FORM 10-K

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                                   ACT OF 1934

     For the fiscal year ended                        Commission file number:
        DECEMBER 31, 2004                                    0-27992

                              ELAMEX, S.A. DE C.V.
             (Exact name of Registrant as specified in its charter)

              MEXICO                                  NOT APPLICABLE
   (State or other jurisdiction of                   (I.R.S. Employer
    incorporation or organization)                   Identification No.)

        1800 NORTHWESTERN DR.                               79912
              EL PASO, TX                                (zip code)
  (Address of principal executive offices)

                                 (915) 298-3061
       (Registrant's telephone number including area code, in El Paso, TX)

           Securities registered pursuant to Section 12(b) of the Act:
                                      NONE

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

       Title of each class                Name of exchange on which registered

  CLASS I COMMON STOCK, NO PAR VALUE             NASDAQ NATIONAL MARKET

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of 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. [X]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [ ] No [X]

The aggregate market value of the voting stock (based upon the closing price of
the NASDAQ National Market on July 2, 2004 of $2.25) held by non-affiliates of
the registrant on that date was approximately $7,146,205.

The number of shares of Class I Common Stock of the registrant outstanding as of
March 8, 2005 was: 7,502,561.

                       DOCUMENTS INCORPORATED BY REFERENCE
The Proxy Statement for the registrant's 2005 Annual Meeting of Stockholders is
incorporated by reference into Part III of this Form 10-K

                       WEBSITE ACCESS TO COMPANY'S REPORTS
Elamex's internet website is www.elamex.com. Our annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to
those reports filed or furnished pursuant to section 13(a) or 15(d) of the
Exchange Act are available free of charge through our website as soon as
reasonably practicable after they are electronically filed with, or furnished
to, the Securities and Exchange Commission.

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                                               TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                                                          PAGE #
<S>                                                                                                                       <C>
PART I

        ITEM 1.   BUSINESS............................................................................................      3
        ITEM 2.   PROPERTIES..........................................................................................      8
        ITEM 3.   LEGAL PROCEEDINGS...................................................................................      8
        ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.................................................      8

PART II

        ITEM 5.   MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES
                  OF EQUITY SECURITES                                                                                       9
        ITEM 6.   SELECTED FINANCIAL DATA.............................................................................     10
        ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                  RESULTS OF OPERATIONS...............................................................................     12
        ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS.........................................     21
        ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.........................................................     22
        ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
                  AND FINANCIAL DISCLOSURE............................................................................     44
        ITEM 9A.  CONTROLS AND PROCEDURES.............................................................................     44
        ITEM 9B.  OTHER INFORMATION                                                                                        44

PART III

        ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT..................................................     44
        ITEM 11.  EXECUTIVE COMPENSATION..............................................................................     46
        ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
                  MATTERS.............................................................................................     46
        ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS......................................................     46
        ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES..............................................................     46

PART IV

        ITEM 15.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES..........................................................     47

                  SIGNATURES..........................................................................................     48
</TABLE>

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<PAGE>

                                     PART I

References in this Form 10-K to Elamex or the Company are to Elamex, S.A. de
C.V. and its subsidiaries, collectively, and references to Elamex, S.A. de C.V.
are solely to Elamex, S.A. de C.V. In this Form 10-K, references to $ and U.S.
Dollars are to United States dollars and references to ps$ and Pesos are to
Mexican Pesos.

ITEM 1. BUSINESS

GENERAL

Elamex is a Mexican company with manufacturing operations and real estate
holdings in Mexico and the United States. The Company is involved in the
production of food items related to its candy manufacturing and nut packaging
and processing operations, and metal and plastic parts for the appliance and
automotive industries.

Elamex, S.A. de C.V. is the successor pursuant to the merger, effective October
1, 1995, of Elamex Internacional, S.A. de C.V. (Elamex Internacional) with and
into Elamex, S.A. de C.V. The predecessor of Elamex, S.A. de C.V. was formed in
1990, when Accel, S.A. de C.V. (Accel), a public company listed on the Mexico
Stock Exchange, acquired a majority interest in Elamex. Elamex was registered as
a public company and began trading its stock on NASDAQ in March 1996.

The Company was established in 1973 as a contract manufacturing company in
Juarez, Mexico.

Elamex prepares financial statements in conformity with accounting principles
generally accepted in the United States of America (U.S. GAAP) and also
maintains certain financial and tax information in conformity with accounting
principles generally accepted in Mexico (Mexican GAAP). As a NASDAQ company
Elamex is subject to the United States Securities and Exchange Commission and
NASDAQ rules and regulations.

BUSINESS SEGMENTS AND SERVICES

FOOD SERVICES

In July 2002 Elamex acquired 100% of Franklin Connections, LP (Franklin), a
general line candy manufacturer and a retail/food service nut packing and
processing company. Candy manufacturing is conducted in a world-class dedicated
candy manufacturing plant of approximately 180,000 square feet located in
Juarez, Mexico. Nut packaging is conducted in Franklin's approximately 185,000
square foot packaging plant in El Paso, Texas. Additionally, Franklin, through
its Sunrise Confections Division, offers both contract manufacturing and shelter
services for U.S. candy companies who market the candy produced in Franklin's
candy manufacturing plant. Franklin distributes its products through mass
merchandisers, grocery retailers, drug store chains, wholesalers, national and
regional food service companies; large U.S. food products companies and U.S.
based candy and confection companies.

SHELTER SERVICES

Effective at the close of business on July 4, 2003, the Company sold certain
Shelter Services operations to TECMA Group LLC, a private contract, shelter and
manufacturing services provider headquartered in El Paso, Texas. The transaction
included the sale of five Shelter Services customer contracts, miscellaneous
assets and stock of five newly created companies. Substantially all Shelter
Services operations personnel related to these contracts were transferred to the
buyer.

Prior to the sale in July 2003 Elamex provided specialized manufacturing
services in Mexico through its Shelter Services Division. Under the shelter
business model, Elamex provided labor and other administrative services,
dedicated or shared manufacturing space, and production management. It also
provided limited procurement services. Subsequent to the sale, Shelter Services
are now limited to services provided to a Franklin affiliate.

Additionally Elamex owns and leases approximately 582 thousand square feet of
manufacturing space in Mexico, which is either utilized by Franklin or rented to
third parties.

METAL STAMPING

The Metal Stamping segment consists solely of Precision Tool, Die and Machine
Company ("Precision"), our wholly owned subsidiary located in Louisville,
Kentucky. Precision manufactures metal parts (metal stampings) and powder paints
metal parts primarily for the U.S. appliance and automotive industries. This
operation has three manufacturing facilities with a combined

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square footage of approximately 390,000. Precision is registered under both ISO
9002 and QS 9000, and is engaged in Six Sigma quality initiatives. Elamex
acquired Precision in July 1999.

On December 19, 2003, Precision voluntarily filed for protection under Chapter
11 of the Federal Bankruptcy Code in the U.S. Bankruptcy Court to implement a
restructuring of its debt. Elamex was authorized by its Board of Directors to
sell Precision. Any sale will be subject to the approval of the U.S. Bankruptcy
Court. As a consequence of seeking protection under bankruptcy laws, the Company
no longer controls Precision's operations as of December 19, 2003 and the
Company's investment in Precision is recognized in accordance with the equity
method of accounting. Due to the bankruptcy activity during 2004, the Company
had no significant influence on Precision's operations and changed from the
equity method to the cost method with no effect on net loss.

QUALCORE

Elamex also has a 50.1% investment in Qualcore, S. de R.L. de C.V. ("Qualcore"),
a joint venture company, which manufactures plastics parts and metal parts
(metal stamping and powder painting capabilities) with General Electric de
Mexico (GE de Mexico). Qualcore is jointly managed with GE de Mexico and the
investment in the joint venture is recorded under the equity method. Qualcore's
customers are Mexican companies engaged in the manufacturing of appliances and
automotive parts for products primarily destined for export to the United
States. Qualcore operates a 116,000 square foot manufacturing facility
constructed in 2000. It is located in Celaya, Mexico, a city approximately 200
miles northwest of Mexico City. Qualcore is registered under ISO 9002 and is
also engaged in Six Sigma quality initiatives.

INDUSTRY BACKGROUND

In the mid-1970's Mexico's Maquiladora program allowed OEMs, willing to partner
with Mexican-owned manufacturing companies to access Mexico's low-cost labor
base in a free-trade environment. Under this program, raw materials could be
imported in-bond, transformed into a finished component or product and exported
without duty. Two distinct manufacturing programs grew from this environment:
shelter services and contract manufacturing, both of which are offered by
Elamex.

Shelter services has offered shared or dedicated manufacturing facilities, hires
and trains manufacturing personnel and provides other related administrative
services. Production management is typically handled by the OEM. The OEM also
provides materials and equipment. Shelter service costs are typically billed by
the hour. Contract manufacturing is a natural expansion of shelter services.
Contract manufacturing generally includes labor management and oversight,
materials procurement and management, control of production processes, customs
management, as well as shared and/or dedicated facilities and manufacturing
administrative services. In contract manufacturing arrangements, the contract
manufacturer normally assumes greater pricing risks due to manufacturing costs,
quality and delivery. Elamex's breadth of services and range of third party
quality certifications, such as ISO 9002, ANSI-J-STD-001 and GIDEP (General
Industry Data Exchange Program), have given it a market advantage.

The elimination of prohibitions on foreign business ownership and the initiation
of the North American Free Trade Agreement (NAFTA) encouraged the migration of
large numbers of multinational competitors. In response to this, Elamex began a
service diversification program by vertically integrating in component-level
markets, such as plastics and metal stamping, both through acquisition and joint
venture.

The appliance and automotive industries began a strong migration to Mexico in
the 1990s. Companies in these industries looked for specialized business
arrangements such as joint ventures, alliances and multi-year business
guarantees, in order to secure capacity from high quality Mexican-based
suppliers. Qualcore was the result of this particular business model used to
meet the perceived needs of these companies. It also appeared that there was a
strong need for regional U.S. support in some of these same commodities.
Elamex's acquisition of Precision in 1999 was intended to expand supplier
arrangements with existing customers by offering U.S. based production and also
to expand its industry penetration through the addition of new customers with
both U.S. and Mexican manufacturing needs. This strategy was intended to provide
benefits to OEM customers seeking to consolidate their supply base.

In 2000, increasing consolidation in the electronic manufacturing industry (EMS)
prompted Elamex to divest itself of its EMS operation.

Mexico has become an important manufacturer of candy products destined to the
United States. Mexico currently enjoys significantly lower labor and raw
material costs when compared to those experienced by U.S. candy companies who
manufacture general line sugar candies in the United States. In 2001, seeing an
opportunity of the lower costs in producing

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general line sugar candy in Mexico, Franklin built a world-class candy
manufacturing facility in Juarez, Mexico. Currently all of the candy produced at
this facility is exported to the United States.

CUSTOMERS AND MARKETS

In 2004 Franklin (Food Services) accounted for $95.3 million or 97.7% of
Elamex's total consolidated sales of $97.6 million. Franklin's customer base is
very diversified. Its customers include some of the largest U.S. mass
merchandisers, grocery retailers, drug store chains, wholesalers, national and
regional food service companies; large U.S. food products companies and U.S.
based candy and confection companies. In 2004, Franklin had two major customers
that accounted for 20.9% and 10% of its total sales.

In 2004, Elamex's Shelter Services Division accounted for $15.2 million, or
13.8% of Elamex's total sales before elimination of sales for manufacturing
services provided to Franklin. In 2004, the Shelter Services Division recorded
$13.0 million in sales to Franklin.

Please see Note 13 of the Financial Statements for additional segment and
geographic information.

SALES AND MARKETING

The Company's principal sources of new business come from existing
relationships, referrals and from Company employed direct sales personnel and
through senior management. Elamex companies advertise in trade journals,
participate in industry trade shows and seminars.

Once introduced to the capabilities, products and services of an Elamex company,
the sales cycle is normally six months to a year. However, once acquired,
customers generally remain for extended periods of time. The selling effort for
manufacturing services requires time and extensive coordination for labor,
supplies, equipment and facilities. Keys to successful customer conversion are
technical expertise, price, product quality and customer service. Team selling,
emphasizing value added services, forms an integral part of the sales and
marketing strategies of all Elamex companies.

COMPETITION

The markets in which Elamex companies compete include competitors who have
substantial market shares, brand recognition and financial resources. Elamex
faces competition from current and prospective customers who evaluate Elamex's
manufacturing capabilities against the merits of manufacturing products
internally.

Although the U.S. candy and nut markets are very large, they are dominated by
large branded food companies. Currently, all of the candy produced in Franklin's
candy manufacturing plant is exported to the United States. Other U.S. based
general line candy companies have established manufacturing plants in Mexico or
acquire candy produced in Mexico or other low cost producing countries.

Elamex's Shelter Services Division competition comes primarily from Mexican
industrial real estate development companies who have established operations
providing services similar to those offered by Elamex's Shelter Services
Division in order to rent and or sell industrial buildings in Mexico. The
primary objective of these real estate companies is the profitable
commercialization of real estate rather than profitability associated with
manufacturing services. During 2001 and 2002, due primarily to the recession in
manufacturing in the United States as well as competition from China, Mexico's
border manufacturing business suffered significant reductions. This situation
has resulted in customer attrition or limited growth possibilities for companies
like Elamex engaged in providing shelter and contract manufacturing services in
Mexico.

Precision competes with both domestic and foreign owned competitors. Foreign
owned competitors are generally well capitalized, use modern equipment and are
closely aligned with other foreign owned companies doing business in the United
States. Due to the cost of transportation, generally the manufacturing plants of
Precision's customers are within 500 miles of Louisville, Kentucky, Precision
attempts to distinguish itself by providing value added pre-manufacturing
services, assembly and cosmetic powder painting capabilities.

Elamex believes that the primary basis of competition in its targeted markets
are time to market, engineering or technical capability, price, manufacturing
quality, product consistency, and reliable delivery. Elamex believes that it
competes favorably with respect to each of these factors. To remain competitive,
Elamex must continue to provide world class manufacturing

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services, maintain high quality levels, offer value-added products and services,
offer flexible and reliable delivery schedules, and compete favorably on price.

EFFECT OF NAFTA

Elamex believes that NAFTA continues to have a positive effect on its business.
NAFTA eliminates import duties and reduces other restrictions on certain imports
into the United States, and Canada. These benefits enable Elamex to manufacture
products from raw materials and components imported into Mexico, then returned
to the United States and Canada as finished products, without paying significant
duties.

BACKLOG

Backlog consists of firm purchase orders and commitments that are to be filled
within the next 12 months. However, since order and commitments may be
rescheduled, increased or canceled, Elamex does not consider backlog to be a
meaningful indicator of future financial performance.

KEY RAW MATERIALS AND SUPPLIERS

Franklin acquires nutmeats from a variety of suppliers, both U.S. and foreign,
for packaging and processing at its plant in El Paso. Franklin generally enters
into purchase contracts for a majority of its nutmeats needs based on its
estimated forward sales forecasts. For its candy operations, Franklin acquires
substantial amounts of sugar and corn syrup. Franklin acquires sugar from both
Mexican and U.S. suppliers, under both spot purchases and annual supply
agreements. The prices of these raw materials fluctuate, depending primarily on
supply and demand. The company has limited ability to pass cost increases
through to its customers.

Raw materials used by third party customers in Elamex's Shelter Services
Division are generally sourced by and owned by the customer. Elamex provides
logistical and customs support to the importation of raw materials and component
parts into Mexico and the return of finished product to the United States and
Canada.

Precision's primary raw material is steel. It purchases steel from a variety of
steel suppliers, some under master contracts associated with specific customers.
Under these contractual arrangements, changes in the price of steel are passed
through to the customer. Approximately 80% of Precision's steel purchases are
subject to such contractual arrangements. Precision orders raw materials based
on anticipated customer orders.

EMPLOYEES

Elamex had a total of 937 employees at December 31, 2004, of which 820 were
employed in Mexico in Elamex's Shelter Services Division (includes employees at
the Franklin candy manufacturing plant), and 113 were employed by Franklin in El
Paso, Texas. The Elamex corporate staff is composed of a President and Chief
Executive Officer, a Chief Financial Officer, a Corporate Controller and one
administrative staff. The Company's employees in the United States and Mexico
are not covered by union agreements.

ENVIRONMENTAL COMPLIANCE

Elamex's operations are subject to the Mexican General Law on Ecological
Equilibrium and Environmental Protection (the Ecological Law) and the
regulations promulgated thereunder. In accordance with the Ecological Law,
companies engaged in industrial activities are subject to the regulatory
jurisdiction of the Secretaria del Medio Ambiente, Recursos Naturales y Pesca
(the Ministry of the Environment, Natural Resources and Fisheries). Since
September 1990, each such company has been required to file semi-annual reports
regarding its production facilities and to comply with the Ecological Law and
the regulations thereunder, with respect to its environmental protection
controls for air emissions, wastewater discharge and the disposition of
industrial waste. Elamex is licensed to handle radioactive materials and
complies with both U.S. and Mexican standards relating to the handling of such
materials. In addition, Elamex is subject to U.S. environmental laws and
regulations as a consequence of the return to the United States of any hazardous
wastes generated by Elamex that are derived from materials imported from the
United States, a requirement of its participation in the Maquiladora program.
Such laws and regulations may impose joint and several liabilities on certain
statutory classes of persons for the costs of investigation and

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remediation of contaminated properties regardless of fault or the legality of
the original disposal. These persons include the present and former owner or
operator of a contaminated property and companies that generated, disposed of,
or arranged for the disposal of hazardous substances found at a property. The
Company does not anticipate any material capital expenditures. Elamex is not
aware of any non-compliance with the above-mentioned regulations.

Mexican environmental laws and regulations have become increasingly stringent
over the last decade. This trend is likely to continue and may be influenced by
the environmental agreement entered into by Mexico, the United States and Canada
in connection with NAFTA. Elamex believes that its policies with respect to
environmental matters in Mexico currently exceed the standards set forth in the
Ecological Law, with the exception of water discharge of the candy plant. The
Company is currently working together with the municipal water agency and
expects to be in compliance in the short term. Elamex is committed to
maintaining high standards of environmental protection controls.

CROSS BORDER TRANSACTIONS AND SECURITY

The Shelter operations rely on the unimpeded movement of raw materials and
finished product between the United States and Mexico. Although Elamex has not
experienced any significant delays with respect to the movement of finished
product from Mexico to the United States due to announced U.S. homeland security
measures, temporary delays at U.S. Customs entry points could be experienced in
the event of high or extreme U.S. homeland security warnings.

Franklin's candy manufacturing plant in Juarez, Mexico and its nut packaging
plant in El Paso, Texas are maintained and monitored against the highest
standards of U.S. food grade manufacturing facilities. Its plants are inspected
by appropriate government entities and independent inspection services. Customer
inspections are frequent. Food products coming into and out of the plants are in
sealed containers or trucks. All of Elamex's plants in Mexico have twenty-four
hour security and controlled access to production areas.

RISKS OF POTENTIAL FUTURE ACQUISITIONS AND INVESTMENTS

Elamex's business strategy may depend in the future on the successful
acquisition, integration, financing and performance of businesses. Such strategy
involves the substantial risk that we will not find suitable businesses to
acquire on terms we believe are reasonable and that the new businesses we choose
to enter will not provide the benefits we expect. Elamex's future business
prospects should therefore be considered in light of the risks, expenses,
problems and delays inherent in acquiring and integrating a new business.

