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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>UNITED
      STATES</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>SECURITIES
      AND EXCHANGE COMMISSION</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>Washington,
      D.C.&#160;&#160;20549</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">__________________</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>FORM
      8-K</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">_______________</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">CURRENT
      REPORT</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Pursuant
      to Section 13 OR 15(d) of The Securities Exchange Act of 1934</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Date
      of
      Report (Date of earliest event reported):&#160;&#160;August 10,
      2007</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman;"><strong>Katy
      Industries, Inc.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">(Exact
      name of registrant as specified in its charter)</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong><font id="TAB2" style="LETTER-SPACING: 9pt;">&#160;</font>Delaware&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font id="TAB2" style="LETTER-SPACING: 9pt;">&#160;&#160;&#160;</font>&#160;<font id="TAB2" style="LETTER-SPACING: 9pt;">&#160;&#160;&#160;</font>&#160;<font id="TAB2" style="LETTER-SPACING: 9pt;">&#160;&#160;&#160;</font>&#160;<font id="TAB2" style="LETTER-SPACING: 9pt;">&#160;&#160;</font>&#160;&#160;001-05558&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font id="TAB2" style="LETTER-SPACING: 9pt;">&#160;&#160;&#160;</font>&#160;<font id="TAB2" style="LETTER-SPACING: 9pt;">&#160;&#160;&#160;</font>&#160;75--1277589</strong></font></div>
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      or
      other
      jurisdiction&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;(Commission
      File
      Number)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;(IRS
      Employer</font></div>
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      incorporation)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font id="TAB2" style="LETTER-SPACING: 9pt;">&#160;&#160;&#160;</font>&#160;<font id="TAB2" style="LETTER-SPACING: 9pt;">&#160;&#160;&#160;</font>&#160;<font id="TAB2" style="LETTER-SPACING: 9pt;">&#160;&#160;&#160;</font>&#160;<font id="TAB2" style="LETTER-SPACING: 9pt;">&#160;&#160;&#160;</font>&#160;<font id="TAB2" style="LETTER-SPACING: 9pt;">&#160;&#160;&#160;</font>&#160;<font id="TAB2" style="LETTER-SPACING: 9pt;">&#160;&#160;&#160;</font>&#160;<font id="TAB2" style="LETTER-SPACING: 9pt;">&#160;&#160;&#160;</font>&#160;&#160;&#160;&#160;Identification
      No.)</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>2461
      South Clark Street, Suite 630</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>Arlington,
      Virginia&#160;&#160;22202</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">(Address
      of principal executive offices) (Zip Code)</font></div>
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      236-4300</strong></font></div>
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      telephone number, including area code)</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Check
      the
      appropriate box below if the Form 8-K filing is intended to simultaneously
      satisfy the filing obligation of the registrant under any of the following
      provisions:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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      communications pursuant to Rule 425 under the Securities Act</font></div>
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      material pursuant to Rule 14a-12 under the Exchange Act</font></div>
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      communications pursuant to Rule 14d-2(b) under the Exchange Act</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">[&#160;&#160;]&#160;&#160;Pre-commencement
      communications pursuant to Rule 13e-4(c) under the Exchange Act</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>Item
      4.02 Non-Reliance on Previously Issued Financial Statements or a Related Audit
      Report or Completed Interim Review.</strong></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">On
      August
      6, 2007, the Audit Committee of the Board of Directors, or the Audit Committee,
      of Katy Industries, Inc. (the &#8220;Company&#8221;), in consultation with management,
      concluded that our following previously issued financial statements should
      no
      longer be relied upon and should be restated based on identified errors: 1)
      the
      consolidated financial statements as of December 31, 2006 and 2005 and for
      the
      years then ended contained in the Company&#8217;s Annual Report on Form 10-K; and 2)
      the consolidated financial statements for the quarters ending March 31, 2006
      and
      2007, June 30, 2006, and September 30, 2006 contained in the Company&#8217;s
      corresponding Form 10-Qs.&#160;&#160;The Company intends to file its restated
      Annual Report on Form 10-K as of December 31, 2006 and its Quarterly Report
      on
      Form 10-Q as of March 31, 2007 as soon as practical.&#160;&#160;In addition, the
      unaudited quarterly financial information included in the Company&#8217;s Annual
      Report on Form 10-K as of December 31, 2006 will be updated as the Annual Report
      on Form 10-K is amended, and the unaudited quarterly financial information
