UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 2004 or

For the transition period from                      to                     

Commission file number: 001-32428

TARPON INDUSTRIES, INC.

Registrant’s telephone number, including area code: (810) 364-7421

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

Securities registered pursuant to section 12(g) of the Act: NONE

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

     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. þ

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

     The aggregate market value of the common shares held by non-affiliates computed by reference to the price at which the common shares were last sold as of June 30, 2004 (the last business day of the registrant’s most recently completed second fiscal quarter), assuming that price was the same as the registrant’s February 14, 2005 initial public offering price of $5.00 a share, was approximately $3,302,310.

     The number of the registrant’s common shares outstanding as of March 31, 2005 was 4,640,130.

Documents Incorporated by Reference

     Portions of the Proxy Statement for the 2005 Annual Meeting of Shareholders, scheduled to be held June 9, 2005, are incorporated by reference in Part III, if the Proxy Statement is filed no later than May 2, 2005.

TARPON INDUSTRIES, INC.

ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED DECEMBER 31, 2004

TABLE OF CONTENTS

1

PART I

ITEM 1. BUSINESS

General and Recent Developments

     We manufacture and sell structural and mechanical steel tubing and steel storage rack systems. We also distribute and broker the sale of structural and mechanical steel tubing manufactured by others. We were incorporated in Michigan on January 16, 2002 and have made three acquisitions. Our subsidiaries are Eugene Welding Co., or “EWCO,” acquired in April 2004, and Steelbank, Inc., or “Steelbank,” acquired in May 2004. Steelbank, Inc. acquired substantially all of the assets and business, other than the real estate, of the Haines Road facility of Bolton Steel Tube Co., Ltd., or “Haines Road,” in February 2005. Through EWCO and Haines Road, we manufacture and sell structural and mechanical steel tubing and steel storage rack systems. Through Steelbank, we act as a distributor and sales representative for structural and mechanical steel tubing. We have two manufacturing facilities in Michigan, within 80 miles north of Detroit, and a third manufacturing facility and a warehouse facility in Mississauga, Ontario, Canada, a suburb of Toronto. Our customers are generally located within 800 miles of our manufacturing plants. We intend to seek other acquisitions in the steel tubing and related industries, although we currently have no agreement for any other such acquisition.

     Our principal executive offices are located at 2420 Wills Street, Marysville, Michigan 48040. Our telephone number is (810)364-7421. Our e-mail address is tarponir@tarponind.com and our web site address is http://www.tarponind.com. Information accessed on or through our web site does not constitute part of this report.

Industry Overview

     The steel tubing and the steel storage rack systems industries are fragmented, with more than 100 manufacturers geographically disbursed in the United States and Canada serving niche and regional markets. Because of the size and weight of structural and mechanical steel tubing, costs of transportation are significant, and it is generally not cost effective to ship these products more than 800 miles from the manufacturing plant. This and customers’ short lead-time requirements limit the geographic market for steel tubing manufacturers.

Structural and Mechanical Steel Tubing

     Structural steel tubing, also known as Hollow Structural Sections or “HSS”, is processed continuously from hot rolled steel coil, roll formed and welded in line using high frequency welding and cut to length by an in-line traveling saw or shear. HSS is manufactured in round, square and rectangular sections in sizes ranging from 2 inches square and round through 4 inches square and 5 inches round at EWCO to ASTM A500 Grade B and C specifications. HSS is used as structural members for buildings and structural frames and parts for equipment in a variety of applications and industries. Structural steel tubing provides a high strength-to-weight ratio, uniform strength, torsional rigidity, an aesthetic appearance, cost-effectiveness and recyclability.

     Mechanical steel tubing is typically manufactured to smaller sizes, 2 inches square and below, and lighter gauges, 0.120 of an inch wall and lighter. This tubing is made to tighter manufacturing tolerances than structural tubing and usually from steels with lower strength and greater formability and

2

ductility. Mechanical tubing produced at EWCO and Haines Road are produced from hot rolled pickled and oiled, cold rolled, aluminized, pre-galvanized (G-60 or G-90), and galvalume steel and galvanneal strip. These products are manufactured typically to ASTM A513 type 1 or 2 specifications. Mechanical steel tubing is manufactured from low carbon to high strength, low alloy material, for greater strength and formability. Using this type of steel allows for lighter weight products for use in automotive parts and furniture and in a variety of applications for machine and equipment parts, typically where formability, machinability and fluid conduction are required.

     Applications for structural and mechanical steel tubing include the following:

	•	Leisure Products: exercise equipment, bicycles, boating trailers, boat hoists, recreational vehicles and pop-up campers.
	•	Agricultural/Commercial: greenhouses, sprinkler systems, farm implement components, tillage equipment, fork lifts and industrial equipment.
	•	Commercial Construction: building conduit, handrails, scaffolding, bridges and miscellaneous uses.
	•	Automotive: various components, including aftermarket automotive exhaust systems, trunk hinges, trailer hitches, storage racks and hydro formed components.
	•	Furniture: tables, chairs, stools, closet and curtain rods, beds, futons, storage units, and store display racks.
	•	Appliance: refrigerators, stoves and barbecues.
	•	Garden and Home Tools: Lawnmowers, snow blowers, shovels, rakes, and water sprinklers.
	•	Fencing: residential, including “dog runs”, commercial, industrial and ornamental.
	•	Energy and Exploration: oil rigging related equipment.
	•	Steel storage rack systems.

Steel Storage Rack Systems

     Steel storage rack systems are generally structural steel tubing or structural beams that are assembled with fabricated metal components and welded together to form frames and beams. Leading manufacturers of steel storage rack systems are members of the Rack Manufacturers Institute, which promulgates standards for, and certifies, standard rack components. These standard components can be assembled to form

	•	selective racks, which are typically used in public and commercial warehouse applications where the ability to select palletized materials is desired, which represent a substantial majority of our steel storage rack system sales,
	•	drive-in/through racks, which provide high-density storage of palletized long shelf life products, such as salt,
	•	push back racks, another form of high-density storage, which provides some degree of selectivity,
	•	cantilevered racks, which are typically used in the bulk storage of large unit items, such as lumber, plywood and drywall,
	•	archival storage systems, which are designed to provide high density records storage, including the legal, medical and banking industries.

3

•

order-picking systems, which are designed to incorporate into the rack a conveying system and multi-level mezzanine from which product can be taken off of pallets and repackaged for shipment to individual store locations.

     These systems are used in the home center, retail distribution, public warehouse and commercial and industrial distribution markets. Engineering and system design services are involved in choosing the appropriate components for the system.

