Edgar Filing: STELAX INDUSTRIES LTD

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K

(Mark One)
(X) Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended March 31, 2003 or

( ) Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ______ to ________.

STELAX INDUSTRIES LTD.
(Exact name of registrant as specified in its charter)

Commission file number 0-18052

British Columbia, Canada None
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

5515 Meadow Crest Drive, Dallas, Texas, 75229
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (972) 233-6041

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

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

Common Stock, no par value

(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve (12) months and (2) has been subject to such filing
requirements for the past ninety (90) days.

Yes X No
----- -----

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

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

Yes No X
----- ---

The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of December 15, 2004, was approximately $2,559,310. At March 31,
2003 there were 47,948,038 shares of common stock outstanding.

Documents Incorporated by Reference
NOT APPLICABLE

PART I

ITEM 1. BUSINESS.

Introduction

Stelax Industries Ltd. (the "Registrant" or the "Company") ceased all trading
operations in March 2002 when a Receiver acquired all assets of the Company's
sole operating entity, Stelax (U.K.) Limited, assets that were subsequently sold
to an affiliate of the Company. It is the Company's intention, subject to legal
and financial restraints being removed, to incorporate other business activities
in the future.

The financial statements included herein include restatements of fiscal year
2002 and 2001. Refer to note M of the consolidated financial statements for
further details.

The registrant was incorporated under the laws of British Columbia, Canada in
May 1987 as Zfax Image Corp, The Registrant changed its name from ZFAX Image
Corp. to its present name in May 1996.

The Registrant's principal executive offices are now located at 5515 Meadow
Crest Dr., Dallas, Texas 75229, and its telephone number is (214) 987-1197.
Unless otherwise required by the context, the term "Company" as used herein
shall mean the Registrant and the Registrant's U.K. subsidiary, hereinafter
referred to as "Stelax (U.K.)".

Until 1992 the Registrant was engaged in the development and production of a
portable facsimile machine using certain advanced facsimile technology. On March
31, 1995, the Registrant sold this business to the Zfax company president for
book value.

On November 15, 1995, Zfax finalized agreements to acquire the real, personal
and intellectual property comprising the Aberneath steel mill facility, paying
cash of approximately $1,377,000 and issuing 2,925,000 shares of Common Stock
and assuming debt of approximately $1,316,000. The Registrant financed the
acquisition principally through the issuance of $600,000 in convertible notes,
which were subsequently converted, and the sale of $1,540,000 of Common Stock
and Warrants.

From 1995 through March 2002 the Registrant's principal activities were
conducted through its wholly-owned subsidiary, Stelax (U.K.), a corporation
organized under the laws of the United Kingdom.

In July 1996, the Registrant sold 10,800,000 shares of Common Stock, raising
$10,831,000. Approximately $1,100,000 of the proceeds was used to liquidate
outstanding mortgages on the Aberneath property. As part of this financing, the
Registrant's Common Stock began trading on the Le Nouveau Marche of the Paris
Stock Exchange.

Beginning in fiscal 1997, the Registrant commenced operations from the Aberneath
plant, principally producing stainless steel. The Registrant also began
developing the market for its Nuovinox product. In 1998, the market for
stainless steel was subject to severe pricing pressures, and the Company
determined to cease production of stainless steel while the Registrant developed
the Nuovinox market. Operating losses since 1997 essentially depleted the
Registrant's working capital.

In the first quarter of fiscal 2001, the Registrant began receiving orders for
the Nuovinox product, In July 2000, with its assets unencumbered, the Registrant
obtained financing from Bank of America so that the Registrant could fulfill
those orders. This financing provided $5,000,000 of a term loan, $500,000 of
receivable financing and $250,000 inventory financing. Bank of America
subsequently assigned this obligation to Wells Fargo. While the Registrant made
some shipments in fiscal 2001, the registrant expended resources on new mill
tooling, completing a finishing line and improving Nuovinox's metallurgical
properties and product quality.

Stelax (U.K.) commenced quantity production in the quarter ended June30, 2001
but was unable to increase production to sufficiently large volumes to achieve
profitability or service debt.

On March 7th, 2002 the subsidiary company, Stelax (U.K.), was placed into
Administrative Receivership by Wells Fargo Bank, which held a loan note that
ranked senior to all other debt of Stelax (U.K.). Control over the assets of
Stelax (U.K.) passed from Stelax Industries to the U.K. Receiver at this point.
A court judgement was subsequently obtained against Stelax Industries Ltd.
Please refer to Item 3 for further details.

Until March 2002 Stelax (U.K.) owned certain property and intellectual rights in
Wales, United Kingdom comprising the Aberneath steel mill facilities (the
"Aberneath Facility"). The property comprised of land, buildings, plant and
machinery. Stelax (U.K.) produced two separate product lines through the
Aberneath Facility: (i) Nuovinox(TM), a stainless steel cladded product with a

carbon steel core utilizing the Company's unique patented manufacturing process
and (ii) steel abrasive shot pellets which are used as an abrasive cleaner and
polisher in steel manufacturing. See "--- Products", below.

In the opinion of the Company's management, interest in the Nuovinox product
remains strong.

With the appointment of the Receiver to the U.K. company in March 2002 the
Company's operations ceased. The Receiver appointed to Stelax (U.K.) was the
firm of Kingston Smith & Partners of 60, Goswell Rd., London EC1M 7AD.

With the acquisition of the assets by the Receiver and subsequent purchase by an
affiliate of the Company, the Company lost all ability to produce Nuovinox,
including any inventory, facilities, equipment and intellectual property such as
patents and trademarks. All the assets were subsequently acquired by an
affiliate of the Company, see below and see Item 12. Certain Relationships and
Related Transactions.

Between March 2002 and August 2003 (inclusive), the Receiver exercised complete
managerial control over the assets of Stelax (U.K.). Final delivery against one
outstanding order was made in March 2002 but since that time no production or
deliveries took place. All but one of the employees of the U.K. company was made
redundant in March 2002. During the period March 2002 and August 2003 the
Receiver was authorized to undertake the sale of the U.K. company's assets
either as a whole entity or on the basis of break up.

In June 2003 an affiliate of the Registrant Company, through an intermediary
company (Timaran Ltd.), made a contract with the Receiver to purchase all of the
Stelax (U.K.) assets held by the Receiver. The contract required staged payments
over a three month licensed period. Timaran Ltd. started recommissioning and
operating under this license agreement. In August Timaran completed the purchase
of the U.K. assets from the Receiver. Timaran has assigned all its rights and
interest to Stelax International Ltd., a private company organized in the United
Kingdom and unassociated with Stelax Industries Ltd.

The Aberneath Facility ( also referred to as The Wern Works )

The Aberneath Facility, now owned by Timaran Ltd., is located at Briton Ferry,
Neath in South Wales, United Kingdom. The facility is located on the banks of
the River Neath beside a deep water wharf and close to highway and national rail
links. The facility includes approximately five acres of land. The steel mill
plant is divided into three bays, each approximately 650 feet long, for a total
of approximately 130,000 square feet of production space. There is a separate
building on the premises with approximately 8,000 square feet of office and
administrative space.

The facility has an open air storage and preparation area covering approximately
two acres of land for the purpose of preparing scrap metal for use in the
Nuovinox product. The interior of the plant contains a modern walking beam
furnace, a rolling mill, a cooling and finishing area and a quality control
process area. All production areas in the plant are serviced by overhead
gantries or pedestal mounted or mobile cranes.

During the year ended March 31, 2000, the Company produced limited quantities of
Nuovinox for use by potential customers in their testing and evaluation of the
product. During the fiscal year ended March 31, 2001, the Company sold limited
quantities of its Nuovinox product. Some production occurred in the fiscal year
ended March 31, 2002 but the Company had depleted its capital resources which
ultimately resulted in the Receiver gaining control and title over the Aberneath
facility which was subsequently sold to Wells Fargo Business Credit, Inc.

Products

With the sale of the Company's sole operating assets by the Receiver to an
affiliate of the Company, the Company's operations ceased. Prior to the
possession of the U.K company's assets by the Receiver, the Company had been
capable of producing two distinct product lines at it's Aberneath facility: (i)
the Company's patented Nuovinox product, a stainless steel cladded product with
metallurigically joined carbon steel core and (ii) steel abrasive shot in
various sizes marketed under the name Stelablast.

Nuovinox is a carbon steel product cladded with stainless steel. From raw
stainless steel the Registrant created tubes several inches in diameter and
filled the tubes with treated scrap steel, reducing and elongating the tubes in
a proprietary process until the desired product was created, usually rebar 1/2
inch or larger in diameter with a core of carbon sheet and an outer casing of
stainless steel. The most commonly produced product was rebar, but Nuovinox

could be manufactured in flat bar, round bar and pipes of various sizes and
dimensions. The resultant product, which generally consisted of up to 25% of
stainless steel by weight, created a molecular bond between the carbon steel
core and the stainless steel exterior. The raw materials for the rebar comes
from very low grade scrap steel.

Nuovinox has corrosion resistant properties comparable to stainless steel and
achieves superior level of mechanical strength when compared with solid
stainless steels manufactured by other parties. The Company priced Nuovinox at
approximately one-third of the price of stainless steel products.

The properties of the stainless steel cladding enable Nuovinox to be used for
many applications which require an upgrading of carbon steel or a substitute for
stainless steel, in particular where corrosion resistance, hygiene and
aesthetics are determining factors. Prior to the possession of all of the
Company's assets, the Company believed there was considerable interest in
Nuovinox from customers around the world who expressed their intention of using
the product in a variety of applications, a belief that continues.

Nuovinox competed with carbon and stainless steel based on the following
properties and characteristics of Nuovinox:

" High level of corrosion resistance;

" Stronger than pure stainless steel (when incorporating a high
tensile carbon steel core);

" Strength and ductility superior to mild steel; and

" Minimal maintenance when incorporated in structures.

The abrasive products produced by the Company were produced as a by-product of
the process used in producing Nuovinox. The Registrant believed that its
abrasive product, Stelablast, offers a superior and longer lasting shot blast
than conventional cast steel shot at a price of approximately 44% of
conventional cast steel shot.

Customers and Distribution

During the 2000, 2001 and 2002 fiscal years, the Company distributed its
Nuovinox and abrasive products through its direct marketing efforts. Over the
last several years, the Registrant has developed contacts with United States and
Federal and State transportation authorizations, confirming the utility of
Nuovinox for highways and bridges.

In 1997, the United States passed the Intermodel Surface Transportation Act to
test for new materials used in highway construction with a goal of achieving a
75 to 100 year life objective for bridges and highways. Existing highway life is
approximately 25 years, largely because rebar and dowels rust, expand, and break
down roads and bridges, particularly in high corrosive areas near salt water.
Dowels are used to pin concrete highway sections that are about 15 feet apart
with each lane requiring 12 dowels per join. While stainless steel can be used
for pins and rebar in concrete highways, particularly in high corrosive areas,
stainless steel costs approximately three times that of Nuovinox.

Despite the receivership of Stelax (U.K.) market interest in the Nuovinox
product remains strong.

It is the Company's intention, subject to legal and financial restraints being
removed, to incorporate other business activities in the future.

Industry Conditions and Competition

The steel industry is generally considered to be highly competitive and cyclical
with a great number of large and sophisticated producers, all of whom have
greater financial and technical resources than the Company. Additionally, the
cycles for steel products vary from one specialty steel to another.

Economic conditions among end-users of steel products may result in cyclical
downturns in business, even in markets expected to expand over the long term.
Until a wide range of different products used in varying sections is produced by
the Company, such downturns may have a significant impact on the Company's
revenues.

Nuovinox is a new product that has been extensively tested. During the 2001
fiscal year, the Company received various commitments for the use of the
product. Further product acceptance may be affected by pricing and the other
variables. Management of the Company is not aware of any product other than pure
stainless steel that competes directly with Nuovinox.

