10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the Period Ended June 30, 2008

or

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number 0-3252

LEXINGTON PRECISION CORPORATION

(Exact name of Registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	22-1830121 (I.R.S. Employer Identification No.)
800 Third Avenue, New York, NY (Address of principal executive office)	10022 (Zip Code)

(212) 319-4657
(Registrant’s telephone number, including area code)

Not Applicable
(Former name, former address, and former fiscal year, if changed since last report date)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o  Accelerated filer o  Non-accelerated filer   þ
(Do not check if a smaller reporting company) Smaller reporting company o 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o  No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of September 4, 2008, there were 5,021,767 shares of common stock of the Registrant outstanding.

LEXINGTON PRECISION CORPORATION

Quarterly Report on Form 10-Q

Table of Contents

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements	1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3. Quantitative and Qualitative Disclosures about Market Risk	36
Item 4T. Controls and Procedures	37
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	38
Item 1A. Risk Factors	38
Item 3. Defaults upon Senior Securities	39
Item 4. Submission of Matters to a Vote of Security Holders	40
Item 6. Exhibits	40
Signatures	41
Exhibit Index	42
EX-10.1
EX-31.1
EX-31.2
EX-31.3
EX-32.1
EX-32.2
EX-32.3

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PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

LEXINGTON PRECISION CORPORATION
(Debtor-In-Possession)
Consolidated Statements of Operations
(thousands of dollars, except per share data)
(unaudited)

	Three Months Ended						Six Months Ended
	June 30						June 30
	2008			2007			2008			2007
Net sales	$	20,000		$	23,778		$	41,352		$	46,308
Cost of sales		16,664			20,202			34,830			39,679
Gross profit		3,336			3,576			6,522			6,629
Selling and administrative expenses		1,454			2,067			3,303			3,835
Income from operations		1,882			1,509			3,219			2,794
Other income (expense):
Interest expense		(1,966	)		(2,799	)		(4,740	)		(4,984	)
Reorganization items, net		(1,795	)		—			(1,795	)		—
Loss from continuing operations before income taxes		(1,879	)		(1,290	)		(3,316	)		(2,190	)
Income tax provision		16			15			26			30
Loss from continuing operations		(1,895	)		(1,305	)		(3,342	)		(2,220	)
Loss from discontinued operations		(45	)		(56	)		(60	)		(58	)
Net loss	$	(1,940	)	$	(1,361	)	$	(3,402	)	$	(2,278	)
Basic and diluted loss per share of common stock:
Continuing operations	$	(0.38	)	$	(0.26	)	$	(0.68	)	$	(0.45	)
Discontinued operations		(0.01	)		(0.01	)		(0.01	)		(0.01	)
Net loss	$	(0.39	)	$	(0.27	)	$	(0.69	)	$	(0.46	)

See notes to consolidated financial statements.

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LEXINGTON PRECISION CORPORATION
(Debtor-In-Possession)
Consolidated Balance Sheets
(thousands of dollars, except share data)

	June 30,			December 31,
	2008			2007
	(unaudited)
Assets:
Current assets:
Cash	$	8,595		$	212
Marketable securities		146			214
Accounts receivable, net		10,337			10,981
Inventories, net		10,077			9,330
Prepaid expenses and other current assets		1,398			1,032
Deferred income taxes		98			98
Current assets of discontinued operations		6			10
Total current assets		30,657			21,877
Plant and equipment, net		19,862			20,854
Plant and equipment of discontinued operations, net		1,284			1,338
Goodwill, net		7,623			7,623
Other assets, net		641			675
	$	60,067		$	52,367
Liabilities and stockholders’ deficit:
Current liabilities:
Accounts payable	$	1,462		$	6,558
Accrued expenses, excluding interest		5,625			3,932
Accrued interest expense		248			7,954
Debt in default		35,792			68,345
Debtor-in-Possession Note		4,000			—
Current portion of long-term debt		39			741
Current liabilities of discontinued operations		71			241
Total current liabilities		47,237			87,771
Liabilities subject to compromise		51,725			—
Long-term debt, excluding current portion		—			5
Deferred income taxes		98			98
Other long-term liabilities		411			434
Stockholders’ deficit:
Common stock, $0.25 par value, 10,000,000 shares authorized, 5,021,767 shares issued and outstanding		1,240			1,238
Additional paid-in-capital		13,192			13,187
Accumulated deficit		(53,768	)		(50,366	)
Accumulated other comprehensive loss		(68	)		—
Total stockholders’ deficit		(39,404	)		(35,941	)
	$	60,067		$	52,367

See notes to consolidated financial statements.

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LEXINGTON PRECISION CORPORATION
(Debtor-In-Possession)
Consolidated Statements of Cash Flows
(thousands of dollars)
(unaudited)

	Six Months Ended
	June 30
	2008			2007
Operating activities:
Net loss	$	(3,402	)	$	(2,278	)
Adjustments to reconcile net loss to net cash provided (used) by continuing operations:
Loss from discontinued operations		60			58
Depreciation		2,633			3,138
Amortization included in cost of sales		124			198
Amortization and write-off of deferred financing expenses		251			182
Increase in accrued reorganization items, net		1,509			—
Changes in operating assets and liabilities that provided (used) cash:
Accounts receivable, net		644			(5,680	)
Inventories, net		(747	)		(684	)
Prepaid expenses and other current assets		(387	)		41
Accounts payable		548			224
Accrued expenses, excluding interest		347			650
Accrued interest expense		2,841			2,689
Other		(6	)		9
Net cash provided (used) by continuing operations		4,415			(1,453	)
Net cash provided (used) by discontinued operations		2			(43	)
Net cash provided (used) by operating activities		4,417			(1,496	)
Investing activities:
Purchases of plant and equipment		(1,663	)		(1,527	)
Proceeds from sales of assets		42			—
Expenditures for tooling owned by customers		(46	)		(87	)
Other		(77	)		17
Net cash used by continuing operations		(1,744	)		(1,597	)
Net cash used by discontinued operations		—			(27	)
Net cash used by investing activities		(1,744	)		(1,624	)
Financing activities:
Issuance of Debtor-in-Possession Note		4,000			—
Prepetition net borrowings under revolving line of credit		3,587			6,299
Prepetition repayment of debt in default and long-term debt		(837	)		(1,654	)
Postpetition repayment of debt in default and long-term debt		(826	)		—
Payment of financing expenses		(214	)		(714	)
Net cash provided by financing activities		5,710			3,931
Net increase in cash		8,383			811
Cash at beginning of year		212			35
Cash at end of period	$	8,595		$	846

See notes to consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1 — Basis of Presentation

     The unaudited interim consolidated financial statements include the accounts of Lexington Precision Corporation and its wholly-owned subsidiary, Lexington Rubber Group, Inc. (collectively, the “Company”). The significant accounting policies followed by the Company are set forth in Note 1 to the consolidated financial statements in the Company’s annual report on Form 10-K for the year ended December 31, 2007, except as set forth below in this Note 1. In the opinion of management, the interim consolidated financial statements contain all adjustments, consisting only of adjustments of a normal, recurring nature, necessary to present fairly the Company’s financial position at June 30, 2008, the Company’s results of operations for the three-month and six-month periods ended June 30, 2008 and 2007, and the Company’s cash flows for the six-month periods ended June 30, 2008 and 2007.

     The preparation of the interim consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenue and expenses during each reporting period. Future events and their impact on the Company’s results of operations or financial position cannot be determined with any certainty. Although the Company strives to use its best judgment in making estimates and assumptions, actual results could vary materially from anticipated results.

     The results of operations for the three-month and six-month periods ended June 30, 2008, are not necessarily indicative of the results to be expected for any succeeding quarter or for the full year.

     Bankruptcy Filing

     On April 1, 2008, the Company filed a voluntary petition for relief under chapter 11 of title 11 of the United States Code in the Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”). On July 31, 2008, the Bankruptcy Court issued an order extending the Company’s exclusive right to file a plan of reorganization until October 28, 2008, and to solicit acceptances of such plan until December 27, 2008.

     In connection with the chapter 11 filing, the Company obtained a financing package that consisted of (1) an arrangement with the Company’s senior, secured lenders to freeze the loan under the Company’s revolving line of credit at the amount outstanding on April 1, 2008, and to permit the Company to utilize the cash collateral of the senior, secured lenders in the operation of its business through February 25, 2009, and (2) a $4,000,000 debtor-in-possession loan (the “Debtor-in-Possession Note” or the “DIP Note”) that matures on April 1, 2009. For more information on the Company’s senior, secured financing and the DIP Note, please refer to Note 5, “Debt.”

     Although there can be no assurance that the Company will be successful, its intent in filing for chapter 11 protection was to use the powers afforded it under the Bankruptcy Code to effect a financial restructuring that would result in a significant reduction in its total indebtedness on a basis that would be fair and equitable to all of its creditors and stockholders. The Company is not utilizing the provisions of the Bankruptcy Code to effect any significant operational restructuring or to eliminate or renegotiate any executory contracts that are material to its business. The Company has experienced no disruptions in its operations to date, and, based upon discussions with a significant number of major suppliers and customers, the Company does not expect any such disruption during the term of the chapter 11

- 4 -

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

proceedings. The Company believes that it has more than adequate liquidity to operate during the chapter 11 proceedings. At August 27, 2008, the Company had $7,432,000 of cash on hand.

     Proposed Plan of Reorganization

     On June 30, 2008, the Company filed with the Bankruptcy Court a plan of reorganization. On August 8, 2008, the Company filed an amended plan of reorganization (the “Amended Plan”) and a proposed disclosure statement. The terms of the Amended Plan provide for the refinancing of the senior, secured credit facility with a similar facility. Under the Amended Plan, holders of general unsecured claims other than holders of Senior Subordinated Notes and the Junior Subordinated Note will receive 25% of their claim in cash and three payments, each equal to 26.5% of their claim, six, twelve, and eighteen months after the effective date of the Amended Plan. Holders of Senior Subordinated Note claims will receive a pro rata share of a new $15,000,000 subordinated note and, for the balance of their claim, shares of new Series C Preferred Stock. Holders of Junior Subordinated Note claims and holders of Series B Preferred Stock claims will receive shares of common stock. For a detailed description of the Amended Plan, the claimant classes, and the treatment of claims and interests, please refer to the proposed disclosure statement filed with the Bankruptcy Court on August 8, 2008. The proposed disclosure statement along with other documents related to the chapter 11 proceedings can be found at http://chapter11.epiqsystems.com/lexington.

     There can be no assurance that the Amended Plan will be confirmed.

American Institute of Certified Public Accountants Statement of Position 90-7, “Financial Reporting by Entities in Reorganization under the Bankruptcy Code”

     The Company’s consolidated financial statements have been prepared in accordance with American Institute of Certified Public Accountants Statement of Position 90-7, “Financial Reporting by Entities in Reorganization under the Bankruptcy Code” (“SOP 90-7”). SOP 90-7 provides guidance for financial reporting by entities that have filed petitions and expect to reorganize as going concerns under chapter 11 of title 11 of the United States Code. SOP 90-7 recommends that all such entities report the same way while reorganizing under chapter 11, with the objective of reflecting their financial evolution. To accomplish this objective, SOP 90-7 requires, among other disclosures, that the financial statements for periods subsequent to the filing of the chapter 11 petition distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business.

     Reorganization Items

     SOP 90-7 requires that revenues, expenses, realized gains and losses, and provisions for losses that can be directly associated with the reorganization and restructuring of a business must be reported separately as “reorganization items” in the statements of operations. Reorganization items reflected in the

- 5 -

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Company’s consolidated financial statements for the three-month and six-month periods ended June 30, 2008, are set forth below (dollar amounts in thousands):

Professional fees and expenses incurred directly by the Company	$	1,024
Professional fees and expenses incurred by creditors		625
Other costs		177
Interest income		(31	)
Reorganization items, net	$	1,795

     Liabilities Subject to Compromise

     SOP 90-7 requires that certain prepetition unsecured or under secured claims against the Company be classified in the balance sheet as “liabilities subject to compromise.” Additional claims that are subject to compromise may arise subsequent to the filing date as a result of the rejection of executory contracts or because claims are allowed for contingencies or disputes. On June 30, 2008, the Bankruptcy Court entered an order establishing August 15, 2008, as the bar date for the filing of all prepetition claims other than claims held by government units. The bar date for government units to file prepetition claims is September 29, 2008. The bar date is the date on which claims against the Company that arose prior to the filing date must be filed if the claimant wishes to receive any distribution in the chapter 11 case. On July 1, 2008, the Company mailed a notice of the bar date and the manner in which a proof of claim was to be filed to all known creditors, and, on July 16, 2008, through publication of an official notice in the Wall Street Journal, the Company gave notice to all unknown potential claimants informing them of the official bar date and the manner in which a proof of claim was to be filed. Although prepetition claims are generally stayed, on April 2 and April 22, 2008, the Company received approvals from the Bankruptcy Court to pay or otherwise honor, subject to certain conditions, certain prepetition obligations critical to its continued operation, including employee wages and benefits, workers’ compensation and product liability insurance programs, certain customer programs, and common carrier charges. The Company has been paying and intends to continue to pay all undisputed postpetition claims in the ordinary course of business.

     Liabilities subject to compromise as of June 30, 2008, consisted of the following (dollar amounts in thousands):

Accounts payable – continuing operations	$	5,820
Accounts payable – discontinued operations		174
Senior Subordinated Notes		34,177
Accrued interest on Senior Subordinated Notes		10,415
Junior Subordinated Note		347
Accrued interest on Junior Subordinated Note		86
Series B Preferred Stock		660
Accrued dividends on Series B Preferred Stock		46
Total liabilities subject to compromise	$	51,725

     The foregoing amounts are based upon the Company’s books and records and do not necessarily take into account all liabilities asserted in proofs of claims filed with the Bankruptcy Court.

- 6 -

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

     Accounting for Interest Expense

     On April 2, 2008, the Bankruptcy Court approved the Company’s cash collateral motion thereby permitting the Company to accrue and pay the contractual rate of interest on its senior, secured credit facility and to pay scheduled monthly principal payments on the term loans outstanding under the facility. In addition, because the management of the Company believes that the Company is solvent, the Company continues to accrue, and report in its consolidated financial statements, interest on all of its unsecured prepetition debt at the applicable contractual rates.

