<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                    FORM 10-Q

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

                        For quarter ended June 30, 2006

                        Commission File Number 33-24317

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

                  Illinois                              36-3598114
      (State or other jurisdiction of                (I.R.S. Employer
      Incorporation or organization)                 Identification No.)

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

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

Former name, former address and former fiscal year, if changed since last
report: Not applicable.

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

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

          Securities registered pursuant to Section 12 (g) of the Act:
                                      None

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

                                 Yes [X] No [ ]

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

  Large Accelerated Filer [ ] Accelerated Filer [ ] Non-Accelerated Filer [X]

      Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12 b-2 of the Exchange Act).

                                 Yes [ ] No [X]

      The number of shares outstanding of Registrant's Common Stock as of August
14, 2006: 98,501.0004.

<PAGE>

                             JORDAN INDUSTRIES, INC.

                                      INDEX

<TABLE>
<CAPTION>
                                                                                                       Page No.
                                                                                                       --------
<S>                                                                                                    <C>
Part I. Financial Information

    Item 1. Financial Statements

        Condensed Consolidated Balance Sheets at June 30, 2006 (Unaudited) and December 31, 2005              3

        Condensed Consolidated Statements of Operations for the Three Months Ended June 30, 2006
          and 2005 (Unaudited) and the Six Months Ended June 30, 2006 and 2005 (Unaudited)                    4

        Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2006
          and 2005 (Unaudited)                                                                                5

        Notes to Condensed Consolidated Financial Statements (Unaudited)                                      6

    Item 2. Management's Discussion and Analysis of Financial Condition and Results of
              Operations                                                                                     20

    Item 3. Quantitative and Qualitative Disclosures About Market Risk                                       27

    Item 4. Controls and Procedures                                                                          27

Part II. Other Information                                                                                   28

    Item 1. Legal Proceedings                                                                                28

    Item 1A. Risk Factors                                                                                    28

    Item 2. Unregistered Sales of Equity Securities and Use of Proceeds                                      28

    Item 3. Defaults Upon Senior Securities                                                                  28

    Item 4. Submissions of Matters to a Vote of Security Holders                                             28

    Item 5. Other Information                                                                                28

    Item 6. Exhibits                                                                                         28
</TABLE>

                                     - 2 -
<PAGE>

                             JORDAN INDUSTRIES, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                        (ALL DOLLAR AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                        June 30,         December 31,
                                                          2006               2005
                                                      ------------      --------------
                                                      (unaudited)         (Restated)
<S>                                                   <C>               <C>
ASSETS
Current Assets:
  Cash and cash equivalents                           $     14,424      $       15,684
  Accounts receivable, net                                 121,764             107,847
  Inventories                                              138,086             123,750
  Assets of discontinued operations (See Note E)             9,262               9,424
  Income tax receivable                                      1,101               1,926
  Investment in and advances to affiliates                       -              23,015
  Prepaid expenses and other current assets                  8,628               9,939
                                                      ------------      --------------
    Total Current Assets                                   293,265             291,585

Property, plant and equipment, net                          74,219              76,689
Investments in and advances to affiliates                   13,873              14,044
Goodwill, net                                              219,441             218,525
Other assets                                                 7,200              10,524
                                                      ------------      --------------
    Total Assets                                      $    607,998      $      611,367
                                                      ============      ==============

LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities:
  Accounts payable                                    $     72,029      $       57,820
  Accrued liabilities                                       68,554              72,263
  Liabilities of discontinued operations                     4,584               4,609
  Current portion of long-term debt                        327,981             318,980
                                                      ------------      --------------
    Total Current Liabilities                              473,148             453,672

Long-term debt, less current portion                       320,889             359,399
Other non-current liabilities                               36,023              32,152
Deferred income taxes                                       17,272              14,535
Preferred stock of a subsidiary                              3,090               2,970

Shareholders' Equity (net capital deficiency):
  Common stock $.01 par value: 100,000 shares
    authorized and 98,501 shares issued and
    outstanding                                                  1                   1
  Additional paid-in capital                                 2,116               2,116
  Accumulated other comprehensive income                     4,218               1,542
  Accumulated deficit                                     (248,759)           (255,020)
                                                      ------------      --------------

    Total Shareholders' Deficit                           (242,424)           (251,361)
                                                      ------------      --------------

    Total Liabilities and Shareholders' Deficit       $    607,998      $      611,367
                                                      ============      ==============
</TABLE>

See accompanying notes to condensed consolidated financial statements.

                                     - 3 -
<PAGE>

                             JORDAN INDUSTRIES, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
                        (ALL DOLLAR AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                         THREE MONTHS ENDED                SIX MONTHS ENDED
                                                              June 30,                         June 30,
                                                    ----------------------------      ---------------------------
                                                        2006            2005             2006             2005
                                                    ------------     -----------      -----------      ----------
                                                                     (Restated)                        (Restated)
<S>                                                 <C>              <C>              <C>              <C>
Net sales                                           $    187,557     $   183,856      $   361,669      $  354,752
Cost of sales, excluding depreciation                    133,834         133,214          259,610         257,756
Selling, general and administrative expenses,
  excluding depreciation                                  32,492          33,627           67,063          68,856
Depreciation                                               3,340           3,532            6,711           7,228
Amortization                                                  65              42              157              83
Income from sale of affiliates (see Note M)                   (8)         (4,410)          (4,620)         (4,410)
Management fees and other                                     35            (626)              70            (596)
                                                    ------------     -----------      -----------      ----------

Operating income                                          17,799          18,477           32,678          25,835

Other (income) expenses:
  Interest expense                                        13,183          13,723           26,674          27,256
  Interest income                                            (24)            (23)             (67)            (80)
  Gain on sale of assets (See Note N)                          -               -           (6,306)              -
  Gain on sale of subsidiary (See Note K)                      -               -                -            (251)
  Other                                                       43              29            1,398              62
                                                    ------------     -----------      -----------      ----------
                                                          13,202          13,729           21,699          26,987
                                                    ------------     -----------      -----------      ----------
Income (loss) from continuing operations before
  income taxes                                             4,597           4,748           10,979          (1,152)

Provision for income taxes                                 3,236           3,318            6,020           6,356
                                                    ------------     -----------      -----------      ----------

Income/(loss) from continuing operations                   1,361           1,430            4,959          (7,508)

Discontinued operations:
Income (loss) from discontinued operations,net
  of tax (See Note E)                                        675            (159)           1,422            (737)
Gain on sale of discontinued operations, net of
  tax (See Note E)                                             -           1,502                -           1,502
                                                    ------------     -----------      -----------      ----------
Net Income/(Loss)                                   $      2,036     $     2,773      $     6,381      $   (6,743)
                                                    ============     ===========      ===========      ==========
</TABLE>

See accompanying notes to condensed consolidated financial statements.

                                     - 4 -
<PAGE>

                             JORDAN INDUSTRIES, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                        (ALL DOLLAR AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                           SIX MONTHS ENDED
                                                                               June 30,
                                                                    -------------------------------
                                                                        2006               2005
                                                                    ------------       ------------
                                                                                        (Restated)
<S>                                                                 <C>                <C>
Cash flows from operating activities:
 Net income/(loss)                                                  $      6,381       $     (6,743)
  Adjustments to reconcile net income/(loss) to net cash
   provided by (used in) operating activities:
    (Gain)/loss on sale of discontinued operations (See Note E)                -             (1,502)
    Gain on sale of subsidiary (See Note K)                                    -               (251)
    Gain on sale of affiliates (See Note M)                               (4,620)            (4,410)
    Depreciation and amortization                                          6,868              7,311
    Amortization of deferred financing fees                                3,241              3,219
    Non-cash interest expense                                              4,264              4,173
    Deferred income taxes                                                  3,356              3,119
    (Gain)/loss on disposal of fixed assets                               (5,827)                10
    Other                                                                   (427)              (339)
    Changes in operating assets and liabilities:
      Increase in current assets                                         (26,117)           (14,208)
      Increase in current liabilities                                     10,501              4,146
      (Increase)/decrease in non-current assets                           (2,538)             9,433
      (Decrease)/increase in non-current liabilities                        (111)               425
    Decrease in net assets of discontinued operations                        137                739
                                                                    ------------       ------------
        Net cash (used in)/provided by operating activities               (4,892)             5,122

Cash flows from investing activities:
  Proceeds from sale of fixed assets                                       9,420                374
  Capital expenditures                                                    (5,049)            (3,470)
  Net proceeds from sale of discontinued operations
     (See Note E)                                                              -              1,002
  Acquisition of subsidiary (See Note F)                                       -               (481)
  Net proceeds from sale of affiliates (See Note M)                       29,565              6,600
  Net proceeds from sale of subsidiary (See Note K)                            -              1,075
                                                                    ------------       ------------
        Net cash provided by investing activities                         33,936              5,100

Cash flows from financing activities:
  (Payment of)/proceeds from revolving credit facilities, net            (13,633)             4,733
  Repayment of long-term debt                                            (19,786)           (16,842)
  Proceeds from other borrowings                                           1,616              3,398
                                                                    ------------       ------------
             Net cash used in financing activities                       (31,803)            (8,711)

Effect of exchange rate changes on cash                                    1,499               (419)
                                                                    ------------       ------------
Net (decrease)/increase in cash and cash equivalents                      (1,260)             1,092
Cash and cash equivalents at beginning of period                          15,684             15,453
                                                                    ------------       ------------
Cash and cash equivalents at end of period                          $     14,424       $     16,545
                                                                    ============       ============
</TABLE>

See accompanying notes to condensed consolidated financial statements.