EXCHANGE RATES

Generally, all of Elamex's customer revenues are invoiced and collected in U.S.
dollars. A significant amount of Elamex's Shelter Services Division expenses are
related to labor and related services paid in Mexican Pesos, generally at spot
market rates. Elamex also maintains certain monetary assets and liabilities in
Mexican Pesos. At any one time, the Company may have a net monetary asset
position, which is exposed to Mexican Peso devaluation. The Company does not
enter into foreign exchange contracts to protect itself against a devaluation of
the Mexican Peso against the U.S. dollar. See Note 2 to the Consolidated
Financial Statements included in Item 8 of this Form 10-K.

The following table sets forth, for the periods indicated, the high, low,
average and period-end free market rates for the purchase and sale of U.S.
dollars (presented in each case as the average between such purchase and sale
rates), expressed in nominal Pesos per U.S. dollar.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,        HIGH (1)     LOW (1)    AVERAGE (2)  PERIOD END (1)
<S>                           <C>          <C>         <C>          <C>
2000                          Ps$ 10.08    Ps$ 9.18     Ps$ 9.46     Ps$ 9.64
2001                               9.98        8.94         9.34         9.17
2002                              10.36        9.02         9.61        10.36
2003                              11.34       10.30        10.78        11.20
2004                              11.53       10.86        11.25        11.26
</TABLE>

The exchange rate as of March 15, 2005 was $11.24

SOURCE: Official exchange rate by the Bank of Mexico

(1) Monthly rates at market close.

(2) Average of monthly rates.

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ITEM 2. PROPERTIES

Elamex's Juarez, Mexico facilities are located only a short distance from the
U.S. border and the international airport, rail and truck depots in El Paso,
Texas. Below are Elamex's manufacturing facilities, either owned or leased from
third parties and their approximate size:

<TABLE>
<CAPTION>
                   SQUARE
    LOCATION        FEET                 ACTIVITY                      SEGMENT           LEASED/OWNED
<S>              <C>          <C>                                   <C>                  <C>
Cd. Juarez          57,450    Medical product assembly              Shelter Services      Owned (1)
Cd. Juarez          50,000    Electromechanical product assembly    Shelter Services      Owned (1)
Cd. Juarez          43,034    Medical product assembly              Shelter Services      Owned (1)
Cd. Juarez          67,541    Medical, military products            Shelter Services      Owned (1)
Cd. Juarez         180,000    Confectionary production              Food Services         Leased(2)
Chihuahua           47,835    Available                             Shelter Services      Owned
Nuevo Laredo        80,155    Automotive products assembly          Shelter Services      Owned (1)
Torreon             55,845    Assembly of shotgun parts             Shelter Services      Owned (1)
El Paso, TX        185,000    Nut processing and packaging          Food Services         Owned (3)
El Paso, TX        239,000    Distribution center                   Food Services         Leased(4)
                 ---------
Total            1,005,860
                 =========
</TABLE>

(1)   Elamex owned facility currently being leased to a third party (See note 15
      of the financial statements).

(2)   Used by Franklin Connections. Leased from Franklin Inmobiliarios, S.A. de
      C.V., a related party.

(3)   Owned and pledged by Franklin (see note 7 of the financial statements).

(4)   Leased by Franklin.

ITEM 3. LEGAL PROCEEDINGS

Elamex is involved in various claims and lawsuits incidental to its business. In
the opinion of management the ultimate liability thereunder, if any, will not
have a material adverse effect on the business or financial position of Elamex.

The bankruptcy filing by Precision involves intensive legal proceedings under
the supervision of the Federal Bankruptcy Court. The parties to these
proceedings have been limited to Precision and its creditors. No claims of
wrongdoing have been made before the Court and no claims have been filed against
any entities in the consolidated group of companies other than Precision.

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

None

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                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES EQUITY SECURITIES

Elamex's Common Stock, is traded on the NASDAQ National Market system under the
symbol ELAM. The following table sets forth, for the period stated, the high and
low closing sales prices for the Common Stock as reported on the NASDAQ National
Market System.

<TABLE>
<CAPTION>
                                            CLOSING SALES PRICE
             PERIOD                          HIGH         LOW
<S>                                         <C>          <C>
January 1, 2003 - April 4, 2003                   5       4  1/5
April 5, 2003 - July 4, 2003                      4       3  1/5
July 5, 2003 - October 3, 2003               3  4/5      3 10/91
October 4, 2003 - December 31, 2003         3 12/25       2  2/5

January 1, 2004 - March 31, 2004              3 1/4        1 1/2
April 1, 2004 - June 30, 2004                 2 3/5            2
July 1, 2004 - September 30, 2004             2 4/5            2
October 1, 2004 - December 31, 2004           3 3/5        2 1/4
</TABLE>

Elamex currently intends to follow a policy of retaining earnings, if any, for
use in the development of business and to finance growth. Elamex has never paid
cash dividends on its Common Stock and has no plans to do so in the foreseeable
future. As of March 8, 2005, there were approximately 634 beneficial holders of
Elamex's Common Stock.

The Mexican Law of Commercial Companies (Ley General de Sociedades Mercantiles)
requires that at least 5% of Elamex's net income each year (after profit sharing
and other deductions required by law) be allocated to a legal reserve fund,
which is not thereafter available for distribution except as a stock dividend
until the amount of such fund equals 20% of Elamex's historical capital stock.
Elamex may also maintain additional reserves.

TAXATION OF DIVIDENDS

UNITED STATES FEDERAL INCOME TAXES

Dividends (other than certain dividends paid on a pro rata basis in additional
Common Stock) paid by Elamex with respect to Common Stock out of current or
accumulated earnings and profits (E&P) to a U.S. holder will be treated as
ordinary income to such holder. U.S. corporations that hold Common Stock will
not be entitled to the dividends received deduction generally available for
dividends received from U.S. corporations (and certain non-U.S. corporations).
To the extent a distribution exceeds E&P, it will be treated first as a return
of such holder's basis to the extent thereof, and then as gain from the sale of
a capital asset. Such capital gain will be long term if such holder has held the
Common Stock for more than one year.

Dividends generally will constitute foreign source passive income or, in the
case of certain U.S. holders, financial service income for U.S. foreign tax
credits purposes.

Dividends paid in Mexican Pesos will be included in gross income of a U.S.
holder in a U.S. dollar amount calculated by reference to the exchange rate in
effect on the date of receipt of the distribution, whether or not the Pesos are
in fact converted into U.S. dollars at that time. If Pesos are converted into
U.S. dollars on the day they are received by a U.S. holder, such holder
generally should not be required to recognize foreign currency gain or loss in
respect of the dividend income. U.S. holders should consult their own tax
advisors regarding the treatment of any foreign currency gain or loss on any
Pesos which are not converted into U.S. dollars on the day the Pesos are
received by such holders.

Distributions of additional Common Stock to U.S. holders with respect to their
pre-distribution holdings of Common Stock (old Common Stock) that are made as
part of a pro rata distribution to all stockholders of Elamex generally will not
be subject to U.S. federal income tax (except with respect to cash received in
lieu of fractional shares of Common Stock). The basis of the Common Stock so
received will be determined by allocating the U.S. holders' adjusted basis in
the old Common Stock between the old Common Stock and the Common Stock so
received.

                                       9
<PAGE>

A holder of Common Stock that is, with respect to the U.S., not a U.S. holder (a
non-U.S. holder) will not be subject to U.S. federal income tax on dividends
paid with respect to the Common Stock, unless such dividends are effectively
connected with the conduct by the holder of a trade or business in the U.S.

MEXICAN INCOME TAXES

Mexican income tax law requires that Mexican corporations must pay income tax on
taxable income for each fiscal year. Mexican corporations must maintain an
account called the CUENTA DE UTILIDAD FISCAL NETA (CUFIN) or previously taxed
net earnings account. In its CUFIN the Mexican Corporation records the balance
of the taxed profits from previous years, on which income tax has already been
paid plus dividends received from Mexican corporations. The CUFIN account
balance is restated each year for inflation.

Whenever a Mexican corporation pays dividends to its stockholders, if the amount
maintained in the CUFIN balance exceeds the dividend payment to be made, neither
the Mexican corporation nor the stockholders will have to pay Mexican income tax
on such dividend payment. Therefore, for Mexican tax purposes, dividend payments
made by Elamex to U.S. holders will not generally be subject to imposition of
Mexican income taxes. However, if the Mexican corporation's CUFIN balance is
less than the dividend payment, then the Mexican corporation must pay income tax
of 30% of 1.5385 times the amount in 2004, 2003 and 2002, which exceeds such
balance.

Beginning in 1999, Mexican law allows corporations to pay tax currently on their
Mexican earnings at a rate of 32% in 1999 and 30% in 2000 and after, to the
extent those earnings are reinvested in the Company (i.e. not paid out in
dividends). The undistributed, untaxed earnings are taxed at a rate of 3% for
1999 and 5% for 2000 and thereafter when they are distributed to the
shareholders as a dividend. The Company can elect out of this treatment and
instead choose to be taxed at a current rate of 35% (with no deferral). The
Company has not elected out of this treatment and thus will pay the additional
tax when those earnings are distributed in the future.

The tax law enacted January 1, 2002 eliminated the option to defer the payment
of 5% of taxable income and reduces the 35% tax rate to 34% in 2003, 33% in 2004
and 32% thereafter.

If Elamex distributes stock dividends to U.S. holders, or pays a dividend in
cash and such payment is to be used by the U.S. holders for a capital
subscription or for reinvestment in Elamex's stock, and either such transaction
by the U.S. holders occurs within 30 days following the date of the dividend
payment, there will be no Mexican tax consequences for such U.S. holders, so
long as Elamex does not reduce its capital stock liquidity. If Elamex reduces
its capital stock and the balance of its CUFIN plus its capital contributions
restated for inflation is less than the amount of such stock reduction, Elamex
will be required to pay income tax on such excess. Tax must also be paid on the
excess, if any, of the shareholder's equity over the sum of the CUFIN, the
capital contributions restated for inflation and the taxable amount determined
as previously indicated. In this case the taxable basis cannot be greater than
the total amount of the capital reduction.

ITEM 6. SELECTED FINANCIAL DATA

Although Elamex is a Mexican company, its functional currency is the U.S.
dollar, which is the principal currency in which it conducts business. Elamex
prepares consolidated financial statements in U.S. dollars in conformity with
U.S. GAAP and also maintains certain financial and tax information in conformity
with Mexican GAAP. Except as otherwise stated herein, all monetary amounts in
this report have been presented in U.S. dollars.

The following table sets forth selected consolidated financial data of Elamex as
of and for each of the years ended December 31, 2000, 2001, 2002, 2003, and
2004. This table is qualified by reference to and should be read in conjunction
with the consolidated financial statements and related notes thereto and other
financial data included elsewhere in this Form 10-K.

The selected consolidated financial data presented below as of and for each of
the years in the five-year period ended December 31, 2004, have been derived
from our consolidated financial statements audited by Galaz, Yamazaki, Ruiz
Urquiza, S.C., a member Firm of Deloitte Touche Tohmatsu.

                                       10
<PAGE>

These historical results are not necessarily indicative of the results to be
expected in the future.

                             YEAR ENDED DECEMBER 31,
               (In thousands of dollars, except per share amount)

<TABLE>
<CAPTION>
                                                                               (b)         (c)           (d)            (e)
                                                               2004           2003         2002         2001           2000
<S>                                                          <C>           <C>          <C>           <C>            <C>
INCOME STATEMENT DATA:
Net sales ...............................................    $   97,587    $  157,250   $  134,269    $ 131,984      $ 174,664
Gross profit ............................................        23,021        17,914       14,127        2,106          2,580
Operating loss ..........................................          (339)      (29,111)      (1,293)     (21,448)       (12,402)
Other (expense) income ..................................        (2,027)         (971)      (3,307)         704         23,127
Income tax provision (benefit) ..........................         1,377         2,419         (561)      (3,362)        (3,203)
Net (loss) income .......................................    $   (5,151)   $  (34,608)  $   (6,017)   $ (11,030)     $  17,381
Basic and diluted net (loss) income per share (a) .......    $    (0.69)   $    (4.61)  $    (0.84)   $   (1.61)     $    2.53
BALANCE SHEET DATA:
Current assets ..........................................    $   22,323    $   20,576   $   45,306    $  45,251      $  76,775
Property, plant and equipment, net ......................        26,956        39,956       69,979       38,582         55,108
Total assets ............................................        54,250        67,403      134,501      101,501        142,368
Notes payable and current portion of long-term debt......         6,628         5,282        8,939        2,569          5,424
Current portion of capital lease obligations.............         1,137         1,051          971
Long-term debt excluding current portion ................             -         1,827       20,133       16,286         24,307
Capital lease obligations, excluding current portion.....         2,694        15,313       16,296
Total stockholders' equity ..............................    $   26,380    $   31,572   $   65,986    $  69,400      $  80,772
OTHER DATA:
Net cash provided by (used in) operating activities......    $    2,603    $    2,237   $   (1,611)   $ (14,541)     $  (8,217)
Net cash (used in) provided by investing activities......        (1,354)       (5,879)     (10,540)       1,327         23,931
Net cash (used in) provided by financing activities......    $   (1,476)   $   (2,978)  $    4,220    $   5,707      $   1,479
</TABLE>

(a)   Net (loss) income per share of Common Stock was calculated by dividing net
      (loss) income by the weighted average number of shares of common stock
      outstanding, which for the years ended December 31, 2004, 2003, 2002, 2001
      and 2000 was approximately 7.5 million, 7.5 million, 7.2 million, 6.9
      million, and 6.9 million, respectively.

(b)   Financial information for 2003 was affected by the deconsolidation of the
      Metal Stamping Segment as of December 19, 2003 and the sale of certain
      shelter operations in July 2003.

(c)   Financial information for 2002 was affected by the acquisition of Franklin
      beginning July 2002.

(d)   Financial information for 2001 was affected by the deconsolidation of
      Qualcore beginning in July 2001.

(e)   Financial information for 2000 was affected by the sale of EMS operations
      in May 2000.

                                       11
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion should be read in conjunction with the Consolidated
Financial Statements and Notes thereto appearing in Item 8 of this Form 10-K.

RESULTS OF OPERATIONS

GENERAL

The Company reports and analyzes its operations based on the markets the Company
serves. The Company's reportable segments are 1) Shelter Services, 2) Metal
Stamping and 3) Food Services.

The Shelter Services segment provides shelter and assembly services in Mexico
for non-electronics manufacturing services companies. Under the
contract-manufacturing model, Elamex provides labor and administrative services.
Under the assembly business model, Elamex provides shared manufacturing space,
production management and may also provide material procurement services.

The Metal Stamping segment is composed solely of Precision Tool, Die and Machine
Company ("Precision"), our wholly owned subsidiary located in Louisville,
Kentucky. It provides metal and stamping services primarily to the appliance and
automotive sectors. On December 19, 2003, Precision filed for protection under
U.S. federal bankruptcy laws. Precision revenues and expenses are consolidated
through December 19, 2003. Commencing on that date, Elamex accounted for
Precision under the equity method of accounting. Due to the bankruptcy activity
during 2004, the Company had no significant influence on Precision's operations
and changed from the equity method to the cost method with no effect on net
loss.

The Food Services segment is the Franklin business, which operates a retail nut
and foodservice nut packaging and marketing business, located in El Paso, Texas,
and a candy manufacturing and packaging facility located in Juarez, Mexico. This
business was acquired in July 2002.

OPERATIONS OVERVIEW

For the year ended December 31, 2004, Elamex and subsidiaries reported a net
loss of $5.2 million. Of that amount, $3.1 million is attributable to Qualcore
S. de R.L. de C.V. ("Qualcore") which is included in the Corporate segment loss
of $4.6 million, a loss of $1.7 million is attributable to our Shelter Services
companies ("Shelter"), and income of $1.1 million is attributable to Franklin
Connections LP ("Franklin") in the food services segment.

Franklin

Franklin sales and gross profits have grown significantly since Franklin entered
the business of manufacturing and distributing candy in 2001. The Food Services
segment recorded growth in net sales to commercial food service customers and to
contract manufacturing customers. Combined, these two product lines make up
about two thirds of our total Food Services segment. During 2004 the operating
expenses of the Food Services segment were affected by the nationwide increase
in fuel prices. The Company also experienced increases in the price of certain
commodities. Inclusive of those adverse factors, however, the Food Services
segment had net income of $1.1 million for the year ended December 31, 2004.
This is compared to a net loss of $2.6 million for the year ended on December
31, 2003.

Franklin operations include candy manufacturing and nut processing. Franklin
sales and distribution services are directed to the food service industry and to
retailers and wholesalers of candies and nuts. Franklin increased its market
share in sales of candy to mass-market retailers in 2003, and improved market
penetration to the retail grocery industry. Franklin is progressively
de-emphasizing sales to customers that purchase bulk candies and bag them for
resale to retailers ("rebaggers"). By eliminating the middleman, gross profit
margins on sales to retailers are significantly higher than on sales to
rebaggers. In addition to making candy for sales through its own distribution
channels, Franklin makes candy on a contract-manufacturing basis for other candy
producers.

Precision

On December 19, 2003, Elamex announced that Precision filed for protection under
federal bankruptcy laws. Elamex acquired Precision in 1999. Precision
experienced net losses and sales decreases in 2001 and 2002 because of a
combination of adverse business conditions, including a depressed national
economy and from the inability to gain pricing control. In 2003 operating losses
surged, reducing liquidity and triggering conditions of default under credit
agreements.

                                       12
<PAGE>

Precision broadened its product lines in 2003 by undertaking the manufacture of
new products with greater complexity and substantially higher unit value.
Although the profit potential of these new products was attractive,
manufacturing costs and production problems far exceeded expectations during
this first year of production. Precision launched this product-line expansion
during a year in which it had begun using a new manufacturing accounting module,
a critical step in its ongoing implementation of an enterprise software system.
Implementation problems in the costing module delayed the recognition of
production problems.

Prior to 2003 Precision had difficulties in its efforts to comply with some
terms of its borrowing agreements. The primary lending bank waived loan covenant
violations as of December 31, 2002, and those occurring prior to the date on
which the company recognized the need to record an adverse inventory adjustment
of $2.1 million in the third quarter 2003 financial statements. The combined
operating losses through November 2003 caused a critical liquidity problem and
caused conditions of default under the terms of bank loans.

In view of the problems associated with manufacturing in this industry, and of
the overall strategy and financial condition of Elamex, the Company made
strategic decisions in the fourth quarter of 2003 to refrain from extending
additional internal funding to Precision, and to engage a firm to sell its
interest in Precision.

Generally accepted accounting principles require an evaluation of impairment of
long-lived assets under circumstances such as those encountered by Precision in
the fourth quarter of 2003. The results of an independent valuation dictated the
fourth quarter recognition of an impairment charge of $13.2 million for
long-lived assets other than goodwill, plus an impairment charge of $4.5 million
for goodwill. This reduction of goodwill is in addition to a $3.6 million
goodwill impairment charge in the first quarter of 2003. Precision's 2003 net
loss, inclusive of these expenses, reduced Elamex's investment in Precision to
zero. Precision is now recorded under the cost method of accounting.