     Going Concern Basis

     The Company’s consolidated financial statements have been prepared on a “going concern basis,” as such term is used in U.S. generally accepted accounting principles. A going concern basis contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company’s ability to restructure, refinance, or repay its indebtedness is subject to risks and uncertainties. As a result, there is substantial doubt about the Company’s ability to continue to report on a going concern basis. The consolidated financial statements do not include any adjustments to the amounts or classification of assets or liabilities to reflect these risks and uncertainties.

     Goodwill Impairment

     Tests for impairment of goodwill are performed using a fair value approach during the fourth quarter of each year and at other times when events or changes in circumstances indicate possible impairment. At June 30, 2008, and December 31, 2007, the Company’s unamortized goodwill totaled $7,623,000, which related entirely to the Rubber Group. At June 30, 2008, the net book value of the Rubber Group, including goodwill but excluding debt, totaled $32,907,000. In the twelve-month period ended December 31, 2007, the Rubber Group’s income from operations totaled $7,975,000. For the six-month period ended June 30, 2008, the Rubber Group’s income from operations totaled $4,870,000. Based on the operating performance of the Rubber Group, the goodwill related to the Rubber Group was not deemed to be impaired as of the filing date of this Form 10-Q; the Company’s filing under chapter 11 was not deemed to have impaired goodwill related to the Rubber Group.

     Recently Issued Accounting Standards

Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities – an Amendment of FASB Statement No. 133”

     In March 2008, the Financial Accounting Standard Board (“FASB”) issued Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities – an Amendment of FASB Statement No. 133” (“FAS 161”). FAS 161 requires qualitative disclosures about a Company’s objectives and strategies for using derivatives, quantitative disclosures about the fair value of gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. FAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008. Based on our current operations, we do not believe that FAS 161 will have a significant impact on our results of operations or financial position.

- 7 -

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Staff Position APB 14-1, “Accounting for Convertible Debt Instruments that May Be Settled in Cash upon Conversion”

     In May 2008, the FASB issued Staff Position APB 14-1, “Accounting for Convertible Debt Instruments that May Be Settled in Cash upon Conversion” (“FSP APB 14-1”). FSP APB 14-1 requires issuers of convertible debt instruments to separately account for the liability and equity components of interest cost recognized in future periods on convertible debt instruments in a manner that will reflect the entity’s nonconvertible debt borrowing rate on the date the instrument was issued. FSP APB 14-1 is effective for fiscal years after December 15, 2008, and interim periods within those fiscal years and must be applied to all periods presented. The Company is currently assessing the impact, if any, that FSP APB 14-1 will have on the Company’s results of operations and financial position.

Note 2 — Cash

     Cash at June 30, 2008, and December 31, 2007, totaled $8,595,000 and $212,000, respectively. The cash on hand at June 30, 2008, resulted primarily from the Company’s debtor-in-possession financing arrangements, which consists of (1) an arrangement with the Company’s senior, secured lenders to freeze the loans under the Company’s revolving line of credit at the amount outstanding on April 1, 2008, and to permit the Company to utilize the cash collateral of the senior, secured lenders in the operation of its business through February 25, 2009, and (2) the DIP Note in the amount of $4,000,000 that matures on April 1, 2009.

Note 3 — Inventories

     Inventories at June 30, 2008, and December 31, 2007, are set forth below (dollar amounts in thousands):

	June 30,		December 31,
	2008		2007
Finished goods	$	5,571	$	5,201
Raw material		2,421		1,944
Work in process		2,085		2,185
	$	10,077	$	9,330

Note 4 — Plant and Equipment

     Plant and equipment at June 30, 2008, and December 31, 2007, is set forth below (dollar amounts in thousands):

	June 30,		December 31,
	2008		2007
Land	$	2,142	$	1,817
Buildings		13,374		13,370
Equipment		111,617		110,723
		127,133		125,910
Less accumulated depreciation		107,271		105,056
Plant and equipment, net	$	19,862	$	20,854

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 5 — Debt

     Debt at June 30, 2008, and December 31, 2007, including debt classified as liabilities subject to compromise at June 30, 2008, is set forth below (dollar amounts in thousands):

	June 30, 2008
	Not Subject		Subject to				December 31,
	To Compromise		Compromise		Total		2007
Debt in default:
Senior, secured credit facility:
Revolving line of credit	$	14,219	$	—	$	14,219	$	10,632
Equipment term loan		7,917		—		7,917		9,167
Real estate term loan		13,656		—		13,656		14,022
Subtotal		35,792		—		35,792		33,821
Senior Subordinated Notes		—		34,177		34,177		34,177
Junior Subordinated Note		—		347		347		347
Total debt in default		35,792		34,524		70,316		68,345
Debtor-in-Possession Note		4,000		—		4,000		—
Current portion of long-term debt		39		660		699		741
Long-term debt:
Series B Preferred Stock		—		660		660		660
Other		39		—		39		86
Subtotal		39		660		699		746
Less current portion		39		660		699		741
Total long-term debt		—		—		—		5
Total debt	$	39,831	$	35,184	$	75,015	$	69,091

     Senior, Secured Credit Facility

     In connection with the Company’s filing under chapter 11 of the Bankruptcy Code on April 1, 2008, the Company and its senior, secured lender, with the approval of the Bankruptcy Court, modified the senior, secured credit facility in the following manner:

1. The default premium of 2% was eliminated and the interest rates on the various components of the senior, secured facility remained at the following contractual rates: LIBOR plus 2.75% on outstandings under the revolving line of credit (5.22% at June 30, 2008); LIBOR plus 4.5% for the equipment term loan (6.97% at June 30, 2008); and prime rate plus 6% on $4,000,000 of the real estate term loan and LIBOR plus 4.5% on the remaining balance of the real estate term loan (weighted average of 8.15% at June 30, 2008).

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

2.	The principal amount of the loan outstanding under the revolving line of credit was fixed at $14,219,000, and the Company was permitted to utilize the cash collateral of the senior, secured lenders in the operation of its business.
3.	The Company agreed to continue to make the scheduled monthly principal payments of $208,000 on the equipment term loan, which had an outstanding principal balance of $8,333,000 on the filing date, and $61,000 on the real estate term loan, which had an outstanding principal balance of $13,778,000 on the filing date.
4.	The senior, secured credit facility would terminate if the Company did not (a) file, by June 30, 2008, a plan of reorganization providing for the payment of the senior, secured debt, (b) file, by July 30, 2008, a disclosure statement regarding such plan, and (c) consummate, by February 25, 2009, a plan of reorganization. The plan and disclosure statement were filed on a timely basis, or within the grace periods provided for in the financing agreements.

     In addition, the financial covenants under the senior, secured financing agreements were modified as follows:

1.	Minimum Cash. The Company’s aggregate cash needed to be greater than $1,000,000 on May 2, 2008, and $500,000 on May 30, 2008, and must be greater than $500,000 on the last day of each four-week period following May 30. At August 22, 2008, the latest measurement date prior to the issuance of this report, aggregate cash was $7,285,000.
2.	Maximum Expenditures. The Company’s cumulative expenditures needed to be less than 110% of its cumulative budgeted expenditures for the period from April 2, 2008, through April 18, 2008, and must be less than 110% on the last day of each two-week period following April 18. At September 5, 2008, the latest measurement date prior to the issuance of this report, the Company’s cumulative expenditures were $7,666,000 less than 110% of cumulative budgeted expenditures.
3.	Minimum Net Sales. The Company’s cumulative net sales needed to be greater than 90% of cumulative budgeted net sales from April 2, 2008, through May 2, 2008, and must be greater than 90% of cumulative budgeted net sales on the last day of each four-week period after May 2. At August 22, 2008, the latest measurement date prior to the issuance of this report, cumulative net sales exceeded 90% of cumulative budgeted net sales by $2,053,000.

     The Company believes that the loans outstanding under the senior, secured credit facility and the monthly interest accrued thereon are fully collateralized and will not be impaired under any plan of reorganization. As a result, the Company has continued to accrue and pay the interest on these loans at the contractual rates of interest.

     The commencement of proceedings under chapter 11 constituted an event of default under the terms of the agreement governing the senior, secured credit facility. In addition, prior to the filing date, a cross-default existed under the senior, secured credit facility because of the Company’s failure to make the scheduled interest payments on its Senior Subordinated Notes on November 1, 2006, February 1, May 1, August 1, and November 1, 2007, and February 1, 2008. As a result, all of the loans under the senior, secured credit facility are classified as debt in default at June 30, 2008, and December 31, 2007.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

From February 1, 2007, through March 31, 2008, a default premium of 2% was charged on the outstanding loan balances.

     The Company’s loans and reimbursement obligations with respect to letters of credit under the senior, secured credit facility are secured by liens on substantially all of the Company’s assets. The agreements governing the senior, secured credit facility contained certain financial covenants and placed certain restrictions on the Company’s business and operations, including limitations on the sale of all or substantially all of its assets, the repurchase of common stock, the redemption of preferred stock, and the payment of cash dividends.

     Debtor-in-Possession Note

     The debtor-in-possession financing in the amount of $4,000,000 was approved by the Bankruptcy Court on April 2 and 17, 2008. The DIP Note is unsecured, subordinated to the senior, secured loans, and bears interest at LIBOR plus 7%, subject to a minimum interest rate of 10%. The DIP Note was granted super-priority status by the Bankruptcy Court. The loan matures on the earliest of (1) April 1, 2009, (2) the effective date of a plan of reorganization, (3) the conversion of the bankruptcy proceeding from a chapter 11 case to a chapter 7 case, (4) the appointment of a chapter 11 trustee, or (5) an event of default as described in the documents governing the DIP Note.

     Senior Subordinated Notes

     The Senior Subordinated Notes mature on August 1, 2009, and are unsecured obligations, subordinated in right of payment to all of the Company’s existing and future senior debt. The Senior Subordinated Notes bear interest at 12% per annum, payable quarterly on February 1, May 1, August 1, and November 1. The Company did not make the interest payment that was due on November 1, 2006, and has not made any of the quarterly payments since that date. Pursuant to a forbearance agreement between the Company and a group of six hedge funds that hold $25,428,000 aggregate principal amount, or 74.4%, of the Senior Subordinated Notes outstanding, the interest rate on the Senior Subordinated Notes was increased to 16% effective March 9, 2007. Upon the commencement of the chapter 11 proceedings, the interest rate on the Senior Subordinated Notes reverted to 12%. An additional $7,772,000 aggregate principal amount, or 22.7% of the Senior Subordinated Notes outstanding, is held by certain of the Company’s affiliates and members of their families. At June 30, 2008, accrued interest on the Senior Subordinated Note totaled $10,415,000. The Senior Subordinated Notes and accrued interest thereon through June 30, 2008, were classified as liabilities subject to compromise in the Company’s consolidated financial statements at June 30, 2008. The Company continues to accrue interest on the Senior Subordinated Notes at the contractual rate of 12% because the management of the Company believes that the Company is solvent.

     Junior Subordinated Note

     The Junior Subordinated Note matures on November 1, 2009, and is an unsecured obligation of the Company that is subordinated in right of payment to all of the Company’s existing and future senior debt and to the Senior Subordinated Notes. The Junior Subordinated Note bears interest at 13% per annum, payable quarterly on February 1, May 1, August 1, and November 1. The Company did not make the interest payment that was due on November 1, 2006, and has not made any of the quarterly payments since that date. At June 30, 2008, accrued interest on the Junior Subordinated Note totaled $86,000. The

- 11 -

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Junior Subordinated Note and accrued interest thereon through June 30, 2008, were classified as liabilities subject to compromise in the Company’s consolidated financial statements as of June 30, 2008. The Company continues to accrue interest on the Junior Subordinated Note at the contractual rate of 13% because the management of the Company believes that the Company is solvent.

     Series B Preferred Stock

     At June 30, 2008, there were outstanding 3,300 shares of the Company’s $8 Cumulative Convertible Preferred Stock, Series B (the “Series B Preferred Stock”), par value $100 per share, with a carrying value of $660,000. Each share of Series B Preferred Stock is (1) entitled to one vote, (2) redeemable for $200 plus accumulated and unpaid dividends, (3) convertible into 14.8148 shares of common stock (subject to adjustment), and (4) entitled, upon voluntary or involuntary liquidation and after payment of all liabilities of the Company, to a liquidation preference of $200 plus accumulated and unpaid dividends. Redemptions of $90,000 are scheduled on November 30 of each year in order to retire 450 shares of Series B Preferred Stock annually. The Company did not make scheduled redemptions in the aggregate amount of $660,000 during the years 2000 through 2007, and the Company did not make the scheduled dividend payments on the Series B Preferred Stock on December 15, 2006, and March 15, June 15, September 15, and December 15, 2007, and March 15 and June 15, 2008, in the aggregate amount of $46,200.

     The Series B Preferred Stock is classified as debt in the Company’s consolidated financial statements. At June 30, 2008, the Series B Preferred Stock and accrued dividends thereon were classified as liabilities subject to compromise in the Company’s consolidated financial statements. The Company continues to accrue dividends on the Series B Preferred Stock at the contractual rate of 4% because the management of the Company believes that the Company is solvent.

     Fair Value of Financial Instruments

     The Company believes that, at June 30, 2008, the fair values of the loan outstanding under the revolving line of credit, the equipment term loan, the real estate term loan, and the DIP Note approximated the principal amounts of such loans. Because of the limited trading in the Company’s various unsecured debt securities, the Company is unable to express an opinion as to the fair value of the Senior Subordinated Notes, the Junior Subordinated Note, or the Series B Preferred Stock.

     Cash Interest Paid

     Cash interest paid during the six-month periods ended June 30, 2008 and 2007, including amounts allocated to discontinued operations, totaled $1,684,000 and $2,196,000, respectively.

