner they reasonably believed to be in or
not opposed to the best interests of the Company.

         Code of Ethics. The Board of Directors has adopted a Code of Ethics for
the Chief Executive Officer, the Chief Financial Officer, the Chief Operating
Officer, and other senior financial personnel. A copy of the Code is available
on the Company's website at www.kinetekinc.com. The company will disclose any
amendments or waivers of the Code of Ethics on the same website.


                                      47
<PAGE>


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

Item 11. EXECUTIVE COMPENSATION
         ----------------------
Directors' Compensation

         Directors of the Parent receive $20,000 per year for serving as a
director of the Company. In addition, the Company reimburses directors for their
travel and other expenses incurred in connection with attending meetings of the
Board of Directors.

Executive Compensation

         The following table sets forth a summary of certain information
regarding compensation paid or accrued by the Company for services rendered to
the Company for the fiscal year ended December 31, 2005 to those persons who
were, (i) the Company's chief executive officer and (ii) the Company's most
highly compensated executive officers other than the chief executive officer
whose total salary and bonus exceeded $100,000 during such period.

<TABLE>
<CAPTION>
                                                                                                   Long Term
                                                        Annual Compensation                      Compensation
                                                        -------------------                      ------------
Name and                                                                   Other Annual              LTIP
Principal Position            Year          Salary            Bonus        Compensation(1)          Payouts
------------------            ----          ------            -----        ---------------          -------
<S>                          <C>          <C>              <C>             <C>                  <C>
Thomas H. Quinn (2)
 Chairman of the
 Board and Chief
 Executive Officer            2005         $      -         $      -            $    -            $    -
                              2004         $      -         $      -            $    -            $    -
                              2003         $      -         $      -            $    -            $    -

D. Randall Bays
 President and
 Chief Operating
 Officer                      2005         $ 388,808        $ 110,000           $    -            $ 150,000
                              2004         $ 342,019        $ 100,000           $    -            $ 125,000

Daniel D. Drury
 Chief Financial
 Officer                      2005         $ 210,000        $ 100,000           $    -            $    -
                              2004         $ 205,833        $ 55,000            $    -            $    -
                              2003         $ 180,000        $                   $    -            $    -

(1)      For the periods indicated, no executive officer named in the table
         received any Other Annual Compensation in an amount in excess of the
         lesser of either $50,000 or 10% of the total of Annual Salary and
         Bonus reported for him in the two preceding columns.
(2)      Does not reflect compensation paid to Mr. Quinn by JII.

   The Company does not maintain a stock option or stock purchase plan and has
not awarded any of its employee's individual stock option grants.
</TABLE>


                                      48
<PAGE>


Compensation Committee Interlock and Insider Participation

         The Board of Directors does not maintain a Compensation Committee.
During fiscal 2005, however, Messrs. Boucher, Jordan and Quinn participated in
deliberations of the Board of Directors concerning executive officer
compensation. During 2005, certain of the foregoing executive officers of the
Company served and currently serve as directors, executive officers and members
of a compensation committee of another entity, one of whose executive officers
served and currently serves as a director of the Company.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
         --------------------------------------------------------------
         All of the outstanding common stock of the Company is owned by Parent.
The table below sets forth as of March 15, 2006 certain information regarding
beneficial ownership of the two classes of common stock of Parent (Class A and
Class B) held by (i) each of its directors and executive officers who own shares
of Class B common stock of Parent, (ii) all directors and executive officers of
Parent as a group and (iii) each person known by Parent to own beneficially more
than 5% of its common stock. The Company believes that each individual or entity
named has sole investment and voting power with respect to shares of common
stock of Parent indicated as beneficially owned by them, except as otherwise
noted.