Our Operations

EWCO

     Currently, EWCO manufactures and sells structural steel tubing and SpaceRak^® steel storage rack systems at its leased facilities in Marysville and Marlette, Michigan,. EWCO commenced operations in 1954 as a manufacturer of steel products. Currently, EWCO manufactures structural and mechanical steel tubing in sizes ranging from 1.5 inches round and square to 5.0 inches round and 4.0 inches square, and complementary sizes in rectangular and specialty oval shapes, typically to the structural specification ASTM A500 Grade B and C and the mechanical specification ASTM A513 Grade B. In addition, EWCO manufactures steel storage rack systems, now including selective racks, drive-in/through racks, push back racks, cantilevered racks, archival storage systems and order picking systems used in the home center, retail distribution, public warehouse and commercial and industrial distribution markets. For the twelve month period ending December 31, 2004, tubular products accounted for approximately 47% of EWCO’s revenues, and SpaceRak systems accounted for approximately 53% of EWCO’s revenues. We believe EWCO has significant additional manufacturing capacity because its equipment can be run at higher speeds, and because additional employee shifts could be added.

     In April 2004, Tarpon Industries acquired 100% of the outstanding common shares of EWCO from its sole shareholder, who was its Chief Executive Officer from April to August 2004. Tarpon acquired EWCO for $415,450 in cash paid to its sole shareholder for all of the then outstanding EWCO shares. Prior to the acquisition, EWCO redeemed 90% of the then outstanding shares from him for $3,603,144, of which $670,000 was represented by a promissory note that was paid out of the proceeds of our initial public offering in February 2005. The remaining $2,933,144 of the redemption price was retained by EWCO to repay a note to EWCO from the former sole shareholder relating to his acquisition of EWCO in 2001.

Steelbank

     Since 1990, Steelbank has distributed structural and mechanical steel tubing and has acted as a sales representative. It currently operates from its leased warehouse facility in Mississauga, Ontario, a suburb of Toronto. It does not manufacture its own products. We intend to relocate the Steelbank offices and warehouse to the Haines Road facility. The relocation of the Steelbank offices and warehouse to the Haines Road plant is on-going and most administrative functions have already been relocated to the Haines road facility. The warehouse function will remain at Maingate until either the Maingate facility has been sublet or the inventory has been liquidated. The Steelbank personnel function primarily as a sales force for EWCO and Haines Road products.

4

     On May 14, 2004, we acquired 100% of the outstanding common stock of Steelbank for a total cost of approximately $1,188,544 U.S. Dollars, by paying approximately $54,263 (Cdn.$75,000) in cash, issuing a promissory note in the principal amount of approximately $574,300 (Cdn.$800,000), payable in monthly installments of Cdn.$15,000 from July 1, 2004 to December 1, 2004 and Cdn.$200,000 on December 10, 2004, as well as Cdn.$62,500 of the holders’ legal and other expenses at maturity, with the balance paid at the earlier of the closing of our initial public offering in February 2005, valued at $375,000 Cdn., by issuing 60,636 of our common shares in February 2005, and by issuing additional promissory notes in the aggregate principal amount of approximately $290,750 (Cdn.$405,000) payable over three years to the three former shareholders of Steelbank, unless their employment with Steelbank is terminated for specified reasons. The notes are secured by all of the shares of Steelbank and the assets of Steelbank. Canadian dollars are translated into U.S. dollars as of the acquisition date of May 14, 2004.

Haines Road

     Haines Road has manufactured and sold structural and mechanical steel tubing at an owned facility in Mississauga, Ontario, Canada, a suburb of Toronto, since 1988. Its customers use its products for residential, commercial and industrial fencing, scaffolding, automotive after-market exhaust systems, racking and greenhouses. We believe Haines Road has significant additional manufacturing capacity, because its equipment can be run at higher speeds and because additional employee shifts could be added.

     In February 2005, Steelbank consummated the acquisition of substantially all of the assets, other than the real estate, of Haines Road from Bolton Steel Tube Co., Ltd. pursuant to an Asset Purchase Agreement originally entered into in July 2004, as amended. The purchase price was an aggregate of approximately $9,677,000 (Cdn.$11,860,000), consisting of (1) approximately $290,000 (Cdn.$356,000) in deposits paid before closing, (2) approximately $7,402,000 (Cdn.$9,072,000), paid in cash at the closing of the acquisition, (3) approximately $979,000 (Cdn.$1,200,000) secured, subordinated promissory note, payable 15 months after closing or by offset against amounts owed for purchases by Bolton from Haines Road after closing, (4) approximately $1,005,000 (Cdn.$1,232,00) for purchased inventory, payable within 45 days after the closing of the acquisition, (5) a $200,000 success fee in connection with the transaction, payable to Bainbridge Advisors over 24 months, and (6) approximately $131,400 in expenses related to the transaction. We funded a portion of the purchase price with proceeds of loans described in Item 7, under “Liquidity and Capital Resources – Financing Arrangements.”

     Pursuant to a Guarantee between Tarpon and Bolton, Tarpon guaranteed Steelbank’s obligations under the secured subordinated promissory note executed by Steelbank in favor of Bolton. As part of the transaction, we have agreed not to compete with Bolton with respect to hot-dipped galvanized products for a period of six months after closing.

     We have also agreed to acquire the Haines Road real estate for an estimated aggregate of approximately $4,651,000 (Cdn.$5,700,000), consisting of (1) approximately $3,264,000 (Cdn. $4,000,000) for the cash portion of the purchase price of the Haines Road real estate, with approximately $163,000 (Cdn.$200,000) paid as a deposit and the balance payable within 90 days after the closing of the acquisition, and (2) approximately $1,224,000 (Cdn.$1,500,000) secured promissory note, payable 15 months after real estate closing date or, if the fair value of the purchased real estate less

5

the loans secured by the purchased real estate is not at least approximately $408,000 (Cdn.$500,000)or if the first mortgage on the purchased real estate exceeds approximately $3,019,000(Cdn.$3,700,000), payable on the real estate closing date. We expect to seek approximately $3,019,000 (Cdn.$3,700,000) in mortgage financing, although we currently have no commitment for the mortgage financing. We have also agreed to lease the Haines Road real estate during the period between the acquisition closing date and the real estate closing date at a monthly rent of approximately $62,300 (Cdn.$75,000).

Our Business Strategy

     Our business strategy is to become a larger and more significant manufacturer and distributor of structural and mechanical steel tubing, steel storage rack systems and related products in our current geographic market, and then to expand outside our markets. Key elements of our strategy are to

     Acquire facilities, customers and management through strategic acquisitions of other steel tubing, steel storage rack system and related product manufacturers or distributors. The steel tubing and the steel storage rack system industries are fragmented, with more than 100 manufacturers geographically dispersed in the United States and Canada serving niche and regional markets, providing us with potential acquisition opportunities. We could use our common shares, other securities or additional indebtedness for possible strategic acquisitions of steel tubing, steel storage rack system and related product manufacturers, distributors or both, to expand our manufacturing capabilities within our current geographic markets to realize purchasing and administrative economies of scale and to expand our geographic markets by acquiring manufacturing facilities closer to additional customers. Although we regularly review potential acquisition opportunities, we have no agreement, other than with respect to Haines Road real estate, and no understanding for any other acquisition.

