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, 2000 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.)

4004 Beltline Road, Suite 107, Dallas, Texas            75244
(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. [ ]

The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of August 15, 2000 was approximately $27,196,850. At March 31,
2000 there were 37,521,442 shares of common stock outstanding.

                       Documents Incorporated by Reference
                                 NOT APPLICABLE


<PAGE>
                                     PART I

ITEM 1.  BUSINESS

Introduction

Stelax Industries Ltd. (the "Registrant") was incorporated under the laws of
British Columbia, Canada in May 1987. The Registrant's principal activities are
conducted through its wholly-owned subsidiary, Stelax (U.K.) Limited, a
corporation organized under the laws of the United Kingdom ("Stelax (U.K.)").
The Company owns certain real and personal property in Wales, United Kingdom
comprising the Aberneath steel mill facilities (the "Aberneath Facility").
Stelax (U.K.) produces 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.

Originally incorporated as Zfax Image Corp, 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 Company's president for book value.

On November 15, 1995, the Company 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 acquired the
facility from an entity that had gone into receivership in 1992. The then owner
had maintained but not operated the facility after entering into receivership
but prior to being acquired by the Registrant. 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.

In July 1996, the Registrant sold 10,800,000 shares of Common Stock, raising
$10,831,000. Approximately $1,100,00 of the proceeds were used to liquidate
outstanding mortgages on the Aberneath property. As part of this financing, the
Registrant's Common Stock began trading on the Nouveau Marche of the Paris Stock
Exchange.

Beginning in fiscal 1997, the Registrant commenced operations from Aberneath
plant, principally producing stainless steel. The Registrant also began
developing the market for the 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 having orders for the
Nuovinox product, and in July, 2000, 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.

The Registrant's principal executive offices are located at 4004 Beltline Rd.,
Suite 107, Dallas, Texas 75244, and its telephone number is (972) 233-6041.
Unless otherwise required by the context, the term "Company" as used herein
shall mean the Registrant and Stelax (U.K.). The Registrant changed its name
from ZFAX Image Corp. to its present name in May 1996.



<PAGE>

The Aberneath Facility

The Aberneath Facility 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
Company's 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, 1999, the Company produced limited quantities of
Nuovinox for use by potential customers in their testing and evaluation of the
product.

Products

The Aberneath facility is capable of producing two distinct product lines: (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 creates tubes several inches in diameter and
fills the tubes with treated scrap steel, reducing and elongating the tubes in a
proprietary process until the desired product is created, usually rebar 1/2 inch
or larger in diameter with a core of carbon sheet and an outer casing of
stainless steel. While the Registrant believes that the most commonly produced
product will be rebar, Nuovinox can be manufactured in flat bar, round bar and
pipes of various sizes and dimensions. The resultant product, which generally
consists of up to 25% of stainless steel by weight, has 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, which the
Registrant believes to be in adequate supply at its facility in the U.K.

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 prices its 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. Although it has not been extensively
marketed, the Company believes there is considerable interest in Nuovinox from
customers around the world who have expressed their intention of using the
product in a variety of applications.

The Company believes Nuovinox will compete 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);

<PAGE>



             " Strength and ductility superior to mild steel; and
             " Minimal maintenance when incorporated in structures.

The abrasive products produced by the Company are produced as a by-product of
the process used in producing Nuovinox. The Registrant believes 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.

Customer and Distribution

During the 1999 fiscal year the Company distributed its Nuovinox and abrasive
products through its direct marketing efforts. Over the last several years, the
Registrant has developed contacts with 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.

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 down-turns may have a significant impact on the Company's
revenues.

Nuovinox is a new product that has been extensively tested. During the 2000
fiscal year, the Company has received various commitments for the use of the
product. Further product acceptance may be affected by pricing and the other
variables beyond the Company's control. Management of the Company is not aware
of any product other than pure stainless steel that competes directly with
Nuovinox.

Currency Fluctuations

It is anticipated that the Company's expenses and sales will 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 will be
significantly exposed to currency fluctuations. Management intends 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, 2000 and there can be no assurance
that the Company would be able to obtain such instruments. However, there can be
no assurance that exchange rate fluctuations will not have an adverse effect on
the Company's results of operations or financial condition.


<PAGE>


Research and Development

During the last three fiscal years the Company has not spent any amounts on
research and development. In the future, amounts may be incurred as specific
customer requirements may arise in connection with the sale of customized
Nuovinox products.

Patents and Trademarks

The Company holds approximately 70 worldwide patents for Nuovinox. The Company
considers its patents important for the success of such product.