                                                    Amount of Beneficial
                                                        Ownership (1)
                                            -----------------------------------
                                               Number of          Percentage
                                                 Shares             Owned
Executive Officers and Directors:
John W. Jordan II (2) (3) (4) (5)             7,136.8809             7.2
David W. Zalaznick (2) (4) (6)                3,531.2473             3.5
Jonathan F. Boucher (2)                       1,116.5587             1.1
Thomas H. Quinn (2)                           1,799.7294             1.8
D. Randall Bays                                   0.0000             0.0
Daniel D. Drury                                   0.0000             0.0
All directors and executive officers
  as a Group (10 persons)                    13,584,4163            13.6

Other Principal Stockholders:
Jordan Industries, Inc (7)                   80,000.0000            80.2
Leucadia Investors, Inc.                      2,019.7802             2.0
JII Partners (8)                              1,500.0000             1.5

(1)         Calculated pursuant to Rule 13d-3(d) under the Exchange Act. Under
            Rule 13d-3(d), shares not outstanding which are subject to options,
            warrants, rights or conversion privileges exercisable within 60 days
            are deemed outstanding for the purpose of calculating the number and
            percentage owned by such person, but not deemed outstanding for the
            purpose of calculating the percentage owned by each other person
            listed. As of March 31, 2003, there were 99,700 shares of Class A
            and Class B common stock issued, including (i) 80,000 shares of
            Class A common stock issued and outstanding and (ii) 19,700 shares
            of Class B common stock of Parent issued, of which 19,400 shares
            were issued and outstanding and 300 shares were issued and held in
            treasury.

(2)         Does not include shares of Class B common stock of Parent owned by
            JII Partners Limited Partnership as to which the named individuals
            disclaim beneficial ownership.

(3)         Includes 0.1650 shares of Class B common stock held personally and
            7,136.7159 shares of Class B common stock held by the John W. Jordan
            II Revocable Trust. Does not include 51.025 shares of Class B common
            stock held by Daly Jordan O'Brien, a sister of Mr. Jordan. 51.025
            shares of Class B common stock held by Elizabeth O'Brien Jordan,
            also a sister of Mr. Jordan or 51.025 shares of Class B common stock
            held by George C. Jordan, Jr., the brother of Mr. Jordan.

(4)         Does not include 16.4973 shares of Class B common stock held by the
            Jordan/Zalaznick Capital Company or 577.4053 shares of Class B
            common stock held by JZ Equity Partners PLC, a publicly traded U.K.
            investment trust advised by an affiliate of The Jordan Company
            (which is controlled by Messrs. Jordan and Zalaznick).


                                      49
<PAGE>

(5)         Does not include  535.8871  shares of Class B common stock held by
            The Jordan Family Trust, of which John W. Jordan II, George
            C. Jordan, Jr. and G. Robert Fisher are the Trustees.

(6)         Does not include 13.5558 shares of Class B common stock held by
            Bruce H. Zalaznick, the brother of Mr. Zalaznick.

(7)         JII owns all of the issued and outstanding of Class A common stock,
            which entitles JII to approximately 80% of the voting power as of
            the date hereof. The principal address of JII is ArborLake Centre,
            Suite 550, 1751 Lake Cook Road, Deerfield, IL 60015.

(8)         JII Partners is an investment partnership whose partners include
            certain officers and employees of JII and its affiliates. The
            principal address of JI Partners is ArborLake Centre, Suite 550,
            1751 Lake Cook Road, Deerfield, IL 60015.

The Company does not maintain any compensation plans under which equity
securities are authorized for issuance.


Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
         ----------------------------------------------
                (ALL DOLLAR AMOUNTS IN THOUSANDS)

         Service Agreements. The Company, our parent, and substantially all of
our subsidiaries are parties to a transaction advisory agreement (the
"Subsidiary Advisory Agreement") with JII, pursuant to which we and our
subsidiaries pay JII (i) investment banking and sponsorship fees of up to 2.0%
of the purchase price of acquisitions, joint ventures, minority investments or
sales involving us and our subsidiaries or their respective businesses or
properties (which were $0, $73 and $0 in 2005, 2004 and 2003 pursuant to this
agreement or the predecessor agreement, as applicable); (ii) financial advisory
fees of up to 1.0% of any debt, equity or other financing or refinancing
involving us or such subsidiary, in each case, arranged with the assistance of
JII or its affiliates (which were $0, $0 and $0 in 2005, 2004 and 2003 pursuant
to this agreement or the predecessor agreement, as applicable); and (iii)
reimbursement of JII's out-of-pocket costs in connection with providing such
services (which were $0 in 2005, 2004 and 2003, pursuant to this agreement or
the predecessor agreement, as applicable). The amount of such fees payable in
each such transaction will be no less favorable to us than those that could be
obtained from comparable, unaffiliated third parties. We are not required to pay
such fees (a) if and to the extent expressly prohibited by the provisions of any
credit or financing arrangements, (b) if we have not paid cash interest on any
interest payment date, or (c) we have not paid cash dividends on any dividend
payment date or have not made redemptions on any redemption date, as applicable
under our certificate of incorporation or other governing documents. Any
required payment which is not paid when due shall accrue and bear interest at
10% per annum. If we acquire or create any new subsidiaries, we will cause them
to be subject to this agreement. The Subsidiary Advisory Agreement expires in
December 2011, but is automatically renewed for successive one-year terms,
unless either party provides written notice of termination 60 days prior to the
scheduled renewal date. Mssrs. Jordan, Quinn, Boucher and Zalaznick, directors
of Holdings, are directors and shareholders of JII.

