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                                    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, 2003                            0-27992

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



                   Mexico                                     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 3, 2003 of $3.36) held by non-affiliates of
the registrant on that date was approximately $10,699,221.

The number of shares of Class I Common Stock of the registrant outstanding as of
March 10, 2004 was: 7,510,762.

                       DOCUMENTS INCORPORATED BY REFERENCE
The Proxy Statement for the registrant's 2004 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

                                                                                                                           PAGE #
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 AND RELATED
                  STOCKHOLDER MATTERS..................................................................................      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

PART III

        ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT...................................................     44
        ITEM 11.  EXECUTIVE COMPENSATION...............................................................................     45
        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, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K......................................     46


                  SIGNATURES...........................................................................................     47
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                                     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
operations, and metal and plastic parts for the appliance and automotive
industries. The Company was established in 1973 as a contract manufacturing
company in Juarez, Mexico.

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. 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 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. Franklin also offers third party logistic services,
utilizing part of its 239,000 square foot main warehouse also located 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.


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.


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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 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.


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 the year 2000. It is located in Celaya, Mexico, a city
approximately 200 miles northwest of Mexico City. Qualcore is registered to 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 significant 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. Elamex's competitive advantage
increased. 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 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 significant
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.


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Mexico has become an important manufacturer of candies for product destined to
the United States. After Canada, Mexico is the second largest exporter of
candies 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 U.S. In 2001, seeing
an opportunity of the lower costs in producing 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

Elamex customers range from large U.S. mass merchandisers to multinational
OEM's. In 2003 Franklin (Food Services) accounted for $75.6 million or 48% of
Elamex's total consolidated sales of $157.3 million. Franklin's customer base is
very diversified. Its customers include some of the largest U.S. mass
merchandisers, grocery retailers, drug store chains, national and regional food
service companies; large U.S. food products companies and U.S. based candy and
confection companies. In 2003, Franklin had two major customers that accounted
for 22.5% and 11.1% of its total sales.

In 2003, Elamex's Shelter Services Division accounted for $25.7 million, or
14.9% of Elamex's total sales before elimination of sales for manufacturing
services provided to Franklin. In 2003, the Shelter Services Division recorded
$15.1 million in sales to Franklin.

During 2003 Precision accounted for $71.0 million or 45% of Elamex total
consolidated sales. Precision's main customers are a manufacturer of automotive
parts and a manufacturer of home appliances, which represented a 27% and 47%,
respectively of Precision's total sales for 2003.

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


SALES AND MARKETING

Elamex'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 are large with 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.

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 sale 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 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.


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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.

Elamex believes that the primary basis of competition in its targeted markets
are time to market, engineering or technical capability, price, manufacturing
quality, 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 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 U.S. and Canada. These benefits enable Elamex to manufacture products
from raw materials and components imported into Mexico, then returned to the
U.S. 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 nut meats from a variety of suppliers, both U.S. and foreign,
for packaging at its plant in El Paso. Franklin generally enters into purchase
contracts for a majority of its nut meats needs based on its estimated forward
sales forecasts. For its candy operations, Franklin acquires significant amounts
of sugar and corn syrup. Franklin acquires sugar from both Mexican and U.S.
suppliers, under both spot purchases and annual supply agreements.

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 794 employees at December 31, 2003, of which 679 were
employed in Mexico in Elamex's Shelter Services Division (includes employees at
the Franklin candy manufacturing plant), and 110 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.

Each Elamex business unit is organized with its own President, sales and
marketing, production personnel and accounting departments. The operating
businesses report to Elamex's President and Chief Executive Officer who reports
to the Chairman of the Board of Directors. The Chief Executive Officer of Elamex
is also the Chief Executive Officer of Franklin.


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


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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 U.S., 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 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. 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 U.S. 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. Elamex is committed to maintaining high standards of
environmental protection controls.


CROSS BORDER TRANSACTIONS AND SECURITY

Except for Precision and the nut packaging business of Franklin, substantially
all of Elamex's other businesses 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 trade associations. 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 elsewhere 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.


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YEAR ENDED DECEMBER 31,      HIGH (1)     LOW (1)   AVERAGE (2)  PERIOD END (1)
1999(*)                    Ps$  10.60   Ps$  9.24    Ps$   9.56     Ps$    9.52
2000(*)                         10.08        9.18          9.46            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
The exchange rate as of March 25, 2004 was $11.03 (*)

SOURCE: Ciemex-Wefa Group and
(1) Monthly rates at market close.
(2) Average of monthly rates. (*) Official exchange rate by the Bank of Mexico.


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
         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 (3)

                         -----------
         Total            1,005,860
                         ===========
</TABLE>

(1) Elamex owned facility currently being leased to a third party, which does
    not utilize Elamex manufacturing services.
(2) Used by Franklin Connections. Leased from Franklin Inmobiliarios, S.A. de
    C.V., a related party.
(3) Leased or owned 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 there under, 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 AND RELATED STOCKHOLDER MATTERS

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.

                                                      CLOSING SALES PRICE
             PERIOD                                     HIGH         LOW

             January 1, 2002 - March 31, 2002          5  3/10      4  3/20
             April 1, 2002 - June 30, 2002             5   1/2      4   7/8
             July 1, 2002 - September 30, 2002         5  6/16      4   3/5
             October 1, 2002 - December 31, 2002       5   2/5      4   1/2

             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


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 10, 2004, there were approximately 723 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 an U.S. holder will be treated as
ordinary income to such holder. United States corporations that hold Common
Stock will not be entitled to the dividends received deduction generally
available for dividends received from United States corporations (and certain
non-United States 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 United States holders, financial service income for U.S. foreign
tax credits purposes.

Dividends paid in Mexican Pesos will be included in gross income of a United
States 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 United States
holder, such holder generally should not be required to recognize foreign
currency gain or loss in respect of the dividend income. United States 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 United States 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 United States holders'
adjusted basis in the old


                                       9
<PAGE>

Common Stock between the old Common Stock and the Common Stock so received.

A holder of Common Stock that is, with respect to the United States, not a
United States holder (a non-United States 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 United States.


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 United States 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 35% of 1.5385 times the amount in 2003, 2002 and 2001, 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 United States holders, or pays a
dividend in cash and such payment is to be used by the United States holders for
a capital subscription or for reinvestment in Elamex's stock, and either such
transaction by the United States holders occurs within 30 days following the
date of the dividend payment, there will be no Mexican tax consequences for such
United States 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, 1999, 2000, 2001, 2002, and
2003. Each of Elamex's fiscal quarters is comprised of 13 weeks and ends on a
Friday, except for the first quarter, which starts on January 1, and the fourth
quarter which ends on December 31. 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, 2003, have been derived
from our consolidated financial statements audited by Deloitte & Touche.


                                       10
<PAGE>

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

<TABLE>
<CAPTION>

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


                                                                  (b)           (c)            (d)            (e)            (f)
                                                                 2003          2002           2001           2000           1999
<S>                                                           <C>           <C>            <C>            <C>            <C>
       INCOME STATEMENT DATA:
       Net sales ............................................ $ 157,250     $ 134,269      $ 131,984      $ 174,664      $ 160,051
       Gross profit .........................................    17,914        14,127          2,106          2,580         14,789
       Operating (loss) income ..............................   (29,111)       (1,293)       (21,448)       (12,402)         1,449
       Other (expense) income ...............................    (3,078)       (4,432)           704         23,127          2,272
       Income tax provision (benefit) .......................     2,419          (561)        (3,362)        (3,203)           245
       Net (loss) income .................................... $ (34,608)    $  (6,017)     $ (11,030)     $  17,381      $   4,336
       Basic and diluted net (loss) income  per share (a).... $   (4.61)    $   (0.84)     $   (1.61)     $    2.53      $    0.63

       BALANCE SHEET DATA:
       Current assets                                         $  20,876     $  45,306      $  45,251      $  76,775      $  63,884
       Property, plant and equipment, net                        39,956        69,979         38,582         55,108         52,875
       Total assets                                              67,703       134,501        101,501        142,368        127,224
       Notes payable and current portion of long-term debt...     5,282         8,939          2,569          5,424          4,364
       Current portion of capital lease obligations..........     1,051           971
       Long-term debt excluding current portion                   1,827        20,133         16,286         24,307         26,455
       Capital lease obligations, excluding current portion..    15,313        16,296
       Total stockholders' equity ........................... $  31,028     $  65,665      $  69,400      $  80,772      $  63,428

       OTHER DATA:
       Net cash provided by (used in) operating activities... $   2,237     $  (1,611)     $ (14,541)     $  (8,217)     $  (2,088)
       Net cash (used in) provided by investing activities...    (5,879)      (10,540)         1,327         23,931        (19,849)
       Net cash (used in) provided by financing activities... $  (2,978)    $   4,220      $   5,707      $   1,479      $  23,404
</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 was approximately 7.5 million, 7.2 million, 6.9 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 operation in
     May 2000.
(f)  Financial information for 1999 was affected by the acquisition of Precision
     in June 1999.


                                       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 accounts for
Precision under the equity method of accounting.

