<PAGE>

================================================================================

                                   FORM 10-K/A
                                (AMENDMENT NO. 1)

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                 ACT OF 1934 FOR THE YEAR ENDED DECEMBER 31, 2004

                                       OR

[ ]   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                                     22-1830121
         (STATE OR OTHER JURISDICTION OF                     (I.R.S. EMPLOYER
         INCORPORATION OR ORGANIZATION)                      IDENTIFICATION NO.)

        40 EAST 52ND STREET, NEW YORK, NY                         10022
       (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                 (ZIP CODE)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 319-4657

                                 ---------------

        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                          COMMON STOCK, $0.25 PAR VALUE
                                (TITLE OF CLASS)

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 [X]  No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in rule 12b-2 of the Act). [ ]

The aggregate market value of the registrant's Common Stock, $0.25 par value per
share, held by non-affiliates of the registrant, as of March 18, 2005, was
approximately $996,000.

The number of shares of common stock outstanding as of March 18, 2005, was
4,931,767.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's proxy statement to be issued in connection with its
2005 Annual Meeting of Stockholders (the "Proxy Statement") are incorporated by
reference into Part III. Only those portions of the Proxy Statement which are
specifically incorporated by reference are deemed filed as part of this report
on Form 10-K.

================================================================================

<PAGE>

EXPLANATORY NOTE

      Lexington Precision Corporation is filing this Amendment No. 1 on Form
10-K/A to our Annual Report on Form 10-K for the year ended December 31, 2004,
filed with the Securities and Exchange Commission on March 31, 2005, to correct
clerical errors contained in the table included in Note 15, "Quarterly Financial
Data (unaudited)," to our consolidated financial statements in Part II, Item 8,
of the Form 10-K.

      Except for the modification of Note 15, this Form 10-K/A does not modify
or update other disclosures in the Form 10-K, including the nature and character
of those disclosures, to reflect events occurring after the filing date of the
Form 10-K. The entirety of Part II, Item 8, as amended, is included in this Form
10-K/A, as are new Exhibits 31.1, 31.2, 31.3, 32.1, 32.2 and 32.3, dated as of
the date of the filing of this Form 10-K/A.

                                     - 1 -
<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                            Page
                                                                                            ----
<S>                                                                                         <C>
Report of Ernst & Young LLP, Independent Registered Public Accounting Firm...............    3

Consolidated Statements of Operations for the Years Ended
   December 31, 2004, 2003, and 2002.....................................................    4

Consolidated Balance Sheets at December 31, 2004 and 2003................................    5

Consolidated Statements of Stockholders' Deficit for
  the Years Ended December 31, 2004, 2003, and 2002......................................    7

Consolidated Statements of Cash Flows for the Years Ended
  December 31, 2004, 2003, and 2002......................................................    8

Notes to Consolidated Financial Statements...............................................    9
</TABLE>

                                     - 2 -
<PAGE>

               REPORT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED
                             PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
Lexington Precision Corporation and Subsidiaries

      We have audited the accompanying consolidated balance sheets of Lexington
Precision Corporation and subsidiaries at December 31, 2004 and 2003, and the
related consolidated statements of operations, stockholders' deficit, and cash
flows for each of the three years in the period ended December 31, 2004. Our
audits also included the financial statement schedule contained in Part IV, Item
15 (a) 2, of the Company's report on Form 10-K. These financial statements and
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial statements and schedule
based on our audits.

      We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. We were not engaged to
perform an audit of the Company's internal control over financial reporting. Our
audit included consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the
Company's internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

      In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Lexington Precision Corporation and its subsidiaries at December 31, 2004 and
2003, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 2004, in conformity
with U.S. generally accepted accounting principles. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.

      As discussed in Note 5 to the consolidated financial statements, effective
July 1, 2003, the Company changed its method of accounting for its $8 Cumulative
Convertible Preferred Stock, Series B, in accordance with the adoption of
Statement of Financial Accounting Standards No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity."

                                             /s/  Ernst & Young LLP

Cleveland, Ohio
March 29, 2005

                                     - 3 -
<PAGE>

                         LEXINGTON PRECISION CORPORATION

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                  (THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                            YEARS ENDED DECEMBER 31
                                                                   ----------------------------------------
                                                                      2004           2003           2002
                                                                   ----------     ----------     ----------
<S>                                                                <C>            <C>            <C>
Net sales                                                          $  110,353     $  113,231     $  112,363
Cost of sales                                                          98,304         99,773         97,571
                                                                   ----------     ----------     ----------
         Gross profit                                                  12,049         13,458         14,792

Selling and administrative expenses                                     7,383          7,904          7,981
Impairment of goodwill                                                      -             47              -
Plant closure costs                                                         -              -            609
                                                                   ----------     ----------     ----------
         Income from operations                                         4,666          5,507          6,202

Other income (expense):
     Gain on repurchase of debt                                         8,598              -              -
     Gain on sale of securities                                             -              -            248
     Interest expense                                                  (8,662)        (6,980)        (7,158)
                                                                   ----------     ----------     ----------
         Income (loss) from continuing operations before
          income tax                                                    4,602         (1,473)          (708)

Income tax provision (benefit)                                           (196)            76           (538)
                                                                   ----------     ----------     ----------
         Income (loss) from continuing operations                       4,798         (1,549)          (170)

Loss from discontinued operations                                      (3,208)        (4,653)        (1,397)
                                                                   ----------     ----------     ----------
         Income (loss) before cumulative effect of a
          change in accounting principle                                1,590         (6,202)        (1,567)

Cumulative effect of a change in accounting principle                       -           (247)             -
                                                                   ----------     ----------     ----------
         Net income (loss)                                         $    1,590     $   (6,449)    $   (1,567)
                                                                   ==========     ==========     ==========

Basic and diluted income (loss) per share of common stock:

     Continuing operations                                         $     0.97     $    (0.35)    $    (0.03)
     Discontinued operations                                            (0.65)         (0.96)         (0.29)
     Cumulative effect of a change in accounting principle                  -          (0.05)             -
                                                                   ----------     ----------     ----------
         Net income (loss)                                         $     0.32     $    (1.36)    $    (0.32)
                                                                   ==========     ==========     ==========
</TABLE>

See notes to consolidated financial statements

                                     - 4 -
<PAGE>

                         LEXINGTON PRECISION CORPORATION

                           CONSOLIDATED BALANCE SHEETS
                             (THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
                                                                                    DECEMBER 31
                                                                           -----------------------------
                                                                              2004               2003
                                                                           ----------         ----------
<S>                                                                        <C>                <C>
ASSETS:

Current assets:
     Cash                                                                  $       17         $      178
     Accounts receivable, net  of allowances of $537,000
      and $545,000, respectively                                               15,322             15,883
     Inventories, net of allowances of $845,000
      and $931,000, respectively                                                8,791              7,633
     Prepaid expenses and other current assets                                  1,665              2,093
     Deferred income taxes                                                      1,090              1,360
     Assets of discontinued operations                                          2,022              2,954
                                                                           ----------         ----------
         Total current assets                                                  28,907             30,101
                                                                           ----------         ----------

Plant and equipment:
     Land                                                                       2,074              2,074
     Buildings                                                                 19,450             19,301
     Equipment                                                                107,961            103,457
                                                                           ----------         ----------
                                                                              129,485            124,832
     Accumulated depreciation                                                  93,428             86,638
                                                                           ----------         ----------
         Plant and equipment, net                                              36,057             38,194
                                                                           ----------         ----------

Goodwill, net                                                                   7,623              7,623
                                                                           ----------         ----------
Assets of discontinued operations                                               2,754              4,438
                                                                           ----------         ----------
Other assets, net                                                               3,036              3,331
                                                                           ----------         ----------
                                                                           $   78,377         $   83,687
                                                                           ==========         ==========
</TABLE>

See notes to consolidated financial statements          (continued on next page)

                                     - 5 -
<PAGE>

                         LEXINGTON PRECISION CORPORATION

                     CONSOLIDATED BALANCE SHEETS (CONTINUED)
                             (THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
                                                                                    DECEMBER 31
                                                                           -----------------------------
                                                                              2004               2003
                                                                           ----------         ----------
<S>                                                                        <C>                <C>
LIABILITIES AND STOCKHOLDERS' DEFICIT:

Current liabilities:
     Accounts payable                                                      $    9,753         $    9,522
     Accrued expenses, excluding interest                                       4,839              5,993
     Accrued interest expense                                                     975                314
     Deferred gain on repurchase of debt                                            -              3,252
     Short-term debt                                                           14,667             12,246
     Current portion of long-term debt                                          4,749              5,585
     Liabilities of discontinued operations                                       794                775
                                                                           ----------         ----------
           Total current liabilities                                           35,777             37,687
                                                                           ----------         ----------

Long-term debt, excluding current portion                                      58,949             63,681
                                                                           ----------         ----------
Deferred income taxes                                                           1,090              1,360
                                                                           ----------         ----------
Other long-term liabilities                                                       436                451
                                                                           ----------         ----------

Stockholders' deficit:
     Common stock, $0.25 par value, 10,000,000 shares
      authorized, 4,931,767 shares issued at December 31, 2004,
      and December 31, 2003                                                     1,233              1,233
     Additional paid-in-capital                                                13,169             13,169
     Accumulated deficit                                                      (32,277)           (33,894)
                                                                           ----------         ----------
           Total stockholders' deficit                                        (17,875)           (19,492)
                                                                           ----------         ----------

                                                                           $   78,377         $   83,687
                                                                           ==========         ==========
</TABLE>

