UNITED STATES
  SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549

FORM 10-K

(MARK ONE)


|   |                                                                                           
|-- | ------------------------------------------------------------------------------------------
|x  | ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
  SECURITIES EXCHANGE ACT OF 1934          
|   | For the
  fiscal year ended December 31, 2005                                             
|OR
|o  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
  THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER 001-12127

EMPIRE RESOURCES, INC.(EXACT
NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

|                                                                 |  |                                     
|---------------------------------------------------------------- |  | ------------------------------------
|DELAWARE                                                         |  | 22-3136782                          
|(State or Other Jurisdiction of Incorporation or
  Organization) |  | (I.R.S. Employer Identification No.)
|                                                                 |  |                                     
|One Parker Plaza                                                 |  |                                     
|Fort Lee, New Jersey                                             |  | 07024                               
|Address
  of Principal Executive Offices)                        |  | (Zip code)                          

201 944-2200(Registrants Telephone Number,
Including Area Code)

Securities registered pursuant to Section 12
(b) of the Act:

|                                        |                     |                         |  |  |                                           | 
|--------------------------------------- | ------------------- | ----------------------- |  |  | ----------------------------------------- | 
|                                        | Title
of each class |                         |  |  | Name
of each exchange on which registered | 
|                                        |                     |                         |  |  |                                           | 
|                                        |                     |                        
|Common
Stock, par value $0.01 per share |                     | American
Stock Exchange

Securities registered pursuant to Section 12 (g) of the Act: None

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 o

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 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. o

Indicate
by check mark whether the registrant is an accelerated filer (as defined in
Exchange Act Rule 12b-2) Yes o   No x

The
aggregate market value of the voting and non-voting common stock of the
registrant held by non-affiliates as of June 30, 2005 (the last business day of
the registrants most recently completed second fiscal quarter) was $38.3
million. Based upon the closing price of the registrants common stock on the
American Stock Exchange as of such date. This calculation excludes shares held
by each officer and director of the registrant and any person that owns 5% or
more of the registrants outstanding common stock. This determination of
affiliate status is not necessarily a conclusive determination for all other
purposes.

The
number of shares of common stock outstanding as of March 22, 2006, was
9,743,184 shares.

DOCUMENTS INCORPORATED BY REFERENCE:

Certain portions of the
registrants definitive proxy statement pursuant to Regulation 14A of the
Securities Exchange Act of 1934 in connection with the 2006 annual meeting of
shareholders of the registrant are incorporated by reference into Part III of
this Report.

---

EMPIRE RESOURCES, INC.
FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005
INDEX

10-K Part
  and Item No.



PagePart IItem 1

Business

4Item 1A

Risk Factors

9Item 2

Properties

12Item 3

Legal Proceedings

12Item 4

Submission of Matters to a Vote of Security Holders

12Part IIItem 5

Market for Common Equity, Related Stockholder Matters and Issuer
  Purchases of Equity Securities

13Item 6

Selected Financial Data

15Item 7

Managements Discussion and Analysis of Financial Condition and
  Results of Operation

16Item 7A

Quantitative and Qualitative Disclosures About Market Risk

20Item 8

Financial Statements

21Item 9

Changes in and Disagreements With Accountants on Accounting and
  Financial Disclosure

21Item 9A

Controls and Procedures

21Item 9B

Other Information

21Part IIIItem 10.

Directors and Executive Officers of the Registrant

22Item 11.

Executive Compensation

22Item 12.

Security Ownership of Certain Beneficial Owners and Management and
  Related Stockholder Matters

22Item 13.

Certain Relationships and Related Transactions

22Item 14.

Principal Accountant Fees and Services

22Part IVItem 15.

Exhibits and Financial Statement Schedules

23Signatures



26PART I

When
used in this report, the terms Company, we, our, and us refers to
Empire Resources, Inc. and its subsidiaries, consolidated for purposes of the
Companys financial statements.

Important Information Regarding Forward
Looking Statements

Certain matters discussed under the captions
Business, Managements Discussion and Analysis of Financial Condition and
Results of Operations, Quantitative and Qualitative Disclosures About Market
Risk and elsewhere in this Annual Report on Form 10-K and the information
incorporated by reference in this report may constitute forward-looking
statements for purposes of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

You can identify forward-looking statements
by the use of the words believe, expect, anticipate, intend, estimate,
assume, will, should, and other expressions which predict or indicate
future events or trends and which do not relate to historical matters. You
should not rely on forward-looking statements, because they involve known and
unknown risks, uncertainties and other factors, some of which are beyond the
control of the Company. These risks, uncertainties and other factors may cause
the actual results, performance or achievements of the Company to be materially
different from the anticipated future results, performance or achievements
expressed or implied by the forward-looking statements.

Some of the factors that might cause these
differences include the following: changes in general, national or regional
economic conditions; an act of war or terrorism, or a natural catastrophe that
disrupts international shipping; changes in laws, regulations and tariffs;
changes in the size and nature of the Companys competition; the imposition of
anti-dumping duties on the products imported by the Company; changes in
interest rates, foreign currencies or spot prices of aluminum; loss of one or
more of the Companys principal suppliers or key executives; increased credit
risk from customers; failure of the government to renew the generalized system
of preference, which provides preferential tariff treatment for certain of the
Companys imports; failure of the Company to grow internally or by acquisition
and to integrate acquired businesses; failure to improve operating margins and
efficiencies; and changes in the assumptions used in making such
forward-looking statements.

You should carefully review all of these
factors, and you should be aware that there may be other factors that could
cause these differences, including, among others, the factors listed under
Risk Factors, beginning on page [9]. Readers should carefully review the
factors described under Risk Factors and should not place undue reliance on
our forward-looking statements.

These forward-looking statements were based
on information, plans and estimates at the date of this report, and we
undertake no obligation to update any forward-looking statement to reflect
changes in underlying assumptions or factors, new information, future events or
other changes.

3

ITEM 1.
BUSINESSOverview

We
are engaged in the purchase, sale and distribution of principally aluminum
semi-finished products to a diverse customer base located throughout the United
States and Canada, Europe, Australia and New Zealand. We sell our products
through our own marketing and sales personnel and our independent sales agents who
are located in North America and in Europe and who receive commissions on
sales. We purchase our products from suppliers located throughout the world.
One supplier, Hulett Aluminium Ltd., furnished approximately 54% of our
products in 2005. We do not typically purchase inventory for stock. Instead, we
place orders with our suppliers based upon orders that we have received from
our customers.

Growth Strategy

Our
strategy for growth consists of the following key elements:

Provide
Customers with a High Level of Service and Cost Effective, Quality Products.We
work closely with our customers to understand their specific requirements. This
enables us to provide each customer with cost-effective, quality materials
matching the customers particular needs. We also provide various ancillary
services to our customers, such as


arranging
  for products to be stored in warehouse facilities for release to them on a
  just-in-time delivery basis,
providing
  them with timely information about market trends and product development, and
upon their
  request, arranging for subsequent metal processing or finishing services.Expand Volumes and Product Breadth with Existing
Suppliers and Customers.We continually seek to build on our market
knowledge. We try to maintain a current understanding of our suppliers
production capabilities and of our customers needs and markets. This enables
us to recognize opportunities to introduce new product lines to our customers
and to increase volume from our suppliers.

Strengthen and Expand Our Supplier Relationships.We
endeavor to continue building our supply sources, both by expanding our
relationships with existing suppliers and by adding new suppliers. In
cultivating supplier relationships, we emphasize our combination of market
knowledge and customer base, which we believe makes us an effective marketing
channel for our suppliers. Conversely, we believe that our supplier
relationships position us to offer our customers greater quantities and a wider
range of products.

Provide Increasingly Efficient and Cost-Competitive
Handling and Delivery Services.We utilize our own warehouse and
distribution facility in Baltimore that serves the dual purpose of: (1)
providing depot/warehousing capacity for just-in-time delivery and (2)
providing handling capability and inventory control at the Baltimore port of
entry, our most active import location. This arrangement reduces freight and
handling expenses while increasing efficiency. It also

4

enables us to monitor
deliveries and serve customers more effectively. At the end of 2004, we
purchased a distribution and warehouse facility at 6900 Quad Avenue, Baltimore,
Maryland. This building was upgraded and put into service in the fourth quarter
of 2005.

Provide
Additional Products & Value Added Services. In the fall of 2004,
we purchased a used aluminum extrusion press. We have installed and are
completing the modernization of this press in our warehouse/distribution
facility in Baltimore, Maryland. We expect to begin the regular manufacturing
of aluminum extrusions in the new facility during the second quarter of 2006
and believe that some of our current customers are potential customers for our
extrusions production. We may also add capability to provide our customers with
additional value-added services (such as processing, manufacturing, finishing,
and or distribution services) through establishing joint venture arrangements
with existing service providers or by selectively making acquisitions.

The Industry

The
industry in which we operate is the sale and distribution of semi-finished
aluminum products. These products are manufactured worldwide by rolling and
extrusion facilities, many of which are owned by large integrated companies and
others by independent producers. The products we purchase are in turn sold to
varied metal working industries including automotive, housing, packaging, as
well as distributors.

Although
demand for aluminum products in the United States has been cyclical, over the
longer-term demand has continued to increase. We believe that this growth
reflects (1) general population and economic growth and (2) the advantages of
aluminum products, including light weight, high degree of formability,
resistance to corrosion and recyclability. According to CRU Monitor, an
industry publication, shipments in North America for mill aluminum products
during 2005 increased approximately 8% from shipments in 2004.

Our Products

During
the last three fiscal years, we have derived substantially all of our revenues
from the sale of semi-finished aluminum products. Semi-finished aluminum
products are produced by processing primary aluminum and/or aluminum scrap. A
product is considered semi-finished if it has not yet been converted into a
final end-product. Semi-finished aluminum products include aluminum sheet,
plate and foil, rod, bar and wire, extruded and cast products. We offer most of
these forms of semi-finished aluminum products to our customers. Demand for our
products is not seasonal.

Sales, Marketing and Services

We
endeavor to build our distribution within the aluminum industry by providing
customers with quality products, access to alternative sources of supply, and
customer service. We offer customers a range of services, including:


sourcing
  aluminum products from the appropriate supplier in order to meet pricing and
  delivery requirements;5


handling
  foreign exchange transactions for sales in local currency;
assuming responsibility
  for the shipment and timely delivery of the product to the customer;
assisting
  customers in identifying materials and matching their particular needs;
where
  necessary, arranging for subsequent metal processing and/or finishing
  services which may be required by the customer;
arranging
  for materials that have been ordered by a customer (and are subject to a firm
  purchase commitment) be stored at an appropriate warehouse for release to the
  customers on a just-in-time delivery basis; and
providing
  customers with information concerning market trends and product development.We
carefully monitor the timing and processing of orders to meet customers needs
and commit to deliver orders within a time-period mutually agreed with the
customer, generally within a 30-day window. We maintain constant and ongoing
communication with our suppliers in order to ensure that these delivery dates
are met and that customers are apprised of the delivery status of their orders.