Employees

As of August 15, 2000, the Company had 34 employees or independent contractors
working for the Company. The Company anticipates increasing the number of
employees in the 2000 fiscal year as the Company expands production at the
Aberneath Facility.

ITEM 2.  PROPERTIES

The Company's principal executive offices in the United States are located at
4004 Belt Line Road, Suite 107, Dallas, Texas and are occupied pursuant to a
month to month lease. The Company owns the land and buildings comprising the
Aberneath Facility in Wales, United Kingdom. See Item 1. Business - The
Aberneath Facility.

ITEM 3.   LEGAL PROCEEDINGS

The Company is not a party to any material pending legal proceedings.

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

Not applicable.

<PAGE>

                                     PART II

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


Market

The Registrant's Common Stock is quoted on the NASDAQ Bulletin Board System. The
Registrant's Common Stock in the United States trades under the symbol "STAX".
The range of the high and low bid prices as quoted on the NASDAQ Bulletin Board
from April 1, 1998 through March 31, 2000 is as follows:

                  Fiscal 1999               High             Low

                  First Quarter             1.37             .75
                  Second Quarter             .77             .37
                  Third Quarter              .44             .22
                  Fourth Quarter            1.00             .27

                  Fiscal 2000               High             Low

                  First Quarter             1.20             .75
                  Second Quarter             .65             .52
                  Third Quarter              .90             .65
                  Fourth Quarter            2.51             .56

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 August 15, 2000, 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, as it intends to use earnings, if
any, to generate growth.

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


<PAGE>

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.


<PAGE>

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 gain. 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.


<PAGE>

         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.


<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

The table below sets forth certain financial data for the Company for its fiscal
years ended March 31, 2000 to 1996, and should be read in  conjunction  with the
Consolidated  Financial  Statements and Notes thereto included elsewhere herein.

                             YEARS ENDED MARCH 31,
                             ---------------------
<TABLE>
<CAPTION>

                                  2000            1999              1998          1997            1996
<S>                           <C>             <C>               <C>           <C>            <C>
 Sales                        $  136,191      $  251,025        $1,728,657    $  733,600     $         -
 Gross Loss                     (657,930)     (1,121,224)       (2,725,973)   (1,070,225)              -
 Net (loss)                   (2,279,926)     (3,150,498)       (4,691,161)   (2,108,789)       (209,273)
 Total Assets                  9,727,826      10,065,688        12,636,869    16,756,767       8,449,341
 Long Term Obligations                 -               -                 -             -               -
 Total Liabilities             2,811,683       1,663,437         2,110,615     1,631,793       1,893,039
 Common Stock
 Outstanding at year end      37,521,442      35,963,729        31,869,285    31,869,285      18,733,906
 Net (loss) per share         $   (0.06)      $   (0.10)        $   (0.15)    $   (0.01)         $(0.12)
</TABLE>



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

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

Since fiscal 1998 the Company has had to fund substantial losses as the Company
determined to cease sale of stainless steel and develop the market for its
Nuovinox products. In fiscal 1999 the Company incurred a loss of $3,150,498 and
in fiscal 2000 incurred a loss of $2,279,926. Because the Company incurs a


<PAGE>

substantial amount of depreciation and amortization, $506,050 in fiscal 1999 and
$538,673 in fiscal 2000, the cash losses for fiscal 1999 and 2000 were
approximately $2,640,000 and $1,740,000, respectively.

In fiscal 1999 the cash loss of approximately $2,640,000 was principally funded
through the liquidation of current assets. Between March 31, 1998, and March 31,
1999, the Company's cash position decreased from $852,892 to $42,973,
receivables decreased from $597,426 to $19,505 and inventories decreased from
$948,093 to $195,663, a reduction in current assets of $2,140,271. The amount of
the cash loss that was not funded through the liquidation of current assets as
well as some increases in property were funded through sales of common stock
that netted $726,670.

In fiscal 2000 the cash loss of approximately $1,740,000 was funded through
financing activities. A related party loaned the Company approximately
$1,000,000 and the Company issued common stock, the sale of which resulted in
net proceeds to the Company of approximately $800,000.

Total equity at the end of fiscal 1999 was $8,402,251 and at the end of fiscal
2000 was $6,916,143. At the end of both fiscal 1999 and 2000, the Company had no
long-term debt.

In fiscal 1999 and 2000 the Company developed the market for its Nuovinox
product, much of which involved extensive testing for United States federal and
state transportation authorities to demonstrate the utility of the Nuovinox
product in bridges and highways. By the end of fiscal 2000, this process was
sufficiently complete to begin sales. With the Company's plant facilities
unencumbered, in July 2000 the Company's United States subsidiary entered into a
Loan and Security Agreement with Banc 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 can be
borrowed under the Loan Agreement is $5,750,000.

