|  **UNITED                    STATES**                                                                                                               |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  **SECURITIES                    AND EXCHANGE COMMISSION**                                                                                          |
|  **WASHINGTON,                    D.C. 20549**                                                                                                      |
|                    **FORM                    10-K**                                                                                                 |
|                                                                                                                                                          |   |
|  **Annual                    Report Pursuant to Section 13 or 15(d) of the Securities Exchange                    Act of                    1934**  |
|                    **For                    the Year Ended September 30, 2006**                                                                     |
|  **Commission                    File Number 1-6560**                                                                                               |
|                    **THE                    FAIRCHILD CORPORATION**                                                                                 |
|  (Exact                    name of Registrant as specified in its charter)                                                                          |
|                                                                                                                                                          |   |
| **Delaware**                                                                                                                                                  |                  **34-0728587** |
|  (State                    or other jurisdiction of                                                                                            |           (I.R.S.                  Employer Identification No.) |
|  Incorporation                    or organization)                                                                                                       |   |
|                                                                                                                                                          |   |
|  **1750                    Tysons Boulevard, Suite 1400, McLean, VA 22102**                                                                         |
|  (Address                    of principal executive offices)                                                                                        |
|                                                                                                                                                          |   |
|  **(703)                    478-5800**                                                                                                              |
|  (Registrant’s                    telephone number, including area code)                                                                      |
|                                                                                                                                                          |   |
|  Securities                    registered pursuant to Section 12(b) of the Act:                                                                     |
|                                                                                                                                                          |
|                                                                                                                                                          |   |
|  Title                    of each class                                                                                                                  |  Name                    of exchange on which registered |
|  Class                    A Common Stock, par value $.10 per share                                                                                       |  New                    York Stock Exchange |
|                                                                                                                                                          |   |
|  Securities                    registered pursuant to Section 12(b) of the Act:                     None                                            |

| **Class                A Common Stock, $0.10 Par Value** | **22,604,835**                      |
|----------------------------------------------------------|-------------------------------------|
| **Class                B Common Stock, $0.10 Par Value** | **                 2,621,338** |

**                                    **

**                                                   **

----

**THE      FAIRCHILD CORPORATION**

**INDEX      TO**

**ANNUAL      REPORT ON FORM 10-K**

**FOR      FISCAL YEAR ENDED SEPTEMBER 30, 2006**

|  PART              I                                   |                                                                                                                            |   | **  **Page |
|-----------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|--------|----------------------|
|                                                                  |                                                                                                                            |   |                 |
|                    Item 1.    |  Business                                                                                                                  |   |  4              |
|                                                                  |                                                                                                                            |   |                 |
|       Item              1A.        |  Risk              Factors                                                                                                 |   |  8              |
|                                                                  |                                                                                                                            |   |                 |
|       Item              2.              |  Properties                                                                                                                |   |  11             |
|                                                                  |                                                                                                                            |   |                 |
|       Item              3.         |  Legal              Proceedings                                                                                            |   |  12             |
|                                                                  |                                                                                                                            |   |                 |
|       Item              4.              |  Submission              of Matters to a Vote of Stockholders                                                              |   |  12             |
|                                                                  |                                                                                                                            |   |                 |
|  PART              II                                            |                                                                                                                            |   |                 |
|                                                                  |                                                                                                                            |   |                 |
|                    Item 5.                   |  Market              for Common Stock, Related Stockholder Matters and              Issuer Purchases of Common Stock  |   |  13             |
|                                                                  |                                                                                                                            |   |                 |
|                    Item 6.                   |  Selected              Financial Data                                                                                      |   |  15             |
|                                                                  |                                                                                                                            |   |                 |
|                    Item 7.                   |  Management's              Discussion and Analysis of Results of Operations              and Financial Condition           |   |  16             |
|                                                                  |                                                                                                                            |   |                 |
|                    Item 7A.                  |  Quantitative              and Qualitative Disclosures about Market              Risk                                      |   |  30             |
|                                                                  |                                                                                                                            |   |                 |
|                    Item 8.                   |  Financial              Statements and Supplementary Data                                                                  |   |  32             |
|                                                                  |                                                                                                                            |   |                 |
|                    Item 9.                   |  Changes              in and Disagreements with Accountants on Accounting and              Financial Disclosure            |   |  80             |
|                                                                  |                                                                                                                            |   |                 |
|                    Item 9A.                  |  Controls              and Procedures                                                                                 |   |  80             |
|                                                                  |                                                                                                                            |   |                 |
|  PART              III                                           |                                                                                                                            |   |                 |
|                                                                  |                                                                                                                            |   |                 |
|                    Item 10.                  |  Directors              and Executive Officers of the              Company                                                 |   |  82             |
|                                                                  |                                                                                                                            |   |                 |
|                    Item 11.                  |  Executive              Compensation                                                                                       |   |  85             |
|                                                                  |                                                                                                                            |   |                 |
|                    Item 12.                  |  Security              Ownership of Certain Beneficial Owners and              Management                                  |   |  95             |
|                                                                  |                                                                                                                            |   |                 |
|                    Item 13.                  |  Certain              Relationships and Related Transactions                                                               |   |  97             |
|                                                                  |                                                                                                                            |   |                 |
|                    Item 14.             |  Principal              Accountant Fees and Services                                                                       |   |  98             |
|                                                                  |                                                                                                                            |   |                 |
|  PART              IV                                            |                                                                                                                            |   |                 |
|                                                                  |                                                                                                                            |   |                 |
|       Item              15.        |  Exhibits              and Financial Statement Schedules                                                                   |   |  99             |

----

**PART      I**

**CAUTIONARY      STATEMENT**

**FINANCIAL        RESTATEMENT**

| ·   | A                $0.6 million increase in earnings for periods prior to October 1,                2003 (as                reflected in beginning retained earnings as of October 1,                2003); |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | A                $1.1 million decrease in earnings for fiscal                2004; |
|--------------------|------------------------------------------------------------------------------------|

| ·   | A                $1.9 million decrease in net loss for fiscal 2005;                and |
|--------------------|----------------------------------------------------------------------------------------|

| ·   | A                $1.3 million decrease in net loss for the nine months ended June                30,                2006. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------|

----

**ITEM      1.  BUSINESS**

**General**

**Financial      Information about Business Segments**

**Narrative      Description of Business Segments**

**PoloExpress      Segment**

**     **

***Products***

----

***   ***

***Sales      and Markets***

***Competition***

**Hein      Gericke Segment**

**     **

***Products***

***   Sales      and Markets***

----

***Competition***

**Aerospace      Segment**

***   Products***

***   Sales      and Markets***

*** Competition***

----

**Corporate      and Other Segment**

**Foreign      Operations**

**Backlog      of Orders**

**Suppliers**

**Research      and Patents**

**Personnel**

**Environmental      Matters**

**Available      Information**

----

**ITEM      1A.  RISK FACTORS**

| ·   | **Our                  operations are primarily dependent upon the retail and aerospace                  industries.**  Our operations may be affected adversely                  by general economic conditions and events which result in reduced                  customer                  spending in the markets served by our products in the retail and                  aerospace                  industries. Any downturn in either or both industries could materially                  and                  adversely affect the overall financial condition of our                  company. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | **Our                  company is highly leveraged.** Our ability to access additional                  capital or liquidate non-core assets may be limited and require                  significant lead time. If we are able to raise additional capital,                  interest rates or other terms may be unfavorable and adversely                  affect our                  financial condition or results of operations. As such, our cash                  requirements are dependent upon our ability to achieve and execute                  internal business plans,                  including: |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| o   | Our                ability to accurately predict demand for our                products; |
|---------------|------------------------------------------------------------------------------------------|

| o   | Our                ability to receive timely deliveries from                suppliers; |
|---------------|----------------------------------------------------------------------------------------|

| o   | Our                ability to raise cash to meet seasonal and other                demands; |
|---------------|---------------------------------------------------------------------------------------------|

| o   | Our                ability to maintain customer satisfaction, attract customers to our                stores, and deliver products of                quality; |
|---------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

| o   | Our                ability to properly assess our competition;                and |
|---------------|-----------------------------------------------------------------------------------|

| o   | Our                ability to improve our operations to profitability                status. |
|---------------|----------------------------------------------------------------------------------------------|

| ·   | **Foreign                exchange rate risks.**  We purchase and sell a significant                amount of our products internationally. In most markets sales are                made in                the foreign country’s local currency.  Additionally, a significant                amount of purchases are made in currencies other than the foreign                country’s local currency.  We do not place a significant                reliance on the use of derivative financial instruments to attempt                to                manage risks associated with foreign currency exchange rates.                 Accordingly, there can be no assurance that in the future we will                not have                a material adverse effect on our business and results of operations                from                exposure to changes in foreign exchange                rates. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | **Interest                rate risk.** We are subject to market risk from exposure to changes                in interest rates based on our variable rate financing. Increases                in                interest rates could have a negative impact on our available cash                and our                results of operations and adversely affect the overall financial                condition                of our company. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | **Government                regulation.** We must comply with governmental laws and regulations                that are subject to change and involve significant                costs.** **Our sales and operations in areas outside the                United States may be subject to foreign laws, regulations and the                legal                systems of foreign courts or tribunals.  These laws and policies                governing operations of foreign-based companies could result in increased                costs or restrictions on the ability of the Company to sell its products                in certain countries.  Our international sales operations may also be                adversely affected by United States laws affecting foreign trade                and                taxation. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | **Economic,                political, and other risks associated with business activities in                foreign                countries.**Because we plan to continue using foreign                manufacturers, our operating results could be harmed by economic,                political, regulatory and other factors in foreign                countries.** **We currently use suppliers in Asia to                manufacture a significant amount of the products we sell, and we                plan to                continue using foreign suppliers to manufacture these products. These                international operations are subject to inherent risks, which may                adversely affect us, including: |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| o   | political                and economic instability; |
|---------------|----------------------------------------------------|

| o   | high                levels of inflation, historically the case in a number of countries                in                Asia; |
|---------------|--------------------------------------------------------------------------------------------------------------------------------|

| o   | burdens                and costs of compliance with a variety of foreign                laws; |
|---------------|-----------------------------------------------------------------------------------------------|

| o   | foreign                taxes; and |
|---------------|-----------------------------------|

| o   | changes                in tariff rates or other trade and monetary                policies. |
|---------------|---------------------------------------------------------------------------------------------|

| ·   | **Our                operations are dependent upon attracting and retaining skilled                employees.**  Our future success depends on our                continuing ability to identify, hire, develop, motivate and retain                skilled                personnel in all areas of our organization.   The current and future                total compensation arrangements, which include benefits and cash                bonuses,                may not be successful in attracting new employees and retaining and                motivating our existing employees. If we do not succeed in attracting                personnel or retaining and motivating existing personnel, we may                be unable                to develop and distribute products and services or grow effectively.                The                success of one or more of our operations is dependent on our ability                to                satisfy top managers and core employees, who may negotiate as a                group. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | **We                have a number of worldwide competitors of varying sizes some of which                have                greater financial resources than we do.** Several of our                competitors are more diversified than we are, and/or they may have                greater                financial resources than we do.  Also, if price becomes a more                important competitive factor for our customers, we may have a competitive                disadvantage.  Failure to adequately address and quickly respond to                these competitive pressures could have a material adverse effect                on our                business and results of operations. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | **Our                marketing strategy of associating our retail products with a motorcycling                lifestyle may not be successful with future customers.**  We                have had success in marketing our products to motorcyclists.  The                lifestyle of motorcyclists is now more typically associated with                a                customer base comprised of individuals who are, on average, in their                mid-forties.  To sustain long-term growth, the motorcycle industry                must continue to be successful in promoting motorcycling to customers                new                to the sport of motorcycling including women and younger                riders.  Accordingly, we must be successful providing products                that satisfy the latest fashion desires and protection requirements                of our                customers. Failure to adequately address and quickly respond to our                customers needs could have a material adverse effect on our business                and                results of operations. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | **Our                success in our retail operations depends upon the continued strength                of                the Hein Gericke and PoloExpress brands**. We believe that our Hein                Gericke and PoloExpress brands have significantly contributed to                the                success of our business and that maintaining and enhancing the brands                is                critical to maintaining and expanding our customer base.  Failure to                protect the brands from infringers or to grow the value of our Hein                Gericke and PoloExpress brands could have a material adverse effect                on our                business and results of operations. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | **Our                    future growth will suffer if we do not achieve sufficient market                    acceptance of our products to compete effectively.**  Our                    success depends, in part, on our ability to gain acceptance of                    our current                    and future products by a large number of customers. Achieving                    market-                    based acceptance for our products will require marketing efforts                    and the                    expenditure of financial and other resources to create product                    awareness                    and demand by potential customers. We may be unable to offer                    products                    consistently, or at all, that compete effectively with products                    of others                    on the basis of price or performance. Failure to achieve broad                    acceptance                    of our products by potential customers and to compete effectively                    could                    have a material adverse effect on our business and results of                    operations. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | **Quarterly                fluctuations.**Quarterly results of our PoloExpress and Hein                Gericke segments’ operations have historically fluctuated as a result of                retail customers purchasing patterns, with the highest quarters in                terms                of sales and profitability being our third and fourth quarters. Any                economic downturn occurring in our third and fourth quarters could                have a                material adverse effect on our business and results of                operations. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | **We                incur substantial costs and cash funding requirements with respect                to                pension benefits and providing healthcare to our former                employees.** Our estimates of liabilities and expenses for pensions                and other post-retirement healthcare benefits require the use of                assumptions. These assumptions include the rate used to discount                the                future estimated liability, the rate of return on plan assets, and                several                assumptions relating to the retirees’ medical costs and mortality. Actual                results may differ, which may have a material adverse effect on future                results of operations, liquidity or shareholders’ equity. Our largest                pension plan is in an underfunded situation, and our future funding                requirements were projected based upon legislation that changed in                fiscal                2006. Any additional changes in the pension laws or estimates used                could                have a material adverse effect on our future funding requirements,                business and results of operations. In addition, rising healthcare                and                retirement benefit costs in the United States may put us at a competitive                disadvantage. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | **If                our goodwill or amortizable intangible assets become impaired, we                may be                required to record a significant charge to                earnings.**    Under generally accepted                accounting principles, we review our amortizable intangible assets                for                impairment when events or changes in circumstances indicate the carrying                value may not be recoverable. Goodwill and nonamortizable intangible                assets are required to be tested for impairment at least annually.                Factors                that may be considered a change in circumstances indicating that                the                carrying value of our goodwill or intangible assets may not be recoverable                include a decline in stock price and market capitalization, reduced                future                cash flow estimates, and slower growth rates in the industries we                serve.                We may be required to record a significant charge to earnings in                our                financial statements during the period in which any impairment of                our                goodwill or intangible assets is determined, negatively impacting                our                results of operations. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | **Expense                of being a public company.** The costs of being a small to                mid-sized public company have increased substantially with the                introduction and implementation of controls and procedures mandated                by the                Sarbanes-Oxley Act of 2002. We have seen audit fees and audit related                fees                significantly increase in past years. These increases, and any additional                burden placed by future legislation, could have a material adverse                effect                on our financial condition, future results of operations, or net                cash                flows.  For fiscal 2006, we were not required to have an                external audit of our internal controls over financial reporting                under                Section 404. We will continue to assess our future requirements to                report                on our assessment of controls or have an external audit of our internal                controls on an annual basis. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | **Concentrated                ownership of voting shares.** As of September 30, 2006, the Steiner                family beneficially owns approximately 60.3% of the aggregate vote                of                shares of the Company.  Therefore, the ability for individual                shareholders to influence the direction of the Company may be                limited. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | **Environmental                matters.** As an owner and former owner and operator of property,                including those at which we performed manufacturing operations, we                are                subject to extensive federal, state and local environmental laws                and                regulations. Inherent in such ownership and operation is also the                risk                that there may be potential environmental liabilities and costs in                connection with any required remediation of such properties. We routinely                assess our environmental accruals for identified concerns at locations                of                our former operations. We cannot provide assurance that unexpected                environmental liabilities will not                arise. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | **Legal                matters.**We are involved in various other claims and lawsuits                incidental to our business or predecessor businesses.  We,                either on our own or through our insurance carriers, are contesting                these                matters.  In the opinion of management, the ultimate resolution                of litigation against us will not have a material adverse effect                on our                financial condition, future results of operations or net cash                flows.  However, litigation and other claims are subject to                inherent uncertainties and management’s view of these matters may change                in the future.  There exists a possibility that a material                adverse impact on our financial position and results of operations                could                occur in the period for which the effect of an unfavorable final                outcome                becomes probable and reasonably                estimable. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

----

**ITEM      2.   PROPERTIES**

|                                              |  Owned                or | Square  |                                    |                                    |
|---------------------------------------------------|-------------------------------|---------|-----------------------------------------|-----------------------------------------|
|  Location                                    | Leased                        | Footage | Business                Segment         | Primary                Use              |
|  Fullerton,                California        | Owned                         | 208,000 |   Corporate                   | Rental                                  |
|  Düsseldorf,                Germany     | Leased                        | 144,000 |   PoloExpress                 | Office                & Warehousing |
|  Düsseldorf,                Germany     | Leased                        | 116,000 |   Hein                Gericke | Office                & Warehousing |
|  Huntington                Beach, California | Owned                         | 58,000  |   Corporate                   | Rental                                  |
|  Titusville,                Florida          | Leased                        | 37,000  |   Aerospace                   | Distribution                            |
|  Atlanta,                Georgia             | Leased                        | 29,000  |   Aerospace                   | Distribution                            |
|  Harrogate,                United Kingdom    | Leased                        | 24,000  |   Hein                Gericke | Office                                  |
|  Tustin,                California           | Leased                        | 15,000  |   Hein                Gericke | Office                & Warehousing |
|  McLean,                Virginia             | Leased                        | 12,000  |   Corporate                   | Office                                  |
|  Wichita,                Kansas              | Owned                         | 11,000  |   Aerospace                   | Distribution                            |

----

**ITEM      3.   LEGAL PROCEEDINGS**

**ITEM      4.  SUBMISSION OF MATTERS TO A VOTE OF      STOCKHOLDERS**

----

**PART      II**

**ITEM      5.  MARKET FOR COMMON STOCK, RELATED STOCKHOLDER MATTERS AND ISSUER      PURCHASES OF****COMMON      STOCK**

**Market      Information**

**Holders      of Record**

**Dividends**

**Sale      of Unregistered Securities**

----

**Securities      Authorized for Issuance under Equity Compensation Plans**

|                                                                                                 | Total                equity compensation plans approved by shareholders |
|------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------|
| Number                of securities to be issued upon exercise of outstanding                options | 336,359                                                                 |
| Weighted                average exercise price of outstanding options                                | $  3.90                                                       |
| Number                of securities remaining available for future issuance                          | None                                                                    |

----

**ITEM      6.  SELECTED FINANCIAL DATA**

**Five-Year      Financial Summary**

**(In      thousands, except per share data)**

|                                                                            |         Years                Ended September 30, |    | 3                MonthTransition                Period                Ended September                30, |     |                       Years                Ended June 30, |    |
|---------------------------------------------------------------------------------|------------------------------------------------------------------------------------------|---------|---------------------------------------------------------------------------------------------------------------|----------|---------------------------------------------------------------------------------------------------|---------|
|                                                                            | 2006                                                                                     |    |                                                                                                          | 2005(1)  |                                                                                              |    | 2004(1) |   |   | 2003(2) |   |   | 2003(3) |   |   | 2002(4) |   |
|                                                                            |                                                                                     |    |                                                                                                          | Restated |                                                                                              |    | Restated |   |   | Restated |   |   | Restated |   |   | Restated |   |
| **Summary                of Operations:**                                       |                                                                                     |    |                                                                                                          |     |                                                                                              |    |   |   |   |   |   |   |   |   |   |   |   |
|                  Net sales                                                 | $                                                                                        | 308,641 |                                                                                                          |     | $                                                                                                 | 341,587 |   |   | $ | 318,132 |   |   | $ | 14,857 |   |   | $ | 59,633 |   |   | $ | 64,648 |   |
|                  Rental revenue                                            |                                                                                     | 950     |                                                                                                          |     |                                                                                              | 656     |   |   |   | 930 |   |   |   | 260 |   |   |   | 808 |   |   |   | 480 |   |
|                  Gross margin                                              |                                                                                     | 123,641 |                                                                                                          |     |                                                                                              | 130,492 |   |   |   | 122,490 |   |   |   | 3,924 |   |   |   | 20,699 |   |   |   | 16,015 |   |
|                  Operating loss                                            |                                                                                     | (26,929 | )                                                                                                             |     |                                                                                              | (28,305 | ) |   |   | (14,099 | ) |   |   | (5,955 | ) |   |   | (51,348 | ) |   |   | (19,140 | ) |
|                  Net interest expense                                      |                                                                                     | 8,501   |                                                                                                          |     |                                                                                              | 11,427  |   |   |   | 10,599 |   |   |   | 662 |   |   |   | 22,328 |   |   |   | 42,534 |   |
|                  Income tax benefit (provision)                            |                                                                                     | (2,176  | )                                                                                                             |     |                                                                                              | 1,048   |   |   |   | 8,953 |   |   |   | 415 |   |   |   | (408 | ) |   |   | 16,094 |   |
|                  Income (loss) from continuing operations                  |                                                                                     | (33,890 | )                                                                                                             |     |                                                                                              | (27,309 | ) |   |   | (7,388 | ) |   |   | (2,486 | ) |   |   | (83,837 | ) |   |   | (49,336 | ) |
|                  Income (loss) per share from continuing  operations: |                                                                                     |    |                                                                                                          |     |                                                                                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       Basic                and diluted            | $                                                                                        | (1.34   | )                                                                                                             |     | $                                                                                                 | (1.08   | ) |   | $ | (0.29 | ) |   | $ | (0.10 | ) |   | $ | (3.33 | ) |   | $ | (1.96 | ) |
| ** Other                Data:**                                            |                                                                                     |    |                                                                                                          |     |                                                                                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                  Capital expenditures                                      |                                                                                     | 7,777   |                                                                                                          |     |                                                                                              | 11,668  |   |   |   | 12,260 |   |   |   | 312 |   |   |   | 7,888 |   |   |   | 2,106 |   |
|                  Cash provided by (used for) operating activities          |                                                                                     | (71,773 | )                                                                                                             |     |                                                                                              | (13,060 | ) |   |   | (13,101 | ) |   |   | (6,971 | ) |   |   | (122,521 | ) |   |   | 19,388 |   |
|                  Cash provided by (used for) investing activities          |                                                                                     | 54,987  |                                                                                                          |     |                                                                                              | 26,802  |   |   |   | (97,284 | ) |   |   | 29 |   |   |   | 605,516 |   |   |   | (9,632 | ) |
|                  Cash provided by (used for) financing activities          |                                                                                     | 12,328  |                                                                                                          |     |                                                                                              | (13,807 | ) |   |   | 116,622 |   |   |   | 1,523 |   |   |   | (485,842 | ) |   |   | (9,655 | ) |
| ** Balance                Sheet Data:**                                    |                                                                                     |    |                                                                                                          |     |                                                                                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                  Total assets                                              |                                                                                     | 415,129 |                                                                                                          |     |                                                                                              | 448,639 |   |   |   | 499,165 |   |   |   | 377,208 |   |   |   | 390,549 |   |   |   | 992,118 |   |
|                  Long-term debt, less current maturities                   |                                                                                     | 65,450  |                                                                                                          |     |                                                                                              | 47,990  |   |   |   | 61,382 |   |   |   | 4,277 |   |   |   | 2,815 |   |   |   | 434,736 |   |
|                  Stockholders' equity                                      |                                                                                     | 89,018  |                                                                                                          |     |                                                                                              | 111,346 |   |   |   | 138,896 |   |   |   | 136,139 |   |   |   | 137,957 |   |   |   | 226,111 |   |
|      Per                outstanding common share       | $                                                                                        | 3.53    |                                                                                                          |     | $                                                                                                 | 4.41    |   |   | $ | 5.52 |   |   | $ | 5.41 |   |   | $ | 5.48 |   |   | $ | 8.99 |   |

| *(1)* | *Amounts                have been restated as described in Note 2 to the Consolidated Financial                Statements.* |
|-------|-----------------------------------------------------------------------------------------------------------------------------|

| *(2)* | *The                Operations, Other, and Balance Sheet Data for the 3-month transition                period ended September 30, 2003 have been derived from audited financial                statements restated to account for the adjustments described in Note                2 to                the Consolidated Financial                Statements.* |
|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *(3)* | *The                Operations, Other, and Balance Sheet Data for fiscal 2003 have been                derived from audited financial statements restated to account for                the                adjustments described in Note 2 to the Consolidated Financial                Statements.  Net interest expense, income from continuing                operations, and stockholders’ equity decreased by $0.1 million due to                restatement adjustment related to death benefit                obligations.  Additionally, stockholders’ equity increased $0.2                million related to reversal of a reserve for potential deduction                disallowance deemed                unnecessary.* |
|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *(4)* | *The                Operations, Other, and Balance Sheet Data for fiscal 2002 have been                derived from audited financial statements restated to account for                the                adjustments described in Note 2 to the Consolidated Financial                Statements.  Net interest expense, income from continuing                operations, and stockholders’ equity decreased by $0.2 million due to                restatement adjustment related to death benefit                obligations.* |
|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**ITEM      7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF      OPERATIONS AND FINANCIAL CONDITION**

**FINANCIAL      RESTATEMENT**

| ·   | A                $0.6 million increase in earnings for periods prior to October 1,                2003 (as                reflected in beginning retained earnings as of October 1,                2003); |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | A                $1.1 million decrease in earnings for fiscal                2004; |
|--------------------|------------------------------------------------------------------------------------|

| ·   | A                $1.9 million decrease in net loss for fiscal 2005;                and |
|--------------------|----------------------------------------------------------------------------------------|

| ·   | A                $1.3 million decrease in net loss for the nine months ended June                30,                2006. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------|

**EXECUTIVE      OVERVIEW**

----

| ·   | Consolidating                and centralizing our warehouse facilities to one location to service                all                of Europe. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Improving                timeliness of product deliveries from suppliers to our warehouse                and                delivery to the stores. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Reintroducing                our Hein Gericke product catalog to expand brand awareness and attract                customer traffic. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Optimizing                store location and appearance. |
|--------------------|----------------------------------------------------------|

| ·   | Continue                cost structure improvements by taking aggressive actions to reduce                expenses. |
|--------------------|---------------------------------------------------------------------------------------------------------------------|

| ·   | Identify                and target strategic markets outside of Germany and the United Kingdom                for                possible expansion. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Close                stores which do not provide a positive                contribution. |
|--------------------|------------------------------------------------------------------------------------------|

| ·   | Invest                in our existing operations; |
|--------------------|---------------------------------------------------|

| ·   | Pursue                acquisition opportunities; |
|--------------------|--------------------------------------------------|

| ·   | Provide                a source for any additional cash needs of our Hein Gericke operations                during the 2007 season; or |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Consider                the repurchase of our outstanding                stock. |
|--------------------|---------------------------------------------------------------------------------|

----

| ·   | Liquidating                investments and other non-core                assets. |
|--------------------|----------------------------------------------------------------------------------|

| ·   | Refinancing                existing debt and borrowing additional funds which may be available                to us                from improved performances at our Aerospace and                PoloExpress operations or increased values of certain real estate we                own. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Eliminating,                reducing, or delaying all non-essential services provided by outside                parties, including consultants. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Significantly                reducing our corporate overhead                expenses. |
|--------------------|---------------------------------------------------------------------------------------|

| ·   | Delaying                inventory purchases. |
|--------------------|----------------------------------------------|

**CRITICAL      ACCOUNTING POLICIES**

*     Valuation      of Long-Lived Assets*

*Impairment      of Goodwill and Intangible Assets With Indefinite Lives*

*Pension      and Postretirement Benefits:*

*Deferred      and Noncurrent Income Taxes:*

----

*     Environmental      Matters:*

*Legal      Matters: *

*     Revenue      Recognition:*

**RESULTS      OF OPERATIONS**

***   Significant      Business Transactions***

----

----

***  Consolidated      Results***

|                                       |   | Actual                                   |    |   | Pro                Forma     |   |
|--------------------------------------------|--------|------------------------------------------|---------|--------|------------------------------|--------|
|                                       |   |                                     |    |   |                         |   |   |   |   |   | Year                Ended |   |
| (In                thousands)              |   | Years                Ended September 30, |    |   | September                30, |   |
|                                       |   | 2006                                     |    |   | 2005                         |   |   | 2004 |   |   | 2004 |   |
|                                       |   |                                     |    |   | Restated                (a)  |   |   | Restated                (a) |   |   | Restated                (a) |   |
| **Revenues**                               |   |                                     |    |   |                         |   |   |   |   |   |   |   |
| PoloExpress                                |   | $                                        | 112,786 |   |                         | $      | 111,161 |   |   | $ | 94,543 |   |   | $ | 98,404 |   |
| Hein                Gericke                |   |                                     | 116,255 |   |                         |   | 145,933 |   |   |   | 148,189 |   |   |   | 155,415 |   |
| Aerospace                Segment           |   |                                     | 79,600  |   |                         |   | 84,493 |   |   |   | 75,400 |   |   |   | 75,400 |   |
| Corporate                and Other         |   |                                     | 1,036   |   |                         |   | 1,036 |   |   |   | 971 |   |   |   | 971 |   |
| Intercompany                Eliminations   |   |                                     | (86     | )      |                         |   | (380 | ) |   |   | (41 | ) |   |   | (41 | ) |
| **Total**                                  |   | $                                        | 309,591 |   |                         | $      | 342,243 |   |   | $ | 319,062 |   |   | $ | 330,149 |   |
|                                       |   |                                     |    |   |                         |   |   |   |   |   |   |   |   |   |   |   |
| **Operating                Income (Loss)** |   |                                     |    |   |                         |   |   |   |   |   |   |   |   |   |   |   |
| PoloExpress                                |   | $                                        | 11,796  |   |                         | $      | 9,895 |   |   | $ | 10,795 |   |   | $ | 11,031 |   |
| Hein                Gericke                |   |                                     | (22,084 | )      |                         |   | (15,295 | ) |   |   | (3,614 | ) |   |   | (4,429 | ) |
| Aerospace                Segment           |   |                                     | 5,968   |   |                         |   | 6,093 |   |   |   | 4,030 |   |   |   | 3,945 |   |
| Corporate                and Other         |   |                                     | (22,609 | )      |                         |   | (28,998 | ) |   |   | (25,310 | ) |   |   | (25,310 | ) |
| **Total**                                  |   | $                                        | (26,929 | )      |                         | $      | (28,305 | ) |   | $ | (14,099 | ) |   | $ | (14,763 | ) |

| *(a)* | *Amounts                have been restated as described in Note 2 to the Consolidated Financial                Statements.* |
|-------|-----------------------------------------------------------------------------------------------------------------------------|