We sell our products primarily through our
own marketing and sales
personnel. In addition, we sell our products through independent
sales agents located in North America and Europe who receive a commission on
sales. Our inventory generally represents material that has been
ordered by customers and is in transit or is being held pending delivery to
such customers.

Backlog

As
of December 31, 2005, the Company had a backlog of firm orders aggregating
approximately $88 million (as compared to $80 million as of December 31, 2004),
which represents orders received from customers and placed into production with
the Companys suppliers. The Company expects to fill and invoice substantially
all of the orders backlogged as of December 31, 2005 by June 30, 2006.

Suppliers

We
enjoy exclusive representation arrangements with several foreign mills. One
supplier, Hulett Aluminium Ltd, furnished approximately 54% of our products in
2005. See Item 7 beginning on page 16 for information about our relationship
with Hulett.

We
strive to maintain long-term relationships with our suppliers and to be a
significant distributor for them. As a result, we are often able to obtain
competitive pricing and to influence quality standards and delivery practices.

We
continuously work with our existing suppliers and explore other sources to
strengthen our position in the market. To this end, our services include:


serving as
  an integrated marketing, distribution, and service channel for export volume;
purchasing
  manufacturing capacity from suppliers in bulk;6


assuming
  responsibility for transporting the products that it purchases;
eliminating
  foreign currency risks for suppliers; and
ensuring
  prompt payment to suppliers for materials purchased.Customers

We
serve more than 200 customers in diverse industries, such as transportation,
automobile, housing, appliances and packaging. In 2005, our top ten customers
represented approximately 44% of our total revenues, with one customer, Ryerson
Tull, accounting for 14% of total revenues. These customers included seven
full-service distribution centers (i.e., distributors that have the capacity to
provide additional processing services), as well as producers of various
consumer and industrial products.

Our
customers are located throughout the United States and Canada and, to a lesser
extent, Australia, New Zealand and Europe. Our U.S. customer base is not
regional.

The
following table summarizes our revenues for the past three years by geographic
region.

Net Revenues (In thousands)2005

2004

2003United
  States

299,875

175,836

148,108Pacific Rim, Canada & Europe

58,601

36,714

36,308Total

358,476

212,550

184,416We
insure our accounts receivable against credit risk by purchasing credit
insurance. This insurance is generally subject to a 10% co-insurance provision
with respect to each claim, and there are limits on the amount of credit that
our insurance carrier will underwrite with respect to each customer. We may
decide in particular instances to exceed the limits granted by the credit
insurance provider.

Transportation

We
arrange for transportation and delivery of the products purchased by each
customer. When we purchase products from an overseas supplier, we accept
delivery either at the port in the suppliers home country or at the port of
destination. If we take delivery at a foreign port, we will generally arrange
for transportation to the port of destination on regularly scheduled
port-to-port, sea-going transportation. Upon delivery of the products at the
destination port, we use trucking and rail services to deliver the products to
our customers.

Competition

Our
principal competitors are North American aluminum producers, including Alcoa
Inc., who dominates the aluminum industry in North America. These companies are
significantly larger, have significantly greater financial resources, and are
active in significantly more areas of the aluminum products business than are
we, including mining, refining, smelting

7

and recycling.
These companies also have access to foreign material imported from their own
subsidiaries, which compete with us. We also compete with other importers and
agents that act for or purchase from foreign aluminum producers. Our principal
means of competition is customer service, and the ability to offer competitive
terms and product quality, including providing value-added services to our
customers and providing a range of product offerings. We believe that agents of
foreign mills are generally less capable of providing the same value-added
services to North American customers because these agents are generally captive
to a single foreign source and often lack the flexibility and range of product
offerings that we offer our customers. We also believe that by offering our
customers a full range of products from independent sources we enable our
customers to avoid dependency in an increasingly concentrated domestic supply
chain.

Employees

As
of December 31, 2005, we had approximately 50 employees, all of whom were
full-time employees. We also had independent sales representatives located in
the United States and in Europe. None of our employees are represented under a
collective bargaining agreement.

History

The
Company was incorporated in the State of Delaware in 1990 under the name
Integrated Technology USA, Inc. Until September 17, 1999, the Company was in
the business of designing, developing and marketing products for emerging
computer related markets.

On
September 17, 1999, the Company merged with Empire Resources, Inc. (Empire),
a distributor of value added, semi-finished aluminum products. Since the
merger, the Company has continued the aluminum business of Empire under the
name of Empire Resources, Inc.

In
conjunction with the merger, Empire Resources Pacific Ltd. (Empire-Pacific),
then an affiliate of Empire operating in Australia, became a wholly owned
subsidiary of the Company. Empire-Pacific acts as our sales agent in Australia
and New Zealand.

Available Information

We
maintain a website at www.empireresources.com. We make copies of our Annual
Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form
8-K and any amendments to those reports filed with or furnished to the
Securities and Exchange Commission (SEC) available to investors on or through
our website free of charge as soon as reasonably practicable after we have
electronically filed them with or furnished them to the SEC. Our code of
business conduct and ethics is available on our website. The
contents of our website do not constitute a portion of this report.

The
public may read and copy any materials filed by us with the SEC at the SECs
Public Reference Room, located at 450 Fifth Street, NW, Washington, DC 20549.
The public may obtain information on the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains a website
at which reports, proxy and information statements and other information
regarding issuers that file electronically with the SEC are available. This
website may be accessed at http://www.sec.gov.

8

ITEM 1A.
RISK FACTORSWe are Highly Dependent on a Few Suppliers.

We
purchased approximately 54% of our products from one supplier in 2005 and
approximately 80% from our three largest suppliers. Accordingly, the
termination or limitation by one or more of our largest suppliers of their
relationship with us could have a material adverse effect on our business and
results of operations. In addition, our loss of any one of our other suppliers
(or material default by any of them in its obligations to us) due to
bankruptcy, financial difficulties, expropriation, social unrest, destruction,
sabotage, strikes, acquisition by a person or entity unwilling to provide
products to us, or for any other reason, could have a material adverse effect
on our business.

Consolidation of Suppliers May Materially
Affect Our Operations.

During
the last several years, consolidations have been taking place among aluminum
suppliers. Although we have in the past successfully replaced suppliers lost as
a result of industry consolidations, there can be no assurance that we would be
able to replace the volume of production or the type of products supplied by
any of our current vendors if they were acquired or their operations terminated
or were interrupted.

We Are Highly Dependent on a Few Significant
Customers.

Our
sales are highly concentrated among a few customers. In 2005, 44% of our
revenues were derived from sales to 10 customers. One major customer accounted
for approximately 14% of our consolidated net sales for the year ended December
31, 2005. Over the last several years, there have been consolidations in the
industry that may increase our sales concentration and the related risks. Any
material reduction in sales to any of these customers could have a material
adverse effect on our business. Our sales contracts tend to be short term in
nature. We typically sell our products on monthly or quarterly customer
commitments.

Rising Interest Rates May Increase Our
Borrowing Costs.

Our
borrowings are primarily short-term Libor or money market based loans. If
interest rates rise, our cost of borrowing will increase and lower our
profitability. Higher interest rates may also adversely affect some of the
markets for our products, such as transportation, housing and commercial
construction.

We Are Dependent on Our Executive Officers.

We
are highly dependent on our executive officers, the loss of any of one of which
could have a significant adverse impact on our business. We maintain key man
life insurance on certain of our executives.

Our Supply Sources Are Subject to Substantial
Risks.

We
generally purchase aluminum products from foreign suppliers. Thus, our
operations could be materially and adversely affected by changes in economic, political
and social conditions in the countries where we currently purchase or may in
the future purchase such

9

products.
Among other things, changes in laws, regulations, or the interpretation
thereof, or restrictions on currency conversions and exports, could negatively
affect our business. Although the trend in the markets in which we operate for
our sourcing has been towards open markets and trade policies and the fostering
of private economic activity, no assurance can be given that the governments
will continue to pursue these policies or that such policies may not be
significantly altered, especially in the event of a change in the leadership,
or as a result of social or political upheaval or unforeseen circumstances
affecting economic, political or social life.

Changing Aluminum Prices Could Impact Our
Profit Margins.

We
rely on long-term relationships with our suppliers but generally have no
long-term, fixed-price purchase contracts. Instead we purchase at prevailing
market prices at the time orders are placed, typically with discounts for
quantity purchases. The aluminum industry is highly cyclical, and the prices
that we pay for aluminum and the prices we charge will be influenced by a
variety of factors outside of our control, including general economic
conditions (both domestic and international), competition, production levels,
import duties and other trade restrictions, and currency fluctuations.

Risk of Counterparty Defaults

In
order to minimize risk associated with fluctuations in foreign currency, and
commodity prices, we use financial instruments to hedge metal pricing and
foreign currency, as we deem appropriate for a portion of our purchase and
sales contracts. The risk of a counterparty default exists in fulfilling the
hedge contract. Should there be a counterparty default, we could be exposed to
losses on the original hedged contract or be unable to recover anticipated
gains from the transactions.

If Suppliers Fail to Provide Products of
Sufficient Quality Customer Relationships and Prices Could be Negatively
Affected.

Our
relationships with our customers depend, in part, on our ability to deliver
products of the quality specified by those customers. We obtain certifications
from our suppliers as to the quality of the products being supplied. However,
if the product is not of the quality certified or if a supplier fails to
deliver products we have ordered, we may be forced to buy products of the
specified quality from another source to fulfill the customers order. While we
would then be left with a claim against the supplier for any loss sustained by
us, we may not be able to bring these claims successfully, particularly in
foreign jurisdictions.

We Are Exposed to Credit Risk from Our
Customers.

We
do not require collateral for customer receivables. We have significant
balances owing from customers that operate in cyclical industries and under
leveraged conditions, which may impair our collection of these receivables. We
carry credit insurance with a 10% co-pay provision covering the majority of our
customers, and we have set specific limits on each customers receivables.
However, we sometimes elect to exceed these specific credit limits. Our failure
to collect a significant portion of the amount due on our receivables directly
from customers or through insurance claims (or other material default by
customers) could have a material adverse effect on our financial condition and
results of operations. In selected instances the co-pay may be increased.

10

Increased Tariffs Could Adversely Affect Our
Financial Condition.