Qualcore

Qualcore is a joint venture company with GE de Mexico, which manufactures
plastics parts and metal parts. Qualcore is jointly managed with GE de Mexico
and the investment in the joint venture is recorded under the equity method and
it is reported under the Corporate segment. During the past twelve months
Qualcore has entered into negotiations with two different companies to sell the
assets of the company. Negotiations with the first company terminated without
concluding the transaction. Negotiations with the second company are in process.

Shelter

In July 2003 Elamex sold certain Shelter Services operations, realizing a gain
of $1.7 million. Shelter services are now limited to a Franklin affiliate, as
well as owning and leasing buildings to third parties in Mexico.

2004 COMPARED TO 2003

Management's discussion and analysis is based on the results of operations by
segment as presented in the following table (in thousands):

<TABLE>
<CAPTION>
                                                                                UNALLOCATED
                                    SHELTER          METAL            FOOD       CORPORATE      INTER-
                                  SERVICES (3)    STAMPING (1)      SERVICES     AND OTHER     SEGMENT (2)      TOTAL
                                  ------------    ------------      --------    ------------   -----------     --------
<S>                               <C>             <C>               <C>         <C>            <C>             <C>
YEAR ENDED DECEMBER 31, 2004
 Net sales (2)                      $ 15,230                        $ 95,341                   $ (12,984)      $ 97,587
 Gross profit                          1,233                          21,788                                     23,021
 Operating expenses                    1,102                          18,565     $  3,693                        23,360
 Other income (expense)                   88                          (2,118)           3                        (2,027)
 Net (loss) income                    (1,679)                          1,105       (4,577)                       (5,151)

YEAR ENDED DECEMBER 31, 2003
 Net sales (2)                      $ 25,677       $  70,988        $ 75,648                   $ (15,063)      $157,250
 Gross profit                          1,706          (1,022)         17,230                                     17,914
 Operating expenses                    2,039          16,209          17,522    $  11,255                        47,025
 Other income (expense)                1,735            (795)         (2,318)         407                          (971)
 Net loss                             (1,917)        (15,915)         (2,610)     (14,166)                      (34,608)
</TABLE>

(1)   Segment deconsolidated effective December 19, 2003

(2)   Includes sales between segments in the normal course of business

(3)   Certain shelter operations were sold in July 2003

                                       13
<PAGE>

NET SALES

Net sales decreased 38% to $97.6 million for the year ended December 31, 2004
from $157.2 million for prior year. The exclusion of Precision from the
consolidation is the largest reason for the decrease. Additionally, the sale of
certain Shelter Services operations in the second quarter of 2003 caused a
comparative decrease. Increases in Food Services segment net sales partially
offset the effect of these decreases.

Sales for Shelter Services decreased 41% to $15.2 million for the current year
from $25.7 million for the prior year. The decrease was primarily due to the
sale of certain customer's contracts at the end of the second quarter of 2003.

In the year ended December 31, 2003, Precision recorded $71.0 million of net
sales, which was 45.1% of consolidated net sales.

Sales for Food Service were $95.3 million for the year ended December 31, 2004
compared to $75.6 million for the prior year. The Food Services net sales
increase is primarily due to a growth in net sales to Contract Manufacturing
customers, and also growth in sales to commercial food service customers.
Contract manufacturing of candy is a relatively new line of business in the Food
Services segment. The contract manufacturing section of the plant has room for
additional equipment, and the company actively searches for customers for this
line of business. The equipment needed for contract manufacturing is normally
provided by the customer.

GROSS PROFIT

Gross profit increased 29% to $23.0 million for year ended December 31, 2004
from $17.9 million in prior year.

Gross profit for Shelter Services decreased 28% to $1.2 million in 2004 from
$1.7 million in 2003. As a percentage of Shelter Services net sales, the rate
increased to 8% in 2004 from 7% in 2003. The decrease was primarily due to the
sale of certain customers' contracts at the end of the second quarter of 2003.

Gross loss for Metal Stamping for the year ended December 31, 2003 was $1.0
million.

Gross profit for Food Services increased to $21.8 million for the year ended
December 31, 2004 from $17.2 million recorded in the prior year. In 2004 this
line of business is operating closer to the capacity of the existing machinery
than it did a year ago, and more equipment is installed and operating in the
contract manufacturing section of the plant. Additionally, operations are more
efficient due to experience gained.

OPERATING EXPENSES

Operating expenses decreased to $23.4 million for the year ended December 31,
2004 from $47.0 million in the prior year.

Operating expenses for Shelter Services were $1.1 million for the year ended
December 31, 2004 and $2.0 million for the prior year. Exit costs associated
with the sale of certain customers contracts in the second quarter of 2003
generated expenses totaling $575 thousand. The decrease was primarily
attributable to the decrease of administrative and selling expenses due to the
sale of certain Shelter Services operations.

Operating expenses for Metal Stamping for the year ended December 31, 2003 were
$16.2 million.

Operating expenses for Food Services were $18.6 million for the year ended
December 31, 2004 compared to $17.5 million for the prior year. Operating
expenses decreased as a percentage of Food Services net sales in 2004, as
compared to the prior year. Increases in sales volume and cost control
initiatives were the primary causal factors for these improvements. Also, during
the second quarter of 2004 a contingency accrual of $430 thousand was reversed
to income as a result of the successful resolution of a contingency for which an
accrual was recorded in the fourth quarter of 2003.

Operating expenses for Corporate decreased to $3.7 million for the year ended
December 31, 2004 from $11.3 million in the prior year. The decrease was
primarily due to impairment of Precision goodwill of $3.6 million and $4.5
million recorded in the first and fourth quarters of 2003, respectively and the
provision of a $1.2 million reserve against notes receivable from Qualcore
recorded in 2003, partially offset by the recognition of a liability of $1.7
million in the fourth quarter of 2004 in connection with a bank loan guarantee.

                                       14
<PAGE>

OTHER (EXPENSE) INCOME

Other expense for the year ended December 31, 2004 increased to $2.0 million
from $971 thousand in 2003.

Other income for Shelter Services for the year ended December 31, 2004 was $88
thousand compared to $1.7 million recorded in 2003. The decrease of other income
was primarily due to a gain on the sale of certain customers contracts of $1.7
million recorded in the second quarter of 2003.

Other expense for Metal Stamping for the year ended December 31, 2003 was $795
thousand.

Other expenses for Food Services were $2.1 million for the year ended December
31, 2004 compared to $2.3 million recorded in 2003.

Other income for Corporate was $3 thousand for the year ended December 31, 2004
and $407 thousand for the year ended December 31, 2003. The decrease was
primarily due to decrease in intercompany interest gain.

2003 COMPARED TO 2002

Management's discussion and analysis is based on the results of operations by
segment as presented in the following table (in thousands):

<TABLE>
<CAPTION>
                                                                                     UNALLOCATED
                                     SHELTER           METAL        FOOD SERVICES    CORPORATE AND      INTER-
                                    SERVICES (4)    STAMPING (1)       (2)               OTHER         SEGMENT(3)     TOTAL
                                    ------------    ------------    -------------    -------------     ----------    --------
<S>                                 <C>             <C>             <C>              <C>               <C>           <C>
YEAR ENDED DECEMBER 31, 2003
 Net Sales (3)                       $ 25,677        $ 70,988         $ 75,648                         $(15,063)     $157,250
 Gross profit (loss)                    1,706          (1,022)          17,230                                         17,914
 Operating expenses                     2,039          16,209           17,522         $ 11,255                        47,025
 Other income (expense)                 1,735            (795)          (2,318)             407                          (971)
 Net loss                              (1,917)        (15,915)          (2,610)         (14,166)                      (34,608)

YEAR ENDED DECEMBER 31, 2002
 Net Sales (3)                       $ 31,677        $ 75,279         $ 33,180                         $ (5,867)     $134,269
 Gross profit                           2,513           3,714            7,900                                         14,127
 Operating expenses                     2,014           3,139            8,164         $  2,103                        15,420
 Other (expense) income                  (239)         (1,244)          (1,672)            (152)                       (3,307)
 Net loss                                (933)           (145)          (1,286)          (3,653)                       (6,017)
</TABLE>

(1)   Segment deconsolidated effective December 19, 2003

(2)   Acquired at the beginning of the third quarter of 2002

(3)   Includes sales between segments in the normal course of business

(4)   Certain shelter operations were sold in July 2003

NET SALES

Net sales increased 17% to $157.3 million for the year ended December 31, 2003
from $134.3 million for prior year.

Sales for Shelter Services decreased 19% to $25.7 million for the current year
from $31.7 million for the prior year. The decrease was primarily due to the
sale of certain customer's contracts at the end of the second quarter. Sales
also decreased due to available buildings that were not rented until the second
and the third quarter of 2003.

Sales for Metal Stamping decreased 6% to $71.0 million for the current year from
$75.3 million for the prior year. The decrease was mainly due to decreases in
customers' orders resulting from a slowdown in end-market demand in the major
appliances industry during the year, also due to the deconsolidation of this
segment after Precision voluntarily filed for protection under federal
bankruptcy laws on December 19, 2003.

Sales for Food Service were $75.6 million for the year ended December 31, 2003
compared to $33.2 million for the six-month period subsequent to the acquisition
of this segment in 2002. The $42.4 million (127.7%) increase was caused
primarily by the comparison of year and six-month periods. The rate of growth
results principally from increase in the sale of candy distributed for sale in
the retail market, a relatively new product line compared to the segment's nut
business. Contract manufacturing of candy is also a relatively new line of
business resulting in increased sales for the segment.

                                       15
<PAGE>

GROSS PROFIT

Gross profit increased 27% to $17.9 million for year ended December 31, 2003
from $14.1 million in prior year.

Gross profit for Shelter Services decreased 32% to $1.7 million in 2003 from
$2.5 million in 2002. The decrease was primarily due to the sale of certain
customers' contracts at the end of the second quarter, gross profit also
decreased due to available buildings that were not rented until the second and
the third quarter of 2003.

Gross profit for Metal Stamping decreased from $3.7 million in 2002 to a gross
loss of $1 million in 2003. Decreases in sales adversely affected production
efficiency, thereby reducing gross profit. Additionally, gross margins were
adversely affected by a high level of start-up costs and low efficiencies
associated with new product lines and breakdown of machines during the third
quarter. Problems with implementation of new cost accounting software delayed
the recognition of production problems.

Gross profit for Food Services was $17.2 million for the year ended December 31,
2003 compared to $7.9 million for the six-month period subsequent to the
acquisition of this segment in 2002. The $9.3 million (117.7%) increase was
caused primarily by the comparison of year and six-month periods. The increase
in gross profit is attributable to the increase in sales. Franklin overall gross
profit rate was 22.8% in 2003, as compared to 23.8% for the six-month period
subsequent to the acquisition of this segment in 2002.

OPERATING EXPENSES

Operating expenses increased to $47 million for the year ended December 31, 2003
from $15.4 million in the prior year.

Operating expenses for Shelter Services were $2.0 million for each of the years
ended December 31, 2003 and 2002. Exit costs associated with the sale of certain
customers contracts in the second quarter of 2003 generated expenses totaling
$575 thousand. These costs were partially offset with a decrease of general and
administrative expenses of approximately $550 thousand in 2003.

Operating expenses for Metal Stamping increased to $16.2 million for the year
ended December 31, 2003 from $3.1 million recorded in the prior year. The
increase was primarily due to an impairment of long-lived assets of $13.2
million recorded in the fourth quarter.

Operating expenses for Food Services were $17.5 million for the year ended
December 31, 2003 compared to $8.2 million recorded for the six-month period
subsequent to the acquisition of this segment in 2002.

Operating expenses for Corporate increased to $11.3 million for the year ended
December 31, 2003 from $2.1 million in the prior year. The increase was
primarily due to impairment of Precision goodwill of $3.6 million and $4.5
million in the first and fourth quarters of 2003, respectively. The provision of
a $1.2 million reserve against notes receivable from Qualcore also contributed
to the increase in operating expenses.

OTHER (EXPENSE) INCOME

Other expense for the year ended December 31, 2003 decreased to $971 thousand
from $3.3 million in 2002.

Other income for Shelter Services for the year ended December 31, 2003 was $1.7
million compared to other expense of $239 thousand recorded in 2002. The
increase of other income was primarily due to a gain on the sale of certain
customers contracts of $1.7 million recorded in the second quarter of 2003.

Other expense for Metal Stamping decreased to $795 thousand for the year ended
December 31, 2003 from $1.2 million in 2002. The decrease was primarily due to a
recognition of loss in fixed assets of approximately $429 thousand in 2002 not
incurred in 2003, partially offset by the recognition of $278 thousand of losses
after the deconsolidation of the segment in the fourth quarter of 2003.

Other expenses for Food Services were $2.3 million for the year ended December
31, 2003 compared to $1.7 million recorded in the six-month period subsequent to
the acquisition of this segment in 2002.

Other income for Corporate was $407 thousand for the year ended December 31,
2003 compared to other expense of $152 thousand recorded in 2002.

                                       16
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

Elamex's working capital (defined as current assets, minus current liabilities)
decreased to a negative $1.8 million as of December 31, 2004, from $1.9 million
as of December 31, 2003, a decrease of $3.7 million.

The decrease in working capital is attributable to the following:

(1) Notes payable to a bank totaling $1.8 million are due in July 2005.
Accordingly, the liability classification shifted from long term to current.
Management expects to refinance the note at the time of, or prior to, maturity.

(2) The Company has a 50.1% investment in Qualcore and is a guarantor on
portions of a $3.4 million bank loan made by that entity. As of December 31,
2004, Qualcore is in default under the loan agreement. The Company recorded a
liability of $1.7 million in December 2004 in recognition of the probability
that it will be obligated to perform under that guarantee for debt which is due
in April 2005.

For the year ended December 31, 2004, the net cash provided by operating
activities was approximately $2.6 million, compared to $2.2 million for the year
ended December 31, 2003.

Net cash used in investing activities was approximately $1.4 million for the
year ended December 31, 2004. Of this amount, $929 thousand for the acquisition
of new equipment and $425 thousand was invested in Qualcore. For the year ended
December 31, 2003, net cash used in investing activities was $5.9 million. Of
this amount, $6.4 million for the acquisition of new equipment and $1.2 million
was invested in Qualcore, these amounts were partially offset by $1.8 million of
net cash proceeds from the sale of certain Shelter Services operations.

Net cash used in financing activities was $1.5 million for the year ended
December 31, 2004, due to payments on notes payable and long-term debt and
capital leases. For the year ended December 31, 2003, net cash used in financing
activities was $3.0 million, which was primarily due to debt repayments of $4.8
million, offset by additional debt incurred of $1.8 million.

The available cash for the year ended December 31, 2004 and 2003 was $2.1
million and $2.3 million, respectively.

In the near-term, we anticipate that refinancing of notes payable, cash flows
from our operations, existing balances in cash and funds available under our
revolving credit facility will be sufficient to fund operating expenses and debt
obligations. There are no commitments on capital expenditures. The Company also
has certain buildings available for immediate sale or additional borrowing,
should this be necessary.

The Company expects to refinance the existing notes payable and revolving line
of credit on or before maturity dates

OFF-BALANCE SHEET ARRANGEMENTS

We have not entered into any off-balance sheet transactions, arrangements or
obligations (including contingent obligations) that have, or are reasonably
likely to have, a material effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources.

CONTRACTUAL OBLIGATIONS

At December 31, 2004, we had contractual cash obligations to repay debt, to make
payments under leases, and purchase obligations. Payments due under these
long-term obligations are as follows:

                             PAYMENTS DUE BY PERIOD
                         (In Thousands of U.S. Dollars)

<TABLE>
<CAPTION>
                                                                              Remaining in                           2010 and
                                                                   Total         2005       2006-2007    2008-2009  Thereafter
<S>                                                               <C>         <C>           <C>          <C>        <C>
Long Term Debt Obligations                                        $  6,628     $   6,628
Note payable, guarantee of unconsolidated Joint Venture debt         1,700         1,700
Gross Capital Lease Obligation                                       4,173         1,397     $  2,776
Operating Leases                                                    25,296         3,062        6,229     $  6,212     $9,793

UNCONDITIONAL PURCHASE OBLIGATIONS                                  29,600        29,600
                                                                  --------     ---------     --------     --------    -------
TOTAL CONTRACTUAL CASH OBLIGATIONS                                $ 67,397     $  42,387     $  9,005     $  6,212    $ 9,793
                                                                  ========     =========     ========     ========    =======
</TABLE>

Estimated taxes and interest to be paid in 2005 are $1.2 million and $2.6
million, respectively.

                                       17
<PAGE>

CONTROLLING SHAREHOLDER

Elamex was acquired by Accel, S.A. de C.V. and certain other investors in May
1990, and is controlled by Accel, S.A. de C.V. Elamex, S.A. de C.V. is the
successor pursuant to the merger, effective October 1, 1995 (the Effective
Date), of Elamex Internacional with and into Elamex, S.A. de C.V.

EXCHANGE RATES AND INFLATION

Although Elamex is a Mexican Corporation its functional currency is the U.S.
dollar, which is the principal currency in which it conducts business. Elamex
maintains certain financial information in accordance with Mexican GAAP, but
prepares Consolidated Financial Statements in U.S. dollars in conformity with
U.S. GAAP.

In the following cases Elamex's results of operations are generally affected by
changes in the exchange rate between Pesos and U.S. dollars. In the case of an
appreciation in value of the U.S. dollar against the Peso, Elamex generally
experiences a benefit because its revenues are denominated in U.S. dollars and
certain of its costs and expenses are denominated in Pesos. This benefit will be
reduced by relative inflation in the Peso versus the U.S. dollar due to
inflation within Mexico, and by competitive pressures from Elamex's customers.
In the case of a depreciation of the U.S. dollar against the Peso, Elamex
generally experiences a detriment mirroring the situation as to appreciation of
the dollar, and this detriment will similarly be reduced by relative inflation
in the U.S. dollar against the Peso and increased pricing by Elamex.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our accounting policies are disclosed in Note 2 to the Consolidated Financial
Statements included in Item 8 of this Form 10-K.

The preparation of financial statements in conformity with accounting principles
generally accepted in the U.S. requires management to make certain estimates
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 revenues and expenses during the reporting period.
Actual results could differ from these estimates.

The following are the accounting policies that most frequently require the
Company to make estimates and judgments and are critical to understanding its
financial condition, results of operations and cash flows:

Accrued Rebates - The Company enters into contractual agreements for rebates on
certain products with its customers. Such amounts are netted against sales and
included in accrued advertising and promotions based on management estimates at
the date the sales occur.

Prepaid Slotting Allowances - Prepaid slotting allowances consist of payments to
customers for store shelf space and distribution agreements and are amortized to
sales revenue, using the straight line method over the term of the customer
contract or proportionally with sales recorded, based on the nature of the
slotting contract. Contracts generally vary in length from one to seven years
and provide for fixed payments or payments upon achievement of sales benchmarks.