Currency Fluctuations

It was anticipated that the Company's expenses and sales would be denominated in
several currencies, including major European currencies, the US Dollar and the
Yen. As a result the Company's operating income and cash flow was significantly
exposed to currency fluctuations. Management's policy is to monitor the
Company's exposure to currency risks, and, as appropriate, use financial forward
or other instruments to minimize the effect of these fluctuations. No such
instruments were held as of March 31, 2002 or 2003 and there was no assurance
that the Company would be able to obtain such instruments.

Research and Development

During the last three fiscal years the Company has not spent any significant
amounts on research and development.

Patents and Trademarks

The Company held approximately 70 worldwide patents for Nuovinox. The Company
considered its patents important for the success of this product. Presently the
Company does not have any patent rights.

Employees

As of September 15, 2004, the Company did not have any employees or independent
contractors working for it.

ITEM 2. PROPERTIES.

The Company's principal executive offices in the United States are located at a
private residence, 5515 Meadow Crest Dr., Dallas, TX 75229. Until acquired by a
Receiver in March 2002 the Company owned the land and buildings comprising the
Aberneath Facility in Wales, United Kingdom. See Item 1. Business - The
Aberneath Facility.

ITEM 3. LEGAL PROCEEDINGS.

In March 2002 Stelax (U.K.) was placed into administrative receivership by the
loan creditor, Wells Fargo Business Credit Inc., who were exercising powers and
remedies available to them by law and by the Debenture and Guarantee dated June
30, 2000 and made between the Banc of America and Stelax (U.K.) and assigned to
Wells Fargo Business Credit Inc. on the April 20, 2001. The Registrant's
operations thus ceased. Stelax Industries, Ltd., and Stelax U.K were
collectively the borrowers under the aforementioned Debenture and Guarantee. The
preferential rights under the latter over other creditors included that of
action to liquidate the assets of the Company and levy late payment interest and
charges upon the borrowers. Wells Fargo exercised their power to appoint the
Receiver to the U.K. company and gain control over the operational assets of the
group. On January 31, 2003, the United States District Court for the Southern
District of New York entered an Order of Judgment in favor of Wells Fargo
Business Credit, Inc. against Stelax Industries, Ltd., and Stelax (U.K.) in the
amount of $4,041,778.27 plus $911.46 per day for each day from August 22, 2002
until the entry of the judgment which occurred on January 31, 2003. The
Company's calculation of cumulative interest to the March 31, 2002 was $ 433,998
and continued to provide for interest at the rate of $911.46 per each day
throughout the fiscal year to March 31, 2003. The financial statements show a
loan note payable of $ 3,645,833 and accrued interest of $766,513 at March 31,
2003. In the Order of Judgment, the judge adopted the magistrate's
recommendations. The magistrate's recommendations indicated that the plaintiff
filed a complaint against the defendants on March 5, 2002. On June 13, 2002, the
Court's clerk issued a Certificate of Default and on July 2, 2002, the court
entered the default judgment, referring the matter to the magistrate to
determine damages. In August 2003 Timaran Limited purchased the assets of the
U.K. company from the Receiver. Timaran Limited has assigned all its rights and
interest in these assets to Stelax International Ltd., a private company
unassociated with Stelax Industries Ltd. The judgement against Stelax Industries
Ltd. still remains.

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

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Market Information

During fiscal 2002 and 2003, the Registrant's Common Stock was quoted on the
NASDAQ Bulletin Board System. The Registrant's Common Stock in the United States
trades under the symbol "STAX". They represent inter-dealer prices and do not
represent actual transactions. The range of the closing high and low bid and
prices as quoted on the NASDAQ Bulletin Board from April 1, 2001 through March
31, 2003 is as follows:

Fiscal 2002 High Low High Low
----------- ---- --- ---- ---

First Quarter 0.81 0.32 0.87 0.36
Second Quarter 0.70 0.25 0.73 0.27
Third Quarter 0.91 0.23 0.97 0.26
Fourth Quarter 0.75 0.24 0.78 0.27
Bid Ask
---------------------- ------------------------
Fiscal 2003 High Low High Low

First Quarter 0.41 0.23 0.43 0.25
Second Quarter 0.34 0.19 0.50 0.23
Third Quarter 0.18 0.18 0.505 0.21
Fourth Quarter 0.38 0.21 0.46 0.24

The Registrant's Common Stock is also quoted on the Le Nouveau Marche of the
Paris Stock Exchange. Trading on the Le Nouveau Marche commenced July 11, 1996.

Holders

As of September 15, 2004, there were approximately 200 holders of record of the
Registrant's Common Stock.

Dividends

The future payment by the Registrant of dividends, if any, rests within the
discretion of its Board of Directors and will depend upon the Registrant's
earnings, if any, capital requirements and the Registrant's financial condition,
as well as other relevant factors. The Registrant has not declared dividends
since its inception, and has no present intention of paying cash dividends on
its Common Stock in the foreseeable future.

Foreign Regulation

The Investment Canada Act ("ICA"), which became effective on June 30, 1985,
regulates the acquisition by non-Canadians of control of a Canadian business
enterprise. In effect, the ICA required review by Investment Canada, the agency
which administers the ICA, and approval by the Canadian government in the case
of an acquisition of control of a Canadian business by a non-Canadian where: (i)
in the case of a direct acquisition (for example, through a share purchase or
asset purchase), the assets of the business are $5 million or more in value; or
(ii) in the case of an indirect acquisition (for example, the acquisition of the
foreign parent of the Canadian business) where the Canadian business has assets
of $50 million or more in value or if the Canadian business represents more than
50% of the assets of the original group and the Canadian business has assets of
$5 million or more in value. Review and approval are also required for the
acquisition or establishment of a new business in areas concerning Canada's
cultural heritage or national identity such as book publishing, film production
and distribution, television and radio, production and distribution of music,
and the oil and natural gas industry, regardless of the size of the investment.

In the context of the Company, in essence, three methods of acquiring control of
a Canadian business are regulated by the ICA: (i) the acquisition of all or
substantially all of the assets used in carrying on the Canadian business; (ii)
the acquisition, directly and indirectly, of voting shares of a Canadian
corporation carrying on the Canadian business; (iii) the acquisition of voting

control of an entity which controls, directly or indirectly, another entity
carrying on a Canadian business. An acquisition of a majority of the voting
interests of an entity, including a corporation, is deemed to be an acquisition
of control under the ICA. An acquisition of less than one-third of the voting
shares of a corporation is deemed not to be an acquisition of control. An
acquisition of less than a majority, but one-third or more, of the voting shares
of a corporation is presumed to be an acquisition of control unless it can be
established that on the acquisition the corporation is not, in fact, controlled
by the acquirer through the ownership of voting shares. For partnerships,
trusts, joint ventures or other unincorporated entities, an acquisition of less
than a majority of the voting interests is deemed not to be an acquisition of
control.

In 1988, the ICA was amended pursuant to the Free Trade Agreement dated January
2, 1988 between Canada and the United States to relax the restrictions of the
ICA. As a result of these amendments, except where the Canadian business is in
the cultural, oil and gas, uranium, financial services or transportation
sectors, the threshold for direct acquisition of control by U.S. investors and
other foreign investors acquiring control of a Canadian business from U.S.
investors has been raised from $5 million to $150 million of gross assets, and
indirect acquisitions are not reviewable.

In addition to the foregoing, the ICA requires that all other acquisitions of
control of Canadian businesses by non-Canadians are subject to formal
notification to the Canadian government. These provisions require a foreign
investor to give notice in the required form, which notices are for information,
as opposed to review, purposes.

The Company does not believe that it is subject to the provisions of ICA because
it does not have a place of business or employees in Canada nor assets in Canada
used to carry on the Company's business, all of which are definitional
requirements to be considered a Canadian business subject to such act. The
Company does not plan to alter its contacts with Canada and, therefore, believes
that ICA will continue not to be applicable to the Common Stock of the Company
and the acquisition thereof by a non-resident or non-citizen of Canada. However,
in the event that management of the Company should for whatever reason decide
that it would be in the best interests of the Company to hire employees in
Canada, lease office space in Canada or acquire properties in Canada, the
Company would probably be deemed to be a Canadian based enterprise and ICA would
be applicable.

Certain Tax Matters

Following is a brief summary of the United States and Canadian federal income
tax provisions which the Company believes are material to an understanding of
the federal income tax matters relating to the ownership of the Company's Common
Stock. The discussion is for general information only and is not a complete
description of all potential consequences which may arise or of all the rules
that may be relevant to certain stockholders. The discussion is not intended to
be, nor should it be construed to be, legal or tax advice to any particular
stockholder. It is the responsibility of each stockholder of the Company to
consult with his own tax advisors with respect to these and other provisions
which may affect his individual tax position.

The presently existing tax treaty between the United States and Canada
essentially calls for taxation of stockholders by the stockholder's country of
residence. In those instances in which a tax may be assessed by the other
country, a corresponding credit against the tax owed in the country of residence
is normally available. Stockholders of the Registrant should consult with their
own tax advisors, however, for full details.

A. United States Taxes.

In general, a stockholder that is a non resident alien will not be
taxed by the United States on dividends paid by the Registrant.
However, a non resident alien stockholder who engages in a U.S.
business under certain circumstances may be subject to United States
federal income tax. Also, a non resident alien may be subject to United
States withholding tax on dividends paid by the Registrant, though a
tax treaty may alter this treatment. Please consult your tax advisor
regarding the impact of applicable tax treaties.

The gross amount of dividends received by a United States individual or
United States resident will be subject to United States federal income
tax generally in the same manner as dividends received from United
States corporations. However, the stockholder generally may claim a
credit against his United States federal income tax liability for the
Canadian tax withheld from the dividend payment. The amount of the
foreign tax credit is subject to various limitations. Stockholders
should consult their own tax advisors with respect to such limitations.
Dividends from foreign corporations such as the Registrant do not
qualify for the dividends received deduction for corporate stockholders
under Code Section 243, but may qualify for the dividends received

deduction for dividends paid by certain foreign corporations under Code
Section 245 if the holder owns at least 10% of the stock of the
Registrant by vote and value.

Except in the case of shares beneficially owned by a person who is or
is deemed to be a resident of the United States or has or is deemed to
have a "permanent establishment" in the United States, United States
federal income tax consequences generally will not arise upon a
disposition of the Registrant's Common Stock by a resident of Canada.
The United States federal income tax consequences arising for a United
States resident upon a disposition of the Registrant's Common Stock
will depend upon whether such shares are capital assets. Generally, if
the disposed stock is a capital asset, the entire gain or loss realized
upon the disposition would be treated as capital gain or loss. Such
capital gain or loss will be long-term if the Common Stock is held for
more than one year. However, even if the shares are considered capital
assets, under certain circumstances a portion of the gain may be
recharacterized as ordinary income under Code Section 1248. If the
disposed stock is not a capital asset, the entire gain or loss would be
treated as ordinary income or loss.

Capital gains income generally is taxed at a maximum tax rate of 28%.
An individual's capital losses are still allowed in full against
capital gains. In addition, capital losses are allowed against up to
$3,000 of ordinary income, and the excess of net long-term capital loss
over net short-term capital gain is allowed in full for this purpose.

B. Canadian Taxes.

The following is a summary of the principal Canadian federal income tax
considerations generally applicable in respect of the Common Shares.
The tax consequences to any particular holder of Common Shares will
vary according to the status of that holder as an individual, trust,
corporation, or member of a partnership, the jurisdiction in which that
holder is subject to taxation, the place where that holder is resident
and, generally, according to that holder's particular circumstances.
This summary is applicable only to holders who are resident in the
United States, have never been resident in Canada, hold their Common
Shares as capital property, and will not use or hold the Common Shares
in carrying on business in Canada.

