----

----

**FORM      10-Q**

**For      the Quarter Ended September 30, 2005**

**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)* |
|                                                      |   |                                    |
| 1118                Centennial Way                        |   |                                    |
| Lansing,                Michigan                          |   | 48917                                   |
| *(Address                of principal executive offices)* |   | *(Zip                Code)*             |
|                                                      |   |                                    |

|                        |   |                                           |
|-----------------------------|--------|------------------------------------------------|
| Class                       |   | Outstanding                at October 31, 2005 |
| Common                Stock |   | 3,446,995                shares                |

----

----

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**MAXCO,      INC.**

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

|                                                                                                                                             | **PAGE**  |
|--------------------------------------------------------------------------------------------------------------------------------------------------|----------------|
|                                                                                                                                             |           |
| Part                  I — Financial Information                                                                                            | 3              |
|                                                                                                                                             |           |
| Item                  1. Financial Statements                                                                                                    | 3              |
|                                                                                                                                             |           |
| Condensed                  Consolidated Balance Sheets                                                                                           | 3              |
|                                                                                                                                             |           |
| Condensed                  Consolidated Statements Of Operations                                                                                 | 5              |
|                                                                                                                                             |           |
| 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 | 16             |
|                                                                                                                                             |           |
| Item                  3. Quantitative And Qualitative Disclosures About Market                  Risk                                             | 20             |
|                                                                                                                                             |           |
| Item                  4. Controls And Procedures                                                                                                 | 20             |
|                                                                                                                                             |           |
| Part                  II — Other Information                                                                                               | 21             |
|                                                                                                                                             |           |
| Item                  1. Legal Proceedings                                                                                                       | 21             |
|                                                                                                                                             |           |
| Item                  2. Unregistered Sales Of Equity Securities And Use Of                  Proceeds                                            | 21             |
|                                                                                                                                             |           |
| Item                  3. Defaults Upon Senior Securities                                                                                         | 21             |
|                                                                                                                                             |           |
| Item                  4. Submission Of Matters To A Vote Of Security Holders                                                                     | 21             |
|                                                                                                                                             |           |
| Item                  5. Other Information                                                                                                       | 21             |
|                                                                                                                                             |           |
| Item                  6. Exhibits                                                                                                                | 21             |
|                                                                                                                                             |           |
| Signatures                                                                                                                                       | 23             |
|                                                                                                                                             |           |
| Certification                                                                                                                                    | 24             |

----

**PART      I — FINANCIAL INFORMATION**

**ITEM      1. FINANCIAL STATEMENTS**

**CONDENSED      CONSOLIDATED BALANCE SHEETS**

**Maxco,      Inc. and Subsidiaries**

|                                                                |   |                                         |    |                                     |   |
|---------------------------------------------------------------------|--------|----------------------------------------------|---------|------------------------------------------|--------|
|                                                                |   | **September                    30,****2005** |    | **March                    31,****2005** |   |
|                                                                |   | **(Unaudited)**                              |    |                                     |   |
|                                                                |   | ***(in                  thousands)***        |    |
|                                                                |   |                                         |    |                                     |   |
| **ASSETS**                                                          |   |                                         |    |                                     |   |
| **Current                  Assets**                                 |   |                                         |    |                                     |   |
| Cash                  and cash equivalents                          |   | $                                            | 928     |                                     | $      | 1,781 |   |
| Restricted                  cash—Note 3                       |   |                                         | 750     |                                     |   | — |   |
| Accounts                  and notes receivable, less allowance of   |   |                                         |    |                                     |   |   |   |
| $180,000                    ($128,000 at March 31, 2005)            |   |                                         | 7,154   |                                     |   | 6,605 |   |
| Inventories—Note                  9                           |   |                                         | 854     |                                     |   | 534 |   |
| Prepaid                  expenses and other                         |   |                                         | 414     |                                     |   | 223 |   |
| **Total                  Current Assets**                           |   |                                         | 10,100  |                                     |   | 9,143 |   |
|                                                                |   |                                         |    |                                     |   |   |   |
| **Property                  and Equipment—Note 1**            |   |                                         |    |                                     |   |   |   |
| Land                                                                |   |                                         | 564     |                                     |   | 437 |   |
| Buildings                                                           |   |                                         | 8,220   |                                     |   | 5,997 |   |
| Machinery,                  equipment, and fixtures                 |   |                                         | 30,954  |                                     |   | 30,052 |   |
|                                                                |   |                                         | 39,738  |                                     |   | 36,486 |   |
| Allowances                  for depreciation                        |   |                                         | (20,600 | )                                        |   | (18,018 | ) |
|                                                                |   |                                         | 19,138  |                                     |   | 18,468 |   |
|                                                                |   |                                         |    |                                     |   |   |   |
| **Other                  Assets**                                   |   |                                         |    |                                     |   |   |   |
| Investments                                                         |   |                                         | 1,014   |                                     |   | 878 |   |
| Notes                  and contracts receivable and other           |   |                                         | 719     |                                     |   | 996 |   |
| Real                  estate investments held for sale              |   |                                         | 1,427   |                                     |   | 1,850 |   |
| Real                  estate held for sale                          |   |                                         | 2,997   |                                     |   | — |   |
| Accounts                  receivable, related parties—Note 11 |   |                                         | 407     |                                     |   | 407 |   |
| Intangibles                                                         |   |                                         | 1,424   |                                     |   | 1,424 |   |
|                                                                |   |                                         | 7,988   |                                     |   | 5,555 |   |
|                                                                |   |                                         |    |                                     |   |   |   |
|                                                                |   | $                                            | 37,226  |                                     | $      | 33,166 |   |