The Term Loan limits the amount that can be borrowed pursuant thereto to the
lesser of $5,000,000 or 80% of the auction sales value of certain equipment, as
defined, at the Company's Aberneath, South Wales, UK facility.

The Revolving Credit and Credit Accommodation provides, subject to certain
provisions, that the Company may borrow up to 50% of the value, as defined, of
the Company's inventory as well as 50% of the amount of certain receivables, as
defined. Borrowing for inventory cannot exceed $750,000 and borrowing against
receivables cannot exceed $500,000.

The term loan is repaid monthly and is amortized over a 48 month period, bearing
interest at prime rate plus 2.25%. The inventory and accounts loan mature 36
months after the date of the agreement and bear interest, payable monthly, at
prime rate plus 2.25%.

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.

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

2000 versus 1999

The Company incurred a gross loss of $657,930 in fiscal 2000 compared to a gross
loss of $1,121,224 in fiscal 1999. The decline reflects a lower volume of sales
and reduction in production personnel due to the suspension of sales of solid
stainless steel in fiscal 1998. Fiscal 2000's revenues of $136,191 reflect sales
of the Company's abrasive products.


<PAGE>

Excluding  depreciation and amortization of $538,673 in fiscal 2000 and $506,050
in fiscal  1999,  general and  administrative  expenses  declined to $992,538 in
fiscal  2000 from  $1,520,461  infiscal  1999,  a decline of 34.6%.  The decline
reflects a decrease in corporate staffing pending sales of Nuovinox.

1999 versus 1998

The Company's revenues declined to $251,025 in fiscal 1999 compared to
$1,728,657 in fiscal 1998. The decline reflects the Company's decision to cease
manufacturing of solid stainless steel. Fiscal 1999 revenues principally reflect
sales of abrasive products.

General and administrative  expenses also declined, to $2,026,511 in fiscal 1999
from  $2,110,248  in fiscal 1998 which  include  depreciation  and  amortization
expenses of $506,050 in fiscal 1999 and  $481,254 in fiscal  1998.  This decline
reflects some reduction in staffing levels.

Inflation

The Company's operations may be impacted by the effects of inflation and
changing prices as increased prices may reduce the demand for steel products.
Additionally, the price of nickel has direct impact on the Company as nickel is
an integral component to the price of the stainless steel utilized in Nuovinox.

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

The  Company  does not engage in any  hedging  activities.  In  particular,  the
Company does not hedge 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.

The Company's  primary market risk is anticipated to be a currency exchange rate
risk,  and the Company  does not, at the present  time,  anticipate  engaging in
management of that risk. For the next fiscal year, the Company's operations will
be  principally  conducted in the United  Kingdom with sales  anticipated in the
United States and Canada.  In addition to currency  market risks  resulting from
trade  accounts  receivable,   the  Company's  loan  with  Bank  of  America  is
denominated in U.S. Dollars. The amounts available to the Company under the Bank
of America  loan  agreement  are  principally  based upon assets  located in the
United Kingdom,  and a large increase in the value of the Dollar relative to the
Pound  could  diminish  the  amounts  that  could be  available  under that loan
agreement. A significant increase in the Pound relative to the Dollar would make
United States trade  receivables  worth less in the United  Kingdom,  decreasing
profit  margins  for  products  produced  in the United  Kingdom and sold in the
United States.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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.

<PAGE>



                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Directors and Officers

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, 71          Chairman of the                       1987
                             Board, President
                             and Chief Financial Officer

Ruben Grubner, 44            Director                              1995

William D. Alexander, 51     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.

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, 2000,  except that the directors failed to file timely reports regarding the
grant of stock options.


<PAGE>


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, 2000 for
services rendered during the fiscal years ended March 31, 2000, 1999, and 1998.
The table includes for the same periods those individuals receiving in excess of
$100,000 per year.
<TABLE>
<CAPTION>
                            Annual Compensation (1)

          Name                  Year         Salary          Bonus          Other       Stock Options   All Other Compensation
-------------------------     ----------  -------------   ------------  -------------  ---------------  ---------------------
<S>                             <C>        <C>                  <C>          <C>                               <C>
Harmon S. Hardy                 2000       $ 144,000            $ -          $ -                -              $ 9,000          (2)
Chairman of the                 1999       $  72,000            $ -          $ -                -              $ 9,000          (2)
  Board of Directors,           1998       $  72,000            $ -          $ -                -              $ 9,000          (2)
  President and Chief
  Financial Officer

A. Cacace                       2000       $ 145,800            $ -          $ -                 -             $ -
Managing Director               1999       $ 145,800            $ -          $ -                 -             $ -
  of Stelax U.K.                1998       $ 145,800            $ -          $ -                 -             $ -
</TABLE>

         (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.

