UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

(Mark One)

                                    FORM 10-K

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

For the fiscal year ended December 31, 2006 or

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

For the transition period from ___________________ to ___________________


                                            Commission file number:  001-32428


                             TARPON INDUSTRIES, INC.
             (Exact name of registrant as specified in its charter)

                    MICHIGAN                                  30-0030900
         (state or other jurisdiction of                   (I.R.S. Employer
         incorporation or organization)                  Identification No.)

     2420 Wills Street, Marysville, Michigan                   48040
     (Address of principal executive offices)               (Zip Code)


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

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

        Title of each class          Name of each exchange on which registered
   Common Shares, no par value                  American Stock Exchange
   ----------------------------      ----------------------------------------


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

     Indicate by check mark if the registrant is a well-known  seasoned  issuer,
as defined in Rule 405 of the Securities Act. Yes [ ] No [X]

     Indicate by check mark if the  registrant  is not  required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]

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

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K (ss.229.405 of this chapter) is not contained herein,  and
will not be  contained,  to the best of  registrant's  knowledge,  in definitive
proxy or information  statements  incorporated  by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.Yes [ ] No [X]

     Indicate by check mark whether the registrant is a large accelerated filer,
an  accelerated   filer,  or  a   non-accelerated   filer.  See  definitions  of
"accelerated  filer and large  accelerated  filer" in Rule 12b-2 of the Exchange
Act. (Check one):

Large accelerated filer [ ]  Accelerated filer [ ]    Non-accelerated filer [X]

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

     State the aggregate market value of the voting and non-voting common equity
held by  non-affiliates  computed by  reference to the price at which the common
equity was last sold, or the average bid and asked priced of such common equity,
as of April 2, 2007: $4,044,907.

     Indicate  the  number of  shares  outstanding  of each of the  registrant's
classes of common stock, as of the latest practicable date. As of April 2, 2007,
it was 4,993,712.

<PAGE>

                             TARPON INDUSTRIES, INC.

                           ANNUAL REPORT ON FORM 10-K

                      FOR THE YEAR ENDED DECEMBER 31, 2006

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                   PAGE
PART I...........................................................................................................4
<S>     <C>                                                                                                     <C>
   ITEM 1.       BUSINESS........................................................................................4
   ITEM 1A.      RISK FACTORS...................................................................................17
   ITEM 1B.      UNRESOLVED STAFF COMMENTS......................................................................27
   ITEM 2.       PROPERTIES.....................................................................................27
   ITEM 3.       LEGAL PROCEEDINGS..............................................................................27
   ITEM 4.       SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............................................27
PART II.........................................................................................................28
   ITEM 5.       MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES
                 OF EQUITY SECURITIES...........................................................................28
   ITEM 6.       SELECTED FINANCIAL DATA........................................................................32
   ITEM 7.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS..........34
   ITEM 7A.      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.....................................54
   ITEM 8.       FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA....................................................57
   ITEM 9.       CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE..........109
   ITEM 9A.      CONTROLS AND PROCEDURES.......................................................................109
   ITEM 9B.      OTHER INFORMATION.............................................................................111
PART III.......................................................................................................111
   ITEM 10.      DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT............................................111
   ITEM 11.      EXECUTIVE COMPENSATION........................................................................116
   ITEM 12.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT................................134
   ITEM 13.      CERTAIN RELATIONSHIPS & RELATED TRANSACTIONS..................................................136
   ITEM 14.      PRINCIPAL ACCOUNTANT'S FEES & SERVICES........................................................136
PART IV........................................................................................................137
   ITEM 15.      EXHIBITS AND FINANCIAL STATEMENT SCHEDULES....................................................138
</TABLE>


<PAGE>

                                     PART I


ITEM 1. BUSINESS

Introduction

     We, through our subsidiary  companies,  manufacture and sell structural and
mechanical  steel tubing and  engineered  steel  storage rack  systems.  We were
incorporated  in Michigan  on January 16, 2002 and have made three  acquisitions
commencing in 2004. Our subsidiaries are Eugene Welding Co., or "EWCO," acquired
in April 2004,  Steelbank,  Inc.,  or  "Steelbank,"  acquired  in May 2004,  and
substantially  all of the assets and  business  of the Haines  Road  facility of
Bolton Steel Tube Co., Ltd., in February 2005,  other than the real estate.  The
Haines Road real estate and buildings  were purchased in May of 2005. The Haines
Road Facility and its real estate were then combined  into  Steelbank  which was
renamed  Steelbank  Tubular,  Inc. In November of 2006,  we completed a sale and
leaseback of the Haines Road real estate,  paying off the existing  mortgages in
the process.

     EWCO has two manufacturing facilities in Michigan, within 80 miles north of
Detroit,  and Steelbank has a manufacturing  facility in  Mississauga,  Ontario,
Canada, a suburb of Toronto.  We intend to seek other  acquisitions in the steel
tubing and steel fabrication industries.

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


Industry Overview

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


     Steel Storage Rack Systems

     Steel  storage  rack  systems  are  generally  structural  steel  tubing or
structural  beams,  assembled from  fabricated  metal  components and are welded
together to form frames and beams. These standard components can be assembled to
form:

o    selective  racks,  which  are  typically  used  in  public  and  commercial
     warehouse  applications where the ability to select palletized materials is
     desired,  which represent a substantial  majority of our steel storage rack
     system sales,
o    drive-in/through  racks, which provide  high-density  storage of palletized
     long shelf life products, such as salt,
o    push back racks, another form of high-density storage,  which provides some
     degree of selectivity,
o    cantilevered  racks,  which are typically used in the bulk storage of large
     unit items, such as lumber, plywood and drywall.
o    archival  storage  systems,  which are  designed  to provide  high  density
     records storage, including the legal, medical and banking industries.
o    order-picking  systems,  which are designed to incorporate  into the rack a
     conveying system and multi-level  mezzanine from which product can be taken
     off pallets and repackaged for shipment to individual store locations.

     These  systems are used in the home  center,  retail  distribution,  public
warehouse and commercial and industrial  distribution  markets.  Engineering and
system design services are involved in choosing the  appropriate  components for
the system.  Leading  manufacturers of steel storage rack systems are members of
the Rack Manufacturers Institute, which promulgates standards for, and certifies
standard rack components.


     Structural and Mechanical Steel Tubing

     Structural steel tubing, also known as hollow structural sections or "HSS",
is processed  continuously from hot rolled steel coil, roll formed and welded in
line using  high  frequency  welding.  The tubing is cut to length by an in-line
traveling  saw or  shear.  HSS is  manufactured  at EWCO in  round,  square  and
rectangular sections in sizes ranging from 1.5 inches square and round through 5
inches round and 4 inches square and  associated  rectangles  and rounds to ASTM
A500  Grade  B and C  specifications.  HSS is  used as  structural  members  for
buildings  and  structural  frames  and parts  for  equipment  in a  variety  of
applications   and   industries.   Structural   steel  tubing  provides  a  high
strength-to-weight  ratio,  uniform strength,  torsional rigidity,  an aesthetic
appearance, cost-effectiveness and recyclability.

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


Our Operations


     EWCO

     EWCO  manufactures and sells structural steel tubing and SpaceRak (R) steel
storage rack systems at its  facilities  in Marysville  and Marlette,  Michigan.
EWCO  commenced  operations  in  1954  as  a  manufacturer  of  steel  products.
Currently,  EWCO  manufactures  structural and mechanical  steel tubing in sizes
ranging  from 1.5 inches  round and  square to 5.0  inches  round and 4.0 inches
square,  and  complementary  sizes in  rectangular  and  specialty  oval shapes,
typically  to the  structural  specification  ASTM  A500  Grade  B and C and the
mechanical specification ASTM A513 Grade B. In addition, EWCO manufactures steel
storage rack systems,  now including  selective racks,  drive-in/through  racks,
push back racks,  cantilevered racks, archival storage systems and order picking
systems used in the home  center,  retail  distribution,  public  warehouse  and
commercial  and  industrial  distribution  markets.  For the twelve month period
ending December 31, 2006,  tubular products  accounted for  approximately 37% of
EWCO's revenues,  and SpaceRak (R) systems  accounted for  approximately  63% of
EWCO's revenues.

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


     Steelbank

     Steelbank  operated as a structural and mechanical  steel tubing  warehouse
and  distribution  center.   Steelbank  brokered  the  sale  of  structural  and
mechanical tubing that was manufactured by other tubing companies. The operation
serviced  the Canadian  mechanical  market with focus on  automotive  tubing and
various furniture applications.

     On May 14,  2004,  we  acquired  100% of the  outstanding  common  stock of
Steelbank for a total cost of approximately  $1,656,563 U.S. dollars,  by paying
approximately  $54,263  (Cdn.$75,000) in cash,  issuing a promissory note in the
principal amount of approximately  $574,300  (Cdn.$800,000),  payable in monthly
installments  of  Cdn.$15,000  from  July  1,  2004  to  December  1,  2004  and
Cdn.$200,000  on December 10, 2004, as well as Cdn.$62,500 of the holders' legal
and other expenses at maturity,  with the balance paid at closing of our initial
public  offering in February  2005,  by issuing  60,636 of our common  shares in
February  2005,  valued at $269,230  (Cdn.  $375,000) and by issuing  additional
promissory notes in the aggregate  principal  amount of  approximately  $290,750
(Cdn.$405,000)  payable  over three years to the three  former  shareholders  of
Steelbank,  unless their  employment  with Steelbank is terminated for specified
reasons.  The  balance  of these  notes was paid in full at the  closing  of our
financing  with Laurus  Master Fund,  Ltd. on December 13, 2005.  The notes were
secured by all of the shares of Steelbank and the assets of Steelbank.. Canadian
dollars are translated into U.S.  dollars as of the acquisition  date of May 14,
2004.

     In February 2005, the Company,  through Steelbank completed the acquisition
of the  assets  of the  Haines  Road  facility,  other  than the land and  plant
building,  and in May 2005 it completed  the  acquisition  of the land and plant
building.  Steelbank,  Inc. combined with the Haines Road business and relocated
to Haines Road. The Haines Road facility has  manufactured  and sold  structural
and  mechanical  steel  tubing at its owned  facility in  Mississauga,  Ontario,
Canada,  a suburb of Toronto,  since 1988. Its customers' use these products for
residential,   commercial  and  industrial  fencing,   scaffolding,   automotive
after-market  exhaust  systems,  racking  and  greenhouses.  On April  6,  2005,
Steelbank,  Inc.  changed its name to  Steelbank  Tubular,  Inc.  and had ceased
substantially all of its prior operations.

     The aggregate  purchase price including expenses related to the Haines Road
acquisition   transaction  was  approximately   $10,190,000  (Cdn.  $12,489,000)
consisting of (1) approximately  $9,211,000 (Cdn.  $11,289,000)  payable in cash
and  (2)  approximately   $979,000  (Cdn.   $1,200,000)  secured,   subordinated
promissory  note,  either  payable  15 months  after  closing  or by  offsetting
adjustments  made after  closing or for purchases by Bolton Steel Tube Co., LTD.
("Bolton") its former owner from Haines Road. The remaining balance of this note
was paid in full at the closing of our financing  with Laurus Master Fund,  Ltd.
on December 13, 2005.  The purchase  price was allocated as follows:  $9,689,000
(Cdn. $11,875,000) for the assets acquired, a $200,000 success fee in connection
with the transaction,  payable to Bainbridge  Advisors, a related party, over 24
months, and approximately $301,000 in expenses related to the transaction.

     Pursuant  to a  guarantee  between  Tarpon and  Bolton,  Tarpon  guaranteed
Steelbank Tubular,  Inc.'s obligations under the secured subordinated promissory
note  executed by  Steelbank  Tubular,  Inc. in favor of Bolton.  As part of the
transaction, Tarpon agreed not to compete with Bolton with respect to hot-dipped
galvanized products for a period of six months after closing. Bolton also agreed
not to compete with Tarpon on the  pre-galvanized  tubing market for six months.
The six month non compete agreements expired on August 17, 2005.