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, 2003, Elamex and subsidiaries reported a net
loss of $34.6 million. Of that amount, $26.9 million is attributable to
Precision, $3.0 million is attributable to Qualcore S. de R.L. de C.V.
("Qualcore"), $1.9 million is attributable to our Shelter Services companies
("Shelter"), and $2.6 million is attributable to Franklin Connections LP
("Franklin").

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.

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 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.


                                       12
<PAGE>

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. 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.
Because the investment in Precision is now recorded under the equity method of
accounting and because Elamex does not guarantee any of the debt of Precision,
Elamex does not expect to record any further losses in connection with
Precision.

QUALCORE
Despite year-ago expectations of a turnaround, Elamex continued to experience
disappointing results in 2003 from its joint venture investment in Qualcore.
This Mexican manufacturing operation struggles in its efforts to gain volume in
an environment in which the manufacture of competing goods has been shifting to
Asia for cost reasons. After a series of disappointing losses, Elamex and its
venture partner have reached a firm decision to sell Qualcore, and are actively
pursuing its sale.

SHELTER
In July 2003 Elamex sold most of its Mexican shelter service operations,
realizing a gain of $1.7 million. Shelter services are now limited to a Franklin
affiliate. In addition to providing shelter services, this group owns and leases
buildings to third parties in Mexico.

FRANKLIN
Upon the culmination of actions initiated in 2003, the Elamex business
operations will primarily be limited in the near-term future to those of
Franklin, its general-line candy manufacturer and retail / food service nut
packing company. Franklin sales and gross profits have grown impressively since
Franklin entered the business of manufacturing and distributing candy in 2001.
Through the end of 2003 Franklin has yet to report a profit on combined nut and
candy operations, but the trends reflect good progress toward achieving planned
revenue levels and market share objectives. Gross profit margins have improved
while operating costs have decreased as a percentage of sales.

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 gained substantial
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.


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     INTER-
                                        SERVICES (4)    STAMPING (1)       (2)        AND OTHER    SEGMENT(3)    TOTAL
------------------------------------------------------------------------------------------------------------------------
<S>                                      <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 (expense) income                      1,735          (1,073)       (2,318)        (1,422)                  (3,078)
------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2002
 Net Sales                               $  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)        (1,277)                  (4,432)
------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Segment deconsolidated effective December 19, 2003
(2) Acquired at the beginning of the third quarter of 2002
(3) Includes sale between segments in the normal course of business
(4) Certain shelter operations were sold in July 2003


                                       13
<PAGE>

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.

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.


                                       14
<PAGE>

OTHER (EXPENSE) INCOME

Other expense for the year ended December 31, 2003 decreased to $3.1 million
from $4.4 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 $1.1 million 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 expenses for Corporate increased to $1.4 million for the year ended
December 31, 2003 from $1.3 million recorded in 2002. The increase was primarily
due to an increase in losses of unconsolidated joint venture of $704 thousand.
In 2002 an expense of approximately $563 thousand was recorded in connection
with the permanent impairment of securities.


2002 COMPARED TO 2001

Management's discussion and analysis of operations for the years ended December
31, 2002 and 2001 is based on the results of operations by segment for the years
ended December 31, 2002 and 2001, after consideration of the proforma effects on
prior periods of the deconsolidation of our joint venture effective in the third
quarter of 2001. The following tables present those proforma effects by segment
(in thousands):

<TABLE>
<CAPTION>

                                                         Food      Unallocated                          Qualcore
                                 Shelter     Metal     Services    Corportate     Inter-   Proforma   Adjustments
                                Services    Stamping     (1)       and other     Segment    Total         (4)         Total
                              -----------------------------------------------------------------------------------------------
<S>                             <C>         <C>         <C>        <C>          <C>        <C>         <C>          <C>
 YEAR ENDED DECEMBER 31, 2002
 Net sales (2)                  $ 31,677    $ 75,279    $ 33,180                $ (5,867)  $ 134,269                $ 134,269
 Gross profit                      2,513       3,714       7,900                              14,127                   14,127
 Operating expenses                2,014       3,139       8,164    $ 2,103                   15,420                   15,420
 Other (expense) income             (239)     (1,244)     (1,672)      (152)                  (3,307)   $ (1,125)      (4,432)
-----------------------------------------------------------------------------------------------------------------------------
 YEAR ENDED DECEMBER 31, 2001
 Net sales                      $ 46,717    $ 78,770                            $ (2,142)  $ 123,345    $  8,639    $ 131,984
 Gross profit (loss)               2,738       3,859                                           6,597      (4,491)       2,106
 Operating expenses (3)            5,531       3,869                $ 6,670                   16,070       7,484       23,554
 Other (expense) income           (1,035)     (1,716)                 5,515                    2,764      (2,060)         704
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>

     (1)  Newly acquired segment in 2002
     (2)  Includes sales between segments in the normal course of business
     (3)  Includes restructuring costs reported in year 2001
     (4)  Proforma effects of deconsolidation of Qualcore through June 30, 2001

NET SALES

Net sales increased 9% to $134.3 million for the year ended December 31, 2002
from $123.3 million for prior year.

Sales for Shelter Services decreased 32% from $46.7 million in the prior year to
$31.7 million for the current year. The decrease was primarily due to
termination of contracts with customers that moved their operations to the far
east and quality customers that became independent by providing manufacturing
services internally.

Sales for Metal Stamping decreased 4% to $75.3 million for the year ended
December 31, 2002 from $78.8 million for prior year. The decrease was primarily
due to decreases in tooling sales of $700 thousand and a decrease in customers'
orders due to the economic conditions in the United States of the automotive and
appliance industries.

The Food Services segment contributed sales of $33.2 million in 2002 for the
period subsequent to its acquisition.


                                       15
<PAGE>

GROSS PROFIT

Gross profit excluding Qualcore increased by 114% or $7.5 million to $14.1
million in 2002 from $6.6 million in 2001.

Gross profit for Shelter Services was $2.5 million in 2002 and $2.7 million in
2001, a decrease of $225 thousand or 8%, this decrease was primarily due to
termination of contracts with certain customers that moved their operations to
the far east and Qualcore customers that became independent by providing
manufacturing services internally.

Gross profit for Metal Stamping decreased $145 thousand to $3.7 million in 2002
from $3.9 million in 2001. The decrease of 4% was primarily due to an increase
in the reserve for obsolete material of approximately $485 thousand, partially
offset by a decrease in labor and other expenses.

Gross profit contributed by the Food Services segment was $7.9 million in 2002
for the period subsequent to its acquisition.

OPERATING EXPENSES

Operating expenses excluding Qualcore decreased $650 thousand to $15.4 million
in 2002 from $16.1 million in 2001, a decrease of 4%.

Operating expenses for Shelter Services decreased $3.5 million to $2 million in
2002 from $5.5 million in 2001, a decrease of 64%. The decrease was primarily
due to the restructuring charges, mainly severance and related costs of $2.6
million recorded during 2001 and a decrease in selling and administrative
expenses of $964 thousand.

Operating expenses for Metal Stamping decreased $730 thousand to $3.1 million in
2002 from $3.9 million in 2001, this decrease of 19% was primarily due to
restructuring charges of $286 thousand recorded during 2001 and decrease in
amortization of goodwill of $482 thousand.

Operating expenses incurred by Food Services segment were $8.2 million in 2002
for the period subsequent to its acquisition.

Operating expenses for Corporate decreased $4.6 million to $2.1 million in 2002
from $6.7 million in 2001. This decrease of 68% was primarily due to $3.2
million of restructuring charges recorded during 2001 and reduction of
administrative expenses of $1.1 million resulting from the reduction of
approximately 30 full time employees and associated costs.

OTHER INCOME (EXPENSE)

Other income excluding Qualcore decreased $6.1 million to an expense of $3.3
million in 2002 from income of $2.8 million recorded in 2001.

Other income for Corporate decreased $5.7 million from an income of $5.5 million
in 2001 to an expense of $152 thousand in 2002. The decrease was primarily due
to the permanent impairment in investment securities of $563 thousand in 2002,
recognition of gain of sale of the EMS operation and earn-out from the sale of
Optimag of $2.6 million during 2001, decrease of Inter-company interest income
of $1.7 million, translation loss expense of $240 thousand recorded in 2002 and
other income of $468 recorded during 2001.

Other expense for Shelter Services decreased from $1 million in 2001 to $239
thousand in 2002. The decrease was primarily due to decrease in inter-company
interest expense of $1 million, partially offset by other expenses of $150
thousand and translation loss of $88 thousand recorded in 2002.

Other expense for Metal Stamping decreased from $1.7 million in 2001 to $1.2
million in 2002. This decrease was primarily due to inter-company interest
charges of $858 thousand, not charged in 2002, partially offset by an increase
in other expenses of $386 thousand.

Other expenses incurred by Food Services segment were $1.7 million in 2002 for
the period subsequent to its acquisition.