----

**CONDENSED      CONSOLIDATED BALANCE SHEETS — CONTINUED**

**Maxco,      Inc. and Subsidiaries**

|                                                                                                     |   |                                               |   |                                       |   |
|----------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------|--------|--------------------------------------------|--------|
|                                                                                                     |   | **September                    30,****2005**  |   | **March                      31,****2005** |   |
|                                                                                                     |   | **(Unaudited)**                                    |   |                                       |   |
|                                                                                                     |   | ***(in                  thousands)***              |   |
| **LIABILITIES                  AND STOCKHOLDERS' EQUITY**                                                |   |                                               |   |                                       |   |
| **Current                  liabilities**                                                                 |   |                                               |   |                                       |   |
| Notes                  payable—Note 6                                                              |   | $                                                  | 3,719  |                                       | $      | 2,091 |   |
| Accounts                  payable                                                                        |   |                                               | 3,663  |                                       |   | 3,870 |   |
| Employee                  compensation                                                                   |   |                                               | 1,856  |                                       |   | 1,711 |   |
| Incentive                  compensation                                                                  |   |                                               | 1,000  |                                       |   | 650 |   |
| Taxes,                  interest, and other liabilities                                                  |   |                                               | 3,987  |                                       |   | 3,850 |   |
| Current                  maturities of long-term obligations                                             |   |                                               | 5,303  |                                       |   | 4,959 |   |
| **Total                  Current Liabilities**                                                           |   |                                               | 19,528 |                                       |   | 17,131 |   |
|                                                                                                     |   |                                               |   |                                       |   |   |   |
| **Long-Term                  Obligations, Less Current Maturities—Notes 1 and                  6** |   |                                               | 7,265  |                                       |   | 7,070 |   |
| **Total                  Liabilities**                                                                   |   |                                               | 26,793 |                                       |   | 24,201 |   |
|                                                                                                     |   |                                               |   |                                       |   |   |   |
| **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  |                                       |   | — |   |
|                                                                                                     |   |                                               | 5,116  |                                       |   | 3,866 |   |
| Common                  stock, $1 par value; 10,000,000 shares                                           |   |                                               |   |                                       |   |   |   |
| authorized,                  3,446,995 shares issued and outstanding                                     |   |                                               | 3,447  |                                       |   | 3,447 |   |
| Accumulated                  other comprehensive loss                                                    |   |                                               | (9     | )                                          |   | (38 | ) |
| Retained                  earnings                                                                       |   |                                               | 1,879  |                                       |   | 1,690 |   |
| **Total                  Stockholders' Equity**                                                          |   |                                               | 10,433 |                                       |   | 8,965 |   |
|                                                                                                     |   | $                                                  | 37,226 |                                       | $      | 33,166 |   |
|                                                                                                     |   |                                               |   |                                       |   |   |   |