----

**    **

----

***   Segment      Results***

**   PoloExpress      Segment**

----

**   Hein      Gericke Segment**

----

**   Aerospace      Segment**

**   Corporate      and Other**

**FINANCIAL      CONDITION, LIQUIDITY AND CAPITAL RESOURCES**

----

----

| ·   | Invest                in our existing operations; |
|--------------------|---------------------------------------------------|

| ·   | Pursue                acquisition opportunities; |
|--------------------|--------------------------------------------------|

| ·   | Provide                a guarantee for any additional cash needed by our Hein Gericke segment                and                corporate needs; or |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Consider                the repurchase of our outstanding                stock. |
|--------------------|---------------------------------------------------------------------------------|

| ·   | Liquidating                investments and other non-core                assets. |
|--------------------|----------------------------------------------------------------------------------|

| ·   | Refinancing                existing debt and borrowing additional funds which may be available                to us                from improved performances at our Aerospace and PoloExpress operations                or                increased values of certain real estate we                own. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Eliminating,                reducing, or delaying all non-essential services provided by outside                parties, including consultants. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Significantly                reducing overhead expenses at certain operations and our corporate                headquarters. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------|

| ·   | Delaying                purchases of inventory. |
|--------------------|-------------------------------------------------|

----

***Off Balance Sheet      Items***

***Contractual      Obligations***

| (In                thousands)                                  |   | 2007   |   |   | 2008   |   |   | 2009   |   |   | 2010   |   |   | 2011   |   |   | Thereafter |   |   | Total  |   |
|----------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|------------|--------|--------|--------|--------|
|                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |       |   |   |   |   |   |   |   |   |   |   |   |
|  Debt                                                     |   | $      | 23,546 |   |   | $      | 31,141 |   |   | $      | 2,711  |   |   | $      | 30,377 |   |       | $      | 589    |   |   | $ | - |   |   | $ | 88,364 |   |
|  Estimated                interest costs                  |   |   | 6,972  |   |   |   | 4,827  |   |   |   | 4,013  |   |   |   | 1,981  |   |       |   | 49     |   |   |   | - |   |   |   | 17,842 |   |
|  Capital                lease obligations                 |   |   | 1,945  |   |   |   | 428    |   |   |   | 204    |   |   |   | -      |   |       |   | -      |   |   |   | - |   |   |   | 2,577 |   |
|  Operating                lease commitments               |   |   | 22,115 |   |   |   | 17,549 |   |   |   | 13,162 |   |   |   | 9,663  |   |       |   | 7,246  |   |   |   | 23,676 |   |   |   | 93,411 |   |
|  Pension                contributions                     |   |   | 1,900  |   |   |   | 8,000  |   |   |   | 7,300  |   |   |   | 7,400  |   |       |   | 8,000  |   |   |   | 15,600 |   |   |   | 48,200 |   |
|  Postretirement                benefits                   |   |   | 2,962  |   |   |   | 2,856  |   |   |   | 2,794  |   |   |   | 2,735  |   |       |   | 2,668  |   |   |   | 11,654 |   |   |   | 25,669 |   |
|  Acquire                remaining interest in PoloExpress |   |   | -      |   |   |   | 13,912 |   |   |   | -      |   |   |   | -      |   |       |   | -      |   |   |   | - |   |   |   | 13,912 |   |
|  Total                contractual cash obligations        |   | $      | 59,440 |   |   | $      | 78,713 |   |   | $      | 30,184 |   |   | $      | 52,156 |   |       | $      | 18,552 |   |   | $ | 50,930 |   |   | $ | 289,975 |   |

----

**RECENTLY      ISSUED ACCOUNTING PRONOUNCEMENTS**

*The Fair      Value Option for Financial Assets and Liabilities*

*Employers’ Accounting for      Defined Benefit Pension and Other Postretirement Pension Plans*

*Fair Value      Measurements*

*Accounting      for Uncertainty in Income Taxes.*

----

* Accounting for      Certain Hybrid Financial Instruments*
* Accounting for Derivative Instruments and Hedging      Activities*
* *
*Accounting for      Transfers and Servicing of Financial Assets and Extinguishments of      Liabilities.*

* Accounting Changes and Error      Corrections,*
* Accounting Changes,*
* Reporting      Accounting Changes in Interim Financial Statements,*

*Accounting for Conditional Asset      Retirement Obligations*
*Accounting for Asset Retirement Obligations*

**ITEM      7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT      MARKET RISK**

*Interest      Rate Risk:*

*     Foreign        Currency Risk: *

----

|                              |  Euro |  British                Pound |  Swiss                Franc |  TotalExposure |
|-----------------------------------|------------|------------------------------------|----------------------------------|---------------------|
| Revenues                          | 80%        | 18%                                | 2%                               | 100%                |
| Operating                Expenses | 82%        | 17%                                | 1%                               | 100%                |
| Working                Capital    | 85%        | 13%                                | 2%                               | 100%                |

*     Inflation:        *

----

**ITEM      8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY      DATA**

|                                                                                                                                                                           |   |  Page |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------|
|                                                                                                                                                                           |   |       |
|                    Report of KPMG LLP, Independent Registered Public Accounting              Firm                                                |   |  33   |
|                                                                                                                                                                           |   |       |
|                    Consolidated Balance Sheets as of September 30, 2006 and 2005                                                                      |   |  34   |
|                                                                                                                                                                           |   |       |
|                    Consolidated Statements of Operations for the years ended September              30,              2006, 2005, and 2004        |   |  36   |
|                                                                                                                                                                           |   |       |
|                    Consolidated Statements of Stockholders’ Equity for the years ended              September 30, 2006, 2005, and 2004          |   |  37   |
|                                                                                                                                                                           |   |       |
|                    Consolidated Statements of Cash Flows for the years ended September              30,              2006, 2005, and 2004   |   |  38   |
|                                                                                                                                                                           |   |       |
|                    Notes to Consolidated Financial Statements                                                                                    |   |  39   |

----

----

**THE      FAIRCHILD CORPORATION AND SUBSIDIARIES**

**CONSOLIDATED      BALANCE SHEETS**

**(In      thousands)**

| **ASSETS**                                                                        |   | September                30,   |        |
|-----------------------------------------------------------------------------------|--------|------------------------------------------|-------------|
|                                                                              |   | 2006                                     |        |   | 2005 |   |
|                                                                              |   |                                     |        |   | Restated |   |
| **CURRENT                ASSETS:**                                                |   |                                     |        |   |   |   |
| Cash                and cash equivalents                                          |   | $                                        | 8,541       |   |   | $ | 12,582 |   |
| Short-term                investments - unrestricted                              |   |                                     | 50,510      |   |   |   | 10,733 |   |
| Short-term                investments - restricted                                |   |                                     | 6,002       |   |   |   | 4,965 |   |
| Accounts                receivable-trade, less allowances of $1,083 and $2,679    |   |                                     | 16,927      |   |   |   | 18,475 |   |
| Inventories,                less reserves for obsolescence of $15,223 and $15,118 |   |                                     | 106,718     |   |   |   | 90,856 |   |
| Current                assets of discontinued operations                          |   |                                     | -           |   |   |   | 1,509 |   |
| Prepaid                expenses and other current assets                          |   |                                     | 10,795      |   |   |   | 8,122 |   |
| Total                Current Assets                                               |   |                                     | 199,493     |   |   |   | 147,242 |   |
|                                                                              |   |                                     |        |   |   |   |   |   |
| Property,                plant and equipment, net of accumulated                  |   |                                     |        |   |   |   |   |   |
|   depreciation                of $24,989 and $18,453                    |   |                                     | 58,698      |   |   |   | 57,468 |   |
| Noncurrent                assets of discontinued operations                       |   |                                     | -           |   |   |   | 79,373 |   |
| Goodwill                                                                          |   |                                     | 14,128      |   |   |   | 13,961 |   |
| Amortizable                intangible assets, net of accumulated                  |   |                                     |        |   |   |   |   |   |
|   amortization                of $1,673 and $1,073                      |   |                                     | 1,279       |   |   |   | 1,729 |   |
| Non-amortizable                intangible assets                                  |   |                                     | 30,969      |   |   |   | 29,424 |   |
| Prepaid                pension assets                                             |   |                                     | 33,373      |   |   |   | 31,239 |   |
| Deferred                loan costs                                                |   |                                     | 3,170       |   |   |   | 1,839 |   |
| Long-term                investments - restricted                                 |   |                                     | 60,949      |   |   |   | 59,419 |   |
| Long-term                investments - unrestricted                               |   |                                     | 4,370       |   |   |   | 10,233 |   |
| Notes                receivable                                                   |   |                                     | 5,396       |   |   |   | 9,765 |   |
| Other                assets                                                       |   |                                     | 3,304       |   |   |   | 6,947 |   |
| **TOTAL                ASSETS**                                                   |   | **$**                                    | **415,129** |   |   | **$** | **448,639** |   |

*The      accompanying Notes to Consolidated Financial Statements are an integral part      of      these statements.*

----

**THE      FAIRCHILD CORPORATION AND SUBSIDIARIES**

**CONSOLIDATED      BALANCE SHEETS**

**(In      thousands, except per share data)**

| **LIABILITIES                AND STOCKHOLDERS’ EQUITY**                                                 |   | September                30,   |        |
|---------------------------------------------------------------------------------------------------------------|--------|------------------------------------------|-------------|
|                                                                                                          |   | 2006                                     |        |   | 2005 |   |
|                                                                                                          |   |                                     |        |   | Restated |   |
| **CURRENT                LIABILITIES:**                                                                       |   |                                     |        |   |   |   |
| Bank                notes payable and current maturities of long-term debt                                    |   | $                                        | 25,492      |   |   | $ | 20,902 |   |
| Accounts                payable                                                                               |   |                                     | 26,325      |   |   |   | 22,602 |   |
| Accrued                liabilities:                                                                           |   |                                     |        |   |   |   |   |   |
|     Salaries,                wages and commissions                                        |   |                                     | 10,044      |   |   |   | 10,187 |   |
|     Insurance                                                                             |   |                                     | 7,357       |   |   |   | 7,335 |   |
|     Interest                                                                              |   |                                     | 1,810       |   |   |   | 443 |   |
|     Other                accrued liabilities                                              |   |                                     | 28,304      |   |   |   | 18,588 |   |
|     Income                taxes                                                           |   |                                     | 2,314       |   |   |   | 1,029 |   |
| Current                liabilities of discontinued operations                                                 |   |                                     | 62          |   |   |   | 1,540 |   |
| Total                Current Liabilities                                                                      |   |                                     | 101,708     |   |   |   | 82,626 |   |
|                                                                                                          |   |                                     |        |   |   |   |   |   |
| **LONG-TERM                LIABILITIES:**                                                                     |   |                                     |        |   |   |   |   |   |
| Long-term                debt, less current maturities                                                        |   |                                     | 65,450      |   |   |   | 47,990 |   |
| Fair                value of interest rate contract                                                           |   |                                     | -           |   |   |   | 5,146 |   |
| Other                long-term liabilities                                                                    |   |                                     | 31,750      |   |   |   | 27,669 |   |
| Pension                liabilities                                                                            |   |                                     | 40,622      |   |   |   | 51,099 |   |
| Retiree                health care liabilities                                                                |   |                                     | 26,008      |   |   |   | 27,459 |   |
| Deferred                tax liabilities                                                                       |   |                                     | 4,530       |   |   |   | 3,438 |   |
| Noncurrent                income taxes                                                                        |   |                                     | 39,923      |   |   |   | 38,385 |   |
| Noncurrent                liabilities of discontinued operations                                              |   |                                     | 16,120      |   |   |   | 53,481 |   |
| **TOTAL                LIABILITIES**                                                                          |   | ** **                               | **326,111** |   |   | ** ** | **337,293** |   |
|                                                                                                          |   |                                     |        |   |   |   |   |   |
| **STOCKHOLDERS’                EQUITY:**                                                                |   |                                     |        |   |   |   |   |   |
| Class                A common stock, $0.10 par value; 40,000 shares authorized,                               |   |                                     |        |   |   |   |   |   |
|   30,480                (30,480 in Sept. 2005) shares issued and 22,605 (22,605 in                  |   |                                     |        |   |   |   |   |   |
|    Sept.                2005); shares outstanding; entitled to one vote per share              |   |                                     | 3,047       |   |   |   | 3,047 |   |
| Class                B common stock, $0.10 par value; 20,000 shares authorized,                               |   |                                     |        |   |   |   |   |   |
|   2,621                (2,621 in Sept. 2005) shares issued and outstanding;                entitled |   |                                     |        |   |   |   |   |   |
|   to                ten votes per share                                                             |   |                                     | 262         |   |   |   | 262 |   |
| Paid-in                capital                                                                                |   |                                     | 232,612     |   |   |   | 232,457 |   |
| Treasury                stock, at cost, 7,875 (7,875 in Sept. 2005) shares                                    |   |                                     |        |   |   |   |   |   |
|    of                Class A common stock                                                      |   |                                     | (76,352     | ) |   |   | (76,352 | ) |
| Retained                earnings (accumulated deficit)                                                        |   |                                     | (15,680     | ) |   |   | 21,619 |   |
| Notes                due from stockholders                                                                    |   |                                     | (43         | ) |   |   | (109 | ) |
| Accumulated                other comprehensive loss                                                           |   |                                     | (54,828     | ) |   |   | (69,578 | ) |
| **TOTAL                STOCKHOLDERS’ EQUITY**                                                           |   | ** **                               | **89,018**  |   |   | ** ** | **111,346** |   |
| **TOTAL                LIABILITIES AND STOCKHOLDERS’ EQUITY**                                           |   | **$**                                    | **415,129** |   |   | **$** | **448,639** |   |

*The      accompanying Notes to Consolidated Financial Statements are an integral part      of      these statements.*

----

**THE      FAIRCHILD CORPORATION AND SUBSIDIARIES**

**CONSOLIDATED      STATEMENTS OF OPERATIONS**

**(In      thousands, except share and per share data)**

|                                                                             |   | Years                Ended September 30, |    |
|----------------------------------------------------------------------------------|--------|------------------------------------------|---------|
|                                                                             |   | 2006                                     |    |   | 2005 |   |   | 2004 |   |
|                                                                             |   |                                     |    |   | Restated |   |   | Restated |   |
| **REVENUE:**                                                                     |   |                                     |    |   |   |   |   |   |   |
|    Net                sales                                       |   | $                                        | 308,641 |   |   | $ | 341,587 |   |   | $ | 318,132 |   |
|    Rental                revenue                                  |   |                                     | 950     |   |   |   | 656 |   |   |   | 930 |   |
|                                                                             |   |                                     | 309,591 |   |   |   | 342,243 |   |   |   | 319,062 |   |
| ** COSTS                AND EXPENSES:**                                     |   |                                     |    |   |   |   |   |   |   |   |   |   |
|    Cost                of goods sold                              |   |                                     | 185,712 |   |   |   | 211,582 |   |   |   | 196,409 |   |
|    Cost                of rental revenue                          |   |                                     | 238     |   |   |   | 169 |   |   |   | 163 |   |
|    Selling,                general & administrative           |   |                                     | 155,364 |   |   |   | 163,734 |   |   |   | 145,136 |   |
|    Other                income, net                               |   |                                     | (5,336  | ) |   |   | (5,497 | ) |   |   | (9,647 | ) |
|    Amortization                of intangibles                     |   |                                     | 542     |   |   |   | 560 |   |   |   | 537 |   |
|    Restructuring                charges                           |   |                                     | -       |   |   |   | - |   |   |   | 563 |   |
|                                                                             |   |                                     | 336,520 |   |   |   | 370,548 |   |   |   | 333,161 |   |
|                                                                             |   |                                     |    |   |   |   |   |   |   |   |   |   |
| ** OPERATING                LOSS**                                          |   |                                     | (26,929 | ) |   |   | (28,305 | ) |   |   | (14,099 | ) |
|                                                                             |   |                                     |    |   |   |   |   |   |   |   |   |   |
|  Interest                expense                                            |   |                                     | (11,498 | ) |   |   | (13,143 | ) |   |   | (12,154 | ) |
|  Interest                income                                             |   |                                     | 2,997   |   |   |   | 1,716 |   |   |   | 1,555 |   |
|  Net                interest expense                                        |   |                                     | (8,501  | ) |   |   | (11,427 | ) |   |   | (10,599 | ) |
|  Investment                income                                           |   |                                     | 2,923   |   |   |   | 5,920 |   |   |   | 3,733 |   |
|  Fair                market value increase in interest rate contract        |   |                                     | 836     |   |   |   | 5,942 |   |   |   | 4,924 |   |
|  Loss                from continuing operations before income taxes         |   |                                     | (31,671 | ) |   |   | (27,870 | ) |   |   | (16,041 | ) |
|  Income                tax (provision) benefit                              |   |                                     | (2,176  | ) |   |   | 1,048 |   |   |   | 8,953 |   |
|  Equity                in loss of affiliates, net                           |   |                                     | (43     | ) |   |   | (487 | ) |   |   | (300 | ) |
|  Loss                from continuing operations                             |   |                                     | (33,890 | ) |   |   | (27,309 | ) |   |   | (7,388 | ) |
|  Net                loss from discontinued operations                       |   |                                     | (14,405 | ) |   |   | (4,806 | ) |   |   | (13,913 | ) |
|  Net                gain on disposal of discontinued operations             |   |                                     | 13,600  |   |   |   | 13,575 |   |   |   | 9,522 |   |
|  Income                tax (provision) benefit from discontinued operations |   |                                     | (2,604  | ) |   |   | (825 | )  |   |   | 14,010 |   |
| ** NET                EARNINGS (LOSS)**                                     |   | $                                        | (37,299 | ) |   | $ | (19,365 | ) |   | $ | 2,231 |   |
|                                                                             |   |                                     |    |   |   |   |   |   |   |   |   |   |
| **BASIC                AND DILUTED EARNINGS (LOSS) PER SHARE:**                  |   |                                     |    |   |   |   |   |   |   |   |   |   |
|  Loss                from continuing operations                             |   | $                                        | (1.34   | ) |   | $ | (1.08 | ) |   | $ | (0.29 | ) |
|  Loss                from discontinued operations, net                      |   |                                     | (0.58   | ) |   |   | (0.19 | ) |   |   | (0.56 | ) |
|  Gain                on disposal of discontinued operations, net            |   |                                     | 0.54    |   |   |   | 0.54 |   |   |   | 0.38 |   |
|  Income                tax (provision) benefit from discontinued operations |   |                                     | (0.10   | ) |   |   | (0.03 | ) |   |   | 0.56 |   |
| **NET                EARNINGS (LOSS)**                                           |   | $                                        | (1.48   | ) |   | $ | (0.76 | ) |   | $ | 0.09 |   |
|                                                                             |   |                                     |    |   |   |   |   |   |   |   |   |   |
| Weighted                average shares outstanding:                              |   |                                     |    |   |   |   |   |   |   |   |   |   |
|   Basic                and Diluted                                     |   |                                     | 25,226  |   |   |   | 25,224 |   |   |   | 25,192 |   |

*The      accompanying Notes to Consolidated Financial Statements are an integral part      of      these statements.*

----

**THE      FAIRCHILD CORPORATION AND SUBSIDIARIES**

**CONSOLIDATED      STATEMENTS OF STOCKHOLDERS’ EQUITY**

**(In      thousands, except share data)**

|                                                                                                      |   |   | Class                A Common Stock  |   |   |   | Class                B  Common Stock  |   |   |   | Paid-in                Capital  |   |   |   | Treasury                Stock  |   |   |   | Retained                Earnings (Accumulated Deficit) |   |   |   | Notes                Due From Stockholders  |   |   |   | Accumulated                Other Comprehensive Loss  |   |   |   | Total  |   |
|-----------------------------------------------------------------------------------------------------------|--------|--------|-------------------------------------------|--------|--------|--------|-------------------------------------------------|--------|--------|--------|--------------------------------------|--------|--------|--------|-------------------------------------|--------|--------|--------|--------------------------------------------------------|--------|--------|--------|-------------------------------------------------------|--------|--------|--------|-----------------------------------------------------------|--------|--------|--------|-------------|--------|
| Balance,                October 1, 2003                                                                   |   | $      | 3,037                                     |   |   | $      | 262                                             |   |   | $      | 232,741                              |   |   | $      | (76,459                             | )      |   | $      | 38,129                                                 |   |   | $      | (1,508                                                | )      |   | $      | (60,687                                                   | )      |   | $      | 135,515     |   |
| Effect                of restatement                                                                      |   |   | -                                         |   |   |   | -                                               |   |   |   | -                                    |   |   |   | -                                   |   |   |   | 624                                                    |   |   |   | -                                                     |   |   |   | -                                                         |   |   |   | 624         |   |
| Restated                balance, October 1, 2003                                                          |   |   | 3,037                                     |   |   |   | 262                                             |   |   |   | 232,741                              |   |   |   | (76,459                             | )      |   |   | 38,753                                                 |   |   |   | (1,508                                                | )      |   |   | (60,687                                                   | )      |   |   | 136,139     |   |
| Comprehensive                income:                                                                      |   |   |                                      |   |   |   |                                            |   |   |   |                                 |   |   |   |                                |   |   |   |                                                   |   |   |   |                                                  |   |   |   |                                                      |   |   |   |        |   |
| Restated                net earnings                                                                      |   |   | -                                         |   |   |   | -                                               |   |   |   | -                                    |   |   |   | -                                   |   |   |   | 2,231                                                  |   |   |   | -                                                     |   |   |   | -                                                         |   |   |   | 2,231       |   |
| Cumulative                translation adjustment                                                          |   |   | -                                         |   |   |   | -                                               |   |   |   | -                                    |   |   |   | -                                   |   |   |   | -                                                      |   |   |   | -                                                     |   |   |   | 517                                                       |   |   |   | 517         |   |
| Change                in fair market value of cash flow hedges                                            |   |   | -                                         |   |   |   | -                                               |   |   |   | -                                    |   |   |   | -                                   |   |   |   | -                                                      |   |   |   | -                                                     |   |   |   | 105                                                       |   |   |   | 105         |   |
| Excess                of additional pension liability over unrecognized                prior service cost |   |   | -                                         |   |   |   | -                                               |   |   |   | -                                    |   |   |   | -                                   |   |   |   | -                                                      |   |   |   | -                                                     |   |   |   | (1,811                                                    | )      |   |   | (1,811      | )      |
| Net                unrealized holding changes on available-for-sale                securities             |   |   | -                                         |   |   |   | -                                               |   |   |   | -                                    |   |   |   | -                                   |   |   |   | -                                                      |   |   |   | -                                                     |   |   |   | 1,242                                                     |   |   |   | 1,242       |   |
| Total                restated comprehensive income                                                        |   |   |                                      |   |   |   |                                            |   |   |   |                                 |   |   |   |                                |   |   |   |                                                   |   |   |   |                                                  |   |   |   |                                                      |   |   |   | 2,284       |   |
| Proceeds                from stockholders loan repayments                                                 |   |   | -                                         |   |   |   | -                                               |   |   |   | -                                    |   |   |   | -                                   |   |   |   | -                                                      |   |   |   | 447                                                   |   |   |   | -                                                         |   |   |   | 447         |   |
| Proceeds                received from stock options exercised                                             |   |   | 1                                         |   |   |   | -                                               |   |   |   | 25                                   |   |   |   | -                                   |   |   |   | -                                                      |   |   |   | -                                                     |   |   |   | -                                                         |   |   |   | 26          |   |
| Restated                balance, September 30, 2004                                                       |   |   | 3,038                                     |   |   |   | 262                                             |   |   |   | 232,766                              |   |   |   | (76,459                             | )      |   |   | 40,984                                                 |   |   |   | (1,061                                                | )      |   |   | (60,634                                                   | )      |   |   | 138,896     |   |
| Comprehensive                income (loss):                                                               |   |   |                                      |   |   |   |                                            |   |   |   |                                 |   |   |   |                                |   |   |   |                                                   |   |   |   |                                                  |   |   |   |                                                      |   |   |   |        |   |
| Restated                net loss                                                                          |   |   | -                                         |   |   |   | -                                               |   |   |   | -                                    |   |   |   | -                                   |   |   |   | (19,365                                                | )      |   |   | -                                                     |   |   |   | -                                                         |   |   |   | (19,365     | )      |
| Cumulative                translation adjustment                                                          |   |   | -                                         |   |   |   | -                                               |   |   |   | -                                    |   |   |   | -                                   |   |   |   | -                                                      |   |   |   | -                                                     |   |   |   | (1,366                                                    | )      |   |   | (1,366      | )      |
| Change                in fair market value of cash flow hedges                                            |   |   | -                                         |   |   |   | -                                               |   |   |   | -                                    |   |   |   | -                                   |   |   |   | -                                                      |   |   |   | -                                                     |   |   |   | 114                                                       |   |   |   | 114         |   |
| Excess                of additional pension liability over unrecognized prior service                cost |   |   | -                                         |   |   |   | -                                               |   |   |   | -                                    |   |   |   | -                                   |   |   |   | -                                                      |   |   |   | -                                                     |   |   |   | (7,457                                                    | )      |   |   | (7,457      | )      |
| Net                unrealized holding changes on available-for-sale                securities        |   |   | -                                         |   |   |   | -                                               |   |   |   | -                                    |   |   |   | -                                   |   |   |   | -                                                      |   |   |   | -                                                     |   |   |   | (235                                                      | )      |   |   | (235        | )      |
| Total                restated comprehensive loss                                                     |   |   |                                      |   |   |   |                                            |   |   |   |                                 |   |   |   |                                |   |   |   |                                                   |   |   |   |                                                  |   |   |   |                                                      |   |   |   | (28,309     | )      |
| Proceeds                received from deferred compensation units exercised                               |   |   | 9                                         |   |   |   | -                                               |   |   |   | (309                                 | )      |   |   | 300                                 |   |   |   | -                                                      |   |   |   | -                                                     |   |   |   | -                                                         |   |   |   | -           |   |
| Purchase                of treasury shares                                                                |   |   | -                                         |   |   |   | -                                               |   |   |   | -                                    |   |   |   | (193                                | )      |   |   | -                                                      |   |   |   | -                                                     |   |   |   | -                                                         |   |   |   | (193        | )      |
| Proceeds                from stockholders loan repayments                                                 |   |   | -                                         |   |   |   | -                                               |   |   |   | -                                    |   |   |   | -                                   |   |   |   | -                                                      |   |   |   | 952                                                   |   |   |   | -                                                         |   |   |   | 952         |   |
| Restated                balance, September 30, 2005                                                       |   |   | 3,047                                     |   |   |   | 262                                             |   |   |   | 232,457                              |   |   |   | (76,352                             | )      |   |   | 21,619                                                 |   |   |   | (109                                                  | )      |   |   | (69,578                                                   | )      |   |   | 111,346     |   |
| Comprehensive                income (loss):                                                               |   |   |                                      |   |   |   |                                            |   |   |   |                                 |   |   |   |                                |   |   |   |                                                   |   |   |   |                                                  |   |   |   |                                                      |   |   |   |        |   |
| Net                loss                                                                                   |   |   | -                                         |   |   |   | -                                               |   |   |   | -                                    |   |   |   | -                                   |   |   |   | (37,299                                                | )      |   |   | -                                                     |   |   |   | -                                                         |   |   |   | (37,299     | )      |
| Cumulative                translation adjustment                                                          |   |   | -                                         |   |   |   | -                                               |   |   |   | -                                    |   |   |   | -                                   |   |   |   | -                                                      |   |   |   | -                                                     |   |   |   | 2,591                                                     |   |   |   | 2,591       |   |
| Change                in fair market value of cash flow hedges                                            |   |   | -                                         |   |   |   | -                                               |   |   |   | -                                    |   |   |   | -                                   |   |   |   | -                                                      |   |   |   | -                                                     |   |   |   | 298                                                       |   |   |   | 298         |   |
| Excess                of additional pension liability over unrecognized                prior service cost |   |   | -                                         |   |   |   | -                                               |   |   |   | -                                    |   |   |   | -                                   |   |   |   | -                                                      |   |   |   | -                                                     |   |   |   | 8,051                                                     |   |   |   | 8,051       |   |
| Net                unrealized holding changes onavailable-for-sale                securities              |   |   | -                                         |   |   |   | -                                               |   |   |   | -                                    |   |   |   | -                                   |   |   |   | -                                                      |   |   |   | -                                                     |   |   |   | 3,810                                                     |   |   |   | 3,810       |   |
| Total                comprehensive loss                                                              |   |   |                                      |   |   |   |                                            |   |   |   |                                 |   |   |   |                                |   |   |   |                                                   |   |   |   |                                                  |   |   |   |                                                      |   |   |   | (22,549     | )      |
| Compensation                expense from stock options                                                    |   |   | -                                         |   |   |   | -                                               |   |   |   | 155                                  |   |   |   | -                                   |   |   |   | -                                                      |   |   |   | -                                                     |   |   |   | -                                                         |   |   |   | 155         |   |
| Proceeds                from stockholders loan repayments                                                 |   |   | -                                         |   |   |   | -                                               |   |   |   | -                                    |   |   |   | -                                   |   |   |   | -                                                      |   |   |   | 66                                                    |   |   |   | -                                                         |   |   |   | 66          |   |
| Balance,                September 30, 2006                                                                |   | $      | 3,047                                     |   |   | $      | 262                                             |   |   | $      | 232,612                              |   |   | $      | (76,352                             | )      |   | $      | (15,680                                                | )      |   | $      | (43                                                   | )      |   | $      | (54,828                                                   | )      |   | $      | 89,018      |   |