         The Company, our parent and substantially all of our subsidiaries are
parties to a management consulting agreement (the "Subsidiary Consulting
Agreement"), pursuant to which we pay JII annual consulting fees (directly and
through our Parent) of the greater of (i) 3.0% of our net income before
interest, tax, depreciation and amortization and other non-cash charges of ours,
or (ii) 1.0% of our net sales, and are required to reimburse JII for its
out-of-pocket costs related to its services. We are not required to pay such
fees (a) if and to the extent expressly prohibited by the provisions of any
credit or financing arrangements, (b) if we have not paid cash interest on any
interest payment date, or (c) we have not paid cash dividends on any dividend


                                      50
<PAGE>


payment date or have not made redemptions on any redemption date, as applicable
under our certificate of incorporation or other governing documents. Any
required payment which is not paid when due shall accrue and bear interest at
10% per annum. If we acquire or create any new subsidiaries, we will cause them
to be subject to this agreement. The Subsidiary Consulting Agreement expires in
December 2011, but is automatically renewed for successive one-year terms,
unless either party provides written notice of termination 60 days prior to the
scheduled renewal date. In accordance with this agreement or the predecessor of
this agreement pursuant to which we only paid under clause (ii) above, we were
charged approximately $3,366, $3,193 and $2,916 for the years ended December 31,
2005, 2004 and 2003, respectively.

         The Company, our parent and substantially all of our subsidiaries are
parties to a properties services agreement (the "JI Properties Services
Agreement") with JI Properties, Inc. ("JI Properties"), a subsidiary of JII,
pursuant to which JI Properties provides to us the use of certain real estate
and other assets, transportation and related services. Pursuant to the JI
Properties Services Agreement, we are charged for our allocable portion of such
services based upon (i) our usage of such services and (ii) our relative
revenues, as compared to JII and its other subsidiaries. The Company is also
required to reimburse JI Properties for all reasonable out of pocket expenses it
incurs (unless such expenses are already included in the charges described
above).

         The Company, our parent and substantially all of our subsidiaries are
parties to a transition agreement (the "Transition Agreement") pursuant to which
JII provides office space and certain administrative and accounting services to
the Company to facilitate the operations of the Company. Also, JII allocates its
overhead, general and administrative charges and expense among JII and its
subsidiaries, including the Company, based on the respective revenues and usage
of corporate overhead by JII and its subsidiaries. The Company reimburses JII
for services provided pursuant to the Transition Agreement on an allocated cost
basis.

         In accordance with the JI Properties Services Agreement and the
Transition Agreement, such charges were $4,634, $5,807 and $7,084 for the years
ended December 31, 2005, 2004 and 2003, respectively. The JI Properties Services
Agreement and the Transition Agreement expires in December 2011, but is
automatically renewed for successive one-year terms, unless either party
provides written notice of termination 60 days prior to the scheduled renewal
date.

         Tax Sharing Agreement. The Company and each of its subsidiaries are
parties to a Tax Sharing Agreement (the "Tax Sharing Agreement") between JII and
each of its consolidated subsidiaries for U.S. Federal income tax purposes.
Pursuant to the Tax Sharing Agreement, the Company and each of its consolidated
subsidiaries owes to JII an amount determined by reference to each entity's
separate return tax liability as defined in Treasury Regulation Section
1.1552-1(a)(2)(ii). For the year ended December 31, 2005 no payments were made
by the Company to JII under the Tax Sharing Agreement.