     On May 18, 2005,  Steelbank  purchased the Haines Road real estate  assets,
including  closing  fees  and  expenses,   for  $4,638,000  (Cdn.   $5,870,000),
consisting  of  (1)  approximately   $530,000  (Cdn.   $670,000)  in  cash,  (2)
approximately  $2,765,000 (Cdn.  $3,500,000) one year mortgage bridge financing,
and (3)  seller  financing  of  approximately  $948,000  (Cdn.  $1,200,000)  and
$395,000  (Cdn.  $500,000)  payable August 18, 2006 in second and third mortgage
financing,  respectively.  On November 22, 2006,  Steelbank completed a sale and
leaseback  of  the  Haines  Road  real  estate  assets  for   $4,691,000   (Cdn.
$5,334,000),  resulting in the payoff of all three mortgages and net proceeds to
the Company of $342,000 (Cdn. $391,000).


Our Business Strategy

     Our business  strategy is to focus and build upon our core  competencies in
the  manufacture  and  distribution  of steel  storage  racks and steel  tubing,
through  improvements  in our operating  efficiencies  and cost  structure,  the
penetration  of additional  markets  through our sales efforts and joint venture
opportunities  with  foreign  producers  and, to the extent  feasible,  selected
strategic acquisitions. We see steel storage racks as engineered,  non-commodity
products with good margins,  and we believe we can be a competitive  participant
in the markets for these  products.  In the near term, we plan to concentrate on
our current geographic market.

     Our steel  storage rack systems are  generally  structural  steel tubing or
structural  beams,  assembled from  fabricated  metal  components and are welded
together to produce  frames and beams in a variety of forms.  These  systems are
used in the home center,  retail  distribution,  public warehouse and commercial
and  industrial  distribution  markets.  Our steel tubing  products are building
blocks for  manufacturers  of other products.  Steel tubing products are used in
original  equipment  manufacturer  automotive,  boating,  industrial  equipment,
construction,  agricultural,  steel service center, and leisure and recreational
vehicle markets.

     We market and sell our steel storage rack systems  products to customers in
the home center industry,  retail distribution,  public warehouse and commercial
and  industrial  distribution  markets and  distributors  to  customers in those
markets.  We market and sell our steel tubing  products to customers in original
equipment manufacturer automotive, boating, industrial equipment,  construction,
agricultural,  steel  service  center,  and  leisure  and  recreational  vehicle
markets.

Our Products

     Steel Storage Rack Systems

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

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

     SpaceRak (R) products include the following:

o    Selective Rack - Roll Formed: We manufacture this product in five different
     post  cross  sections,  from 3 inch x 1-5/8  inch to 4 inch x 3 inch,  with
     gauges  ranging  from  16  gauge  to 10  gauge  in  most  shapes.  We  also
     manufacture  eight  different  size step beams,  ranging  from 2-1/4 inch x
     2-1/5 inch to 6 inch x 2-1/2 inch rolled in 16 gauge  through 11 gauge.  We
     also offer a large quantity of box beams. We also  manufacture  accessories
     for pallet rack installation,  including special accessories for the retail
     market.  Historically,  this rack has  generated  our largest steel storage
     rack systems sales.
o    Selective  Rack -  Structural  Steel:  We can  furnish  this  product  with
     uprights from 3 inch to 4 inch structural  channels and beams made from any
     structural channel,  I-beam or wide flange section. It makes a special wide
     flange upright frame that also uses bolt on beams.
o    Drive-in/Drive-through  Rack: Using the frames and beams from the selective
     rack,  we design  drive in racks using  special  arms and rails to hold the
     pallets.
o    Pushback Racks - Roll Formed and Structural Steel: We furnish rolled formed
     and structural  pushback racks.  They use a pushback track system purchased
     from a third party for most of its systems.
o    Cantilever Rack - Roll Formed:  We have a roll formed  cantilever rack that
     is  medium  duty and is used for  smaller  systems  and  furniture  storage
     applications. We also offer accessories to compliment this product.
o    Cantilever Rack - Structural  Steel: We have a structural  steel cantilever
     rack  that is heavy  duty and is used in the  lumber  industry  and  retail
     lumber applications.  We offer columns from 6 inches to 16 inches deep that
     have  matching  arms welded from 3 inch to 5 inch  I-beams and 6 inch and 8
     inch wide flanges. We also offer accessories to compliment this product.
o    Archival storage system:  We use our roll formed storage racks with special
     decking options and mezzanine decking options to create a multi-level steel
     storage rack system to store archival records.
o    Order  Picking  Systems:  We use our roll formed  storage racks with pallet
     flow and carton flow products. These systems also require a large amount of
     outside purchased items, including floor decking,  safety grating,  stairs,
     and fire baffles.

     Tubular Products

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

     Applications  for  structural  and  mechanical  steel  tubing  include  the
following:

o    leisure products:  exercise  equipment,  bicycles,  boating trailers,  boat
     hoists, recreational vehicles and pop-up campers.
o    agricultural/commercial:  greenhouses,  sprinkler  systems,  farm implement
     components, tillage equipment, fork lifts and industrial equipment.
o    commercial construction:  building conduit, handrails, scaffolding, bridges
     and miscellaneous uses.
o    automotive:  various components,  including aftermarket  automotive exhaust
     systems,  trunk  hinges,  trailer  hitches,  storage racks and hydro formed
     components.
o    furniture:  tables,  chairs, stools, closet and curtain rods, beds, futons,
     storage units, and store display racks.
o    appliance: refrigerators, stoves and barbecues.
o    garden and home tools: lawnmowers,  snow blowers, shovels, rakes, and water
     sprinklers.
o    fencing:  residential,  including dog kennels,  commercial,  industrial and
     ornamental.
o    energy and exploration: oil rigging related equipment.

Our Customers

     We market and sell our steel  tubing  products  to  customers  in  original
equipment manufacturer automotive, boating, industrial equipment,  construction,
agricultural,  steel  service  center,  and  leisure  and  recreational  vehicle
markets. We market and sell our steel storage rack systems products to customers
in  the  home  center  industry,  retail  distribution,   public  warehouse  and
commercial and industrial  distribution markets and distributors to customers in
those markets. During 2006, our ten largest customers represented  approximately
46% of our combined net revenues,  including  Menard,  Inc.,  which  represented
approximately  15% of our combined net  revenues.  During 2005,  our ten largest
customers represented approximately 55% of our combined net revenues,  including
Menard, Inc., which represented  approximately 14% of our combined net revenues.
The  loss of any of  these  customers  or any  significant  reduction  in  their
business would have an adverse effect on our business,  financial  condition and
results of operations.

Our Marketing, Sales and Distribution

     We currently  sell our  structural  and  mechanical  steel tubing and steel
storage rack systems products  primarily through our direct sales force.  EWCO's
steel tubing products are sold through five direct salespersons, EWCO's customer
service department and independent sales  representatives.  EWCO's steel storage
rack system  products are sold through seven direct sales  persons,  independent
distributors and independent sales representatives. Steelbank sells its products
through two direct and two inside sales persons.

Inventory and Backlog

     We generally produce our products to fill specific orders or for forecasted
requirements  to provide us with some  additional  flexibility  in responding to
customer delivery demands. Inventories of our steel storage rack system products
are generally a combination  of components  manufactured  by EWCO and components
purchased from third parties.

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

Manufacturing

     The raw material for  manufacturing  structural steel tubing is steel coil.
We purchase  various  gauges of steel coil that is  typically 50 inches wide and
weighs  40,000 to 50,000  pounds.  The steel coil is slit to the desired  width,
typically  between five (5) to sixteen  (16) inches.  The slit steel is then fed
into a tube mill,  which forms the steel into a round  tube,  welds the seam and
then  reforms the tube into the desired  shape:  square,  rectangular,  round or
special  shape.  The tubes are then cut to a desired length and are prepared for
shipment to the customer or moved for further  processing,  such as saw cutting,
punching,  drilling,  mitering,  de-burring,  or painting.  Steelbank mechanical
steel tubing  products are primarily  manufactured  from coated steels,  such as
pre-galvanized, aluminized and G90 steel.

     EWCO  currently  has five tube mill lines  primarily  producing  structural
steel tubing commonly  referred to as hollow  structural  shapes  (H.S.S.).  The
mills are capable of producing  product within one half the tolerance  specified
under  ASTM A500  GRADE B and GRADE C  tubing.  Four of the five tube  mills are
conventional tube mills. The fifth mill is a form square,  weld square mill that
tightly controls the physical  dimensions of the tube as well as the orientation
of the weld seam.

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

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

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

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

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


Competition

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

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

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

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

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


Steel

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

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

     In 2006,  we  purchased  approximately  17% of our  steel  coil  from  four
suppliers.  We are  currently on cash terms and also have  payment  plans with a
number  of our  steel  suppliers.  While  we  believe  steel  coil is  generally
available from a number of suppliers,  the loss of any of our present suppliers,
interruption  of  production  at one or more of  these  suppliers  or any  other
disruption  in the supply of steel coil from these  suppliers  could  impair our
ability to manufacture our products or require us to pay higher prices to obtain
steel  coil  from  other  sources.  We do not  intend  to  maintain  significant
inventories of steel coil. Therefore,  we might incur delays in meeting delivery
deadlines  if  a  particular  supplier  is  unable  or  unwilling  to  meet  our
requirements.

     The cost of steel  represented  approximately  62% of our net  revenues  in
2006. As a result, the steel industry,  which is highly volatile and cyclical in
nature,  materially affects our business. Steel is a global commodity,  with its
price based on worldwide supply and demand.  Numerous factors, most of which are
beyond our control,  drive the cycles of the steel industry and influence  steel
prices.  The average cost per ton of our base steel coil  purchased in the years
ended December 31, 2006, 2005 and 2004 was $655, $575 and $649, respectively.

     The  United  States  imposed  anti-dumping  tariffs  in March  2002 on some
countries over a three-year period at decreasing rates, reducing foreign imports
of  steel  coil and  increasing  the cost of flat  rolled  steel in 2003.  These
protections  were rescinded in December 2003, but we believe the  devaluation of
the U.S.  dollar  in  relation  to  foreign  currencies  and  increased  Chinese
consumption  of  steel  has  limited  steel  imports.   We  believe  that  these
conditions,  combined with increased  demand from a recovering U.S.  economy and
increased  consolidation  in the domestic steel producing  industry  resulted in
continued  increased  costs of steel coil in the beginning of the second quarter
of 2004,  although  steel prices  stabilized  in the latter part of 2004. In the
fourth quarter of 2004, steel prices began to decline. Steel prices for our base
steel coil continued to abate during 2005,  stabilizing in the fourth quarter of
2005.  This  deterioration  in the U.S.  markets  with  declines  in  shipments,
consumption,  and  production  were due  largely to excess  inventories  at both
distributors and original  equipment  manufactures.  Less robust economic growth
and weakness in the automotive  sector also contributed to the declines.  Prices
firmed starting in September 2005 and continued to increase gradually throughout
2006 before  tapering off from  November of 2006 to March of 2007. We anticipate
increasing steel costs during the remainder of 2007.


Trademark and Domain Names

     We have  registered  the trademark  SpaceRak (R) in the United  States.  We
believe that SpaceRak (R) is recognizable in the industry and might be important
to our steel storage rack systems business.

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


Environmental, Health and Safety Regulation

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

     EWCO is  unaware  of any  material  noncompliance  with its air  permits or
applicable  air,  water  and  waste  management  rules  and  regulations  at its
Marysville or Marlette,  Michigan  facilities,  except that,  in July 2004,  the
Michigan  Department of Environmental  Quality, or "MDEQ," notified EWCO that it
had determined that the Marysville facility was a "major source" for certain air
emissions and that EWCO had failed to apply for a Renewable Operating Permit for
air emissions not covered by its Permit to Install then in effect.  EWCO applied
for a revised  Permit to Install to obviate the need for a  Renewable  Operating
Permit in August 2004,  and  received the revised  Permit to Install in December
2004.  The MDEQ and EWCO  negotiated a resolution of the  violations  alleged by
MDEQ, and EWCO paid a settlement amount of approximately  $31,000 to resolve the
violations alleged by the MDEQ in July 2004.

     Subsequently  in October  2005,  the MDEQ Water  Bureau  cited EWCO for not
having  separate  Storm  Water  Pollution  Prevention  Plans  for each  physical
location  in  Marysville  along with other  minor  infractions.  Since that time
separate plans were developed and submitted to the MDEQ for their approval.  The
Company  incurred  approximately  $28,000  to  remediate  the issue and does not
anticipate any further expenses.