      included in the Company&#8217;s Quarterly Reports on Form 10-Q as of March 31, 2006,
      June 30, 2006 and September 30, 2006 will be updated as the Company files its
      corresponding Quarterly Reports for 2007.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">In
      the
      second quarter of 2007, management of the Company noted discrepancies in its
      physical raw material inventory levels and the corresponding perpetual inventory
      records.&#160;&#160;These discrepancies led the Company to initiate an internal
      investigation which resulted in the identification of errors in the physical
      inventory count of raw material used for valuation purposes at the Company&#8217;s
      wholly-owned subsidiary, Continental Commercial Products, LLC
      (&#8220;CCP&#8221;).&#160;&#160;The Company has concluded these errors are isolated to
      fiscal 2005, fiscal 2006 and the three months ended March 31, 2007.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">When
      management became aware of the issues referenced above, the Company, including
      the Audit Committee, initiated an investigation of the
      matter.&#160;&#160;Management has discussed the investigation, the resolution of
      the problems and the strengthening of internal controls with the Audit
      Committee.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Based
      on
      the results of the investigation, management and the Audit Committee determined
      that (a) the errors were caused by intentional acts of a CCP employee who
      improperly accounted for physical quantity of raw material inventory and who
      has
      since been dismissed; (b) the scope of the errors were contained in fiscal
      2005,
      fiscal 2006 and the three months ended March 31, 2007; and (c) the errors were
      concentrated in the area discussed above.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">The
      Company&#8217;s management and the Audit Committee have discussed this matter with
      PricewaterhouseCoopers LLP, the Company&#8217;s independent registered public
      accounting firm.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><em>Impact
      of Error on Previously filed Financial Statements</em></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">The
      impact of the raw material inventory error on loss from continuing operations
      and net loss is approximately ($0.2) million and ($0.6) million for the years
      ended December 31, 2005 and 2006, respectively.&#160;&#160;The impact of the raw
      material inventory error on loss from continuing operations and net loss is
      approximately ($0.2) million for the three months ended March 31, 2006, ($0.2)
      million and ($0.4) million for the three and six months ended June 30, 2006,
      ($0.2) million and ($0.6) million for the three and nine months ended September
      30, 2006, and $0.1 million for the three months ended March 31,
      2007.&#160;&#160;In addition, as part of the restatement, the Company will be
      recording additional items, certain of which were previously identified and
      determined to be immaterial.&#160;&#160;The impact of these additional items on
      net loss is approximately ($0.4) million and $0.2 million for the years ended
      December 31, 2005 and 2006, respectively, and will be allocated between loss
      from continuing operations and loss from discontinued operations as
      appropriate.</font></div>
    <div>&#160;</div>
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    <div>&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><em>Internal
      Control Considerations</em></font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">In
      connection with the Company's evaluation of the restatement described above,
      management has concluded that the restatement is the result of previously
      unidentified material weaknesses in the Company's internal control over
      financial reporting.&#160;&#160;A material weakness is a control deficiency, or
      combination of control deficiencies, that results in more than a remote
      likelihood that a material misstatement of the annual or interim consolidated
      financial statements will not be prevented or detected.&#160;&#160;Management
      has also determined that the Company's disclosure controls and procedures were
      ineffective as of December 31, 2005 and 2006, March 31, 2006 and 2007, June
      30,
      2006, and September 30, 2006 due to the material weaknesses described
      below.&#160;&#160;In addition the Company expects to report that its disclosure
      controls and procedures were ineffective as of June 30, 2007.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">As
      discussed above, these control deficiencies will result in the restatement
      of
      the Company's consolidated financial statements for December 31, 2005 and 2006,
      March 31, 2006 and 2007, June 30, 2006, and September 30,
      2006.&#160;&#160;Additionally, these control deficiencies could result in
      further misstatements to the Company's financial statements, which would result
      in a material misstatement to the annual or interim consolidated financial
      statements that would not be prevented or detected.&#160;&#160;Accordingly,
      management determined that these control deficiencies represented material
      weaknesses in internal control over financial reporting.</font></div>
    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Management