                                     - 5 -
<PAGE>

                             JORDAN INDUSTRIES, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                        (ALL DOLLAR AMOUNTS IN THOUSANDS)

A. Organization

The unaudited condensed consolidated financial statements, which reflect all
adjustments that management believes necessary to present fairly the results of
interim operations and are of a normal recurring nature, should be read in
conjunction with the Notes to the Consolidated Financial Statements (including
the Summary of Significant Accounting Policies) included in the Company's
audited consolidated financial statements for the year ended December 31, 2005,
which are included in the Company's Annual Report filed on Form 10-K for such
year (the "2005 10-K"). Results of operations for the interim periods are not
necessarily indicative of annual results of operations.

B. Summary of Significant Accounting Policies

The condensed consolidated financial statements include the accounts of Jordan
Industries, Inc. and its subsidiaries. Material intercompany transactions and
balances are eliminated in consolidation. Operations of certain subsidiaries
outside the United States are included for periods ending two months prior to
the Company's year-end and interim periods to ensure timely preparation of the
condensed consolidated financial statements. Certain amounts in the prior year
financial statements have been reclassified to conform to the 2006 presentation.
Prior year financial statements have been restated to reflect the sale of a
subsidiary as a discontinued operation.

In 2005, the non-cash reduction in the Exchange Notes, as a result of troubled
debt accounting, in the amount of $11,267 was reclassified from the "accounts
payable and accrued liabilities" line in the operating activities section of the
Consolidated Statement of Cash Flows to the "payment of long-term debt" line in
the financing activities section. In addition, $3,899 of waived interest on the
Waived Debentures (as defined in the 2005 10-K) was reclassified from the
"accounts payable and accrued liabilities" line in the Consolidated Statement of
Cash Flows to the "non-cash interest expense" line. This reclass was entirely
within the operating activities section of the Consolidated Statement of Cash
Flow. Both reclassifications were made to more accurately classify the nature of
these transactions consistently with 2006 presentation.

The Company has recorded income tax expense of $6,020 for the six months ended
June 30, 2006 primarily attributable to foreign taxes, state taxes and the
change in the Company's deferred tax liability. Due to the uncertainty of when
the goodwill deferred tax liability will reverse, the Company has not considered
any future reversal of the deferred tax liability related to goodwill to support
the realization of deferred tax assets. Additionally, the Company continues to
maintain a full valuation allowance against its deferred tax assets.

In February 2006, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 155, "Accounting for Certain
Hybrid Instruments" ("SFAS 155"). SFAS 155 is an amendment of SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133") and
SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities" ("SFAS 140") and allows financial instruments
that have embedded derivatives to be accounted for as a whole (eliminating the
need to bifurcate the derivative from its host) if the holder elects to account
for the whole instrument on a fair value basis. SFAS 155 is effective for an
entity's first fiscal year that begins after September 15, 2006. The Company
does not expect the adoption of SFAS 155 to have a material impact.

In June 2006, the Financial Accounting Standards Board, or the FASB, issued
Interpretation No. 48, Accounting for Uncertainty in Income Taxes, and
Interpretation of FASB Statement No. 109, or FIN 48. FIN 48 clarifies the
accounting for uncertainty in income taxes recognized in a company's financial
statements and prescribes a recognition

                                     - 6 -
<PAGE>

threshold and measurement attribute for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax return. FIN
48 also provides guidance on description, classification, interest and
penalties, accounting in interim periods, disclosure and transition. We are
required to adopt FIN 48 effective at the beginning of 2007. We are currently
evaluating the impact of adopting FIN 48 on our future results of operations and
financial condition.

C. Inventories

Inventories are summarized as follows:

<TABLE>
<CAPTION>
                         June 30,             December 31,
                          2006                   2005
                     ----------------       ----------------
                                               (Restated)
<S>                   <C>                   <C>
Raw materials         $        62,372       $         54,956
Work-in-process                17,481                 16,111
Finished goods                 58,233                 52,683
                     ----------------       ----------------
                     $        138,086       $        123,750
                     ================       ================
</TABLE>

D. Comprehensive Income/(Loss)

Total comprehensive income/(loss) for the three months and six months ended June
30, 2006 and 2005 was as follows:

<TABLE>
<CAPTION>
                                       Three Months ended                 Six Months Ended
                                           June 30,                           June 30,
                                 ----------------------------      -----------------------------
                                    2006             2005              2006            2005
                                    ----             ----              ----            ----
                                                  (Restated)                         (Restated)

<S>                              <C>              <C>              <C>             <C>
Net income/(loss)                $     2,036      $     2,773      $     6,381     $      (6,743)
Foreign currency translation           1,730           (1,096)           2,676              (217)
                                 -----------      -----------      -----------     -------------
Comprehensive income/(loss)      $     3,766      $     1,677      $     9,057     $      (6,960)
                                 ===========      ===========      ===========     =============
</TABLE>

E. Discontinued Operations

As discussed in Note O, on July 31, 2006 the Company sold its ownership in Pamco
Printed Tape and Label Company ("Pamco") for cash proceeds of $19.2 million. As
a result, the Company's financial statements reflect Pamco as a discontinued
operation. The Company expects to record a gain on this transaction in the third
quarter of 2006.

During 2004, the Company undertook a plan to sell Electrical Design & Control
("ED&C"), a subsidiary of Kinetek. As such, the consolidated financial
statements reflect ED&C as a discontinued operation in all periods presented. On
May 2, 2005, the Company sold certain inventory, equipment, intellectual
property assets and contracts of ED&C to a third party. The sales price was $0.1
million which was offset by a $0.2 million payment to the buyer to complete
those contracts which were not sold. Therefore, the net payment related to the
sale was $0.1 million. The Company no longer has any ownership interest in ED&C,
however it will continue to collect on the outstanding receivables which were
not sold.

On January 20, 2004, the Company sold certain assets and liabilities of JII
Promotions' Ad Specialty and Calendar product lines to a third party for $6,155.
Concurrent with the transaction, the Company agreed to wind down the remaining
activities of JII Promotions and to ultimately retain only the pension-related
liabilities and various immaterial capital leases. The consolidated financial
statements for 2005 reflect JII Promotions as a discontinued operation. The
Company recorded a loss on the sale of $1,171 in 2004. In the second quarter of
2005, the Company reached a final settlement with the purchasers of JII
Promotions which provided additional proceeds to the Company of $1,502, $1,002
of which was paid in cash and $500 of which was evidenced by promissory notes to
be paid in 2006 and 2007. The Company received a payment of $300 on March 14,
2006 in accordance with these notes. There was no tax impact on the gain or loss
on sale or on the loss from discontinued operations.

                                     - 7 -
<PAGE>

Summarized selected financial information for the discontinued operations is as
follows:

<TABLE>
<CAPTION>
                                            Three months ended               Six months ended
                                                  June 30,                       June 30,
                                         -------------------------      --------------------------
                                            2006           2005            2006           2005
                                         ----------     ----------      ----------     -----------
<S>                                      <C>            <C>             <C>            <C>
Revenues                                 $    4,727     $    4,500      $    9,225     $     9,925
Income from discontinued operations             675          1,343           1,422             765
</TABLE>

The major classes of assets and liabilities of the discontinued operations are
as follows:

<TABLE>
<CAPTION>
                                              June 30,        December 31,
                                               2006               2005
                                            ------------     ---------------
<S>                                         <C>              <C>
Current assets                              $      4,151     $         4,026
Property, plant and equipment, net                 2,959               3,262
Goodwill                                           1,990               1,990
Other long-term assets                               162                 146
                                            ------------     ---------------
  Total assets                                     9,262               9,424
Current liabilities                                4,584               4,609
                                            ------------     ---------------
  Net assets of discontinued operations     $      4,678     $         4,815
                                            ============     ===============
</TABLE>

F. Acquisition of Subsidiaries

On March 28, 2005, the Company, through its wholly owned subsidiary, Kinetek,
paid in cash the remaining acquisition cost for its September 30, 2004
acquisition of O. Thompson, a New York City-based elevator control company. The
total acquisition cost was originally $877 which was subsequently adjusted to
$853 during the first quarter of 2005. Of the total acquisition price, $372 was
paid during 2004, and the remaining $481 was paid during the first quarter of
2005. The operating results of O. Thompson are included with those of Kinetek's
wholly owned subsidiary, Motion Control.

On September 28, 2005, the Company, through its wholly owned subsidiary, Atco,
acquired certain assets including inventory and machinery of Coolstar, Inc. for
$393 including fees. Coolstar is a manufacturer of evaporators for the
automotive climate control market and its operations were fully integrated into
Atco.

G. Additional Purchase Price Agreements

The Company has a contingent purchase price agreement relating to its
acquisition of Deflecto in 1998. The agreement is based on Deflecto achieving
certain earnings before interest and taxes and is payable on April 30, 2008. If
Deflecto is sold prior to April 30, 2008, the agreement is payable 120 days
after the transaction. Additional consideration, if any, will be recorded as an
addition to goodwill.