See notes to consolidated financial statements

                                     - 6 -
<PAGE>

                         LEXINGTON PRECISION CORPORATION

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
                             (THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
                                                                      ADDITIONAL                      TOTAL
                                                          COMMON       PAID-IN-     ACCUMULATED    STOCKHOLDERS'
                                                          STOCK        CAPITAL        DEFICIT        DEFICIT
                                                        ---------     ----------   ------------    -------------
<S>                                                     <C>           <C>          <C>             <C>
Balance at January 1, 2001                              $   1,207     $   12,960   $   (23,703)    $    (9,536)

     Net loss                                                   -              -        (2,151)         (2,151)
     Amortization of restricted stock grants                    -              -            28              28
                                                        ---------     ----------     ---------     -----------

Balance at December 31, 2001                                1,207         12,960       (25,826)        (11,659)

     Net loss                                                   -              -        (1,567)         (1,567)
     Amortization of restricted stock grants                    -              -            27              27
                                                        ---------     ----------     ---------     -----------

Balance at December 31, 2002                                1,207         12,960       (27,366)    $   (13,199)

     Net loss                                                   -              -        (6,449)         (6,449)
     Amortization of restricted stock grants                    -              -            27              27
     Conversion of interest payable on
      junior subordinated notes into
      103,731  shares of common stock                          26            209             -             235
     Dividends on preferred stock                               -              -          (106)           (106)
                                                        ---------     ----------     ---------     -----------

Balance at December 31, 2003                                1,233         13,169       (33,894)        (19,492)

     Net income                                                                          1,590           1,590
     Amortization of restricted stock grants                                                27              27
                                                        ---------     ----------     ---------     -----------

Balance at December 31, 2004                            $   1,233     $   13,169     $ (32,277)    $   (17,875)
                                                        =========     ==========     =========     ===========
</TABLE>

See notes to consolidated financial statements

                                     - 7 -
<PAGE>

                         LEXINGTON PRECISION CORPORATION

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
                                                                                YEARS ENDED DECEMBER 31
                                                                        ------------------------------------
                                                                           2004         2003         2002
                                                                        ----------   ----------   ----------
<S>                                                                     <C>          <C>          <C>
OPERATING ACTIVITIES:
     Income (loss) from continuing operations                           $    4,798   $   (1,549)  $     (170)
     Adjustments to reconcile net loss to net cash
      provided by operating activities:
         Depreciation                                                        8,140        8,573        9,649
         Amortization included in operating expense                            304          382          598
         Amortization included in interest                                   1,098          610          440
         Impairment of goodwill                                                  -           47            -
         Gain on repurchase of debt                                         (8,598)           -            -
         Gain on sales of marketable securities                                  -            -         (248)
         Current year interest expense converted to debt                         -        3,953            -
         Changes in operating assets and liabilities that
          provided (used) cash:
              Accounts receivable, net                                         561         (376)       1,112
              Inventories, net                                              (1,158)         301         (136)
              Prepaid expenses and other assets                                310          850         (360)
              Accounts payable                                               1,920          413       (1,050)
              Accrued expenses, excluding interest                          (1,154)          67          620
              Accrued interest expense                                         827          164        4,137
              Other long term liabilities                                      104          (33)         158
         Other                                                                 (84)          68           16
                                                                        ----------   ----------   ----------
              Net cash provided by continuing operations                     7,068       13,470       14,766
              Net cash provided (used) by discontinued operations             (135)      (2,351)       1,465
                                                                        ----------   ----------   ----------
                  Net cash provided by operating activities                  6,933       11,119       16,231
                                                                        ----------   ----------   ----------

INVESTING ACTIVITIES:
     Purchases of plant and equipment                                       (5,715)      (4,966)      (3,401)
     Proceeds from sales of marketable securities                                -            -        1,522
     Decrease (increase) in equipment deposits                                  27          (61)         345
     Proceeds from sales of equipment                                          271           23           21
     Expenditures for tooling owned by customers                              (650)        (148)        (368)
     Other                                                                     (18)         374          328
                                                                        ----------   ----------   ----------
              Net cash used by continuing operations                        (6,085)      (4,778)      (1,553)
              Net cash used by discontinued operations                        (440)         (75)      (1,551)
                                                                        ----------   ----------   ----------
                  Net cash used by Investing activities                     (6,525)      (4,853)      (3,104)
                                                                        ----------   ----------   ----------

FINANCING ACTIVITIES:
     Net increase (decrease), in borrowings under revolving
      line of credit                                                         2,421       (3,347)        (750)
     Proceeds from issuance of debt                                          7,000       25,000            -
     Repayment of long-term debt                                            (6,364)     (21,548)     (10,194)
     Repurchase of debt                                                     (2,892)      (5,550)           -
     Payment of deferred financing expenses                                   (745)      (2,279)           -
     Other                                                                       -         (106)        (619)
                                                                        ----------   ----------   ----------
                  Net cash used by financing activities                       (580)      (7,830)     (11,563)
                                                                        ----------   ----------   ----------
Net increase (decrease) in cash                                               (172)      (1,564)       1,564
Cash at beginning of year                                                      189        1,753          189
                                                                        ----------   ----------   ----------
Cash at end of year                                                     $       17   $      189   $    1,753
                                                                        ==========   ==========   ==========
</TABLE>

See notes to consolidated financial statements

                                     - 8 -
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      PRINCIPLES OF CONSOLIDATION

      The consolidated financial statements include the accounts of Lexington
Precision Corporation and its subsidiaries (the "Company"). All significant
intercompany accounts and transactions have been eliminated.

      During 2004, the Company committed to a plan to sell the assets and
business, or to close its die casting division. The results of operations and
assets and liabilities of the die casting division are classified as
discontinued operations in the Company's consolidated financial statements.
Unless otherwise indicated all disclosures and amounts relate solely to
continuing operations.

      Certain reclassifications have been made to the financial statements for
prior years in order to conform to the current year's presentation.

      USE OF ESTIMATES

      The preparation of the consolidated financial statements in conformity
with U.S. generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, revenues and expenses, and the disclosure of contingent liabilities
in the consolidated financial statements. Actual results could differ from those
estimates.

      INVENTORIES

      Inventories are valued at the lower of cost (first-in, first-out method)
or market. Inventory levels by principal classification are set forth below
(dollar amounts in thousands):

<TABLE>
<CAPTION>
                                                       DECEMBER 31
                                                  ---------------------
                                                   2004          2003
                                                  ------        ------
<S>                                               <C>           <C>
                 Finished goods                   $ 4,142       $ 3,475
                 Work in process                    2,372         1,570
                 Raw materials                      2,277         2,588
                                                  -------       -------
                                                  $ 8,791       $ 7,633
                                                  =======       =======
</TABLE>

      PLANT AND EQUIPMENT

      Plant and equipment are carried at cost less accumulated depreciation.
Depreciation is calculated principally on the straight-line method over the
estimated useful lives of the various assets (15 to 32 years for buildings and 3
to 8 years for equipment). When an asset is retired or otherwise disposed of,
the related cost and accumulated depreciation are eliminated. Maintenance and
repair expenses are charged as incurred, while major improvements that increase
the useful life of plant and equipment are capitalized. Maintenance and repair
expenses were $5,552,000, $5,733,000, and $5,961,000 for 2004, 2003, and 2002,
respectively.

                                     - 9 -
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

VALUATION OF LONG-LIVED ASSETS

      The Company evaluates long-lived assets, such as plant and equipment and
other long-term amortizable assets, for impairment when events or changes in
circumstances indicate that the carrying value of the assets may not be fully
recoverable. When performing this evaluation, the Company compares the
undiscounted, projected cash flow of an asset or group of assets to the carrying
value of such asset or asset group. If such cash flow is less than the carrying
value of the asset or asset group, an impairment loss is recognized equal to the
excess, if any, of the carrying value of the asset or asset group over the
appraised value of the asset or asset group, net of estimated disposal costs.
Although the Company believes that its projections of future cash flows are
reasonable, changes in assumptions regarding future unit volumes, pricing,
operating efficiencies, material, labor, and overhead costs, and other factors
could significantly affect the Company's cash flow projections. During the
fourth quarter of 2003, the Company tested the long-lived assets of its die
casting division for impairment and, as a result thereof, recorded an impairment
charge of $2,427,000 to reduce the carrying value of the long-lived assets of
the division to their estimated fair value at that time. During 2004, the
Company committed to a plan to discontinue the operations of the die casting
division and recognized pre-tax impairment charges of $1,595,000 to reduce the
value of the division's assets to estimated fair value, which approximates the
projected proceeds to be realized on the disposition of the assets, net of
selling costs. For additional information, see Note 14, "Discontinued
Operations."

      GOODWILL

      Goodwill represents the excess of the purchase price of acquired
businesses over the fair value of the identifiable assets acquired, net of the
fair value of liabilities assumed. Tests for impairment of goodwill are
performed, using a fair value approach, during the fourth quarter of each year,
and at other times when there is a change in circumstances or an adverse event
that would indicate impairment. To assess the value of goodwill, an estimate of
future cash flows and other factors are considered in order to determine fair
value. During 2003, the Company performed its annual impairment test and
determined that the goodwill associated with the Metals Group was impaired; as a
result, the Company recorded a provision of $208,000 to write off all of the
unamortized goodwill of the Metals Group, of which $161,000 has been classified
as discontinued operations. At December 31, 2004 and 2003, there was $7,623,000
of unamortized goodwill recorded as an asset in the Company's consolidated
balance sheet, all of which related to the Rubber Group.

      DEFERRED FINANCING EXPENSES

      Deferred financing expenses are amortized over the lives of the related
debt instruments.

