----

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**FORM      10-Q**

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

**MAXCO,      INC.**

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

| Michigan                                                                                        | 38-1792842                                                               |
|-------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------|
| *(State                or other Jurisdiction of**Incorporation                or Organization)* | *(I.R.S.                Employer**Identification                Number)* |

| 1005                Charlevoix Drive, Suite 100           |                        |
|-----------------------------------------------------------|-----------------------------|
| Grand                Ledge, Michigan                      | 48837                       |
| *(Address                of principal executive offices)* | *(Zip                Code)* |

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

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**MAXCO,      INC.**

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

|                                                                                                                                       | **PAGE** |
|--------------------------------------------------------------------------------------------------------------------------------------------|----------|
|                                                                                                                                       |     |
| Part                I — Financial Information                                                                                        | 3        |
|                                                                                                                                       |     |
| Item                1. Consolidated Financial Statements                                                                                   | 3        |
|                                                                                                                                       |     |
| Condensed                Consolidated Balance Sheets                                                                                       | 3        |
|                                                                                                                                       |     |
| Condensed                Consolidated Statements Of Operations                                                                             | 5        |
|                                                                                                                                       |     |
| Consolidated                Statements Of Stockholders’ Equity                                                                       | 6        |
|                                                                                                                                       |     |
| Condensed                Consolidated Statements Of Cash Flows                                                                             | 7        |
|                                                                                                                                       |     |
| Notes                To Consolidated Financial Statements                                                                                  | 8        |
|                                                                                                                                       |     |
| Item                2. Management's Discussion And Analysis Of Financial Condition And                Results                Of Operations | 13       |
|                                                                                                                                       |     |
| Item                3. Quantitative And Qualitative Disclosures About Market                Risk                                           | 17       |
|                                                                                                                                       |     |
| Item                4. Controls And Procedures                                                                                             | 17       |
|                                                                                                                                       |     |
| Part                II — Other Information                                                                                           | 18       |
|                                                                                                                                       |     |
| Item                1. Legal Proceedings                                                                                                   | 18       |
|                                                                                                                                       |     |
| Item                2. Unregistered Sales Of Equity Securities And Use Of                Proceeds                                          | 18       |
|                                                                                                                                       |     |
| Item                3. Defaults Upon Senior Securities                                                                                     | 18       |
|                                                                                                                                       |     |
| Item                4. Submission Of Matters To A Vote Of Security Holders                                                                 | 18       |
|                                                                                                                                       |     |
| Item                5. Other Information                                                                                                   | 18       |
|                                                                                                                                       |     |
| Item                6. Exhibits                                                                                                            | 18       |
|                                                                                                                                       |     |
| Signatures                                                                                                                                 | 20       |
|                                                                                                                                       |     |
| Certification                                                                                                                              |          |