     Invest in production equipment. We intend to use a portion of the proceeds of our initial public offering to invest in newer, more efficient equipment and information technology systems to replace older, less efficient equipment and systems, which we believe will improve our manufacturing costs and operations. In addition, if we can obtain additional financing, although we currently have no commitments for such financing, we intend to invest in equipment to enable us to perform additional finishing operations, which may include punching, mitering, drilling, cutting, de-burring, assembly and additional automated welding for the various tube sizes we currently produce. We expect these value added processes will generate additional revenue and gross margin from existing customers and allow us to sell products to additional customers that require these services. In addition, based on financing availability, we intend to upgrade our liquid painting system at EWCO to a powder coat painting system, since we believe that some customers will only purchase product painted with a powder coat painting system. We believe that adding this capability could increase our sales of steel storage rack systems in the home center and other retail markets.

     Expand marketing and sales activities for EWCO and Haines Road. We intend to use Steelbank’s marketing and distribution personnel to increase its distribution of EWCO and Haines Road products. Steelbank, however, is likely to lose existing suppliers and customers as a result of this plan; in particular, manufacturers that compete with our subsidiaries are expected to stop using Steelbank to distribute or sell their products. We also intend to use our steel storage rack systems engineering and manufacturing expertise to attempt to increase sales to existing customers and to new customers and to identify additional potential markets, including automatic storage and retrieval systems, refrigerated

6

steel storage rack systems, archival steel storage rack systems and additional engineered projects in the home center and other retail industries.

     Integrate the operations of EWCO, Haines Road and Steelbank, as appropriate, and other entities we may acquire. We intend to use our combined buying power to purchase more efficiently and to use senior management’s purchasing expertise. We also intend to centralize some management functions, including accounting, finance, human resources and administration and adopt consistent standards, controls, procedures and policies. We intend to relocate the Steelbank offices and warehouse to the Haines Road facility and to have its personnel function primarily as a sales force for EWCO and Haines Road products, and either terminate or sublease the existing Steelbank facility. Because they produce different products for different customers, with EWCO primarily producing structural steel tubing and Haines Road primarily producing mechanical steel tubing, we currently intend to continue to use the EWCO and Haines Road facilities to manufacture the types of products they currently produce.

Our Products

Tubular Products

     EWCO’s and Haines Road’s steel tubing products are building blocks for manufacturers of other products. Steel tubing products are used in original equipment manufacturer automotive, boating, industrial equipment, construction, agricultural, steel service center, leisure and recreational vehicle markets. EWCO manufactures primarily structural steel tubing from plain steel coil, while Haines Road manufactures primarily mechanical steel tubing from coated steels, the primary difference being that mechanical steel tube uses thinner, generally coated steel, such as pre-galvanized, aluminized and G90 steel, and generally has closer tolerances, smaller diameters and more corrosion resistance, making it more useful for some consumer products.

Steel Storage Rack Systems

     Our steel storage rack systems are used for heavy-duty industrial, warehouse and retail storage systems. EWCO manufactures structural and roll-formed steel selective racks, drive-in/through racks, push back racks, cantilevered racks, archival storage systems and order picking systems. The general difference between these products is the manner in which the stored items are accessed. The difference between structural and roll-formed racks is primarily the material from which the product is manufactured. Structural racks use structural beams as their base material, for heavier-duty applications, while roll-formed racks use structural steel tubing.

     Our roll-formed products are “R-mark certified” (#5170), which is an independent certification process registered with the Rack Manufacturers Institute of North America. This certification assures that the designs and capacity tables meet all current Rack Manufacturers Institute, American Iron and Steel Institute and American Institute of Steel Construction specifications. It also makes our products standardized. We design our steel storage rack systems to comply with customer specifications.

     SpaceRak^® products include the following:

•

Selective Rack – Roll Formed: We manufacture this product in five different post cross sections, from 3 inch x 1-5/8 inch to 4 inch x 3 inch, with gauges ranging from 16 gauge to 10 gauge in most shapes. We also manufacture eight different size step beams, ranging from 2-1/4 inch x 2-

7

		1/5 inch to 6 inch x 2-1/2 inch rolled in 16 gauge through 11 gauge. We also offer a large quantity of box beams. We also manufacture accessories for pallet rack installation, including special accessories for the retail market. Historically, this rack has generated our largest steel storage rack systems sales.
	•	Selective Rack – Structural Steel: We can furnish this product with uprights from 3 inch to 4 inch structural channels and beams made from any structural channel, I-beam or wide flange section. It makes a special wide flange upright frame that also uses bolt on beams.
	•	Drive-in/Drive-through Rack: Using the frames and beams from the selective rack, we design drive in racks using special arms and rails to hold the pallets.
	•	Pushback Racks – Roll Formed and Structural Steel: We furnish rolled formed and structural pushback racks. They use a pushback track system purchased from a third party for most of its systems.
	•	Cantilever Rack – Roll Formed: We have a roll formed cantilever rack that is medium duty and is used for smaller systems and furniture storage applications. We also offer accessories to compliment this product.
	•	Cantilever Rack – Structural Steel: We have a structural steel cantilever rack that is heavy duty and is used in the lumber industry and retail lumber applications. We offer columns from 6 inches to 16 inches deep that have matching arms welded from 3 inch to 5 inch I-beams and 6 inch and 8 inch wide flanges. We also offer accessories to compliment this product.
	•	Archival storage system: We use our roll formed storage racks with special decking options and mezzanine decking options to create a multi-level steel storage rack system to store archival records.
	•	Order Picking Systems: We use our roll formed storage racks with pallet flow and carton flow products. These systems also require a large amount of outside purchased items, including floor decking, safety grating, stairs, and fire baffles.

Our Customers

     We market and sell our steel tubing products to customers in original equipment manufacturer automotive, boating, industrial equipment, construction, agricultural, steel service center, leisure and recreational vehicle markets. We market and sell our steel storage rack systems products to customers in the home center industry, retail distribution, public warehouse and commercial and industrial distribution markets and distributors to customers in those markets. During 2004, our ten largest customers represented approximately 61% of our combined net revenues, including Menard, Inc., which represented approximately 22% of our combined revenues. During 2003, our ten largest customers represented approximately 56% of our pro forma combined net revenues, including Menard, Inc., which represented approximately 10% of our pro forma combined net revenues. The loss of any of these customers or any significant reduction in their business would have an adverse effect on our business, financial condition and results of operations.

8

Our Marketing, Sales and Distribution

     We currently sell our structural and mechanical steel tubing and steel storage rack systems products primarily through our direct sales force. EWCO’s steel tubing products are sold through two direct salespersons, including Mark Madigan of Steelbank, EWCO’s customer service department and independent sales representatives. EWCO’s steel storage rack system products are sold through two direct sales persons, independent distributors and independent sales representatives. Haines Road sells its products through two direct sales persons. Steelbank, a sales representative and distributor, sells products through four direct sales persons.

     EWCO’s tubing products sold for approximately $909 a ton as of December 2004. EWCO’s steel storage rack systems products sold for approximately $1,322 a ton as of December 2004. These prices exclude shipping costs.