      RESEARCH AND DEVELOPMENT EXPENSES

      Research and development expenses are expensed as incurred. These costs
totaled $991,000, $1,168,000, and $924,000 during 2004, 2003, and 2002,
respectively.

      NET INCOME OR LOSS PER COMMON SHARE

      Basic net income or loss per common share is computed using the
weighted-average number of common shares outstanding. Diluted net income or loss
per share is calculated after giving effect to all potential common shares that
were dilutive, using the treasury stock method. Potential common shares are

                                     - 10 -
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

securities (convertible preferred stock and warrants to purchase common stock)
that do not have a current right to participate in earnings but could in the
future by virtue of their terms.

      REVENUE RECOGNITION

      All of the Company's revenues result from the sale of rubber and metal
components. The Company recognizes revenue from the sale of components when
title and risk of loss pass to the customer according to shipping schedules and
terms of sale mutually agreed to by the Company and its customers. Shipping and
handling costs are typically paid by the customer. If paid by the Company,
shipping and handling costs are included in cost of sales.

RECENTLY ISSUED ACCOUNTING STANDARDS

      Listed below are recently issued accounting standards and a discussion of
how they have affected the Company's consolidated financial statements:

      STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 106-2, "ACCOUNTING AND
      DISCLOSURE REQUIREMENTS RELATED TO THE MEDICARE PRESCRIPTION DRUG,
      IMPROVEMENT AND MODERNIZATION ACT OF 2003"

      The Medicare Prescription Drug, Improvement, and Modernization Act of 2003
(the "Act") became law on December 8, 2003. The Act provides for prescription
drug benefits under Medicare Part D and contains a subsidy, effective January 1,
2006, under current law, for plan sponsors who provide actuarially equivalent
prescription drug benefits to retirees on and after January 1, 2006. Statement
of Financial Accounting Standards No. 106-2, "Accounting and Disclosure
Requirements Related to the Medicare Prescription Drug, Improvement and
Modernization Act of 2003" ("FAS 106-2"), provides accounting guidance and
disclosure for the subsidy, if applicable. Although the Company currently
believes that this legislation may eventually reduce the prescription drug
portion of its retiree medical cost, it has not yet made any such determination.
The adoption of FAS 106-2 during 2004 did not have any effect on the Company's
results of operations or financial position and it is not expected to have any
significant effect in 2005.

      STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 151, "INVENTORY COSTS - AN
      AMENDMENT OF ARB NO. 43, CHAPTER 4"

      In November 2004, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 151, "Inventory costs, an
Amendment of ARB No. 43, Chapter 4" ("FAS 151"), which is effective for fiscal
years beginning on January 1, 2006. Early adoption of FAS 151 is not
anticipated. FAS 151 amends ARB No. 43, Chapter 4, to clarify that abnormal
amounts of idle facility expense, freight, handling costs, and waste materials
(spoilage) should be recognized as current-period charges. FAS 151 also requires
that the allocation of fixed production overheads to the costs of conversion be
based on the normal capacity of the production facilities. The Company has not
yet determined the potential impact of adopting FAS 151 on January 1, 2006, if
any, on its results of operations or financial position.

                                     - 11 -
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

      STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 123 (REVISED 2004), "SHARE
      BASED PAYMENT"

      In December 2004, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123 (revised 2004), "Share Based
Payment" ("FAS 123 Revised"). FAS 123 Revised is a revision to Financial
Accounting Standards Board Statement No. 123, "Accounting for Stock-Based
Compensation," and supercedes Accounting Principles Board Opinion No. 25.
"Accounting for Stock Issued to Employees," and effectively eliminates the
intrinsic value method of accounting for stock options that was available in FAS
123 as originally issued. FAS 123 Revised requires entities to recognize the
cost of employee services received in exchange for awards of equity instruments
based on the grant-date fair value of those awards. This statement is effective
at the beginning of the third quarter of 2005 and applies to all awards granted
after the effective date. The Company does not anticipate that the adoption of
FAS 123 Revised will have any a material impact on its results of operations or
financial position.

      STATEMENT OF FINANCIAL POSITION NO. 109-1, "APPLICATION OF STATEMENT OF
      FINANCIAL ACCOUNTING STANDARDS NO. 109, `ACCOUNTING FOR INCOME TAXES,' TO
      THE TAX DEDUCTION ON QUALIFIED PRODUCTION ACTIVITIES PROVIDED BY THE
      AMERICAN JOBS CREATION ACT OF 2004"

      On December 21, 2004, the Financial Accounting Standards Board issued
Statement of Financial Position No. 109-1, "Application of Statement of
Financial Accounting Standards No. 109, `Accounting for Income Taxes,' to the
Tax Deduction on Qualified Production Activities Provided by the American Jobs
Creation Act of 2004" ("SOP 109-1"). The American Jobs Creation Act provides for
a specified tax credit on qualified production activities beginning in 2005. SOP
109-1 clarifies that the specified tax credit should be accounted for as a
special tax deduction in accordance with Statement of Financial Accounting
Standard No.109, "Accounting for Income Taxes." The Company currently believes
that SOP 109-1 will not have any impact on its results of operations or
financial position.

NOTE 2 -- PREPAID EXPENSES AND OTHER CURRENT ASSETS

      At December 31, 2004 and 2003, other current assets included $306,000 and
$715,000, respectively, of tooling manufactured or purchased by the Company
pursuant to purchase orders issued by its customers. Upon customer approval of
the components produced by such tooling, which normally takes less than 90 days,
the customer is obligated to pay for the tooling in accordance with previously
agreed-upon terms.

NOTE 3 -- OTHER NONCURRENT ASSETS

      The Company has paid a portion of the cost of certain tooling that was
purchased by customers and is being used by the Company to produce components
under long-term supply arrangements. The payments have been recorded as a
noncurrent asset and are being amortized on a straight-line basis over three
years or, if shorter, the period during which the tooling is expected to produce
components. At December 31, 2004 and 2003, other noncurrent assets included
$746,000 and $728,000, respectively, representing the unamortized portion of
such capitalized payments. During 2004, 2003, and 2002, the Company amortized
$274,000, $354,000, and $570,000, respectively, of such capitalized payments.

                                     - 12 -
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 -- ACCRUED EXPENSES, EXCLUDING INTEREST EXPENSE

      Accrued expenses, excluding interest expense, at December 31, 2004 and
2003, are summarized below (dollar amounts in thousands):

<TABLE>
<CAPTION>
                                                            DECEMBER 31
                                                      ----------------------
                                                        2004          2003
                                                      --------       -------
<S>                                                   <C>            <C>
           Employee fringe benefits                   $  2,762       $ 3,768
           Salaries and wages                            1,065           931
           Taxes                                           195           445
           Other                                           817           849
                                                      --------       -------

                                                      $  4,839       $ 5,993
                                                      ========       =======
</TABLE>

NOTE 5 -- DEBT

      Debt at December 31, 2004 and 2003, is set forth below (dollar amounts in
thousands):

<TABLE>
<CAPTION>
                                                            DECEMBER 31
                                                    ------------------------
                                                       2004           2003
                                                    ---------      ---------
<S>                                                 <C>            <C>
           Short-term debt:
                Revolving line of credit             $  14,509     $  12,088
                12 3/4% Senior Subordinated Notes          158           158
                                                     ---------     ---------
                    Subtotal                            14,667        12,246
                Current portion of long-term debt        4,749         5,585
                                                     ---------     ---------

                    Total short-term debt               19,416        17,831
                                                     ---------     ---------

           Long-term debt:
                Equipment term loans                    10,200        13,500
                Real estate term loan                   10,350        11,500
                12% Senior Subordinated Notes           34,177        42,441
                13% Junior Subordinated Note               347           347
                Increasing Rate Note                     7,000             -
                Unsecured, amortizing term notes           669           104
                Capital lease obligations                  275           573
                Series B Preferred Stock                   623           594
                Other                                       57           207
                                                     ---------     ---------
                    Subtotal                            63,698        69,266
                Less current portion                    (4,749)       (5,585)
                                                     ---------     ---------

                    Total long-term debt                58,949        63,681
                                                     ---------     ---------

                         Total Debt                  $  78,365     $  81,512
                                                     =========     =========
</TABLE>

      REVOLVING LINE OF CREDIT

      At December 31, 2004, the Company had outstanding loans of $14,509,000,
outstanding letters of credit of $2,093,000, and net unused availability of
$1,224,000 under the revolving line of credit. The

                                     - 13 -
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

revolving line of credit expires on June 30, 2006. Loans under the revolving
line of credit bear interest at either the prime rate plus 1% or the London
Interbank Offered Rate ("LIBOR") plus 3 1/4%, at the Company's option. The loans
outstanding under the revolving line of credit are classified as short-term debt
because the revolving line of credit provides that the Company's cash receipts
are automatically used to reduce such loans on a daily basis, by means of a
lock-box sweep arrangement, and the lender has the ability to modify certain
terms of the revolving line of credit without the Company's approval. Loans
under the revolving line of credit are limited to 88% of eligible accounts
receivable plus 65% of eligible inventories, less outstanding letters of credit
and any reserves established by the lender. All loans and reimbursement
obligations with respect to letters of credit under the revolving line of credit
are secured by first priority liens on substantially all of the Company's assets
other than real estate.

      At December 31, 2004, the Company's availability under the revolving line
of credit was reduced by $1,350,000 of reserves established by the lender. In
connection with amendments to certain of the Company's loan agreements on
January 27, 2005, $600,000 of these reserves were released. The release of the
balance of the reserves is at the discretion of the lender, and the Company
cannot predict at this time whether any of the remaining reserves will be
released.