         If the Tax Sharing Agreement is terminated, then the Company and its
subsidiaries will remain contingently liable to JII under the Tax Sharing
Agreement in respect of any increases in their separate return tax liability for
periods prior to such termination.

         Directors. Directors of the Company, John W. Jordan II, David W.
Zalaznick and Thomas H. Quinn each have a beneficial ownership interest of more
than 10% of the common stock of Jordan Industries, Inc.


                                      51
<PAGE>

         Investment in Affiliate. The Company has a $12,344 investment in the
Class A and Class B Preferred Units of JZ International, LLC. JZ International's
Chief Executive Officer is David W. Zalaznick, and its members include Messrs.
Jordan, Quinn, Zalaznick and Boucher, who are the Company's directors and
stockholders, as well as other members. JZ International and its subsidiaries
are focused on making European and other international investments.

         Merkle-Korff Leases. Merkle-Korff leases some of its plants, warehouse
and offices under a net lease (the "Merkle-Korff Leases") from companies
controlled by John Simms, Sr., a Director of the Company. Rent expenses,
including real estate taxes attributable to the Merkle-Korff Leases, amounted to
$303 for the year ended December 31, 2005. The Company has agreed to pay future
minimum rental payments under the Merkle-Korff Leases amounting to approximately
$267 for the year ended December 31, 2006. The Company has the right of first
refusal to buy these facilities from Mr. Simms. See Note 10 to the Company's
Consolidated Financial Statements. The Company believes the terms of the
Merkle-Korff Leases are comparable to the terms it would obtain from a
non-affiliated party.

         Motion Control Leases. Motion Control leases substantially all of its
production and office space under noncancellable operating leases from a limited
partnership whose partners include officers of Motion Control. These leases
expire in 2011. Rent expense under the leases was $1,135 for the year ended
December 31, 2005. The Company believes the terms of the Motion Control leases
are comparable to the terms it would obtain from a non-affiliated party.

         Directors and Officers Indemnification. The Company has entered into
indemnification agreements with each member of the Company's Board of Directors
and certain executive officers whereby the Company agreed, subject to certain
exceptions, to indemnify and hold harmless each director and certain executive
officers from liabilities incurred as a result of such person's status as a
director or executive officer of the Company. See Item 10, Directors and
Executive Officers - Board of Directors - Indemnification Agreements.

         Future Transactions. The Company has adopted a policy to provide that
all transactions between the Company and its officers, directors and other
affiliates must (i) be approved by a majority of the members of the Board of
Directors and by a majority of the disinterested members of the Board of
Directors and (ii) be on terms no less favorable to the Company than could be
obtained from unaffiliated third parties.


Item 14. PRINCIPAL ACCOUNTANT FEES & SERVICES
         ------------------------------------
         The following table presents fees for professional services rendered by
Ernst & Young LLP for the audit of the Company's annual financial statements for
the years ended December 31, 2005 and 2004 and fees billed for other services
rendered by Ernst & Young LLP during those periods.


                                   2005          2004
                                   ----          ----
Audit                             $ 616         $ 646
Tax Fees                             85           298
Audit-Related Fees                    -             -
                                 -------       -------
  Total                           $ 701         $ 944
                                 -------       -------




                                      52
<PAGE>


Part IV
-------
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
         ------------------------------------------

Documents filed as part of this report:

(1) Financial Statements
    --------------------
    Reference is made to the Index to Consolidated Financial Statements
    Appearing in Item 8, which Index is incorporated herein by reference.

(2) Financial Statement Schedule
    ----------------------------
    The following financial statement schedule for the years ended
    December 31, 2005, 2004 and 2003 is submitted herewith:

               Item                                            Page Number
               ----                                            -----------
    Schedule II - Valuation and qualifying accounts                57

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


(3) Exhibits

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




                                      53
<PAGE>



                                  SIGNATURES

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

                                             KINETEK, INC.