     We intend to increase Steelbank’s distribution of EWCO and Haines Road steel tubing products, and expect a reduction in our distribution of products of other suppliers with a complete elimination of competing products. Before the closing of our acquisition of Haines Road and Steelbank’s access to its products, Steelbank’s loss of existing suppliers might make it unable to fill its customer’s needs, adversely affecting its relationships with its customers.

     We also intend to use our steel storage rack systems engineering and manufacturing expertise to attempt to increase sales to existing customers and to new customers and to identify additional potential markets, including automatic storage and retrieval systems, refrigerated steel storage rack systems, archival steel storage rack systems and additional engineered projects in the home center and other retail industries.

Inventory and Backlog

     We generally produce our products to fill specific orders or for forecasted requirements to provide us with some additional flexibility in responding to customer delivery demands, while generally producing one tube size on each mill over a six to eight week mill rolling schedule to minimize changeover costs. Inventories of our steel storage rack system products are generally a combination of components manufactured by EWCO and components purchased from third parties. Historically, stock inventory levels of steel storage rack systems components of large volume products fluctuate between two and three weeks.

     Neither EWCO nor Haines Road has a backlog of firm orders. We do not consider any of our backlog orders to be firm, as they generally may be cancelled without penalty.

Manufacturing

     The raw material for manufacturing structural steel tubing is steel coil. We purchase various gauges of steel coil that is typically 50 inches wide and weighs 40,000 to 50,000 pounds. The steel coil is slit to the desired width, typically between five (5) to sixteen (16) inches. If appropriate, we then punch holes in the steel. The slit, and sometimes punched, steel is then fed into a tube mill. The mill forms the steel into a round tube, welds the seam and then reforms the tube into the desired shape: square, rectangular, round or special shape. The tubes are then cut to a desired length and are prepared for shipment to the customer or moved for further processing, such as saw cutting, punching, drilling,

9

mitering, de-burring, or painting. Haines Road’s mechanical steel tubing products are primarily manufactured from coated steels, such as pre-galvanized, aluminized and G90 steel.

     EWCO currently has five (5) tube mills primarily producing structural steel tubing products. We intend to use a portion of the proceeds of our initial public offering to upgrade our tube mill systems, acquire additional production tooling, material handling systems, and automation systems for EWCO’s structural steel tubing operations. We also intend to use a portion of the proceeds of our initial public offering to invest in equipment that will enable us to perform more finishing operations on EWCO’s steel tubing and to acquire a new frame welding system for EWCO’s steel storage rack systems operations to automate and reduce the costs of welding.

     The acquisition of Haines Road in February 2005 added three principal tube mills, primarily producing mechanical steel tubing. It is produced using a variety of steel types and in a wide variety of sizes. Its close tolerances allow the tubing to be used in mechanical parts with little or no metal removal or machining, making it cost-effective for many mechanical applications. One of Haines Road’s primary tube mills is a high-speed tube mill with quick change and “dimple free cut” capability. This mill has the ability to produce close tolerance tubing at high run speeds, using more efficient solid-state welding technology. This mill also has remetalizing, UVC coating and in-line quality testing capabilities. Haines Road’s other two primary mills also have in-line UVC coating as well as in-line de-dimpling capability.

     Haines Road’s mills have the capability to provide a clear UVC coating on products for customers who require or request additional corrosion resistance for more severe applications. The coating is applied in-line and is cured rapidly using “ultra-violet” technology. It is typically applied over zinc-coated substrates, such as G90, to enhance the corrosion resistant properties and prevent the onset of “white-rust.” The finish is a smooth clear paint coating, which is bonded to the substrate. Haines Road is considering adding the capability to apply the coating in various colors. The in-line remetalizing system for tube products manufactured from coated (pre-galvanized) steel repairs the weld area of the tube.

     The manufacturing process for roll formed steel storage rack systems is similar to the process for structural and mechanical steel tubing. Slit steel coil is fed into a tube mill and converted into C and U shaped sections of various lengths. These parts are then assembled together with a variety of fabricated metal components, either produced by us or acquired from third parties. The parts are assembled in fixtures and welded, currently primarily by hand, into their desired configuration. The completely welded “frames” and “beams” are then painted using an electrostatic paint system. The paint system applies a water-based acrylic enamel coating.

     For structural steel storage rack systems, we initially cut structural beams to the required dimensions. These structural components are then used for the columns or support arms of the steel storage rack system. We then use equipment such as shears, press brakes, ironworkers and presses to produce various fabricated components and then weld the necessary brackets and components to the structural columns or arms. The completely welded parts are then painted using a hand-applied electrostatic baking enamel, matched to the customer’s color requirements, on a continuous flow paint line.

10

     EWCO currently has one step tube mill and five (5) roll form tube mills primarily producing steel storage rack system products. Manufacturing time for an order is typically one week, although complex or large orders may take up to several weeks.

Competition

     Our structural and mechanical steel tubing and steel storage rack systems products are generally manufactured according to standard industry specifications. Substantially similar products are available from a number of manufacturers. As a result, we are subject to intense competition, principally based on price and also based on how closely the product conforms to specifications, product availability, delivery and service. Some of our competitors are larger than we are, have larger product lines, have more diversified businesses, have well-established reputations and customer relationships and have greater financial, engineering, manufacturing, marketing, distribution and management resources than we do and are more able to engage in price competition.

     Because of the size and weight of structural and mechanical steel tubing and the resulting costs of transportation and price competition, it is generally not cost effective to ship these products more than 800 miles from the manufacturing plant. This and customers’ short lead-time requirements create geographic limits for our steel tubing products.

     Our competitors may be more successful than we are in manufacturing and marketing their products, may be able to take advantage of the significant time and effort we invest in engineering and system design services for steel storage rack systems and may be better able to endure business downturns or periods of declining prices of steel tubing and steel storage rack systems products. We believe that some competitors reduce their prices and gross profits from time to time to obtain market share. We also believe that our manufacturing costs are higher than some of our competitors. As a result, our competitors may be more willing or better able to engage in price competition.

     Our more significant competitors with respect to structural and mechanical steel tubing are United States and Canadian manufacturers located within 800 miles of our selling area, including Copperweld Corporation, Atlas Tube, Inc., Bull Moose Tube Company, Levitt Tube Company, Lockjoint Tube, Inc., Sterling Pipe and Tube, Inc., Hanna Steel Corporation, Independence Tube Corporation, Allied Tube and Conduit, a division of Tyco International Limited Company, Maverick Tube Corporation, Wheatland Tube Company, Welded Tube of Canada Limited, and James Steel & Tube Company.

     Our more significant competitors with respect to steel storage rack systems are United States and Canadian manufacturers, including United Store Fixtures Company, Morgan Marshall Industries, Inc., Ridg-u-Rak, Inc., SpeedRack Products Group, Ltd. and SteelKing Industries, Inc. We believe that the principal competitive factors affecting our steel storage rack system products depend on the type of customer. For sales to distributors, we believe the principal competitive factors are price and delivery, with little engineering and system design on our part. For retail sales, we believe the principal competitive factors are price, quality, product availability, delivery and customer support systems that can work with the logistical and purchasing functions of the customer. Engineered large products are generally sold through systems consultants and manufacturing representatives. We believe that the principal competitive factors for these sales are price, quality, product availability, delivery and engineering design knowledge, including technical creativity and project management capabilities.