      At December 31, 2004, 2003, and 2002, the weighted-average interest rates
on borrowings under the revolving line of credit were 6 1/4%, 5%, and 5 1/4%,
respectively.

      EQUIPMENT TERM LOANS

      The equipment term loans were originally payable in monthly installments
of $300,000 each, with interest at either the prime rate plus 1 1/2% or LIBOR
plus 3 3/4%, at the Company's option. On January 27, 2005, the Company and the
lender amended the terms of the agreement governing the equipment term loans.
The amendment permitted the Company to borrowing an additional $1,500,000 under
its equipment loan agreement, which increased the equipment term loans to
$11,400,000, eliminated the principal payment due February 1, 2005, reduced the
scheduled monthly principal payments to $200,000 commencing March 1, 2005,
eliminated the option of a Eurodollar rate for the equipment term loans, and
increased the interest rate to the prime rate plus 4 3/4%. At December 31, 2004,
the interest rate on the equipment term loans was 6 3/4%. The unpaid balance of
the equipment term loans is payable on June 30, 2006, if the revolving line of
credit is not extended. The equipment term loans are secured by first priority
liens on substantially all of the Company's assets other than real estate.

      REAL ESTATE TERM LOAN

      The real estate term loan is payable in monthly installments of $96,000
each from January 1, 2004, through June 1, 2006, with the unpaid balance due on
June 30, 2006. The Company has the option to extend the loans to June 30, 2007,
on the same terms, provided that the revolving line of credit is also extended
from June 30, 2006, to June 30, 2007. The real estate term loan bears interest
at the prime rate plus 5%, subject to a minimum of 9 1/4%, and requires the
Company to pay a fee of $216,000 on each anniversary of the closing date. The
real estate term loan is secured by first mortgages on substantially all of the
Company's real estate and by second priority liens on substantially all of the
Company's other assets. The real estate term loan contains a provision that
permits the lender to accelerate the loan if there is a material adverse change
in the Company's financial condition, business, or operating performance. At
December 31, 2004, the interest rate on the real estate term loan was 10 1/4%.

                                     - 14 -
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

      INCREASING RATE NOTE

      On September 3, 2004, the Company issued a $7,000,000 note with an
increasing rate of interest. The Increasing Rate Note is an unsecured obligation
of the Company that is senior in right of payment to the 12% Senior Subordinated
Notes, the 12 3/4% Senior Subordinated Notes, and the 13% Junior Subordinated
Notes. The Increasing Rate Note matures on June 30, 2007. Interest is due
monthly and is currently being paid at the rate of 13.8% per annum (the "Cash
Rate"). In lieu of paying the Cash Rate, the Company has the option to pay
interest at the rate of 12% in cash and an additional 3.6% in additional
Increasing Rate Notes (the "PIK Rate"). The Cash Rate will increase by up to 0.6
percentage points on each of September 1, 2005 and 2006, and the PIK Rate will
increase by up to 1.2 percentage points on each of September 1, 2005 and 2006.
The exact amount of each increase will depend upon the principal amount of the
Increasing Rate Note then outstanding.

      12 3/4% SENIOR SUBORDINATED NOTES

      The 12 3/4% Senior Subordinated Notes matured on February 1, 2000, and are
unsecured obligations of the Company that are subordinated to all of the
Company's existing and future senior debt. In December 2003, 99.3% of the
12 3/4% Senior Subordinated Notes then outstanding were exchanged for units
consisting of 12% Senior Subordinated Notes and warrants to purchase common
stock. The remaining $158,000 of 12 3/4% Senior Subordinated Notes that did not
participate in the exchange remained outstanding at December 31, 2004.

      12% SENIOR SUBORDINATED NOTES

      The 12% 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. Interest on the 12%
Senior Subordinated Notes is payable quarterly on February 1, May 1, August 1,
and November 1. On October 1, 2004, the Company purchased $8,264,000 principal
amount of its 12% Senior Subordinated Notes plus interest accrued thereon for
$2,892,000. See Note 13, "Gain on the Repurchase of Debt."

      13% JUNIOR SUBORDINATED NOTE

      The 13% 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 existing and future secured and senior, unsecured debt of the Company, the
12 3/4% Senior Subordinated Notes, and the 12% Senior Subordinated Notes.

      UNSECURED, AMORTIZING TERM NOTES

      The unsecured, amortizing term notes mature in 2005, and bear interest at
rates varying from 6% to 8%. At December 31, 2004, the weighted average interest
rate on the notes was 7.8%.

      CAPITAL LEASE OBLIGATIONS

      Capital lease obligations relate to the purchase of equipment used in the
Company's manufacturing operations. During 2004, the Company entered into
capital leases totaling $144,000. At December 31, 2004, the Company's
consolidated balance sheet included equipment held under capital

                                     - 15 -
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

leases with a cost of $1,146,000 and related accumulated depreciation of
$252,000. The future minimum lease payments under the terms of the various
capital leases are set forth below under the heading "Scheduled Maturities of
Long-Term Debt." Amortization of assets recorded as capital leases is included
in depreciation expense.

      SERIES B PREFERRED STOCK

      At December 31, 2004, 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 $623,000. 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
failed to make scheduled redemptions in the aggregate amount of $450,000 on
November 30, 2000, 2001, 2002, 2003, and 2004.

      During 2003, the Company adopted Statement of Financial Accounting
Standards No. 150, "Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity" ("FAS 150"), which established
standards for classifying and measuring as liabilities certain financial
instruments that embody obligations of the issuer that have characteristics of
both liabilities and equity. As a result of the adoption of FAS 150, the Company
began to classify the Series B Preferred Stock as debt in the consolidated
financial statements and recognized a pre-tax charge of $247,000 to increase the
carrying value of the Series B Preferred Stock to its fair value. Subsequent to
adoption, increases in the fair value of the Series B Preferred Stock and
payments of quarterly dividends have been recorded by monthly charges to
interest expense.

      NON-CASH INVESTING AND FINANCING ACTIVITIES

      The Company purchased equipment under capitalized lease obligations in the
amount of $144,000, $720,000, and $365,000, during 2004, 2003, and 2002,
respectively, and obtained seller financing for the purchase of equipment in the
aggregate amount of $198,000 in 2004 and $247,000 in 2002.

      RESTRICTIVE COVENANTS

      The agreements governing the revolving line of credit, the equipment term
loans, and the real estate term loan contain certain financial covenants that
require the Company to maintain specified financial ratios as of the end of
specified periods, including the maintenance of a minimum level of fixed charge
coverage, minimum levels of net worth and EBITDA, and a maximum ratio of debt to
EBITDA. The Company also has covenants that limit its unfinanced capital
expenditures to $6,250,000 per annum and limit the amount of additional secured
financing that it can incur for the purchase of plant and equipment to
$2,500,000 per annum. Although there can be no assurance, the Company currently
believes that this provision will not limit its planned capital expenditures
during 2005. The Company also has other covenants that place restrictions on its
business and operations, including covenants relating to the sale of all or
substantially all of its assets, the purchase of common stock, the redemption of
preferred stock, and the payment of cash dividends.

                                     - 16 -
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

      From time to time, the Company's secured lenders have agreed to waive,
amend, or eliminate certain of the financial covenants contained in its various
financing agreements in order to maintain or otherwise ensure the Company's
current or future compliance.

   -  Effective March 31, 2004, the Company's two secured lenders amended fixed
      charge coverage ratios and annual limitations on unfinanced capital
      expenditures;

   -  Effective May 31, 2004, one of the Company's secured lenders waived
      compliance with a minimum net worth covenant;

   -  Effective June 30, 2004, the Company's two secured lenders amended
      financial covenants, related to minimum net worth, minimum fixed charge
      coverage, minimum EBITDA, and maximum debt to EBITDA; and

   -  Effective January 27, 2005, the Company's two secured lenders further
      amended financial covenants, related to minimum consolidated EBITDA,
      minimum Rubber Group EBITDA, fixed charge coverage ratios, and maximum
      secured debt to EBITDA.

      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 financing agreements to be due and payable immediately.

      FAIR VALUE OF FINANCIAL INSTRUMENTS

      The Company believes that, at December 31, 2004, the fair values of the
loans outstanding under the revolving line of credit, the equipment term loans,
and the real estate term loan approximated the principal amounts of such loans.

      On October 1, 2004, the Company repurchased a total of $8,264,000
principal amount of its 12% Senior Subordinated Notes plus interest accrued
thereon at an aggregate cost of $2,892,000. The Company is unaware of any other
trading activity in the 12% Senior Subordinated Notes or the 12 3/4% Senior
Subordinated Notes since January 1, 2001. The Company believes that it has no
basis to express an opinion as to the fair market value of 12% Senior
Subordinated Notes, 12 3/4% Senior Subordinated Notes, the 13% Junior
Subordinated Note, the Increasing Rate Note, or the Series B Preferred Stock.

      FINANCIAL LEVERAGE AND LIQUIDITY

      The Company operates with substantial financial leverage and limited
liquidity. Aggregate indebtedness as of December 31, 2004, totaled $78,365,000.
During 2005, interest and scheduled principal payments are projected to be
approximately $8,189,000 and $4,277,000, respectively.

      CASH INTEREST PAID

      Cash interest paid during 2004, 2003, and 2002 totaled $7,144,000,
$2,122,000, and $2,644,000, respectively.

