================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

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

                                    FORM 10-Q


[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934
     For the quarterly period ended September 30, 2006
                                    ------------------

                                       OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934
     For the transition period from __________ to __________


Commission File No.  0-50186
                    --------


                           LEVCOR INTERNATIONAL, INC.
             ------------------------------------------------------
             (Exact Name of Registrant as Specified in Its Charter)


             Delaware                                         06-0842701
  -------------------------------                         -------------------
  (State or Other Jurisdiction of                          (I.R.S. Employer
   Incorporation or Organization)                         Identification No.)


1065 Avenue of the Americas, New York, New York                 10018
-----------------------------------------------               ----------
(Address of Principal Executive Offices)                      (Zip Code)


                                 (212) 354-8500
              ----------------------------------------------------
              (Registrant's Telephone Number, Including Area Code)


Former name, former address and former fiscal year, if changed since last
report: N/A

Indicate by check whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days: Yes [ ]  No [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 check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act)  Yes [ ] No [X]

As of November 9, 2006, 5,331,881 shares of Common Stock, par value $0.01 per
share, were issued and outstanding.

================================================================================
<PAGE>

                           LEVCOR INTERNATIONAL, INC.

                                      INDEX

                                                                            Page
                                                                            ----
PART I.   FINANCIAL INFORMATION

Item 1.   Financial Statements

          Condensed Consolidated Balance Sheets
          as of September 30, 2006 (Unaudited) and December 31, 2005..........1

          Condensed Consolidated Statements of Operations (Unaudited)
          for the Three and Nine Months Ended September 30, 2006 and 2005.....2

          Condensed Consolidated Statements of Comprehensive Income (Loss)
          (Unaudited) for the Three and Nine Months Ended
          September 30, 2006 and 2005.........................................3

          Condensed Consolidated Statements of Cash Flows (Unaudited)
          for the Nine Months Ended September 30, 2006 and 2005...............4

          Notes to Condensed Consolidated Financial Statements (Unaudited)....5

Item 2.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations .............................................22

Item 3.   Quantitative and Qualitative Disclosures About Market Risk.........40

Item 4.   Controls and Procedures............................................41

PART II.  OTHER INFORMATION

Item 1.   Legal Proceedings..................................................42

Item 1A   Risk Factors.......................................................43

Item 6.   Exhibits ..........................................................45

          Signatures.........................................................46

<PAGE>
<TABLE>
<CAPTION>

                          PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                   LEVCOR INTERNATIONAL, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                  (dollars in thousands, except share amounts)

                                                                          September 30,   December 31,
                                                                              2006            2005
                                                                          ------------    ------------
                                                                          (Unaudited)      (Audited)
                                                                          ------------    ------------
<S>                                                                       <C>             <C>
ASSETS
Current Assets:
      Cash                                                                $         72    $         50
      Due from factor                                                               22              --
      Accounts receivable trade, net                                             3,106           2,760
      Inventories                                                                6,250           7,725
      Other current assets                                                         122             173
                                                                          ------------    ------------
            Total current assets                                                 9,572          10,708

Property, Plant and Equipment, net                                               1,959           2,067
Goodwill                                                                         2,543           2,543
Other assets                                                                       744             751
                                                                          ------------    ------------
            Total Assets                                                  $     14,818    $     16,069
                                                                          ============    ============

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
      Revolving loan and current maturities of long-term debt             $      5,089    $      4,203
      Due to factor                                                                 --             775
      Current maturities of stockholder loan                                       500             850
      Accounts payable                                                           1,004           1,897
      Income taxes payable                                                         205              29
      Pension liabilities - current portion                                      1,625             171
      Other current liabilities                                                  1,107           1,286
                                                                          ------------    ------------
            Total current liabilities                                            9,530           9,211
Long term debt, less current maturities                                          4,191           4,299
Stockholder loans, less current maturities                                       1,500           1,500
Accrued interest, stockholder loans                                                560             454
Pension liabilities, less current portion                                        3,921           5,506
Post retirement medical liabilities                                                 --           1,960
Environmental liabilities                                                        1,308           1,348
Other liabilities                                                                  276             179
Mandatorily Redeemable Preferred Stock, par value $0.01 per share
      8,000,000 shares authorized:  Shares issued and outstanding:
      Series A - 4,555,007                                                       4,555           4,555
Accumulated dividends on Mandatorily Redeemable Preferred Stock                    217              --
                                                                          ------------    ------------
            Total Liabilities                                                   26,058          29,012
                                                                          ------------    ------------

Commitments and Contingencies                                                       --              --

STOCKHOLDERS' DEFICIT
Common Stock, par value $0.01 per share
      15,000,000 shares authorized;
      5,331,881 shares issued and outstanding                                       54              54
Paid in Capital                                                                 33,228          33,238
Accumulated Deficit                                                            (40,171)        (41,839)
Accumulated Other Comprehensive Loss                                            (4,351)         (4,332)
Unearned Compensation                                                               --             (64)
                                                                          ------------    ------------
Total Stockholders' Deficit                                                    (11,240)        (12,943)
                                                                          ------------    ------------
Total Liabilities and Stockholders' Deficit                               $     14,818    $     16,069
                                                                          ============    ============
</TABLE>

See Notes to Condensed Consolidated Financial Statements.

                                     Page 1
<PAGE>
<TABLE>
<CAPTION>

                           LEVCOR INTERNATIONAL, INC.
                                AND SUBSIDIARIES
           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
                  (dollars in thousands, except per share data)

                                                                    Three Months Ended              Nine Months Ended
                                                                      September 30,                   September 30,
                                                              ----------------------------     ----------------------------
                                                                  2006            2005             2006            2005
                                                              ------------    ------------     ------------    ------------
<S>                                                           <C>             <C>              <C>             <C>
Net sales                                                     $      5,593    $      6,096     $     16,376    $     15,764
Cost of sales                                                        3,925           3,922           10,825          10,445
                                                              ------------    ------------     ------------    ------------
Gross profit                                                         1,668           2,174            5,551           5,319
Selling, general and administrative expenses (including
     stock based compensation expense of $1 and $54 for
     the three and nine months ended September 30, 2006,
     respectively, and none and $4 for the three and
     nine months ended September 30, 2005)                           1,500           1,445            4,464           4,487
                                                              ------------    ------------     ------------    ------------
Income from continuing operations before gain on
     termination of post retirement benefit plan, interest,
     preferred dividends and income tax                                168             729            1,087             832
Gain on termination of post retirement benefit plan                  1,662              --            1,662              --
                                                              ------------    ------------     ------------    ------------
Income from continuing operations before interest,
     preferred dividends and income tax                              1,830             729            2,749             832
Interest expense                                                       330             145              625             365
Dividends on mandatorily redeemable preferred stock                     68              69              204             205
                                                              ------------    ------------     ------------    ------------
Income from continuing operations before income tax
     and discontinued operations                                     1,432             515            1,920             262
Income tax                                                             200             318              177             262
                                                              ------------    ------------     ------------    ------------
Net income from continuing operations                                1,232             197            1,743              --
Income (loss) from discontinued operations, net of tax                  11          (3,472)             (75)         (3,876)
                                                              ------------    ------------     ------------    ------------
Net income (loss)                                             $      1,243    $     (3,275)    $      1,668    $     (3,876)
                                                              ============    ============     ============    ============
Income (loss) per share:
        Basic and Diluted:
            Income  from continuing operations                $        .23    $        .04     $        .33    $         --
            Income (loss) from discontinued operations                   *            (.65)            (.01)           (.73)
                                                              ------------    ------------     ------------    ------------
                                                              $        .23    $       (.61)    $        .32    $       (.73)
                                                              ============    ============     ============    ============

Weighted average common shares outstanding - basic                   5,332           5,332            5,332           5,332
Potential common stock                                                  --              --                2              --
                                                              ------------    ------------     ------------    ------------
Weighted average common shares outstanding - diluted                 5,332           5,332            5,334           5,332
                                                              ============    ============     ============    ============
</TABLE>

*  Less than $.005

See Notes to Condensed Consolidated Financial Statements.

                                     Page 2
<PAGE>
<TABLE>
<CAPTION>

                           LEVCOR INTERNATIONAL, INC.
                                AND SUBSIDIARIES
                             CONDENSED CONSOLIDATED
                    STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
                                   (UNAUDITED)
                             (dollars in thousands)

                                                                Three Months Ended               Nine Months Ended
                                                                   September 30,                   September 30,
                                                           ----------------------------    ----------------------------
                                                               2006            2005            2006            2005
                                                           ------------    ------------    ------------    ------------
<S>                                                        <C>             <C>             <C>             <C>
Net income (loss)                                          $      1,243    $     (3,275)   $      1,668    $     (3,876)

Other comprehensive loss:
            Foreign currency translation adjustment                   1              --             (19)            (14)
                                                           ------------    ------------    ------------    ------------
Comprehensive income (loss)                                $      1,244    $     (3,275)   $      1,649    $     (3,890)
                                                           ============    ============    ============    ============
</TABLE>

See Notes to Condensed Consolidated Financial Statements.

                                     Page 3
<PAGE>
<TABLE>
<CAPTION>

                   LEVCOR INTERNATIONAL, INC. AND SUBSIDIARIES
                             CONDENSED CONSOLIDATED
                            STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                             (dollars in thousands)

                                                                          Nine Months Ended September 30,
                                                                          ------------------------------
                                                                              2006              2005
                                                                          ------------      ------------
<S>                                                                       <C>               <C>
Cash Flows From Operating Activities:
Net income (loss)                                                         $      1,668      $     (3,876)
Reconciliation of net income (loss) to net cash provided by
 (used in) operations:
        Non-cash gain on post retirement medical plan termination               (1,662)               --
        Goodwill and trademark impairment - Textile segment                         --             3,009
        Depreciation and amortization                                              296               291
        Deferred income taxes                                                       --              (192)
        Non-cash stock based compensation                                           54                 4
        Accrued interest on stockholder loans                                      106                99
        Accrued dividends on preferred stock                                       217                --
        Changes in operating assets and liabilities:
           Accounts receivable trade, net                                         (346)             (516)
           Inventories                                                           1,421                15
           Other current assets                                                     51               (24)
           Other assets                                                            (61)             (129)
           Accounts payable                                                       (893)               24
           Income taxes payable                                                    176               (40)
           Other current liabilities                                              (327)             (360)
           Pension liabilities                                                    (131)              (71)
           Post retirement medical liabilities                                    (150)             (149)
           Environmental liabilities                                               (40)              (34)
           Other liabilities                                                        97              (145)
                                                                          ------------      ------------
                 Net cash provided by (used in) operating activities               476            (2,094)
                                                                          ------------      ------------
Cash Flows From Investing Activities:
Capital expenditures                                                               (50)              (19)
Investment in other assets                                                         (35)              (38)
                                                                          ------------      ------------
                 Net cash used in investing activities                             (85)              (57)
                                                                          ------------      ------------
Cash Flows From Financing Activities:
Borrowings under revolving loan                                                 15,770            16,047
Repayments under revolving loan                                                (14,884)          (14,452)
Repayment of long term debt                                                       (108)             (108)
(Repayments) borrowings under stockholder loan                                    (350)            1,924
Due to/from factor                                                                (797)           (1,230)
                                                                          ------------      ------------
                 Net cash provided by (used in) financing activities              (369)            2,181
                                                                          ------------      ------------

Increase in cash                                                                    22                30
Cash at beginning of period                                                         50                32
                                                                          ------------      ------------
Cash at end of period                                                     $         72      $         62
                                                                          ============      ============
Supplemental Disclosure of Cash Flow Information:
Cash paid (refunded) during the period for:
    Interest                                                              $        689      $        523
                                                                          ============      ============
    Income taxes                                                          $         --      $         50
                                                                          ============      ============
</TABLE>

See Notes to Condensed Consolidated Financial Statements.

                                     Page 4
<PAGE>

                           LEVCOR INTERNATIONAL, INC.
                         NOTES TO CONDENSED CONSOLIDATED
                        FINANCIAL STATEMENTS (UNAUDITED)


NOTE 1: UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
---------------------------------------------------------------------

Nature of Operations:
---------------------
Levcor International, Inc. and Subsidiaries (the "Company" or "Levcor" or "we")
manufacture, package and distribute a line of buttons and other craft products
for sale in the home sewing and craft retail industry. The Company formerly
operated a textile business which is in the process of being exited and is
treated as a discontinued operation as described in Note 2. The Company sells
its products to customers primarily in North America and also has distribution
in Europe.

The accompanying unaudited condensed consolidated financial statements have been
prepared in compliance with Rule 10-01 of regulation S-X and accounting
principles generally accepted in the United States of America ("GAAP"), as
applicable to interim financial information and following other requirements of
the Securities and Exchange Commission ("SEC") for interim reporting.
Accordingly, the unaudited condensed consolidated financial statements do not
include all of the information and footnotes normally required by accounting
principles generally accepted in the United States of America for complete
financial statements. In the opinion of management, all normal and recurring
adjustments and accruals considered necessary for a fair presentation have been
included. The interim results are not necessarily indicative of the results for
a full year and do not contain information included in the Company's annual
consolidated financial statements and notes for the year ended December 31,
2005. The consolidated balance sheet as of December 31, 2005 was derived from
audited financial statements, but does not include all disclosures required by
accounting principles generally accepted in the United States of America. It is
suggested that these condensed consolidated financial statements be used in
conjunction with the financial statements and notes thereto included in the
Company's latest annual report on Form 10-K.

The condensed consolidated balance sheets as of September 30, 2006 (unaudited)
and December 31, 2005 (audited) and the unaudited condensed consolidated
statements of operations, comprehensive income (loss) and cash flows for the
nine months ended September 30, 2006 and 2005 include the accounts of the
Company and subsidiaries.

NOTE 2: DISCONTINUED OPERATIONS
-------------------------------

During the fourth quarter of 2005, the Company's Board of Directors approved
management's plan to exit the garment manufacturing business. On May 11, 2006,
management determined to exit its remaining Textile business completely. As a
result, Textile segment operations for the current and prior comparative periods
have been presented as discontinued operations.

The decision to exit the Textile business was made after a full review and
analysis of the Textile business and the Company's strategic alternatives. The
decision was based on a variety of factors, including, (i) that the Company's
contract garment manufacturing and other textile business has incurred operating
losses resulting from lower than planned business volume from our major
customers and has been unable to grow its customer base, (ii) that the business

                                     Page 5
<PAGE>

has incurred sales decreases, (iii) a decrease in margins due to an increase in
raw material costs that were unable to be passed to customers, and (iv) the long
production lead times and the related working capital requirements of the
business which contributed to interest costs that exceeded the segment's
operating profits. The Company had determined that the future net revenues and
gross profits in the Textile business would continue to deteriorate and as a
result the Company concluded that a withdrawal from the business was the
appropriate course of action at that time.

During the first nine months of 2006, the Company has been disposing of Textile
segment inventory. The Company will continue to transact sales of Textile
segment inventory until such inventory is fully disposed of. As of September 30,
2006 the Company had $15,000 of Textile segment inventory remaining. The Company
estimates exit costs associated with exiting the garment manufacturing and
remaining Textile business not to be material.