      has not yet finalized its assessment of internal controls over financial
      reporting related to the matters described above, and, accordingly, the Company
      may identify additional material weaknesses.&#160;&#160;The Company believes the
      above errors resulted from the following material weaknesses in internal control
      over financial reporting:</font></div>
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              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt;" face="Symbol, serif">&#183;&#160;&#160;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">The
                Company did not maintain a proper level of segregation of duties,
                specifically the verification process of physical raw material inventory
                on hand and the operational handling of this inventory;
                and</font></div>
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              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt;" face="Symbol, serif">&#183;&#160;&#160;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">The
                Company did not maintain sufficient oversight of the raw material
                inventory counting and reconciliation
                process.</font></div>
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    <div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">The
      Company has undertaken the following steps during the second and third quarters
      of 2007 to address the above material weaknesses within our internal controls
      over physical counting of inventory:</font></div>
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              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt;" face="Symbol, serif">&#183;&#160;&#160;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Completed
                a full resin physical inventory by independent employees not involved
                in
                the operational handling and reporting of resin
                inventory;</font></div>
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      </table>
    </div>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Completed
                a full comparison of the physical resin inventory to the general
                ledger
                and recorded the appropriate
                adjustment;</font></div>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Verified
                the automated measurement systems with third parties as well as the
                physical observation of the resin inventory by independent
                employees;</font></div>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Initiated
                weekly physical counts of resin inventory and completed a comparison
                to
                the perpetual inventory system for any differences with any significant
                differences investigated by management.&#160;&#160;We will continue to
                perform these weekly physical counts until management believes the
                process
                and related controls are operating as designed;
                and</font></div>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Reviewed
                and adjusted, as necessary, procedures and personnel involved in
                the
                physical inventory counting of
                resin.</font></div>
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      and the Board of Directors are committed to the remediation and continued
      improvement of our internal control over financial reporting associated with
      inventory.&#160;&#160;We have dedicated and will continue to dedicate
      significant resources to this remediation effort and believe that we have made
      significant progress in reestablishing effective internal controls over
      financial reporting associated with the above raw material inventory counting
      process.&#160;&#160;The process of designing and implementing effective internal
      controls is a continuous effort that requires us to anticipate and react to
      changes in our business and the economic and regulatory environments and to
      continue to expend significant resources to maintain a system of internal
      controls that is adequate to satisfy our reporting obligations as a public
      company.&#160;&#160;We have started to implement remedial measures for the
      material weaknesses we have identified; however, we have very limited operating
      experience with the remedial measures we have implemented to date and the
      measures we have taken to date or any future measures we may take may not
      adequately remedy all of the material weaknesses in internal control we have
      identified.&#160;&#160;Despite our efforts, the measures we implement may not
      enable us to maintain adequate controls over our financial and reporting
      processes in the future.</font></div>
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      material weaknesses in our internal controls could be discovered in the
      future.&#160;&#160;Any failure to remedy the deficiencies identified by
      management, any failure to implement required new or improved controls and
      the
      discovery of unidentified deficiencies could harm our operating results, cause
      us to fail to meet our reporting obligations, subject us to increased risk
      of
      errors and fraud related to our financial statements or result in material
      misstatements in, and untimely filing of, our financial
