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 ~~March~~June 3130, 2006


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.)
Delaware		22-1830121
40 East 52nd Street, New York, NY (Address of principal executive office)		10022 (Zip Code)
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
40 East 52nd Street, New York, NY		10022
(Address of principal executive office)		(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, or a non-accelerated filer. (Check one):

Large Accelerated Filer o Accelerated Filer o Non-Accelerated Filer þ

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

As of ~~June~~August 17, 2006, there were 4,981,767 shares of common stock of the Registrant outstanding. ~~(Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date)~~

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

LEXINGTON PRECISION CORPORATION

Quarterly Report on Form 10-Q

Table of Contents

PART I. FINANCIAL INFORMATION
PART I.	FINANCIAL INFORMATION
Item 1. Financial Statements		1
Item 1.	Financial Statements		1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		14
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		12
Item 3. Quantitative and Qualitative Disclosures about Market Risk		22
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		24
Item 4. Controls and Procedures		22
Item 4.	Controls and Procedures		25
PART II. OTHER INFORMATION
PART II.	OTHER INFORMATION
Item 1A. Risk Factors		24
Item 1A.	Risk Factors		26
Item 3. Defaults on Senior Securities		24
Item 3.	Defaults on Senior Securities		26
Item 5. Other Information		24
Item 4	Submission of Matters to a Vote of Security Holders		26
Item 6. Exhibits		25
Item 6.	Exhibits		27
EX-10.1 AMEND. NO 8 TO RESTATED LOAN AGREEMENT
EX-31.1
EX-10.2 3RD AMEND. TO RESTATED TERM PROMISS. NOTE
EX-31.2
EX-10.3 AMEND. NO 2 TO INTERCREDIT AGREEMENT
EX-31.3
EX-10.4 CREDIT AND SECURITY AGREEMENT
EX-32.1
EX-10.5 LOAN AND SECURITY AGREEMENT
EX-32.2
EX-10.6 LOAN AND SECURITY AGREEMENT
EX-32.3
EX-10.7 PLEDGE AGREEMENT
EX-10.8 TERMINATION AGREEMENT
EX-10.9 INTERCREDITOR AGREEMENT
EX-31.1 302 CERTIF. FOR CO-PRINCIPAL EXEC. OFFICER
EX-31.2 302 CERTIF. FOR CO-PRINCIPAL EXEC. OFFICER
EX-31.3 CERTIFICATION FOR CFO AND SECRETARY
EX-32.1 906 CERTIF. FOR CO-PRINCIPAL EXEC. OFFICER
EX-32.2 906 CERTIF. FOR CO-PRINCIPAL EXEC. OFFICER
EX-32.3 906 CERTIFICATION FOR CFO

- i -

PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

LEXINGTON PRECISION CORPORATION

Consolidated Statements of Operations
(thousands of dollars, except per share data)
(unaudited)

	Three Months Ended						Six Months Ended
	March 31
	June 30						June 30
	2006			2005			2006			2005
Net sales	$	24,~~798~~439		$	2625,~~284~~294		$	49,237		$	51,578
Cost of sales		21,~~059~~028			2322,~~162~~553			42,087			45,715
Gross profit		3,~~739~~411			32,~~122~~741			7,150			5,863
Selling and administrative expenses		1,~~776~~839			1,~~785~~719			3,615			3,504
Income from operations		1,963			1,337
Gain on sale of assets held for sale		–			1,100			–			1,100
Interest expense		(2,278	)		(2,310	)
Income from operations		1,572			2,122			3,535			3,459
Income (loss) before income taxes		(315	)		(973	)
Other income (expense):
Income tax provision		(15	)		(21	)
Interest expense		(2,590	)		(2,328	)		(4,868	)		(4,638	)
Income (loss) from continuing operations		(330	)		(994	)
Gain on repurchase of debt		–			77			–			77
Income (loss) from discontinued operations		(70	)		294
Income (loss) before income taxes		(1,018	)		(129	)		(1,333	)		(1,102	)
Net loss	$	(400	)	$	(700	)
Income tax provision		15			21			30			42
Basic and diluted income (loss) per share of common stock:
Income (loss) from continuing operations		(1,033	)		(150	)		(1,363	)		(1,144	)
Continuing operations	$	(0.07	)	$	(0.20	)
Income (loss) from discontinued operations		(69	)		167			(139	)		461
Discontinued operations		(0.01	)		0.06
Net income (loss)	$	(1,102	)	$	17		$	(1,502	)	$	(683	)
Net loss	$	(0.08	)	$	(0.14	)
Basic and diluted net income (loss) per share of common stock:
Continuing operations	$	(0.21	)	$	(0.03	)	$	(0.27	)	$	(0.23	)
Discontinued operations		(0.01	)		0.03			(0.03	)		0.09
Net income (loss)	$	(0.22	)	$	–		$	(0.30	)	$	(0.14	)

See notes to consolidated financial statements.

- 1 -

LEXINGTON PRECISION CORPORATION

Consolidated Balance Sheets
(thousands of dollars)

	March 31,			December 31,
	June 30,			December 31,
	2006			2005
	(unaudited)
Assets:
Current assets:
Cash	$	15580		$	13
Accounts receivable, net		14,~~138~~851			12,701
Inventories, net		8,~~155~~267			7,784
Prepaid expenses and other current assets		~~933~~994			616
Deferred income taxes		1,028			1,028
Current assets of discontinued operations		4525			254
Total current assets		2425,~~314~~745			22,396
Plant and equipment, net		2726,~~069~~314			28,487
Plant and equipment of discontinued operations, net		1,~~454~~439			1,474
Goodwill, net		7,623			7,623
Other assets, net		2,~~120~~850			2,363
	$	6263,~~580~~971		$	62,343
Liabilities and stockholders’ deficit:
Current liabilities:
Accounts payable	$	98,~~281~~336		$	9,053
Accrued expenses, excluding interest		45,~~924~~002			4,701
Accrued interest expense		~~741~~1,007			849
Short-term debt		68,~~689~~262			11,979
Current portion of long-term debt		3,~~318~~511			14,025
Current liabilities of discontinued operations		~~256~~216			485
Total current liabilities		2526,~~209~~334			41,092
Long-term debt, excluding current portion		5859,~~038~~417			41,545
Deferred income taxes		1,028			1,028
Other long-term liabilities		~~353~~340			334
Stockholders’ deficit:
Common stock, $0.25 par value, 10,000,000 shares authorized, 4,981,767 shares issued at March 31, 2006, and 4,931,767 shares issued at December 31, 2006		1,235			1,233
Common stock, $0.25 par value, 10,000,000 shares authorized, 4,981,767 shares issued at June 30, 2006,
Additional paid-in-capital		13,175			13,169
and 4,931,767 shares issued at December 31, 2005		1,235			1,233
Accumulated deficit		(36,458	)		(36,058	)
Additional paid-in-capital		13,177			13,169
Total stockholders’ deficit		(22,048	)		(21,656	)
Accumulated deficit		(37,560	)		(36,058	)
	$	62,580		$	62,343
Total stockholders’ deficit		(23,148	)		(21,656	)
	$	63,971		$	62,343

See notes to consolidated financial statements.

- 2 -

LEXINGTON PRECISION CORPORATION

Consolidated Statements of Cash Flows
(thousands of dollars)
(unaudited)

	Three Months Ended
	Six Months Ended
	March 31
	June 30
	2006			2005
Operating activities:
Net loss	$	(~~400~~1,502	)	$	(~~700~~683	)
Adjustments to reconcile net loss to net cash provided (used) by continuing operations:
Net loss (income) from discontinued operations		70139			(~~294~~461	)
Depreciation		13,~~776~~530			24,~~052~~107
Amortization included in operating expense		89			83
Amortization included in cost of sales		181			165
Amortization included in interest expense		~~358~~969			~~308~~635
Gain on repurchase of debt		–			(77	)
Gain on sale of assets held for sale		–			(1,100	)
Changes in operating assets and liabilities that provided (used) cash:
Accounts receivable, net		(12,~~437~~150	)		(1,~~636~~561	)
Inventories, net		(~~371~~483	)		52592
Prepaid expenses and other current assets		(~~317~~378	)		~~277~~621
Accounts payable		~~228~~(717	)		(~~312~~496	)
Accrued expenses, excluding interest		~~223~~301			—544
Accrued interest expense		~~(108~~158	)		6(118	)
Other long-term liabilities		(26	)		(120	)
Other		4(30	)		8
Net cash provided (used) by continuing operations		113			(157	)
Net cash provided by continuing operations		24			2,156
Net cash provided (used) by discontinued operations		(70144	)		~~637~~1,335
Net cash provided by operating activities		43			480
Net cash provided (used) by operating activities		(120	)		3,491
Investing activities:
Purchases of plant and equipment		(~~358~~1,200	)		(12,~~345~~291	)
Proceeds from sales of plant and equipment		—			100
Decrease in equipment deposits		5			44
Expenditures for tooling owned by customers		—			(324	)
Proceeds from sales of plant and equipment		40			2,636
Other		6			(55	)
Expenditures for tooling owned by customers		(41	)		(475	)
Net cash used by continuing operations		(~~352~~1,196	)		(~~1,624~~86	)
Net cash provided by discontinued operations		—–			1
Net cash used by investing activities		(~~352~~1,196	)		(~~1,623~~85	)
Financing activities:
Net increase in borrowings under revolving line of credit		1,457			1,344
Net increase (decrease) in borrowings under revolving line of credit		(3,692	)		488
Proceeds from issuance of debt		—28,500			1,500
Repayment of long-term debt		(~~964~~21,331	)		(15,~~424~~100	)
Payment of deferred financing expenses		(182	)		(188	)
Capitalized financing expenses		(1,594	)		(198	)
Net cash provided by financing activities		311			1,232
Net cash provided (used) by financing activities		1,883			(3,310	)
Net increase in cash		2567			8996
Cash at beginning of year		13			17
Cash at end of period	$	15580		$	~~106~~113

See notes to consolidated financial statements.

- 3 -

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 subsidiaries (collectively, the “Company”), and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, the interim consolidated financial statements do not include all the information and footnotes included in the Company’s annual consolidated financial statements. 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, 2005. 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 financial position of the Company at ~~March~~June 3130, 2006, ~~and~~ the Company’s results of operations for the three-month and six-month periods ended June 30, 2006 and 2005, and the Company’s cash flows for the ~~three~~six-month periods ended ~~March~~June 3130, 2006 and 2005. In preparing the interim consolidated financial statements, the Company is required to make estimates and assumptions that affect the reported amounts and disclosures; actual results could differ from those estimates.

The results of operations for the three-month ~~period~~and six-month periods ended ~~March~~June 3130, 2006, are not necessarily indicative of the results to be expected for any succeeding quarter or for the full year.

~~During 2004, the Company committed to a plan to sell its die casting division.~~ The results of operations and the assets and liabilities of the die casting division are classified as discontinued operations in the Company’s consolidated financial statements. For more ~~information~~ information regarding discontinued operations, please refer to Note 8.