Management concluded that the carrying amounts of goodwill and trademarks
totaling $2.3 million and $709,000, respectively, related to the Textile segment
were deemed to be fully impaired as of September 30, 2005 and were written off
accordingly at that time.

The Textile segment generated the following operating results which have been
classified as discontinued operations in the unaudited condensed consolidated
statements of operations (dollars in thousands):
<TABLE>
<CAPTION>

                                                     Three Months Ended                Nine Months Ended
                                                        September 30,                    September 30,
                                                 ----------------------------    ----------------------------
                                                     2006            2005            2006            2005
                                                 ------------    ------------    ------------    ------------
<S>                                              <C>             <C>             <C>             <C>
Sales                                            $         47    $      4,798    $      2,393    $      7,171
Cost of sales                                              36           4,948           2,022           6,943
                                                 ------------    ------------    ------------    ------------
Gross profit                                               11            (150)            371             228
Selling, general and administrative expenses               --             463             269           1,314
Goodwill and trademark impairment                          --           3,009              --           3,009
Interest expense                                           --              89             177             227
Income tax (benefit)                                       --            (239)             --            (446)
                                                 ------------    ------------    ------------    ------------
Results of discontinued operations,
      net of tax                                 $         11    $     (3,472)   $        (75)   $     (3,876)
                                                 ============    ============    ============    ============
</TABLE>

                                     Page 6
<PAGE>

The Textile segment's assets and liabilities as included in the Company's
condensed consolidated balance sheets were as follows (dollars in thousands):
<TABLE>
<CAPTION>

                                                           September 30,   December 31,
                                                               2006            2005
                                                           ------------    ------------
<S>                                                        <C>             <C>
         Cash                                              $         --    $          4
         Due from factor                                             22              --
         Accounts receivable, net                                     2              --
         Inventories, net                                            15           1,198
         Intercompany receivable                                     --             501
         Other current assets                                        --               1
                                                           ------------    ------------
               Total current assets                                  39           1,704
         Property, plant and equipment, net                          --              25
         Other assets                                                --               6
                                                           ------------    ------------
               Total assets                                $         39    $      1,735
                                                           ============    ============

         Accounts payable                                  $         76    $        373
         Due to factor                                               --             775
         Current maturities of stockholder loan                      --             850
         Intercompany payable                                     5,507              --
         Other current liabilities                                   34             239
                                                           ------------    ------------
               Total current liabilities                          5,617           2,237
         Long term debt                                              --           3,000
         Stockholder loans less current maturities                   --           1,500
         Accrued interest, stockholder loans                         --             454
                                                           ------------    ------------
               Total liabilities                           $      5,617    $      7,191
                                                           ============    ============
</TABLE>

Effective June 30, 2006, the short and long term debt of the Textile segment
became short and long term debt of the Company's continuing operations and, as
such, interest expense related to this debt has been classified as part of
continuing operations during the third quarter of 2006.

NOTE 3: GOING CONCERN
---------------------

The accompanying unaudited condensed consolidated financial statements have been
prepared on a basis which contemplates the realization of assets and the
satisfaction of liabilities and commitments in the normal course of business. In
2005 the Company incurred a net loss attributable to common stockholders of $8.3
million (of which $6.1 million was represented by non-cash charges reflecting
impairment of Textile segment assets) contributing to a stockholders deficit
which totaled $11.2 million at September 30, 2006, which amount was inclusive of
paid in capital of $33.2 million and accumulated deficit and other comprehensive
loss totaling $44.5 million. The Company's ability to continue as a going
concern is dependent upon its ability to execute management's plans to be
profitable, generate positive cash flow from operations, obtain financing to
meet the Company sponsored defined benefit pension funding obligations currently
estimated to be $1.8 million in 2007 and an aggregate of $3.7 million during the
years 2008 to 2014 (see Note 9) and to continue to have access to existing
financing to meet obligations and repay liabilities when they come due,
including amounts payable with respect to claimed environmental liabilities in
connection with the Solvents Recovery Service of New England Superfund Site (see
Note 14) in the event the parent corporation is determined to be responsible for
these claimed liabilities and the redemption of preferred stock (see Note 10)
due in 2007 and thereafter. Although management continues to pursue these plans
and believes it will be successful, there is no assurance that the Company will

                                     Page 7
<PAGE>

be successful in generating such profitable operations or maintaining such
access to existing financing or obtaining financing for such pension and
environmental obligations on terms acceptable to the Company. The outcome of
these matters cannot be predicted with any certainty at this time. These
factors, as well as the Company's historical losses from operations and negative
cash flows raise substantial doubt about the Company's ability to continue as a
going concern. Management plans to satisfy the Company's capital needs through
cash generated from operations, advances under its facilities with CIT and
stockholder loans. These condensed consolidated financial statements do not
include any adjustments to the amounts and classification of assets and
liabilities that may be necessary should the Company be unable to continue as a
going concern.

NOTE 4: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
--------------------------------------------------

Consolidation:
--------------
The condensed consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries, Blumenthal Lansing Company, LLC and
Button Fashion B.V. after elimination of intercompany items and transactions.

Use of Estimates:
-----------------
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires the Company to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents:
--------------------------
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents. The Company did not have
any cash equivalents at September 30, 2006 and December 31, 2005.

Property, Plant and Equipment:
------------------------------
Property, plant and equipment is stated at cost less accumulated depreciation
and amortization. Depreciation and amortization are computed principally by the
straight-line method for each class of depreciable and amortizable asset based
on their estimated useful lives. Buildings and improvements, machinery and
equipment, and furniture and fixtures are generally depreciated over periods of
20-35, 3-25 and 5-10 years, respectively. Leasehold improvements are amortized
over the shorter of the lease or its estimated useful life.

Credit Risk:
------------
Financial instruments which potentially subject us to concentration of credit
risk consist principally of accounts receivable. We perform ongoing credit
evaluations of our customers' financial condition and, generally, require no
collateral from our customers.

Accounts Receivable:
--------------------
Accounts receivable are stated at the net realizable value. An allowance for
doubtful accounts is recorded based on a combination of historical experience,
aging analysis and information on specific accounts. Account balances are
written off against the allowance after all means of collection have been
exhausted and the potential for recovery is considered remote. The allowance for
doubtful accounts was $31,000 at September 30, 2006 and $50,000 at December 31,
2005.

                                     Page 8
<PAGE>

Inventories:
------------
Inventories are valued at the lower of cost or market using a weighted-average
cost method basis. We make provisions for obsolete or slow moving inventories as
necessary to properly reflect inventory value.

Long-Lived Assets:
------------------
The Company evaluates the carrying value of long-lived assets whenever events or
changes in circumstances indicate the carrying value of an asset may not be
recoverable. When factors indicate the asset may not be recoverable, the Company
compares the related undiscounted future net cash flows to the carrying value of
the asset to determine if impairment exists. If the expected future net cash
flows are less than the carrying value, the asset is written down to its
estimated fair value. When assets are removed from operations and held for sale,
the impairment loss is estimated as the excess of the carrying value of the
assets over their fair value. No such impairments of long-lived assets were
recorded for the three or nine-month periods ended September 30, 2006. During
the three and nine-month periods ended September 30, 2005, the Company
determined that Goodwill and Trademark amounts related to the Textile segment
were fully impaired and such amounts were written off as of September 30, 2005.

Goodwill:
---------
The Company reviews goodwill for impairment annually, or more frequently if
impairment indicators arise and goodwill is written off when impaired.
Impairment, if any, would be determined based on an implied fair value model for
determining the carrying value of goodwill. The impairment test is a two-step
process. The first step requires comparing the fair value of each reporting unit
to its net book value. The Company uses management estimates of future cash
flows to perform the first step of the goodwill impairment test. Estimates made
by management include assumptions about future conditions such as future
revenues, gross margins and operating expenses. The second step is only
performed if impairment is indicated after the first step is performed, as it
involves measuring the actual impairment to goodwill.

Income Taxes:
-------------
The liability method is used in accounting for income taxes as required by
Statement of Financial Accounting Standards ("SFAS") No. 109, Accounting for
Income Taxes. Under this method, deferred tax assets and liabilities are
recognized for operating income and tax credit carryforwards and for the future
tax consequences attributable to the differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in the results of
operations in the period that includes the enactment date.

Realization of our deferred tax assets is, for the most part, dependent upon our
U.S. consolidated tax group of companies having sufficient federal taxable
income in future years to utilize our domestic net operating loss carryforwards
before they expire. We adjust our deferred tax valuation allowance on a
quarterly basis in light of certain factors, including our financial
performance.

The Company has significant deferred tax assets, resulting from net operating
loss carryforwards and deductible temporary differences. As of September 30,
2006 and December 31, 2005, the Company has provided a full valuation allowance
against our deferred tax assets. Management weighs the positive and negative
evidence to determine if it is more likely than not that some or all of the

                                     Page 9
<PAGE>

deferred tax assets will be realized. Forming a conclusion that a valuation
allowance is not needed is difficult when there is negative evidence such as
cumulative losses in past years. The Company will continue to maintain a full
valuation allowance on our tax benefits until profitability has been sustained
over a time period and in amounts that are sufficient to support a conclusion
that it is more likely than not that a portion or all of the deferred tax assets
will be realized. A decrease in our valuation allowance would result in an
immediate material income tax benefit, an increase in total assets and
stockholder's deficit, and could have a significant impact on earnings in future
periods.

Because of the Company's net operating loss carryforward, the Company is not
required to record a provision for income taxes related to its pretax income
except in instances where minimum taxes are payable. An income tax benefit of
$23,000 was recorded during the first quarter of 2006 and was the result of a
refund of state income taxes during the period. An income tax provision of
$200,000 and an interest accrual of $100,000 were recorded during the third
quarter of 2006 in connection with a proposed audit settlement with the State of
Connecticut related to 1994 and 1995 filings by a previously disposed of entity,
Danfield Threads, Inc. Income tax expense of $318,000 and $262,000 were recorded
during the three and nine months ended September 30, 2005, respectively.

Environmental Liabilities:
--------------------------
The Company accrues for losses associated with environmental remediation
obligations when such losses are probable and reasonably estimable. Accruals for
estimated losses from environmental remediation obligations generally are
recognized no later than completion of the remedial feasibility study. Such
accruals are adjusted as further information develops or circumstances change.
Costs of future expenditures for environmental remediation obligations are not
discounted to their present value.

Loss Contingencies:
-------------------
There are times when non-recurring events occur that require management to
consider whether an accrual for a loss contingency is appropriate. Accruals for
loss contingencies typically relate to certain legal proceedings, customer and
other claims and litigation. As required by SFAS No. 5, we determine whether an
accrual for a loss contingency is appropriate by assessing whether a loss is
deemed probable and can be reasonably estimated. We analyze our legal
proceedings, warranty and other claims and litigation based on available
information to assess potential liability. We develop our views on estimated
losses in consultation with outside counsel handling our defense in these
matters, which involves an analysis of potential results assuming a combination
of litigation and settlement strategies. The adverse resolution of any one or
more of these matters over and above the amounts that have been estimated and
accrued in the current condensed consolidated financial statements could have a
material adverse effect on our business, results of operations and financial
condition.

Foreign Currency Translation:
-----------------------------
The assets and liabilities of Levcor's foreign subsidiaries, whose functional
currencies are the local currencies, are translated into United States dollars
at the current exchange rate as of the applicable balance sheet date. Revenues
and expenses are translated at the average exchange rate prevailing during the
period. Gains and losses resulting from the translation of the financial
statements are reported as a separate component of stockholders' deficit. Net
currency transaction gains and losses included in income were not material.

                                    Page 10
<PAGE>

Fair Value of Financial Instruments:
------------------------------------
The Company's financial instruments are comprised of revolving debt, long-term
debt, loans payable to stockholder, Robert A. Levinson, and Series A Mandatory
Redeemable Preferred Stock at September 30, 2006 and December 31, 2005. The fair
values of the revolving debt, long-term debt and loans payable to Robert A.
Levinson approximate the carrying values because these obligations had
market-based interest rates.

Revenue Recognition:
--------------------
Revenue is recognized when goods are shipped to customers. Shipment is made by
UPS or common carrier. Deliveries generally take place within three days of
shipment. Standard terms for shipments are F.O.B. shipping point, at which time
the Company has completed all performance obligations to consummate the sale. In
some circumstances, shipments are made F.O.B. destination, in which case the
Company insures the sales value of most shipments.

Revenue is reported net of a reserve for sales returns and allowances. Sales
returns and allowances are estimated based upon specific agreements and or
historical patterns with major accounts.

Advertising:
------------
The Company expenses the cost of advertising at the time the cost is incurred.
Advertising expense totaled approximately $8,000 and $35,000 during the three
and nine-month periods ended September 30, 2006. In 2005, advertising expense
totaled approximately $27,000 and $111,000 during the three and nine-month
periods ended September 30, 2005, respectively.

Income (Loss) Per Common Share:
-------------------------------
Basic income (loss) per share is computed by dividing income (loss) available to
common stockholders by the weighted average number of common shares outstanding
for the period. Diluted income (loss) per share reflects the potential increase
in outstanding shares that could result from exercising in-the-money stock
options. The shares issuable upon the exercise of in-the-money stock options
were not included in the computation of loss per common share, for the three and
nine months ended September 30, 2005 as the effect would be anti-dilutive.
Accordingly, the 2005 diluted loss per share is the same as the basic loss per
share.

At September 30, 2005, the Company had 86,300 options outstanding that could
potentially dilute basic loss per share in the future but were not included in
the calculation of diluted loss per share because this inclusion would have been
anti-dilutive.

Mandatorily Redeemable Preferred Stock:
---------------------------------------
The Company accounts for mandatorily redeemable preferred stock in accordance
with SFAS No. 150, "Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity" ("SFAS 150"). SFAS 150 requires
an issuer to classify certain financial instruments within its scope, such as
mandatorily redeemable preferred stock, as liabilities (or assets in some
circumstances). SFAS 150 defines a financial instrument as mandatorily
redeemable if it embodies an unconditional obligation requiring the issuer to
redeem the instrument by transferring its assets at a specified or determinable
date(s) or upon an event certain to occur.

Reclassifications:
------------------
Certain reclassifications have been made to the prior period financial
statements to conform to the current period presentation.

                                    Page 11
<PAGE>

Significant Accounting Policy Updates

Stock-Based Compensation Plans:
-------------------------------
On January 1, 2006, we adopted Financial Accounting Standards No. 123 (revised
2004), "Share-Based Payment" ("FAS 123(R)"), that addresses the accounting for
share-based payment transactions in which an enterprise receives employee
services in exchange for either equity instruments of the enterprise or
liabilities that are based on the fair value of the enterprise's equity
instruments or that may be settled by the issuance of such equity instruments.
The statement eliminates the ability to account for share-based compensation
transactions, as we formerly did using the intrinsic value method as prescribed
by Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock
Issued to Employees," and generally requires that such transactions be accounted
for using a fair-value-based method and recognized as expenses in our condensed
consolidated statement of operations.

