The Company incurred a net loss of $1,974 and $2,720, respectively, for the three and six months ended June 30, 2012 compared to $1,254 and $3,058 for the same periods in 2011. The increase in the net loss of $720 for the second quarter of 2012 compared to the same period in 2011 was primarily due to approximately $371 in one-time fees related to the termination of our Former Credit Facility, and to a lesser extent a reduction in gross margin for the second quarter. The net loss for the six months ended June 30, 2012 exceeded the limit set forth in the net income (loss) covenant for that period under the New Credit Facility by $970, resulting in an event of default under the loan and security agreement with Gibraltar. Following discussions with the Company, Gibraltar has agreed to waive this event of default and our noncompliance with this covenant for the six month period ended June 30, 2012. As a condition to Gibraltar providing its waiver, the New Credit Facility will be amended to increase the interest rate on advances to the greater of (i) prime rate (the prime rate at June 30, 2012 was 3.25%) plus 6.25%, or (ii) 9.50% per annum, effective August 14, 2012.

The Company has negotiated a revised net income (loss) covenant with Gibraltar under the New Credit Facility of $3,500 net loss for both the nine months ended September 29, 2012 and the year ended December 31, 2012. However, it is possible that the Company will not satisfy this net income (loss) covenant and would need to seek additional waivers from Gibraltar. These waivers, if needed, may impose additional conditions and contain other concessions from the Company beyond what Gibraltar required for the present waiver.

Management has continued its efforts to reduce its net losses to be in compliance with the financial and other covenants in the New Credit Facility for the third and fourth quarters of 2012. These efforts focus on increasing sales volume in both the residential and commercial product markets. Management's anticipation of future growth is not contingent solely upon a significant improvement in the economic conditions for the furniture industry, but instead on identifying key opportunities in the residential and commercial product segments and providing the product and strong service to exceed our customers' expectations. These efforts also focus on gross margin improvement, primarily by implementing identified cost reductions and improving efficiencies in its operating facilities and supply chain process, as well as exploring pricing opportunities. In addition, the Company will continue to closely monitor and control its selling, general and administrative expenses to be in line with its revenues. Management is also revising its operating plan beyond 2012.

There is no guarantee that management's efforts will be successful in the near term and beyond. The inability to fully utilize our current credit facility due to borrowing base limitations or the inability to raise additional financing, if needed, would have a material adverse effect on the future performance of the Company, our liquidity and our ability to continue to operate.

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

Overview

A sluggish economy, weak consumer confidence, lower housing activity, continued high levels of unemployment and reduced consumer access to credit have continued to affect demand for residential furniture in our price segment and product categories. Shipments of residential furniture in the second quarter of 2012 were lower than the same period in 2011. Residential furniture sales for the second quarter of 2012 were slightly less compared to the first quarter of 2012. The difficult economic conditions led to a decline in residential sales orders in the second quarter of 2012 as compared to the prior quarter. Shipments of commercial products increased in the second quarter of 2012 compared to both the prior year period and the first quarter of 2012. We expect our acquisition of EOC, a California-based manufacturer and distributor of commercial office suites and waiting area furniture products, and with an extensive health care line, will continue to complement our current commercial product line by offering its branded products to our current customers while also expanding our customer base.

We continue to review our product offerings and reduce operating costs to be in line with our current revenue base. A prolonged economic downturn could cause outcomes to differ materially from those expected above.

Results of Operations

The following table sets forth the Condensed Consolidated Statements of
Operations of Chromcraft Revington for the three and six months ended June 30,
2012 and July 2, 2011 expressed as a percentage of sales.