                                             By  /s/ Thomas H. Quinn
                                                 -----------------------------
Dated:  March 24, 2006                           Thomas H. Quinn
                                                 Chairman of the Board


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

                                             By  /s/ Thomas H. Quinn
                                                 -----------------------------
Dated:  March 24, 2006                           Thomas H. Quinn
                                                 Chairman of the Board

                                             By  /s/ John W. Jordan II
                                                 -----------------------------
Dated:  March 24, 2006                           John W. Jordan II
                                                 Director

                                             By  /s/ Daniel D. Drury
                                                 -----------------------------
Dated:  March 24, 2006                           Daniel D. Drury
                                                 Chief Financial Officer















                                      54
<PAGE>


                                  EXHIBIT INDEX


Exhibit
Number                             Description
-------                            -----------

2.1      Contingent Earnout Agreement, dated as of November 7, 1996, by and
         among Kinetek, Inc., Kinetek Industries, Inc., The New Imperial
         Electric Company, The New Scott Motors Company, New Gear Research,
         Inc., The Imperial Electric Company, The Scott Motors Company and
         Gear Research, Inc. (incorporated by reference to Exhibit 2.2 to
         Kinetek, Inc.'s Form S-4 Registration Statement) (File No. 333-19257)
         (The "1996 S-4")

2.2      Share Purchase Agreement, dated March 2, 1997, by and among Motors
         and Gears Holdings, Inc. and the stockholders of FIR Group Holdings
         Italia, S.r.l. (incorporate by reference to exhibit 2.1 to Form 8-K
         of Kinetek, Inc., date March 31, 1998)

2.3      Purchase Agreement, dated November 17, 1997, by and among Motion
         Holdings, Inc. and the shareholders of Motion Control Engineering,
         Inc. (incorporated by reference to exhibit 2.2 to Form 8-K of
         Kinetek, Inc., dated March 31, 1998)

2.4      Agreement for purchase and sale of stock of Electrical Design and
         Control Company by and among ED&C Holdings, Inc. and the shareholders
         of Electrical Design and Control Company, (incorporated by reference
         to exhibit 2.3 to Form 8-K of Kinetek, Inc., dated March 31, 1998)

2.5      Share Purchase Agreement, dated April 9, 1998, for the direct and
         indirect sale of all the shares of Advanced DC (incorporated by
         reference to exhibit 99.1 to Form 8-K of Kinetek, Inc., dated
         January 28, 2000)

2.6      Amendment No. 1 to Agreement for Purchase and Sale of Stock, dated
         May 15, 1998, for the direct and indirect sale of all the shares of
         Advanced DC (incorporated by reference to exhibit 99.2 to Form 8-K of
         Kinetek, Inc., dated January 28, 2000)

3.1      Certificate of Amendment of Certificate of Incorporation of Motors
         And Gears, Inc. and Certificate of Incorporation of Motors And Gears,
         Inc. (incorporated by reference to Exhibit 3.1 to Kinetek Inc.'s Form
         10-K Annual Report, dated March 28, 2001)

3.2      Bylaws of Kinetek, Inc. (incorporated by reference to Exhibit 3.2
         to the 1996 S-4)

4.1      Indenture, dated November 7, 1996, between Kinetek, Inc. and Fleet
         National Bank (incorporated by reference to Exhibit 4.1 to the 1996
         S-4)

4.2      First Supplemental Indenture, dated December 17, 1997, between
         Kinetek, Inc. and State Street Bank and Trust Company, as Trustee
         (incorporated by reference to Kinetek Inc.'s Form S-4 Registration
         Statement) (File No. 333-44057) (the "1998 S-4")

4.3      Indenture, dated December 17, 1997, between Kinetek, Inc. and State
         Street Bank and Trust Company, as Trustee (incorporated by reference
         to Exhibit 4.3 to the 1998 S-4)



                                      55
<PAGE>

4.4      5% Indenture, dated as of April 12, 2002, among Kinetek Industries,
         Inc., U.S. Bank National Association, as Trustee and the Guarantors
         listed therein (this Indenture is the same as the 10% Indenture other
         than the interest rate) (incorporated by reference to Exhibit 4.4 to
         Form 8-K of Kinetek, Inc., dated May 8, 2002)(the "2002 8-K")