We adopted FAS 123(R) using the modified prospective transition method which
requires the application of the accounting standard as of January 1, 2006. Our
condensed consolidated financial statements as of and for the three and nine
months ended September 30, 2006 reflect the impact of adopting FAS 123(R). In
accordance with the modified prospective transition method, the condensed
consolidated financial statements for prior periods have not been restated to
reflect, and do not include the impact of FAS 123(R). See Note 11, "Common Stock
and Stock Options" for further details.

Stock-based compensation expense recognized during the period is based on the
value of the portion of stock-based payment awards that is ultimately expected
to vest. Stock-based compensation expense recognized in the condensed
consolidated statement of operations during the three and nine months ended
September 30, 2006 included compensation expense for stock-based payment awards
granted prior to, but not yet vested, as of December 31, 2005 based on the grant
date fair value estimated in accordance with the pro forma provisions of FAS
148.

The fair value of share-based payment awards is estimated at the grant date
using the Black-Scholes option valuation model. The Company's determination of
fair value of share-based payment awards on the date of grant using an
option-pricing model is affected by the Company's stock price as well as
assumptions regarding a number of highly complex and subjective variables. These
variables include, but are not limited to the Company's expected stock price
volatility over the term of the awards, and actual and projected employee stock
option exercise behaviors.

Prior to fiscal 2006, the Company had used its historical stock price
volatility, in accordance with SFAS 123, for purposes of calculating its pro
forma information.

The risk-free interest rate assumption is based upon observed interest rates
appropriate for the expected life of the Company's employee stock options.

The dividend yield assumption is based on the Company's history of not paying
dividends and the resultant future expectation of dividend payouts.

The expected life of employee stock options represents the weighted-average
period that the stock options are expected to remain outstanding and was
determined based on the contractual terms of the stock-based awards.

                                    Page 12
<PAGE>

As the stock-based compensation expense recognized in the condensed consolidated
statement of operations for the first nine months of 2006 is based on awards
ultimately expected to vest, such amount has been reduced for estimated
forfeitures. SFAS 123(R) requires forfeitures to be estimated at the time of
grant and revised, if necessary, in subsequent periods if actual forfeitures
differ from those estimates. Forfeitures were estimated based on the Company's
historical experience.

Recently Issued Accounting Pronouncements:
------------------------------------------
Financial Accounting Standards Board ("FASB") Interpretation No. 48, Accounting
for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109
("FIN 48"). We will adopt the provisions of FIN 48 effective January 1, 2007.
The Company does not expect FIN 48 to have a material impact on our results of
operations, financial position, or cash flows.

SFAS No. 157, Fair Value Measurements ("SFAS 157"), defines fair value,
establishes a framework for measuring fair value in generally accepted
accounting principles (GAAP), and expands disclosures about fair value
measurements. The Company will adopt the provisions of SFAS 157 effective
January 1, 2008. The Company does not expect SFAS 157 to have a material impact
on the Company's results of operations, financial position, or cash flows.

SFAS No. 158, Employers' Accounting for Defined Benefit Pension and Other
Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106 and
132(R) ("SFAS 158"), improves financial reporting by requiring an employer to
recognize the overfunded or underfunded status of a defined benefit
postretirement plan as an asset or liability in its statement of financial
position and to recognize changes in that funded status in the year in which the
changes occur through comprehensive income. SFAS 158 will not have an impact on
the Company's results of operations, financial position, or cash flow.

NOTE 5: TERMINATION OF POST RETIREMENT MEDICAL PLAN
---------------------------------------------------

In September 2006, the Company determined that it would terminate its post
retirement medical plan as of December 31, 2006. As a result, the Company
reduced the balance sheet liability for post retirement medical costs by $1.7
million as of September 30, 2006 and recorded a corresponding non-cash gain on
the plan termination. As of September 30, 2006, the Company continued to have
approximately $148,000 included in other current liabilities related to payments
expected to be made under the plan during the fourth quarter of 2006 as well as
during the run off period in 2007 for 2006 claims. Because the Company's
deferred tax asset is fully reserved, there was no corresponding income tax
provision with respect to this gain.

NOTE 6: INVENTORIES
-------------------

The components of inventories are as follows (dollars in thousands):

                                      September 30, 2006   December 31, 2005
                                      ------------------   -----------------
         Raw materials                 $         2,991      $         4,245
         Work in progress                           46                  245
         Finished goods                          3,213                3,235
                                       ---------------      ---------------
                                       $         6,250      $         7,725
                                       ===============      ===============

                                    Page 13
<PAGE>

Inventories were valued on a weighted average cost method basis. Inventories are
stated at the lower of cost or market. Cost elements included in inventory are
material, labor and overhead, primarily using standard cost, which approximates
actual cost.

NOTE 7: PROPERTY, PLANT AND EQUIPMENT
-------------------------------------

The components of Property, Plant and Equipment are as follows (dollars in
thousands):

                                         September 30, 2006    December 31, 2005
                                         ------------------    -----------------
         Land and improvements             $            78      $            76
         Buildings and improvements                  2,483                2,466
         Machinery and equipment                     2,204                2,101
                                           ---------------      ---------------
                                                     4,765                4,643
         Less: Accumulated depreciation
            and amortization                        (2,806)              (2,576)
                                           ---------------      ---------------
                                           $         1,959      $         2,067
                                           ===============      ===============

Depreciation and amortization expense was $108,000 and $296,000 for the three
and nine months ended September 30, 2006, respectively and $104,000 and $291,000
for the three and nine months ended September 30, 2005, respectively.

NOTE 8: SHORT TERM AND LONG TERM DEBT
-------------------------------------

The Company has a credit facility with CIT and a promissory note payable to
JPMorgan Chase Bank ("JPMorgan"). In addition, the Company has borrowings and
advances outstanding from Robert A. Levinson, a stockholder, officer and
director of the Company.

At September 30, 2006, the Company's credit facility with CIT (the "CIT
Facility") provided for maximum aggregate borrowings of up to $7.5 million in
the form of revolving credit, letters of credit and term loans. The CIT Facility
is comprised of separate financing agreements with the Company and its
wholly-owned subsidiary, Blumenthal Lansing Company, LLC ("Blumenthal"). There
was approximately $750,000 of unused availability under the Company's credit
facility with CIT as of September 30, 2006.

The CIT Facility provides for (i) a term loan to the Company (the "Term Loan")
in the initial amount of $2.0 million, $1.3 million of which was outstanding at
September 30, 2006, (ii) revolving credit advances to the Company, $1.1 million
of which was outstanding at September 30, 2006 and (iii) revolving credit
advances to Blumenthal based upon eligible accounts receivable and inventory,
$3,832,000 of which was outstanding at September 30, 2006, and a Letter of
Credit facility with a limit of $500,000, of which there was none outstanding at
September 30, 2006. The Term Loan is amortized at $12,000 per month followed by
a final installment payment of $1.2 million due on January 1, 2008. The
revolving credit advances are also due on January 1, 2008. CIT may terminate the
Credit facility upon 60 days written notice. In the case of the Term Loan, CIT
may accelerate the maturity in the event of a default by the Company after
thirteen months notice of such acceleration. At September 30, 2006, all amounts
outstanding under the CIT Facility in excess of $2.5 million bear interest at
8.75% (the Chase Bank N.A. prime rate plus 0.5%) with a minimum rate of 5.0%.
The first $2.5 million of advances from CIT bears interest at the prime rate
(8.25%).

                                    Page 14
<PAGE>

In connection with the CIT Facility, the Company and its subsidiary have made
cross corporate guarantees and have issued first priority liens covering
substantially all of the assets of the Company and its subsidiary. The
guarantees are full and unconditional. The non-guarantor subsidiary is
immaterial and the Company's financial statements are representative of the
combined guarantors. In addition, Mr. Robert A. Levinson, a stockholder, officer
and director of the Company, provided certain collateral against advances
provided under the CIT Facility, in the approximate amount of $2.5 million.

The CIT Facility contains representations and warranties and events of default
customary for agreements of this nature such as restrictions on incurring more
debt, acquisitions, the use of proceeds from the sales of assets, the
prohibition of preferred stock redemptions, dividend payments in excess of
$300,000 per year, and a change in voting control of the Company. The CIT
Facility also contains a subjective acceleration clause which states that all
obligations shall, at CIT's option, be immediately due and payable without
notice or demand upon the occurrence of any change in the Company's condition or
affairs (financial or otherwise) that, in CIT's sole discretion exercised by CIT
in accordance with CIT's business judgment, materially impairs the collateral or
increases CIT's risk. In the case of the Term Loan, CIT may accelerate the
maturity in the event of a default by the Company after thirteen months notice
of such acceleration. Management of the Company believes that it is unlikely CIT
will accelerate the payment of any of the obligations under the CIT Facility
during the next twelve months.

On July 26, 2006, the CIT Facility was amended to increase the advance
percentage against the value of Eligible Inventory (as defined in the agreement)
to 40% (from 20%) of Eligible Inventory with respect to the revolving credit
portion of the CIT Facility. Total borrowing availability under the entire CIT
Facility remains at $7.5 million. In addition, the guaranty of the CIT Facility
by Robert A. Levinson, the Company's Chief Executive Officer and principal
shareholder, was removed and the applicable interest rate was changed to the
Chase Rate on the first $2.5 million of average net balances owed, and the Chase
Rate plus .50% per annum on average net balances owed in excess of $2.5 million,
but in either case not less than 5% per annum.

In connection with the Company's discontinued Textile operations, during the
nine months ended September 30, 2006, pursuant to a factoring agreement between
CIT and the Company, CIT purchased the Textile segment's eligible trade accounts
receivable without recourse and assumed substantially all credit risk with
respect to such accounts. The amounts due to the Company from CIT under the
factoring agreement earned no interest. The factoring agreement allowed the
Company to obtain advances that bear interest at 8.75% (0.5% above the Chase
Bank, N.A. prime rate). The Company pledged its Textile segment's eligible
accounts receivable and property and equipment as collateral under the factoring
agreement. There was no set limit on borrowings. The amount available for
borrowing was based on a formula consisting of 90% of eligible accounts
receivable increased by side collateral and reduced by both the current loan
balance and outstanding letters of credit.

The promissory note payable to JPMorgan Chase Bank, N.A. in the amount of $3.0
million is dated May 2, 2002 and had a maturity date of April 30, 2007, as
amended. The note bears interest at a fixed rate per annum equal to the Adjusted
LIBOR applicable to such note plus 0.75% (a "Eurodollar Loan"). The interest
rate on the note at September 30, 2006 was 6.36%. In addition, Robert A.
Levinson, a stockholder, officer and director of the Company, has provided
certain additional collateral guaranteeing the note. On July 26, 2006, the
maturity date of the JPMorgan Chase Bank note was extended to January 1, 2008.

                                    Page 15
<PAGE>

Mr. Robert A. Levinson, a stockholder, has agreed to personally support the
Company's cash requirements to enable it to fulfill its obligations through
January 1, 2008, to the extent necessary, up to a maximum amount of $3.0
million. The Company believes its reliance on such commitment is reasonable and
that Mr. Levinson has sufficient liquidity and net worth to honor such
commitment. The Company believes that Mr. Levinson's written commitment provides
the Company with the legal right to request and receive such advances. In the
event that Mr. Levinson did not honor such commitment, the Company would have
the right to sue Mr. Levinson for breach of his agreement. Mr. Levinson
reaffirmed this undertaking in writing on March 21, 2006.

Mr. Levinson's loan balance totals $2.0 million to the Company as of September
30, 2006. During 2005, he made short term advances of approximately $2.5 million
of which $1.5 million and $1.850 million, respectively, were outstanding at
September 30, 2006 and December 31, 2005. Mr. Levinson has agreed not to seek
repayment of $1.0 million of these 2005 advances before January 1, 2008 and, as
such, $1.5 million and $1.850 million of his loan balances have been classified
as non-current on the Company's September 30, 2006 and December 31, 2005
condensed consolidated balance sheets. He has also pledged collateral in support
of certain Company obligations. Accrued interest on Mr. Levinson's loans has
been classified as non-current liabilities on the Company's balance sheet and
totaled $560,000 and $454,000, respectively, at September 30, 2006 and December
31, 2005.

As of September 30, 2006, the Company was in compliance with all debt covenants,
as defined in the agreements.

Future maturities of long-term debt during each of the next five years ending
September 30 and thereafter were as follows (in thousands):

                             2007                $        644
                             2008                       5,691
                             Thereafter                    --
                                                 ------------
                                                 $      6,335
                                                 ============

NOTE 9: PENSION AND OTHER POST-RETIREMENT BENEFIT PLANS
-------------------------------------------------------

The Company sponsors a defined benefit plan, which requires no contribution from
the employees. The plan was frozen as of December 31, 1994, and no new employees
have been eligible to join the plan since that date. Prior to December 31, 1994,
the plan covered substantially all employees. The employees covered under the
plan do not receive any additional accruals for service rendered after December
31, 1994. Plan assets consist principally of common stocks, U.S. Government
obligations, and mutual funds.

The benefits under the plan are determined based on formulas, which reflect the
employees' years of service and compensation during their employment period. The
projected unit credit method is used to determine pension cost. Funding
requirements for the plan are based on the unit credit method. The Company's
policy is to fund pension cost as required by ERISA. With respect to the 2006
plan year, the Company is making quarterly contributions to the plan in 2006 of
approximately $19,000 with an additional $988,000 due on September 15, 2007,
based on current legislated discount rates and actuarial assumptions.

                                    Page 16
<PAGE>

On August 17, 2006 The Pension Protection Act of 2006 was signed into law. New
pension funding rules are effective for plan years beginning on or after January
1, 2008. For 2006 and 2007 the prior law funding rules remain in effect. Under
the new law, the 90% funding target is replaced with a 100% target. Shortfalls
from the 100% target must be amortized over a seven year period. Based on the
new law, the Company currently estimates the following pension contributions
with respect to the defined benefit pension plan (Years Ended December 31):

                                                          Payment Amounts
                                                          (in thousands)
                                                           ------------
                   2007                                    $      1,805
                   2008                                             644
                   2009                                             504
                   2010                                             504
                   2011                                             504
                   2012-2014                                      1,512
                                                           ------------
                   Expected future payments                $      5,473
                                                           ============
                   Estimated unfunded current
                   liability discounted at 5.77%           $      4,500
                                                           ============

In addition to the liability of $4.3 million for this Company sponsored plan,
the Company also has an additional pension liability in the amount of $1.0
million at September 30, 2006 in connection with a terminated multi-employer
plan which requires annual payments of $142,000 inclusive of principal and
interest through 2016. In addition, the Company has a $295,000 deferred
compensation liability payable to the former owner of an acquired business.