11

Steel

     We use steel coil in the manufacture of our products. We try to coordinate our steel purchases with our sales and production forecast, generally resulting in a one to two month supply of steel coil on hand. We currently seek to minimize the potential adverse impact of commodity price risks of our steel inventory by minimizing the amount of steel inventory we carry. However, opportunities to purchase larger quantities at below market value are considered and reviewed against current market conditions. A portion of our working capital may be used to purchase and store steel when prices are deemed to be favorable.

     EWCO also uses structural materials in the manufacture of its steel storage rack systems, such as angle iron, I-beams, and flange beams. EWCO generally purchases items that it uses in larger volumes directly from three steel mills to obtain the best price and quality, subject to product availability and freight costs. It typically maintains a one-month supply of large volume materials. It purchases smaller volume materials through one of two local service centers, which may charge more, but do not require us to carry as much inventory.

     In 2004, EWCO purchased approximately 73% of its steel coil from four suppliers. While we believe steel coil is generally available from a number of suppliers, the loss of any of our present suppliers, interruption of production at one or more of these suppliers or any other disruption in the supply of steel coil from these suppliers could impair our ability to manufacture our products or require us to pay higher prices to obtain steel coil from other sources. We do not intend to maintain significant inventories of steel coil. Therefore, we might incur delays in meeting delivery deadlines if a particular supplier is unable or unwilling to meet our requirements.

     The cost of steel represented approximately 64% of EWCO’s revenues in 2004. As a result, the steel industry, which is highly volatile and cyclical in nature, materially affects our business. Steel is a global commodity, with its price based on worldwide supply and demand. Numerous factors, most of which are beyond our control, drive the cycles of the steel industry and influence steel prices. The following table sets forth the average cost per ton of steel coil purchased by EWCO in the years ended December 31, 2004, 2003 and 2002:

     The United States imposed anti-dumping tariffs in March 2002 on some countries over a three-year period at decreasing rates, reducing foreign imports of steel coil and increasing the cost of flat rolled steel in 2003. These protections were rescinded in December 2003, but we believe the devaluation of the U.S. dollar and increased Chinese consumption of steel have limited steel imports. We believe that these conditions, combined with increased demand from a recovering U.S. economy and increased consolidation in the domestic steel producing industry resulted in continued increased costs of steel coil in the beginning of the second quarter of 2004, although steel prices stabilized in the latter part of 2004.

12

Trademark and Domain Names

     We have registered the trademark SpaceRak^® in the United States. The registration of this trademark is renewable indefinitely. We believe that SpaceRak^® is recognizable in the industry and might be important to our steel storage rack systems business.

     Tarpon maintains web sites at www.tarponindustries.net (under construction) and www.tarponind.com (under construction). EWCO also maintains web sites at www.spacerak.net and www.ewco.net.

Environmental, Health and Safety Regulation

     Our business is subject to numerous U.S. and Canadian local, state, provincial and federal laws and regulations concerning environmental, health and safety matters, including those relating to air emissions, wastewater discharges, storm water drainage, and the generation, handling, storage, transportation, treatment and disposal of hazardous materials. Violations of such laws and regulations could lead to substantial fines and penalties. Also, there are risks of substantial costs and liabilities relating to the investigation and remediation of past or present contamination, at current or former properties used or owned by us and at third-party disposal sites, regardless of fault or the legality of the original activities that led to such contamination.

     EWCO is unaware of any material noncompliance with its air permits or applicable air, water and waste management rules and regulations at its Marysville or Marlette, Michigan facilities, except that, in July 2004, the Michigan Department of Environmental Quality, or “MDEQ,” notified EWCO that it had determined that the Marysville facility was a “major source” for certain air emissions and that EWCO had failed to apply for a Renewable Operating Permit for air emissions not covered by its Permit to Install then in effect. EWCO applied for a revised Permit to Install to obviate the need for a Renewable Operating Permit in August 2004, and received the revised Permit to Install in December 2004. The MDEQ and EWCO have negotiated a resolution of the violations alleged by MDEQ, and EWCO has agreed in principle to pay a settlement amount of approximately $31,000 to resolve the violations alleged by the MDEQ in July 2004. The MDEQ posted for public comment a proposed consent order summarizing the agreement, and the MDEQ will accept public comment on the proposed consent order until April 20, 2005.

     A Phase I and II environmental report prepared in June 2003 for the Haines Road facility in Mississauga, Ontario, acquired in 2005, did not identify any material noncompliance with applicable environmental legislation and guidelines, except that it recommended that the facility determine whether it is required to obtain from the appropriate regulatory agencies a certificate of approval for its baghouse operation. The report also identified an area of petroleum hydrocarbon soil contamination near a disconnected electrical transformer on the Haines Road property. We will be responsible for any remediation of the Haines Road site, and our agreement to purchase Haines Road allocates these costs to us.

     A Phase I update for the Haines Road facility was performed in December 2004. The report reconfirmed the prior reports’ conclusions regarding the need to determine whether a certificate of approval is necessary for the baghouse operation. We expect to determine the necessity of these approvals and, if the approvals are required, to file the necessary applications after the closing of our acquisition of Haines Road. The December 2004 Phase I update also reconfirmed the prior reports’ observations regarding an area of petroleum hydrocarbon soil contamination near a disconnected

13

electrical transformer on the Haines Road property and also identified an additional, similar staining around an above-ground fuel storage tank. We expect to perform additional tests on these areas after the closing of our acquisition of Haines Road.

Seasonality

     There are seasonal fluctuations in demand for our products. Historically, the demand for our steel tubing products typically peaks during the first and second quarters, while demand for our steel storage rack systems typically peaks during the third and fourth quarters. The timing of these fluctuations has been dependent on the overall economy and may change as our customer and product mix change.

Insurance

     Actual or claimed defects in our products could give rise to products liability claims against us. We might be sued because of injury or death, property damage, loss of production or suspension of operations resulting from actual or claimed defects in our products. We have products liability insurance with a liability limit of $3,000,000 at EWCO.

Employees

     As of March 13, 2005, and February 17, 2005, prior to the acquisition of Haines Road, Tarpon, EWCO and Steelbank employed approximately 160 full-time individuals respectively, as described below:

     Our future performance depends on the continued service of our key sales, production and senior management personnel and consultants.

     Approximately 117 EWCO employees are covered by a collective bargaining agreement with the International Brotherhood of Teamsters that expires on October 15, 2006. The Teamsters have represented employees at the Marysville facility since 1967 and employees at the Marlette facility since 2000.