     On  January  19,  2006,  the  Michigan   Occupational   Safety  and  Health
Administration  (MIOSHA)  performed an  inspection of both the SpaceRak and EWCO
facilities to identify any violations of the General Industry Safety  Standards.
On February 7, 2006,  an exit  interview was held with the  inspector,  at which
time the State identified nineteen "Serious" violations and fourteen "Other Than
Serious" violations. On April 27, 2006 formal notification was received from the
State of Michigan outlining  proposed  penalties  totaling $13,650.  The various
citations  were  subsequently  addressed  by the  Company,  which  supplied  the
necessary  documentation  to the State of Michigan,  resulting in a reduction of
penalties to a total of $6,825,  paid by the Company on May 17, 2006. On June 5,
2006 the  Company  received  notification  from the State of  Michigan  that all
violations had been satisfactorily abated and the investigation was closed.

     A  Phase I and II  environmental  report  prepared  in  June  2003  for the
Steelbank facility in Mississauga,  Ontario,  acquired in 2005, did not identify
any  material  noncompliance  with  applicable  environmental   legislation  and
guidelines.  In  connection  with  a  non-functional  bag  house  operation,  it
recommended  that in the event that the bag house  became  operational  that the
facility  determine  whether  it is  required  to  obtain  from the  appropriate
regulatory agencies a certificate of approval for its baghouse operation.

     A Phase I update for the  Steelbank  facility was  performed in April 2005.
The report  reconfirmed  the prior  reports'  conclusions  regarding the need to
determine  whether a  certificate  of approval  is  necessary  for the  baghouse
operation in the event it became operational.

     The  report  also  identified  an  area  of  petroleum   hydrocarbon   soil
contamination  near a  disconnected  electrical  transformer  on the Haines Road
property.  A total of 2.76 metric tons of  contaminated  material  was  removed.
Subsequent soil verification met the applicable standard.

     The Phase I report  identified  a concern  related  to  staining  around an
above-ground  storage tank. The Phase 1 update report reviewed the  above-ground
storage tank and did not observe  significant  staining on the ground surface or
distressed  vegetation near the above-ground  storage tank and did not recommend
any further action.

     The  Phase  1  update  report  also  identified  a  concern  related  to an
underground storage tank ("UST").  The location of the tank was identified.  The
tank was removed and the area remediated to applicable standards.

     We  conducted  a Phase I  review  in  December  2004.  The  Phase I  update
reconfirmed  the prior  reports'  observations  regarding  an area of  petroleum
hydrocarbon soil contamination near a disconnected electrical transformer on the
Steelbank property and also identified an additional, similar staining around an
above-ground fuel storage tank.

     During  the  quarter  ended  June  30,  2006,  Agellan  Investments,   Inc.
("Agellan"),  in the  course of its due  diligence  toward the  purchase  of the
Haines Road real estate,  hired an environmental  engineering firm to survey the
site. The  engineering  firm  discovered  contaminants  on the property,  a fact
previously  undisclosed to us.  Remediation  cost estimates  ranged between $0.5
million  and $1.2  million.  As a  result,  we  recorded  an  accured  a cost of
$750,000,  the amount negotiated with Agellan to assume  responsibility  for the
contaminants  and  indemnify  us.  The sale of the  Haines  Road real  estate to
Agellan  was  completed  on  November  22,  2006,   thus   eliminating   further
environmental risk to us.


Seasonality

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

     Insurance

     Actual or claimed  defects  in our  products  could  give rise to  products
liability  claims  against  us.  We might be sued  because  of  injury or death,
property damage,  loss of production or suspension of operations  resulting from
actual or claimed defects in our products.  We have products liability insurance
with a liability  limit of $5,000,000  for our U.S.  operations  and  $4,291,000
($5,000,000 Cdn.) for Canadian operations.

     Employees

     As of December 31, 2006, the Company employed a total of approximately  232
full-time  individuals,  with  Tarpon  employing  six,  EWCO  employing  181 and
Steelbank  employing 45. Of the total, 177 were involved with production and the
remaining 55 were executive and administrative personnel.

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

     Approximately  143 EWCO  employees  are covered by a collective  bargaining
agreement  with the  International  Brotherhood  of  Teamsters  that  expires on
October 15, 2009.  The Teamsters  have  represented  employees at the Marysville
facility  since 1967 and  employees at the  Marlette  facility  since 2000.  The
Company  has  a  two  year  collective  bargaining  agreement  with  the  United
Steelworkers Union at Steelbank. The agreement covers approximately  thirty-four
employees  and expires on November 30, 2008.  We believe our employee  relations
are good.

     Financial Information about Geographic Areas

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


                                        Year Ended December 31,
                                        -----------------------
Revenues By Country               2006       2005 Proforma     2004 Proforma
                                  ----       -------------     -------------
                                         (dollars in thousands)
United States............   $     60,229     $    49,732       $      43,188
Canada...................   $     15,102     $    11,119       $       7,849


                                       As of December 31,
Long-Lived Assets Located In:     2006                           2005
                                      (dollars in thousands)
United States............    $            463            $          629
Canada...................    $          4,682            $       14,013


Where You May Obtain Information We File With The SEC

     We file annual,  quarterly and current reports,  proxy statements and other
information  with the SEC. You may read and copy any  materials we file with the
SEC at the SEC's Public  Reference Room at 100 F Street N.E.,  Washington,  D.C.
20549. You may obtain  information on the operation of the Public Reference Room
by calling the SEC at  1-800-SEC-0330.  The SEC also  maintains an Internet site
that contains  reports,  proxy and information  statements and other information
regarding  issuers,  such as us,  that  file  electronically  with the SEC.  The
address of the SEC's web site is http://www.sec.gov.

     The  Company's  current Web sites are  http://www.tarponindustries.net  and
http://www.tarponind.com.  We will make  available  free of charge on or through
our Web site,  our annual report on Form 10-K,  quarterly  reports on Form 10-Q,
current  reports on Form 8-K and  amendments to those reports filed or furnished
pursuant to Section  13(a) or 15(d) of the  Exchange  Act as soon as  reasonably
practicable after we  electronically  file such material with, or furnish it to,
the SEC. We will voluntarily  provide  electronic or paper copies of our filings
free of charge upon request.


ITEM 1A. RISK FACTORS

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


Risks Relating to Our Business

We have a history of losses,  and may not achieve  profitability  in the future,
which would adversely affect the price of our Common Stock.

     From our  inception on January 16, 2002 through  December 31, 2006, we have
incurred  net losses of  approximately  $20.7  million.  Tarpon has funded  such
losses and a portion of its acquisition  costs through equity  proceeds,  credit
facilities and the proceeds of its initial public offering.

     Based on our current  business  plan,  we believe  that our  existing  cash
resources will be sufficient to fund our operating losses, capital expenditures,
debt payments and working  capital  requirements.  We are planning to complete a
private  placement  that has been in process since January 2007, and we are also
planning  a public  offering,  of our  equity  securities,  in order to fund our
operations and provide financial stability, but there can be no assurance of the
timing or net proceeds of the same.  Our liquidity is not  sufficient to sustain
operations  or to meet our debt  servicing  requirements  without  at least  the
substantial portion of this financing.

     Management's plans, in addition to obtaining additional financing,  include
completing the cost reduction plan begun in January 2006,  improved  receivables
and inventory  management,  improving of operating  margins,  and continuing the
development of additional customers and markets through its sales initiatives.

     If we are  unable to  generate  adequate  funds  from  operations  or raise
additional  funds,  we will not be able to repay our  existing  debt or fund our
operations, which may cease.

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

     As of December 31, 2006 our total  consolidated  indebtedness  for borrowed
money, including current maturities, was approximately $16.0 million. Subject to
the limits on EWCO and Steelbank credit facilities, we may incur additional debt
in the future. Our level of indebtedness and the debt servicing costs associated
with that indebtedness will require us to dedicate a substantial  portion of our
cash flow from operations to payments on our debt,  reducing cash flow available
for  working  capital,  capital  expenditures,  acquisitions  and other  general
corporate  purposes.  In addition,  a material default in our indebtedness could
result in the failure of our business.

Our high level of debt and debt service obligations could:

     Limit our ability to obtain  additional  financing  for working  capital or
acquisitions;  Reduce the amount of funds  available to finance our  operations,
capital expenditures and activities;

     Increase our vulnerability to economic  downturns and industry  conditions,
including increased competition; and place us at a disadvantage when compared to
our competitors.

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

     We are  currently  in  violation  of certain  financial  covenants  for the
Steelbank  credit  facilities  with our  senior  lender.  As a  result  of these
violations  and  cross  collateral  terms  in  our  convertible  note  we are in
violation  of  covenants  with our  convertible  term note  holder  as well.  We
anticipate  obtaining a waiver for Steelbank shortly,  but we can not assure the
same. We have also not made principal  repayments to such  noteholder  from June
2006 through March 2007. We have entered into a restructuring agreement with the
noteholder to resolve the missed principal payments,  the effectiveness of which
is  dependant on our proposed  equity  financing.  We are planning to complete a
private  placement  that has been in process  since  January  2007.  We are also
planning  a  public  offering  of our  equity  securities  in  order to fund our
operations and provide financial stability.  However,  there can be no assurance
of the timing or net proceeds of these  efforts.  If we complete  the same,  and
make certain  payments to the  noteholder,  we will be in  compliance  with this
obligation, as restructured.

     EWCO has a credit facility secured by all of its assets. Its loan agreement
requires  it to  maintain a minimum  debt  service  coverage  ratio and  minimum
tangible net worth.  It also  generally  prohibits  dividends  and limits EWCO's
ability to make capital expenditures and incur additional debt.

     Steelbank has a credit  facility  secured by all of its personal  property.
Its  credit   facility   prohibits   Steelbank  from   guaranteeing   additional
indebtedness,  incurring indebtedness,  creating liens, paying dividends, making
certain types of investments, entering into transactions with affiliates, making
capital expenditures,  selling assets,  merging with other companies or entering
into any  transactions  outside  of the  ordinary  course of  business.  It also
requires  it to  maintain  certain  financial  tangible  net worth debt  service
coverage and interest coverage.

     These  covenants for EWCO and  Steelbank  affect our ability to operate our
business  and may limit our  ability to take  advantage  of  potential  business
opportunities as they arise.  Moreover, our failure to comply with the financial
or other  covenants  could result in an event of default  that,  if not cured or
waived,  could prevent us from borrowing  under our credit  facilities,  require
accelerated payements and could cause us to seek to refinance our borrowings.

     Tarpon has a convertible  term note secured by certain assets of Tarpon and
its  subsidiaries and the equity  interests of Tarpon's  subsidiaries.  The note
requires  Tarpon  to use the  proceeds  to repay  certain  obligations,  finance
acquisitions  and fund other working capital needs. In addition,  as long as 25%
of the principal amount of the note is outstanding, Tarpon is, without the prior
written consent of the holder of convertible term note, prevented from declaring
or paying  dividends,  issuing or redeeming certain types of preferred stock and
equity, materially altering or reorganizing the business,  incurring,  assuming,
guaranteeing  or canceling  any  additional  indebtedness  (exclusive of certain
trade  debt,  debt  incurred to finance the  purchase  of  equipment,  financing
incurred to replace debt on terms no less favorable than the debt being replaced
and other debt not considered to have a material  impact on the balance  sheet).
It also  provides  the lender with first right of refusal to provide  additional
financing  to Tarpon or any of its  subsidiaries  subject to  certain  terms and
conditions.

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

     Interest  under our existing and proposed  working  capital  facilities and
convertible note accrues at fluctuating rates.  Rising interest rates could have
a substantial impact on our interest expense and will impact our ability to make
our debt  payments.  As of December  31,  2006,  each 1% increase in prime rates
would  result in an  approximate  increase of  $137,000  in our yearly  interest
expense  under  such  facilities,  assuming  they are at the  maximum  permitted
amounts.