----

**CONDENSED      CONSOLIDATED STATEMENTS OF OPERATIONS**

**Maxco,      Inc. and Subsidiaries**

**(Unaudited)**

|                                                                   |   |                                                                      |    |     |   |
|------------------------------------------------------------------------|--------|---------------------------------------------------------------------------|---------|----------|--------|
|                                                                   |   | **Three                  Months Ended****September                  30,** |    |
|                                                                   |   | **2005**                                                                  |    | **2004** |   |
|                                                                   |   | ***(in                  thousands, except per share data)***              |    |
| **Net                  Sales**                                         |   | $                                                                         | 11,396  |     | $      | 11,156 |   |
| **Costs                  and Expenses:**                               |   |                                                                      |    |     |   |   |   |
| Cost                  of sales and operating expenses                  |   |                                                                      | 7,312   |     |   | 7,345 |   |
| Selling,                  general and administrative                   |   |                                                                      | 2,893   |     |   | 2,732 |   |
| Depreciation                  and amortization                         |   |                                                                      | 780     |     |   | 743 |   |
|                                                                   |   |                                                                      | 10,985  |     |   | 10,820 |   |
| **Operating                  Income**                                  |   |                                                                      | 411     |     |   | 336 |   |
| **Other                  Income (Expense)**                            |   |                                                                      |    |     |   |   |   |
| Investment,                  interest, and other income (loss), net    |   |                                                                      | 37      |     |   | 16 |   |
| Gain                  on sale of assets                                |   |                                                                      | — |     |   | 56 |   |
| Interest                  expense                                      |   |                                                                      | (384    | )        |   | (358 | ) |
| **Income                  Before Equity in Loss of Affiliates**        |   |                                                                      | 64      |     |   | 50 |   |
| Equity                  in loss of affiliates                          |   |                                                                      | — |     |   | — |   |
| **Net                  Income**                                        |   |                                                                      | 64      |     |   | 50 |   |
| Less                  preferred stock dividends                        |   |                                                                      | (102    | )        |   | (102 | ) |
| **Net                  Loss Applicable to Common Stock**               |   | $                                                                         | (38     | )        | $      | (52 | ) |
|                                                                        |   |                                                                      |    |     |   |   |   |
| **Net                  Loss Per Common Share—Basic and Diluted** |   | $                                                                         | (0.01   | )        | $      | (0.02 | ) |
|                                                                   |   |                                                                      |    |     |   |   |   |

----

**CONDENSED      CONSOLIDATED STATEMENTS OF OPERATIONS**

**Maxco,      Inc. and Subsidiaries**

**(Unaudited)**

|                                                                     |   |                                                         |    |
|--------------------------------------------------------------------------|--------|--------------------------------------------------------------|---------|
|                                                                     |   | **Six                  Months Ended September 30,**          |    |
|                                                                     |   | **2005**                                                     |    | **2004** |   |
|                                                                     |   | ***(in                  thousands, except per share data)*** |    |
| **Net                  Sales**                                           |   | $                                                            | 22,844  |   | $ | 22,523 |   |
| **Costs                  and Expenses:**                                 |   |                                                         |    |   |   |   |   |
| Cost                  of sales and operating expenses                    |   |                                                         | 14,426  |   |   | 14,715 |   |
| Selling,                  general and administrative                     |   |                                                         | 5,793   |   |   | 5,510 |   |
| Depreciation                  and amortization                           |   |                                                         | 1,532   |   |   | 1,487 |   |
|                                                                     |   |                                                         | 21,751  |   |   | 21,712 |   |
| **Operating                  Income**                                    |   |                                                         | 1,093   |   |   | 811 |   |
| **Other                  Income (Expense)**                              |   |                                                         |    |   |   |   |   |
| Investment,                  interest, and other income (loss), net      |   |                                                         | 35      |   |   | 151 |   |
| Gain                  on sale of assets                                  |   |                                                         | 2       |   |   | 57 |   |
| Interest                  expense                                        |   |                                                         | (737    | ) |   | (765 | ) |
| **Income                  Before Equity in Loss of Affiliates**          |   |                                                         | 393     |   |   | 254 |   |
| Equity                  in loss of affiliates, net of tax                |   |                                                         | — |   |   | — |   |
| **Net                  Income**                                          |   |                                                         | 393     |   |   | 254 |   |
| Less                  preferred stock dividends                          |   |                                                         | (204    | ) |   | (204 | ) |
| **Net                  Income Applicable to Common Stock**               |   | $                                                            | 189     |   | $ | 50 |   |
|                                                                     |   |                                                         |    |   |   |   |   |
| **Net                  Income Per Common Share—Basic and Diluted** |   | $                                                            | 0.05    |   | $ | 0.02 |   |
|                                                                     |   |                                                         |    |   |   |   |   |