     While we believe our relations with our employees are good, if we are unable to renew the collective bargaining agreements on mutually agreeable terms, it could result in strikes, closing our manufacturing facilities or limiting their operations, labor disruptions and increased labor costs, which would increase the costs of producing our products.

14

Financial Information about Geographic Areas

     The following table sets forth on a proforma basis (after giving effect to the acquisition of EWCO and Steelbank, beginning in 2002) information regarding our revenues from the United States and Canada and long-lived assets located in the United States and Canada:

Where You May Obtain Information We File With The SEC

     We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers, such as us, that file electronically with the SEC. The address of the SEC’s web site is http://www.sec.gov.

     The Company is currently developing a Web site at http://www.tarponind.com. We will make available free of charge on or through our Web site, our annual report 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 as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. We will voluntarily provide electronic or paper copies of our filings free of charge upon request.

RISK FACTORS

     An investment in our common shares involves a high degree of risk. You should carefully consider the specific factors listed below, together with the cautionary statement under the caption “Cautionary Statement Regarding Forward Looking Statements” and the other information included in this report, before purchasing our common shares. If any of the following risks actually occur, our business, financial condition or results of operations could be adversely affected. In such case, the trading price of our common shares could decline, and you may lose all or part of your investment.

15

Risks Relating to Our Business

We and our acquired companies have a history of losses, and may not achieve profitability in the future, which would adversely affect the price of our common shares.

     Tarpon, our parent company, does not have any revenue generating operations. It operates through its recently acquired operating subsidiaries, EWCO and Steelbank and Haines Road. From our inception on January 16, 2002 through December 31, 2004, Tarpon did not generate any revenues and incurred net losses of approximately $3,411,377 Tarpon has funded such losses and a portion of its acquisition costs through equity investments and through the proceeds of our initial public offering. EWCO experienced profitability in the twelve month period ended December 31, 2004, and incurred a net loss of approximately $1.3 million in 2003, but the 2004 profitability may not be sustainable. If EWCO and other affiliated companies are not able to attain profitability, the market price of our common shares will likely decline.

We expect our expenses to increase, which could result in losses or frustrate our business strategy.

     We expect to incur increased depreciation expenses in connection with our capital improvements plans and expenses in connection with grants of options to non-employees. In addition, acquisition expenses, interest, and other expenses from our 2004 note financing began to increase our costs beginning in our second quarter of 2004. Our expenses might be greater than we expect, which might result in losses, and it is possible that our business strategy will not be successful.

We currently have no commitment for mortgage financing for the Haines Road real estate, and if we fail to obtain it within 90 days of the closing date, our Haines Road business might have to discontinue its operations for a significant time, we could be subjected to onerous lease terms even if we are allowed to remain on the premises, and we would be liable for damages for breaching our purchase agreement.

     We currently have no commitment for the mortgage financing we need to complete the acquisition of the Haines Road real estate. We have only 90 days after the closing of our acquisition of Haines Road’s operating assets to close our purchase of the Haines Road real estate, although the owner has agreed to extend our use of the premises for up to one year if we are unable to close our purchase of the Haines Road real estate within this 90-day period. The proceeds of our initial public offering will not be sufficient to fund the acquisition of the Haines Road real estate, and we have assumed that we will be able to obtain approximately $3,019,000 (Cdn.$3,700,000) in mortgage financing to complete the acquisition. If we are unable to obtain that financing and complete the acquisition of the Haines Road real estate within the 90-day period, we could be evicted from the premises after the extended lease term, which would likely require us to discontinue Haines Road’s business for a significant period of time or even permanently. Even if the landlord would agree to allow us to continue to operate the Haines Road assets on the premises after the extended lease term, we could be subjected to burdensome lease terms, including significantly increased rent or restrictions on our use of the premises, which could make it unprofitable, inefficient or impractical to operate the Haines Road business at that location. Even if we could find another suitable location on terms and conditions acceptable to us, we would incur substantial costs and disruption of our business if we were

16

required to move our Haines Road assets to a different location. We would also be subject to damage claims for failure to acquire the Haines Road real estate pursuant to our purchase agreement.

Our level of indebtedness materially affects our operations and even our survival.

     Excluding indebtedness we repaid from the proceeds of our initial public offering, as of December 31, 2004 our total consolidated indebtedness for borrowed money, including current maturities, was approximately $9,602,000. Subject to the limits on EWCO and Steelbank pursuant to their credit facilities, we may incur additional debt in the future. Our level of indebtedness and the debt servicing costs associated with that indebtedness will require us to dedicate a substantial portion of our cash flow from operations to payments on our debt, reducing cash flow available for working capital, capital expenditures, acquisitions and other general corporate purposes. In addition, a material default in our indebtedness obligations could result in the failure of our business. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contractual Obligations” for a description of the maturities of our long-term debt.

Covenant restrictions in our credit facilities may limit our ability to operate our business and, if we do not comply with them, may prevent us from borrowing under those facilities and may require us to seek to refinance our loans.

     EWCO has a credit facility secured by all of its personal property. Its loan agreement requires it to maintain a minimum debt service coverage ratio and minimum tangible net worth. It also generally prohibits dividends and limits EWCO’s ability to make capital expenditures and incur additional debt. Steelbank has a credit facility secured by all of its assets. Its credit facility prohibits Steelbank from guaranteeing additional indebtedness, incurring indebtedness, creating liens, paying dividends, making certain types of investments, entering into transactions with affiliates, making capital expenditures in excess of $500,000 Canadian dollars in any fiscal year, selling assets, merging with other companies or entering into any transactions outside of the ordinary course of business. It also requires compliance with several financial covenants, including adjusted net worth, debt service coverage and interest coverage covenants. These covenants affect our ability to operate our business and may limit our ability to take advantage of potential business opportunities as they arise. Moreover, our failure to comply with the financial or other covenants could result in an event of default that, if not cured or waived, could prevent us from borrowing under our credit facilities and could cause us to seek to refinance our borrowings. We intend to seek approximately $3,019,000 (Cdn.$ 3,700,000), in mortgage financing for Haines Road’s real estate, although we currently have no commitment for the mortgage financing.

Rising interest rates will have a substantial impact on our interest expense under our working capital loans and will impact our ability to make our debt payments.

     Interest under our existing and proposed working capital facilities accrues at fluctuating rates. Rising interest rates could have a substantial impact on our interest expense and will impact our ability to make our debt payments. As of December 31, 2004, each 1% increase in prime rates would result in an approximate increase of $175,000 in our yearly interest expense under such facilities, assuming they are at the maximum permitted amounts.

17

Our financial resources are not sufficient to finance any additional acquisitions.

     We believe that our financial resources will be adequate to satisfy our operating and capital requirements for at least the next 12 months, except for additional acquisitions beyond the Haines Road acquisition, unless they are made with our common shares. If we are unable to consummate additional acquisitions with our common shares, we will be required to raise capital through additional sales of debt or equity securities, which might not be possible, or forego the acquisition.

We do not have a combined operating history with our acquired companies, so historical financial information is not necessarily a good indicator of future results of operations or financial condition; we have limited experience operating and integrating steel tube and pipe and steel storage rack system manufacturers and distributors.