*The      accompanying Notes to Consolidated Financial Statements are an integral part      of      these statements.*

----

**THE      FAIRCHILD CORPORATION AND SUBSIDIARIES**

**CONSOLIDATED      STATEMENTS OF CASH FLOWS**

**(In      thousands)**

|                                                                                                                 |   | Years                Ended September 30, |    |
|----------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------|---------|
|                                                                                                                 |   | 2006                                     |    |   | 2005 |   |   | 2004 |   |
|                                                                                                                 |   |                                     |    |   | Restated |   |   | Restated |   |
| Cash                flows from operating activities:                                                                 |   |                                     |    |   |   |   |   |   |   |
|   Net                earnings (loss)                                                                       |   | $                                        | (37,299 | ) |   | $ | (19,365 | ) |   | $ | 2,231 |   |
|   Depreciation                and amortization                                                             |   |                                     | 7,523   |   |   |   | 7,873 |   |   |   | 5,011 |   |
|   Deferred                loan fee amortization                                                            |   |                                     | 1,138   |   |   |   | 1,329 |   |   |   | 412 |   |
|   Gain                on sale of property, plant, and equipment, net                                       |   |                                     | (8      | ) |   |   | (645 | ) |   |   | (39 | ) |
|   Compensation                expense from stock options                                                   |   |                                     | 155     |   |   |   | - |   |   |   | - |   |
|   Equity                in loss of affiliates, net of distributions                                        |   |                                     | 43      |   |   |   | 487 |   |   |   | 300 |   |
|   Unrealized                holding gain on interest rate contract                                         |   |                                     | (836    | ) |   |   | (5,942 | ) |   |   | (4,924 | ) |
|   Loss                from impairments                                                                     |   |                                     | -       |   |   |   | 2,894 |   |   |   | 1,206 |   |
|   Realized                gain from sale and impairment of investments                                     |   |                                     | (1,812  | ) |   |   | (7,022 | ) |   |   | (4,263 | ) |
|   Change                in trading securities                                                              |   |                                     | (33,048 | ) |   |   | 8,097 |   |   |   | 32,518 |   |
|   Change                in accounts receivable                                                             |   |                                     | 1,798   |   |   |   | 9,975 |   |   |   | (16,805 | ) |
|   Change                in inventories                                                                     |   |                                     | (15,862 | ) |   |   | 4,456 |   |   |   | (16,520 | ) |
|   Change                in prepaid expenses and other current assets                                       |   |                                     | (2,673  | ) |   |   | 513 |   |   |   | (3,613 | ) |
|   Change                in other non-current assets                                                        |   |                                     | 5,053   |   |   |   | 978 |   |   |   | (19,956 | ) |
|                  Change in accounts payable, accrued liabilities and other long-term                liabilities |   |                                     | 15,970  |   |   |   | (8,226 | ) |   |   | 9,219 |   |
|   Non-cash                charges and working capital changes of discontinued                operations    |   |                                     | (11,915 | ) |   |   | (8,462 | ) |   |   | 2,122 |   |
|   Net                cash used for operating activities                                                    |   |                                     | (71,773 | ) |   |   | (13,060 | ) |   |   | (13,101 | ) |
| Cash                flows from investing activities:                                                                 |   |                                     |    |   |   |   |   |   |   |   |   |   |
|   Purchase                of property, plant and equipment                                                 |   |                                     | (7,777  | ) |   |   | (11,668 | ) |   |   | (12,260 | ) |
|   Proceeds                from sale of plant, property and equipment                                       |   |                                     | 61      |   |   |   | 10,502 |   |   |   | 4,264 |   |
|   Change                in available-for-sale investment securities, net                                   |   |                                     | 4,239   |   |   |   | 9,532 |   |   |   | (18,577 | ) |
|   Equity                investment in affiliates                                                           |   |                                     | -       |   |   |   | (400 | ) |   |   | - |   |
|   Acquisitions,                net of cash acquired                                                        |   |                                     | -       |   |   |   | - |   |   |   | (75,495 | ) |
|   Net                proceeds received from the sale of discontinued operations                            |   |                                     | 54,561  |   |   |   | 18,500 |   |   |   | 5,736 |   |
|   Changes                in notes receivable                                                               |   |                                     | 4,001   |   |   |   | 963 |   |   |   | 152 |   |
|   Investing                activities of discontinued operations                                           |   |                                     | (98     | ) |   |   | (627 | ) |   |   | (1,104 | ) |
|   Net                cash provided by (used for) investing activities                                      |   |                                     | 54,987  |   |   |   | 26,802 |   |   |   | (97,284 | ) |
| Cash                flows from financing activities:                                                                 |   |                                     |    |   |   |   |   |   |   |   |   |   |
|   Proceeds                from issuance of debt                                                            |   |                                     | 50,068  |   |   |   | 29,894 |   |   |   | 171,493 |   |
|   Debt                repayments                                                                           |   |                                     | (30,589 | ) |   |   | (43,395 | ) |   |   | (103,507 | ) |
|   Issuance                of Class A common stock                                                          |   |                                     | -       |   |   |   | - |   |   |   | 26 |   |
|   Purchase                of treasury stock                                                                |   |                                     | -       |   |   |   | (193 | ) |   |   | - |   |
|   Payment                of financing fees                                                                 |   |                                     | (2,403  | ) |   |   | (377 | ) |   |   | (3,246 | ) |
|   Proceeds                from stockholder loan repayments                                                 |   |                                     | 66      |   |   |   | 952 |   |   |   | 447 |   |
|   Payment                of interest rate contract                                                         |   |                                     | (4,310  | ) |   |   | - |   |   |   | - |   |
|   Financing                activities of discontinued operations                                           |   |                                     | (504    | ) |   |   | (688 | ) |   |   | 51,409 |   |
|   Net                cash provided by (used for) financing activities                                      |   |                                     | 12,328  |   |   |   | (13,807 | ) |   |   | 116,622 |   |
| Net                change in cash and cash equivalents                                                               |   |                                     | (4,458  | ) |   |   | (65 | ) |   |   | 6,237 |   |
| Effect                of exchange rate changes on cash                                                               |   |                                     | 417     |   |   |   | (202 | ) |   |   | 11 |   |
| Cash                and cash equivalents, beginning of the period                                                    |   |                                     | 12,582  |   |   |   | 12,849 |   |   |   | 6,601 |   |
| Cash                and cash equivalents, end of the period                                                          |   | $                                        | 8,541   |   |   | $ | 12,582 |   |   | $ | 12,849 |   |

*The      accompanying Notes to Consolidated Financial Statements are an integral part      of      these statements.*

----

**THE      FAIRCHILD CORPORATION AND SUBSIDIARIES**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

| **1.** | **SUMMARY                        OF SIGNIFICANT ACCOUNTING                        POLICIES:** |
|--------|-----------------------------------------------------------------------------------------------|

*     General:*

*     Corporate      Structure:*

*Nature      of Business Operations: *

*    Fiscal      Year:*

*     Basis      of Presentation:*

*     Liquidity:*

*     Revenue      Recognition:*

*Shipping      and Handling Costs: *

*Concentration      of Credit Risk:*

*Cash      Equivalents/Statements of Cash Flows:*

| (In                thousands)     |   | 2006   |   |   | 2005   |   |   | 2004   |   |
|-----------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|  Interest                    |   | $      | 10,131 |   |   | $      | 13,488 |   |   | $ | 12,052 |   |
|  Income                taxes |   |   | 260    |   |   |   | 520    |   |   |   | 263 |   |

----

*     Restricted      Cash and Investments:*

*     Investments:*

*Accounts      Receivable:*

| (In                thousands)                      |   | 2006   |   |   | 2005   |   |   | 2004   |   |
|----------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|  Beginning                balance             |   | $      | 2,679  |   |   | $      | 2,775  |   |   | $ | 1,221 |   |
|  From                acquired companies       |   |   | -      |   |   |   | -      |   |   |   | 1,983 |   |
|  Charges                to cost and expenses  |   |   | 1,002  |   |   |   | 629    |   |   |   | 48 |   |
|  Charges                to other accounts (a) |   |   | 41     |   |   |   | (183   | )      |   |   | 161 |   |
|  Amounts                written off           |   |   | (2,639 | )      |   |   | (542   | )      |   |   | (638 | ) |
|  Ending                balance                |   | $      | 1,083  |   |   | $      | 2,679  |   |   | $ | 2,775 |   |

| *(a)* | *Represent                recoveries of amounts written off in prior periods and foreign currency                translation adjustments.* |
|-------|--------------------------------------------------------------------------------------------------------------------------------------------|

----

*     Inventories:*

| (In                thousands)                      |   | 2006   |   |   | 2005   |   |   | 2004   |   |
|----------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|  Beginning                balance             |   | $      | 15,118 |   |   | $      | 13,681 |   |   | $ | 7,765 |   |
|  From                acquired companies       |   |   | -      |   |   |   | -      |   |   |   | 2,107 |   |
|  Charges                to cost and expenses  |   |   | 768    |   |   |   | 3,378  |   |   |   | 4,320 |   |
|  Charges                to other accounts (a) |   |   | 196    |   |   |   | (616   | )      |   |   | 155 |   |
|  Amounts                written off           |   |   | (859   | )      |   |   | (1,325 | )      |   |   | (666 | ) |
|  Ending                balance                |   | $      | 15,223 |   |   | $      | 15,118 |   |   | $ | 13,681 |   |

| *(a)* | *Represent                recoveries of amounts written off in prior periods and foreign currency                translation adjustments.* |
|-------|--------------------------------------------------------------------------------------------------------------------------------------------|

*Properties      and Depreciation:*

|                                                  |   | September                30, |   |
|-------------------------------------------------------|--------|------------------------------|--------|
| (In                thousands)                         |   | 2006                         |   |   | 2005 |   |
| Land                                                  |   | $                            | 21,606 |   |   | $ | 21,605 |   |
| Building                and improvements              |   |                         | 11,482 |   |   |   | 11,616 |   |
| Machinery                and equipment                |   |                         | 14,866 |   |   |   | 13,442 |   |
| Transportation                vehicles                |   |                         | 7,134  |   |   |   | 6,471 |   |
| Furniture                and fixtures                 |   |                         | 24,838 |   |   |   | 19,237 |   |
| Construction                in progress               |   |                         | 3,761  |   |   |   | 3,550 |   |
| Property,                plant and equipment, at cost |   |                         | 83,687 |   |   |   | 75,921 |   |
| Less:                Accumulated depreciation         |   |                         | 24,989 |   |   |   | 18,453 |   |
| Net                property, plant and equipment      |   | $                            | 58,698 |   |   | $ | 57,468 |   |

*Leases:*

*Goodwill      and Intangible Assets*

*Deferred      Loan Costs:*

*Valuation      of Long-Lived Assets*

----

***    ***
*      Environmental Liabilities*

*Income      Taxes:*

*Other      Obligations: *

*Foreign      Currency Translation:*

*Advertising      Expense: *

*Research      and Development*

*     Stock-Based      Compensation*
*Share-Based Payment*
*Accounting for Stock-Based Compensation*

----

| (In                thousands, except per share data)                                                                                                             |   | 2005   |    |   | 2004   |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| Net                earnings (loss), as restated                                                                                                                  |   | $      | (19,365 | )      |   | $      | 2,231 |   |
| Total                stock-based employee compensation  expense determined under the                fair value based method for all awards, net of tax |   |   | (150    | )      |   |   | (334 | ) |
|     Pro                forma                                                                                                                 |   | $      | (19,515 | )      |   | $      | 1,897 |   |
| Basic                and diluted earnings (loss) per share:                                                                                                      |   |   |    |   |   |   |   |   |
|     As                restated                                                                                                               |   | $      | (0.76   | )      |   | $      | 0.09 |   |
|     Pro                forma                                                                                                                 |   |   | (0.77   | )      |   |   | 0.08 |   |

|                                   |   | 2006   |      |   | 2005   |   |      | 2004                       |   |
|----------------------------------------|--------|--------|-----------|--------|--------|--------|-----------|----------------------------|--------|
| Risk-free                interest rate |   |   | 4.6%-5.0% |   |   |   | 3.6%-4.2% |                       |   |   | 3.4% |   |
| Expected                life in years  |   |   | 4.94      |   |   |   | 4.94      |                       |   |   | 4.92 |   |
| Expected                volatility     |   |   | 60%-61%   |   |   |   | 61%-63%   |                       |   |   | 72% |   |
| Expected                dividends      |   | None   |      |   | None   |   |      |                  None |   |

*          Derivative Instruments and Hedging Activities*

*     Fair      Value of Financial Instruments*

*Discontinued      Operations:*
*Accounting      for the Impairment or Disposal of Long-lived Assets*

----

*     Use      of Estimates*

*Recently      Issued      Accounting Pronouncements:*
*The Fair Value Option for Financial Assets and      Liabilities*

*Employers’ Accounting for      Defined Benefit Pension and Other Postretirement Pension Plans*

*Fair Value      Measurements*

*Accounting for Uncertainty in      Income Taxes*

* Accounting for      Certain Hybrid Financial Instruments*
* Accounting for Derivative Instruments and Hedging      Activities*
* *
*Accounting for      Transfers and Servicing of Financial Assets and Extinguishments of      Liabilities.*

----

* Accounting Changes and Error      Corrections,*
* Accounting      Changes,*
* Reporting Accounting Changes in Interim      Financial Statements,*

| **2.** | **RESTATEMENT** |
|--------|-----------------|

| ·   | A                $0.6 million increase in earnings for periods prior to October 1,                2003 (as                reflected in beginning retained earnings as of October 1,                2003); |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | A                $1.1 million decrease in earnings for fiscal                2004; |
|--------------------|------------------------------------------------------------------------------------|

| ·   | A                $1.9 million decrease in net loss for fiscal 2005;                and |
|--------------------|----------------------------------------------------------------------------------------|

| ·   | A                $1.3 million decrease in net loss for the nine months ended June                30, 2006                (see Note 18). |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                        |   | **Years                Ended**   |    |
|-------------------------------------------------------------|--------|----------------------------------|---------|
|                                                        |   | **September                30,** |    |
| (In                thousands, except per share data)        |   | **2005**                         |    |   | **2004** |   |
| Net                income (loss), as previously reported    |   | $                                | (21,284 | ) |   | $ | 3,361 |   |
| Restatement                adjustments for:                 |   |                             |    |   |   |   |   |   |
| Commitments                and contingencies                |   |                             | 1,565   |   |   |   | (36 | ) |
| Long-term                investments                        |   |                             | (833    | ) |   |   | 139 |   |
| Income                taxes                                 |   |                             | 1,187   |   |   |   | (1,233 | ) |
| Net                income (loss), as restated               |   | $                                | (19,365 | ) |   | $ | 2,231 |   |
|                                                        |   |                             |    |   |   |   |   |   |
| Basic                and diluted earnings (loss) per share: |   |                             |    |   |   |   |   |   |
| As                previously reported                       |   | $                                | (0.84   | ) |   | $ | 0.13 |   |
| Total                impact of restatement adjustments      |   |                             | 0.08    |   |   |   | (0.04 | ) |
| As                restated                                  |   | $                                | (0.76   | ) |   | $ | 0.09 |   |

**Income      Taxes**

*Foreign      Taxes*

*Domestic      Taxes*

*Tax      Contingencies*

----

**Commitments      and Contingencies**

*Accounting for Contingencies*

*Accounting for Leases*

**Long-Term      Investments**

----

**Financial      Statement Impact**

*Balance      Sheet Impact*

|                                                 |   |                                      |    |   | Restatement                Adjustments for: |   |   |                                         |   |   |                                 |   |
|-----------------------------------------------------------|--------|-------------------------------------------|---------|--------|---------------------------------------------|--------|--------|----------------------------------------------|--------|--------|--------------------------------------|--------|
| (In                thousands)                             |   | As                Previously Reported (a) |    |   | Income                Taxes                 |   |   | Commitments                and Contingencies |   |   | Long-Term                Investments |   |   | Total                Restatement Adjustments |   |   | As                Restated |   |
| Assets:                                              |   |                                      |    |   |                                        |   |   |                                         |   |   |                                 |   |   |   |   |   |   |   |
| Cash,                cash equivalents, and investments    |   | $                                         | 97,932  |   |                                        |   | -      |                                         |   |   | -                                    |   |   |   | - |   |   | $ | - |   |   | $ | 97,932 |   |
| Accounts                receivable-trade, net             |   |                                      | 18,475  |   |                                        |   | -      |                                         |   |   | -                                    |   |   |   | - |   |   |   | - |   |   |   | 18,475 |   |
| Inventories,                net                           |   |                                      | 90,856  |   |                                        |   | -      |                                         |   |   | -                                    |   |   |   | - |   |   |   | - |   |   |   | 90,856 |   |
| Property,                plant, and equipment, net        |   |                                      | 57,468  |   |                                        |   | -      |                                         |   |   | -                                    |   |   |   | - |   |   |   | - |   |   |   | 57,468 |   |
| Intangible                assets, net                     |   |                                      | 42,665  |   |                                        |   | 2,449  |                                         |   |   | -                                    |   |   |   | - |   |   |   | 2,449 |   |   |   | 45,114 |   |
| Prepaid                pension assets                     |   |                                      | 31,239  |   |                                        |   | -      |                                         |   |   | -                                    |   |   |   | - |   |   |   | - |   |   |   | 31,239 |   |
| Assets                of discontinued operations          |   |                                      | 80,882  |   |                                        |   | -      |                                         |   |   | -                                    |   |   |   | - |   |   |   | - |   |   |   | 80,882 |   |
| Other                assets                               |   |                                      | 27,543  |   |                                        |   | (68    | )                                            |   |   | -                                    |   |   |   | (802 | ) |   |   | (870 | ) |   |   | 26,673 |   |
| Total                assets                               |   | $                                         | 447,060 |   |                                        | $      | 2,381  |                                         |   | $      | -                                    |   |   | $ | (802 | ) |   | $ | 1,579 |   |   | $ | 448,639 |   |
|                                                 |   |                                      |    |   |                                        |   |   |                                         |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities                and Stockholders' Equity       |   |                                      |    |   |                                        |   |   |                                         |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities:                                         |   |                                      |    |   |                                        |   |   |                                         |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Debt                                                 |   | $                                         | 68,892  |   |                                        | $      | -      |                                         |   | $      | -                                    |   |   | $ | - |   |   | $ | - |   |   | $ | 68,892 |   |
| Accounts                payable and accrued liabilities   |   |                                      | 58,944  |   |                                        |   | -      |                                         |   |   | 122                                  |   |   |   | 89 |   |   |   | 211 |   |   |   | 59,155 |   |
| Postretirement                liabilities                 |   |                                      | 78,558  |   |                                        |   | -      |                                         |   |   | -                                    |   |   |   | - |   |   |   | - |   |   |   | 78,558 |   |
| Tax                liabilities                            |   |                                      | 43,267  |   |                                        |   | (415   | )                                            |   |   | -                                    |   |   |   | - |   |   |   | (415 | ) |   |   | 42,852 |   |
| Liabilities                of discontinued operations     |   |                                      | 55,021  |   |                                        |   | -      |                                         |   |   | -                                    |   |   |   | - |   |   |   | - |   |   |   | 55,021 |   |
| Other                liabilities                          |   |                                      | 32,460  |   |                                        |   | -      |                                         |   |   | 355                                  |   |   |   | - |   |   |   | 355 |   |   |   | 32,815 |   |
| Total                liabilities                          |   |                                      | 337,142 |   |                                        |   | (415   | )                                            |   |   | 477                                  |   |   |   | 89 |   |   |   | 151 |   |   |   | 337,293 |   |
|                                                 |   |                                      |    |   |                                        |   |   |                                         |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stockholders'                equity:                      |   |                                      |    |   |                                        |   |   |                                         |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Paid-in-capital                                           |   |                                      | 232,457 |   |                                        |   | -      |                                         |   |   | -                                    |   |   |   | - |   |   |   | - |   |   |   | 232,457 |   |
| Retained                earnings (accumulated deficit)    |   |                                      | 20,206  |   |                                        |   | 2,781  |                                         |   |   | (477                                 | )      |   |   | (891 | ) |   |   | 1,413 |   |   |   | 21,619 |   |
| Accumulated                other comprehensive loss       |   |                                      | (69,593 | )      |                                        |   | 15     |                                         |   |   | -                                    |   |   |   | - |   |   |   | 15 |   |   |   | (69,578 | ) |
| Other                stockholders' equity                 |   |                                      | (73,152 | )      |                                        |   | -      |                                         |   |   | -                                    |   |   |   | - |   |   |   | - |   |   |   | (73,152 | ) |
| Total                stockholders' equity                 |   |                                      | 109,918 |   |                                        |   | 2,796  |                                         |   |   | (477                                 | )      |   |   | (891 | ) |   |   | 1,428 |   |   |   | 111,346 |   |
| Total                liabilities and stockholders' equity |   | $                                         | 447,060 |   |                                        | $      | 2,381  |                                         |   | $      | -                                    |   |   | $ | (802 | ) |   | $ | 1,579 |   |   | $ | 448,639 |   |

| *(a)* | *Certain                previously reported balances have been reclassified to conform to                the                current condensed consolidated balance sheet presentation, including                reclassification to discontinued operations those assets and liabilities                related to a landfill development partnership, sold in April 2006,                and                Airport Plaza shopping center, sold in July                2006.* |
|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (In                thousands)                                     |   | Retained                Earnings |   |   | Accumulated                Other Comprehensive Loss |   |    | Other                Stockholders' Equity |   |   | Total                Stockholders' Equity |   |
|-------------------------------------------------------------------|--------|----------------------------------|--------|--------|-----------------------------------------------------|--------|---------|-------------------------------------------|--------|--------|-------------------------------------------|--------|
| September                30, 2003 balance, as previously reported |   | $                                | 38,129 |   |                                                | $      | (60,687 | )                                         |   | $      | 158,073                                   |   |   | $ | 135,515 |   |
| Restatement                adjustments for:                       |   |                             |   |   |                                                |   |    |                                      |   |   |                                      |   |   |   |   |   |
| Commitments                and contingencies                      |   |                             | (2,005 | )      |                                                |   | -       |                                      |   |   | -                                         |   |   |   | (2,005 | ) |
| Long-term                investments                              |   |                             | (199   | )      |                                                |   | -       |                                      |   |   | -                                         |   |   |   | (199 | ) |
| Pre-tax                total impact of restatement adjustments    |   |                             | (2,204 | )      |                                                |   | -       |                                      |   |   | -                                         |   |   |   | (2,204 | ) |
| Restatement                adjustments for income taxes           |   |                             | 2,828  |   |                                                |   | -       |                                      |   |   | -                                         |   |   |   | 2,828 |   |
| Tax                impact (benefit) of restatement adjustments    |   |                             | -      |   |                                                |   | -       |                                      |   |   | -                                         |   |   |   | - |   |
| Total                impact of restatement adjustments            |   |                             | 624    |   |                                                |   | -       |                                      |   |   | -                                         |   |   |   | 624 |   |
| September                30, 2003 balance, as restated            |   | $                                | 38,753 |   |                                                | $      | (60,687 | )                                         |   | $      | 158,073                                   |   |   | $ | 136,139 |   |

*Statement      of Operations Impact*

|                                                                |   |                                      |    |   | Restatement                Adjustments for: |   |   |                                         |   |   |                                 |   |
|---------------------------------------------------------------------|--------|-------------------------------------------|---------|--------|---------------------------------------------|--------|--------|----------------------------------------------|--------|--------|--------------------------------------|--------|
| (In                thousands)                                       |   | As                Previously Reported (a) |    |   | Income                Taxes                 |   |   | Commitments                and Contingencies |   |   | Long-term                Investments |   |   | Total                Restatement Adjustments |   |   | As                Restated |   |
| Revenues                                                            |   | $                                         | 342,243 |   |                                        | $      | -      |                                         |   | $      | -                                    |   |   | $ | - |   |   | $ | - |   |   | $ | 342,243 |   |
| Cost                of revenues                                     |   |                                      | 211,751 |   |                                        |   | -      |                                         |   |   | -                                    |   |   |   | - |   |   |   | - |   |   |   | 211,751 |   |
| Other                operating expenses                             |   |                                      | 158,300 |   |                                        |   | -      |                                         |   |   | 85                                   |   |   |   | 412 |   |   |   | 497 |   |   |   | 158,797 |   |
| Operating                loss                                       |   |                                      | (27,808 | )      |                                        |   | -      |                                         |   |   | (85                                  | )      |   |   | (412 | ) |   |   | (497 | ) |   |   | (28,305 | ) |
| Interest                expense, net                                |   |                                      | (11,577 | )      |                                        |   | -      |                                         |   |   | 150                                  |   |   |   | - |   |   |   | 150 |   |   |   | (11,427 | ) |
| Investment                income                                    |   |                                      | 6,009   |   |                                        |   | -      |                                         |   |   | -                                    |   |   |   | (89 | )  |   |   | (89 | ) |   |   | 5,920 |   |
| Fair                market value increase in interest rate contract |   |                                      | 5,942   |   |                                        |   | -      |                                         |   |   | -                                    |   |   |   | - |   |   |   | - |   |   |   | 5,942 |   |
| Loss                from continuing operations before income taxes  |   |                                      | (27,434 | )      |                                        |   | -      |                                         |   |   | 65                                   |   |   |   | (501 | ) |   |   | (436 | ) |   |   | (27,870 | ) |
| Income                tax (provision) benefit                       |   |                                      | (2,294  | )      |                                        |   | 3,342  |                                         |   |   | -                                    |   |   |   | - |   |   |   | 3,342 |   |   |   | 1,048 |   |
| Equity                in loss of affiliates, net                    |   |                                      | (155    | )      |                                        |   | -      |                                         |   |   | -                                    |   |   |   | (332 | ) |   |   | (332 | ) |   |   | (487 | ) |
| Loss                from continuing operations                      |   |                                      | (29,883 | )      |                                        |   | 3,342  |                                         |   |   | 65                                   |   |   |   | (833 | ) |   |   | 2,574 |   |   |   | (27,309 | ) |
| Loss                from discontinued operations, net               |   |                                      | (6,306  | )      |                                        |   | -      |                                         |   |   | 1,500                                |   |   |   | - |   |   |   | 1,500 |   |   |   | (4,806 | ) |
| Gain                on disposal of discontinued operations, net     |   |                                      | 13,575  |   |                                        |   | -      |                                         |   |   | -                                    |   |   |   | - |   |   |   | - |   |   |   | 13,575 |   |
| Income                tax benefit from discontinued operations      |   |                                      | 1,330   |   |                                        |   | (2,155 | )                                            |   |   | -                                    |   |   |   | - |   |   |   | (2,155 | ) |   |   | (825 | ) |
| Net                earnings (loss)                                  |   | $                                         | (21,284 | )      |                                        | $      | 1,187  |                                         |   | $      | 1,565                                |   |   | $ | (833 | ) |   | $ | 1,919 |   |   | $ | (19,365 | ) |