----

**CONSOLIDATED        STATEMENTS OF STOCKHOLDERS’ EQUITY**

**Maxco,      Inc. and Subsidiaries**

**(Unaudited)**

|                                                |   |                                                                                               |      |                   |         |                                                                                                        |   |                                                |                                     |                                   |   |                                                       |   |
|-----------------------------------------------------|--------|----------------------------------------------------------------------------------------------------|-----------|------------------------|--------------|-------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------|------------------------------------------|----------------------------------------|--------|------------------------------------------------------------|--------|
|                                                |   | **Number                  of Common****Shares                  Outstanding**                       |      | **Preferred****Stock** |         | **Common****Stock**                                                                                         |   | **Accumulated                  Comprehensive Loss** |                                     | **Retained                  Earnings** |   | **Totals**                                                 |   |
|                                                |   | ***(in                  thousands, except number of common shares                  outstanding)*** |      |
|                                                |   |                                                                                               |      |                   |         |                                                                                                        |   |                                                |                                     |                                   |   |                                                       |   |
| **Balances                  at April 1, 2005**      |   |                                                                                               | 3,446,995 |                   | $            | 3,866                                                                                                       |   | $                                                   | 3,447                                    |                                   | $      | (38                                                        | )      | $ | 1,690 |   | $ | 8,965 |   |
| Net                  income for the period          |   |                                                                                               |      |                   |         |                                                                                                        |   |                                                |                                     |                                   |   |                                                       |   |   | 393 |   |   | 393 |   |
| Unrealized                  gain on swap agreement  |   |                                                                                               |      |                   |         |                                                                                                        |   |                                                |                                     |                                   |   | 29                                                         |   |   |   |   |   | 29 |   |
| Total                  Comprehensive income         |   |                                                                                               |      |                   |         |                                                                                                        |   |                                                |                                     |                                   |   |                                                       |   |   |   |   |   | 422 |   |
| Issuance                  of preferred stock        |   |                                                                                               |      |                   |         | 1,250                                                                                                       |   |                                                |                                     |                                   |   |                                                       |   |   |   |   |   | 1,250 |   |
| Preferred                  stock dividends          |   |                                                                                               |      |                   |    |                                  |   |                                                |                      |                              |   |                         |   |   | (204 | ) |   | (204 | ) |
| **Balances                  at September 30, 2005** |   |                                                                                               | 3,446,995 |                   | $            | 5,116                                                                                                       |   | $                                                   | 3,447                                    |                                   | $      | (9                                                         | )      | $ | 1,879 |   | $ | 10,433 |   |
|                                                |   |                                                                                               |      |                   |         |                                                                                                        |   |                                                |                                     |                                   |   |                                                       |   |   |   |   |   |   |   |
|                                                |   |                                                                                               |      |                   |         |                                                                                                        |   |                                                |                                     |                                   |   |                                                       |   |   |   |   |   |   |   |