      statements.&#160;&#160;Any such failure also could adversely affect the results
      of the periodic management evaluations and annual auditor attestation reports
      regarding the effectiveness of our &#8220;internal control over financial reporting&#8221;
that will become required under Section 404 of the Sarbanes-Oxley Act of
      2002.&#160;&#160;The existence of a material weakness could result in errors in
      our financial statements that could warrant an additional restatement of our
      existing financial statements or could cause a restatement of future presented
      financial statements.&#160;&#160;The need to restate our financial statements
      could cause us to fail to meet our reporting obligations.&#160;&#160;Inadequate
      internal controls and untimely financial reporting could harm our operating
      results and cause investors to lose confidence in our reported financial
      information, which could also have a negative effect on the trading price of
      our
      stock.</font></div>
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              <div>&#160;</div>
            </td>
            <td>
              <div align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>SIGNATURES</strong></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Pursuant
      to the requirements of the Securities Exchange Act of 1934, the registrant
      has
      duly caused this report to be signed on its behalf by the undersigned hereunto
      duly authorized.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 216pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><strong>KATY
      INDUSTRIES, INC.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 216pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">(Registrant)</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 216pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">By:
      <u>/s/ Amir Rosenthal</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 234pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Amir
      Rosenthal</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 234pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Vice
      President, Chief Financial Officer,</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;"><font id="TAB1" style="MARGIN-LEFT: 234pt;"></font>General
      Counsel and
      Secretary</font></div>
    <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman;">Date:&#160;&#160;August
      10, 2007</font></div>
    <div><br></div>
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form8-k.htm
UNITED
      STATES
SECURITIES
      AND EXCHANGE COMMISSION
Washington,
      D.C.  20549
__________________
FORM
      8-K
_______________
CURRENT
      REPORT
Pursuant
      to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date
      of
      Report (Date of earliest event reported):  August 10,
      2007
Katy
      Industries, Inc.
(Exact
      name of registrant as specified in its charter)
Delaware
001-05558
75--1277589
(State
      or
      other
      jurisdiction                                                                           (Commission
      File
      Number)                                                                (IRS
      Employer
of
      incorporation)
Identification
      No.)
2461
      South Clark Street, Suite 630
Arlington,
      Virginia  22202
(Address
      of principal executive offices) (Zip Code)
(703)
      236-4300
(Registrant's
      telephone number, including area code)
Check
      the
      appropriate box below if the Form 8-K filing is intended to simultaneously
      satisfy the filing obligation of the registrant under any of the following
      provisions:
[  ]  Written
      communications pursuant to Rule 425 under the Securities Act
[  ]  Soliciting
      material pursuant to Rule 14a-12 under the Exchange Act
[  ]  Pre-commencement
      communications pursuant to Rule 14d-2(b) under the Exchange Act
[  ]  Pre-commencement
      communications pursuant to Rule 13e-4(c) under the Exchange Act
Item
      4.02 Non-Reliance on Previously Issued Financial Statements or a Related Audit
      Report or Completed Interim Review.
On
      August
      6, 2007, the Audit Committee of the Board of Directors, or the Audit Committee,
      of Katy Industries, Inc. (the "Company"), in consultation with management,
      concluded that our following previously issued financial statements should
      no
      longer be relied upon and should be restated based on identified errors: 1)
      the
      consolidated financial statements as of December 31, 2006 and 2005 and for
      the
      years then ended contained in the Company's Annual Report on Form 10-K; and 2)
      the consolidated financial statements for the quarters ending March 31, 2006
      and
      2007, June 30, 2006, and September 30, 2006 contained in the Company's
      corresponding Form 10-Qs.  The Company intends to file its restated
      Annual Report on Form 10-K as of December 31, 2006 and its Quarterly Report
      on
      Form 10-Q as of March 31, 2007 as soon as practical.  In addition, the
      unaudited quarterly financial information included in the Company's Annual
      Report on Form 10-K as of December 31, 2006 will be updated as the Annual Report
      on Form 10-K is amended, and the unaudited quarterly financial information
      included in the Company's Quarterly Reports on Form 10-Q as of March 31, 2006,
      June 30, 2006 and September 30, 2006 will be updated as the Company files its
      corresponding Quarterly Reports for 2007.