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

H. Pension Plans and Other Post-Retirement Benefit Plans

The components of net periodic benefit cost for the Company's pension plans for
the three months and six months ended June 30, 2006 and 2005 were as follows:

<TABLE>
<CAPTION>
                                     Three Months Ended              Six Months Ended
                                          June 30,                      June 30,
                                  ------------------------     ----------------------------
                                     2006          2005            2006            2005
                                  ----------    ----------     ------------     -----------
<S>                               <C>           <C>            <C>              <C>
Service cost                      $      183    $      177     $        366     $       354
Interest cost                            325           315              650             630
Expected return on plan assets          (335)         (296)            (670)           (592)
Prior service costs recognized            11            15               22              30
Recognized net actuarial loss             50            32              100              64
                                  ----------    ----------     ------------     -----------
   Net periodic benefit cost      $      234    $      243     $        468     $       486
                                  ==========    ==========     ============     ===========
</TABLE>

                                     - 8 -
<PAGE>

The components of net periodic benefit cost for the Company's post-retirement
healthcare benefit plans for the three months and six months ended June 30, 2006
and 2005 were as follows:

<TABLE>
<CAPTION>
                                         Three Months Ended                Six Months Ended
                                             June 30,                           June 30,
                                    -----------------------------     -----------------------------
                                        2006             2005             2006             2005
                                    ------------     ------------     ------------     ------------
<S>                                 <C>              <C>              <C>              <C>
Service cost                        $         41     $         37     $         82     $         74
Interest cost                                 69               55              138              110
Prior service costs recognized                 2                -                4                -
Recognized net actuarial loss                 23                5               46               10
                                    ------------     ------------     ------------     ------------
   Net periodic benefit cost        $        135     $         97     $        270     $       194
                                    ============     ============     ============     ============
</TABLE>

I. Business Segment Information

Summary financial information included in the financial statements of the
Company is as follows:

<TABLE>
<CAPTION>
                                                 Three Months Ended              Six Months Ended
                                                      June 30,                      June 30,
                                             --------------------------     --------------------------
                                                2006            2005            2006           2005
                                             -----------     ----------     -----------     ----------
                                                             (Restated)                     (Restated)
<S>                                          <C>             <C>            <C>             <C>
NET SALES:
Specialty Printing and Labeling              $     8,822     $    8,321     $    17,115     $   16,061
Jordan Specialty Plastics                         34,964         40,600          69,471         79,596
Jordan Auto Aftermarket                           34,215         31,802          66,207         61,806
Kinetek                                           96,462         87,433         183,349        167,710
Consumer and Industrial Products                  13,094         15,700          25,527         29,579
                                             -----------     ----------     -----------     ----------
   Total                                     $   187,557     $  183,856     $   361,669     $ 354,752
                                             ===========     ==========     ===========     ==========

OPERATING INCOME (LOSS):
Specialty Printing and Labeling              $       886     $      560     $     1,209     $      917
Jordan Specialty Plastics                          1,464          1,139           2,487          2,511
Jordan Auto Aftermarket                            1,139           (744)            951           (833)
Kinetek                                           13,865         11,045          23,930         18,122
Consumer and Industrial Products                  (1,272)          (670)         (3,000)        (2,662)
                                             -----------     ----------     -----------     ----------
 Total business segment operating income          16,082         11,330          25,577         18,055
Corporate income                                   1,717          7,147           7,101          7,780
                                             -----------     ----------     -----------     ----------
 Total consolidated operating income         $    17,799     $   18,477     $    32,678     $   25,835
                                             ===========     ==========     ===========     ==========
</TABLE>

J. Management Discussion of Liquidity

As discussed in the 2005 10-K, one of the Company's revolving credit facilities
expires in December 2006 and contains a provision for the step-down in maximum
borrowing capacity during 2006. As of March 1, 2006, the Company's maximum
borrowings under this agreement decreased from $55,000 to $45,000. This, coupled
with the facts that the Company's Kinetek subsidiary has a significant portion
of its Senior debt due in 2006, the Company has experienced operating losses in
recent years and the Company has used cash in operating activities, has caused
the Company's executive management to evaluate various options to improve the
Company's liquidity. To this end, the Company has restructured some of its
outstanding debt through the Exchange Offer discussed in the 2005 10-K and the
Modification and Waiver Agreements also discussed in the 2005 10-K. The effect
of these transactions has been to reduce cash paid for interest in the current
year as well as to provide for further reductions in debt maturity payments if
certain financial performance is not achieved. In addition, the Company expects
improved operating performance on a consolidated basis in the coming quarters.
Specifically, new product development and the continued shift of manufacturing
to China in the Specialty Plastics and Kinetek groups are expected to improve
results. Further, the Company has evaluated its holdings of investments in
affiliates and, when appropriate, will sell certain investments, similar to the
sale of the Company's investments in DMS Holdings Inc, Mabis Healthcare Holdings
Inc., Flavor and Fragrance Holdings Inc., Fleet Graphics Holdings, JIR
Broadcast, Inc. and JIR Paging as described

                                     - 9 -
<PAGE>

in the 2005 10-K and the Company's quarterly filings. The Company believes that
through its efforts discussed above, in conjunction with opportunistic sale of
assets, refinancings or market transactions, the Company will have sufficient
liquidity to meet its obligations in the current year. As noted, the Company's
subsidiary Kinetek has long-term debt that matures in the current year. The
Company is contemplating various avenues of retiring and/or refinancing this
debt, and management is confident that it will do so prior to maturity. If the
Company is unable to refinance or enter into a transaction that allows it to pay
off this debt, then there is substantial doubt about the Company's ability to
continue as a going concern.

K. Sale of Subsidiary

On March 24, 2005, the Company sold the assets of Cho-Pat, Inc. ("Cho-Pat") to
Cho-Pat's management team for proceeds of $1,075. Cho-Pat is a designer and
manufacturer of orthopedic related sports medicine devices and was part of the
Consumer and Industrial Products segment. The Company recognized a gain of $251
related to the sale of Cho-Pat. In July 2005, the Company received additional
purchase price of $134. These additional funds did not alter the amount of the
gain recorded on the sale.

L. Warranties

The Company provides warranties on certain products for varying lengths of time.
The Company estimates the costs that may be incurred and records a liability in
the amount of such costs at the time product revenue is recognized. Changes to
the Company's product warranty accrual during the six months ended June 30, 2006
and 2005 are as follows:

<TABLE>
<CAPTION>
                                     Six Months Ended
                                         June 30,
                               ----------------------------
                                   2006            2005
                               ------------     -----------
<S>                            <C>              <C>
Balance, beginning of year     $      1,622     $     2,315
Warranties issued                       943             652
Change in estimate                        -            (425)
Settlements                            (796)           (822)
                               ------------     -----------
Balance, end of period         $      1,769     $     1,720
                               ============     ===========
</TABLE>

M. Affiliate Transactions

On May 18, 2005, JIR Paging, Inc. repurchased from the Company its promissory
note in the amount of $9,200. The proceeds to the Company were $9,449 and
consisted of the principal amount of the note plus accrued and unpaid interest
since the last interest payment date of $249. JIR Paging was subsequently sold
in March 2006 to a third party. At closing, the Company received net cash
proceeds of $274 for amounts previously invested in JIR Paging. The Company
recorded a gain of $274 in the fourth quarter of 2005 as a result of reversing
reserves previously recorded against the receivable from JIR Paging.

On June 10, 2005, the Company's affiliate, Fleet Graphics Holdings, was sold to
management of that company for $6,600. A portion of the proceeds from the sale
was used to pay the Company accrued and unpaid management fees and operating
expenses which were paid by the Company on behalf of Fleet Graphics Holdings.
These repayments totaled $1,577 and $613; respectively. Also as a result of the
sale, the Company was paid $1,400 for the termination of its management fee
arrangement with Fleet Graphics Holdings and a fee of $1,160 pursuant to certain
advisory agreements. The Company also received $1,850 for various fees and
charges associated with the transaction. The Company recorded income of $4,410
in the second quarter of 2005 as a result of this transaction.

On July 29, 2005, Healthcare Products Holdings, Inc. ("HPI"), an affiliate of
the Company based on partial common ownership, and its operating subsidiary
Hoveround, undertook an independent refinancing of its obligations with several
new third party lenders. A portion of the proceeds from the refinancing was used
to repay obligations to the Company. The Company received proceeds of $15,000
for payment of notes, accrued

                                     - 10 -
<PAGE>

interest, accrued and unpaid management fees, amounts previously paid by the
Company on behalf of HPI and accrued and unpaid financing fees. Due to previous
concerns regarding the collectibility of these amounts the Company had reserved
against these receivables leaving an unreserved amount of $7,034. As a result,
the Company recorded a gain of $7,966 on the transaction. In the fourth quarter
of 2005, the Company reversed additional reserves related to HPI resulting in an
addition to the previously recorded gain of $618. This gain was recorded as a
component of operating income in the fourth quarter of 2005 because the original
reserves taken by the Company were charged to operating income. At June 30,
2006, the Company had unreserved amounts due from HPI of $1,530.

JIR Broadcast was sold on February 28, 2006 and resulted in cash proceeds to the
Company of $30,250, a small portion of which was received in December 2005. The
proceeds included repayment of amounts previously loaned to and paid on behalf
of, JIR Broadcast of $15,610, accrued interest of $9,187, accrued and unpaid
management fees of $1,679, a fee for the termination of the management fee
agreement of $3,400, and reimbursement of expenses incurred by the Company
during the sale process of $374. Income of $14,453 was recorded in the Company's
financial statements during 2005 related to the JIR Broadcast sale due to the
reversal of reserves previously recorded by the Company against the loans,
interest on its loans, and the recognition of management fee income from JIR
Broadcast which was not previously accrued. In 2006, the Company recorded income
of $4,620 related to the termination of the management fee agreement, interest
income and management fees earned by the Company up to the date of sale, and
other closing amounts.

N. Sale of Assets.

In March 2006, the Company sold certain fully depreciated non-operating assets
for $6,405 to related parties. The sales price was determined by an independent
third party. The proceeds were used to repay long-term debt on these assets of
$3,834. After giving consideration to fees associated with the transaction, the
Company recorded a gain of $6,306 in the first quarter of 2006.

O. Subsequent Events

On July 31, 2006, the Company sold its ownership in Pamco Printed Tape and Label
Company ("Pamco") for net proceeds of $19.2 million. The Company expects to
record a gain on this transaction in the third quarter. The results of
operations for Pamco and its respective balance sheets and cash flows have been
classified as discontinued operations in the Company's financial statements for
all periods presented.

