----

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**FORM      10-Q**

**For      the Quarter Ended September 30, 2006**

**MAXCO,      INC.**

*(Exact      Name of Registrant as Specified in its Charter)*

| Michigan                                                  | 38-1792842                              |
|-----------------------------------------------------------|-----------------------------------------|
| *(State                or other Jurisdiction of*          | *(I.R.S.                Employer*       |
| *Incorporation                or Organization)*           | *Identification                Number)* |
|                                                      |                                    |
| 1005                Charlevoix Drive, Suite 100           |                                    |
| Grand                Ledge, Michigan                      | 48837                                   |
| *(Address                of principal executive offices)* | *(Zip                Code)*             |

| Class                       | Outstanding                at October 31, 2006 |
|-----------------------------|------------------------------------------------|
| Common                Stock | 3,454,039                shares                |

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**MAXCO,      INC.**

**INDEX      TO QUARTERLY REPORT ON FORM 10-Q**

|                                                                                                                                       | **PAGE** |
|--------------------------------------------------------------------------------------------------------------------------------------------|----------|
| PART                I — FINANCIAL INFORMATION                                                                                        | 3        |
| ITEM                1. CONSOLIDATED FINANCIAL STATEMENTS                                                                                   | 3        |
| CONDENSED                CONSOLIDATED BALANCE SHEETS                                                                                       | 3        |
| CONDENSED                CONSOLIDATED STATEMENTS OF OPERATIONS                                                                             | 5        |
| CONDENSED                CONSOLIDATED STATEMENTS OF OPERATIONS                                                                             | 6        |
| CONSOLIDATED                STATEMENTS OF STOCKHOLDERS’ EQUITY                                                                       | 7        |
| CONDENSED                CONSOLIDATED STATEMENTS OF CASH FLOWS                                                                             | 8        |
| NOTES                TO CONSOLIDATED FINANCIAL STATEMENTS                                                                                  | 9        |
| ITEM                2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND                RESULTS                OF OPERATIONS | 15       |
| ITEM                3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET                RISK                                           | 19       |
| ITEM                4. CONTROLS AND PROCEDURES                                                                                             | 19       |
| PART                II — OTHER INFORMATION                                                                                           | 20       |
| Item                1. Legal Proceedings                                                                                                   | 20       |
| Item                1A Risk Factors                                                                                                        | 20       |
| Item                2. Unregistered Sales of Equity Securities and Use of                Proceeds                                          | 20       |
| Item                3. Defaults upon Senior Securities                                                                                     | 20       |
| Item                4. Submission of Matters to a Vote of Security Holders                                                                 | 20       |
| Item                5. Other Information                                                                                                   | 20       |
| Item                6. Exhibits                                                                                                            | 20       |
| SIGNATURES                                                                                                                                 | 22       |
| CERTIFICATION                                                                                                                              |     |

----

**PART      I — FINANCIAL INFORMATION**

**ITEM      1. CONSOLIDATED FINANCIAL STATEMENTS**

**CONDENSED      CONSOLIDATED BALANCE SHEETS**

**Maxco,      Inc. and Subsidiaries**

|                                                                                                                                       |   | **September                  30,**    |   | **March                  31,** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|--------|--------------------------------|--------|
|                                                                                                                                       |   | **2006**                              |   | **2006**                       |   |
|                                                                                                                                       |   | **(Unaudited)**                       |   | **(Restated)**                 |   |
|                                                                                                                                       |   | ***(in                  thousands)*** |   |
| **ASSETS**                                                                                                                                 |   |                                  |   |                           |   |   |   |
| **Current                  Assets**                                                                                                        |   |                                  |   |                           |   |   |   |
| Cash                  and cash equivalents                                                                                                 |   | $                                     | 400    |                           | $      | 738 |   |
| Restricted                  cash                                                                                                           |   |                                  | -      |                           |   | 750 |   |
| Accounts                  and notes receivable                                                                                             |   |                                  | 166    |                           |   | 132 |   |
| Prepaid                  expenses and other                                                                                                |   |                                  | 8      |                           |   | 38 |   |
| Assets                  of business held for sale                                                                                          |   |                                  | 27,021 |                           |   | 27,325 |   |
| **Total                  Current Assets**                                                                                                  |   |                                  | 27,595 |                           |   | 28,983 |   |
|                                                                                                                                       |   |                                  |   |                           |   |   |   |
| **Property                  and Equipment**                                                                                                |   |                                  |   |                           |   |   |   |
| Office                  equipment and fixtures                                                                                             |   |                                  | 160    |                           |   | 160 |   |
| Allowances                  for depreciation                                                                                               |   |                                  | (150   | )                              |   | (147 | ) |
|                                                                                                                                       |   |                                  | 10     |                           |   | 13 |   |
|                                                                                                                                       |   |                                  |   |                           |   |   |   |
| **Other                  Assets**                                                                                                          |   |                                  |   |                           |   |   |   |
| Building                  held for sale                                                                                                    |   |                                  | 7,947  |                           |   | - |   |
| Real                  estate held for sale                                                                                                 |   |                                  | 2,900  |                           |   | 2,900 |   |
| Real                  estate investments held for sale                                                                                     |   |                                  | 1,427  |                           |   | 627 |   |
| Investments                                                                                                                                |   |                                  | 630    |                           |   | 688 |   |
| Notes                  and contracts receivable, including related parties, and other                  (net of                  allowance) |   |                                  | 581    |                           |   | 915 |   |
|                                                                                                                                       |   |                                  | 13,485 |                           |   | 5,130 |   |
|                                                                                                                                       |   |                                  |   |                           |   |   |   |
|                                                                                                                                       |   | $                                     | 41,090 |                           | $      | 34,126 |   |