In
      the
      second quarter of 2007, management of the Company noted discrepancies in its
      physical raw material inventory levels and the corresponding perpetual inventory
      records.  These discrepancies led the Company to initiate an internal
      investigation which resulted in the identification of errors in the physical
      inventory count of raw material used for valuation purposes at the Company's
      wholly-owned subsidiary, Continental Commercial Products, LLC
      ("CCP").  The Company has concluded these errors are isolated to
      fiscal 2005, fiscal 2006 and the three months ended March 31, 2007.
When
      management became aware of the issues referenced above, the Company, including
      the Audit Committee, initiated an investigation of the
      matter.  Management has discussed the investigation, the resolution of
      the problems and the strengthening of internal controls with the Audit
      Committee.
Based
      on
      the results of the investigation, management and the Audit Committee determined
      that (a) the errors were caused by intentional acts of a CCP employee who
      improperly accounted for physical quantity of raw material inventory and who
      has
      since been dismissed; (b) the scope of the errors were contained in fiscal
      2005,
      fiscal 2006 and the three months ended March 31, 2007; and (c) the errors were
      concentrated in the area discussed above.
The
      Company's management and the Audit Committee have discussed this matter with
      PricewaterhouseCoopers LLP, the Company's independent registered public
      accounting firm.
Impact
      of Error on Previously filed Financial Statements
The
      impact of the raw material inventory error on loss from continuing operations
      and net loss is approximately ($0.2) million and ($0.6) million for the years
      ended December 31, 2005 and 2006, respectively.  The impact of the raw
      material inventory error on loss from continuing operations and net loss is
      approximately ($0.2) million for the three months ended March 31, 2006, ($0.2)
      million and ($0.4) million for the three and six months ended June 30, 2006,
      ($0.2) million and ($0.6) million for the three and nine months ended September
      30, 2006, and $0.1 million for the three months ended March 31,
      2007.  In addition, as part of the restatement, the Company will be
      recording additional items, certain of which were previously identified and
      determined to be immaterial.  The impact of these additional items on
      net loss is approximately ($0.4) million and $0.2 million for the years ended
      December 31, 2005 and 2006, respectively, and will be allocated between loss
      from continuing operations and loss from discontinued operations as
      appropriate.
Internal
      Control Considerations
In
      connection with the Company's evaluation of the restatement described above,
      management has concluded that the restatement is the result of previously
      unidentified material weaknesses in the Company's internal control over
      financial reporting.  A material weakness is a control deficiency, or
      combination of control deficiencies, that results in more than a remote
      likelihood that a material misstatement of the annual or interim consolidated
      financial statements will not be prevented or detected.  Management
      has also determined that the Company's disclosure controls and procedures were
      ineffective as of December 31, 2005 and 2006, March 31, 2006 and 2007, June
      30,
      2006, and September 30, 2006 due to the material weaknesses described
      below.  In addition the Company expects to report that its disclosure
      controls and procedures were ineffective as of June 30, 2007.
As
      discussed above, these control deficiencies will result in the restatement
      of
      the Company's consolidated financial statements for December 31, 2005 and 2006,
      March 31, 2006 and 2007, June 30, 2006, and September 30,
      2006.  Additionally, these control deficiencies could result in
      further misstatements to the Company's financial statements, which would result
      in a material misstatement to the annual or interim consolidated financial
      statements that would not be prevented or detected.  Accordingly,
      management determined that these control deficiencies represented material
      weaknesses in internal control over financial reporting.