                                                   Three Months Ended                 Six Months Ended
                                                June 30,         July 2,          June 30,         July 2,
                                                  2012             2011             2012             2011
Sales                                               100.0 %          100.0 %          100.0 %          100.0 %
Cost of sales                                        82.7             81.7             81.1             84.1
Gross margin                                         17.3             18.3             18.9             15.9
Selling, general and administrative expenses         29.2             26.9             27.3             27.0
Operating loss                                      (11.9 )           (8.6 )           (8.4 )          (11.1 )
Interest expense                                     (2.0 )           (0.5 )           (1.3 )           (0.5 )
Net loss                                            (13.9 ) %         (9.1 ) %         (9.7 ) %        (11.6 ) %

2012 Compared to 2011

Consolidated sales for the three and six months ended June 30, 2012 of $14.2 million and $28.1 million, respectively, represented a 2.5% and 6.7% increase, respectively from the same periods last year.

Shipments of residential furniture were lower in the three months ended June 30, 2012 as compared to the prior year period, primarily due to lower sales of bedroom and occasional furniture, partially offset by higher sales of dining room furniture. The decrease in residential shipments reflected the impact of continued weakness in consumer demand for residential products in our price segment which we believe is consistent with industry trends; the continuing economic difficulties which reflect the ongoing labor and housing market struggles and reduced consumer access to credit. Commercial furniture shipments for the second quarter of 2012 were higher than the same period last year due to sales of office suites and waiting area furniture, primarily to the health care industry resulting from our acquisition of EOC in March of 2012.

Shipments of residential furniture for the six months ended June 30, 2012 were comparable to the prior year period. Shipments of commercial furniture for the six months ended June 30, 2012 were higher than the same period in 2011 due to shipments of office suites and waiting area furniture products, primarily to the health care industry, and increased sales of seating products. The consolidated sales increase for the three months and six months ended June 30, 2012 compared to the same periods in 2011 was primarily due to higher unit volume.

Gross margin was approximately $2.5 million for both the quarter ended June 30, 2012 and the same period in 2011. The incremental gross margin contributed by EOC products in the second quarter of 2012 was offset by the reduced margin on the Company's other product lines, primarily due to material cost increases and an unfavorable product sales mix.

Gross margin for the six months ended June 30, 2012 was $5.3 million, representing a 26.6% increase over the $4.2 million gross margin in the prior year period. The higher gross margin in the first half of 2012 as compared to the same period last year was primarily due to a favorable product sales mix, lower unabsorbed fixed manufacturing costs and increased sales.

Selling, general and administrative expenses were $4.1 million, or 29.3% of net sales, in the second quarter of 2012 as compared to $3.7 million, or 26.9% of net sales, in the prior year period. Selling, general and administrative expenses for the six months ended June 30, 2012 were $7.6 million, or 27.3% of net sales as compared to $7.1 million, or 27.0% of net sales in the prior year period. The increase in selling, general and administrative expenses for both the three and six months ended June 30, 2012 compared to the prior year periods was primarily a result of the operating expenses of EOC which was acquired in March 2012 and $0.2 million in fees resulting from the termination of our revolving credit facility with First Business Capital Corp. in April 2012.

Net interest expense, which includes Credit Facility fees, was $0.3 million and $0.4 million for the three months and six months ended June 30, 2012, respectively, compared to $0.1 million and $0.1 million for the prior year periods, respectively. The increase for the 2012 periods was primarily due to the write-off of deferred financing fees resulting from the termination of the credit facility with FBCC in April 2012.

At December 31, 2011 and 2010, the Company maintained a full valuation allowance against the entire net deferred income tax balance. The Company expects to maintain a full valuation allowance on its entire net deferred tax assets at December 31, 2012, resulting in an effective tax rate of zero for the six months ended June 30, 2012 and the prior year period.

Financial Condition, Liquidity and Capital Resources

Working capital, excluding cash, the revolving credit facility and the effect of the acquisition of EOC, decreased $0.9 million in the first six months of 2012 primarily due to a decrease in accounts receivable and inventories, partially offset by a decrease in accounts payable and accrued liabilities. Accounts receivable decreased at the end of the second quarter of 2012 compared to December 31, 2011 primarily due to lower sales in the second quarter of 2012 as compared to the fourth quarter of 2011, which experienced high sales volume late in the quarter. The decrease in inventories and accounts payable at June 30, 2012 compared to December 31, 2011 is primarily due to lower import purchases in the second quarter of 2012.