Income Taxes - The Company accounts for income taxes under the asset and
liability method, as required by SFAS No. 109. Under the asset and liability
method, deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date. Provisions for taxes are made based
upon the applicable tax laws of Mexico and the United States. Deferred tax
assets and liabilities are not provided for differences related to assets and
liabilities that are remeasured from Pesos into U.S. dollars using historical
exchange rates and that result from inflation indexing for Mexican tax purposes
or exchange rate changes.

Allowances for Doubtful Accounts - The Company performs ongoing credit
evaluations of its customers and generally does not require collateral to
support amounts due for the sale of its products. The Company maintains an
allowance for doubtful accounts based on its best estimate of accounts
receivable.

Impairment of Long-Lived Assets - Long-lived assets, which include property,
goodwill, intangible assets and certain other assets, comprise a significant
amount of our total assets. We make judgments and estimates in conjunction with
the carrying value of these assets, including amounts to be capitalized,
depreciation and amortization methods and useful lives. Additionally, the
carrying values of these assets are periodically reviewed for impairment or
whenever events or changes in circumstances

                                       18
<PAGE>

indicate that the carrying amounts may not be recoverable. An impairment loss is
recorded in the period in which it is determined that the carrying amount is not
recoverable. This requires us to make long-term forecasts of our future revenues
and costs related to the assets subject to review. These forecasts require
assumptions about demand for our products and services, future market conditions
and technological developments. Significant and unanticipated changes to these
assumptions could require a provision for impairment in a future period.

Elamex does not engage in futures contracts with the purpose of hedging U.S.
dollar/Peso revenues or costs, with the exception of regular treasury operations
to cover operating requirements for up to 30 days.

Also, see section under Recent Accounting Pronouncements.

EMPLOYEE STATUTORY PROFIT-SHARING

All Mexican companies are required to pay their employees, in addition to their
agreed compensation benefits, profit-sharing in an aggregate amount equal to 10%
of net income, calculated for employee statutory profit-sharing purposes, of the
individual corporation employing such employees. All of Elamex's Mexico based
employees are employed by its subsidiaries, each of which pays profit-sharing in
accordance with its respective net income for profit-sharing purposes. Tax
losses and other certain adjustments for US GAAP purposes do not affect employee
statutory profit sharing. Employee statutory profit-sharing expense is reflected
in Elamex's cost of goods sold and selling, general and administrative expenses,
depending upon the function of the employees to whom profit-sharing payments are
made. Elamex's net income on a consolidated basis as shown in the Consolidated
Financial Statements is not a meaningful indication of net income of Elamex's
subsidiaries for profit-sharing purposes or of the amount of employee statutory
profit sharing.

There was no employee statutory profit-sharing expense for the years ended
December 31, 2004, 2003, and 2002.

INCOME TAX AND ASSET TAX

The Company's Mexican subsidiaries are each required to pay an alternative
minimum asset tax if the asset tax calculation is greater than income taxes
payable for the year. Asset taxes are calculated at 1.8% of assets less certain
liabilities and can be carried forward for up to 10 years as credits against
future income taxes payable. Before any asset tax carry forwards can be applied,
all net operating losses must be first utilized. Mexican companies have the
option to defer the asset tax four years forward and determine the higher of the
taxes comparing the current income tax calculation and the four year old asset
tax calculation increased by the effects of inflation. Some of the Company's
subsidiaries have elected this option. The total asset tax paid by the Company's
subsidiaries for the year ended December 31, 2004 was approximately $1.6
million.

Effective January 1, 1999, a tax rate was enacted in Mexico whereby the
corporate tax rate is 35%. An amount equal to 30% is paid on taxable earnings
reinvested in the Company and 5% on those earnings when they are distributed in
the form of dividends for the year ended December 31, 2001.

On December 1, 2004, certain amendments to the tax and asset tax laws were
enacted and are effective as of 2005. The most significant amendments are as
follows: (a) the tax rate will be reduced to 30% in 2005, 29% in 2006 and 28% in
2007 and forward; (b) for purposes of the calculation of income tax, purchases
of inventory are deductible only after being sold; the tax law previously
allowed for the immediate deduction of all inventory purchases in the year
acquired; (c) companies must establish a tax basis for their inventory balances
as of December 31, 2004 using the specific costing methods allowed by the
amendments to the tax law; companies may elect to ratably step-up such tax basis
of inventories over a period from 4 to 12 years, as determined in conformity
with the respective tax rules, which include deducting from the tax basis
certain items such as unamortized tax loss carryforwards; (d) beginning January
1, 2006, paid employee statutory profit sharing will be fully deductible for tax
purposes; (e) bank liabilities and liabilities with foreign entities are
deductible in the determination of the asset tax taxable base, thereby
decreasing the base on which the asset tax is calculated.

The amounts of Elamex's Mexican net asset tax and tax loss carry-forwards at
December 31, 2004 and 2003 are set forth in Note 9 to the Consolidated Financial
Statements, included in Item 8 of this form 10-K. Elamex's effective tax rate
was 12.2% in 2002 and (8.0)% in 2003 and (58.2)% in 2004.

The primary difference between the overall effective tax rate and the statutory
rates of 33% for Mexico and 35% for the U.S. are currency and inflation gains
and losses for Mexican tax purposes, Mexican asset tax, non-deductible goodwill
impairment expense in the U.S, and changes in the Mexican and US valuation
allowances.

                                       19
<PAGE>

In addition SFAS No. 109, "Accounting for Income Taxes," requires that a
valuation allowance be established when it is "more likely than not" that all or
a portion of deferred tax assets will not be realized. A review of all available
positive and negative evidence needs to be considered, including a company's
performance, the market environment in which the company operates, the
utilization of past tax credits, length of carry back and carry forward periods,
and existing contracts or sales backlog that will result in future profits,
among other factors. For 2003, the Company concluded that it was appropriate to
increase the valuation allowance for most of the net deferred tax assets arising
from its operations in Mexico and in the United States. As a result, the
valuation allowances for deferred tax assets in Mexico and the United States
increased by approximately $2.6 million, resulting in additional income tax
expense for the third and fourth quarters of 2003, respectively. In addition,
primarily as a consequence of Precision's filing for protection under bankruptcy
laws on December 19, 2003, the Company's investment in Precision, reported under
the equity method of accounting, was reduced by an increase in the valuation
allowance against Precision's underlying deferred tax assets of $4.5 million.

The majority stockholder has filed a consolidated tax return with Elamex's
operations since 1995. The Tax Sharing Agreement entered into between the
majority stockholder, Accel, S.A. de C.V., and Elamex through 1998 provided that
Elamex transfer monthly an amount equal to its estimated tax payment, less
credits, split between Accel and the Mexican tax Authority based on Accel's
ownership in Elamex. Beginning in 1999, tax law for consolidation required
Elamex and its subsidiaries to pay amounts directly to the Mexican Tax Authority
(SHCP) based on their individual tax calculations. The payments are calculated
as required by the SHCP as if Elamex and subsidiaries were filing a stand-alone
income tax return for such year. The majority stockholder further agrees to
reimburse Elamex for use of any of Elamex's tax benefits at the time Elamex
would otherwise realize the benefit.

Elamex's U.S. subsidiaries file a consolidated U.S. income tax return and pay
their own taxes as if they had to file individual income tax returns.

RECENT ACCOUNTING PRONOUNCEMENTS

In December 2004, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123 (revised 2004) ("Statement 123(R)"),
"Share-Based Payment", which revised Statement No. 123, "Accounting for
Stock-Based Compensation". This statement supercedes APB Opinion No. 25,
"Accounting for Stock Issued to Employees". The revised statement addresses the
accounting for share-based payment transactions with employees and other third
parties, eliminates the ability to account for share-based compensation
transactions using APB 25, and requires that the compensation costs relating to
such transactions be recognized in the consolidated statement of operations. The
revised statement is effective as of the first interim period beginning after
June 15, 2005. The Company is allowed to select from three alternative
transition methods, each having different reporting implications. The Company
has not completed its evaluation of the methods of adopting Statement 123(R).
Accordingly, the impact of adoption of Statement 123(R) cannot be predicted at
this time because it will depend on the method of adoption selected and 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 SFAS No. 123 as described in the disclosure of
pro forma net loss and net loss per share in the stock-based compensation
accounting policy note included in the consolidated financial statements.

In December 2004, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 153 ("Statement 153"), "Exchanges of
Nonmonetary Assets--an amendment of APB Opinion No. 29". Statement 153 amends
the guidance in APB Opinion No. 29, "Accounting for Nonmonetary Transactions",
based on the principle that exchanges of nonmonetary assets should be measured
based on the fair value of the assets exchanged. The guidance in that Opinion,
however, included certain exceptions to that principle. Statement 153 amends
Opinion 29 to eliminate the exception for nonmonetary exchanges of similar
productive assets and replaces it with a general exception for 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 Statement
153 are effective for nonmonetary asset exchanges occurring in fiscal periods
beginning after June 15, 2005. The provisions of Statement 153 are not expected
to have a material effect on the Company's consolidated financial statements.

In November 2004, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 151, Inventory Costs--An Amendment of ARB No. 43, Chapter 4 ("SFAS 151").
SFAS 151 amends the guidance in ARB No. 43, Chapter 4, Inventory Pricing , to
clarify the accounting for abnormal amounts of idle facility expense, freight,
handling costs, and wasted material (spoilage). Among other provisions, the new
rule requires that items such as idle facility expense, excessive spoilage,
double freight, and rehandling costs be recognized as current-period charges
regardless of whether they meet the criterion of "so abnormal" as stated in ARB
No. 43. Additionally, SFAS 151 requires that the allocation of fixed production
overhead to the costs of conversion be based on the normal capacity of the
production facilities. SFAS 151 is effective for fiscal years beginning after
June 15, 2005 and is required to be adopted by the Company on January 1, 2006.
The company is currently

                                       20
<PAGE>

evaluating the effect that the adoption of SFAS 151 will have on its
consolidated results of operations and financial condition but does not expect
SFAS 151 to have a material impact.

FORWARD LOOKING STATEMENTS

This Form 10-K includes forward-looking statements that involve risks and
uncertainties, including, but not limited to, risks associated with Elamex's
future growth and profitability, the ability of Elamex to continue to increase
sales to existing customers and new customers, and the effects of competitive
and general economic conditions. These risks may cause our actual results,
levels of activity, performance or achievements to be materially different from
our future results from any future results, levels of activity, performance or
achievements expressed or implied by these forward looking statements.

All statements that relate to future events or to our future performance as
forward-looking statements. In some cases, forward-looking statements can be
identified by terms such as "may", "will", "should", "expect", "plans", "seeks",
"anticipates", "believes", "estimates", "predicts", "potential", "continue",
"seeks to continue", "intends", or other comparable terminology. Although
forward-looking statements help provide complete information about us, investors
should keep in mind that forward-looking statements are only predictions, at a
point in time, and are inherently less reliable than historical information.

There can be no assurance that Elamex's principal customers will continue to
purchase products and services from Elamex at the current levels, if at all, and
the loss of one or more major customers could have a material adverse effect on
Elamex's operating results.

We do not guarantee future results, levels of activity, performance or
achievements and we do not assume responsibility for the accuracy and
completeness of these statements. The forward-looking statements in this Annual
Report on Form 10-K are based on information as of the date of this report. We
assume no obligation to update any of these statements based on information
after the date of this report.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Elamex's functional currency is the U.S. dollar and it is exposed to the risk of
currency fluctuations of the Mexican Peso against the U.S. dollar. Elamex's
currency fluctuation risk management objective is to limit the impact of
currency fluctuations. Elamex has adopted a policy of not engaging in future
contracts with the purpose of hedging U.S. dollar/Peso revenues or costs, with
the exception of regular treasury operations to cover operating requirements for
up to thirty days. No such items were outstanding at December 31, 2004. A Peso
devaluation of 10% would result in a translation gain of $44 thousand assuming
the Company's existing $486 thousand liability monetary position in Mexican
Pesos.

Elamex and certain of its subsidiaries are exposed to some market risk due to
the floating interest rate under its revolving lines of credit, notes payable
and long-term debt. Floating-rate obligations aggregated $8.3 million at
December 31, 2004, inclusive of amounts borrowed under short-term and long-term
credit facilities. A 1.0 % increase in interest rates could result in a $83
thousand annual increase in interest expense on the existing principal balance.
The Company has determined that it is not necessary to participate in interest
rate-related derivative financial instruments because it currently does not
expect significant short-term increases in interest rates charged under its
borrowings.

                                       21
<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPLEMENTARY DATA.

      REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

      To the Board of Directors and Stockholders of Elamex, S.A. de C.V.

      We have audited the accompanying consolidated balance sheets of Elamex,
      S.A. de C.V. and subsidiaries (the "Company") as of December 31, 2004 and
      2003, and the related consolidated statements of operations and
      comprehensive loss, stockholders' equity, and cash flows for each of the
      three years in the period ended December 31, 2004. 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 consideration of internal control over financial
      reporting as a basis for designing audit procedures that are appropriate
      in the circumstances, but not for the purpose of expressing an opinion on
      the effectiveness of the Company's internal control over financial
      reporting. Accordingly, we express no such opinion. An audit also includes
      examining, on a test basis, evidence supporting the amounts and
      disclosures in the financial statements, assessing the accounting
      principles used and significant estimates made by management, as well as
      evaluating the overall financial statement presentation. We believe that
      our audits provide a reasonable basis for our opinion.

      In our opinion, such consolidated financial statements present fairly, in
      all material respects, the financial position of Elamex, S.A. de C.V. and
      subsidiaries as of December 31, 2004 and 2003, and the results of their
      operations and their cash flows for the three years in the period ended
      December 31, 2004 in conformity with accounting principles generally
      accepted in the United States of America.

      As discussed in Note 2 to the accompanying consolidated financial
      statements, in 2002 the Company changed its method of accounting for
      goodwill and other intangible assets to conform to Statement of Financial
      Accounting Standards No. 142.

      Galaz, Yamazaki, Ruiz Urquiza, S.C.
      Member of Deloitte Touche Tohmatsu

      Michael A. Bryant

      March 21, 2005

      Ciudad Juarez, Chihuahua, Mexico

                                       22
<PAGE>

ELAMEX, S.A. DE C.V. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF U.S. DOLLARS)

<TABLE>
<CAPTION>
                                                                                   DECEMBER 31, 2004   DECEMBER 31, 2003
                                                                                   -----------------   -----------------
<S>                                                                                <C>                 <C>
ASSETS
Current assets:
      Cash and cash equivalents                                                        $ 2,072               $ 2,299
      Receivables:
          Trade accounts receivable, net                                                 9,609                 7,400
          Other receivables, net                                                           512                   854
                                                                                       -------               -------
                                                                                        10,121                 8,254
      Inventories, net                                                                   8,797                 7,921
      Income taxes receivable from Accel                                                   326                   579
      Other taxes receivable                                                                15                   499
      Prepaid expenses                                                                     992                 1,024
                                                                                       -------               -------
          Total current assets                                                          22,323                20,576
Property, plant and equipment, net                                                      26,956                39,956
Investment and loans to unconsolidated joint venture                                                             864
Investment in unconsolidated subsidiary in bankruptcy                                        -                     -
Goodwill, net                                                                            3,707                 3,707
Deferred income taxes                                                                      621                   885
Other assets, net                                                                          643                 1,415
                                                                                       -------               -------
                                                                                       $54,250               $67,403
                                                                                       =======               =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
      Notes payable and current portion of long-term debt                              $ 6,628               $ 5,282
      Note payable, guarantee of unconsolidated joint venture debt                       1,700
      Current portion of capital lease obligations                                       1,137                 1,051
      Accounts payable                                                                   7,546                 6,251
      Accrued expenses                                                                   6,251                 5,999
      Taxes payable                                                                        722                   108
      Current portion of deferred gain on sale-leaseback                                   184
                                                                                       -------               -------
          Total current liabilities                                                     24,168                18,691
Long-term debt, excluding current portion                                                    -                 1,827
Capital lease obligations, excluding current obligations                                 2,694                15,313
Deferred gain on sale-leaseback, excluding current portion                                 889
Excess of loss in investment and loans to unconsolidated joint venture                     119
                                                                                       -------               -------
          Total liabilities                                                             27,870                35,831
                                                                                       -------               -------
Commitments and contingencies                                                                -                     -
Stockholders' equity:
      Preferred stock, no par, 50,000,000 shares authorized,
        none issued or outstanding
      Common stock, 22,400,000 shares authorized, 8,323,161
        issued and 7,502,561 outstanding                                                37,466                37,507
      Deficit                                                                           (8,539)               (3,388)
      Treasury stock, 542,101 shares at cost                                            (2,547)               (2,547)
                                                                                       -------               -------
          Total stockholders' equity                                                    26,380                31,572
                                                                                       -------               -------
                                                                                       $54,250               $67,403
                                                                                       =======               =======
</TABLE>

See accompanying notes to the consolidated financial statements

                                       23
<PAGE>

ELAMEX, S.A. DE C.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
(IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE DATA)

<TABLE>

                                                                                   2004             2003             2002
                                                                                -----------      -----------      -----------
<S>                                                                             <C>              <C>              <C>
Net sales                                                                       $    97,587      $   157,250      $   134,269
Cost of sales                                                                        74,566          139,336          120,142
                                                                                -----------      -----------      -----------
     Gross profit                                                                    23,021           17,914           14,127
                                                                                -----------      -----------      -----------
Operating expenses:
     General and administrative                                                       5,610            9,198            7,092
     Selling                                                                          7,053            7,009            4,179
     Distribution                                                                    10,367            9,463            4,149
     Impairment of long lived assets                                                    330           13,235
     Goodwill impairment                                                                               8,120
                                                                                -----------      -----------      -----------
       Total operating expenses                                                      23,360           47,025           15,420
                                                                                -----------      -----------      -----------
       Operating loss                                                                  (339)         (29,111)          (1,293)
                                                                                -----------      -----------      -----------
Other (expense) income:
     Interest expense                                                                (2,169)          (3,503)          (1,774)
     Gain on sale of certain Shelter operations                                                        1,680
     Other, net                                                                         142              852           (1,533)
                                                                                -----------      -----------      -----------
       Total other expense                                                           (2,027)            (971)          (3,307)
                                                                                -----------      -----------      -----------
     Loss before income taxes, equity in losses of unconsolidated
      joint venture and cumulative effect of change in accounting principle          (2,366)         (30,082)          (4,600)
Income tax provision (benefit)                                                        1,377            2,419             (561)
                                                                                -----------      -----------      -----------
     Loss before equity in losses of unconsolidated affiliates and
       cumulative effect of change in accounting principle                           (3,743)         (32,501)          (4,039)
Equity in losses of unconsolidated affiliates, net of tax                             1,408            2,107            1,125
                                                                                -----------      -----------      -----------
     Loss before cumulative effect of change in accounting principle                 (5,151)         (34,608)          (5,164)
Cumulative effect of change in accounting principle, net of tax                                                          (853)
                                                                                -----------      -----------      -----------
     Net loss                                                                   $    (5,151)     $   (34,608)     $    (6,017)
Other comprehensive income, net of income tax                                                                             379
                                                                                -----------      -----------      -----------
Comprehensive loss                                                              $    (5,151)     $   (34,608)     $    (5,638)
                                                                                ===========      ===========      ===========
Net loss per share, basic and diluted before cumulative effect
  of change in accounting principle                                             $     (0.69)     $     (4.61)     $     (0.72)
Cumulative effect of change in accounting principle, net of tax                                                   $     (0.12)
                                                                                -----------      -----------      -----------
Net loss per share, basic and diluted                                           $     (0.69)     $     (4.61)     $     (0.84)
                                                                                ===========      ===========      ===========
Shares used to compute net loss per share, basic and diluted                      7,502,561        7,505,257        7,188,431
                                                                                ===========      ===========      ===========
</TABLE>