Pamco was a member of the Specialty Printing and Labeling group and is a
manufacturer and distributor of a wide variety of printed tapes and labels.

                                     - 11 -
<PAGE>

P. Condensed Consolidating Financial Statements (Unaudited)

Pursuant to the Exchange Offer described in the 2005 10-K, wholly owned
subsidiaries of the Company, JII Holdings, LLC and JII Holdings Finance
Corporation, issued senior secured notes which have been guaranteed by the
Company and certain of the Company's subsidiaries. Each of these subsidiaries is
100% owned (as defined in Rule 3-10 of Regulation S-X) by the Company, and in
all cases the guarantees are full and unconditional and joint and several. The
following condensed consolidating financial information is provided in lieu of
separate financial statements for the issuers of these notes.

Three Months Ended June 30, 2006

<TABLE>
<CAPTION>
                                    Jordan        JII           JII                        Non-
                                  Industries    Holdings      Finance     Guarantors    Guarantors   Eliminations   Consolidated
                                  ----------    ---------    ---------    ----------    ----------   ------------   ------------
<S>                               <C>           <C>          <C>          <C>           <C>          <C>            <C>
Net Sales                         $        -    $       -    $       -    $   83,563    $  103,994   $          -   $    187,557
Cost of sales, excluding
depreciation                               -            -            -        59,522        74,312              -        133,834
Selling, general, and
 administrative expenses,
 excluding depreciation               (1,318)           -            -        20,511        12,979            320         32,492
Depreciation                             104            -            -         1,766         1,470              -          3,340
Amortization                               -            -            -            11            54              -             65
Income from sale of affiliates            (8)           -            -             -             -              -             (8)
Management fees and other                 35            -            -           (70)           70              -             35
                                  ----------    ---------    ---------    ----------    ----------   ------------   ------------
  Operating income/(loss)              1,187            -            -         1,823        15,109           (320)        17,799

Other (income) and expenses:
  Interest expense                     2,821          709            -           591         9,062              -         13,183
  Intercompany interest
   (income) expense                   (1,875)      (5,612)           -         5,514         1,973              -              -
  Interest income                         (7)           -            -             -           (49)            32            (24)
  Intercompany management fee
  (income) expense                      (963)        (929)           -           913           980             (1)             -
  Equity in losses (earnings)
   of subsidiaries                    (1,776)       5,043            -             -             -         (3,267)             -
   Other, net                            951            -            -           114        (1,022)             -             43
                                  ----------    ---------    ---------    ----------    ----------   ------------   ------------
                                        (849)        (789)           -         7,132        10,944         (3,236)        13,202
Income/(loss) from continuing
operations before taxes                2,036          789            -        (5,309)        4,165          2,916          4,597

  Provision for income taxes               -            -            -           409         2,202            625          3,236
                                  ----------    ---------    ---------    ----------    ----------   ------------   ------------

Income/(loss) from continuing
operations                             2,036          789            -        (5,718)        1,963          2,291          1,361

Discontinued operations:
  Income from discontinued
   operations, net of tax                  -            -            -           675             -              -            675
                                  ----------    ---------    ---------    ----------    ----------   ------------   ------------

Net income/(loss)                 $    2,036    $     789    $       -    $   (5,043)   $    1,963   $      2,291   $      2,036
                                  ==========    =========    =========    ==========    ==========   ============   ============
</TABLE>

                                     - 12 -
<PAGE>

Three Months Ended June 30, 2005
Restated

<TABLE>
<CAPTION>
                                   Jordan       JII          JII
                                 Industries   Holdings     Finance    Guarantors   Non-Guarantors   Eliminations   Consolidated
                                 ----------   ---------   ---------   ----------   ---------------   ------------   ------------
<S>                              <C>          <C>         <C>         <C>          <C>               <C>            <C>
Net Sales                        $        -   $       -   $       -   $   89,496   $        94,360   $          -   $    183,856
Cost of sales, excluding
 depreciation                             -           -           -       65,708            67,506              -        133,214
Selling, general, and
 administrative expenses,
 excluding depreciation              (1,821)          8           -       20,698            14,742              -         33,627
Depreciation                            179           -           -        1,808             1,545              -          3,532
Amortization                              1           -           -           11                30              -             42
Income from sale of affiliates       (4,410)          -           -            -                 -              -         (4,410)
Management fees and other              (626)          -           -          (39)               39              -           (626)
                                 ----------   ---------   ---------   ----------   ---------------   ------------   ------------
  Operating income/(loss)             6,677          (8)          -        1,310            10,498              -         18,477

Other (income) and expenses:
  Interest expense                    2,822         709           -        1,104             9,088              -         13,723
  Intercompany interest
   (income) expense                  (1,643)     (5,475)          -        5,377             1,739              2              -
  Interest income                        (6)          -           -           (1)              (54)            38            (23)
  Intercompany management fee
   (income)expense                     (873)       (978)          -          716             1,136             (1)             -
  Equity in losses of
   subsidiaries                       2,297       5,067           -            -                 -         (7,364)             -
  Other, net                          1,307           -           -           67            (1,345)             -             29
                                 ----------   ---------   ---------   ----------   ---------------   ------------   ------------
                                      3,904        (677)          -        7,263            10,564         (7,325)        13,729

Income/(loss) from continuing
  operations before taxes             2,773         669           -       (5,953)              (66)         7,325          4,748

Provision for income taxes                -           -           -          848             2,206            264          3,318
                                 ----------   ---------   ---------   ----------   ---------------   ------------   ------------

Income/(loss) from continuing
  operations                          2,773         669           -       (6,801)           (2,272)         7,061          1,430

Discontinued operations:
 Income (loss) from
   discontinued operations, net
   of tax                                 -           -           -          232              (391)             -           (159)
 Gain on sale of discontinued
   operations, net of tax                 -           -           -        1,502                 -              -          1,502
                                 ----------   ---------   ---------   ----------   ---------------   ------------   ------------

Net income/(loss)                $    2,773   $     669   $       -   $   (5,067)  $        (2,663)  $      7,061   $     2,773
                                 ==========   =========   =========   ==========   ===============   ============   ============
</TABLE>

                                     - 13 -
<PAGE>

Six Months Ended June 30, 2006

<TABLE>
<CAPTION>
                                   Jordan       JII          JII
                                 Industries   Holdings     Finance    Guarantors   Non-Guarantors   Eliminations   Consolidated
                                 ----------   ---------   ---------   ----------   ---------------   ------------   ------------
<S>                              <C>          <C>         <C>         <C>          <C>               <C>            <C>
Net Sales                        $        -   $       -   $       -   $  162,782   $       198,887   $          -   $    361,669
Cost of sales,
  excluding depreciation                  -           -           -      116,945           142,665              -        259,610
Selling, general, and
  administrative expenses,
  excluding depreciation             (1,366)          -           -       41,404            27,165           (140)        67,063
Depreciation                            208           -           -        3,596             2,907              -          6,711
Amortization                              2           -           -           21               134              -            157
Income from sale of affiliates       (4,620)          -           -            -                 -              -         (4,620)
Management fees and other                70           -           -         (134)              134              -             70
                                 ----------   ---------   ---------   ----------   ---------------   ------------   ------------
  Operating income                    5,706           -           -          950            25,882            140         32,678

Other (income) and expenses:
  Interest expense                    5,641       1,419           -        1,429            18,185              -         26,674
  Intercompany interest
    (income) expense                 (3,730)    (11,111)          -       10,918             3,923              -              -
  Interest income                       (15)          -           -            -              (116)            64            (67)
  Intercompany management fee
    (income)expense                  (1,853)     (1,814)          -        1,781             1,886              -              -
  Equity in losses (earnings)
    of subsidiaries                  (3,079)     13,177           -            -                 -        (10,098)             -
  Gain on sale of assets                  -           -           -            -            (6,306)             -         (6,306)
  Other, net                          2,361           -           -          622            (1,585)             -          1,398
                                 ----------   ---------   ---------   ----------   ---------------   ------------   ------------
                                       (675)      1,671           -       14,750            15,987        (10,034)        21,699

Income/(loss) from continuing
  operations before taxes             6,381      (1,671)          -      (13,800)            9,895         10,174         10,979

Provision for income taxes                -           -           -          828             3,985          1,207          6,020
                                 ----------   ---------   ---------   ----------   ---------------   ------------   ------------

Income/(loss) from continuing
  operations                          6,381      (1,671)          -      (14,628)            5,910          8,967          4,959

Discontinued operations:
 Income (loss) from
   discontinued operations, net
   of tax                                 -           -           -        1,451               (29)             -          1,422
                                 ----------   ---------   ---------   ----------   ---------------   ------------   ------------

Net income/(loss)                $    6,381   $  (1,671)  $       -   $  (13,177)  $         5,881   $      8,967   $      6,381
                                 ==========   =========   =========   ==========   ===============   ============   ============
</TABLE>

                                     - 14 -
<PAGE>

Six Months Ended June 30, 2005
Restated

<TABLE>
<CAPTION>
                                   Jordan       JII          JII
                                 Industries   Holdings     Finance    Guarantors   Non-Guarantors   Eliminations   Consolidated
                                 ----------   ---------   ---------   ----------   ---------------   ------------   ------------
<S>                              <C>          <C>         <C>         <C>          <C>               <C>            <C>
Net Sales                        $        -   $       -   $       -   $  174,092   $       180,660   $          -   $    354,752
Cost of sales,
  excluding depreciation                  -           -           -      127,817           129,939              -        257,756
Selling, general, and
  administrative expenses,
  excluding depreciation             (2,290)          8           -       41,442            29,696              -         68,856
Depreciation                            359           -           -        3,783             3,086              -          7,228
Amortization                              2           -           -           21                60              -             83
Income from sale of affiliates       (4,410)          -           -            -                 -              -         (4,410)
Management fees and other              (596)          -           -          (69)               69              -           (596)
                                 ----------   ---------   ---------   ----------   ---------------   ------------   ------------
  Operating income                    6,935          (8)          -        1,098            17,810              -         25,835