----

**CONDENSED      CONSOLIDATED STATEMENTS OF CASH FLOWS**

**Maxco,      Inc. and Subsidiaries**

**(Unaudited)**

|                                                                     |   | **Six                  Months Ended September 30,** |   |
|--------------------------------------------------------------------------|--------|-----------------------------------------------------|--------|
|                                                                     |   | **2005**                                            |   | **2004** |   |
|                                                                     |   | ***(in                  thousands)***               |   |
| **Operating                  Activites**                                 |   |                                                |   |   |   |
| Net                  income                                              |   | $                                                   | 393    |   | $ | 254 |   |
| Adjustments                  to reconcile net income to net cash         |   |                                                |   |   |   |   |   |
| provided                  by operating activites:                        |   |                                                |   |   |   |   |   |
| Loss                  on investment                                      |   |                                                | 30     |   |   | — |   |
| Net                  gains                                               |   |                                                | (2     | ) |   | (57 | ) |
| Depreciation                  and other non-cash items                   |   |                                                | 1,532  |   |   | 1,487 |   |
| Changes                  in operating assets and liabilities             |   |                                                | (1,260 | ) |   | 616 |   |
| **Net                  Cash Provided By Operating Activities**           |   |                                                | 693    |   |   | 2,300 |   |
|                                                                     |   |                                                |   |   |   |   |   |
| **Investing                  Activities**                                |   |                                                |   |   |   |   |   |
| Collections                  on notes receivable                         |   |                                                | 125    |   |   | 1,003 |   |
| Sale                  of buildings                                       |   |                                                | 278    |   |   | — |   |
| Purchase                  of subsidiaries                                |   |                                                | (342   | ) |   | — |   |
| Purchases                  of property and equipment                     |   |                                                | (988   | ) |   | (537 | ) |
| Other                                                                    |   |                                                | 74     |   |   | 65 |   |
| **Net                  Cash (Used In) Provided By Investing Activities** |   |                                                | (853   | ) |   | 531 |   |
|                                                                     |   |                                                |   |   |   |   |   |
| **Financing                  Activities**                                |   |                                                |   |   |   |   |   |
| Net                  proceeds from (repayments on) line of credit        |   |                                                | 1,574  |   |   | (752 | ) |
| Net                  repayments on other debt obligations                |   |                                                | (1,517 | ) |   | (1,834 | ) |
| **Net                  Cash Provided By (Used In) Financing Activities** |   |                                                | 57     |   |   | (2,586 | ) |
|                                                                     |   |                                                |   |   |   |   |   |
| **(Decrease)                  Increase in Cash and Cash Equivalents**    |   |                                                | (103   | ) |   | 245 |   |
| **Cash                  and Cash Equivalents at Beginning of Period**    |   |                                                | 1,781  |   |   | 78 |   |
| **Cash                  and Cash Equivalents at End of Period**          |   | $                                                   | 1,678  |   | $ | 323 |   |
|                                                                     |   |                                                |   |   |   |   |   |
| **Supplemental                  cash flow disclosure:**                  |   |                                                |   |   |   |   |   |
| Interest                  paid                                           |   | $                                                   | 789    |   | $ | 724 |   |
|                                                                     |   |                                                |   |   |   |   |   |

----

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**Maxco,      Inc. and Subsidiaries**

**September      30, 2005**

**NOTE      1 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING      POLICIES**

----

**NOTE      2 - EARNINGS PER SHARE**

|                                                                           |   |                                                                        |   |                                                                      |   |     |   |     |   |
|--------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------|--------|---------------------------------------------------------------------------|--------|----------|--------|----------|--------|
|                                                                           |   | **Three                    Months Ended****September                  30,** |   | **Six                    Months Ended****September                  30,** |   |
|                                                                           |   | **2005**                                                                    |   | **2004**                                                                  |   | **2005** |   | **2004** |   |
| **NUMERATOR:**                                                                 |   | ***(in                  thousands, except per share data)***                |   |
| Net                  income                                                    |   | $                                                                           | 64     |                                                                      | $      | 50       |   | $        | 393    |   | $ | 254 |   |
| Preferred                  stock dividends                                     |   |                                                                        | (102   | )                                                                         |   | (102     | )      |     | (204   | ) |   | (204 | ) |
| **Numerator                  for basic and diluted earnings per share—** |   |                                                                        |   |                                                                      |   |     |   |     |   |   |   |   |   |
| **income                  (loss) available to common stockholders**            |   | $                                                                           | (38    | )                                                                         | $      | (52      | )      | $        | 189    |   | $ | 50 |   |
| **DENOMINATOR:**                                                               |   |                                                                        |   |                                                                      |   |     |   |     |   |   |   |   |   |
| **Denominator                  for basic and diluted earnings per**            |   |                                                                        |   |                                                                      |   |     |   |     |   |   |   |   |   |
| **share—weighted                  average shares**                       |   |                                                                        | 3,447  |                                                                      |   | 3,101    |   |     | 3,447  |   |   | 3,101 |   |
| **BASIC                  AND DILUTED EARNINGS (LOSS) PER SHARE**               |   | $                                                                           | (0.01  | )                                                                         | $      | (0.02    | )      | $        | 0.05   |   | $ | 0.02 |   |
|                                                                           |   |                                                                        |   |                                                                      |   |     |   |     |   |   |   |   |   |