This summary is based upon current provisions of the Income Tax Act of
Canada and the regulations thereunder (collectively, the "ITA"),
publicly-announced current proposals to amend the ITA and the current
administrative practices of Revenue Canada. This summary does not take
into account provincial income tax consequences. The summary assumes
that the publicly announced current proposals will be enacted as
proposed with effective dates set out therein; otherwise, the summary
assumes that there will be no other changes in law whether by judicial
or legislative action.

This summary is of a general nature only and is not exhaustive of all
possible income tax consequences. It is not intended as legal or tax
advice to any particular holder of Common Shares and should not be so
construed. Each holder should consult his own tax advisor with respect
to the income tax consequences applicable to him in his own particular
circumstances.

Disposition of Common Shares

Under the ITA, a gain from the sale of Common Shares by a non-resident will not
be subject to Canadian tax, provided the shareholder (and/or persons who do not
deal at arm's length with the shareholder) has not held a "substantial interest"
in the Registrant (25% or more of the shares of any class of the Registrant's
stock) at any time in the five years preceding the disposition. Generally, the
Canadian-United States Tax Convention (the "Tax Convention") will exempt from
Canadian taxation any capital gain realized by a resident of the United States,
provided that the value of the common stock is not derived principally from real
property situated in Canada.

If a non-resident was to dispose of Common Shares to another Canadian
corporation which deals or is deemed to deal on a non-arm's length basis with
the non-resident and which, immediately after the disposition, is connected with
the Registrant (i.e., controls the Registrant or holds shares representing more
than 10% of the voting power and more than 10% of the market value of all issued
and outstanding Common Shares of the Registrant), the excess of the proceeds
over the paid-up capital of the Common Shares sold will be deemed to be taxable
as a dividend either immediately or eventually by means of a deduction in
computing the paid-up capital of the purchasing corporation.

Dividends

In the case of any dividends paid to non-residents, the Canadian tax is withheld
by the Registrant, which remits only the net amount to the shareholder. By
virtue of Article X of the Tax Convention, the rate of tax on dividends paid to
beneficial owners who are residents of the United States is generally limited to
15% of the gross dividend (or 10%, reducing to 6% in 1996 and 5% in 1997 and
thereafter, in the case of certain corporate shareholders owning at least 10% of
the Registrant's voting shares). In the absence of the treaty provisions, the
rate of Canadian withholding tax imposed on non-residents is 25% of the gross
dividend. Stock dividends received by non-residents from the Registrant are
treated by Canada as ordinary dividends.

ITEM 6. SELECTED FINANCIAL DATA

The table below sets forth certain financial data for the Company for its fiscal
years ended March 31, 2003 to 1999 and should be read in conjunction with the
Consolidated Financial Statements and Notes thereto included elsewhere herein.

YEARS ENDED MARCH 31,
2003 2002 2001 2000 1999
--------------------------------------------------------------------------
(restated)1 (restated)1 (restated)2 (restated)2
---------------------------------------------------------------------------

Sales $ - $ 559,170 $ 304,377 $ 136,191 $ 251,025
Gross Loss - (1,222,896) (1,009,953) (657,930) (1,121,224)
Net Loss (1,445,492) (10,751,019) (3,031,717) (2,279,926) (3,150,498)
Total Assets 73,694 148,308 10,328,918 9,586,346 9,624,208
Long Term Obligations - - 2,916,666 - -
Total Liabilities 5,484,655 5,180,734 5,791,155 2,670,203 1,521,957
Common Stock Outstanding at year end 47,948,038 43,184,775 39,240,175 37,521,442 35,963,729
Net Loss per share $ (0.03) $ (0.26) $ (0.08) $ (0.06) $ (0.10)

1 See Note N in the Notes to Consolidated Financial Statements herein
2 The data for this period has been restated from that presented previously to
reflect those adjustments set forth in Note N that affect these periods.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL PLAN OF OPERATION.

Forward-Looking Statements - Cautionary Statements. This Annual Report contains
certain "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of
the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Specifically, all statements other than statements of historical facts included
in this report regarding the Company's financial position, business strategy and
plans and objectives of management of the Company for future operations are
forward-looking statements. These forward-looking statements are based on the
beliefs of the Company's management, as well as assumptions made by and
information currently available to the Company's management. When used in this
report, the words "anticipate," "believe," "estimate," "expect," and "intend"
and words or phrases of similar import, as they relate to the Company or Company
management, are intended to identify forward-looking statements. Such statements
reflect the current view of the Company with respect to future events and are
subject to risks, uncertainties and assumptions related to various factors
including, without limitation, competitive factors, general economic conditions,
customer relations, increases in raw material prices, governmental regulation
and supervision, seasonality, acceptance of the Company's Nuovinox products in
the marketplace, technological changes and changes in industry practices
("cautionary statements"). Although the Company believes that its expectations
are reasonable, it can give no assurance that such expectations will prove to be
correct. Based upon changing conditions, should any one or more of these risks
or uncertainties materialize, or should any underlying assumptions prove
incorrect, actual results may vary materially from those described herein as
anticipated, believed, estimated, expected or intended. All subsequent written
and oral forward-looking statements attributable to the Company or persons
acting on its behalf are expressly qualified in their entirety by the applicable
cautionary statements.

Liquidity and Capital Resources

With the Company's cessation of operations because of the receivership in March
2002 of Stelax (U.K.) and subsequent judgment against Stelax Industries Ltd,
Stelax (U.K.)'s parent, the Company lacked any resources to conduct operations
or to pay its creditors. The Company does not envisage being capable of either
unless debt forgiveness is obtained from the loan creditor, Wells Fargo Inc. The
financial statements have been prepared on the basis that the company is a
"going concern". In the absence of any debt forgiveness from Wells Fargo the

Company cannot pay its debts and is not a "going concern". However the Directors
of the Company do not believe that any material adjustments to the values of
assets or liabilities would be necessary to reflect the "liquidation basis".

With the Company's plant facilities unencumbered, in July 2000 the Company's
United States subsidiary entered into a Loan and Security Agreement with Bank of
America Commercial Finance Corporation (the "Loan Agreement") whereby the
Company obtained a Term Loan as well as Revolving Credit and Credit
Accommodations. The maximum amount that could have been borrowed under the Loan
Agreement was $5,750,000. The loan was subsequently assigned to Wells Fargo.

The proceeds from the term loan were used to fund operational losses to the
extent necessary to cover the start up period for Nuovinox sales and to finance
inventory and receivables to the extent that the Company needed funds in excess
of borrowing under the Term Loan for inventory and receivables.

Financially, the Company had to achieve positive cash flow, including debt
service, from the capital provided from the Loan Agreement. This goal seemed
achievable because the Nuovinox product had received strong acceptance and a
large number of orders. Production of Nuovinox began in large quantities in the
first quarter 2001, the delay being caused by the development of processes
unique to the product, development that had not been completed and implemented
successfully until shortly before the Company's subsidiary entered into
receivership in March 2002.

In fiscal 2001, cash used by operating and investing activities were funded
through a line of credit. This line of credit resulted in $4,166,666 being
infused into the Company. Net cash used in operations was $3,169,320,
principally due to out net losses and an increase in working capital of $
855,534. The increase in working capital was attributable primarily to the
settlement of trade creditors following the receipt of loan funds. Offsetting
the $3,169,320 in cash consumed in operations was $24,820 from the purchase of
stock by affiliates of the Company. The Company had purchases of equipment and
intangibles of $266,130. Accordingly, these uses of cash were funded by the
$4,166,666 from the Company's institutional lender resulting in an increase in
cash of $756,036 over the year taking cash balances to a year end position of
$800,696. Interest paid out within the year amounted to $382,098.

In fiscal 2002, there were no other sources of funds to cover cash used by
operating and investing activities and in March 2002, the U.K. subsidiary
entered into receivership. The Company's cash position decreased by $796,594 in
fiscal 2002 consuming the $800,696 cash balance that existed at the end of
fiscal 2001. Operating activities consumed $519,386. While the Company lost
$10,751,019, $7,027,482 was a non-cash write down of assets controlled by the
receiver. Of the balance, $465,820 consisted of the non-cash depreciation
charge. The majority of this amount was funded through an increase in accounts
payable accruals, and payables to related parties of $2,058,566, an increase
that was accrued for but not paid. Reductions in inventory, receivables, and
other assets generated $514,733 cash. The Company utilized an additional
$520,833 in cash to reduce debt, debt owed primarily to a commercial lender
which triggered the receivership in March 2002. The Company received $322,755
from the sale of stock resulting in a cash decrease from financing activities of
$198,078. There were no purchases of property, equipment or intangibles in this
period and no cash payment in regard to interest within the year. The resulting
year end cash & equivalents balance was $4,102.

In fiscal year 2003, there was no commercial activity within the Company. The
Company consumed $1,285 cash. Cash used by operating activities was $60,162 and
this was funded by a $1,276,001 increase in accounts payable and payables to
related parties, accordingly, operating activities used $60,162 cash which was
partly funded by $58,877 cash received from the sale of stock to affiliates of
the Company. There were no purchases of property, equipment or intangibles in
this period and no cash payment in regard to interest within the year. The
resulting year end cash and equivalents balance was $ 2,817. In fiscal year
2003, the President of the Company and the President of the subsidiary converted
debt owed to each into Common Stock of the Company. This conversion was in
regard to a total debt of $1,008,080 and was converted for 4,241,273 shares.

At the present time the Company possesses no operational activities and lacks
cash resources to either service or repay its debt. Debt forgiveness from its
major creditor, Wells Fargo Inc. would allow the Company to reverse this
position. Liquidation of the Company is not imminent and therefore the Directors
have concluded that it is appropriate to prepare the financial statements on a
going concern basis. The Company's audit report is modified because of this
concern. The Directors of the Company do not believe that any material
adjustments to the values of assets or liabilities would be necessary to reflect
the "liquidation basis".

2003 versus 2002

The Company had no revenues in fiscal 2003 and incurred a loss of $1,445,492, $
443,223 of which was interest expense (including $73,329 interest computed on
warrants). The whole of these expenses were marketing, general and
administrative expenses incurred in connection with administration of the
registrant whilst the U.K. subsidiary, was under the control of the Receiver.
Within the $1,002,269 loss from operations legal and accounting expense
accounted for $214,048, bad debt write off for $ 37,711 and management and
affiliate fees for $ 285,895. Many of the other expenses such as listing fees,
travel and motoring, rent and insurance, phones, and advertising & marketing
were accounted for within the account statements but were settled, in the first
instance, by the President of the Company who subsequently recharged the Company
accordingly. This increased related party debt was partly offset by conversion
of debt into common stock The Plant was not operational throughout the period
and therefore no cost of sales were incurred. The depletion of cash reserves
meant that the company earned no interest within 2003 but continued to accrue
interest on its debt to Wells Fargo. Of the $443,223 interest shown within the
financial statements $ 332,000 was accrued interest on the Wells Fargo
indebtedness. However total interest in 2003 was lower than in 2002 due mainly
to the reduction in interest being accrued on a reduced related party loan.

2002 versus 2001

The Company's revenues increased to $559,170 in fiscal 2002 period compared to
revenues of $304,377 in the earlier period, an 83.71% increase. Revenues in
fiscal 2001 were less than fiscal 2002 because production of Nuovinox(TM), which
began in the first quarter of fiscal 2001, was not as efficient as in fiscal
2002, such inefficiencies reflecting the development of manufacturing processes
and resulting improvement of those processes continuing into the 2002 fiscal
year. Revenues reflect the net sales value achieved less any discount, if any.

However, by the end of fiscal 2001 on March 31, 2001, the Company had used the
maximum amount available under the Loan Agreement. The Company had to reduce
staffing and limit production in the second quarter of fiscal 2002 due
principally to the unavailability of capital to expand production and meet
demand.