     Non-Cash Investing and Financing Activities

     Capital expenditures for the six-month period ended June 30, 2007, included $28,000 of equipment purchased under capitalized lease obligations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 6 — Interest Expense

     A breakdown of interest expense for the three-month and six-month periods ended June 30, 2008 and 2007, are set forth below (dollar amounts in thousands):

	Three Months Ended				Six Months Ended
	June 30				June 30
	2008		2007		2008		2007
Interest expense at contractual interest rates:
Senior, secured loans	$	627	$	958	$	1,308	$	1,874
Debtor-in-Possession Note		88		—		88		—
Senior Subordinated Notes		1,026		1,026		2,051		2,051
Junior Subordinated Note		12		12		23		23
All other		9		11		66		23
Subtotal		1,762		2,007		3,536		3,971
Interest expense resulting from incremental interest:
Senior, secured loans – default or forbearance premium		—		196		172		319
Senior Subordinated Notes – forbearance premium		—		370		411		459
Senior Subordinated Notes – interest on missed interest payments		246		86		454		137
Subtotal		246		652		1,037		915
Financing costs and fees		—		182		251		182
Total interest expense		2,008		2,841		4,824		5,068
Less interest expense allocated to discontinued operations		42		42		84		84
Interest expense related to continuing operations	$	1,966	$	2,799	$	4,740	$	4,984

Note 7— Income Taxes

     At June 30, 2008, and December 31, 2007, the Company’s net deferred income tax assets were fully reserved by a valuation allowance. The income tax provisions recorded during the three-month and six-month periods ended June 30, 2008 and 2007, consisted of estimated state income taxes.

Note 8 — Net Loss per Common Share

     The calculations of basic and diluted net loss per common share for the three-month and six-month periods ended June 30, 2008 and 2007, are set forth below (in thousands, except per share amounts). The assumed conversion of the Series B Preferred Stock and the assumed exercise of warrants to purchase the Company’s common stock were not dilutive. In addition, non-vested shares of restricted

- 13 -

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

common stock issued under the Company’s 2005 Stock Award Plan are not considered outstanding common shares for purposes of the calculation of basic net loss per share of common stock because the effect would not be dilutive. As a result, the weighted average number of common shares outstanding used in the calculation of net loss per common share set forth below does not reflect the assumed conversion of the Series B Preferred Stock, the assumed exercise of the warrants, or the vesting of the non-vested shares of restricted common stock.

	Three Months Ended						Six Months Ended
	June 30						June 30
	2008			2007			2008			2007
Numerator — Loss:
Continuing operations	$	(1,895	)	$	(1,305	)	$	(3,342	)	$	(2,220	)
Discontinued operations		(45	)		(56	)		(60	)		(58	)
Net loss	$	(1,940	)	$	(1,361	)	$	(3,402	)	$	(2,278	)
Denominator — Weighted average shares outstanding		4,962			4,952			4,957			4,947
Basic and diluted net loss per share of common stock:
Continuing operations	$	(0.38	)	$	(0.26	)	$	(0.68	)	$	(0.45	)
Discontinued operations		(0.01	)		(0.01	)		(0.01	)		(0.01	)
Net loss	$	(0.39	)	$	(0.27	)	$	(0.69	)	$	(0.46	)

Note 9 — Segments

     Description of Segments and Products

     The Company has two operating segments, the Rubber Group and the Metals Group. The Rubber Group manufactures tight-tolerance rubber components, primarily, insulators used in aftermarket and original equipment automotive ignition-wire, connector seals used in automotive wiring systems, and molded rubber components used in a variety of medical devices, such as intravenous medication-delivery systems, syringes, and surgical equipment. The Metals Group manufactures machined metal components from aluminum, brass, steel, and stainless steel bars, forgings, and cold-headed blanks. The Rubber Group and the Metals Group conduct substantially all of their business in the continental United States.

     The Corporate Office consists primarily of general administrative expenses that are not a result of any activity carried on by either the Rubber Group or the Metals Group. Corporate Office expenses include the compensation and benefits of the Company’s executive officers and corporate staff, rent on the office space occupied by these individuals, general corporate legal fees, including fees related to financings, and certain insurance expenses. Assets of the Corporate Office are primarily cash, marketable securities, certain prepaid expenses and other miscellaneous current assets, and deferred tax assets.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

     The following table summarizes net sales for the three-month and six-month periods ended June 30, 2008 and 2007, by the type of product in which the Company’s components were utilized (dollar amounts in thousands):

	Three Months Ended				Six Months Ended
	June 30				June 30
	2008		2007		2008		2007
Automotive — OEM	$	7,513	$	12,336	$	17,386	$	23,534
Automotive — aftermarket		7,502		6,760		14,273		13,106
Medical		4,250		3,813		8,261		7,845
All other		735		869		1,432		1,823
Total	$	20,000	$	23,778	$	41,352	$	46,308

[This space intentionally left blank]

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

     Segment Financial Data

     Information relating to the Company’s operating segments and the Corporate Office for the three-month and six-month periods ended June 30, 2008 and 2007, are summarized below (dollar amounts in thousands):

	Three Months Ended						Six Months Ended
	June 30						June 30
	2008			2007			2008			2007
Net sales:
Rubber Group	$	17,230		$	20,213		$	35,316		$	39,389
Metals Group		2,770			3,565			6,036			6,919
Total net sales	$	20,000		$	23,778		$	41,352		$	46,308
Income (loss) from operations:
Rubber Group	$	2,532		$	2,445		$	4,870		$	4,519
Metals Group		(74	)		13			(20	)		(13	)
Subtotal		2,458			2,458			4,850			4,506
Corporate Office (1)		(576	)		(949	)		(1,631	)		(1,712	)
Total income from operations	$	1,882		$	1,509		$	3,219		$	2,794
Depreciation and amortization (2):
Rubber Group	$	1,189		$	1,474		$	2,444		$	2,978
Metals Group		140			172			288			350
Subtotal		1,329			1,646			2,732			3,328
Corporate Office		13			5			25			8
Total depreciation and amortization	$	1,342		$	1,651		$	2,757		$	3,336
Capital expenditures (3):
Rubber Group	$	840		$	603		$	1,509		$	1,233
Metals Group		96			68			143			266
Subtotal		936			671			1,652			1,499
Corporate Office		2			6			11			56
Total capital expenditures	$	938		$	677		$	1,663		$	1,555

	June 30,		Dec. 31,
	2008		2007
Assets:
Rubber Group	$	41,311	$	42,236
Metals Group		8,371		7,963
Subtotal		49,682		50,199
Corporate Office (4)		9,095		820
Total assets	$	58,777	$	51,019

(1) The Corporate Office’s losses from operations for the three-month period ended June 30, 2007, and the six-month periods ended June 30, 2008 and 2007, included expenses incurred in connection with the Company’s efforts to refinance, restructure, or repay its indebtedness in the amount of $357,000, $508,000, and $542,000, respectively. During the three-month period ended June 30, 2008, the Company incurred $1,826,000 of reorganization expenses and, in accordance with the provisions of

(continued on next page)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(continued from previous page)

	SOP 90-7, these expenses were classified as reorganization items in the non-operating section of the Company’s consolidated statements of operations.
(2)	Excludes amortization and write-off of deferred financing expenses, which totaled $182,000 during the three-month period ended June 30, 2007, and $251,000 and $182,000 during the six-month periods ended June 30, 2008 and 2007, respectively. Amortization and write-off of deferred financing expenses is included in interest expense in the consolidated financial statements.
(3)	Capital expenditures during the six-month period ended June 30, 2007, included $28,000 of equipment purchased under capitalized lease obligations.
(4)	Assets of the Corporate Office included cash at June 30, 2008, and December 31, 2007, of $8,535,000 and $160,000, respectively.

Note 10 — Accumulated Other Comprehensive Loss

     Marketable securities held by the Company are valued at their quoted market prices at the close of business on June 30, 2008, and December 31, 2007. Based on the classification of these marketable securities as available-for-sale, the Company recognized $31,000 and $68,000 of other comprehensive loss during the three-month and six-month periods ended June 30, 2008, respectively.

Note 11 — Discontinued Operations

     The results of operations, assets, liabilities, and cash flows of the Company’s former diecasting business have been classified as discontinued operations in the consolidated financial statements. During the three-month periods ended June 30, 2008 and 2007, the loss from discontinued operations totaled $45,000 and $56,000, respectively, which included allocated interest expense of $42,000 during each three-month period. During the six-month periods ended June 30, 2008 and 2007, the loss from discontinued operations totaled $60,000 and $58,000, respectively, which included allocated interest expense of $84,000 during each six-month period. At June 30, 2008, and December 31, 2007, assets of discontinued operations totaled $1,290,000 and $1,348,000, respectively.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

     Some of our statements in this Form 10-Q are “forward-looking statements.” Forward-looking statements usually can be identified by our use of words like “believes,” “expects,” “may,” “will,” “should,” “anticipates,” “estimates,” “projects,” or the negative thereof. They may be used when we discuss strategy, which typically involves risk and uncertainty, and they generally are based upon projections and estimates rather than historical facts and events.

     Forward-looking statements are subject to a number of risks and uncertainties that could cause our actual results or performance to be materially different from the future results or performance expressed in or implied by those statements. Some of those risks and uncertainties are:

• our ability to operate pursuant to the terms of our debtor-in-possession credit arrangements;

• our ability to obtain court approval with respect to motions in the chapter 11 proceedings;

• our ability to develop, confirm, and consummate a plan of reorganization with respect to the chapter 11 proceedings;

• increases and decreases in business awarded to us by our customers;

• unanticipated price reductions for our products as a result of competition;

• our ability to offset any increases in the cost of raw materials;

• North American automotive production significantly above or below current industry forecasts;

• changes in the competitive environment;

• unanticipated operating results;

• changes in economic conditions;

• changes in interest rates;

• financial difficulties encountered by our customers or suppliers;

• chapter 11 filings by one or more of our customers or suppliers; and

• labor interruptions at our facilities or at our customers’ or suppliers’ facilities.

     Our results of operations for any particular period are not necessarily indicative of the results to be expected for any succeeding period. The use of forward-looking statements should not be regarded as a representation that any of the projections or estimates expressed in or implied by those forward-looking statements will be realized, and actual results may vary materially. We cannot assure you that any of the

- 18 -

forward-looking statements contained herein will prove to be accurate. All forward-looking statements are expressly qualified by the discussion above.

     Because we have substantial borrowings for a company our size, any negative event may have a greater adverse effect upon us than it would have upon a company of the same size that has less debt.

     For additional discussion about risks and uncertainties that may affect our business, please refer to “Risk Factors” in Part II, Item 1A, of our annual report on Form 10-K for the year ended December 31, 2007.

     Unless otherwise indicated, the data set forth below in this Part I, Item 2, relate solely to our continuing operations.

Results of Operations — Second Quarter of 2008 Versus Second Quarter of 2007

     The following table sets forth our consolidated operating results for the three-month periods ended June 30, 2008 and 2007, the reconciliation of the loss from continuing operations to earnings before interest, taxes, depreciation, and amortization (“EBITDA”) for those periods, and the reconciliation of EBITDA to net cash provided or used by our operating activities for those periods. A similar table for the six-month periods ended June 30, 2008 and 2007, follows later on in this Part I, Item 2. EBITDA is not a measure of performance under U.S. generally accepted accounting principles (“GAAP”) and should not be considered in isolation or used as a substitute for income from operations, net income, net cash provided by operating activities, or other operating or cash flow statement data prepared in accordance with GAAP. We have presented EBITDA here and elsewhere in this Form 10-Q because (a) we believe that this measure enhances the ability of our investors to evaluate our ability to satisfy our interest and principal obligations with respect to our outstanding indebtedness, (b) management uses EBITDA as a supplemental measure to evaluate the operating performance of our business and believes that it provides a useful measure for comparing period to period performance among our business units because it does not include period to period fluctuations in taxes, interest costs, costs associated with capital investments, and certain non-operating items, and (c) because certain financial covenants in our senior, secured credit agreements have been calculated using variations of EBITDA. Nevertheless, EBITDA has material limitations when used as a measurement of performance, including the following:

1.	EBITDA excludes interest expense. Cash interest payments represent a reduction in cash available to us, and accruals for interest expense represent an obligation to pay cash interest in the future.
2.	EBITDA excludes provisions for taxes. Cash payments of taxes represent a reduction in cash available to us, and accruals for non-cash taxes represent an obligation to pay cash taxes in the future.
3.	EBITDA excludes depreciation and amortization related to buildings, equipment, and tooling. Although depreciation and amortization are non-cash charges, they represent the using up, over a projected period, of assets that produce revenue. EBITDA does not reflect the capital expenditures required for the replacement of these depreciated assets.
4.	EBITDA does not reflect cash provided or used as a result of changes in our working capital.
5.	Our definition of EBITDA may not be the same as the definition of EBITDA used by other companies, including companies in our industry; as the number of differences in the

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definition of EBITDA increases, the usefulness of EBITDA as a comparative measure decreases. The definition of EBITDA used here is different from the definition of EBITDA used to calculate compliance with the financial covenants in the loan agreements governing our senior, secured credit facility.

     To compensate for the shortcomings of EBITDA as a financial measure, it is important to use financial data derived under GAAP. In particular, we monitor gross profit and operating profit, both in dollars and as a percentage of net sales. In addition, when setting prices for components that we manufacture, we use a cost system that calculates the gross profit margin of each component.

     Also included in the table are the net cash flows provided or used by our investing activities and financing activities. All dollar amounts in the table are in thousands.

	Three Months Ended June 30
	2008					2007
Net sales	$	20,000		100.0	%	$	23,778		100.0	%
Cost of sales		16,664		83.3			20,202		85.0
Gross profit		3,336		16.7			3,576		15.0
Selling and administrative expenses		1,454		7.3			2,067		8.7
Income from operations		1,882		9.4			1,509		6.3
Other income (expense):
Interest expense		(1,966	)	(9.8	)		(2,799	)	(11.8	)
Reorganization items, net		(1,795	)	(9.0	)		—		—
Loss before income taxes		(1,879	)	(9.4	)		(1,290	)	(5.4	)
Income tax provision		16		0.1			15		0.1
Loss from continuing operations		(1,895	)	(9.5	)		(1,305	)	(5.5	)
Add back:
Depreciation and amortization (1)		1,342		6.7			1,651		6.9
Interest expense		1,966		9.8			2,799		11.8
Reorganization items, net		1,795		9.0			—		—
Income tax provision		16		0.1			15		0.1
EBITDA	$	3,224		16.1	%	$	3,160		13.3	%

(continued on next page)

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(continued from previous page)

	Three Months Ended June 30
	2008					2007
EBITDA	$	3,224		16.1	%	$	3,160		13.3	%
Adjustments to reconcile EBITDA to net cash provided (used) by operating activities:
Interest expense		(1,966	)	(9.8	)		(2,799	)	(11.8	)
Reorganization items, net		(1,795	)	(9.0	)		—		—
Amortization of deferred financing expenses included in interest expense		—		—			182		0.8
Income tax provision		(16	)	(0.1	)		(15	)	(0.1	)
Net change in accrued reorganization items, net		1,509		7.5			—		—
Net change in operating assets and liabilities		3,738		18.7			(901	)	(3.8	)
Net cash provided (used) by operating activities	$	4,694		23.5	%	$	(373	)	(1.6)	%
Net cash used by investing activities	$	(993	)			$	(701	)
Net cash provided by financing activities	$	4,518				$	1,100

(1) Does not include the amortization of deferred financing expenses, which totaled $182,000 during the three-month period ended June 30, 2007, and which is included in interest expense in the consolidated financial statements.