         (2) Includes a monthly car allowance which has been accrued but not
         paid.

2000 Option Grants

         There were 600,000 options granted to Mr. Hardy during the fiscal year
ended March 31, 2000, which include 600,000 options granted in connection with
the extension of a line of credit. See Item 13. Certain Relationships and
Related Transactions. There were no options granted to Mr. Cacace during the
fiscal year ended March 31, 2000.




<PAGE>


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth, as of August 15, 2000, 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 directors
as a group:

Name and Address                        Shares of Common Stock        Percentage
 of Benefiial Owner(1)                   Beneficially Owned           of Class
--------------------------------------------------------------------------------
Harmon S. Hardy, Jr.
  4004 Belt Line Road, Suite 107
  Dallas, TX 75244                           7,302,700 (2)              19.0%

Ruben Grubner                                  100,000 (3)                  *

William D. Alexander                           200,000 (4)                  *

All Officers and Directors as a Group        7,602,700                  19.7%
  (Three Persons)


* 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, 2000 and 1999, the Company owed an aggregate of $1,049,172 and
$135,643, 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, 2000 and 1999, the Company owed to Mr. Hardy personally $215,896
and $75,095.

On January 1, 1999, 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 shares of common stock in exchange for $225,000 of
debt. The exchange ratio was at current market price of the common stock.


<PAGE>


                                     PART IV

ITEM 14.  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 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."      c

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(UK) 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(UK) Limited
                     (c/k/a Stelax (U.K.) Limited)                      b

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

<PAGE>

10(f)           Chattel Mortgage dated November 13, 1995 by
                     and between ZX(UK) 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(UK) 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(UK) 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

27                   Financial Data Schedule                            *


         *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.

(c) Reports on Form 8-K.
         No reports on Form 8-K were filed during the last fiscal quarter of
         1998.

<PAGE>





         STARKP/CORR/217908_1(02880/01)

                                   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.

October 6, 2000                  STELAX INDUSTRIES, LTD.



                                     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 October 6, 2000.

                NAME                                        OFFICE

 /s/ Harmon S. Hardy, Jr.
Harmon S. Hardy, Jr.                       President and Chief Financial Officer
(Principal Executive and Financial Officer)



 /s/ Ruben Grubner
Ruben Grubner                                               Director



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

<PAGE>
[DELOITTE & TOUCHE LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

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, 2000 and 1999,  and the related  consolidated
statements of operations,  stockholders' deficiency,  and cash flows for each of
the three years in the period ended March 31, 2000.  These financial  statements
are the  responsibility of the Company's  management.  Our  responsibility is to
express an opinion on the financial  statements and financial  schedule based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America.Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit 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 Limited and
subsidiary as of March 31, 2000 and 1999, and the results of their operations
and their cash flows for each of the three years in the period ended March 31,
2000 in conformity with accounting principles accepted in the United States of
America.


/s/ DELOITTE & TOUCHE

DELOITTE & TOUCHE
Chartered Accountants

Date 6th October 2000

Cardiff, UK
<PAGE>

                              Stelax Industries Ltd
                           CONSOLIDATED BALANCE SHEETS
                      (Presented in United States dollars)
<TABLE>
<CAPTION>

                        ASSETS
                                                                March 31,           March 31,
                                                                   2000               1999

CURRENT ASSETS:
<S>                                                             <C>            <C>
      Cash and Cash Equivalents                                 $ 44,660       $     42,973
      Note Receivable                                            141,480            141,480
      Accounts Receivable-Trade, net (allowance for
        doubtful accounts at March 31, 2000 and 1999
        $0 and $0, respectively)                                  62,447             19,505
      Inventory-Raw materials                                     10,283               ----
        Work in process                                           26,315             55,278
        Finished goods                                           118,687            140,385
      Prepaids and other current assets                           81,529             49,689

      Total Current Assets                                       485,401            449,310

PROPERTY & EQUIPMENT-AT COST:
      Plant & Machinery                                        9,290,878          9,249,561
      Building                                                   848,843            848,843
      Land                                                      270,136            270,136
                                                              10,409,857         10,368,540
      Accumulated Depreciation                                (1,753,567)        (1,276,183)
      Total Property & Equipment                               8,656,290          9,092,357