Other (income) and expenses:
  Interest expense                    5,650       1,419           -        2,174            18,013              -         27,256
  Intercompany interest
    (income) expense                 (3,267)    (10,844)          -       10,649             3,459              3              -
  Interest income                       (14)          -           -           (1)             (140)            75            (80)
  Intercompany management fee
    (income)expense                  (1,666)     (1,879)          -        1,408             2,138             (1)             -
  Equity in losses (earnings)
    of subsidiaries                  10,675      12,953           -            -                 -        (23,628)             -
  (Gain)/loss on sale of
    subsidiary                         (273)          -           -           22                 -              -           (251)
  Other, net                          2,573           -           -           88            (2,599)             -             62
                                 ----------   ---------   ---------   ----------   ---------------   ------------   ------------
                                     13,678       1,649           -       14,340            20,871        (23,551)        26,987

Income/(loss) from continuing
  operations before taxes            (6,743)     (1,657)          -      (13,242)           (3,061)        23,551         (1,152)

Provision for income taxes                -           -           -        1,507             3,964            885          6,356
                                 ----------   ---------   ---------   ----------   ---------------   ------------   ------------

Income/(loss) from continuing
operations                           (6,743)     (1,657)          -      (14,749)           (7,025)        22,666         (7,508)

Discontinued operations:
Income/(loss) from
  discontinued operations, net
  of tax                                  -           -           -          294            (1,031)             -           (737)
 Gain on sale of discontinued
   operations, net of tax                 -           -           -        1,502                 -              -          1,502
                                 ----------   ---------   ---------   ----------   ---------------   ------------   ------------

Net income/(loss)                $   (6,743)  $  (1,657)  $       -   $  (12,953)  $        (8,056)  $     22,666   $     (6,743)
                                 ==========   =========   =========   ==========   ===============   ============   ============
</TABLE>

                                     - 15 -
<PAGE>

Balance Sheet as of June 30, 2006

<TABLE>
<CAPTION>
                                    Jordan        JII           JII                       Non-
                                  Industries    Holdings      Finance     Guarantors    Guarantors   Eliminations   Consolidated
                                  ----------    ---------    ---------    ----------    ----------   ------------   ------------
<S>                               <C>           <C>          <C>          <C>           <C>          <C>            <C>
Current assets:
    Cash and equivalents          $    2,543    $       -    $       -    $    2,003    $    9,878   $          -   $     14,424
    Intercompany receivables          50,927      (42,339)           -        (5,804)       20,881        (23,665)             -
    Accounts receivable, net               -            -            -        45,053        76,711              -        121,764
    Inventories                            -            -            -        72,306        65,780              -        138,086
    Assets of discontinued
     operations                            -            -            -         8,889           373              -          9,262
    Income tax receivable                  -            -            -             -         1,101              -          1,101
    Prepaids and other
     current assets                    2,443            -            -         4,738         3,845         (2,398)         8,628
                                  ----------    ---------    ---------    ----------    ----------   ------------   ------------
    Total current assets              55,913      (42,339)           -       127,185       178,569        (26,063)       293,265

Property, plant and equipment,
  net                                    842            -            -        37,693        35,684              -         74,219
Investments and advances to
  affiliates                           1,529            -            -             -        12,344              -         13,873
Investments in subsidiaries           57,167      216,793            -             -             -       (273,960)             -
Equity in earnings of
  subsidiaries                      (240,612)    (117,937)           -             -             -        358,549              -
Goodwill, net                              -            -            -        50,370       182,345        (13,274)       219,441
Intercompany notes receivable         (1,000)     216,533            -             -         1,000       (216,533)             -
Other assets                             109        2,129            -         1,170         3,792              -          7,200
                                  ----------    ---------    ---------    ----------    ----------   ------------   ------------
    Total assets                  $ (126,052)   $ 275,179    $       -    $  216,418    $  413,734   $   (171,281)  $    607,998
                                  ==========    =========    =========    ==========    ==========   ============   ============

Current liabilities:
  Accounts payable                $        -    $       -    $       -    $   24,937    $   47,092   $          -   $     72,029
  Accrued liabilities                 24,159        9,390            -        20,476        17,526         (2,997)        68,554
  Intercompany payables                    -            -            -        (1,825)       17,322        (15,497)             -
  Liabilities of discontinued
   operations                              -            -            -         4,584             -              -          4,584
  Current portion of long
   term debt                               -            -            -        12,009       315,972              -        327,981
                                  ----------    ---------    ---------    ----------    ----------   ------------   ------------
  Total current liabilities           24,159        9,390            -        60,181       397,912        (18,494)       473,148

Long term debt                       122,113      190,233            -         6,701         1,842              -        320,889
Other non current liabilities         22,526            -            -         8,369         5,128              -         36,023
Intercompany note payable            (49,805)           -            -       234,616        31,722       (216,533)             -
Deferred income taxes                 (2,271)           -            -       (17,043)       35,356          1,230         17,272
Preferred stock of a subsidiary         (350)           -            -        41,531         3,090        (41,181)         3,090

Shareholders equity (deficit)       (242,424)      75,556            -      (117,937)      (61,316)       103,697       (242,424)
                                  ----------    ---------    ---------    ----------    ----------   ------------   ------------
    Total liabilities and
      shareholders equity         $ (126,052)   $ 275,179    $       -    $  216,418    $  413,734   $   (171,281)  $    607,998
                                  ==========    =========    =========    ==========    ==========   ============   ============
</TABLE>

                                     - 16 -
<PAGE>

Balance Sheet as of December 31, 2005
Restated

<TABLE>
<CAPTION>
                                    Jordan        JII           JII                     Non-
                                  Industries    Holdings      Finance   Guarantors   Guarantors   Eliminations  Consolidated
                                  ----------    --------      -------   ----------   ----------   ------------  ------------
<S>                               <C>           <C>           <C>       <C>          <C>          <C>           <C>
Current assets:
    Cash and equivalents          $    2,135    $      -      $     -   $    1,300   $   12,249   $          -  $     15,684
    Intercompany receivables          38,896     (38,516)           -       (4,364)      16,803        (12,819)            -
    Accounts receivable, net               -           -            -       39,027       68,820              -       107,847
    Inventories                            -           -            -       67,024       56,726              -       123,750
    Assets of discontinued
     operations                            -           -            -        9,009          415              -         9,424
    Income tax receivable                  -           -            -            -        1,926              -         1,926
    Investments in and
     advances to affiliates           23,015           -            -            -            -              -        23,015
    Prepaids and other
     current assets                    2,890           -            -        7,764        4,079         (4,794)        9,939
                                  ----------    --------      -------   ----------   ----------   ------------  ------------
    Total current assets              66,936     (38,516)           -      119,760      161,018        (17,613)      291,585

Property, plant and
 equipment, net                        1,045           -            -       39,938       35,706              -        76,689
Investments and advances to
 affiliates                            1,700           -            -            -       12,344              -        14,044
Investments in subsidiaries           55,476     211,890            -            -            -       (267,366)            -
Equity in earnings of
 subsidiaries                       (259,593)   (114,472)           -            -            -        374,065             -
Goodwill, net                              -           -            -       49,819      181,980        (13,274)      218,525
Intercompany notes
 receivable                           (1,000)    206,345            -            -        1,000       (206,345)            -
Other assets                             140       3,548            -        2,029        4,807              -        10,524
                                  ----------    --------      -------   ----------   ----------   ------------  ------------
    Total assets                  $ (135,296)   $268,795      $     -   $  211,546   $  396,855   $   (130,533) $    611,367
                                  ==========    ========      =======   ==========   ==========   ============  ============

Current liabilities:
    Accounts payable              $        -    $      -      $     -   $   20,582   $   37,238   $          -  $     57,820
    Accrued liabilities               27,775       9,389            -       22,893       17,438         (5,232)       72,263
    Intercompany payables                  -           -            -      (10,087)      13,189         (3,102)            -
    Liabilities of
     discontinued operations               -           -            -        4,609            -              -         4,609
    Current portion of long
     term debt                           530           -            -       24,489      293,961              -       318,980
                                  ----------    --------      -------   ----------   ----------   ------------  ------------

    Total current liabilities         28,305       9,389            -       62,486      361,826         (8,334)      453,672

PLong term debt                      121,559     201,500            -        5,127       31,213              -       359,399
Other non current
 liabilities                          18,628           -            -        8,321        5,203              -        32,152
Intercompany note payable            (50,424)          -            -      226,596       31,722       (207,894)            -
Deferred income taxes                 (1,653)          -            -      (16,839)      33,027              -        14,535
Preferred stock of a
 subsidiary                             (350)          -            -       40,327        2,970        (39,977)        2,970

Shareholders equity (deficit)       (251,361)     57,906            -     (114,472)     (69,106)       125,672      (251,361)
                                  ----------    --------      -------   ----------   ----------   ------------  ------------
    Total liabilities and
     shareholders equity          $ (135,296)   $268,795      $     -   $  211,546   $  396,855   $   (130,533) $    611,367
                                  ==========    ========      =======   ==========   ==========   ============  ============
</TABLE>