----

**PART      I — FINANCIAL INFORMATION**

**ITEM      1. CONSOLIDATED FINANCIAL STATEMENTS**

**CONDENSED      CONSOLIDATED BALANCE SHEETS**

**Maxco,      Inc. and Subsidiaries**

|                                                              |   | **June                      30,****2006** |    | **March                      31,****2006** |   |
|-------------------------------------------------------------------|--------|-------------------------------------------|---------|--------------------------------------------|--------|
|                                                              |   | **(Unaudited)**                           |    |                                       |   |
|                                                              |   | ***(in                  thousands)***     |    |
| **ASSETS**                                                        |   |                                      |    |                                       |   |
| **Current                  Assets**                               |   |                                      |    |                                       |   |
| Cash                  and cash equivalents                        |   | $                                         | 626     |                                       | $      | 817 |   |
| Restricted                  cash                                  |   |                                      | 750     |                                       |   | 750 |   |
| Accounts                  and notes receivable, less allowance of |   |                                      |    |                                       |   |   |   |
| $172,000                  ($169,000 at March 31, 2006)            |   |                                      | 6,804   |                                       |   | 6,212 |   |
| Inventories                                                       |   |                                      | 722     |                                       |   | 1,048 |   |
| Prepaid                  expenses and other                       |   |                                      | 642     |                                       |   | 673 |   |
| **Total                  Current Assets**                         |   |                                      | 9,544   |                                       |   | 9,500 |   |
|                                                              |   |                                      |    |                                       |   |   |   |
| **Property                  and Equipment**                       |   |                                      |    |                                       |   |   |   |
| Land                                                              |   |                                      | 389     |                                       |   | 389 |   |
| Buildings                                                         |   |                                      | 7,522   |                                       |   | 7,522 |   |
| Machinery,                  equipment, and fixtures               |   |                                      | 32,238  |                                       |   | 31,550 |   |
|                                                              |   |                                      | 40,149  |                                       |   | 39,461 |   |
| Allowances                  for depreciation                      |   |                                      | (22,452 | )                                          |   | (21,675 | ) |
|                                                              |   |                                      | 17,697  |                                       |   | 17,786 |   |
|                                                              |   |                                      |    |                                       |   |   |   |
| **Other                  Assets**                                 |   |                                      |    |                                       |   |   |   |
| Investments                                                       |   |                                      | 688     |                                       |   | 688 |   |
| Notes                  and contracts receivable and other         |   |                                      | 781     |                                       |   | 793 |   |
| Real                  estate investments held for sale            |   |                                      | 627     |                                       |   | 627 |   |
| Real                  estate held for sale                        |   |                                      | 2,900   |                                       |   | 2,900 |   |
| Accounts                  receivable, related parties             |   |                                      | 407     |                                       |   | 407 |   |
| Intangibles                                                       |   |                                      | 1,424   |                                       |   | 1,424 |   |
|                                                              |   |                                      | 6,827   |                                       |   | 6,839 |   |
|                                                              |   |                                      |    |                                       |   |   |   |
|                                                              |   | $                                         | 34,068  |                                       | $      | 34,125 |   |

----

**CONDENSED      CONSOLIDATED BALANCE SHEETS — CONTINUED**

**Maxco,      Inc. and Subsidiaries**

|                                                                 |   | **June                    30,****2006** |   | **March                      31,****2006** |   |
|----------------------------------------------------------------------|--------|-----------------------------------------|--------|--------------------------------------------|--------|
|                                                                 |   | **(Unaudited)**                         |   |                                       |   |
|                                                                 |   | ***(in                  thousands)***   |   |
| **LIABILITIES                  AND STOCKHOLDERS' EQUITY**            |   |                                    |   |                                       |   |
| **Current                  liabilities**                             |   |                                    |   |                                       |   |
| Notes                  payable                                       |   | $                                       | 1,414  |                                       | $      | 1,414 |   |
| Accounts                  payable                                    |   |                                    | 2,639  |                                       |   | 2,141 |   |
| Employee                  compensation                               |   |                                    | 2,210  |                                       |   | 2,258 |   |
| Incentive                  compensation                              |   |                                    | 2,026  |                                       |   | 2,026 |   |
| Taxes,                  interest, and other liabilities              |   |                                    | 4,924  |                                       |   | 4,922 |   |
| Current                  maturities of long-term obligations         |   |                                    | 3,574  |                                       |   | 4,436 |   |
| **Total                  Current Liabilities**                       |   |                                    | 16,787 |                                       |   | 17,197 |   |
|                                                                 |   |                                    |   |                                       |   |   |   |
| **Long-Term                  Obligations, Less Current Maturities**  |   |                                    | 6,097  |                                       |   | 7,131 |   |
| **Total                  Liabilities**                               |   |                                    | 22,884 |                                       |   | 24,328 |   |
|                                                                 |   |                                    |   |                                       |   |   |   |
| **Stockholders'                  Equity**                            |   |                                    |   |                                       |   |   |   |
| Preferred                  stock:                                    |   |                                    |   |                                       |   |   |   |
| Series                  Three: 10% cumulative redeemable, $60 face   |   |                                    |   |                                       |   |   |   |
| value;                  14,784 shares issued                         |   |                                    | 678    |                                       |   | 678 |   |
| Series                  Four: 10% cumulative redeemable, $51.50 face |   |                                    |   |                                       |   |   |   |
| value;                  46,414 shares issued                         |   |                                    | 2,390  |                                       |   | 2,390 |   |
| Series                  Five: 10% cumulative redeemable, $120 face   |   |                                    |   |                                       |   |   |   |
| value;                  6,648 shares issued                          |   |                                    | 798    |                                       |   | 798 |   |
| Series                  Six: 10% cumulative callable, $160 face      |   |                                    |   |                                       |   |   |   |
| value;                  7,812.5 shares issued                        |   |                                    | 1,250  |                                       |   | 1,250 |   |
|                                                                 |   |                                    | 5,116  |                                       |   | 5,116 |   |
| Common                  stock, $1 par value; 10,000,000 shares       |   |                                    |   |                                       |   |   |   |
| authorized,                  3,454,039 shares issued and outstanding |   |                                    | 3,454  |                                       |   | 3,454 |   |
| Retained                  earnings                                   |   |                                    | 2,614  |                                       |   | 1,227 |   |
| **Total                  Stockholders' Equity**                      |   |                                    | 11,184 |                                       |   | 9,797 |   |
|                                                                 |   |                                    |   |                                       |   |   |   |
|                                                                 |   | $                                       | 34,068 |                                       | $      | 34,125 |   |