     Net sales by the type of product in which our components were utilized for the three-month periods ended June 30, 2008 and 2007, are set forth below (dollar amounts in thousands):

	Three Months Ended June 30
	2008				2007
Automotive — OEM	$	7,513	37.6	%	$	12,336	51.9	%
Automotive — aftermarket		7,502	37.5			6,760	28.4
Medical		4,250	21.3			3,813	16.0
All other		735	3.6			869	3.7
Total	$	20,000	100.0	%	$	23,778	100.0	%

     Net sales for the second quarter of 2008 declined by $3,778,000, or 15.9%, compared to the second quarter of 2007. The decrease in net sales was a result of decreased unit sales of original equipment automotive components offset, in part, by increased net sales of automotive aftermarket components and components for medical devices. EBITDA for the second quarter of 2008 was $3,224,000, or 16.1% of net sales, compared to EBITDA of $3,160,000, or 13.3% of net sales, for the second quarter of 2007. Administrative expenses for the second quarter of 2007, included $357,000 of expenses incurred in connection with our efforts to restructure, refinance, or repay our indebtedness, as

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more fully discussed in the section titled “Liquidity and Filing of Chapter 11” in this Part I, Item 2. In accordance with SOP 90-7, restructuring expenses incurred during the second quarter of 2008 are classified as reorganization items in our consolidated statements of operations. Excluding those expenses, our EBITDA for the second quarter of 2007, was $3,517,000, or 14.8% of net sales.

     Net cash provided by our operating activities during the second quarter of 2008 totaled $4,694,000, compared to net cash used by operating activities of $373,000 for the second quarter of 2007. For more information about the net cash provided or used by our operating activities, please refer to the consolidated statements of cash flows in Part I, Item 1, and the section titled “Operating Activities” in this Part I, Item 2.

     The discussion that follows sets forth our analysis of the operating results of the Rubber Group, the Metals Group, and the Corporate Office for the three-month periods ended June 30, 2008 and 2007.

     Rubber Group

     The Rubber Group manufactures tight-tolerance rubber components. The Rubber Group’s primary products are connector seals used in automotive wiring systems, insulators used in both original equipment and aftermarket automotive ignition-wire sets, and molded rubber components used in a variety of medical devices, such as intravenous medication-delivery systems, syringes, and surgical equipment.

     The following table sets forth the operating results of the Rubber Group for the three-month periods ended June 30, 2008 and 2007, and the reconciliation of the Rubber Group’s income from operations to its EBITDA (dollar amounts in thousands):

	Three Months Ended June 30
	2008				2007
Net sales	$	17,230	100.0	%	$	20,213	100.0	%
Cost of sales		13,957	81.0			16,794	83.1
Gross profit		3,273	19.0			3,419	16.9
Selling and administrative expenses		741	4.3			974	4.8
Income from operations		2,532	14.7			2,445	12.1
Add back depreciation and amortization		1,189	6.9			1,474	7.3
EBITDA	$	3,721	21.6	%	$	3,919	19.4	%

     During the second quarter of 2008, net sales of the Rubber Group decreased by $2,983,000, or 14.8%, compared to the second quarter of 2007, primarily because net sales of components for use in automotive original equipment decreased by $4,058,000, or 43.7%. We believe that this reduction was caused by production cutbacks by the Detroit-based automobile manufacturers. This decline was partially offset by a $742,000, or 11.0%, increase in net sales of components for the automotive aftermarket and a $437,000, or 11.5%, increase in net sales of components for medical devices.

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     Cost of sales of the Rubber Group as a percentage of net sales decreased to 81.0% of net sales during the second quarter of 2008, compared to 83.1% of net sales during the second quarter of 2007, primarily due to improved labor efficiencies, lower employee benefit expenses, and lower depreciation and amortization expenses.

     Selling and administrative expenses of the Rubber Group expressed as a percentage of net sales decreased to 4.3% of net sales during the second quarter of 2008, compared to 4.8% during the second quarter of 2007, primarily due reduced salary and wage expense resulting from a reduction in the number of selling and administrative employees.

     For the second quarter of 2008, the Rubber Group’s income from operations totaled $2,532,000, an increase of $87,000, or 3.6%, compared to the second quarter of 2007. The Rubber Group’s EBITDA for the second quarter of 2008 was $3,721,000, or 21.6% of net sales, compared to $3,919,000, or 19.4% of net sales, for the second quarter of 2007.

     Metals Group

     The Metals Group manufactures machined metal components from aluminum, brass, steel, and stainless steel bars, forgings, and cold-headed blanks. The Metals Group’s sales are primarily to automotive industry customers.

     The following table sets forth the operating results of the Metals Group for the three-month periods ended June 30, 2008 and 2007, and the reconciliation of the Metals Group’s income or loss from operations to its EBITDA (dollar amounts in thousands):

	Three Months Ended June 30
	2008					2007
Net sales	$	2,770		100.0	%	$	3,565	100.0	%
Cost of sales		2,707		97.7			3,408	95.6
Gross profit		63		2.3			157	4.4
Selling and administrative expenses		137		4.9			144	4.0
Income (loss) from operations		(74	)	(2.7	)		13	0.4
Add back depreciation and amortization		140		5.1			172	4.8
EBITDA	$	66		2.4	%	$	185	5.2	%

     During the second quarter of 2008, net sales of the Metals Group decreased by $795,000, or 22.3%, compared to the second quarter of 2007, primarily as a result of reduced net sales of components to automotive industry customers, which we believe was primarily a result of production cutbacks by the Detroit-based automobile manufacturers. The effects of the overall reduction in automotive industry demand were partially offset by the continued ramp-up of sales to three new automotive industry customers.

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     Cost of sales as a percentage of net sales increased to 97.7% of net sales during the second quarter of 2008 from 95.6% of net sales during the second quarter of 2007, primarily because of the underabsorption of fixed or partially fixed manufacturing overhead during a period of reduced net sales, offset, in part, by improved production efficiencies and product mix and the elimination of an unprofitable job.

     During the second quarter of 2008, selling and administrative expenses decreased to $137,000 from $144,000 during the second quarter of 2007.

     For the second quarter of 2008, the Metals Group’s loss from operations was $74,000, compared to income from operations of $13,000 for the second quarter of 2007. The Metals Group’ s EBITDA for the second quarter of 2008 was $66,000, compared to $185,000 for the second quarter of 2007.

     Corporate Office

     Corporate Office expenses, which are not included in the operating results of the Rubber Group or the Metals Group, represent administrative expenses incurred primarily at our New York City and Cleveland offices. Corporate Office expenses are consolidated with the selling and administrative expenses of the Rubber Group and the Metals Group in our consolidated financial statements.

     The following table sets forth the operating results of the Corporate Office for the three-month periods ended June 30, 2008 and 2007, and the reconciliation of the Corporate Office’s loss from operations to its EBITDA (dollar amounts in thousands):

	Three Months Ended
	June 30
	2008			2007
Loss from operations	$	(576	)	$	(949	)
Add back depreciation and amortization (1)		13			5
EBITDA	$	(563	)	$	(944	)

(1) Excludes the amortization of deferred financing expenses, which totaled $182,000 during the second quarter of 2007, and which is included in interest expense in the consolidated financial statements.

     During the second quarter of 2008, Corporate Office expenses decreased to $576,000 from $949,000 during the second quarter of 2007. During the second quarter of 2007, Corporate Office expenses included $357,000 of expenses incurred in connection with our efforts to refinance, restructure, or repay our indebtedness. During the second quarter of 2008, we incurred $1,826,000 of expenses in connection with our efforts to refinance, restructure, or repay our indebtedness, which, in accordance with SOP 90-7, was classified as reorganization items in our consolidated statements of operations. For more information on our efforts to refinance, restructure, or repay our indebtedness, please refer to the section titled “Liquidity and Filing of Chapter 11” in this Part I, Item 2.

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     Interest Expense

     A breakdown of interest expense for the three-month periods ended June 30, 2008 and 2007, is set forth below (dollar amounts in thousands):

	Three Months Ended
	June 30
	2008		2007
Interest expense at contractual interest rates:
Senior, secured loans	$	627	$	958
Debtor-in-Possession Note		88		—
Senior Subordinated Notes		1,026		1,026
Junior Subordinated Note		12		12
All other		9		11
Subtotal		1,762		2,007
Interest expense resulting from incremental interest rates:
Senior, secured loans – default or forbearance premium		—		196
Senior Subordinated Notes – forbearance premium		—		370
Senior Subordinated Notes – interest on missed interest payments		246		86
Subtotal		246		652
Financing costs and fees		—		182
Total interest expense		2,008		2,841
Less interest expense allocated to discontinued operations		42		42
Interest expense related to continuing operations	$	1,966	$	2,799

     The average amount of debt outstanding during the second quarters of 2008 and 2007, including past due interest payments on which we are accruing interest, was $82,091,000 and $76,639,000, respectively. During the same periods, cash interest payments were $715,000 and $1,173,000, respectively.

     On April 2 and 17, 2008, the Bankruptcy Court entered orders authorizing certain arrangements pursuant to which we are permitted to utilize the cash collateral of our senior, secured lenders in the operation of our business. Under those arrangements, the interest rates on our senior, secured debt were reduced to the original contractual rates, and we have agreed to continue to pay the scheduled monthly principal payments on the term loans included in the senior, secured debt. We continue to accrue interest on our unsecured prepetition debt at the applicable contractual rates because we believe that the company is solvent and our unsecured debt, including accrued interest thereon, will be paid in full. Because we have continued to accrue interest on our secured and unsecured prepetition debt, our contractual interest expense equals the interest expense recorded in our consolidated statements of operations for the three-month period ended June 30, 2008.

     For more information about the status of our debt, please refer to the section titled “Liquidity and Filing of Chapter 11” in this Part I, Item 2.

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     Reorganizations Items

     SOP 90-7 requires that revenues, expenses, realized gains and losses, and provisions for losses that can be directly associated with the reorganization and restructuring of a business must be reported separately as reorganization items in the statements of operations. Reorganization items reflected in our consolidated financial statements for the three-month and six-month periods ended June 30, 2008, are set forth below (dollar amounts in thousands):

Professional fees and expenses incurred directly by the Company	$	1,024
Professional fees and expenses incurred by creditors		625
Other costs		177
Interest income		(31	)
Reorganization items, net	$	1,795

     Income Tax Provision

     At June 30, 2008, and December 31, 2007, our net deferred tax assets were fully reserved by a valuation allowance. The income tax provisions recorded during the three-month periods ended June 30, 2008 and 2007, consisted of estimated state income taxes.

Results of Operations — First Six Months of 2008 Versus First Six Months of 2007

     The following table sets forth our consolidated operating results for the six-month periods ended June 30, 2008 and 2007, the reconciliation of the loss from continuing operations to EBITDA for those periods, and the reconciliation of EBITDA to net cash used by our operating activities for those periods. Also included in the table are the net cash flows provided or used by our investing activities and financing activities. All dollar amounts in the table are in thousands.

	Six Months Ended June 30
	2008					2007
Net sales	$	41,352		100.0	%	$	46,308		100.0	%
Cost of sales		34,830		84.2			39,679		85.7
Gross profit		6,522		15.8			6,629		14.3
Selling and administrative expenses		3,303		8.0			3,835		8.3
Income from operations		3,219		7.8			2,794		6.0
Other income (expense):
Interest expense		(4,740	)	(11.5	)		(4,984	)	(10.7	)
Reorganization items, net		(1,795	)	(4.3	)		—		—
Loss before income taxes		(3,316	)	(8.0	)		(2,190	)	(4.7	)
Income tax provision		26		0.1			30		0.1
Loss from continuing operations		(3,342	)	(8.1	)		(2,220	)	(4.8	)

     (continued on next page)

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(continued from previous page)

	Six Months Ended June 30
	2008					2007
Add back:
Depreciation and amortization (1)		2,757		6.7			3,336		7.2
Interest expense		4,740		11.5			4,984		10.7
Reorganization items, net		1,795		4.3			—		—
Income tax provision		26		0.1			30		0.1
EBITDA	$	5,976		14.5	%	$	6,130		13.2	%
EBITDA	$	5,976		14.5	%	$	6,130		13.2	%
Adjustments to reconcile EBITDA to net cash provided (used) by operating activities:
Interest expense		(4,740	)	(11.5	)		(4,984	)	(10.7	)
Reorganization items, net		(1,795	)	(4.3	)		—		—
Amortization and write-off of deferred financing expenses included in interest expense		251		0.6			182		0.4
Income tax provision		(26	)	(0.1	)		(30	)	(0.1	)
Net change in accrued reorganization items, net		1,509		3.6			—		—
Net change in operating assets and liabilities		3,240		7.8			(2,751	)	(5.9	)
Net cash provided (used) by operating activities	$	4,415		10.7	%	$	(1,453	)	(3.1)	%
Net cash used by investing activities	$	(1,744	)			$	(1,597	)
Net cash provided by financing activities	$	5,710				$	3,931

(1) Does not include the amortization and write-off of deferred financing expenses, which totaled $251,000 and $182,000 during the six-month periods ended June 30, 2008 and 2007, respectively, and which is included in interest expense in the consolidated financial statements.