----

**CONDENSED      CONSOLIDATED BALANCE SHEETS — CONTINUED**

**Maxco,      Inc. and Subsidiaries**

|                                                                 |   | **September                  30,**    |   | **March                  31,** |   |
|----------------------------------------------------------------------|--------|---------------------------------------|--------|--------------------------------|--------|
|                                                                 |   | **2006**                              |   | **2006**                       |   |
|                                                                 |   | **(Unaudited)**                       |   | **(Restated)**                 |   |
|                                                                 |   | ***(in                  thousands)*** |   |
| **LIABILITIES                  AND STOCKHOLDERS' EQUITY**            |   |                                  |   |                           |   |   |   |
| **Current                  liabilities**                             |   |                                  |   |                           |   |   |   |
| Notes                  payable                                       |   | $                                     | 1,226  |                           | $      | 1,414 |   |
| Accounts                  payable                                    |   |                                  | 228    |                           |   | 280 |   |
| Employee                  compensation                               |   |                                  | 818    |                           |   | 835 |   |
| Incentive                  compensation                              |   |                                  | 2,026  |                           |   | 2,026 |   |
| Taxes,                  interest, and other liabilities              |   |                                  | 4,764  |                           |   | 4,520 |   |
| Current                  maturities of long-term obligations         |   |                                  | 443    |                           |   | 3,120 |   |
| Liabilities                  of business held for sale               |   |                                  | 15,636 |                           |   | 11,018 |   |
| **Total                  Current Liabilities**                       |   |                                  | 25,141 |                           |   | 23,213 |   |
|                                                                 |   |                                  |   |                           |   |   |   |
| **Long-Term                  Obligations, Less Current Maturities**  |   |                                  | 5,157  |                           |   | 1,116 |   |
| **Total                  Liabilities**                               |   |                                  | 30,298 |                           |   | 24,329 |   |
|                                                                 |   |                                  |   |                           |   |   |   |
| **Stockholders'                  Equity**                            |   |                                  |   |                           |   |   |   |
| Preferred                  stock:                                    |   |                                  |   |                           |   |   |   |
| Series                  Three: 10% cumulative redeemable, $60 face   |   |                                  |   |                           |   |   |   |
| value;                  14,784 shares issued                         |   |                                  | 678    |                           |   | 678 |   |
| Series                  Four: 10% cumulative redeemable, $51.50 face |   |                                  |   |                           |   |   |   |
| value;                  46,414 shares issued                         |   |                                  | 2,390  |                           |   | 2,390 |   |
| Series                  Five: 10% cumulative redeemable, $120 face   |   |                                  |   |                           |   |   |   |
| value;                  6,648 shares issued                          |   |                                  | 798    |                           |   | 798 |   |
| Series                  Six: 10% cumulative callable, $160 face      |   |                                  |   |                           |   |   |   |
| value;                  7,812.5 shares issued                        |   |                                  | 1,250  |                           |   | 1,250 |   |
|                                                                 |   |                                  | 5,116  |                           |   | 5,116 |   |
| Common                  stock, $1 par value; 10,000,000 shares       |   |                                  |   |                           |   |   |   |
| authorized,                  3,454,039 shares issued and outstanding |   |                                  | 3,454  |                           |   | 3,454 |   |
| Retained                  earnings                                   |   |                                  | 2,222  |                           |   | 1,227 |   |
| **Total                  Stockholders' Equity**                      |   |                                  | 10,792 |                           |   | 9,797 |   |
|                                                                 |   |                                  |   |                           |   |   |   |
|                                                                 |   | $                                     | 41,090 |                           | $      | 34,126 |   |