----

**CONDENSED      CONSOLIDATED STATEMENTS OF OPERATIONS**

**Maxco,      Inc. and Subsidiaries**

**(Unaudited)**

|                                                                     |   | **Three                  Months Ended June 30,**             |    |
|--------------------------------------------------------------------------|--------|--------------------------------------------------------------|---------|
|                                                                     |   | **2006**                                                     |    | **2005** |   |
|                                                                     |   | ***(in                  thousands, except per share data)*** |    |
| **Net                  Sales**                                           |   | $                                                            | 12,576  |   | $ | 11,448 |   |
| **Costs                  and Expenses:**                                 |   |                                                         |    |   |   |   |   |
| Cost                  of sales and operating expenses                    |   |                                                         | 7,288   |   |   | 7,114 |   |
| Selling,                  general and administrative                     |   |                                                         | 2,706   |   |   | 2,900 |   |
| Depreciation                  and amortization                           |   |                                                         | 777     |   |   | 752 |   |
|                                                                     |   |                                                         | 10,771  |   |   | 10,766 |   |
| **Operating                  Income**                                    |   |                                                         | 1,805   |   |   | 682 |   |
| **Other                  Income (Expense)**                              |   |                                                         |    |   |   |   |   |
| Investment,                  interest, and other income, net             |   |                                                         | 25      |   |   | (2 | ) |
| Gain                  on sale of assets                                  |   |                                                         | — |   |   | 2 |   |
| Interest                  expense                                        |   |                                                         | (310    | ) |   | (353 | ) |
| **Net                  Income**                                          |   |                                                         | 1,520   |   |   | 329 |   |
| Less                  preferred stock dividends                          |   |                                                         | (133    | ) |   | (102 | ) |
| **Net                  Income Applicable to Common Stock**               |   | $                                                            | 1,387   |   | $ | 227 |   |
|                                                                     |   |                                                         |    |   |   |   |   |
| **Net                  Income Per Common Share—Basic and Diluted** |   | $                                                            | 0.40    |   | $ | 0.07 |   |
|                                                                     |   |                                                         |    |   |   |   |   |
| See                  notes to consolidated financial statements          |   |                                                         |    |