Note 2 — Inventories

Inventories at ~~March~~June 3130, 2006, and December 31, 2005, are set forth below (dollar amounts in thousands):

	March 31,		December 31,
	June 30,		December 31,
	2006		2005
Finished goods	$	3,~~820~~807	$	3,845
Work in process		2,~~360~~418		2,114
Raw material		12,~~975~~042		1,825
	$	8,~~155~~267	$	7,784

- 4 -

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 3 — Plant and Equipment

Plant and equipment at ~~March~~June 3130, 2006, and December 31, 2005, is set forth below (dollar amounts in thousands):

	March 31,		December 31,
	June 30,		December 31,
	2006		2005
Land	$	1,~~759~~769	$	1,759
Buildings		13,~~318~~325		13,318
Equipment		~~109~~110,~~414~~141		109,244
		124,491		124,321
		125,235		124,321
Accumulated depreciation		9798,~~422~~921		95,834
Plant and equipment, net	$	2726,~~069~~314	$	28,487

Note 4 — Debt

Debt at ~~March~~June 3130, 2006, and December 31, 2005, is set forth below (dollar amounts in thousands):

	March 31,		December 31,
	June 30,		December 31,
	2006		2005
Short-term debt:
Revolving line of credit	$	68,~~689~~262	$	11,954
Other		—–		25
Subtotal		68,~~689~~262		11,979
Current portion of long-term debt		3,~~318~~511		14,025
Total short-term debt		1011,~~007~~773		26,004
Long-term debt:
Revolving line of credit refinanced with term loans on May 31, 2006		6,722		—
Equipment term loan		12,500		8,512
Equipment term loan		7,912		8,512
Real estate term loan		15,000		4,681
Real estate term loan		4,368		4,681
Capital lease obligations		–		85
Capital lease obligations		64		85
Increasing Rate Note		–		7,000
Increasing Rate Note		7,000		7,000
Senior Subordinated Notes		34,177		34,177
Junior Subordinated Note		347		347
Series B Preferred Stock		~~647~~651		644
Other		~~119~~253		124
Subtotal		6162,~~356~~928		55,570
Less current portion		3,~~318~~511		14,025
Total long-term debt		5859,~~038~~417		41,545
Total debt	$	6871,~~045~~190	$	67,549

- 5 -

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Extension of Maturity Date of Revolving Line of Credit and Secured Term Loans on May 2, 2006

On May 2, 2006, the maturity dates of the Company’s revolving line of credit and secured term loans were extended from June 30, 2006, to June 30, 2007.

Refinancing of Revolving Line of Credit and Secured Term Loans on May 31, 2006

On May 31, 2006, the Company completed a refinancing of substantially all of its secured debt. As a result of the refinancing, the Company was able to:

	1.		Reduce the loans outstanding under its revolving line of credit while creating approximately $6,100,000 of additional unused availability under the line;

	2.		Increase the amount of its secured term loans while reducing its monthly principal payments;

	3.		Extend the maturity of the revolving line of credit and the secured term loans from June 30, 2007, to May 15, 2009; and

	4.		Repay its Increasing Rate Note.

In connection with the refinancing, the Company wrote-off $316,000 of deferred financing charges related to indebtedness repaid with the proceeds of the refinancing. This write-off was classified as interest expense in the Company’s consolidated financial statements.

Revolving Line of Credit

AtOn ~~March~~May 31, 2006, the Company ~~had~~replaced ~~outstanding under~~ its existing revolving line of credit ~~$13,411,000 of loans and $2,093,000 of reimbursement obligations~~ with ~~respect~~a tonew revolving ~~letters~~line of credit. Atthat ~~March 31,~~expires ~~2006,~~on ~~there was $979~~May 15,~~000~~ of2009. ~~unused~~Loans ~~availability~~ under the new revolving line of credit~~. At March~~ ~~31,~~bear ~~2006, and December 31, 2005, the~~ interest ~~rates~~at ~~on borrowings under~~ the ~~revolving~~London ~~line~~Interbank ~~of credit~~Offered ~~were~~Rate ~~8.50%~~(“LIBOR”) ~~and~~plus 72.8575%~~, respectively~~. AtRevolving ~~December 31,~~loans ~~2005,~~and reimbursement ~~the~~obligations ~~loans~~with ~~outstanding~~respect ~~under~~to ~~the revolving~~letters ~~line~~ of credit ~~were~~are ~~classified~~limited asto ~~short-term debt because~~ the ~~revolving~~lesser ~~line~~ of ~~credit~~ ~~was~~$17,500,000 ~~scheduled~~or toan ~~expire~~amount onequal ~~June 30,~~to ~~2006. On March~~(1) ~~31,~~85% ~~2006, $6,689,000~~ of ~~loans~~eligible ~~outstanding~~accounts ~~under the~~receivable, ~~revolving~~plus ~~line~~(2) 65% of ~~credit~~eligible inventories, ~~were~~minus ~~classified~~(3) as$500,000. ~~short-term~~The ~~debt because the~~ Company’s ~~cash~~obligations ~~receipts are automatically used to reduce loans outstanding~~ under the new revolving line of credit ~~on a daily~~ ~~basis~~are ~~and~~secured ~~the~~by ~~lender~~a ~~has~~first ~~the~~priority ~~ability~~lien toon ~~modify~~substantially ~~certain~~all ~~terms~~ of the ~~revolving line of credit without the~~ Company’s ~~approval~~assets ~~and~~other ~~$6,722,000~~than ofreal estate ~~loans~~and ~~were~~a ~~classified~~second aspriority ~~long-term~~lien ~~debt~~on ~~because~~ the ~~loans~~Company’s ~~were~~real ~~refinanced on a long-term basis on May 31, 2006~~estate.

OnAt ~~May~~June 3130, 2006, the Company ~~replaced~~had ~~the~~outstanding ~~existing~~loans ~~revolving~~of ~~line~~$8,262,000, ofoutstanding ~~credit~~reimbursement obligations with arespect ~~new revolving~~to ~~line~~letters of credit ~~that~~in ~~expires~~the onamount ~~May 15~~of $1,900,000, ~~2009.~~and ~~Loans~~net unused availability of $5,729,000 under the new revolving line of credit ~~bear interest at the London Interbank Offered Rate (“LIBOR”) plus 2~~.~~75%.~~ At ~~May~~June 3130, 2006, ~~the~~and December 31, 2005, the interest ~~rate~~rates on ~~loans~~borrowings ~~outstanding~~ under the ~~new~~ revolving ~~line~~lines of credit ~~was~~were 78.8612%. ~~Revolving~~and ~~loans~~7.85%, ~~and~~respectively. ~~reimbursement~~The ~~obligations~~loans ~~with~~outstanding ~~respect~~under tothe ~~letters~~revolving line of credit are ~~limited~~classified ~~to the lesser of~~as ~~$17,500,000~~short-term ordebt anbecause ~~amount~~the ~~equal~~Company’s tocash ~~85%~~receipts ofare ~~eligible~~automatically ~~accounts~~used ~~receivable~~to ~~plus~~reduce ~~65% of eligible~~loans ~~inventories.~~outstanding ~~Immediately following the refinancing, there was approximately $7,100,000 of unused availability~~ under the ~~new~~ revolving line of credit. ~~The~~on ~~Company’s~~a ~~obligations~~daily ~~under~~basis and the ~~new revolving~~lender ~~line~~has ofthe ~~credit~~ability ~~are~~to modify ~~secured~~certain byterms ~~a first priority lien on substantially all~~ of the ~~Company’s assets~~revolving ~~other~~line ~~than~~of ~~real~~credit ~~estate~~without ~~and a second priority lien on~~ the Company’s ~~real estate~~approval.

Equipment Term Loan

On May 31, 2006, the Company refinanced its existing equipment term loan with a new $12,500,000 equipment term loan. The new equipment term loan matures on May 15, 2009, and is payable in monthly principal installments of $208,000, commencing on September 1, 2006. Interest on the new equipment term loan is payable monthly at LIBOR plus 4.50%. At June 30, 2006, the interest rate on the new equipment term loan was 9.85%. The new equipment term loan is secured by a first

- 6 -

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

~~Secured~~priority ~~Term~~lien ~~Loans~~on substantially all of the Company’s assets other than real estate and a second priority lien on the Company’s real estate.

~~The~~Real ~~equipment~~Estate ~~term~~Term ~~loan outstanding on March 31, 2006, in the principal amount of $7,912,000~~Loan was payable in monthly principal installments of $200,000 plus interest at the prime rate plus 4.75%. At March 31, 2006, the interest rate on the equipment term loan was 12.50%. On May 19, 2006, the lender advanced the Company $1,000,000 of new funds under the equipment term loan.

On May 31, 2006, the Company refinanced ~~the~~its existing ~~equipment~~real estate term loan with a new $1215,~~500~~000,000 ~~equipment~~real estate term loan. The new ~~equipment~~real estate term loan matures on May 15, 2009, and is payable in monthly principal installments of $~~208~~61,000, commencing on September 1, 2006. Additionally, ~~Interest~~if the outstanding balance of the new real estate term loan is not reduced to $11,022,000 or less by December 31, 2007 (which would require principal prepayments aggregating $3,000,000 in addition to the scheduled monthly principal payments), interest payments on the Company’s subordinated debt may only be made if the unused availability under the Company’s revolving line of credit exceeds an amount equal to $3,000,000 minus any principal prepayments made to date. Interest on the new ~~equipment~~real estate term loan is payable monthly at (1) LIBOR plus 4.50% on $11,000,000 of the loan and (2) the prime rate plus 6.00% on $4,000,000 of the loan. At ~~May~~June 3130, 2006, the weighted average interest rate on the new ~~equipment~~real estate term loan was 911.6102%. The new ~~equipment~~real estate term loan is secured by a first priority lien on ~~substantially all of~~ the Company’s ~~assets other than~~ real estate and a second priority lien on substantially all of the Company’s ~~real~~other ~~estate~~assets.

The real estate term loan outstanding on March 31, 2006, in the amount principal of $4,368,000 was payable in monthly installments of $108,000 plus interest at the prime rate plus 5.00%. Additionally, a fee of $216,000 was payable in December of each year until the loan was paid in full. At March 31, 2006, the interest rate on the real estate term loan was 12.75%.

On May 31, 2006, the Company refinanced the existing real estate term loan with a new $15,000,000 real estate term loan. The new real estate term loan matures on May 15, 2009, and is payable in monthly principal installments of $61,000, commencing on September 1, 2006. Additionally, if the outstanding balance of the new real estate term loan is not reduced to $11,022,000 or less by December 31, 2007, which would require principal prepayments aggregating $3,000,000 in addition to the scheduled monthly principal payments, interest payments on the Company’s subordinated debt thereafter may only be made if the unused availability under the Company’s revolving line of credit exceeds an amount equal to $3,000,000 minus any principal prepayments made to date. Interest on the new real estate term loan is payable monthly at (1) LIBOR plus 4.50% on $11,000,000 of the loan and (2) the prime rate plus 6.00% on $4,000,000 of the loan. At May 31, 2006, the interest rate on the new real estate term loan was 10.78%. The new real estate term loan is secured by a first priority lien on the Company’s real estate and a second priority lien on substantially all of the Company’s other assets.

Capital Leases

Capital leases relate to the purchase of equipment used in the Company’s manufacturing operations. At March 31, 2006, the Company’s consolidated balance sheet included equipment held under capital leases with a cost of $196,000 and related accumulated amortization of $64,000. Amortization of assets recorded as capital leases is included in depreciation expense. In connection with the refinancing of substantially all of the Company’s secured debt on May 31, 2006, capital leases with an aggregate outstanding principal balance of $6456,000 were ~~repaid~~paid in full.

- 7 -

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Increasing Rate Note

On ~~March~~May 31, 2006, the ~~outstanding principal balance of the~~ Increasing Rate Note was ~~$7,000,000.~~ The Increasing Rate Note was an unsecured obligation of the Company that was senior in right of payment to the Senior Subordinated Notes and the Junior Subordinated Note. On May 31, 2006, the Increasing Rate Note was paid in full. ~~The~~with ~~interest~~the ~~rate~~proceeds onfrom the ~~Increasing Rate Note was~~new ~~13.80%~~equipment ~~from~~term ~~September 3,~~loan ~~2004, through August 31, 2005,~~ and ~~14.40%~~real ~~from~~estate ~~September 1,~~term ~~2005, through May 31, 2006~~loan.

Senior Subordinated Notes

The Senior Subordinated Notes mature on August 1, 2009, and are unsecured obligations of the Company that are subordinated in right of payment to all of the Company’s existing and future senior debt. The Senior Subordinated Notes bear interest at ~~the rate of~~ 12% per annum, ~~which is~~ payable quarterly on February 1, May 1, August 1, and November 1. ~~The interest payment that was~~ due on May 1, 2006, was paid on May 30, 2006. Because the Company made the May 1, 2006, interest payment within the thirty-day grace period provided for in the indenture pursuant to which the Senior Subordinated Notes were issued, there was no Event of Default as defined in the indenture.