During
2005, approximately 69% of our sales were of aluminum products from countries
that were considered developing countries whose exports were eligible for
preferential tariff treatment upon import into the United States under the
generalized system of preferences (GSP). There can be no assurance that any of
our suppliers will continue to be eligible for such preferential tariff
treatment or that the generalized system of preference will be renewed after it
expires on December 31, 2006. If the preferential tariff treatment of any of
our suppliers that are currently eligible for such treatment becomes
unavailable, then imports from such supplier may be subjected to a tariff, instead
of the duty-free treatment those imports now enjoy. To the extent these
increased costs could not be passed on to our customers, our profit margins
could be negatively affected. This could result in higher costs to us and have
a material adverse effect on our business, financial condition and results of
operations.

Antidumping and Other Duties Could be Imposed
on Us, Our Suppliers and Our Products.

The
imposition of an antidumping or other increased duty on any products that we
import could have a material adverse effect on our financial condition. For
example, under United States law, an antidumping duty may be imposed on any
imports if two conditions are met. First, the Department of Commerce must
decide that the imports are being sold in the United States at less than fair
value. Second, the International Trade Commission (the ITC) must determine
that the United States industry is materially injured or threatened with
material injury by reason of the imports. The ITCs determination of injury
involves a two-prong inquiry: first, whether the industry is materially
injured, and second, whether the dumping, not other factors, caused the injury.
The ITC is required to analyze the volume of imports, the effect of imports on
United States prices for like merchandise, and the effects the imports have on
United States producers of like products, taking into account many factors,
including lost sales, market share, profits, productivity, return on
investment, and utilization of production capacity.

If We Fail to Deliver Products on a Timely
Basis, We May Suffer Losses.

Interruption
of shipping schedules upon which we rely for foreign purchases could result in
untimely deliveries to our customers or force us to purchase the products in the
United States at a higher cost in order to meet delivery schedules.
Consequently, our profit margins could be reduced or we could suffer losses. We
guarantee our customers that we will deliver products within the period
specified in their purchase orders. Any interruption of the means of
transportation used by us to transport products could cause delays in delivery
of products, could force us to buy the products from domestic suppliers at a
higher cost in order to fulfill our commitments, and also could result in the
loss of customers.

We Compete with Companies with Captive
Sources of Supply.

Many
of our competitors are significantly larger than us, and many have captive
sources of supply and significantly greater access to capital and other resources.
Thus, if our sources of supply were interrupted, our competitors could be in a
position to capture our customers.

11

We Are Exposed to Increased Energy Costs.

To
the extent that we utilize both over-the-road and ocean transportation, the
imposition of any additional fuel or bunker surcharges may adversely affect our
results. Should we be unable to pass along any such changes to our customers,
our results would be adversely affected.

An Act of War or Terrorism or Natural
Catastrophes Could Disrupt Our Supply of Products.

We
purchase our aluminum products primarily from foreign suppliers. An act of war
or terrorism could disrupt international shipping schedules, cause additional
delays in importing our Companys products into the United States or increase
the costs required to do so. Any natural disaster that disrupts the normal
course of international or domestic shipping could also adversely affect our
business.

ITEM 2.
DESCRIPTION OF PROPERTIESOur
corporate headquarters are located in Fort Lee, New Jersey, where we lease
office space pursuant to a lease expiring in March 2015. The lease provides for
a minimum annual rental payment of $274,000.

At
the end of 2004, we purchased a distribution and warehouse facility at 6900
Quad Avenue, Baltimore, Maryland. This building was upgraded and put into
service in the fourth quarter of 2005.

We
believe that our facilities are adequate to meet our current and proposed
needs.

ITEM 3.
LEGAL PROCEEDINGSWe
are a party from time to time to certain legal proceedings and claims that
arise in the ordinary course of our business. We do not believe that the
disposition of any claims that are pending or have been asserted will have a
material adverse effect on our results of operation or financial position.

ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSNo
matters were submitted to shareholders during the fourth quarter for their
approval.

12

PART II

ITEM 5.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERSMarket for Common Stock

Our
common stock is listed and trades on the American Stock Exchange (AMEX) under
the symbol ERS.

The
table below sets forth the high and low sales per share prices for our common
stock as reported by AMEX for the periods indicated and sets forth our dividend
payments for the periods indicated.

Common Stock

Common Stock2005

2004Period

High

Low

Cash 
  Dividend

High

Low

Cash 
  Dividend1st Quarter

$
4.65

$
3.75


$
0.04


$
4.550

$
3.000


$
0.042nd Quarter

$
12.10

$
4.23


$
0.05


$
5.000

$
3.380


$
0.043rd Quarter

$
13.45

$
7.66


$
0.05


$
3.930

$
3.020


$
0.044th Quarter

$
10.89

$
6.47


$
0.21


$
4.930

$
3.250


$
0.10On
March 17, 2006, the closing price of our common stock on the American Stock
Exchange was $21.24, and there were 37 holders of record of our common stock
and approximately 1,660 beneficial holders of our common stock.

We
did not sell any unregistered equity securities in 2005.

Dividends

During
2005, our Board of Directors declared quarterly dividends on our common stock.
The Board of Directors determined that we were able to return some of our cash
to stockholders without impacting future revenue and earnings growth or
restricting strategic opportunities. The Board of Directors declared a regular
cash dividend of $0.04 per share on March 11, 2005. On June 21st and September
19th the Board of Directors declared a regular cash dividend of
$0.05 per share. On December 8th, the Board of Directors declared a
regular cash dividend of $0.05 per share and a special dividend of $0.16 per
share. The Board of Directors intends to review our dividend policy on a
quarterly basis and make a determination with respect to a dividend
distribution, subject to profitability, free cash flow and the other
requirements of the business. There can be no assurance that dividends will be
paid in the future.

Share Repurchase

In
November 1999, the Board of Directors authorized the repurchase up to 1.0
million shares of our common stock. In December 2000, the Board of Directors
authorized an increase in the share repurchase program from 1.0 million shares
to 1.5 million shares. On June 18, 2002, the Board of Directors authorized an
additional increase in the share repurchase program of 1.0 million shares. This
brought the total authorized number of shares available under the repurchase
program to 2.5 million. As of December 31, 2005, we had repurchased a total of

13

2,267,400
shares for an aggregate cost of $2,731,049. We also had acquired 50,000 shares
for a cost of $50,000 in connection with the reverse merger in September 1999.

We
did not complete any repurchases of equity securities in the fourth quarter of
fiscal 2005.

Equity Compensation Plan Information

The
following table provides information as of December 31, 2005 regarding our only
compensation plan, our 1996 Stock Option Plan (the 1996 Plan), under which
our common stock is authorized for issuance.

Equity Compensation Plan InformationPlan category

Number of securities to be
  issued upon exercise of
  outstanding options

Weighted Average
  exercise price of
  outstanding options

Number of securities
  remaining available for
  future issuance under
  equity compensation
  plans (excluding
  securities reflected in
  column (a))(a)

(b)

(c)Equity compensation plans approved by security holders

359,000

1.65

559,000Equity compensation plans not approved by security holders





Total

359,000

1.65

559,00014

ITEM 6.
SELECTED FINANCIAL DATAThe
following table sets forth for the periods indicated selected consolidated
financial and operating data for the Company. The consolidated balance sheet
data and consolidated statement of operations data as of and for the years
ended December 31, 2005, 2004, 2003, 2002, and 2001 have been derived from our
Consolidated Financial Statements. The following selected consolidated
financial and operating data are qualified by and should be read in conjunction
with our more detailed Consolidated Financial Statements and notes thereto and
the discussion under Managements Discussion and Analysis of Financial
Condition and Results of Operations included in Part II, Items 7 and 8 of this
Form 10-K.

Year Ended December 31,2005

2004

2003

2002

2001Net sales

$
358,476


212,550

$
184,416

$
158,738

$
143,235Cost of goods sold


330,602


196,266


171,222


147,714


133,862Gross profit


27,874


16,284


13,194


11,024


9,373Selling, general and administrative expenses


8,623


7,457


6,419


6,032


5,290Operating income


19,251


8,827


6,775


4,992


4,083Interest expense


3,945


1,140


1,013


1,046


2,032Income before income taxes


15,306


7,687


5,762


3,946


2,051Income taxes


5,762


2,877


2,218


1,576


755Net income

$
9,544

$
4,810

$
3,544

$
2,370

$
1,296Weighted average shares outstanding:Basic


9,677


9,574


9,466


10,049


10,956Diluted


9,958


9,913


9,702


10,189


11,091Earnings per share:Basic

$
.99

$
.50

$
.37

$
.24

$
.12Diluted

$
.96

$
.49

$
.37

$
.23

$
.12Balance Sheet Data:

As of December 31,2005

2004

2003

2002

2001Total Assets

$
156,733

$
93,915

$
74,504

$
54,469

$
52,762Long Term
  Debt

$
2,287

$
2,406








Working
  Capital

$
19,757

$
17,459

$
14,962

$
12,871

$
11,823Stockholders
  Equity

$
24,233

$
17,948

$
15,119

$
12,922

$
11,94415

ITEM 7.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
  RESULTS OF OPERATIONSOverview

Introduction

The
following discusses our results of operations and liquidity and capital
resources. The discussion should be read in conjunction with the consolidated
financial statements and related notes. Certain statements in this
report under this caption and elsewhere relate to future events and
expectations and, as such, constitute forward-looking statements.
Forward-looking statements also include those containing such words as believe, expect,
anticipate, intend,
estimate, assume, will, should, and other expressions which predict or
indicate future events or trends and which do not relate to historical matters.
Such forward-looking
statements involve known and unknown risks, uncertainties, and other factors
that may cause our actual results, performance, or achievements to be different
from those expressed or implied in the forward-looking statements. For additional
information on forward-looking statements, see Part I of this Form 10-K.

Our
Business

We
are engaged in the purchase, sale and distribution of principally nonferrous
metals to a diverse customer base located throughout the United States and
Canada, Australia, Europe, and New Zealand. We sell our products through our
own marketing and sales personnel and our independent sales agents located in
North America and Europe who receive commissions on sales. We purchase our
products from suppliers located throughout the world. One supplier, Hulett
Aluminium Ltd., furnished approximately 54% of our products in 2005. We do not
typically purchase inventory for stock. Instead, we place orders with our
suppliers based upon orders that we have received from our customers.

Critical Accounting
Policies and Estimates

The
following discussion and analysis of our financial condition and results of
operations are based upon our consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in
the United States of America. Certain accounting policies have a significant
impact on amounts reported in our financial statements. A summary of those
significant accounting policies can be found in Note B to our financial
statements. We have not adopted any significant new accounting policies during
the period ended December 31, 2005.

Among the
significant judgments made by management in the preparation of our financial
statements are the determination of the allowance for doubtful accounts and
accruals for inventory claims.