----

**CONDENSED      CONSOLIDATED STATEMENTS OF OPERATIONS**

**Maxco,      Inc. and Subsidiaries**

**(Unaudited)**

|                                                                   |   | **Three                  Months Ended September 30,**        |   |
|------------------------------------------------------------------------|--------|--------------------------------------------------------------|--------|
|                                                                   |   | **2006**                                                     |   | **2005** |   |
|                                                                   |   | ***(in                  thousands, except per share data)*** |   |
| **Net                  Sales**                                         |   | $                                                            | 11,004 |   | $ | 11,396 |   |
| **Costs                  and Expenses:**                               |   |                                                         |   |   |   |   |   |
| Cost                  of sales and operating expenses                  |   |                                                         | 6,640  |   |   | 7,312 |   |
| Selling,                  general and administrative                   |   |                                                         | 3,200  |   |   | 2,893 |   |
| Depreciation                  and amortization                         |   |                                                         | 801    |   |   | 780 |   |
|                                                                   |   |                                                         | 10,641 |   |   | 10,985 |   |
| **Operating                  Income**                                  |   |                                                         | 363    |   |   | 411 |   |
| **Other                  Income (Expense)**                            |   |                                                         |   |   |   |   |   |
| Investment,                  interest, and other income, net           |   |                                                         | 3      |   |   | 37 |   |
| Gain                  on sale of assets                                |   |                                                         | (4     | ) |   | - |   |
| Interest                  expense                                      |   |                                                         | (563   | ) |   | (384 | ) |
| **Income                  (Loss) Before Equity in Loss of Affiliates** |   |                                                         | (201   | ) |   | 64 |   |
| Equity                  in loss of affiliates                          |   |                                                         | (58    | ) |   | - |   |
| **Net                  Income (Loss)**                                 |   |                                                         | (259   | ) |   | 64 |   |
| Less                  preferred stock dividends                        |   |                                                         | (133   | ) |   | (102 | ) |
| **Net                  Loss Applicable to Common Stock**               |   | $                                                            | (392   | ) | $ | (38 | ) |
|                                                                   |   |                                                         |   |   |   |   |   |
| **Net                  Loss Per Common Share—Basic and Diluted** |   | $                                                            | (0.11  | ) | $ | (0.01 | ) |

----

**CONDENSED      CONSOLIDATED STATEMENTS OF OPERATIONS**

**Maxco,      Inc. and Subsidiaries**

**(Unaudited)**

|                                                                     |   | **Six                  Months Ended September 30,**          |   |
|--------------------------------------------------------------------------|--------|--------------------------------------------------------------|--------|
|                                                                     |   | **2006**                                                     |   | **2005** |   |
|                                                                     |   | ***(in                  thousands, except per share data)*** |   |
| **Net                  Sales**                                           |   | $                                                            | 23,580 |   | $ | 22,844 |   |
| **Costs                  and Expenses:**                                 |   |                                                         |   |   |   |   |   |
| Cost                  of sales and operating expenses                    |   |                                                         | 13,928 |   |   | 14,426 |   |
| Selling,                  general and administrative                     |   |                                                         | 5,906  |   |   | 5,793 |   |
| Depreciation                  and amortization                           |   |                                                         | 1,578  |   |   | 1,532 |   |
|                                                                     |   |                                                         | 21,412 |   |   | 21,751 |   |
| **Operating                  Income**                                    |   |                                                         | 2,168  |   |   | 1,093 |   |
| **Other                  Income (Expense)**                              |   |                                                         |   |   |   |   |   |
| Investment,                  interest, and other income, net             |   |                                                         | 28     |   |   | 35 |   |
| Gain                  on sale of assets                                  |   |                                                         | (4     | ) |   | 2 |   |
| Interest                  expense                                        |   |                                                         | (873   | ) |   | (737 | ) |
| **Income                  Before Equity in Loss of Affiliates**          |   |                                                         | 1,319  |   |   | 393 |   |
| Equity                  in loss of affiliates                            |   |                                                         | (58    | ) |   | - |   |
| **Net                  Income**                                          |   |                                                         | 1,261  |   |   | 393 |   |
| Less                  preferred stock dividends                          |   |                                                         | (266   | ) |   | (204 | ) |
| **Net                  Income Applicable to Common Stock**               |   | $                                                            | 995    |   | $ | 189 |   |
|                                                                     |   |                                                         |   |   |   |   |   |
| **Net                  Income Per Common Share—Basic and Diluted** |   | $                                                            | 0.29   |   | $ | 0.05 |   |

----

** **
**CONSOLIDATED      STATEMENTS OF STOCKHOLDERS’ EQUITY**

**Maxco,      Inc. and Subsidiaries**

**(Unaudited)**

|                                                                        |   | **Number                of Common Shares Outstanding**                                         |         | **Preferred                Stock** |   | **Common                Stock** |   | **Retained                Earnings** |   | **Totals** |   |
|-----------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------|--------------|------------------------------------|--------|---------------------------------|--------|--------------------------------------|--------|------------|--------|
|                                                                        |   | ***(in                thousands, except number of common shares                outstanding)*** |         |
|                                                                        |   |                                                                                           |         |                               |   |                            |   |                                 |   |       |   |
| **Balances                at April 1, 2006**                                |   |                                                                                           | 3,454,039    |                               | $      | 5,116                           |   | $                                    | 3,454  |       | $      | 1,227 |   | $ | 9,797 |   |
| Net                income and comprehensive income for the six month period |   |                                                                                           |         |                               |   |                            |   |                                 |   |       |   | 1,261 |   |   | 1,261 |   |
| Preferred                stock dividends                                    |   |                                                                                           |    |                               |   |                            |   |                                 |   |       |   | (266 | ) |   | (266 | ) |
| **Balances                at September 30, 2006**                           |   |                                                                                           | 3,454,039    |                               | $      | 5,116                           |   | $                                    | 3,454  |       | $      | 2,222 |   | $ | 10,792 |   |