                                     - 17 -
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

      SCHEDULED MATURITIES OF LONG-TERM DEBT

      Scheduled maturities of long-term debt and capital lease obligations for
the years ending December 31 are listed below (dollar amounts in thousands):

<TABLE>
<CAPTION>
                                                   CAPITAL
                                     LONG-TERM      LEASE
                                        DEBT      OBLIGATIONS      TOTAL
                                     ---------    -----------    ----------
<S>                                  <C>          <C>            <C>
             2005                    $   4,565    $       184    $    4,749
             2006                       17,236             86        17,322
             2007                        7,074              4         7,078
             2008                           25              -            25
             2009                       34,524              -        34,524
                                     ---------    -----------    ----------

                                     $  63,424    $       274    $   63,698
                                     =========    ===========    ==========
</TABLE>

NOTE 6 -- COMMON STOCK, WARRANTS, AND OTHER EQUITY SECURITIES

      COMMON STOCK, $.25 PAR VALUE

      At December 31, 2004, 2003, and 2002, there were 4,931,767, 4,931,767 and
4,828,036 shares of the Company's common stock outstanding, respectively, and
48,889 shares were reserved for issuance on the conversion of the Series B
Preferred Stock. In connection with the completion of the Company's debt
refinancing on December 18, 2003, the Company exchanged 103,731 shares of its
common stock for the $235,000 of interest that was accrued and unpaid on its
then outstanding junior subordinated notes.

      WARRANTS

      At December 31, 2004 and 2003, there were outstanding 345,237 and 427,877
warrants, respectively, each of which entitles the holder to purchase one share
of the Company's common stock at $3.50 per share from August 1, 2005, through
August 1, 2009. The Company issued 424,410 of the warrants in connection with
the exchange of its 12 3/4% Senior Subordinated Notes due February 1, 2000, for
units consisting of warrants and 12% Senior Subordinated Notes due August 1,
2009, and 3,467 of the warrants in connection with the exchange of its 14%
Junior Subordinated Notes for units consisting of warrants and new 13% Junior
Subordinated Notes due November 1, 2009. On October 1, 2004, the Company
repurchased units comprising $8,264,000 principal amount of its 12% Senior
Subordinated Notes and 82,640 warrants, which were subsequently retired. The
warrants will trade only as part of a unit with the 12% Senior Subordinated
Notes or the 13% Junior Subordinated Notes, as the case may be, until August 1,
2005, at which time the warrants can be separated from the notes. Because the
exercise price of the warrants substantially exceeded the market price of the
Company's common stock at the date of issuance, the Company concluded that the
warrants had negligible value.

      OTHER AUTHORIZED PREFERRED STOCK

      The Company's restated certificate of incorporation provides that the
Company is authorized to issue 2,500 shares of 6% Cumulative Convertible
Preferred Stock, Series A, par value $100 per share. No shares of this preferred
stock have been issued.

                                     - 18 -
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

      The Company's restated certificate of incorporation also provides that the
Company is authorized to issue 2,500,000 shares of other preferred stock having
a par value of $1 per share. No shares of this preferred stock have been issued.

NOTE 7 -- EMPLOYEE BENEFIT PLANS

      RETIREMENT AND SAVINGS PLAN

      The Company maintains a retirement and savings plan pursuant to Section
401 of the Internal Revenue Code (a "401(k) plan"). All employees of the Company
are entitled to participate in the 401(k) plan after meeting the eligibility
requirements. Effective January 1, 2003, employees may generally contribute up
to 60% of their annual compensation but not more than prescribed dollar amounts
established by the United States Secretary of the Treasury. Employee
contributions, up to a maximum of 6% of an employee's compensation, are matched
50% by the Company. During 2004, 2003, and 2002, matching contributions made by
the Company totaled $507,000, $504,000, and $520,000, respectively. Company
contributions to the 401(k) plan vest at a rate of 20% per year commencing after
the participant's second year of service until the participant becomes fully
vested after six years of service.

      INCENTIVE COMPENSATION PLAN

      The Company has an incentive compensation plan that provides for the
payment of annual cash bonus awards to certain officers and key employees of the
Company if specified targets are met. The Compensation Committee of the
Company's Board of Directors, which consists of two directors who are not
employees of the Company, oversees the administration of the incentive
compensation plan and approves the cash bonus awards. Bonus awards for eligible
divisional employees are typically based upon the attainment of predetermined
targets for earnings before interest, taxes, depreciation, and amortization
("EBITDA") at each division. Bonus awards for corporate officers are typically
based upon the attainment of predetermined consolidated EBITDA targets. The
consolidated financial statements include provisions for bonuses totaling
$641,000, $569,000, and $623,000 for 2004, 2003, and 2002, respectively.

      POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

      The Company maintains programs to fund certain costs related to a
prescription drug card program for a closed group of retirees of one of its
former divisions and to fund limited medical costs for certain retirees of one
of its divisions. At December 31, 2004, the Company's accumulated postretirement
benefit obligation totaled $322,000. Prior to January 1, 2004, the Company
amortized its transition obligation over the remaining life expectancy of the
participants, which equated to an annual rate of $23,000. Effective January 1,
2004, the Company revised the life expectancy of the participants in the
prescription drug program and, as a result, the Company began to amortize its
unamortized transition obligation at the rate of $20,000 per year during 2004.
The Company measures its post-retirement benefit obligation on January 1 of each
year.

      The Medicare Prescription Drug, Improvement, and Modernization Act of 2003
(the "Act") became law on December 8, 2003. The Act provides for a prescription
drug benefit under Medicare Part D and contains a federal subsidy, effective
January 1, 2006, to plan sponsors who provide actuarially equivalent
prescription drug benefit to retirees. The Company has not yet determined if the
prescription drug benefit it provides to a closed group of retirees is
actuarially equivalent to the benefits provided for in the Act. As a result, the
possible effects of the Act are not reflected in the obligations or net annual

                                     - 19 -
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

postretirement benefit cost set forth below. During 2004 and 2003, the Company
paid $14,000 and $15,000, respectively, for retiree prescription drug benefits.

      A reconciliation of the changes in the Company's post-retirement
obligations at December 31, 2004 and 2003, is set forth below (dollar amounts in
thousands):

<TABLE>
<CAPTION>
                                                                   DECEMBER 31
                                                                 ----------------
                                                                  2004      2003
                                                                 ------    ------
<S>                                                              <C>       <C>
Accumulated postretirement benefit obligation at
  beginning of year                                              $  332    $  411
Interest cost                                                        19        26
Benefits paid                                                       (36)      (43)
Actuarial loss (gain)                                                 7       (62)
                                                                 ------    ------
     Accumulated postretirement benefit obligation at
      end of year                                                   322       332
Plan assets at fair market value                                      -         -
                                                                 ------    ------
     Unfunded accumulated postretirement benefit obligation
      at end of year                                                322       332
Unrecognized transition obligation                                  (79)      (99)
Unrecognized net gain                                                52        64
                                                                 ------    ------

     Accrued benefit cost                                        $  295    $  297
                                                                 ======    ======
</TABLE>

      Net annual postretirement benefit costs for 2004, 2003, and 2002, are
summarized below (dollar amounts in thousands):

<TABLE>
<CAPTION>
                                                        YEARS ENDED DECEMBER 31
                                                       --------------------------
                                                        2004      2003      2002
                                                       ------    ------    ------
<S>                                                    <C>       <C>       <C>
Interest cost                                          $   19    $   26    $   28
Net amortization and deferral                              15        22        54
                                                       ------    ------    ------

       Net annual postretirement benefit cost          $   34    $   48    $   82
                                                       ======    ======    ======
</TABLE>

      The weighted-average annual rate of increase in the per capita cost of
covered benefits for the prescription drug card program is assumed to be 10% in
2005 and is projected to decrease gradually thereafter until it reaches 5% in
2012. Changing the assumed rate of increase in the prescription drug cost by one
percentage point in each year would not have a significant effect on the
accumulated postretirement benefit obligation. The Company's program to fund
certain insurance premiums for retirees of one of its divisions has a defined
dollar benefit and is therefore unaffected by increases in health care costs.
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation at December 31, 2004 and 2003, was 6% and
6 1/4%, respectively.

NOTE 8 -- INCOME TAXES

      Income taxes are accounted for in accordance with Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes." The Company

                                     - 20 -
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

files a consolidated federal income tax return with its wholly-owned subsidiary.
Deferred tax assets are reduced by a valuation allowance if, based on the weight
of available evidence, it is more likely than not that some portion or all of
the deferred tax assets will not be realized.

      The components of the provisions for income taxes related to continuing
operations in 2004, 2003, and 2002, are set forth below (dollar amounts in
thousands):

<TABLE>
<CAPTION>
                                                                YEARS ENDED DECEMBER 31
                                                            -------------------------------
                                                              2004        2003        2002
                                                            -------      -------    -------
<S>                                                         <C>          <C>        <C>
            Current:
                 Federal                                    $  (328)     $     -    $  (643)
                 State                                          132           76        105
                                                            -------      -------    -------
                                                               (196)          76       (538)
            Deferred:
                 Federal                                          -            -          -
                                                            -------      -------    -------

            Income tax provision (benefit)                  $  (196)     $    76    $  (538)
                                                            =======      =======    =======
</TABLE>

      The federal income tax benefit recorded during 2004, consisted of an
adjustment of previously recorded federal income tax liabilities.

      The federal income tax benefit recorded during 2002 resulted from a refund
of alternative minimum taxes totaling $643,000 that were paid in earlier
periods.

      Excluding the receipt of refunds of prior years' income taxes, income
taxes paid during 2004, 2003, and 2002 totaled $84,000, $103,000, and $80,000,
respectively.