INTANGIBLE ASSETS (patents)
      (accumulated amortization of $218,343 and $157,054
       at 31 March, 2000 and 1999, respectively)                 556,685            501,846

OTHER ASSETS                                                     29,450              22,175

TOTAL ASSETS                                                $ 9,727,826        $ 10,065,688
                 LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
      Accounts payable                                       $ 1,546,615        $ 1,452,699
      Payable to related parties                               1,265,068            210,738
      Total Current Liabilities                                2,811,683          1,663,437

STOCKHOLDERS' EQUITY :
      Common stock - 50,000,000 shares
         authorized, no stated par value;
         issued and outstanding 37,521,442
         and 35,963,729 shares at March 31,
         2000 and 1999, respectively                           23,686,222         22,885,219
      Accumulated other Comprehensive Income                      195,679            202,864
      Accumulated deficit                                     (16,965,758)       (14,685,832)
      Total Stockholders' Equity                              $ 6,916,143        $ 8,402,251

TOTAL LIABILITIES AND
      STOCKHOLDERS' EQUITY                                    $ 9,727,826       $ 10,065,688
</TABLE>



                       See notes to financial statements.
<PAGE>


                              Stelax Industries Ltd
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (Presented in United States dollars)

<TABLE>
<CAPTION>
                                                              Year Ended
                                                               March 31,          March 31,           March 31,
                                                                 2000               1999                1998
<S>                                                           <C>               <C>                   <C>
Sales                                                         $    136,191      $     251,025         $ 1,728,657
Cost of sales                                                     (794,121)        (1,372,249)         (4,454,630)

Gross loss                                                        (657,930)        (1,121,224)         (2,725,973)

Selling, general and administrative expenses
  (including depreciation and amortization of
  $538,673, $506,050 and $481,254 for the
  years ended March 31, 2000, 1999 and 1998,
  respectively)                                                 (1,531,211)        (2,026,511)         (2,110,248)

Loss from operations                                            (2,189,141)        (3,147,735)         (4,836,221)

Other income (expense):
  Interest income                                                     -                16,498             154,844
  Interest expense                                                 (90,785)           (19,261)             (9,784)

Net loss                                                       $(2,279,926)     $  (3,150,498)        $(4,691,161)


Weighted average shares of common stock                         36,267,505         32,771,146          31,869,285

Net loss per share                                             $     (0.06)     $       (0.10)        $     (0.15)

</TABLE>

                        See notes to financial statements
<PAGE>
                             Stelax Industries Ltd.
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                      (Presented in United States dollars)
<TABLE>
<CAPTION>

                                           Common Stock                                                                 Total
                                      ---------------------------------     Accumulated    Translation                Comprehensive
                                               Shares          Amount          Deficit     Adjustments     Total         Income
                                              ---------      -----------    ------------     ---------   ---------     ------------
                                                                 $               $             $            $              $

<S>              <C>                          <C>            <C>             <C>             <C>        <C>            <C>
BALANCE at April 1, 1997                      31,869,285     21,821,087      (6,844,173)     148,060    15,124,974
Accumulated other Comprehensive Income              -              -               -          92,441        92,441         92,441
Net loss                                            -              -         (4,691,161)        -       (4,691,161)    (4,691,161)
                                              ----------     -----------    -------------     -------    ----------    -------------
BALANCE at March 31, 1998                     31,869,285     21,821,087     (11,535,334)     240,501    10,526,254     (4,598,720)
Common stock issued during the period:
  $.23 to $1.00 per share for note payable
      conversion                                 447,444        195,982            -            -          195,982
  $.20 per share for related party payable     1,125,000        225,000            -            -          225,000
  $.20 to $.40 per share                         900,000        252,000            -            -          252,000
  $.20 to .50 per share for option exercise    1,622,000        391,150            -            -          391,150
Accumulated other Comprehensive Income              -              -               -         (37,637)      (37,637)       (37,637)
Net loss                                               -           -         (3,150,498)        -       (3,150,498)    (3,150,498)
                                              ----------     ----------      -----------     -------    ---------      -----------
BALANCE at March 31, 1999                     35,963,729     22,885,219     (14,685,832)     202,864     8,402,251     (3,188,135)