     Net sales by the type of product in which our components were utilized for the six-month periods ended June 30, 2008 and 2007, are set forth below (dollar amounts in thousands):

	Six Months Ended June 30
	2008				2007
Automotive — OEM	$	17,386	42.0	%	$	23,534	50.8	%
Automotive — aftermarket		14,273	34.5			13,106	28.3
Medical		8,261	20.0			7,845	16.9
All other		1,432	3.5			1,823	4.0
Total	$	41,352	100.0	%	$	46,308	100.0	%

     Our net sales for the first half of 2008 declined by $4,956,000, or 10.7%, compared to the first half of 2007. The decrease in net sales was a result of decreased unit sales of original equipment automotive components offset, in part, by increased net sales of automotive aftermarket components and

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components for medical devices. EBITDA for the first half of 2008 was $5,976,000, or 14.5% of net sales, compared to EBITDA of $6,130,000, or 13.2% of net sales, for the first half of 2007. Administrative expenses for the first halves of 2008 and 2007, included $508,000 and $542,000, respectively, of expenses incurred in connection with our efforts to restructure, refinance, or repay our indebtedness, as more fully discussed in the section titled “Liquidity and Filing of Chapter 11” in this Part I, Item 2. Excluding those expenses, our EBITDA for the first half of 2008, was $6,484,000, or 15.7% of net sales, compared to $6,672,000, or 14.4% of net sales, for the first half of 2007.

     Net cash provided by our operating activities during the first half of 2008 totaled $4,415,000, compared to net cash used by operating activities of $1,453,000 for the first half of 2007. For more information about the net cash provided or used by our operating activities, please refer to the consolidated statements of cash flows in Part I, Item 1, and to the section titled “Operating Activities” in this Part I, Item 2.

     The discussion that follows sets forth our analysis of the operating results of the Rubber Group, the Metals Group, and the Corporate Office for the six-month periods ended June 30, 2008 and 2007.

     Rubber Group

     The Rubber Group manufactures tight-tolerance rubber components. The Rubber Group’s primary products are connector seals used in automotive wiring systems, insulators used in both original equipment and aftermarket automotive ignition-wire sets, and molded rubber components used in a variety of medical devices, such as intravenous medication-delivery systems, syringes, and surgical equipment.

     The following table sets forth the operating results of the Rubber Group for the six-month periods ended June 30, 2008 and 2007, and the reconciliation of the Rubber Group’s income from operations to its EBITDA (dollar amounts in thousands):

	Six Months Ended June 30
	2008				2007
Net sales	$	35,316	100.0	%	$	39,389	100.0	%
Cost of sales		29,050	82.3			33,009	83.8
Gross profit		6,266	17.7			6,380	16.2
Selling and administrative expenses		1,396	4.0			1,861	4.7
Income from operations		4,870	13.8			4,519	11.5
Add back depreciation and amortization		2,444	6.9			2,978	7.5
EBITDA	$	7,314	20.7	%	$	7,497	19.0	%

     During the first half of 2008, net sales of the Rubber Group decreased by $4,073,000, or 10.3%, compared to the first half of 2007, primarily because net sales of components for use in automotive original equipment decreased by $5,284,000, or 29.8%. We believe that this reduction was caused by production cutbacks by the Detroit-based automotive manufacturers. This decrease was partially offset

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by a $1,167,000, or 8.9%, increase in net sales of components for the automotive aftermarket and a $416,000, or 5.3%, increase in net sales of components for medical devices.

     Cost of sales as a percentage of net sales decreased to 82.3% of net sales during the first half of 2008, compared to 83.8% of net sales during the first half of 2007, primarily due to improved labor efficiencies, lower employee benefit expenses, and lower depreciation and amortization expenses.

     Selling and administrative expenses of the Rubber Group expressed as a percentage of net sales decreased to 4.0% of net sales during the first half of 2008, compared to 4.7% during the first half of 2007, primarily because of a reduction in the number of selling and administrative employees.

     During the first half of 2008, the Rubber Group’s income from operations totaled $4,870,000, an increase of $351,000, or 7.8%, compared to the first half of 2007. The Rubber Group’s EBITDA for the first half of 2008 was $7,314,000, or 20.7% of net sales, compared to $7,497,000, or 19.0% of net sales, for the first half of 2007.

     Metals Group

     The Metals Group manufactures machined metal components from aluminum, brass, steel, and stainless steel bars, forgings, and cold-headed blanks. The Metals Group’s sales are primarily to automotive industry customers.

     The following table sets forth the operating results of the Metals Group for the six-month periods ended June 30, 2008 and 2007, and the reconciliation of the Metals Group’s income or loss from operations to its EBITDA (dollar amounts in thousands):

	Six Months Ended June 30
	2008					2007
Net sales	$	6,036		100.0	%	$	6,919		100.0	%
Cost of sales		5,780		95.8			6,670		96.4
Gross profit		256		4.2			249		3.6
Selling and administrative expenses		276		4.6			262		3.8
Loss from operations		(20	)	(0.3	)		(13	)	(0.2	)
Add back depreciation and amortization		288		4.8			350		5.1
EBITDA	$	268		4.4	%	$	337		4.9	%

     During the first half of 2008, net sales of the Metals Group decreased by $883,000, or 12.8%, compared to the first half of 2007, primarily as a result of reduced net sales of components to automotive industry customers, which we believe was primarily a result of production cutbacks by the Detroit-based automobile manufacturers, exacerbated by the employee strike at the facilities of American Axle, which began on February 26, 2008, and ended on May 22, 2008. The effects of the overall reduction in automotive industry demand were partially offset by the continued ramp-up of sales to three new automotive industry customers.

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     Cost of sales as a percentage of net sales decreased to 95.8% of net sales during the first half of 2008 from 96.4% of net sales during the first half of 2007, primarily because of improved production efficiencies and product mix, lower depreciation expense, and the elimination of an unprofitable job.

     During the first half of 2008, selling and administrative expenses increased to $276,000 from $262,000 during the first half of 2007.

     For the first half of 2008, the Metals Group’s loss from operations was $20,000, compared to a loss from operations of $13,000 for the first half of 2007. The Metals Group’s EBITDA for the first half of 2008 was $268,000, compared to $337,000 for the first half of 2007.

     Corporate Office

     Corporate Office expenses, which are not included in the operating results of the Rubber Group or the Metals Group, represent administrative expenses incurred primarily at our New York City and Cleveland offices. Corporate Office expenses are consolidated with the selling and administrative expenses of the Rubber Group and the Metals Group in our consolidated financial statements.

     The following table sets forth the operating results of the Corporate Office for the six-month periods ended June 30, 2008 and 2007, and the reconciliation of the Corporate Office’s loss from operations to its EBITDA (dollar amounts in thousands):

	Six Months Ended
	June 30
	2008			2007
Loss from operations	$	(1,631	)	$	(1,712	)
Add back depreciation and amortization (1)		25			8
EBITDA	$	(1,606	)	$	(1,704	)

(1) Excludes the amortization and write-off of deferred financing expenses, which totaled $251,000 and $182,000, during the six-month periods ended June 30, 2008 and 2007, respectively, and which is included in interest expense in the consolidated financial statements.

     During the first half of 2008, Corporate Office expenses decreased to $1,631,000 from $1,712,000 during the second half of 2007. During the first halves of 2008 and 2007, corporate office expenses included $508,000 and $542,000, respectively, of expenses incurred in connection with our efforts to refinance, restructure, or repay our indebtedness. During the second quarter of 2008, we incurred an additional $1,826,000 of expenses in connection with our efforts to refinance, restructure, or repay our indebtedness, which, in accordance with SOP 90-7, was classified as reorganization items in our consolidated statements of operations. For more information on our efforts to refinance, restructure, or repay our indebtedness, please refer to the section titled “Liquidity and Filing of Chapter 11” in this Part I, Item 2.

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     Interest Expense

     A breakdown of interest expense for the six-month periods ended June 30, 2008 and 2007, is set forth below (dollar amounts in thousands):

	Six Months Ended
	June 30
	2008		2007
Interest expense at contractual interest rates:
Senior, secured loans	$	1,308	$	1,874
Debtor-in-Possession Note		88		—
Senior Subordinated Notes		2,051		2,051
Junior Subordinated Note		23		23
All other		66		23
Subtotal		3,536		3,971
Interest expense resulting from incremental interest rates:
Senior, secured loans – default or forbearance premium		172		319
Senior Subordinated Notes – forbearance premium		411		459
Senior Subordinated Notes – interest on missed interest payments		454		137
Subtotal		1,037		915
Financing costs and fees		251		182
Total interest expense		4,824		5,068
Less interest expense allocated to discontinued operations		84		84
Interest expense related to continuing operations	$	4,740	$	4,984

     The average amount of debt outstanding during the first half of 2008 and 2007, including past due interest payments on which we are accruing interest, was $79,265,000 and $75,005,000, respectively. During the same periods, cash interest payments were $1,684,000 and $2,196,000, respectively.

     On April 2 and 17, 2008, the Bankruptcy Court entered orders authorizing certain arrangements pursuant to which we are permitted to utilize the cash collateral of our senior, secured lenders in the operation of our business. Under those arrangements, the interest rates on our senior, secured debt were reduced to the original contractual rates, and we have agreed to continue to pay the scheduled monthly principal payments on the term loans included in the senior, secured debt. We continue to accrue interest on our unsecured prepetition debt at the applicable contractual rates because we believe that the company is solvent and our unsecured debt, including accrued interest thereon, will be paid in full. Because we have continued to accrue interest on our secured and unsecured prepetition debt, our contractual interest expense equals the interest expense recorded in our consolidated statements of operations for the six-month period ended June 30, 2008.

     For more information about the status of our debt, please refer to the section titled “Liquidity and Filing of Chapter 11” in this Part I, Item 2.

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     Reorganizations items

     SOP 90-7 requires that revenues, expenses, realized gains and losses, and provisions for losses that can be directly associated with the reorganization and restructuring of a business must be reported separately as reorganization items in the statements of operations. Reorganization items reflected in our consolidated financial statements for the three-month and six-month periods ended June 30, 2008, are set forth below (dollar amounts in thousands):

Professional fees and expenses incurred directly by the Company	$	1,024
Professional fees and expenses incurred by creditors		625
Other costs		177
Interest income		(31	)
Reorganization items, net	$	1,795

     Income Tax Provision

     At June 30, 2008, and December 31, 2007, our net deferred tax assets were fully reserved by a valuation allowance. The income tax provisions recorded during the six-month periods ended June 30, 2008 and 2007, consisted of estimated state income taxes.

Liquidity and Capital Resources

     Operating Activities

     During the first half of 2008, operating activities of our continuing operations provided net cash of $4,415,000. Accounts receivable decreased by $644,000 during the first half of 2008, primarily because (1) the amount of outstanding billings for sales of tools and automation equipment decreased by $656,000, (2) the terms of sale to one of our customers changed, resulting in a reduction in the dollar amount of receivables outstanding, and (3) a number of invoices outstanding beyond terms at December 31, 2007, were paid during the first quarter of 2008. Inventories increased by $747,000 primarily because of (a) increased metals prices, (b) the rescheduling of customer orders due to the continued reduction in the number of vehicles manufactured by the Detroit-based automobile manufacturers, and (c) the build of components to satisfy the safety stock requirements of certain of our customers as a result of our chapter 11 filing. Accrued expenses increased by $1,693,000, primarily because of the increase in accrued reorganization expenses during the six-month period ended June 30, 2008. Accrued interest expense, including accrued interest expense classified as a liability subject to compromise, increased by $2,841,000 because of additional accruals of interest on our subordinated debt.

     Investing Activities

     During the first half of 2008, investing activities of our continuing operations used net cash of $1,744,000. Capital expenditures attributable to the Rubber Group, the Metals Group, and the Corporate Office totaled $1,509,000, $143,000, and $11,000, respectively, primarily for the purchase of equipment. Capital expenditures for the Rubber Group, the Metals Group, and the Corporate Office are currently projected to total $2,985,000, $503,000, and $11,000, respectively, for the year ending December 31, 2008.

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     Financing Activities

     During the first half of 2008, our financing activities provided net cash of $5,710,000. In April 2008, we received $4,000,000 of cash from the issuance of the DIP Note and, during the first six months of 2008, we increased borrowings under our revolving line of credit by $3,587,000. We made principal payments on our debt totaling $1,663,000. We used $214,000 of cash to fund financing expenses that were incurred in connection with our efforts to restructure, refinance, or repay our indebtedness.

     Liquidity and Filing of Chapter 11

     We have experienced a significant decrease in sales of original equipment automotive components. We believe that this reduction was primarily a result of production cutbacks by the Detroit-based automobile manufacturers and resultant production cutbacks and inventory adjustments by our automotive customers that are tier-one suppliers to automobile manufacturers. Although we reduced expenses in an effort to offset the impact of the lower sales, our operating profit and cash flow were adversely affected, as was the availability under our prepetition revolving line of credit.

     We have not made the scheduled interest payments due on our Senior Subordinated Notes since November 1, 2006. From May 25, 2007, through January 24, 2008, we operated under a forbearance agreement with six hedge funds that hold $25,428,000 aggregate principal amount, or 74.4%, of the Senior Subordinated Notes outstanding. While the forbearance agreement was in effect, we were not required to make interest payments on the Senior Subordinated Notes, and the forbearing noteholders could not take any action to collect any past due interest payments. An additional $7,772,000 aggregate principal amount, or 22.7%, of the Senior Subordinated Notes outstanding, is held by certain of our affiliates and members of their families. We raised the interest rate on the Senior Subordinated Notes from 12% to 16% for the period from March 9, 2007, through the filing of the chapter 11. At June 30, 2008, accrued interest on our Senior Subordinated Notes totaled $10,415,000.

     The failure to make the scheduled interest payments on the Senior Subordinated Notes caused a cross-default under the agreements governing our senior, secured debt. Additionally, we were not in compliance with a financial covenant related to fixed charge coverage on February 28, March 31, and April 30, 2007, or with a financial covenant related to leverage on March 31, 2007. From May 25, 2007, through January 24, 2008, we operated under a forbearance arrangement with the senior, secured lenders. The forbearance agreement (1) provided that the senior, secured lenders would take no action to accelerate or collect their loans as a result of any existing default or cross-default and (2) modified certain of the financial covenants effective March 31, 2007. During the forbearance period, we remained in compliance with all financial covenants, as modified, and we remained current on all principal and interest payments owed to the secured lenders.

     Upon the commencement of the forbearance period, we engaged the investment banking firm of W.Y. Campbell & Company to assist in the review of the various strategic alternatives available to us to satisfy our outstanding indebtedness. As a consequence of this review, we determined to pursue a sale of the assets and business of the Rubber Group and, with the assistance of W.Y. Campbell, prepared an offering memorandum with respect to the proposed sale. During the summer and fall of 2007, we distributed the offering memorandum to a number of interested parties, including both financial and strategic purchasers.