      The difference between the Company's income tax provision (benefit) for
income (loss) from operations in 2004, 2003, and 2002 and the income taxes that
would have been payable at the federal statutory rate for income (loss) from
operations is reconciled as follows (dollar amounts in thousands):

<TABLE>
<CAPTION>
                                                                YEARS ENDED DECEMBER 31
                                                          -----------------------------------
                                                            2004         2003         2002
                                                          ---------    ---------    ---------
<S>                                                       <C>          <C>          <C>
            Federal statutory income tax provision        $   1,564    $    (501)   $    (241)
            Change in valuation allowance                    (1,542)         718         (409)
            Adjustment of tax liabilities                      (328)
            Nondeductible goodwill                                -           16            -
            State income taxes, net of federal benefit           87           50           78
            Other                                                23         (207)          34
                                                          ---------    ---------    ---------

                Income tax provision (benefit)            $    (196)   $      76    $    (538)
                                                          =========    =========    =========
</TABLE>

                                     - 21 -
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table sets forth the Company's deferred tax assets and deferred
tax liabilities at December 31, 2004 and 2003 (dollar amounts in thousands):

<TABLE>
<CAPTION>
                                                                                     DECEMBER 31
                                                                                ---------------------
                                                                                  2004         2003
                                                                                --------    ---------
<S>                                                                             <C>         <C>
             Deferred tax assets:
                  Net operating losses and tax credit carryforwards:
                      Federal net operating losses                              $  5,566    $   6,714
                      State net operating losses                                   1,852        1,942
                      Federal alternative minimum taxes                              864          864
                      Investment tax credit                                          100          100
                      Other tax credit                                                81           81
                                                                                --------    ---------
                           Total tax carryforwards                                 8,463        9,701
                  Deductible temporary differences:
                      Impairment of long-lived assets                                693          693
                      Accounts receivable and inventory reserves                     470          520
                      Tax inventory over book                                        193          159
                      Compensation accruals                                          542          318
                      Other accruals                                                 398          381
                      Other                                                          129          118
                                                                                --------    ---------
                           Total deferred tax assets                              10,888       11,890
                  Valuation allowance                                             (8,121)      (8,925)
                                                                                --------    ---------
                           Net deferred tax assets                                 2,767        2,965
             Deferred tax liabilities:
                  Tax over book depreciation                                       2,767        2,965
                                                                                --------    ---------

                           Net deferred taxes                                   $      -    $       -
                                                                                ========    =========
</TABLE>

      During 2004, the Company's valuation allowance decreased by $804,000,
primarily due to the net income reported by the Company for calendar 2004.

      At December 31, 2004, the Company had net operating loss carryforwards for
federal income tax purposes of $16,370,000, which expire in the years 2005
through 2022, alternative minimum tax net operating loss carryforwards of
$7,838,000, which can be used to reduce future taxable income for purposes of
calculating alternative minimum taxable income, if any, without any time
limitation, and alternative minimum tax credit carryforwards of $864,000, which
can be used to offset future payments of regular federal income taxes, if any,
without any time limitation.

                                     - 22 -
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

      The expiration of the Company's federal net operating loss carryforwards
by year of expiration is set forth in the table below (dollar amounts in
thousands):

<TABLE>
<S>                                                            <C>
             2005                                              $      319
             2006                                                   3,473
             2007                                                   1,246
             2008                                                       -
             2009                                                       -
             Thereafter                                            11,332
                                                               ----------
                  Total federal net operating loss
                    carryforwards                              $   16,370
                                                               ==========
</TABLE>

NOTE 9 -- 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. During 2004, the Company
committed to a plan to discontinue the operations of its die casting division,
which is one of two operating units that comprise the Metals Group segment. In
the following table, information related to the die casting division has been
excluded. The Rubber Group and the Metals Group conduct substantially all of
their business in the continental United States. At December 31, 2004,
approximately 34.9% of the Company's employees were subject to collective
bargaining agreements that expire in 2007 and 2008.

      MEASUREMENT OF SEGMENT PROFIT OR LOSS

      The Company evaluates its performance based upon several measures,
including income from operations, EBITDA, and asset utilization.

      The accounting policies of the Company's operating segments are the same
as those described in Note 1, "Summary of Significant Accounting Policies,"
except that debt, deferred financing expenses, interest expense, and income tax
expense are recorded at the Corporate Office. Also, Corporate Office expenses
that are not considered direct expenses of the Rubber Group or the Metals Group
are not allocated to those segments.

      FACTORS MANAGEMENT USED TO IDENTIFY REPORTABLE SEGMENTS

      Although all of the Company's production facilities are similar
manufacturing operations, selling to similar customers, the Company presents
financial data for the Rubber Group and the Metals Group because of the
significant difference in financial performance between those businesses.

      INDUSTRY CONCENTRATION; RELIANCE ON LARGE CUSTOMERS AND CREDIT RISK

      During 2004, 2003, and 2002, net sales from continuing operations to
customers in the automotive industry totaled $97,902,000, $97,146,000, and
$96,458,000, respectively, which represented 88.7%, 85.8%, and 85.9%,
respectively, of the Company's net sales. At December 31, 2004 and 2003,

                                     - 23 -
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

accounts receivable from automotive industry customers totaled $15,248,000 and
$15,166,000, respectively. The Company operates primarily in the domestic
automotive market, which has been characterized by intense price competition and
increasing customer requirements for quality and service. These factors, among
others, may have a sudden and an adverse affect on the operating results and
financial condition of the Company's customers, and, in turn, the collectibility
of the Company's accounts receivable from those customers. The Company attempts
to mitigate this risk of loss through ongoing evaluations of automotive market
conditions, examinations of customer financial statements, and discussions with
customer management as deemed necessary. Provisions for credit losses are based
upon historical experience and such ongoing evaluations of the financial
condition of the Company's customers. The Company generally does not require
collateral from its customers to support the extension of trade credit. At
December 31, 2004 and 2003, the Company had reserves for credit losses of
$537,000 and $545,000, respectively. At December 31, 2004 and 2003, accounts
receivable from automotive industry customers of discontinued operations totaled
$1,227,000 and $1,552,000, respectively.

      During 2004, 2003, and 2002, the Company's net sales to Delphi
Corporation, totaled $23,413,000, $24,591,000, and $25,181,000. Substantially
all of the Company's net sales to Delphi during the three years ended December
31, 2004, were made by the Rubber Group. Sales to Delphi in 2004, 2003, and
2002, represented 21.2%, 21.7%, and 22.4%, respectively, of the Company's net
sales and 23.5%, 23.4%, and 25.1%, respectively, of the Rubber Group's net
sales. At December 31, 2004, 2003, and 2002, accounts receivable due from Delphi
represented 23.8%, 23.3%, and 26.8% of the Company's total trade receivable
balances. During 2004 and 2003, net sales to General Cable Corporation totaled
$11,636,000 and $11,802,000 or 10.5% and 10.4%, respectively, of the Company's
net sales, and 11.7% and 11.4%, respectively, of the Rubber Group's net sales.
No other customer accounted for more than 10% of the Company's net sales during
2004, 2003, or 2002. In 2004, the three largest customers of the Rubber Group,
including Delphi, accounted for 44.6% of the Rubber Group's net sales and, at
December 31, 2004, 43.2% of the Company's total trade receivable balances. In
2004, the three largest customers of the continuing operations of the Metals
Group accounted for 61.3% of the Metals Group's net sales and, at December 31,
2004, 9.3% of the Company's total trade receivable balances. Loss of a
significant amount of business from Delphi, General Cable, or any of the
Company's other large customers would have a material adverse effect on the
Company if such business were not substantially replaced by additional business
from existing or new customers. In addition, the Company's results of operations
could be materially adversely affected if Delphi, General Cable, or any of the
Company's other large customers experience financial difficulties that cause
them to delay or fail to make payments for goods sold to them.

      Net sales to Delphi of connector seals for automotive wiring harnesses
totaled $19,802,000, $20,227,000, and $21,147,000 during 2004, 2003, and 2002,
respectively. Since July 2001, substantially all of the connector seals that the
Company has sold to Delphi were sold pursuant to a supply agreement that was
scheduled to expire on December 31, 2004.

      During 2004, Delphi advised the Company that it planned to insource during
2005, approximately 36 high-volume connector seals that were then being produced
by the Company's Lexington Connector Seals division, and asked the Company to
provide a proposal to continue to manufacture the remaining connector seals then
being supplied to Delphi by the connector seals division. On November 22, 2004,
Delphi and the connector seals division entered into an agreement pursuant to
which Delphi agreed to purchase from the division 100% of its requirements
through December 31, 2009, for all connector seals not scheduled to be insourced
and 100% of its requirements through various dates in 2005 for the connector
seals scheduled to be insourced. The Company estimates that if the 36 connector
seals had been

                                     - 24 -
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

in-sourced by Delphi on January 1, 2004, its net sales and income from
operations for 2004 would have been reduced by approximately $8,624,000 and
$840,000, respectively. Pursuant to the agreement, the connector seals division
will receive price increases effective January 1, 2005 on the remaining parts
supplied to Delphi, which are expected to offset a significant portion of the
profit lost due to the in-sourcing. The Company is currently restructuring the
operations of the connector seals division to reduce expenses and further
mitigate the impact of the reduced volume. The restructuring of the connector
seals division will include, among other things, the closing of one of its
existing manufacturing facilities.