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

     In 2004, we acquired EWCO and  Steelbank,  and in 2005, we acquired  Haines
Road,  which was combined with  Steelbank.  All of our senior  management  group
joined us in 2005 or later. As a result,  our experience as a unified enterprise
in operating  steel  manufacturers  and  distributors  is very limited,  and the
financial  information  regarding our acquired companies included in this report
substantially  reflects  their  operations  before  we  acquired,   managed  and
controlled  them and are not  indicators of their future results of operation or
financial condition.  In addition,  our lack of a combined operating history may
result in difficulty  integrating our operations,  service  interruptions to our
customers, inefficiencies and conflicts.

If we are unable to attract and retain key personnel, our ability to operate our
businesses will be adversely impacted..

     Our present and future performance  depends on the continued service of our
key sales,  production and senior management personnel and consultants.  Our key
employees  include James W. Bradshaw,  our Chief Executive  Officer,  Patrick J.
Hook,  our  President and Chief  Operating  Officer,  and C. David Weaver,  Vice
President of Sales & Engineering in EWCO's SpaceRak(R) division. The loss of the
services of any of these individuals or entities could have an adverse effect on
us. We lost our prior Chief Financial Officer and we are conducting a search for
a replacement.  We do not maintain any significant key man life insurance on any
of our key personnel.

Our internal  financial  reporting  procedures are still being  developed and we
will  need  to  allocate  significant  resources  to  meet  applicable  internal
financial reporting standards.

     Our  management  has  evaluated,  with the  participation  of our principal
executive and principal financial officers,  the effectiveness of our disclosure
controls and procedures as of December 31, 2006.  Based on their  evaluation and
review, our principal  executive and principal financial officers have concluded
that these  controls  and  procedures,  as  designed  and  implemented,  are not
operating  effectively.  There have been no  material  changes  in our  internal
control over financial  reporting  identified in connection with such evaluation
that occurred  during our fourth fiscal quarter ended December 31, 2005 that has
materially affected,  or is reasonably likely to materially affect, our internal
control over financial reporting.

     Disclosure  controls and procedures  are our controls and other  procedures
that are designed to ensure that  information  required to be disclosed by us in
the  reports  that  we  file or  submit  under  the  Exchange  Act is  recorded,
processed,  summarized  and reported,  within the time periods  specified in the
Securities and Exchange  Commission's rules and forms.  Disclosure  controls and
procedures  include,  without  limitation,  controls and procedures  designed to
ensure that  information  required to be  disclosed by us in the reports that we
file or submit under the Exchange Act is  accumulated  and  communicated  to our
management,  including our principal executive and principal financial officers,
as appropriate to allow timely decisions regarding required disclosure.

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

     Our independent  registered  public accounting firm identified a variety of
material weaknesses in our internal financial reporting  procedures.  A material
weakness  is  a  significant   deficiency,   or  a  combination  of  significant
deficiencies,  that  results  in more than a remote  likelihood  that a material
misstatement of the annual or interim financial statements will not be prevented
or detected. The material weaknesses are as follows:

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

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

     C.   Insufficient  resources  and  knowledge  to  adequately  complete  the
          process and documenting, testing, and evaluating our internal controls
          over financial reporting required by the Sarbanes-Oxley Act.

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

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

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

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

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

     I.   The Company's invoicing system relies on certain manual controls which
          may not be  sufficient  to  minimize  the  risk of  incorrect  revenue
          recognition, and

     J.   The Company is required to comply with the provisions of Sections 302,
          906  and 404 of the  Sarbanes-Oxley  Act.  Section  404  requires  the
          Company to document,  test,  and evaluate its internal  controls  over
          financial  reporting  and  have its  independent  auditor  conduct  an
          evaluation  of and report on  management's  evaluation  process in the
          near future. In addition, we will also be required to audit and report
          on the  effectiveness of internal  controls.  All material  weaknesses
          identified  in  this  process  are  required  to be  disclosed  in the
          Company's reporting with the Securities and Exchange Commission (SEC).
          Our experience with this documentation,  testing and audit process has
          identified  that  significant  resources are required to complete this
          exercise and considerable  costs are incurred.  We do not believe that
          the Company  currently  has the  resources or knowledge to  adequately
          complete  this  process,  which could  result in a failure to file the
          appropriate reports with the SEC.

     As  a  public  company,  we  have  significant  requirements  for  enhanced
financial  reporting  and  internal  controls.  We are taking steps to unify the
financial  reporting  of  all  of  our  component  companies,  to  increase  our
accounting  and  information  technology  staff  and to put  in  place  internal
controls concerning accounting entries and adjustments, with full documentation,
which are responsive to the issues raised by our independent  auditors,  and, as
of this time, we have made progress on these  points.  We have hired  additional
staff  and are in the  initial  planning  phase  of  upgrading  our  information
technology systems.

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

Our products are viewed as  commodities  and are subject to intense  competition
based  principally on price, and we may not be able to compete  effectively with
companies with greater financial resources.

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

Our products have limited  geographic  markets,  which may adversely  affect our
ability to grow our sales.

     Because of the size and weight of structural  and  mechanical  steel tubing
and the resulting costs of transportation and price competition, it is generally
not  cost  effective  to ship  these  products  more  than  800  miles  from the
manufacturing plant. This and customers' short lead-time  requirements limit the
market for our steel tubing products. Our rack products have a larger geographic
market area, but the same is also subject to physical limits.

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

     The cost of steel for manufacturing our products represented  approximately
67% of Company  revenues  in 2005 and  approximately  62% in 2006.  As a result,
steel  prices,  which are highly  volatile  and  cyclical in nature,  materially
affect our business.  Changes in steel prices have a  significant  impact on the
margins of our products. While we attempt to recover any increase in steel costs
by increasing the price of our products, increases in the prices of our products
might  not  fully  compensate  for  steel  price  increases  and can lag  behind
increases in steel prices,  adversely affecting our gross profit margins. Due to
inventory  carrying costs and general market dynamics,  decreases in steel costs
have  historically  resulted in reduction  of volume and gross  profit  margins.
Steel prices for our base steel coil declined  approximately  15% over the first
nine months of 2006 and increased  approximately  12% over the last three months
of 2006.

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

     For the year ended  December 31, 2006,  we purchased  approximately  17% in
dollar value of our steel from four  suppliers.  We are  currently on cash terms
and also  have  payment  plans  with a number of our  steel  suppliers.While  we
believe steel is generally available from a number of suppliers, the loss of any
of our present  suppliers,  interruption  of  production at one or more of these
suppliers or any other  disruption  in the supply of steel from these  suppliers
could impair our ability to manufacture our products or require us to pay higher
prices to  obtain  steel  from  other  sources.  We do not  intend  to  maintain
significant inventories of steel.

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

     As of December 31, 2006,  approximately 143 EWCO employees are covered by a
collective bargaining agreement with the International Brotherhood of Teamsters,
which  expires in October  2009 and  approximately  34 Steelbank  employees  are
covered by a collective bargaining agreement with the United Steelworkers Union,
which expires in November of 2008. We believe our relations with these employees
are good.

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

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

Steelbank's  operations  are located in Canada,  and exchange rate  fluctuations
between  the  US and  Canadian  dollar  may  adversely  affect  our  results  of
operations.

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

Seasonal fluctuations affect sales for our products and may adversely affect our
cash flow.

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

Equipment  failures  would  interfere  with  production  and increase  costs and
adversely affect our revenues.

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

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

     We currently have an internal sales force of approximately six persons. Our
sales force accounted for a substantial  majority of the Company's sales for the
year ended December 31, 2006. Therefore,  the loss of any of our sales employees
may have an adverse effect on our business,  financial  condition and results of
operations.

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

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

Purchasers of our products may assert product liability claims against us, which
may adversely affect our financial condition.

     Actual or  claimed  defects  in our  products  could  give rise to  product
liability  claims  against  us.  We might be sued  because  of  injury or death,
property damage,  loss of production or suspension of operations  resulting from
actual  or  claimed  defects  in our  products.  Regardless  of  whether  we are
ultimately  determined to be liable,  we might incur  significant legal expenses
not covered by  insurance.  In addition,  products  liability  litigation  could
damage our reputation and impair our ability to market our products.  Litigation
could also impair our ability to retain products liability insurance or make our
insurance more expensive.  We have product liability  insurance with a liability
limit of $5,000,000 for U.S. operations and $4,291,000 for Canadian  operations.
We could incur product  liability claims in excess of our insurance  coverage or
that are subject to substantial  deductibles,  or we may incur uninsured product
liability  costs.  If we are subject to an  uninsured  or  inadequately  insured
products  liability  claim  based  on  our  products,  our  business,  financial
condition and results of operations would be adversely affected.

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

     Our  business  is subject to  numerous  U.S.  and  Canadian  local,  state,
provincial and federal laws and regulations concerning environmental, health and
safety matters, including those relating to air emissions, wastewater discharges
and the generation, handling, storage, transportation, treatment and disposal of
hazardous  materials.  Violations  of such laws and  regulations  could  lead to
substantial fines and penalties.  Also, there are risks of substantial costs and
liabilities  relating to the  investigation  and  remediation of past or present
contamination,  at  current  or  former  properties  used or  owned by us and at
third-party disposal sites,  regardless of fault or the legality of the original
activities that led to such contamination.  Moreover, future developments,  such
as changes in laws and regulations, more stringent enforcement or interpretation
of laws and regulations, and claims for property damage or personal injury would
cause us to incur substantial losses or expenditures. Although we believe we are
in substantial  compliance with all applicable laws and regulations,  such laws,
regulations,  enforcement  proceedings  or private  claims might have a material
adverse effect on our business, results of operations and financial condition.

Risks Relating to Our Common Stock

Our Common Stock may be delisted by the  American  Stock  Exchange,  which would
adversely affect the price of our common stock.

     The American  Stock  Exchange  advised us in September  2006 of a potential
delisting  due to the  lack of a total  of  three  independent  directors  and a
deterioration  in our  financial  position.  We  have  since  appointed  a third
independent  director  and were given  until mid  January  2007 to  improve  our
financial  position  through  equity  financings  and  a  restructuring  of  our
convertible note debt. That date was  subsequently  extended to May 31, 2007. We
may not  achieve  the  necessary  benchmarks  by such date and will then have to
request an extension  from AMEX,  which it could  grant,  if at all, in its sole
discretion.  If we fail to meet the  benchmarks by the deadline,  it is expected
that AMEX will seek a  delisting  of our Common  Stock.  If we became  delisted,
trading of our common stock could be conducted in the over-the-counter market in
the so-called  "pink sheets" or, if available,  the NASD's  Electronic  Bulletin
Board,  and there can be no  assurance  our common  stock will be quoted on such
systems.  In such case,  an  investor  would  likely find it more  difficult  to
dispose of our securities or to obtain accurate  market  quotations for them. If
our Common Stock were delisted from the American Stock Exchange, they may become
subject to Rule 15g9,  under the Securities  Exchange Act of 1934, which imposes
sales practice requirements on broker-dealers that sell "penny stock" securities
to  persons  other  than   established   customers  and  accredited   investors.
Application of this rule could adversely affect the ability, willingness or both
of broker-dealers to sell our securities.

The market price of our Common Stock has fluctuated  significantly  and there is
presently not a significant trading market for the Common Stock.

     The market price of our Common Stock has been volatile and has been trading
at historical  low prices.  There is currently not a significant  trading market
for the Common Stock on the American Stock  Exchange,  and holders of our Common
Stock might find it difficult to sell their Common Stock.  Also,  changes in our
business, our results of operations,  our financial condition, our industry, the
economy,  stock markets in general and trading in our stock in particular  could
cause the market price of our shares to fluctuate substantially.

The market price of the Common  Stock may be  depressed  by shares  eligible for
future sale,  shares  reserved for future  issuance upon the exercise of options
and warrants and registration rights we have granted.

     Future sales of substantial amounts of Common Stock in the public market or
the perception that such sales may occur could adversely affect the market price
of the Common Stock. As of April 2, 2007,  there are 4,993,712  shares of Common
Stock outstanding.  Warrants and optional convertible note shares to purchase an
aggregate  of  4,351,448  Common  Stock  were then  outstanding  and  options to
purchase a total of 519,785  Common  Stock  were then  granted  under our option
plan.  Our  outstanding  Common  Stock and the  Common  Stock  underlying  these
warrants,  convertible  securities  and options are either now eligible for sale
under Rule 144 or will be eligible  beginning at varying times in the future. In
connection with a private  placement we are  conducting,  we expect to register,
under the  Securities  Act of 1933, a total of  5,600,000  shares sold and to be
sold and related warrant  shares,  as well as warrant shares and shares issuable
on conversion of convertible securities related to prior financings,  the amount
of which is not presently  fixed,  and which  together  could total in excess of
10,000,000  shares All of the above  represents  a  significant  overhang on the
trading  market for our Common Stock and may serve to depress the trading  price
of our Common Stock.