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 the Senior Subordinated Notes. The Junior Subordinated Note bears interest at ~~the rate of~~ 13% per annum, ~~which is~~ payable quarterly on February 1, May 1, August 1, and November 1. The interest payment that was due on May 1, 2006, was paid on May 30, 2006. Because the Company made the May 1, 2006, interest payment within the thirty-day grace period provided for in the Junior Subordinated Note, there was no Event of Default as defined in the Junior Subordinated Note.

Series B Preferred Stock

At ~~March~~June 3130, 2006, 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 $647,000. 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 the debts and other 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 $540,000 during the years 2000 through 2005.

~~The~~- ~~Series B~~7 ~~Preferred Stock is classified as debt in the consolidated financial statements in~~- ~~accordance with the provisions of Statement of Financial Accounting Standards No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.”~~

- 8 -

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

~~Non-Cash~~with ~~Investing~~a carrying value of $651,000. Each share of Series B Preferred Stock is (1) entitled to one vote, (2) redeemable for $200 plus accumulated and ~~Financing~~unpaid ~~Activities~~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 $540,000 during the years 2000 through 2005.

The ~~Company~~Series B ~~did~~Preferred ~~not~~Stock ~~purchase~~is ~~equipment~~classified ~~under~~as ~~capitalized~~debt ~~lease~~in ~~obligations~~the ~~during~~consolidated ~~the~~financial statements in ~~three-month~~accordance ~~periods~~with ~~ended~~the ~~March 31,~~provisions ~~2006,~~of orStatement ~~March~~of Financial Accounting Standards No. 31150, ~~2005~~“Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.”

Restrictive Covenants

AtThe ~~March~~agreements governing the new revolving line of credit and the new secured term loans contain covenants that (1) require the Company to maintain a minimum level of fixed charge coverage and a maximum ratio of senior debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”), (2) limit the Company’s capital expenditures to $5,000,000, $5,500,000, and $6,000,000 per annum during the years ending December 31, 2006, 2007, and 2008, respectively, (3) limit the amount of new secured financing that it can incur for the purchase of plant and equipment to $5,000,000 during the term of the new secured financing, and (4) place certain other 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 stocks, and the payment of cash dividends. At June 30, 2006, the Company was in compliance with all covenants included in its various financing agreements.

The agreements governing the new revolving line of credit and the new secured term loans contain covenants that (1) require the Company to maintain a minimum level of fixed charge coverage and a maximum ratio of senior debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”), (2) limit the Company’s capital expenditures to $5,000,000, $5,500,000, and $6,000,000 per annum during the years ending December 31, 2006, 2007, and 2008, respectively, (3) limit the amount of new secured financing that it can incur for the purchase of plant and equipment to $5,000,000 during the term of the new secured financing, and (4) place certain other 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 stocks, and the payment of cash dividends.

From time to time, the Company’s secured lenders have agreed to waive, amend, or eliminate certain of the financial covenants contained in the Company’s various loan agreements in order to maintain or otherwise ensure the Company’s current or future compliance. During 2005, covenants were amended on three occasions. In the event that the Company is not in compliance with any of its covenants in the future and its lenders do not agree to amend, waive, or eliminate those covenants, the lenders would have the right to declare the borrowings under their loan agreements to be due and payable.

Fair Value of Financial Instruments

The Company believes that, at ~~March~~June 3130, 2006, the fair values of the loans outstanding under the revolving line of credit, the equipment term loan, and the real estate term loan 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 ~~Increasing Rate Note, the~~ Senior Subordinated Notes, the Junior Subordinated Note, or the Series B Preferred Stock.

Cash Interest Paid

Cash interest paid during the ~~three~~six months ended ~~March~~June 3130, 2006 and 2005, including ~~cash~~amounts ~~interest expense~~ allocated to discontinued operations, totaled $23,~~076~~835,000 and $24,~~069~~271,000, respectively.

-Note 95 -— Income Taxes

At June 30, 2006, and December 31, 2005, 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, 2006 and 2005, consisted of estimated state income taxes payable.

- 8 -

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 5 — Income Taxes

At March 31, 2006, and December 31, 2005, the Company’s net deferred income tax assets were fully reserved by a valuation allowance. The income tax provisions recorded during the three-month periods ended March 31, 2006 and 2005, consisted of estimated state income taxes payable.

Note 6 — Net Loss per Common Share

The calculations of basic and diluted net loss per common share for the three-month ~~periods~~and six-month periods ended ~~March~~June 3130, 2006 and 2005, are set forth below (in thousands, except per share amounts). The assumed conversion of the Series B Preferred Stock and the assumed exercise of outstanding warrants to purchase the Company’s common stock were not dilutive. As a result, the weighted average number of outstanding common shares 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 or the assumed exercise of the warrants. In addition, awards of restricted 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 income or loss per share of common stock until such shares vest.

	Three Months Ended						Six Months Ended
	March 31
	June 30						June 30
	2006			2005			2006			2005
Numerator — Income (loss):
Numerator – Net income (loss):
Continuing operations	$	(~~330~~1,033	)	$	(~~994~~150	)	$	(1,363	)	$	(1,144	)
Discontinued operations		(7069	)		~~294~~167			(139	)		461
Net loss	$	(400	)	$	(700	)
Net income (loss)	$	(1,102	)	$	17		$	(1,502	)	$	(683	)
Denominator — Weighted average shares outstanding		4,932			4,932
Denominator – Weighted average shares outstanding		4,942			4,932			4,937			4,932
Basic and diluted income (loss) per share of common stock:
Basic and diluted net income (loss) per share of common stock:
Continuing operations	$	(0.0721	)	$	(0.2003	)	$	(0.27	)	$	(0.23	)
Discontinued operations		(0.01	)		0.0603			(0.03	)		0.09
Net loss	$	(0.08	)	$	(0.14	)
Net income (loss)	$	(0.22	)	$	–		$	(0.30	)	$	(0.14	)

Note 7 — Segments

Description of Segments and Products

The Company has two operating segments, the Rubber Group and the Metals Group. The Rubber Group produces seals used in automotive wiring systems, insulators for automotive ignition wire sets, and components for medical devices. The Metals Group machines components from aluminum, brass, and steel bars for sale primarily to automotive ~~suppliers~~industry customers. The Rubber Group and the ~~Metals~~ Metals Group conduct substantially all of their business in the continental United States.

- The 10Corporate -Office performs certain general administrative activities 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

- 9 -

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The Corporate Office performs certain general administrative activities 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, certain prepaid expenses and other miscellaneous current assets, deferred tax assets, and deferred financing expenses.

Segment Financial Data

Information relating to the Company’s operating segments and the Corporate Office for the three-month and six-month periods ended ~~March~~June 3130, 2006 and 2005, and at ~~the~~June 30, ~~end~~2006, ofand ~~those~~December 31, ~~periods~~2005, is summarized below (dollar amounts in thousands):

	Three Months Ended						Six Months Ended
	March 31
	June 30						June 30
	2006			2005			2006			2005
Net sales:
Rubber Group	$	21,~~709~~070		$	2322,~~004~~218		$	42,779		$	45,222
Metals Group		3,~~089~~369			3,~~280~~076			6,458			6,356
Total net sales	$	24,~~798~~439		$	2625,~~284~~294		$	49,237		$	51,578
Income (loss) from operations:
Rubber Group	$	2,~~876~~445		$	2,~~306~~082		$	5,321		$	4,388
Metals Group		(~~274~~235	)		~~(304~~630	)		(509	)		326
Subtotal		2,~~602~~210			2,~~002~~712			4,812			4,714
Corporate Office		(~~639~~638	)		(~~665~~590	)		(1,277	)		(1,255	)
Total income from operations	$	1,~~963~~572		$	12,~~337~~122		$	3,535		$	3,459
Depreciation and amortization (1):
Rubber Group	$	1,~~632~~639		$	1,~~803~~842		$	3,271		$	3,645
Metals Group		~~224~~203			~~328~~293			427			621
Subtotal		1,~~856~~842			2,~~131~~135			3,698			4,266
Corporate Office		94			42			13			6
Total depreciation and amortization	$	1,~~865~~846		$	2,~~135~~137		$	3,711		$	4,272
Capital expenditures:
Capital expenditures (2):
Rubber Group	$	~~295~~711		$	~~1,300~~822		$	1,006		$	2,122
Metals Group		63288			42124			351			166
Subtotal		~~358~~999			~~1,342~~946			1,357			2,288
Corporate Office		—–			3–			–			3
Total capital expenditures	$	~~358~~999		$	~~1,345~~946		$	1,357		$	2,291

~~Continued~~Table continued on next page

- 1110 -

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

~~Continued~~Table continued from prior page

	March 31,		December 31,
	June 30,		December 31,
	2006		2005
Assets:
Rubber Group	$	5150,~~149~~188	$	50,412
Metals Group		78,~~487~~221		7,692
Subtotal		58,~~636~~409		58,104
Corporate Office		24,~~445~~098		2,511
Total assets	$	6162,~~081~~507	$	60,615

(1) Excludes amortization of deferred financing expenses, which totaled $358,000 and $308,000, during the three-month periods ended March 31, 2006 and 2005, respectively, and which is included in interest expense in the consolidated financial statements.



	(1)		Excludes amortization and write-off of deferred financing expenses, which totaled $611,000 and $327,000, during the three-month periods ended June 30, 2006 and 2005, respectively, and $969,000 and $635,000 during the six-month periods ended June 30, 2006 and 2005, respectively. Amortization and write-off of deferred financing expenses is included in interest expense in the consolidated financial statements.

	(2)		Capital expenditures during the three-month and six-month periods ended June 30, 2006, include $157,000 of equipment acquired with seller financing.

Note 8 — Discontinued Operations

~~During~~The ~~2004, the Company committed to a plan to discontinue the operations of its die casting division and initiated a program to sell the division. Accordingly, the~~ results of operations, assets, liabilities, and cash flows of the Company’s die casting division have been classified as discontinued operations in the consolidated financial statements.

InThe ~~connection~~following ~~with~~table ~~the~~summarizes ~~sale,~~operating indata ~~2005,~~ of ~~the~~discontinued ~~die~~operations ~~casting division’s equipment, the purchaser leased the die casting facility from the Company~~ for ~~$150,000 per year. The lessee has an option to purchase~~ the ~~facility for $1,500,000. During 2005, the Company recorded a $230,000 provision for~~three-month ~~the~~and ~~projected cost of environmental remediation at the facility. During the three~~six-month ~~period~~ periods ended ~~March~~June 3130, 2006, ~~the~~and ~~Company~~2005 ~~charged~~(dollar ~~$14,000~~amounts ofin ~~costs to the environmental reserve.~~thousands):

The following table summarizes operating data of discontinued operations for the three-month periods ended March 31, 2006 and 2005 (dollar amounts in thousands):


	Three Months Ended					Six Months Ended
	June 30					June 30
	2006			2005		2006			2005

Net sales	$	–		$	682	$	–		$	3,377

Income (loss) from operations	$	(23	)	$	244	$	(45	)	$	611
Allocated interest expense		46			77		94			150


Income (loss) before income taxes		(69	)		167		(139	)		461
Income tax provision		–			–		–			–


Income (loss)	$	(69	)	$	167	$	(139	)	$	461

	Three Months Ended
	March 31
	2006			2005
Net sales	$	—		$	2,695
Income (loss) from operations	$	(22	)	$	367
Allocated interest expense		(48	)		(73	)
Income (loss) before income taxes		(70	)		294
Income tax provision		—			—
Income (loss)	$	(70	)	$	294

- 11 -

- 12 -

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 9 — Subsequent Event

On May 31, 2006, the Company completed a refinancing of substantially all of its secured debt. The refinancing consisted of the following:

	1.		A new $17,500,000 revolving line of credit, which replaced the existing $20,000,000 revolving line of credit; and
	2.		A new equipment term loan of $12,500,000 and a new real estate term loan of $15,000,000, the proceeds of which were utilized to:

(a) repay the existing $8,512,000 equipment term loan; (b) repay the existing $4,152,000 real estate term loan; (c) repay $62,000 of other equipment financing; (d) repay the $7,000,000 Increasing Rate Note; and (e) reduce the loans outstanding under the revolving line of credit by $6,923,000.