4.5      Global 5% Note of Kinetek Industries, Inc. (incorporated by
         reference to Exhibit 4.5 to the 2002 8-K)

4.6      Global 10% Note of Kinetek Industries, Inc. (incorporated by
         reference to Exhibit 4.5 to the 2002 8-K)

4.7      Registration Rights Agreement, dated as of April 12, 2002, among
         Kinetek Industries, Inc., Jefferies & Company, Inc. and the
         Guarantors listed therein (incorporated by reference to Exhibit 4.7
         to the 2002 8-K)

4.8      Intercreditor Agreement, dated as of April 12, 2002, between U.S.
         Bank National Association and Fleet Capital Corporation, as agent
         (incorporated by reference to Exhibit 4.8 to the 2002 8-K)

4.9      Security Agreement, dated as of April 12, 2002, between Kinetek
         Industries, Inc. and U.S. Bank National Association (incorporated by
         reference to Exhibit 4.9 to the 2002 8-K)

4.10     Guarantor Security Agreement, dated as of April 12, 2002, between
         Kinetek, Inc. and U.S. Bank National Association (substantially
         identical agreements were entered into with 9 subsidiaries that are
         also guarantors) (incorporated by reference to Exhibit 4.9 to the
         2002 8-K)

4.11     Pledge Agreement, dated as of April 12, 2002, between Kinetek
         Industries, Inc. and U.S. Bank National Association (substantially
         identical agreements were entered into with Kinetek, Inc. and 3
         subsidiaries) (incorporated by reference to Exhibit 4.9 to the 2002
         8-K)

4.12     Copyright, Patent and Trademark License Mortgage, dated as of April
         12, 2002, between Kinetek, Inc. and U.S. Bank National Association
         (substantially identical agreements were entered into with 3
         subsidiaries) (incorporated by reference to Exhibit 4.9 to the 2002
         8-K)

4.13     Real Property Mortgage, dated as of April 12, 2002, between Advanced
         D.C. Motors, Inc. and U.S. Bank National Association (substantially
         identical agreements were entered into with 2 other subsidiaries)
         (incorporated by reference to Exhibit 4.9 to the 2002 8-K)

10.1     Loan and Security Agreement, dated December 18, 2001 by and among
         Kinetek Industries, Inc., the lenders listed thereto and Fleet
         Capital Corporation, as Agent (incorporated by reference to Exhibit
         10.1 to Form 10-K/A of Kinetek, Inc., dated April 19, 2002

10.2     Consent and Amendment No. 1 to Loan and Security Agreement, dated as
         of April 12, 2002, among Kinetek Industries, Inc., the lenders listed
         thereon and Fleet Capital Corporation, as agent (incorporated by
         reference to Exhibit 10.2 to the 2002 8-K)



                                      56
<PAGE>

10.3     Management Consulting Agreement, dated December 14, 2001, by and
         among Jordan Industries, Inc., the Company and the other signatories
         thereto (incorporated by reference to Exhibit 10.2 to Form 10-K of
         Kinetek, Inc., dated March 29, 2002 (the "2002 10-K")

10.4     Properties Services Agreement, dated December 14, 2001, by and among
         JI Properties, Inc., the Company and the other signatories thereto
         (incorporated by reference to Exhibit 10.3 to the 2002 10-K)

10.5     Transaction Advisory Agreement, dated December 14, 2001, by and
         among Jordan Industries, Inc., the Company and the other signatories
         thereto (incorporated by reference to Exhibit 10.4 to the 2002 10-K)

10.6     Agreement to Join in the Filing of Consolidated Tax Return, dated
         December 14, 2001 by and among Jordan Industries, Inc., the Company
         and the other signatories thereto (incorporated by reference to
         Exhibit 10.5 to the 2002 10-K)

10.7     Transition Agreement, dated July 25, 1997, by and between Motors and
         Gears Holdings, Inc. and Jordan Industries, Inc. (incorporated by
         reference to Exhibit 10.8 to the 1998 S-4).