     During the fourth quarter of 2007, we received several offers to purchase all or portions of the assets of the Rubber Group. Based upon these offers and the advice of W.Y. Campbell, we concluded

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that (1) the value of the Rubber Group alone was significantly in excess of our total indebtedness and (2) the proposal that would provide the maximum value for all of our constituencies was an offer from a major, multi-national, industrial company to purchase our facility in Rock Hill, South Carolina, which specializes in manufacturing molded rubber components for use in medical devices. The proposed purchase price of $32,000,000 would have resulted in an after-tax gain of approximately $26,000,000.

     During January 2008, we approached the six hedge funds that own a majority of our Senior Subordinated Notes to advise them of the following:

1.	We had decided to pursue the proposal to purchase the Rock Hill facility;
2.	We had received a proposal from a new senior, secured lender to provide us with a $36,700,000 senior, secured credit facility upon completion of the sale of the Rock Hill facility;
3.	We believed that the proceeds of the sale and the new credit facility would permit us to pay all accrued interest on the Senior Subordinated Notes plus 50% of the principal amount of the Senior Subordinated Notes held by non-affiliates;
4.	In order to facilitate the refinancing, the balance of the Senior Subordinated Notes held by non-affiliates would have to be extended to mature on August 31, 2013, and would receive cash interest at 12% per annum; and
5.	We had agreed that the 22.7% of the Senior Subordinated Notes held by affiliates would be converted into shares of our common stock.

     At the same time, we requested an extension of the forbearance agreement to May 31, 2008, in order to provide the prospective purchaser and the new senior, secured lender the time they required to complete their due diligence and documentation.

     In late January 2008, the six hedge funds responded with an alternative proposal for an extension of the forbearance arrangement. After reviewing this proposal with our counsel and W.Y. Campbell, we concluded that it would not be in the best interest of all of our creditors and equity holders to proceed with an extension on the terms proposed. Further discussions were unproductive and, as a result, the forbearance agreement expired on January 25, 2008. Because the forbearance agreement with the hedge funds was not extended, the forbearance agreement with the senior, secured lenders also expired on January 25, 2008, and we were in default of our senior, secured financing agreements.

     Subsequent to the expiration of the forbearance agreements, we continued our discussions with the six hedge funds and proposed a number of transactions for the restructuring of our debt, but each of these proposals was rejected. Ultimately, we determined that the best available method to effect a restructuring of our debt on terms that would be fair to all of our creditors and stockholders was to utilize the provisions of chapter 11 of the Bankruptcy Code.

     On April 1, 2008, we filed a voluntary petition for relief under chapter 11 of title 11 of the United States Code in the United States Bankruptcy Court for the Southern District of New York. In connection with this petition, we obtained a financing package that we believed provided us more than adequate liquidity to operate our business without interruption throughout the term of the chapter 11 proceedings. This financing package consists of (1) an arrangement with our senior, secured lenders to freeze the loans under our revolving line of credit at the amount outstanding on April 1, 2008, and to

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permit us to utilize the cash collateral of the senior, secured lenders in the operation of our business through February 25, 2009, and (2) the DIP Note in the amount of $4,000,000, which matures on April 1, 2009. The arrangement with the senior, secured lenders provides for a continuation of the scheduled monthly, term loan principal payments, which aggregate $269,000 per month, and the elimination of the default interest premium, so that our interest rates returned to the original contractual rates. The DIP Note is unsecured, subordinated to the senior, secured loans, and bears interest at LIBOR plus 7%, subject to a minimum interest rate of 10%.

     On March 31, 2008, prior to our chapter 11 filing, our senior, secured credit facility included a $17,500,000 revolving line of credit, with $12,875,000 of loans and $907,000 of letters of credit outstanding at March 31, 2008. At April 1, 2008, there were $14,219,000 of loans and $907,000 of letters of credit outstanding under the revolving line of credit. The contractual interest rate on loans under the revolving credit is LIBOR plus 2.75% (5.22% at June 30, 2008).

     Our equipment term loan had an outstanding principal balance of $8,542,000 at March 31, 2008, and $8,333,000 at April 1, 2008. The contractual interest rate on the equipment term loan is LIBOR plus 4.5% (6.97% at June 30, 2008). At June 30, 2008, the equipment term loan had an outstanding balance of $7,917,000.

     Our real estate term loan had an outstanding principal balance of $13,839,000 at March 31, 2008, and $13,778,000 at April 1, 2008. The contractual interest rate on the real estate term loan is the prime rate plus 6% on $4,000,000 principal amount and LIBOR plus 4.5% on the balance (weighted average of 8.15% at June 30, 2008). At June 30, 2008, the real estate term loan had an outstanding balance of $13,656,000.

     On April 1, 2008, the financial covenants under the senior, secured financing agreements were modified as follows:

1.	Minimum Cash. Our aggregate cash needed to be greater than $1,000,000 on May 2, 2008, and $500,000 on May 30, 2008, and must be greater than $500,000 on the last day of each four-week period following May 30. At August 22, 2008, the latest measurement date prior to the issuance of this report, aggregate cash was $7,285,000.
2.	Maximum Expenditures. Our cumulative expenditures needed to be less than 110% of cumulative budgeted expenditures for the period from April 2, 2008, through April 18, 2008, and must be less than 110% on the last day of each two-week period following April 18. At September 5, 2008, the latest measurement date prior to the issuance of this report, our cumulative expenditures were $7,666,000 less than 110% of cumulative budgeted expenditures.
3.	Minimum Net Sales. Our cumulative net sales needed to be greater than 90% of cumulative budgeted net sales from April 2, 2008, through May 2, 2008, and must be greater than 90% of cumulative budgeted net sales on the last day of each four-week period after May 2. At August 22, 2008, the latest measurement date prior to the issuance of this report, cumulative net sales exceeded 90% of cumulative budgeted net sales by $2,053,000.

     We do not believe that we will need to utilize the provisions of the Bankruptcy Code to effect any significant operational restructuring or to eliminate or renegotiate any unprofitable executory contracts that are material to our business. Our operations are healthy and profitable and, although there can be no assurance, we expect that to continue throughout the term of the chapter 11 proceedings. We have experienced no disruptions in our operations to date, and, based upon discussions with a significant

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number of major suppliers and customers, we do not expect any such disruption during the term of the chapter 11 proceedings.

     Although there can be no assurance that we will be successful, our intent in filing for chapter 11 protection is to use the powers afforded us under the Bankruptcy Code to effect a financial restructuring that results in a significant reduction in our total indebtedness on a basis that is fair and equitable to all of our creditors and stockholders. We filed a plan of reorganization with the Bankruptcy Court on June 30, 2008, and we filed the Amended Plan and related proposed disclosure statement on August 8, 2008. We expect that our plan of reorganization will result in a significant reduction in our aggregate indebtedness by means of a conversion of a significant portion of our subordinated debt to equity. We also intend to retain all of our operations, including the Rock Hill facility.

     The terms of the Amended Plan provide for the refinancing of the senior, secured credit facility with a similar facility. Holders of general unsecured claims other than holders of Senior Subordinated Notes and Junior Subordinated Note will receive 25% of their claim in cash and three payments, each equal to 26.5% of their claim, six, twelve, and eighteen months after the effective date of the Amended Plan. Holders of Senior Subordinated Note claims will receive a pro rata share of a new $15,000,000 subordinated note and for the balance of their claim, shares of Series C Preferred Stock. Holders of Junior Subordinated Note claims and holders of Series B Preferred Stock claims will receive shares of common stock. For a detailed description of the Amended Plan, the claimant classes, and the treatment of claims and interests, please refer to the proposed disclosure statement filed with the Bankruptcy Court on August 8, 2008. The proposed disclosure statement along with other documents related to the chapter 11 proceedings can be found at http://chapter11.epiqsystems.com/lexington.

     Our aggregate indebtedness at June 30, 2008, totaled $75,015,000 plus $10,501,000 of accrued interest on our subordinated debt, compared to $69,091,000 plus $7,564,000 of accrued interest on our subordinated debt at December 31, 2007.

     Including liabilities classified as subject to compromise, we had a net working capital deficit of $68,305,000 at June 30, 2008, compared to a net working capital deficit of $65,894,000 at December 31, 2007.

     The risks and uncertainties associated with the chapter 11 proceedings may have a material adverse effect on our results of operations and financial position.

     Our consolidated financial statements have been prepared on a “going concern basis,” as such term is used in U.S. generally accepted accounting principles. A going concern basis contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Our ability to restructure, refinance, or repay our indebtedness is subject to risks and uncertainties. As a result, there is substantial doubt about our ability to continue to report on a going concern basis. The consolidated financial statements do not include any adjustments to the amounts or classification of assets or liabilities to reflect these risks and uncertainties.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We do not invest in or trade market risk sensitive instruments. We also do not have any foreign operations or any significant amount of foreign sales and, therefore, we believe that our exposure to foreign currency exchange rate risk is insignificant.

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     At June 30, 2008, we had outstanding $39,792,000 of floating-rate debt at interest rates equal to either LIBOR plus 2.75%, LIBOR plus 4.5%, prime rate plus 6%, or LIBOR plus 7%, subject to a minimum interest rate of 10%.

     At June 30, 2008, we had outstanding $35,223,000 of fixed-rate debt with a weighted-average interest rate of 11.9%.

     Assuming that our senior, secured debt and our subordinated debt were outstanding for all of 2008 and that we accrued interest during 2008 at the specified contractual rates (no default premiums), we currently estimate that a one-percentage-point increase or decrease in both LIBOR and the prime rate would increase or decrease our monthly interest expense by approximately $29,000.

     For further information about our indebtedness, please refer to Note 5, “Debt,” in the notes to our consolidated financial statements in Part I, Item 1.

Item 4T. CONTROLS AND PROCEDURES

     Our Chairman of the Board, President, and Chief Financial Officer, with the participation of members of management of our operating divisions, evaluated, as of June 30, 2008, the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended. Based on that evaluation, our principal executive officers and our principal financial officer concluded that, because of deficiencies in our internal control over financial reporting, our disclosure controls and procedures as defined in Rule 13a-15(e) were not effective in ensuring that information required to be included in our periodic filings with the Securities and Exchange Commission is recorded, processed, summarized, and reported to management to allow timely decisions regarding required disclosures because of certain deficiencies which, in the aggregate, constitute a material weakness. This material weakness remained unremediated through June 30, 2008. Notwithstanding the foregoing, we are not aware that such deficiencies have resulted in any material errors or omissions in the consolidated financial statements contained in our annual report on Form 10-K for 2007, our quarterly reports on Form 10-Q for the three-month periods ended March 31 and June 30, 2008, or in any related disclosures.

     Changes in Internal Controls over Financial Reporting

     There have been no changes in our internal controls over financial reporting, as defined in Rule 13a-15(f) or 15(d)-15(f), or in other factors identified in connection with our evaluation, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

     On April 1, 2008, we filed a voluntary petition for relief under chapter 11 of title 11 of the United States Code in the Bankruptcy Court for the Southern District of New York (Case No. 08-11153). On July 31, 2008, the Bankruptcy Court issued an order extending our exclusive right to file a plan of reorganization until October 28, 2008, and to solicit acceptances of such plan until December 27, 2008.

     In connection with the chapter 11 filing, we obtained a financing package that consisted of (1) an arrangement with our senior, secured lenders to freeze the loan under our revolving line of credit at the amount outstanding on April 1, 2008, and to permit us to utilize the cash collateral of the senior, secured lenders in the operation of our business through February 25, 2009, and (2) a $4,000,000 debtor-in-possession loan that matures on April 1, 2009. For more information on our senior, secured financing and the DIP Note, please refer to Note 5, “Debt,” in the notes to our consolidated financial statements in Part I, Item 1.

     Although there can be no assurance that we will be successful, our intent in filing for chapter 11 protection was to use the powers afforded us under the Bankruptcy Code to effect a financial restructuring that would result in a significant reduction in our total indebtedness on a basis that would be fair and equitable to all of our creditors and stockholders. We are not utilizing the provisions of the Bankruptcy Code to effect any significant operational restructuring or to eliminate or renegotiate any executory contracts that are material to our business. We have experienced no disruptions in our operations to date, and, based upon discussions with a significant number of major suppliers and customers, we do not expect any such disruption during the term of the chapter 11 proceedings. We believe that we have more than adequate liquidity to operate during the chapter 11 proceedings. At August 27, 2008, we had $7,432,000 of cash on hand.

     On June 30, 2008, we filed with the Bankruptcy Court a plan of reorganization. On August 8, 2008, we filed the Amended Plan and a proposed disclosure statement. For a detailed description of the Amended Plan, the claimant classes, and the treatment of claims and interests, please refer to the proposed disclosure statement filed with the Bankruptcy Court on August 8, 2008. The proposed disclosure statement along with other documents related to the chapter 11 proceedings can be found at http://chapter11.epiqsystems.com/lexington.

     There can be no assurance that the Amended Plan will be confirmed.

Item 1A. RISK FACTORS

     The first risk factor in our Annual Report on Form 10-K for the period ended December 31, 2007, is replaced in its entirety by the following:

We are subject to risks associated with bankruptcy proceedings.

     On April 1, 2008, we filed a voluntary petition for relief under chapter 11 of title 11 of the United States Code in the Bankruptcy Court for the Southern District of New York (Case No. 08-11153). On July 31, 2008, the Bankruptcy Court issued an order extending our exclusive right to file a plan of reorganization until October 28, 2008, and to solicit acceptances of such plan until December 27, 2008.

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     In connection with the chapter 11 filing, we obtained a financing package that consisted of (1) an arrangement with our senior, secured lenders to freeze the loan under our revolving line of credit at the amount outstanding on April 1, 2008, and to permit us to utilize the cash collateral of the senior, secured lenders in the operation of our business through February 25, 2009, and (2) a $4,000,000 debtor-in-possession loan that matures on April 1, 2009. For more information on our senior, secured financing and the DIP Note, please refer to Note 5, “Debt,” in the notes to our consolidated financial statements in Part I, Item 1.

     Although there can be no assurance that we will be successful, our intent in filing for chapter 11 protection was to use the powers afforded us under the Bankruptcy Code to effect a financial restructuring that would result in a significant reduction in our total indebtedness on a basis that would be fair and equitable to all of our creditors and stockholders. We are not utilizing the provisions of the Bankruptcy Code to effect any significant operational restructuring or to eliminate or renegotiate any executory contracts that are material to our business. We have experienced no disruptions in our operations to date, and, based upon discussions with a significant number of major suppliers and customers, we do not expect any such disruption during the term of the chapter 11 proceedings. We believe that we have more than adequate liquidity to operate during the chapter 11 proceedings. At August 27, 2008, we had $7,432,000 of cash on hand.