Cost of sales in fiscal 2002 were $1,782,066 compared to $ 1,314,330 in 2001,
that is, in fiscal 2002 each $1.00 in revenue cost about $3.14 compared to $1.00
in revenue in fiscal 2001 costing about $2.31. Cost of sales figures incorporate
the cost of direct raw materials and consumables consumed, plant repair and
maintenance, overheads directly attributed to the running of the Plant and
include direct and indirect wages together with factory staff salaries includes
the portion of depreciation and amortisation in respect of plant utilized in the
attainment of the revenue, $328,667 and $293,121 respectively. The balance of
depreciation and amortisation is charged to selling, general and administration
expenses. Freight charges are also included within the cost of sales figures.
Management undertook analyses of individual expenses to identify where positive
and / or negative variances to budget have occurred. Conclusions drawn were that
efficiencies and subsequent cost reductions within the production process were
being evidenced. The workforce was becoming more multi skilled and experienced,
areas of process improvement had been identified and implemented, better
utilization of power sources was being achieved and as labour and plant running
costs are semi fixed in nature overall throughputs per man hour were rising as
production levels rose. Cost of sales exceeded revenue in both years for a
number of reasons. Despite the gross contribution (Revenue less cost of direct
materials) being in excess of 55% for both years the volume of sales achieved
had simply not been sufficient to generate the total gross contribution to cover
the cost of direct material and all other costs incorporated into cost of
sales.. Total production output and throughput per hour rates needed to be
elevated against the backcloth of relatively fixed direct on-costs of wages,
depreciation and other factory overheads. Better energy usage and the removal of
the other inefficiencies would also be contributory factors. Additionally the
Company could see further benefit accruing from being able to purchase its raw
material in larger volumes and thus hopefully at lower cost.

Selling, general and administrative expenses include all other costs other than
interest. Fiscal year 2002 saw an 4% increase in these expenses, from $1,520,428
to $ 1,579,935 with the greater part of this increase being due to higher
insurance, legal and accountancy costs. Such costs are however relatively fixed
in nature. Management reviews movements of overhead costs between years and also
reviews their percentage relativity to revenues.

Interest income declined to $2,505 in fiscal 2002 from $92,840 in fiscal 2001.
While declining interest rates on cash balances contributed to the decline in
interest income between the two periods, the Company's cash balances declined
throughout the 2002 fiscal year as operational losses consumed cash resulting in
less cash earning interest as these balances declined. At the end of fiscal
2001, the Company had a cash balance of $800,696 which decreased throughout
fiscal 2002 to $211,763, $45,327, $15,035 and $4,102 at the end of each
succeeding fiscal quarter. As cash decreased, borrowing under the Company's

credit facilities increased such that interest expense increased in fiscal 2002
to $923,211 from $594,176 in fiscal 2001.

Included within the Company's consolidated statement of operations was that of
the investment write down and other charges associated with the U.K. subsidiary
being placed under administrative receivership in March 2002. A total charge of
$7,027,482 is included in the total net loss of $ 10,751,019.

Accounting Policies

The Company's accounting policies are detailed in Note A to the Consolidated
Financial Statements. The Company follows US GAAP. In applying these accounting
policies in the preparation of the consolidated financial statements, management
is required to make estimates and assumptions about future events that affect
the reporting and disclosure of assets and liabilities at the balance sheet
dates and the reported amounts of revenue and expense during the periods
covered. The following is a summary of certain critical accounting policies of
Stelax Industries which are impacted by judgments and uncertainties and for
which different amounts would be reported under a different set of conditions or
using different assumptions.

Revenue recognition -- Stelax Industries pursues its policy on revenue
recognition in line with the guidance given in SAB 101. In recognizing revenue
the company looks to the existence of a contract to sell the goods to the buyer,
that delivery has occurred, that the Company's price to the to the buyer has
been fixed and that collectibility is reasonably assured. It records revenue
upon receipt and acceptance by the customer. Once product is delivered and
accepted there are no further consequential performance obligations on the
seller in regard to that delivery. For the years ended March 31, 2003, 2002, and
2001, there was no unbilled revenue included in total revenues and at the fiscal
year end of March 31, 2003 all cash against billed revenue had been received
within the fiscal year itself. This also applied to the position at the year end
March 31, 2002. At March 31,2001 $111,981 was due from trade debtors but had
been fully received at the time of financial statement preparation. The $111,981
was comprised of monies owed by nominated USA Department of Transport nominated
sub-contractors who had accepted delivery of the respective product.
Collectibility of such monies was deemed assured in any case at fiscal year end.
However as a precautionary measure the Company serves notice on the customer
that Title Transfer becomes effective on the day that that payment for goods is
received and cleared, failing which the Company has the right to recover those
goods in the event of customer default. Goods in transit are subject to
insurance cover put in place by the Company, the Seller and therefore the
Company removes the risk of loss of revenue whilst the goods are in transit to
the buyer.

RECENTLY ISSUED BUT NOT YET ADOPTED ACCOUNTING STANDARDS

In view of the fact that the Company has no operations no recently issued but
not yet adopted accounting pronouncements are expected to have a material impact
on the Company's results of operations or financial position.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The Company does not engage and has not engaged in any hedging activities. In
particular, the Company does not hedge, nor has it hedged, its sales for
currency fluctuations, and, accordingly, does not acquire market risk sensitive
instruments. Over the last two fiscal years, market risks have been negligible
because of the small amount of operations in which the Company has engaged.

After the Company's U.K. subsidiary was placed into administrative receivership
in March 2002, the Company's operations effectively ceased, and prior to that
time the Company's primary market risk was a currency exchange rate risk. The
Company did not engage in management of that risk.

In January 2003 a United States Federal District Court entered a judgment
against the Company (See Item 3. Legal Proceedings) in the amount $4,041,778.27
plus interest. The judgment is denominated in United States Dollars, and the
Company does not believe that it is appropriate to engage in financial risk
management of this judgment.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The debt shown in the balance sheet at March 31, 2003 comprises of $390,230
payable to trade creditors, $682,079 payable to related parties, and $ 4,412,346
payable on the Wells Fargo loan note. All are overdue for payment. The latter
item is comprised of $3,645,833 loan capital outstanding and $766,513 on-going
accrued interest. Wells Fargo was the creditor that appointed the Receiver in
March 2002.

See the consolidated financial statements beginning at page F-2 of this Form
10-K Annual Report.

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

Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES.

Annual Evaluation of Our Disclosure Controls and Internal Controls

Within the 90 days prior to the date of this Annual Report on Form 10-K,
management evaluated the effectiveness of the design and operation of the
Company's disclosure controls and procedures and the internal controls and
procedures for financial reporting. This controls evaluation was done under the
supervision and with the participation of the Chief Executive Officer (CEO) and
Chief Financial Officer (CFO), both offices being performed by Harmon H. Hardy.
Following are the conclusions of Mr. Hardy, acting as the Company's CEO and the
CFO, with respect to the effectiveness of our disclosure controls and internal
controls as of March 13, 2003.

CEO and CFO Certifications

Appearing immediately following the Signatures section of this Annual Report on
Form 10-K there are certifications of the CEO and the CFO. The certifications
are required in accordance with Section 302 of the Sarbanes-Oxley Act of 2002.
This section of the Annual Report is the information concerning the controls
evaluation referred to in the Section 302 certifications and this information
should be read in conjunction with the Section 302 certifications for a more
complete understanding of the topics presented.

Disclosure Controls and Internal Controls

Disclosure controls are procedures that are designed with the objective of
ensuring that information required to be disclosed in reports filed under the
Securities Exchange Act of 1934, or the Exchange Act, such as this Annual
Report, is recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms. Disclosure controls are also designed
with the objective of ensuring that such information is accumulated and
communicated to management, including the CEO and CFO, as appropriate to allow
timely decisions regarding required disclosure. Internal controls are procedures
which are designed with the objective of providing reasonable assurance that the
Company's transactions are properly authorized, its assets are safeguarded
against unauthorized or improper use and transactions are properly recorded and
reported, all to permit the preparation of the Company's financial statements in
conformity with generally accepted accounting principles.

Scope of the Controls Evaluation

The evaluation of our disclosure controls and our internal controls by our CEO
and our CFO included a review of all previously existing controls as well as
those recently implemented by the Company and the effect of the controls on the
information generated for use in this Annual Report on Form 10-K. In the course
of the controls evaluation, management sought to identify data errors, controls
problems or acts of fraud and to confirm that appropriate corrective action,
including process improvements, were being undertaken. The internal controls are
also evaluated on an ongoing basis by the Company's independent auditors in
connection with their audit and review activities. The overall goals of these
various evaluation activities are to monitor the Company's disclosure controls
and internal controls and to make modifications as necessary, with the intent
being that the disclosure controls and the internal controls will be maintained
as dynamic systems that change (including with improvements and corrections) as
conditions warrant. Among other matters, management sought in its evaluation to
determine whether there were any "significant deficiencies" or "material
weaknesses" in the Company's internal controls, or whether any acts of fraud
involving personnel who have a significant role in the internal controls were
identified. This information was important both for the controls evaluation
generally and because Items 5 and 6 in the Section 302 certifications of the CEO
and the CFO require that the CEO and the CFO disclose such information to the
Company's Board of Directors, which acts as the Company's Audit Committee, and
to the independent auditors and to report on related matters in this section of
the Annual Report on Form 10-K. In the professional auditing literature,
"significant deficiencies" are referred to as "reportable conditions." These are
control issues that could have a significant adverse effect on the ability to
record, process, summarize and report financial data in the financial
statements. A "material weakness" is defined in the auditing literature as a
particularly serious reportable condition where the internal control does not
reduce to a relatively low level the risk that misstatements caused by error or
fraud may occur in amounts that would be material in relation to the financial
statements and not be detected within a timely period by employees in the normal
course of performing their assigned functions. Management also sought to deal
with other controls matters in the controls evaluation and, in each case if a
problem was identified, to consider what revision, improvement and/or correction
to make in accordance with ongoing procedures.

Conclusions

Based upon the controls evaluation, Mr. Hardy, acting as the Company's CEO and
CFO has concluded that the Company's disclosure controls are effective to ensure
that material information relating to the Company is made known to management
particularly during the period when the Company's periodic reports are being
prepared, and that the Company's internal controls are effective to provide
reasonable assurance that the Company's financial statements are fairly
presented in conformity with generally accepted accounting principles. Further,
since the date of the controls evaluation to the date of this Annual Report,
there have been no significant changes in internal controls or in other factors
that could significantly affect internal controls, including any corrective
actions with regard to significant deficiencies and material weaknesses.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Directors and Officers

Directors and executive officers are elected to serve until each's respective
successor is elected and qualified, typically at the next ensuing annual meeting
of stockholders. The directors and executive officers of the Company as of March
31, 2000 are as follows:

Name and Age Position Served In Office Since

Harmon S. Hardy, 74 Chairman of the 1987
Board, President
and Chief Financial Officer

Ruben Grubner, 47 Director 1995

William D. Alexander, 54 Director 1996

Harmon S. Hardy has been the President of the Company since its inception in
May, 1987 and is Chairman and President of various other entities. Mr. Hardy
devotes a substantial portion of his time to the matters and business of the
Company.

Ruben Grubner has been President of Altec Travel, a travel service firm in
Vancouver, B.C., Canada since 1978.

William D. Alexander is a Senior Vice-President with Bank of Nova Scotia in
Toronto, Canada and has been employed by the bank since 1987.

Audit Committee

The Company does not have an audit committee.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than 10% of a registered class
of the Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Officers, directors and
10% stockholders are required by regulations promulgated by the Securities and
Exchange Commission to furnish the Company copies of all Section 16(a) reports
they file.