See accompanying notes to the consolidated financial statements

                                       24
<PAGE>

ELAMEX, S.A. DE C.V. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER
31, 2004, 2003 AND 2002
 (IN THOUSANDS OF U.S. DOLLARS)

<TABLE>
<CAPTION>
                                                       COMMON STOCK                                     ACCUMULATED
                                                -----------------------      (DEFICIT)                      OTHER         TOTAL
                                                   SHARES                    RETAINED      TREASURY    COMPREHENSIVE  STOCKHOLDERS'
                                                OUTSTANDING      AMOUNT      EARNINGS        STOCK         LOSS          EQUITY
                                                -----------     --------    ----------    -----------  -------------  -------------

<S>                                             <C>             <C>         <C>           <C>          <C>              <C>
BALANCE, JANUARY 1, 2002                        6,866,100       $ 35,060    $   37,237    $   (2,518)    $  (379)       $   69,400

Common stock issued in purchase acquisition       923,161          2,865                                                     2,865

Common stock under escrow agreement              (278,499)          (962)                                                     (962)

Net loss                                                                        (6,017)                                     (6,017)

Stock options vested                                                 321                                                       321

Permanent impairment on investment securities                                                                379               379
                                                ---------       --------    ----------    ----------     -------        ----------
BALANCE, DECEMBER 31, 2002                      7,510,762         37,284        31,220        (2,518)                       65,986

 Treasury stock                                    (8,201)                                       (29)                          (29)

 Net loss                                                                      (34,608)                                    (34,608)

Stock options vested                                                 223                                                       223
                                                ---------       --------    ----------    ----------     -------        ----------
 BALANCE, DECEMBER 31, 2003                     7,502,561         37,507        (3,388)       (2,547)                       31,572

 Net loss                                                                       (5,151)                                     (5,151)

 Stock options forfeited, net                                        (41)                                                      (41)
                                                ---------       --------    ----------    ----------     -------        ----------
 BALANCE, DECEMBER 31, 2004                     7,502,561       $ 37,466    $   (8,539)   $   (2,547)    $              $   26,380
                                                =========       ========    ==========    ==========     =======        ==========
</TABLE>

See accompanying notes to the consolidated financial statements

                                       25
<PAGE>

ELAMEX, S.A. DE C.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
(IN THOUSANDS OF U.S. DOLLARS)

<TABLE>
<CAPTION>
                                                                                 2004         2003           2002
                                                                               --------      --------      --------
<S>                                                                            <C>           <C>           <C>
Cash flows from operating activities:
  Net loss                                                                     $ (5,151)     $(34,608)     $ (6,017)
  Adjustments to reconcile net loss to net cash provided by (used in)
   operating activities:
 Depreciation and amortization                                                    3,134         6,085         4,750
 Gain on sale of certain Shelter operations                                                    (1,680)
 Cumulative effect of change in accounting principle                                                            853
 Provision for doubtful trade accounts receivable                                   111         1,294           141
 Goodwill impairment loss                                                                       8,120
 Provision for excess and obsolete inventory                                         31                       1,176
 Equity in loss of unconsolidated affiliates                                      1,408         2,107         1,125
 Permanent impairment on investment securities                                                                  563
 Deferred income tax expense (benefit)                                              264         1,326          (548)
 Losses on disposal-impairment of property, plant and equipment                     330        13,235           613
 Provision for guarantee of unconsolidated joint venture debt                     1,700
 Change in operating assets and liabilities, net of effects from
   deconsolidation of Precision in 2003 and acquisition of Franklin in 2002:
 Trade accounts receivable                                                       (2,320)        1,719         2,642
 Other receivables                                                                  342          (901)        1,777
 Inventories                                                                       (907)        1,013        (4,167)
 Refundable income taxes                                                            737         1,117           870
 Prepaid expenses                                                                    32           396          (304)
 Other assets                                                                       772           (71)       (4,686)
 Accounts payable                                                                 1,295         1,671           839
 Accrued expenses                                                                   211         1,384        (1,192)
 Taxes payable                                                                      614            30            11
 Other liabilities                                                                                              (57)
                                                                               --------      --------      --------
    Net cash provided by (used in) operating activities                           2,603         2,237        (1,611)
                                                                               --------      --------      --------
Cash flows from investing activities:
 Purchase of property, plant and equipment                                         (929)       (6,433)       (6,237)
 Investment in joint venture                                                       (425)       (1,175)       (1,550)
 Cash effects of deconsolidation of affiliates                                                    (71)
 Acquisition of Franklin, net of cash acquired                                                               (2,753)
 Proceeds from sale of certain Shelter operations                                               1,800
                                                                               --------      --------      --------
    Net cash used in investing activities                                        1,354)       (5,879)      (10,540)
                                                                               --------      --------      --------
Cash flows from financing activities:
 Proceeds from notes payable and long term-debt                                                 1,839         7,795
 Payments on notes payable and long term-debt                                      (481)       (3,912)       (3,124)
 Principal repayments of capital lease obligations                                 (995)         (905)         (451)
                                                                               --------      --------      --------
    Net cash (used in) provided by financing activities                          (1,476)       (2,978)        4,220
                                                                               --------      --------      --------
Net decrease in cash and cash equivalents                                          (227)       (6,620)       (7,931)
Cash and cash equivalents, beginning of period                                    2,299         8,919        16,850
                                                                               --------      --------      --------
Cash and cash equivalents, end of period                                       $  2,072      $  2,299      $  8,919
                                                                               ========      ========      ========
</TABLE>

See accompanying notes to the consolidated financial statements

                                       26
<PAGE>

ELAMEX, S.A. DE C.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
(IN THOUSANDS OF U.S. DOLLARS)

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

<TABLE>
<CAPTION>
                                                                           2004             2003            2002
                                                                         ---------        ----------      --------
<S>                                                                      <C>              <C>             <C>
Interest paid, net of amounts capitalized of $0, $136 and $106 for
  2004, 2003 and 2002, respectively                                      $   2,126        $    2,709      $  3,826
                                                                         =========        ==========      ========
Income taxes paid                                                        $   1,582        $      823      $    393
                                                                         =========        ==========      ========

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
  AND FINANCIAL ACTIVITIES:

Lease modification, sale-leaseback treatment of production plant
  Property, plant and equipment                                          $ (10,413)
  Obligations under related party capital lease                          $  11,539
                                                                         ---------
  Deferred gain on sale-leaseback transaction                            $   1,126
                                                                         =========
Forfeited and vested stock options                                       $     (41)       $      223      $    321
                                                                         =========        ==========      ========

The Company discontinued consolidation of its Metal Stamping
  Segment (Precision) as of December 19, 2003. In conjunction
  with the deconsolidation, assets and liabilities removed from the
  consolidated balance sheet were as follows:

  Assets removed net of cash                                                              $   32,198
  Liabilities removed                                                                        (32,269)
                                                                                          ----------
  Net cash effect of deconsolidation                                                      $      (71)
                                                                                          ==========

Stock received for employee loan                                                          $       29
                                                                                          ==========

The Company purchased Franklin in 2002. In conjunction with
  the acquisition, the fair value of assets acquired and liabilities
  assumed were as follows:

  Fair value of assets acquired                                                                           $ 37,569
  Liabilities assumed                                                                                       32,913)
  Common stock issued, net of amounts in escrow                                                             (1,903)
                                                                                                          --------
  Net cash paid                                                                                           $  2,753
                                                                                                          ========
</TABLE>

                                       27

<PAGE>

ELAMEX, S.A. DE C.V. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31,
2004, 2003 AND 2002
(IN THOUSANDS OF U.S. DOLLARS)

1. ORGANIZATION AND BASIS OF PRESENTATION

COMPANY BACKGROUND - Elamex, S.A. de C.V. and its subsidiaries ("Elamex" or the
"Company") are a group of Companies in Mexico and the United States that provide
manufacturing, packaging and distribution services. The Company provides
customized manufacturing services in the candy and nut industry. The Company's
manufacturing machinery and equipment are located in facilities in Ciudad
Juarez, in Mexico, and in El Paso, Texas in the United States.

On December 19, 2003 the Metal Stamping segment, a wholly owned subsidiary,
Precision Tool, Die and Machine Company ("Precision"), voluntarily filed for
protection under Chapter 11 of the Federal Bankruptcy Code in the U.S.
Bankruptcy Court to implement a restructuring of its debt. Also, in December
2003 the Company's Board of Directors authorized the sale of Precision. As a
consequence of seeking protection under bankruptcy laws, the Company no longer
controls Precision's operations as of December 19, 2003. The Company's
investment in Precision was deconsolidated and was recognized in accordance with
the equity method of accounting in 2003. Due to the bankruptcy activity during
2004, the Company had no significant influence on Precision's operations and
changed from the equity method to the cost method with no effect on net loss.

In July 2002, the Company acquired the new Food Products segment, which is Mt.
Franklin Holdings LLC and subsidiaries ("Franklin"). Franklin operates a retail
nut and foodservice nut packaging and marketing company located in El Paso,
Texas, and a candy manufacturing and packaging facility located in Ciudad
Juarez, Mexico (see Note 3).

The Company is a subsidiary of Accel, S.A. de C.V. (Accel), which owns
approximately 57.7% of the Company's issued and outstanding common shares at
December 31, 2004.

BASIS OF PRESENTATION - These consolidated financial statements and the
accompanying notes are prepared in U.S. dollars, the functional and reporting
currency of Elamex.

PRINCIPLES OF CONSOLIDATION - The consolidated financial statements are prepared
in accordance with accounting principles generally accepted in the United States
of America (U.S.) and include the accounts of the Company and its wholly-owned
and majority-owned, controlled subsidiaries. All significant intercompany
balances and transactions are eliminated in consolidation.

Effective December 19, 2003, the results of operations of Precision, (Metal
Stamping Segment) which was previously consolidated are being reported on the
cost method. This was due to the voluntary petition for reorganization under
Chapter 11 of the U.S. Bankruptcy code.

Unaudited financial information for Precision as of and for the years ended
December 31, 2004 and 2003 is as follows:

<TABLE>
<CAPTION>
                                          2004                   2003
                                        (In Thousands of U.S. Dollars)
<S>                                    <C>                   <C>
Current assets                         $      9,052          $    13,188
Non current assets                           15,476               17,860
Current liabilities                          29,067               32,547
Net sales                                    65,406               72,019
Gross margin                                  1,899               (1,861)
Net loss                                     (2,246)             (16,709)
</TABLE>

During the fourth quarter of 2003 Precision encountered circumstances that
indicated that its carrying value may not be recoverable, as such, the Company
engaged an independent company to assist in the valuation of long-lived assets
for impairment. Based on the analysis of future cash flows of the assets group
the Company reported an impairment of Precision's long-lived assets of $13.2
million in December 2003. This impairment is recorded in the statement of
operations as impairment of long-lived assets.

                                       28
<PAGE>

During 2003 the Company loaned Precision $1.5 million in the form of a note
receivable, to meet working capital needs. At December 31, 2004, the Company had
notes receivable from Precision of $1.5 million.

The Company's share of undistributed equity net of amounts receivable from
Precision at December 31, 2004 and 2003 was $0.

Elamex also has a 50.1% investment in Qualcore, S. de R.L. de C.V., a joint
venture company, which manufactures plastics parts and metal parts with GE de
Mexico. Qualcore is jointly managed with GE de Mexico and the investment in the
joint venture is recorded under the equity method.

Unaudited financial information for Qualcore as of and for the years ended
December 31, 2004 and 2003 is as follows:

<TABLE>
<CAPTION>
                                   (In Thousands of U.S. Dollars)
                                     2004                   2003
<S>                               <C>                   <C>
Current assets                    $    6,120            $    3,473
Non current assets                     8,057                 9,529
Current liabilities                   12,724                 9,588
Net sales                             24,126                18,798
Gross margin                          (1,068)               (2,067)
Net loss                              (2,515)               (3,657)
</TABLE>

During 2004 and 2003 the Company loaned Qualcore $425 thousand and $1.0 million,
respectively, in the form of a note receivable to meet working capital needs. At
December 31, 2004 and 2003, the Company had notes receivable from Qualcore of
$2.7 million and $2.3 million, respectively.

The Company's share of undistributed equity (deficiency) net of amounts
receivable from Qualcore at December 31, 2004 and 2003 was $(19) thousand and
$864 thousand, respectively.

MANAGEMENT ESTIMATES - The preparation of financial statements in conformity
with accounting principles generally accepted in the U.S. requires management to
make certain estimates 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 revenues and expenses
during the reporting period. Actual results could differ from these estimates.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CHANGE IN ACCOUNTING PRINCIPLE - As of January 1, 2002 the Company adopted
Statement of Financial Accounting Standards No. 142 ("SFAS No. 142"), "Goodwill
and Other Intangible Assets" which requires, among other things, the
discontinuance of amortization of goodwill and intangible assets with indefinite
lives. In addition, the standard includes provisions for the reclassification of
certain existing recognized intangibles, reclassification of certain intangibles
out of previously reported goodwill and the identification of reporting units
for purposes of assessing potential impairments of goodwill. SFAS No. 142 also
required the Company to complete a transitional goodwill impairment test six
months from the date of adoption. The result of the non-amortization provision
of SFAS No. 142 was a decrease in the net loss of $492 thousand for the year
ended December 31, 2002.

The Company engaged an independent company to assist in the valuation of
goodwill assigned to Precision. The fair value of the operating entity was
determined using a discounted cash flow model. Based on the analysis performed
the Company completed its implementation analysis of goodwill arising from prior
acquisitions and recorded an impairment charge of $853 thousand in the first
quarter of 2002, which was recorded as a cumulative effect of change in
accounting principle.

The Company completed its annual impairment test during the first quarter of
2003 and reported an impairment of goodwill of $3.6 million. The goodwill
affected by the impairment analysis is that recorded at the time of the
acquisition of Precision Tool, Die and Machine Co. in 1999. The primary reason
for the impairment was an increase in required capital expenditures necessary to
replace aging equipment and new capital for business expansion. The Company has
elected to annually test goodwill for impairment during the first quarter of the
year and whenever an indication of impairment occurs. As a consequence of the
voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy
code filed by Precision the Company tested the value of the goodwill in December
2003 and determined an additional impairment of goodwill of $4.5 million for
Precision goodwill. After impairment, goodwill remaining on the books is
approximately $3.7 million of goodwill recorded during the third quarter of 2002
as a result of the acquisition of Mt. Franklin Holdings (See Note 3). The
Company

                                       29
<PAGE>

completed its annual impairment test of the Franklin goodwill in the first
quarter of 2004 and determined that there was no impairment of goodwill.

CASH AND CASH EQUIVALENTS - The Company considers all highly liquid debt
instruments and investments purchased with an original maturity of three months
or less to be cash equivalents. Cash includes deposits in Mexican banks,
denominated in Mexican Pesos ("Pesos"), of approximately $199 thousand and $0
thousand at December 31, 2004 and 2003, respectively. The Company had
approximately $1.9 million and $2.3 million at December 31, 2004 and 2003,
respectively, in short-term repurchase agreements, denominated in U.S. dollars,
deposited in U.S. banks.

CONCENTRATION OF CREDIT RISK - Financial instruments that potentially subject
the Company to concentrations of credit risk consist of cash and accounts
receivable. The Company monitors the risk of having deposits in bank in excess
of the Federal Deposit Insurance Corporation limits and does not anticipate any
losses. The Company performs ongoing credit evaluations of its customers and
generally does not require collateral to support amounts due for the sale of its
products.

ALLOWANCE FOR DOUBTFUL ACCOUNTS - The Company maintains an allowance for
doubtful accounts based on its best estimate of accounts receivable considered
to be uncollectible.

An analysis of the activity in the allowance for doubtful accounts for the years
ended December 31, 2004, 2003 and 2002 is as follows:

<TABLE>
<CAPTION>
                                             2004               2003                 2002
                                                     (In Thousands of U.S. Dollars)
<S>                                        <C>                <C>                  <C>
Beginning balance                          $   1,275          $     654            $     649
Additions charged to expense                     111              1,294                  141
Accounts written off                             (85)              (159)                (136)
Precision balance deconsolidated                                   (514)
                                           ---------          ---------            ---------
Ending balance                             $   1,301          $   1,275            $     654
                                           =========          =========            =========
</TABLE>

FOREIGN CURRENCY TRANSLATION - The functional currency of the Company is the
U.S. dollar, the currency of the primary economic environment in which the
Company operates. Gains and losses on foreign currency transactions and
remeasurement of balance sheet amounts are reflected in net income. Included in
other, net on the accompanying consolidated statements of operations are foreign
exchange losses of $46 thousand, $211 thousand, and $328 thousand for the years
ended December 31, 2004, 2003, and 2002, respectively. Assets and liabilities of
the Company are denominated in U.S. dollars except for certain amounts as
indicated below. Certain balance sheet amounts (primarily inventories, property,
plant and equipment, accumulated depreciation, prepaid expenses, and common
stock) denominated in other than U.S. dollars are remeasured at the rates in
effect at the time the relevant transaction was recorded, and all other assets
and liabilities are remeasured at rates effective as of the end of the related
periods. Revenues and expenses denominated in other than U.S. dollars are
remeasured at weighted-average exchange rates for the relevant period the
transaction was recorded. Assets and liabilities denominated in Pesos are
summarized as follows in thousands of U.S. dollars at the exchange rate
published in the Diario Oficial de la Federacion (the Official Gazette of the
Federation), which is the approximate rate at which a receivable or payable can
be settled as of each period end:

<TABLE>
<CAPTION>
                                             2004                2003
                                           ----------         ----------
                                           (In Thousands of U.S. Dollars)
<S>                                        <C>                <C>
Cash and cash equivalents                  $     199          $
Other receivables                                509               854
Prepaid expenses and refundable taxes            342             1,282
Other assets, net                                  4                 5
Accounts payable                                (309)             (189)
Accrued expenses and other liabilities        (1,231)             (546)
                                           ---------          --------
Net foreign currency position              $    (486)         $  1,406
                                           =========          ========
</TABLE>

In addition, the Company has recorded a net deferred tax liability pursuant to
Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for
Income Taxes (see Note 10). The recorded net deferred tax asset of $621 thousand
and $885 thousand at December 31, 2004 and 2003 respectively, represent the net
dollar value of amounts provided for temporary differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective Mexican and U.S. tax bases.

                                       30
<PAGE>

FOREIGN EXCHANGE INSTRUMENTS - The Company maintains a policy of not engaging in
futures contracts with the purpose of hedging U.S. dollar/Peso revenues or
costs, with the exception of regular treasury operations to cover operating
requirements for up to 30 days. The Company had no open hedge contracts at
December 31, 2004 or 2003.