The Provisions of our Articles of  Incorporation,  Bylaws and corporate law have
anti-takeover effects.

     Some provisions in our articles of incorporation  and bylaws could delay or
prevent  a change  in  control  of the  Company,  even if that  change  might be
beneficial  to our  shareholders.  Our restated  articles of  incorporation  and
bylaws contain  provisions  that might make  acquiring  control of us difficult,
including  provisions  limiting rights to call special  meetings of shareholders
and  regulating  the  ability of our  shareholders  to  nominate  directors  for
election  at annual  meetings of our  shareholders.  In  addition,  our board of
directors has the authority,  without further approval of our  shareholders,  to
issue  preferred  shares having such rights,  preferences  and privileges as the
board of directors may determine.  Any such issuance of preferred  shares could,
under some circumstances,  have the effect of delaying or preventing a change in
control  of the  Company  and might  adversely  affect  the rights of holders of
Common Stock.

     In  addition,  we are  subject to  Michigan  statutes  regulating  business
combinations,  takeovers and control share acquisitions, which might also hinder
or delay a change in control of the  Company.  Anti-takeover  provisions  in our
restated  articles of incorporation  and bylaws,  anti-takeover  provisions that
could be included in the preferred shares when issued and the Michigan  statutes
regulating business  combinations,  takeovers and control share acquisitions can
depress  the  market  price of our  securities  and can limit the  shareholders'
ability to receive a premium on their shares by discouraging takeover and tender
offer  bids,  even  if  such  events  could  be  viewed  as  beneficial  by  our
shareholders.

     Our  directors  serve  staggered  three-year  terms,  and  directors may be
removed only for cause.  Our  restated  articles of  incorporation  also set the
minimum  number of  directors  constituting  the  entire  Board at three and the
maximum at fifteen,  and they  require  approval of holders of 90% of our voting
shares to amend these  provisions.  These provisions could have an anti-takeover
effect by making it more  difficult to acquire us by means of a tender offer,  a
proxy contest or otherwise or by removing incumbent directors.  These provisions
could  delay,  deter or  prevent  a  tender  offer or  takeover  attempt  that a
shareholder  might  consider  in his  or her  best  interests,  including  those
attempts  that might  result in a premium  over the market  price for the Common
Stock held by our shareholders. See "Description of Securities."

The lead  underwriter  of our  initial  public  offering  may exert  significant
influence over us.

     We agreed that for a period  ending in 2011, we would allow Joseph Gunnar &
Co., LLC the right to appoint a non-voting  observer to our board of  directors.
Joseph Gunnar & Co., LLC appointed  Stephan Stein, its chief operating  officer,
as its non-voting  observer.  The observer is entitled to attend all meetings of
the board of  directors,  to receive all notices  and other  correspondence  and
communications we send to the board of directors and to receive any compensation
that may be paid to our  non-employee  directors.  We have also  entered into an
agreement  for  Joseph  Gunnar & Co.,  LLC to provide  non-exclusive  investment
banking services to us  indefinitely,  unless either party notifies the other of
its  intention not to renew before the  expiration of the then current  one-year
term.  These  arrangements  may  enable  Joseph  Gunnar  &  Co.,  LLC  to  exert
significant  influence over us through the presence of its designee at our board
meetings and through its provision of investment banking services to us.

            CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     Some of the  statements  in this  report  are  forward-looking  statements.
Forward-looking statements include statements relating to our performance in the
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations," and "Business"  sections of this report.  In addition,  we may make
forward-looking  statements in future  filings with the  Securities and Exchange
Commission and in written  materials,  press releases and oral statements issued
by us or on our behalf.  Forward-looking statements include statements regarding
the intent,  belief or current  expectations  of us or our  officers,  including
statements  preceded by,  followed by or including  forward-looking  terminology
such as "may," "will,"  "should,"  "believe,"  "expect,"  "anticipate,"  "plan,"
"intend," "propose,"  "estimate,"  "continue," "predict" or similar expressions,
with  respect  to  various  matters.  Our  actual  results  are likely to differ
materially  from  those  projected  in  the  forward-looking  statements  due to
numerous   factors,   particularly   those  discussed  in  "Risk  Factors."  All
forward-looking  statements in this report are based on information available to
us on the date of this report. We do not undertake to update any forward-looking
statements that may be made by us or on our behalf in this report or otherwise.


ITEM 1B. UNRESOLVED STAFF COMMENTS

     None.


ITEM 2. PROPERTIES

     As of December  31, 2006,  the  Company's  facilities  are set forth in the
following table:

                                    Square                             Own /
Location                            footage           Purpose          Lease
--------                            -------           -------          -----
Marysville, Michigan                 200,000  *      Manufacturing     Lease
Marlette, Michigan                    40,000         Manufacturing     Lease
Mississauga, Ontario, Canada          85,000         Manufacturing     Lease

         * Includes approximately 7,000 square feet of offices.

     Obligations for the leased  facilities are incorporated  within  "Operating
lease  obligations"  under the heading  "Contractual  Obligations"  in Item 7 of
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operation.


ITEM 3. LEGAL PROCEEDINGS

     We are involved from time to time in routine  litigation  incidental to our
business.  This  litigation  arises  principally  from  claims of defects in our
products sold, from  governmental  agency  proceedings  relating to occupational
safety and  health,  wage and hour laws and  similar  employment  and  workplace
regulations, from workers compensation,  and from employment termination claims.
Although  the amount of any  liability  that could  arise with  respect to these
actions cannot accurately be predicted,  in our opinion, such liability will not
have a material adverse effect on our financial position,  results of operations
or cash flows.


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

     None.


<PAGE>


                                     PART II


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


Market for Common Equity

     Our common  shares have traded on the  American  Stock  Exchange  under the
trading  symbol "TPO" since the February 14, 2005.  There was no public  trading
market for our common shares before  February 14, 2005. The following table sets
forth, for the periods  indicated,  the high and low sales prices for our common
shares as reported by the American Stock Exchange.

         Fiscal Year Ended December 31, 2006            High            Low
         --------------------------------------      ----------       ---------
         First Quarter......................... $         3.25     $      2.05
         Second Quarter........................ $         2.96     $      1.24
         Third Quarter......................... $         2.35     $      1.10
         Fourth Quarter........................ $         1.29     $      0.75


         Fiscal Year Ended December 31, 2005            High            Low
         ---------------------------------------     ---------       --------
         First Quarter (2/14/05 to 3/31/05).... $         5.99     $      4.61
         Second Quarter........................ $         5.65     $      3.30
         Third Quarter......................... $         5.20     $      3.19
         Fourth Quarter........................ $         4.35     $      2.15

     As of April 2, 2007, we had 4,993,712 shares issued and  outstanding,  held
by 18 shareholders of record.

Dividends

     We have never paid cash dividends on our common shares and do not expect to
pay such dividends in the foreseeable  future. We currently intend to retain any
future earnings for use in our business. Any future payment of dividends will be
in the sole  discretion of our board of directors.  Credit  agreements  with our
subsidiaries prohibit the payment of dividends. See "Management's Discussion and
Analysis of  Financial  Condition  and  Results of  Operations  - Liquidity  and
Capital Resources."


Recent Sales of Unregistered Securities

1. In  February  and March  2004,  we  privately  placed  $150,000 of our junior
subordinated secured promissory notes to two of our existing accredited investor
shareholders.  The notes were issued at their face amount, bore interest at 8% a
year,  15% after January 5, 2005,  and were paid in February 2005 at the closing
of our initial  public  offering.  The notes were  secured by our assets and the
assets of our subsidiaries,  but were subordinate to our  subsidiaries'  secured
bank financing.  Our net proceeds, after deducting the expenses of the offering,
were approximately  $146,000. We also granted the purchasers in the February and
March offerings  warrants to purchase 30,000 common shares at $5.00 a share. The
warrants are exercisable for five years beginning August 16, 2005. The notes and
warrants were issued in reliance on the exemptions from  registration  contained
in Sections 3(a) (3), 4(2) and 4(6) of the  Securities  Act and Rule 505 and 506
of Regulation D under the Securities Act.

2.  In  March  2004,  we  issued  10,000  of  our  common  shares  to one of our
consultants,  in payment of $50,000 for consulting  fees. The common shares were
issued in reliance on the  exemptions  from  registration  contained in Sections
4(2) and 4(6) of the Securities Act.

3.  We  affected  a  1-for-3.69203259  reverse  split  in  December  2003  and a
1-for-1.6176795 reverse stock split in March 2004. The reverse stock splits were
effected in reliance on the  exemption  from  registration  contained in Section
3(a) (9) of the Securities Act.

4. April  2004,  we  privately  placed  $2,000,000  of our  junior  subordinated
promissory  secured notes to 27 accredited  investors.  The notes were issued at
their face amount,  bore interest at 8% a year,  15% after January 5, 2005,  and
were paid in the February 2005 closing of our initial public offering. The notes
were  secured  by our  assets  and the  assets  of our  subsidiaries,  but  were
subordinate to our  subsidiaries'  secured bank  financing.  We also granted the
purchasers in the April offering  warrants to purchase  435,000 common shares at
$5.00 a share.  The warrants are exercisable for five years beginning August 16,
2005.

     Joseph  Gunnar & Co.,  LLC,  the lead  underwriter  in our  initial  public
offering,  was our placement  agent in our April 2004 $2,000,000 note financing.
Joseph  Gunnar & Co., LLC received for its services (1) $200,000 in  commissions
and fees, (2) a $50,000  non-accountable,  non-refundable  retainer  ($25,000 of
which was applied to our initial  public  offering and was credited  against its
non-accountable   expense  allowance  of  our  initial  public  offering),   (3)
reimbursement of its out-of-pocket expenses,  including the fees of its counsel,
subject to (a) a $35,000 limit on legal fees of its counsel in  connection  with
blue sky matters and blue sky filing fees, plus disbursements,  and (b) a credit
of $25,000 for a portion of the retainer received by the placement agent,  which
was credited  against its expenses,  (4) a five year warrant to purchase 100,000
common shares at $6.25 a share, which was issued to its employee designees,  (5)
the right to appoint a  non-voting  observer to our board of  directors  for two
years from the  completion of our April 2004 note  financing,  and (6) a monthly
agreement to provide  investment  banking services to us in consideration  for a
$7,500  a month  retainer  plus  out-of-pocket  expenses  and  success  fees for
business combinations, other than EWCO and Steelbank.

     Our net proceeds, after deducting the commissions and fees and the expenses
of the  offering,  were  approximately  $1,725,000.  The notes and warrants were
issued in reliance on the  exemptions  from  registration  contained in Sections
3(a) (3), 4(2) and 4(6) of the Securities Act and Rule 506 of Regulation D under
the Securities Act.

     We have  registered the resale by the warrant  holders of the common shares
underlying  the warrants  described in Items 1 and 3 above to permit the warrant
holders to resell these shares to the public.

6. In connection with our acquisition of Steelbank, we agreed to issue 60,636 of
our common shares to the three  accredited  investor former owners of Steelbank.
These  common  shares were issued at the  February  2005  closing of our initial
public  offering in reliance on the exemptions  from  registration  contained in
Sections 4(2) and 4(6) of the Securities Act.