     Over the last twelve months, we acquired EWCO, Steelbank and Haines Road. All of our senior management group joined us in 2004 or later, and two senior EWCO managers resigned following our purchase of EWCO. As a result, our experience as a unified enterprise in operating steel manufacturers and distributors is very limited, and the financial information regarding our acquired companies included in this report substantially reflects their operations before we acquired, managed and controlled them and may not be indicators of their future results of operation or financial condition. In addition, our lack of a combined operating history may result in difficulty integrating our operations, service interruptions to our customers, inefficiencies and conflicts.

Our success depends on our ability to attract and retain key personnel.

     Our present and future performance depends on the continued service of our key sales, production and senior management personnel and consultants. Our key employees include J. Peter Farquhar, our Chief Executive Officer, James T. House, our Senior Vice President, Chief Financial Officer and Chief Accounting Officer, Patrick J. Hook, our President and Chief Operating Officer, C. David Weaver, Vice President of Sales & Engineering in EWCO’s SpaceRak division, Jerry Cunningham, EWCO’s General Manager of Operations, and Barry Seigel, Mark D. Madigan and Jeffrey Greenberg, former owners of Steelbank who now manage its and, in the case of Mr. Madigan, also EWCO’s sales and distribution activities, all of whom became associated with us in the last ten months. We have also engaged Bainbridge Advisors, Inc., an advisory firm primarily owned by Gary D. Lewis, our former Chairman of the Board, President and Chief Executive Officer, to provide general advice and services and to assist us in completing and integrating our acquisitions. The loss of the services of any of these individuals or entities could have an adverse effect on us. We do not maintain any significant key man life insurance on any of our key personnel.

     Charles Vanella, the former Chief Executive Officer and President of Tarpon and EWCO, and Jason Vines, the former Chief Accounting Officer of Tarpon and EWCO, our current principal operating subsidiary, resigned approximately four months after we acquired EWCO. In August 2004, we entered into a Termination Agreement with Mr. Vanella, pursuant to which he resigned from all of his positions with us and agreed to render consulting services to us for one year. Mr. Vanella had served as President of EWCO since 1998, as Chief Executive Officer of EWCO since April 2004, and as one of its officers since 1995 and was its sole shareholder at the

18

time of our purchase of EWCO in April 2004. In addition, Mr. Vines resigned in October 2004. Mr. Vines is Mr. Vanella’s son-in-law and served EWCO in a financial capacity from April 2000 to February 2001 and from February 2003 to October 2004. The Chief Executive Officer functions have been assumed by J. Peter Farquhar, Patrick J. Hook has assumed the President and Chief Operating Officer functions, and James T. House had assumed the Chief Accounting Officer function in 2004 on an interim basis.

Our internal financial reporting procedures are in development and we will need to allocate significant resources to meet applicable internal financial reporting standards.

     Until April 2004, we consisted only of a holding company with no operations. In April and May 2004, we acquired EWCO and Steelbank. These companies were established private companies with accounting procedures not suitable for public company reporting. In February 2005, we acquired Haines Road. This was one operation of a larger private company, again with accounting procedures which were not suitable for public company reporting.

     Our Independent Registered Public Accounting Firm has identified a variety of deficiencies in our internal financial reporting procedures. These deficiencies stem in significant part from the acquisition policy which we are following in which private, unrelated companies are being combined. Nine of these deficiencies were classified as significant which when aggregated meet the definition of a material weakness in our systems of internal control. A material weakness is a significant deficiency, or a combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. The significant deficiencies are as follows:

     A. A lack of formalized accounting policies and procedures, including written procedures for monthly, quarterly and annual closing of our financial books and records,

     B. A lack of common systems or a common chart of accounts and we use spreadsheets to perform consolidations, which has resulted in errors,

     C. Insufficient staff in the accounting and information technology departments.

     D. Insufficient process to ensure financial statements adequately disclose information required by Generally Accepted Accounting Principles (GAAP),

     E. Account reconciliations and supporting documentation not prepared on a timely basis,

     F. Duties and control activities within the finance function have not been appropriately segregated,

     G. The Company does not have a formal process to ensure that appropriate system access is granted,

     H. A lack of adequate process to identify and ensure that non-standard journal entries are subject to an appropriate level of review and,

     I. Little review or oversight of the reporting process which has resulted in the inability to detect errors.

19

     In addition, our independent auditors have informed us that our compliance with section 404 of the Sarbanes-Oxley Act will require significant resources for which our independent auditors have concluded we do not have the necessary in-house expertise.

     As a public company, we will have significant requirements for enhanced financial reporting and internal controls. We are taking steps to unify the financial reporting of all of our component companies, to increase our accounting and information technology staff and to put in place internal controls concerning accounting entries and adjustments, with full documentation, which are responsive to the issues raised by our independent auditors, and, as of this time, we have made progress on these points. We have hired additional staff and are in the initial planning phase of upgrading our information technology systems. We expect these steps to be completed by December 31, 2005, but it is possible that they might not be completed by then.

     These efforts require significant time and resources. If we are unable to establish appropriate internal financial reporting controls and procedures, our reported financial information may be inaccurate and we will encounter difficulties in the audit or review of our financial statements by our independent auditors, which in turn may have material adverse effects on our ability to prepare financial statements in accordance with generally accepted accounting principles and to comply with our SEC reporting obligations.

Sale and distribution of our products by Steelbank is expected to lead to the loss of a substantial number or all of Steelbank’s other manufacturer sources and may result in supply interruptions to its customers.

     Steelbank is expected to lose 90% of its existing manufacturer sources as a result of our plan to increase Steelbank’s direct sale and distribution of EWCO and Haines Road products. In particular, manufacturers that compete with our subsidiaries are expected to stop using Steelbank to distribute or sell their products. For the year ended December 31, 2004, approximately $6,507,000, or 80%, of Steelbank’s revenues were derived from products made by manufacturers other than EWCO or Haines Road, although approximately $5,856,000 or 90% of those sales were of products that EWCO or Haines Road are capable of manufacturing. Loss of these suppliers could adversely affect Steelbank’s ability to fulfill customer orders, resulting in damage to Steelbank’s customer relationships.

Our products are viewed as commodities, and are subject to intense competition based on price.

     Our structural and mechanical steel tubing and steel storage rack systems products are generally a commodity. As a result, we are subject to intense competition, principally based on price and also based on how closely the product conforms to specifications, product availability, delivery and service. Some of our competitors are larger than we are, have larger product lines, have more diversified businesses, have well-established reputations and customer relationships and have greater financial, engineering, manufacturing, marketing, distribution and management resources than we do and are more able to engage in price competition.

Our products have limited geographic markets.

     Because of the size and weight of structural and mechanical steel tubing and the resulting costs of transportation and price competition, it is generally not cost effective to ship these products more than 800 miles from the manufacturing plant. This and customers’ short lead-time requirements limit the market for our steel tubing products.