LIQUIDITY AND CAPITAL RESOURCES

Elamex's working capital (defined as current assets, minus current liabilities)
decreased to $1.3 million as of December 31, 2003, from $12.9 million as of
December 31, 2002, a decrease of $11.6 million. As of December 31, 2002,
Precision had an outstanding balance under its revolving line of bank credit of
$9.2 million. That liability was classified in the long term liability


                                       16
<PAGE>

section of the consolidated balance sheet because the loan had a maturity date
that was more than 12 months from the balance sheet date. If that loan had been
classified as a current liability as of December 31, 2002, the Company's
consolidated working capital would have been $9.2 million less than the $12.1
million that was reported. Therefore, the substantial majority of the working
capital reduction in 2003 is attributable to the changes at Precision. As a
consequence of Precision's filing for protection under bankruptcy laws on
December 19, 2003, the Company no longer controls Precision's operations.
Accordingly, as of December 31, 2003 the Company's investment in Precision is
reported under the equity method of accounting rather than being consolidated
into the Company's financial statements.

The available cash for the year ended December 31, 2003 and 2002 was $2.3
million and $8.9 million, respectively.

For the year ended December 31, 2003, Elamex operating activities provided net
cash of $2.2 million. Changes in current assets and current liabilities balances
provided cash of $6.5 million, and a net loss for the year, adjusted for
non-cash items, reduced the net increase by $4.3 million.

Net cash used in investing activities for the year ended December 31, 2003, was
$5.9 million. Of this amount, $6.4 million was used to buy new equipment and
$1.2 million was invested in the joint venture with GE de Mexico. 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 for the year ended December 31, 2003, was
$3.0 million, which is primarily due to debt repayments of $4.8 million, offset
by additional debt incurred of $1.8 million.

Management believes that existing working capital, cash flows from operations
and available credit facilities will be sufficient to fund the Company's
operations and investment activities. The Company does not intend to fund any of
the cash requirements of Precision.

At December 31, 2003, 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:

<TABLE>
<CAPTION>
                                                                             PAYMENTS DUE BY PERIOD
                                                                         (In Thousands of U.S. Dollars)
                                                                      Remaining in                             2009 AND
CONTRACTUAL OBLIGATIONS                                  TOTAL            2004      2005-2006   2007-2008     THEREAFTER
<S>                                                     <C>             <C>          <C>       <C>          <C>
Long Term Debt Obligations                              $  7,109        $  5,282     $ 1,827

Gross Capital Lease Obligation                            30,409           3,198       7,775     $  3,602     $    15,834

Operating Leases                                          14,206             977       2,106        2,134           8,989

UNCONDITIONAL PURCHASE OBLIGATIONS                        23,256          23,256
                                                    ------------ --------------- ----------- ------------ ----------------
TOTAL CONTRACTUAL CASH OBLIGATIONS                      $ 74,980       $  32,713    $ 11,708      $ 5,736     $    24,823
                                                    ============ =============== =========== ============ ================
</TABLE>

Estimated taxes and interest to be paid in 2004 are $1.7 million and $2.1
million, respectively.


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


                                       17
<PAGE>

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.

On October 26, 1996, the Mexican government signed a pact with labor and
business representatives called the Alliance for Economic Growth (the Alliance).
The Alliance defines a macroeconomic policy designed to support Mexico's
economic recovery and promote future growth. Under the Alliance the Mexican
government has attempted to boost the economy by providing tax incentives for
new business investments, while utilizing wage and price controls to contain
inflation. As part of the Alliance the Mexican government has committed to
maintaining a free flotation system for the Peso in the international currency
markets. The Alliance also calls for development of social and rural programs.


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 more critical of these
policies are as follows:

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, as required by EITF 01-09 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. Under SFAS No. 109, 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. In conformity with SFAS No. 109, 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. 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 Company estimates a valuation allowance based on the historical
results of operations and expected results in each individual entity.

Revenue Recognition - For metal stamping and food products, revenues are
recognized at the time the order is shipped. For contract-manufacturing revenues
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.

Allowances for bad debts - 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 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.


                                       18
<PAGE>

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, 2003, 2002, and 2001.


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, 2003 was approximately $923
thousand.

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.

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.

The amounts of Elamex's Mexican net asset tax and tax loss carry-forwards at
December 31, 2003 and 2002 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 16.2% in 2001, 9.8% in 2002 and (7.5)% in 2003.

The primary difference between the overall effective tax rate and the statutory
rates of 34% 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.

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


                                       19
<PAGE>

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.


ACQUISITIONS / DIVESTITURES

The sale of certain assets, effective at the close of business on July 4, 2003,
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, located in El Paso,
Texas and a candy manufacturing and packaging facility located in Juarez,
Mexico. The purchase price was cash payment of US$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, as if Franklin had been
acquired at the beginning of fiscal 2001, are estimated in the following table:

                        (IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)
                            ----------------------  ----------------------
                               December 31, 2002       December 31, 2001
                            ----------------------  ----------------------
      Net sales                   $ 151,179               $ 170,461
      Gross profit                   18,077                   8,693
      Net loss                      (11,090)                (23,120)
      Net loss per share              (1.48)                  (3.08)

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
if the acquisition had been consummated as of the beginning of the periods
presented, nor are they necessarily indicative of future operating results.


RECENT ACCOUNTING PRONOUNCEMENTS

In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation of
Variable Interest Entities" ("FIN 46"). In December 2003, FIN 46 was replaced by
FASB Interpretation No. 46 (revised December 2003), "Consolidation of Variable
Interest Entities" ("FIN 46(R)"). FIN 46(R) clarifies the application of
Accounting Research Bulletin No. 51, "Consolidated Financial Statements", to
certain entities in which equity investors do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk for the
entity to finance its activities without additional subordinated financial
support from other parties. FIN 46(R) requires an enterprise to consolidate a
variable interest entity if that enterprise will absorb a majority of the
entity's expected losses, is entitled to receive a majority of the entity's
expected residual returns or both. For investments in variable interest entities
formed after December 31, 2003, the Company will be required to apply FIN 46(R)
as of January 1, 2004. As of December 31, 2003, the Company does not have any
variable interests held in special purpose entities. The Company will be
required to apply FIN 46(R) to any other investments in variable interest
entities no later than the end of the first reporting period that ends after
March 15, 2004. The Company does not expect the adoption of FIN 46(R) to have a
material impact on its financial position or results of operations.


                                       20
<PAGE>

In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." SFAS No. 149 improves financial
reporting by requiring that contracts with comparable characteristics be
accounted for similarly. In particular, SFAS No. 149 (1) clarifies under what
circumstances a contract with an initial net investment meets the characteristic
of a derivative discussed in paragraph 6(b) of SFAS No. 133, (2) clarifies when
a derivative contains a financing component, (3) amends the definition of an
underlying to conform it to language used in FIN No. 45, and (4) amends certain
other existing pronouncements. Those changes will result in more consistent
reporting of contracts as either derivatives or hybrid instruments. In general,
SFAS No. 149 is effective for contracts entered into or modified after June 30,
2003 and for hedging relationships designated after June 30, 2003. The adoption
of SFAS No. 149 has not had a material impact on the Company's financial
position or results of operations.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. In
general this statement is effective for financial instruments entered into or
modified after May 31, 2003, and otherwise is effective for interim periods
beginning after June 15, 2003. The adoption of this statement did not have a
material impact on the Company's financial position or results of operations.


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, 2003.

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 $7.1 million at
December 31, 2003, inclusive of amounts borrowed under short-term and long-term
credit facilities. A 1.0 % increase in interest rates could result in a $70
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>

                                    PART III

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

INDEPENDENT AUDITORS' REPORT



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 as of December 31, 2003 and 2002, 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, 2003. 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 auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, 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, 2003 and 2002, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 2003 in conformity with accounting principles generally
accepted in the United States of America.

As discussed in Note 2 to the 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.


Deloitte & Touche


March 25, 2004
Ciudad Juarez, Chihuahua, Mexico


                                       22
<PAGE>
<TABLE>
<CAPTION>

ELAMEX, S.A. DE C.V. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2003 AND 2002 (IN THOUSANDS OF U.S. DOLLARS)

                                                                           2003              2002
                                                                        ---------         ---------
<S>                                                                     <C>               <C>
ASSETS
Current assets:
 Cash and cash equivalents                                              $   2,299         $   8,919
 Receivables:
  Trade accounts receivable, net                                            7,400            17,120
  Other receivables, net                                                      854             1,055
                                                                        ---------         ---------

                                                                            8,254            18,175

 Inventories, net                                                           7,921            14,018
 Income taxes receivable from Accel                                           879               950
 Other taxes receivable                                                       499             1,545
 Prepaid expenses                                                           1,024             1,420
 Deferred income taxes                                                          -               279
                                                                        ---------         ---------
  Total current assets                                                     20,876            45,306

Property, plant and equipment, net                                         39,956            69,979
Investment and loans to unconsolidated joint venture                          864             3,269
Investment in unconsolidated subsidiary in bankruptcy                           -
Goodwill, net                                                               3,707            11,827
Deferred income taxes                                                         885             1,932
Other assets, net                                                           1,415             2,188
                                                                        ---------         ---------
                                                                        $  67,703         $ 134,501
                                                                        =========         =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Notes payable and current portion of long-term debt                    $   5,282         $   8,939
 Current portion of capital lease obligations                               1,051               971
 Accounts payable                                                           6,551            16,442
 Accrued expenses                                                           6,543             5,977
 Taxes payable                                                                108                78
                                                                        ---------         ---------
  Total current liabilities                                                19,535            32,407