Operating activities of the Company used $1.5 million of cash in the first six months of 2012 as compared to $2.3 million of cash used in the prior year period. The reduction in cash used for operating activities in the first half of 2012 compared to the prior year period was primarily due to a lower operating loss and an increase in cash from net working capital.

Investing activities includes the Company's purchase of EOC on March 20, 2012 for $0.5 million, of which $0.1 million was paid at closing, net of cash acquired, and the balance will be paid in equal quarterly installments which began in July 2012 and will end April 2015. Investing activities also includes capital expenditures for the first half of 2012 which were comparable to the prior year period. The Company expects to spend approximately $0.2 million for capital expenditures in 2012.

Financing activities includes $1.8 million of net borrowings on the Company's revolving credit facility for the first six months of 2012, primarily to fund the cash used in operating activities, partially offset by deferred financing costs associated with entering into the New Credit Facility with Gibraltar.

On April 20, 2012, the Company terminated the Former Credit Facility with FBCC according to which FBCC had provided a secured revolving credit facility to the Company up to a maximum amount of $10.0 million (including letters of credit) based on qualified accounts receivable of the Company. On the same day, the Company replaced the Former Credit Facility by entering into the New Credit Facility with Gibraltar according to which Gibraltar currently provides the Company with a two-year secured revolving credit facility up to a maximum amount of $5.0 million (including letters of credit) based upon eligible accounts receivable of the Company. A summary of the New Credit Facility is included under Item 1 above in Note 7 to our Condensed Consolidated Financial Statements and is incorporated herein by reference.

The Company had net borrowings on its revolving credit facility of approximately $1.8 million in the first six months of 2012 and an outstanding loan balance of $2.7 million at June 30, 2012. The Company had approximately $2.3 million of availability under the New Credit Facility at June 30, 2012. The Company had approximately $1.1 of availability under the New Credit Facility at August 10, 2012. Availability fluctuates during any given period based on the volume and timing of customer shipments, lockbox receipts, and advances against the loan.

As of the end of the second quarter of 2012, we were not in compliance with a financial covenant under the New Credit Facility because our net loss for the six month period ended June 30, 2012 exceeded the limit set forth in the covenant for the same period by approximately $1.0 million. Consequently, there is an event of default under the loan and security agreement with Gibraltar. However, following discussions with the Company, Gibraltar has agreed to waive this event of default and our noncompliance with this covenant for the six month period ended June 30, 2012. As a condition to Gibraltar providing its waiver, the New Credit Facility will be amended to increase the interest rate on advances to the greater of (i) prime rate (the prime rate at June 30, 2012 was 3.25%) plus 6.25%, or (ii) 9.50% per annum, effective August 14, 2012.

The Company has negotiated a revised net income (loss) covenant with Gibraltar under the New Credit Facility of approximately $3.5 million net loss for both the nine months ended September 29, 2012 and the year ended December 31, 2012. However, it is possible that the Company will not satisfy this net income (loss) covenant and would need to seek additional waivers from Gibraltar. These waivers, if needed, may impose additional conditions and contain other concessions from the Company beyond what Gibraltar required for the present waiver.

There is no assurance that Gibraltar will grant additional waivers of any events of default or noncompliance with financial or other covenants of the New Credit Facility in the future. In the event that we are not in compliance with the amended financial covenants under the New Credit Facility on September 29, 2012 or December 31, 2012, Gibraltar could, if it is unwilling to provide us with a subsequent waiver, declare an event of default, terminate the New Credit Facility and not extend further credit to the Company, declare upon notice to the Company all amounts then outstanding under the New Credit Facility to be immediately due and payable, charge a default rate of interest, take possession and sell assets of the Company that constitute collateral for the New Credit Facility and exercise any other rights and remedies that Gibraltar may have. Any of these actions would adversely affect our liquidity, business and ability to continue to operate.