For more information about the refinancing, please refer to Note 4, “Debt.”

- 13 -


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

Overview

Some of our statements in this Form 10-Q, ~~including this item,~~ 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:

• increases and decreases in business awarded to us by our customers, • unanticipated price reductions for our products as a result of competition, • changes in the cost of raw materials, • strength or weakness in the North American automotive market, • financial difficulties encountered by our customers, • the filing by one or more of our customers for protection under the federal bankruptcy code, • changes in the competitive environment, • labor interruptions at our facilities or at our customers’ facilities, • unanticipated operating results, • changes in economic conditions, and • changes in interest rates~~, and • our ability, or inability, to obtain financing on reasonable terms~~.

Our results of operations for any particular period are not necessarily indicative of the results to be expected for any ~~one or more~~ succeeding ~~periods~~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 forward-looking statements contained herein will prove to be accurate. All forward-looking statements are expressly qualified by the discussion above.

For further discussion of risks associated with our business, please refer to our annual report on Form 10-K for the year ended December 31, 2005.

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

- 12 -

Results of Operations — Second Quarter of 2006 Versus Second Quarter of 2005

The following table sets forth our consolidated operating results for continuing operations for the three-month periods ended June 30, 2006 and 2005, and the reconciliation of income from operations to earnings before interest, taxes, depreciation, and amortization (“EBITDA”) (dollar amounts in thousands).


	Three Months Ended June 30
	2006					2005

Net sales	$	24,439		100.0	%	$	25,294	100.0	%
Cost of sales		21,028		86.0			22,553	89.2

Gross profit		3,411		14.0			2,741	10.8
Selling and administrative expenses		1,839		7.5			1,719	6.8
Gain on sale of assets held for sale		–		–			1,100	4.3

Income from operations		1,572		6.4			2,122	8.4
Add back: depreciation and amortization (1)		1,846		7.6			2,137	8.4

EBITDA (2)	$	3,418		14.0	%	$	4,259	16.8	%

Net cash provided (used) by operating activities (3)	$	(89	)	(0.4)	%	$	2,313	9.1	%



(1)		Does not include the amortization and write-off of deferred financing expenses, which totaled $611,000 and $327,000, during the three-month periods ended June 30, 2006 and 2005, respectively, and which is included in interest expense in the consolidated financial statements.

(2)		EBITDA is not a measure of performance under U.S. generally accepted accounting principles 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 U.S. generally accepted accounting principles. We have presented EBITDA here and elsewhere in this Form 10-Q because this measure is used by investors, as well as our own management, to evaluate the operating performance of our business, including its ability to service debt, and because it is used by our lenders in setting financial covenants. Our definition of EBITDA may not be the same as the definition of EBITDA used by other companies.

(3)		Net cash provided or used by operating activities is calculated in accordance with U.S. generally accepted accounting principles.

Our net sales for the second quarter of 2006 were $24,439,000, compared to net sales of $25,294,000 for the second quarter of 2005, a decrease of $855,000 or 3.4%. The decrease in net sales was principally a result of decreased unit sales, offset, in part, by price increases on selected products. EBITDA for the second quarter of 2006 was $3,418,000, or 14.0% of net sales, compared to EBITDA of $4,259,000, or 16.8% of net sales, for the second quarter of 2005. The reduction in EBITDA was caused by a $955,000 decrease in EBITDA at the Metals Group, due to a one-time gain of $1,100,000 on the sale

- 13 -

of assets held for sale that was included in the Metals Group’s EBITDA for the second quarter of 2005. Excluding this gain, our EBITDA for the second quarter of 2005 was $3,159,000 or 12.5% of net sales. Net cash used by our operating activities during the second quarter of 2006 totaled $89,000, compared to net cash provided by operating activities of $2,313,000 during the second quarter of 2005.

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, 2006 and 2005.

Rubber Group

The Rubber Group manufactures silicone and organic rubber components for automotive industry customers and, to a lesser extent, for manufacturers of medical devices. For more information regarding the end use of our products, please refer to our annual report on Form 10-K for the year ended December 31, 2005.

The following table sets forth the operating results of the Rubber Group for the three-month periods ended June 30, 2006 and 2005, and the reconciliation of the Rubber Group’s income from operations to its EBITDA (dollar amounts in thousands):


	Three Months Ended June 30
	2006				2005

Net sales	$	21,070	100.0	%	$	22,218	100.0	%
Cost of sales		17,597	83.5			19,153	86.2

Gross profit		3,473	16.5			3,065	13.8
Selling and administrative expenses		1,028	4.9			983	4.4

Income from operations		2,445	11.6			2,082	9.4
Add back: depreciation and amortization		1,639	7.8			1,842	8.3

EBITDA	$	4,084	19.4	%	$	3,924	17.7	%

During the second quarter of 2006, net sales of the Rubber Group decreased by $1,148,000, or 5.2%, compared to the second quarter of 2005. The decrease in net sales was primarily due to (1) the in-sourcing by Delphi Corporation, our largest customer, of certain connector seals that were previously manufactured by us, (2) the resourcing by Delphi during the fourth quarter of 2005, of two high-volume components unrelated to our connector seal business, as a result of price increases instituted by us, (3) decreased net sales of connector seals for automotive wire harness assemblies, which we believe resulted primarily from market share losses by the three largest domestic automobile manufacturers, and (4) price reductions on certain components. The factors reducing sales were partially offset by price increases negotiated with certain customers, which increased net sales by approximately $599,000. During the second quarter of 2006, the Rubber Group’s net sales to Delphi totaled $3,029,000, compared to net sales of $4,500,000 during the second quarter of 2005.

Cost of sales as a percentage of net sales decreased to 83.5% of net sales during the second quarter of 2006, compared to 86.2% of net sales during the second quarter of 2005, primarily due to

- 14 -

~~Results~~(1) the ofclosing ~~Operations~~and —sale, ~~First~~during ~~Quarter~~2005, of ~~2006~~our ~~Versus~~unprofitable ~~First~~manufacturing ~~Quarter~~facility in LaGrange, Georgia, and the consolidation of ~~2005~~our connector seal production in Vienna, Ohio, (2) price increases on certain components, (3) reduced consulting fees, and (4) lower depreciation and amortization expenses, partially offset by price reductions on certain components and unreimbursed product development costs incurred at our medical products facility.

~~The~~Selling ~~following~~and ~~table~~administrative ~~sets~~expenses ~~forth~~increased ~~our~~slightly ~~consolidated~~during ~~operating results for~~ the ~~three-month~~second ~~periods ended~~quarter ~~March 31,~~of 2006 compared ~~and~~to ~~2005, and~~ the ~~reconciliation~~second quarter of ~~income from operations to earnings before interest~~2005, ~~taxes,~~primarily ~~depreciation,~~because ~~and~~of ~~amortization~~increased ~~(“EBITDA”)~~employee ~~(dollar~~benefits ~~amounts in thousands)~~costs.

	Three Months Ended March 31
	2006				2005
Net sales	$	24,798	100.0	%	$	26,284		100.0	%
Cost of sales		21,059	84.9			23,162		88.1
Gross profit		3,739	15.1			3,122		11.9
Selling and administrative expenses		1,776	7.2			1,785		6.6
Income from operations		1,963	7.9			1,337		5.2
Add back: depreciation and amortization (1)		1,865	7.5			2,135		8.1
EBITDA (2)	$	3,828	15.4	%	$	3,472		13.2	%
Net cash provided (used) by operating operating activities of continuing operations (3)	$	113	0.5	%	$	(157	)	(0.6	)%

During the second quarter of 2006, income from operations totaled $2,445,000, an increase of $363,000, or 17.4%, compared to the second quarter of 2005. EBITDA for the second quarter of 2006 was $4,084,000, or 19.4% of net sales, compared to $3,924,000, or 17.7% of net sales, for the second quarter of 2005.

(1)		Does not include amortization of deferred financing expenses, which totaled $358,000 and $308,000, during the three-month periods ended March 31, 2006 and 2005, respectively, and which is included in interest expense in the consolidated financial statements.
(2)		EBITDA is not a measure of performance under U.S. generally accepted accounting principles 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 U.S. generally accepted accounting principles. We have presented EBITDA here and elsewhere in this Form 10-Q because this measure is used by investors, as well as our own management, to evaluate the operating performance of our business, including its ability to service debt, and because it is used by our lenders in setting financial covenants. Our definition of EBITDA may not be the same as the definition of EBITDA used by other companies.
(3)		The calculation of net cash provided or used by operating activities is detailed in the consolidated statements of cash flows included in our consolidated financial statements in Part I, Item 1.

Metals Group

~~Our net sales for the first quarter of 2006 were $24,798,000, compared to net sales of $26,284,000 for the first quarter of 2005, a decrease of $1,486,000 or 5.7%.~~ The ~~decrease~~Metals inGroup ~~net sales~~machines ~~was principally a result of decreased unit sales of~~ components, ~~offset,~~from ~~in part~~aluminum, ~~by price increases on selected products. EBITDA for the first quarter of 2006 was $3~~brass,~~828,000,~~ orand ~~15.4%~~steel ~~of net sales~~bars, ~~compared~~primarily ~~to EBITDA of $3,472,000, or 13.2% of net sales,~~ for ~~the first quarter of 2005.~~ ~~The~~automotive ~~change~~industry ~~in EBITDA reflected a $399,000 increase in EBITDA at our Rubber Group, partially offset by a $74,000 decrease in EBITDA at our Metals Group~~customers.

The following table sets forth the operating results of the Metals Group for the three-month periods ended June 30, 2006 and 2005, 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
	2006					2005

Net sales	$	3,369		100.0	%	$	3,076		100.0	%
Cost of sales		3,431		101.8			3,400		110.5

Gross profit (loss)		(62	)	(1.8	)		(324	)	(10.5	)
Selling and administrative expenses		173		5.1			146		4.7
Gain on sale of assets held for sale		–		–			1,100		35.8

Income (loss) from operations		(235	)	(7.0	)		630		20.5
Add back: depreciation and amortization		203		6.0			293		9.5

EBITDA	$	(32	)	(0.9)	%	$	923		30.0	%

During the second quarter of 2006, net sales increased by $293,000, or 9.5%, compared to the second quarter of 2005. The increase in net sales resulted primarily from the rollout of new products for existing and new customers, offset, in part, by reduced net sales of components reaching the end of their product life cycle.

- 15 -

~~Net~~Cost ~~cash~~of ~~provided~~sales byas ~~our~~a ~~operating~~percentage ~~activities during the first quarter~~ of ~~2006~~net ~~totaled $113,000,~~sales ~~compared~~decreased to a101.8% ~~use~~ of ~~cash~~net ofsales ~~$157,000~~during ~~for~~ the ~~first~~ second quarter of ~~2005.~~2006 ~~For~~from ~~more~~110.5% ~~information about~~during the ~~net~~second ~~cash~~quarter ~~provided~~of ~~by our operating activities~~2005, ~~please~~primarily ~~refer~~because ~~to the consolidated statements~~ of ~~cash flows in Part~~(1) Iimproved production efficiencies, ~~Item~~(2) 1,reduced ~~and~~consulting tofees, ~~our discussion of operating activities under the caption “Liquidity~~ and ~~Capital Resources” in this Part~~(3) I,lower ~~Item 2~~depreciation expense.

~~The~~During ~~discussion that follows sets forth our analysis of~~ the ~~operating~~second ~~results~~quarter of ~~the Rubber Group~~2006, ~~the~~selling ~~Metals Group,~~ and ~~the~~administrative ~~Corporate~~expenses ~~Office~~increased ~~for~~to ~~the~~$173,000 from ~~three-month~~$146,000 ~~periods~~during ~~ended~~the ~~March 31,~~second ~~2006 and~~quarter of 2005.