A summary of net periodic benefit costs of the Company's defined benefit plan
and post retirement medical benefit plan for the three and nine months ended
September 30, 2006 and 2005, respectively, is as follows (dollars in thousands):
<TABLE>
<CAPTION>

                                                      Three Months Ended               Nine Months Ended
                                                         September 30,                   September 30,
                                                 ----------------------------    ----------------------------
    Pension Benefits                                 2006            2005            2006            2005
    ----------------                             ------------    ------------    ------------    ------------
<S>                                              <C>             <C>             <C>             <C>
    Service                                      $               $         --    $         --    $         --
    Interest cost                                         297             304             891             912
    Expected return on plan assets                       (334)           (342)         (1,002)         (1,026)
    Amortization of prior service cost                     --              --              --              --
    Recognized net actuarial loss                          45              46             135             138
                                                 ------------    ------------    ------------    ------------
    Net periodic benefit cost                    $          8    $          8    $         24    $         24
                                                 ============    ============    ============    ============
<CAPTION>


                                                      Three Months Ended               Nine Months Ended
                                                         September 30,                   September 30,
                                                 ----------------------------    ----------------------------
    Other Benefits                                   2006            2005            2006            2005
    ----------------                             ------------    ------------    ------------    ------------
<S>                                              <C>             <C>             <C>             <C>
    Service                                      $         --    $          4    $         --    $         12
    Interest cost                                          13              14              39              42
    Expected return on plan assets                         --              --              --              --
    Amortization of prior service cost                     (4)             (4)            (12)            (12)
    Recognized net actuarial (gain)                       (20)            (26)            (60)            (78)
                                                 ------------    ------------    ------------    ------------
    Net periodic benefit (gain)                  $        (11)   $        (12)   $        (33)   $        (36)
                                                 ============    ============    ============    ============
</TABLE>

                                    Page 17
<PAGE>

For more information on the Company's pension and other post-retirement benefit
plans, refer to the consolidated financial statements and notes included in the
Company's Annual Report on Form 10-K.

NOTE 10: MANDATORILY REDEEMABLE PREFERRED STOCK
-----------------------------------------------

The Series A Preferred Stock is subject to mandatory redemption, to the extent
the Company may lawfully do so, in three equal annual installments on June 15,
2007, June 15, 2008 and June 15, 2009, in each case, from funds legally
available therefor, at a price per share of Series A Preferred Stock equal to $1
per share, together with an amount representing accrued and unpaid dividends,
whether or not declared, to the date of redemption. Under the terms of the
Company's Certificate of Incorporation, the mandatory redemption of the Series A
Preferred Stock can only be made to the extent that such redemptions can be made
without contravening or causing a default under any contract, agreement or other
instrument by which the Company or its subsidiaries or any of their property is
bound. Under the terms of the CIT Facility, preferred stock redemption payments
are prohibited and preferred stock dividend payments are limited to $300,000 per
year. Because preferred stock redemption payments are prohibited under the CIT
Facility, the Company is precluded by its Certificate of Incorporation from
making any such payments so long as the CIT Facility is outstanding. In
addition, the amount redeemable within the next twelve months, including
accumulated dividends, will continue to be classified as a noncurrent liability
so long as any portion of the CIT Facility has a maturity of more than one year.
The CIT Facility is currently scheduled to mature on January 1, 2008.

Dividends on the Series A Preferred Stock accrue at a rate of $0.06 per annum
per share when, as and if declared by the Company and are payable quarterly on
March 15, June 15, September 15 and December 15. Quarterly dividends which are
not paid in full in cash on any dividend payment date will accumulate without
interest until the first mandatory redemption date. In the event that the
Company does not redeem shares of Series A Preferred Stock as scheduled, any
unpaid accumulated dividends will also begin to accrue dividends from that date
forward at the rate of 6% per year.

The availability of resources to make dividend payments to the holders of Series
A Preferred Stock in the future will depend on the Company's future earnings and
cash flow. Under Delaware law, preferred dividend payments are restricted to the
Company's accumulated or current earnings and profits. Losses in 2005 and
earlier years have depleted the Company's accumulated earnings and profits and,
as such, future preferred dividend payments will be limited to future earnings
and profits. Preferred dividends which cannot be paid under Delaware law will
continue to accrue and will be added to the Preferred Stock liability account.
As of September 30, 2006, unpaid preferred stock dividends totaled approximately
$217,000 and have been classified as a noncurrent liability on the Company's
balance sheet. The preferred stock is owned 98.3% by Mr. Robert A. Levinson, a
stockholder, officer and director of the Company. The mandatorily redeemable
preferred stock is redeemable at $1.00 per share plus accrued and unpaid
dividends.

NOTE 11: COMMON STOCK AND STOCK OPTIONS
---------------------------------------

We adopted FAS 123(R) using the modified prospective transition method beginning
January 1, 2006. Accordingly, during the nine-month period ended September 30,
2006, we recorded stock-based compensation expense for awards granted prior to,
but not yet vested, as of January 1, 2006, as if the fair value method required
for pro forma disclosure under FAS 123 were in effect for expense recognition

                                    Page 18
<PAGE>

purposes, adjusted for estimated forfeitures. There were no stock-based awards
granted after January 1, 2006. However, for all future stock-based awards we
will recognize compensation expense based on the estimated grant date fair value
method using the Black-Scholes valuation model. For awards granted prior to, but
not yet vested, as of January 1, 2006, we have recognized compensation expense
using a straight-line amortization method. As FAS 123(R) requires that
stock-based compensation expense be based on awards that are ultimately expected
to vest, stock-based compensation for the nine-month period ended September 30,
2006 has been reduced for estimated forfeitures. When estimating forfeitures, we
consider voluntary termination behaviors as well as trends of actual option
forfeitures. The impact on our results of operations of recording stock-based
compensation for the three and nine-month periods ended September 30, 2006, were
an expense of $1,000 and $54,000, respectively, which are included in general
and administrative expense.

Prior to the adoption of FAS 123(R), the intrinsic value of unvested common
stock options assumed in the January 3, 2003 Carlyle acquisition was recorded as
unearned stock-based compensation. Upon the adoption of FAS 123(R) in January
2006, the unearned stock-based compensation balance of approximately $60,000 was
reclassified to additional paid-in capital.

Prior to the adoption of FAS No. 123(R), we provided the disclosures required
under FAS No. 123, as amended by FAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosures." Employee stock-based compensation
expense recognized under FAS 123(R) was not reflected in our results of
operations for the three and nine-month periods ended September 30, 2005 for
employee stock option awards as all options were granted with an exercise price
equal to the market value of the underlying common stock on the date of grant.
Forfeitures of awards were recognized as they occurred. Previously reported
amounts have not been restated.

The pro forma information for the three and nine months ended September 30, 2005
was as follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>

                                                                     Three Months     Nine Months
                                                                     ------------    ------------
<S>                                                                  <C>             <C>
Net loss, as reported                                                $     (3,275)   $     (3,876)
Add:      Amortization of stock-based compensation
          expense determined under the intrinsic value method
          (net of cancellations)                                               --              --
Deduct:   Total stock-based compensation expense
          determined under fair value based method, net of tax                (17)            (52)
                                                                     ------------    ------------
Pro forma net loss                                                   $     (3,292)   $     (3,928)
                                                                     ============    ============
Loss per share:
          Basic   - Reported                                         $       (.61)   $       (.73)
                    Pro forma*                                       $       (.62)   $       (.74)
          Diluted - Reported *                                       $       (.61)   $       (.73)
                    Pro forma*                                       $       (.62)   $       (.74)
</TABLE>

                                    Page 19
<PAGE>

The following table summarizes the stock option transactions for the nine-month
periods ended September 30 (In thousands except per share amounts):
<TABLE>
<CAPTION>

                                                   2006                           2005
                                       ----------------------------    ----------------------------
                                                         Weighted                        Weighted
                                                         average                         average
                                                         exercise                        exercise
                                         Options         price            Options        price
                                       ------------    ------------    ------------    ------------
<S>                                             <C>    <C>                      <C>    <C>
Options outstanding at January 1                411    $       2.79             445    $       2.70
Options granted                                  --              --              --              --
Options exercised                                --              --              --              --
Options forfeited/cancelled                     (45)          (1.43)             --
                                       ------------    ------------    ------------    ------------

Options outstanding at September 30             366    $       2.96             445    $       2.70
                                       ============    ============    ============    ============

Exercisable at September 30                     361    $       2.97             366    $       2.77
                                       ============    ============    ============    ============
</TABLE>

During the nine months ended September 30, 2005, the Company issued an aggregate
of 2,317 shares of common stock to a director and recorded such issuance as
stock based compensation expense. There were no such issuances in 2006.

NOTE 12: CUSTOMER AND SUPPLIER CONCENTRATIONS
---------------------------------------------

The Company's three largest customers (Wal-mart, a mass merchandiser and Jo-Ann
Stores and Hancock Fabrics, each a specialty chain) represented approximately
48%, 25% and 9%, respectively, of the Company's net sales in the three months
ended September 30, 2006 and represented approximately 49%, 23% and 7%,
respectively, of the Company's net sales in the nine months ended September 30,
2006. These customers also represented approximately 46%, 31% and 6% of the
Company's net sales during the three months ended September 30, 2005 and 45%,
25% and 8%, respectively, of the Company's net sales in the nine months ended
September 30, 2005. These customers also represented approximately 62% and 80%
of the total outstanding accounts receivable as of September 30, 2006 and
December 31, 2005, respectively. A reduction in sales to any of these customers
could adversely impact the financial condition and results of operations of the
Company.

NOTE 13: RELATED PARTY TRANSACTIONS
-----------------------------------

Robert A. Levinson, a stockholder, officer and director, had outstanding loans
of $2.0 million to the Company as of September 30, 2006. The Company also had
$560,000 of accrued interest payable to Mr. Levinson with respect to such loans
as of September 30, 2006. He has also pledged collateral in support of certain
Company obligations. See Note 8 for a description of these transactions.

In addition to being a director of the Company, Edward H. Cohen serves as
counsel to Katten Muchin Rosenman LLP, legal counsel to the Company. During the
three and nine months ended September 30, 2006, fees for services provided to
the Company by Katten Muchin Rosenman LLP totaled approximately $63,000 and
$234,000, respectively and fees for the three and nine months ended September
30, 2005 totaled $96,000 and $159,000 respectively. Mr. Cohen does not share in
the fees that the Company pays to such law firm and his compensation is not
based on such fees.

                                    Page 20
<PAGE>

NOTE 14: COMMITMENTS AND CONTINGENCIES
--------------------------------------

Environmental. The Company is subject to a number of federal, state and local
environmental laws and regulations, including those concerning the treatment,
storage and disposal of waste, the discharge of effluents into waterways, the
emissions of substances into the air and various health and safety matters. In
addition, CERCLA and comparable state statutes generally impose joint and
several liability on present and former owners and operators, transporters and
generators for remediation of contaminated properties regardless of fault. These
parties are typically identified as "potentially responsible parties" or "PRPs."
On or about June 1992 the Company received notices from the United States
Environmental Protection Agency ("EPA") that the Company, Belding Corticelli
Thread Co. ("BCTC") (a discontinued operation) and Carlyle Manufacturing
Company, Inc. ("CM") (a subsidiary) had been identified, along with 1,300 other
parties, as PRPs in connection with the alleged release of hazardous substances
from the Solvents Recovery Service of New England Superfund Site in Southington,
Connecticut (the "SRS site"). The Company settled its alleged liability in
connection with the SRS site by paying $1,626 in connection with a settlement
offered to de minimis parties at the SRS site in 1994. BCTC and CM, along with
other PRPs, committed to perform the Remedial Investigation and Feasibility
Study ("RIFS") and two Non-Time Critical Removal Actions ("NTCRA") at the SRS
site. The RIFS, and the first NTCRA (except for certain maintenance activities)
have been completed. BCTC and CM have been allocated approximately .04% and
1.34%, respectively, of costs incurred to date, based on their alleged volume of
waste shipped to the SRS site. In September of 2005, the EPA issued its Record
of Decision ("ROD") for the SRS site. In September 2006, the EPA sent special
notice letters to the PRPs to initiate consent decree negotiations concerning,
among other things, the scope of the work to be performed under the ROD.
Assuming those negotiations are successful, it is expected that payments to the
EPA by parties to the Consent Decree would begin in 2007 or early 2008.

The issues referred to above do not include costs that the Company or its
subsidiaries may incur for consultants' or attorneys' fees or for administrative
expenses in connection with the Company's participation as part of a PRP group.
The reserve the Company has established for these and other environmental
liabilities, in the amount of $1.3 million, represents the Company's best
current estimate of the costs of addressing all identified environmental
situations, based on the Company's review of currently available evidence, and
takes into consideration the Company's prior experience in remediation and that
of other companies, as well as public information released by the EPA and by the
PRP groups in which the Company or its subsidiaries are participating. Although
the reserve currently appears to be sufficient to cover these environmental
liabilities, there are uncertainties associated with environmental liabilities,
and no assurances can be given that the Company's estimate of any environmental
liability will not increase or decrease in the future. The uncertainties relate
to the difficulty of estimating the ultimate cost of any remediation that may be
undertaken, including any operating costs associated with remedial measures, the
duration of any remediation required, the amount of consultants' or attorneys'
fees that may be incurred, the administrative costs of participating in the PRP
groups, and any additional costs or requirements that may be imposed by federal,
state or local agencies.

Legal Proceedings. The Company is a party to various other environmental claims,
legal proceedings and administrative actions, all arising from the ordinary
course of business. Although it is impossible to predict the outcome of any such
claims or legal proceedings, the Company believes any liability that may finally

                                    Page 21
<PAGE>

be determined should not have a material effect on its consolidated financial
position, results of operations or cash flows.


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

Forward-Looking Statements

Introduction

This 2006 Report on Form 10-Q contains statements which constitute
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. Those statements include statements regarding the intent and belief
or current expectations of the Company and its management team. Prospective
investors are cautioned that any such forward-looking statements are not
guarantees of future performance and involve risks and uncertainties, and that
actual results may differ materially from those projected in the forward-looking
statements. Such risks and uncertainties include, among other things, the
Company's ability to continue to operate as a going concern, the Company's
lenders continuing to support the Company, the Company's ability to secure
additional financing to meet future capital needs, the timing and amount of
required defined benefit pension plan contributions, the Company's ability to
generate increased revenues from its Craft division, reliance on short term
advances from a significant stockholder, the Company's ability to generate free
cash flow or obtain additional financing in excess of its debt service and other
current obligations in order to support and grow its Craft business, reliance on
a limited number of significant customers, future revenue opportunities,
inventory risk, growth of the Company's Craft business in Europe and North
America, the expansion and future growth of the Company's customer base and
strategic and distribution relationships, future capital, marketing and sales
force needs, the Company's ability to manage expenses and maintain margins, the
possible acquisition of complementary products and businesses, and other risks
and uncertainties that may be detailed herein, and from time-to-time, in the
Company's other reports filed with the Securities and Exchange Commission. The
Company undertakes no obligation to publicly update any forward-looking
statements for any reason, even if new information becomes available or other
events occur in the future.

Overview

Levcor International, Inc. ("Levcor" or the "Company") was incorporated in 1964
as Pantepec International, Inc. under the laws of the Islands of Bermuda and was
reorganized in 1967 under the laws of the State of Delaware. In 1995, Pantepec
International, Inc. changed its name to Levcor International, Inc.

In 1995 and 1999, the Company acquired various fabric businesses. These
acquisitions formed the basis of the Company's Textile business.

                                    Page 22
<PAGE>

In 2003, the Company acquired by merger Carlyle Industries, Inc. ("Carlyle").
This acquisition formed the basis of the Company's Craft business.