16

Allowance
for Doubtful Accounts

As
of December 31, 2005, we had $51,486,189 in trade receivables. Additionally, we
had recorded an allowance for doubtful accounts of $191,000. We report accounts
receivable, net of an allowance for doubtful accounts, to represent our
estimate of the amount that ultimately will be realized in cash. We review the
adequacy of our allowance for doubtful accounts on an ongoing basis, using
historical collection trends, aging of receivables, as well as review of
specific accounts, and makes adjustments in the allowance as we believe
necessary. We maintain a credit insurance policy on the majority of our
customers. In general, this policy has a 10% co-insurance; however there are
some instances where the co-insurance may vary and instances where we may
exceed the insured values. Changes in economic conditions could have an impact
on the collection of existing receivable balances or future allowance
considerations. In
addition, changes in the credit insurance environment could affect the
availability of credit insurance and our ability to secure the same.

Accruals
for Inventory Claims

Generally,
our exposure on claims for defective material is small as we refer all claims
on defects back to the Mill supplying the material. In the event that we do not
believe the Mill will honor a claim, we will record an allowance for inventory
adjustments.

Results of
Operations

Comparison
of Fiscal Years Ended December 31, 2005 and 2004(in
thousands)

Our
success during 2005 was in part due to continued customer satisfaction,
supplier and customer loyalty and the ability to manage the competitive economic
environment through the expansion and upgrading of our service to our suppliers
and customers. This includes the ability to ship material on a just in time
basis from both private and public warehouses, and the use of proprietary
on-line service modules for customers to track their shipments. This bolstered
our commitment to service and customer satisfaction. We have also used our
excellent customer relationships to leverage sales per employee by developing
long term relationships with our customers and understanding their needs. In
addition, due in part to our long-term customers, we have been able to build
sales volume without a similar increase in selling, general and administrative
expenses that would otherwise accompany customer turn-over. Our supply
arrangements have also enabled us to benefit from the increased and steady
availability of products from key suppliers. Our stable customer and supplier
base has also enabled us to increase our purchases from our suppliers and to
sell the majority of these quantities to our existing customer base. While this
does expose us to concentration risks, it has provided the foundation of our
growth and performance. Our substantial increase in sales during 2005 was due
to higher aluminum pricing, and to an increase of approximately 35% in volumes
shipped to our customers.

During
2005, our net sales increased by $145,926 to $358,476, or 69% above net sales
in 2004. The increase in net sales was primarily due to increases in the prices
of products and the steady availability of supply shipments from our existing
supplier base. Our top ten customers represented 44% of the sales in 2005,
compared to 46% in 2004.

17

Our
sales volume has been, and will continue to be, a function of our ongoing
ability to secure quality aluminum products from our suppliers. While we
maintain long-term supply relationships with several foreign mills, one
supplier accounted for approximately 54% of our purchases for the year ended
December 31, 2005, and the three largest suppliers accounted for 80% of 2005
purchases. As a result, the termination or limitation by one or more of our
largest suppliers of their relationship with us could have a material adverse
effect on our business and results of operations.

Our
inventory increased by $27,542 to $86,511 during 2005 as compared to inventory
of $58,969 in 2004. This increase in inventory supported our increased sales
and it allowed us to be increasingly sensitive to timely shipments to our
customers. As a result of the increased inventory on hand, we were able to
extend our customer service efforts by allowing additional time to stage
material in our private or public warehouses to serve our customers needs.

Our
net income grew during this same period by 98%. Net income for 2005 was $9,544
compared with net income for 2004 of $4,810. We did not have to increase
selling, general and administrative expenses by the same percentage as our
sales increased, in large part through the use of long term planning, customer
relationships, and technology. In 2005, our selling, general and administrative
expenses increased by $1,166 to $8,623, or 16% above selling, general and
administrative expenses in 2004. Our strategy of maintaining long-term
relationships with our customers, while allowing for sales growth, also exposes
us to concentration risks.

In
2005, our interest expense increased by $2,805 to $3,945, or 246% above
interest expense in 2004. This is a result of rising interest rates and loan
balances that have doubled from 2004 to 2005 to support increased sales and
required inventory. The increasing interest rates could adversely affect our
profitability.

Comparison of Fiscal Years
Ended December 31, 2004 and 2003(in thousands)

Our
success during 2004 was in part due to continued customer satisfaction,
supplier and customer loyalty and the ability to manage the competitive
economic environment through the expansion and upgrading of our service to our
suppliers and customers. This includes the ability to ship material on a just
in time basis from both private and public warehouses, and the use of
proprietary on-line service modules for customers to track their shipments.
This bolstered our commitment to service and customer satisfaction. We have
also used our excellent customer relationships to leverage sales per employee
by developing long term relationships with our customers and understanding
their needs. In addition, due in part to our long-term customers, we have been
able to build sales volume without a similar increase in selling, general and
administrative expenses that would otherwise accompany customer turn-over. Our
stable customer and supplier base has also enabled us to increase our purchases
from our suppliers and to sell the majority of these quantities to our existing
customer base. While this does expose us to concentration risks, it has
provided the foundation of our growth and performance. Our success in 2004 was
also due to higher aluminum pricing, and to an increase of approximately 10% in
volumes shipped to our customers.

During
2004, our net sales increased by $28,134 to $212,550, or 15% above net sales in
2003. The increase in net sales was primarily due to increases in the prices of
products and the

18

steady
availability of supply shipments from our existing supplier base. Our top ten
customers represented 45% of the sales in 2004, compared to 36% in 2003.

Our
sales volume has been, and will continue to be, a function of our ongoing
ability to secure quality aluminum products from our suppliers. While we
maintain long-term supply relationships with several foreign mills, one
supplier accounted for approximately 54% of our purchases for the year ended
December 31, 2004, and the three largest suppliers accounted for 79% of 2004
purchases. As a result, the termination or limitation by one or more of our
largest suppliers of their relationship with us could have a material adverse
effect on our business and results of operations.

Our
inventory increased by $16,921 to $58,969 during 2004 as compared to
inventories of $42,048 in 2003. This increase in inventory supported our
increased sales by allowing us to be increasingly sensitive to timely shipments
to our customers. In addition, due to having inventory on hand, we were able to
extend our customer service efforts by allowing additional time to stage
material in our private or public warehouses to achieve timely customer
deliveries. Some of our customers do not accept deliveries in the last two
weeks of the fiscal year which also increased the inventory levels at year end.

Our
net income grew during this same period by 36%. Net income for 2004 was $4,810
compared with net income for 2003 of $3,544. We did not have to increase
selling, general and administrative expenses by the same percentage as our
sales increased, in large part through the use of long term planning, customer
relationships, and technology. In 2004, our selling, general and administrative
expenses increased by $1,038 to $7,457, or 16% above selling, general and
administrative expenses in 2003. Our strategy of maintaining long-term
relationships with our customers, while allowing for sales growth, also exposes
us to concentration risks.

In
2004, our interest expense increased by $127 to $1,140, or approximately 13% above
interest expense in 2003. As a result of historically low interest rates, we
have been able to minimize our interest expense and as a result our net income
has increased. In the current changing interest rate environment, our
profitability could be adversely affected if the interest rates increase.

Liquidity and Capital
Resources(in
thousands)

Our
cash balance increased by $1,273 in the year ended December 31, 2005. Net cash
of $36,601 was used in operating activities, while $41,846 of net cash was
provided by financing activities, specifically proceeds of loans from banks.
Increases in accounts receivable and inventories at year end were the most
significant contributor to the increased use of cash. Both of these increases
support the increased volume of shipments.

We
currently operate under a revolving line of credit, including a commitment to
issue letters of credit, with four commercial banks. The maximum availability
of this facility is $90,000. Borrowings under these lines of credit are
collateralized by security interests in substantially all of our assets. Under
these credit agreements, we are required to maintain working capital and net
worth ratios. These facilities expire on June 30, 2006. As of December 31,
2005, the amount outstanding under our revolving lines of credit was $87,677
(including letters of credit of approximately $3,177). Management is in
discussions to extend the maturity,

19

increase the
value of the overall facility, and revise some of the covenants and terms of
the Credit Facility. We expect to complete this transaction prior to the
expiration of the current facility. Management believes that cash from
operations, together with funds available under our credit facility, will be
sufficient to fund the cash requirements relating to our existing operations.
We may require additional debt or equity financing in connection with the
future expansion of our operations.

The
table below provides a summary of our commitments and contractual obligations
arrangements as of December 31, 2005:

Commitments and
Contingencies(in
thousands)

Total

Less than
  1 Year

1-3 Years

4-5 Years

More than
  5 YearsBank Debt

$
86,897


$
84,610


$
374

$
292


$
1,621Operating Leases

$
2,577


$
274


$
822

$
558


$
923Letters of Credit

$
3,177


$
3,177









$
Total

$
92,651


$
88,061


$
1,196

$
850


$
2,544We
have contingent liabilities in the form of letters of credit to some of our
suppliers.

ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES
  ABOUT MARKET RISK.We
use financial instruments designated as fair value hedges to manage our
exposure to commodity price risk and foreign currency exchange risk inherent in
our trading activities. It is our policy to hedge such risks, to the extent
practicable. We enter into high-grade aluminum futures contracts to limit our
gross margin exposure by hedging the metals content element of firmly committed
purchase and sales commitments. In cases where we enter into fixed price
contracts with our suppliers and variable priced sales with our customers, we
will utilize the futures market to match the terms of the purchase and sale. We
also enter into foreign exchange forward contracts to hedge our exposure
related to commitments to purchase or sell non-ferrous metals denominated in
international currencies. In situations where we enter into purchase or sales
denominated in foreign currency, the foreign exchange market will be utilized
to hedge foreign exchange risk exposure. We record mark-to-market adjustments
on these futures and forward positions, and on the underlying firm purchase and
sales commitments which they hedge, and reflect the net gains and losses
currently in earnings.

At
  December 31, 2005 and 2004, net unrealized gain on the Companys foreign exchange
  forward contracts amounted to approximately $192,000 and $543,000 respectively.
  Net realized and unrealized losses on aluminum futures contracts at December
  31, 2005 and 2004 amounted to approximately $11,744,000 and $803,000, respectively.
  These amounts, which represent the fair value of the derivative contracts, were
  offset by like amounts for the changes in the fair value of inventories and
  commitments which were hedged. Such amounts are reflected in the accompanying
  2005 balance sheet in inventory ($11,744,000) and derivative liabilities ($7,874,00).
  In 2004 such amounts are reflected in other current assets ($543,000), inventory
  ($803,000) and derivative liabilities ($1,346,000).


20

ITEM 8.
FINANCIAL STATEMENTSFurnished at end
of report commencing on page F-1.

ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
  FINANCIAL DISCLOSURENone.