The Company believes all Section 16(a) filing requirements applicable to its
officers, directors and 10% beneficial owners were complied with through March
31, 2003, except that the directors failed to file timely reports regarding the
grant of stock options.

Code of Ethics

Given that the Company's operations have been in receivership, the Company has
not adopted a Code of Ethics for the principal executive officer, principal
financial officer, or principal accounting officer or controller.

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth information with respect to the compensation to
the Company's chief executive officer at March 31, 2003 for services rendered
during the fiscal years ended March 31, 2003, 2002, and 2001. The table includes
for the same periods those individuals receiving in excess of $100,000 per year.

Annual Compensation (1)
Stock All Other
Options Compensa-
Name Year Salary Bonus Other (Shares) tion
------------------------- --------- ------------ ------------- ----------- ------------ ------------

Harmon S. Hardy 2003 $ 144,000 $ - $ - - $ 9,000 (2)
Chairman of the 2002 $ 144,000 $ - $ - - $ 9,000 (2)
Board of Directors, 2001 $ 144,000 $ - $ - - $ 9,000 (2)
President and Chief
Financial Officer

A. Cacace 2003 $ 126,895 $ - $ - - $ 6,889 (3)
Managing Director 2002 $ 133,805 $ - $ - - $ 6,226 (4)
of Stelax (U.K.) 2001 $ 145,800 $ - $ - - $ 6,226 (4)

(1) The compensation described in the table does not include the cost to
the Company of benefits furnished to certain officers, including
premiums for health insurance, and other personal benefits provided to
such individuals that are extended in connection with the conduct of
the Company's business. No executive officer named above received other
compensation in excess of the lesser of $50,000 or 10% of such
officer's salary and bonus compensation. Any other payments to officers
of the Company were direct reimbursements to those officers for payment
outlays made on behalf of the Company and in respect of business
expenses.
(2) Includes a monthly car allowance which has been accrued but not paid.
(3) Mr. Cacace's salary was paid in Pounds Sterling and converted at the
rate of 1.41 pounds per Dollar. Of $126,895 salary, $74,250 was accrued
but not paid. See 2003 versus 2002 commentary on page 10.
(4) The entire amount was accrued but not paid.

2002 Option Grants

There were 200,000 options granted to Mr. Hardy during the fiscal year ended
March 31, 2002. In addition the exercise date on 1,350,000 of options granted to
Mr. Hardy was extended from January 2002 to January 2005 during the fiscal year
ended March 31, 2002. The appraised market value of the company's stock at the
time option grant was extended was below the exercise price. There were no
options granted to Mr. Cacace during the fiscal year ended March 31, 2002,
however the exercise date on 500,000 of options granted to Mr. Cacace was
extended from January 2002 to January 2005 during the fiscal year ended March
31, 2002. The appraised market value of the company's stock at the time option
grant was extended was below the exercise price.

See Item 12. Certain Relationships and Related Transactions.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of March 31, 2003, the number and percentage
of outstanding shares of Common Stock beneficially owned by (i) each person
known by the Company to be a beneficial owner of more than five percent (5%) of
the Company's Common Stock; (ii) each of the executive officers of the Company;
(iii) each director of the Company; and (iv) all officers and other directors as
a group:

Shares of Common
Stock Beneficially Percentage
Name and Address of Beneficial Owner (1) Owned of Class
--------------------------------------------------- -------------------------- ----------------
Harmon S. Hardy, Jr.
4004 Belt Line Road, Suite 107

Dallas, TX 75244 11,916,061 (2) 23.83%

Ruben Grubner 100,000 (3) *

William D. Alexander 200,000 (4) *

All Officers and other Directors as a Group 11,382,182 22.76%

* Represents less than one percent

(1) The persons named in the table have sole voting and investment power with
respect to all shares of Common Stock showing as beneficially owned by
them, subject to community property laws, where applicable, and the
information contained in the footnotes to the table.

(2) Includes options to purchase 3,000,000 shares of common stock.

(3) Includes options to purchase 100,000 shares of common stock.

(4) Includes options to purchase 200,000 shares of common stock.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

As of March 31, 2003 and 2002, the Company owed an aggregate of $682,079 and
$864,250, respectively, to Mr. Hardy, the Company's President, and to his
affiliates. These amounts are payable on demand. Effective January 12, 1999, Mr.
Hardy began providing a line of credit up to $600,000 for the benefit of the
Company. The credit line bears interest at 10% per annum. The Company granted
600,000 warrants to purchase common stock of the Company at $0.30 per shares as
consideration of the credit line. In fiscal year 2000, the line of credit was
extended to $1,200,000 at the same interest rate, and the Company granted Mr.
Hardy a warrant to purchase an additional 600,000 shares of common stock for
$0.50 per share. The warrants may be exercised for a period of five years from
the date of the grant. At March 31, 2003 and 2002, $309,164 and $478,283 of the
total owed to Mr. Hardy represented draws on the line of credit and interest.

Subsequent to March 31, 2003, Audit fees of 17,000 pound sterling have been paid
personally by Mr. Hardy in respect of March 31, 2003 and 2002.

At March 31, 2003 and 2002, the Company owed to Mr. Cacace personally $74,250
and $0, respectively.

On January 1, 1999, and again on December 15, 2000, Mr. Hardy and the President
of a subsidiary converted debt owed to each into common stock of the Company.
The conversion resulted in the Company issuing 1,125,000 and 1,500,000 shares of
common stock being issued in exchange for $225,000 and $375,000 of debt,
respectively. The exchange ratio was at current market price of the common
stock. In fiscal year 2002 Mr. Hardy and Mr. Cacace converted debt owed to each
into common stock of the Company. The conversion resulted in the Company issuing
3,100,000 shares of common stock, being issued in exchange for $ 775,000 debt.
In fiscal year 2003 Mr. Hardy and Mr. Cacace converted debt owed to each into
common stock of the Company. The conversion resulted in the Company issuing
4,582,182 shares of common stock, being issued in exchange for $ 1,088,080 debt.
The exchange ratio was at the current market price of the Common Stock.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Not Applicable

PART IV

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

(a) See "Index to Consolidated Financial Statements" included at F-1 of this
Form 10-K Annual Report for a listing of financial statements and schedules
filed as a part of this Form 10-K Annual Report.

(b) The following exhibits are or have been filed as a part of this Annual
Report on Form 10-K:

Exhibit
Number Description of Exhibit Location of Exhibit

3(a) Certificate of Incorporation of the Company a

3(b) Memorandum of Association of the Company a

3(c) Articles of the Company a

3(d) Amendment to Articles of the Company a

3(e) Amendment to Articles of the Company
changing the name to "Stelax Industries Ltd."
Previously filed
4(a) Form of Stock Certificate a

4(b) Form of 7% Convertible Note due August 31, 1997 c

4(c) Form of Common Stock Purchase Warrant b

10(a) Sale and Purchase Agreement dated August 4, 1995 by and
between Shipyard Limited and ZX(U.K.) Limited
(c/k/a Stelax (U.K.) Limited) b

10(b) Agreement for Sale and Purchase of Assets by and between
Camborne Industries PLC (in receivership) and ZX(U.K.) Limited
(c/k/a Stelax (U.K.) Limited) b

10(c) Agreement relating to the land and buildings at Wern Works,
Briton Ferry Neath by and between Maritime Transport
Services Limited and ZX(U.K.) Limited (c/k/a Stelax (U.K.)
Limited) b

10(d) Variation Agreement dated November 13, 1995 by and between
Camborne Industries PLC and ZX(U.K.) Limited
(c/k/a Stelax (U.K.) Limited) b

10(e) Agreement dated November 13, 1995 by and between
Maritime Transport Services Limited and ZX(U.K.) Limited
(c/k/a Stelax (U.K.) Limited) b

10(f) Chattel Mortgage dated November 13, 1995 by and between
ZX(U.K.) Limited and Camborne Industries PLC (c/k/a Stelax
(U.K.) Limited) b

10(g) Patent Mortgage dated November 13, 1995 by and
between ZX(U.K.) Limited and Camborne Industries PLC
(c/k/a Stelax (U.K.) Limited) b

10(h) Trademarks Mortgage dated November 13, 1995 by and between
ZX(U.K.) Limited and Camborne Industries PLC
(c/k/a Stelax(U.K.) Limited) b

21(a) Subsidiaries of the Company

Stelax (U.K.) Limited, a United Kingdom subsidiary
Stelax USA, Inc., a Delaware corporation

31* Certification of the Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
32* Certification of the Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

*Filed herewith

a. Incorporated by reference from the Form S-18 Registration Statement,
as amended (No. 33-27667-FW), for the Company.

b. Incorporated by reference from the Form 8-K dated November 7, 1995.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Stelax Industries Ltd
British Columbia, Canada

We have audited the accompanying consolidated balance sheet of Stelax Industries
Ltd and subsidiary as of March 31, 2003 and 2002, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
years in the three year period ended March 31, 2003. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on the financial statements based on our audits.

We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Stelax Industries Ltd and
subsidiary as of March 31, 2003 and 2002, and the results of their operations
and their cash flows for each of the years in the three year period ended March
31, 2003 in conformity with accounting principles accepted in the United States
of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note I to the
financial statements, at March 31, 2003, the Company was not in compliance with
certain covenants of its long-term loan agreement as a consequence of which a
Receiver was appointed to the company's U.K. subsidiary and a judgement was made
against the company. As discussed in Note I there is substantial doubt about the
Company's ability to continue as a going concern. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.

As discussed in Note N, the accompanying financial statements for the years
ended March 31, 2002 and 2001 have been restated.

/s/ DELOITTE & TOUCHE LLP

DELOITTE & TOUCHE LLP
Cardiff, U.K.

Date 20 December, 2004

F-1

Stelax Industries Ltd

CONSOLIDATED BALANCE SHEETS
(Presented in United States dollars)

ASSETS

Restated
March 31, March 31,
2003 2002
------------- -------------

CURRENT ASSETS:

Cash and cash equivalents $ 2,817 $ 4,102
Receivable from related parties 3,000 3,000
------------ -------------
Total Current Assets 5,817 7,102

OTHER ASSETS 67,877 141,206
------------ -------------

TOTAL ASSETS $ 73,694 $ 148,308
============= =============

See notes to consolidated financial statements.
F-2

Stelax Industries Ltd

BALANCE SHEETS
(Presented in United States dollars)

LIABILITIES AND STOCKHOLDERS' DEFICIT

Restated
March 31, March 31,
2003 2002
------------- -------------
CURRENT LIABILITIES:

Accounts payable $ 390,230 $ 206,653
Payable to related parties 682,079 894,250
Accrued interest 766,513 433,998
Note payable--short term 3,645,833 3,645,833
------------- -------------

Total Current Liabilities 5,484,655 5,180,734

STOCKHOLDERS' DEFICIT:
Common stock - 50,000,000 shares authorized, no stated par value; issued and
outstanding 47,948,038 and 43,184,775 shares at March 31,
2003 and 2002, respectively 26,348,674 25,281,717
Additional paid in capital 477,060 477,060
Accumulated deficit (32,236,695) (30,791,203)
------------- -------------

Total Stockholders' Deficit $ (5,410,961) $ (5,032,426)
------------- --------------

TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIT $ 73,694 $ 148,308
============= =============

See notes to consolidated financial statements.
F-3

Stelax Industries Ltd.