Common stock issued during the period:
  $.51 to $.56 per share for note payable
      conversion                                 725,000        354,453            -            -          354,453
  $.55 to $1.25 per share                        257,713        187,800            -            -          187,800
  $.30 to $.95 per share for option exercise     575,000        258,750            -            -          258,750
Accumulated other Comprehensive Income              -              -               -          (7,185)       (7,185)        (7,185)
Net loss                                            -              -         (2,279,926)        -       (2,279,926)    (2,279,926)
                                              ----------     ----------     ------------     --------   -----------    -----------
BALANCE at March 31, 2000                     37,521,442     23,686,222     (16,965,758      195,679     6,916,143     (2,287,111)
                                              ==========     ==========     ============     ========   ==========     ===========
</TABLE>
<PAGE>


                              Stelax Industries Ltd
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      (Presented in United States dollars)
<TABLE>
<CAPTION>

                                                                          Year Ended
                                                        ----------------------------------------------
                                                          March 31,        March 31,        March 31,
                                                            2000              1999             1998
                                                         -------------    -----------      -----------
OPERATING ACTIVITIES
<S>                                                      <C>              <C>              <C>
  Net loss                                               $ (2,279,926)    $(3,150,498)     $(4,691,161)
  Adjustments to reconcile net loss
  to net cash provided by operating
  activities:
      Depreciation & amortization                             538,673         506,050          481,254
      Allowance for doubtful accounts                            -            (93,593)          68,993
      Foreign currency transaction gain (loss)                 (7,185)        (37,637)          92,441
      Changes in operating assets and
        liabilities:
         Increase (decrease) in receivables                   (42,942)        671,514         (373,418)
         Decrease (increase) in inventory & other assets        1,263         930,105         (202,683)
         Increase (decrease) in accounts
             payable & accrued interest                     1,148,246        (251,196)         478,822
                                                          -----------      ----------       ----------

 Net cash used in operating activities                       (641,871)     (1,425,255)      (4,145,752)


INVESTING ACTIVITIES
 Purchase of property, equipment & intangibles               (157,445)       (111,334)      (1,188,068)
                                                          -----------      ----------       ----------

 Net cash used in investing activities                       (157,445)       (111,334)      (1,188,068)


FINANCING ACTIVITIES:
 Convertible note payable repayment                              -           (195,982)            -
 Net proceeds from common stock                               801,003         922,652             -
                                                          -----------      ----------       ----------
 Net cash provided by financing activities                    801,003         726,670             -
                                                          -----------      ----------       ----------

 Increase (decrease) in cash and cash
  equivalents                                                   1,687        (809,919)      (5,333,820)

 Cash & cash equivalents at beginning
  of year                                                      42,973         852,892        6,186,712
                                                          -----------      ----------       ----------
 Cash & cash equivalents at end of year                  $     44,660     $    42,973      $   852,892
                                                          -----------      ----------       ----------
  Interest paid                                          $     31,034     $    19,261      $     9,784
                                                          -----------      ----------       ----------
  Income taxes paid                                      $       -               -                -
                                                          ===========      ==========       ==========
</TABLE>

                       See notes to financial statements.
<PAGE>

                        NOTES TO CONSOLIDATED 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, 2000, 1999, and 1998 include the accounts of the Company and its U.K.
subsidiary. The operating loss of this subsidiary was $2,080,970, $2,779,555,
and $4,596,968, for the years ended March 31, 2000, 1999, and 1998 and it had
identifiable assets of $9,526,408 and $9,907,955 at March 31, 2000 and 1999. All
significant intercompany balances and transactions have been eliminated.

The Company's consolidated financial statements are presented in accordance with
accounting principles generally accepted in the United States.



CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with a 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









                                       F-6

<PAGE>



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



INVENTORY

The Company records raw material purchases at the lower of cost or market value
and records the disposition of inventory on a first-in, first out basis.
Inventory is evaluated periodically for obsolete items.

RESEARCH AND DEVELOPMENT

Research and development expenses are charged to operations as incurred. There
were no Research and development costs for the years ended March 31, 2000 and
1999.

START UP EXPENSES

All expenses incurred in connection with the start up of the steel mill have
been expensed as incurred. Expenses incurred in relation to the commissioning of
the planetary mill are capitalized as assets.

USE OF ESTIMATES

The preparation of the consolidated financial statements in conformity with
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.

RECLASSIFICATIONS

Certain reclassifications have been made to 1999 amounts to conform to the
current year presentation.

IMPAIRMENT OF LONG-LIVED ASSETS

The Company accounts for impaired long-lived assets in accordance with Statement
of Financial Accounting Standards ("SFAS") No. 121 "Accounting for the
Impairment of Long-Lived Assets to be Disposed Of." 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 INCOME

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





                                      F-7

<PAGE>

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, 2000 was $7,185. Gains and losses on foreign currency transactions for
the fiscal years ended March 31, 2000 and March 31, 1999 resulted in net foreign
currency gains/(losses) of $30,452 and $30,078, 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.