| *(a)* | *Certain                  previously reported balances have been reclassified to conform                  to the                  current condensed consolidated balance sheet presentation, including                  reclassification to discontinued operations those assets and liabilities                  related to a landfill development partnership, sold in April 2006,                  and                  Airport Plaza shopping center, sold in July                  2006.* |
|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                                |   |                                      |    |   | Restatement                Adjustments for: |   |   |                                         |   |   |                                 |   |
|---------------------------------------------------------------------|--------|-------------------------------------------|---------|--------|---------------------------------------------|--------|--------|----------------------------------------------|--------|--------|--------------------------------------|--------|
| (In                thousands)                                       |   | As                Previously Reported (a) |    |   | Income                Taxes                 |   |   | Commitments                and Contingencies |   |   | Long-term                Investments |   |   | Total                Restatement Adjustments |   |   | As                Restated |   |
| Revenues                                                            |   | $                                         | 319,062 |   |                                        | $      | -      |                                         |   | $      | -                                    |   |   | $ | - |   |   | $ | - |   |   | $ | 319,062 |   |
| Cost                of revenues                                     |   |                                      | 196,572 |   |                                        |   | -      |                                         |   |   |                                 |   |   |   | - |   |   |   | - |   |   |   | 196,572 |   |
| Other                operating expenses                             |   |                                      | 136,383 |   |                                        |   | -      |                                         |   |   | 206                                  |   |   |   | - |   |   |   | 206 |   |   |   | 136,589 |   |
| Operating                loss                                       |   |                                      | (13,893 | )      |                                        |   | -      |                                         |   |   | (206                                 | )      |   |   | - |   |   |   | (206 | ) |   |   | (14,099 | ) |
| Interest                expense, net                                |   |                                      | (10,768 | )      |                                        |   | -      |                                         |   |   | 169                                  |   |   |   | - |   |   |   | 169 |   |   |   | (10,599 | ) |
| Investment                income                                    |   |                                      | 3,733   |   |                                        |   | -      |                                         |   |   | -                                    |   |   |   | - |   |   |   | - |   |   |   | 3,733 |   |
| Fair                market value increase in interest rate contract |   |                                      | 4,924   |   |                                        |   | -      |                                         |   |   | -                                    |   |   |   | - |   |   |   | - |   |   |   | 4,924 |   |
| Loss                from continuing operations before income taxes  |   |                                      | (16,004 | )      |                                        |   | -      |                                         |   |   | (37                                  | )      |   |   | - |   |   |   | (37 | ) |   |   | (16,041 | ) |
| Income                tax (provision) benefit                       |   |                                      | 10,761  |   |                                        |   | (1,808 | )                                            |   |   | -                                    |   |   |   | - |   |   |   | (1,808 | ) |   |   | 8,953 |   |
| Equity                in loss of affiliates, net                    |   |                                      | (439    | )      |                                        |   | -      |                                         |   |   | -                                    |   |   |   | 139 |   |   |   | 139 |   |   |   | (300 | ) |
| Loss                from continuing operations                      |   |                                      | (5,682  | )      |                                        |   | (1,808 | )                                            |   |   | (37                                  | )      |   |   | 139 |   |   |   | (1,706 | ) |   |   | (7,388 | ) |
| Loss                from discontinued operations, net               |   |                                      | (13,914 | )      |                                        |   | -      |                                         |   |   | 1                                    |   |   |   | - |   |   |   | 1 |   |   |   | (13,913 | ) |
| Gain                on disposal of discontinued operations, net     |   |                                      | 9,522   |   |                                        |   | -      |                                         |   |   | -                                    |   |   |   | - |   |   |   | - |   |   |   | 9,522 |   |
| Income                tax benefit from discontinued operations      |   |                                      | 13,435  |   |                                        |   | 575    |                                         |   |   | -                                    |   |   |   | - |   |   |   | 575 |   |   |   | 14,010 |   |
| Net                earnings (loss)                                  |   | $                                         | 3,361   |   |                                        | $      | (1,233 | )                                            |   | $      | (36                                  | )      |   | $ | 139 |   |   | $ | (1,130 | ) |   | $ | 2,231 |   |

| *(a)* | *Certain                  previously reported balances have been reclassified to conform                  to the                  current condensed consolidated balance sheet presentation, including                  reclassification to discontinued operations those assets and liabilities                  related to a landfill development partnership, sold in April 2006,                  and                  Airport Plaza shopping center, sold in July                  2006.* |
|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                |   | For                the Year Ended September 30, 2005 |    |   | For                the Year Ended September 30, 2004 |   |
|---------------------------------------------------------------------|--------|------------------------------------------------------|---------|--------|------------------------------------------------------|--------|
| (In                thousands)                                       |   | As                Previously Reported                |    |   | Total                Restatement Adjustments (a)     |   |   | As                Restated |   |   | As                Previously Reported |   |   | Total                Restatement Adjustments (b) |   |   | As                Restated |   |
| Net                cash flows used in operating activities          |   | $                                                    | (13,959 | )      |                                                 | $      | 899 |   |   | $ | (13,060 | ) |   | $ | (15,559 | ) |   | $ | 2,458 |   |   | $ | (13,101 | ) |
| Net                cash flows provided by investing activities      |   |                                                 | 27,701  |   |                                                 |   | (899 | ) |   |   | 26,802 |   |   |   | (94,826 | ) |   |   | (2,458 | ) |   |   | (97,284 | ) |
| Net                cash flows provided by financing activities      |   |                                                 | (13,807 | )      |                                                 |   | - |   |   |   | (13,807 | ) |   |   | 116,622 |   |   |   | - |   |   |   | 116,622 |   |
| Net                increase (decrease) in cash and cash equivalents |   |                                                 | (65     | )      |                                                 |   | - |   |   |   | (65 | ) |   |   | 6,237 |   |   |   | - |   |   |   | 6,237 |   |
| Effect                of exchange rate changes on cash              |   |                                                 | (202    | )      |                                                 |   | - |   |   |   | (202 | ) |   |   | 11 |   |   |   | - |   |   |   | 11 |   |
| Cash                and cash equivalents, beginning of the period   |   |                                                 | 12,849  |   |                                                 |   | - |   |   |   | 12,849 |   |   |   | 6,601 |   |   |   | - |   |   |   | 6,601 |   |
| Cash                and cash equivalents, end of the period         |   | $                                                    | 12,582  |   |                                                 | $      | - |   |   | $ | 12,582 |   |   | $ | 12,849 |   |   | $ | - |   |   | $ | 12,849 |   |

| *(a)* |   | *The                primary impact to both operating and investing cash flows in fiscal                2005                resulted from the restatement adjustment associated with our investment                in                Voyager Kibris.* |
|-------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *(b)* |   | *The                primary impact to both operating and investing cash flows in fiscal                2004                resulted from the restatement adjustment associated with the additional                goodwill related to the establishment of the necessary deferred taxes                as                part of the acquisition of Hein Gericke and                PoloExpress.* |
|-------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **3.** | ** ACQUISITIONS** |
|--------|------------------------|

----

| **4.** | ** GOODWILL                            AND INTANGIBLE                            ASSETS** |
|--------|------------------------------------------------------------------------------------------------|

|   |  Changes                    in the carrying amount of goodwill by segment were as                    follows: |
|--------|--------------------------------------------------------------------------------------------------------------------|

| (In                  thousands)              |   | September                    30, 2004 |   |   | Translation                    Adjustment |   |   | September                    30, 2005 |   |   | Translation                    Adjustment |   |   | September                    30, 2006 |   |
|----------------------------------------------|--------|---------------------------------------|--------|--------|-------------------------------------------|--------|--------|---------------------------------------|--------|--------|-------------------------------------------|--------|--------|--------------------------------------------|--------|
|  PoloExpress,                  restated |   | $                                     | 3,221  |   |                                      |   | (81    | )                                     |   |   | 3,140                                     |   |   |                                       | 167    |   |   | $ | 3,307 |   |
|  Aerospace                              |   |                                  | 10,821 |   |                                      |   | -      |                                  |   |   | 10,821                                    |   |   |                                       | -      |   |   |   | 10,821 |   |
|  Total                                  |   | $                                     | 14,042 |   |                                      |   | (81    | )                                     |   |   | 13,961                                    |   |   |                                       | 167    |   |   | $ | 14,128 |   |

----

|   | The                components of intangible assets, all of which pertain to our PoloExpress                and Hein Gericke segments, were as                follows: |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (In                thousands)               |   | September                  30, 2004 |   |   | Amortization |   |   | Translation                  Adjustment |   |   | September                  30, 2005 |   |   | Amortization |   |   | Translation                Adjustment |   |   | September                  30, 2006 |   |
|---------------------------------------------|--------|-------------------------------------|--------|--------|--------------|--------|--------|-----------------------------------------|--------|--------|-------------------------------------|--------|--------|--------------|--------|--------|---------------------------------------|--------|--------|-------------------------------------|--------|
|  Trademarks                            |   | $                                   | 30,398 |   |         |   | -      |                                    |   |   | (974                                | )      |   |         | 29,424 |   |                                  |   | -      |                                |   |   | 1,545 |   |   | $ | 30,969 |   |
|  Customer                relationships |   |                                | 2,312  |   |         |   | (519   | )                                       |   |   | (72                                 | )      |   |         | 1,721  |   |                                  |   | (533   | )                                   |   |   | 91 |   |   |   | 1,279 |   |
|  Other                                 |   |                                | 53     |   |         |   | (41    | )                                       |   |   | (4                                  | )      |   |         | 8      |   |                                  |   | (8     | )                                   |   |   | - |   |   |   | - |   |
|  Total                                 |   | $                                   | 32,763 |   |         |   | (560   | )                                       |   |   | (1,050                              | )      |   |         | 31,153 |   |                                  |   | (541   | )                                   |   |   | 1,636 |   |   | $ | 32,248 |   |

| **5.** | ** **CASH                            EQUIVALENTS AND                            INVESTMENTS**** |
|--------|------------------------------------------------------------------------------------------------------|

|   | A                  summary of the cash equivalents and investments held by us                  follows: |
|--------|---------------------------------------------------------------------------------------------------------|

|                                                                                                                               |   | September                  30, 2006 |    |   | September                  30, 2005 |   |
|------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------|---------|--------|-------------------------------------|--------|
|                                                                                                                               |   | Aggregate                           |    |   | Aggregate                           |   |
|                                                                                                                               |   | Fair                                |    |   | Cost                                |   |   | Fair |   |   | Cost |   |
| (In                  thousands)                                                                                                    |   | Value                               |    |   | Basis                               |   |   | Value |   |   | Basis |   |
|  Cash                  and cash equivalents:                                                                                  |   |                                |    |   |                                |   |   |   |   |   |   |   |
|       U.S.                  government securities                                                    |   | $                                   | -       |   |                                | $      | - |   |   | $ | 16 |   |   | $ | 16 |   |
|       Money                  market and other cash funds                                             |   |                                | 8,541   |   |                                |   | 8,541 |   |   |   | 12,566 |   |   |   | 12,566 |   |
|  Total                  cash and cash equivalents                                                                             |   |                                | 8,541   |   |                                |   | 8,541 |   |   |   | 12,582 |   |   |   | 12,582 |   |
|                                                                                                                               |   |                                |    |   |                                |   |   |   |   |   |   |   |   |   |   |   |
|  Short-term                  investments:                                                                                     |   |                                |    |   |                                |   |   |   |   |   |   |   |   |   |   |   |
|       Money                  market funds – available-for-sale – restricted              |   |                                | 6,002   |   |                                |   | 6,002 |   |   |   | 4,965 |   |   |   | 4,965 |   |
|       Corporate                  bonds – trading securities                                    |   |                                | 42,919  |   |                                |   | 42,919 |   |   |   | - |   |   |   | - |   |
|       Equity                  securities – trading securities                                  |   |                                | 2,459   |   |                                |   | 2,459 |   |   |   | 10,733 |   |   |   | 10,733 |   |
|       Equity                  and equivalent securities – available-for-sale                   |   |                                | 5,132   |   |                                |   | 825 |   |   |   | - |   |   |   | - |   |
|  Total                  short-term investments                                                                                |   |                                | 56,512  |   |                                |   | 52,205 |   |   |   | 15,698 |   |   |   | 15,698 |   |
|                                                                                                                               |   |                                |    |   |                                |   |   |   |   |   |   |   |   |   |   |   |
|  Long-term                  investments:                                                                                      |   |                                |    |   |                                |   |   |   |   |   |   |   |   |   |   |   |
|       U.S.                  government securities – available-for-sale – restricted      |   |                                | 512     |   |                                |   | 512 |   |   |   | 9,547 |   |   |   | 9,547 |   |
|       Money                  market funds – available-for-sale – restricted              |   |                                | 10,313  |   |                                |   | 10,313 |   |   |   | 10,438 |   |   |   | 10,438 |   |
|       Corporate                  bonds – available-for-sale – restricted                 |   |                                | 28,934  |   |                                |   | 29,326 |   |   |   | 23,741 |   |   |   | 24,319 |   |
|       Equity                  and equivalent securities – available-for-sale –restricted |   |                                | 9,275   |   |                                |   | 7,984 |   |   |   | 4,247 |   |   |   | 3,500 |   |
|       Other                  securities – available-for-sale - restricted                      |   |                                | 11,915  |   |                                |   | 11,565 |   |   |   | 11,446 |   |   |   | 11,565 |   |
|       Equity                  and equivalent securities – available-for-sale                   |   |                                | -       |   |                                |   | - |   |   |   | 5,309 |   |   |   | 3,612 |   |
|       Other                  investments, at cost                                                    |   |                                | 4,370   |   |                                |   | 4,370 |   |   |   | 4,924 |   |   |   | 4,924 |   |
| Total                  long-term investments                                                                                       |   |                                | 65,319  |   |                                |   | 64,070 |   |   |   | 69,652 |   |   |   | 67,905 |   |
| Total                  cash equivalents and investments                                                                            |   | $                                   | 130,372 |   |                                | $      | 124,816 |   |   | $ | 97,932 |   |   | $ | 96,185 |   |

----

| (In                thousands)                                                         |   | 2006   |   |   | 2005   |   |   | 2004   |   |
|---------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|  Gross                realized gain from sales of available-for-sale securities  |   | $      | 873    |   |   | $      | 262    |   |   | $ | 42 |   |
|  Gross                realized loss from sales of available-for-sales securities |   |   | -      |   |   |   | (191   | )      |   |   | (141 | ) |
|  Gross                realized gain from sales of trading securities             |   |   | 667    |   |   |   | 183    |   |   |   | 411 |   |
|  Gross                realized loss from sales of trading securities             |   |   | (200   | )      |   |   | (6     | )      |   |   | (35 | ) |
|  Change                in unrealized holding gain (loss) from trading securities |   |   | 475    |   |   |   | 746    |   |   |   | (479 | ) |
|  Gross                realized loss from impairments                             |   |   | -      |   |   |   | (825   | )      |   |   | - |   |
|  Dividend                income, restated                                        |   |   | 1,108  |   |   |   | 5,751  |   |   |   | 3,935 |   |
|                                                                                  |   | $      | 2,923  |   |   | $      | 5,920  |   |   | $ | 3,733 |   |

| (In                thousands)                |   | Fair                Value |   |   | Cost                Basis |   |
|----------------------------------------------|--------|---------------------------|--------|--------|---------------------------|--------|
|  Due                in one year or less |   | $                         | 29,065 |   |                      | $      | 29,457 |   |
|  Due                after ten years     |   |                      | 43,300 |   |                      |   | 43,300 |   |
|                                         |   | $                         | 72,365 |   |                      | $      | 72,757 |   |

----

| **6.** | ** ****NOTES                          PAYABLE AND LONG-TERM                          DEBT****** |
|--------|------------------------------------------------------------------------------------------------------|

|                                                                              |   | September                30, |    |
|-----------------------------------------------------------------------------------|--------|------------------------------|---------|
|                                                                              |   | 2006                         |    |   | 2005 |   |
| (In                thousands)                                                     |   | Amount                       |    |   | Average                Rate |   |   | Amount |   |   | Average                Rate |   |
|  Revolving                credit facilities – Fairchild Sports         |   | $                            | 11,425  |   |   |   |  6.9% |   |   | $ | 8,917 |   |   |   |  5.6% |   |
|  Current                maturities of long-term debt                         |   |                         | 14,067  |   |   |   |   |   |   |   | 11,985 |   |   |   |   |   |
|  Total                notes payable and current maturities of long-term debt |   |                         | 25,492  |   |   |   |   |   |   |   | 20,902 |   |   |   |   |   |
|  Golden                Tree term loan – Corporate                      |   |                         | 30,000  |   |   |   | 12.8% |   |   |   | - |   |   |   | - |   |
|  Term                loan agreement – Fairchild Sports                 |   |                         | 17,382  |   |   |   |  4.6% |   |   |   | 25,301 |   |   |   |  3.7% |   |
|  Promissory                note – Corporate                            |   |                         | 13,000  |   |   |   | 11.5% |   |   |   | 13,000 |   |   |   | 10.3% |   |
|  CIT                revolving credit facility – Aerospace              |   |                         | 9,603   |   |   |   |  9.3% |   |   |   | 8,164 |   |   |   |  7.8% |   |
|  GMAC                credit facility – Fairchild Sports                |   |                         | 3,118   |   |   |   |  7.0% |   |   |   | 3,650 |   |   |   |  6.8% |   |
|  Other                notes payable, collateralized by assets                |   |                         | 3,837   |   |   |   |  6.7% |   |   |   | 5,263 |   |   |   |  4.1% |   |
|  Capital                lease obligations                                    |   |                         | 2,577   |   |   |   |  8.9% |   |   |   | 4,597 |   |   |   |  9.0% |   |
|  Less:                current maturities of long-term debt                   |   |                         | (14,067 | ) |   |   |   |   |   |   | (11,985 | ) |   |   |   |   |
|  Net                long-term debt                                           |   |                         | 65,450  |   |   |   |   |   |   |   | 47,990 |   |   |   |   |   |
|  Total                debt                                                   |   | $                            | 90,942  |   |   |   |   |   |   | $ | 68,892 |   |   |   |   |   |

***     Term      Loan at Corporate***

----

| ·   | We                must maintain cash, cash equivalents, or public securities that meet                or                exceed a minimum liquidity threshold between $10 million and $20                million. At September 30, 2006, our minimum liquidity requirement                was                $10.0 million, and accordingly we have classified $10.0 million of                qualified investments as restricted long-term                investments. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | A                change of control whereby Jeffrey Steiner, Eric Steiner, or Natalia                Hercot                cease to own a controlling interest in The Fairchild Corporation                would be                an event of default under the loan. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*     **Credit      Facilities at Hein Gericke***

----

*     **Credit      Facility at Aerospace Segment***

***Promissory      Note – Corporate***

*     **Guarantees***

***Letters      of Credit***

*     **Debt      Maturity Information***

----

| **7.** | **PENSIONS                              AND POSTRETIREMENT                              BENEFITS** |
|--------|----------------------------------------------------------------------------------------------------|

***     Defined      Benefit Plans***

|                                                                     |   | Pension                Benefits |    |   | Postretirement                Benefits (a) |   |
|--------------------------------------------------------------------------|--------|---------------------------------|---------|--------|--------------------------------------------|--------|
|                                                                     |   | September                30,    |    |   | September                30,               |   |
| (In                thousands)                                            |   | 2006                            |    |   | 2005                                       |   |   | 2006 |   |   | 2005 |   |
|  Change                in benefit obligation:                       |   |                            |    |   |                                       |   |   |   |   |   |   |   |
|    Benefit                obligation at beginning of year |   | $                               | 198,441 |   |                                       | $      | 201,522 |   |   | $ | 34,859 |   |   | $ | 51,302 |   |
|  Service                cost                                        |   |                            | 391     |   |                                       |   | 534 |   |   |   | 26 |   |   |   | 42 |   |
|  Interest                cost                                       |   |                            | 10,589  |   |                                       |   | 11,529 |   |   |   | 1,920 |   |   |   | 2,901 |   |
|  Plan                participants’ contributions              |   |                            | -       |   |                                       |   | - |   |   |   | 791 |   |   |   | 1,001 |   |
|  Amendments                                                         |   |                            | (3      | )      |                                       |   | (4,307 | ) |   |   | (2,569 | ) |   |   | (15,575 | ) |
|  Actuarial                (gain) loss                               |   |                            | (9,530  | )      |                                       |   | 7,026 |   |   |   | (3,989 | ) |   |   | 805 |   |
|  Settlements                                                        |   |                            | -       |   |                                       |   | (965 | ) |   |   | - |   |   |   | - |   |
|  Benefits                paid                                       |   |                            | (21,549 | )      |                                       |   | (16,898 | ) |   |   | (4,853 | ) |   |   | (5,617 | ) |
|  Benefit                obligation at end of year                   |   |                            | 178,339 |   |                                       |   | 198,441 |   |   |   | 26,185 |   |   |   | 34,859 |   |
|                                                                     |   |                            |    |   |                                       |   |   |   |   |   |   |   |   |   |   |   |
|  Change                in plan assets:                              |   |                            |    |   |                                       |   |   |   |   |   |   |   |   |   |   |   |
|  Fair                value of plan assets at beginning of year      |   |                            | 163,282 |   |                                       |   | 169,189 |   |   |   | - |   |   |   | - |   |
|  Actual                return on plan assets                        |   |                            | 4,630   |   |                                       |   | 10,468 |   |   |   | - |   |   |   | - |   |
|  Employer                contribution                               |   |                            | 4,251   |   |                                       |   | 820 |   |   |   | 4,062 |   |   |   | 4,616 |   |
|  Plan                participants’ contributions              |   |                            | -       |   |                                       |   | - |   |   |   | 791 |   |   |   | 1,001 |   |
|  Expenses                                                           |   |                            | (2      | )      |                                       |   | (302 | ) |   |   | - |   |   |   | - |   |
|  Benefits                paid                                       |   |                            | (21,549 | )      |                                       |   | (16,893 | ) |   |   | (4,853 | ) |   |   | (5,617 | ) |
|  Fair                value of plan assets at end of year            |   |                            | 150,612 |   |                                       |   | 163,282 |   |   |   | - |   |   |   | - |   |
|                                                                     |   |                            |    |   |                                       |   |   |   |   |   |   |   |   |   |   |   |
|  Funded                status                                       |   |                            | (27,727 | )      |                                       |   | (35,159 | ) |   |   | (26,185 | ) |   |   | (34,859 | ) |
|  Unrecognized                net actuarial loss                     |   |                            | 80,691  |   |                                       |   | 85,373 |   |   |   | 16,414 |   |   |   | 21,703 |   |
|  Unrecognized                prior service cost                     |   |                            | 1,513   |   |                                       |   | 1,699 |   |   |   | (19,588 | ) |   |   | (18,129 | ) |
|  Net                amount recognized                               |   | $                               | 54,477  |   |                                       | $      | 51,913 |   |   | $ | (29,359 | ) |   | $ | (31,285 | ) |

|   | *(a)* | *Exclusive                of death benefit obligation discussed                below.* |
|--------|-------|----------------------------------------------------------------------------------------|

----

|                                                                                                                          |   | Pension                Benefits |    |   | Postretirement                Benefits |   |
|-------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------|---------|--------|----------------------------------------|--------|
|                                                                                                                          |   | September                30,    |    |   | September                30,           |   |
| (In                thousands)                                                                                                 |   | 2006                            |    |   | 2005                                   |   |   | 2006 |   |   | 2005 |   |
| Amounts                recognized in our balance sheets:                                                                      |   |                            |    |   |                                   |   |   |   |   |   |   |   |
|           Prepaid                benefit cost                               |   | $                               | 33,373  |   |                                   | $      | 31,239 |   |   | $ | - |   |   | $ | - |   |
|           Accrued                liabilities                                |   |                            | -       |   |                                   |   | - |   |   |   | (3,351 | ) |   |   | (3,826 | ) |
|           Accrued                benefit cost                               |   |                            | (42,432 | )      |                                   |   | (51,099 | ) |   |   | (26,008 | ) |   |   | (27,459 | ) |
|           Intangible                Assets                                  |   |                            | 1,513   |   |                                   |   | 1,699 |   |   |   | - |   |   |   | - |   |
|           Accumulated                other comprehensive loss               |   |                            | 62,023  |   |                                   |   | 70,074 |   |   |   | - |   |   |   | - |   |
|           Net                amount recognized                              |   | $                               | 54,477  |   |                                   | $      | 51,913 |   |   | $ | (29,359 | ) |   | $ | (31,285 | ) |
|                                                                                                                          |   |                            |    |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
| Pension                plans with an accumulated benefit obligation in   excess                of plan assets: |   |                            |    |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
|           Projected                benefit obligation                       |   | $                               | 134,184 |   |                                   | $      | 153,568 |   |   |   |   |   |   |   |   |   |
|           Accumulated                benefit obligation                     |   |                            | 133,623 |   |                                   |   | 152,487 |   |   |   |   |   |   |   |   |   |
|           Fair                value of plan assets                          |   |                            | 91,191  |   |                                   |   | 101,389 |   |   |   |   |   |   |   |   |   |

|                                         |   | Pension                Benefits |        |   | Postretirement                Benefits |   |
|----------------------------------------------|--------|---------------------------------|-------------|--------|----------------------------------------|--------|
|                                         |   | September                30,    |        |   | September                30,           |   |
|                                         |   | 2006                            |        |   | 2005                                   |   |   | 2006 |   |   | 2005 |   |
| Discount                rate                 |   |                            | 6.0%        |   |                                   |   |                  5.625% |   |   |   | 6.0% |   |   |   | 5.625% |   |
| Rate                of compensation increase |   |                            |  3.75% |   |                                   |   | 3.75% |   |   |                  N/A |   |   |  N/A |   |

----

|                                                    | Pension                Benefits |   | Postretirement                Benefits |
|---------------------------------------------------------|---------------------------------|--------|----------------------------------------|
|                                                    | September                30,    |   | September                30,           |
|                                                    | 2006                            | 2005   |                                   | 2006 | 2005 |
| Discount                rate                            | 5.625%                          | 6.0%   |                                   | 5.625% | 6.0% |
| Expected                long-term return on plan assets | 8.5%                            | 8.5%   |                                   | N/A | N/A |
| Rate                of compensation increase            | 3.75%                           | 3.75%  |                                   | N/A | N/A |

|                                                 |   | Pension                Benefits |    |   | Postretirement                Benefits |   |
|------------------------------------------------------|--------|---------------------------------|---------|--------|----------------------------------------|--------|
| (In                thousands)                        |   | 2006                            |    |   | 2005                                   |   |   | 2004 |   |   | 2006 |   |   | 2005 |   |   | 2004 |   |
| Service                cost                          |   | $                               | 391     |   |                                   | $      | 534 |   |   | $ | 2,074 |   |   | $ | 26 |   |   | $ | 42 |   |   | $ | 83 |   |
| Interest                cost                         |   |                            | 10,589  |   |                                   |   | 11,529 |   |   |   | 11,685 |   |   |   | 1,920 |   |   |   | 2,901 |   |   |   | 2,961 |   |
| Expected                return on assets             |   |                            | (13,675 | )      |                                   |   | (14,443 | ) |   |   | (14,876 | ) |   |   | - |   |   |   | - |   |   |   | - |   |
| Amortization                of prior service cost    |   |                            | 260     |   |                                   |   | 314 |   |   |   | 409 |   |   |   | (1,111 | ) |   |   | (217 | ) |   |   | (217 | ) |
| Amortization                of actuarial (gain)/loss |   |                            | 3,675   |   |                                   |   | 3,509 |   |   |   | 3,244 |   |   |   | 1,301 |   |   |   | 1,306 |   |   |   | 1,263 |   |
| Net                periodic pension cost             |   |                            | 1,240   |   |                                   |   | 1,443 |   |   |   | 2,536 |   |   | $ | 2,136 |   |   | $ | 4,032 |   |   | $ | 4,090 |   |
|  Curtailment                charge (a)          |   |                            | -       |   |                                   |   | 970 |   |   |   | - |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Settlement                charge (b)           |   |                            | 524     |   |                                   |   | 750 |   |   |   | - |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                net pension cost                |   | $                               | 1,764   |   |                                   | $      | 3,163 |   |   | $ | 2,536 |   |   |   |   |   |   |   |   |   |   |   |   |   |

| *(a)  * | *The                curtailment reflects the freezing of our SERP plan for the remaining                active employee participants who were executive officers as of December                31, 2004.* |
|-------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *(b)  * | *As                a result of the sale of Fairchild Aerostructures on June 24, 2005,                we have                settled the pension benefits for the Fairchild Aerostructures employees.                This amount was recorded in discontinued operations. The 2006 settlement                resulted from lump distributions from our SERP                plan.* |
|-------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                                   |   | 1%                PointIncrease |   |   | 1%                PointDecrease |   |
|------------------------------------------------------------------------|--------|---------------------------------|--------|--------|---------------------------------|--------|
| Effect                on total of service and interest cost components |   | $                               | 29     |   |                            | $      | (27 | ) |
| Effect                on postretirement benefit obligation             |   | $                               | 247    |   |                            | $      | (221 | ) |

|                             |   | September                30, |                             |
|----------------------------------|--------|------------------------------|----------------------------------|
|                             |   | 2006                         |                             |   | 2005 |   |
| Asset                Category    |   |                         |                             |   |   |   |
| Equity                securities |   |                         |  13.1%                      |   |   |   |  16.0% |   |
| Debt                securities   |   |                         |  81.8%                      |   |   |   |  78.0% |   |
| Other                            |   |                         |                   5.1% |   |   |   |                   6.0% |   |
| Total                            |   |                         | 100.0%                           |   |   |   | 100.0% |   |

| *Asset                Category*  |         |
|----------------------------------|--------------|
| Equity                securities | 10–30% |
| Debt                securities   | 65–85% |
| Real                estate       | 0–20%  |
| Other                            | 0–20%  |

| (In                thousands)    |   | Pension                Benefits |   |   | Postretirement                Benefits |   |
|----------------------------------|--------|---------------------------------|--------|--------|----------------------------------------|--------|
| 2007                             |   | $                               | 17,082 |   |                                   | $      | 2,962 |   |
| 2008                             |   |                            | 14,095 |   |                                   |   | 2,856 |   |
| 2009                             |   |                            | 13,970 |   |                                   |   | 2,794 |   |
| 2010                             |   |                            | 16,151 |   |                                   |   | 2,735 |   |
| 2011                             |   |                            | 14,655 |   |                                   |   | 2,668 |   |
| 2012                – 2014 |   | $                               | 68,270 |   |                                   | $      | 11,654 |   |