**NOTE      3 - RESTRICTED CASH**

**NOTE      4 - COMPREHENSIVE INCOME**

|                                               |   |                                                                        |   |                                                                      |   |     |   |     |   |
|----------------------------------------------------|--------|-----------------------------------------------------------------------------|--------|---------------------------------------------------------------------------|--------|----------|--------|----------|--------|
|                                               |   | **Three                    Months Ended****September                  30,** |   | **Six                    Months Ended****September                  30,** |   |
|                                               |   | **2005**                                                                    |   | **2004**                                                                  |   | **2005** |   | **2004** |   |
|                                               |   | ***(in                  thousands)***                                       |   |
| Net                  income                        |   | $                                                                           | 64     |                                                                      | $      | 50       |   | $        | 393    |   | $ | 254 |   |
| Unrealized                  gain on swap agreement |   |                                                                        | 14     |                                                                      |   | 14       |   |     | 29     |   |   | 78 |   |
| Comprehensive                  income              |   | $                                                                           | 78     |                                                                      | $      | 64       |   | $        | 422    |   | $ | 332 |   |
|                                               |   |                                                                        |   |                                                                      |   |     |   |     |   |   |   |   |   |

**NOTE      5 - INDUSTRY SEGMENT INFORMATION**

|                                           |   |                                         |   |                                          |   |
|------------------------------------------------|--------|----------------------------------------------|--------|------------------------------------------|--------|
|                                           |   | **September                    30,****2005** |   | **March                    31,****2005** |   |
|                                           |   | ***(in                  thousands)***        |   |
| **Identifiable                  Assets:**      |   |                                         |   |                                     |   |
| Heat                  treating                 |   | $                                            | 28,673 |                                     | $      | 27,081 |   |
| Corporate                  and other           |   |                                         | 6,112  |                                     |   | 3,357 |   |
| Investments                  and advances      |   |                                         | 2,441  |                                     |   | 2,728 |   |
| **Total                  Identifiable Assets** |   | $                                            | 37,226 |                                     | $      | 33,166 |   |

----

|                                                             |   |                                                                        |    |                                                                      |   |     |   |     |    |
|------------------------------------------------------------------|--------|-----------------------------------------------------------------------------|---------|---------------------------------------------------------------------------|--------|----------|--------|----------|---------|
|                                                             |   | **Three                    Months Ended****September                  30,** |    | **Six                    Months Ended****September                  30**, |   |
|                                                             |   | **2005**                                                                    |    | **2004**                                                                  |   | **2005** |   | **2004** |    |
|                                                             |   | ***(in                  thousands)***                                       |    |
| **Net                  Sales:**                                  |   |                                                                        |    |                                                                      |   |     |   |     |    |
| Heat                  treating                                   |   | $                                                                           | 11,396  |                                                                      | $      | 11,156   |   | $        | 22,844  |   | $ | 22,523 |   |
| Corporate                  and other                             |   |                                                                        | — |                                                                      |   | —  |   |     | — |   |   | — |   |
| **Total                  Net Sales**                             |   | $                                                                           | 11,396  |                                                                      | $      | 11,156   |   | $        | 22,844  |   | $ | 22,523 |   |
|                                                             |   |                                                                        |    |                                                                      |   |     |   |     |    |   |   |   |   |
| **Operating                  Earnings (Loss):**                  |   |                                                                        |    |                                                                      |   |     |   |     |    |   |   |   |   |
| Heat                  treating                                   |   | $                                                                           | 1,061   |                                                                      | $      | 705      |   | $        | 2,367   |   | $ | 1,668 |   |
| Corporate                  and other                             |   |                                                                        | (650    | )                                                                         |   | (369     | )      |     | (1,274  | ) |   | (857 | ) |
| **Total                  Operating Earnings**                    |   | $                                                                           | 411     |                                                                      | $      | 336      |   | $        | 1,093   |   | $ | 811 |   |
|                                                             |   |                                                                        |    |                                                                      |   |     |   |     |    |   |   |   |   |
| **Depreciation                  and Amortization Expense:**      |   |                                                                        |    |                                                                      |   |     |   |     |    |   |   |   |   |
| Heat                  treating                                   |   | $                                                                           | 773     |                                                                      | $      | 735      |   | $        | 1,518   |   | $ | 1,471 |   |
| Corporate                  and other                             |   |                                                                        | 7       |                                                                      |   | 8        |   |     | 14      |   |   | 16 |   |
| **Total                  Depreciation and Amortization Expense** |   | $                                                                           | 780     |                                                                      | $      | 743      |   | $        | 1,532   |   | $ | 1,487 |   |
|                                                             |   |                                                                        |    |                                                                      |   |     |   |     |    |   |   |   |   |
| **Capital                  Expenditures:**                       |   |                                                                        |    |                                                                      |   |     |   |     |    |   |   |   |   |
| Heat                  treating                                   |   | $                                                                           | 400     |                                                                      | $      | 406      |   | $        | 975     |   | $ | 537 |   |
| Corporate                  and other                             |   |                                                                        | 6       |                                                                      |   | —  |   |     | 13      |   |   | — |   |
| **Total                  Capital Expenditures**                  |   | $                                                                           | 406     |                                                                      | $      | 406      |   | $        | 988     |   | $ | 537 |   |
|                                                             |   |                                                                        |    |                                                                      |   |     |   |     |    |   |   |   |   |