INVENTORIES - Inventories are stated at the lower of cost or market. Cost is
determined using a moving weighted average. Inventory cost includes material,
labor and overhead. Inventory reserves, which are charged to cost of sales, are
provided for excess inventory, obsolete inventory, and for differences between
inventory cost and its net realizable value.

PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are stated at
cost, less accumulated depreciation and amortization. Plant and equipment under
capital leases are stated at the lower of their fair value at the inception of
the lease or the present value of minimum lease payments. Depreciation and
amortization are calculated using the straight-line method over the shorter of
related lease terms or estimated useful lives of the assets. The Company charges
amounts expended for maintenance and repairs to expense and capitalizes
expenditures for major replacements and improvements.

LONG-LIVED ASSETS - The Company measures impairment losses on long-lived assets,
including goodwill, when events and circumstances indicate that the assets might
be impaired and the undiscounted cash flows estimated to be generated by those
assets are less than the carrying amounts of those assets. The Company measures
impairment loss as the difference between the carrying value and the fair value
of the asset.

STOCK-BASED COMPENSATION - The Company accounts for the stock option plans under
APB Opinion No. 25, under which compensation cost of $(42) thousand and $223
thousand were recognized in 2004 and 2003, respectively. No additional
compensation expense will be expensed in the future in connection with these
options. Had compensation cost for these plans been determined consistent with
SFAS No. 123, "Accounting for Stock Based Compensation", the Company's net loss
and loss per share for the year ended December 31, 2004, 2003 and 2002, would
have been adjusted to the following pro forma amounts:

<TABLE>
<CAPTION>
                                                           (In Thousands of U.S. Dollars, Except per Share Data)
                                                                    2004            2003         2002
<S>                                                               <C>           <C>            <C>
Net loss as reported                                              $  (5,151)    $  (34,608)    $   (6,017)
Stock based employee compensation expense included in
  reported net loss                                                     (42)           223            321

Total stock-based employee compensation expense
  determined under fair value based method                               46           (282)          (440)
                                                                  ---------     ----------     ----------
Pro forma net loss                                                $  (5,147)    $  (34,667)    $   (6,136)
                                                                  =========     ==========     ==========
Loss per share Basic and Diluted
           As reported                                            $   (0.69)    $    (4.61)    $    (0.84)
                                                                  =========     ==========     ==========
           Pro forma                                                  (0.69)         (4.62)         (0.85)
                                                                  =========     ==========     ==========
</TABLE>

BASIC AND DILUTED NET LOSS PER SHARE - Basic and diluted net loss per share of
common stock is calculated by dividing net loss by the weighted-average number
of common shares outstanding for the year. Dilutive stock options for the years
ended December 31, 2004 and 2003 have not been included in the calculation as
their effect would be antidilutive due to the net loss.

INCOME TAXES - The Company accounts for income taxes under the asset and
liability method, as required by SFAS No. 109. Under the asset and liability
method, deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date. Provisions for taxes are made based
upon the applicable tax laws of Mexico and the United States. Deferred tax
assets and liabilities are not provided for differences related to assets and
liabilities that are remeasured from Pesos into U.S. dollars using historical
exchange rates and that result from inflation indexing for Mexican tax purposes
or exchange rate changes.

                                       31
<PAGE>

REVENUE RECOGNITION - For metal stamping and food products, sales are recognized
at the time the order is shipped in satisfaction of customer orders. For
contract manufacturing, sales are recognized when the order is shipped for
manufacturing contracts and over the contract period for assembly services.
Anticipated losses on assembly services contracts are charged to operations as
soon as they are determined.

EMPLOYEE STATUTORY PROFIT-SHARING - A provision for deferred employee statutory
profit-sharing in Mexico is computed on income subject to employee statutory
profit-sharing, which differs from net income, due to certain differences in the
recognition of income and expenses for statutory profit-sharing and financial
statement purposes. There has been no employee statutory profit-sharing expense
for the years ended December 31, 2004, 2003, and 2002, respectively.

POST-RETIREMENT BENEFITS - Employees in Mexico are entitled to certain benefits
upon retirement after 15 years or more of service (seniority premiums), in
accordance with the Mexican Federal Labor Law. The benefits are accrued as a
liability and recognized as expense during the year in which services are
rendered.

FINANCIAL INSTRUMENTS - The carrying amounts of financial instruments, including
cash and cash equivalents, receivables, accounts payable, accrued expenses,
notes payable, taxes payable, and amounts due to related parties, approximated
fair value as of December 31, 2004 because of the relatively short maturity of
these instruments. The fair values of floating rate long-term debt are estimated
to be equivalent to their carrying amount based on current market conditions.

ACCRUED REBATES - The Company enters into contractual agreements for rebates on
certain products with its customers. Such amounts are netted against sales and
included in accrued advertising and promotions based on management estimates at
the date the sales occur.

PREPAID SLOTTING ALLOWANCES - Prepaid slotting allowances consist of payments to
customers for store shelf space and distribution agreements and are amortized to
sales revenue, using the straight line method over the term of the customer
contract or proportionally with sales recorded, based on the nature of the
slotting contract. Contracts generally vary in length from one to seven years
and provide for fixed payments or payments upon achievement of sales benchmarks.
Prepaid slotting allowances of $652 thousand and $1.3 million are included on
the balance sheet as other assets at December 31, 2004 and 2003 respectively.

RECENT ACCOUNTING PRONOUNCEMENTS -

In December 2004, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123 (revised 2004) ("Statement 123(R)"),
"Share-Based Payment", which revised Statement No. 123, "Accounting for
Stock-Based Compensation". This statement supercedes APB Opinion No. 25,
"Accounting for Stock Issued to Employees". The revised statement addresses the
accounting for share-based payment transactions with employees and other third
parties, eliminates the ability to account for share-based compensation
transactions using APB 25, and requires that the compensation costs relating to
such transactions be recognized in the consolidated statement of operations. The
revised statement is effective as of the first interim period beginning after
June 15, 2005. The Company is allowed to select from three alternative
transition methods, each having different reporting implications. The Company
has not completed its evaluation of the methods of adopting Statement 123(R).
Accordingly, the impact of adoption of Statement 123(R) cannot be predicted at
this time because it will depend on the method of adoption selected and 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 SFAS No. 123 as described in the disclosure of
pro forma net loss and net loss per share in the stock-based compensation
accounting policy note included in the consolidated financial statements.

In December 2004, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 153 ("Statement 153"), "Exchanges of
Nonmonetary Assets--an amendment of APB Opinion No. 29". Statement 153 amends
the guidance in APB Opinion No. 29, "Accounting for Nonmonetary Transactions",
based on the principle that exchanges of nonmonetary assets should be measured
based on the fair value of the assets exchanged. The guidance in that Opinion,
however, included certain exceptions to that principle. Statement 153 amends
Opinion 29 to eliminate the exception for nonmonetary exchanges of similar
productive assets and replaces it with a general exception for 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 Statement
153 are effective for nonmonetary asset exchanges occurring in fiscal periods
beginning after June 15, 2005. The provisions of Statement 153 are not expected
to have a material effect on the Company's consolidated financial statements.

In November 2004, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 151, Inventory Costs--An Amendment of ARB No. 43, Chapter 4 ("SFAS 151").
SFAS 151 amends the guidance in ARB No. 43, Chapter 4, Inventory Pricing , to
clarify the accounting for abnormal amounts of idle facility expense, freight,
handling costs, and wasted material

                                       32
<PAGE>

(spoilage). Among other provisions, the new rule requires that items such as
idle facility expense, excessive spoilage, double freight, and rehandling costs
be recognized as current-period charges regardless of whether they meet the
criterion of "so abnormal" as stated in ARB No. 43. Additionally, SFAS 151
requires that the allocation of fixed production overhead to the costs of
conversion be based on the normal capacity of the production facilities. SFAS
151 is effective for fiscal years beginning after June 15, 2005 and is required
to be adopted by the Company on January 1, 2006. The company is currently
evaluating the effect that the adoption of SFAS 151 will have on its
consolidated results of operations and financial condition but does not expect
SFAS 151 to have a material impact.

RECLASSIFICATIONS - Certain prior year amounts have been reclassified to conform
to the 2004 financial statement presentation.

3. ACQUISITIONS AND DISPOSITION OF ASSETS

Effective at the close of business on July 4, 2003, the sale of certain assets
was made to TECMA Group LLC, a private contract, shelter and manufacturing
services provider headquartered in El Paso, Texas. The transaction included the
sale of five Shelter Services customer contracts, miscellaneous assets and stock
of five newly created companies. Substantially all Shelter Services operations
personnel related to these contracts were transferred to the buyer. Elamex
received approximately $1.8 million in cash. In connection with the disposition
the Company transferred assets with a book value of $120 thousand to the buyer
and recorded a gain of $1.7 million. The Company incurred other costs of
approximately $575 thousand associated with the sale, which were included in
operating expenses in the 2003 results of operations.

On July 18, 2002, Elamex USA, Corp. ("Elamex USA"), a wholly owned Delaware
subsidiary of Elamex, completed the acquisition of Mt. Franklin Holdings, LLC
("Franklin"), Franklin Food Products LLC and the merger of Reprop Corporation
with and into Elamex USA. The effective closing date for tax and accounting
purposes was the close of business on June 28, 2002. Franklin operates a retail
nut and foodservice nut packaging and marketing company, whose operations are
located in El Paso, Texas and a candy manufacturing and packaging facility in
Ciudad Juarez, Mexico. The purchase price was cash payment of $1,445,040 and
923,161 restricted shares of the common stock of Elamex. 278,499 of these shares
were contingent and subject to escrow agreements, which required Franklin to
reach certain income levels through December 31, 2003. Franklin did not reach
the required income level; therefore the 278,499 shares in escrow will be
canceled or used for a different purpose.

The unaudited proforma combined historical results of the Company, as if
Franklin had been acquired at the beginning of fiscal 2002, are estimated in the
following table:

<TABLE>
<CAPTION>
                                                (In Thousands of U.S. Dollars,
                                                    Except Per Share Data)
                                                ------------------------------
                                                      DECEMBER 31, 2002
                                                ------------------------------
<S>                                             <C>
Net sales                                             $     151,179
Gross profit                                                 18,077
Net loss                                                    (11,090)
Net loss per share                                            (1.48)
</TABLE>

The above proforma results include adjustments to give effect to intercompany
sales, depreciation and other purchase price adjustments. The proforma results
are not necessarily indicative of the operating results that would have occurred
had the acquisition been consummated as of the beginning of the period
presented, nor are they necessarily indicative of future operating results.

4. INVENTORIES

Inventories consist of the following:

<TABLE>
<CAPTION>
                                                                   (In Thousands of U.S. Dollars)
                                                                   2004                   2003
<S>                                                            <C>                    <C>
Raw materials                                                  $      2,560           $      1,841
Packaging supplies                                                    2,446                  2,140
Work-in-process                                                         386                    260
Finished goods                                                        3,967                  4,220
                                                               ------------           ------------
Sub total                                                             9,359                  8,461
Less reserve for excess and obsolete inventory                         (562)                  (540)
                                                               ------------           ------------
Total                                                          $      8,797           $      7,921
                                                               ============           ============
</TABLE>

                                       33
<PAGE>

The provision for excess and obsolete inventory is charged against cost of
sales. An analysis of the excess and obsolete inventory reserve for the years
ended December 31 is as follows:

<TABLE>
<CAPTION>
                                                                2004         2003               2002
                                                                    (In Thousands of U.S. Dollars)
<S>                                                           <C>           <C>               <C>
Beginning balance                                             $    540      $ 1,011           $      25
Additions charged to expense                                        31                            1,176
Inventory disposed during the year                                  (9)        (151)               (190)
Metal Stamping deconsolidation                                                 (320)
                                                              --------      -------           ---------
Ending balance                                                $    562      $   540           $   1,011
                                                              ========      =======           =========
</TABLE>

6. PROPERTY, PLANT AND EQUIPMENT

A summary of property, plant and equipment is as follows:

<TABLE>
<CAPTION>
                                                                      2004              2003
                                       Estimated useful lives     (In Thousands of U.S. Dollars)
                                             (Years)
<S>                                    <C>                       <C>                  <C>
Land                                                             $       4,392        $      7,084
Buildings                                        20                     23,268              31,154
Machinery and equipment                        3-10                     12,622              12,350
Vehicles                                          5                         42                  42
                                                                 -------------        ------------
Subtotal                                                                40,324              50,630

Less accumulated depreciation                                          (13,368)            (10,674)
                                                                 -------------        ------------
Total                                                            $      26,956        $     39,956
                                                                 =============        ============
</TABLE>

7. NOTES PAYABLE AND LONG-TERM DEBT

The following is a summary of notes payable and long-term debt at December 31,
2004 and 2003.

<TABLE>
<CAPTION>
                                                                                           2004          2003
<S>                                                                                       <C>           <C>
Line of credit with interest-only payments through April 30,
2005 at the bank's prime rate plus 0.75% (6.5% and 4.75% at
December 31, 2004 and 2003, respectively); collateralized with
substantially all assets of Franklin. Unused available credit as
of December 31, 2004 is $2.2 million (1)                                                  $  4,793      $ 4,969

Building loan - note payable to a bank due in monthly installments
of $34 thousand, including interest at the bank's prime rate plus 0.75% (6.0%
and 4.75% at December 31, 2004 and 2003) through July 24, 2005; collateralized
by substantially all assets of Franklin, net of unamortized loan
fees of $2 thousand (1)                                                                      1,835        2,140
                                                                                          --------      -------
Total notes payable and long term debt                                                       6,628        7,109

Less: Current maturities of notes payable and long-term debt                                (6,628)      (5,282)
                                                                                          --------      -------
                                                                                          $      -      $ 1,827
                                                                                          ========      =======
</TABLE>

All notes payable and long-term debt mature during the year ending December 31,
2005.

      (1)   In connection with the long-term debt and line of credit, Franklin
            is required to comply with certain financial covenants including
            minimum tangible net worth. As of December 31, 2004 Franklin was in
            compliance with such financial covenants. The company is in
            discussions with the bank to refinance its revolving note payable
            and its building loan.

                                       34
<PAGE>

8. LEASES

Prior to September 16, 2004, the Company financed, via a capital lease
arrangement with a related party, a candy production plant located in Juarez,
Mexico. This arrangement specified that, at the end of the lease term in
November 2010, the Company would purchase the building at a specified price. On
September 16, 2004, the Company and the related party entered into an agreement
eliminating the purchase commitment. The transaction resulted in a deemed sale
and subsequent leaseback of the property through the original lease term. At the
date of the lease modification, land and buildings with a net book value
aggregating $2.4 million and $8.1 million, respectively, and the related
obligation under capital leases of $11.5 million were removed resulting in a
deferred gain of $1.1 million. The deferred gain is being amortized through the
remaining lease term ending in November 2010. For the year ended December 31,
2004, the amount of deferred gain recognized amounted to $53 thousand.

The Company utilizes certain machinery and equipment and occupies certain
buildings under both capital and operating lease arrangements that expire at
various dates through 2010, some of which have renewal options for additional
periods. Rental expense under these operating lease agreements aggregated $6.9
million, $6.7 million, and $7.9 million for the years ended December 31, 2004,
2003, and 2002, respectively.

Future minimum lease obligations at December 31, 2004 having an initial or
remaining term in excess of one year are as follows:

<TABLE>
<CAPTION>
                                 YEAR               CAPITAL    OPERATING
                                                (In Thousands of U.S. Dollars)
<S>                           <C>                  <C>         <C>
                                 2005              $   1,397   $   3,062
                                 2006                  2,776       3,123
                                 2007                              3,106
                                 2008                              3,106
                                 2009                              3,106
                              Thereafter                           9,793
                                                   ---------   ---------
Total minimum lease payments                           4,173   $  25,296
                                                               =========
Less amount representing interest at 7.83%              (342)
                                                   ---------
Present value of minimum lease payments                3,831
Less current portion                                  (1,137)
                                                   ---------
    Long-term capital lease obligations            $   2,694
                                                   =========
</TABLE>

The Company leases manufacturing facilities to unrelated parties under operating
lease agreements. The Company pays certain taxes on the properties and provides
for general maintenance.

Rental income was $1.7 million, $1.5 million, and $882 thousand for the years
ended December 31, 2004, 2003, and 2002, respectively. The future minimum rental
income to be received under these operating leases is $1.7 million in 2005.

9. INCOME TAXES

Mexican tax legislation requires that companies pay a tax calculated as the
greater of tax resulting from taxable income or tax on the value of certain
assets less certain liabilities (asset tax). Taxes resulting from net income are
calculated using Mexican tax regulations, which define deductibility of expenses
and recognize certain effects of inflation.

Effective January 1, 1999, a tax rate was enacted in Mexico whereby the
corporate tax rate was 35%. An amount equal to 30% is paid on taxable earnings
reinvested in the Company and 5% on those earnings when they are distributed in
the form of dividends for the year ended December 31, 2001.

On December 1, 2004, certain amendments to the tax and asset tax laws were
enacted and are effective as of 2005. The most significant amendments are as
follows: (a) the tax rate will be reduced to 30% in 2005, 29% in 2006 and 28% in
2007 and forward; (b) for purposes of the calculation of income tax, purchases
of inventory are deductible only after being sold; the tax law previously
allowed for the immediate deduction of all inventory purchases in the year
acquired; (c) companies must establish a tax basis for their inventory balances
as of December 31, 2004 using the specific costing methods allowed by the

                                       35
<PAGE>

amendments to the tax law; companies may elect to ratably step-up such tax basis
of inventories over a period from 4 to 12 years, as determined in conformity
with the respective tax rules, which include deducting from the tax basis
certain items such as unamortized tax loss carryforwards; (d) beginning January
1, 2006, paid employee statutory profit sharing will be fully deductible for tax
purposes; (e) bank liabilities and liabilities with foreign entities are
deductible in the determination of the asset tax taxable base, thereby
decreasing the base on which the asset tax is calculated.