Discontinued Operations

During the fourth quarter of 2005, the Company's Board of Directors approved
management's plan to exit the garment manufacturing business. On May 11, 2006,
Management determined to exit its remaining Textile business completely. As a
result, Textile segment operations for the current and prior comparative periods
have been presented as discontinued operations.

The decision to exit the Textile business was made after a full review and
analysis of the Textile business and the Company's strategic alternatives. The
decision was based on a variety of factors, including, (i) that the Company's
contract garment manufacturing and other textile business has incurred operating
losses resulting from lower than planned business volume from our major
customers and has been unable to grow its customer base, (ii) that the business
has incurred sales decreases (iii) a decrease in margins due to an increase in
raw material costs that were unable to be passed to customers, and (iv) the long
production lead times and the related working capital requirements of the
business which contributed to interest costs that exceeded the segment's
operating profits. The Company had determined that the future net revenues and
gross profits in the Textile business would continue to deteriorate and as a
result the Company concluded that a withdrawal from the business was the
appropriate course of action at that time.

During the first nine months of 2006, the Company has been disposing of Textile
segment inventory. The Company will continue to transact sales of Textile
segment inventory until such inventory is fully disposed of. As of September 30,
2006 the Company had $15,000 of Textile segment inventory remaining. The Company
estimates exit costs associated with exiting the garment manufacturing and
remaining textile business not to be material.

Management concluded that the carrying amounts of goodwill and trademarks
totaling $2.3 million and $709,000, respectively, related to the Textile segment
were deemed to be fully impaired as of September 30, 2005 and were written off
accordingly at that time.

The Textile segment generated the following operating results which have been
classified as discontinued operations in the unaudited condensed consolidated
statements of operations (dollars in thousands):
<TABLE>
<CAPTION>

                                                      Three Months Ended               Nine Months Ended
                                                         September 30,                   September 30,
                                                 ----------------------------    ----------------------------
                                                     2006            2005            2006            2005
                                                 ------------    ------------    ------------    ------------
<S>                                              <C>             <C>             <C>             <C>
    Sales                                        $         47    $      4,798    $      2,393    $      7,171
    Cost of sales                                          36           4,948           2,022           6,943
                                                 ------------    ------------    ------------    ------------
    Gross profit                                           11            (150)            371             228
    Selling, general and administrative
          expense                                          --             463             269           1,314
    Goodwill and trademark impairment                      --           3,009              --           3,009
    Interest expense                                       --              89             177             227
    Income tax (benefit)                                   --            (239)             --            (446)
                                                 ------------    ------------    ------------    ------------
    Results of discontinued operations,
          net of tax                             $         11    $     (3,472)   $        (75)   $     (3,876)
                                                 ============    ============    ============    ============
</TABLE>

                                    Page 23
<PAGE>

The Textile segment's assets and liabilities as included in the Company's
consolidated balance sheets are as follows (dollars in thousands):
<TABLE>
<CAPTION>

                                                      September 30,   December 31,
                                                          2006            2005
                                                      ------------    ------------
<S>                                                   <C>             <C>
    Cash                                              $         --    $          4
    Due from factor                                             22              --
    Accounts receivable, net                                     2              --
    Inventories                                                 15           1,198
    Intercompany receivable                                     --             501
    Other current assets                                        --               1
                                                      ------------    ------------
          Total current assets                                  39           1,704
    Property, plant and equipment, net                          --              25
    Other assets                                                --               6
                                                      ------------    ------------
          Total assets                                $         39    $      1,735
                                                      ============    ============

    Accounts payable                                  $         76    $        373
    Due to factor                                               --             775
    Current maturities of stockholder loan                      --             850
    Intercompany payable                                     5,507              --
    Other current liabilities                                   34             239
                                                      ------------    ------------
          Total current liabilities                          5,617           2,237
    Long term debt                                              --           3,000
    Stockholder loans less current maturities                   --           1,500
    Accrued interest, stockholder loans                         --             454
                                                      ------------    ------------
          Total liabilities                           $      5,617    $      7,191
                                                      ============    ============
</TABLE>

Effective June 30, 2006, the short and long term debt of the Textile segment
became short and long term debt of the Company's continuing operations and as
such, interest expense related to this debt in future periods will be classified
as part of our continuing operations.

Operating Activities

The Company sells product in the home sewing and craft retail industry. Its
retail customers are located primarily in the United States with some additional
distribution in Canada and Europe.

The Company's strategy to expand its business and improve profitability
includes, among other things:

         o        expanding its craft distribution product offerings, business
                  and customer base within retail and wholesale markets,
                  including an expansion into international markets, primarily
                  in Canada and Europe; and

         o        acquiring new lines of business within the Craft industry
                  through acquisition.

The Company manufactures, packages and distributes buttons, embellishments,
craft products and complimentary product lines, including appliques, craft kits
and fashion and jewelry accessories. These products are marketed to the home
sewing and craft customers. The Company's products are sold to mass
merchandisers, specialty chains and independent retailers and wholesalers.
Products are sold under the La Mode (R), Le Chic (R), Streamline (R), Favorite
Findings (R), Crafter's Images (R), and Button Fashion (R) registered trademarks
and the Le Bouton, La Petite, Classic, Boutique, Elegant and Mill Mountain brand

                                    Page 24
<PAGE>

names. The Company also produces and distributes a private-label button line for
one of the nation's best-known retailers.

The button products are sold primarily for use in the home sewing market where
buttons are used for garment manufacturing, replacement and the upgrading and/or
restyling of ready-to-wear clothing. More modest button usage is found in craft
projects, home decorating and garment manufacturing. The domestic market is
concentrated and is served by national and regional fabric specialty chains,
mass merchandisers, independent fabric stores, notions wholesalers and craft
stores and chains.

All imported and domestically purchased products for sale in the North American
market are shipped to the Company's Lansing, Iowa facility for packaging and
distribution to customers. As thousands of button styles are received in bulk,
computerized card printing systems enable the Company's wholly-owned subsidiary,
Blumenthal Lansing Company, LLC ("Blumenthal") to economically imprint millions
of button cards with such necessary data as style number, price, number of
buttons, bar code, country of origin and care instructions. The Company also
blister-packages and shrink-wraps some products. Domestic shipments are made
primarily to individual stores with a smaller percentage to warehouse locations.
The European business is primarily serviced by third party distributors from the
Company's button manufacturing and distribution facility in Veendam, the
Netherlands.

The Company's accounts include fabric and craft specialty chains, mass
merchandisers carrying buttons and crafts, distributors and many independent
stores. Mass merchandisers and specialty chain customers are characterized by
the need for sophisticated electronic support, rapid turn-around of merchandise
and direct-to-store service to customers with hundreds to thousands of locations
nationwide. The Company enjoys long-standing ties to all of its key accounts and
the average relationship with its three largest customers extends over 30 years.
Due to the large account nature of its customer base, most customer contact is
coordinated by management and additional sales coverage is provided by regional
sales managers. Many smaller retailers are serviced by independent
representatives and representative organizations.

The Company believes that its craft business depends on trends within the craft
market including the more mature home-sewing market. The retail customer base
for buttons has changed substantially over the past two decades as department
stores and small independent fabric stores have been replaced by mass
merchandisers and specialty retail chains which have continued to consolidate.
In response to this trend, the Company has broadened its lines to include
embellishments, novelty buttons and products used in the craft industry which
are not viewed by management as mature markets. In addition, the Company has
sought to expand its markets beyond the traditional U.S. retail outlets by
expansion into the major European countries.

The Company's three largest customers (Wal-mart, a mass merchandiser and Jo-Ann
Stores and Hancock Fabrics, each a specialty chain) represented approximately
48%, 25% and 9%, respectively, of the Company's net sales in the three months
ended September 30, 2006 and represented approximately 49%, 23% and 7%,
respectively, of the Company's net sales in the nine months ended September 30,
2006. These customers also represented approximately 46%, 31% and 6% of the
Company's net sales during the three months ended September 30, 2005 and 45%,
25% and 8%, respectively, of the Company's net sales in the nine months ended
September 30, 2005. These customers also represented approximately 62% and 80%
of the total outstanding accounts receivable as of September 30, 2006 and
December 31, 2005, respectively. A reduction in sales to any of these customers
could adversely impact the financial condition and results of operations of the
Company.

                                    Page 25
<PAGE>

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and judgments related to
the application of certain accounting policies.

While we base our estimates on historical experience, current information and
other factors deemed relevant, actual results could differ from those estimates.
We consider accounting estimates to be critical to our reported financial
results if (i) the accounting estimate requires us to make assumptions about
matters that are uncertain and (ii) different estimates that we reasonably could
have used for the accounting estimate in the current period, or changes in the
accounting estimate that are reasonably likely to occur from period to period,
would have a material impact on our financial statements.

We consider our policies for revenue recognition to be critical due to the
continuously evolving standards and industry practice related to revenue
recognition, changes to which could materially impact the way we report
revenues. Accounting polices related to: allowance for doubtful accounts,
inventories, impairment of long-lived assets, deferred taxes, pension
liabilities and loss contingencies are also considered to be critical as these
policies involve considerable subjective judgment and estimation by management.
Critical accounting policies, and our procedures related to these policies, are
described in detail below. Also, see Note 4 -- Summary of Significant Accounting
Policies.

Allowance for Doubtful Accounts

The Company extends credit to customers that satisfy established credit
criteria. The Company has a significant concentration of credit risk due to the
large volume of business conducted with a few major retail customers. Our
largest retail customers are public companies and as such, the Company monitors
their financial reports on a regular basis and obtains accounts receivable
insurance in certain circumstances.

Accounts receivable, trade, is reported net of reserves for bad debts, returns
and allowances. A reserve for bad debts is determined through analysis of the
aging of accounts receivable at the date of the financial statements and
assessments of collectability based on historical trends. The reserve for bad
debts includes 100% of all invoices that management deems doubtful of
collection. The Company also estimates reserves for sales returns and allowances
based on historical experience.

Inventories

Inventories are stated at the lower of cost (principally average cost) or
market. Inventories consist of loose buttons, packaged buttons and craft
products. The Company estimates markdowns required for inventories based upon
future marketability as well as general economic conditions. The Company
regularly reviews inventory quantities on hand, by item, and records a provision
for excess inventory based primarily upon the Company's historical experience
and estimated forecast of product demand using historical and recent ordering
data relative to the quantity on hand for each item. A significant decrease in
demand for the Company's products could result in an increase in the amount of

                                    Page 26
<PAGE>

excess inventory quantities on hand; however, the Company manages inventory and
monitors product purchasing to reduce this risk.

Impairment of Long-Lived Assets

The Company evaluates goodwill and indefinite lived intangible assets on an
annual basis and whenever events or changes in circumstances indicate that the
carrying amount may not be fully recoverable. Long-lived assets, including
property and equipment, long-term assets and amortizable intangible assets are
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be fully recoverable. Conditions that would
necessitate an impairment assessment include a significant decline in the
observable market value of an asset, a significant change in the extent or
manner in which an asset is used, or a significant adverse change that would
indicate that the carrying amount of an asset or group of assets is not
recoverable. The Company assesses impairment in accordance with the requirements
of Statement of Financial Accounting Standards ("SFAS") No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets. The Company assesses the
impairment of goodwill and intangible assets in accordance with the provisions
of SFAS No. 142, Goodwill and Other Intangible Assets. The Company determines
the recoverability of the assets by comparing the carrying amount of the assets
to net future cash flows that the assets are expected to generate. The
impairment recognized is the amount by which the carrying amount exceeds the
fair market value of the assets.

Deferred Taxes

Deferred tax assets and liabilities represent estimated future tax amounts
attributable to the differences between the carrying amounts of assets and
liabilities in the condensed consolidated financial statements and their
respective tax bases. These estimates are computed using the tax rates in effect
for the applicable period. Realization of our deferred tax assets is, for the
most part, dependent upon our U.S. consolidated tax group of companies having
sufficient federal taxable income in future years to utilize our domestic net
operating loss carryforwards before they expire. We adjust our deferred tax
valuation allowance on a quarterly basis in light of certain factors, including
our financial performance.

Pension Liabilities

The determination of pension obligations and the related pension expense or
credits to operations involves significant estimates. The most significant
estimates are the discount rate used to calculate the actuarial present value of
benefit obligations and the expected long-term rate of return on assets used in
calculating the pension charges or credits for the year. Under the Company's
defined benefit plan, the Company uses discount rates based on yields of highly
rated fixed income debt securities at the end of the year. At September 30,
2006, the weighted average discount rate for the plan was 5.75%. The Company
uses an expected long-term rate of return on assets that is based on both past
performance of the plan's assets and estimated future performance of the assets.
At September 30, 2006, the expected long-term rate of return used was 8%. Due to
the nature of the plan's assets and the volatility of debt and equity markets,
results may vary significantly from year to year.

Based on current estimates, the Company has an aggregate $5.5 million pension
obligation representing $4.3 million related to the Company sponsored plan and
$1.0 million related to a terminated multi-employer plan and a $295,000 deferred
compensation liability payable to the former owner of an acquired business. See
Note 9 to the unaudited condensed consolidated financial statements for
estimated future contribution requirements.

                                    Page 27
<PAGE>

Loss Contingencies

There are times when non-recurring events occur that require management to
consider whether an accrual for a loss contingency is appropriate. Accruals for
loss contingencies typically relate to certain legal proceedings, customer and
other claims and litigation. As required by SFAS No. 5, if the assessment of a
contingency indicates that it is probable that a material loss has been incurred
and the amount of liability can be estimated, then the estimated liability would
be accrued in our financial statements. If the assessment indicates that a
potentially material loss contingency is not probable but is reasonably
possible, or is probable but cannot be estimated, then the nature of the
contingent liability, together with an estimate of the range of possible loss if
determinable and material, is disclosed. We analyze our legal proceedings,
warranty and other claims and litigation based on available information to
assess potential liability. We develop our views on estimated losses in
consultation with outside counsel handling our defense in these matters, which
involves an analysis of potential results assuming a combination of litigation
and settlement strategies. As a result of the significant judgment required in
assessing and estimating loss contingencies, actual losses realized in future
periods could differ significantly from our estimates. The adverse resolution of
any one or more of these matters over and above the amounts that have been
estimated and accrued in the current unaudited condensed consolidated financial
statements could have a material adverse effect on our business, results of
operations and financial condition.

Revenue Recognition

Revenue is recognized when goods are shipped to customers. Shipment is made by
UPS or common carrier. Deliveries generally take place within three days of
shipment. Standard terms for shipments are F.O.B. shipping point, at which time
the Company has completed all performance obligations to consummate the sale. In
some circumstances, shipments are made F.O.B. destination, in which case the
Company insures the sales value of most shipments.

Revenue is reported net of a reserve for sales returns and allowances. Sales
returns and allowances are estimated based upon specific agreements and
historical patterns with major accounts and are accrued in the period in which a
customer becomes entitled to an allowance or return of product.

                                    Page 28
<PAGE>

Results of Operations

The following presents the results of the Company's continuing operations in the
Craft business and does not reflect the remaining or historical activity of its
discontinued Textile operations. See Note 2 of the Notes to Financial statements
and "Overview" and "Discontinued Operations" above.