      CORPORATE OFFICE

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

                                     - 25 -
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

      SEGMENT FINANCIAL DATA

      Information relating to the Company's operating segments and the Corporate
Office for 2004, 2003, and 2002 is summarized below (dollar amounts in
thousands):

<TABLE>
<CAPTION>
                                                        YEARS ENDED DECEMBER 31
                                                ---------------------------------------
                                                  2004           2003           2002
                                                ---------     ----------     ----------
<S>                                             <C>           <C>            <C>
NET SALES:
    Rubber Group                                $  99,565     $  103,243     $   98,880
    Metals Group                                   10,788          9,988         13,483
                                                ---------     ----------     ----------
         Total net sales                        $ 110,353     $  113,231     $  112,363
                                                =========     ==========     ==========
INCOME (LOSS) FROM OPERATIONS (1):
    Rubber Group                                $   9,865     $   10,026     $   10,765
    Metals Group                                   (2,788)        (1,840)        (2,099)
                                                ---------     ----------     ----------
         Subtotal                                   7,077          8,166          8,666
    Corporate Office                               (2,411)        (2,679)        (2,464)
                                                ---------     ----------     ----------
         Total income from operations           $   4,666     $    5,507     $    6,202
                                                =========     ==========     ==========
DEPRECIATION AND AMORTIZATION (2):
    Rubber Group                                $   6,929     $    7,121     $    7,786
    Metals Group                                    1,476          1,796          2,408
                                                ---------     ----------     ----------
         Subtotal                                   8,405          8,919         10,194
    Corporate Office                                   39             38             53
                                                ---------     ----------     ----------
         Total depreciation and amortization    $   8,444     $    8,955     $   10,247
                                                =========     ==========     ==========
CAPITAL EXPENDITURES (3):
    Rubber Group                                $   5,277     $    4,873     $    3,690
    Metals Group                                      773            799            319
                                                ---------     ----------     ----------
         Subtotal                                   6,050          5,672          4,009
    Corporate Office                                    7             14              4
                                                ---------     ----------     ----------
         Total capital expenditures             $   6,057     $    5,686     $    4,013
                                                =========     ==========     ==========
ASSETS:
    Rubber Group                                $  60,377     $   61,953     $   64,439
    Metals Group                                    9,872         10,231         11,702
                                                ---------     ----------     ----------
         Subtotal                                  70,249         72,184         76,141
    Corporate Office                                3,352          4,111          5,252
    Discontinued operations                         4,776          7,392         10,752
                                                ---------     ----------     ----------
         Total assets                           $  78,377     $   83,687     $   92,145
                                                =========     ==========     ==========
</TABLE>

    (1) During 2003, the loss from operations at the Metals Group includes a
        provision of $47,000 to write off goodwill. During 2002, the loss from
        operations at the Metals Group includes costs of $609,000 incurred to
        close the Metals Group's metal machining facility in Arizona, and
        $1,290,000 of other losses related to the Arizona facility.

    (2) Excludes amortization of deferred financing expenses, which totaled
        $1,098,000, $610,000, and $440,000, during 2004, 2003, and 2002,
        respectively, and which is included in interest expense in the
        consolidated financial statements.

    (3) Capital expenditures for 2004, included $144,000 of equipment
        purchased under capitalized lease obligations and $198,000 of equipment
        acquired with seller-provided financing. Capital expenditures for 2003
        included $720,000 of equipment purchased under capital lease
        obligations. Capital expenditures for 2002 included $365,000 of
        equipment purchased under capitalized lease obligations and $247,000 of
        equipment acquired with seller-provided financing.

                                     - 26 -
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 -- NET INCOME (LOSS) PER COMMON SHARE

      The calculations of basic and diluted net income (loss) per common share
for 2004, 2003, and 2002, 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, which
were issued on December 18, 2003, were not dilutive. As a result, the weighted
average number of outstanding common shares used in the calculation of net
income (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.

      During 2003, the Company's loss per share calculation reflected dividends
on the Series B Preferred Stock totaling $106,000. If the Company had paid
dividends on the Series B Preferred Stock during 2002, the Company's net loss
per share would have been increased by one cent per share. Dividends and
redemptions accruing on the Series B preferred stock subsequent to the adoption
of FAS 150 by the Company on July 1, 2003, are classified as interest expense in
the Company's consolidated statements of operations.

<TABLE>
<CAPTION>
                                                                                 YEARS ENDED DECEMBER 31
                                                                             -------------------------------
                                                                               2004       2003        2002
                                                                             --------   --------    --------
<S>                                                                          <C>        <C>         <C>
               Numerator for basic and diluted earnings per share:

                    Income (loss) from continuing operations before
                      deducting preferred stock dividends                    $  4,798   $ (1,549)   $   (170)
                    Less: preferred stock dividends                                 -        106           -
                                                                             --------   --------    --------
                    Income (loss) from continuing operations after
                      deducting preferred stock dividends                       4,798     (1,655)       (170)
                    Loss from discontinued operations                          (3,208)    (4,653)     (1,397)
                    Cumulative effect of a change in accounting principle           -       (247)          -
                                                                             --------   --------    --------
                    Net income (loss) applicable to common stockholders      $  1,590   $ (6,555)   $ (1,567)
                                                                             ========   ========    ========
               Denominator - weighted average shares outstanding                4,932      4,832       4,828
                                                                             ========   ========    ========

               Basic and diluted income (loss) per share of common stock:

                    Continuing operations                                    $   0.97   $  (0.35)   $  (0.03)
                    Discontinued operations                                     (0.65)     (0.96)      (0.29)
                    Cumulative effect of a change in accounting principle           -      (0.05)          -
                                                                             --------   --------    --------
                    Net income (loss)                                        $   0.32   $  (1.36)   $  (0.32)
                                                                             ========   ========    ========
</TABLE>

                                     - 27 -
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 -- COMMITMENTS AND CONTINGENCIES

      PURCHASE COMMITMENTS

      At December 31, 2004, the Company had outstanding commitments to purchase
equipment of $341,000.

      LEASES

      The Company is lessee under various operating leases relating to storage
and office space, temporary office units, and equipment. Total rent expense
under operating leases from continuing operations aggregated $440,000, $395,000,
and $419,000 for 2004, 2003, and 2002, respectively. At December 31, 2004,
future minimum lease commitments under noncancelable operating leases from
continuing operations totaled $226,000, $109,000, and $54,000 for 2005, 2006,
and 2007, respectively. Commitments subsequent to 2007 are not significant.

      LEGAL ACTIONS

      The Company is subject to various claims and legal proceedings covering a
wide range of matters that arise in the ordinary course of its business
activities. It is the Company's policy to record accruals for such matters when
a loss is deemed probable and the amount of such loss can be reasonably
estimated. The various actions to which the Company is or may in the future be a
party are at various stages of completion. Although there can be no assurance as
to the outcome of existing or potential litigation, the Company believes, based
upon the information currently available to it, that the outcome of such actions
will not have a material adverse effect upon its financial position.

      OTHER

      The Company maintains insurance coverage for certain aspects of its
business and operations. Based on the Company's evaluation of the various risks
to which it may be exposed, the Company has elected to retain a portion of the
potential losses that it could experience in the future through the use of
various deductibles, limits, and retentions. These forms of self-insurance
subject the Company to possible future liability for which it is partially or
completely uninsured. Although there can be no assurance that it will be
successful in its efforts, the Company attempts to limit future liability
through, among other things, the ongoing training and education of its
employees, the implementation of safety programs, the ongoing testing and
evaluation of the safety and suitability of its workplace environments, the
development of sound business practices, and the exercise of care and judgment
in the negotiation of contracts.

NOTE 12 -- RELATED PARTIES

      The Chairman of the Board and the President of the Company, Michael A.
Lubin and Warren Delano, are the Company's two largest stockholders, with
beneficial ownership of 32.7% and 28.3%, respectively, of the Company's common
stock. They are also the holders of the 13% Junior Subordinated Note, and,
together with affiliates and associates, the holders of $2,831,000 principal
amount of 12% Senior Subordinated Notes. In December 2003, Messrs. Delano and
Lubin converted accrued interest of $235,000 on the Company's junior
subordinated notes into 103,731 shares of common stock.

                                     - 28 -
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

      In 2004, Messrs. Delano and Lubin, through an investment banking firm of
which they are the only partners, were paid $700,000 to provide management and
investment banking services. Additionally, Messrs. Delano and Lubin may receive
incentive compensation tied to the Company's operating performance and other
compensation for specific transactions completed by the Company with the
assistance of Messrs. Lubin and Delano. The Company also has agreed to reimburse
their firm for certain out-of-pocket expenses. During each of 2003 and 2002, the
Company paid the Messrs. Lubin and Delano fees of $500,000. During 2004, 2003,
and 2002, the Company reimbursed their firm for expenses of $163,000, $200,000,
and $196,000, respectively.

      For more information on the compensation of Messrs. Delano and Lubin,
refer to the Company's proxy statement to be issued in connection with its
Annual Meeting of Stockholders and to be filed during April, 2005.

NOTE 13 -- GAIN ON THE REPURCHASE OF DEBT

      During 2004, the Company recognized $8,598,000 of aggregate gains on the
repurchase of its debt.

      REPURCHASE OF 10 1/2% SENIOR, UNSECURED NOTE

      During the second quarter of 2004, the Company recognized a pre-tax gain
of $3,252,000 on the repurchase of its $7,500,000 10 1/2% senior, unsecured note
and all accrued interest thereon. Although the Company repurchased the senior,
unsecured note on December 18, 2003, the gain on the repurchase of the senior,
unsecured note was deferred and recorded, at December 31, 2003, in current
liabilities as "deferred gain on repurchase of debt" because the agreement
governing the repurchase of the note provided that the claim could be reinstated
if certain events occurred prior to April 20, 2004. Because none of these events
occurred prior to April 20, 2004, the Company recognized the pre-tax gain during
the three-month period ended June 30, 2004.