DERIVATIVE INSTRUMENTS

SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" (as
amended by SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133")
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives), and for hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. This statement is effective for fiscal years beginning after June
15, 2000, although early adoption is encouraged. The Company has not yet
assessed what the impact of this statement will be on the Company's future
earnings or financial position.

REVENUE RECOGNITION

In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin ("SAB") 101, "Revenue Recognition in Financial Statements", which
provides guidance related to revenue recognition based on interpretations and
practices followed by the SEC. SAB 101 requires companies to report any changes
in revenue recognition as cumulative change in accounting principle at the time
of implementation in accordance with Accounting Principles Board opinion 20,
"Accounting Changes." The SEC delayed the required implementation date of SAB
101 by issuing Staff Accounting Bulletins No. 101A, "Amendment: Revenue
Recognition in Financial Statements" and 101B, "Second Amendment: Revenue
Recognition in Financial Statements" in March and June 2000, respectively. As a
result of these amendments, SAB 101 will be effective no later than the fourth
fiscal quarter of fiscal years beginning after December 15, 1999.

                                      F-8

<PAGE>


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



B.       RELATED PARTY TRANSACTIONS


As of March 31, 2000 and 1999, funds were due to the President and his
affiliates totaling $1,049,172 and $135,643 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 of such credit
line. In fiscal year 2000, the line of credit was extended to $1,200,000 at the
same interest rate. A 600,000 additional warrants were issued at $.50 a share.
The warrants are valid for five (5) years. At March 31, 2000 and 1999, $795,920
and $88,080 of the total owed to the President represented draws on the line of
credit and accrued interest.


At March 31, 2000 and 1999, the Company owed the President of Stelax Industries,
Ltd. $215,896 and $75,095.

In connection with its private placement of common stock and secondary offering,
the Company paid $55,000 in fiscal 1997 to Austin Friars Securities Limited as
commission expense. The President of the Company is a director of Austin Friars
Securities Limited.

On January 1, 1999, 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 1,125,000 common shares being issued in exchange for
$225,000 of debt. The exchange ratio was at current market price of the common
stock.


C.       MAJOR CUSTOMER INFORMATION

One customer accounted for approximately 80% of net sales in fiscal 2000. No
customer accounted for more than 10% of net sales in fiscal 1999.

D.       MAJOR SUPPLIERS INFORMATION

The Company purchased inventory from two suppliers during the fiscal year ended
March 31,2000 accounting for 43% and 36% of total inventory purchases
respectively. As of March 31, 2000 the Company had $9,700 and $10,871
respectively in amounts owed to these suppliers included in accounts payable.
The same supplier accounted for 45% and 37% of total inventory purchased in
1999.

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. Additional options were issued in fiscal year 2000 at
prices ranging from $.50 to $1.10 per share, which either approximates or
exceeds fair market value at date of grant. The options are valid for three to
five years. Certain options previously granted totaling 1,500,000 have had the
expiration date extended and or the option price lowered. In all cases the
lowered option price either approximates or exceeds fair market value. The
extended option period does not exceed four years.




                                      F-11

<PAGE>


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



A summary of the stock option transactions follows:
<TABLE>
<CAPTION>

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

<S>                                            <C>                    <C>                         <C>
Options outstanding March 31, 1998               3,569,500
Issued                                           3,915,000            $.30 - $1.00                $      0.445
Exercised                                       (1,622,000)
Expired                                           (222,500)

Options outstanding March 31, 1999               5,640,000
Issued                                           2,040,000            $.50 - $1.10                $      0.642
Exercised                                         (575,000)

Options outstanding March 31,2000                7,105,000

</TABLE>































                                      F-12


<PAGE>

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


Stock options are exercisable from date of grant until expiry date which range
from April 2001 to January 2004.

The Company accounts for its share options in accordance with Accounting
Principles Board Opinion No. 25.

Statement of Financial Accounting Standards ("FASB") No. 123 "Accounting for
Stock Based Compensation" (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 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.