20

The volatile nature of steel prices could adversely affect our sales and operating profits.

     The cost of steel for manufacturing our products represented approximately 66% of EWCO’s revenues in 2004. As a result, the steel industry, which is highly volatile and cyclical in nature, materially affects our business. EWCO’s average steel costs increased approximately 85% from 2003 to 2004. Changes in steel prices have a significant impact on the margins for our products. While we attempt to recover any increase in steel costs by increasing the price of our products, increases in the prices of our products might not fully compensate for steel price increases and can lag behind increases in steel prices, adversely affecting our gross profit margins.

We are dependent on a few suppliers for a significant portion of our steel, so interruption of that supply could impair our ability to manufacture our products or require us to pay higher prices to obtain steel.

     In 2004, EWCO purchased approximately 73% in dollar value of its steel from a total of four suppliers. While we believe steel is generally available from a number of suppliers, the loss of any of our present suppliers, interruption of production at one or more of these suppliers or any other disruption in the supply of steel from these suppliers could impair our ability to manufacture our products or require us to pay higher prices to obtain steel from other sources. We do not intend to maintain significant inventories of steel.

A majority of our employees are covered by collective bargaining agreements that could subject us to additional labor costs or strikes.

     As of March 13, 2005, approximately 117 EWCO employees are covered by a collective bargaining agreement with the International Brotherhood of Teamsters that expires in October 2006. While we believe our relations with these employees are good, if we are unable to renew the collective bargaining agreements on mutually agreeable terms, it would result in labor disruptions, strikes, plant shutdowns and increased labor costs, which could result in lost sales and increase the costs of producing our products.

We are dependent on third parties to transport our products, so their failure to transport our products could adversely affect our earnings, sales and geographic market.

     We use third parties for the majority of our shipping and transportation needs. If these parties fail to deliver our products in a timely fashion, including due to lack of available trucks or drivers, labor stoppages, or traffic delays at the U.S. or Canadian borders, or if there is an increase in transportation costs, including due to increased fuel costs, it would have a material adverse effect on our earnings and could reduce our sales and geographic market.

There are risks associated with our acquisition strategy, including our inability to successfully complete acquisitions, our assumption of liabilities, dilution of your investment, significant costs and additional financing required.

     We intend to expand our markets and customers through strategic acquisitions of other steel tubing, steel storage rack system and related product manufacturers, distributors or both, although we have no agreement or understanding for any other acquisition. Risks associated

21

with our current and potential acquisitions include the disruption of our ongoing business, problems retaining the employees of the acquired business, assets acquired proving to be less valuable than expected, the potential assumption of unknown or unexpected liabilities, costs and problems, the inability of management to maintain uniform standards, controls, procedures and policies, the difficulty of managing a larger company, the risk of becoming involved in labor, commercial or regulatory disputes or litigation related to the new enterprises and the difficulty of integrating the acquired operations and personnel into our existing business.

     We intend to use common shares or other securities to finance a portion of the consideration for future acquisitions, either by issuing them to pay a portion of the purchase price or selling additional shares to investors to raise cash to pay a portion of the purchase price. If our common shares do not maintain sufficient market value or potential acquisition candidates are unwilling to accept our common shares as part of the consideration for the sale of their businesses, we will be required to raise capital through additional sales of debt or equity securities, which might not be possible, or forego the acquisition opportunity, and our growth could be limited. In addition, securities issued in such acquisitions may dilute the holdings of our current or future shareholders.

Steelbank’s and Haines Road’s operations are located in Canada, and exchange rate fluctuations between the U.S. and Canadian dollar will affect our results of operations.

     A substantial amount of our sales and operating costs are in Canadian dollars. As a United States company, we will be exposed to cash flow and earnings volatility as a result of fluctuations in relative currency values. In particular, our results of operations may be adversely affected by a strengthening of the United States dollar against the Canadian dollar. A strengthening of the Canadian dollar against the United States dollar would adversely affect our ability to export products manufactured in Canada, such as by Haines Road.

Seasonal fluctuations affect demand for our products.

     We expect seasonal fluctuations in demand for our products. Historically, the demand for our steel tubing products typically peaks during the first and second calendar quarters, while demand for our steel storage rack systems typically peaks during the third and fourth calendar quarters. The timing of these fluctuations has been dependent on the overall economy and may change as our customer and product mix change.

Equipment failures or casualties will interfere with production and increase costs.

     Our manufacturing processes depend on production mills and related equipment, which are occasionally out of service as a result of mechanical failures. We may experience material plant shutdowns or periods of reduced production as a result of equipment failures. Interruptions in our production capabilities will increase production costs and reduce our sales and earnings. Furthermore, any interruption in production capability may require us to make capital expenditures to remedy the situation, which could have a negative effect on our profitability and cash flows. In addition to equipment failures, our facilities are also subject to the risk of catastrophic loss due to unanticipated events such as fires, loss of energy, explosions and adverse weather conditions.

22

We are dependent on a small sales force for a majority of our sales, so losing any of them would adversely affect our business.

     We depend on a sales force of approximately eight people for a majority of our sales, which includes one Haines Road sales employee. Our sales force accounted for approximately 92% of EWCO’s sales in 2004. Therefore, the loss of any of our sales employees may have an adverse effect on our business, financial condition and results of operations. As of April 1, 2005, we had a seven person sales force.

We are dependent on our distributors for a significant portion of our SpaceRak sales, so their failure to sell our products adequately would adversely affect our business.

     We depend on our distributors for a significant portion of our sales of SpaceRak products. If our distributors fail to market, promote and sell our products adequately, our business, financial condition and results of operations would be adversely affected.

Purchasers of our products may assert product liability claims against us.

     Actual or claimed defects in our products could give rise to products liability claims against us. We might be sued because of injury or death, property damage, loss of production or suspension of operations resulting from actual or claimed defects in our products. Regardless of whether we are ultimately determined to be liable, we might incur significant legal expenses not covered by insurance. In addition, products liability litigation could damage our reputation and impair our ability to market our products. Litigation could also impair our ability to retain products liability insurance or make our insurance more expensive. EWCO has products liability insurance with a liability limit of $3,000,000. We could incur product liability claims in excess of our insurance coverage or that are subject to substantial deductibles, or we may incur uninsured product liability costs. If we are subject to an uninsured or inadequately insured products liability claim based on our products, our business, financial condition and results of operations would be adversely affected.

Environmental, health and safety laws regulating the operation of our business could increase the costs of producing our products and expose us to environmental claims.

     Our business is subject to numerous U.S. and Canadian local, state, provincial and federal laws and regulations concerning environmental, health and safety matters, including those relating to air emissions, wastewater discharges and the generation, handling, storage, transportation, treatment and disposal of hazardous materials. Violations of such laws and regulations could lead to substantial fines and penalties. Also, there are risks of substantial costs and liabilities relating to the investigation and remediation of past or present contamination, at current or former properties used or owned by us and at third-party disposal sites, regardless of fault or the legality of the original activities that led to such contamination. Moreover, future developments, such as c