Long-term debt, excluding current portion                                   1,827            20,133
Capital lease obligations, excluding current obligations                   15,313            16,296
                                                                        ---------         ---------
  Total liabilities                                                        36,675            68,836
                                                                        ---------         ---------

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 7,510,762 and 7,789,261(including shares in escrow)
 outstanding for 2003 and 2002, respectively                               36,963            36,963
 (Deficit) retained earnings                                               (3,388)           31,220
 Treasury stock, 542,101 and 533,900 shares at cost for 2003 and
 2002, respectively                                                        (2,547)           (2,518)
                                                                        ---------         ---------
  Total stockholders' equity                                               31,028            65,665
                                                                        ---------         ---------
                                                                        $  67,703         $ 134,501
                                                                        =========         =========

See accompanying notes to the consolidated financial statements
</TABLE>

                                                 23
<PAGE>
<TABLE>
<CAPTION>

ELAMEX, S.A. DE C.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE DATA)


                                                                      2003               2002               2001
                                                               ------------------ ------------------ ------------------
<S>                                                             <C>                <C>                <C>
Net sales                                                       $        157,250   $        134,269   $        131,984
Cost of sales                                                            139,336            120,142            129,878
                                                               ------------------ ------------------ ------------------
  Gross profit                                                            17,914             14,127              2,106
                                                               ------------------ ------------------ ------------------

Operating expenses:
 General and administrative                                                9,198              7,092              9,373
 Selling                                                                   7,009              4,179              1,265
 Distribution                                                              9,463              4,149
 Impairment of long lived assets                                          13,235
 Goodwill impairment                                                       8,120
 Restructuring charges                                                                                          12,916
                                                               ------------------ ------------------ ------------------
  Total operating expenses                                                47,025             15,420             23,554
                                                               ------------------ ------------------ ------------------
  Operating loss                                                         (29,111)            (1,293)           (21,448)
                                                               ------------------ ------------------ ------------------

Other (expense) income:
 Interest income                                                              14                506              1,280
 Interest expense                                                         (3,517)            (2,280)            (2,098)
 Equity in losses of unconsolidated affiliates                            (2,107)            (1,125)            (1,464)
 Gain on sale of certain shelter operations                                1,680
 Gain on sale of subsidiaries                                                                                    2,612
 Other, net                                                                  852             (1,533)               374
                                                               ------------------ ------------------ ------------------
  Total other (expense) income                                            (3,078)            (4,432)               704
                                                               ------------------ ------------------ ------------------

  Loss before income taxes, minority interest and cumulative
  effect of change in accounting principle                               (32,189)            (5,725)           (20,744)

 Income tax provision (benefit)                                            2,419               (561)            (3,362)
                                                               ------------------ ------------------ ------------------

 Loss before minority interest and cumulative effect
 of change in accounting principle                                       (34,608)            (5,164)           (17,382)

 Minority interest                                                                                               6,352
                                                               ------------------ ------------------ ------------------
 Loss before cumulative effect of change in accounting
 principle                                                               (34,608)            (5,164)           (11,030)

 Cumulative effect of change in accounting principle, net of
 tax                                                                                           (853)
                                                               ------------------ ------------------ ------------------
  Net loss                                                               (34,608)            (6,017)           (11,030)

 Other comprehensive income (loss), net of income tax benefit                                   379               (342)
                                                               ------------------ ------------------ ------------------
 Comprehensive loss                                             $        (34,608)  $         (5,638)  $        (11,372)
                                                               ================== ================== ==================

 Net loss per share, basic and diluted before
 cumulative effect of change in accounting principle            $          (4.61)  $          (0.72)  $          (1.61)
 Cumulative effect of change in accounting principle, net of
 tax                                                                                          (0.12)
                                                               ------------------ ------------------ ------------------
 Net loss per share, basic and diluted                          $          (4.61)  $          (0.84)  $          (1.61)
                                                               ================== ================== ==================
 Shares used to compute net loss per share, basic and diluted          7,505,257          7,188,431          6,866,100
                                                               ================== ================== ==================
</TABLE>

See accompanying notes to the consolidated financial statements


                                                 24
<PAGE>
<TABLE>
<CAPTION>

ELAMEX, S.A. DE C.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(IN THOUSANDS OF U.S. DOLLARS)


                                                  COMMON STOCK                                 ACCUMULATED
                                           --------------------------- (DEFICIT)                  OTHER           TOTAL
                                                SHARES       AMOUNT    RETAINED    TREASURY   COMPREHENSIVE   STOCKHOLDERS'
                                             OUTSTANDING               EARNINGS      STOCK         LOSS          EQUITY
                                           --------------------------------------------------------------------------------
<S>                                            <C>         <C>         <C>         <C>          <C>             <C>
 BALANCE, JANUARY 1, 2001                      6,866,100   $  35,060   $  48,267   $ (2,518)    $     (37)      $   80,772

 Net loss                                                                (11,030)                                  (11,030)

 Unrealized loss on investment securities                                                            (342)            (342)
                                           --------------------------------------------------------------------------------

 BALANCE, DECEMBER 31, 2001                    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)

 Permanent impairment on investment
   securities                                                                                         379              379
                                           --------------------------------------------------------------------------------

 BALANCE, DECEMBER 31, 2002                    7,510,762      36,963      31,220     (2,518)            -           65,665

 Treasury stock                                                                         (29)                           (29)

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

 BALANCE, DECEMBER 31, 2003                    7,510,762   $  36,963   $  (3,388)  $ (2,547)    $       -       $   31,028
                                           ================================================================================
</TABLE>

 See accompanying notes to the consolidated financial statements


                                                 25
<PAGE>
<TABLE>
<CAPTION>

ELAMEX, S.A. DE C.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(IN THOUSANDS OF U.S. DOLLARS)


                                                                      2003               2002               2001
                                                               ------------------ ------------------ ------------------
<S>                                                             <C>                <C>                <C>
Cash flows from operating activities:
   Net loss                                                     $        (34,608)  $         (6,017)  $        (11,030)
   Adjustments to reconcile net loss to net cash provided by
     (used in) operating activities:
 Depreciation and amortization                                             6,085              4,750              4,409
 Gain on sale of certain shelter operations                               (1,680)
 Gain on sale of subsidiaries                                                                                   (2,612)
 Cumulative effect of change in accounting principle -
   goodwill impairment                                                                          853
 Provision for doubtful trade accounts receivable                          1,294                141              1,364
 Goodwill impairment loss                                                  8,120
 Provision for excess and obsolete inventory                                                  1,176
 Equity in loss of unconsolidated affiliates                               2,107              1,125              1,464
 Permanent impairment on investment securities                                                  563
 Deferred income tax expense (benefit)                                     1,326               (548)            (4,062)
 Minority interest in losses of joint venture                                                                   (6,352)
 Losses on disposal-impairment of property, plant and
   equipment                                                              13,235                613              6,106
 Change in operating assets and liabilities, net of effects
   from deconsolidation of Precision in 2003, acquisition
   of Franklin in 2002 and deconsolidation of Joint Venture
   in 2001:
 Trade accounts receivable                                                 1,719              2,642              2,204
 Other receivables                                                          (901)             1,777                885
 Inventories                                                               1,013             (4,167)             3,493
 Refundable income taxes                                                   1,117                870                (64)
 Prepaid expenses                                                            396               (304)               742
 Other assets                                                                (71)            (4,686)              (126)
 Accounts payable                                                          1,671                839             (7,320)
 Accrued expenses                                                          1,384             (1,192)            (2,824)
 Taxes payable                                                                30                 11               (770)
 Other liabilities                                                             -                (57)               (48)
                                                               ------------------ ------------------ ------------------
         Net cash provided by (used in) operating activities               2,237             (1,611)           (14,541)
                                                               ------------------ ------------------ ------------------

Cash flows from investing activities:
 Proceeds from sale of investment security                                                                       1,945
 Purchases of property, plant and equipment                               (6,433)            (6,237)            (4,424)
 Investment in joint venture                                              (1,175)            (1,550)            (1,300)
 Cash effects of deconsolidation of affiliates                               (71)                               (1,506)
 Acquisition of Franklin, net of cash acquired                                               (2,753)
 Proceeds from sale of subsidiaries                                        1,800                                 2,612
 Issuance of related party note receivable                                                                      (3,000)
 Repayment of related party note receivable                                                                      7,000
                                                               ------------------ ------------------ ------------------
         Net cash (used in) provided by investing activities              (5,879)           (10,540)             1,327
                                                               ------------------ ------------------ ------------------

Cash flows from financing activities:
 Proceeds from notes payable and long term-debt                            1,839              7,795             11,633
 Payments of notes payable and long term-debt                             (3,912)            (3,124)            (5,926)
 Principal repayments of capital lease obligations                          (905)              (451)
                                                               ------------------ ------------------ ------------------
         Net cash (used in) provided by financing activities              (2,978)             4,220              5,707
                                                               ------------------ ------------------ ------------------