----

**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, 2006** |   |                                                                                               | 3,454,039 |                                 | $      | 5,116                             |   | $                                                   | 3,454        |                                   | $      | —      |   | $ | 1,227 |   | $ | 9,797 |   |
| Net                  income for the period     |   |                                                                                               |      |                                 |   |                              |   |                                                |         |                                   |   |         |   |   | 1,520 |   |   | 1,520 |   |
| Comprehensive                  income          |   |                                                                                               |      |                                 |   |                              |   |                                                |         |                                   |   |         |   |   |   |   |   | 1,520 |   |
| Preferred                  stock dividends     |   |                                                                                               |      |                                 |   |                         |   |                                                |    |                                   |   |    |   |   | (133 | ) |   | (133 | ) |
| **Balances                  at June 30, 2006** |   |                                                                                               | 3,454,039 |                                 | $      | 5,116                             |   | $                                                   | 3,454        |                                   | $      | —      |   | $ | 2,614 |   | $ | 11,184 |   |

----

**CONDENSED      CONSOLIDATED STATEMENTS OF CASH FLOWS**

**Maxco,      Inc. and Subsidiaries**

**(Unaudited)**

|                                                                  |   | **Three                  Months Ended June 30,** |    |
|-----------------------------------------------------------------------|--------|--------------------------------------------------|---------|
|                                                                  |   | **2006**                                         |    | **2005** |   |
|                                                                  |   | ***(in                  thousands)***            |    |
| **Operating                  Activites**                              |   |                                             |    |   |   |
| Net                  income                                           |   | $                                                | 1,520   |   | $ | 329 |   |
| Adjustments                  to reconcile net income to net cash      |   |                                             |    |   |   |   |   |
| provided                  by operating activites:                     |   |                                             |    |   |   |   |   |
| Loss                  on investment                                   |   |                                             | — |   |   | 30 |   |
| Gain                  on sale of assets                               |   |                                             | — |   |   | (2 | ) |
| Depreciation                  and other non-cash charges              |   |                                             | 777     |   |   | 752 |   |
| Changes                  in operating assets and liabilities          |   |                                             | 84      |   |   | 734 |   |
| **Net                  Cash Provided By Operating Activities**        |   |                                             | 2,381   |   |   | 1,843 |   |
|                                                                  |   |                                             |    |   |   |   |   |
| **Investing                  Activities**                             |   |                                             |    |   |   |   |   |
| Purchases                  of property and equipment                  |   |                                             | (688    | ) |   | (582 | ) |
| Collections                  on notes receivable                      |   |                                             | — |   |   | 116 |   |
| Purchase                  of subsidiaries                             |   |                                             | — |   |   | (342 | ) |
| Other                                                                 |   |                                             | 13      |   |   | 42 |   |
| **Net                  Cash Used In Investing Activities**            |   |                                             | (675    | ) |   | (766 | ) |
|                                                                  |   |                                             |    |   |   |   |   |
| **Financing                  Activities**                             |   |                                             |    |   |   |   |   |
| Net                  (repayments on) proceeds from line of credit     |   |                                             | (674    | ) |   | 379 |   |
| Net                  repayments on other debt obligations             |   |                                             | (1,223  | ) |   | (1,086 | ) |
| **Net                  Cash Used In Financing Activities**            |   |                                             | (1,897  | ) |   | (707 | ) |
|                                                                  |   |                                             |    |   |   |   |   |
| **(Decrease)                  Increase in Cash and Cash Equivalents** |   |                                             | (191    | ) |   | 370 |   |
| **Cash                  and Cash Equivalents at Beginning of Period** |   |                                             | 1,567   |   |   | 1,781 |   |
| **Cash                  and Cash Equivalents at End of Period**       |   | $                                                | 1,376   |   | $ | 2,151 |   |
|                                                                  |   |                                             |    |   |   |   |   |
| **Supplemental                  cash flow disclosure:**               |   |                                             |    |   |   |   |   |
| Interest                  paid                                        |   | $                                                | 307     |   | $ | 310 |   |

----

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**Maxco,      Inc. and Subsidiaries**