During the second quarter of 2006, the loss from operations was $235,000, compared to income from operations of $630,000 during the second quarter of 2005, which included a one-time gain of $1,100,000 on the sale of our land and building in Casa Grande, Arizona. The Casa Grande property was classified as an asset held for sale at December 31, 2005, but not as part of discontinued operations. EBITDA for the second quarter of 2006 was negative $32,000 compared to positive $923,000 for the second quarter of 2005. Excluding the gain on the sale of the Casa Grande, Arizona, facility, the loss from operations for the second quarter of 2005 was $470,000 and EBITDA was negative $177,000.

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 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, 2006 and 2005, and the reconciliation of the Corporate Office’s loss from operations to its EBITDA (dollar amounts in thousands):


	Three Months Ended
	June 30
	2006			2005

Loss from operations	$	(638	)	$	(590	)

Add back: depreciation and amortization (1)		4			2


EBITDA	$	(634	)	$	(588	)


(1)		Excludes the amortization and write-off of deferred financing expenses, which totaled $611,000 and $327,000 during the second quarters of 2006 and 2005, respectively, and which is included in interest expense in the consolidated financial statements.

Corporate Office expenses increased by $48,000 in the second quarter of 2006, primarily because of higher audit fees and the reversal of accruals for incentive compensation in the second quarter of 2005.

Interest Expense

During the second quarters of 2006 and 2005, interest expense (excluding interest expense allocated to our discontinued operation of $46,000 and $77,000, respectively) totaled $2,590,000 and

-16-

$2,328,000, respectively, which included the amortization and write-off of deferred financing expenses of $611,000 and $327,000, respectively.

Income Tax Provision

At June 30, 2006, and December 31, 2005, our net deferred income tax assets were fully reserved by a valuation allowance. The income tax provisions recorded during the three-month periods ended June 30, 2006 and 2005, consisted of estimated state income taxes.

Results of Operations — First Six Months of 2006 Versus First Six Months 2005

The following table sets forth our consolidated operating results for continuing operations for the six-month periods ended June 30, 2006 and 2005, and the reconciliation of income from operations to EBITDA (dollar amounts in thousands).


	Six Months Ended June 30
	2006				2005

Net sales	$	49,237	100.0	%	$	51,578	100.0	%

Cost of sales		42,087	85.5			45,715	88.6


Gross profit		7,150	14.5			5,863	11.4

Selling and administrative expenses		3,615	7.3			3,504	6.8

Gain on sale of assets held for sale		–	–			1,100	2.1


Income from operations		3,535	7.2			3,459	6.7

Add back: depreciation and amortization (1)		3,711	7.5			4,272	8.3


EBITDA (2)	$	7,246	14.7	%	$	7,731	15.0	%


Net cash provided by operating activities (3)	$	24	–	%	$	2,156	4.2	%


(1)		Does not include the amortization and write-off of deferred financing expenses, which totaled $969,000 and $635,000, during the six-month periods ended June 30, 2006 and 2005, respectively, and which is included in interest expense in the consolidated financial statements.

(2)		EBITDA is not a measure of performance under U.S. generally accepted accounting principles 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 U.S. generally accepted accounting principles. We have presented EBITDA here and elsewhere in this Form 10-Q because this measure is used by investors, as well as our own management, to evaluate the operating performance of our business, including its ability to service debt, and because it is used by our lenders in setting financial covenants. Our definition of EBITDA may not be the same as the definition of EBITDA used by other companies.

-17-

(3)

Net cash provided by operating activities is calculated in accordance with U.S. generally acceptable accounting principles. The calculations of net cash provided by operating activities for the six-month periods ended June 30, 2006 and 2005, are detailed in the consolidated statements of cash flows included in our consolidated financial statements in Part I, Item 1.

Our net sales for the first half of 2006 were $49,237,000, compared to net sales of $51,578,000 for the first half of 2005, a decrease of $2,341,000 or 4.5%. The decrease in net sales was principally a result of decreased unit sales, offset, in part, by price increases on selected products. EBITDA for the first half of 2006 was $7,246,000, or 14.7% of net sales, compared to EBITDA of $7,731,000, or 15.0% of net sales, for the first half of 2005. The reduction in EBITDA was caused by a $1,029,000 decrease in EBITDA at our Metals Group, due to a one-time gain of $1,100,000 on the sale of assets held for sale that was included in the Metals Group’s EBITDA for the first half of 2005. Excluding this gain, our EBITDA for the first half of 2005 was $6,631,000, or 12.9% of net sales. Net cash provided by operating activities during the first half of 2006 totaled $24,000, compared to $2,156,000 for the first half of 2005. For more information about the net cash provided by our operating activities, please refer to our discussion of operating activities under the caption “Liquidity and Capital Resources” 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, 2006 and 2005.

Rubber Group

The following table sets forth the operating results of the Rubber Group for the ~~three~~six-month periods ended ~~March~~June 3130, 2006 and 2005, and the reconciliation of the Rubber Group’s income from operations to its EBITDA (dollar amounts in thousands):

	Three Months Ended March 31
	Six Months Ended June 30
	2006				2005
Net sales	$	2142,~~709~~779	100.0	%	$	2345,~~004~~222	100.0	%
Cost of sales		1735,~~909~~506	8283.50			1938,~~755~~908	8586.90
Gross profit		37,~~800~~273	17.50			36,~~249~~314	14.10
Selling and administrative expenses		~~924~~1,952	4.36			~~943~~1,926	4.13
Income from operations		25,~~876~~321	1312.24			24,~~306~~388	109.07
Add back: depreciation and amortization		13,~~632~~271	7.56			13,~~803~~645	7.8.1
EBITDA	$	48,~~508~~592	20.80	%	$	48,~~109~~033	17.98	%

~~During the first quarter of 2006, net sales of the Rubber Group decreased by $1,295,000, or 5.6%, compared to the first quarter of 2005. The decrease in net sales was primarily due to (1) the in~~-sourcing by Delphi Corporation, our largest customer, of certain connector seals that were previously manufactured by us, (2) the resourcing, as a result of price increases instituted by us, of two high18-~~volume components unrelated to our connector seal business by Delphi during the fourth~~ quarter of 2005, (3) decreased net sales of connector seals for automotive wire harness assemblies, which we believe resulted primarily from market share losses by the three largest domestic automobile manufacturers, (4) reduced sales to original equipment manufacturers of insulators for automotive ignition wire sets due to the end of life of certain components and the loss of certain business by one of our customers, and (5) contractual price reductions with Delphi. The factors reducing sales were partially offset by price increases negotiated with certain customers, which increased net sales by approximately $490,000. During the first quarter of 2006, the Rubber Group’s net sales to Delphi totaled $3,390,000, a decrease of $1,034,000, compared to net sales of $4,424,000 during the first quarter of 2005.

- 16 -

~~Cost~~During ofthe ~~sales~~first ashalf ~~a percentage~~ of 2006, net sales of the Rubber Group decreased toby ~~82.~~$2,443,000, or 5.4%, compared to the first half of 2005. The decrease in net sales ~~during~~was ~~the~~primarily ~~first~~due to (1) the ~~quarter~~in-sourcing ofby ~~2006~~Delphi Corporation, ~~compared~~our tolargest ~~85.9%~~customer, of ~~net~~certain ~~sales~~connector seals that were previously manufactured by us, (2) the resourcing by Delphi during the ~~first~~fourth quarter of 2005, ~~primarily~~of two ~~due~~high-volume components unrelated to our connector seal business, as a result of price increases instituted by us, (13) ~~the~~decreased ~~closing~~net ~~and~~sales ~~sale~~ of ~~our~~connector ~~unprofitable~~seals ~~manufacturing~~for ~~facility~~automotive inwire ~~LaGrange~~harness assemblies, ~~Georgia,~~which ~~and~~we ~~the consolidation~~believe ofresulted ~~our~~primarily ~~connector~~from ~~seal~~market ~~production~~share inlosses ~~Vienna,~~by ~~Ohio~~the three largest domestic automobile manufacturers, (24) ~~price~~reduced ~~increases~~sales onto ~~certain~~original equipment manufacturers of ~~our~~insulators for automotive ignition wire sets due to the end of the product life cycle of certain components and the loss of certain business by one of our customers, and (35) ~~lower~~price ~~depreciation~~reductions ~~and~~on certain ~~amortization expense~~components. The factors reducing ~~cost~~sales ofwere partially offset by price increases negotiated with certain customers, which increased net sales asby aapproximately ~~percentage~~$1,089,000. During the first half of 2006, the Rubber Group’s net sales ~~were~~to ~~partially~~Delphi ~~offset~~totaled by$6,419,000, a decrease of $2,505,000, compared to net sales of $8,924,000 during the ~~contractual~~first ~~price~~half ~~reductions~~of ~~with Delphi~~2005.

~~Selling~~Cost ~~and~~of ~~administrative~~sales ~~expenses~~as ~~were~~a ~~essentially~~percentage ~~unchanged~~of net sales decreased to 83.0% of net sales during the first half ~~quarter~~ of 2006, compared to 86.0% of net sales during the first ~~quarter~~half of 2005, primarily due to (1) the closing and sale, during 2005, of our unprofitable manufacturing facility in LaGrange, Georgia, and the consolidation of our connector seal production in Vienna, Ohio, (2) price increases on certain of our components, (3) reduced consulting fees, and (4) lower depreciation and amortization expense. The factors reducing cost of sales as a percentage of net sales were partially offset by the price reductions on certain components.

~~During~~Selling ~~the~~and ~~first~~administrative ~~quarter~~expenses ofwere ~~2006,~~essentially ~~income~~unchanged ~~from~~during ~~operations totaled $2,876,000, an increase of $570,000, or 24.7%, compared to~~ the first ~~quarter~~half of ~~2005. EBITDA for the first quarter of~~ 2006 ~~was~~ ~~$4,508,000, or 20.8% of net sales,~~ compared to ~~$4,109,000, or 17.9% of net sales, for~~ the first ~~quarter~~ half of 2005.

During the first half of 2006, income from operations totaled $5,321,000, an increase of $933,000, or 21.3%, compared to the first half of 2005. EBITDA for the first half of 2006 was $8,592,000, or 20.0% of net sales, compared to $8,033,000, or 17.8% of net sales, for the first half of 2005.

-19-

Metals Group

The Metals Group machines components from aluminum, brass, and steel bars, primarily for automotive industry customers.

The following table sets forth the operating results of the Metals Group for the ~~three~~six-month periods ended ~~March~~June 3130, 2006 and 2005, and the reconciliation of the Metals Group’s ~~loss~~income ~~from~~or loss from operations to its EBITDA (dollar amounts in thousands):

	Three Months Ended March 31
	Six Months Ended June 30
	2006					2005
Net sales	$	36,~~089~~458		100.0	%	$	36,~~280~~356		100.0	%
Cost of sales		36,~~150~~581		~~102~~101.09			36,~~407~~807		~~103~~107.91
Gross profit (loss)		(61123	)	(21.09	)		(~~127~~451	)	(37.91	)
Selling and administrative expenses		~~213~~386		6.90			~~177~~323		5.41
Loss from operations		(274	)	(8.9	)		(304	)	(9.3	)
Gain on sale of assets held for sale		–		–			1,100		17.3
Add back: depreciation and amortization		224		7.3			328		10.0
Income (loss) from operations		(509	)	(7.9	)		326		5.1
EBITDA	$	(50	)	(1.6	)%	$	24		0.7	%
Add back: depreciation and amortization		427		6.6			621		9.8
EBITDA	$	(82	)	(1.3	)%	$	947		14.9	%

During the first ~~quarter~~half of 2006, net sales ~~decreased~~increased by $~~191~~102,000, or 51.86%, compared to the first half ~~quarter~~ of 2005. ~~The decrease in net sales resulted primarily from inventory adjustments at~~ ~~several of our largest customers.~~

Cost of sales as a percentage of net sales decreased to ~~102~~101.09% of net sales during the first ~~quarter~~half of 2006 from ~~103~~107.91% during the first ~~quarter~~half of 2005, primarily because of (1) improved production efficiencies, (2) ~~lower~~reduced ~~depreciation~~consulting ~~expense~~fees, and (3) ~~the~~lower ~~sale,~~depreciation in May 2005, of our idle facility in Casa Grande, Arizona, which incurred operating expenses of $62,000 during the first quarter of 2005, primarily to maintain, insure, protect, and depreciate the facilityexpense.