Management
      has not yet finalized its assessment of internal controls over financial
      reporting related to the matters described above, and, accordingly, the Company
      may identify additional material weaknesses.  The Company believes the
      above errors resulted from the following material weaknesses in internal control
      over financial reporting:
·
The
                Company did not maintain a proper level of segregation of duties,
                specifically the verification process of physical raw material inventory
                on hand and the operational handling of this inventory;
                and
·
The
                Company did not maintain sufficient oversight of the raw material
                inventory counting and reconciliation
                process.
The
      Company has undertaken the following steps during the second and third quarters
      of 2007 to address the above material weaknesses within our internal controls
      over physical counting of inventory:
·
Completed
                a full resin physical inventory by independent employees not involved
                in
                the operational handling and reporting of resin
                inventory;
·
Completed
                a full comparison of the physical resin inventory to the general
                ledger
                and recorded the appropriate
                adjustment;
·
Verified
                the automated measurement systems with third parties as well as the
                physical observation of the resin inventory by independent
                employees;
·
Initiated
                weekly physical counts of resin inventory and completed a comparison
                to
                the perpetual inventory system for any differences with any significant
                differences investigated by management.  We will continue to
                perform these weekly physical counts until management believes the
                process
                and related controls are operating as designed;
                and
·
Reviewed
                and adjusted, as necessary, procedures and personnel involved in
                the
                physical inventory counting of
                resin.
Management
      and the Board of Directors are committed to the remediation and continued
      improvement of our internal control over financial reporting associated with
      inventory.  We have dedicated and will continue to dedicate
      significant resources to this remediation effort and believe that we have made
      significant progress in reestablishing effective internal controls over
      financial reporting associated with the above raw material inventory counting
      process.  The process of designing and implementing effective internal
      controls is a continuous effort that requires us to anticipate and react to
      changes in our business and the economic and regulatory environments and to
      continue to expend significant resources to maintain a system of internal
      controls that is adequate to satisfy our reporting obligations as a public
      company.  We have started to implement remedial measures for the
      material weaknesses we have identified; however, we have very limited operating
      experience with the remedial measures we have implemented to date and the
      measures we have taken to date or any future measures we may take may not
      adequately remedy all of the material weaknesses in internal control we have
      identified.  Despite our efforts, the measures we implement may not
      enable us to maintain adequate controls over our financial and reporting
      processes in the future.
Additional
      material weaknesses in our internal controls could be discovered in the
      future.  Any failure to remedy the deficiencies identified by
      management, any failure to implement required new or improved controls and
      the
      discovery of unidentified deficiencies could harm our operating results, cause
      us to fail to meet our reporting obligations, subject us to increased risk
      of
      errors and fraud related to our financial statements or result in material
      misstatements in, and untimely filing of, our financial
      statements.  Any such failure also could adversely affect the results
      of the periodic management evaluations and annual auditor attestation reports
      regarding the effectiveness of our "internal control over financial reporting"
that will become required under Section 404 of the Sarbanes-Oxley Act of
      2002.  The existence of a material weakness could result in errors in
      our financial statements that could warrant an additional restatement of our
      existing financial statements or could cause a restatement of future presented
      financial statements.  The need to restate our financial statements
      could cause us to fail to meet our reporting obligations.  Inadequate
      internal controls and untimely financial reporting could harm our operating
      results and cause investors to lose confidence in our reported financial
      information, which could also have a negative effect on the trading price of
      our
      stock.
SIGNATURES
Pursuant
      to the requirements of the Securities Exchange Act of 1934, the registrant
      has
      duly caused this report to be signed on its behalf by the undersigned hereunto
      duly authorized.
KATY
      INDUSTRIES, INC.
(Registrant)
By:
/s/ Amir Rosenthal
Amir
      Rosenthal
Vice
      President, Chief Financial Officer,
General
      Counsel and
      Secretary
Date:  August
      10, 2007