**June      30, 2006**

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

**NOTE      2 - EARNINGS PER SHARE**

|                                                                           |   | **Three                  Months Ended **June                  30,**** |   |
|--------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------|--------|
|                                                                           |   | **2006**                                                              |   | **2005** |   |
| **NUMERATOR:**                                                                 |   | ***(in                  thousands, except per share data)***          |   |
| Net                  income                                                    |   | $                                                                     | 1,520  |   | $ | 329 |   |
| Preferred                  stock dividends                                     |   |                                                                  | (133   | ) |   | (102 | ) |
| **Numerator                  for basic and diluted earnings per share—** |   |                                                                  |   |   |   |   |   |
| **income                  available to common stockholders**                   |   | $                                                                     | 1,387  |   | $ | 227 |   |
| **DENOMINATOR:**                                                               |   |                                                                  |   |   |   |   |   |
| **Denominator                  for basic and diluted earnings per**            |   |                                                                  |   |   |   |   |   |
| **share—weighted                  average shares**                       |   |                                                                  | 3,454  |   |   | 3,454 |   |
|                                                                           |   |                                                                  |   |   |   |   |   |
| **BASIC                  AND DILUTED EARNINGS PER SHARE**                      |   | $                                                                     | 0.40   |   | $ | 0.07 |   |

**NOTE      3 - RESTRICTED CASH**

----

**NOTE      4 - COMPREHENSIVE INCOME**

|                                               |   | **Three                  Months Ended** |    |
|----------------------------------------------------|--------|-----------------------------------------|---------|
|                                               |   | **June                  30,**           |    |
|                                               |   | **2006**                                |    | **2005** |   |
|                                               |   | ***(in                  thousands)***   |    |
| Net                  income                        |   | $                                       | 1,520   |   | $ | 329 |   |
| Unrealized                  gain on swap agreement |   |                                    | — |   |   | 15 |   |
| Comprehensive                  income              |   | $                                       | 1,520   |   | $ | 344 |   |

**NOTE      5 - INDUSTRY SEGMENT INFORMATION**

|                                           |   | **June                  30,**         |   | **March                  31,** |   |
|------------------------------------------------|--------|---------------------------------------|--------|--------------------------------|--------|
|                                           |   | **2006**                              |   | **2006**                       |   |
|                                           |   | ***(in                  thousands)*** |   |
| **Identifiable                  Assets:**      |   |                                  |   |                           |   |
| Heat                  treating                 |   | $                                     | 27,424 |                           | $      | 27,292 |   |
| Corporate                  and other           |   |                                  | 2,429  |                           |   | 2,618 |   |
| Investments                  and advances      |   |                                  | 4,215  |                           |   | 4,215 |   |
| **Total                  Identifiable Assets** |   | $                                     | 34,068 |                           | $      | 34,125 |   |

|                                                             |   | **Three                  Months Ended** |    |
|------------------------------------------------------------------|--------|-----------------------------------------|---------|
|                                                             |   | **June                  30,**           |    |
|                                                             |   | **2006**                                |    | **2005** |   |
|                                                             |   | ***(in                  thousands)***   |    |
| **Net                  Sales:**                                  |   |                                    |    |   |   |
| Heat                  treating                                   |   | $                                       | 12,576  |   | $ | 11,448 |   |
| Corporate                  and other                             |   |                                    | — |   |   | — |   |
| **Total                  Net Sales**                             |   | $                                       | 12,576  |   | $ | 11,448 |   |
|                                                             |   |                                    |    |   |   |   |   |
| **Operating                  Earnings (Loss):**                  |   |                                    |    |   |   |   |   |
| Heat                  treating                                   |   | $                                       | 2,207   |   | $ | 1,306 |   |
| Corporate                  and other                             |   |                                    | (402    | ) |   | (624 | ) |
| **Total                  Operating Earnings**                    |   | $                                       | 1,805   |   | $ | 682 |   |
|                                                             |   |                                    |    |   |   |   |   |
| **Depreciation                  and Amortization Expense:**      |   |                                    |    |   |   |   |   |
| Heat                  treating                                   |   | $                                       | 776     |   | $ | 745 |   |
| Corporate                  and other                             |   |                                    | 1       |   |   | 7 |   |
| **Total                  Depreciation and Amortization Expense** |   | $                                       | 777     |   | $ | 752 |   |
|                                                             |   |                                    |    |   |   |   |   |
| **Capital                  Expenditures:**                       |   |                                    |    |   |   |   |   |
| Heat                  treating                                   |   | $                                       | 688     |   | $ | 575 |   |
| Corporate                  and other                             |   |                                    | — |   |   | 7 |   |
| **Total                  Capital Expenditures**                  |   | $                                       | 688     |   | $ | 582 |   |