----

**CONDENSED      CONSOLIDATED STATEMENTS OF CASH FLOWS**

**Maxco,      Inc. and Subsidiaries**

**(Unaudited)**

|                                                                                                    |   | **Six                  Months Ended September 30,** |   |
|---------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------|--------|
|                                                                                                    |   | **2006**                                            |   | **2005** |   |
|                                                                                                    |   |                                                |   | **(Restated)** |   |
|                                                                                                    |   | ***(in                  thousands)***               |   |
| **Operating                  Activites**                                                                |   |                                                |   |   |   |   |   |
| Net                  income                                                                             |   | $                                                   | 1,261  |   | $ | 393 |   |
| Adjustments                  to reconcile net income to net cash                                        |   |                                                |   |   |   |   |   |
| provided                  by operating activites:                                                       |   |                                                |   |   |   |   |   |
| Change                  in net assets of business held for sale                                         |   |                                                | 4,922  |   |   | (277 | ) |
| Equity                  in net loss of affiliate                                                        |   |                                                | 58     |   |   | - |   |
| Loss                  on investment                                                                     |   |                                                | -      |   |   | 30 |   |
| Gain                  on sale of assets                                                                 |   |                                                | -      |   |   | (2 | ) |
| Depreciation                  and other non-cash charges                                                |   |                                                | 3      |   |   | 14 |   |
| (Increase)                  in accounts receivable                                                      |   |                                                | 352    |   |   | (14 | ) |
| (Increase)                  decrease in prepaid expenses and other                                      |   |                                                | 30     |   |   | (58 | ) |
| Increase                  (decrease) in accounts payable and other current                  liabilities |   |                                                | (1,279 | ) |   | 67 |   |
| **Net                  Cash Provided By Operating Activities**                                          |   |                                                | 5,347  |   |   | 153 |   |
|                                                                                                    |   |                                                |   |   |   |   |   |
| **Investing                  Activities**                                                               |   |                                                |   |   |   |   |   |
| Purchase                  of building                                                                   |   |                                                | (8,500 | ) |   | - |   |
| Purchases                  of equipment and building improvements                                       |   |                                                | (247   | ) |   | (13 | ) |
| Collections                  on notes receivable                                                        |   |                                                | -      |   |   | 125 |   |
| Purchase                  of subsidiary                                                                 |   |                                                | -      |   |   | (142 | ) |
| Sale                  of buildings                                                                      |   |                                                | -      |   |   | 278 |   |
| Other                                                                                                   |   |                                                | (53    | ) |   | (4 | ) |
| **Net                  Cash (Used In) Provided By Investing Activities**                                |   |                                                | (8,800 | ) |   | 244 |   |
|                                                                                                    |   |                                                |   |   |   |   |   |
| **Financing                  Activities**                                                               |   |                                                |   |   |   |   |   |
| Repayments                  on line of credit                                                           |   |                                                | (750   | ) |   | - |   |
| Proceeds                  from long term financing                                                      |   |                                                | 4,375  |   |   | - |   |
| Net                  repayments on other debt obligations                                               |   |                                                | (1,260 | ) |   | (455 | ) |
| **Net                  Cash Provided By (Used In) Financing Activities**                                |   |                                                | 2,365  |   |   | (455 | ) |
|                                                                                                    |   |                                                |   |   |   |   |   |
| **Decrease                  in Cash and Cash Equivalents**                                              |   |                                                | (1,088 | ) |   | (58 | ) |
| **Cash                  and Cash Equivalents at Beginning of Period**                                   |   |                                                | 1,488  |   |   | 1,638 |   |
| **Cash                  and Cash Equivalents at End of Period**                                         |   | $                                                   | 400    |   | $ | 1,580 |   |
|                                                                                                    |   |                                                |   |   |   |   |   |
| **Supplemental                  cash flows disclosure:**                                                |   |                                                |   |   |   |   |   |
| Interest                  paid                                                                          |   | $                                                   | 284    |   | $ | 439 |   |

----

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**Maxco,      Inc. and Subsidiaries**