ITEM 9A.
CONTROLS AND PROCEDURESAs
required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended
(the Exchange Act), our management conducted an evaluation with the
participation of our Chief Executive Officer and Chief Financial Officer,
regarding the effectiveness of our disclosure controls and procedures, as of
the end of the last fiscal year. In designing and evaluating our disclosure
controls and procedures, we and our management recognize that any controls and
procedures, no matter how well designed and operated, can provide only a
reasonable assurance of achieving the desired control objectives, and
management necessarily was required to apply its judgment in evaluating and
implementing possible controls and procedures. Based upon that evaluation, our
Chief Executive Officer and Chief Financial Officer concluded that, as of
the evaluation date, our disclosure controls and procedures are reasonably
effective to ensure that material information required to be disclosed by us in
the reports we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commissions rules and forms. We intend to continue to review and
document our disclosure controls and procedures, including our internal
controls and procedures for financial reporting, and we may from time to time
make changes to the disclosure controls and procedures to enhance their
effectiveness and to ensure that our systems evolve with our business.

There
was no change in our internal control over financial reporting that occurred
during the period covered by this Annual Report on Form 10-K that has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.

ITEM 9B.
OTHER INFORMATIONNone.

21

PART III

ITEM 10.
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTThe
  information required by this item is incorporated by reference from the material
  responsive to such item in our definitive proxy statement relating to the 2006
  Annual Meeting of Shareholders.

ITEM 11.
EXECUTIVE COMPENSATIONThe
information required by this item is incorporated by reference from the
material responsive to such item in our definitive proxy statement relating to
the 2006 Annual Meeting of Shareholders.

ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
  RELATED STOCKHOLDER MATTERSThe
information required by this item is incorporated by reference from the
material responsive to such item in our definitive proxy statement relating to
the 2006 Annual Meeting of Shareholders.

ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONSThe
information required by this item is incorporated by reference from the
material responsive to such item in our definitive proxy statement relating to
the 2006 Annual Meeting of Shareholders.

ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICESThe
information required by this item is incorporated by reference from the
material responsive to such item in our definitive proxy statement relating to
the 2006 Annual Meeting of Shareholders.

22

PART IV

ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES(a)
1. Index to Financial Statements:

The
consolidated financial statements of the Company and report of the Companys
independent public accountants incorporated herein are included in Item 8 of
this Report, as follows:

Report of
  Independent Certified Public Accountants
F-1Consolidated
  Balance Sheets
F-2Consolidated
  Statements of Income
F-3Consolidated
  Statements of Changes in Stockholders Equity
F-4Consolidated
  Statements of Cash Flows
F-5Notes to
  Consolidated Financial Statements
F-62. Financial
Statement Schedules:

A statement
regarding the computation of per share earnings is attached as Exhibit 11.1
Other schedules have been omitted because they are not applicable or are not
required under the instructions contained in Regulation S-X or because the
information required to be set forth therein is included in the consolidated
financial statements or notes thereto.

3. Exhibits:

2.1 Agreement
and Plan of Merger among the Registrant, Empire Resources Inc., Empire Resource
Pacific, Ltd., Nathan Kahn and Sandra Kahn, dated as of February 22, 1999
(incorporated by reference to Exhibit 2.1 to the Registrants Report on Form
8-K dated March 9, 1999)

3.1 Certificate
of Merger of Empire Resources, Inc. into Integrated Technology USA, Inc.
(incorporated by reference from the correspondingly numbered exhibit in the
Companys Annual Report on Form 10-KSB for the year ended December 31, 1999).

3.2 Amended
and Restated Certificate of Incorporation of the Registrant (incorporated by
reference from the correspondingly numbered exhibit in the Companys
Registration Statement on Form SB-2 (No. 333-9697).

3.3 Amendment
No. 1 to the Amended and Restated Certificate of Incorporation (incorporated by
reference from the correspondingly numbered exhibit in the Companys Annual
Report on Form 10-K for the year ended December 31, 2001).

3.4 Amended
and Restated By-Laws of the Registrant (incorporated by reference from the
correspondingly numbered exhibit in the Companys Registration Statement on
Form SB-2 (No. 333-9697).

3.5 Amendment
No. 1 to Amended and Restated By-Laws of the Registrant (incorporated by
reference to the correspondingly numbered exhibit in the Companys Annual
Report on Form 10-K for the year ended December 31, 2002).

23

3.6 Amendment
No. 2 to Amended and Restated By-Laws of the Registrant (incorporated by
reference to Exhibit 3.1 to the Registrants Current Report on Form 8-K dated
May 11, 1997).

10.1 Employment
Agreement dated September 15, 1999 entered into by Registrant with Nathan Kahn
(incorporated by reference from the correspondingly numbered exhibit in the
Companys Annual Report on Form 10-KSB for the year ended December 31, 1999).

10.2 Amendment
No. 1 to Employment Agreement and Noncompetition Agreement entered into by
Registrant with Nathan Kahn (incorporated by reference from Exhibit 10.1 to the
Companys Quarterly Report on Form 10-Q for the quarter ended September 30,
2002).

10.3 Employment
Agreement dated September 15, 1999 entered into by Registrant with Sandra Kahn
(incorporated by reference from the Companys Annual Report on Form 10-KSB for
the year ended December 31, 1999).

10.4 Employment
Agreement dated September 15, 1999 entered into by Registrant with Harvey
Wrubel (incorporated by reference from the Companys Annual Report on Form
10-KSB for the year ended December 31, 1999).

10.5 Restricted
Stock Agreement dated September 15, 1999 entered into by Registrant with Harvey
Wrubel (incorporated by reference from the Companys Annual Report on Form
10-KSB for the year ended December 31, 1999).

10.6 Third
Modification and Extension of Lease for office space, dated as of the 17th of
February, 2000, to the Lease between 400 Kelby Associates, as Landlord, and Registrant
as Tenant (incorporated by reference from the Companys Annual Report on Form
10-KSB for the year ended December 31, 1999).

10.7 Registrants
1996 Stock Option Plan (incorporated by reference from the Companys
Registration Statement on Form SB-2 (No. 333-9697).

10.8 Form
of Indemnification Agreement entered into by the Registrant with executive
officers and directors (incorporated by reference from the Companys Annual
Report on Form 10-KSB for the year ended December 31, 2000).

10.9 Credit
Facility dated December 21, 2000 between the Registrant and The Chase Manhattan
Bank, as Lead Arranger and Administrative Agent (incorporated by reference from
the Companys Annual Report on Form 10-KSB for the year ended December 31,
2000).

10.10 Amendment
No. 1 to Credit Facility, dated July 16, 2002 between the Registrant and The
Chase Manhattan Bank, as Lead Arranger and Administrative Agent (incorporated
by reference to Exhibit 10.1 from the Companys Quarterly Report on Form 10-Q
for the quarter ended June 30, 2002).

10.11 Amendment
No. 2 to Credit Facility, dated May 8, 2003 between the Registrant and The
Chase Manhattan Bank, as Lead Arranger and Administrative Agent (incorporated
by reference from the Companys Quarterly Report on Form 10-Q for the quarter
ended March 31, 2003).

24

10.12 Amendment
No. 3 to Credit Facility, dated June 19, 2003 between the Registrant and The
Chase Manhattan Bank, as Lead Arranger and Administrative Agent (incorporated
by reference from the Companys Quarterly Report on Form 10-Q for the quarter
ended June 30, 2003).

10.13 Agreement
of Lease for warehouse facility dated September 27, 2000 between Townsend
Properties, Inc. and Registrant (incorporated by reference from the Companys
Annual Report on Form 10-KSB for the year ended December 31, 2000).

10.14 Amendment
No. 4 to Credit Facility, dated December 13, 2004 between the Registrant and JP
Morgan Chase Bank, N.A. as Lead Arranger and Administrative Agent.

10.15 Agreement
of purchase and sale of 6900 Quad Avenue dated May 31, 2004 between Dale W.
Brougher, Trustee and Registrant.

10.16 Loan
Agreement dated December 27, 2004 between 6900 Quad Avenue a subsidiary of the
Registrant and JP MORGAN CHASE BANK, N.A.

10.17 Agreement
of purchase and sale of extrusion equipment dated November 4, 2004 between
Werner Co., and Registrant.

10.18 Fourth
Modification and Extension of Lease for office space, dated as of the 17th of
November 2004, to the Lease between 400 Kelby Associates, as Landlord, and
Registrant as Tenant

10.19 Amendment
No. 5 to Credit Facility, dated February 23, 2005 between the Registrant and JP
Morgan Chase Bank, N.A. as Lead Arranger and Administrative Agent.

10.20 Amendment
No. 6 to Credit Facility, dated April 22, 2005 between the Registrant and JP
Morgan Chase Bank, N.A. as Lead Arranger and Administrative Agent.

10.21 Amendment
No. 7 to Credit Facility, dated October 3, 2005 between the Registrant and JP
Morgan Chase Bank, N.A. as Lead Arranger and Administrative Agent.*

11.1 Statement
regarding computation of per share earnings.*

21.1 List
of subsidiaries of the Registrant.*

31.1 Certification
of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities
Exchange Act of 1934.*

31.2 Certification
of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities
Exchange Act of 1934.*

32.1 Certifications
of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.*

* Filed
Herewith

25

SIGNATURES

In
accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned thereunto duly
authorized.

Empire
Resources, Inc.

By:
/s/ Nathan
  KahnNathan Kahn 
  Chief Executive Officer
        March 30, 2006Pursuant to
the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the persons on behalf of the Registrant and in the capacities
and on the dates indicated.

/s/ Nathan
  KahnNathan Kahn 
  Chief Executive Officer and Director (Principal Executive Officer)
        March 30, 2006/s/ Sandra
  KahnSandra Kahn,
  Chief Financial Officer and Director(Principal Financial and Principal
  Accounting Officer) 
        March 30, 2006/s/ William
  SpierWilliam
  Spier, Director 
        March 30, 2006/s/ Jack
  BendheimJack
  Bendheim, Director 
        March 30, 2006/s/ Peter G.
  HowardPeter G.
  Howard, Director 
        March 30, 200626

/s/ Nathan
  MazurekNathan
  Mazurek, Director
        March 30, 2006/s/ L. Rick
  MilnerL. Rick
  Milner, Director 
        March 30, 2006/s/ Morris
  J. SmithMorris J.
  Smith, Director 
        March 30, 2006/s/ Harvey
  WrubelHarvey
  Wrubel, Director 
        March 30, 200627

REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
Empire Resources, Inc.
Fort Lee, New Jersey

We have
audited the accompanying consolidated balance sheets of Empire Resources, Inc.
and subsidiaries as of December 31, 2005 and 2004, and the related
consolidated statements of income, changes in stockholders equity and cash
flows for each of the years in the three-year period ended December 31,
2005. These financial statements are the responsibility of the Companys
management.  Our responsibility is to
express an opinion on these financial statements 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.  An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements.  An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation.  We believe that our
audits provide a reasonable basis for our opinion.