**NOTE      6 - DEBT**

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|                                                                                                                      |   |                                         |   |                                     |   |
|---------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|--------|------------------------------------------|--------|
|                                                                                                                      |   | **September                    30,****2005** |   | **March                    31,****2005** |   |
|                                                                                                                      |   | ***(in                  thousands)***        |   |
| **Short                  term obligations:**                                                                              |   |                                         |   |                                     |   |
| Notes                  payable (various interest rates)                                                                   |   | $                                            | 289    |                                     | $      | 1,554 |   |
| Mortgage                  notes payable (prime +3%)                                                                       |   |                                         | 1,319  |                                     |   | — |   |
| Revolving                  line of credit (LIBOR + 1.6%)                                                                  |   |                                         | 2,111  |                                     |   | 537 |   |
|                                                                                                                      |   | $                                            | 3,719  |                                     | $      | 2,091 |   |
|                                                                                                                      |   |                                         |   |                                     |   |   |   |
| **Long                  term obligations:**                                                                               |   |                                         |   |                                     |   |   |   |
| Term                  notes (various variable interest rates)                                                             |   | $                                            | 3,594  |                                     | $      | 4,930 |   |
| Mortgage                  notes payable (various variable interest rates)                                                 |   |                                         | 5,829  |                                     |   | 4,962 |   |
| Equipment                  purchase contracts and capitalized lease                  obligations (various interest rates) |   |                                         | 1,759  |                                     |   | 1,791 |   |
| Subordinated                  debt (fixed rate of 10.00%)                                                                 |   |                                         | 346    |                                     |   | 346 |   |
| Other                  amounts due on real estate held for sale                                                           |   |                                         | 1,040  |                                     |   | — |   |
|                                                                                                                      |   |                                         | 12,568 |                                     |   | 12,029 |   |
| Less                  current maturities                                                                                  |   |                                         | 5,303  |                                     |   | 4,959 |   |
|                                                                                                                      |   | $                                            | 7,265  |                                     | $      | 7,070 |   |
|                                                                                                                      |   |                                         |   |                                     |   |   |   |

**NOTE      7 - FEDERAL INCOME TAXES**

**NOTE      8 - PREFERRED STOCK DIVIDENDS**

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**NOTE      9 - INVENTORIES**

|                              |   |                                         |    |                                     |   |
|-----------------------------------|--------|----------------------------------------------|---------|------------------------------------------|--------|
|                              |   | **September                    30,****2005** |    | **March                    31,****2005** |   |
|                              |   | ***(in                  thousands)***        |    |
| Raw                  materials    |   | $                                            | 650     |                                     | $      | 329 |   |
| Work                  in progress |   |                                         | 204     |                                     |   | 157 |   |
| Finished                  goods   |   |                                         | — |                                     |   | 48 |   |
|                              |   | $                                            | 854     |                                     | $      | 534 |   |
|                              |   |                                         |    |                                     |   |   |   |

**NOTE      10 - REAL ESTATE INVESTMENT (DISCONTINUED AND HELD FOR      SALE)**

**NOTE      11 - ACCOUNTS RECEIVABLE AND PAYABLE—RELATED PARTIES**

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**NOTE      12 - RECENT ACCOUNTING PRONOUNCEMENTS**

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**NOTE      13 - SUBSEQUENT EVENTS**

**Settlement      Agreement and Indemnification**

** **

**Board      Resolution**

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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***

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***Revenue      Recognition***

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

***Derivative      Financial Instruments***

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**MATERIAL      CHANGES IN FINANCIAL CONDITION**