10.8     Indemnification Agreement, dated November 7, 1996, between Kinetek,
         Inc. and Thomas H. Quinn (incorporated by reference to Exhibit
         10.1(a) to the 1998 S-4)

10.9     Indemnification Agreement, dated November 7, 1996, between Kinetek,
         Inc. and Jonathan F. Boucher (incorporated by reference to Exhibit
         10.1(b) to the 1996 S-4)

10.10    Indemnification Agreement, dated November 7, 1996, between Kinetek,
         Inc. and David W. Zalaznick (incorporated by reference to Exhibit
         10.1(c) to the 1996 S-4)

10.11    Indemnification Agreement, dated November 7, 1996, between Kinetek,
         Inc. and John W. Jordan II (incorporated by reference to Exhibit
         10.1(d) to the 1996 S-4)

10.12    Merkle-Korff Industries, Inc. Non-negotiable Subordinated Note in
         the principal aggregate amount of $5,000,000 payable to John D. Simms
         Revocable Trust Under Agreement (incorporated by reference to Exhibit
         10.9 to the 1996 S-4)

10.13    Electrical Design and Control Company, Inc. Non-negotiable
         Subordinated Note in the principal aggregate amount of $1,333,333
         payable to Tina Levire (incorporated by reference to Exhibit 10.13 to
         the 1998 Form S-4)

10.14    Electrical Design and Control Company, Inc. Non-negotiable
         Subordinated Note in the principal aggregate amount of $1,333,333
         payable to Marta Monson (incorporated by reference to Exhibit 10.14
         to the 1998 form S-4)

10.15    Electrical Design and Control Company, Inc. Non-negotiable
         Subordinated Note in the principal aggregate amount of $1,333,334
         payable to Eric Monson (incorporated by reference to Exhibit 10.15 to
         the 1998 form S-4)



                                      57
<PAGE>

10.16    Industrial Building Leases, each dated as of September 22, 1996, by
         and between Merkle-Korff Industries, Inc. and the signatory thereto
         (incorporated by reference to Exhibits 10.16 - 10.19 to the 1996 S-4)

10.17    Employment and Non Competition Agreement, dated as of September 22,
         1995, by and between Merkle-Korff Industries, Inc. and John D. Simms
         (incorporated by reference to Exhibit 10.20 to the 1996 S-4)

10.18    Employment and Non Competition Agreement, dated as of September 22,
         1995, by and between Merkle-Korff Industries, Inc. and John W. Brown
         (incorporated by reference to Exhibit 10.21 to the 1996 S-4)

12.1*    Computations of the Ratios of Earnings to Fixed Charges

21.1*    Subsidiaries of Kinetek, Inc.

31.1*    Certification of Thomas H. Quinn

31.2*    Certification of Daniel D. Drury

32.1*    Certification of Thomas H. Quinn pursuant to Section 906 of the
         Sarbanes Oxley Act of 2002

32.2*    Certification of Daniel D. Drury pursuant to Section 906 of the
         Sarbanes Oxley Act of 2002

* filed herewith












                                      58
<PAGE>
<TABLE>
<CAPTION>



                                                                                             Schedule II

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

                                                                 Additions
                               Balance at        Additions       Charged to     Write Offs                 Balance at
                               Beginning           due to        Costs and        Net of                     end of
                               of Period        acquisitions      Expenses      Recoveries     Other(1)      Period
<S>                           <C>               <C>              <C>            <C>           <C>         <C>
December 31, 2005:
  Allowance for
  doubtful accounts             $4,110                 -              256         (2,162)         233         $ 2,437

  Deferred Tax
  Valuation
  Allowance                    $26,919                 -                -              -       (8,301)        $18,618

December 31, 2004:
  Allowance for
  doubtful accounts             $4,579                 3              499         (1,056)          88         $ 4,110

  Deferred Tax
  Valuation
  Allowance                    $22,147                 -            4,772              -            -         $26,919

December 31, 2003:
  Allowance for
  doubtful accounts             $4,327                 3              729           (913)         433         $ 4,579

  Deferred Tax
  Valuation
  Allowance                    $16,558                 -            5,589              -            -         $22,147

(1) Changes in Allowance for doubtful accounts resulting from foreign currency translations. Changes
in Deferred Tax Valuation Allowance resulting from decrease in Deferred Tax Asset base.


</TABLE>












                                      59