                                     - 17 -

<PAGE>

Six Months Ended June 30, 2006

<TABLE>
<CAPTION>
                                        Jordan        JII       JII                     Non-
                                      Industries   Holdings   Finance    Guarantors  Guarantors   Eliminations   Consolidated
                                      ----------   --------   -------    ----------  ----------   ------------   ------------
<S>                                   <C>          <C>        <C>        <C>         <C>          <C>            <C>
Net cash (used in) provided by
 operating activities                 $   11,681   $      -   $     -    $  (16,003) $     (570)  $          -   $     (4,892)

Cash flows from investing activities
   Proceeds from sales of
    fixed assets                               -          -         -         2,237       7,183              -          9,420
   Capital expenditures                       (6)         -         -        (2,465)     (2,578)             -         (5,049)
   Intercompany transfers                (40,832)    11,267         -        29,565           -              -              -
   Net proceeds from sale of
    affiliate                             29,565          -         -             -           -              -         29,565
                                      ----------   --------   -------    ----------  ----------   ------------   ------------
Net cash provided by (used
 in) investing activities                (11,273)    11,267         -        29,337       4,605              -         33,936

Cash flows from financing
 activities
   Proceeds from (payments of)
    revolving credit facilities                -          -         -        (9,548)     (4,085)             -        (13,633)
   Repayment of long term
    debt                                       -    (11,267)        -        (3,473)     (5,046)             -        (19,786)
   Proceeds from other
    borrowings                                 -          -         -           390       1,226              -          1,616
                                      ----------   --------   -------    ----------  ----------   ------------   ------------
Net cash (used in) provided
 by financing activities                       -    (11,267)        -       (12,631)     (7,905)             -        (31,803)

Effect of exchange rate
 changes on cash                               -          -         -             -       1,499              -          1,499
                                      ----------   --------   -------    ----------  ----------   ------------   ------------
Net (decrease) increase in cash and
 equivalents                                 408          -         -           703      (2,371)             -         (1,260)
Cash and equivalents at
 beginning of period                       2,135          -         -         1,300      12,249              -         15,684
                                      ----------   --------   -------    ----------  ----------   ------------   ------------
Cash and equivalents at
 end of period                        $    2,543   $      -   $     -    $    2,003  $    9,878   $          -   $     14,424
                                      ==========   ========   =======    ==========  ==========   ============   ============
</TABLE>

                                     - 18 -

<PAGE>

Six Months Ended June 30, 2005
Restated

<TABLE>
<CAPTION>
                                        Jordan        JII       JII                     Non-
                                      Industries   Holdings   Finance    Guarantors  Guarantors   Eliminations   Consolidated
                                      ----------   --------   -------    ----------  ----------   ------------   ------------
<S>                                   <C>          <C>        <C>        <C>         <C>          <C>            <C>
Net cash (used in) provided by
 operating activities                 $    9,605   $      -   $     -    $   (5,711) $    1,228   $          -   $      5,122

Cash flows from investing activities
   Proceeds from sales of
    fixed assets                               -          -         -           258         116              -            374
   Capital expenditures                      (42)         -         -        (1,478)     (1,950)             -         (3,470)
   Intercompany transfers                (17,867)    11,267         -         6,600           -              -              -
   Net proceeds from sale of
    discontinued operations                1,002          -         -             -           -              -          1,002
   Acquisition of subsidiary                   -          -         -             -        (481)             -           (481)
   Net proceeds from sale of
    affiliate                              6,600          -         -             -           -              -          6,600
   Net proceeds from sale of
    subsidiary                             1,075          -         -             -           -              -          1,075
                                      ----------   --------   -------    ----------  ----------   ------------   ------------
Net cash provided by (used
 in) investing activities                 (9,232)    11,267         -         5,380      (2,315)             -          5,100

Cash flows from financing
 activities
   Proceeds from (payments of)
    revolving credit facilities                -          -         -         1,421       3,312              -          4,733
   Repayment of long term
    debt                                       -    (11,267)        -          (752)     (4,823)             -        (16,842)
   Proceeds from other
    borrowings                                 -          -         -           150       3,248              -          3,398
                                      ----------   --------   -------    ----------  ----------   ------------   ------------
Net cash (used in) provided
 by financing activities                       -    (11,267)        -           819       1,737              -         (8,711)

Effect of exchange rate
 changes on cash                               -          -         -             -        (419)             -           (419)
                                      ----------   --------   -------    ----------  ----------   ------------   ------------
Net increase in cash and
 equivalents                                 373          -         -           488         231              -          1,092
Cash and equivalents at
 beginning of period                       2,152          -         -         1,734      11,567              -         15,453
                                      ----------   --------   -------    ----------  ----------   ------------   ------------
Cash and equivalents at
 end of period                        $    2,525   $      -   $     -    $    2,222  $   11,798   $          -   $     16,545
                                      ==========   ========   =======    ==========  ==========   ============   ============
</TABLE>

                                     - 19 -

<PAGE>

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

Overview

The following discussion and analysis of the Company's results of operations and
of its liquidity and capital resources should be read in conjunction with the
financial statements and the related notes thereto appearing elsewhere in this
Form 10-Q. For additional information, see "Item 1A - Risk Factors", in the
Company's annual report on Form 10-K for the year ended December 31, 2005.

Results of Operations

Summarized below are the net sales, operating income (loss) and operating
margins (as defined) for each of the Company's business segments for the three
month and six month periods ended June 30, 2006 and 2005. Due to the sale of
ED&C, a subsidiary of Kinetek, in the second quarter of 2005 and the sale of
Pamco in July of 2006, the results of ED&C and Pamco have been classified as
discontinued operations in all periods presented. (See Note E to the financial
statements.) The following discussion reviews the following segment data and
certain of the consolidated financial data for the Company.

<TABLE>
<CAPTION>
                                    Three Months Ended        Six Months Ended
                                          June 30,             June 30, 2006
                                   --------------------     ----------------------
                                      2006       2005         2006         2005
                                   ---------   --------     ---------   ----------
<S>                                <C>         <C>          <C>         <C>
NET SALES:
Specialty Printing and Labeling    $   8,822   $  8,321     $  17,115   $   16,061
Jordan Specialty Plastics             34,964     40,600        69,471       79,596
Jordan Auto Aftermarket               34,215     31,802        66,207       61,806
Kinetek                               96,462     87,433       183,349      167,710
Consumer and Industrial Products      13,094     15,700        25,527       29,579
                                   ---------   --------     ---------   ----------
   Total                           $ 187,557   $183,856     $ 361,669   $  354,752
                                   =========   ========     =========   ==========

OPERATING INCOME (LOSS):
Specialty Printing and Labeling    $     886   $    560     $   1,209   $      917
Jordan Specialty Plastics              1,464      1,139         2,487        2,511
Jordan Auto Aftermarket                1,139       (744)          951         (833)
Kinetek                               13,865     11,045        23,930       18,122
Consumer and Industrial Products      (1,272)      (670)       (3,000)      (2,662)
                                   ---------   --------     ---------   ----------
   Total(a)                        $  16,082   $ 11,330     $  25,577   $   18,055
                                   =========   ========     =========   ==========

OPERATING MARGIN(b)
Specialty Printing and Labeling         10.0%       6.7%          7.1%         5.7%
Jordan Specialty Plastics                4.2%       2.8%          3.6%         3.2%
Jordan Auto Aftermarket                  3.3%      (2.3)%         1.4%        (1.3)%
Kinetek                                 14.4%      12.6%         13.1%        10.8%
Consumer and Industrial Products        (9.7)%     (4.3)%       (11.8)%       (9.0)%
                                   ---------   --------     ---------   ----------
   Total                                 8.6%       6.2%          7.1%         5.1%
</TABLE>

----------
(a)   Before corporate income and management fee income of $1,717 and $7,147 for
      the three months ended June 30, 2006 and 2005, respectively, and $7,101
      and $7,780 for the six months ended June 30, 2006 and 2005, respectively.

(b)   Operating margin is operating income (loss) divided by net sales.

                                     - 20 -
<PAGE>

CONSOLIDATED RESULTS. (See Condensed Consolidated Statement of Operations.)

Net sales from continuing operations increased $3.7 million, or 2.0%, to $187.6
million for the second quarter of 2006 from $183.9 million last year. Net sales
from continuing operations increased $6.9 million, or 1.9%, to $361.7 million
through the first half of 2006 from $354.8 million last year. The increase in
sales for the second quarter was primarily due to solid growth at Kinetek and
the Jordan Automotive Aftermarket segment, which grew 10.3% and 7.6%,
respectively. These increases were partially offset by a 13.9% decline in the
Jordan Specialty Plastics segment and a 16.6% decline in the Consumer and
Industrial Products segment. The improved economy helped Kinetek but most of the
growth in this segment continues to come from the introduction of the new
products and market share gains in several niche markets. The sales growth at
Jordan Automotive Aftermarket throughout the first half is primarily the result
of share gains in the climate control segment and the impact of the Coolstar
acquisition completed in the third quarter of 2005. The sales decline at Jordan
Specialty Plastics was driven by reduced sales of certain hardware products to
the wholesale distribution channel due to the limited availability of insulation
material used in the products offset partially by sales growth in office
products and reflector products. Kinetek and Jordan Specialty Plastics both had
improved success with passing along raw material inflation through increased
selling prices, some of which do not become effective until the third quarter.