----

**     *Pensions      – Defined Contribution Plan***

***     Death      Benefit Obligation***

| **8.** | **INCOME                            TAXES** |
|--------|---------------------------------------------|

| (In                thousands)                               |   | 2006   |   |   | 2005     |   |   | 2004     |   |
|-------------------------------------------------------------|--------|--------|--------|--------|----------|--------|--------|----------|--------|
|                                                        |   |   |   |   | Restated |   |   | Restated |   |
| Earnings                (loss) from continuing operations   |   | $      | 2,176  |   |     | $      | (1,048 |  )  |   | $ | (8,953 | ) |
| Earnings                (loss) from discontinued operations |   |   | 2,604  |   |     |   | 825    |     |   |   | (14,010 | ) |
|                                                        |   | $      | 4,780  |   |     | $      | (223   | )        |   | $ | (22,963 | ) |

----

| (In                thousands)                          |   | 2006   |   |   | 2005     |   |   | 2004     |   |
|--------------------------------------------------------|--------|--------|--------|--------|----------|--------|--------|----------|--------|
|                                                   |   |   |   |   | Restated |   |   | Restated |   |
|  Current:                                         |   |   |   |   |     |   |   |     |   |
|                     Federal        |   | $      | 94     |   |     | $      | -      |     |   | $ | (12,982 | ) |
|                     State          |   |   | 160    |   |     |   | 241    |     |   |   | 264 |   |
|                     Foreign        |   |   | 88     |   |     |   | 936    |     |   |   | 596 |   |
|                     Total current  |   |   | 342    |   |     |   | 1,177  |     |   |   | (12,122 | ) |
|  Deferred:                                        |   |   |   |   |     |   |   |     |   |   |   |   |
|                     Federal        |   |   | -      |   |     |   | (3,167 | )        |   |   | - |   |
|                     State          |   |   | -      |   |     |   | -      |     |   |   | - |   |
|                     Foreign        |   |   | 1,834  |   |     |   | 942    |     |   |   | 3,169 |   |
|                     Total deferred |   |   | 1,834  |   |     |   | (2,225 | )        |   |   | 3,169 |   |
| Total                tax provision (benefit)           |   | $      | 2,176  |   |     | $      | (1,048 | )        |   | $ | (8,953 | ) |

| (In                thousands)                                                                                            |   | 2006   |    |   | 2005     |   |   | 2004     |   |
|--------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|----------|--------|--------|----------|--------|
|                                                                                                                     |   |   |    |   | Restated |   |   | Restated |   |
|  Tax                at United States statutory rates                                                                |   | $      | (11,085 | )      |     | $      | (9,755 | )        |   | $ | (5,614 | ) |
|  State                income taxes, net of federal tax benefit                                                      |   |   | 104     |   |     |   | 157    |     |   |   | (963 | ) |
|  Effect                of foreign operations                                                                        |   |   | 129     |   |     |   | 32     |     |   |   | (280 | ) |
|  Revision                of estimate for tax accruals, net of deferred tax asset valuation                allowance |   |   | 10,846  |   |     |   | 7,996  |     |   |   | (3,807 | ) |
|  Extraterritorial                income exclusion                                                                   |   |   | (307    | )      |     |   | (281   | )        |   |   | - |   |
|  Effect                of change in tax laws of foreign affiliates                                                  |   |   | -       |   |     |   | -      |     |   |   | 1,175 |   |
|  Effect                of change in tax status                                                                      |   |   | 1,970   |   |     |   | -      |     |   |   | - |   |
|  Other,                net                                                                                          |   |   | 519     |   |     |   | 803    |     |   |   | 536 |   |
|  Net                tax provision (benefit)                                                                         |   | $      | 2,176   |   |     | $      | (1,048 | )        |   | $ | (8,953 | ) |

----

|                                                              |   | September                30, |     |
|-------------------------------------------------------------------|--------|------------------------------|----------|
| (In                thousands)                                     |   | 2006                         |     |   | 2005 |   |
|                                                              |   |                         |     |   | Restated |   |
| Deferred                tax assets:                               |   |                         |     |   |   |   |
|                  Accrued expenses                            |   | $                            | 3,786    |   |   | $ | 3,304 |   |
|                  Asset basis differences                     |   |                         | 5,629    |   |   |   | 3,645 |   |
|                  Inventory                                   |   |                         | 4,371    |   |   |   | 4,385 |   |
|                  Employee compensation and benefits          |   |                         | 2,962    |   |   |   | 2,763 |   |
|                  Environmental reserves                      |   |                         | 4,895    |   |   |   | 3,934 |   |
|                  Postretirement health benefits              |   |                         | 11,182   |   |   |   | 11,884 |   |
|                  Net operating loss and credit carryforwards |   |                         | 82,511   |   |   |   | 80,787 |   |
|                  Other                                       |   |                         | 1,904    |   |   |   | 3,537 |   |
|                  Pensions                                    |   |                         | 39,355   |   |   |   | 42,382 |   |
|                  Total deferred tax assets                   |   |                         | 156,595  |   |   |   | 156,621 |   |
|                  Less:  Valuation allowance             |   |                         | (128,155 | ) |   |   | (133,486 | ) |
|                  Net deferred tax assets                     |   |                         | 28,440   |   |   |   | 23,135 |   |
| Deferred                tax liabilities:                          |   |                         |     |   |   |   |   |   |
|                  Asset basis-liabilities                     |   |                         | (19,325  | ) |   |   | (18,546 | ) |
|                  Pensions                                    |   |                         | (13,645  | ) |   |   | (7,286 | ) |
|   Other                                                 |   |                         | -        |   |   |   | - |   |
| Total                deferred tax liabilities                     |   |                         | (32,970  | ) |   |   | (25,832 | ) |
| Net                deferred tax assets (liabilities)              |   | $                            | (4,530   | ) |   | $ | (2,697 | ) |

----

|                                                                                                                  |   | September                30, |   |
|-----------------------------------------------------------------------------------------------------------------------|--------|------------------------------|--------|
| (In                thousands)                                                                                         |   | 2006                         |   |   | 2005 |   |
|                                                                                                                  |   |                         |   |   | Restated |   |
|  Current                deferred tax assets included in Prepaid expenses and other current                assets |   | $                            | -      |   |   | $ | 713 |   |
|                                                                                                                  |   |                         |   |   |   |   |   |   |
|  Noncurrent                deferred tax assets included in Other assets                                          |   | $                            | -      |   |   | $ | 335 |   |
|  Current                liabilities:                                                                             |   |                         |   |   |   |   |   |   |
|                    Deferred income taxes                                                               |   | $                            | -      |   |   | $ | - |   |
|                    Other current                                                                       |   |                         | 2,314  |   |   |   | 1,029 |   |
|                                                                                                        |   | $                            | 2,314  |   |   | $ | 1,029 |   |
|  Noncurrent                income tax liabilities:                                                               |   |                         |   |   |   |   |   |   |
|                   Deferred income taxes                                                                     |   | $                            | 4,530  |   |   | $ | 3,438 |   |
|                   Deferred income taxes included in Other long-term                liabilities              |   |                         | -      |   |   |   | 307 |   |
|                   Other noncurrent                                                                          |   |                         | 39,923 |   |   |   | 38,385 |   |
|                                                                                                                  |   | $                            | 44,453 |   |   | $ | 42,130 |   |

----

| **9.** | **EQUITY                              SECURITIES** |
|--------|----------------------------------------------------|

| **10.** | **STOCK                      OPTIONS** |
|---------|----------------------------------------|

***Stock      Options***

----

|                                             |   |   |      |   | Weighted                Average |   |
|--------------------------------------------------|--------|--------|-----------|--------|---------------------------------|--------|
|                                             |   | Shares |      |   | Exercise                Price   |   |
| Outstanding                at October 1, 2003    |   |   | 1,328,454 |   |                            | $      | 6.38 |   |
|     Granted                  |   |   | 35,000    |   |                            |   | 5.11 |   |
|     Exercised                |   |   | (10,500   | )      |                            |   | 2.49 |   |
|     Expired                  |   |   | (299,411  | )      |                            |   | 9.90 |   |
|     Forfeited                |   |   | (500      | )      |                            |   | 3.10 |   |
| Outstanding                at September 30, 2004 |   |   | 1,053,043 |   |                            |   | 5.37 |   |
|     Granted                  |   |   | 77,000    |   |                            |   | 2.54 |   |
|     Expired                  |   |   | (309,727  | )      |                            |   | 9.12 |   |
|     Forfeited                |   |   | (5,229    | )      |                            |   | 2.49 |   |
| Outstanding                at September 30, 2005 |   |   | 815,087   |   |                            |   | 3.70 |   |
|     Granted                  |   |   | 93,000    |   |                            |   | 2.18 |   |
|     Expired                  |   |   | (485,478  | )      |                            |   | 3.41 |   |
|     Forfeited                |   |   | (86,250   | )      |                            |   | 2.92 |   |
| Outstanding                at September 30, 2006 |   |   | 336,359   |   |                            | $      | 3.90 |   |
| Exercisable                at September 30, 2003 |   |   | 864,471   |   |                            | $      | 7.57 |   |
| Exercisable                at September 30, 2004 |   |   | 787,015   |   |                            | $      | 5.82 |   |
| Exercisable                at September 30, 2005 |   |   | 664,497   |   |                            | $      | 3.71 |   |
| Exercisable                at September 30, 2006 |   |   | 246,359   |   |                            | $      | 4.53 |   |

|                           |                         |   | Options                Outstanding |   | Options                Exercisable |
|--------------------------------|------------------------------|--------|------------------------------------|--------|------------------------------------|
|                           |                         |   |                               |   |                               |   |   | Weighted |   |   |   |   |   |   | Weighted |
|                           |                         |   |                               |   |                               | Weighted |   | Average |   |   |   |   | Weighted |   | Average |
|                           |                         |   |                               |   |                               | Average |   | Remaining |   |   |   |   | Average |   | Remaining |
| Range                of        |                         |   | Number                             |   |                               | Exercise |   | Contractual |   | Number |   |   | Exercise |   | Contractual |
| Exercise                Prices |                         |   | Outstanding                        |   |                               | Price |   | Term |   | Exercisable |   |   | Price |   | Term |
|                           | $2.17                - $2.99 |   |                               |   | 134,442                            |   |   | $ | 2.24 |   | 4.5                years |   |   | 44,442 |   |   | $ | 2.37 |   | 1.3                years |
|                           | $3.00                - $3.99 |   |                               |   | 4,000                              |   |   |   | 3.49 |   | 2.5                years |   |   | 4,000 |   |   |   | 3.49 |   | 2.6                years |
|                           | $4.00                - $4.99 |   |                               |   | 3,000                              |   |   |   | 4.99 |   | 0.8                years |   |   | 3,000 |   |   |   | 4.99 |   | 0.8                years |
|                           | $5.00                - $5.11 |   |                               |   | 194,917                            |   |   |   | 5.03 |   | 1.0                years |   |   | 194,917 |   |   |   | 5.03 |   | 1.0                years |
|                           | $2.17                - $5.11 |   |                               |   | 336,359                            |   |   | $ | 3.90 |   | 2.4                years |   |   | 246,359 |   |   | $ | 4.53 |   | 2.4                years |

***       Stock      Option Deferral Plan***

----

***      Shares      Available for Future Issuance***

|                                                   |   |   |    |   | 1996      |   |    | 2001      |   |   | Stock    |   |   |   |    |
|--------------------------------------------------------|--------|--------|---------|--------|-----------|--------|---------|-----------|--------|--------|----------|--------|--------|--------|---------|
|                                                   |   | 1986   |    |   | Directors |   |    | Directors |   |   | Deferral |   |   |   |    |
| Securities                to be issued upon:           |   | Plan   |    |   | Plan      |   |    | Plan      |   |   | Plan     |   |   | Total  |    |
| Exercise                of outstanding options         |   |   | 194,417 |   |      |   | 106,000 |      |   |   | 35,942   |   |   |   | -       |   |   |   | 336,359 |   |
| Weighted                average option exercise price  |   | $      | 5.00    |   |      | $      | 2.40    |      |   | $      | 2.35     |   |   |   | -       |   |   | $ | 3.90 |   |
| Issuance                of deferred compensation units |   |   | -       |   |      |   | -       |      |   |   | -        |   |   |   | 177,657 |   |   |   | 177,657 |   |
| Shares                available for future issuance    |   |   | 194,417 |   |      |   | 106,000 |      |   |   | 35,942   |   |   |   | 177,657 |   |   |   | 514,016 |   |

| **11. ** | **EARNINGS                      (LOSS) PER SHARE****RESULTS** |
|---------------|---------------------------------------------------------------|

| (In                thousands, except per share data)             |   | 2006         |    |   | 2005         |   |    | 2004         |   |
|------------------------------------------------------------------|--------|--------------|---------|--------|--------------|--------|---------|--------------|--------|
|                                                             |   |         |    |   | Restated     |   |    | Restated     |   |
| **Basic                loss per share:**                         |   |         |    |   |         |   |    |         |   |
| Loss                from continuing operations                   |   | $            | (33,890 | )      |         | $      | (27,309 | )            |   | $ | (7,388 | ) |
| Weighted                average common shares outstanding        |   |         | 25,226  |   |         |   | 25,224  |         |   |   | 25,192 |   |
| Basic                loss from continuing operations per share   |   | $            | (1.34   | )      |         | $      | (1.08   | )            |   | $ | (0.29 | ) |
|                                                             |   |         |    |   |         |   |    |         |   |   |   |   |
| **Diluted                loss per share:**                       |   |         |    |   |         |   |    |         |   |   |   |   |
| Loss                from continuing operations                   |   | $            | (33,890 | )      |         | $      | (27,309 | )            |   | $ | (7,388 | ) |
| Weighted                average common shares outstanding        |   |         | 25,226  |   |         |   | 25,224  |         |   |   | 25,192 |   |
| Diluted                effect of options                         |   | antidilutive |    |   | antidilutive |   |    | antidilutive |   |
| Total                shares outstanding                          |   |         | 25,226  |   |         |   | 25,224  |         |   |   | 25,192 |   |
| Diluted                loss from continuing operations per share |   | $            | (1.34   | )      |         | $      | (1.08   | )            |   | $ | (0.29 | ) |

----

| **12. ** | **ACCUMULATED                          OTHER COMPREHENSIVE                          LOSS** |
|---------------|--------------------------------------------------------------------------------------------|

| (In                thousands)                                                       |   | 2006   |   |   | 2005     |   |   | 2004     |   |
|-------------------------------------------------------------------------------------|--------|--------|--------|--------|----------|--------|--------|----------|--------|
|                                                                                |   |   |   |   | Restated |   |   | Restated |   |
| Minimum                pension liability                                            |   | $      | 8,051  |   |     | $      | (7,457 | )        |   | $ | (1,811 | ) |
| Unrealized                holding changes on derivatives                            |   |   | 298    |   |     |   | 114    |     |   |   | 105 |   |
| Unrealized                periodic holding changes on available-for-sale securities |   |   | 3,810  |   |     |   | (235   | )        |   |   | 1,242 |   |
| Foreign                currency translation adjustments                             |   |   | 2,591  |   |     |   | (1,366 | )        |   |   | 517 |   |
| Other                comprehensive income (loss)                                    |   | $      | 14,750 |   |     | $      | (8,944 | )        |   | $ | 53 |   |

|                                                                                                       |   | September                30, |    |
|------------------------------------------------------------------------------------------------------------|--------|------------------------------|---------|
| (In                thousands)                                                                              |   | 2006                         |    |   | 2005 |   |   | 2004 |   |
|                                                                                                       |   |                         |    |   | Restated |   |   | Restated |   |
| Excess                of additional pension liability over unrecognized prior service                costs |   | $                            | (62,023 | ) |   | $ | (70,074 | ) |   | $ | (62,617 | ) |
| Foreign                currency translation adjustments                                                    |   |                         | 1,636   |   |   |   | (955 | ) |   |   | 411 |   |
| Unrealized                holding gains on available-for-sale securities                                   |   |                         | 5,559   |   |   |   | 1,749 |   |   |   | 1,984 |   |
| Other                                                                                                      |   |                         | -       |   |   |   | (298 | ) |   |   | (412 | ) |
| Accumulated                other comprehensive loss                                                        |   | $                            | (54,828 | ) |   | $ | (69,578 | ) |   | $ | (60,634 | ) |

| **13. ** | **RELATED                              PARTY                              TRANSACTIONS** |
|---------------|------------------------------------------------------------------------------------------|

----

*, et al*
*et al*

----

| **14. ** | **LEASES** |
|---------------|------------|

***        Operating Leases***

***          Capital Leases***

|                                          |   | September                30, |        |
|-----------------------------------------------|--------|------------------------------|-------------|
| (In                thousands)                 |   | 2006                         |        |   | 2005 |   |
| Machinery                and equipment        |   | $                            |  5,177 |   |   | $ | 7,066 |   |
| Transportation                vehicles        |   |                         | -           |   |   |   | 44 |   |
| Other                                         |   |                         | 330         |   |   |   | 330 |   |
| Less:                Accumulated depreciation |   |                         | (2,910      | ) |   |   | (1,617 | ) |
|                                          |   | $                            | 2,597       |   |   | $ | 5,823 |   |

***          Leasing Operations***

|                                          |   | September                30, |   |
|-----------------------------------------------|--------|------------------------------|--------|
| (In                thousands)                 |   | 2006                         |   |   | 2005 |   |
| Land                and improvements          |   | $                            | 5,168  |   |   | $ | 5,168 |   |
| Buildings                and improvements     |   |                         | 3,423  |   |   |   | 3,423 |   |
| Less:                Accumulated depreciation |   |                         | (608   | ) |   |   | (428 | ) |
|                                          |   | $                            | 7,983  |   |   | $ | 8,163 |   |

| **15. ** | **CONTINGENCIES** |
|---------------|-------------------|

***Environmental      Matters***

----

***Asbestos      Matters***

----

***     CL      Motor Freight Litigation***

*     **Other      Matters***

*In re      The Fairchild Corporation Shareholders Litigation*

*, et al*
*et al*

----

----

| **16. ** | **BUSINESS                                    SEGMENT                                    INFORMATION** |
|---------------|--------------------------------------------------------------------------------------------------------|

| (In                thousands)                        |   | PoloExpress                (a) |    |   | Hein                Gericke (a) |   |    | Aerospace |   |   | Corporate                  and Other |   |   | Total  |    |
|------------------------------------------------------|--------|--------------------------------|---------|--------|---------------------------------|--------|---------|-----------|--------|--------|--------------------------------------|--------|--------|--------|---------|
|  2006:                                          |   |                           |    |   |                            |   |    |      |   |   |                                 |   |   |   |    |
|  Revenues                                       |   | $                              | 112,786 |   |                            | $      | 116,255 |      |   | $      | 79,600                               |   |   | $      | 950     |   |   | $ | 309,591 |   |
|  Operating                income (loss)         |   |                           | 11,796  |   |                            |   | (22,084 | )         |   |   | 5,968                                |   |   |   | (22,609 | ) |   |   | (26,929 | ) |
|  Interest                income                 |   |                           | 927     |   |                            |   | 95      |      |   |   | 2                                    |   |   |   | 1,973   |   |   |   | 2,997 |   |
|  Interest                expense                |   |                           | (2,161  | )      |                            |   | (2,586  | )         |   |   | (1,444                               | )      |   |   | (5,307  | ) |   |   | (11,498 | ) |
|  Income                tax (provision) benefit  |   |                           | 1,845   |   |                            |   | (3,685  | )         |   |   | (11                                  | )      |   |   | (325    | ) |   |   | (2,176 | ) |
|  Capital                expenditures            |   |                           | 1,417   |   |                            |   | 5,233   |      |   |   | 332                                  |   |   |   | 795     |   |   |   | 7,777 |   |
|  Depreciation                and amortization   |   |                           | 1,478   |   |                            |   | 4,399   |      |   |   | 403                                  |   |   |   | 1,243   |   |   |   | 7,523 |   |
|  Identifiable                assets at Sept. 30 |   |                           | 75,657  |   |                            |   | 89,421  |      |   |   | 47,331                               |   |   |   | 202,720 |   |   |   | 415,129 |   |
|                                                 |   |                           |    |   |                            |   |    |      |   |   |                                 |   |   |   |    |   |   |   |   |   |
|  2005                (Restated):                |   |                           |    |   |                            |   |    |      |   |   |                                 |   |   |   |    |   |   |   |   |   |
|  Revenues                                       |   | $                              | 111,161 |   |                            | $      | 145,933 |      |   | $      | 84,493                               |   |   | $      | 656     |   |   | $ | 342,243 |   |
|  Operating                income (loss)         |   |                           | 9,895   |   |                            |   | (15,295 | )         |   |   | 6,093                                |   |   |   | (28,998 | ) |   |   | (28,305 | ) |
|  Interest                income                 |   |                           | -       |   |                            |   | 98      |      |   |   | -                                    |   |   |   | 1,618   |   |   |   | 1,716 |   |
|  Interest                expense                |   |                           | (1,758  | )      |                            |   | (3,632  | )         |   |   | (1,329                               | )      |   |   | (6,424  | ) |   |   | (13,143 | ) |
|  Income                tax (provision) benefit  |   |                           | (1,733  | )      |                            |   | (49     | )         |   |   | (26                                  | )      |   |   | 2,856   |   |   |   | 1,048 |   |
|  Capital                expenditures            |   |                           | 985     |   |                            |   | 8,434   |      |   |   | 550                                  |   |   |   | 1,699   |   |   |   | 11,668 |   |
|  Depreciation                and amortization   |   |                           | 1,395   |   |                            |   | 5,006   |      |   |   | 375                                  |   |   |   | 1,097   |   |   |   | 7,873 |   |
|  Identifiable                assets at Sept. 30 |   |                           | 65,405  |   |                            |   | 91,624  |      |   |   | 42,848                               |   |   |   | 248,762 |   |   |   | 448,639 |   |
|                                                 |   |                           |    |   |                            |   |    |      |   |   |                                 |   |   |   |    |   |   |   |   |   |
|  2004                (Restated):                |   |                           |    |   |                            |   |    |      |   |   |                                 |   |   |   |    |   |   |   |   |   |
|  Revenues                                       |   | $                              | 94,543  |   |                            | $      | 148,189 |      |   | $      | 75,400                               |   |   | $      | 930     |   |   | $ | 319,062 |   |
|  Operating                income (loss)         |   |                           | 10,795  |   |                            |   | (3,614  | )         |   |   | 4,030                                |   |   |   | (25,310 | ) |   |   | (14,099 | ) |
|  Interest                income                 |   |                           | -       |   |                            |   | 343     |      |   |   | -                                    |   |   |   | 1,212   |   |   |   | 1,555 |   |
|  Interest                expense                |   |                           | (768    | )      |                            |   | (3,894  | )         |   |   | (596                                 | )      |   |   | (6,896  | ) |   |   | (12,154 | ) |
|  Income                tax (provision) benefit  |   |                           | (2,118  | )      |                            |   | (1,866  | )         |   |   | (36                                  | )      |   |   | 12,973  |   |   |   | 8,953 |   |
|  Capital                expenditures            |   |                           | 2,087   |   |                            |   | 8,413   |      |   |   | 277                                  |   |   |   | 1,483   |   |   |   | 12,260 |   |
|  Depreciation                and amortization   |   |                           | 1,252   |   |                            |   | 2,470   |      |   |   | 516                                  |   |   |   | 773     |   |   |   | 5,011 |   |
|  Identifiable                assets at Sept. 30 |   |                           | 84,026  |   |                            |   | 79,908  |      |   |   | 52,618                               |   |   |   | 282,613 |   |   |   | 499,165 |   |

| *(a)* | *The                results of the PoloExpress and Hein Gericke segments reflect 11 months                of                activity in 2004 since our date of acquisition on *November                1, 2003.** |
|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

----

| **17. ** | **FOREIGN                                      OPERATIONS AND EXPORT                                      SALES** |
|---------------|-------------------------------------------------------------------------------------------------------------------|

|                                                                        |   | United |    |   |   |   |    |   |   |   |   |   |
|-----------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------|--------|--------|
| (In                thousands)                                               |   | States |    |   | Europe |   |    | Other  |   |   | Total  |   |
| 2006:                                                                       |   |   |    |   |   |   |    |   |   |   |   |   |
| Revenues                by geographic area                                  |   | $      | 91,341  |   |   | $      | 218,250 |   |   | $      | -      |   |   | $ | 309,591 |   |
| Operating loss                by geographic area                       |   |   | (17,920 | )      |   |   | (8,996  | )      |   |   | (13    | )      |   |   | (26,929 | ) |
| Loss                from continuing operations before taxes                 |   |   | (18,497 | )      |   |   | (13,161 | )      |   |   | (13    | )      |   |   | (31,671 | ) |
| Identifiable                assets by geographic area at September 30       |   |   | 159,910 |   |   |   | 251,974 |   |   |   | 3,245  |   |   |   | 415,129 |   |
| Long-lived                assets by geographic area at September 30         |   |   | 115,956 |   |   |   | 50,059  |   |   |   | 3,245  |   |   |   | 169,260 |   |
|                                                                        |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |
| 2005                (Restated):                                             |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |
| Revenues                by geographic area                                  |   | $      | 114,516 |   |   | $      | 227,727 |   |   | $      | -      |   |   | $ | 342,243 |   |
| Operating loss                by geographic area                       |   |   | (20,680 | )      |   |   | (7,615  | )      |   |   | (10    | )      |   |   | (28,305 | ) |
| Loss                from continuing operations before taxes                 |   |   | (13,578 | )      |   |   | (14,092 | )      |   |   | (200   | )      |   |   | (27,870 | ) |
| Identifiable                assets by geographic area at September 30 *(a)* |   |   | 214,683 |   |   |   | 230,711 |   |   |   | 3,245  |   |   |   | 448,639 |   |
| Long-lived                assets by geographic area at September 30 *(b)*   |   |   | 203,264 |   |   |   | 49,775  |   |   |   | 3,245  |   |   |   | 256,284 |   |
|                                                                        |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |
| 2004                (Restated):                                             |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |
| Revenues                by geographic area                                  |   | $      | 113,489 |   |   | $      | 205,572 |   |   | $      | 1      |   |   | $ | 319,062 |   |
| Operating                income (loss) by geographic area                   |   |   | (17,100 | )      |   |   | 3,145   |   |   |   | (144   | )      |   |   | (14,099 | ) |
| Loss                from continuing operations before taxes                 |   |   | (14,617 | )      |   |   | (1,280  | )      |   |   | (144   | )      |   |   | (16,041 | ) |
| Identifiable                assets by geographic area at September 30 *(c)* |   |   | 299,714 |   |   |   | 196,271 |   |   |   | 3,180  |   |   |   | 499,165 |   |
| Long-lived                assets by geographic area at September 30 *(d)*   |   |   | 231,249 |   |   |   | 51,440  |   |   |   | 3,180  |   |   |   | 285,869 |   |

| *(a)* | *Identifiable                assets related to discontinued operations in the United States were                $80,882 at September 30, 2005.* |
|-------|-------------------------------------------------------------------------------------------------------------------------------------------------|

| *(b)* | *Long-lived                assets related to discontinued operations in the United States were                $79,373 at September 30, 2005.* |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------|

| *(c)* | *Identifiable                assets related to discontinued operations in the United States were                $91,818 at September 30, 2004.* |
|-------|-------------------------------------------------------------------------------------------------------------------------------------------------|

| *(d)* | *Long-lived                assets related to discontinued operations in the United States were                $85,791 at September 30, 2004.* |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------|

| (In                thousands) |   | Europe |   |   | Canada |   |   | Japan  |   |   | Asia(without                Japan) |   |   | SouthAmerica |   |   | Other  |   |   | Total  |   |
|-------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|------------------------------------|--------|--------|--------------|--------|--------|--------|--------|--------|--------|--------|
| 2006                          |   | $      | 10,431 |   |   | $      | 4,052  |   |   | $      | 12,600                             |   |   | $            | 4,496  |   |   | $      | 3,394  |   |   | $ | 5,234 |   |   | $ | 40,207 |   |
| 2005                          |   |   | 10,304 |   |   |   | 4,594  |   |   |   | 8,426                              |   |   |         | 4,902  |   |   |   | 3,127  |   |   |   | 4,950 |   |   |   | 36,303 |   |
| 2004                          |   |   | 8,227  |   |   |   | 10,577 |   |   |   | 6,489                              |   |   |         | 3,087  |   |   |   | 2,771  |   |   |   | 3,176 |   |   |   | 34,327 |   |