In our
opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Empire Resources,
Inc. and subsidiaries as of December 31, 2005 and 2004, and the
consolidated results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 2005, in conformity with
accounting principles generally accepted in the United States of America.

Eisner LLP

New York, New YorkMarch 8, 2006

F-1


EMPIRE RESOURCES, INC. AND
SUBSIDIARIES

Consolidated
Balance Sheets(In thousands except share amounts)

December 31,2005

2004ASSETSCurrent
  assets:Cash

$
1,560

$
287Restricted cash


5,050


0Trade accounts receivable (less allowance
  for doubtful accounts of $191 and $191)


51,486


30,367Inventories


90,381


58,969Other current assets


1,493


1,397Total current assets


149,970


91,020Property and
  Equipment, net


6,763


2,895$
156,733

$
93,915LIABILITIES AND STOCKHOLDERS EQUITYCurrent
  liabilities:Notes payable - banks

$
84,500

$
40,300Current maturities of long-term debt


110


94Trade accounts payable


30,513


25,411Accrued
        expenses and derivative liabilities


13,044


6,796Dividends payable


2,046


960Total current liabilities


130,213


73,561Long-term
  debt, net of current maturities


2,287


2,406Commitments
  and contingenciesStockholders
  equity:Common stock $.01 par value, 20,000,000
  shares authorized and 11,749,651 shares issued at December 31, 2005 and 2004


117


117Additional paid-in capital


10,690


10,827Retained earnings


15,687


9,547Accumulated other comprehensive income


92


14Treasury stock (2,006,467 shares and
  2,150,400 shares)


(2,353
)

(2,557
)Total stockholders equity


24,233


17,948$
156,733

$
93,915F-2

EMPIRE RESOURCES, INC. AND
SUBSIDIARIES

Consolidated
Statements of Income(In thousands except per share
amounts)

Year Ended December 31,2005

2004

2003Net sales

$
358,476


212,550

$
184,416Cost of
  goods sold


330,602


196,266


171,222Gross profit


27,874


16,284


13,194Selling,
  general and administrative expenses


8,623


7,457


6,419Operating
  income


19,251


8,827


6,775Interest
  expense


3,945


1,140


1,013Income
  before income taxes


15,306


7,687


5,762Income taxes


5,762


2,877


2,218Net income

$
9,544

$
4,810

$
3,544Weighted average shares outstanding:Basic


9,677


9,574


9,466Diluted


9,958


9,913


9,702Earnings per share:Basic

$
.99

$
.50

$
.37Diluted

$
.96

$
.49

$
.37F-3

EMPIRE RESOURCES, INC. AND SUBSIDIARIESConsolidated Statements of Changes in Stockholders Equity(In thousands)

Common
  Stock
  Number of
  Shares

Amount

Additional
  Paid-in
  Capital

Retained
  Earnings

Acumulated
  Other
  Comprehensive
  Income (Loss)

Treasury
  Stock

Total
  Stockholders
  Equity

Total
  Comprehensive
  IncomeBalance at December 31, 2002


11,750

$
117

$
10,727

$
4,824

$
21

($
2,767
)
$
12,922Purchase of treasury stock (10 shares)

















(14
)

(14
)Stock options exercised








21








118


139Tax Benefit from exercise of options








55











55Net change in cumulative translation adjustment














(7
)




(7
)

(7
)Dividends ($.16 per share)











(1,520
)







(1,520
)Net income for 2003











3,544








3,544


3,544$
3,537Balance at December 31, 2003


11,750

$
117

$
10,803

$
6,848

$
14

($
2,663
)
$
15,119Stock options exercised








24








106


130Dividends ($.22 per share)











(2,111
)







(2,111
)Net income for 2004











4,810








4,810


4,810$
4,810Balance at December 31, 2004


11,750


117


10,827


9,547


14


(2,557
)

17,948Stock options exercised








(137
)









204


67Net change in cumulative translation adjustment














(22
)




(22
)

(22
)Increase in value
        of interest rate swap derivative contract, net of taxes $63














100





100


100Dividends ($.35 per share)











(3,404
)







(3,404
)Net income for 2005











9,544








9,544


9,544$
9,622Balance at December 31, 2005


11,750


117


10,690


15,687


92


(2,353
)

24,233F-4

EMPIRE RESOURCES, INC. AND SUBSIDIARIESConsolidated Statements of Cash Flows (In Thousands)

Year Ended December 31,2005

2004

2003Cash flows from operating
  activities:Net income

$
9,544

$
4,810

$
3,544Adjustments to
  reconcile net income to net cash used in operating activities:Depreciation and
  amortization


104


76


76Deferred income
  taxes


(754
)

(22
)

(27
)Translation
  adjustment


0


0


(7
)Tax benefit from
  stock options exercised


0


0


55Changes in:Restricted cash


(5,050
)

0


0Trade accounts
  receivable


(21,119
)

(4,644
)

(1,468
)Inventories


(31,412
)

(16,921
)

(14,216
)Other current assets


736
    

3,725


(3,814
)Trade accounts payable


5,102


8,516


3,859Accrued expenses


6,248


(532
)

4,417Net cash used in
  operating activities


(36,601
)

(4,992
)

(7,581
)Cash flows used in investing
  activities:Purchases of
  property and equipment


(3,972
)

(2,815
)

(181
)Cash flows from financing
  activities:Proceeds from
  (repayments of) notes payable  banks


44,200


5,900


8,800(Repayments)
  Proceeds from mortgage payable


(103
)

2,500Dividends Paid


(2,318
)

(1,913
)

(758
)Stock options
  exercised


67


130


139Purchase of
  treasury stock


0


0


(14
)Net cash
  provided by financing activities


41,846


6,617


8,167Net increase (decrease) in cash


1,273


(1,190
)

405Cash at beginning of period


287


1,477


1,072Cash at end of period

$
1,560

$
287

$
1,477Supplemental disclosures of cash
  flow information:Cash paid during
  the period for:Interest

$
3,622

$
1,066

$
1,024Income taxes

$
7,031

$
3,106

$
2,233Non Cash Financing Activities:Dividend
  Declared but not yet paid

$
2,046

$
960

$
762F-5

EMPIRE
RESOURCES, INC. AND SUBSIDIARIES

NOTE A - BUSINESS

Empire Resources, Inc (the Company) is engaged principally
  in the purchase, sale and distribution of value added semi finished aluminum
  products to a diverse customer base located throughout North America, Europe
  and Australia. The Company sells its products through its own marketing and
  sales personnel and through its independent sales agents located in the U.S.
  and Europe who receive commissions on sales. The Company purchases from several
  suppliers located throughout the world. See B [12]

NOTE B - SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES

[1]
Principles of consolidation:The consolidated financial statements include the
  accounts of the Company and its wholly owned subsidiaries. All intercompany
  balances have been eliminated in consolidation.[2]
Revenue recognition:Revenue on product sales is recognized at the point
  in time when the product has been shipped, title and risk of loss has been
  transferred to the customer, and the following conditions are met: persuasive
  evidence of an arrangement exists, the price is fixed and determinable, and
  collectibility of the resulting receivable is reasonably assured.[3]
Inventories:Inventories which consist of purchased semi-finished
  aluminum products are stated at the lower of cost or market. Cost is
  determined by the specific-identification method. Inventory has generally
  been purchased for specific customer orders.[4]
Property and equipment:Property and equipment are stated at cost and
  depreciated by the straight-line method over their estimated useful lives.[5]
Commodity futures and foreign
  currency hedging activities:The Company uses derivative financial instruments
  designated as fair value hedges to manage its exposure to commodity price
  risk and foreign currency exchange risk inherent in its operations. It is the
  Companys policy to hedge such risks, to the extent practicable. The Company
  enters into high-grade aluminum futures contracts to limit its gross margin
  exposure by hedging the metals content element of firmly committed purchase
  and sales commitments. The Company also enters into foreign exchange forward
  contracts to hedge its exposure related to commitments to purchase or sell
  non-ferrous metals denominated in international currencies. The Company
  recognizes in the balance sheet derivative contracts at fair value, as well
  as changes in the fair value of the related hedged firm purchase and sales
  commitments attributable to the hedged risk and reflects any net gains and
  losses currently in earnings (See Note D).F-6

EMPIRE RESOURCES, INC. AND SUBSIDIARIES
NOTE B  SUMMARY OF SIGNIFICANT
  ACCOUNTING POLICIES (CONTINUED)

[6]
    Foreign currency translation:The functional currency of Empire Resources
        Pacific Ltd., a wholly-owned subsidiary which acts as a sales agent in
        Australia and New Zealand, is the Australian dollar. In 2005, the Company
        organized a wholly owned subsidiary in Belgium which sells semi finished
        aluminum products in Europe. The functional currency of this subsidiary
        is the Euro. Cumulative translation adjustments, which are charged or
        credited to accumulated other comprehensive income, arise from translation
        of functional currency amounts into U.S. dollars.[7]
    Income taxes:The Company follows the asset and liability
        approach for deferred income taxes. This method provides that deferred
        tax assets and liabilities are recorded, using currently enacted tax rates,
        based upon the difference between the tax bases of assets and liabilities
        and their carrying amounts for financial statement purposes.Deferred tax asset valuation allowances are
        recorded when management does not believe that it is more likely than
        not that the related deferred tax assets will be realized.[8]
    Earnings per share:Basic earnings per share is computed by dividing
        net income by the weighted average number of common shares outstanding
        during the year. Diluted earnings per share gives effect to all dilutive
        potential common shares outstanding during the year, consisting of outstanding
        stock options, using the treasury stock method.[9]
    Stock - based compensation:At December 31, 2005 the Company had a stock
        option plan which is described more fully in Note F. The Company accounts
        for stock-based employee compensation under the recognition and measurement
        principles of Accounting Principles Board (APB) Opinion No. 25,
        Accounting for Stock Issued to Employees, and related interpretations.
        No stock-based employee compensation cost is reflected in net income as
        all options granted under the Plan had an exercise price equal to the
        market value of the underlying common stock on the date of grant. The
        Company has adopted the disclosure-only provisions of Statement of Financial
        Accounting Standards (SFAS) No. 123, Accounting
        for Stock-Based Compensation. The following table illustrates the
        effect on net income and earnings per share if the fair value based method
        had been applied to all awards.Year Ended December 31,(In thousands)2005

2004

2003Reported net income

$
9,544

$
4,810

$
3,544Stock-based employee compensation determined under
  the fair value based method (net of tax)


(0
)

(18
)

(7
)Pro forma net income

$
9,544

$
4,792

$
3,537Earnings per share (basic and diluted):As reportedBasic

$
.99

$
.50

$
.37Diluted

$
.96

$
.49

$
.37Pro-formaBasic

$
.99

$
.50

$
.37Diluted

$
.96

$
.48

$
.37F-7

EMPIRE RESOURCES, INC. AND SUBSIDIARIES
NOTE B  SUMMARY OF SIGNIFICANT
  ACCOUNTING POLICIES (CONTINUED)

The fair value of each option grant on the date of
grant is estimated using the Black-Scholes option-pricing model which included
the following assumptions stated on a weighted average basis:

2004

2003Dividend yield

4%

4.78%Volatility

.59

0.59Risk free interest rate

4.24%

2.08%Expected life in years

5

5The weighted average fair values of options granted
during the years ended December 31, 2004 and 2003 were $1.59, and $0.67,
respectively. There were no options granted during 2005.