**RESULTS      OF OPERATIONS**

**Three      Months Ended September 30, 2005 Compared to 2004**

|                                 |   |                                                                               |    |                                                                               |   |                           |   |                                              |    |
|--------------------------------------|--------|------------------------------------------------------------------------------------|---------|------------------------------------------------------------------------------------|--------|--------------------------------|--------|---------------------------------------------------|---------|
|                                 |   | ****Three                  Months Ended******September                  30, 2005** |    | ****Three                  Months Ended******September                  30, 2004** |   |
|                                 |   | **Net                  Sales**                                                     |    | **Operating****Earnings                  (Loss)**                                  |   | **Net                  Sales** |   | **Operating****Earnings                  (Loss)** |    |
|                                 |   | ***(in                  thousands)***                                              |    |
| Heat                  treating       |   | $                                                                                  | 11,396  |                                                                               | $      | 1,061                          |   | $                                                 | 11,156  |   | $ | 705 |   |
| Corporate                  and other |   |                                                                               | — |                                                                               |   | (650                           | )      |                                              | — |   |   | (369 | ) |
|                                 |   | $                                                                                  | 11,396  |                                                                               | $      | 411                            |   | $                                                 | 11,156  |   | $ | 336 |   |
|                                 |   |                                                                               |    |                                                                               |   |                           |   |                                              |    |   |   |   |   |

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**Six      Months Ended September 30, 2005 Compared to 2004**

|                                 |   |                                                                           |    |                                                                           |   |                           |   |                                              |    |
|--------------------------------------|--------|--------------------------------------------------------------------------------|---------|--------------------------------------------------------------------------------|--------|--------------------------------|--------|---------------------------------------------------|---------|
|                                 |   | **Six                    Months Ended****September                  30, 2005** |    | **Six                    Months Ended****September                  30, 2004** |   |
|                                 |   | **Net                  Sales**                                                 |    | **Operating****Earnings                  (Loss)**                              |   | **Net                  Sales** |   | **Operating****Earnings                  (Loss)** |    |
|                                 |   | ***(in                  thousands)***                                          |    |
| Heat                  treating       |   | $                                                                              | 22,844  |                                                                           | $      | 2,367                          |   | $                                                 | 22,523  |   | $ | 1,668 |   |
| Corporate                  and other |   |                                                                           | — |                                                                           |   | (1,274                         | )      |                                              | — |   |   | (857 | ) |
|                                 |   | $                                                                              | 22,844  |                                                                           | $      | 1,093                          |   | $                                                 | 22,523  |   | $ | 811 |   |
|                                 |   |                                                                           |    |                                                                           |   |                           |   |                                              |    |   |   |   |   |

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

**ITEM      4. CONTROLS AND PROCEDURES**

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**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. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 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.                                                                                                                                                                                                                                                                                                                                                                                                |

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| 10.12  | Asset                    Purchase Agreement - Axson North America Inc. is hereby incorporated                    by                    reference from registrants Form 10-Q dated February 14,                    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.                                                                                                         |
|   |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.31  | Asset                    Purchase Agreement between Pak Sak Industries, Inc., Maxco, Inc.,                    P-S                    Business Acquisition, Inc., and P&D Real Estate, LLC and Packaging                    Personified, Inc. dated September 27, 2002 is hereby incorporated                    by                    reference from Form 10-Q dated February 14, 2003.                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.32  | First                    Amendment to Asset Purchase Agreement between Pak Sak Industries,                    Inc.,                    Maxco, Inc., P-S Business Acquisition, Inc., and P&D Real Estate, LLC                    and Packaging Personified, Inc. dated October 30, 2002 is hereby                    incorporated by reference from Form 10-Q dated February 14,                    2003.   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.33  | Second                    Amendment to Asset Purchase Agreement between Pak Sak Industries,                    Inc.,                    Maxco, Inc., P-S Business Acquisition, Inc., and P&D Real Estate, LLC                    and Packaging Personified, Inc. dated November 25, 2002 is hereby                    incorporated by reference from Form 10-Q dated February 14,                    2003. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 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.                                                                                                                            |
|   |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.35  | Subordination                    Agreement between Maxco, Inc., Atmosphere Annealing, Inc. and                    Comerica                    Bank 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.              |
|   |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 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              14, 2005 |                                                                                        | /s/ VINCENT              SHUNSKY |
|                                              | Vincent Shunsky, Vice President-Financeand Treasurer (Principal Financial andAccounting Officer) |
|                                              |                                                                                             |

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