CONSOLIDATED STATEMENTS OF OPERATIONS
(Presented in United States dollars)

Year Ended
--------------------------------------------------

Restated Restated
March 31, March 31, March 31,
2003 2002 2001
------------- ------------- -------------

Revenues $ - $ 559,170 $ 304,377
Cost of sales - 1,782,066 1,314,330
------------- ------------- -------------

Gross loss - (1,222,896) (1,009,953)

Selling, general and administrative expenses
(including depreciation and
amortization of $0, $219,500 and $262,110
for the years ended March 31, 2003, 2002
and 2001, respectively) 1,002,269 1,579,935 1,520,428
------------- ------------- -------------

Loss from operations (1,002,269) (2,802,831) (2,530,381)

Other income (expense):
Interest income - 2,505 92,840
Interest expense (443,223) (923,211) (594,176)
Investment write-downs - (7,027,482) -
------------ ---------- ------------

Net loss $ (1,445,492) $ (10,751,019) $ (3,031,717)
============= ============= ===============

Weighted average shares of common stock
- basic and diluted 44,446,718 41,220,912 37,993,516
============= ============= =============

Net loss per share - basic and diluted $ (0.03) $ (0.26) $ (0.08)
============ ============ ============

See notes to consolidated financial statements.
F-4

Stelax Industries Ltd

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY/(DEFICIT)
(Presented in United States dollars)

Additional Total
Common Stock Paid in Accumulated Translation Comprehensive
Shares Amount Capital Deficit Adjustments Total Loss
------------- ------------ ------- ------------ ---------- ----- -------------

BALANCE at March 31, 2000 (Restated) 37,521,442 $ 23,686,222 $353,984 $(17,008,467) $ 195,679 $ 7,227,418 $

Common stock issued during the period:
$.25 per share for related party
note payable conversion 1,500,000 375,000 - - - 375,000 -
$.30 per share 82,733 24,820 - - - 24,820 -
Stock based compensation 136,000 97,920 - - - 97,920 -
Issuance of warrants - - 123,076 - - 123,076 -
Foreign currency translation adjustment - - - - 26,453 26,453 26,453
Net loss - - - (3,031,717) - (3,031,717) (3,031,717)
----------
COMPREHENSIVE LOSS (3,005,264)
----------- ------------ ------- ----------- ------- ---------- ==========

BALANCE at March 31, 2001 (Restated) 39,240,175 $ 24,183,962 $477,060 $(20,040,184) $ 222,132 $ 4,842,970

Common stock issued during the period:
$.25 per share for related party note
payable conversion 3,100,000 775,000 - - - 775,000 -
$.30 to $.50 per share 844,600 322,755 - - - 322,755 -
Foreign currency translation adjustment - - - - (222,132) (222,132) (222,132)
Net loss - - - (10,751,019) - (10,751,019) (10,751,019)
-----------
COMPREHENSIVE LOSS $(10,973,751)
----------- ------------ ------- ----------- --------- --------- ===========

BALANCE at March 31, 2002 (Restated) 43,184,775 $ 25,281,717 $477,060 $(30,791,203) $ - $(5,032,426)

Common Stock issued during the period;
$.22 per share for related party debt
conversion 4,582,182 $ 1,008,080 - - - $ 1,008,080
$.30 to .50 per share 181,081 58,877 - - - 58,877
Net Loss - - - (1,445,492) - (1,445,492) (1,445,492)
----------- ------------ ------- ----------- ---------
COMPREHENSIVE LOSS $ (1,445,492)
----------- ------------ ------- ----------- --------- --------- ----------

BALANCE at March 31, 2003 47,948,038 $ 26,348,674 $477,060 $(32,236,695) $ - $(5,410,961)
=========== ============ ======= = ========== ========= ==========

See notes to consolidated financial statements.
F-5

Stelax Industries Ltd

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Presented in United States dollars)

Year Ended
------------------------------------------------
Restated Restated
March 31, March 31, March 31,
2003 2002 2001
------------ ------------- -------------

CASH FLOW FROM OPERATING ACTIVITIES

Net loss $ (1,445,492) $ (10,751,019) $ ( 3,031,717)
Adjustments to reconcile net loss
to net cash used by operating activities:
Depreciation & amortization - 465,820 490,867
Stock based compensation - - 97,920
Stock based interest expense 109,329 164,001 129,144
Investment write-down - 7,027,482 -
Changes in operating assets and liabilities
Receivables - 102,754 (49,534)
Inventory and prepaids - 209,975 (7,536)
Other assets - 202,004 (143,237)
Accounts payable and accruals 516,092 1,826,982 (725,487)
Payable to related parties 759,909 232,615 70,260
----------- ------------ ------------

Net cash used by operating activities (60,162) (519,386) (3,169,320)

CASH FLOW FROM INVESTING ACTIVITIES

Purchase of property, equipment &
intangibles - (79,130) (266,130)
----------- ------------ ------------

Net cash used by investing activities - (79,130) (266,130)

CASH FLOW FROM FINANCING ACTIVITIES:

Net proceeds from common stock issuance 58,877 322,755 24,820
Note payable borrowings - - 4,166,666
Note payable payments - (520,833) -
----------- ------------ ------------

Net cash provided by financing activities 58,877 (198,078) 4,191,486
------------ ------------ ------------

Net increase (decrease) in cash and cash
equivalents (1,285) (796,594) 756,036

Cash and cash equivalents at beginning
of year 4,102 800,696 44,660
----------- ------------ ------------

Cash & cash equivalents at end of year $ 2,817 $ 4,102 $ 800,696
========== ============ ============

Interest paid $ 37,379 $ 260,212 $ 382,098
========== ============ ============
Income taxes paid $ - $ - $ -
========== ============ ============

NON-CASH INVESTING AND FINANCING
ACTIVITIES

Receivable from related parties $ 141,480 $ - $ -
Issuance of stock for related party payable 1,008,080 775,000 375,000
Issuance of warrants - - (123,076)
Payment of payable to related parties (1,149,560) (775,000) (399,820)
----------- ------------ ------------

$ - $ - $ -
=========== ============ ============

See notes to consolidated financial statements.
F-6

STELAX INDUSTRIES LTD.
NOTES TO FINANCIAL STATEMENTS
(Presented in United States Dollars)

A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

Stelax Industries, Ltd. (a Canadian corporation) formerly Zfax Image Corp., (the
"Company") was incorporated on May 5, 1987, primarily to develop and produce
portable facsimile machines. These operations were conducted through the
Company's formerly owned subsidiary, Zfax, Inc.

On July 11, 1995, the Company incorporated Stelax (U.K.) Limited ("Stelax") as a
wholly owned subsidiary in the United Kingdom to acquire certain assets of a
steel mill in West Glamorgan, Wales and establish operations in the stainless
steel manufacturing business. The financial statements for the years ended March
31, 2001 and 2000 include the accounts of the Company and its U.K. subsidiary.
The operating loss of this subsidiary was $2,223,244, and $2,080,970 for the
years ended March 31, 2001 and 2000 and it had identifiable assets of $9,362,218
at March 31, 2000. All significant intercompany balances and transactions were
eliminated. On March 7, 2002 an Administrative Receiver was appointed to manage
the assets covered by the note payable agreement. The financial statements at
March 31,2002 consolidate the results of the subsidiary up to March 7,2002,
thereafter the subsidiary has been reported using the cost method The operating
loss of this subsidiary was $2,295,227 up to March 7 2002. The company considers
the investment in the subsidiary to be worthless. Accordingly the investment has
been written off at March 31, 2002 resulting in a loss of $7,027,482.

The Company's consolidated financial statements are presented in accordance with
accounting principles generally accepted in the United States of America (US
GAAP). The financial statements have been prepared on the basis that the company
is a "going concern". In the absence of any debt forgiveness from Wells Fargo
the Company cannot pay its debts and is not a "going concern". However the
Directors of the Company do not believe that any material adjustments to the
values of assets or liabilities would be necessary to reflect the "liquidation
basis" and believe that the Company can become a going concern again in the
future but hinges this opinion on the willingness of the loan creditor, Wells
Fargo, to grant debt forgiveness. It would become a going concern by
incorporating other business activities into the Group. The Company is in
default of covenants and repayment schedules on the Term Loan, Revolving Credit
and Credit Accommodations with Wells Fargo Business Credit, inc. As a result of
these defaults on March 7,2002 Wells Fargo appointed an Administrative Receiver
to the subsidiary under the terms of the debenture instrument to manage the
assets covered by the note payable agreement. The group's operations therefore
ceased from this point. . On January 31, 2003, the United States District Court
for the Southern District of New York entered an Order of Judgment in favor of
Wells Fargo Business Credit, Inc. against Stelax Industries, Ltd., Stelax
(U.K.), and Stelax Industries in the amount of $4,041,778.27 plus $911.46 per
day for each day from August 22, 2002 until the entry of the judgment which
occurred on January 31, 2003. In the Order of Judgment, the judge adopted the
magistrate's recommendations. The magistrate's recommendations indicated that
the plaintiff filed a complaint against the defendants on March 5, 2002. On June
13, 2002, the Court's clerk issued a Certificate of Default and on July 2, 2002,
the court entered the default judgment, referring the matter to the magistrate
to determine damages. In August 2003 Timaran Limited purchased the assets of the
U.K. company from the Receiver. Timaran Limited has assigned all its rights and
interest in these assets to Stelax International Ltd., a private company
unassociated with Stelax Industries Ltd. The judgement against Stelax Industries
Ltd. still remains.

DECONSOLIDATION OF STELAX (U.K.)

Under generally accepted accounting principles consolidation is generally
required for investments of more than 50% of the outstanding voting stock of an
investee except when control is not held by the majority owner.

On March 7, 2002 a Receiver was appointed to Stelax (U.K.) pursuant to a
debenture instrument executed over the whole of the assets of the company in
favour of Bank of America Finance Corporation dated June 30, 2000 and assigned
to Wells Fargo Business Credit Inc on April 20, 2001.

Accordingly from March 7, 2002 control rests with the Receiver not Stelax
Industries.

The results of Stelax (U.K.) have been consolidated up to March 7, 2002.
Thereafter Stelax (U.K) has been reported using the cost method. At March 7,
2002 Stelax (U.K.) had net assets of $7,249,614 principally consisting of plant
and equipment at the Aberneath facility in South Wales, United Kingdom,
including $222,132 of amounts related with foreign currency translation,

F-7

included in Cumulative Translation Adjustment. Following the appointment of the
Receiver this investment was reported as a single line item in "Investments"
using the cost method. However, Stelax Industries does not expect to recover any
monies from the Receiver in respect of this investment. This investment has
therefore been written off, and a loss of $7,027,482 has been recorded in the
income statement for the year to March 31, 2002.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with an original maturity of
three months or less when purchased to be cash equivalents.

LOSS PER SHARE

The computation of loss per share is based upon the weighted average shares of
Common Stock outstanding during the period.

DEPRECIATION AND AMORTIZATION

Depreciation is provided using the straight-line method over the estimated
useful lives of their assets as follows:

Buildings 20 years
Plant and equipment 4 to 20 years
Intangible assets (Patents) 12 years

Total Depreciation and amortisation in the years ended March 31 2003, 2002 and
2001 were $ 0, $ 548,167, and $ 555,231 respectively. In the consolidated
statement of operations depreciation and amortisation on plant utilized in the
attainment of revenue appears within cost of sales and are $0, $ 328,667 and $
293,121 respectively. The remaining depreciation and amortisation are included
within selling, general and administration expenses.

RESEARCH AND DEVELOPMENT

Research and development expenses are charged to operations as incurred. There
were no research and development costs of any significance for the years ended
March 31, 2003, 2002, and 2001. Process improvement costs are expensed as they
arise.

USE OF ESTIMATES

The preparation of the consolidated financial statements in conformity with US
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

IMPAIRMENT OF LONG-LIVED ASSETS

The Company accounts for impaired long-lived assets in accordance with Statement
of Financial Accounting Standards ("SFAS") No. 144 "Accounting for Impairment or
Disposal of Long-Lived Assets". This standard prescribes the method for asset
impairment evaluation for long-lived assets and certain identifiable intangibles
that are either held and used or to be disposed of. The Company reviews the
carrying values of its long-lived and identifiable intangible assets for
possible impairment whenever events or changes in circumstances indicate that
the carrying amount of assets may not be recoverable.