The tax provision differs from the statutory tax rate of 33% in 2004 and 34% for
2003 and 35% for 2002 on taxable income as follows:

<TABLE>
<CAPTION>
                                                   2004      2003     2002
<S>                                                <C>      <C>      <C>
Taxes at Statutory Rate of 33%                      33.0%    34.0%    35.0%
Permanent Differences
   Asset Tax Expense                               (66.9)    (3.1)     1.7
   Foreign Currency Gains/Losses                    (5.7)    (1.2)   (35.6)
   Loss of Subsidiary Not Recognized
   Non-Deductible Expenses                          (0.8)             (3.0)
   Inflationary Effects                             28.1      1.0     10.3
   Inflationary Effects - Fixed assets              15.6      0.6      8.2
   Expiration of Tax Loss Carryforwards                               (7.1)
   Expiration of Asset Tax Credit Carryforwards              (1.4)   (11.5)
   Expiration of Capital Loss Carryforwards                  (6.6)
   Effect of Tax Rate Change                        (7.3)             (2.9)
   State Taxes, net of federal benefit                        0.9      0.6
   Change in Valuation Allowance (Precision)                (14.8)
   Change in Valuation Allowance                   (81.9)    (8.8)    26.5
   Goodwill Amortization/Impairment                          (9.2)    (6.3)
   Other                                            27.7      0.6     (3.7)
                                                   -----     ----     ----
                                                   (58.2)%   (8.0)%   12.2%%
                                                   =====     ====     ====
</TABLE>

Income tax expense (benefit) consists of:

<TABLE>
<CAPTION>
                                 CURRENT        CURRENT       DEFERRED
                                ASSET TAX      INCOME TAX    INCOME TAX     TOTAL
                                          (In Thousands of U.S. Dollars)
<S>                             <C>            <C>           <C>           <C>
Mexican                          $  1,582      $     26      $    290      $  1,898
U.S. Companies                                     (521)                       (521)
                                 --------      --------      --------      --------
Year ended December 31, 2004     $  1,582          (495)     $    290      $  1,377
                                 ========      ========      ========      ========
Mexican                          $    923      $     72      $  2,496      $  3,491
U.S. Companies                                       99        (1,171)       (1,072)
                                 --------      --------      --------      --------
Year ended December 31, 2003     $    923      $    171      $  1,325      $  2,419
                                 ========      ========      ========      ========
Mexican                          $    (78)     $   (485)     $  1,756      $  1,193
U.S. Companies                                      (67)       (1,687)       (1,754)
                                 --------      --------      --------      --------
Year ended December 31, 2002     $    (78)     $   (552)     $     69      $   (561)
                                 ========      ========      ========      ========
</TABLE>

                                       36
<PAGE>

The tax effects of significant temporary differences representing deferred tax
assets and liabilities are as follows:

<TABLE>
<CAPTION>
                                                                2004               2003
                                                             (In Thousands of U.S. Dollars)
<S>                                                           <C>                  <C>
DEFERRED TAX ASSETS:
Asset Tax Credit Carryforward - Mexico                        $   4,620            $ 2,400
NOL Carryforwards - Mexico                                        3,094              3,594
NOL Carryforwards - US                                            5,865              3,940
Capital Loss - US                                                    71                 71
Related Party Interest                                              849                849
Inventory                                                           291                291
Bad Debts                                                           583                591
Stock Option Plan                                                                      201
Accrued Liabilities                                                  46                 26
Guarantee                                                           510
                                                              ---------            -------
Subtotal                                                         15,929             11,963
Less: Valuation Allowance - Mexico                               (7,236)            (4,701)
Less: Valuation Allowance - US                                   (6,839)            (5,115)
                                                              ---------            -------
Net Deferred Tax Asset                                            1,854              2,147
                                                              ---------            -------
DEFERRED TAX LIABILITIES:
   Property, plant and equipment                                   (815)              (857)
   5% Deferred payment of Taxes - Mexico                           (365)              (335)
   Other                                                            (53)               (70)
                                                              ---------            -------
Total Deferred Tax Liabilities                                   (1,233)            (1,262)
                                                              ---------            -------
Net Deferred Tax Asset                                         $    621             $  885
                                                              =========            =======
</TABLE>

A valuation allowance is provided when it is more likely than not that some
portion or all of the deferred tax assets will not be realized in the future.
The valuation allowances of $14.1 million and $9.8 million at December 31, 2004
and December 31, 2003, respectively, relate primarily to certain asset tax
credit and tax net operating loss carryforwards of individual Mexican
subsidiaries and the entire net deferred tax asset of the US companies. The
increase in the valuation allowance at December 31, 2004 to $13.6 million
relates primarily to the expiration of certain asset tax credits and capital
loss carryforwards of individual Mexican subsidiaries, and the effect of
reserving the entire net deferred asset tax related to the US companies. In
addition, primarily as a result of the voluntary petition for reorganization
filed by Precision under Chapter 11 of the U.S. Bankruptcy Code on December 19,
2003, the Company's investment in Precision, reported under the equity method of
accounting, was reduced by an increase in the valuation allowance against
Precision's underlying deferred tax assets of $4.5 million.

An analysis of the activity of the valuation allowance for the years ended
December 31, 2004, 2003 and 2002 is as follows:

<TABLE>
<CAPTION>
                                                               2004              2003                   2002
                                                                       (In thousands of U.S. Dollars)
<S>                                                          <C>              <C>                    <C>
Beginning balance                                            $   9,816        $     7,172            $     5,972
Additions charged to expense (Mexico)                            2,602              2,743                  1,340
Decreases recorded to income (Mexico)                              (71)              (804)                (2,558)
Expiration of capital loss carryforwards (Mexico)                                  (1,992)
Additions recorded to goodwill (U.S.)                                                                      2,418
Additions charged to expense (U.S. - Precision)                                     4,465
Decrease - deconsolidation of Precision                                            (4,465)
Increase recorded to income (U.S.)                               1,728              2,697
                                                             ---------        -----------            -----------
Ending Balance                                               $  14,075        $     9,816            $     7,172
                                                             =========        ===========            ===========
</TABLE>

The Mexican net asset taxes paid, adjusted for inflation, may be used to offset
income taxes that exceed the asset tax due for the year, for ten years following
the payment of the tax. These asset tax carryforwards as of December 31, 2004
are $4.6 million and expire on various dates through 2014.

                                       37
<PAGE>

At December 31, 2004, certain of the Mexican companies had tax net operating
loss carryforwards that can be utilized only by the Mexican company that
incurred the losses. These net operating loss carryforwards, adjusted for
inflation, expire as follows, if not utilized to offset taxable income:

<TABLE>
<CAPTION>
YEAR                                                    AMOUNT
                                           (In Thousands of U.S. Dollars)
<S>                                        <C>
2007                                                  $      297
2010                                                          96
2011                                                       7,011
2012                                                       2,022
2013                                                         809
2014                                                         815
                                                      ----------
                                                      $   11,050
                                                      ==========
</TABLE>

The majority stockholder has filed a consolidated tax return with Elamex's
operations since 1995. The tax sharing agreement entered into between the
majority stockholder, Accel, S.A. de C.V., and Elamex through 1998 provided that
Elamex transfer monthly an amount equal to its estimated tax payment, less
credits. Beginning in 1999, the Mexican tax law for consolidation required
Elamex and its subsidiaries to pay amounts directly to the Mexican Tax Authority
(SHCP) based on their individual tax calculations. The payments are calculated
as required by the SHCP as if Elamex and subsidiaries were filing a stand-alone
income tax return for such year. The majority stockholder further agrees to
reimburse Elamex for use of any of Elamex's tax benefits at the time Elamex
would otherwise realize the benefit.

Dividends paid by Mexican companies, which exceed earnings, and profits, as
defined by the Mexican income tax law, are subject to a 33% income tax, payable
by the Company on 1.5152 times the amount in excess of earnings and profits.
Dividends paid which do not exceed earnings and profits are not currently
subject to Mexican tax to either the Company or the stockholder. The Mexican
companies paid no dividends on common stock in 2004, 2003 and 2002.

10. STOCKHOLDERS' EQUITY

COMMON STOCK - Under the bylaws and Mexican law, the capital stock of Elamex,
S.A. de C.V. must consist of fixed capital and may have, in addition thereto,
variable capital. Stockholders holding shares representing variable capital
common stock may require the Company, with a notice of at least three months
prior to December 31 of the prior year, to redeem those shares at a price equal
to the lesser of either (i) 95% of the market price, based on the average of
trading prices in the stock exchange where it is listed during the 30 trading
days preceding the end of the fiscal year in which the redemption is to become
effective or (ii) the book value of the Company's shares as approved at the
meeting of stockholders for the latest fiscal year prior to the redemption date.
In July 2002, the Company issued 923,161 restricted shares of its authorized
variable capital common stock in connection with the acquisition of Mt. Franklin
Holdings (see Note 3). Although the variable capital common stock is redeemable
by the terms described above, such shares would be classified as a component of
stockholders' equity in the consolidated balance sheets. Management believes the
variable common stock represents permanent capital because the timing and
pricing mechanisms through which a stockholder would exercise this option to
redeem are such that a stockholder, from an economic standpoint, would not
exercise this option. At the time a stockholder is required to give notice of
redemption, the stockholder will not be able to know at what price the shares
would be redeemed and would not expect the present value of the future
redemption payment to equal or exceed the amount which would be received by the
stockholder in an immediate public sale.

Under Mexican law, dividends must be declared in Pesos. If dividends are
declared in the future, the Company's intent is to pay the dividends to all
stockholders in U.S. dollars, as converted from Pesos as of the date of record,
unless otherwise instructed by the stockholder.

Mexican law requires that at least 5% of the Company's net income each year
(after profit sharing and other deductions required by the law) be allocated to
a legal reserve fund, which is not thereafter available for distribution, except
as a stock dividend, until the amount of such fund equals 20% of the Company's
historical capital stock. The legal reserve fund at December 31, 2004 and 2003
was approximately $1.6 million. The Company anticipates that no additional
allocation will be made at its annual stockholders' meeting to be held on April
28, 2005. There were no retained earnings available for dividends under Mexican
law at December 31, 2004 and 2003.

COMMON STOCK PURCHASE RESTRICTIONS AND PREEMPTIVE RIGHTS - Any person who seeks
to acquire ownership of 15% or more of the total outstanding shares of the
Company's common stock must receive written consent from the Company's Board of
Directors. Should shares in excess of 15% be acquired without permission, the
purchaser will be subject to liquidated damages, which will be used by the
Company to repurchase stock in excess of the 15% ownership

                                       38
<PAGE>

limitation. In addition, in the event that the Company issues additional shares,
existing stockholders will have a preemptive right to subscribe for new shares,
except when shares are issued in connection with a merger or for the conversion
of convertible debentures. The 15,000,000 shares of variable capital are not
subject to preemptive rights.

PREFERRED STOCK - Pursuant to the Company's bylaws, the Company's Board of
Directors, at its discretion, can issue up to an aggregate of 50,000,000 shares
of preferred stock in one or more series. The Board may attach any preferences,
rights, qualifications, limitations, and restrictions to the shares of each
series issued, including dividend rights and rates, conversion rights, voting
rights, terms of redemption, and liquidation preferences. The shares may be
issued at no par value or at a par value determined by the Board of Directors.

No shares of preferred stock have been issued as of December 31, 2004.

11. STOCK OPTION PLANS

On April 19, 2002, the shareholders approved the issuance of up to 850,000
Elamex stock options and authorized the Board of Directors to establish the
terms and conditions of the grant of the stock options.

On July 19, 2002, the Board of Directors of the Company granted 200,000 stock
options at $2.00 per share and 70,730 stock options at $6.00 per share. During
the quarter ended September 30, 2004, 200,000 stock options were forfeited due
to the termination of a senior executive. During the second and third quarter of
2003, 38,210 and 25,020, options respectively, were forfeited due to the
resignation of one of the awarded executives during the second quarter and two
awarded executives during the third quarter.

The following is a summary of option activity for the 3 years ended December 31,
2004:

<TABLE>
<CAPTION>
                                   OPTIONS UNDER      WEIGHTED AVERAGE
                                      PLAN             EXERCISE PRICE
<S>                                <C>                <C>
Outstanding at
       January 1, 2002
       Granted                       270,730              $  3.05
                                     -------              -------
Outstanding at
       December 31, 2002             270,730              $  3.05
       Forfeited                     (63,230)             $  6.00
                                     -------              -------
Outstanding at
       December 31, 2003             207,500              $  2.14
       Forfeited                    (200,000)             $  2.00
                                     -------              -------
Outstanding at
       December 31, 2004               7,500              $  6.00
                                     =======              =======
</TABLE>

The following table summarizes information concerning currently outstanding and
exercisable options:

<TABLE>
<CAPTION>
  OPTIONS                   EXERCISE                LIFE IN                       NUMBER                           STOCK
OUTSTANDING                   PRICE                  YEARS            EXERCISABLE AT DECEMBER 31, 2004      PRICE AT GRANT DATE
<S>                         <C>                     <C>               <C>                                   <C>
   7,500                     $6.00                    10                             -                             $5.35
</TABLE>

The fair value of each option is estimated on the date of grant using the
Black-Scholes option pricing model using the following assumptions; risk free
interest rate of 2.68%; expected dividend yield of 0.0%; expected life of 5
years and expected volatility of 61%.

In addition to the above, Franklin, a subsidiary of the Company has an options
plan in shares of the subsidiary. There are 50,000 options outstanding under
this plan with an exercise price of $12.87. No compensation expense has been
recorded in connection with this plan. Also, based on an analysis of these
options using the Black-Scholes method, the Company believes the fair value of
such options is zero and no proforma expense is recorded in connection with
these options.

12. EMPLOYEE BENEFIT PLANS

The Company and its subsidiaries sponsor 401(k) defined contribution plans.
Participants in the plans may contribute up to 10% of their salary for which the
Company provides matching or discretionary contributions. In 2004, 2003 and
2002, approximately $7 thousand, $120 thousand and $118 thousand, respectively,
have been charged to expense in connection with these plans.

                                       39
<PAGE>

Prior to its acquisition by the Company, Franklin had a 401(k) Savings Plan for
eligible Franklin employees as defined in the plan agreement. The 401(k) Savings
Plan provides for discretionary matching contributions. For the years ended
December 31, 2004 and 2003 Franklin approved matching contributions of 100% of
participating employees' contributions up to a maximum of 6% of each employee's
compensation, which were approximately $147 thousand $136 thousand. No matching
contributions were approved in year 2002, subsequent to the acquisition by the
Company.

13. SEGMENTS AND GEOGRAPHIC INFORMATION

The Company's reportable segments are 1) Shelter Services, 2) Metal Stamping,
and 3) Food Services. During the third quarter of 2002 the Company acquired the
third segment, Food Services. The Shelter Services segment provides shelter and
assembly services in Mexico for non-electronics manufacturing services
companies. Certain assets and contracts related to Shelter services were sold as
of July 4, 2003 (See note 3). The Metal Stamping segment consists of Precision
the subsidiary located in Louisville, Kentucky. Precision provides metal and
stamping services primarily to the appliance and automotive sectors and was
deconsolidated in December 2003 (see Note 1). The Food Services segment,
Franklin, operates a retail nut and foodservice nut packaging and marketing
company, located in El Paso, Texas and a candy manufacturing and packaging
facility in Juarez, Mexico. The accounting policies for the segments are the
same as for Elamex taken as a whole. Corporate expenses are not allocated to any
of the segments and are presented separately. Inter-segment adjustments are
related primarily to inter-segment sales at cost in the normal course of
business.

Information about the operating segments for the years ended December 31, 2004,
2003 and 2002 was as follows:

<TABLE>
<CAPTION>
                                                                                    UNALLOCATED
                                           SHELTER (1)     METAL (2)     FOOD        CORPORATE     INTER-
                                           SERVICES        STAMPING     SERVICES     AND OTHER     SEGMENT       TOTAL
                                           -----------------------------------------------------------------------------
<S>                                        <C>             <C>          <C>         <C>           <C>           <C>
YEAR ENDED DECEMBER 31, 2004
Net sales                                  $    15,230                  $ 95,341                  $(12,984)     $ 97,587
Operating Income (loss)                            131                     3,223        (3,693)                     (339)
Net interest expense                                36                     2,118            15                     2,169
Income (loss) before income taxes and
 equity in losses of affiliates                    219                     1,105        (3,690)                   (2,366)
Net (loss) income                               (1,679)                    1,105        (4,577)                   (5,151)
Assets                                          13,422                    40,932         1,427      (1,531)       54,250
Depreciation & Amortization                        735                     2,391             8                     3,134
Capital expenditures                                 4                       925                                     929

YEAR ENDED DECEMBER 31, 2003
Net sales                                 $     25,677     $ 70,988     $ 75,648                  $(15,063)     $157,250
Operating income (loss)                           (333)     (17,231)        (292)      (11,255)                  (29,111)
Net interest expense (income)                       41          754        3,071          (363)                    3,503
Loss before income taxes and equity in
 losses of affiliates                            1,402      (18,304)      (2,610)      (10,570)                  (30,082)
Net loss                                        (1,917)     (15,915)      (2,610)      (14,166)                  (34,608)
Assets                                          13,878                    50,537         4,629      (1,641)       67,403
Depreciation and amortization                      868        2,938        2,271    $        8                     6,085
Capital expenditures                               313        4,327        1,750            43                     6,433

YEAR ENDED DECEMBER 31, 2002
Net sales                                 $     31,677     $ 75,279     $ 33,180                  $ (5,867)     $134,269
Operating income (loss)                            499          575         (264)       (2,103)                   (1,293)
Net interest expense (income)                        1          815        1,672          (714)                    1,774
Loss before income taxes and equity in
 losses of affiliates                              260         (669)      (1,936)       (2,255)                   (4,600)
Net loss                                          (933)        (145)      (1,286)       (3,653)                   (6,017)
Assets                                          18,995       47,085       50,154        28,336     (10,069)      134,501
Depreciation and amortization                    1,275        2,416        1,059                                   4,750
Capital expenditures                               286        5,075          876                                   6,237
</TABLE>

(1) Certain assets and contracts related to this segment were sold as of July 4,
2003

(2) The Metal Stamping Segment (Precision) was consolidated through December 19,
2003. As a consequence of voluntary filing for Chapter 11 protection, the
investment in Precision is now recognized in accordance with the cost method.

                                       40
<PAGE>

The Company has 10 facilities in the U.S. and Mexico to serve its customers.
Geographic net sales information reflects the destination of the product
shipped. Long-lived assets information is based on the physical location of the
asset. The United States accounted for 66.5% and 74.7% of total long-lived
assets in 2004 and 2003, respectively. Mexico accounted for 33.5% and 25.3% of
total long-lived assets in 2004 and 2003, respectively.

Geographic net sales for the years ended December 31, were as follows:

<TABLE>
<CAPTION>
                    2004           2003              2002
                        (In Thousands of U.S. Dollars)
                   ---------------------------------------
<S>                <C>           <C>              <C>
United States      $95,887       $155,750         $133,387
Mexico               1,700          1,500              882
                   -------       --------         --------
                   $97,587       $157,250         $134,269
                   =======       ========         ========
</TABLE>

Geographic net property, plant and equipment by location as of December 31, were
as follows:

<TABLE>
<CAPTION>
                       2003                  2003
                     (In Thousands of U.S. Dollars)
<S>                  <C>                   <C>
United States        $ 17,917              $ 29,856
Mexico                  9,039                10,100
                     --------              --------
                     $ 26,956              $ 39,956
                     ========              ========
</TABLE>

14. MAJOR CUSTOMERS

Certain customers, all located in the United States, accounted for at least 10%
of the Company's total sales during the years ended December 31, as follows:

<TABLE>
<CAPTION>
CUSTOMER                     PRODUCTS AND SERVICES                2004          2003      2002
<S>                    <C>                                        <C>           <C>       <C>
   A                   Major distributor                          20.4 %         11%

   B                   Metal stamping of appliance products                      21%       25%

   C                   Metal stamping of automotive parts                        12%       19%
</TABLE>

15. RELATED PARTY TRANSACTIONS

The Company paid for services rendered by Comercial Aerea, of which the chairman
of the board of directors of Elamex is a principal, totaling approximately $31
thousand, $148 thousand, and $127 thousand during the years ended December 31,
2004, 2003, and 2002, respectively.

The Company purchases insurance through an insurance broker of which the
chairman of the board of Elamex is a principal. Premiums paid were approximately
$153 thousand, $337 thousand, and $393 thousand for the years ended December 31,
2004, 2003, and 2002, respectively.