7. Effective February 17, 2005 we granted designees of Bainbridge advisor, Inc.,
one of our consultants,  J. Peter Farquhar,  our former Chief Executive Officer,
James T.  House,  our former  Chief  Financial  Officer,  Patrick  J. Hook,  our
President and Chief Operating Officer,  Jeffrey Greenberg,  Mark D. Madigan, and
Barry Seigel, former owners of Steelbank,  J. Peter Farquhar,  Dr. Robert H. Pry
and Michael A. Ard, three of our directors, and various employees (including Mr.
Madigan),  options to purchase 110,000,  50,000, 40,000, 40,000, 18,595, 18,595,
18,595, 10,000, 10,000 and 21,000 common shares,  respectively,  and on December
12,  2005 we granted  John  Mayfield,  our former  Chief  Financial  Officer and
various   employees  options  to  purchase  40,000  and  55,000  common  shares,
respectively,  all under our 2004  Stock  Option  Plan,  and we granted J. Peter
Farquhar,  one of our  directors,  2,000  common  shares,  all  effective at the
February 2005 closing of our initial public offering. Bainbridge designated Gary
D. Lewis and his son, Gary N. Lewis, who both performed  consulting work for us,
as its  designees.  The  common  shares,  the  options,  and  the  offer  of the
underlying common shares upon exercise of the options,  were granted in reliance
on the exemptions from  registration  contained in Rule 701 under the Securities
Act and Section 4(2) of the Securities Act.

8. We entered into a Securities Purchase Agreement with Laurus Master Fund, Ltd.
("Laurus")  in December  2005.  Proceeds  from the sale of a three-year  secured
convertible note and a seven year common stock purchase warrant were $6,000,000.
Approximately  $1,000,000  of the net  proceeds  of the  sale  was  used for the
repayment  of  seller  notes  associated  with the  Steelbank  purchase  and the
acquisition  of  the  Haines  Road  facility.  Approximately  $4,000,000  of the
proceeds  will be used to provide  additional  working  capital for the existing
businesses  and to provide  funding to move  forward with  acquisitions  and the
remaining $1,000,000 will be used to pay the fees of the financing.

     The note bears  interest at the Wall Street  Journal Prime Rate plus 2% and
is subject to a floor of 8%.  Interest only is payable until April 1, 2006,  and
thereafter  interest plus one thirty-second  (1/32) of the principal $187,500 is
payable  monthly  until  maturity.  Laurus  can elect to take some or all of any
monthly  payment in our stock  initially  valued at $3.27 per share,  subject to
volume  limitations.  In  addition,  Laurus has a warrant to purchase our common
stock,  exercisable for a period of seven years at an initial  exercise price of
$3.81  per  share.  We agreed  to  register  with the  Securities  and  Exchange
Commission the shares of common stock that are issuable,  from time to time upon
conversion  of the note and the shares of common  stock that are  issuable  upon
exercise of the  warrant.  Our  obligations  are secured by the Master  Security
Agreement,  Stock Pledge Agreement and Grant of Security Interest in Trademarks,
pursuant to which Laurus acquired a continuing  security  interest in all of our
present and future assets,  including the stock of the subsidiaries owned by us.
A Subsidiary  Guaranty was also executed by our subsidiaries.  Laurus is subject
to a  subordination  agreement  between  us and ABN AMRO  Bank,  N.V.,  Canadian
Province and LaSalle Bank,  Midwest,  N.A.,  pursuant to which it has a security
interest  in our  assets  and a first  security  interest  in the  stock  of our
subsidiaries.


     Equity Compensation Plan Information

     The following  information is provided as of December 31, 2006 with respect
to compensation plans,  including individual  compensation  arrangements,  under
which our equity securities are authorized for issuance:

-------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                               (a)                        (b)                     (c)
                                             Number of                  Weighted-         Number of securities
                                         securities to be               average           remaining available for
                                            issued upon              exercise price       future issuance under
                                            exercise of                   of              equity compensation
                                            outstanding               outstanding         plans (excluding
                                         options, warrants         options warrants       securities reflected
                                            and rights                and rights             in column (a)
<S>              <C>                             <C>            <C>                                   <C>
Plan category
Equity compensation
plans approved by
security holders (1)                             343,190        $           4.81                       90,215
Equity compensations
plans not approved by
security holders (2)                           2,631,265        $           1.33                           --
                                               ---------                                               -------
Total                                          2,974,455                                               90,215
                                               =========                                               ======
</TABLE>

     (1)  This equity compensation is under the 2004 Stock Option Plan and after
          giving  effect to options  approved  in 2004,  but  granted  effective
          February 17, 2005.

     (2)  These  plans  consist of (a)  warrants to  purchase  an  aggregate  of
          702,416  common  shares at an  exercise  price of $3.31 a share  until
          August 16, 2010 issued to 29  participants  in our 2004 note financing
          in February, March and April 2004 and adjusted per their anti-dilution
          provision  with  regards  to our  December  2005 note  financing,  (b)
          warrants to  purchase  an  aggregate  of 123,614  common  shares at an
          exercise  price of $1.25 a share  until  August 16,  2010 issued to 16
          designees of the placement  agent in our 2004 note  financing in April
          2004 and adjusted per their  anti-dilution  provision  with regards to
          our December  2005 note  financing,  (c) warrants to purchase  243,360
          common shares at an exercise price of $0.98 a share until February 14,
          2010 issued to 12 designees of the  underwriters in our initial public
          offering of common  shares in  February  2005 and  adjusted  per their
          anti-dilution  provision  with  regards  to  our  December  2005  note
          financing,  (d) warrants to purchase an  aggregate  of 300,000  common
          shares at an exercise  price of $0.91 a share until  December 13, 2010
          issued to 8 designees of the placement agent in our December 2005 note
          financing,  (e) warrants to purchase an  aggregate  of 390,000  common
          shares at an exercise  price of $3.08 a share until  December 13, 2012
          issued to 1 designee in our December 2005 note financing, (e) warrants
          to purchase  775,000  common  shares at an  exercise  price of $0.80 a
          share  to the 13  holders  of  bridge  notes  in  connection  with our
          December 7, 2006 bridge note  financing  and (f)  warrants to purchase
          96,875  common  shares  at an  exercise  price  of $0.80 a share to 11
          designees of the  placement  agent in our December 7, 2006 bridge note
          financing. The warrants are subject to anti-dilution adjustments.  The
          exercise  prices of these  warrants  were at or above the fair  market
          value of the  underlying  common  shares on the date of grant.  At the
          time these  options  are  exercised,  the  optionee  must pay the full
          option  price  for all  shares  purchased  in  cash  or by a  cashless
          exercise  in which we  withhold  shares with a fair value equal to the
          exercise price.  The warrants may be assigned,  but we are required to
          be notified of the assignment.


ITEM 6. SELECTED FINANCIAL DATA

     The following selected financial data is for Tarpon as of and for the years
ended December 31, 2006,  2005,  2004,  2003 and 2002 (year of  inception).  The
financial data has been derived from our audited financial  statements,  some of
which  appear  elsewhere  in this  report  together  with the  report of Rehmann
Robsons our current independent  registered public accounting firm, and of Grant
Thornton LLP, our previous Independent  Registered Public Accounting Firm, whose
report on EWCO's financial statements includes an explanatory paragraph relating
to an  uncertainty  concerning  their  ability to continue  as a going  concern.
Individual  data for  Steelbank  has not been  included  because the same is not
deemed significant in relation to EWCO and Haines Road.


Tarpon Industries Inc. and Subsidiaries

<PAGE>
<TABLE>
<CAPTION>

                                                                            Tarpon Industries, Inc.
                                                                            Year Ended December 31,
                                                                    (in thousands except per share data)

Statement of Operations Data:                            2006           2005           2004          2003         2002
                                                      ------------    ----------     ----------    ---------    ---------
<S>                                                    <C>         <C>            <C>           <C>          <C>
Net revenues.......................................    $   75,331  $     60,851   $     37,622  $        --  $        --
Gross profit.......................................         5,801         4,950          3,750           --           --
Interest expense...................................         3,087         1,075          1,237           --           --
Depreciation and amortization......................           929           939            141           --           --
Net loss before taxes..............................       (9,993)       (7,411)        (2,065)        (650)        (766)
Net income loss....................................       (9,993)       (7,310)        (1,995)        (650)        (766)
Net loss per common share
- basic and diluted................................        (2.08)        (1.74)         (1.63)       (0.54)       (0.73)
Weighted average number of common
shares outstanding.................................         4,814         4,194          1,227        1,195        1,050

</TABLE>
<TABLE>
<CAPTION>

                                                                                  Tarpon Industries, Inc.
                                                                                  Year Ended December 31,
                                                                           (in thousands except per share data)

 Balance Sheet Data:                                             2006          2005           2004          2003         2002
                                                              -----------    ----------    -----------    ---------    ----------
<S>                                                           <C>            <C>           <C>            <C>          <C>
 Cash and cash equivalents...............................     $    1,376     $  7,317      $      258     $     22     $     169
 Working capital (deficit)...............................        (9,848)      (11,083)        (2,084)           13            81
 Total Assets............................................         24,116        39,005         21,708          331           269
 2005 note financing obligations.........................             --            --          2,150          ---            --
 Long-term obligations, net of current portion...........              3            10          1,314          ---            --
 Accumulated deficit.....................................       (20,714)      (10,721)        (3,411)      (1,417)         (766)
 Shareholder's (deficit) equity (1)......................        (3,427)         5,195        (1,039)           13            81

</TABLE>

<TABLE>
<CAPTION>

                                                                             Eugene Welding Co. As of
                                                                                  December 31,
                                                                          2003               2002
                                                                     ---------------     --------------
Statement of Operations Data;                                        (In thousands, except per share data)
<S>                                                                       <C>                 <C>             <C>
Net revenues................................................            $  26,442           $    26,444
Gross margin................................................                1,479                 1,916
Interest expense............................................                  200                   183
Depreciation and amortization...............................                  148                   150
Net income (loss) before taxes..............................              (1,260)                   (4)
Net income (loss) (1).......................................              (1,260)                   (4)
</TABLE>

(1)  Does not include any provision or benefit for federal or state income taxes
     for EWCO through December 31, 2003 because it was taxed as an S corporation
     through December 31, 2003.

<TABLE>
<CAPTION>

                                                                    Eugene Welding Co. As of
                                                                           December 31,
                                                                     2003             2002
                                                                  -----------      -----------
Balance Sheet Data:                                                      (In thousands)
<S>                                                               <C>              <C>              <C>
Cash and cash equivalents...................................      $       270      $      497
Working capital.............................................              763           2,284
Total assets................................................           10,467          10.128
Long term obligations, net of current portion...............              535             699
Retained earnings...........................................            4,145           5,494
Shareholder's equity........................................            1,212           2,561

</TABLE>



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

     The following discussions contain  forward-looking  statements that involve
numerous risks and  Uncertainties.  Our actual  results could differ  materially
from those  discussed  in the  forward-looking  statements  as a result of these
risks  and  uncertainties,  including  those  set  forth  in this  report  under
"Forward-Looking  Statements"  and under  "Risk  Factors."  You should  read the
following  discussion in  conjunction  with  "Selected  Financial  Data" and our
consolidated financial statements and notes appearing elsewhere in this filing.

     Overview

     We were  incorporated  in January  2002.  We acquired EWCO and Steelbank in
2004.  Steelbank then acquired Haines Road in February 2005. Our information for
2006,  2005, and 2004 reflects the  acquisitions for the period of time we owned
them. In February 2005, we completed an initial  public  offering for our common
shares.

     Since  our   inception,   we  have  had  continuing   losses,   aggregating
approximately  $20.7  million.  We have  funded such losses and a portion of our
acquisition  costs  through  equity  investments,  loans and the proceeds of our
initial public offering. Our total consolidated indebtedness for borrowed money,
including current maturities, was approximately $16.0 million as of December 31,
2006. Our level of  indebtedness  and the debt servicing  costs  associated with
that indebtedness will require us to dedicate a substantial  portion of our cash
flow from  operations to payments on our debt,  reducing cash flow available for
working capital, capital expenditures,  acquisitions and other general corporate
purposes.

     For the year ended  December 31, 2006,  our auditors have issued an opinion
with a "going concern"  qualification.  Their qualification is based upon, among
other  things,  the losses that we have  incurred  since  inception and concerns
about our ability to have  sufficient  liquidity to continue  operations for the
next 12 months. If we are unable to reduce or eliminate  continued  losses,  and
obtain  additional  financing,  our  financial  resources may not be adequate to
satisfy  our  operating  and  capital  requirements  for the next 12 months.  In
addition,  if we are unable to raise additional capital, our financial resources
will not be adequate to satisfy our operating and capital  requirements  for the
next 12 months.  Our  failure  to  generate  sufficient  revenues,  achieve  our
business  objectives or raise  additional  funds,  will have a material  adverse
effect  on our  results  of  operations,  cash  flows  and  financial  position,
including  our ability to continue as a going  concern.  This  situation is more
fully discussed under the heading Liquidity and Capital Resources.