Assuming that we are in compliance with the financial covenants and other terms of the New Credit Facility, we believe that our available line of credit under our New Credit Facility provides the Company with the borrowing capacity to meet our anticipated cash requirements for working capital purposes and normal capital expenditures for the foreseeable future and, in addition, provides greater flexibility than the Former Credit Facility. However, there can be no assurance regarding these matters given the current state of the global economy, which has negatively impacted our ability to accurately forecast our results of operations and cash position, and which may result in deterioration of our revenues from what we anticipate. We believe further deterioration in our revenues would expose us to declining margins as a result of unabsorbed fixed manufacturing overhead, operating inefficiencies and an imbalance between our inventory levels and customer demand which would likely result in continued losses and reduced liquidity. In addition, the inability to fully utilize our current credit facility due to borrowing base limitations or the inability to raise additional financing, if needed, would have a material adverse effect on the future performance of the Company, our liquidity and our ability to continue to operate. Further, if our trade creditors were to put forth unfavorable terms, it could negatively impact our ability to obtain raw materials, products and services on acceptable terms. We have implemented expense controls and limitations on capital expenditures to conserve cash during the current economic downturn.

Because we presently are incurring losses, the continued availability of credit under our New Credit Facility is critical to meeting our liquidity needs. The Company expects additional borrowings under the New Facility in the second half of 2012. In addition, the loan and security agreement for our New Credit Facility allows us to incur other indebtedness at a favorable interest rate under certain government programs up to $1.5 million for capital expenditures and improvements for our Senatobia, Mississippi facility without the consent of Gibraltar.

We will need to generate adequate cash flow from operations in future periods in order to meet our long term liquidity needs. In the absence of adequate cash flow from operations in the future, the Company may need to further restrict expenditures, sell assets, seek additional business funding or capital or consider other alternatives. Our ability to obtain additional funding or capital would likely be adversely affected because all of our assets have been secured as collateral for our New Credit Facility and the New Credit Facility contains restrictions on most other indebtedness of the Company as well as other liens on our assets without Gibraltar's prior consent and because our financial results could adversely affect the availability and terms of any such funding or capital.

Recently Issued Accounting Standards

There have been no recent accounting standards or changes in accounting standards during the six months ended June 30, 2012, that are of significance, or potential significance to the Company, as compared to the recent accounting standards described in the Company's Annual Report on Form 10-K for the year ended December 31, 2011.

Forward-Looking Statements

Certain information and statements contained in this report including, without limitation, in the section captioned "Management's Discussion and Analysis of Financial Condition and Results of Operations," are forward-looking statements. These forward-looking statements can be generally identified as such because they include future tense or dates, are not historical or current facts, or include words such as "believe," "may," "expect," "intend," "plan," "anticipate," or words of similar import. Forward-looking statements express management's current expectations or forecasts of future events or outcomes, but are not guarantees of performance or outcomes and are subject to certain risks and uncertainties that could cause actual results or outcomes to differ materially from those in such statements.

Among such risks and uncertainties that could cause actual results or outcomes to differ materially from those identified in the forward-looking statements are the impact of the current economic difficulties in the United States and elsewhere; import and domestic competition in the furniture industry; our ability to execute our business strategies; our ability to grow sales and reduce expenses to eliminate our operating losses; the recent slowdown in the U.S. office furniture market will continue; our ability to sell the right product mix; our inability to raise prices in response to increasing costs: our ability to fully utilize our current credit facility; our ability to raise additional financing, if needed; our ability to anticipate or respond to changes in the tastes or needs of our end users in a timely manner; supply disruptions with products manufactured in China, Vietnam and other Asian countries; continued credit availability under the Company's credit facility; market interest rates; consumer confidence levels; cyclical nature of the furniture industry; consumer and business spending; changes in relationships with customers; customer acceptance of existing and new products; new home and existing home sales; financial viability of our customers and their ability to continue or increase product orders; loss of key management; other factors that generally affect business; and certain risks set forth in the Company's annual report on Form 10-K for the year ended December 31, 2011.

The Company does not undertake any obligation to update or revise publicly any forward-looking statements to reflect information, events, circumstances or outcomes after the date of such statements or to reflect the occurrence of anticipated or unanticipated events or circumstances.