- During 17the -first half of 2006, selling and administrative expenses increased to $386,000 from $323,000 during the first half of 2005.

During the first half of 2006, the loss from operations was $509,000, compared to income from operations of $326,000 during the first half of 2005, which included a one-time gain of $1,100,000 on the sale of our land and building in Casa Grande, Arizona, during May of 2005. The Casa Grande property was classified as an asset held for sale at December 31, 2005, but not as part of discontinued operations. EBITDA for the first half of 2006 was negative $82,000 compared to positive $947,000 for the first half of 2005. Excluding the gain on the sale of the Casa Grande, Arizona, facility, the loss from operations for the first half of 2005 was $774,000 and EBITDA was negative $153,000.

-20-

During the first quarter of 2006 selling and administrative expenses increased to $213,000 from $177,000 during the first quarter of 2005 primarily because of the addition of two new account managers.

During the first quarter of 2006, the loss from operations was $274,000, compared to a loss from operations of $304,000 during the first quarter of 2005. EBITDA for the first quarter of 2006 was negative $50,000 compared to positive $24,000 for the first quarter of 2005.

Corporate Office

The following table sets forth the operating results of the Corporate Office for the ~~three~~ six-month periods ended ~~March~~June 3130, 2006 and 2005, and the reconciliation of the Corporate Office’s loss from operations to its EBITDA (dollar amounts in thousands):

	Three Months Ended
	Six Months Ended
	March 31
	June 30
	2006			2005
Loss from operations	$	(~~639~~1,277	)	$	(~~665~~1,255	)
Add back: depreciation and amortization (1)		913			46
EBITDA	$	(~~630~~1,264	)	$	(~~661~~1,249	)

(1) Excludes the amortization and write-off of deferred financing expenses, which totaled $~~358~~969,000 and $~~308~~635,000 during the ~~first~~six ~~quarters~~month ofperiods ended June 30, 2006 and 2005, respectively, and which is included in interest expense in the consolidated financial statements.

Corporate Office expenses ~~decreased~~were byessentially ~~$26,000~~unchanged induring the first ~~quarter~~half of 2006~~, primarily~~ ~~because~~compared ofto athe ~~reduction~~first inhalf ~~incentive~~of ~~compensation expense~~2005.

Interest Expense

During the first ~~quarters~~half of 2006 and 2005, interest expense (excluding interest expense ~~allocated~~ allocated to our discontinued operation of $4894,000 and $73150,000, respectively) totaled $24,~~278~~868,000 ~~and~~ and $24,~~310~~638,000, respectively, which included the amortization and write-off of deferred financing expenses of $~~358~~969,000 and $~~308~~635,000, respectively. ~~Interest expense decreased in the first quarter of 2006~~ compared to the first quarter of 2005. Although the average aggregate amount of indebtedness outstanding decreased to approximately $68,000,000 during the first quarter of 2006 from approximately $79,000,000 during the first quarter of 2005, this reduction was substantially offset by higher rates of interest on our floating-rate indebtedness and increased amortization of deferred financing charges.

- 18 -

Income Tax Provision

At ~~March~~June 3130, 2006, and December 31, 2005, our net deferred income tax assets were fully reserved by a valuation allowance. The income tax provisions recorded during the ~~three~~six-month ~~periods~~ periods ended ~~March~~June 3130, 2006 and 2005, consisted of estimated state income taxes.

Liquidity and Capital Resources

Operating Activities

During the first ~~quarter~~six months of 2006, our operating activities provided net cash of $~~113~~24,000. ~~Accounts~~ Accounts receivable increased by $12,~~437~~150,000, during the first ~~quarter~~six months of 2006, primarily because net sales during ~~February~~May and ~~March~~June of 2006 were higher than our net sales during November and December of ~~2005. Prepaid expenses and other current assets increased by $317,000, primarily because~~ of an ~~increase in the amount of unbilled tooling being manufactured or purchased by us for sale to our customers.~~

-21-

2005. Prepaid expenses and other current assets increased by $378,000 during the first six months of 2006, primarily because of an increase in the amount of unbilled tooling being manufactured or purchased by us for sale to our customers.

Investing Activities

During the first ~~quarter~~six months of 2006, our investing activities ~~of our continuing operations~~ used net cash of $~~352~~1,196,000. Capital expenditures during the first ~~quarter~~six months of 2006 attributable to the Rubber Group and the Metals Group totaled $~~295~~1,006,000 and $63351,000, respectively, primarily for the purchase of equipment. Capital expenditures for the Metals Group include $157,000 of equipment acquired with seller financing. Capital expenditures for the Rubber Group, the Metals Group, and the Corporate ~~Office~~ Office are currently projected to total $3,557,000, $392,000, and $25,000, respectively, for the ~~year~~ year ending December 31, 2006. At ~~March~~June 3130, 2006, we had approximately $~~149~~485,000 of ~~unrecorded~~outstanding commitments ~~outstanding~~ to purchase equipment.

Financing Activities

During the first ~~quarter~~six months of 2006, our financing activities provided $~~311~~1,883,000 of cash.

During the first quarter of 2006, we made $913,000 of scheduled payments on our equipment term loan and real estate term loan and paid $2,076,000 of cash interest. Financing expenses of $182,000 were capitalized.

Liquidity

On May 31, 2006, we completed a refinancing of substantially all of our secured debt. The refinancing consisted of the following:

1. A new $17,500,000 revolving line of credit, which replaced the existing $20,000,000 revolving line of credit; and

	1.		A new $17,500,000 revolving line of credit, which replaced our existing $20,000,000 revolving line of credit; and

	2.		A new equipment term loan of $12,500,000 and a new real estate term loan of $15,000,000, the proceeds of which were utilized to:

-(a) 19repay - our existing $8,512,000 equipment term loan; (b) repay our existing $4,152,000 real estate term loan; (c) repay $56,000 of other equipment financing; (d) repay our $7,000,000 Increasing Rate Note; and (e) reduce the loans outstanding under our revolving line of credit by $6,923,000.

Unused availability under the revolving line of credit was approximately $1,000,000 before the refinancing and approximately $7,100,000 following the refinancing. We have since used a portion of our increased availability to reduce trade accounts payable that were outstanding beyond industry terms and for general corporate purposes.

During the first six months of 2006, we paid $3,835,000 of cash interest, and financing expenses of $1,594,000 were capitalized.

-22-

~~2. A new equipment term loan of $12,500,000 and a new real estate term loan of $15,000,000, the proceeds of which were utilized to:~~ Liquidity

~~(f)~~ Our ~~repay~~aggregate ~~the~~indebtedness ~~existing~~at $8June 30,~~512~~ 2006,~~000~~ ~~equipment~~totaled ~~term loan; (g) repay the existing~~ $471,~~152~~190,000, ~~real~~compared ~~estate~~to ~~term loan; (h) repay~~ $6267,549,000 ofat December 31, ~~other~~2005. ~~equipment~~During ~~financing;~~the ~~(i)~~second ~~repay~~half ~~the~~of $72006,~~000,000~~ ~~Increasing~~cash ~~Rate~~interest ~~Note;~~expense and ~~(j)~~scheduled ~~reduce~~principal payments ~~the~~are ~~loans~~projected ~~outstanding~~to ~~under~~be ~~the~~approximately ~~revolving~~$3,861,000 ~~line~~and ~~of credit by~~ $61,~~923~~187,000, respectively.

~~Unused~~We ~~availability~~had ~~under~~a ~~the~~net ~~revolving~~working ~~line~~capital deficit of ~~credit was approximately~~ $1589,000 at June 30,~~000~~ ~~before~~2006, ~~the~~compared to a net working ~~refinancing~~capital ~~and~~deficit ~~approximately~~of $718,~~100~~696,000 ~~following~~at December 31, 2005. The change in working capital was primarily the result of the extension of the maturity dates on our term loans and the refinancing of loans outstanding under our revolving line of credit with long-term debt.

~~Our~~At ~~aggregate indebtedness as of March~~June 3130, 2006, ~~totaled~~we had outstanding under our revolving line of credit $688,~~045~~262,000, ~~compared~~of toloans and $671,~~549~~900,000 at ~~December 31,~~of ~~2005.~~reimbursement ~~During~~obligations ~~the~~with ~~period~~respect ~~from~~to ~~April 1,~~outstanding ~~2006,~~letters ~~through~~of ~~December 31~~credit, ~~2006,~~and ~~cash~~we ~~interest~~had ~~expense~~$5,729,000 ~~and~~of ~~scheduled~~unused ~~principal~~availability ~~payments~~under ~~are~~the ~~projected~~revolving toline beof ~~approximately $5,900,000 and $1,750,000, respectively~~credit.

WeOur ~~had~~new arevolving ~~net~~line ~~working~~of ~~capital~~credit ~~deficit~~expires ofon ~~$895~~May 15,~~000~~ at2009. ~~March 31,~~Under ~~2006~~the new revolving line of credit, ~~compared~~loans and reimbursement obligations with respect to aletters ~~net~~of ~~working capital~~credit ~~deficit~~are limited to the lesser of $1817,~~696~~500,000 ator ~~December~~an amount equal to (1) 3185% of eligible accounts receivable, ~~2005.~~plus ~~The~~(2) 65% of ~~change~~eligible ininventories, ~~working~~minus ~~capital~~(3) ~~was~~$500,000. ~~primarily~~ Loans under the ~~result~~new revolving line of credit bear interest at LIBOR plus 2.75%, compared to the ~~extension~~prime ofrate ~~maturity~~plus ~~dates~~1% onor ~~our~~LIBOR ~~term~~plus ~~loans~~3.25% ~~and~~under ~~the~~our previous ~~reclassification~~revolving line of $6 credit. At June 30,~~722~~ 2006,~~000~~ ofthe interest rate for loans outstanding under the new revolving line of credit aswas ~~long-term~~8.12%. ~~because~~Our ~~they~~obligations ~~were~~under the new revolving line of credit ~~refinanced~~are secured by a first priority lien on substantially all of our assets other than real estate and a ~~long-term~~second ~~basis~~priority lien on ~~May 31,~~our ~~2006~~real estate.

AtOn ~~March~~May 31, 2006, we ~~had~~refinanced ~~outstanding~~our ~~under~~existing ~~the~~equipment ~~revolving~~term ~~line~~loan ofwith ~~credit~~a new $1312,~~411~~500,000 equipment ofterm ~~loans and~~loan. ~~$2,093,000~~The ofnew ~~reimbursement~~equipment ~~obligations~~term ~~with~~loan ~~respect~~matures toon ~~outstanding~~May 15, ~~letters~~2009, ofand ~~credit.~~is Atpayable ~~March~~in monthly ~~31,~~principal ~~2006,~~installments weof ~~had~~ $~~979~~208,000, ofcommencing ~~unused~~on ~~availability~~September 1, 2006. ~~under~~Interest on the ~~revolving~~new ~~line~~equipment ofterm ~~credit.~~loan Atis ~~March 31~~payable monthly at LIBOR plus 4.50%, compared to the prime rate plus 4.75% under our ~~2006,~~previous ~~and~~equipment ~~December~~term loan. At June 3130, ~~2005~~2006, the interest ~~rates~~rate on ~~borrowings under~~ the ~~revolving~~new ~~line~~equipment ofterm ~~credit~~loan ~~were~~was 89.5085%. The new equipment term loan is secured by a first priority lien on substantially all of our assets other than real estate and ~~7.85%,~~a ~~respectively~~second priority lien on our real estate.