     On June 30, 2008, we filed with the Bankruptcy Court a plan of reorganization. On August 8, 2008, we filed the Amended Plan and a proposed disclosure statement. For a detailed description of the Amended Plan, the claimant classes, and the treatment of claims and interests, please refer to the proposed disclosure statement filed with the Bankruptcy Court on August 8, 2008. The proposed disclosure statement along with other documents related to the chapter 11 proceedings can be found at http://chapter11.epiqsystems.com/lexington.

     There can be no assurance that the Amended Plan will be confirmed.

Item 3. DEFAULTS UPON SENIOR SECURITIES

     On November 1, 2006, and February 1, May 1, August 1, and November 1, 2007, and February 1, May 1, and August 1, 2008, we failed to pay the quarterly interest payments then due on our Senior Subordinated Notes. The past due interest payments total $9,653,000.

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Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Annual Meeting of our Stockholders was held on May 28, 2008.

The matters voted upon at the Annual Meeting and the results of the voting on each matter are set forth below:

1. The following number of votes were cast for and withheld on a proposal to elect six directors (Messrs. William B. Conner, Warren Delano, Kenneth I. Greenstein, Michael A. Lubin, and Joseph A. Pardo and Ms. Elizabeth Ruml).

Mr. Conner:
Votes for Mr. Conner	3,245,804
Votes withheld from Mr. Conner	10,931
Mr. Delano:
Votes for Mr. Delano	3,230,859
Votes withheld from Mr. Delano	25,876
Mr. Greenstein:
Votes for Mr. Greenstein	3,230,804
Votes withheld from Mr. Greenstein	25,931
Mr. Lubin:
Votes for Mr. Lubin	3,230,859
Votes withheld from Mr. Lubin	25,876
Mr. Pardo:
Votes for Mr. Pardo	3,230,804
Votes withheld from Mr. Pardo	25,931
Ms. Ruml:
Votes for Ms. Ruml	3,239,859
Votes withheld from Ms. Ruml	25,876

2. Ratification of Malin, Bergquist & Company, LLP as our independent auditors for the year ending December 31, 2008.

Votes for ratification	3,239,837
Votes against ratification	1,502
Abstentions	15,396

     There were no broker non-votes in respect of the foregoing matters.

Item 6. EXHIBITS

     The exhibits listed on the accompanying Exhibit Index are filed herewith or incorporated herein by reference.

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LEXINGTON PRECISION CORPORATION
FORM 10-Q
June 30, 2008

SIGNATURES

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

	LEXINGTON PRECISION CORPORATION
		(Registrant)
September 9, 2008	By:	/s/ Michael A. Lubin
Date	Michael A. Lubin Chairman of the Board
September 9, 2008	By:	/s/ Warren Delano
Date	Warren Delano President
September 9, 2008	By:	/s/ Dennis J. Welhouse
Date	Dennis J. Welhouse Senior Vice President and      Chief Financial Officer

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EXHIBIT INDEX

10-1	Super-Priority DIP Note dated April 21, 2008, between the Holders of the Super-Priority DIP Note, Lubin Partners, LLC, William B. Conner, and ORA Associates, LLC, and the Debtors, Lexington Precision Corporation and Lexington Rubber Group, Inc.
31-1	Rule 13(a) – 14(a) / 15(d) – 14(a) Certification of Michael A. Lubin, Chairman of the Board and Co-Principal Executive Officer of the registrant.
31-2	Rule 13(a) – 14(a) / 15(d) – 14(a) Certification of Warren Delano, President and Co-Principal Executive Officer of the registrant.
31-3	Rule 13(a) – 14(a) / 15(d) – 14(a) Certification of Dennis J. Welhouse, Chief Financial Officer and Principal Financial Officer of the registrant.
32-1	Certification of Michael A. Lubin, Chairman of the Board and Co-Principal Executive Officer of the registrant, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32-2	Certification of Warren Delano, President and Co-Principal Executive Officer of the registrant, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32-3	Certification of Dennis J. Welhouse, Chief Financial Officer and Principal Financial Officer of the registrant, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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EX-10.1

Exhibit 10-1

SUPER- PRIORITY DIP NOTE

$4,000,000	New York, New York
	Issue Date: April 21, 2008

     FOR VALUE RECEIVED, the undersigned, Lexington Precision Corporation and Lexington Rubber Group, Inc., each a Delaware corporation and a debtor in possession (collectively, the “Debtors”), hereby jointly and severally and unconditionally promise to pay to the order of Lubin Partners, LLC, a Delaware limited liability company, William B. Connor and ORA Associates, LLC, a New York limited liability company (collectively, the “Holders”), the aggregate principal sum of Two Million Dollars ($4,000,000), to be allocated among the Holders as follows:

Lubin Partners, LLC	$	2,000,000
William B. Connor	$	1,500,000
ORA Associates, LLC	$	500,000

     1. Payment of Principal and Interest. The principal amount of this Note shall be paid on the earliest of (i) the one year anniversary of the Petition Date, (ii) the effective date of a confirmed chapter 11 plan of reorganization in the Chapter 11 Cases,¹ (iii) the conversion of any of the Chapter 11 Cases to cases under chapter 7 of the Bankruptcy Code, (iv) the appointment of a chapter 11 trustee in any of the Chapter 11 Cases or the appointment of an examiner with expanded powers to operate or manage the financial affairs, the business or the reorganization of any Debtor and (v) the date of acceleration by the Holders pursuant to Section 7 hereof (such date, the “Stated Maturity Date”). The Debtors also promise to pay interest on this Note on the first business day of each month (in arrears) and upon the date this Note matures or otherwise becomes due and payable at the rate of LIBOR plus 7% per annum with a LIBOR floor of 3% per annum (computed on the basis of a 360 day year for the actual number of days lapsed); provided that any principal amount not paid when due, and to the extent permitted by applicable law, any interest not paid when due, in each case whether at Stated Maturity Date, by required prepayment, declaration, acceleration or demand or otherwise (both before as well as after judgment), shall bear interest payable upon demand at the rate that is 2% per annum in excess of the rate of interest otherwise payable upon this Note. All payments hereunder, including any prepayment, shall be made to the Holders on a pro rata basis based on the respective principal amounts owed to each Holder.

     2. Optional Prepayment. Debtors shall have the right at any time or from time to time and without premium or penalty, to voluntarily prepay all or any portion of this Note. Each prepayment shall be accompanied by the payment of accrued

¹ Capitalized terms used but not otherwise defined shall have the meanings ascribed to such terms in Section 9 hereof.

and unpaid interest on the amount being prepaid, through the date of prepayment. Any amounts prepaid hereunder may not be reborrowed.

     3. Lender Fee. Pursuant to the Final Order, the Debtors shall pay to the Holders a fee in cash in the aggregate amount of $80,000, to be allocated to the Holders pro rata based upon their funding commitment.

     4. Use of Proceeds. The proceeds of this Note shall be used by the Debtors to the extent Cash Collateral (as defined in the Final Borrowing Order) is insufficient to fund working capital requirements and general corporate purposes relating to the Debtors’ post-petition operations and for other expenditures as authorized in the Final Borrowing Order or as otherwise authorized by the Bankruptcy Court; provided that no portion of the proceeds shall be used, directly or indirectly, to (a) finance or make any payment or prepayment to any Person with respect to a Prepetition Indebtedness unless authorized by an order of the Bankruptcy Court; or (b) finance in any way any investigation, adversary action, suit, arbitration, proceeding or other litigation of any type against the Holders. The Debtors shall use the entire amount of the proceeds in accordance with this Section 4; provided, however, that nothing herein shall in any way prejudice the Holders from objecting, for any reason, to any requests, motions or applications made in the Bankruptcy Court, including any applications for interim or final allowances of compensation for services rendered or reimbursement of expenses incurred under Sections 105(a), 330 or 331 of the Bankruptcy Code, by any party in interest; and provided, further, that Debtor shall not use the proceeds for any purpose that is prohibited under the Bankruptcy Code. The proceeds of this Note shall be deposited and held in a new bank account at a bank that has been approved by the Office of the United States Trustee for the Southern District of New York as an authorized bank depository (the “DIP Account”) as described in the Final Borrowing Order and no other funds or cash collateral of the Debtors shall be co-mingled with the proceeds of this Note or deposited in the DIP Account.

     5. Superpriority Nature of Obligations. All obligations of the Debtors under this Note (including the obligation to pay principal, interest, fees, costs, charges, commissions and expenses) shall be paid as provided herein when due, without defense, offset, reduction or counterclaim, and shall constitute allowed claims to the full extent thereof against the Debtors arising under Section 364(c)(1) of the Bankruptcy Code, and senior to any and all other claims, including, without limitation, all administrative expenses or other claims arising under sections 105, 326, 328, 330, 331, 503(b), 506(c), 507(a), 507(b), 726, 1113 or 1114 of the Bankruptcy Code; provided, however, that notwithstanding the foregoing, the DIP Super-Priority Claim shall be junior, subordinate, and subject to the Adequate Protection Claim, the Prepetition Senior Secured Debt, the Senior Lender Prepetition Liens, the Carve-Out, and the Adequate Protection Lien (all as defined in the Final Borrowing Order). Subject to the Carve-Out, the Adequate Protection Liens (as defined in Final Borrowing Order), the Prepetition Senior Secured Debt (as defined in the Final Borrowing Order) and the Adequate Protection Claim (as defined in the Final Borrowing Order), the DIP Super-Priority Claim will at all times be

2

senior to any unsecured claims of any creditor or other entity in this and any subsequent case under the Bankruptcy Code. With the exception of the Carve-Out, the Adequate Protection Liens, the Prepetition Senior Secured Debt, and the Adequate Protection Claim, no cost or expense of administration or any claims in this case, including those resulting from or incurred after any conversion of this case pursuant to Section 1112 of the Bankruptcy Code shall rank prior to, or on parity with, the DIP Super-Priority Claims.

     6. Covenants. Each of the Debtors covenant and agree that until this Note is paid in full, neither of the Debtors shall, without the prior written consent of the Required Holders:

     (a) Asset Sales. enter into any transaction of merger or consolidation, or liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease or sub-lease (as lessor or sublessor), transfer or otherwise dispose of, in one transaction or a series of transactions, all or any part of its business, property or assets, whether now owned or hereafter acquired, other than sales of inventory and equipment in the ordinary course of business and sales of obsolete equipment or equipment that is no longer required in the business;

     (b) Chapter 11 Claims. incur, create, assume, suffer or permit any claim or encumbrance against it or any of its property or assets in any Chapter 11 Case (other than the Existing Secured Claims, the Carve-Out, the Adequate Protection Claim, and the Insurance Premium Financing) to be pari passu with or senior to the claims of the Holders against such Debtor in respect of the obligations hereunder, or apply to the Bankruptcy Court for authority to do so; or

     (c) Limitation on Payments Related to Prepetition Obligations. (i) make any payment or prepayment on or redemption or acquisition for value of any Prepetition Indebtedness or other pre-Petition Date obligations of such Debtor, (ii) pay any interest on any Prepetition Indebtedness of such Debtor, including, without limitation, by way of depositing with the trustee with respect thereto money or securities before due for the purpose of paying when due (whether in cash, in kind, in securities or otherwise), or (iii) make any payment or create or permit any lien pursuant to Section 361 of the Bankruptcy Code (other than the Adequate Protection Liens (as such term is defined in the Final Borrowing Order), or apply to the Bankruptcy Court for the authority to do any of the foregoing; provided that the Debtors may make payments as permitted in the Final Borrowing Order, or as authorized in any other order of the Bankruptcy Court, including, for example, making Adequate Protection Payments (as such term is defined in the Final Borrowing Order).

     7. Events of Default. Notwithstanding the provisions of Section 362 of the Bankruptcy Code and without application or motion to, or order from, the Bankruptcy Court, if any of the following conditions or events (“Events of Default”) shall occur:

3

     (a) Failure to Make Payments When Due. Failure by the Debtors to pay any installment of principal on this Note when due or pay any installment of interest within 3 business days of when due, whether at stated maturity, by acceleration, by notice of voluntary prepayment, by mandatory prepayment or otherwise; or failure by the Debtors to pay any fee or any other amount due under this Note within three days after the date due;

     (b) Chapter 11 Cases. With respect to the Chapter 11 Cases, (i) the entry of an order authorizing any Debtor in any of the Chapter 11 Cases to obtain additional financing under Section 364(c) or (d) of the Bankruptcy Code (other than Insurance Premium Financing, as defined in Final Borrowing Order); (ii) the appointment of an interim or permanent trustee in any of the Chapter 11 Cases or the appointment of an examiner in any of the Chapter 11 Cases with expanded powers to operate or manage the financial affairs, the business, or the reorganization of any Debtor; (iii) the dismissal of any of the Chapter 11 Cases, or the conversion of any of the Chapter 11 Cases to a case under chapter 7 of the Bankruptcy Code; (iv) the entry of an order granting relief from or modifying the automatic stay of Section 362 of the Bankruptcy Code (a) to allow any creditor to execute upon or enforce a lien on any material portion of the property or assets of any Debtor or (b) with respect to any lien of, or the granting of any lien on any other property or assets of any Debtor to, any state or local environmental or regulatory agency or authority, but only to the extent that it would have a Material Adverse Effect; (v) exercise of rights by the Prepetition Senior Lenders (as defined in the Final Borrowing Order) pursuant to Paragraph 13 of the Final Borrowing Order against the Senior Lender Prepetition Collateral and/or the other collateral in which Adequate Protection Liens were granted to the Prepetition Senior Lenders; (vi) the entry of an order amending, supplementing, staying, vacating or otherwise modifying any of the Final Borrowing Order or this Note or any of the Holders’ rights, benefits, privileges or remedies under the Final Borrowing Order or this Note; (vii) the entry of an order consolidating or combining any Debtor with any other Person (other than another Debtor); (viii) an order shall be entered approving, or the Debtor shall have consented to, any claim or administrative expense claim (other than the Carve-Out and the Adequate Protection Claim) having any priority over, or being pari passu to the super-priority administrative expense claim of the obligations under this Note; or (ix) use of the proceeds of this Note for any purpose that is prohibited under Section 6(c) hereof;

     (c) Default. Any Debtor shall default in the due performance or observance by it of any term, covenant or agreement contained in this Note or any term or agreement relating to this Note that is contained in the Final Borrowing Order, and such default shall continue for a period of 5 days after receipt by the Debtors of notice from the Holders of such default; or

     (d) Judgments. (i) Any money judgment, writ or warrant of attachment or similar process as to post-Petition Date liability or debt (a) in any individual case an amount in excess of $50,000 or (b) in the aggregate at any time an amount in excess of $250,000 (in either case not adequately covered by insurance as to

4

which a solvent and unaffiliated insurance company has acknowledged coverage) shall be entered or filed against the Debtors or any of their respective assets and shall remain undischarged, unvacated, unbonded or unstayed for a period of 60 days; or (ii) any non-monetary judgment or order with respect to a post-Petition Date event shall be rendered against any Debtor that would reasonably be expected to result in a Material Adverse Effect and shall remain undischarged, unvacated, unbonded or unstayed for a period of 60 days.