----

**NOTE      6 - DEBT**

|                                                                                                                           |   |                                        |   |
|--------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------|--------|
|                                                                                                                           |   |  **June                  30,**         |   |  **March                  31,** |   |
|                                                                                                                           |   |  **2006**                              |   |  **2006** |   |
| **Short                  term obligations:**                                                                                   |   |  ***(in                  thousands)*** |   |
| Notes                  payable (various interest rates)                                                                        |   | $                                           | 1,414  |   | $ | 1,414 |   |
|                                                                                                                           |   | $                                           | 1,414  |   | $ | 1,414 |   |
|                                                                                                                           |   |                                        |   |   |   |   |   |
| **Long                  term obligations:**                                                                                    |   |                                        |   |   |   |   |   |
| Term                  notes (various variable interest rates)                                                                  |   | $                                           | 2,517  |   | $ | 2,741 |   |
| Revolving                  line of credit (LIBOR + 1.25%)                                                                      |   |                                        | 849    |   |   | 1,523 |   |
| Mortgage                  notes payable (various variable interest rates)                                                      |   |                                        | 4,834  |   |   | 4,914 |   |
| Equipment                  purchase contracts and capitalized lease                  obligations (various interest rates) |   |                                        | 1,125  |   |   | 2,043 |   |
| Subordinated                  debt (fixed rate of 10.00%)                                                                      |   |                                        | 346    |   |   | 346 |   |
|                                                                                                                           |   |                                        | 9,671  |   |   | 11,567 |   |
| Less                  current maturities                                                                                       |   |                                        | 3,574  |   |   | 4,436 |   |
|                                                                                                                           |   | $                                           | 6,097  |   | $ | 7,131 |   |
|                                                                                                                           |   |                                        |   |   |   |   |   |

**Settlement      Agreement and Indemnification Matters**

----

** **

**NOTE      7 - FEDERAL INCOME TAXES**

**NOTE      8 - PREFERRED STOCK DIVIDENDS**

**NOTE      9 - INVENTORIES**

|                              |   | **June                  30,**         |   | **March                  31,** |   |
|-----------------------------------|--------|---------------------------------------|--------|--------------------------------|--------|
|                              |   | **2006**                              |   | **2006**                       |   |
|                              |   | ***(in                  thousands)*** |   |
| Raw                  materials    |   | $                                     | 242    |                           | $      | 314 |   |
| Work                  in progress |   |                                  | 470    |                           |   | 700 |   |
| Finished                  goods   |   |                                  | 10     |                           |   | 34 |   |
|                              |   | $                                     | 722    |                           | $      | 1,048 |   |

----

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

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

**NOTE      12 - ABANDONMENT OF DEREGISTRATION**

----

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

**CRITICAL      ACCOUNTING POLICIES**

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

***Revenue      Recognition***

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

----

***Derivative      Financial Instruments***

***Material      Trends and Uncertainties***

**Caution      Concerning Forward Looking Statements and Certain Risks Related to Our Business      and Our Company — Safe Harbor Statements**