Net decrease in cash and cash equivalents                                 (6,620)            (7,931)            (7,507)

Cash and cash equivalents, beginning of year                               8,919             16,850             24,357
                                                               ------------------ ------------------ ------------------
Cash and cash equivalents, end of year                          $          2,299   $          8,919   $         16,850
                                                               ================== ================== ==================
</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, 2003, 2002 AND 2001
(IN THOUSANDS OF U.S. DOLLARS)

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

<TABLE>
<CAPTION>
                                                                      2003               2002               2001
                                                               ------------------ ------------------ ------------------
<S>                                                             <C>                <C>                <C>

Interest paid, net of amounts capitalized of $136, $106 and
$92 for 2003, 2002 and 2001, respectively                       $          2,709   $          3,826   $          1,124
                                                               ================== ================== ==================
Income taxes paid                                               $            823   $            393   $            632
                                                               ================== ================== ==================
</TABLE>

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCIAL ACTIVITIES:

The Company discontinued consolidation of its joint venture (Qualcore) as of
June 30, 2001. In conjunction with the deconsolidation, assets and liabilities
removed from the consolidated balance sheet were as follows:

<TABLE>
<CAPTION>
<S>                                                                                                   <C>
         Assets removed net of cash                                                                   $         20,298
         Liabilities removed                                                                                    21,804
                                                                                                     ------------------
         Net cash effect of deconsolidation                                                           $          1,506
                                                                                                     ==================

         Debt incurred to refinance existing debt                                                     $          2,841
                                                                                                     ------------------
         Debt capitalized as equity in the joint
         venture                                                                                      $          9,023
                                                                                                     ==================
</TABLE>

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

<TABLE>
<CAPTION>
<S>                                                                                <C>
         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>

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 used to repay employee loan

                       Treasury stock                       $            (29)
                                                           ==================
                       Other receivables                    $             29
                                                           ==================


                                       27
<PAGE>

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31,
2003, 2002 AND 2001 (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, plastic and
stamped metal components industry. The Company's manufacturing machinery and
equipment are located in facilities in Ciudad Juarez, in Mexico, and in
Louisville, Kentucky and El Paso, Texas in the United States.

On December 19, 2003 the Metal Stamping segment 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 is thereafter recognized in
accordance with the equity method of accounting.

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 57.6% of the Company's issued and outstanding common shares at
December 31, 2003.

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
equity method. This was due to the voluntary petition for reorganization under
Chapter 11 of the U.S. Bankruptcy code.

Financial information for Precision as of and for the year ended December 31,
2003 is as follows:

                                               (In Thousands of
                                                 U.S. Dollars)
                                            ----------------------
              Current assets                          $    13,188
              Non current assets                           17,860
              Current liabilities                          32,547
              Net sales                                    72,019
              Gross margin                                (1,861)
              Net loss                                   (16,709)

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, 2003 , 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, 2003 was $0.

Effective July 1, 2001, the operating results of Qualcore S. de R. L. de C.V.
("Qualcore"), a joint venture with General Electric de Mexico ("GE de Mexico"),
which was previously consolidated, are being reported on the equity method. This
was the result of the change in management control of the joint venture. As of
the beginning of the third quarter 2001 a new four-member board of directors in
which the two partners have equal voting rights directs the operations of
Qualcore. A general manager appointed by the board of directors, reports
directly to such board of directors.

Financial information for Qualcore as of and for the year ended December 31,
2003 is as follows:

                                          (In Thousands of U.S. Dollars)
                                         ----------------------------------
           Current assets                          $       3,473
           Non current assets                              9,529
           Current liabilities                             9,588
           Long-term liabilities                           3,991
           Net sales                                      18,798
           Gross margin                                   (2,067)
           Net loss                                       (3,657)

During 2003 the Company loaned Qualcore $1,025 in the form of a note receivable,
to meet working capital needs. At December 31, 2003 and 2002, the Company had
notes receivable from Qualcore of $2,325 and $1,750, respectively

The Company's share of undistributed equity net of amount receivable from
Qualcore at December 31, 2003 was $864.

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 following table details the pro forma transitional disclosures:

<TABLE>
<CAPTION>
                                                                    ($000s except for earnings-per-share amounts)
                                                                     2003               2002               2001
                                                                ----------------   ----------------   ----------------
<S>                                                               <C>                <C>                <C>
      Reported net loss                                          $      (34,608)    $       (6,017)    $     (11,030))

      Add back: Goodwill amortization                                                                            492
      Add back: Cumulative effect of change in accounting
      principle, net of tax                                                                    853
                                                                ----------------   ----------------   ----------------
      Adjusted net loss                                          $      (34,608)    $       (5,164)    $      (10,538)
                                                                ----------------   ----------------   ----------------
      Basic and diluted earnings per share:
           Reported net loss                                     $        (4.61)    $        (0.84)    $        (1.61)
           Goodwill amortization                                                                                 0.07
           Cumulative effect of change in accounting principle                                0.12
                                                                ----------------   ----------------   ----------------
           Adjusted net loss                                     $        (4.61)    $        (0.72)    $        (1.54)
                                                                ----------------   ----------------   ----------------
</TABLE>


                                       29
<PAGE>

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).

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 $0 and $262 thousand at
December 31, 2003 and 2002, respectively. The Company had approximately $2.3
million and $8.7 million at December 31, 2003 and 2002, 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, 2003, 2002 and 2001 is as follows:

<TABLE>
<CAPTION>
                                                2003               2002               2001
                                          ----------------   ----------------   ----------------
<S>                                         <C>                <C>                <C>
                                                      (In Thousands of U.S. Dollars)
Beginning balance                          $          654     $          649     $          165
Additions charged to expense                        1,294                141              1,364
Accounts written off                                 (159)              (136)              (880)
Precision balance deconsolidated                     (514)
                                          ----------------   ----------------   ----------------
Ending balance                             $        1,275     $          654     $          649
                                          ================   ================   ================
</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 $211 thousand, $328 thousand, and $8 thousand for the years
ended December 31, 2003, 2002, and 2001, 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:

                                                2003               2002
                                          ----------------   ----------------
                                             (In Thousands of U.S. Dollars)

         Cash and cash equivalents         $            -     $          262
         Other receivables                            854              1,032
         Prepaid expenses and refundable
           taxes                                    1,282              1,705
         Other assets, net                              5                 26
         Accounts payable                            (189)              (477)
         Accrued expenses and other
           liabilities                               (546)            (1,264)
                                          ----------------   ----------------
         Net foreign currency position     $        1,406     $        1,284
                                          ================   ================


                                       30
<PAGE>

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 $885 thousand
and $2.2 million at December 31, 2003 and 2002 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.

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, 2003 or 2002.

INVENTORIES - Inventories are stated at the lower of cost or market. Cost is
determined using the first-in first-out (FIFO) method for Precision and a moving
weighted average for Franklin. 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 $223 thousand and $321
thousand were recognized in 2003 and 2002, respectively. Additional compensation
expense of $126 thousand 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, 2003, would have been
adjusted to the following pro forma amounts:

<TABLE>
<CAPTION>
                                                                   (In Thousands of U.S. Dollars, Except Per Share Data)
                                                                                             2003                   2002
<S>                                                                                     <C>                     <C>
  Net loss as reported                                                                  $(34,608)               $(6,017)

  Stock based employee compensation expense included in reported net loss                    223                    321

  Total stock-based employee compensation expense determined under
  fair value based method                                                                   (282)                  (440)
                                                                                       -----------    -------------------
  Pro forma net loss                                                                    $(34,667)               $(6,136)
                                                                                       ===========    ===================

  Loss per share Basic and Diluted:
  As reported                                                                             $(4.61)                $(0.84)
                                                                                       ===========    ===================
  Pro forma                                                                               $(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. There are no potentially dilutive
securities for the year ended December 31, 2001. Dilutive stock options for the
years ended December 31, 2003 and 2002 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


                                       31
<PAGE>

historical exchange rates and that result from inflation indexing for Mexican
tax purposes or exchange rate changes.

REVENUE RECOGNITION - For metal stamping and food products sales are recognized
at the time the order is shipped. 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, 2003, 2002, and 2001, respectively.

POST-RETIREMENT BENEFITS - Employees 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, 2003 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, as required by EITF 01-09, 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 $1.3 million and $1.6
million are included on the balance sheet as other assets at December 31, 2003
and 2002 respectively.