**September      30, 2006**

**NOTE      1 - BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING      POLICIES**

----

**NOTE      2 - EARNINGS PER SHARE**

|                                                                                                                                                                           |   | **Three                  Months Ended**                      |   | **Six                  Months Ended** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------|--------|---------------------------------------|--------|
|                                                                                                                                                                           |   | **September                  30,**                           |   | **September                  30,**    |   |
|                                                                                                                                                                           |   | **2006**                                                     |   | **2005**                              |   | **2006** |   | **2005** |   |
|                                                                                                                                                                                |   | ***(in                  thousands, except per share data)*** |   |
| **NUMERATOR:**                                                                                                                                                            |   |                                                         |   |                                  |   |   |   |   |   |   |   |   |   |
| Net                  income (loss)                                                                                                                                             |   | $                                                            | (259   | )                                     | $      | 64 |   | $ | 1,261 |   | $ | 393 |   |
| Preferred                  stock dividends                                                                                                                                     |   |                                                         | (133   | )                                     |   | (102 | ) |   | (266 | ) |   | (204 | ) |
| **Numerator                      for basic and diluted earnings per share—****income                      (loss) available to common                      stockholders** |   | $                                                            | (392   | )                                     | $      | (38 | ) | $ | 995 |   | $ | 189 |   |
| **DENOMINATOR:**                                                                                                                                                               |   |                                                         |   |                                  |   |   |   |   |   |   |   |   |   |
| **Denominator                  for basic and diluted earnings per**                                                                                                            |   |                                                         |   |                                  |   |   |   |   |   |   |   |   |   |
| **share—weighted                  average shares**                                                                                                                       |   |                                                         | 3,447  |                                  |   | 3,447 |   |   | 3,447 |   |   | 3,447 |   |
|                                                                                                                                                                           |   |                                                         |   |                                  |   |   |   |   |   |   |   |   |   |
| **BASIC                  AND DILUTED EARNINGS (LOSS) PER SHARE**                                                                                                               |   | $                                                            | (0.11  | )                                     | $      | (0.01 | ) | $ | 0.29 |   | $ | 0.05 |   |

**NOTE      3 - RESTRICTED CASH**

**NOTE      4 - COMPREHENSIVE INCOME**

|                                               |   | **Three                  Months Ended** |   | **Six                  Months Ended** |   |
|----------------------------------------------------|--------|-----------------------------------------|--------|---------------------------------------|--------|
|                                               |   | **September                  30,**      |   | **September                  30,**    |   |
|                                               |   | **2006**                                |   | **2005**                              |   | **2006** |   | **2005** |   |
|                                               |   | ***(in                  thousands)***   |   |
| Net                  income (loss)                 |   | $                                       | (259   | )                                     | $      | 64 |   | $ | 1,261 |   | $ | 393 |   |
| Unrealized                  gain on swap agreement |   |                                    | -      |                                  |   | 14 |   |   | - |   |   | 29 |   |
| Comprehensive                  income (loss)       |   | $                                       | (259   | )                                     | $      | 78 |   | $ | 1,261 |   | $ | 422 |   |

**NOTE      5 - INDUSTRY SEGMENT INFORMATION**

|                                           |   | **September                  30,**    |   | **March                  31,** |   |
|------------------------------------------------|--------|---------------------------------------|--------|--------------------------------|--------|
|                                           |   | **2006**                              |   | **2006**                       |   |
|                                           |   | ***(in                  thousands)*** |   |
| **Identifiable                  Assets:**      |   |                                  |   |                           |   |   |   |
| Assets                  held for sale          |   | $                                     | 39,295 |                           | $      | 30,852 |   |
| Investments                                    |   |                                  | 630    |                           |   | 688 |   |
| Corporate                  and other           |   |                                  | 1,165  |                           |   | 2,586 |   |
| **Total                  Identifiable Assets** |   | $                                     | 41,090 |                           | $      | 34,126 |   |

----

|                                                             |   | **Three                  Months Ended** |   | **Six                  Months Ended** |   |
|------------------------------------------------------------------|--------|-----------------------------------------|--------|---------------------------------------|--------|
|                                                             |   | **September                  30,**      |   | **September                  30,**    |   |
|                                                             |   | **2006**                                |   | **2005**                              |   | **2006** |   | **2005** |   |
|                                                             |   | ***(in                  thousands)***   |   |
| **Net                  Sales:**                                  |   |                                    |   |                                  |   |   |   |   |   |   |   |   |   |
| Heat                  treating                                   |   | $                                       | 11,004 |                                  | $      | 11,396 |   | $ | 23,580 |   | $ | 22,844 |   |
| Corporate                  and other                             |   |                                    | -      |                                  |   | - |   |   | - |   |   | - |   |
| **Total                  Net Sales**                             |   | $                                       | 11,004 |                                  | $      | 11,396 |   | $ | 23,580 |   | $ | 22,844 |   |
|                                                             |   |                                    |   |                                  |   |   |   |   |   |   |   |   |   |
| **Operating                  Earnings (Loss):**                  |   |                                    |   |                                  |   |   |   |   |   |   |   |   |   |
| Heat                  treating                                   |   | $                                       | 1,191  |                                  | $      | 1,061 |   | $ | 3,398 |   | $ | 2,367 |   |
| Corporate                  and other                             |   |                                    | (828   | )                                     |   | (650 | ) |   | (1,230 | ) |   | (1,274 | ) |
| **Total                  Operating Earnings**                    |   | $                                       | 363    |                                  | $      | 411 |   | $ | 2,168 |   | $ | 1,093 |   |
|                                                             |   |                                    |   |                                  |   |   |   |   |   |   |   |   |   |
| **Depreciation                  and Amortization Expense:**      |   |                                    |   |                                  |   |   |   |   |   |   |   |   |   |
| Heat                  treating                                   |   | $                                       | 799    |                                  | $      | 773 |   | $ | 1,575 |   | $ | 1,518 |   |
| Corporate                  and other                             |   |                                    | 2      |                                  |   | 7 |   |   | 3 |   |   | 14 |   |
| **Total                  Depreciation and Amortization Expense** |   | $                                       | 801    |                                  | $      | 780 |   | $ | 1,578 |   | $ | 1,532 |   |
|                                                             |   |                                    |   |                                  |   |   |   |   |   |   |   |   |   |
| **Capital                  Expenditures:**                       |   |                                    |   |                                  |   |   |   |   |   |   |   |   |   |
| Heat                  treating                                   |   | $                                       | 1,088  |                                  | $      | 400 |   | $ | 1,776 |   | $ | 975 |   |
| Corporate                  and other                             |   |                                    | 247    |                                  |   | 6 |   |   | 247 |   |   | 13 |   |
| **Total                  Capital Expenditures**                  |   | $                                       | 1,335  |                                  | $      | 406 |   | $ | 2,023 |   | $ | 988 |   |