Operating income from continuing operations decreased $0.7 million, or 3.7%, to
$17.8 million for the second quarter of 2006 from $18.5 million for the same
period last year. Operating income from continuing operations increased $6.8
million, or 26.5%, to $32.6 million through the first half of 2006 from $25.8
million for the same period last year. The most significant increase in
operating income was the gain on sale of affiliates of $4.6 million (see Note M)
during the first quarter of 2006. In addition, operating income was driven by
the operating income associated with the increased sales at Kinetek along with
improved operating margins. Also, Kinetek recorded certain expenses associated
with the rationalization of facilities in the first quarter of 2005 that were
not repeated in the first quarter of 2006. Second quarter operating income at
Jordan Automotive Aftermarket increased $1.8 million due to improved results at
Alma Products operations and the impact of the Coolstar acquisition. Increased
operating income for the second quarter at Jordan Specialty Plastics benefited
from selling price increases and charges of approximately $1.0 million recorded
in the second quarter of 2005 for increased accruals and reserves in foreign
operations. These increases in operating income at Jordan Specialty Plastics
were partially offset by the lower hardware product sales.

SPECIALTY PRINTING AND LABELING. As of June 30, 2006, the Specialty Printing and
Labeling group ("SPL") consisted of Valmark and Seaboard.

Net sales from continuing operations increased $0.5 million, or 6.0%, to $8.8
million for the second quarter of 2006 from $8.3 million for the same period
last year. Net sales of continuing operations increased $1.1 million, or 6.6%,
to $17.1 million through the first half of 2006 from $16.0 million for the same
period last year. Revenues for Valmark product lines and Seaboard folding box
products increased 8.0% and 4.0% respectively in the second quarter. Sales
related to membrane switch and screen printing products were up well over last
year largely driven by sales in the medical equipment and instrumentation
products. Seaboard sales increases were largely driven by an improved economy
and share gains with key customers.

Operating income from continuing operations increased $0.3 million, or 58.2%, to
$0.9 million for the second quarter of 2006 from $0.6 million for the same
period last year. Operating income from continuing operations increased $0.3
million, or 31.8%, to $1.2 million through the first half of 2006 from $0.9
million for the same period last year. The increase in operating income is
largely due to improved operating margins at Valmark and Seaboard. The sales
growth at Valmark and Seaboard combined with the benefit of cost reduction
initiatives and a favorable sales mix were the significant drivers of the
increased operating income. Increased operating income through the first half
includes expenses of $0.4 million mostly related to the JII Promotions building
which was sold during the first half of 2006.

                                     - 21 -
<PAGE>

JORDAN SPECIALTY PLASTICS. As of June 30, 2006, the Jordan Specialty Plastics
group ("JSP") consisted of Beemak, Sate-Lite, and Deflecto.

Net sales decreased $5.6 million, or 13.9%, to $35.0 million for the second
quarter of 2006 from $40.6 million for the same period last year. Net sales
decreased $10.1 million, or 12.7%, to $69.5 million through the first half of
2006 from $79.6 million for the same period last year. The decrease in sales in
the second quarter and first half was driven by reduced sales of hardware
products through the wholesale distribution channel due to the limited
availability of insulation material used in the products. This decline was
offset partially by the impact of a stronger economy, the introduction of
several new products, market share gains, and selling price increases. Revenues
were up significantly at several of the large office products distributors.
Sales of chairmats to large distributors and wholesale retailers were also
stronger in the second quarter. Continued sales growth in Asia throughout the
first half also contributed to the increased sales of Office Products. Sales to
one of the large home improvement customers were significantly lower for the
first quarter as a result of what appeared to be an aggressive inventory
reduction initiative, negatively impacting first half sales. Sales of bike
related products and safety reflectors for commercial trucks also increased
significantly throughout the first half. In the second quarter, Jordan Specialty
Plastics has experienced improved success with passing along raw material
inflation through increased selling prices, some of which do not become
effective until the third quarter.

Operating income increased $0.3 million, or 28.5%, to $1.4 million for the
second quarter of 2006 from $1.1 million for the same period last year.
Operating income through the first half of 2006 remained relatively flat
compared to the same period last year. Increased operating income for the second
quarter benefited from selling price increases and charges of approximately $1.0
million recorded in the second quarter of 2005 for increased accruals and
reserves in foreign operations. Inefficiencies associated with the transition of
the Niles manufacturing operations to Indianapolis and China continued through
most of the first quarter and negatively impacted the first half results.
Absorption costs associated with the precipitous sales decline of certain
hardware products as described above also contributed to the decline in
operating income throughout the first half. The Company continues to pursue cost
reduction initiatives and price increases to overcome the increased raw material
costs.

JORDAN AUTO AFTERMARKET. As of June 30, 2006, the Jordan Auto Aftermarket group
("JAAI") consisted of Dacco, Alma and Atco.

Net sales increased $2.4 million, or 7.6%, to $34.2 million for second quarter
of 2006 from $31.8 million for the same period last year. Net sales increased
$4.4 million, or 7.1%, to $66.2 million through the first half of 2006 from
$61.8 million for the same period last year. The evaporator product line
acquired from Coolstar in the fourth quarter of 2005 contributed significantly
to the increased sales for the second quarter and first half of 2006. Sales of
air compressors increased approximately 13% in the second quarter and 16%
through the first half primarily as a result of share gains with targeted
wholesale distributors. Sales of torque converters to the non-OEM automotive
aftermarket were flat with prior year through the first half. Sales of torque
converters to original equipment manufacturers decreased approximately 12%
through the first half partially due to special sales incentives offered by our
largest customer to their customers in the fourth quarter of 2005 as well as
better warranty experience on new vehicles. Dacco continues to open new stores
in selected geographic regions which have offset a general market decline
through the first half. Sales of tubing assemblies and fittings for the truck
market were up approximately 30% in the second quarter and approximately 25%
through the first half due to a stronger economy and many companies updating
their fleets in advance of the new emissions standards set to become effective
in 2007. Hose assemblies and AC fittings sales were also stronger through the
first half due to share gains and a special military order.

Operating income increased $1.8 million to operating income of $1.1 million for
the second quarter of 2006 from a loss of $0.7 million for the same period last
year. Operating income increased $1.8 million to operating income of $1.0
million through the first half of 2006 from a loss of $0.8 million for the same
period last year.

                                     - 22 -
<PAGE>

Increased operating income associated with sales growth described above was
partially offset by the initial increased operating costs associated with
recently opened DACCO stores. Improved operating income was largely the result
of improved results at Alma Products operations and the impact of the Coolstar
acquisition. Management continues to reduce the cost structure through lean
manufacturing and other cost reduction initiatives as a means to improve
profitability and position the Company for additional sales growth.

KINETEK. As of June 30, 2006, the Kinetek group consisted of Imperial Group,
Merkle-Korff, FIR, Motion Control, Advanced DC and DeSheng.

Net sales increased $9.0 million, or 10.3%, to $96.5 million for the second
quarter of 2006 from $87.4 million for the same period last year. Net sales
increased $15.6 million, or 9.3%, to $183.3 million through the first half of
2006 from $167.7 million for the same period last year. The subfractional sales
increases for both periods were led by strong demand for gearmotors sold to
manufacturers of alternative fuel pellet stoves. Rising global energy prices
have stimulated significant growth of this product for sale in North America and
Europe. The fractional and integral motors increases in both periods were due
primarily to favorable conditions in most of Kinetek's principal markets in
North America and Europe, plus net increases in market share. Kinetek has
experienced significant growth from sales of motors used in commercial floor
care and golf cars, as well as from the introduction of AC motors used in
material handling applications which have traditionally been served with DC
motors. These increases were partially offset by the unfavorable impact of the
Euro on European sales when translated into dollars. The stronger dollar caused
unfavorable translation impacts to consolidated net sales of $1.0 million for
the second quarter of 2006, and $2.0 million for the year to date. Kinetek's
controls segment sales increase for both periods were led by higher shipments of
Kinetek's "I" family of elevator control products, which are up over 100% from
2005. These increases are partially offset by lower shipments of Kinetek's
traditional control products, which are being cannibalized by the "I" family of
controllers.

Operating income from continuing operations increased $2.8 million, or 25.5%, to
$13.9 million for the second quarter of 2006 from $11.0 million for the same
period last year. Operating income increased $5.8 million, or 32.0%, to $23.9
million through the first half of 2006 from $18.1 million for the same period
last year. The increases in operating margins are primarily attributable to the
sales increases described above. In addition, several key factors affected the
operating margins: 1) During the first half of 2005, Kinetek incurred
approximately $0.7 million in expenses and operating inefficiencies associated
with the integration of the O. Thompson operations which were acquired in
September, 2004, and other facility rationalization actions. These expenses had
a favorable impact on the first six months of 2006 in comparison with the
previous year. 2) Since 2003, and continuing through the first half of 2006,
Kinetek has experienced severe increases in market prices paid for parts used in
the assembly of motors, especially copper, steel, and zinc, and increases in the
prices of plastic components and freight and transportation associated with
rising global oil prices. 3) Kinetek has increased revenue by raising prices to
customers and imposing surcharges linked to the cost of key commodities to
partially offset the aforementioned inflation. 4) Kinetek's ongoing productivity
actions, including rationalization of facilities and relocation of production to
low-cost locales, have a favorable impact on operating margin, providing further
offset to the aforementioned inflation. Selling, general, and administrative
expenses ("SG&A") decreased $1.0 million for the quarter and $1.6 million
through the first half of 2006. The reduction is primarily driven by the timing
of certain normal corporate overhead expenses which are expected to be incurred
later in 2006, and to Kinetek's ongoing productivity actions. In addition, a
$0.3 million gain from the sale of its land and building, once associated with
its Gear Research facility, was recorded as a reduction of these expenses.

                                     - 23 -
<PAGE>

CONSUMER AND INDUSTRIAL PRODUCTS. As of June 30, 2006, the Consumer and
Industrial Products group consisted of Welcome Home LLC and its two divisions,
Cape Craftsmen and Welcome Home, and GramTel.