     Despite our history of losses and related  issues,  our steel  storage rack
business has experienced  significant  growth in the last twelve months. We plan
to concentrate our efforts on expanding this area of our business, which is in a
highly  fragmented   industry.   We  see  steel  storage  racks  as  engineered,
non-commodity products with good margins, and we believe we can be a competitive
participant in the markets for these products.

Summary of Recent Operations

     On a consolidated  basis, we generated net revenues of approximately  $75.3
million  in 2006 as  compared  with  $60.9  million  in  2005,  an  increase  of
approximately  24%.  The  increase in net  revenue of $14.4  million in 2006 was
primarily  attributable  to the growth of our SpaceRak  division of EWCO,  which
increased its revenue by $11.3 million, or 50%, over 2005.

     Our operations in 2006 reflected a net loss of approximately  $10.0 million
as compared  with a net loss of  approximately  $7.4 million in 2005,  and a net
loss before taxes of approximately  $2.1 million in 2004. The 2006 loss includes
a non-cash  impairment  of $4.3 million in the carrying  value of our  Steelbank
subsidiary.

     The  financial  results for 2006  compared to 2005 were mixed,  in that our
emphasis on reduced  manufacturing  costs and improved pricing controls resulted
in  significant  increases  in  revenues  and gross  profit  at EWCO's  SpaceRak
division,  while our tubing  business at EWCO and Steelbank  failed to show such
improvements, due primarily to market and competitive factors.

     The increase in the net loss for 2005 over 2004 was also adversely impacted
the cost associated with our company  operating as a public entity. We completed
our IPO in February 2005. We incurred an increase in administrative salaries and
benefits of approximately  $1.9 million,  an increase in legal professional fees
of approximately $1,918,000, primarily associated with becoming a public company
and searching for additional acquisitions targets. Our consolidated 2005 results
were also  materially  impacted  by  several  expenses  such as an  increase  in
depreciation and amortization expense of approximately $798,000, associated with
the  acquired  assets  of  EWCO  and  Steelbank.   Bad  debt  expense  increased
approximately  $595,000 in 2005 as compared with 2004  primarily  related to the
bankruptcy  of  a  significant   customer.   Our  interest   expense   decreased
approximately  $162,000, as a result of repayment of a bridge note financing. As
noted  above,  we also  experienced  a $1.9 million  non-cash  write down in the
carrying value of Steelbank.

     We currently  seek to minimize the  potential  adverse  impact of commodity
price risks of our steel  inventory by minimizing the amount of steel  inventory
we carry.  We might not be able to raise our  prices,  as we expect  competitive
factors in our  industry to result in more  moderate  gross profit  margins.  We
cannot quantify the impact of these factors on future profitability. Major price
fluctuations are  characteristic  of our industry and typically lead to dramatic
changes in results  of  operations,  including  losses if price  reductions  are
severe.

     We believe that maintaining and growing future profitability will depend on
increasing our sales tonnage and reducing our manufacturing costs, together with
buying steel as cost effectively as possible.  However, we may not be able to do
some or all of these things.

Results of Operations

Tarpon Industries, Inc.

Year Ended December 31, 2006 Compared to Year Ended December 31, 2005

Net Revenues

     In 2006 and 2005,  our net revenues and shipments  were  (including  Haines
Road since the February 2005 date of acquisition):
<TABLE>
<CAPTION>

                                                                 2006             2005                  Change
                                                                   $               $                $              %
                                                             --------------   -------------    ------------    ----------
                                                                                    (dollars in thousands)
<S>                                                          <C>              <C>              <C>                <C>
EWCO Tubular.........................................        $      19,637    $     20,178     $     (541)        (2.7%)
EWCO SpaceRak(R).....................................               34,189          22,851          11,338         49.6%
Steelbank............................................               21,505          17,822           3,683         20.7%


                                                                 2006             2005                  Change
                                                                 Tons             Tons            Tons             %
                                                             --------------   -------------   -------------    ----------
EWCO Tubular.........................................               24,614          26,625         (2,011)        (7.6%)
EWCO SpaceRak(R).....................................               24,028          17,223           6,805         39.5%
Steelbank (1)........................................               19,715          15,736           3,979         25.3%
</TABLE>

(1)  Steelbank  did not  maintain  a record  of tons  shipped  prior to the 2005
     Haines road acquisition

     The  increase in our net revenues of $14.4  million for 2006 was  primarily
due to growth  of EWCO's  SpaceRak  division,  as well as the full year  revenue
related to our acquisition of the Haines Road operations in February 2005 (which
was then combined with Steelbank).

Cost of Goods Sold and the Related Gross Profit

     In 2006  and 2005 our cost of  goods  sold  and the  related  gross  margin
(including Haines Road since the February 2005 date of acquisition) were:
<TABLE>
<CAPTION>

                                                    2006                            2005                      Cost Change
                                                 COGS            GM%           COGS          GM%          $              %
                                                                        (dollars in thousands)
<S>                                              <C>             <C>            <C>            <C>          <C>          <C>
EWCO Tubular........................             $ 18,569        5.4%           19,287         4.4%         (718)        (3.7%)
EWCO SpaceRak (R)...................               30,754       10.0%           21,513         5.9%         9,241         43.0%
Steelbank...........................               20,207        6.0%           15,731        11.7%         4,476         28.5%
</TABLE>

     Gross profit was $5.8 million and $4.3 million for the years ended December
31, 2006 and 2005,  respectively.  The increase in gross profit  dollars in 2006
compared with 2005 was primarily due to reduced manufacturing costs and improved
pricing controls at EWCO's SpaceRak division. Overall gross margins increased to
7.7% for 2006 versus 7.1% for 2005 for the reasons noted above.

Operating Expenses


Selling General and Administration Expense

     In 2006 and 2005, our operating  expenses  (including Haines Road since the
February 2005 date of acquisition) were:
<TABLE>
<CAPTION>

                                                  2006                         2005                    Cost Change
                                        -------------------------     ------------------------    -----------------------
                                              $         Sales %          $          Sales %           $            %
                                          ----------  ------------    --------    ------------    ---------    ----------
                                                                    (dollars in thousands)
<S>                                       <C>                         <C>                         <C>              <C>
Tarpon (unconsolidated)...............    $   4,745          N/A      $ 3,113             N/A     $    922         24.1%
EWCO..................................        3,027         5.6%        3,268            7.2%        (241)        (7.4%)
Steelbank ............................        1,519         7.1%        5,281           19.0%      (1,383)       (47.7%)
</TABLE>


     Selling,  general and  administrative  expenses ("SG&A")  decreased for the
year ended  December 31, 2006 to $9.3  million  from $9.7 million in 2005.  SG&A
expenses as a percent of sales were 12.3% in 2006 compared to 15.9% in 2005, due
primarily  to an increase in sales.  The bad debt  write-off of  FENCEMaster  of
$925,000 in the third  quarter of 2005 was the most  significant  year over year
change.  Excluding this change,  SG&A expenses showed increases in audit,  legal
and consulting fees of $419,000 and insurance of $104,000.

Impairment
<TABLE>
<CAPTION>

                                                2006                           2005                     Cost Change
                                     ----------------------------    -------------------------    ------------------------
                                            $          Sales %          $           Sales %          $             %
                                        ---------    ------------    ---------    ------------    ---------    -----------
                                                                    (dollars in thousands)
<S>                                        <C>              <C>         <C>              <C>         <C>           <C>
Steelbank.........................         4,326            5.7%        1,894            3.1%        2,432         128.4%
</TABLE>


     Steelbank incurred  impairments in 2006 and 2005.  Goodwill and intangibles
related to the  Steelbank  (2004) and the Haines Road (2005)  acquisitions  were
determined to be impaired based upon an evaluation of those assets  conducted in
the second  quarter of 2006 in  accordance  with  provisions  of SFAS 142.  This
resulted in an impairment  charge of  $3,576,000 in 2006 and  $1,894,000 in 2005
(see  Note 5  "Goodwill  and  Intangible  Assets").  Additionally,  the  Company
incurred an impairment charge in Q2 2006 of $750,000 related to reduced value of
the Haines Road real  property  located in  Mississauga,  Ontario as a result of
environmental conditions.

Other Income and Expense

     Other income and expense  resulted in income for 2006 of $911,000  compared
with  income of $897,000  in 2005,  with  increases  in Gain on  Derivatives  of
$738,000  associated with the  convertibility  option associated with the Laurus
Senior  Convertible Term Note and  Miscellaneous  Income of $212,000,  offset by
Finance  Costs of $158,000  and Loss on Disposal of Property  and  Equipment  of
$184,000, as well as a decrease in Foreign Exchange Gain of $595,000.

Interest Expense

     Net interest expense increased to $3.1 million in 2006 from $1.0 million in
2005.  Approximately $1.9 million of the 2006 total was incurred by Tarpon, with
$595,000 of interest on  borrowings  under the Laurus Senior  Convertible  Note,
$1.0 million representing  amortization of financing costs under the Laurus note
and $338,000 of default  interest  associated  with the fourth  quarter of 2006.
Interest  expense  under  EWCO's  line of credit and term note  borrowings  were
$544,000  compared  with  $490,000 in 2005 due to interest  rates that  averaged
approximately  200 basis points higher in 2006.  Steelbank  interest  expense of
$624,000  compared with  $404,000 in 2005 is  attributable  to higher  revolving
credit  balances in 2006 and interest rates ranging from 150 to 200 basis points
higher in 2006 than in 2005.

Income Taxes

     We have not recognized a potential tax benefit from our net losses, because
of the  uncertainty  regarding  our ability to realize the future tax benefit of
our net operating  loss carry  forwards.  This  potential  loss carry forward if
utilized would be approximately $ 17.0 million.


Tarpon Industries, Inc.

Year Ended December 31, 2005 Compared to Year Ended December 31, 2004

Net Revenues

     In 2005 and 2004 our net revenues and shipments  were  (including  EWCO and
Steelbank  since the date of  acquisition,  April  2004 for  EWCO,  May 2004 for
Steelbank, and February 2005 for Haines Road):

<TABLE>
<CAPTION>

                                         2005             2004                    Change
                                     --------------   -------------    ------------    ----------
                                           $               $                $              %
                                     --------------   -------------    ------------    ----------
                                                            (dollars in thousands)
<S>                                        <C>              <C>              <C>            <C>
EWCO Tubular                               $20,178          14,622           5,556          38.0%
EWCO SpaceRak(R)                            22,851          17,733           5,118          28.9%
Steelbank                                   17,822           5,267          12,555         238.4%


                                          2005            2004                    Change
                                     --------------   -------------    ------------    ----------
                                         Tons             Tons            Tons             %
                                     --------------   -------------   -------------     ---------
EWCO Tubular                                26,625          16,835           9,790          58.2%
EWCO SpaceRak(R)                            17,223          13,393           3,830          28.6%
Steelbank (1)                               15,736             N/A             N/A           N/A
</TABLE>

(1)  Steelbank  did not  track  tons  shipped  prior  to the  2005  Haines  road
     acquisition

     The  increase in our net revenues of $23.3  million for 2005 was  primarily
due to the full year revenue  related to our  acquisition  of EWCO  (acquired in
April  2004),  the full year  revenue  related to our  acquisition  of Steelbank
(acquired  in  May  2004)  and  the  partial  year  of  revenue  related  to our
acquisition  of the  Haines  Road  location  in  February  2005  (which was then
combined with Steelbank).  Net revenues  associated with the acquisition of EWCO
added  approximately  $10.7  million in net  revenues  and the  acquisitions  of
Steelbank and Haines Road added approximately $12.6 million.