RECENT ACCOUNTING PRONOUNCEMENTS - In January 2003, the FASB issued FASB
Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN 46").
In December 2003, FIN 46 was replaced by FASB Interpretation No. 46 (revised
December 2003), "Consolidation of Variable Interest Entities" ("FIN 46(R)"). FIN
46(R) clarifies the application of Accounting Research Bulletin No. 51,
"Consolidated Financial Statements", to certain entities in which equity
investors do not have the characteristics of a controlling financial interest or
do not have sufficient equity at risk for the entity to finance its activities
without additional subordinated financial support from other parties. FIN 46(R)
requires an enterprise to consolidate a variable interest entity if that
enterprise will absorb a majority of the entity's expected losses, is entitled
to receive a majority of the entity's expected residual returns or both. For
investments in variable interest entities formed after December 31, 2003, the
Company will be required to apply FIN 46(R) as of January 1, 2004. As of
December 31, 2003, the Company does not have any variable interests held in
special purpose entities. The Company will be required to apply FIN 46(R) to any
other investments in variable interest entities no later than the end of the
first reporting period that ends after March 15, 2004. The Company does not
expect the adoption of FIN 46(R) to have a material impact on its financial
position or results of operations.

In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities". SFAS No. 149 improves financial
reporting by requiring that contracts with comparable characteristics be
accounted for similarly. In particular, SFAS No. 149 (1) clarifies under what
circumstances a contract with an initial net investment meets the characteristic
of a derivative discussed in paragraph 6(b) of SFAS No. 133, (2) clarifies when
a derivative contains a financing component, (3) amends the definition of an
underlying to conform it to language used in FIN No. 45, and (4) amends certain
other existing pronouncements. Those changes will result in more consistent
reporting of contracts as either derivatives or hybrid instruments. In general,
SFAS No. 149 is effective for contracts entered into or modified after June 30,
2003 and for hedging relationships designated after June 30, 2003. The adoption
of SFAS No. 149 has not had a material impact on the Company's financial
position or results of operations.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. In
general this statement is effective for financial instruments entered into or
modified after May 31, 2003, and otherwise is effective for interim periods
beginning after June 15, 2003. The adoption of this statement did not have a
material impact on the Company's financial position or results of operations.


                                       32
<PAGE>

RECLASSIFICATIONS - Certain prior year amounts have been reclassified to conform
to the 2003 financial statement presentation.


3. ACQUISITIONS AND DISPOSITION OF ASSETS

The sale of certain assets, effective at the close of business on July 4, 2003,
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 US$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 requires 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, as if Franklin had been
acquired at the beginning of fiscal 2001, are estimated in the following table:

                           (IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)
                               ---------------------   ---------------------
                                 December 31, 2002       December 31, 2001
                               ---------------------   ---------------------
       Net sales                $           151,179     $           170,461
       Gross profit                          18,077                   8,693
       Net loss                             (11,090)                (23,120)
       Net loss per share                     (1.48)                  (3.08)

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 periods
presented, nor are they necessarily indicative of future operating results.

4. RESTRUCTURING CHARGES

During the first quarter of 2001, the Company initiated a process of
restructuring its business model to eliminate non-productive assets and business
lines. As a result the Company recognized restructuring charges of $12.9 million
during the year ended December 31, 2001. Such restructuring charges include
severance and related costs and write-off of non-productive assets. As of
December 31, 2003 the Company has no accrued liabilities remaining in connection
with such restructuring charges.

5. INVENTORIES

Inventories consist of the following:

                                                     2003            2002
                                                 (In Thousands of U.S. Dollars)
       Raw materials                             $      1,841    $       4,519
       Packaging supplies                               2,140            2,096
       Work-in-process                                    260            1,622
       Finished goods                                   4,220            6,792
                                                --------------  ---------------
       Sub total                                        8,461           15,029
       Less reserve for excess and obsolete
        inventory                                        (540)          (1,011)
                                                --------------  ---------------
       Total                                         $  7,921        $  14,018
                                                ==============  ===============


                                       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>
                                                2003               2002               2001
<S>                                         <C>                <C>                <C>
                                                       (In Thousands of U.S. Dollars)

 Beginning balance                         $        1,011     $           25     $          188
 Additions charged to expense                           -              1,176
 Inventory disposed during the year                  (151)              (190)              (163)
 Deconsolidation of Precision                        (320)
                                          ----------------   ----------------   ----------------
 Ending balance                            $          540     $        1,011     $          25
                                          ================   ================   ================
</TABLE>

6. PROPERTY, PLANT AND EQUIPMENT

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

                                                2003               2002
                 Estimated useful lives      (In Thousands of U.S. Dollars)
                                     (Years)
         Land                                 $        7,084     $        7,407
         Buildings                      20            31,154             35,340
         Machinery and equipment       3-10           12,350             39,491
         Leasehold improvements         5                                   132
         Vehicles                       5                 42                157
         Construction-in-progress                                         2,490
                                             ----------------   ----------------
          Subtotal                                    50,630             85,017
          Less accumulated depreciation              (10,674)           (15,038)
                                             ----------------   ----------------
          Total                               $       39,956     $       69,979
                                             ================   ================

7. NOTES PAYABLE AND LONG-TERM DEBT

The following is a summary of notes payable and long-term debt at December 31,
2003 and 2002.

<TABLE>
<CAPTION>
                                                                                                      2003          2002
                                                                                                 (In Thousand of U.S. Dollars)
<S>                                                                                               <C>            <C>
Revolving line of credit with a bank expiring March 2004. (1)                                                    $     9,150

Note payable to a bank due in semi-annual installments of principal through March 2010. (1)                            7,773

Line of credit with interest-only payments through April 30, 2003 at the bank's prime rate plus
0.75% (4.75% and 5.0% at December 31, 2003 and 2002, respectively); collateralized by
substantially all the assets of Franklin. Unused available credit as of December 31, 2003 is
$2.3 million (2)                                                                                  $      4,969         5,774

Building loan - note payable to bank due in monthly installments, including interest at the
bank's prime rate plus 0.75% (4.75% and 5.0% at December 31, 2003 and 2002) through July 24,
2005; collateralized by substantially all the assets of Franklin, net of unamortized loan fees
of $5 thousand (2)                                                                                       2,140         2,433

Industrial Revenue Bonds due in semi-annual installments of principal and interest through March
2007. (1)                                                                                                              1,580

Line of credit. (1)                                                                                                    1,500

Note payable to GE Appliances to purchase equipment for Precision. (1)                                                   747

Other                                                                                                                    115
                                                                                                 ------------------------------
Total notes payable and long term debt                                                                   7,109        29,072

 Less:  Current maturities of notes payable and long-term debt                                          (5,282)       (8,939)
                                                                                                 ------------------------------
                                                                                                  $      1,827   $    20,133
                                                                                                 ==============================
</TABLE>


                                       34
<PAGE>

Maturities of notes payable and long-term debt are as follows:

                                YEAR            AMOUNT
                                           (In thousands of
                                            U.S. Dollars)
                                2004         $     5,282
                                2005               1,827
                                          -----------------
                                             $     7,109
                                          =================

(1) On December 19, 2003 Precision voluntary filed for protection under Chapter
11 of the Federal Bankruptcy Code in order to implement a restructuring of its
debt. As a result of the Chapter 11 filing the Company no longer controls
Precision and the assets, liabilities and operations of Precision are no longer
consolidated, but are recorded under the equity method of accounting.

(2)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, 2003 Franklin was in compliance with such
financial covenants.

8. LEASES

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 $6.7
million, $7.9 million, and $2.5 million for the years ended December 31, 2003,
2002, and 2001, respectively.

Future minimum lease obligations at December 31, 2003 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>
                                    2004                             $        3,198      $           977
                                    2005                                      3,198                1,023
                                    2006                                      4,577                1,083
                                    2007                                      1,801                1,067
                                    2008                                      1,801                1,067
                                 Thereafter                                  15,834                8,989
                                                                    ----------------     ----------------
         Total minimum lease payments                                        30,409       $       14,206
                                                                                         ================
         Less amount representing interest at 7.83% to 16.30%               (14,045)
                                                                    ----------------
         Present value of minimum lease payments                             16,364
         Less current portion                                                (1,051)
                                                                    ----------------
             Long-term capital lease obligations                             15,313
             Long-term capital lease obligations to related parties          11,482
                                                                    ----------------
             Long-term capital lease obligations to third parties    $        3,831
                                                                    ================
</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. Included in property, plant and equipment at December
31, 2003 and 2002 is the cost of the land and buildings under operating lease
agreements of $16 million and $7.8 million and the related accumulated
depreciation of $6.7 million and $3.3 million, respectively.

Rental income was $1.5 million, $882 thousand, and $1.1 million for the years
ended December 31, 2003, 2002, and 2001, respectively. The future minimum rental
income to be received under these operating leases is $1.3 million in 2004 and
in 2005.


                                       35
<PAGE>

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.

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.