     (e) Use of Proceeds. Funds or Cash Collateral (as defined in the Final Borrowing Order) are co-mingled with the proceeds of this Note in the DIP Account or proceeds of this Note are used in a manner prohibited by this Note.

Upon the occurrence and during the continuance of any Event of Default, the Holders may (notwithstanding the provisions of Section 362 of the Bankruptcy Code and without application or motion to, or order from, the Bankruptcy Court) by written notice to the Debtors declare (i) the unpaid principal amount of and accrued interest on the Notes and (ii) all other obligations immediately due and payable, without presentment, demand, protest or other requirements of any kind, all of which are hereby expressly waived by the Debtors, and the same shall forthwith become, immediately due and payable.

     9. Definitions. The following terms shall have the following meanings in this Note:

“Bankruptcy Code” means title 11 of the United States Code entitled “Bankruptcy”, as now and hereafter in effect, or any successor statute.

“Bankruptcy Court” means the United States Bankruptcy Court for the Southern District of New York.

“Business Day” means each day that is not a Legal Holiday.

“Chapter 11 Cases” means those certain proceedings for relief filed by the Debtors under Chapter 11 of the Bankruptcy Code and being jointly administered under Case No. 08-11153 in the United States Bankruptcy Court for the Southern District of New York.

“Existing Secured Claims” means any secured claims in existence as of the commencement of the Chapter 11 Cases.

“Final Borrowing Order” means that certain Final Order, issued April 17, 2008, (i) Authorizing the Debtors to Use Cash Collateral, (ii) Granting Adequate Protection to Prepetition Secured Lenders, and (iii) Authorizing Post-Petition Financing.

“Final Order” means an order, judgment or other decree of the Bankruptcy Court or any other court or judicial body with proper jurisdiction, as the case may be, which is in full force and effect and has not been reversed, stayed, modified or amended and as to which (i) any right to appeal or seek certiorari, review or rehearing has been waived or (ii) the

5

time to appeal or seek certiorari, review or rehearing has expired and as to which no appeal or petition for certiorari, review or rehearing is pending.

“Issue Date” means the issue date of this Note on April 21, 2008.

“Legal Holiday” means a Saturday, a Sunday or a day on which banking institutions in the State of New York are authorized or required by law to close. If a payment date is a Legal Holiday, payment shall be made on the next succeeding date that is not a Legal Holiday, and interest shall accrue for the intervening period at the rate set forth in Section 1 hereof. If a regular record date is a Legal Holiday, the record shall not be affected.

“LIBOR” means a fluctuating rate of interest determined on a daily basis equal to the one-month rate of interest appearing on Telerate Page 3750 (or any successor page) as the 30-day London interbank offered rate for deposits in U.S. Dollars at approximately 11:00 a.m. (London Time) on the second preceding Business Day. If for any reason such rate is not available, “LIBOR” means the fluctuating rate of interest calculated on a daily basis equal to the one-month rate of interest appearing on Reuters Screen LIBO Page as the 30-day London interbank offered rate for deposits in U.S. Dollars at approximately 11:00 a.m. (London time) on the second preceding Business Day; provided, however, if more than one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of all such rates; provided, however, if such rate is not available, “LIBOR” shall mean a fluctuating rate of interest based upon a comparable rate designated by the Holders as a substitute therefore. “Telerate Page 3750” means the British Bankers Association Libor Rates (determined as of 11:00 a.m. London time) that are published by Moneyline Telerate (or any successor thereto). As used in this definition, the term “Business Day” means a day on which commercial banks are open for international business (including dealings in U.S. Dollar deposits in London, England).

“Material Adverse Effect” means (i) a material adverse effect upon the business, operations, liabilities (whether contractual, environmental or otherwise), properties, assets, condition (financial or otherwise) or prospects of the Debtors taken as a whole or (ii) the material impairment of the ability of any Debtor to perform the obligations of the Debtors under the Note.

“Motion” means the Debtors’ Motion for Authorization Pursuant to 11 U.S.C. §§ 105, 361, 362, 364(c)(1), and 364(e) to (i) Use Cash Collateral, (ii) Grant Adequate Protection to Prepetition Secured Lenders, and (iii) Obtain Postpetition Financing.

“Note” means this $4,000,000 Super-Priority DIP Note by and between the Debtors and the Holders and issued on April 21, 2008.

“Person” an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority or other entity of whatever nature.

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“Petition Date” means April 1, 2008, the date on which the Debtors filed their petitions for relief commencing these Chapter 11 Cases.

“Prepetition Indebtedness” means indebtedness of any Debtor outstanding on the Petition Date, including Indebtedness under the Prepetition Credit Agreements, the Senior Subordinated Notes and the 13% Junior Subordinated Note (as those terms are defined and/or referenced in the Motion).

“Required Holders” means Holders holding more than 50% of the principal amount of the Note.

     10. Successors and Assigns. This Note shall inure to the benefit of the Holders and their respective successors and assigns and shall bind the Holders, their respective successors and assigns, and any chapter 7 or chapter 11 trustee appointed after the Petition Date or elected for the estates of the Debtors or an examiner appointed pursuant to section 1104 of the Bankruptcy Code.

     11. Presentment and Demand. Demand, presentment, protest and notice of nonpayment and protest are hereby waived by the Debtors.

     12. Amendment and Non-Waiver.

     (a) This Note may not be amended, modified, or waived except by an agreement in writing signed by the Debtors and the Required Holders; provided that consent of all Holders shall be required to reduce the principal amount, the interest rate, or extend any payment date.

     (b) To the extent permitted by law, no failure to exercise and no delay on the part of the Holders in exercising any power or right in connection with this Note or available at law or in equity, shall operate as a waiver thereof, and no single or partial exercise of any such rights or power, or any abandonment or discontinuance of steps to enforce such a right or power, shall preclude any other or further exercise thereof or the exercise of any other right or power.

     13. Notices. Except as otherwise provided herein, any notice, demand, request, consent, approval, declaration, delivery or other communication hereunder to be made pursuant to the provisions of this Note shall be sufficiently given or made if in writing and either delivered in person with receipt acknowledged or three (3) Business Days after being sent by registered or certified mail, return receipt requested, postage prepaid, or by telecopy and confirmed by telecopy answerback, addressed as follows:

(a)	If to the Debtors:
	Lexington Precision Corporation
	Lexington Rubber Group, Inc.

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	800 Third Avenue, 15th Floor
	New York, NY 10022
	Attn: Warren Delano
	Telecopy No.: 212-319-4659
with a copy to:
	Weil, Gotshal & Manges LLP
	767 Fifth Avenue
	New York, NY 10153
	Telecopy No.: 212-310-8000
	Attn: Marcia L. Goldstein, Esq.
	Christopher J. Marcus, Esq.
(b)	If to the Holders:
	c/o Michael A. Lubin
	Lexington Precision Corporation
	800 Third Avenue, 15th Floor
	New York, NY 10022
	Telecopy No.: 212-319-4659
with a copy to:
	O’Melveny & Myers LLP
	7 Times Square
	New York, NY 10036
	Telecopy No.: 212-362-2061
	Attn: Gerald C. Bender, Esq.

or at such other address as may be substituted by notice given as herein provided. The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice.

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     14. Submission to Jurisdiction: Waiver of Jury Trial.

     (a) The Debtors and the Holders hereby irrevocably submit to the jurisdiction of the Bankruptcy Court, and they hereby irrevocably agree that any action concerning the Note shall be heard and determined in the Bankruptcy Court. The Debtors and the Holders hereby irrevocably waive, to the fullest extent they may effectively do so, the defense of an inconvenient forum to the maintenance of any such action in the Bankruptcy Court. The Debtors and the Holders hereby irrevocably agree that the summons and complaint or any other process in any such action may be served by mailing in accordance with the provisions set forth in Section 13 hereof.

     (b) EACH OF THE DEBTORS AND THE HOLDERS HEREBY IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO ANY OBLIGATIONS UNDER THIS NOTE.

     15. Governing Law. This Note shall be governed by, construed and enforced in accordance with the laws of the State of New York applicable to agreements made and to be wholly performed in such State and without giving effect to the conflict of laws principles thereof.

     16. Indemnification for Expenses. The Debtors agree to pay all reasonable out-of-pocket expenses of the Holders incurred in connection with the preparation, execution, delivery, enforcement and administration of this Note, the documents and instruments referred to herein and any amendments, waivers or consents relating hereto or thereto including, without limitation, the reasonable fees and expenses of O’Melveny & Myers LLP, counsel for the Holders. In addition, the Debtors agree to pay, and save Holders harmless from all liability for, any stamp or other documentary taxes which may be payable in connection with the execution or delivery of this Note by the Debtors.

     17. Indemnification of Holders. The Debtors hereby agree to protect, indemnify, pay and save harmless the Holders from and against any and all claims, demands, liabilities, damages, losses, costs, chargers and expenses (including reasonable fees, expenses and disbursements of outside counsel) that Holders may incur or be subject to as consequence, direct or indirect, of the issuance of this Note by the Debtors other than as a result of the gross negligence or willful misconduct of the Holders as determined by a final judgment of a court of competent jurisdiction.

[SIGNATURE PAGE FOLLOWS]

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     IN WITNESS WHEREOF, the Debtors have executed and delivered this Note as of the day and year and at the place first above written.

LEXINGTON PRECISION CORPORATION
By:	/s/ Warren Delano
	Name: Warren Delano
	Title: President
LEXINGTON RUBBER GROUP, INC.
By:	/s/ Warren Delano
	Name: Warren Delano
	Title: President

10

EX-31.1

Exhibit 31-1

CERTIFICATION

I, Michael A. Lubin, certify that:

1.	I have reviewed this Form 10-Q of Lexington Precision Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  September 9, 2008

/s/ Michael A. Lubin
Michael A. Lubin
Chairman of the Board
(Co-Principal Executive Officer)

EX-31.2

Exhibit 31-2

CERTIFICATION

I, Warren Delano, certify that:

1.	I have reviewed this Form 10-Q of Lexington Precision Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  September 9, 2008

/s/ Warren Delano
Warren Delano
President and Director
(Co-Principal Executive Officer)

EX-31.3

Exhibit 31-3

CERTIFICATION

I, Dennis J. Welhouse, certify that:

1.	I have reviewed this Form 10-Q of Lexington Precision Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  September 9, 2008

/s/ Dennis J. Welhouse  

Dennis J. Welhouse 

Senior Vice President,
Chief Financial Officer, and Secretary
(Principal Financial Officer) 

EX-32.1

Exhibit 32-1

Certification Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906 of the
Sarbanes - Oxley Act of 2002

     In connection with the Quarterly Report of Lexington Precision Corporation, a Delaware corporation (the “Company”), on Form 10-Q for the period ended June 30, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, the Chairman of the Board, hereby certifies pursuant to 18 U.S.C. §1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that, to the undersigned’s knowledge other than, with respect to clause (1) below, the timing of the Report:

     (1) the Report of the Company filed today pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), fully complies with the requirements of Section 13(a) of the Exchange Act; and

     (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Michael A. Lubin  

Michael A. Lubin 

Chairman of the Board
(Co-Principal Executive Officer)
September 9, 2008

A signed original of this written statement required by Section 906 has been provided to the registrant and will be retained by the registrant and furnished to the Securities and Exchange Commission or its staff upon request.

This certification accompanies the Company’s Quarterly Report on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by the Company for purposes of Section 18 of the Exchange Act. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.

EX-32.2

Exhibit 32-2

Certification Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906 of the
Sarbanes - Oxley Act of 2002

     In connection with the Quarterly Report of Lexington Precision Corporation, a Delaware corporation (the “Company”), on Form 10-Q for the period ended June 30, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, the President, hereby certifies pursuant to 18 U.S.C. §1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that, to the undersigned’s knowledge other than, with respect to clause (1) below, the timing of the Report:

     (1) the Report of the Company filed today pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), fully complies with the requirements of Section 13(a) of the Exchange Act; and

     (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Warren Delano  

Warren Delano 

President
(Co-Principal Executive Officer)
September 9, 2008

A signed original of this written statement required by Section 906 has been provided to the registrant and will be retained by the registrant and furnished to the Securities and Exchange Commission or its staff upon request.

This certification accompanies the Company’s Quarterly Report on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by the Company for purposes of Section 18 of the Exchange Act. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.

EX-32.3

Exhibit 32-3

Certification Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906 of the
Sarbanes - Oxley Act of 2002

     In connection with the Quarterly Report of Lexington Precision Corporation, a Delaware corporation (the “Company”), on Form 10-Q for the period ended June 30, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, the Chief Financial Officer, hereby certifies pursuant to 18 U.S.C. §1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that, to the undersigned’s knowledge other than, with respect to clause (1) below, the timing of the Report:

     (1) the Report of the Company filed today pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), fully complies with the requirements of Section 13(a) of the Exchange Act; and

     (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Dennis J. Welhouse  

Dennis J. Welhouse 

Senior Vice President,
Chief Financial Officer, and Secretary
(Principal Financial Officer)
September 9, 2008

A signed original of this written statement required by Section 906 has been provided to the registrant and will be retained by the registrant and furnished to the Securities and Exchange Commission or its staff upon request.

This certification accompanies the Company’s Quarterly Report on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by the Company for purposes of Section 18 of the Exchange Act. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.