[10]
Recent accounting pronouncementsIn December 2004, the FASB issued SFAS No. 123 (Revised 2004)
        Share-Based Payment (SFAS No. 123R) that prescribes
        the accounting for share-based payment transactions in which a company
        receives employee services in exchange for (a) equity instruments of the
        company or (b) liabilities that are based on the fair value of the companys
        equity instruments. SFAS No. 123R addresses all forms of share-based payment
        awards, including shares issued under employee stock purchase plans, stock
        options, restricted stock and stock appreciation rights. SFAS No. 123R
        eliminates the ability to account for share-based compensation transactions
        using APB Opinion No. 25, Accounting for Stock Issued to Employees,
        that was previously allowed under SFAS No. 123 as originally issued. Under
        SFAS No. 123R, companies are required to record compensation expense for
        all share based payment award transactions measured at fair value. This
        statement is effective for us beginning January 1, 2006. As permitted
        by Statement 123, the Company currently accounts for share-based payments
        to employees using Opinion 25s intrinsic value method and, as such
        recognizes no compensation cost for employee stock options. Accordingly,
        the adoption of SFAS No. 123(R)s fair value method could have a
        significant impact on the Companys results of operations if we were
        to grant additional options although it will have no impact on the Companys
        overall financial position. The impact of adoption of SFAS No. 123(R)
        cannot be predicted at this time because it will depend on levels of share-based
        payments granted in the future. However, had the Company adopted Statement
        123(R) in prior periods, the impact of that standard would have approximated
        the impact of Statement 123 as described in the disclosure of proforma
        net income and earnings per share in (9) above.In December 2004, the FASB issued SFAS No. 153,
  Exchanges of Nonmonetary Assetsan amendment of APB Opinion No. 29 that
  amends Opinion No. 29 to eliminate the exception for nonmonetary exchanges of
  similar productive assets and replaces it with a general exception forF-8

EMPIRE RESOURCES, INC. AND SUBSIDIARES
NOTE B  SUMMARY OF
  SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)

exchanges of nonmonetary assets that do not have commercial substance.
        A nonmonetary exchange has commercial substance if the future cash flows
        of the entity are expected to change significantly as a result of the
        exchange. The provisions of this statement are effective for non-monetary
        asset exchanges for the Company beginning July 1, 2005. The adoption of
        SFAS 153 did not have an impact on our results of operations or financial
        position.[11]
Use of estimates:The
  preparation of financial statements in accordance with accounting principles
  generally accepted in the United States of America requires management to
  make estimates and assumptions that affect the reported amounts of assets and
  liabilities and disclosure of contingent assets and liabilities at the date
  of the financial statements and the reported amounts of income and expenses
  during the reporting period.  The
  principle estimate made relates to the allowance for doubtful accounts.  Actual results could differ from these
  estimates.[12]
Significant customers and concentration of suppliers:One major
  customer accounted for approximately 14%, 17%, and 14% of the Companys consolidated
  net sales for the years ended December 31, 2005, 2004, and 2003 respectively.The
  Companys purchase of nonferrous metal is from a limited number of suppliers
  located throughout the world. One supplier, Hulett Aluminium Ltd., accounted
  for 54%, 54% and 53% of total purchases during the years ended December 31,
  2005, 2004 and 2003, respectively, and the top three suppliers accounted for
  79.5%, 78.5%, and 72.3% respectively, of total purchases during such years.
  The Companys loss of any of its three largest suppliers or a material
  default by any such supplier in its obligations to the Company would have at
  least a short-term material adverse effect on the Companys business.NOTE C  FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying
amounts of notes payable to the banks approximate fair value as of December 31,
2005 and 2004 because the interest rates on such debt approximate the market
rate for the Company given the appropriate risk factors.  The carrying amount of the variable rate
mortgage payable approximates fair value as of December 31, 2005 and 2004,
exclusive of the impact of the interest rate swap.  Derivative financial instruments are carried at fair value. (See
Note E)

NOTE D  PROPERTY AND EQUIPMENT

Property and
equipment are summarized as follows:

F-9

EMPIRE RESOURCES, INC. AND SUBSIDIARES

December 31, 2005

December 31, 2004

Estimated Useful Life
  (Years)Land

$
1,180,000

$
375,000Buildings and improvements


2,810,000


2,125,000


40Extrusion Equipment


2,626,000


255,000


15Office equipment


723,000


612,000


37,339,000


3,367,000Less Accumulated
  depreciation


576,000


472,000$
6,763,000

$
2,895,000Building and
improvements consist of a facility purchased in December 2004, which has been
upgraded and occupied in the third quarter of 2005, prior to the expiration of
the Companys lease for its previous warehouse.  A section of the facility houses an extrusion plant, which is
being refurbished.  The Company expects
to begin the regular manufacturing of aluminum extrusions in the new facility
during the second quarter of 2006.
Depreciation of property and equipment was $104,000, $76,000, and
$49,000, for the years ended December 31, 2005, 2004, and 2003
respectively.

NOTE E  DERIVATIVE FINANCIAL INSTRUMENTS AND RISK
MANAGEMENT

Statement of Financial Accounting Standards (SFAS) No. 133, Accounting
  For Derivative Instruments and Hedging Activities, issued by the Financial
  Accounting Standards Board. requires the Company to recognize all derivatives
  in the balance sheet at fair value. Derivatives that are not hedges must be
  adjusted to fair value through earnings. If the derivative is a hedge, depending
  upon the nature of the hedge, changes in the fair value of the derivative are
  either offset against the change in fair value of the hedged assets, liabilities
  or firm commitments through earnings (fair value hedge), or recognized in other
  comprehensive income until the hedged item is recognized in earnings (cash flow
  hedge). The ineffective portion of a derivatives change in fair value,
  if any, is immediately recognized in earnings. At December 31, 2005, approximately $5,050,000 was deposited with
  various brokers for margin calls. Such deposits are classified as restricted
  cash on the accompanying 2005 balance sheet.

At December 31, 2005 and 2004, net unrealized gain on the Companys
  foreign exchange forward contracts amounted to approximately $192,000 and $543,000
  respectively. Net realized and unrealized losses on aluminum futures contracts
  at December 31, 2005 and 2004 amounted to approximately $11,744,000 and $803,000,
  respectively. These amounts, which represent the fair value of the derivative
  contracts, were offset by like amounts for the changes in the fair value of
  the inventories and commitments which were hedged. Such amounts are reflected
  in the accompanying 2005 balance sheet in inventory ($11,744,000) and derivative
  liabilities ($7,874,000). In 2004 such amounts are reflected in other current
  assets ($543,000), inventory ($803,000) and derivative liabilities ($1,346,000).

For the years
ended December 31, 2005, and 2004 and 2003, hedge ineffectiveness associated
with derivatives designated as fair value hedges was insignificant, and no fair
value hedges were derecognized.

As discussed
in Note F, the Company has entered into an interest rate swap to convert a
mortgage from a variable rate to a fixed rate obligation which has been
designated as a cash flow hedge.  At
December 31, 2005, the fair value of the interest rate swap amounted to
$163,000 and is included in other current assets with a  corresponding credit in accumulated other
comprehensive income in the accompanying balance sheet.  At December 31, 2004, the fair value of the
swap was not significant to the accompanying balance sheet.


F-10

EMPIRE RESOURCES, INC. AND SUBSIDIARES

NOTE F  MORTGAGE PAYABLE

In December
2004, the Company entered into a mortgage in connection with the purchase of a
warehouse.  The mortgage, which requires
monthly payments of approximately $21,000 including interest, bears interest at
Libor + 1.75% and matures in December 2014.

In connection
with the mortgage, the Company entered into an interest rate swap with a bank
which has been designated as a cash flow hedge.  Effective 2004 through December 29, 2014 each month the Company
will pay a fixed interest rate of 6.37% to the bank on a notional principal
equal to the outstanding principal balance of the mortgage.  In return, the bank will pay to the Company
a floating rate, namely, LIBOR, to reset monthly plus 1.75% on the same
notional principal amount.

The following
are the future maturities of the mortgage at December 31, 2005 (in thousands):

Year
  ending December 31,2006

$
1102007


1162008


1242009


1322010


141Thereafter


1,7742,397NOTE G - NOTES PAYABLE - BANKS

As of December
31, 2005, the Company operated under a $90,000,000 committed credit facility
with four commercial banks.  This
facility as amended, expires on June 30, 2006.
Borrowings by the Company under this line of credit are collateralized
by security interests in substantially all its assets.  The Company is required to maintain working
capital and net worth ratios as defined by the loan agreement.  As of December 31, 2005 and 2004
respectively, the credit utilized under this facility amounted to $87.7 million
and $57.3 million (including approximately $3.2 million and $17.0 million of
outstanding letters of credit).
Interest on borrowings is either (i) the federal funds rate, (ii) the
prime rate of JP Morgan Chase or (iii) LIBOR, plus the applicable margins
defined in the loan agreement.  At
December 31, 2005 and 2004, the interest rate charged approximated 6.35% and
4.4%, respectively.

NOTE H - STOCK OPTIONS

The Companys
1996 Stock Option Plan (the 1996 Plan), as amended, provides for the granting
of options to purchase not more than an aggregate of 1,129,000 shares of common
stock.  All officers, directors and
employees of the Company and other persons who perform services for the Company
are eligible to participate in the 1996 Plan.
Some or all of the options may be incentive stock options within the
meaning of the Internal Revenue Code of 1986, as amended.