COMPREHENSIVE LOSS

Comprehensive loss is reported in accordance with SFAS No. 130, "Reporting
Comprehensive Income." Other comprehensive loss includes foreign currency
translation adjustments.

WARRANTS

The proceeds received upon issuance of debt and detachable warrants is allocated
between the debt and the warrants on a relative fair value basis. The fair value
of the warrants is determined with reference to a Black-Scholes valuation model.
Any resulting debt discount is amortised over the term of the debt using the
effective interest rate method.

The fair value of warrants issued in connection with the grant of a line of
credit is deferred and recognized in the income statement on a straight-line
basis over the period under which the credit facility is available. When amounts
are drawn down the unamortized deferred warrant cost is allocated, on a pro-rata
basis, between the draw down amount and remaining available credit facility. The
portion allocated to the draw down amount is recognized over the period of the
loan using the effective interest rate method.

F-8

OTHER ASSETS

The balance of other assets at 31st March 2002 was zero. The remaining balance
of the financing costs associated with the Term Loan which had been subject to
amortisation over the life of the loan was written off at March 31, 2002.

INCOME TAXES

The Company uses the liability method of accounting for income taxes in
accordance with SFAS No. 109, "Accounting for Income Taxes." Under the liability
method, deferred income taxes are determined based upon enacted tax laws and
rates applied to the difference between the financial statement and tax bases of
assets and liabilities.

SEGMENT INFORMATION

The Company reports segment information in accordance with SFAS No. 131,
"Disclosure about Segments of an Enterprise and Related Information." The
Company operates in one industry, the manufacture of steel related products, in
accordance with SFAS No. 131.

FOREIGN CURRENCY TRANSLATION

In accordance with the provisions of SFAS No. 52, "Foreign Currency
Translation," exchange adjustments resulting from foreign currency transactions
generally are recognized currently in income, whereas adjustments resulting from
translations of financial statements are reflected in accumulated other
comprehensive income (loss). The cumulative currency translation loss as of
March 31, 2003 was $nil. Gains and losses on foreign currency transactions for
the fiscal years ended March 31, 2003, March 31, 2002 and March 31, 2001
resulted in net foreign currency gains/(losses) of $ nil, $(222,132) and $26,453
respectively.

FINANCIAL INSTRUMENTS

The fair values of financial instruments are determined by reference to various
market data and other valuation techniques, as appropriate. Unless otherwise
disclosed, the fair values of financial instruments approximate their recorded
values.

REVENUE RECOGNITION

Stelax Industries pursues its policy on revenue recognition in line with the
guidance given in SAB 101. In recognizing revenue the company looks to the
existence of a contract to sell the goods to the buyer, that delivery has
occurred, that the Company's price to the to the buyer has been fixed and that
collectibility is reasonably assured. It records revenue upon receipt and
acceptance by the customer. Once product is delivered and accepted there are no
further consequential performance obligations on the seller in regard to that
delivery. For the years ended March 31, 2003, 2002, and 2001, there was no
unbilled revenue included in total revenues and at the fiscal year end of 31
March 2003 all cash against billed revenue had been received within the fiscal
year itself. This also applied to the position at the year end 31st March 2002.
For both of these years revenue recognition is therefore not an issue. At the
31st March 2001 $111,981 was due from trade debtors but had been fully received
at the time of financial statement preparation. The $111,981 was comprised of
monies owed by nominated USA Department of Transport nominated sub-contractors
who had accepted delivery of the respective product. Collectibility of such
monies was deemed assured in any case at fiscal year end. However as a
precautionary measure the Company serves notice on the customer that Title
Transfer becomes effective on the day that that payment for goods is received
and cleared, failing which the Company has the right to recover those goods in
the event of customer default. Goods in transit are subject to insurance cover
put in place by the Company, the Seller and therefore the Company removes the
risk of loss of revenue whilst the goods are in transit to the buyer.

STOCK BASED COMPENSATION

The Company accounts for its stock-based compensation related to its employees
under APB 25 and has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation" ("SFAS No. 123"). In December 2002,
the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation -
Transition and Disclosure, an amendment of SFAS No. 123" ("SFAS No. 148").

SFAS 123 requires disclosure of pro forma information regarding net income and
earnings per share had compensation cost been determined using the fair value
method. The fair value of the Company's stock based awards was estimated as of
the date of grant using the Black-Scholes option pricing model. Limitations on
the effectiveness of the Black-Scholes option valuation model are that it was

F-9

developed for use in estimating the fair value of trade options which have no
vesting restriction and are fully transferable and that the model requires the
use of highly subjective assumptions including expected stock price volatility.
Because changes in the subjective input assumptions can materially affect the
fair value estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its stock
based awards. The fair value of options granted was estimated assuming no
dividends and using the following weighted average assumptions.

The following tables set forth the required annual reconciliation of reported
and Pro Forma Net Income and EPS under SFAS No. 148:

2003 2002 2001

Net (Loss) applicable to common stock $ (1,445,492) $ (10,751,019) $ (3,031,717)
Deduct: Total stock-based employee
compensation expense determined
under fair value based method for
all awards granted net of related
tax effects - (894,301) (49,231)
-------------- --------------- ---------------
Pro Forma Net Loss $ (1,445,492) $ (11,645,320) $ (3,080,948)
============== =============== ===============

Average shares outstanding - basic 44,446,718 41,220,912 37,993,516

Average shares outstanding - diluted 44,446,718 41,220,912 37,993,516

Per share as reported (basic and diluted) $ (0.03) $ (0.26) $ (0.08)
============== =============== ===============

Per share pro forma (basic and diluted) $ (0.03) $ (0.28) $ (0.08)
============== =============== ===============

B. RELATED PARTY TRANSACTIONS

As of March 31, 2003 and 2002, funds were due to the President and his
affiliates totaling $682,079 and $864,250 respectively. These amounts are
payable on demand. Effective January 12, 1999, the President of the Company
began providing a line of credit up to $600,000 for the benefit of the Company.
The credit line bears interest at 10% and 600,000 warrants to purchase Common
Stock of the Company at $.30 a share were issued as consideration for such
credit line. In fiscal year 2000, the line of credit was extended to $1,200,000
at the same interest rate. An additional 600,000 warrants were issued at $.50 a
share. The warrants are valid for five (5) years. The fair value calculated
using the Black-Scholes option valuation model was $353,984 and as such
additional paid in capital and pre-paid interest has been recognized . The
interest is being amortised over the life of the loans using the interest
method. At March 31, 2003 and 2002, $167,684 and $478,283 of the total owed to
the President represented draws on the line of credit and accrued interest.

At March 31, 2003 and 2002, the Company owed the President of the subsidiary
$74,250 and $nil, respectively.

In fiscal year 2003, the President of the Company and the President of the
subsidiary converted debt owed to each into Common Stock of the Company. This
conversion was in regard to a total debt of $1,008,080 and was converted for
4,582, 182 shares. During fiscal year 2002, the President of the Company and the
President of the subsidiary converted debt owed to each into Common Stock of the
Company. The conversion resulted in 3,100,000 common shares being issued in
exchange for $775,000 of debt, respectively. On December 15, 2000, the President
of the Company and the President of the subsidiary converted debt owed to each
into Common Stock of the Company. The conversion resulted in 1,500,000 common
shares being issued in exchange for $375,000 of debt, respectively. The exchange
ratio was at current market price of the Common Stock.

The $3000 shown as receivable from a related party at March 31, 2003 represents
amounts advanced in respect of expenses. It was reduced to zero in the first
quarter of fiscal 2004 as the related party has submitted duly authorized
expenses against the Company.

C. MAJOR CUSTOMER INFORMATION

In fiscal year 2003 there were no customers.

One customer accounted for approximately 21% and another accounted for
approximately 14% of new sales in fiscal 2002. In fiscal 2001 one customer
accounted for approximately 50% of net sales.

F-10

D. MAJOR SUPPLIERS' INFORMATION

The Company had no inventory suppliers in fiscal year 2003.

In fiscal year 2002 one supplier accounted for 24% of all inventory purchases.

The Company purchased inventory from two suppliers during the fiscal year ended
March 31, 2001 accounting for 23% and 19% of total inventory purchases
respectively. As of March 31, 2001 the Company had $nil and $nil respectively in
amounts owed to these suppliers included in accounts payable. In 2002 the
Company purchased inventory from one supplier accounting for 24% of total
inventory purchased. As of March 31, 2002 the Company owed $nil to this
supplier.

E OPTIONS

The Company has granted stock options to certain directors, officers, employees,
investors and consultants to purchase shares of the Company's Common Stock under
a non-qualified plan. No new options were issued in fiscal year 2003. The
options are valid for three to five years.

A summary of the stock option transactions follows:

WEIGHTED
AVERAGE
NUMBER EXERCISE PRICE EXERCISE PRICE
OF SHARES PER SHARE PER SHARE
--------- -------------------- -------------

Options outstanding March 31, 2000 7,105,000 $ 0.555
Issued 65,000 $0.50-$0.85 $ 0.811

Options outstanding March 31, 2001 7,170,000 $ 0.557
Issued 1,770,000 $0.40-$0.75 $ 0.525

Options outstanding March 31, 2002 8,940,000 $ 0.551
Issued -

Options outstanding March 31, 2003 8,940,000 $ 0.551

The following table summarizes information about stock options outstanding at
March 31, 2003:

WEIGHTED WEIGHTED
AVERAGE AVERAGE
RANGE OF NUMBER REMAINING EXERCISE PRICE
EXERCISE PRICES OF SHARES CONTRACTUAL LIFE PER SHARE
--------------- --------- ----------------- ---------

$0.30 - 0.50 7,210,000 16 months $0.474

$0.51 - 0.80 800,000 14 months $0.763

$0.81 - 1.10 930,000 9 months $0.963
---------

8,940,000

Stock options are exercisable from date of grant until expiry date which range
from January 2002 to January 2005.

The fair value of the options granted has been estimated assuming no dividends
and using the following assumptions:

2003 2002 2001

Risk free interest rate N/A 5.38% 5.12%
Expected term N/A 2-5 years 2-5 years
Volatility N/A 154% 102%
Weighted average fair value per share
for options granted during the year N/A $0.51 $0.90

During the fiscal year ended March, 31 2002 the exercise date on 1,350,000
options granted to the President of Company and 500,000 options granted to the
President of the subsidiary was extended from January 2002 to January 2005. At
the date of the extension the share price was lower than that at the original
grant date and the exercise price. Accordingly, no incremental compensation
expense was recognized.

F-11

F. COMMITMENTS AND CONTINGENCIES

The Company had occupied corporate office space in Dallas, Texas on a month to
month lease, after completing a long term lease. Rent expense for fiscal year
2003, 2002, and 2001 respectively was $0, $7,396, and $17,714.

G. INCOME TAXES

The Company, as a Canadian corporation, does not file United States income tax
returns.

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The only component of
deferred taxes for the Company is its net operating loss carry forwards of
approximately $11,996,076 in Canada which began to expire in 1997 and $nil in
the U.K. Deferred tax assets at March 31, are:

2003 2002
------------ ------------
Deferred tax assets $ 4,558,510 $ 4,009,220
Valuation allowance (4,558,510) (4,009,220)
Net deferred-tax asset $ - $ -

The valuation allowance was increased by $549,290 and $3,473,840 during the
fiscal years ended March 31,2003 and 2002, respectively. Given the loss making
position of the Company, it is uncertain whether losses could be utilized in the
foreseeable future and therefore no benefit for deferred tax has been taken. The
significant reduction in 2002 followed the write off of the U.K. assets pursuant
to the receiver being appointed.

H. STOCKHOLDERS' EQUITY

Shares reserved for future issuance include 10,790,000 shares for stock options.
From time to time, the directors may declare and authorize payments of dividends
to the stockholders of record. To date, no dividends have been declared or paid.