----

| **18. ** | **QUARTERLY                                          FINANCIAL DATA                                          (UNAUDITED)** |
|---------------|----------------------------------------------------------------------------------------------------------------------------|

|                                                                  |   | December                31,2005        |    |   | March                31,2006 |   |    | June                30,2006            |   |   |                             |   |   |                                   |    |
|-----------------------------------------------------------------------|--------|----------------------------------------|---------|--------|------------------------------|--------|---------|----------------------------------------|--------|--------|----------------------------------|--------|--------|----------------------------------------|---------|
| (In                thousands, except per share data)                  |   | Previously                Reported (a) |    |   | Restated(b)                  |   |    | Previously                Reported (a) |   |   | Restated(b)                      |   |   | Previously                Reported (a) |    |   | Restated(b) |   |   | September                30, 2006 |   |   |   |   |
| Net                revenues                                           |   | $                                      | 51,547  |   |                         | $      | 51,547  |                                   |   | $      | 62,964                           |   |   | $                                      | 62,964  |   |   | $ | 105,815 |   |   | $ | 105,815 |   |   | $ | 89,265 |   |   |   |   |
| Gross                margin                                           |   |                                   | 19,403  |   |                         |   | 19,403  |                                   |   |   | 23,937                           |   |   |                                   | 23,937  |   |   |   | 44,379 |   |   |   | 44,379 |   |   |   | 35,922 |   |   |   |   |
| Operating                income (loss)                                |   |                                   | (9,145  | )      |                         |   | (9,193  | )                                      |   |   | (10,895                          | )      |   |                                   | (10,918 | ) |   |   | 2,414 |   |   |   | 2,405 |   |   |   | (9,223 | ) |   |   |   |
| Tax                (provision) benefit   (c)           |   |                                   | (65     | )      |                         |   | 13      |                                   |   |   | (22                              | )      |   |                                   | 5       |   |   |   | (149 | ) |   |   | (1,580 | ) |   |   | (614 | ) |   |   |   |
| Earnings                (loss) from continuing operations (c, d)      |   |                                   | (10,205 | )      |                         |   | (10,095 | )                                      |   |   | (12,746                          | )      |   |                                   | (11,687 | ) |   |   | 299 |   |   |   | (951 | ) |   |   | (11,157 | ) |   |   |   |
| Per                basic and diluted share                            |   |                                   | (0.41   | )      |                         |   | (0.40   | )                                      |   |   | (0.50                            | )      |   |                                   | (0.46   | ) |   |   | 0.01 |   |   |   | (0.04 | ) |   |   | (0.45 | ) |   |   |   |
| Earnings              (loss) from discontinued operations, net of     |   |                                   |    |   |                         |   |    |                                   |   |   |                             |   |   |                                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                  tax                (e, f)                       |   |                                   | (411    | )      |                         |   | (411    | )                                      |   |   | 621                              |   |   |                                   | 622     |   |   |   | (2,592 | ) |   |   | (1,192 | ) |   |   | (16,028 | ) |   |   |   |
| Per                basic and diluted share                            |   |                                   | (0.02   | )      |                         |   | (0.02   | )                                      |   |   | 0.02                             |   |   |                                   | 0.02    |   |   |   | (0.10 | ) |   |   | (0.04 | ) |   |   | (0.64 | ) |   |   |   |
| Net                gain (loss) on disposal of discontinued operations |   |                                   | 12,500  |   |                         |   | 12,500  |                                   |   |   | -                                |   |   |                                   | -       |   |   |   | 1,000 |   |   |   | 1,000 |   |   |   | 100 |   |   |   |   |
| Per                basic and diluted share                            |   |                                   | 0.50    |   |                         |   | 0.50    |                                   |   |   | -                                |   |   |                                   | -       |   |   |   | 0.04 |   |   |   | 0.04 |   |   |   | 0.00 |   |   |   |   |
| Net                earnings (loss)                                    |   |                                   | 1,883   |   |                         |   | 1,993   |                                   |   |   | (12,125                          | )      |   |                                   | (11,066 | ) |   |   | (1,293 | ) |   |   | (1,144 | ) |   |   | (27,082 | ) |   |   |   |
| Per                basic and diluted share                            |   |                                   | 0.07    |   |                         |   | 0.08    |                                   |   |   | (0.48                            | )      |   |                                   | (0.44   | ) |   |   | (0.05 | ) |   |   | (0.05 | ) |   |   | (1.07 | ) |   |   |   |
| Market                price range of Class A stock:                   |   |                                   |    |   |                         |   |    |                                   |   |   |                             |   |   |                                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| High                                                                  |   | $                                      | 2.85    |   |                         | $      | 2.85    |                                   |   | $      | 2.79                             |   |   | $                                      | 2.79    |   |   | $ | 2.61 |   |   | $ | 2.61 |   |   | $ | 2.80 |   |   |   |   |
| Low                                                                   |   | $                                      | 2.11    |   |                         | $      | 2.11    |                                   |   | $      | 2.26                             |   |   | $                                      | 2.26    |   |   | $ | 2.00 |   |   | $ | 2.00 |   |   | $ | 2.08 |   |   |   |   |
| Close                                                                 |   | $                                      | 2.55    |   |                         | $      | 2.55    |                                   |   | $      | 2.60                             |   |   | $                                      | 2.60    |   |   | $ | 2.08 |   |   | $ | 2.08 |   |   | $ | 2.60 |   |   |   |   |
|                                                                  |   |                                   |    |   |                         |   |    |                                   |   |   |                             |   |   |                                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                  |   | December                31,2004        |    |   | March                31,2005 |   |    | June                30,2005            |   |   | September                30,2005 |   |
|                                                                  |   | Previously                Reported (a) |    |   | Restated(b)                  |   |    | Previously                Reported (a) |   |   | Restated(b)                      |   |   | Previously                Reported (a) |    |   | Restated(b) |   |   | Previously                Reported (a) |   |   | Restated(b) |   |
| Net                revenues                                           |   | $                                      | 64,489  |   |                         | $      | 64,489  |                                   |   | $      | 79,834                           |   |   | $                                      | 79,834  |   |   | $ | 112,954 |   |   | $ | 112,954 |   |   | $ | 84,966 |   |   | $ | 84,966 |   |
| Gross                margin                                           |   |                                   | 21,890  |   |                         |   | 21,890  |                                   |   |   | 29,924                           |   |   |                                   | 29,924  |   |   |   | 46,891 |   |   |   | 46,891 |   |   |   | 31,787 |   |   |   | 31,787 |   |
| Operating                income (loss)                                |   |                                   | (10,388 | )      |                         |   | (10,434 | )                                      |   |   | (8,127                           | )      |   |                                   | (8,146  | ) |   |   | 736 |   |   |   | 720 |   |   |   | (10,030 | ) |   |   | (10,445 | ) |
| Tax                (provision) benefit   (g)           |   |                                   | (70     | )      |                         |   | 2,895   |                                   |   |   | (84                              | )      |   |                                   | (290    | ) |   |   | (1,457 | ) |   |   | (609 | ) |   |   | (683 | ) |   |   | (948 | ) |
| Earnings                (loss) from continuing operations (g, h, j)   |   |                                   | (11,984 | )      |                         |   | (9,021  | )                                      |   |   | (3,297                           | )      |   |                                   | (3,575  | ) |   |   | (2,265 | ) |   |   | (1,391 | ) |   |   | (12,339 | ) |   |   | (13,322 | ) |
| Per                basic and diluted share                            |   |                                   | (0.47   | )      |                         |   | (0.35   | )                                      |   |   | (0.13                            | )      |   |                                   | (0.14   | ) |   |   | (0.09 | ) |   |   | (0.06 | ) |   |   | (0.49 | ) |   |   | (0.53 | ) |
| Earnings              (loss) from discontinued operations,            |   |                                   |    |   |                         |   |    |                                   |   |   |                             |   |   |                                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                  net of tax   (i, j)              |   |                                   | 386     |   |                         |   | (2,779  | )                                 |   |   | (602                             | )      |   |                                   | (602    | ) |   |   | (463 | ) |   |   | (463 | ) |   |   | (4,296 | ) |   |   | (1,787 | ) |
| Per                basic and diluted share                            |   |                                   | 0.02    |   |                         |   | 0.11    |                                   |   |   | (0.01                            | )      |   |                                   | (0.02   | ) |   |   | (0.02 | ) |   |   | (0.02 | ) |   |   | (0.17 | ) |   |   | (0.07 | ) |
| Net                gain (loss) on disposal of discontinued operations |   |                                   | 12,500  |   |                         |   | 12,500  |                                   |   |   | -                                |   |   |                                   | -       |   |   |   | 1,158 |   |   |   | 1,158 |   |   |   | (83 | ) |   |   | (83 | ) |
| Per                basic and diluted share                            |   |                                   | 0.50    |   |                         |   | 0.50    |                                   |   |   | -                                |   |   |                                   | -       |   |   |   | 0.05 |   |   |   | 0.05 |   |   |   | - |   |   |   | (0.00 | ) |
| Net                earnings (loss)                                    |   |                                   | 902     |   |                         |   | 698     |                                   |   |   | (3,900                           | )      |   |                                   | (4,177  | ) |   |   | (1,570 | ) |   |   | (698 | ) |   |   | (16,716 | ) |   |   | (15,188 | ) |
| Per                basic and diluted share                            |   |                                   | 0.04    |   |                         |   | 0.03    |                                   |   |   | (0.15                            | )      |   |                                   | (0.17   | ) |   |   | (0.06 | ) |   |   | (0.03 | ) |   |   | (0.66 | ) |   |   | (0.60 | ) |
| Market                price range of Class A stock:                   |   |                                   |    |   |                         |   |    |                                   |   |   |                             |   |   |                                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| High                                                                  |   | $                                      | 4.04    |   |                         | $      | 4.04    |                                   |   | $      | 3.99                             |   |   | $                                      | 3.99    |   |   | $ | 3.14 |   |   | $ | 3.14 |   |   | $ | 3.18 |   |   | $ | 3.18 |   |
| Low                                                                   |   | $                                      | 2.96    |   |                         | $      | 2.96    |                                   |   | $      | 3.00                             |   |   | $                                      | 3.00    |   |   | $ | 2.11 |   |   | $ | 2.11 |   |   | $ | 2.20 |   |   | $ | 2.20 |   |
| Close                                                                 |   | $                                      | 3.69    |   |                         | $      | 3.69    |                                   |   | $      | 3.10                             |   |   | $                                      | 3.10    |   |   | $ | 2.86 |   |   | $ | 2.86 |   |   | $ | 2.32 |   |   | $ | 2.32 |   |

| *(a)* | *Certain                previously reported balances have been reclassified to conform to                the                current condensed consolidated balance sheet presentation, including                reclassification to discontinued operations those amounts related                to a                landfill development partnership, sold in April 2006, and Airport                Plaza                shopping center, sold in July                2006.* |
|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *(b)* | *Amounts                have been restated as described in Note                2.* |
|-------|------------------------------------------------------------------------------------|

| *(c)* | *$1.4                million of the increase in the tax provision for quarter ended June                30,                2006 resulted from the restatement of deferred tax liabilities associated                with the acquisition of indefinite lived intangibles in foreign taxing                jurisdictions.  This restatement adjustment was also the                principal reason for the $1.2 million shift to loss from continuing                operations for the quarter ended June 30,                2006.* |
|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *(d)* | *$1.0                million of the improvement in loss from continuing operations for                the                quarter ended March 31, 2006 resulted from the recharacterization                of our                interest in Voyager Kibris, including elimination of the related                loss                during the quarter ended March 31,                2006.* |
|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| *(e)* | *The                $1.4 million decrease in loss from discontinued operations, net of                tax for                the quarter ended June 30, 2006 resulted from the decrease in the                accrual                for the claim made by the Ohio Bureau of Workers                Compensation.* |
|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *(f)* | *The                $15.0 million loss from discontinued operations, net of tax for the                quarter ended September 30, 2006 was primarily comprised of $4.1                million                of additional environmental accruals, $4.0 million accrued for the                settlement of health and safety claims with Alcoa, and a $1.4 million                additional accrual for the claim made by the Ohio Bureau of Workers                Compensation.* |
|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *(g)* | *$0.8                million of the decrease in the tax provision for quarter ended June                30,                2005 resulted from the change in restated deferred tax liabilities                associated with the acquisition of indefinite lived intangibles in                foreign                taxing jurisdictions.  This restatement adjustment was also the                principal reason for the $0.9 million improvement in the loss from                continuing operations for the quarter ended June 30,                2005.* |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *(h)* | *Loss                from continuing operations for the quarter ended September 30, 2005                increased by $1.0 million due primarily to elimination of $0.3 million                of                equity earnings associated with our recharacterized interest in Voyager                Kibris, $0.4 million decrease to other income associated with the                restructured note, and $0.3 million decrease to tax provision for                the                quarter ended September 30, 2005 due to the change in restated deferred                tax liabilities associated with the acquisition of indefinite lived                intangibles in foreign taxing                jurisdictions.* |
|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *(i)* | *$1.5                million of the decrease in loss from discontinued operations, net                of tax                for the quarter ended September 30, 2005 resulted from reversal of                the                accrual for the claim made by the Ohio Bureau of Workers                Compensation.* |
|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| *(j)* | *$3.2                million of the decrease in the loss from continuing operations for                the                quarter ended December 31, 2004 resulted from the reallocation of                tax                benefit from discontinued operations to continuing operations. This                restatement adjustment was also the principal reason for the $3.2                million                decrease in earnings from discontinued operations, net of tax for                the                quarter ended December 31,                2004.* |
|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **19. ** | **PRO                                              FORMA FINANCIAL STATEMENTS                                              (UNAUDITED)** |
|---------------|------------------------------------------------------------------------------------------------------------------------------------------|

| (In                thousands, except per share data)                 |   | 2004       |    |
|----------------------------------------------------------------------|--------|------------|---------|
|                                                                 |   | (Restated) |    |
| Net                revenues                                          |   | $          | 330,148 |   |
| Operating                loss                                        |   |       | (14,763 | ) |
| Earnings                (loss) from continuing operations            |   |       | (9,835  | ) |
| Earnings                (loss) from continuing operations, per share |   | $          | (0.39   | ) |

| **20. ** | **RESTRUCTURING                                                CHARGES** |
|---------------|--------------------------------------------------------------------------|

**    **

| **21. ** | **DISCONTINUED                                                  OPERATIONS** |
|---------------|------------------------------------------------------------------------------|

***Shopping      Center***

----

***Landfill      Development Partnership***

***Aerostructures      Business***

***     Fastener      Business***

***APS***

----

| (In                thousands)                                                  |   | 2006   |    |   | 2005   |   |   | 2004   |   |
|--------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|--------|--------|--------|
|    Net                sales                                     |   | $      | 7,450   |   |   | $      | 17,745 |   |   | $ | 19,223 |   |
|    Cost                of goods sold                            |   |   | 3,524   |   |   |   | 14,510 |   |   |   | 16,564 |   |
|    Gross                margin                                  |   |   | 3,926   |   |   |   | 3,235  |   |   |   | 2,659 |   |
|                                                                           |   |   |    |   |   |   |   |   |   |   |   |   |
|    Selling,                general & administrative expense |   |   | 16,638  |   |   |   | 5,062  |   |   |   | 13,331 |   |
|    Other expense,                net                       |   |   | (1,008  | )      |   |   | (402   | )      |   |   | (175 | ) |
|  Operating loss                                                      |   |   | (11,704 | )      |   |   | (1,425 | )      |   |   | (10,497 | ) |
|  Net                interest expense                                      |   |   | (2,701  | )      |   |   | (3,381 | )      |   |   | (3,416 | ) |
|  Loss                from discontinued operations before income taxes     |   |   | (14,405 | )      |   |   | (4,806 | )      |   |   | (13,913 | ) |
|  Income                tax (provision) benefit                            |   |   | (2,604  | )      |   |   | (825   | )      |   |   | 14,010 |   |
|  Net                (income) loss from discontinued operations            |   | $      | (17,009 | )      |   | $      | (5,631 | )      |   | $ | 97 |   |

|                                                                                         |   | September                30, |    |
|----------------------------------------------------------------------------------------------|--------|------------------------------|---------|
| (In                thousands)                                                                |   | 2006                (a)      |    |   | 2005 |   |
|   Current                assets of discontinued operations:                        |   |                         |    |   |   |   |
|       Accounts                receivable                       |   | $                            | -       |   |   | $ | 60 |   |
|       Prepaid                expenses and other current assets |   |                         | -       |   |   |   | 1,449 |   |
|                                                                                         |   |                         | -       |   |   |   | 1,509 |   |
|   Noncurrent                assets of discontinued operations:                     |   |                         |    |   |   |   |   |   |
|       Property,                plant and equipment             |   |                         | -       |   |   |   | 91,031 |   |
|       Accumulated                depreciation                  |   |                         | -       |   |   |   | (15,571 | ) |
|       Deferred                loan costs                       |   |                         | -       |   |   |   | 832 |   |
|       Other                assets                              |   |                         | -       |   |   |   | 3,081 |   |
|                                                                                         |   |                         | -       |   |   |   | 79,373 |   |
|   Current                liabilities of discontinued operations:                   |   |                         |    |   |   |   |   |   |
|  Current                maturities of long-term debt                                    |   |                         | -       |   |   |   | (668 | ) |
|       Accounts                payable                          |   |                         | (62     | ) |   |   | (425 | ) |
|       Accrued                liabilities                       |   |                         | -       |   |   |   | (447 | ) |
|                                                                                         |   |                         | (62     | ) |   |   | (1,540 | ) |
| Noncurrent                liabilities of discontinued operations:                            |   |                         |    |   |   |   |   |   |
|       Long-term                debt                            |   |                         | -       |   |   |   | (53,313 | ) |
|       Other                long-term liabilities               |   |                         | (16,120 | ) |   |   | (168 | ) |
|                                                                                         |   |                         | (16,120 | ) |   |   | (53,481 | ) |
|  Total                net assets of discontinued operations                             |   | $                            | (16,182 | ) |   | $ | 25,861 |   |

|   | *(a)* | *Represents                a $15.1 million deferred gain on the sale of the shopping center                and $1.0                million for the estimated minimum cost to remediate environmental                matters.* |
|--------|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **22. ** | **SUBSEQUENT                                                      EVENTS** |
|---------------|----------------------------------------------------------------------------|

----

**ITEM      9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON      ACCOUNTING AND FINANCIAL DISCLOSURE**

**ITEM      9A.  CONTROLS AND PROCEDURES**

**   *Evaluation      of Disclosure Controls and Procedures***

***    Plan      for Remediation of the Material Weaknesses***

** *   Elimination      of a Prior Period Material Weakness***

----

***    Changes      in Internal Control over Financial Reporting***

***Future      Assessment of Internal Controls Over Financial      Reporting***

***   Limitations      on Effectiveness of Internal Controls***

----

**PART      III**

**ITEM      10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE      COMPANY**

**DIRECTORS      STANDING FOR ELECTION**

| *Name*                             |   | *Age* |   | *Position*                                                                                     |
|------------------------------------|--------|-------|--------|------------------------------------------------------------------------------------------------|
| Didier                Choix        |   | 50    |   |      Director                                                         |
| Robert                E. Edwards   |   | 59    |   |      Director                                                         |
| Daniel                Lebard       |   | 68    |   |      Director                                                         |
| Glenn                Myles         |   | 52    |   |      Director                                                         |
| Eric                I. Steiner     |   | 45    |   |      President,                Chief Operating Officer and Director   |
| Jeffrey                J. Steiner  |   | 70    |   |      Chairman                of the Board and Chief Executive Officer |
| Michael                J. Vantusko |   | 50    |   |      Director                                                         |

**Didier      Choix.**

**Robert      E. Edwards.**

**Daniel      Lebard.**

**Glenn      Myles.**

**Dr. Eric I.      Steiner.**

**Jeffrey      J. Steiner.**

**Michael      J. Vantusko.**

----

***Legal      Proceedings Involving Jeffrey Steiner:***

***Derivative      Shareholder Actions:***
*Noto v.      Steiner, et al*
*Barbonel v. Steiner, et al*
***Derivative Settlement***

***Class      Action Litigation:***
* *
*In re      The Fairchild Corporation Shareholders Litigation*

***Director      Independence:***

**Two      New Independent Directors Appointed:**

----

**INFORMATION      AS TO EXECUTIVE OFFICERS**

*“Certain Transactions*

**Klaus      Esser**

**Michael      L. McDonald,**

**Donald      E. Miller,**

**Warren      D. Persavich,**

**SECTION      16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE**

**BUSINESS      CONDUCT POLICIES AND CODE OF ETHICS**

*www.fairchild.com*

*www.fairchild.com*

----

**ITEM      11.  EXECUTIVE COMPENSATION**

**DIRECTORS      COMPENSATION**

|                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|----------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **Annual                Retainer:**                | $20,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| **Attendance                Fees:**                | $2,500                for each Board meeting.$2,500                for each Audit Committee meeting.$1,000                per meeting for all other Board Committee meetings.Expenses                related to attendance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| **Stock                Options:**                  | Under                the 1996 Non-Employee Directors Stock Option Plan (the “1996 NED Plan”)                each non-employee director is issued stock options for 30,000 shares                at                the time he or she is first elected as a director. Thereafter, each                director is issued stock options for 1,000 shares on an annual basis                (immediately after each Annual Meeting). The 1996 NED Plan expired                in                September 2006 and there is no current proposal to adopt a new stock                option plan in its place.  Outstanding options continue in full                force and effect. |
|                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| **Special                Committee:**              | $25,000                to each member, one time retainer$30,000                to the Chairman, one time retainer$1,000                attendance fee for each meeting (member)$1,250                attendance fee for each meeting (Chairman)                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| **ChCChairman                of Audit Committee:** | $10,000                a year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |

**REPORT      OF THE COMPENSATION AND STOCK OPTION COMMITTEE**

*The      following report does not constitute solicitation material and is not considered      filed or incorporated by reference into any other Company filing under the      Securities Act of 1933 or the Securities Exchange Act of 1934, unless we state      otherwise.*

**Compensation      Philosophy**

| ·   | Provide                compensation competitive with other similar                companies. |
|--------------------|----------------------------------------------------------------------------------------------|

| ·   | Encourage                executives to increase shareholder                value. |
|--------------------|-----------------------------------------------------------------------------------|

| ·   | Directly                relate compensation to Company performance and/or the objective value                of                individual service. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------|

**Components      of Executive Officer Compensation**

*Cash      Compensation (Base Salary and Annual Incentive Bonus)*

----

*Mix      Between Salary and Annual Incentive Pay*

*Stock      Option Grants*

*Total      Compensation Program*

**Compensation      of CEO**

*Base      Compensation*

*Stock      Option Grants*

*Incentive      Compensation for 2006 Fiscal Year*

----

|   | Daniel                Lebard, Chairman |
|--------|----------------------------------------|

|   | Michael                J. Vantusko |
|--------|------------------------------------|

|   | Robert                E. Edwards |
|--------|----------------------------------|

**EMPLOYMENT      AGREEMENTS AND CHANGE OF CONTROL ARRANGEMENTS**

| ·   | ***Employment                Agreement between the Company and Jeffrey                Steiner:*** |
|--------------------|---------------------------------------------------------------------------------------------------|

|                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|-----------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Term                of the Agreement:                                             | Pursuant                to the Derivative Settlement, the term under this employment agreement                is                thirty (30) months, extended annually by an additional 12 months                unless                either party gives timely notice not to extend the                agreement.                                                                                                                                                                                                                                                                                                                                                                                          |
|                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| Minimum                Base Salary Under the Agreement:                      | As                determined by the Board of Directors. However, see description immediately                below regarding current base salary.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| Current                Base Salary:                                               | Pursuant                to the terms of the Derivative Settlement, effective as of January                12,                2006, Jeffrey Steiner’s aggregate base-pay compensation under all his                employment agreements was reduced to $1,325,000 per year. Such reduction                shall remain in place until such time as the Compensation Committee                and                Jeffrey Steiner agree on the terms of a new employment agreement.                Prior to                January 12, 2006, Jeffrey Steiner’s aggregate base salary under all his                employment agreements was $2,500,000 per annum.                                 |
|                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| Payments                in Event of Death:                                        | Estate                to receive an amount equal to one year’s base salary, plus bonuses for the                fiscal year in which death occurred.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| Payments                in Event of Termination Due                to Disability: |  Base              salary until the date of termination, and fifty percent of base salary              for              two years thereafter, plus bonuses for the fiscal year in which disability              occurred.                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| Change                in Control Payments:                                        | In                connection with the sale of Fairchild Fasteners to Alcoa Inc., our                Board                of Directors determined that Jeffrey Steiner was entitled to a change                of                control payment in the amount of $6,280,000. Fifty percent (50%)                of such                payment was made to Jeffrey Steiner during January to June 2003.                The                remaining 50% ($3,140,000) will be paid upon Jeffrey Steiner’s termination                of employment with Fairchild. No other change of control payments                are                provided for in Jeffrey Steiner’s employment agreement. |
|                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| Split-Dollar                Life Insurance:                                       | Pursuant                to the Derivative Settlement, the Company and Jeffrey Steiner executed                an                agreement confirming that the Company’s obligations under Jeffrey                Steiner’s split-dollar life insurance policy are irrevocably terminated                and released.                                                                                                                                                                                                                                                                                                                                                                           |

| ·   | ***Employment                Agreement between Banner Aerospace (a Company Subsidiary) and Jeffrey                Steiner:*** |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------|

|                                    |                                                                                                                                                                                                                                                                                                                           |
|-----------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Term                  of the Agreement: | Pursuant                  to the Derivative Settlement, the term under this employment agreement                  is                  thirty (30) months, extended annually by an additional 12 months                  unless                  either party gives timely notice not to extend the                  agreement. |

| Minimum                  Base Salary Under the Agreement: | Not                  less than $250,000 per year. However, see description immediately                  below                  regarding current base salary.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|-----------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                      |
|                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| Current                  Base Salary:                     | Pursuant                  to the terms of the Derivative Settlement, effective as of                  January 12, 2006, Jeffrey Steiner’s aggregate base-pay compensation                  under all his employment agreements was reduced to $1,325,000 per                  year.                  Such reduction shall remain in place until such time as the Compensation                  Committee and Jeffrey Steiner agree on the terms of a new employment                  agreement. Prior to January 12, 2006, Jeffrey Steiner’s aggregate                  base salary under all his employment agreements was $2,500,000                  per                  annum. |

----

| Payments                  in Event of Death:                                          | Estate                  to receive an amount equal to one year’s base salary, plus bonuses for the                  fiscal year in which death occurred.                                                                                     |
|---------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                  |                                                                                                                                                                                                                                               |
| Payments                  in Event of Termination Due to                  Disability: | Base                  salary until the date of termination, and fifty percent of base                  salary for two years thereafter, plus bonuses for the fiscal year                  in which                  disability occurred. |
|                                                                                       |

| ·   | ***Service                  Agreement between Fairchild Switzerland, Inc. (Company Subsidiary)                  and                  Jeffrey Steiner:*** |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|-----------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Term                  of the Agreement:                   | Year                  to year, terminated in 2006 due to the planned closure of the Swiss                  branch                  of Fairchild Switzerland, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| Minimum                  Base Salary Under the Agreement: | Greater                  of $400,000 or 680,000 Swiss Francs per year, but not more than                  $400,000.                  However, see description immediately below regarding current base                  salary.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                                                      |
|                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| Current                  Base Salary:                     | Pursuant                  to the terms of the Derivative Settlement, effective as of January                  12,                  2006, Jeffrey Steiner’s aggregate base-pay compensation under all his                  employment agreements was reduced to $1,325,000 per year. Such                  reduction                  shall remain in place until such time as the Compensation Committee                  and                  Jeffrey Steiner agree on the terms of a new employment agreement.                  Prior to                  January 12, 2006, Jeffrey Steiner’s aggregate base salary under all his                  employment agreements was $2,500,000 per                  annum. |

| ·   | ***Employment                  Agreement between the Company and Eric                  Steiner:*** |
|--------------------|----------------------------------------------------------------------------------------------------|

|                                                      |                                                                                                                                                                        |
|-----------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Term                  of the Agreement:                   | Pursuant                  to the Derivative Settlement, the term under this employment agreement                  is                  two years, expiring January 12, 2008. |
|                                                      |                                                                                                                                                                        |
| Minimum                  Base Salary Under the Agreement: | $540,000.                  However, see description immediately below regarding current base                  salary.                                                       |

|                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|---------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Current                  Base Salary:                                                 | Pursuant                  to the terms of the Derivative Settlement, effective as of January                  12,                  2006, Eric Steiner’s base-pay was reduced to $535,500 per year. Such                  reduction shall remain in place until such time as the Compensation                  Committee and Eric Steiner agree on the terms of a new employment                  agreement. Prior to January 12, 2006, Eric Steiner’s base salary was                  $725,000 per annum.                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| Payments                  in Event of Death:                                          | Same                  as the Company’s CEO.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| Payments                  in Event of Termination Due to                  Disability: | Same                    as the Company’s CEO.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| Change                  in Control Payments:                                          | In                  connection with the sale of Fairchild Fasteners to Alcoa Inc.,                  our Board                  of Directors determined that Eric Steiner was entitled to a change                  of                  control payment in the amount of $5,434,000.  Fifty percent                  (50%) of such payment was made to Eric Steiner in January                  2003.  The remaining 50% was paid in four equal and consecutive                  quarterly installments, with the first installment made on March                  3, 2003,                  and the last installment made in January 2004. In                  connection with such change of control award, Eric Steiner’s employment                  agreement was amended, pursuant to which he relinquished any future                  change                  of control payments under such employment                  agreement. |