Three Months Ended September 30, 2006 Compared to Three Months Ended September
30, 2005

Net sales totaled $5.6 million during the third quarter of 2006 as compared with
$6.1 million during the third quarter of 2005 for a decrease of approximately
$0.5 million or 8% as compared to the third quarter of 2005. The decrease in
third quarter sales was primarily the result of the timing of an annual modular
change for a major customer. In 2006, this annual modular change took place in
March and is reflected in our first quarter net sales; in 2005 the modular
change took place in July and was reflected in our third quarter net sales.

Gross profit totaled $1.7 million during the third quarter of 2006 as compared
to $2.2 million during the third quarter of 2005. The lower gross profit
reflects the lower net sales as described above. The gross margin percent during
the third quarter of 2006 was 29.8% as compared to 35.7% during the third
quarter of 2005. Reduced leverage of fixed cost of sales accounted for
approximately 3.5 basis points of the reduction in gross profit percent and
higher variable cost of goods sold accounted for approximately 2.4 basis points
of the margin decline.

Selling, general and administrative expenses totaled $1.5 million during the
third quarter of 2006 as compared to $1.4 million during the third quarter of
2005. Selling, general and administrative expenses increased by $55,000 during
the third quarter of 2006 as compared to the same period in 2005.

Income before gain on termination of post retirement medical plan, interest
expense, preferred dividends and income taxes or operating income totaled
$168,000 during the third quarter of 2006 as compared to $729,000 during the
third quarter of 2005. The decrease in operating income was the result of the
decreased gross profit combined with the higher selling, general and
administrative expenses all as described above.

During the third quarter of 2006, the Company recorded a non-cash $1.7 million
gain on the termination of the post retirement medical plan. There was no
comparable item in 2005.

Net interest expense during the third quarter of 2006 totaled $330,000 as
compared to $145,000 during the third quarter of 2005. Interest expense during
the third quarter of 2006 included an accrual of $100,000 of interest payable to
the State of Connecticut related to the settlement of 1994 and 1995 state income
tax audits of a previously disposed of entity, Danfield Threads, Inc. There were
no comparable interest charges in the third quarter of 2005. In addition,
interest expense during the third quarter of 2006 also included $81,000 of
interest on debt related to the textile division which effective June 30, 2006
was reclassified as continuing operations debt.

Preferred dividend expense totaled $68,000 and $69,000 during the third quarters
of 2006 and 2005, respectively. The preferred dividends were accrued during the
third quarter of 2006 but were not paid in cash. In 2005, the preferred
dividends were paid in cash.

                                    Page 29
<PAGE>

In 2006, because of the Company's net operating loss carryforward and the full
valuation allowance against its deferred tax asset, the Company was not required
to record a provision for income taxes related to its 2006 pretax income and
will not be required to do so in the future except in instances where minimum
taxes are payable. During the third quarter of 2006, the income tax provision of
$200,000 was the result of a settlement of 1994 and 1995 state income tax audits
of a previously disposed of entity, Danfield Threads, Inc. During the third
quarter of 2005, the income tax provision totaled $318,000.

Net income from continuing operations for the three months ended September 30,
2006 totaled $1.2 million as compared to $197,000 during the three months ended
September 30, 2005. Included in net income from continuing operations for the
third quarter of 2006 was $1.7 million of non-cash gain on the termination of
the Company's post retirement medical plan. Excluding this non-cash gain, the
Company's loss from continuing operations was $430,000.


Nine Months Ended September 30, 2006 Compared to Nine Months Ended September 30,
2005

Net sales totaled $16.4 million during the nine months ended September 30, 2006
as compared to $15.8 million in 2005 for an increase of approximately $0.6
million or 3.7%. The increase in sales was the result of a combination of an
increase in the average unit price partially offset by a decrease in unit
shipments. During the nine months ended September 30, 2006, unit pricing
improved approximately 6.5% as compared to 2005 while unit volume during the
nine-month period decreased approximately 3% as compared to last year.

Gross profit totaled $5.6 million during the nine months ended September 30,
2006 as compared to $5.3 million during the nine month period in 2005 for an
increase of approximately $0.3 million or 5.6%. The gross margin percent during
the year to date period in 2006 was 33.9% as compared to 33.7% during the year
to date period in 2005. The increase in gross profit dollars was the result of
the increase in sales volume as discussed above and the increase in gross margin
percent over 2005 was primarily the result of higher pricing during the year to
date period.

Selling, general and administrative expenses totaled $4.5 million during the
nine months ended September 30, 2006 and 2005. Overall, selling, general and
administrative expenses were lower by $23,000 during the 2006 year to date
period as compared to the same period in 2005.

Operating income or income before gain on termination of post retirement medical
plan, interest expense, preferred dividends and income taxes totaled $1.1
million during the nine months ended September 30, 2006 as compared to $832,000
during the nine month period in 2005 for an increase of $255,000 or 30.1%. The
increase in operating income was the result of the increased gross profit
combined with flat selling, general and administrative expenses all as described
above.

In 2006, the Company recorded a non-cash $1.7 million gain on the termination of
the post retirement medical plan. There was no comparable gain in 2005.

Net interest expense during the nine months ended September 30, 2006 totaled
$625,000 as compared to $365,000 during the nine month period in 2005. Interest
expense during 2006 included an accrual of $100,000 of interest payable to the
State of Connecticut related to the settlement of 1994 and 1995 state income tax
audits of a previously disposed of entity, Danfield Threads, Inc. There were no
comparable interest charges in 2005. In addition, interest expense during 2006

                                    Page 30
<PAGE>

also includes $81,000 of interest on debt related to the textile division which
effective June 30, 2006 was reclassified as continuing operations debt.

Preferred dividend expense totaled $204,000 and $205,000 during the nine months
ended September 30, 2006 and 2005, respectively. The preferred dividends were
accrued during 2006 but were not paid in cash. In 2005, the preferred dividends
were paid in cash.

In 2006, because of the Company's net operating loss carryforward and the full
valuation allowance against its deferred tax asset, the Company was not required
to record a provision for income taxes related to its 2006 pretax income and
will not be required to do so in the future except in instances where minimum
taxes are payable. During 2006, an income tax provision of $200,000 was recorded
as the result of a settlement of 1994 and 1995 state income tax audits of a
previously disposed of entity, Danfield Threads, Inc. During the nine months
ended September 30, 2005 the income tax provision totaled $262,000.

Net income from continuing operations for the nine months ended September 30,
2006 totaled $1.7 million as compared to none during the nine months ended
September 30, 2005. Included in net income from continuing operations for 2006
was $1.7 million of non-cash gain on the termination of the Company's post
retirement medical plan. Excluding this non-cash gain, the Company's income from
continuing operations was approximately $81,000 during the nine months ended
September 30, 2006.

Going Concern
-------------

We have prepared our unaudited condensed consolidated financial statements on a
going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities and commitments in the normal course of business.
The condensed consolidated financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset amounts or
amounts of liabilities that might be necessary should we be unable to continue
in existence.

Our historical losses in the Textile division and resulting negative cash flows
raise substantial doubt about our ability to continue as a going concern. These
circumstances caused our independent registered public accounting firm to
include an explanatory paragraph in their report dated March 15, 2006, regarding
their concerns about our ability to continue as a going concern. Substantial
doubt about our ability to continue as a going concern may create negative
reactions to the price of the common shares of our stock and we may have a more
difficult time obtaining financing.


Liquidity and Capital Resources

The Company's principal sources of cash flow are from internally generated
funds, borrowings under revolving credit facilities, advances under its
factoring agreement and advances from Robert A. Levinson, a principal
stockholder, officer and director of the Company. The Company believes these
sources of cash will be sufficient to meet its liquidity needs for at least the
next 12 months.

                                    Page 31
<PAGE>

The current year has produced a number of favorable financial results, including
positive cash flow, an ongoing orderly liquidation of the textile segment
inventory and an improved working capital position. In addition, on July 26,
2006, the Company's $3 million Promissory Note (the "Note") in favor of J. P.
Morgan Chase Bank, N.A. was amended to extend the maturity date of the Note to
January 1, 2008 from April 30, 2007. Also on July 26, 2006 the Company's credit
facility (the "Facility") with CIT Group/Financial Services, Inc. was amended to
increase the advance percentage against the value of Eligible Inventory (as
defined under the Facility) to 40% (from 20%) of Eligible Inventory (a dollar
increase of approximately $1.1 million in borrowing availability at current
inventory levels) with respect to the revolving credit portion of the Facility.
Total borrowing availability under the entire Facility remains at $7.5 million.
In addition, the guaranty of the Facility by Robert A. Levinson, the Company's
Chief Executive Officer and principal shareholder, was removed and the
applicable interest rate was changed to the Chase Rate on the first $2.5 million
of average net balances owed, and the Chase Rate plus .50% per annum on average
net balances owed in excess of $2.5 million, but in either case not less than 5%
per annum. However, there can be no assurance that the Company will not require
additional financing, due to historical losses, debt service requirements or
other factors to meet its liquidity needs, including its obligation to make $1.8
million of pension plan contributions next year and the redemption of preferred
stock in 2007. There can be no assurance the Company will be able to obtain such
additional financing if needed, in which case the Company's operations would be
materially adversely affected and it could be forced to cease operations.

Losses sustained in prior years may have materially adversely affected the
Company's long-term liquidity. While the Company has taken recent steps to
improve its long term liquidity outlook, the Company still has limited
availability under its existing credit facilities, and there can be no assurance
the Company will not require additional financing to support its operations,
that the Company will be able to obtain any needed additional financing, or that
it can obtain additional financing on favorable terms. Robert A. Levinson, the
Company's Chairman and principal stockholder, has agreed to continue to
personally support the Company's cash requirements through January 1, 2008 by
providing short-term loans to the Company up to a maximum of $3 million. There
is currently $1 million of borrowing available from Mr. Levinson under this
agreement. If we (1) do not substantially achieve our overall projected revenue
levels for 2006, (2) fail to operate within our projected expense levels as
reflected in our business operating plans, or (3) do not receive the ongoing
support of our lenders, then we will be unable to meet our cash and operating
requirements for the next twelve months, which would in turn require us to seek
additional financing to fund operations and/or implement additional expense
reductions. Levcor has implemented several actions to reduce losses and improve
cash flow, including exiting the textile business, reduction of headcount,
elimination of non-profitable product lines, termination of the post retirement
medical plan and reductions in other general and administrative costs. However,
there can be no assurance that Mr. Levinson will continue to personally support
the Company's cash requirements, that such support from Mr. Levinson, together
with the support of the Company's commercial lenders, will be sufficient to
address the Company's liquidity needs and cash requirements or that the actions
taken by management will be sufficient to allow the Company to generate net
income from continuing operations.

The Company is dependent on the ongoing support of its commercial lenders. Under
its existing credit facilities (which are secured by all the Company's assets),
the lenders have the right to accelerate payment of the loans in the event of
material adverse changes in the Company's business. CIT has the right to require
repayment of the Company's indebtedness owed to them on 60 days notice. The
Company's lenders continue to support the Company, although there is no

                                    Page 32
<PAGE>

assurance they will continue to do so. Management of the Company believes that
the likelihood of the lenders accelerating the payment of any of the obligations
under the Company's facility during the next twelve months is unlikely.

Failing to substantially achieve our projected cash flow levels for 2006 may
also result in a default under our credit agreement with our lenders. If a
default were to occur and is not timely cured by us or waived by our lenders, or
if this were to happen and our debt could not be refinanced or restructured, our
lenders could pursue remedies, including: (1) penalty rates of interest; (2)
demand for immediate repayment of the debt; and/or (3) the foreclosure on any of
our assets securing the debt. If this were to happen and we were liquidated or
reorganized after payment to our creditors, there would likely be insufficient
assets remaining for any distribution to our stockholders.

At September 30, 2006, the Company's principal sources of liquidity included
cash of $72,000 and trade accounts receivable of $3.1 million. There was
approximately $750,000 of unused borrowing capacity available under the
Company's credit facility with CIT as of September 30, 2006. The Company also
had an additional $1 million of borrowing available from Mr. Levinson who has
agreed to fund up to $3 million of temporary advances to the Company.

The following discussion regarding the Company's cash flows for the nine months
ended September 30, 2006 and 2005 is inclusive of both continuing and
discontinued operating activities.

Cash Flow Summary:
(in thousands)
                                                     2006            2005
                                                 ------------    ------------
          Net cash provided by (used in):
                     Operating activities        $        476    $     (2,094)
                     Investing activities                 (85)            (57)
                     Financing activities                (369)          2,181
                                                 ------------    ------------
                     Net increase in cash        $         22    $         30
                                                 ============    ============

Net cash flow provided by operating activities totaled $476,000 during the nine
months ended September 30, 2006, as compared to net cash flow used in operating
activities during the same period last year totaling $2.1 million.

In 2006, the components of net cash provided by operating activities were
$679,000 of cash provided by net income adjusted for non-cash items, consisting
primarily of gain on termination of post retirement medical plan, depreciation,
non-cash stock based compensation, accrued interest on stockholder loan and
accrued dividends on preferred stock, less $203,000 of cash used in operating
assets and liabilities.

In 2005, the components of net cash used by operating activities were $665,000
of net loss adjusted for non-cash items, consisting primarily of goodwill and
trademark impairment, depreciation, deferred income tax benefit, non-cash stock
based compensation and accrued interest on stockholder loan, combined with
approximately $1.4 million of cash used by operating assets and liabilities.

                                    Page 33
<PAGE>

Major components of the changes in operating assets and liabilities in 2006 as
compared to 2005 were inventories, accounts payable, accounts receivable and
other liabilities.

Changes in inventories provided $1.4 million in cash flow in 2006 as compared to
$15,000 in 2005. During the nine months ended September 30, 2006, the Company
has been liquidating inventory related to its discontinued textile business thus
creating a positive cash flow related to inventory.

Changes in accounts payable utilized $893,000 of cash flow in 2006 as compared
to providing $24,000 of cash flow in the nine months ended September 30, 2005.
The reduction in accounts payable in 2006 was the result of the payment of
accounts payable related to the discontinued Textile segment as discussed above.

Changes in accounts receivable used $346,000 of cash flow in 2006 as compared to
utilizing $516,000 of cash flow in 2005. The primary reason for the decreased
cash usage related to accounts receivable was the timing of a large modular
change for a major customer which occurred during March in 2006 and September in
2005 thus resulting in lower accounts receivable balances at September 2006 as
compared to September 2005.

Net cash used in investing activities totaled $85,000 during the nine months
ended September 30, 2006, as compared to $57,000 during the same period in 2005.
This increase was primarily a result of higher capital expenditures during 2006.

Net cash used in financing activities totaled $369,000 during the nine months
ended September 30, 2006 as compared to $2.2 million of cash provided by
financing activities during the nine months ended September 30, 2005. In 2006,
cash flow from operating activities was positive and was sufficient to fund
investing activities and reduce borrowings. In 2005, cash flow from operating
activities was negative and as a result cash of $2.2 million was provided by
financing activities to fund cash used in operations and cash used in investing
activities.