| ·   | ***Dependence                on Automotive Industry and Industry Cyclicality***—                The industries in which we operate depend upon general economic conditions                and are highly cyclical. Our performance is affected particularly                by new                vehicle sales, which can be highly sensitive to changes in interest                rates,                consumer confidence and fuel costs. We experience sales declines                during                the third and fourth calendar quarter as a result of scheduled OEM                shutdowns. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| ·   | ***Customer                Concentration***—                Our base of customers is concentrated among original equipment                manufacturers as well as Tier I and Tier II suppliers in North America.                The loss of business from a major customer, the discontinuance of                particular vehicle models or a change in regulations or auto consumer                preferences could materially adversely affect us. In addition, certain                of                our customers have suffered financial distress, which may materially                adversely impact us as well in terms of the potential for lost revenue                and/or uncollectible accounts                receivable. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| ·   | ***Ability                to Finance Capital Requirements***—                Our business is capital intensive. We have made substantial capital                investments to improve capacity and productivity and to meet customer                requirements. More investment is required to maintain and expand                our                future business awards. If we are unable to meet future capital                requirements, our business may be materially adversely                affected. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| ·   | ***Increases                in Energy Costs***—                Increases in energy costs could negatively affect our financial health                and                results. To the extent feasible, in light of competitive factors,                we have                offset these fluctuations through selective price adjustments. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| ·   | ***Increases                in Healthcare Costs***—                Increases in our healthcare costs could negatively affect our financial                health and results. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| ·   | ***Our                Industries are Highly Competitive***—                Continuing trends among our customers will increase competitive pressures                in our businesses. The continuing trend towards limiting outside                suppliers                involves significant risks, as well as opportunities, and has increased                competition. We have experienced and may continue to experience adverse                pricing pressures as a result. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| ·   | ***Changing                Technology***—                Our processes are subject to changing technology, which could place                us at                a competitive disadvantage relative to alternative processes introduced                by                competitors. We may require significant ongoing and recurring additional                capital expenditures to remain                competitive. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| ·   | ***Changing                Processes***—A                change in a foundry’s                mold line may eliminate the need for heat treating by controlled                cooling                in mold which would have a materially adverse affect on our                business. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | ***Dependence                on Key Personnel and Relationships***—                We depend on the services of key individuals, particularly our executive                officers and senior managers. The loss of any key individual could                materially and adversely harm us. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| ·   | ***Labor                Stoppages***—                Our customers or suppliers may be subject to work stoppages at their                facilities, which could materially and adversely harm                us. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| ·   | ***Outsourcing                Trend***—                Our strategies may not succeed if anticipated outsourcing fails to                materialize to the extent we have assumed. Principal risks to continued                outsourcing are union/labor considerations and                objections. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| ·   | ***Offshoring                Trend***—                Our customers could relocate their manufacturing facilities out of                the                United States which could materially and adversely harm                us. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| ·   | ***Environmental                Matters***—                Our business may be materially and adversely affected by compliance                obligations and liabilities under environmental laws and                regulations. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Market      Opportunities and Growth Strategies**

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

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

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

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

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

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

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

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

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

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

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

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

**MATERIAL      CHANGES IN FINANCIAL CONDITION**

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**RESULTS      OF OPERATIONS**

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

|                                 |   | **Three                  Months Ended** |    | **Three                  Months Ended**             |   |
|--------------------------------------|--------|-----------------------------------------|---------|-----------------------------------------------------|--------|
|                                 |   | **June                  30, 2006**      |    | **June                  30, 2005**                  |   |
|                                 |   | **Net                  Sales**          |    | **Operating****Earnings                    (Loss)** |   | **Net                  Sales** |   | **Operating****Earnings                    (Loss)** |   |
|                                 |   | ***(in                  thousands)***   |    |
| Heat                  treating       |   | $                                       | 12,576  |                                                | $      | 2,207 |   | $ | 11,448 |   | $ | 1,306 |   |
| Corporate                  and other |   |                                    | — |                                                |   | (402 | ) |   | — |   |   | (624 | ) |
|                                 |   | $                                       | 12,576  |                                                | $      | 1,805 |   | $ | 11,448 |   | $ | 682 |   |

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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:              August              14, 2006 | By:                                                                                                                                    | /s/ LAWRENCE              O. FIELDS  |
|                                            | Lawrence              O. Fields, Chief Financial Officerand                Treasurer (Principal Financial and Accounting                Officer) |
|                                            |                                                                                                                                                  |

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