On May 31, 2006, we refinanced our existing real estate term loan with a new $15,000,000 real estate term loan. The new ~~revolving~~real ~~line~~estate ofterm ~~credit~~loan ~~expires~~matures on May 15, 2009., ~~Under~~and ~~the~~is ~~new~~payable ~~revolving~~in ~~line~~monthly principal installments of ~~credit~~ $61,000, ~~loans~~commencing ~~and~~on ~~reimbursement~~September 1, ~~obligations~~2006. ~~with~~Additionally, ~~respect~~if tothe outstanding ~~letters~~balance of ~~credit~~the ~~are~~new ~~limited~~real toestate ~~the lesser~~term ofloan is not reduced to $1711,~~500~~022,000 or anless ~~amount~~by December 31, ~~equal~~2007, (which would require principal prepayments aggregating $3,000,000 in addition to the ~~85%~~scheduled ofmonthly ~~eligible~~principal ~~accounts~~payments), ~~receivable~~interest ~~plus~~payments ~~65%~~on ofour subordinated debt may only be ~~eligible~~made ~~inventories.~~to ~~Loans~~the ~~under~~extent that the ~~new~~unused availability under the revolving line of credit ~~bear~~exceeds ~~interest~~an amount equal to $3,000,000 minus any principal prepayments made to date. Interest on the new real estate term loan is payable monthly at (1) LIBOR plus 4.50% on $11,000,000 of the loan and (2) the prime rate plus 6.7500% on $4,000,000 of the loan. At ~~May~~June 3130, 2006, the weighted average interest rate on the new real estate term loan was 11.02%. The interest rate ~~for~~on ~~loans~~our ~~outstanding~~previous ~~under~~real estate term loan was the ~~new~~prime ~~revolving~~rate ~~line~~plus 5%, and a fee of $216,000 was payable in December of each year ~~credit~~until the loan was 7paid in full.~~86%.~~ ~~All~~The of$7,000,000 ~~our~~Increasing ~~obligations~~Rate ~~under~~Note, which was repaid with proceeds from the new ~~revolving~~equipment ~~line~~term loan and the real estate term loan, had an interest rate of ~~credit~~14.4%, ~~are~~which was to increase to 15% on September 1, 2006. The new real estate term loan is secured by a first priority lien on ~~substantially all of~~ our ~~assets other than~~ real estate and a second priority ~~lien~~ lien on substantially all of our ~~real~~other ~~estate~~assets.

~~The equipment term loan outstanding on March 31, 2006, in the principal amount of $8,512,000~~-23- was payable in monthly principal installments of $200,000 plus interest at the prime rate plus 4.75%. At March 31, 2006, the interest rate on the equipment term loan was 12.50%. On May 19, 2006, the lender advanced to us $1,000,000 of new funds under the equipment term loan.

On May 31, 2006, we refinanced the existing equipment term loan with a new $12,500,000 equipment term loan. The new equipment term loan matures on May 15, 2009, and is payable in monthly principal installments of $208,000, commencing on September 1, 2006. Interest on the new equipment

- 20 -

~~term~~ The ~~loan~~new isrevolving ~~payable~~line ~~monthly~~of atcredit ~~LIBOR~~and ~~plus 4.50%. At May 31, 2006,~~ the ~~interest rate on the~~ new ~~equipment~~ ~~loan~~secured ~~was 9.61%. The new equipment~~ term ~~loan~~loans iscontain ~~secured~~certain byfinancial covenants, athe ~~first~~most ~~priority~~significant ~~lien~~of ~~on substantially~~which ~~all~~are ofsummarized ~~our~~below. ~~assets~~Please ~~other~~refer ~~than~~to ~~real~~the ~~estate~~financing documents ~~and~~for adefinitions ~~second~~of ~~priority~~capitalized ~~lien~~terms onincluded ~~our real estate~~below.

The real estate term loan outstanding on March 31, 2006, in the amount principal of $4,368,000 was payable in monthly installments of $108,000 plus interest at the prime rate plus 5.00%. At March 31, 2006, the interest rate on the real estate term loan was 12.75%.

	1.		Fixed Charge Coverage Ratio. The Fixed Charge Coverage Ratio is calculated by dividing Consolidated EBITDA, less Unfinanced Capital Expenditures, by Fixed Charges and is required to be not less than 1.1 to 1.0 for each year-to-date period at the end of each month during 2006 and for each twelve-month period at the end of each month from January 2007 through November 2007; and not less than 1.2 to 1.0 for each twelve-month period at the end of each month thereafter. As of June 30, 2006, our Fixed Charge Coverage Ratio was 1.47 to 1.0.

	2.		Leverage Ratio. The Leverage Ratio is calculated by dividing Senior Debt by Consolidated EBITDA for the trailing twelve-month period and is required to be not more than 3.0 to 1.0 at the end of each quarter ending on or prior to June 30, 2007, and not more than 2.5 to 1.0 at the end of each quarter thereafter. As of June 30, 2006, our Leverage Ratio was 2.34 to 1.0.

OnThe ~~May 31,~~agreements ~~2006,~~that wegovern ~~refinanced~~ the ~~existing~~new ~~real~~revolving ~~estate~~line ~~term~~of ~~loan~~credit ~~with~~and athe new ~~$15,000,000~~secured ~~real estate~~ term ~~loan.~~loans also ~~The~~contain ~~new~~covenants ~~real~~that ~~estate term loan matures on May~~(1) ~~15,~~limit ~~2009,~~our ~~and~~capital isexpenditures ~~payable~~to ~~in monthly principal installments of~~ $615,000, ~~commencing on September 1~~000, ~~2006. Additionally, if the outstanding balance of the new real estate term loan is not reduced to~~ $115,~~022~~500,000 ~~or less by December 31~~, ~~2007, which would require principal prepayments aggregating~~ and $36,000,000 inper ~~addition~~annum to during the ~~scheduled~~years ~~monthly~~ending ~~principal~~December 31, ~~payments~~2006, ~~then~~2007, ~~interest~~and ~~payments~~2008, onrespectively, ~~our subordinated debt may only~~(2) belimit ~~made~~the toamount ~~the~~of ~~extent~~new ~~that~~secured ~~the~~financing ~~unused~~we ~~availability~~can ~~under~~incur for the ~~revolving~~purchase ~~line~~ of ~~credit~~plant ~~exceeds~~and ~~an amount~~equipment ~~equal~~ to $35,000,000 ~~minus~~during ~~any~~the ~~principal~~term ~~prepayments~~of ~~made to date. Interest on~~ the new ~~real estate~~secured ~~term loan is payable monthly at (1) LIBOR plus 4.50% on $11~~financing,~~000,000~~ ~~of the loan~~ and (23) ~~the prime~~place ~~rate~~certain ~~plus~~other ~~6.00%~~ restrictions on ~~$4,000,000~~our ofbusiness ~~the~~and ~~loan. At May 31~~operations, ~~2006,~~including ~~the~~limitations ~~interest rate~~ on the ~~new~~sale ~~real estate~~of ~~loan~~all ~~was~~or ~~10.78%.~~substantially ~~The~~all ~~new~~of our ~~real~~assets, ~~estate~~the ~~term~~repurchase ~~loan~~of iscommon ~~secured~~stock, bythe aredemption ~~first~~of ~~priority~~preferred ~~lien~~stock, ~~on our real estate~~ and athe ~~second~~payment ~~priority lien on substantially all~~ of cash ~~our other assets~~dividends.

~~The~~We ~~new~~currently ~~revolving~~believe ~~line~~that ofour ~~credit~~operating cash flow and ~~the~~availability under our new ~~secured~~revolving line ~~term~~of ~~loans~~credit ~~contain~~will ~~several~~be ~~financial covenants.~~adequate ~~The~~to ~~principal~~allow ~~covenants~~us ~~are~~to ~~summarized~~meet ~~below.~~all ~~Please~~scheduled ~~refer~~debt toservice ~~the~~and ~~financing~~all ~~documents~~planned ~~for~~capital ~~definitions~~expenditures offor ~~capitalized~~the ~~terms~~next ~~included~~twelve ~~below~~months.

	1.		Fixed Charge Coverage Ratio. The Fixed Charge Coverage Ratio is calculated by dividing Consolidated EBITDA, less Unfinanced Capital Expenditures, by Fixed Charges and is required to be not less than 1.1 to 1.0 for each of the year-to-date periods at the end of each month during 2006 and for each of the twelve-month periods ending at the end of each month from January 2007 through November 2007; and not less than 1.2 to 1.0 for each twelve-month period ending at the end of each month thereafter. We currently project that our Fixed Charge Coverage Ratio will be approximately 1.5 to 1.0 at June 30, 2006.
	2.		Leverage Ratio. The Leverage Ratio is calculated by dividing Senior Debt by Consolidated EBITDA for the trailing twelve-month period and is required not to be more than 3.0 to 1.0 at the end of each quarter ending on or prior to June 30, 2007, and 2.5 to 1.0 at the end of each quarter thereafter, except that, for the quarters ended June 30 and September 30, 2006, Consolidated EBITDA shall be equal to Consolidated EBITDA recorded from January 1, 2006, through the respective measurement date, annualized. We currently project that our Leverage Ratio will be approximately 2.24 to 1.0 at June 30, 2006.

The agreements that govern the new revolving line of credit and the new secured term loans contain covenants that (1) limit our capital expenditures to $5,000,000, $5,500,000, and $6,000,000 per annum during the years ending December 31, 2006, 2007, and 2008, respectively, (2) limit the amount of new secured financing we can incur for the purchase of plant and equipment to $5,000,000 during the term of the new secured financing, and (3) place certain other restrictions on our business and operations, including limitations on the sale of all or substantially all of our assets, the repurchase of common stock, the redemption of preferred stock, and the payment of cash dividends.

- 21 -

From time to time, our secured lenders have agreed to waive, amend, or eliminate certain of the financial covenants contained in our various loan agreements in order to maintain or otherwise ensure current or future compliance. During 2005, covenants were amended on three occasions. In the event that we are not in compliance with any of our covenants in the future and our lenders do not agree to amend, waive, or eliminate those covenants, the lenders would have the right to declare the borrowings under their loan agreements to be due and payable.

On May 30, 2006, we made the interest payments on our Senior Subordinated Notes and Junior Subordinated Notes that were due on May 1, 2006, in the amounts of $1,025,000 and $11,000, respectively. Because the payments were made within the thirty-day grace period provided for in the indenture pursuant to which the Senior Subordinated Notes were issued and in the Junior Subordinated Note there were no Events of Default as defined in the indenture pursuant to which the Senior Subordinated Notes were issued and as defined in the Junior Subordinated Note.

We currently project that we will have adequate operating cash flow to meet all scheduled debt service and planned capital expenditures for the next twelve months. Nevertheless, the possible occurrence of any of the risks and uncertainties listed under “Overview” in this Item 7 in this Form 10-Q and “Risk Factors” in Part I, Item 1, of our Form 10-K for the year ended December 31, 2005, might cause our actual results or performance to be materially different from our projected results.

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.

At ~~March~~June 3130, 2006, we had $2535,~~691~~762,000 of outstanding floating-rate debt at interest rates ~~equal~~ equal to either LIBOR plus 32.2575%, ~~the~~LIBOR ~~prime rate~~ plus ~~1.00%, the prime rate plus~~ 4.7550%, or the prime rate plus 56.000%.

At ~~March~~June 3130, 2006, we had outstanding $4235,~~354~~428,000 of fixed-rate, long-term debt with a weighted-average interest rate of 1211.2080%.

We currently estimate that our monthly cash interest expense during the remaining ~~nine~~six months of 2006 will be approximately $650,000 and that a one percentage point increase or decrease in short-term interest rates would increase or decrease our monthly interest expense by approximately $29,000.

For further information about our indebtedness, please refer to Note 4, “Debt,” ~~and Note 9, “Subsequent Event,”~~ to our consolidated financial statements in Part I, Item 1.