<TABLE>
<CAPTION>

                                               2000                  1999                  1998
<S>                                         <C>                   <C>                   <C>
Risk free interest rate                        6.91%                 5.23%                 6.14%
Expected term                                2-5 years             2-5 years             2-5 years
Volatility                                      109%                   97%                  123%
Weighted average fair value per share
for options granted during the year         $  0.49               $  0.35               $    --
</TABLE>


Had compensation costs for the Company's plan been recorded, the Company's net
loss and earnings per share would have been as indicated below:
<TABLE>
<CAPTION>

                                                2000               1999               1998
<S>                                          <C>                <C>                <C>
Net loss            as reported              $2,279,926         $3,150,498         $4,691,161
                    pro forma                $3,269,729         $4,331,026         $5,157,736

Loss per share      as reported              $    0.06          $    0.10          $    0.15
                    pro forma                $    0.09          $    0.13          $    0.16
</TABLE>


F.       COMMITMENTS AND CONTINGENCIES

The Company occupies corporate office space in Dallas, Texas on a month to month
lease, after completing a long term lease.





                                      F-13

<PAGE>



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




G.       INCOME TAXES

The Company, as a Canadian corporation, does not file United States income tax
returns. The UK subsidiary will file tax returns in the United Kingdom.

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 $420,000 in Canada which began to expire in 1997 and approximately
$6,200,000 in the U.K. which may be carried forward indefinitely, subject to the
agreement of the UK Inland Revenue, against profits of the same trade. Deferred
tax assets at March 31, are:


                                  2000                         1999
                                --------                     ---------
Deferred tax assets             500,716                      $ 419,465
Valuation allowance            (500,716)                      (419,465)
Net deferred-tax asset         $  --                             --

The valuation allowance was decreased by $81,251 and $400,000 during the fiscal
years ended March 31, 2000 and 1999, 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.

H.       STOCKHOLDERS' EQUITY

Shares reserved for future issuance include 7,105,000 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.

The Company sold convertible notes payable in previous fiscal years, of which
the balance of $195,982 was converted by March 31, 1999 for an additional
447,444 common shares. During fiscal year 2000, convertible notes payable were
sold and converted for a net proceeds of $354,453 and resulted in 725,000 shares
being issued.

Additional funds of $252,000 were raised in fiscal year 1999 by selling 900,000
common shares at current market prices ranging from $.20 to $.40 a share.
Options on common stock totaling 1,622,000 were exercised in fiscal year 1999.
Option price was $.10 a share and the exercise occurred when current market
price ranged from $.20 to $.50 a share. The Company is financing 90% of the
exercise price on 1,572,000 shares. The note balance at March 31, 2000 and 1999
is $141,480.

During fiscal year 2000, 257,713 common stock shares were sold for either cash
or services totaling $187,800.

In fiscal year 1999, common stock options totaling 3,915,000 were issued at $.30
to $1.00 per share. In fiscal year 2000, common stock options totaling 2,040,000
were issued at $.50 to $1.10 per share. During fiscal year 2000, 575,000 common
stock options were exercised resulting in $258,750 in cash.

                                      F-14

<PAGE>


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


I.       LOSSES FROM OPERATIONS AND CASH FLOW REQUIREMENTS

The Company meets its day to day working capital requirements through its cash
reserves and management of working capital. The nature of the Company's business
is such that there can be unpredictable variation in the timing of cash inflows.
Management of the Company is concerned that, at the time of approval of the
financial statements, there is insufficient cash reserves to meet the
requirements of the Company for the next year. They have therefore raised
additional funding from external sources. See subsequent event footnote for
additional details.

The financial statements have been prepared on the going concern basis which
assumes that the Company and its subsidiaries will continue in operational
existence for the foreseeable future.

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 have been excluded from the calculation
of diluted losses per share because their effect would be antidilutive.


K.       SUBSEQUENT EVENT

In July 2000 the Company obtained a Term Loan as well as Revolving Credit and
Credit Accommodations. The maximum amount that can be borrowed under the Loan
Agreement is $5,750,000.

The Term Loan limits the amount that can be borrowed pursuant thereto to the
lesser of $5,000,000 or 80% of the auction sales value of certain equipment, as
defined, at the Company's Aberneath, South Wales, UK facility.

The Revolving Credit and Credit Accommodation provides, subject to certain
provisions, that the Company may borrow up to 50% of the value, as defined, of
the Company's inventory as well as 50% of the amount of certain receivables, as
defined. Borrowing for inventory cannot exceed $750,000 and borrowing against
receivables cannot exceed $500,000.

The term loan is repaid monthly and is amortized over a 48 month period, bearing
interest at prime rate plus 2.25%. The inventory and accounts loans mature 36
months after the date of the agreement and bear interest, payable monthly, at
prime rate plus 2.25%.

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.

The proceeds from the term loan will be 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 will need funds in
excess of borrowing under the Term Loan for inventory and receivables.

The Company's directors believe that this financing will achieve those results.

                                      F-15
<PAGE>