Net sales decreased $2.6 million, or 16.6%, to $13.1 million for the second
quarter of 2006 from $15.7 million for the same period last year. Net sales
decreased $4.1 million, or 13.7%, to $25.5 million through the first half of
2006 from $29.6 million for the same period last year. Sales for Cape and
Welcome Home consolidated decreased 17.7% in the second quarter and 14.9%
through the first half. Comparable store sales at Welcome Home decreased 9.3% in
the second quarter and are 5.1% below prior year through the first half. Cape
Craftsman sales to third parties decreased substantially as a result of
increased competition at key accounts. Cho-Pat was sold in March of 2005 and
represents $0.4 million of the CIP sales decrease in the first half of 2006 as
compared with prior year.

Operating income decreased $0.6 million to a loss of $1.3 million for the second
quarter of 2006 from a loss of $0.7 million for the same period last year.
Operating income decreased $0.3 million to an operating loss of $3.0 million
from a loss of $2.7 million for the same period last year. Merchandise margins
increased slightly at Welcome Home due to the new merchandising strategy and the
completion of the inventory turnover. The reduced third party sales at Cape
Craftsman and lower Welcome Home sales were the primary drivers of the reduced
operating income in the second quarter and first half. Improved operating income
at Gramtel partially offset the decreased operating income of Cape Craftsman and
Welcome Home.

      Liquidity and Capital Resources.

In general, the Company requires liquidity for working capital, capital
expenditures, interest, taxes, and debt repayment. Of primary importance are the
Company's working capital requirements, which increase whenever the Company
experiences strong incremental demand or geographical expansion.

The Company had approximately $(184.6) million of working capital at June 30,
2006, compared to approximately $(166.9) million at December 31, 2005. The
negative working capital in 2006 and 2005 is the result of the reclassification
of $270.0 million of Kinetek's Senior Notes from long term to current based on
their maturity date. Currently, the Company is contemplating various avenues of
redeeming or refinancing this debt, and management is confident that it will do
so prior to maturity.

Operating activities. Net cash used in operating activities for the six months
ended June 30, 2006 was $4.9 million compared to net cash provided by operating
activities of $5.1 million during the same period in 2005. The change in
operating activities is primarily due to an increase in inventory in the current
year. Kinetek's inventory is $7.7 million higher through the first six months
compared to the same period last year due to the general increase in their
business which is running significantly higher than last year. In addition,
Jordan Auto Aftermarket's inventory is $1.7 million higher through the first six
months compared to the same period last year because they added some new product
lines from prior year and has more seasonal increases compared to the same
period last year.

Investing activities. Net cash provided by investing activities for the six
months ended June 30, 2006 was $33.9 million compared to net cash provided by
investing activities of $5.1 million during the same period in 2005. In 2006,
the increase in net cash provided by investing activities was primarily due to
net proceeds of $29.6 million from the sale of an affiliate and $9.4 million
from the sale of fixed assets, of which $6.3 million related to the sale of
non-operating assets. This is compared to $1.1 million of proceeds from the sale
of Cho-Pat in the first quarter of 2005, $6.6 million from the sale of
affiliates and proceeds from the sale of fixed assets of $0.4 million.

                                     - 24 -
<PAGE>

Financing activities. Net cash used in financing activities for the six months
ended June 30, 2006 was $31.8 million compared to net cash used in financing
activities of $8.7 million during the same period in 2005. The increase in cash
used in financing activities is primarily due to higher repayments of borrowings
under revolving credit facilities in 2006.

The Company is party to two credit agreements under which the Company is able to
borrow up to $80.0 million based on the value of certain assets, to fund
acquisitions, provide working capital and for other general corporate purposes.
Both credit agreements mature in 2006 and all borrowings outstanding under these
agreements are classified as current liabilities as of June 30, 2006. The
agreements are secured by a first priority security interest in substantially
all of the Company's assets. As of June 30, 2006, the Company had approximately
$30.7 million of available funds under these arrangements.

In conjunction with the Exchange Offer completed by the Company in February 2004
(see 2005 10-K), one of the Company's revolving credit facilities was amended to
reduce, over time, the maximum loan commitment under the facility. As of
December 31, 2004, the maximum loan commitment under the facility was $75.0
million. As of June 1, 2005, that commitment was reduced to $55.0 million and to
$45.0 million as of March 1, 2006 and through the remaining life of the
agreement. At this time, the Company does not expect this decrease in available
funds to have a material impact on its operations.

Both of the Company's credit agreements expire in 2006. If necessary, the
Company intends to replace these facilities in 2006. Management is confident
such financings can be obtained under favorable terms to the Company and
Kinetek, however, such terms will be subject to market conditions which may
change significantly.

The Company may, from time to time, use cash, including cash generated from
borrowings under its credit agreement, to purchase its 11 3/4% Senior
Subordinated Discount Debentures due 2009, its 10 3/8% Senior Notes due 2007, or
its 13% Exchange Notes due 2007, or any combination thereof, through open market
purchases, privately negotiated purchases or exchanges, tender offers,
redemptions or otherwise, and may, from time to time, pursue various refinancing
or financial restructurings, including pursuant to consent solicitations and
waivers involving those securities, in each case, without public announcement or
prior notice to the holders thereof, and if initiated or commenced, such
purchases or offers to purchase may be discontinued at any time.

As discussed above, one of the Company's revolving credit facilities contains a
provision for the step-down in maximum borrowing capacity during 2006. As of
March 1, 2006 the Company's maximum borrowings under this agreement decreased
from $55.0 million to $45.0 million. This, coupled with the facts that the
Company's Kinetek subsidiary has a significant portion of its Senior debt due in
2006, the Company has experienced operating losses in recent years and has used
cash in operating activities, has caused the Company's executive management to
evaluate various options to improve the Company's liquidity. To this end, the
Company has restructured some of its outstanding debt through the Exchange Offer
discussed in the 2005 10-K and the Modification and Waiver Agreements also
discussed in the 2005 10-K. The effect of these transactions has been to reduce
cash paid for interest in the current year as well as to provide for further
reductions in debt maturity payments if certain financial performance is not
achieved. In addition, the Company expects improved operating performance on a
consolidated basis in the coming quarters. Specifically, new product development
and the continued shift of manufacturing to China in the Specialty Plastics and
Kinetek groups are expected to improve results. In addition, plans to improve
production efficiencies within the Auto Aftermarket Group will increase
operating margins.

Further, the Company has evaluated its holdings of investments in affiliates
and, when appropriate, will sell certain investments, similar to the sale of the
Company's investments in DMS Holdings Inc, Mabis Healthcare Holdings Inc.,
Flavor and Fragrance

                                     - 25 -
<PAGE>

Holdings Inc., JIR Broadcast, Inc. and JIR Paging as described in the 2005 10-K
and the Company's quarterly filings. The Company believes that through its
efforts discussed above, in conjunction with opportunistic sales of assets, the
Company will have sufficient liquidity to meet its obligations in the coming
year. As noted, the Company's subsidiary Kinetek has long-term debt that matures
in the current year. The Company is contemplating various avenues of retiring
and/or refinancing this debt, and management is confident that it will do so
prior to maturity. If the Company is unable to refinance or enter into a
transaction that allows it to pay off this debt, then there is substantial doubt
about the Company's ability to continue as a going concern.

                                     - 26 -
<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

The Company's debt obligations are primarily fixed-rate in nature and, as such,
are not sensitive to changes in interest rates. At June 30, 2006, the Company
had $24.0 million of variable rate debt outstanding. A one-percentage point
increase in interest rates would increase the annual amount of interest paid by
approximately $0.2 million. The Company does not believe that its market risk
financial instruments on June 30, 2006 would have a material effect on future
operations or cash flows.

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

ITEM 4. CONTROLS AND PROCEDURES

Pursuant to Section 302 of the Sarbanes-Oxley Act and Rule 13a-15 of the
Securities Exchange Act of 1934 ("Exchange Act") promulgated thereunder, the
Company's chief executive officer and chief financial officer have evaluated the
effectiveness of the Company's disclosure controls and procedures as of the end
of the period covered by this report (the "Evaluation Date"). Based on such
evaluation, the Company's chief executive officer and chief financial officer
have concluded that the Company's disclosure controls and procedures were
effective as of the Evaluation Date to ensure that information required to be
disclosed in reports that the Company files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in SEC rules and forms. There have been no changes in the Company's internal
controls over financial reporting during the period covered by this report that
were identified in connection with the evaluation referred to above that have
materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.

                                     - 27 -
<PAGE>

Part II. OTHER INFORMATION

Item 1.       Legal Proceedings
              None

Item 1A.      Risk Factors
              No significant changes

Item 2.       Unregistered Sales of Securities and Use of Proceeds
              None

Item 3.       Defaults upon Senior Securities
              None

Item 4.       Submission of Matters to a Vote of Security Holders
              None

Item 5.       Other Information
              None

Item 6.       Exhibits

              A list of exhibits filed with this report is contained on the
              Exhibit Index immediately preceding such exhibits and is
              incorporated herein by reference

                                     - 28 -
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                                         JORDAN INDUSTRIES, INC.

August 14, 2006                                    By: /s/ Norman R. Bates
                                                       -----------------------
                                                       Norman R. Bates
                                                       Chief Financial Officer

                                     - 29 -
<PAGE>

                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
 EXHIBIT
  NUMBER                            DESCRIPTION
<S>         <C>
   31(a)    Certificate of Chief Executive Officer pursuant to Rule 13a-14 (a) or Rule 15d-14 (a)

   31(b)    Certificate of Chief Financial Officer pursuant to Rule 13a-14 (a) or Rule 15d-14 (a)

   32(a)    Certification of John W. Jordan II pursuant to Section 1350.

   32(b)    Certification of Norman R. Bates pursuant to Section 1350.
</TABLE>

                                     - 30 -