-24-

Item 4. CONTROLS AND PROCEDURES

Our Chairman of the Board, President, and Chief Financial Officer, with the participation of the management of our operating divisions, evaluated the effectiveness of our disclosure controls and procedures as of ~~March~~June 3130, 2006. Based on that evaluation, our principal executive officers and our Chief Financial Officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the ~~Securities~~rules and ~~Exchange~~forms ~~Commission’s~~of ~~rules~~the Securities and ~~forms~~Exchange Commission. We ~~also~~ also reviewed our internal controls and determined that there have been no changes in our internal controls or in other factors identified in connection with this evaluation that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

- 22 25-

determined that there have been no changes in our internal controls or in other factors identified in connection with this evaluation that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

- 23 -

PART II. OTHER INFORMATION

Item 1A. RISK FACTORS

OnIn ~~May~~Part 31I, ~~2006~~Item 1A, ~~we refinanced substantially all~~ of our ~~secured~~annual ~~debt~~report ~~and,~~on ~~among~~Form ~~other~~10-K ~~changes, extended~~for the ~~maturity~~year ~~dates~~ended ofDecember 31, ~~the~~2005, ~~revolving~~we described ~~line~~certain ofrisk ~~credit~~factors ~~and~~relating ~~the~~to ~~secured~~our ~~term~~business. ~~loans~~One toof ~~May 15, 2009.~~those ~~The~~ risk factors ~~set~~has ~~forth~~been eliminated as ~~Part I,~~a ~~Item 1A,~~result of ~~our~~the ~~Annual~~refinancing ~~Report~~of onsubstantially ~~Form~~all ~~10-K~~of ~~for~~our ~~the~~secured ~~year ended~~debt ~~December~~on May 31, ~~2005,~~2006. The ~~are modified by eliminating the first~~ risk factor, ~~which~~explains ~~stated~~ that our then existing revolving line of credit and secured term loans were maturing on June 30, 2006, and, if we did not refinance them, we might be forced to seek relief from our creditors under chapter 11 of the federal bankruptcy code. ~~For~~The ~~more~~maturing ~~information~~debt ~~about~~was refinanced, and the ~~refinancing,~~new ~~please~~secured ~~refer~~financing tohas ~~the~~a ~~subsection entitled~~maturity ~~“Liquidity”~~date inof ~~Part~~May I15, ~~Item 2~~2009.

Item 3. DEFAULTS UPON SENIOR SECURITIES

OnAt ~~May~~June 30, 2006, wethere ~~made the interest payments on our Senior Subordinated Notes and Junior Subordinated Notes that~~ were ~~due on May 1, 2006, in the amounts of~~ $1540,~~025,~~000 and $11,000, respectively. Because the payments were made within the thirty-day grace period provided for in the indenture pursuant to which the Senior Subordinated Notes were issued and in the Junior Subordinated Note there were no Events of ~~Default~~scheduled asredemptions ~~defined~~ in ~~the~~arrears ~~indenture~~on ~~pursuant~~our ~~to which the~~Series B ~~Senior~~Preferred ~~Subordinated Notes were issued and as defined in the Junior Subordinated Note~~Stock.

~~At March~~Item 31, 2006, there were outstanding 3,300 shares of our $8 Cumulative Convertible Preferred Stock, Series B (the “Series B Preferred Stock”), par value $100 per share with a carrying value of $647,000. 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 our debts and other liabilities, to a liquidation preference of $200 plus accumulated and unpaid dividends~~. ~~Redemptions~~SUBMISSION ofOF ~~$90,000~~MATTERS ~~are~~TO ~~scheduled~~A onVOTE ~~November 30~~OF ofSECURITY ~~each year~~HOLDERS ~~in order to retire 450 shares of Series B Preferred Stock annually. We did not make scheduled redemptions in the aggregate amount of $540,000 during the years 2000 through 2005.~~

~~Item 5.~~ The ~~OTHER~~Annual ~~INFORMATION~~Meeting of our Stockholders was held on May 16, 2006.

OnThe ~~May 31,~~matters ~~2006,~~voted ~~Lexington~~upon ~~Precision~~at ~~Corporation and its wholly-owned subsidiary, Lexington Rubber Group, Inc. (~~the ~~“Company”),~~Annual ~~entered~~Meeting ~~into a new secured lending facility with CapitalSource Finance LLC, as agent,~~ and ~~its~~the ~~affiliate,~~results ~~CSE Mortgage LLC, as agent. The new secured lending facility includes a revolving line~~ of ~~credit,~~the anvoting ~~equipment~~on ~~term~~each ~~loan,~~matter ~~and~~are aset ~~real~~forth ~~estate term loan.~~ below:

1. The ~~revolving~~following ~~line~~number of ~~credit~~votes ~~expires~~were oncast ~~May 15,~~for ~~2009. Under the revolving line of credit, loans~~ and ~~reimbursement~~withheld ~~obligations~~on ~~with~~a ~~respect~~proposal to ~~letters~~elect ofsix ~~credit~~directors ~~are~~(Messrs. ~~limited~~William toB. ~~the~~Conner, ~~lesser~~Warren ~~of $17~~Delano,~~500,000~~ orKenneth anI. ~~amount~~Greenstein, ~~equal~~Michael toA. ~~85%~~Lubin, ofand ~~eligible~~Joseph ~~accounts~~A. ~~receivable~~Pardo ~~plus~~and ~~65% of eligible inventories~~Ms. ~~Loans~~Elizabeth ~~under the revolving line of credit bear interest at LIBOR plus 2~~Ruml).~~75%.~~

The equipment term loan, in the original principal amount of $12,500,000, matures on May 15, 2009, and is payable in monthly principal installments of $208,000, commencing on September 1, 2006. Interest on the equipment term loan is payable monthly at LIBOR plus 4.50%.


Mr. Conner:
Votes for Mr. Conner			4,620,100
Votes withheld from Mr. Conner			19,165

Mr. Delano:
Votes for Mr. Delano			4,617,190
Votes withheld from Mr. Delano			22,075

Mr. Greenstein:
Votes for Mr. Greenstein			4,619,650
Votes withheld from Mr. Greenstein			19,615

Mr. Lubin:
Votes for Mr. Lubin			4,617,156
Votes withheld from Mr. Lubin			22,109

Mr. Pardo:
Votes for Mr. Pardo			4,620,686
Votes withheld from Mr. Pardo			18,579

- 24 26-

The real estate term loan, in the original principal amount of $15,000,000, matures on May 15, 2009, and is payable in monthly principal installments of $61,000, commencing on September 1, 2006. Additionally, if the outstanding balance of the real estate term loan is not reduced to $11,022,000 or less by December 31, 2007, which would require principal prepayments aggregating $3,000,000 in addition to the scheduled monthly principal payments, interest payments on the Company’s subordinated debt may only be made to the extent that the unused availability under the revolving line of credit exceeds an amount equal to $3,000,000 minus any principal prepayments made to date. Interest on the real estate term loan is payable monthly at (1) LIBOR plus 4.50% on $11,000,000 of the loan and (2) the prime rate plus 6.00% on $4,000,000 of the loan.


Ms. Ruml:
Votes for Ms. Ruml			4,620,888
Votes withheld from Ms. Ruml			18,377

~~All~~2. Ratification of ~~the~~Ernst ~~loans~~& ~~made~~Young ~~under~~LLP ~~the~~as ~~new~~our ~~secured~~independent ~~lending~~auditors ~~facility~~for ~~are~~the ~~secured~~year byending ~~liens~~December ~~on substantially~~31, ~~all of the Company’s assets~~2006.

The new secured lending facility contains covenants, including covenants that require the Company to maintain certain financial ratios, which are described in the subsection entitled “Liquidity” in Part I, Item 2.


Votes for ratification			4,627,475
Votes against ratification			6,099
Abstentions			5,691

~~Proceeds~~There ~~from the new secured lending facility~~ were ~~used~~no tobroker ~~repay~~non-votes ~~the Company’s prior secured lending facilities and the Increasing Rate Note, the terms of which are described~~ in ~~the~~respect ~~Note 4, “Debt,” to our consolidated financial statements in Part I, Item 1, and to pay approximately $851,000~~ of ~~financing costs, which will be capitalized and amortized over~~ the ~~term~~foregoing ~~of the financing~~matters.

Other than the secured lending facility, the Company and its affiliates have no material relationship with the lenders. The above description of the new secured lending facility is qualified in its entirety by the terms of the actual loan documents, which are filed as exhibits to this quarterly report on Form 10-Q.

We are reporting about the new secured lending facility in this Part II, Item 5, rather than on a Form 8-K.

Item 6. EXHIBITS

The following exhibits are filed herewith:

	10-1		Amendment No. 8 to the Amended and Restated Loan and Security Agreement, dated as of May 18, 2006, by and among Lexington Precision Corporation (“LPC”), Lexington Rubber Group, Inc. (“LRG”), the lenders a party to the Amended and Restated Loan and Security Agreement and Wachovia Bank, National Association, as Agent.
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.
	10-2		Third Amended and Restated Term Promissory Note, dated as of May 18, 2006, by LRG, as debtor, payable to the order of Wachovia Bank, National Association, as agent for the lenders under the Amended and Restated Loan and Security Agreement.
31-2		Rule 13(a) – 14(a) / 15(d) – 14(a) Certification of Warren Delano, President and Co-Principal Executive Officer of the registrant.
	10-3		Amendment No. 2 to Intercreditor Agreement, dated as of May 19, 2006, by Wachovia Bank, National Association, as agent for the lenders under the Working Capital Loan and Security Agreement, and Ableco Finance LLC, as agent for the lenders under the Term Loan and Security Agreement.
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.

- 25 27-

10-4		Credit and Security Agreement, dated as of May 31, 2006, by and among LPC and LRG, as borrowers, the lenders from time to time party thereto (the “Lenders”), CapitalSource Finance LLC, as collateral agent and administrative agent for the Lenders, and CapitalSource Finance LLC and Webster Business Credit Corporation, as co-documentation agents.
10-5		Pledge Agreement, dated as of May 31, 2006, made by LPC in favor of CapitalSource Finance LLC, as agent.
10-6		Loan and Security Agreement, dated as of May 31, 2006, by and among LPC and LRG, as borrowers, the lenders from time to time party thereto (the “Term Lenders”), and CSE Mortgage LLC, as collateral agent and administrative agent for the Term Lenders.
10-7		Pledge Agreement, dated as of May 31, 2006, made by LPC in favor of CSE Mortgage LLC, as agent.
10-8		Termination Agreement, dated as of May 31, 2006, by and among Wachovia Bank, National Association, as agent and lender, Ableco Finance LLC, as lender, LPC, LRG, and CapitalSource Finance LLC.
10-9		Intercreditor Agreement, dated as of May 31, 2006, by and between CapitalSource Finance LLC, as agent, and CSE Mortgage LLC, as agent, with the acknowledgment of LPC and LRG, as borrowers, and Webster Business Credit Corporation, CapitalSource Finance LLC, CSE Mortgage LLC, and DMD Special Situations, LLC, as lenders.
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.

LEXINGTON PRECISION CORPORATION
FORM 10-Q
June 30, 2006

- 26 -

LEXINGTON PRECISION CORPORATION FORM 10-Q March 31, 2006

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)~~	LEXINGTON PRECISION CORPORATION (Registrant)
June 7, 2006	By:	/s/ Michael A. Lubin
August 11, 2006		By:	/s/ Michael A. Lubin
Date		Michael A. Lubin
		Chairman of the Board
June 7, 2006	By:	/s/ Warren Delano
Date		Warren Delano
		President
June 7, 2006	By:	/s/ Dennis J. Welhouse
Date		Dennis J. Welhouse
		Senior Vice President and Chief Financial Officer

- 27 -


August 11, 2006	By:	/s/ Warren Delano

Date	Warren Delano
	President

August 11, 2006	By:	/s/ Dennis J. Welhouse

Date	Dennis J. Welhouse
	Senior Vice President and
	Chief Financial Officer

-28-

Filing Compare · LEXINGTON PRECISION CORP