----

| ·   | ***Letter                Agreement between the Company and Donald                Miller*** |
|--------------------|--------------------------------------------------------------------------------------------|

|                                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|--------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Payments                in the event of Termination Without Cause: | Two                  (2) times then current annual base salary, plus 1 times current                  annual                  base salary in lieu of bonus.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| Change                in Control Payments:                         | In                connection with the sale of Fairchild Fasteners to Alcoa Inc., our                Board                of Directors determined that Mr. Miller was entitled to a change                of                control payment in the amount of $1,125,000. Fifty percent (50%)                of such                payment was made to Mr. Miller in December 2002. The remaining 50%                was                paid in four equal and consecutive quarterly installments, with the                first                installment made on March 3, 2003, and the last installment made                in                January, 2004. |
|                                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                                               | In                connection with such change of control award, the letter agreement                between                the Company and Mr. Miller was amended, pursuant to which                Mr. Miller relinquished any future change of control payments under                such letter agreement.                                                                                                                                                                                                                                                                                                                                         |

| ·   | ***Employment                Agreement between PoloExpress and Klaus                Esser*** |
|--------------------|----------------------------------------------------------------------------------------------|

|                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|-------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Term                  of the Agreement:   | Initially                  for three years ending on December 31, 2008. Either party could                  elect to                  terminate the contract as of December 31, 2008 by giving nine (9)                  months                  prior written notice. If the contract was not terminated as of                  December                  31, 2008, it continued in place until either party gave twelve                  (12) months                  prior written notice of termination.  The initial term of the                  amended and restated agreement is 7 years, beginning on January                  1, 2006,                  and ending on December 31, 2012, subject to certain provisions                  for                  automatic renewal. |
|                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| Base                  Salary and Bonuses: | Base                  pay compensation to Mr. Esser during fiscal year 2006 initially                  was                  240,000 Euros per year. In addition, if PoloExpress had an annual                  EBITDA                  of more than 6 million Euros, Mr. Esser was entitled to a bonus                  for such                  year equal to 5% of the total EBITDA.  The amended and restated                  agreement provides for an increase in base salary of 60,000 Euros,                  to                  300,000 Euros per year, and bonus amounts payable as follows:                                                                                                                                                                             |

|   | **Fiscal                    years**Ending                    until September 30, 2008September                    30, 2009 After                    September 30, 2009 | **EBITDA                    threshold**5                    Million Euros or more  6                    Million Euros or more  7                    Million Euros or                    more               | **Percentage                    Bonus**5%                    of EBITDA6%                    of EBITDA6%                    of EBITDA |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------|

|                                   |  The                  bonus for each year is payable in monthly installments. The actual                  bonus                  amount is determined at the end of each year, after EBITDA is confirmed.                  If the aggregate monthly installments paid are less than or more                  than the                  amounts due, the Company or Mr. Esser, respectively, shall repay                  the other                  party for the difference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|----------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| Non-Compete                  Payments: | Following                  termination of employment, Mr. Esser shall not compete for a period                  of 24                  months, provided that PoloExpress continues to compensate Mr. Esser                  during                  such period at the rate of fifty percent (50%) of his average                  compensation. Average compensation is based on the last three years                  of                  employment, and includes base pay and bonuses. Within twenty-eight                  (28)                  days of the termination of employment, PoloExpress may elect not                  to                  enforce the two-year non-compete covenant, in which case Mr. Esser                  shall                  not compete for a period of one year (as specified in Paragraph                  75a of the                  German Commercial Code) and PoloExpress will compensate Mr. Esser                  at the                  rate of 14,000 Euros per month during such one year                  period.  Under the amended and restated agreement, starting                  January 1, 2009, following termination of employment, the PoloExpress                  option to elect not to enforce the two-year non-compete provision                  is                  terminated. |

----

| ·   | ***Employment                Agreement between Banner Aerospace, Inc. and Warren D.                Persavich*** |
|--------------------|-----------------------------------------------------------------------------------------------------------------|

| Term                of the Agreement:                                                                                                                                                                                                                                                          | Currently                under an extended “rolling term” of at least 730 days, with one day added                to the term for each day there is no notice by either party to terminate                the agreement. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  Base                Salary and Bonuses:                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                 |
| Not                less than $155,000 per year, with a 50% bonus upon achievement of                goals                designated from time to time by the Compensation Committee, plus                any other                bonuses, such as transaction related                bonuses. |

|                                                                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                        |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Current                Base Salary:                                                                                                                                                                                                                                                                                                                                                                              | As                determined by the Board of Directors.  See the Summary                Compensation Chart.                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                        |
| Payments                in Event of Death:                                                                                                                                                                                                                                                                                                                                                                       | Estate                to receive an amount equal to six month’s base salary, plus bonuses for                the fiscal year in which death occurred. |
|  Payments                in Event of Termination                Due to Disability:                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                        |
| Base                salary until the date of termination, and bonuses for the fiscal                year in                which termination occurred, provided that the foregoing payments                shall be                made only to the extent that such payments, plus disability insurance                proceeds, would not exceed 100% of base salary for the applicable                period. |

**PENSION      AND RETIREMENT BENEFITS**

*Fairchild      Retirement Plan*

| *Annual**Salary* |    |   | *10 Years**of Service* |   |   | *20 Years**of Service* |   |   | *30 Years**of Service* |   |   | *40 Years**of Service* |   |
|------------------|---------|--------|----------------------------------|--------|--------|----------------------------------|--------|--------|----------------------------------|--------|--------|----------------------------------|--------|
| $                | 25,000  |   |                             | $      | 2,000  |                             |   | $      | 4,000                            |   |   | $                                | 6,000  |   |   | $ | 7,313 |   |
|             | 50,000  |   |                             |   | 4,000  |                             |   |   | 8,000                            |   |   |                             | 12,000 |   |   |   | 14,625 |   |
|             | 100,000 |   |                             |   | 9,950  |                             |   |   | 19,900                           |   |   |                             | 29,850 |   |   |   | 36,075 |   |
|             | 150,000 |   |                             |   | 15,950 |                             |   |   | 31,900                           |   |   |                             | 47,850 |   |   |   | 57,700 |   |
|             | 200,000 |   |                             |   | 21,950 |                             |   |   | 43,900                           |   |   |                             | 65,850 |   |   |   | 79,325 |   |
|             | 250,000 |   |                             |   | 22,790 |                             |   |   | 45,580                           |   |   |                             | 68,370 |   |   |   | 82,352 |   |

| *Officer*                            |   | *Average                Salary* |    | *Years                of Credit* |
|--------------------------------------|--------|---------------------------------|---------|----------------------------------|
|  Jeffrey                Steiner |   | $                               | 207,000 |                             | 16                years |
| Donald                Miller         |   |                            | 207,000 |                             | 15                years |
| Eric                Steiner          |   |                            | 207,000 |                             | 15                years |
| Warren                Persavich      |   |                            | 207,000 |                             | 29                years |

*Supplemental      Executive Retirement Plans*

----

|                                                           | **Unfunded                SERP**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | **Funded                SERP**                                                                                                                                                                                                                                                       |
|----------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                                                                                                                                                                                                                                                                 |
| **Retirement                Benefits**                         | Provides                a maximum retirement benefit (in the aggregate for both Supplemental                Executive Retirement Plans) equal to the difference between (i) sixty                percent (60%) of the participant’s highest base salary for five                consecutive years of the last ten years of employment, and (ii) the                aggregate of other pension benefits, profit sharing benefits, and                primary                Social Security payments to which the participant is                entitled. |   | An                annual retirement benefit determined by multiplying the participant’s                years of credited service times a fixed amount. The amount varies                by                participant.                                                         |
|                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                                                                                                                                                                                                                                                                 |
| **Funding**                                                    | This                is an unfunded obligation of the Company, not subject to ERISA                regulations. The Company makes discretionary contributions to a “Rabbi                Trust” to help meet its obligations under this plan, but the assets under                such trust are subject to the claims of the Company’s                creditors.                                                                                                                                                                             |   | This                benefit is a part of the Retirement Plan for Employees of the Fairchild                Corporation. It is a funded obligation of the Company. Such funding                contributions are not assets available to the creditors of the                Company. |
|                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                                                                                                                                                                                                                                                                 |
| **Pre-Retirement                Distributions**                | Subject                to the approval of the Compensation Committee, the plan permits                participants who have reached retirement age, to elect to receive                retirement advances.                                                                                                                                                                                                                                                                                                                                                    |   | At                the participant’s request upon attainment of Normal Retirement Age as                defined in the Plan.                                                                                                                                                    |
|                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                                                                                                                                                                                                                                                                 |
| **Participants**                                               | Executive                Officers. All persons named in the Summary Compensation Table are                eligible                for participation in this plan except Mr. Klaus Esser.                                                                                                                                                                                                                                                                                                                                                                       |   | Same                as the unfunded plan.                                                                                                                                                                                                                                            |
|                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                                                                                                                                                                                                                                                                 |
| **Special                Years of Service Accreditation** | Pursuant                to a letter agreement with Mr. Miller, for purposes of determining                years                of service with the Company under the Supplemental Executive Retirement                Plans, Mr. Miller will be credited with two years of service for                each of                the first ten years he is employed by the Company.                                                                                                                                                                                |   | None.                                                                                                                                                                                                                                                                                |

----

**EXECUTIVE      COMPENSATION**

**Table:    Summary      Compensation**

|                                               |   |                     |   | *Annual                Compensation* |      |    | *Long-Term                Compensation Awards* |   |
|----------------------------------------------------|--------|--------------------------|--------|--------------------------------------|-----------|---------|------------------------------------------------|--------|
| *Name                and Principal*                |   | *Fiscal*                 |   | *Salary*                             |      |    | *Bonus*                                        |   |   | *Other                Annual Compensation* |   |   | *Securities                Underlying Options* |   |   | *All                Other Compensation* |   |
| *Position*                                         |   | *   Year* |   | *($)*                                |      |    | *($)*                                          |   |   | *($)* |   |   | * * | *(#)* |   |   | *($)***(1)** |   |
|                                               |   |                     |   |                                 |      |    |                                           |   |   |   |   |   |   |   |   |   |   |   |
| Jeffrey                Steiner,                    |   | FY                2006   |   | $                                    | 1,542,596 |    |                                           |   | - |   |   | $ | 52,394 | **(5)** |   |   | - |   |   | $ | 6,027 | **(3)** |
| Chairman &                                |   | FY                2005   |   |                                 | 2,500,005 |    |                                           |   | - |   |   |   | - |   |   |   | - |   |   | ** ** | 6,317 | **(3)** |
| CEO**(****4****)**                                 |   | FY                2004   |   |                                 | 2,500,005 |    |                                           |   | - |   |   |   | - |   |   |   | - |   |   | ** ** | 2,937 | **(3)** |
|                                               |   |                     |   |                                 |      |    |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Klaus                Esser                         |   | FY                2006   |   |                                 | 283,086   |    |                                           | $      | 529,248 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Managing                Director,                  |   | FY                2005   |   |                                 | 254,516   |    |                                           |   | 585,386 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| PoloExpress                GmbH                    |   | FY                2004   |   |                                 | 204,030   |    |                                           |   | 497,732 |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                               |   |                     |   |                                 |      |    |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Donald                Miller,                      |   | FY                2006   |   |                                 | 375,003   |    |                                           |   | 200,000 |   |   |   | - |   |   |   | - |   |   |   | 6,010 |   |
| Executive                VP, General Counsel & |   | FY                2005   |   |                                 | 375,250   |    |                                           |   | - |   |   |   | - |   |   |   | - |   |   |   | 6,250 |   |
| Secretary                                          |   | FY                2004   |   |                                 | 422,311   |    |                                           |   | - |   |   |   | 112,500 |   |   |   | - |   |   |   | 2,937 |   |
|                                               |   |                     |   |                                 |      |    |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Warren                Persavich,                   |   | FY                2006   |   |                                 | 226,289   |    |                                           |   | 155,400 |   |   |   | - |   |   |   | - |   |   |   | 5,463 |   |
| President,                                         |   | FY                2005   |   |                                 | 226,289   |    |                                           |   | 43,290 |   |   |   | - |   |   |   | - |   |   |   | 3,629 |   |
| Aerospace                Division                  |   | FY                2004   |   |                                 | 232,693   |    |                                           |   | - |   |   |   | - |   |   |   | - |   |   |   | 2,655 |   |
|                                               |   |                     |   |                                 |      |    |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Eric                Steiner,                       |   | FY                2006   |   |                                 | 588,707   |    |                                           |   | - |   |   |   | - |   |   |   | - |   |   |   | 6,029 |   |
| President &                COO            |   | FY                2005   |   | ** **                           | 725,005   | **(2)** |                                           |   | - |   |   |   | - |   |   |   | - |   |   |   | 6,308 |   |
|                                               |   | FY                2004   |   |                                 | 725,005   |    |                                           |   | - |   |   |   | 543,400 |   |   |   | - |   |   |   | 2,937 |   |

----

|   | FY                2006 = Fiscal Year for October 1, 2005 to September 30,                2006. |
|--------|------------------------------------------------------------------------------------------------|

|   | FY                2005 = Fiscal Year for October 1, 2004 to September 30,                2005. |
|--------|----------------------------------------------------------------------------------------------------------|

|   | FY                2004 = Fiscal Year for October 1, 2003 to September 30,                2004. |
|--------|----------------------------------------------------------------------------------------------------------|

| **(1)** | For                FY 2006, includes imputed interest on loans to officers, as                follows: |
|---------|--------------------------------------------------------------------------------------------------------|

| J.                Steiner   |  $       -            |
|-----------------------------|---------------------------------------------------------------|
| D.                Miller    |           - |
| W.                Persavich |           - |
| E.                Steiner   |           - |

|   |  New              loans to executive officers are no longer permitted as of July 30,              2002. |
|--------|-------------------------------------------------------------------------------------------------------------------|
|   |   |
|--------|--------|
| **(2)** | Includes                $11,154 which was earned in FY 2005, but which payment has been                deferred. |
|---------|------------------------------------------------------------------------------------------------------------------|

----

| **(3)** | Does                not include advances, before retirement of earned benefits under                the                Company’s Unfunded SERP (Supplemental Executive Retirement Plan). See                disclosure under Certain Transactions.  Advances under the                Unfunded SERP for Jeffrey Steiner are as                follows: |
|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| FY                2006 |  $     3,459,283                            |
|------------------------|---------------------------------------------------------------------------|
| FY                2005 |            477,222 |
| FY                2004 |         1,990,028                 |

| **(4)** | Table                    does not include a remaining $3,140,000 change in control payment                    due to                    Mr. Jeffrey Steiner upon termination                    of employment. |
|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **(5)** | Represents                payment under a release of claims required by the Derivative Settlement                in                connection with a former split-dollar                life insurance premium. |
|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Table:    Options      Granted**

**Table:    Option      Exercises and Year-End Value**

|                                    |   | *Shares                    Acquired*  |    |   |                   |   |    |                         *Number                      of Securities**Underlying                      Unexercised**Options at**September                    30, 2006* |   |   |                          *Value                      of Unexercised**In-the-Money**Options                    at**September                    30, 2006* |   |
|-----------------------------------------|--------|---------------------------------------|---------|--------|------------------------|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|  *Name*                            |   | *on                    Exercise**(#)* |    |   | *Value**Realized**($)* |   |    | *Exercisable**(#)*                                                                                                                                                                      |   |   | *Unexercisable**(#)*                                                                                                                                                              |   |   | *Exercisable**($)* |   |   | *Unexercisable**($)* |   |
|  Jeffrey                  Steiner  |   |                                  | — |   |                   |   | — |                                                                                                                                                                                    |   |   | 145,518                                                                                                                                                                           |   |   |   | — |   |   |   | — |   |   |   | — |   |
|  Warren                  Persavich |   |                                  | — |   |                   |   | — |                                                                                                                                                                                    |   |   | —                                                                                                                                                                           |   |   |   | — |   |   |   | — |   |   |   | — |   |
|  Klaus                  Esser      |   |                                  | — |   |                   |   | — |                                                                                                                                                                                    |   |   | —                                                                                                                                                                           |   |   |   | — |   |   |   | — |   |   |   | — |   |
|  Donald                  Miller    |   |                                  | — |   |                   |   | — |                                                                                                                                                                                    |   |   | 13,333                                                                                                                                                                            |   |   |   | — |   |   |   | — |   |   |   | — |   |
|  Eric                  Steiner     |   |                                  | — |   |                   |   | — |                                                                                                                                                                                    |   |   | 26,400                                                                                                                                                                            |   |   |   | — |   |   |   | — |   |   |   | — |   |

----

**STOCK      PERFORMANCE GRAPH**

*The      following stock performance graph does not constitute solicitation material      and      is not considered filed or incorporated by reference into any other Company      filing under the Securities Act of 1933 or the Securities Exchange Act of 1934,      unless we state otherwise.*

----

**ITEM      12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND      MANAGEMENT**

**STOCK      OWNERSHIP**

| ·   | each                director; |
|--------------------|-------------------------------|

| ·   | each                executive officer named in the Summary Compensation                Table; |
|--------------------|-----------------------------------------------------------------------------------------------|

| ·   | the                directors and executive officers as a group;                and |
|--------------------|------------------------------------------------------------------------------------|

| ·   | each                person who we know beneficially owns more than 5% of the common                stock. |
|--------------------|-----------------------------------------------------------------------------------------------------------|

| *Name*                                                              |   | *Number                of Shares of Class A Stock **(1)*** |      |   | *Percentage                of Class* |   |   | *Number                of Shares of Class B Stock **(1)*** |   |   | *Percentage                of Class* |   |
|---------------------------------------------------------------------|--------|------------------------------------------------------------|-----------|--------|--------------------------------------|--------|--------|------------------------------------------------------------|--------|--------|--------------------------------------|--------|
| **Directors:**                                                      |   |                                                       |      |   |                                 |   |   |                                                       |   |   |                                 |   |
| Didier                Choix**(2)**                                  |   |                                                       | 7,500     |   |                                 |   | *      |                                                       |   |   | -                                    |   |   |   | - |   |
| Robert                E. Edwards**(2)**                             |   |                                                       | 999,695   |   |                                 |   | 4.42   | %                                                          |   |   | -                                    |   |   |   | - |   |
| Daniel                Lebard**(2)**                                 |   |                                                       | 49,356    |   |                                 |   | *      |                                                       |   |   | -                                    |   |   |   | - |   |
| Glenn                Myles**(2)**                                   |   |                                                       | 7,500     |   |                                 |   | *      |                                                       |   |   | -                                    |   |   |   | - |   |
| Eric                Steiner**(2)(3)(6)**                            |   |                                                       | 5,978,622 |   |                                 |   | 23.74  | %                                                          |   |   | 2,548,996                            |   |   |   | 97.24 | % |
| Jeffrey                J. Steiner**(2)(3)(4)**                      |   |                                                       | 219,062   |   |                                 |   | 0.96   | %                                                          |   |   | 30,000                               |   |   |   | 1.14 | % |
| Michael                J. Vantusko**(2)**                           |   |                                                       | 7,500     |   |                                 |   | *      |                                                       |   |   | -                                    |   |   |   | - |   |
|                                                                |   |                                                       |      |   |                                 |   |   |                                                       |   |   |                                 |   |   |   |   |   |
| **Other                Named Executive Officers:**                  |   |
| Klaus                Esser                                          |   |                                                       | -         |   |                                 |   | -      |                                                       |   |   | -                                    |   |   |   | - |   |
| Donald                E. Miller**(2)(3)**                           |   |                                                       | 103,409   |   |                                 |   | *      |                                                       |   |   | -                                    |   |   |   | - |   |
| Warren                D. Persavich                                  |   |                                                       | -         |   |                                 |   | -      |                                                       |   |   | -                                    |   |   |   | - |   |
|                                                                |   |                                                       |      |   |                                 |   |   |                                                       |   |   |                                 |   |   |
| **All                Directors and Executive Officers as a Group:** |   |
| (11                persons including the foregoing)**(2)**          |   |                                                       | 7,377,904 |   |                                 |   | 29.02  | %                                                          |   |   | 2,578,996                            |   |   |   | 98.38 | % |
|                                                                |   |                                                       |      |   |                                 |   |   |                                                       |   |   |                                 |   |   |   |   |   |
| **Other                5% Beneficial Owners:(5)**                   |   |
| Dimensional                Fund Advisors, Inc.                      |   |                                                       | 1,954,931 |   |                                 |   | 8.65   | %                                                          |   |   | -                                    |   |   |   | - |   |
| GAMCO                Investors, Inc.                                |   |                                                       | 4,280,132 |   |                                 |   | 18.93  | %                                                          |   |   | -                                    |   |   |   | - |   |
| Natalia                Hercot**(3)(6)**                             |   |                                                       | 5,794,521 |   |                                 |   | 23.04  | %                                                          |   |   | 2,548,996                            |   |   |   | 97.24 | % |
| The                Steiner Group LLC**(6)**                         |   |                                                       | 5,727,684 |   |                                 |   | 22.78  | %                                                          |   |   | 2,533,996                            |   |   |   | 96.67 | % |

----

----

**Footnotes      to Stock Ownership Chart:**

| **(1)** | The                Class A Stock Column includes shares of Class B Stock, which are                immediately convertible into Class A Stock on a share-for-share                basis.  Options that are exercisable immediately or within sixty                days after June 30, 2007, appear in the Class A Stock column.                Excludes Deferred Compensation Units (“DCUs”) to be paid out on                February 28, 2010 in the form of one share of Class A Common                Stock for each DCU as follows: E. Steiner, 42,826 shares; J. Steiner,                134,831 shares. |
|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **(2)** | Includes                exercisable stock options to purchase Class A Stock as                follows:  D. Choix, 7,500 shares; R. Edwards, 2,000 shares; D.                Lebard, 34,000 shares; D. Miller, 13,333 shares; G. Myles, 7,500                shares;                E. Steiner, 26,400 shares; J. Steiner, 145,518 shares M. Vantusko,                7,500                shares;  Directors and Executive Officers as a group, 243,751                shares. |
|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **(3)** | Includes                shares beneficially owned, as                follows: |
|---------|-------------------------------------------------------------------------------|

| **(4)** | Mr. Jeffrey                Steiner, c/o The Fairchild Corporation, 1750 Tysons Boulevard, Suite                1400,                McLean, VA 22102. |
|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **(5)** | Based                on the following information: |
|---------|----------------------------------------------------|

| **(6)** | *Controlling                Interest held by LLC:*  The Steiner Group LLC (a Delaware                limited liability company) (the “LLC”) holds 3,193,688 shares of                Class A Stock and 2,533,996 shares of Class B Stock. It holds a                controlling interest in the                Company. |
|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Change      of Control:*

*Membership      Interest Held in the LLC:*

----

**ITEM      13.  CERTAIN RELATIONSHIPS AND RELATED      TRANSACTIONS**

**CERTAIN      TRANSACTIONS**

| ·   | The                Company provided a surety for Mr. Steiner and paid his expenses in                connection with legal proceedings in France, totaling approximately                $5.645                million, and Mr. Steiner undertook to repay such amounts to the                Company if it were ultimately determined that he was not entitled                to                indemnification under Delaware law (the “*Undertaking*”). Pursuant                to the Derivative Settlement, the Company and Mr. Steiner agreed to                mutually resolve Mr. Steiner’s claims for indemnity and his                obligations to the Company under the Undertaking, by paying the Company                $3,763,333, of which $833,333 was withdrawn from Mr. Steiner’s                Company SERP account, and $2,930,000 was paid by him via the Company’s                D&O liability insurance carrier, in satisfaction of its obligations                to                indemnify and insure                Mr. Steiner.  |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Previously,                we have extended loans to purchase our Class A common stock to certain                members of our senior management and Board of Directors, for the                purpose                of encouraging ownership of our stock, and to provide additional                incentive                to promote our success. The loans are non-interest bearing, and have                all                been fully repaid except for one.  The remaining outstanding                loan is non-interest bearing, and matures in 1¼ years, or becomes due and                payable immediately upon the termination of employment if prior to                such                maturity date. On September 30, 2006, the borrower, who is an officer                of                the Company, owed us approximately $50,000. In fiscal 2006, Mr. Steven                Gerard, a former director, repaid, when due, his outstanding loan.                All                other loans to directors and executive officers were repaid in full                prior                to September 30, 2005. During 2006, the largest aggregate balance                of                indebtedness outstanding under the officer and director stock purchase                program was approximately $66,000 from Mr. Gerard, and $50,000 from                the                officer. In fiscal 2003, the Board of Directors extended, by five                years,                the expiration date of the loan to the officer, who was not deemed                an                executive officer. In accordance with the Sarbanes-Oxley Act of 2002,                no                new loans will be made to executive officers or                directors. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | On                September 30, 2006, we owed a remaining amount for change of control                payments of $3.1 million to Mr. J. Steiner. The amount owed to Mr.                J.                Steiner is payable to him upon his termination of employment with                us. On                September 30, 2006, deferred compensation of $11,000 was due from                us to                Mr. E. Steiner. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | In                December 2006, Mr. J. Steiner reimbursed us $40,000 for personal                expenses                that we paid on his behalf, which were outstanding as of September                30,                2006.  At no time during 2006 did amounts due to us from Mr. J.                Steiner exceed the amount of the after-tax salary on deferrals we                owed to                him. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Subject                to the approval of the Compensation and Stock Option Committee, our                Unfunded Supplemental Executive Retirement Plan (SERP) permits                participants who are over retirement age to elect to receive retirement                advances on an actuarially reduced basis. Mr. J. Steiner received                pre-retirement distributions from the Unfunded SERP (representing                a                partial distribution of his vested benefits) in the amount of $3.5                million                in fiscal 2006. As of September 30, 2006, Mr. J. Steiner’s remaining                balance in the Unfunded SERP plan was $2.1                million. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Eric                Steiner, son of Mr. J. Steiner, is an executive officer of the Company.                His compensation is set forth in the compensation table of our proxy                statement. Natalia Hercot, daughter of Mr. J. Steiner, is a Vice                President                of the Company, for which she received compensation of approximately                $20,000 in fiscal 2006. Mrs. Hercot’s annual salary was adjusted to                $10,000 per year on December 23,                2005. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | During                2006, Phillipe Hercot, son-in-law of Jeffrey Steiner, subleased a                room in                our Paris office and paid arm's length rent to the                Company. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | We                paid $36,000 in 2006 for security protection at the Steiner Family                residence in France. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------|

| ·   | We                provide to Mr. J. Steiner automobiles for business use. We charged                Mr. J.                Steiner $15,000 in 2006 to cover personal use and the cost of these                vehicles that exceeded our reimbursement                policy. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | During                fiscal 2006, we reimbursed $0.4 million to Mr. J. Steiner, representing                a                portion of out-of-pocket costs he incurred personally in connection                with                the entertainment of third parties, which may benefit the                Company. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Mr.                Klaus Esser’s brother is an employee of PoloExpress. His compensation                (currently €72,000) was approximately $94,000 in 2006. Petra Esser is a                relative of Mr. K. Esser and has current annual compensation of                approximately €16,000. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**ITEM      14.  PRINCIPAL ACCOUNTANT FEES AND      SERVICES**

**RELATIONSHIP      WITH INDEPENDENT ACCOUNTANTS**

**Principal      Accountants**

**Audit      Fees**

***2006      Audit Fees:***

***2005      Audit Fees:***

**Audit      Related Fees**

***2006      Audit Related Fees:***

***2005      Audit Related Fees:***

**Tax      Fees:**

***2006      Tax Fees:***

***2005      Tax Fees:***

**Policy      Regarding Non-Audit Services by Outside Auditors**

**Procedures      For Submitting Shareholder Proposals**

----

**PART      IV**

**ITEM      15.  EXHIBITS AND FINANCIAL STATEMENT      SCHEDULES**

|  Schedule                Number |                Description                                 |  Page |
|--------------------------------------|----------------------------------------------------------------------|------------|
|                                 |                                                                 |       |
|  I                         |  Condensed              Financial Information of Parent Company |  100  |