In fiscal year 2001, 65,000 Common Stock options were issued with exercise
prices in the range of $.50 to $.85 per share.

In fiscal year 2002, 1,770,000 Common Stock options were issued with exercise
prices in the range of $.40 to $.85 per share.

No options were issued in fiscal year 2003.

In fiscal year 2003, related parties converted debt owed of $1,008,080 into
common shares of 4,582,182.

In fiscal year 2002, related parties converted note payable of $ 775,000 into
common shares of 3,100,000.

In fiscal year 2001, related parties converted debt owed of $375,000 into common
shares of 1,500,000.

During fiscal year 2003, 2002, and 2001, 181,081, 844,600, and 82,733 Common
Stock shares were sold for cash totaling $58,877, $322,755, and $24,820,
respectively.

I. GOING CONCERN

The Company is in default of covenants and repayment schedules on the Term Loan,
Revolving Credit and Credit Accommodations with Wells Fargo Business Credit,
Inc. As a result of these defaults on March 7, 2002 Wells Fargo appointed an
Administrative Receiver to the subsidiary under the terms of the debenture
instrument. The Receiver therefore acquired control of the U.K. assets including
the group's Aberneath Steel Mill facility on March 7, 2002. The group's
operations therefore ceased from this point.

In March 2002 Stelax (U.K.) was placed into administrative receivership by, the
loan creditor, Wells Fargo., who were exercising powers and remedies available
to them by law and by the Debenture and Guarantee dated June 30, 2000 and made
between the Banc of America and Stelax (U.K.) and assigned to Wells Fargo
Business Credit Inc. on the April 20, 2001. The Registrant's operations thus
ceased. Stelax U.K. and Stelax USA Inc. were collectively the borrowers under
the aforementioned Debenture and Guarantee. The preferential rights under the
latter over other creditors included that of action to liquidate the assets of
the Company and levy late payment interest and charges upon the borrowers. Wells
Fargo exercised their power to appoint the Receiver to the U.K. company and gain

F-12

control over the operational assets of the group. On January 31, 2003, the
United States District Court for the Southern District of New York entered an
Order of Judgment in favor of Wells Fargo Business Credit, Inc. against Stelax
Industries, Ltd., Stelax (U.K.), and Stelax Industries in the amount of
$4,041,778.27 plus $911.46 per day for each day from August 22, 2002 until the
entry of the judgment which occurred on January 31, 2003. The Company's
calculation of cumulative interest to the March 31, 2002 was $ 433,998 and
continued to provide for interest at the rate of $911.46 per each day as a
prudent measure throughout the fiscal year to March 31, 2003. Final settlement
of the indebtedness may prove this to be an over-provision. The financial
statements show a loan note payable of $ 3,645,833 and accrued interest of $
766,513 at March 31, 2003. totalling In the Order of Judgment, the judge adopted
the magistrate's recommendations. The magistrate's recommendations indicated
that the plaintiff filed a complaint against the defendants on March 5, 2002. On
June 13, 2002, the Court's clerk issued a Certificate of Default and on July 2,
2002, the court entered the default judgment, referring the matter to the
magistrate to determine damages. In August 2003 Timaran Limited purchased the
assets of the U.K. company from the Receiver. Timaran Limited has assigned all
its rights and interest in these assets to Stelax International Ltd., a private
company unassociated with Stelax Industries Ltd. The judgement against Stelax
Industries Ltd. still remains.

The financial statements have been prepared on the basis that the company is a
"going concern". In the absence of any debt forgiveness from Wells Fargo the
Company cannot pay its debts and is not a "going concern". However the Directors
of the Company do not believe that any material adjustments to the values of
assets or liabilities would be necessary to reflect the "liquidation basis".

The Directors are of the opinion that the Company can become a going concern
again in the future but hinges this opinion on the willingness of the loan
creditor, Wells Fargo, to grant debt forgiveness. It would become a going
concern by incorporating other business activities into the Group. There is no
current intention to place the Company into liquidation.

J. NET LOSS PER SHARE

Losses per share have been computed in accordance with SFAS No. 128, Earnings
per Share. Basic and diluted losses per share are computed by dividing net loss
by the weighted average number of shares of Common Stock outstanding during the
year. Outstanding Common Stock options and warrants have been excluded from the
calculation of diluted losses per share because their effect would be
antidilutive. The number of share options outstanding at the March 31, 2003 that
could be potentially dilutive was 8,940,000. (March 31, 2002 - 8,940,000; March
31, 2001 7,105,000). See Note E. In addition, the number of warrants outstanding
at March 31, 2003 that could be potentially dilutive was (March 31, 2003 -
160,000, March 31, 2001 - 160,000). See notes B and K.

K. BANK FINANCING

In July 2000 the Company obtained a Term Loan as well as Revolving Credit and
Credit Accommodations. The balance of the loan at March 31, 2003 and 2002 was
$3,645,833 and $3,645,833. The original loan debt of $4,166,166 had been reduced
by repayments totaling $ 520,833 in fiscal 2002. Due to the appointment of an
Administrative Receiver in the subsidiary, the entire note payable is due in
full.

In connection with the Loan Agreement the Company granted a warrant to Bank of
America Commercial Finance Corporation to purchase up to 160,000 shares of
Common Stock. These warrants for purchase of shares of the Registrant were
issued at a price equal to 105% of the market value at the time of closing of
the loan agreement.

The fair value calculated using the Black-Scholes option valuation model was
$123,076 and this amount has been credited to additional paid in capital in July
2000 and has been accreted as interest expense in the accompanying financial
statements. The assumptions used in calculating this fair value were dividend
yield 0%, risk free interest rate 50%; volatility 105%; and expected term of
three years.

F-13

L. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

Fiscal 2003 Revenues Net Loss Net Loss Per Share
----- ---------- ----------- -----------------
March $ Nil $ 323,139 $ 0.026
December Nil 254,200 0.010
September Nil 595,683 0.013
June Nil 272,471 0.007

Fiscal 2002 Revenues Net Loss Net Loss Per Share
---- ---------- ----------- ------------------

March $ Nil $ 8,079,408 $ 0.26
December 26,335 763,120 0.06
September 266,338 1,082,722 0.03
June 266,497 825,768 0.02

As discussed in Note N the prior year financial restatements have been restated.
The quarterly financial information reported above has also been restated to
reflect these changes. The effect on the net loss as previously reported in the
F orm 10Q's is as follows:

As previously
Reported Restated
-------------- ----------
Fiscal 2003
December (272,532) (254,200)
September (614,015) (595,683)
June (290,803) (272,471)

Fiscal 2002
March (8,019,158) (8,079,408)
December (722,120) (763,120)
September (1,041,722) (1,082,722)
June (784,768) (825,768)

(10,567,768) (10,750,019)

The revenue figure previously reported for December 2002 and March 2003 have
also been restated, to correct for credit notes raised in the March 2003 quarter
which relate to December 2002 sales.

M Subsequent events

N Notes on restated 2001 and 2002 data in 2003 10K.
------------------------------------------------

The Company has reclassified and restated certain items in its financial
statements for the years ended March 31, 2001, and 2002. The Company has
reclassified and restated certain items for the quarters subsequent to those
times.

The reclassification relates to depreciation of $293,121 in fiscal 2001 and
$328,667 in fiscal 2002 being reclassified from selling, general and
administrative expense to cost of sales. In addition, a note receivable of
$141,480 related to a stock issuance has been offset against amounts payable to
related parties. The restatement of the income statement relates to (1) the
prior incorrect accounting for the value of certain warrants issued by the
Company and the consequent lack of amortization of interest of $129,144 and
$164,001, respectively, on those warrants in fiscal 2001 and fiscal 2002; (2)
the write off of other assets in fiscal 2002 in the amount of $102,934; and (3)
the movement of $83,684 from translation adjustment to an expense.

The restatement of the cash flow statement relates to (1) the treatment of stock
issued for compensation (2) the elimination of the investment write-down of
$7,027,482 in fiscal 2002 from cash flow from provided by investing activities;
(3) the elimination of non-cash transactions of $775,000 in fiscal 2002 and
$375,000 in fiscal 2001 relating to the issuance of common stock in exchange for
debt from cash flow provided by financing activities and (4) the
reclassification of foreign currency translation gains/losses to the relevant

F-14

caption within the reconciliation of net loss to cash outflow from operating
activities.

The effect of these reclassifications and restatements and the related financial
statement captions for the respective periods during 2001 and 2002 are as
follows:

Statement of Operations As Originally Restatement As Restated
Captions Reported Adjustments Herein
---------------------- ------------- ------------- -------------

March 31, 2001

Cost of Sales (Depreciation) $ 1,021,209 $ 293,121 $ 1,314,330

Selling, general and
Expenses (Depreciation) 1,813,549 (293,131) 1,520,428

Other income (expense)
Interest expense
Interest on (warrant expense) (465,032) (129,144) (594,176)

March 31, 2002

Cost of Sales (Depreciation) 1,453,399 328,667 1,782,066

Selling, general and administrative
Expenses (Depreciation) 1,908,602 (328,667) 1,579,935

Other income (expense)
Interest expense (656,276)
Other asset write off (102,934)
----------
Interest on (warrant expense) (164,001)
--------------
(266,935) (923,211)

Investment write downs
(Translation adjustment) (7,111,166) 83,684 (7,027,482)

Balance Sheet As Originally Restatement As Restated
Captions Reported Adjustments Herein
---------------------- ------------- ------------- -------------

March 31, 2002

Current Assets

Note Receivable $ 141,480 $ (141,480) $ -
Current Liabilities
Payable to related parties 1,035,730 141,480 894,250
Other Assets
Other asset write off 102,934 (102,934)
Prepaid interest 141,206
-----------

Summary 141,206 141,206

Stockholders' Equity
Cumulative translation adjustments 83,684 (83,684) -
Paid in capital
Value of Warrants issued for
extension of credit - 477,060 477,060
Accumulated deficit (30,436,099)
Other asset write off (102,934)
Reclassification of Translation
Adjustment 83,684
Amortization of warrant expense (335,854)
-------------

Summary (355,104) (30,791,203)

F-15

Statements of Cash As Originally Restatement As Restated
Flows Captions Reported Adjustments Herein
---------------------- ------------- ------------- -------------

March 31, 2001

Net Cash Flow (used) by

operating activities $(3,642,240) $ $
Issuance of stock
for payment of debt 375,000
Issuance of stock
for compensation 97,920
------------
Summary 472,920 (3,169,320)

Net Cash Flow Provided by
Financing Activities 4,664,406
Issuance of stock for
payment of debt (375,000)
Issuance of stock for
Compensation (97,920)
-----------

Summary 472,920 4,191,486

March 31, 2002

Net Cash Flow (used) by
operating activities (9,813,587)
Issuance of stock
for payment of debt 775,000
Change in investment
write down and accounts
related to subsidiary 8,519,201
---------
Summary 9,294,201 (591,386)

Net Cash Flow Provided by
Investing Activities 8,440,071
Change in investment
write down and accounts
related to subsidiary (8,519,201) (79,130)

Net Cash Flow Provided by
Financing Activities 576,922
Issuance of Common
Stock for Debt (775,000) (198,078)

F-16

SIGNATURES

Pursuant to the requirements of 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.

December 17, 2004 STELAX INDUSTRIES, LTD.

/s/ Harmon S. Hardy, Jr.
-------------------------
By: Harmon S. Hardy, Jr.
President and Chief Financial 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 indicated, on December 17, 2004.

NAME OFFICE

/s/ Harmon S. Hardy, Jr.
-----------------------------
Harmon S. Hardy, Jr. President and Chief Financial Officer

/s/ Ruben Grubner
----------------------------
Ruben Grubner Director

/s/ William D. Alexander
---------------------------
William D. Alexander Director