**NOTE      6 - DEBT**

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|                                                                                                                      |   | **September                  30,**    |   | **March                  31,** |   |
|---------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|--------|--------------------------------|--------|
|                                                                                                                      |   | **2006**                              |   | **2006**                       |   |
|                                                                                                                      |   |                                  |   | **(Restated)**            |   |
|                                                                                                                      |   | ***(in                  thousands)*** |   |
| **Short                  term obligations:**                                                                              |   |                                  |   |                           |   |   |   |
| Notes                  payable (various interest rates)                                                                   |   | $                                     | 226    |                           | $      | 1,414 |   |
| Revolving                  line of credit (prime + 1.25%)                                                                 |   |                                  | 1,000  |                           |   | - |   |
|                                                                                                                      |   | $                                     | 1,226  |                           | $      | 1,414 |   |
|                                                                                                                      |   |                                  |   |                           |   |   |   |
| **Long                  term obligations:**                                                                               |   |                                  |   |                           |   |   |   |
| Mortgage                  notes payable (various variable interest rates)                                                 |   | $                                     | 4,370  |                           | $      | 1,950 |   |
| Equipment                  purchase contracts and capitalized lease                  obligations (various interest rates) |   |                                  | 884    |                           |   | 1,940 |   |
| Subordinated                  debt (fixed rate of 10.00%)                                                                 |   |                                  | 346    |                           |   | 346 |   |
|                                                                                                                      |   |                                  | 5,600  |                           |   | 4,236 |   |
| Less                  current maturities                                                                                  |   |                                  | 443    |                           |   | 3,120 |   |
|                                                                                                                      |   | $                                     | 5,157  |                           | $      | 1,116 |   |

**Liabilities        of business held for sale**

**Settlement      Agreement Resolution**

| 1.   | On                August 30, 2006, Maxco, Inc. guaranteed a Mortgage Loan Agreement                (the                “Agreement”) for $2,775,000 between The Huntington National Bank (“HNB”)                and CCA. In addition to Maxco, Inc., other guarantors named are L/M                and                Max A. Coon. The Agreement, which is secured by a first mortgage                on a                commercial building in Lansing, Michigan (“CCA Building”), calls for CCA                to make 60 monthly payments of principal and interest of $22,363.76                plus a                final payment of the remaining principal and any accrued interest                on                September 15, 2011 to HNB. Maxco, Inc. and the other guarantors would                be                liable for payment to HNB should CCA                default. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2.   | The                Company’s wholly-owned subsidiary, Atmosphere Annealing, Inc. (“AAI”), as                part of refinancing of its debt with its principal lender, provided                the                Company with $5,761,333.25 as part of an intercompany demand note                toward                fulfilling the commitment to ARE. The $5,761,333.25, which was advanced                under loan agreements with AAI’s principal lender, is collateralized by                certain assets of AAI including real estate and                equipment. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 3.   | On                August 30, 2006, CCA, L/M and the Company agreed that the Company                loan the                $5,761,333.25 to CCA to fulfill the commitment to ARE. The loan to                CCA by                the Company is evidenced by a demand note, secured by a second mortgage                on                the CCA Building in favor of the Company, and guaranteed by L/M. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Indemnification      Matters**

** **

**NOTE      7 - FEDERAL INCOME TAXES**

**NOTE      8 - PREFERRED STOCK DIVIDENDS**

**NOTE      9 - INVENTORIES**

|                              |   | **September                  30,**    |   | **March                  31,** |   |
|-----------------------------------|--------|---------------------------------------|--------|--------------------------------|--------|
|                              |   | **2006**                              |   | **2006**                       |   |
|                              |   | ***(in                  thousands)*** |   |
| Raw                  materials    |   | $                                     | 197    |                           | $      | 314 |   |
| Work                  in progress |   |                                  | 664    |                           |   | 700 |   |
| Finished                  goods   |   |                                  | 32     |                           |   | 34 |   |
|                              |   | $                                     | 893    |                           | $      | 1,048 |   |

**NOTE      10 - REAL ESTATE INVESTMENTS HELD FOR SALE**

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**NOTE      11 - NOTES AND CONTRACTS RECEIVABLE, INCLUDING RELATED PARTIES, AND      OTHER**

**NOTE      12 - RECEIPT OF NON-BINDING LETTER OF INTEREST TO ACQUIRE SUBSTANTIALLY ALL      THE      ASSETS OF ATMOSPHERE ANNEALING, INC.**