The 1996 Plan
provides that it is to be administered by the Board of Directors, or by a
committee appointed by the Board, which will be responsible for determining,
subject to the provisions of the 1996 Plan, to whom

F-11

EMPIRE RESOURCES, INC. AND SUBSIDIARES


the options are granted, the number of shares of common stock subject to an option, whether an option shall be incentive or non-qualified, the exercise price of each option (which, other than in the case of incentive stock options, may be less than the fair market value of the shares on the date of grant), the period during which each option may be exercised and the other terms and conditions of each option. No options may be granted under the 1996 Plan after July 29, 2006.


The Company did not grant any options during 2005.


The following is a summary of stock option activity for the years ended December 31, 2005, 2004 and 2003:

Numberof shares

WeightedAverageExercisePriceOptions outstanding at December 31, 2002


683,933

$
1.33Options granted


18,000

$
1.87Options exercised


(96,000
)
$
1.44Options forfeited


(50,000
)
$
0.81Options outstanding at December 31, 2003


555,933

$
1.30Options granted


18,000

$
3.64Options exercised


(71,000
)
$
1.82Options outstanding at December 31, 2004


502,933
(a)
$
1.64Options granted





Options exercised


(143,933
)
$
0.47Options outstanding at December 31, 2005


359,000

$
1.65Options available for grant under 1996 Plan at December 31, 2005


559,000(a) Restated from amount previously reported to correct for elimination of forfeitures of options during 2004 erroneously reported.


The following table summarizes information about outstanding stock options under the Plan at December 31, 2005:

Options outstandingand exercisableExercisePrice Range


NumberOutstanding

Weighted-AverageRemainingContractualLife (Years)

Weighted-AverageExercisePrice.98 - 1.19



42,000



5.67



1.101.41 - 1.63



277,000



3.30



1.601.87 - 2.00



24,000



5.80



1.923.64



16,000



8.50



3.64359,000



4.00



1.65F-12

EMPIRE RESOURCES, INC. AND SUBSIDIARES


NOTE I - COMMON STOCK


The Board of Directors has authorized the Company to repurchase up to 2,500,000 shares of its common stock at prices not to exceed $1.50 per share. As of December 31, 2005, the Company had repurchased a total of 2,267,400 shares under the repurchase program for an aggregate cost of $2,731,049.


NOTE J - ACCUMULATED OTHER COMPREHENSIVE INCOME


Components of accumulated other comprehensive income included in the accompanying consolidated balance sheets are as follows (in thousands):

December 31,2005

2004Foreign currency translation adjustment

$
(8
)
$
14Unrealized gain on interest-rate swap derivative contract, net
        of tax of $63

$
100$
92

$
14NOTE K - INCOME TAXES


Income tax expense (benefit) consists of the following (In Thousands):

Year Ended December 31,2005

2004

2003Current

$
6,516

$
2,899

$
2,245Deferred

$
(754
)
$
(22
)
$
(27
)$
5,762

$
2,877

$
2,218The U.S. statutory rate of 35% (34% for the years ended December 31, 2004 and 2003) can be reconciled to the effective tax rate as follows (In Thousands):

Year Ended December 31,2005

2004

2003Provision for taxes at statutory rate

$
5,357

$
2,614

$
1,959State and local taxes, net of federal tax benefit


386

$
220

$
265Permanent differences and other


19


43


(6
)$
5,762

$
2,877

$
2,218F-13

EMPIRE RESOURCES, INC. AND SUBSIDIARES


Deferred tax assets and liabilities are composed of the following:

December 31,2005
    
    2004Deferred tax assetsAllowance
        for doubtful accounts
    
    
    74
    
    
    74Accrued
        expenses
    
    
    60
    
    
    23Derivative
        contracts
    
    
    3,007
    
    
    5203,141
    
    
    617Deferred tax liabilitiesProperty
        and equipment
    
    
    0
    
    
    (32
    )Inventories
    
    
    (2,322
    )
    
    (520
    )(2,322
    )
    
    (552
    )Net
        deferred tax assets 
        (included in other current assets)
    
    $
    819
    
    $
    65NOTE L - EMPLOYEE RETIREMENT BENEFITS


The Company has implemented a salary reduction employee benefit plan, a qualified plan adopted to conform to Internal Revenue Code Section 401(k). Employees may contribute up to 15% of their eligible compensation, and the Company will provide a matching contribution of 50% of employee contributions limited to 2% of employee compensation. The plan covers all employees who have attained age 18, and substantially all eligible employees have elected to participate.


Each employees pre-tax contributions are immediately vested upon participation in the plan. The employees vesting of the Companys matching contribution is based upon length of service as follows:

Years of service


Vested%1


25
%2


50
%3


75
%4


100
%Employees who terminate prior to 100% vesting forfeit their non-vested portion of the Companys matching contribution, and those funds are used to reduce future matching contributions. Employees in active service on the effective date of the plan were granted retroactive service credit for the purpose of determining their vested percentage. Company matching contributions amounted to $38,000 in 2005, $32,000 in 2004, and $28,000 in 2003.

F-14

EMPIRE RESOURCES, INC. AND SUBSIDIARES

NOTE M   EARNINGS PER SHARE

The following
is the reconciliation of the numerators and denominators of the basic and
diluted earnings per share:

Year Ended
  December 31,(In
  thousands except per share amounts)2005
  
  2004
  
  2003Numerator:Net Income
  
  $
  9,544
  
  $
  4,810
  
  $
  3,544Denominator:Computation of basic earnings per
share:Weighted average shares outstanding 
basic
  
  
  9,677
  
  
  9,574
  
  
  9,466Basic earnings per share
  
  $
  0.99
  
  $
  0.50
  
  $
  0.37Computation of diluted earnings per
share:Weighted average shares outstanding 
basic
  
  
  9,677
  
  
  9,574
  
  
  9,466Potentially
  dilutive shares:Shares issuable upon exercise of dilutive
  options
  
  
  281
  
  
  339
  
  
  236Weighted average shares outstanding 
  diluted
  
  
  9,958
  
  
  9,913
  
  
  9,702Diluted
  earnings per share
  
  $
  0.96
  
  $
  0.49
  
  $
  0.37NOTE N  BUSINESS
SEGMENT AND GEOGRAPHIC AREA INFORMATION

The Company operates in one business segment-the purchase, sale
  and distribution of non-ferrous metals.Sales are attributed to countries based
  on location of customer. Sales to domestic and foreign customers were as follows:

Year Ended
  December 31,(In
  thousands)2005
  
  2004
  
  2003United States
  
  $
  299,875
  
  $
  175,836
  
  $
  148,108Pacific Rim,
  Canada & Europe
  
  $
  58,601
  
  
  36,714
  
  
  36,308$
  358,476
  
  $
  212,550
  
  
  184,416F-15

EMPIRE RESOURCES, INC. AND SUBSIDIARES

NOTEO  SUMMARY OFQUARTERLYRESULTS
(UNAUDITED)

2005March

June

September

December31

30

30

31(In thousands except per share amounts)Net sales

$
80,014

$
89,446

$
90,777

$
98,239Gross profit


6,674


6,788


7,283


7,129Operating income


4,118


4,899


5,036


5,198Net income


2,224


2,522


2,388


2,410Income per common share-Basic and dilutedBasic

$
0.23

$
0.26

$
0.25

$
0.25Diluted

$
0.23

$
0.25

$
0.24

$
0.24Weighted average shares
  outstandingBasic


9,599


9,618


9,743


9,677Diluted


9,848


9,903


10,045


9,9582004March

June

September

December31

30

30

31(In thousands except per share amounts)Net sales

$
54,185

$
51,605

$
53,809

$
52,951Gross profit


3,836


3,823


4,313


4,312Operating income


2,145


1,994


2,568


2,120Net income


1,135


1,064


1,415


1,196Income per common share-Basic and dilutedBasic

$
0.12

$
0.11

$
0.15

$
0.12Diluted

$
0.11

$
0.11

$
0.14

$
0.12Weighted average shares
  outstandingBasic


9,530


9,553


9,553


9,599Diluted


9,885


9,903


9,864


9,913NOTE P - COMMITMENTS AND
CONTINGENCIES

[1]
Lease:The Company leases office facilities under a lease expiring in
        2015. The minimum non-cancelable scheduled rentals under such lease are
        as follows (in thousands):Year EndingDecember 31,2006
    
    
    $
    2742007
    
    
    
    2742008
    
    
    
    2742009
    
    
    
    2742010
    
    
    
    274Thereafter
    
    
    
    1,207$
    2,577F-16

EMPIRE RESOURCES, INC. AND SUBSIDIARES

Rent expense
  for the years ended December 31, 2005, 2004, and 2003 was $492,000, $479,000,
  and $452,000 respectively.[2]
Letters of credit:Outstanding
  letters of credit at December 31, 2005 amounted to $3.2 million all of which
  expired February 15, 2006.[3]
Employment agreements:The Company
  has an employment agreement with one of its executive officers expiring in
  December 2006. The agreement provides that the Company may terminate the
  agreement upon the disability of the executive or for cause (as such terms
  are defined in the agreement). Base salary under this agreement is $450,000
  per annum. The amount may be increased, but not decreased, by the Board of
  Directors.The Company
  has an employment agreement with another officer, expiring in December 2006.
  The minimum base salary is $220,000 and is subject to possible upward annual
  adjustments based upon changes in a designated cost of living index.[4]
Purchase commitments:Under the
  terms of some of its supply contracts, the Company may be required to
  purchase certain minimum tonnages over the term of the contracts.NOTE QALLOWANCE FOR
DOUBTFUL ACCOUNTS

In thousandsAdditionsBalance at
  Beginning of
  Period

Charged to Costs
  And
  Expenses

Charged to
  Other
  Accounts

Deductions from
  Reserves

Balance at End of
  Period2004


$
191
















$
1912003


$
191
















$
1912002


$
189



$
2











$
191EXHIBIT 21.1 List of
subsidiaries

Name of
  subsidiary
JurisdictionEmpire Resources Pacific
  Ltd.
DelawareI.T.I. Innovative
  Technology, Ltd.
IsraelCompuPrint Ltd.
Israel6900 Quad Avenue LLC
DelawareEmpire Resources
  Extrusions LLC
DelawareImbali
BelgiumF-17

EMPIRE RESOURCES, INC. AND SUBSIDIARES

EXHIBIT 11.1
Statement re computation of per share earnings

Earnings per
share  basic, are based upon the Companys weighted average number of common
shares outstanding.

2005

2004

2003(In thousands  except per share data)Net Income

$
9,544

$
4,810

$
3,544Weighted average shares
  outstanding  basic


9,677


9,574


9,466Shares issuable upon
  exercise of dilutive options


359


503


567Less: shares assumed
  repurchased


(78
)

(164
)

(331
)Weighted average shares
  outstanding  diluted


9,958


9,913


9,702Earnings per share  basic

$
0.99

$
0.50

$
0.37Earnings per
  share  diluted

$
0.96

$
0.49

$
0.37F-18