The Company, through its wholly owned subsidiary Confecciones de Juarez
("Confecciones"), leases a candy manufacturing building owned by Franklin
Inmobiliarios S.A. de C.V. ("Inmobiliarios"), a Mexican company in which the
chairman of the board has an indirect ownership interest. The building, located
in Ciudad Juarez, Mexico, is the site on which all of Franklin's candy
manufacturing operations are performed. Confecciones passes the cost of this
lease to Franklin under the terms of a shelter services agreement executed on
July 24, 2000 ("Shelter Contract"). Shelter services companies generally lease
real properties in the normal course of arranging shelter services for a US
company. This lease agreement was executed on November 22, 2000, which was prior
to the July 1, 2001 date on which Elamex acquired Franklin. On September 16,
2004, the Company and the related party entered into an agreement eliminating
the purchase commitment. The lease modification resulted in a change in the
lease from a capital lease to an operating lease (see note 8).

The rights to collect lease payments from Confecciones have been assigned by
Inmobiliarios to the bank that financed the

                                       41
<PAGE>

building. Franklin made lease payments directly to that bank on behalf of
Inmobiliarios in the amounts of $2.0 million, $1.9 million and $1.9 million
during 2004, 2003 and 2002 respectively.

During 2004 the Company loaned Qualcore $425 thousand in the form of a note
receivable, to meet working capital needs. At December 31, 2004 and 2003, the
Company had notes receivable from Qualcore of $2.7 million and $2.3 million,
respectively.

16. COMMITMENTS AND CONTINGENCIES

The Company is a party to various claims, actions, and complaints, the ultimate
disposition of which, in the opinion of management, will not have a material
adverse effect on the operations or financial position of the Company.

The Mexican Federal Labor Law requires a severance payment for all permanent
employees that are terminated by the employer. This payment is calculated on the
basis of 90-days' pay for termination anytime during the first year of
employment, with an additional 12 days pay for each year of service thereafter
up to two times minimum wage. While most of the Company's Mexican assembly labor
is hired under temporary labor contracts during the first two months of
employment, the labor force is changed to permanent labor contracts after this
period. The Company has agreements with many of its contract-assembly customers,
which require that the customers pay the severance costs incurred, in the event
that assembly contracts are terminated prior to their scheduled completion. In
management's opinion, any severance costs incurred upon the termination of any
manufacturing contracts would not be material.

Seniority premiums to which employees are entitled upon retirement after 15
years or more of service, in accordance with the Mexican Federal Labor Law, are
recognized as expense during the year in which services are rendered. Included
in other liabilities is approximately $30 thousand and $20 thousand as of
December 31, 2004 and 2003, respectively, which fully accrues for these
estimated seniority obligations.

One of the Company's subsidiaries has entered into certain fixed-price
commitments to purchase raw materials to be used in its manufacturing process
over the next year. As of December 31, 2004, the aggregate value of these
commitments was approximately $29.6 million.

On February 21, 2005, one of the Company's customers filed Chapter 11 under the
United States Bankruptcy Court. The Company received payments of approximately
$226,000 within ninety days of the filing date that were paid outside of terms
and subject to possible preference action by the Trustee for the bankruptcy
estate. The payments received relate to 2004 sales and there were no sales to
this customer in 2005. Based on a review of the facts and circumstances,
management has provided an accrual, in other accrued expenses, of $135,000,
which is believed to be a reasonable estimate of the probable loss associated
with this matter.

17. GUARANTEES

In November 2002, Financial Accounting Standards Interpretation ("FIN") No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others" was issued. FIN No. 45 requires a
Company, at the time it issues a guarantee, to recognize an initial liability
for the fair value of obligations assumed under the guarantee and to expand
existing disclosure requirements. The Company has entered into contracts in the
normal course of business, which include certain guarantees within the scope of
FIN 45 under which it could be required to make payments to third parties upon
the occurrence or non-occurrence of certain future events. These guarantees
primarily include:

1) Qualcore, the joint venture with GE de Mexico, entered into a 12-year lease
agreement beginning January 2001 for the building that it occupies in Celaya
Mexico. The monthly lease payments are approximately $94,628 and are guaranteed
by both Elamex and GE de Mexico. Although the likelihood of funding under this
guarantee is not considered by the Company to be probable, the maximum amount
the Company may be liable for under such guarantee is approximately $4.5
million.

2) Qualcore also obtained bank financing from Wells Fargo and Eximbank for the
plastic molding and metal stamping equipment for the Celaya plant in 2001. The
original notes payable totaled $8.4 million with a five-year term and have equal
semi-annual principal payments of $840 thousand plus interest. Guarantors
include Elamex S.A de C.V. and GE Mexico, S.A. de C.V.

The guarantors are defined as primary obligors and guarantee the amounts as
follows:

For Tranche A of $981 thousand.

      a.    Elamex - 100%

      b.    GE Mexico - 49.9%

Both parties are liable jointly and severally up to 49.9%.

                                       42
<PAGE>

For Tranche B of $2.4 million.

      a.    Elamex - 50.1%

      b.    GE Mexico 49.9%

The guarantors' liability under Tranche B is several, but not joint.

As of December 31, 2004 the bank debt was approximately $3.4 million and
Qualcore was in default under the loan agreement.

On January 1, 2005 the bank executed a forbearance agreement with Qualcore. The
forbearance agreement provides Qualcore with a period of 120 days in which the
bank will not issue a demand for payment of any or all of the outstanding debt.
However, the bank did not waive the existing default. Should Qualcore not be
able to make the payments within the forbearance period, the bank will require
the guarantors to pay the debt.

The maximum liability exposure of Elamex is considered to be 50.1% of the total
bank debt and as of December 31, 2004 Elamex recorded a liability of $1.7
million in recognition of the probability that it will be obligated to perform
under this guarantee.

18. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) In thousands of U.S. dollars,
except per share amounts:

<TABLE>
<CAPTION>
                                                2004 QUARTERS                                2003 QUARTERS
                               --------------------------------------------    ------------------------------------------
                                 1ST          2ND        3RD         4TH         1ST         2ND       3RD         4TH
<S>                            <C>         <C>         <C>         <C>         <C>         <C>       <C>         <C>
Net sales                      $ 19,780    $ 23,402    $ 25,051    $ 29,354    $ 39,428    $41,400   $ 38,455    $ 37,967
Gross profit                      4,634       6,044       6,012       6,331       4,674      5,366      2,338       5,536
Net (loss) income                (1,345)       (409)       (959)     (2,438)     (5,436)       220     (5,739)    (23,653)
Basic and diluted net (loss)
 income per common share          (0.18)      (0.05)      (0.13)      (0.32)      (0.72)      0.03      (0.76)      (3.16)
</TABLE>

                                     ******

                                       43
<PAGE>

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

Not applicable

ITEM 9A. CONTROLS AND PROCEDURES

The Company's management, including the Chief Executive Officer and Chief
Financial Officer, evaluated the Company's disclosure controls and procedures
(as defined in Rules 13a-15 (e) and 15d-15(e) under the Securities and Exchange
Act of 1934, as amended) (the "Exchange Act") as of the filing date of this
annual report. Based on this evaluation, the Chief Executive Officer and the
Chief Financial Officer concluded that the Company's disclosure controls and
procedures are effective to ensure that information required to be disclosed by
the Company in the reports that it files or submits 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. During the
Company's fiscal quarter ended December 31, 2004, no change occurred in the
Company's internal control over financial reporting that has materially affected
or is reasonably likely to materially affect, the Company's internal control
over financial reporting. See the certifications by the Company's Chief
Executive Officer and Chief Financial Officer filed as Exhibits 31.1 and 31.2 to
this Report.

ITEM 9B. OTHER INFORMATION

None

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The names, ages, and positions of the Directors and executive officers of the
Registrant as of December 31, 2004 were as follows:

<TABLE>
<CAPTION>
      NAME                      AGE                     POSITION
------------------------------------------------------------------------------------------
<S>                             <C>        <C>
Eloy S. Vallina                 67         Chairman of the Board of Directors
Richard R. Harshman             69         President, Chief Executive Officer
Sam L. Henry                    54         Senior Vice President & Chief Financial Officer
Eloy Vallina Garza              33         Director, son of Chairman of the Board
Richard P. Spencer              61         Director
Carlos Hernandez                47         Director
Keith Cannon                    64         Director
Benito Bucay                    72         Director
Martin W. Pitts                 63         Director
Fernando Todd                   49         Director
Manuel Munoz                    52         Director
Fernando Ruiz Sahagun           61         Statutory Auditor
</TABLE>

ELOY S. VALLINA

Mr. Vallina has been Director since 1990. Mr. Vallina has been Chairman of the
Board of Accel, S.A. de C.V. and its predecessor, Grupo Chihuahua, S.A. de C.V.,
since its inception in 1979. He is also chairman of Kleentex Corp., and a
Director of Tropical Sportswear International, Inc. Mr. Vallina was Chairman of
Banco Comercial Mexicano, later Multibanco Comermex, one of Mexico's largest
commercial banks at that time, from 1971 until all Mexican private banks were
expropriated in 1982. He graduated with a B.A. in Business Administration from
the Instituto Tecnologico y de Estudios Superiores de Monterrey.

RICHARD R. HARSHMAN

Mr. Harshman joined the Company as President and Chief Executive Officer of
Franklin Connection on August 9, 2004 and on January 1, 2005 he was appointed as
President and Chief Executive Officer of Elamex. Recently, he served as Chief
Executive Officer of Favorite Brands, a company that was eventually sold to
Nabisco Brands, a division of Kraft Foods. He previously served as President and
Chief Executive Officer of Storck USA, LP for thirteen years, where he
introduced and expanded the growth of key brands. Mr. Harshman also served in
executive sales and marketing positions with Tootsie Roll Industries and F&F
Laboratories.

                                       44
<PAGE>

SAM L. HENRY

Mr. Henry joined the Company as a Chief Financial Officer on September 1, 2003.
For the four years prior to his appointment Mr. Henry performed a series of
contract CFO engagement focused on financial turnarounds, financial systems
improvements and merger integration. From 1986 to 1999, he was Chief Financial
Officer of Helen of Troy Limited, a NASDAQ listed seller of hair care and other
personal care products. Mr. Henry began his career as an auditor for Arthur
Andersen & Co. in 1973. He is a Certified Public Accountant and holds a Bachelor
of Business Administration degree in Accounting with High Honors from the
University of Texas at Arlington.

ELOY VALLINA GARZA

Mr. Vallina has been Director since 1997. Mr. Vallina is currently Vice
President of Jeronimo Services, Inc. He is also a Director of Accel, S.A. de
C.V., Almacenadora, S.A., Silver Eagle Oil, Inc., Tropical Sportswear
International, Inc. and Copamex. Mr. Vallina is a graduate of the Universidad de
Monterrey, where he received a B.A. in Business Administration.

RICHARD P. SPENCER

Mr. Spencer was the Company's President and Chief Executive from February 1,
2001 through December 31, 2004. Prior to his appointment, Mr. Spencer was
President and Chief Executive Officer of Silver Eagle Refining Inc., with
refineries located in western Wyoming and near Salt Lake City, Utah. He has
served as President and Chief Executive Officer of two different regional banks,
as the head of corporate lending in Mexico for Bank of America, as well as other
executive positions with Bank of America, Citibank, and other business entities.
He received an M.B.A. degree from Harvard University.

CARLOS HERNANDEZ

Mr. Hernandez has been Director since 2004. Mr. Hernandez is Chief Operating
Officer and Director of Accel, S.A. de C.V., a publicly traded company in the
Mexican Stock Exchange, a logistics and holding company since 2002. He also is a
Director of Almacenadora Accel, S.A. de C.V. and President of Jeronimo Services
Inc, a real estate business since 1999. Mr. Hernandez graduated from Universidad
Autonoma de Chihuahua in Business Administration and Public Accounting and
obtained his Master in Business Administration from Columbia University Graduate
School of Business in New York, N.Y. Mr. Hernandez also participated in the
Executive Education Program at Harvard University Graduate School of Business,
he is also a member of the Board of Directors of the Foreign Trade Association.

KEITH CANNON

Mr. Cannon has been Director since 2001. Mr. Cannon is a Securities Branch
Manager of Wilson-Davis &Co., with a variety of domestic and international
clients. He is a Director and member of the Audit Committee of Montgomery Realty
Group, Inc., and JLM Couture. Mr. Cannon received his M.S. degree from the
University of Utah.

BENITO BUCAY

Mr. Bucay has been Director since 2002. Mr. Bucay is Managing Director of Grupo
Industrial Bre and Consulting Partner, Analitica Consultores, Mexico. Mr. Bucay
received a B.S. in Chemical Engineering from the Universidad Nacional Autonoma
de Mexico. He has degrees in Operations Research and Computer Science from the
University of Oklahoma. Mr. Bucay was the Chief Executive Officer of Industrial
Resistol, and Senior Vice President of Grupo DESC. He is Director of Tropical
Sportswear International Inc.

MARTIN W. PITTS

Mr. Pitts has been Director since 2003. Mr. Pitts retired in January 2001 from
KPMG where he served as partner since 1975. During his career at KPMG, he served
a wide range of clients, including investor-owned utilities, real estate
companies, wholesale distributors, and apparel companies. He was a member of the
American Institute of Certified Public Accountants, the Texas Institute of
Certified Public Accountants and the El Paso Chapter of Certified Public
Accountants. He also has served as Chairman of the National Association of
Accountants and was the recipient of the District Accountant Advocate of the
Year by the U.S. Small Business Administration. He currently serves as Director
and member of the Audit Committee of Tropical Sportswear International.

FERNANDO TODD

Mr. Todd has been Director since 2004. Mr. Todd is a founder and Senior Partner
of the Mexican legal firm of Todd y Asociados, S.C., in Mexico City. Mr. Todd is
a member of the Board of Directors and Statutory Auditor of several Mexican
corporations, some of them have their securities listed in the Mexican Stock
Exchange. Mr. Todd has a law degree from the Universidad Nacional Autonoma de
Mexico. He is a member of the Mexican Bar Association, National Association of
Corporate lawyers and Mexican Mediation Institute.

MANUEL MUNOZ

Mr. Munoz has been Director since 2004. Mr. Munoz has been Director and General
Manager of Almacenadora Accel, S.A. de C.V a Logistics company since 1995. Mr.
Munoz also worked for Almacenadora Bancomer from 1976 to 1995 where he

                                       45
<PAGE>

performed different positions, including the position of General Director. Mr.
Munoz graduated from Universidad Autonoma de Chihuahua in Business
Administration.

FERNANDO RUIZ SAHAGUN

Mr. Ruiz Sahagun has been the Statutory Auditor since 2003, he was also Director
in year 2002. Mr. Ruiz Sahagun is a founder and Senior Partner of the Mexican
tax consulting firm of Chevez, Ruiz, Zamarripa in Mexico City. Mr. Ruiz is a
member of the Board of Directors of Accel, S.A. de C.V. Additionally, Mr. Ruiz
is a member of the Board of Directors of Kimberly Clark de Mexico, S.A. de C.V.,
Grupo Financiero IXE, S.A., BASF de Mexico, S.A. de C.V. and ISPAT
International, N.V. He is a member of the College of Public Accountants of
Mexico and of the International Fiscal Association. Mr. Ruiz Sahagun received
his Accounting degree from the Universidad Nacional Autonoma de Mexico.

Additional information required by this item will be contained in the Proxy
Statement that will be prepared and filed for the Elamex, S.A. de C.V. 2005
annual meeting of shareholders and is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item will be contained in the proxy statement
that will be prepared and filed for the Elamex, S.A. de C.V. 2005 annual meeting
of shareholders, under the captions "Executive Compensation" "Director
Compensation", "Compensation Committee Report on Executive Compensation",
"Comparison of Cumulative Total Returns" and "Employment Contracts and Severance
Agreements" and are incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

Information with respect to security ownership of certain beneficial owners and
management is included under "Security Ownership of Certain Beneficial Owners
and Management" in the Company's Proxy Statement for the 2005 annual meeting of
shareholders.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information with respect to certain relationships and related transactions
is included under "Certain Relationships and Related Transactions" in the
Company's Proxy Statement

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this item will be contained in the proxy statement
that will be prepared and filed for Elamex, S.A. de C.V. 2005 annual meeting of
shareholders, under the caption "Principal Accountant Fees and Services" and is
incorporated herein by reference.

                                       46
<PAGE>

PART IV

ITEM 15. EXHIBITS, AND FINANCIAL STATEMENT SCHEDULES

      (a)   1. Financial Statements

      The following financial statements are included herein at Item 8.

      Consolidated Balance Sheets as of December 31, 2004 and 2003.

      Consolidated Statements of Operations and comprehensive loss for the years
      ended December 31, 2004, 2003, and 2002.

      Consolidated Statements of Stockholders' Equity for the years ended
      December 31, 2004, 2003, and 2002.

      Consolidated Statements of Cash Flows for the years ended December 31,
      2004, 2003, and 2002.

      Notes to Consolidated Financial Statements.

      Independent Auditors' Report.

      2. Financial Statements Schedules

      The financial statement schedules required to be included pursuant to this
      Item are not included herein because they are not applicable or the
      required information is shown in the financial statements or notes thereto
      which are incorporated by reference at subsection 1 of this Item, above.

      3. Exhibits

                                       47
<PAGE>

                                   SIGNATURES

Pursuant to the requirements Section 13 or 15(d) of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

                                ELAMEX, S.A. DE C.V.

March 31, 2005                  /s/ Richard R. Harshman
-------------                   ---------------------------
Date                            Richard R. Harshman, President and
                                Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

March 31, 2005                  /s/ Eloy S. Vallina
-------------                   --------------------------------
Date                            Eloy S. Vallina, Chairman of the
                                Board of Directors

March 31, 2005                  /s/ Richard R. Harshman
-------------                   --------------------------------
Date                            Richard R. Harshman, President and
                                Chief Executive
                                (Principal Executive Officer)

March 31, 2005                  /s/ Sam L. Henry
-------------                   --------------------------------
Date                            Sam L. Henry, Senior Vice-President
                                and Chief Financial Officer
                                (Principal Financial Officer)
                                (Principal Accounting Officer)

March 31, 2005                  /s/ Eloy Vallina Garza
-------------                   --------------------------------
Date                            Eloy Vallina Garza, Director

March 31, 2005                  /s/ Richard P. Spencer
-------------                   --------------------------------
Date                            Richard P. Spencer, Director

March 31, 2005                  /s/ Martin W. Pitts
-------------                   --------------------------------
Date                            Martin W. Pitts, Director

March 31, 2005                  /s/ Keith Cannon, Director
-------------                   --------------------------------
Date                            Keith Cannon, Director

March 31, 2005                  /s/ Benito Bucay
-------------                   --------------------------------
Date                            Benito Bucay, Director

March 31, 2005                  /s/ Carlos Hernandez
-------------                   --------------------------------
Date                            Carlos Hernandez, Director

March 31, 2005                  /s/ Manuel Munoz
-------------                   --------------------------------
Date                            Manuel Munoz, Director

March 31, 2005                  /s/ Fernando Todd
-------------                   --------------------------------
Date                            Fernando Todd, Director

                                       48