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

**CRITICAL      ACCOUNTING POLICIES**

***Principles      of Consolidation and Transactions with Affiliates***

***Revenue      Recognition***

***Goodwill,      Intangible and Other Long-Lived Assets***

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***Derivative      Financial Instruments***

***Material      Trends and Uncertainties***

**Market      Opportunities and Growth Strategies**

| ·   | Companies                are focusing on core competencies and outsourcing non-core processes                such                as heat treating and coating. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| ·   | In                some cases, our customers are consolidating their supply                base. |
|--------------------|-------------------------------------------------------------------------------------------------|

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

| ·   | Foreign                automakers are locating manufacturing facilities in the United                States. |
|--------------------|--------------------------------------------------------------------------------------------------------------|

| ·   | ***Expand                Capabilities***.    By                adding new capabilities in our existing plants we believe that we                could                secure new business from our existing customer base. By offering                a                “one-stop" shop we could significantly reduce logistical costs for                our                customers. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| ·   | ***Provide                Technical Expertise To Support Our Customers*****.**    We                believe that our technical expertise is one of our competitive advantages.                We partner with our customers to find ways to improve quality and                reduce                cost. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| ·   | ***Cost                Savings Opportunities and Efficiency                Improvements***.    We                have pursued, and will continue to pursue, cost savings that enhance                our                competitive position in serving our customers. We have made significant                investments in material handling equipment in order to improve efficiency                and to provide a safer environment for our                employees. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| ·   | ***Pursue                Strategic Acquisitions***.    We                plan to pursue acquisitions that strategically expand our process                capabilities and contribute to our geographic diversity and market                share.                Our ability to execute this element of our strategy may be limited                by our                capital resources. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**MATERIAL      CHANGES IN FINANCIAL CONDITION**

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**RESULTS      OF OPERATIONS**

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

|                                 |   | **Three                  Months Ended** |   | **Three                  Months Ended** |   |
|--------------------------------------|--------|-----------------------------------------|--------|-----------------------------------------|--------|
|                                 |   | **September                  30, 2006** |   | **September                  30, 2005** |   |
|                                 |   |                                    |   | **Operating**                           |   |   |   | **Operating** |   |
|                                 |   | **Net                  Sales**          |   | **Earnings                  (Loss)**    |   | **Net                  Sales** |   | **Earnings                  (Loss)** |   |
|                                 |   | ***(in                  thousands)***   |   |
| Heat                  treating       |   | $                                       | 11,004 |                                    | $      | 1,191 |   | $ | 11,396 |   | $ | 1,061 |   |
| Corporate                  and other |   |                                    | -      |                                    |   | (828 | ) |   | - |   |   | (650 | ) |
|                                 |   | $                                       | 11,004 |                                    | $      | 363 |   | $ | 11,396 |   | $ | 411 |   |

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**Six      Months Ended September 30, 2006 Compared to 200**
**5**

|                                 |   | **Six                  Months Ended**   |   | **Six                  Months Ended**   |   |
|--------------------------------------|--------|-----------------------------------------|--------|-----------------------------------------|--------|
|                                 |   | **September                  30, 2006** |   | **September                  30, 2005** |   |
|                                 |   |                                    |   | **Operating**                           |   |   |   | **Operating** |   |
|                                 |   | **Net                  Sales**          |   | **Earnings                  (Loss)**    |   | **Net                  Sales** |   | **Earnings                  (Loss)** |   |
|                                 |   | ***(in                  thousands)***   |   |
| Heat                  treating       |   | $                                       | 23,580 |                                    | $      | 3,398 |   | $ | 22,844 |   | $ | 2,367 |   |
| Corporate                  and other |   |                                    | -      |                                    |   | (1,230 | ) |   | - |   |   | (1,274 | ) |
|                                 |   | $                                       | 23,580 |                                    | $      | 2,168 |   | $ | 22,844 |   | $ | 1,093 |   |

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**ITEM      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET      RISK**

**ITEM      4. CONTROLS AND PROCEDURES**

----

**PART      II — OTHER INFORMATION**

| 3               | Restated                Articles of Incorporation are hereby incorporated from Form 10-Q                dated                February 13, 1998.                                                                                                                                                                                                                                                                                                                                                                                                                           |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 3.1   | By-laws                are hereby incorporated by reference from Form S-4 dated November                4, 1991                (File No. 33-43855).                                                                                                                                                                                                                                                                                                                                                                                                                       |
|            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 3.2   | First                Amendment to the By-laws is hereby incorporated by reference from                Form 8-K                dated November 14, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                    |
|            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 4.2             | Resolution                establishing Series Three Preferred Shares is hereby incorporated                by                reference from Form S-4 dated November 4, 1991 (File No.                33-43855).                                                                                                                                                                                                                                                                                                                                                           |
|            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 4.3             | Resolution                authorizing the redemption of Series Two Preferred Stock and establishing                Series Four Preferred Stock and the terms of the subordinated notes                is                hereby incorporated by reference from Form 10-Q dated February 14,                1997.                                                                                                                                                                                                                                                           |
|            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 4.4             | Resolution                establishing Series Five Preferred Shares is hereby incorporated                by                reference from Form 10-K dated June 5, 1997.                                                                                                                                                                                                                                                                                                                                                                                                  |
|            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 4.5             | Resolution                establishing Series Six Preferred Shares is hereby incorporated by                reference from Form 10-K dated June 23, 1999.                                                                                                                                                                                                                                                                                                                                                                                                                 |
|            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.1            | Incentive                stock option plan adopted August 15, 1983, including the amendment                (approved by shareholders August 25, 1987) to increase the authorized                shares on which options may be granted by two hundred fifty thousand                (250,000), up to five hundred thousand (500,000) shares of the common                stock of the company is hereby incorporated by reference from the                registrant's annual report on Form 10-K for the fiscal year ended                March                31, 1988. |