During the nine months ended September 30, 2006, the Company repaid Mr. Levinson
$350,000 against his stockholder loan. There were no additional borrowings from
Mr. Levinson during 2006. During the nine months ended September 30, 2005, Mr.
Levinson provided net funding of $1.9 million. The stockholder borrowings in
2005 were primarily for the purpose of funding the operating activities of the
discontinued Textile segment. In 2006 those activities produced positive cash
flow as the result of the winding down of the discontinued textile business and,
consequently, additional stockholder borrowings were not required.

Total borrowings during the first nine months of 2006 and 2005 under the CIT
revolving credit facility were $15.8 million and $16.0 million respectively;
total repayments during the periods under this facility were $14.9 million and
$14.5 million, respectively. Repayments under the Company's term loan totaled
$108,000 during each of the nine months ended September 30, 2006 and 2005. Net
amount repaid to factor during the year to date period totaled $797,000 and $1.2
million in 2006 and 2005 respectively.

The Company has a credit facility with CIT and a promissory note payable to
JPMorgan Chase Bank ("JPMorgan"). In addition, the Company has borrowings and
advances outstanding from Robert A. Levinson, a stockholder, officer and
director of the Company.

                                    Page 34
<PAGE>

At September 30, 2006, the Company's credit facility with CIT (the "CIT
Facility") provided for maximum aggregate borrowings of up to $7.5 million in
the form of revolving credit, letters of credit and term loans. The CIT Facility
is comprised of separate financing agreements with the Company and its
wholly-owned subsidiary, Blumenthal Lansing Company, LLC ("Blumenthal"). There
was approximately $750,000 of unused availability under the Company's credit
facility with CIT as of September 30, 2006.

The CIT Facility provides for (i) a term loan to the Company (the "Term Loan")
in the initial amount of $2.0 million, $1.3 million of which was outstanding at
September 30, 2006, (ii) revolving credit advances to the Company, $1.1 million
of which was outstanding at September 30, 2006 and (iii) revolving credit
advances to Blumenthal based upon eligible accounts receivable and inventory,
$3,832,000 of which was outstanding at September 30, 2006, and a Letter of
Credit facility with a limit of $500,000, of which there was none outstanding at
September 30, 2006. The Term Loan is amortized at $12,000 per month followed by
a final installment payment of $1.2 million due on January 1, 2008. The
revolving credit advances are also due on January 1, 2008. CIT may terminate the
Credit facility upon 60 days written notice. In the case of the Term Loan, CIT
may accelerate the maturity in the event of a default by the Company after
thirteen months notice of such acceleration. At September 30, 2006, all amounts
outstanding under the CIT Facility in excess of $2.5 million bear interest at
8.75% (the Chase Bank N.A. prime rate plus 0.5%) with a minimum rate of 5.0%.
The first $2.5 million of advances from CIT bears interest at the prime rate
(8.25%).

In connection with the CIT Facility, the Company and its subsidiary have made
cross corporate guarantees and have issued first priority liens covering
substantially all of the assets of the Company and its subsidiary. The
guarantees are full and unconditional. The non-guarantor subsidiary is
immaterial and the Company's financial statements are representative of the
combined guarantors. In addition, Mr. Robert A. Levinson, a stockholder, officer
and director of the Company, provided certain collateral against advances
provided under the CIT Facility in the approximate amount of $2.5 million.

The CIT Facility contains representations and warranties and events of default
customary for agreements of this nature such as restrictions on incurring more
debt, acquisitions, the use of proceeds from the sales of assets, the
prohibition of preferred stock redemptions, dividend payments in excess of
$300,000 per year, and a change in voting control of the Company. The CIT
Facility also contains a subjective acceleration clause which states that all
obligations shall, at CIT's option, be immediately due and payable without
notice or demand upon the occurrence of any change in the Company's condition or
affairs (financial or otherwise) that, in CIT's sole discretion exercised by CIT
in accordance with CIT's business judgment, materially impairs the collateral or
increases CIT's risk. In the case of the Term Loan, CIT may accelerate the
maturity in the event of a default by the Company after thirteen months notice
of such acceleration. Management of the Company believes that it is unlikely CIT
will accelerate the payment of any of the obligations under the CIT Facility
during the next twelve months.

On July 26, 2006, the CIT Facility was amended to increase the advance
percentage against the value of Eligible Inventory (as defined in the agreement)
to 40% (from 20%) of Eligible Inventory with respect to the revolving credit
portion of the CIT Facility. Total borrowing availability under the entire CIT
Facility remains at $7.5 million. In addition, the guaranty of the CIT Facility
by Robert A. Levinson, the Company's Chief Executive Officer and principal
shareholder, was removed and the applicable interest rate was changed to the
Chase Rate on the first $2.5 million of average net balances owed, and the Chase
Rate plus .50% per annum on average net balances owed in excess of $2.5 million,
but in either case not less than 5% per annum.

                                    Page 35
<PAGE>

In connection with the Company's discontinued Textile operations, during the
nine months ended September 30, 2006, pursuant to a factoring agreement between
CIT and the Company, CIT purchased the Textile segment's eligible trade accounts
receivable without recourse and assumed substantially all credit risk with
respect to such accounts. The amounts due to the Company from CIT under the
factoring agreement earned no interest. The factoring agreement allowed the
Company to obtain advances that bear interest at 8.75% (0.5% above the Chase
Bank, N.A. prime rate). The Company pledged its Textile segment's eligible
accounts receivable and property and equipment as collateral under the factoring
agreement. There was no set limit on borrowings. The amount available for
borrowing was based on a formula consisting of 90% of eligible accounts
receivable increased by side collateral and reduced by both the current loan
balance and outstanding letters of credit.

The promissory note payable to JPMorgan Chase Bank, N.A. in the amount of $3.0
million is dated May 2, 2002 and had a maturity date of April 30, 2007, as
amended. The note bears interest at a fixed rate per annum equal to the Adjusted
LIBOR applicable to such note plus 0.75% (a "Eurodollar Loan"). The interest
rate on the note at September 30, 2006 was 6.36%. In addition, Robert A.
Levinson, a stockholder, officer and director of the Company, has provided
certain additional collateral guaranteeing the note. On July 26, 2006, the
maturity date of the JPMorgan Chase Bank note was extended to January 1, 2008.

Mr. Robert A. Levinson, a stockholder, has agreed to personally support the
Company's cash requirements to enable it to fulfill its obligations through
January 1, 2008, to the extent necessary, up to a maximum amount of $3.0
million. The Company believes its reliance on such commitment is reasonable and
that Mr. Levinson has sufficient liquidity and net worth to honor such
commitment. The Company believes that Mr. Levinson's written commitment provides
the Company with the legal right to request and receive such advances. In the
event that Mr. Levinson did not honor such commitment, the Company would have
the right to sue Mr. Levinson for breach of his agreement. Mr. Levinson
reaffirmed this undertaking in writing on March 21, 2006.

Mr. Levinson's loan balance totals $2.0 million to the Company as of September
30, 2006. During 2005, he made short term advances of approximately $2.5 million
of which $1.5 million and $1.850 million, respectively, were outstanding at
September 30, 2006 and December 31, 2005. Mr. Levinson has agreed not to seek
repayment of $1.0 million of these 2005 advances before January 1, 2008 and, as
such, $1.5 million and $1.850 million of his loan balances have been classified
as non-current on the Company's September 30, 2006 and December 31, 2005
condensed consolidated balance sheets. He has also pledged collateral in support
of certain Company obligations. Accrued interest on Mr. Levinson's loans has
been classified as non-current liabilities on the Company's balance sheet and
totaled $560,000 and $454,000, respectively, at September 30, 2006 and December
31, 2005.

As of September 30, 2006, the Company was in compliance with all debt covenants,
as defined in the agreements.

                                    Page 36
<PAGE>

Future maturities of long-term debt during each of the next five years ending
September 30 and thereafter were as follows (in thousands):

                             2007                $        644
                             2008                       5,691
                             Thereafter                    --
                                                 ------------
                                                 $      6,335
                                                 ============

The Series A Preferred Stock is subject to mandatory redemption, to the extent
the Company may lawfully do so, in three equal annual installments on June 15,
2007, June 15, 2008 and June 15, 2009, in each case, from funds legally
available therefor, at a price per share of Series A Preferred Stock equal to $1
per share, together with an amount representing accrued and unpaid dividends,
whether or not declared, to the date of redemption. Under the terms of the
Company's Certificate of Incorporation, the mandatory redemption of the Series A
Preferred Stock can only be made to the extent that such redemptions can be made
without contravening or causing a default under any contract, agreement or other
instrument by which the Company or its subsidiaries or any of their property is
bound. Under the terms of the CIT Facility, preferred stock redemption payments
are prohibited and preferred stock dividend payments are limited to $300,000 per
year. Because preferred stock redemption payments are prohibited under the CIT
Facility, the Company is precluded by its Certificate of Incorporation from
making any such payments so long as the CIT Facility is outstanding. In
addition, the amount redeemable within the next twelve months, including
accumulated dividends, will continue to be classified as a noncurrent liability
so long as any portion of the CIT Facility has a maturity of more than one year.
The CIT Facility is currently scheduled to mature on January 1, 2008.

Dividends on the Series A Preferred Stock accrue at a rate of $0.06 per annum
per share when, as and if declared by the Company and are payable quarterly on
March 15, June 15, September 15 and December 15. Quarterly dividends which are
not paid in full in cash on any dividend payment date will accumulate without
interest until the first mandatorily redemption date. In the event that the
Company does not redeem shares of Series A Preferred Stock as scheduled, any
unpaid accumulated dividends will also begin to accrue dividends from that date
forward at the rate of 6% per year.

The availability of resources to make dividend payments to the holders of Series
A Preferred Stock in the future will depend on the Company's future earnings and
cash flow. Under Delaware law, preferred dividend payments are restricted to the
Company's accumulated or current earnings and profits. Losses in 2005 and
earlier years have depleted the Company's accumulated earnings and profits and,
as such, future preferred dividend payments will be limited to future earnings
and profits. Preferred dividends which cannot be paid under Delaware law will
continue to accrue and will be added to the Preferred Stock liability account.
As of September 30, 2006, unpaid preferred stock dividends totaled approximately
$217,000 and have been classified as a noncurrent liability on the Company's
balance sheet. The preferred stock is owned 98.3% by Mr. Robert A. Levinson, a
stockholder, officer and director of the Company. The mandatorily redeemable
preferred stock is redeemable at $1.00 per share plus accrued and unpaid
dividends.

                                    Page 37
<PAGE>

Impact of Inflation

The Company's results are affected by the impact of inflation on operating
costs. Historically, the Company has used selling price adjustments, cost
containment programs and improved operating efficiencies to offset the otherwise
negative impact of inflation on its operations.


Seasonality and New Product Lines

The Company's business is largely based on its ability to fulfill reorders of
existing product lines and to place new product lines with its retail customers.
The business is fundamentally influenced by the buying habits of consumers. Home
sewing and craft activities take place on a year-round basis; however, they are
generally indoor activities and as a result they experience an increased
participation level during the fall, winter and early spring months.
Anticipating this pattern, the Company's retail customers place somewhat larger
reorders during the July through March period. Sales are influenced by the
introduction of new product lines and the discontinuance of existing product
lines. A successful new program requires the retail customer to add the program
and experience an acceptable level of sell-through. The Company develops and
introduces new program ideas on a regular basis. However, there is no assurance
that its retail customers will buy the new product lines and if they do, there
is no assurance the consumer will purchase the new product at an acceptable
level.

The sale of the Company's products can be subject to substantial cyclical
fluctuation. Sales may decline in periods of recession or uncertainty regarding
future economic prospects that affect consumer spending, particularly on
discretionary items. This cyclicality and any related fluctuation in consumer
demand could have a material adverse effect on the Company's results of
operations and financial condition.

Significant Accounting Policy Updates

Stock-Based Compensation Plans:
-------------------------------
On January 1, 2006, we adopted Financial Accounting Standards No. 123 (revised
2004), "Share-Based Payment" ("FAS 123(R)"), that addresses the accounting for
share-based payment transactions in which an enterprise receives employee
services in exchange for either equity instruments of the enterprise or
liabilities that are based on the fair value of the enterprise's equity
instruments or that may be settled by the issuance of such equity instruments.
The statement eliminates the ability to account for share-based compensation
transactions, as we formerly did, using the intrinsic value method as prescribed
by Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock
Issued to Employees," and generally requires that such transactions be accounted
for using a fair-value-based method and recognized as expenses in our condensed
consolidated statement of operations.

We adopted FAS 123(R) using the modified prospective transition method which
requires the application of the accounting standard as of January 1, 2006. Our
condensed consolidated financial statements as of and for the three and nine
months ended September 30, 2006 reflect the impact of adopting FAS 123(R). In
accordance with the modified prospective transition method, the condensed
consolidated financial statements for prior periods have not been restated to
reflect, and do not include the impact of FAS 123(R). See Note 11 "Common Stock
and Stock Options" for further details.

Stock-based compensation expense recognized during the period is based on the
value of the portion of stock-based payment awards that is ultimately expected
to vest. Stock-based compensation expense recognized in the condensed

                                    Page 38
<PAGE>

consolidated statement of operations during the three and nine months ended
September 30, 2006 included compensation expense for stock-based payment awards
granted prior to, but not yet vested, as of December 31, 2005 based on the grant
date fair value estimated in accordance with the pro forma provisions of FAS
148.

The fair value of share-based payment awards is estimated at the grant date
using the Black-Scholes option valuation model. The Company's determination of
fair value of share-based payment awards on the date of grant using an
option-pricing model is affected by the Company's stock price as well as
assumptions regarding a number of highly complex and subjective variables. These
variables include, but are not limited to, the Company's expected stock price
volatility over the term of the awards, and actual and projected employee stock
option exercise behaviors.

Prior to fiscal 2006, the Company had used its historical stock price
volatility, in accordance with SFAS 123, for purposes of calculating its pro
forma information.

The risk-free interest rate assumption is based upon observed interest rates
appropriate for the expected life of the Company's employee stock options.

The dividend yield assumption is based on the Company's history of not paying
dividends and the resultant future expectation of dividend payouts.

The expected life of employee stock options represents the weighted-average
period that the stock options are expected to remain outstanding and was
determined based on the contractual terms of the stock-based awards.

As the stock-based compensation expense recognized in the Condensed Consolidated
Statement of Operations for the first nine months of 2006 is based on awards
ultimately expected to vest, such amount has been reduced for estimated
forfeitures. SFAS 123(R) requires forfeitures to be estimated at the time of
grant and revised, if necessary, in subsequent periods if actual forfeitures
differ from those estimates. Forfeitures were estimated based on the Company's
historical experience.


Recently Issued Accounting Pronouncements

Financial Accounting Standards Board ("FASB") Interpretation No. 48, Accounting
for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109
("FIN 48"). We will adopt the provisions of FIN 48 for fiscal years beginning
after December 15, 2006. The Company does not expect FIN 48 to have a material
impact on our results of operations, financial position, or cash flows.