      REPURCHASE OF 12% SENIOR SUBORDINATED NOTES

      On October 1, 2004, the Company repurchased a total of $8,264,000
principal amount of its 12% Senior Subordinated Notes plus interest accrued
thereon at an aggregate cost of $2,892,000. After the write-off of deferred
financing expenses of $192,000, the Company realized a pre-tax gain on the
repurchase of $5,346,000. The purchased 12% Senior Subordinated Notes have been
cancelled and retired.

                                     - 29 -
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 -- DISCONTINUED OPERATIONS

      During 2002 and 2003, the Company's die casting division, which was one of
two operating units that comprised the Company's Metals Group segment,
experienced negative gross profit margins. At December 31, 2003, the Company
reassessed the division's business and reduced its overall expectations for the
division's future financial performance. As a result, the Company reviewed the
long-lived assets of the die casting division for impairment as of December 31,
2003, under the provisions of Statement of Financial Accounting Standards
No.144, "Accounting for Impairment or Disposal of Long-Lived Assets" ("FAS
144"). The Company determined that the undiscounted, projected cash flow of the
division was less than the carrying value of the long-lived assets being tested.
As a result, the Company concluded that the long-lived assets of this division,
which had a carrying value of $7,131,000, were impaired and the Company wrote
them down to their estimated fair value of $4,704,000, recording a non-cash,
pre-tax impairment charge of $2,427,000 at December 31, 2003. Fair value was
based primarily on independent appraisals of the long-lived assets.

      In September 2004, as a result of continued poor operating performance and
reduced expectations for the division's future financial performance, the
Company committed to a plan to discontinue the operations of the die casting
division. In the fourth quarter of 2004, the Company initiated a program to sell
the assets or business of the die casting division. If a sale of the entire
business does not occur during the first half of 2005, the Company plans to
close the operations of the die casting division during the second quarter of
2005, after fulfilling certain agreed-upon customer purchase orders.
Accordingly, pursuant to FAS 144, the carrying value of the assets of the die
casting division have been adjusted to the Company's estimate of the fair value
of such assets, which approximates the projected proceeds to be realized on the
disposition of the assets, net of estimated selling costs. As a result, the
Company recognized a pretax impairment charge of $1,595,000 during 2004.

      In accordance with Financial Accounting Standards Board Emerging Issue
Task force Abstract No. 87-24, "Allocation of Interest to Discontinued
Operations" ("EITF 87-24"), the Company has allocated interest to the
discontinued operations based on the debt that would be required to be repaid
using management's estimate of the proceeds to be realized on the anticipated
sale of the die casting assets. No allocation was made to the die casting
division for any other interest or for any corporate office expenses. Interest
expense allocated to the die casting division totaled $241,000, $69,000, and
$62,000 for 2004, 2003, and 2002, respectively.

                                     - 30 -
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

      The following table summarizes certain operating data of the die casting
division for 2004, 2003, and 2002 (dollar amounts in thousands):

<TABLE>
<CAPTION>
                                                                          YEARS ENDED DECEMBER 31
                                                                      ------------------------------
                                                                        2004       2003       2002
                                                                      --------   --------   --------
<S>                                                                   <C>        <C>        <C>
Net sales                                                             $  9,096   $  8,385   $ 12,489
                                                                      ========   ========   ========
     Loss from operations before asset impairment charge              $ (1,372)  $ (1,996)  $ (1,335)
Impairment of long-lived assets                                         (1,595)    (2,427)         -
Impairment of goodwill                                                       -       (161)         -
                                                                      --------   --------   --------

     Loss from operations of discontinued operations                    (2,967)    (4,584)    (1,335)

Allocated interest expense                                                 241         69         62
                                                                      --------   --------   --------

Loss before income tax                                                  (3,208)    (4,653)    (1,397)

Income tax                                                                   -          -          -
                                                                      --------   --------   --------

Loss from discontinued operations                                       (3,208)    (4,653)    (1,397)

Add back: depreciation and amortization                                    666      1,324      1,618
             interest expense                                              241         69         62
                                                                      --------   --------   --------

EBITDA from discontinued operations                                   $ (2,301)  $ (3,260)  $    283
                                                                      ========   ========   ========
</TABLE>

      The following table sets forth the assets and liabilities of the die
casting division in our consolidated balance sheets at December 31, 2004 and
2003 (dollar amounts in thousands):

<TABLE>
<CAPTION>
                                                                                    DECEMBER 31
                                                                                --------------------
                                                                                  2004        2003
                                                                                --------    --------
<S>                                                                             <C>         <C>
ASSETS:

Current assets:
     Cash                                                                       $      -    $     11
     Accounts receivable, net                                                      1,056       1,394
     Inventories, net                                                                695         894
     Prepaid expenses and other current assets                                       240         388
     Other assets, net                                                                31         267
                                                                                --------    --------
              Current assets                                                       2,022       2,954
Plant and equipment, net (1)                                                       2,754       4,438
                                                                                --------    --------
              Assets of discontinued operations                                 $  4,776    $  7,392
                                                                                ========    ========

LIABILITIES (2):

Current liabilities:
     Accounts payable                                                           $    615    $    516
     Accrued expenses                                                                179         166
     Other liabilities                                                                 -          93
                                                                                --------    --------
              Liabilities of discontinued operations                            $    794    $    775
                                                                                ========    ========
</TABLE>

                                     - 31 -
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)   Under the terms of our secured loan agreements, we are required to use
      proceeds from the sale of property, plant and equipment to pay down the
      indebtedness collateralized by such property, plant, and equipment.

(2)   Liabilities do not include debt for money borrowed by us that is secured
      by assets of the division.

NOTE 15 -- QUARTERLY FINANCIAL DATA (UNAUDITED)

      Quarterly unaudited financial data for the eight fiscal quarters ended
December 31, 2004, is set forth below (dollar amounts in thousands, except per
share amounts).

<TABLE>
<CAPTION>
                                                                         QUARTERS ENDED 2004
                                                            ---------------------------------------------
                                                            MAR. 31      JUNE 30     SEPT. 30    DEC. 31
                                                            --------     --------    --------    --------
<S>                                                         <C>          <C>         <C>         <C>
Net sales                                                   $ 30,607     $ 29,474    $ 25,880    $ 24,392
                                                            ========     ========    ========    ========
Gross profit                                                $  4,146     $  3,093    $  2,817    $  1,993
                                                            ========     ========    ========    ========
Income (loss) from continuing operations                    $    103     $  2,139    $ (1,194)   $  3,750
Loss from discontinued operations                               (259)        (857)     (1,525)       (567)
                                                            --------     --------    --------    --------
Net income (loss)                                           $   (156)    $  1,282    $ (2,719)   $  3,183
                                                            ========     ========    ========    ========

Basic and diluted income (loss) per share of
 common stock:
    Continuing operations                                   $   0.02     $   0.42    $  (0.25)   $   0.76
    Discontinued operations                                    (0.05)       (0.16)      (0.30)      (0.11)
                                                            --------     --------    --------    --------
    Net income (loss)                                       $  (0.03)    $   0.26    $  (0.55)   $   0.65
                                                            ========     ========    ========    ========
</TABLE>

<TABLE>
<CAPTION>
                                                                         QUARTERS ENDED 2003
                                                            ---------------------------------------------
                                                             MAR. 31     JUNE 30     SEPT. 30    DEC. 31
                                                            --------     --------    --------    --------
<S>                                                         <C>          <C>         <C>         <C>
Net sales                                                   $ 29,949     $ 28,925    $ 26,551    $ 27,806
                                                            ========     ========    ========    ========
Gross profit                                                $  3,853     $  3,700    $  2,334    $  3,571
                                                            ========     ========    ========    ========
Income (loss) from continuing operations                    $    158     $    (65)   $ (1,262)   $   (380)
Loss from discontinued operations                               (327)        (609)       (454)     (3,263)
Cumulative effect of a change in accounting principle              -            -        (247)          -
                                                            --------     --------    --------    --------
Net income (loss)                                           $   (169)    $   (674)   $ (1,963)   $ (3,643)
                                                            ========     ========    ========    ========

Basic and diluted income (loss) per share of
  common stock
    Continuing operations                                   $   0.02     $  (0.02)   $  (0.26)   $  (0.10)
    Discontinued operations                                    (0.06)       (0.12)      (0.10)      (0.67)
    Cumulative effect of a change in accounting
      principle                                                    -            -       (0.05)          -
                                                            --------     --------    --------    --------
    Net income (loss)                                       $  (0.04)    $  (0.14)   $  (0.41)   $  (0.77)
                                                            ========     ========    ========    ========

</TABLE>

      Results of the discontinued operations for the third and fourth quarters
of 2004, included non-cash, pre-tax impairment charges of $928,000 and $667,000,
respectively, to reduce the carrying value of the assets of the discontinued die
casting division to management's estimate of the current fair value of such
assets, which approximates the projected proceeds to be realized on the
disposition of the assets, net of selling costs.

                                     - 32 -
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

      Results of the discontinued operations for the fourth quarter of 2003,
included a non-cash, pre-tax impairment charge of $161,000 to write off its
unamortized goodwill and a non-cash, pre-tax charge of $2,427,000 to write down
to fair value the long-lived assets of the discontinued die casting division.

                                     - 33 -
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 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)

April 5, 2005               By: /s/ Dennis J. Welhouse
                                ------------------------------------------
                                Dennis J. Welhouse, Senior Vice President,
                                 Chief Financial Officer, and Secretary

                                     - 34 -