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| 10.11            | Asset                purchase agreement for the purchase of Atmosphere Annealing, Inc.                is                hereby incorporated by reference from Form 8-K dated January 17,                1997.                                                                                                                                                         |
|------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|             |                                                                                                                                                                                                                                                                                                                                                                  |
| 10.18            | Maxco,                Inc. 1998 Employee Stock Option Plan is hereby incorporated by reference                from Form 10-Q dated November 12, 1998.                                                                                                                                                                                                                 |
|             |                                                                                                                                                                                                                                                                                                                                                                  |
| 10.29            | Obligor                assignment agreement among Contractor Supply Incorporated, Maxco,                Inc.,                and Ersco Corporation dated November 14, 2002 is hereby incorporated                by                reference from Form 10-Q dated November 25, 2002.                                                                                  |
|             |                                                                                                                                                                                                                                                                                                                                                                  |
| 10.30            | Stock                purchase agreement between Ersco Corporation, Maxco, Inc., and Contractor                Supply Incorporated dated November 14, 2002 is hereby incorporated                by                reference from Form 10-Q dated November 25, 2002.                                                                                                   |
|             |                                                                                                                                                                                                                                                                                                                                                                  |
| 10.34            | Credit                Agreement between Atmosphere Annealing, Inc. and Huntington National                Bank                dated November 18, 2003 is hereby incorporated by reference from                Form 10-Q                dated November 19, 2003.                                                                                                       |
|             |                                                                                                                                                                                                                                                                                                                                                                  |
| 10.36            | Incentive                agreement between Sanjeev Deshpande and Maxco, Inc. dated April 20,                2004                is hereby incorporated by reference from Form 10-K dated July 13,                2004.                                                                                                                                                |
|             |                                                                                                                                                                                                                                                                                                                                                                  |
| 10.37            | Business                Loan Agreement between Capitol National Bank and Maxco, Inc. dated                May 28,                2004 is hereby incorporated by reference from Form 10-K dated July                13,                2004.                                                                                                                           |
|             |                                                                                                                                                                                                                                                                                                                                                                  |
| 10.38            | Settlement                Agreement between and among American Realty Equities, Inc., Capital                Center                Associates, L.L.C., L/M Associates, LLC, Max A. Coon, and Maxco,                Inc.                dated October 27, 2005 is hereby incorporated by reference from Form                8-K                dated November 2, 2005. |
|             |                                                                                                                                                                                                                                                                                                                                                                  |
| 10.39            | Business                Loan Agreement between Capitol National Bank and Maxco, Inc. dated                August                11, 2006.                                                                                                                                                                                                                             |
|             |                                                                                                                                                                                                                                                                                                                                                                  |
| 10.40            | Amended                and Restated Credit Agreement between Atmosphere Annealing, Inc.                and                Huntington National Bank dated August 28, 2006.                                                                                                                                                                                             |
|             |                                                                                                                                                                                                                                                                                                                                                                  |
| 31.1             | Certification                of Chief Executive Officer of periodic report pursuant to Rule 13a-15(e)                or Rule 15d-15(e).                                                                                                                                                                                                                               |
|             |                                                                                                                                                                                                                                                                                                                                                                  |
| 31.2             | Certification                of Chief Financial Officer of periodic report pursuant to Rule 13a-15(e)                or Rule 15d-15(e).                                                                                                                                                                                                                               |
|             |                                                                                                                                                                                                                                                                                                                                                                  |
| 32.1             | Certification                of Chief Executive Officer of periodic report pursuant to 18 U.S.C.                §1350.                                                                                                                                                                                                                                           |
|             |                                                                                                                                                                                                                                                                                                                                                                  |
| 32.2   | Certification                of Chief Financial Officer of periodic report pursuant to 18 U.S.C.                §1350.                                                                                                                                                                                                                                           |

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|                                              |                                                                                                                                              |                                        |
|---------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------|
|                                              | MAXCO,                INC.                                                                                                                        |
|                                         |                                                                                                                                         |                                   |
| Date:              November              20, 2006 |                                                                                                                                                   | /s/                LAWRENCE O. FIELDS  |
|                                              | Lawrence                O. Fields, Chief Financial Officerand                Treasurer (Principal Financial andAccounting                Officer) |

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