SFAS No. 157, Fair Value Measurements ("SFAS 157"), defines fair value,
establishes a framework for measuring fair value in generally accepted
accounting principles (GAAP), and expands disclosures about fair value
measurements. The Company will adopt the provisions of SFAS 157 effective
January 1, 2008. The Company does not expect SFAS 157 to have a material impact
on the Company's results of operations, financial position, or cash flows.

SFAS No. 158, Employers' Accounting for Defined Benefit Pension and Other
Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106 and
132(R) ("SFAS 158"), improves financial reporting by requiring an employer to

                                    Page 39
<PAGE>

recognize the overfunded or underfunded status of a defined benefit
postretirement plan as an asset or liability in its statement of financial
position and to recognize changes in that funded status in the year in which the
changes occur through comprehensive income. SFAS 158 will not have an impact on
the Company's results of operations, financial position, or cash flow.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to certain market risks arising from transactions in the normal
course of our business, and from obligations under our short term and long term
debt arrangements. Such risk is principally associated with interest rate
fluctuation. We do not use derivative instruments to manage our exposure and do
not currently hold any market risk sensitive instruments for trading purposes.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" for a detailed discussion of our
credit arrangements.

Interest Rate Risk

Our short term and long-term third party debt bears interest at floating rates,
and accordingly we are sensitive to changes in prevailing interest rates. At
September 30, 2006, our indebtedness with CIT was at 8.75% interest rate (based
on the Chase Bank N.A. prime rate plus .5%). Effective July 26, 2006, the
applicable rate is the Chase Bank, N.A. prime rate on the first $2.5 million of
outstanding borrowing plus .05% on outstanding borrowing in excess of $2.5
million but in either case not less than 5% per annum. Our Textile operation's
factoring arrangement with CIT was also at 8.75% (based on Chase Bank N.A. prime
rate plus .5%) and our indebtedness with JP Morgan Chase was at a 6.36% interest
rate (based on adjusted LIBOR plus .75%). Our shareholder loan interest is not
variable and bore a 6% interest rate. A 1% increase or decrease in market
interest rates that affect our borrowing arrangements would have a material
impact on earnings and cash flow of approximately $93,000 during the next fiscal
year.

Foreign Currency Exchange Rates

Foreign currency exposures arise from transactions denominated in a currency
other than an entity's functional currency and from foreign-denominated revenues
translated into U.S. dollars.

We generally purchase our products in U.S. dollars. However, we source most of
our products in Europe and Asia and, as such, the cost of these products may be
affected by changes in the value of the relevant currencies and related exchange
rates. Changes in currency exchange rates may also affect the relative prices at
which we and our foreign competitors sell products in the same market. We
currently do not hedge our exposure to changes in foreign currency exchange
rates. We cannot assure you that foreign currency fluctuations will not have a
material adverse impact on our financial condition and results of operations.

Customer Concentration

Our sales are concentrated with major retail chains and as such, approximately
70-80% of our sales in 2006 are expected to be from our top three accounts;
these accounts represented 62% of our trade accounts receivable at September 30,
2006. The loss of any one of our major accounts would have a material adverse
impact on our financial condition and results of operations.

                                    Page 40
<PAGE>

ITEM 4.  CONTROLS AND PROCEDURES

The Company's management is responsible for establishing and maintaining a
system of disclosure controls and procedures (as defined in Rule 13a-15 and
15d-15 under the Securities Exchange Act of 1934 (the "Exchange Act"), designed
to ensure that information required to be disclosed by the Company in the
reports that it files or submits under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the Securities and
Exchange Commission's rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that
information required to be disclosed by an issuer in the reports that it files
or submits under the Exchange Act is accumulated and communicated to the
issuer's management, including its principal executive officer or officers and
principal financial officer or officers, or persons performing similar
functions, as appropriate to allow timely decisions regarding required
disclosure.

In accordance with Exchange Act Rules 13a-15 and 15d-15, the Company carried out
an evaluation, with the participation of the Chief Executive Officer and Chief
Financial Officer of the Company, of the effectiveness of the Company's
disclosure controls and procedures as of the end of the period covered by this
report. Based on that evaluation, the Company's Chief Executive Officer and
Chief Financial Officer concluded that the Company's disclosure controls and
procedures were effective, as of the end of the period covered by this report,
to ensure that information required to be disclosed in the Company's reports
filed or submitted under the Exchange Act is (i) accumulated and communicated to
management, including the Chief Executive Officer and Chief Financial Officer as
appropriate to allow timely decisions regarding required disclosure and (ii)
recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commission's rules and forms.

In designing and evaluating the Company's disclosure controls and procedures (as
defined in Rules 13a-15(e) or 15d-15(e) of the Exchange Act), management
recognized that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurances of achieving the desired
control objectives, as ours are designed to do, and management necessarily was
required to apply its judgment in evaluating the cost-benefit relationship of
possible controls and procedures. We believe that our disclosure controls and
procedures provide such reasonable assurance.

No change occurred in the Company's internal controls concerning financial
reporting during the third quarter of the fiscal year ended December 31, 2006
that has materially affected, or is reasonably likely to materially affect, the
Company's internal controls over financial reporting.


                                    Page 41
<PAGE>

                           PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

Environmental. The Company is subject to a number of federal, state and local
environmental laws and regulations, including those concerning the treatment,
storage and disposal of waste, the discharge of effluents into waterways, the
emissions of substances into the air and various health and safety matters. In
addition, CERCLA and comparable state statutes generally impose joint and
several liability on present and former owners and operators, transporters and
generators for remediation of contaminated properties regardless of fault. These
parties are typically identified as "potentially responsible parties" or "PRPs."
On or about June 1992 the Company received notices from the United States
Environmental Protection Agency ("EPA") that the Company, Belding Corticelli
Thread Co. ("BCTC") (a discontinued operation) and Carlyle Manufacturing
Company, Inc. ("CM") had been identified, along with 1,300 other parties, as
PRPs in connection with the alleged release of hazardous substances from the
Solvents Recovery Service of New England Superfund Site in Southington,
Connecticut (the "SRS site"). The Company settled its alleged liability in
connection with the SRS site by paying $1,626 in connection with a settlement
offered to de minimis parties at the SRS site in 1994. BCTC and CM, along with
other PRPs, committed to perform the Remedial Investigation and Feasibility
Study ("RIFS") and two Non-Time Critical Removal Actions ("NTCRA") at the SRS
site. The RIFS, and the first NTCRA (except for certain maintenance activities)
have been completed. BCTC and CM have been allocated approximately .04% and
1.34%, respectively, of costs incurred to date, based on their alleged volume of
waste shipped to the SRS site. In September of 2005, the EPA issued its Record
of Decision ("ROD") for the SRS site. In September 2006, the EPA sent special
notice letters to the PRPs to initiate consent decree negotiations concerning,
among other things, the scope of the work to be performed under the ROD. It is
expected that in late 2007 or early 2008 negotiations between the EPA and the
PRP group will be completed and result in a consent decree after which it is
expected that payments to the EPA would begin.

The issues referred to above do not include costs that the Company or its
subsidiaries may incur for consultants' or attorneys' fees or for administrative
expenses in connection with the Company's participation as part of a PRP group.
The reserve the Company has established for these and other environmental
liabilities as described above, in the amount of $1.3 million, represents the
Company's best current estimate of the costs of addressing all identified
environmental situations, based on the Company's review of currently available
evidence, and takes into consideration the Company's prior experience in
remediation and that of other companies, as well as public information released
by the EPA and by the PRP groups in which the Company or its subsidiaries are
participating. Although the reserve currently appears to be sufficient to cover
these environmental liabilities, there are uncertainties associated with
environmental liabilities, and no assurances can be given that the Company's
estimate of any environmental liability will not increase or decrease in the
future. The uncertainties relate to the difficulty of estimating the ultimate
cost of any remediation that may be undertaken, including any operating costs
associated with remedial measures, the duration of any remediation required, the
amount of consultants' or attorneys' fees that may be incurred, the
administrative costs of participating in the PRP groups, and any additional
costs or requirements that may be imposed by federal, state or local agencies.

                                    Page 42
<PAGE>

Legal Proceedings. The Company is a party to various other environmental claims,
legal proceedings and administrative actions, all arising from the ordinary
course of business. Although it is impossible to predict the outcome of any such
claims or legal proceedings, the Company believes any liability that may finally
be determined should not have a material effect on its consolidated financial
position, results of operations or cash flows.


ITEM 1A  RISK FACTORS

There have been no material changes to our Risk Factors from those presented in
our 2005 Form 10-K, except for certain updating changes to the Risk Factors
"Going Concern," "Pension Funding" and "A Substantial Portion Of The Company's
Revenues And Gross Profits Is Derived From A Small Number Of Large Customers And
The Loss Of Any Of These Customers Could Substantially Reduce Our Revenues," as
presented below.


Going Concern

Our historical losses in the Textile division and resulting negative cash flows
raise substantial doubt about our ability to continue as a going concern. These
circumstances caused our independent registered public accounting firm to
include an explanatory paragraph in their report dated March 15, 2006, regarding
their concerns about our ability to continue as a going concern. Substantial
doubt about our ability to continue as a going concern may create negative
reactions to the price of the common shares of our stock and we may have a more
difficult time obtaining financing.

The accompanying unaudited condensed consolidated financial statements have been
prepared on a basis which contemplates the realization of assets and the
satisfaction of liabilities and commitments in the normal course of business. In
2005 the Company incurred a net loss attributable to common stockholders of $8.3
million (of which $6.1 million was represented by non-cash charges reflecting
impairment of Textile segment assets) contributing to a stockholders deficit
which totaled $11.2 million at September 30, 2006, which amount was inclusive of
paid in capital of $33.2 million and accumulated deficit and other comprehensive
loss totaling $44.5 million. The Company's ability to continue as a going
concern is dependent upon its ability to execute management's plans to be
profitable, generate positive cash flow from operations, obtain financing to
meet the Company sponsored defined benefit pension funding obligations currently
estimated to be $1.8 million in 2007and an aggregate of $3.7 million during the
years 2008 to 2014 (see Note 9), and to continue to have access to existing
financing to meet obligations and repay liabilities when they come due,
including amounts payable with respect to claimed environmental liabilities in
connection with the Solvents Recovery Service of New England Superfund Site (see
Note 14) in the event the parent corporation is determined to be responsible for
these claimed liabilities and the redemption of preferred stock (see Note 10)
due in 2007 and thereafter. Although management continues to pursue these plans
and believes it will be successful, there is no assurance that the Company will
be successful in generating such profitable operations or maintaining such
access to existing financing or obtaining financing for such pension and
environmental obligations on terms acceptable to the Company. The outcome of
these matters cannot be predicted with any certainty at this time. These
factors, as well as the Company's historical losses from operations and negative
cash flows raise substantial doubt about the Company's ability to continue as a

                                    Page 43
<PAGE>

going concern. Management plans to satisfy the Company's capital needs through
cash generated from operations, advances under its facilities with CIT and
stockholder loans. These condensed consolidated financial statements do not
include any adjustments to the amounts and classification of assets and
liabilities that may be necessary should the Company be unable to continue as a
going concern.

Pension Funding

The Company's projected benefit obligation with its Company sponsored defined
benefit plan at September 30, 2006 was $21.5 million. The fair market value of
Plan assets was $17.8 million at September 30, 2006. The current actuarial
estimate is that contributions totaling $1.8 million in 2007 and an aggregate of
$3.7 million during the years 2008 to 2014 will be required (see Note 9). The
Company is investigating available alternatives to making such contributions.
There can be no assurance that the Company will not be required to make this
contribution, in which case the Company will be required to obtain additional
financing to allow it to make these contributions. There can be no assurance the
Company will be able to obtain such additional financing.

A Substantial Portion Of The Company's Revenues And Gross Profits Is Derived
From A Small Number Of Large Customers And The Loss Of Any Of These Customers
Could Substantially Reduce Our Revenues.

The Company's customer base has been and continues to be highly concentrated.
The Company's three largest customers (Wal-mart, a mass merchandiser and Jo-Ann
Stores and Hancock Fabrics, each a specialty chain) represented approximately
48%, 25% and 9%, respectively, of the Company's net sales in the three months
ended September 30, 2006 and represented approximately 49%, 23% and 7%,
respectively, of the Company's net sales in the nine months ended September 30,
2006. These customers also represented approximately 46%, 31%, and 6% of the
Company's net sales during the three months ended September 30, 2005 and 45%,
25% and 8%, respectively, of the Company's net sales in the nine months ended
September 30, 2005. These customers also represented approximately 62% and 80%
of the total outstanding accounts receivable as of September 30, 2006 and
December 31, 2005, respectively.

Based upon historical and recent results and existing relationships with
customers, the Company believes that a substantial portion of its net sales and
gross profits will continue to be derived from a small number of large
customers. Customers generally have the right to terminate their relationship
with the Company without penalty and with little or no notice. Without long-term
contracts with the majority of its customers, the Company cannot be certain that
its customers will continue to purchase its products or that it will be able to
maintain a consistent level of sales. A decision by any of our major customers,
whether motivated by competitive conditions, financial difficulties or
otherwise, to decrease significantly the amount of merchandise purchased from
us, or to change their manner of doing business with us, could substantially
reduce our revenues and have a material adverse effect on our financial
condition and results of operations. There can be no assurance that the
Company's largest customers will continue to place orders with the Company or
that orders by such customers will continue at their previous levels.

                                    Page 44
<PAGE>

ITEM 6.  EXHIBITS

(a)      Exhibits


         31.1     Chief Executive Officer's Certificate, pursuant to Section 302
                  of the Sarbanes-Oxley Act of 2002.

         31.2     Chief Financial Officer's Certificate, pursuant to Section 302
                  of the Sarbanes-Oxley Act of 2002.

         32.1     Chief Executive Officer's Certificate, pursuant to 18 U.S.C.
                  Section 1350, as adopted pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002.

         32.2     Chief Financial Officer's Certificate, pursuant to 18 U.S.C.
                  Section 1350, as adopted pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002.

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

                                    Page 45
<PAGE>

                                   SIGNATURES
                                   ----------

Pursuant to the requirements 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.


                                       LEVCOR INTERNATIONAL, INC.


Date: November 9, 2006                /s/ ROBERT A. LEVINSON
      ----------------                ------------------------------------------
                                      Robert A. Levinson
                                      Chairman of the Board, President and Chief
                                      Executive Officer


Date: November 9, 2006                /s/ EDWARD F. COOKE
      ----------------                ------------------------------------------
                                      Edward F. Cooke
                                      Chief Financial Officer, Vice President,
                                      Secretary and Treasurer


                                    Page 46
<PAGE>

                                  Exhibit Index
                                  -------------

31.1     Chief Executive Officer's Certificate, pursuant to Section 302 of the
         Sarbanes-Oxley Act of 2002.

31.2     Chief Financial Officer's Certificate, pursuant to Section 302 of the
         Sarbanes-Oxley Act of 2002.

32.1     Chief Executive Officer's Certificate, pursuant to 18 U.S.C. Section
         1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
         2002.

32.2     Chief Financial Officer's Certificate, pursuant to 18 U.S.C. Section
         1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
         2002.


                                    Page 47