----

**SCHEDULE      I – CONDENSED FINANCIAL INFORMATION OF REGISTRANT**

**THE      FAIRCHILD CORPORATION**

**CONDENSED      FINANCIAL STATEMENTS OF THE PARENT COMPANY**

**BALANCE      SHEETS (NOT CONSOLIDATED)**

**(In      thousands)**

|                                                                              |   | September                30,   |    |
|-----------------------------------------------------------------------------------|--------|------------------------------------------|---------|
|                                                                              |   | 2006                                     |    |   | 2005 |   |
|                                                                              |   |                                     |    |   | (Restated) |   |
|  ASSETS                                                                      |   |                                     |    |   |   |   |
|  Current                assets:                                              |   |                                     |    |   |   |   |
|  Cash                and cash equivalents                                    |   | $                                        | 4,308   |   |   | $ | 2,874 |   |
|  Marketable                Securities                                        |   |                                     | 45,378  |   |   |   | 4,774 |   |
|  Accounts                receivable                                          |   |                                     | 447     |   |   |   | 261 |   |
|  Prepaid                expenses and other current assets                    |   |                                     | 58      |   |   |   | 197 |   |
|  Total                current assets                                         |   |                                     | 50,191  |   |   |   | 8,106 |   |
|                                                                              |   |                                     |    |   |   |   |   |   |
|  Property,                plant and equipment, less accumulated depreciation |   |                                     | 1,809   |   |   |   | 1,516 |   |
|  Investments                in subsidiaries                                  |   |                                     | 136,125 |   |   |   | 177,697 |   |
|  Deferred                loan fees                                           |   |                                     | 2,044   |   |   |   | - |   |
|  Investments                                                                 |   |                                     | 34,173  |   |   |   | 38,601 |   |
|  Other                assets                                                 |   |                                     | 39      |   |   |   | 1,313 |   |
|  Total                assets                                                 |   | $                                        | 224,381 |   |   | $ | 227,233 |   |
|                                                                              |   |                                     |    |   |   |   |   |   |
|  LIABILITIES                AND STOCKHOLDERS' EQUITY                         |   |                                     |    |   |   |   |   |   |
|  Current                liabilities:                                         |   |                                     |    |   |   |   |   |   |
|  Current                maturities of long term debt                         |   | $                                        | 69      |   |   | $ | 85 |   |
|  Accounts                payable                                             |   |                                     | 19      |   |   |   | 14 |   |
|  Other                accrued expenses                                       |   |                                     | 6,897   |   |   |   | 658 |   |
|  Total                current liabilities                                    |   |                                     | 6,985   |   |   |   | 757 |   |
|                                                                              |   |                                     |    |   |   |   |   |   |
|  Long-term                debt                                               |   |                                     | 30,781  |   |   |   | 862 |   |
|  Fair                market value of interest rate contract                  |   |                                     | -       |   |   |   | 5,146 |   |
|  Noncurrent                income taxes                                      |   |                                     | 39,923  |   |   |   | 38,383 |   |
|  Other                long-term liabilities                                  |   |                                     | 2,045   |   |   |   | 39 |   |
|  Total                liabilities                                            |   |                                     | 79,734  |   |   |   | 45,187 |   |
|                                                                              |   |                                     |    |   |   |   |   |   |
|  Stockholders'                equity:                                        |   |                                     |    |   |   |   |   |   |
|  Class                A common stock                                         |   |                                     | 3,047   |   |   |   | 3,047 |   |
|  Class                B common stock                                         |   |                                     | 262     |   |   |   | 262 |   |
|  Notes                due from Stockholders                                  |   |                                     | -       |   |   |   | - |   |
|  Treasury                Stock                                               |   |                                     | (76,352 | ) |   |   | (76,352 | ) |
|  Accumulated                other comprehensive income                       |   |                                     | 758     |   |   |   | 858 |   |
|  Paid-in                capital                                              |   |                                     | 232,612 |   |   |   | 232,612 |   |
|  Retained                earnings (accumulated deficit)                      |   |                                     | (15,680 | ) |   |   | 21,619 |   |
|  Total                stockholders' equity                                   |   |                                     | 144,647 |   |   |   | 182,046 |   |
|  Total                liabilities and stockholders' equity                   |   | $                                        | 224,381 |   |   | $ | 227,233 |   |

----

**THE      FAIRCHILD CORPORATION**

**CONDENSED      FINANCIAL STATEMENTS OF THE PARENT COMPANY**

**STATEMENTS      OF EARNINGS (NOT CONSOLIDATED)**

**(In      thousands)**

|                                                                             |   | Years                Ended September 30, |    |
|----------------------------------------------------------------------------------|--------|------------------------------------------|---------|
|                                                                             |   | 2006                                     |    |   | 2005 |   |   | 2004 |   |
|                                                                             |   |                                     |    |   | (Restated) |   |   | (Restated) |   |
|  Costs                and Expenses:                                         |   |                                     |    |   |   |   |   |   |   |
|  Selling,                general & administrative                       |   | $                                        | 12,192  |   |   | $ | 11,648 |   |   | $ | 5,790 |   |
|                                                                             |   |                                     | 12,192  |   |   |   | 11,648 |   |   |   | 5,790 |   |
|                                                                             |   |                                     |    |   |   |   |   |   |   |   |   |   |
|  Operating                loss                                              |   |                                     | (12,192 | ) |   |   | (11,648 | ) |   |   | (5,790 | ) |
|                                                                             |   |                                     |    |   |   |   |   |   |   |   |   |   |
|  Net                interest expense                                        |   |                                     | (2,548  | ) |   |   | (2,980 | ) |   |   | (4,772 | ) |
|  Investment                income                                           |   |                                     | 851     |   |   |   | 112 |   |   |   | 74 |   |
|  Fair                market value adjustment – interest rate contract |   |                                     | 836     |   |   |   | 5,942 |   |   |   | 4,924 |   |
|  Loss                from continuing operations before taxes                |   |                                     | (13,053 | ) |   |   | (8,574 | ) |   |   | (5,564 | ) |
|                                                                             |   |                                     |    |   |   |   |   |   |   |   |   |   |
|  Income                tax (provision) benefit                              |   |                                     | (244    | ) |   |   | (2,953 | ) |   |   | 27,053 |   |
|  Income                (loss) from discontinued operations, net of tax      |   |                                     | (8,594  | ) |   |   | (735 |  ) |   |   | 405 |   |
|  Equity                in loss of affiliates                                |   |                                     | -       |   |   |   | (87 | ) |   |   | - |   |
|  Loss                before equity in earnings (loss) of subsidiaries       |   |                                     | (21,891 | ) |   |   | (6,443 | ) |   |   | 21,894 |   |
|                                                                             |   |                                     |    |   |   |   |   |   |   |   |   |   |
|  Equity                in loss of subsidiaries                              |   |                                     | (15,408 | ) |   |   | (12,922 | ) |   |   | (19,663 | ) |
|  Net                earnings (loss)                                         |   | $                                        | (37,299 | ) |   | $ | (19,365 | ) |   | $ | 2,231 |   |

----

**CONDENSED        FINANCIAL STATEMENTS OF THE PARENT COMPANY**

**STATEMENTS      OF CASH FLOWS (NOT CONSOLIDATED)**

**(In      thousands)**

|                                                                       |   | Years                Ended September 30, |    |
|----------------------------------------------------------------------------|--------|------------------------------------------|---------|
|                                                                       |   | 2006                                     |    |   | 2005 |   |   | 2004 |   |
|                                                                       |   |                                     |    |   | (Restated) |   |   | (Restated) |   |
|                                                                       |   |                                     |    |   |   |   |   |   |   |
|  Cash                provided by (used for) operations                |   | $                                        | (62,790 | ) |   | $ | (13,841 | ) |   | $ | 5,968 |   |
|  Cash                flows from investing activities:                 |   |                                     |    |   |   |   |   |   |   |   |   |   |
|  Purchase                of fixed assets                              |   |                                     | (724    | ) |   |   | (1,146 | ) |   |   | (135 | ) |
|  Net                change in investments in subsidiaries             |   |                                     | 41,572  |   |   |   | 13,498 |   |   |   | (6,329 | ) |
|  Net                proceeds received from investment securities, net |   |                                     | -       |   |   |   | - |   |   |   | 1,690 |   |
|  Net                cash provided by (used for) investing activities  |   |                                     | 41,848  |   |   |   | 12,352 |   |   |   | (4,774 | ) |
|                                                                       |   |                                     |    |   |   |   |   |   |   |   |   |   |
|  Cash                flows from financing activities:                 |   |                                     |    |   |   |   |   |   |   |   |   |   |
|  Proceeds                from issuance of debt                        |   |                                     | 31,552  |   |   |   | 961 |   |   |   | - |   |
|  Debt                repayments                                       |   |                                     | (1,649  | ) |   |   | (70 | ) |   |   | (3,500 | ) |
|  Payment                of interest rate contract                     |   |                                     | (4,310  | ) |   |   | - |   |   |   | - |   |
|  Payment                of financing fees                             |   |                                     | (2,217  | ) |   |   | - |   |   |   | - |   |
|  Issuance                of common stock                              |   |                                     | -       |   |   |   | - |   |   |   | 26 |   |
|  Purchase                of treasury stock                            |   |                                     | -       |   |   |   | (193 | ) |   |   | - |   |
|  Loan                repayments from stockholders'                    |   |                                     | -       |   |   |   | - |   |   |   | 394 |   |
|  Net                cash provided by (used for) financing activities  |   |                                     | 23,376  |   |   |   | 698 |   |   |   | (3,080 | ) |
|  Net                change in cash and cash equivalents               |   |                                     | 1,434   |   |   |   | (791 | ) |   |   | (1,886 | ) |
|  Cash                and cash equivalents, beginning of the year      |   |                                     | 2,874   |   |   |   | 3,665 |   |   |   | 5,551 |   |
|  Cash                and cash equivalents, end of the year            |   | $                                        | 4,308   |   |   | $ | 2,874 |   |   | $ | 3,665 |   |

----

**THE      FAIRCHILD CORPORATION**

**CONDENSED      FINANCIAL STATEMENTS OF THE PARENT COMPANY**

**NOTES      TO FINANCIAL STATEMENTS (NOT CONSOLIDATED)**

**(In      thousands**

**1.  BASIS      OF PRESENTATION**

**2.      LONG-TERM DEBT**

|                                                                              |   | September                30, |   |   | September                30, |   |
|-----------------------------------------------------------------------------------|--------|------------------------------|--------|--------|------------------------------|--------|
|                                                                              |   | 2006                         |   |   | 2005                         |   |
|  Golden                Tree term loan                                        |   | $                            | 30,000 |   |                         | $      | - |   |
|  Other                term debt                                              |   |                         | 845    |   |                         |   | 921 |   |
|  Capital                lease obligations                                    |   |                         | 5      |   |                         |   | 26 |   |
|     Total                Debt                                 |   |                         | 30,850 |   |                         |   | 947 |   |
|     Less:                Current maturities of long-term debt |   |                         | (69    | )      |                         |   | (85 | ) |
|     Total                Long-Term Debt                       |   | $                            | 30,781 |   |                         | $      | 862 |   |

**3.  CONTINGENCIES**

----

**(a)(3)  Exhibits.**

***2           Material      Agreements of Acquisition or Disposition***

| 2.1 | Acquisition                Agreement dated as of July 16, 2002 among Alcoa Inc., The Fairchild                Corporation, Fairchild Holding Corp. and Sheepdog, Inc., with Exhibit                A                (Conveyance, Assignment, Transfer and Bill of Sale), Exhibit B                (Undertaking and Indemnity Agreement) and Exhibit C (Escrow Agreement)                attached thereto (incorporated by reference to Exhibit 2.1 to the                Current                Report on Form 8-K dated July 16, 2002) (incorporated by reference                to the                Registrant's Report on Form 8-K dated December 3,                2002). |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2.2 | Amendment                No. 1 to the Acquisition Agreement, dated as of December 3, 2002,                to the                Acquisition Agreement, dated as of July 16, 2002, among Alcoa Inc.,                The                Fairchild Corporation, Fairchild Holding Corp. and Sheepdog, Inc.                (incorporated by reference to the Registrant's Report on Form 8-K                dated                December 3, 2002) (incorporated by reference to the Registrant's                Report on                Form 8-K dated December 3, 2002). |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2.3 | Purchase                Contract, relating to the assets of Hein Gericke (the “Hein Gericke                Purchase Contract”) executed October 11, 2003, among Fairchild Textile                GmbH (as Purchaser), Eurobike Vermögensverwaltungs GmbH (as a Seller) and                (as additional Sellers) the insolvency administrator Dr. Biner Bähr,                acting in his capacity as insolvency administrator over the assets                of (i)                Hein Gericke-Holding GmbH, (ii) Hein Gericke Vertriebs GmbH, (iii)                Paul A                Boy GmbH and (iv) Eurobike AG (incorporated by reference to the                Registrant's Report on Form 8-K dated November 14,                2003). |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2.4 | Amendment                to Purchase Contract, dated November 1, 2003, amending the Hein Gericke                Purchase Contract referred to immediately above (incorporated by                reference                to the Registrant's Report on Form 8-K dated November 14,                2003). |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2.5 | Purchase                Contract, relating to the Sellers ownership interest in PoloExpress                (the                “PoloExpress Purchase Contract”), executed October 11, 2003, among                Fairchild Textile GmbH (as Purchaser) and the following Sellers,                Helmet                House GmbH , BMJ Motorsport Vertriebs GmbH, and Eurobike AG (incorporated                by reference to the Registrant's Report on Form 8-K dated November                14,                2003). |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2.6 | Amendment                to Purchase Contract, dated November 1, 2003, amending the PoloExpress                Purchase Contract referred to immediately above (incorporated by                reference                to the Registrant's Report on Form 8-K dated November 14,                2003). |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2.7 | Guaranties                by The Fairchild Corporation, each dated November 1, 2003, to the                Sellers                of the Polo Express business, guaranteeing the deferred purchase                price                under the PoloExpress Purchase Contract (aggregate of EUR 20,000                Million)                due no later than April 30, 2004 (incorporated by reference to the                Registrant's Report on Form 8-K dated November 14,                2003). |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2.8 | Contract,                relating to Mr. Klaus Esser’s Ownership interest in PoloExpress ,executed                October 11, 2003, between Fairchild Textile GmbH (as Purchaser) and                Mr.                Klaus Esser (as Seller) (incorporated by reference to the Registrant's                Report on Form 8-K dated November 14,                2003). |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***3           Articles      of Incorporation, Bylaws, and Instruments Defining Rights of      Securities***

| 3.1   | Registrant's                Restated Certificate of Incorporation (incorporated by reference                to                Exhibit "C" of Registrant's Proxy Statement dated October 27,                1989). |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.2 | Certificate                of Amendment to Registrant’s Certificate of Incorporation, dated November                16, 1990, changing name from Banner Industries, Inc. to The Fairchild                Corporation. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.3 | Registrant's                Amended and Restated By-Laws, as amended as of November 21, 1996                (incorporated by reference to the Registrant's Quarterly Report on                Form                10-Q for the quarter ended December 29,                1996). |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|
| 3.4 | Amendment                to the Company's By-Laws, dated as of February 12, 1999 (incorporated                by                reference to Registrant's Annual Report on Form 10-K for the fiscal                year                ended June 30, 1999). |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.5 | Amendment                to the Company's By-Laws, dated December 23, 2005 (incorporated by                reference to Registrant's Annual Report on Form 10-K for the fiscal                year                ended September 30, 2005). |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.6 | Amended                and Restated Charter of the Audit Committee dated January 31, 2005                (incorporated by reference to Registrant's Annual Report on Form                10-K for                the fiscal year ended September 30,                2005). |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ***4*** | ***Instruments                Defining the Rights of Security Holders, Including                Indentures*** |
|---------|---------------------------------------------------------------------------------------------------------------|

| 4.1 | Specimen                of Class A Common Stock certificate (incorporated by reference to                Registration Statement No. 33-15359 on Form                S-2). |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|
| 4.2   | Specimen                of Class B Common Stock certificate (incorporated by reference to                Registrant's Annual Report on Form 10-K for the fiscal year ended                June 30,                1989). |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.3   | Savings                Plan for Employees of The Fairchild Corporation, amended and restated                as                of February 28, 2002 (incorporated by reference to the Registrant’s Report                on Form S-8 dated August 6, 2002). |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.4   | Savings                Plan for Employees of The Fairchild Corporation Trust Agreement,                dated                February 1, 2002, between The Fairchild Corporation and Putnam Fiduciary                Trust Company (incorporated by reference to the Registrant’s Report on                Form S-8 dated August 6, 2002). |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|
| 4.5   | Notice                of Hearing and Proposed Settlement of The Fairchild Corporation                Stockholder Derivative Litigation, dated April 1, 2005 (incorporated                by                reference to the Registrant's Report on Form 8-K dated April 1,                2005). |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.6   | Notice                of Hearing and Proposed Supplemental Settlement of The Fairchild                Corporation Stockholder Derivative Litigation, dated October 24,                2005                (incorporated by reference to the Registrant's Report on Form 8-K                dated                October 24, 2005). |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ***10*** | ***Material                Contracts*** |
|----------|-----------------------------------------|

|   |   |
|--------|--------|
| ***10(a)*** | ***(Stock                Option Plans)*** |
|-------------|-------------------------------------------|

|   |   |
|--------|--------|
| 10.1 | Amended                and Restated 1986 Non-Qualified and Incentive Stock Option Plan,                dated as                of February 9, 1998 (incorporated by reference to Exhibit B of                Registrant's Proxy Statement dated October 9,                1998). |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|
| 10.2 | Amendment                Dated May 7, 1998 to the 1986 Non-Qualified and Incentive Stock Option                Plan (incorporated by reference to Exhibit A of Registrant's Proxy                Statement dated October 9, 1998). |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|
| 10.3 | 1996                Non-Employee Directors Stock Option Plan (incorporated by reference                to                Exhibit B of Registrant's Proxy Statement dated October 7,                1996). |
|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|
| 10.4 | Stock                Option Deferral Plan dated February 9, 1998 (for the purpose of allowing                deferral of gain upon exercise of stock options) (incorporated by                reference to Registrant's Quarterly Report on Form 10-Q for the quarter                ended March 29, 1998). |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|
| 10.5 | Amendment                to the Stock Option Deferral Plan, dated June 28, 2000 (for the purpose                of                making an equitable adjustment in connection with the spin off of                Fairchild Bermuda and the receipt of Global Sources shares) (incorporated                by reference to Registrant's Annual Report on Form 10-K for the fiscal                year ended June 30, 2000). |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|
| 10.6 | Amendment                dated May 21, 1999, amending the 1996 Non-Employee Directors Stock                Option                Plan (for the purpose of allowing deferral of gain upon exercise                of stock                options) (incorporated by reference to Registrant's Annual Report                on Form                10-K for the fiscal year ended June 30,                1999). |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|
| 10.7 | 2000                Non-Employee Directors Stock Option Plan (incorporated by reference                to                Appendix 2 of Registrant's Proxy Statement dated October 10,                2000). |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 10.8 | 2001                Non-Employee Directors Stock Option Plan (incorporated by reference                to                Appendix 1 of Registrant's Proxy Statement dated October 10,                2000). |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|
| ***10(b)*** | ***(Employee                Agreements)*** |
|-------------|--------------------------------------------|

|   |   |
|--------|--------|
| 10.9 | Amended                and Restated Employment Agreement between Registrant and Jeffrey                J.                Steiner dated September 10, 1992 (incorporated by reference to                Registrant's Annual Report on Form 10-K for the fiscal year ended                June 30,                1993). |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|
| 10.10 | Employment                Agreement between Banner Aerospace, Inc. and Jeffrey J. Steiner,                dated                September 9, 1992. |
|-------|---------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.11 | Restated                and Amended Service Agreement between Fairchild Switzerland, Inc.                and                Jeffrey J. Steiner, dated April 1,                2001. |
|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.12 | Letter                Agreement dated February 27, 1998, between Registrant and Donald                E. Miller                (incorporated by reference to Registrant's Quarterly Report on Form                10-Q                for the quarter ended March 29,                1998). |
|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|
| 10.13 | Officer                Loan Program, dated as of February 5, 1999, lending up to $750,000                to                officers for the purchase of Company Stock (incorporated by reference                to                Registrant's Annual Report on Form 10-K for the fiscal year ended                June 30,                1999). |
|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|
| 10.14 | Director                and Officer Loan Program, dated as of August 12, 1999, lending up                to                $2,000,000 to officers and directors for the purchase of Company                Stock                (incorporated by reference to Registrant's Annual Report on Form                10-K for                the fiscal year ended June 30,                1999). |
|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|
| 10.15 | Employment                Agreement between Eric Steiner and The Fairchild Corporation, dated                as of                August 1, 2000 (incorporated by reference to Registrant's Annual                Report on                Form 10-K for the fiscal year ended June 30,                2000). |
|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|
| 10.16 | Employment                Agreement between Banner Aerospace, Inc. and Warren D. Persavich                (together                with Amendment No. 1 to such Agreement) (incorporated by reference                to                Registrant's Annual Report on Form 10-K for the fiscal year ended                June 30,                2000). |
|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|
| 10.17 | Amendment                to Employment Agreements between the Company and Jeffrey Steiner,                dated                January 22, 2003 (for the purpose of amending change of control payments)                (incorporated by reference to Registrant's Quarterly Report on Form                10-Q                for the quarter ended December 29,                2002). |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.18 | Amendment                to Employment Agreement between the Company and Eric Steiner, dated                January 22, 2003 (for the purpose of amending change of control payments)                (incorporated by reference to Registrant's Quarterly Report on Form                10-Q                for the quarter ended December 29,                2002). |
|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.19 | Amendment                to Incentive Contract between the Company and Donald Miller, dated                January                22, 2003 (for the purpose of amending change of control payments)                (incorporated by reference to Registrant's Quarterly Report on Form                10-Q                for the quarter ended December 29,                2002). |
|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.20 | Employment                Agreement dated October 18, 2005, between PoloExpress and Klaus Esser                (incorporated by reference to the Registrant's Report on Form 8-K                dated                October 18, 2005). |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.21 | Amendment                to Employment Agreement between PoloExpress and Klauss Esser, dated                May                30, 2007 (incorporated by reference to the Registrant’s Report on Form 8-K                dated May 30, 2007). |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ***10(c)*** | ***(Credit                Agreements)*** |
|-------------|------------------------------------------|

| 10.22 | Promissory                Note dated as of August 26, 2004 issued by The Fairchild Corporation                to                Beal Bank, SSB in connection with $13,000,000 loan secured by the                Company’s real estate in Huntington Beach CA, Fullerton CA, and Wichita KS                (incorporated by reference to the Registrant's Annual Report on Form                10-K                dated September 30, 2004). |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.23 | Loan                Agreement (English Translation) dated April 21, 2004, between Hein                Gericke                and Polo Express (as Borrower) and Stadtsparkasse Düsseldorf and HSBC                Trinkaus & Burkhardt AG (as Lenders) relating to €31,000,000 loan, as                reported by the Company in the Registrant’s Report on Form 8-K dated May                6, 2004 (incorporated by reference to the Registrant's Report on                Form 10-Q                dated August 4, 2004). |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.24 | Working                Capital Loans (English Translation) dated April 21, 2004, between                Hein                Gericke (as Borrower) and Stadtsparkasse Düsseldorf relating to €5,000,000                loan, as reported by the Company in the Registrant’s Report on Form 8-K                dated May 6, 2004 (incorporated by reference to the Registrant's                Report on                Form 10-Q dated August 4, 2004). |
|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.25 | Working                Capital Loans (English Translation) dated April 21, 2004, between                Hein                Gericke (as Borrower) and HSBC Trinkaus & Burkhardt AG relating to                €5,000,000 loan, as reported by the Company in the Registrant’s Report on                Form 8-K dated May 6, 2004 (incorporated by reference to the Registrant's                Report on Form 10-Q dated August 4,                2004). |
|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.26  | Loan                Agreement dated December 26, 2003, between Republic Thunderbolt LLC,                as                borrower and Column Financial, Inc. as lender, relating to $55,000,000                loan secured by Airport Plaza Shopping Center, Farmingdale                NY  (incorporated by reference to the Registrant's Report on                Form 10-Q dated February 12, 2004). |
|-------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.27 | Loan                Agreement dated April 30, 2004, between Hein Gericke UK, as borrower,                and                GMAC Commercial Finance PLC, as lender, relating to inventory loan                to Hein                Gericke UK (incorporated by reference to the Registrant's Report                on Form                10-Q dated August 4, 2004). |
|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.28 | Loan                Agreement dated January 12, 2004, between Banner Aerospace Holding                Corp.                I, as borrower, and CIT Group/Business Credit, Inc., as lender, relating                to inventory loan to Banner (incorporated by reference to the Registrant's                Report on Form 10-Q dated May 13,                2004). |
|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.29 | Credit                Agreement dated May 3, 2006, between The Fairchild Corporation, as                borrower, The Bank of New York, as Administrative Agent, and GoldenTree                Asset management L.P., as Collateral Agent, for a four-year term                loan in                the original principal amount of $30,000,000 (incorporated by reference                to                the Registrant’s Report on Form 8-K dated May 3,                2006). |
|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ***11*** | ***Other                Exhibits*** |
|----------|-------------------------------------|

|   |   |
|--------|--------|
| 11. | Computation                of net loss per share (found at Note 11 in Item 8 to Registrant's                Consolidated Financial Statements for the fiscal years ended September                30,                2006, September 30, 2005, and September 30,                2004). |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ***14*** | ***Corporate                Governance Matters*** |
|----------|---------------------------------------------------|

| 14.1 | Corporate                Governance and Committee Charter:  The Company’s Board of                Directors has adopted a written charter for the Corporate Governance                and                Nominating. Committee.  The charter is posted on the Company’s                website (www.fairchild.com).  A copy may                also be obtained upon request from the Company’s Corporate                Secretary. |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 14.2 | Compensation                Committee Charter:  The Company’s Board of Directors has adopted                a written charter for the Compensation Committee.  The charter                is posted on the Company’s website                (www.fairchild.com).  A copy may also be obtained upon                request from the Company’s Corporate                Secretary. |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 14.3 | Audit                Committee Charter:  The Company’s Board of Directors has adopted                a written charter for the Audit Committee.  The charter is                posted on the Company’s website (www.fairchild.com).  A                copy may also be obtained upon request from the Company’s Corporate                Secretary. |
|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 14.4 | On                January 31, 2005, the Company’s Board of Directors adopted an Amended and                Restated Corporate Governance Guidelines.  The full text of the                Corporate Governance Guidelines can be found on the Company’s website                www.fairchild.com).  A copy may also be obtained upon                request from the Company’s Corporate                Secretary. |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 14.5 | On                August 2, 2004, the Company’s Board of Directors adopted an Amended and                Restated Code of Business Conduct and Ethics, applicable to all employees,                officers and directors of the corporation.  The code is posted                on the Company’s website (www.fairchild.com).  A copy may                also be obtained upon request from the Company’s Corporate                Secretary. |
|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 14.6 | In                November 2003, the Company’s Board of Directors adopted the Code of Ethics                for Senior Financial Officers (including the Chief Executive Officer,                the                Chief Finical Officer, the Principal Accounting Officer or Controller,                and                all persons performing similar functions on behalf of the Company).                The                code is posted on the Company’s website (www.fairchild.com). A copy                may also be obtained upon request from the Company’s Corporate                Secretary. |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *14.7 | Annual                Certification by CEO as filed with the NYSE,                dated March 29, 2006, regarding Compliance with NYSE Corporate Governance                Listing Standards. |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *14.8 | Annual                Certification by CEO as filed with the NYSE                Arca, dated March 29, 2006, regarding Compliance with NYSE Arca Corporate                Governance Listing Standards. |
|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 14.9 | Pre-Approval                Policy by the Audit Committee Re Audit and Non-Audit Services,                incorporated by reference to the Fiscal 2005 Proxy                Statement. |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *21 | List                of subsidiaries of                Registrant. |
|-----|-------------------------------------------------------------------|

|   |   |
|--------|--------|
| *23 | Consent                of Independent Registered Public Accounting                Firm. |
|-----|-----------------------------------------------------------------------------------------|

| *31.1 | Certifications                required by Section 302 of the                Sarbanes-Oxley Act, signed by Jeffrey J.                Steiner. |
|-------|----------------------------------------------------------------------------------------------------------------------------------------------|

| *31.2 | Certifications                required by Section 302 of the                Sarbanes-Oxley Act, signed by Michael                McDonald. |
|-------|--------------------------------------------------------------------------------------------------------------------------------------------|

| *32.1 | Certifications                required by Section 906 of the                Sarbanes-Oxley Act, signed by Jeffrey J.                Steiner. |
|-------|----------------------------------------------------------------------------------------------------------------------------------------------|

| *32.2 | Certifications                required by Section 906 of the                Sarbanes-Oxley Act, signed by Michael                McDonald. |
|-------|--------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | *Filed                herewith. |
|--------|---------------------------------|

----

**SIGNATURES**

----

| By:       |  /s/ |  JEFFREY                J. STEINER  |  Chairman,                Chief Executive             |  August                13, 2007 |
|-----------|-----------|------------------------------------------|------------------------------------------------------------|--------------------------------------|
|      |      |  Jeffrey                J. Steiner  |  Officer                and Director                  |                                 |
|      |      |                                     |                                                       |                                 |
|  By: |  /s/ |  DIDIER                CHOIX        |  Director                                             | August                13, 2007       |
|      |      |  Didier                Choix        |                                                       |                                 |
|      |      |                                     |                                                       |                                 |
|  By: |  /s/ |  ROBERT                E. EDWARDS   |  Director                                             |  August                13, 2007 |
|      |      |  Robert                E. Edwards   |                                                       |                                 |
|      |      |                                     |                                                       |                                 |
|  By: |  /s/ |  DANIEL                LEBARD       |  Director                                             |  August                13, 2007 |
|      |      |  Daniel                Lebard       |                                                       |                                 |
|      |      |                                     |                                                       |                                 |
|  By: |  /s/ |  GLENN                MYLES         |  Director                                             | August                13, 2007       |
|      |      |  Glenn                Myles         |                                                       |                                 |
|      |      |                                     |                                                       |                                 |
|  By: |  /s/ |  MICHAEL                J. VANTUSKO |  Director                                             | August                13, 2007       |
|      |      |  Michael                J. Vantusko |                                                       |                                 |
|      |      |                                     |                                                       |                                 |
|  By: |  /s/ |  ERIC                I. STEINER     |  President,                Chief  Operating |  August                13, 2007 |
|      |      |  Eric                I. Steiner     |  Officer                and Director                  |                                 |