The tax provision differs from the statutory tax rate of 34% in 2003 and 35% for
2002 and 2001 on taxable income as follows:

<TABLE>
<CAPTION>
                                                              2003               2002                2001
<S>                                                                 <C>                 <C>                <C>
Taxes at Statutory Rate of 34%                                      34.0 %              35.0 %             35.0 %
Permanent Differences

   Asset Tax Expense                                                (2.9)                1.4

   Foreign Currency Gains/Losses                                    (1.1)              (28.6)              (4.7)

   Loss of Subsidiary Not Recognized                                (1.9)               (6.9)             (15.5)
   Non-Deductible Expenses                                                              (2.4)              (1.3)

   Inflationary Effects                                              1.0                 8.3                5.8

   Inflationary Effects - Fixed assets                               0.6                 6.6                3.6
   Expiration of Tax Loss Carryforwards                                                 (5.7)

   Expiration of Asset Tax Credit Carryforwards                     (1.4)               (9.2)

   Expiration of Capital Loss Carryforwards                         (6.2)
   Effect of Tax Rate Change                                                            (2.3)

   State Taxes, net of fed benefit                                   0.9                 0.5
   Change in Valuation Allowance (Precision)                       (13.9)
   Change in Valuation Allowance                                    (8.2)               21.3              (10.7)
   Goodwill Amortization/Impairment                                 (8.6)               (5.1)              (0.8)

   Other                                                             0.2                (3.1)               4.8
                                                        ----------------- ------------------- ------------------
                                                                    (7.5)%               9.8 %             16.2 %
                                                        ================= =================== ==================

Income tax expense (benefit) consists of:

                                  CURRENT                 CURRENT                DEFERRED                  TOTAL
                                 ASSET TAX              INCOME TAX                 TAX
                                                        (In Thousands of U.S. Dollars)

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)
                              ================       =================       =================       =================

Mexican                        $          645         $            55         $        (4,343)        $        (3,557)
U.S. Companies                                                                            281                     195
                              ----------------       -----------------       -----------------       -----------------
Year ended December 31, 2001   $          645         $            55         $        (4,062)        $        (3,362)
                              ================       =================       =================       =================
</TABLE>


                                       36
<PAGE>

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

                                                    2003               2002
                                                 (In Thousands of U.S. Dollars)
       DEFERRED TAX ASSETS:
       Asset Tax Credit Carryforward - Mexico   $       2,400      $      1,836
       NOL Carryforwards - Mexico                       3,594             4,580
       NOL Carryforwards - US                           3,940             3,413
       Loss on Sale of Stock (Mexico)                                     1,992

       Capital Loss - US                                   71                71
       Related Party Interest                             849               905
       Inventory                                          291               459
       Bad Debts                                          591               247
       State Taxes                                                          149
       Stock Option Plan                                  201               109

       Accrued Liabilities                                 26               159
       Other                                                                 23
                                               ---------------    --------------
       Subtotal                                        11,963            13,943
       Less:  Valuation Allowance - Mexico             (4,701)           (4,754)
       Less:  Valuation Allowance - US                 (5,115)           (2,418)
                                               ---------------    --------------
       Net Deferred Tax Asset                           2,147             6,771
                                               ---------------    --------------
       DEFERRED TAX LIABILITIES:
          P,P&E                                          (857)           (4,192)
          5% Deferral of Taxes - Mexico                  (335)             (363)

          Other                                           (70)               (5)
                                               ---------------    --------------
       Total Deferred Tax Liabilities                  (1,262)           (4,560)
                                               ---------------    --------------
       Net Deferred Tax Asset/(Liability)       $         885      $      2,211
                                               ===============    ==============

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 $9.8 and $7.2 million at December 31, 2003 and
December 31, 2002, 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, 2003 to $9.8 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, 2003, 2002 and 2001 is as follows:

<TABLE>
<CAPTION>
                                                        2003           2002            2001
                                                           (In thousands of U.S. Dollars)
<S>                                                  <C>            <C>            <C>
Beginning balance                                    $    7,172     $    5,972     $     6,077

Additions charged to expense (Mexico)                     2,743          1,340           2,227
Decrease - Deconsolidation of Qualcore                                                  (2,332)

Decreases recorded to income (Mexico)                      (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)

Additions charged to expense (U.S.)                       2,697
                                                    ------------   ------------   ------------
Ending Balance                                       $    9,816     $    7,172     $    5,972
                                                    ============   ============   ============
</TABLE>


                                       37
<PAGE>

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, 2003
are $2.7 million and expire on various dates through 2013.

At December 31, 2003, 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:

                  YEAR                           AMOUNT
                                         (In Thousands of U.S.
                                                Dollars)
                  2007                           $      455
                  2009                                  148
                  2010                                  447
                  2011                                6,805
                  2012                                2,698
                  2013                                  680
                                         -----------------------
                                                $    11,233
                                         =======================

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 34% 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 2003, 2002 and 2001.

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, 2003 and 2002
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
29, 2004. Retained earnings available for dividends under Mexican law at
December 31, 2003 and 2002 were $16.0 million and $17.4 million respectively.


                                       38
<PAGE>

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 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, 2003.

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
2003, 63,230 options were forfeited due to the resignation of the awarded
executives during the year.

The following is a summary of option activity for the 2 years ended December 31,
2003:

                                                                 Weighted
                                     Options Under               Average
                                         Plan                 Exercise Price
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
                                ======================== =======================

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

         OPTIONS      EXERCISE     LIFE IN          NUMBER             STOCK
       OUTSTANDING     PRICE        YEARS       EXERCISABLE AT    PRICE AT GRANT
                                              DECEMBER 31, 2003        DATE

         200,000       $2.00         10            100,000            $5.35

          7,500        $6.00         10               -               $5.35

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.


                                       39
<PAGE>

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 2003, 2002 and
2001, approximately $120 thousand, $118 thousand and $134 thousand,
respectively, have been charged to expense in connection with these plans.

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 year ended
December 31, 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 $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. 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, 2003,
2002 and 2001 was as follows:

<TABLE>
<CAPTION>
                                                                                       UNALLOCATED
                                                   SHELTER     METAL (1)      FOOD       CORPORATE     INTER-
                                                   SERVICES    STAMPING     SERVICES     AND OTHER    SEGMENT       TOTAL
                                                ---------------------------------------------------------------------------
<S>                                               <C>          <C>          <C>        <C>           <C>          <C>
YEAR ENDED DECEMBER 31, 2003
 Net sales                                        $  25,677    $  70,988    $ 75,648   $             $ (15,063)   $157,250
 Operating loss                                        (333)     (17,231)       (292)      (11,255)                (29,111)
 Net interest expense (income)                           41          754       3,071          (363)                  3,503
 Income (loss) before income taxes                    1,402      (18,304)     (2,610)      (12,677)                (32,189)
 Net loss                                            (1,917)     (15,915)     (2,610)      (14,166)                (34,608)
 Assets                                              14,178                   50,537         4,629      (1,641)     67,703
 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
 Income (loss) before income taxes                      260         (669)     (1,936)       (3,380)                 (5,725)
 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
---------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2001
 Net sales                                        $  55,356    $  78,770               $         -   $  (2,142)   $131,984
 Operating income (loss)                            (14,768)         (10)                   (6,670)                (21,448)
 Net interest expense (income)                       (1,580)      (1,673)                    2,435                    (818)
 Loss before income taxes                           (17,863)      (1,726)                   (1,155)                (20,744)
 Net loss                                           (10,486)      (1,532)                      988                 (11,030)
 Assets                                              21,931       43,054                    36,516                 101,501
 Depreciation and amortization                        1,999        2,145                       265                   4,409
 Capital expenditures                                   910        3,514                                             4,424
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) THE METAL STAMPING SEGMENT (PRECISION) WAS CONSOLIDATED THROUGH DECEMBER 19,
2003. AS A CONSEQUENCE OF VOLUNTARY FILING FOR CHAPTER 11 PROTECTION, AS OF
DECEMBER 19, 2003 THE INVESTMENT IN PRECISION IS RECOGNIZED IN ACCORDANCE WITH
THE EQUITY 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 74.7% and 73.5% of total long-lived
assets in 2003 and 2002, respectively. Mexico accounted for 25.3% and 26.5% of
total long-lived assets in 2003 and 2002, respectively.

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

                                   2003           2002            2001
                                      (In Thousands of U.S. Dollars)
                              -----------------------------------------------
                 United States      $157,250       $134,269         $127,452
                 Mexico                                                4,532
                              --------------- -------------- ----------------
                                    $157,250       $134,269         $131,984
                              =============== ============== ================

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

                                             2003                2002
                                          (In Thousands of U.S. Dollars)
                 United States          $        29,856      $      51,407
                 Mexico                          10,100             18,572
                                       -----------------    ---------------
                                        $        39,956      $      69,979
                                       =================    ===============

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:

       CUSTOMER            PRODUCTS AND SERVICES          2003    2002    2001

          A      Metal stamping of appliance products      21%     25%     23%

          B      Metal stamping of automotive parts        12%     19%     19%

          C      Major retailer                            11%

15. RELATED PARTY TRANSACTIONS

The Company leases a building in Torreon, Mexico to Elamex de Torreon, S.A. de
C.V. a Mexican company established solely for the purpose of holding certain
governmental permits required by an Elamex Shelter Services Division customer.
For legal purposes only, Elamex de Torreon S.A. de C.V. was owned by an
affiliate of the Company. The assets and contracts related to Elamex de Torreon,
SA de C.V. are included in the assets sold to Tecma Group on July 4, 2003. Lease
income received by the Company through Elamex de Torreon from the Shelter
Services Division customer was approximately $106 thousand for the current year
period prior to the sale on July 4, 2003 and $211 thousand for each of the years
ended December 31, 2002 and 2001. In addition the customer obtained shelter
assembly services from the Company through Elamex de Torreon. For the current
year period prior to the sale on July 4, 2003 the services invoiced to Elamex de
Torreon were $2.3 million. For the years ended December 31, 2002 and 2001
services invoiced were and $2.5 million and $2.6 million, respectively.

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 $148
thousand, $127 thousand, and $173 thousand during the years ended December 31,
2003, 2002, and 2001, 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
$337 thousand, $393 thousand, and $761 thousand for the years ended December 31,
2003, 2002, and 2001, respectively.


                                       41
<PAGE>

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.

The rights to collect lease payments from Confecciones have been assigned by
Inmobiliarios to the bank that financed the building. Franklin made lease
payments directly to that bank on behalf of Inmobiliarios in the amounts of $1.9
million, $1.9 million and $1.8 million during 2003, 2002 and 2001 respectively.

Under the terms of the Shelter Contract, Confecciones invoiced services to
Franklin in the amount of $8.8 million in 2001 and in the amount of $4.1 million
for the first six months of 2002. Thereafter, Franklin is a wholly owned
subsidiary of the Company.

In August 2001 the Company made a $3 million convertible subordinated loan to
Franklin Connections. In February 2002, May 2002 and June 2002 the Company
issued demand loans for $2 million, $1.1 million and $1 million, respectively to
Franklin Connections. The Company completed the acquisition of Franklin
Connections on July 18, 2002 and Franklin repaid $4.1 million plus interest to
the Company in connection with the demand loans.

During 2003 the Company loaned Qualcore $1,025 in the form of a note receivable,
to meet working capital needs. At December 31, 2003 and 2002, the Company had
notes receivable from Qualcore of $2,325 and $1,750, respectively

Qualcore sales of $1.6 million were made during 2001 to various companies and
divisions of GE.

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, based on
actuarial computations. Included in other liabilities is approximately $51
thousand and $25 thousand as of December 31, 2002 and 2001, respectively, which
fully accrues for these estimated seniority obligations.

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. Qualcore also obtained bank financing from
Wells Fargo and Eximbank for the plastic molding and metal stamping equipment
for the Celaya plant. 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. The loan facilities are guaranteed by both GE de Mexico and
Elamex.

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, 2003, the aggregate value of these
commitments was approximately $23.3 million.

Franklin is a defendant in a preferential payment transfer action in the United
States Bankruptcy Court for the District of New Mexico. The Trustee for the
Bankruptcy Estate of Furr's Supermarkets, Inc (Furr's) alleges that Franklin has
received preferential payments by Furr's prior to the Furr's bankruptcy filing
of $194 thousand and is seeking repayment from Franklin


                                       42
<PAGE>

for the alleged transfer. Based on a review of the current facts and
circumstances, management has provided an accrual of $130,000, which is believed
to be a reasonable estimate of the probable loss associated with this matter.

One of the Company's subsidiaries has received a Notice of Proposed Adjustment
issued by the Internal Revenue Service (IRS) in connection with an audit of the
subsidiary's 2001 U.S. Corporate Income Tax Return. The IRS asserts that the
taxpayer failed to pay $274,000 of withholding taxes in 2001 on lease payments
made to Elamex pursuant to a maquiladora shelter services agreement. Management
intends to defend its position that no tax is payable, but has accrued expense
of $430 thousand as an estimate of all costs associated with this issue through
December 31, 2003.

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

<TABLE>
<CAPTION>
                                                   2003 QUARTERS                             2002 QUARTERS
                                     ---------------------------------------------------------------------------------------
                                        1ST        2ND        3RD        4TH        1ST        2ND        3RD        4TH
<S>                                   <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>
 Net sales                            $ 39,428   $ 41,400   $ 38,455   $ 37,967   $ 26,386   $ 27,330   $ 37,580   $ 42,973
 Gross profit                            4,674      5,366      2,338      5,536      2,198      1,904      4,427      5,598
 Net (loss) income                      (5,436)       220     (5,739)   (23,653)    (1,097)      (827)    (2,234)    (1,859)
 Basic and diluted net (loss) income
  per common share                       (0.72)      0.03      (0.76)     (3.16)     (0.16)     (0.12)     (0.30)     (0.26)
</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-1(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 Commissions rules and forms. During the Company's
fiscal quarter ended December 31, 2003, 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.

                                    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, 2003 were as follows:

NAME                      AGE           POSITION
--------------------------------------------------------------------------------
Eloy S. Vallina            66         Chairman of the Board of Directors
Richard P. Spencer         60         President, Chief Executive Officer
Samuel L. Henry            53         Vice President & Chief Financial Officer
Daniel L. Johnson          58         Vice President and Secretary
Eloy Vallina Garza         32         Director, son of Chairman of the Board
Keith Cannon               63         Director
Benito Bucay               71         Director
Martin W. Pitts            62         Director
Byram E. Dickes            69         Director
Fernando Ruiz Sahagun      60         Statutory Auditor


--------------------------------------------------------------------------------
ELOY S. VALLINA
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 P. SPENCER
Mr. Spencer joined the Company as President and Chief Executive Officer on
February 1, 2001. 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.

SAMUEL 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.


                                       44
<PAGE>

DANIEL L. JOHNSON
Mr. Johnson joined Elamex as Vice President and Chief Financial Officer in
December of 1999. He assumed the position of President of the Shelter Services
Division in July 2002. He has more than 30 years of experience with
multinationals in the U.S. and in Latin America, including General Mills, Inc.,
Citibank and Continental Grain Company. He received his B.S. degree from Brigham
Young University.

ELOY VALLINA GARZA
Mr. Vallina has been Director since year 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.

KEITH CANNON
Mr. Cannon has been Director since year 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 year 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 year 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.

BYRAM E. DICKES
Mr. Dickes has been Director since year 2003. Mr. Dickes is President and
Director of Chase Franklin Corporation, a private venture capital company. He is
a director of a number of private companies engaged in consulting, printing,
catalog merchandising, metal marking and agriculture. He was a member of the
Board of Directors of Franklin Connections at the time Elamex acquired Franklin
Connections. He holds an M.B.A. from the Harvard Graduate School of Business.

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. 2004
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. 2004 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.


                                       45
<PAGE>

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 2004 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. 2004 annual meeting of
shareholders, under the caption "Principal Accountant Fees and Services" and is
incorporated herein by reference.


                                     PART IV

ITEM 15. EXHIBITS, AND FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

       (a)    1.   FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
<S>                                                                             <C>
       The following financial statements are included herein at Item 8.

       Consolidated Balance Sheets as of December 31, 2003 and 2002.

       Consolidated Statements of Operations and comprehensive loss for the years ended December 31, 2003, 2002, and 2001.

       Consolidated Statements of Stockholders' Equity for the years ended December 31, 2003, 2002, and 2001.

       Consolidated Statements of Cash Flows for the years ended December 31, 2003, 2002, and 2001.

       Notes to Consolidated Financial Statements.
</TABLE>

       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

       (b) Reports on Form 8-K

A Form 8-K was filed on February 29, 2004, under Item 12, announcing its
financial results for the fourth quarter and year ended December 31, 2003 and
certain other information.

A Form 8-K was filed on December 16, 2003, under Item 9, reporting that the
NASDAQ Listing Qualifications Panel has determined to continue the listing of
the Company's common stock on The NASDAQ National Market and that the delisting
proceedings have been closed.

A Form 8-K was filed on December 12, 2003, under Item 12, announcing its
financial results for the third quarter ended October 3, 2003 and certain other
information.


                                       46
<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 29, 2004                            /S/ RICHARD P. SPENCER
--------------                          ---------------------------------------
Date                                    Richard P. Spencer, 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 29, 2004                            /s/ ELOY S. VALLINA
--------------                          ---------------------------------------
Date                                    Eloy S. Vallina, Chairman of the
                                        Board of Directors


March 29, 2004                            /s/ RICHARD P. SPENCER
--------------                          ---------------------------------------
Date                                    Richard P. Spencer, President and
                                        Chief Executive
                                        (Principal Executive Officer)


March 29, 2004                            /s/ SAMUEL L. HENRY
--------------                          ---------------------------------------
Date                                    Samuel L. Henry, Vice-President
                                        and Chief Financial Officer
                                        (Principal Financial Officer)
                                        (Principal Accounting Officer)


March 29, 2004                            /s/ ELOY VALLINA GARZA
--------------                          ---------------------------------------
Date                                    Eloy Vallina Garza, Director


March 29, 2004                            /s/ MARTIN W. PITTS
--------------                          ---------------------------------------
Date                                    Martin W. Pitts, Director


March 29, 2004                            /s/ KEITH CANNON, DIRECTOR
--------------                          ---------------------------------------
Date                                    Keith Cannon, Director


March 29, 2004                            /s/ BENITO BUCAY
--------------                          ---------------------------------------
Date                                    Benito Bucay, Director


March 29, 2004                            /s/ BYRAM DICKES
--------------                          ---------------------------------------
Date                                     Byram Dickes, Director



                                       47