Cost of Goods Sold and the Related Gross Profit

     In 2005  and 2004 our cost of  goods  sold  and the  related  gross  margin
(including  EWCO and  Steelbank  since the date of  acquisition,  April 2004 for
EWCO, May 2004 for Steelbank, and February 2005 for Haines Road) were:
<TABLE>
<CAPTION>

                                                     2005                           2004                   Cost Change
                                          ----------------------------    -------------------------    --------------------
                                                COGS $         GM%        COGS $         GM %           $           %
                                             ------------    ---------  -----------    ----------      -----    ---------
                                                                          (dollars in thousands)
<S>                                              <C>            <C>          <C>            <C>       <C>           <C>
EWCO Tubular............................     $   19,287         4.4%      $   12,743         12.9%      $ 6,544       51.4%
EWCO SpaceRak (R).......................         21,513         5.9%          16,757          5.5%        4,756       28.4%
Steelbank...............................         15,7 31       11.7%           4,446         15.6%       11,285      253.8%
</TABLE>

     Gross profit was $4.3 million and $3.7 million for the twelve month periods
ended  December  31, 2005 and 2004,  respectively.  The increase in gross profit
dollars in 2005 compared with 2004 was due to the  acquisition of Haines Road in
February  2005.  Gross margins  decreased to 7.1% for 2005 versus 9.8% for 2004.
The  decrease in gross margin as a percent of sales for 2005 as compared to 2004
was  attributable  to falling  steel prices and the  competitive  factors in our
industry  which  caused us to lower  pricing to retain and  maintain our current
sales volume in a soft market.  Reduced steel pricing  created  several  adverse
effects. In addition to reduced margin, it caused many of our customers to defer
purchases in  anticipation  of further price  reductions.  This resulted in both
reduced  selling prices and reduced  tonnage  volume,  which  contrasts with the
benefits we experienced in 2004 as a result of sharply rising steel prices.

Operating Expenses

     In 2005 and 2004,  our  operating  expenses  (including  EWCO and Steelbank
since the date of acquisition,  April 2004 for EWCO, May 2004 for Steelbank, and
February 2005 for Haines Road) were:
<TABLE>
<CAPTION>

                                                2005                           2004                     Cost Change
                                     ----------------------------    -------------------------    ------------------------
                                            $          Sales %           $          Sales %          $          Sales %
                                        ---------    ------------    ---------    ------------    ---------    -----------
                                                                    (dollars in thousands)
<S>                                     <C>                           <C>                          <C>              <C>
Tarpon..........................        $  3,823             N/A      $   929             N/A      $ 2,892          311.3%
EWCO............................           3,018            6.9%        2,124             6.6%         989           46.6%
Steelbank (including
Haines Road)....................           4,747           26.6%          884            15.6%       4,397          497.4%
</TABLE>


     Operating expenses were $11.6 million and $3.9 million for the twelve month
periods  ended  December  31, 2005 and 2004.  Operating  expense as a percent of
sales was 19.0% and 10.3% of net revenue,  respectively. We incurred an increase
in administrative salaries,  commissions and benefits of approximately $703,000,
$844,000  and  $503,000  at  Tarpon,  EWCO and  Steelbank  respectively.  Tarpon
incurred  increased legal and  professional  fees of  approximately  $1,660,000,
non-cash,  non-employee  stock option  expense of  $424,200,  and an increase in
insurance  expense of  approximately  $119,000.  These  expenses were  primarily
associated  with becoming a public company in February 2005, the  acquisition of
EWCO in April 2004,  Steelbank in May 2004, and Haines Road in February 2005 and
searching for additional companies for acquisitions.  In addition we incurred an
increase  in bad debt  expense of  approximately  $595,000  over 2004  primarily
related to the bankruptcy of a significant  Steelbank customer for which we have
purchase  commitments  through  June 2006 with the new owner.  Depreciation  and
amortization expense increased  approximately  $798,000 primarily as a result of
the  acquisition  of the Haines Road plant and real  estate in February  and May
2005,  respectively.  Our operating  expense will remain high as a percentage of
net  revenues,   until  the  Company  can  increase   sales   through   proposed
acquisitions.  Further,  we  recognized  an  impairment  loss  in our  Steelbank
investment described below.

     We recorded an  impairment  loss of $1.9  million as a result of our annual
impairment  test during the fourth  quarter 2005. As a result of our  impairment
test, the carrying value of the Steelbank  goodwill exceeded the fair value, and
was written down $1.1 million. The definite life intangibles were also tested in
this process.  As a result, the customer base definite life intangible  carrying
value exceeded its fair value. It was written down $794,000.

Interest and Other Expenses

     Tarpon's interest and other expenses decreased approximately $1,734,700 for
2005  as  compared  to  2004.  This  change  was  primarily  due  to a  gain  of
approximately  $322,000 resulting from fair value accounting from the conversion
feature and stock  warrants  issued for financing fees which were required to be
treated as  derivatives.  There was a positive  change in  foreign  exchange  of
approximately  $816,000,  and a decrease  in interest  expense of  approximately
$162,000 in 2005,  compared to 2004.  The decrease  was due to the  repayment of
note financing.

Income Taxes

     We have not recognized a potential tax benefit from our net losses, because
of the  uncertainty  regarding  its ability to realize the future tax benefit of
its net operating  loss carry  forwards.  This  potential  loss carry forward if
utilized would be approximately $ 8.8 million.


Pro Forma Year Ended December 31, 2004

Net Revenues

     Our 2004 pro forma net revenues and  shipments,  as if we had acquired EWCO
and Haines Road as of January 1, 2004, and Steelbank as of May 14, 2004, were as
follows:

                                               2004
                               --------------------------------------
                                         $                      %
                                   --------------    ----------------
                                      (dollars in thousands)
                               --------------------------------------
EWCO Tubular.................   $         20,551                32.5
EWCO SpaceRak................             23,051                36.5
Haines Road..................             15,397                24.4
Steelbank....................              5,267                 8.3
Less Inter-Company...........            (1,064)               (1.7)
                                   --------------
Total Pro Forma..............   $         63,202               100.0
                                   ==============

                                               2004
                               --------------------------------------
                                         Tons                   %
                                    --------------    ----------------
EWCO Tubular.................             24,803               40.8%
EWCO SpaceRak................             18,452               30.3%
Haines Road..................             17,544               28.9%
                                   --------------
Total........................             60,799              100.0%
                                   ==============

     Pro forma revenues for 2004 reflect an increase in tons of product  shipped
at EWCO SpaceRak and Haines Road and the following  increases in average revenue
per ton: (1) $14, or 3%, for EWCO's steel tubing  products,  (2) $39, or 4%, for
EWCO's steel  storage  rack system  products,  and (3) $191,  or 20%, for Haines
Road.  The  increase in the  average  price per ton was  primarily  due to price
increases  in 2004 in the  industry  generally  as a result of  increased  steel
costs.  Increases in average  revenue per ton for these  products  substantially
moderated in the third and fourth  quarters.  We currently  seek to minimize the
amount of steel inventory we carry. The increase in our net revenues is also due
to the  increase  in tons of product  shipped.  The  increase in tons of product
shipped in the 2004 period was  primarily  due to  increased  shipments  of EWCO
SpaceRak and Haines Road products,  which we believe  resulted from more focused
sales  efforts.  EWCO steel  tubular  product  tonnage  decreased as a result of
customers  purchasing lower volumes due to increased product prices. The per ton
information provided above includes inter-company amounts, which are not tracked
internally.


Cost of Goods Sold and Gross Margin

     The  following  table  reflects  cost of goods sold and the  related  gross
margin percentages for 2004 on a pro forma basis, as if we had acquired EWCO and
Haines Road as of January 1, 2004, and Steelbank as of May 14, 2004:

                                                   2004
                               --------------------------------------
                                           $                   GM%
                                   --------------    ----------------
EWCO Tubular......................          17,599               14.4%
EWCO SpaceRak.....................          21,663                6.0%
Haines Road.......................          12,484               18.9%
Steelbank.........................           4,446               15.6%
Less Inter-Company................           (974)
                                      -------------
Total.............................          55,218               12.6%
                                      =============    ---------------

     Our pro forma gross margin percentage for 2004 increased,  primarily due to
the increases in average revenue per ton described above, which more than offset
increased costs of materials  primarily due to rising steel prices,  except that
SpaceRak did not  increase  its prices as fast due to a lag between  pricing and
shipping,  which  accounts  for its below  average  margins for the  period,  an
approximately  $43, or 8.9% decrease in average  manufacturing  costs for EWCO's
steel  storage  rack system  products  and an  approximately  $27 per ton, or an
approximately  14%,  decrease for Haines Road's  products,  partially  offset by
approximately  $34, or approximately  31.8%,  increase in average  manufacturing
costs for EWCO's tubular products,  and the steel inventories on hand at EWCO at
the end of 2003  that it had  purchased  at  lower  prices  than  first  quarter
replacement costs; EWCO currently maintains lower inventory levels.


Selling, General and Administrative Expenses

     The following  table  reflects total  selling,  general and  administrative
expenses,  including  depreciation,  for 2004 on a pro forma basis, as if we had
acquired EWCO and Haines Road as of January 1, 2004, and Steelbank as of May 14,
2004. Included is approximately $424,000 in non-employee stock options.

                                      2004
                               --------------------------------------
                                       $                      Sales %
                                    --------------    ----------------
                                          (dollars in thousands)
 Tarpon........................     $         1,121              N/A
 EWCO..........................               3,162               7.2%
 Haines Road...................               1,154               7.4%
 Steelbank.....................                 908              17.2%
 Consolidating adjustment......               (213)
 EWCO adjustment...............                  13
 Offering adjustment...........                 424
 Haines Road adjustment........                  75
                                     -----------------
 Total.........................     $          6,644              10.5%
                                     =================


Interest and Other Expenses

     Pro forma interest expense for 2004 was approximately  $968,000,  primarily
due to increased  borrowings in connection with the Haines Road  acquisition and
increased borrowings at EWCO and Haines Road in 2004.

Income Taxes

     Tarpon and has not  recognized a potential tax benefit from its net losses,
because of the  uncertainty  regarding our ability to realize future tax benefit
of our net  operating  loss  carryforwards.  EWCO ceased to be an S  corporation
effective January 1, 2004. Tarpon's  acquisition of Steelbank's stock results in
a limitation on its use of Steelbank's net operating loss carryforwards.


Pro Forma Year Ended December 31, 2003

Net Revenues

     Our 2003 pro forma net revenues and  shipments,  as if we had acquired EWCO
and Haines Road as of January 1, 2003, were as follows:

                                                      2003
                                       ------------------------------------
                                                 $                 %
                                           --------------    --------------
                                             (dollars in thousands)
EWCO Tubular........................    $         13,069              35.0
EWCO SpaceRak.......................              13,373              35.8
Haines Road.........................              11,171              29.9
Less Inter-Company..................               (255)             (0.7)
                                           --------------    --------------
Total Pro Forma.....................    $         37,358             100.0
                                           ==============    ==============


                                                      2003
                                       -----------------------------------
                                              Tons                %
                                          --------------    --------------
 EWCO Tubular.......................             29,750              50.5
 EWCO SpaceRak......................             13,053              22.2
 Haines Road........................             16,102              27.3
                                          --------------    --------------
 Total Pro Forma....................             58,905             100.0
                                          ==============    ==============


     Pro forma revenues for 2003 reflect an increase in tons of product  shipped
at EWCO and a $51, or 7.9%  increase in average  revenue per ton at Haines Road,
partially  offset by the decrease in tons of product shipped at Haines Road, and
by the following decreases in the average revenue per ton: (1) $14, or 3.1%, for
EWCO's steel tubing  products,  and (2) $40, or 3.7%,  for EWCO's steel  storage
rack systems  products.  See "Steel" for a description of changes in our average
cost per ton of  steel.  Haines  Road lost a major  customer  during  2003,  but
partially replaced the customer with a new customer  purchasing the same product
line. As a result, Haines Road's tons shipped and revenues declined in 2003. The
increase  in tons of product  shipped  at EWCO was  primarily  due to  increased
shipments of EWCO Tubular  products,  which we believe  resulted from aggressive
pricing.

     The  decrease in the  average  price per ton at EWCO was  primarily  due to
price decreases in the beginning of 2003 in the industry generally,  we believe,
as a result of the  weaker  economy  and not  raising  our prices as fast as our
steel costs increased at the end of the year.

Cost of Goods Sold and Gross Margin

     The  following  table  reflects  cost of goods sold and the  related  gross
margin percentages for 2003 on a pro forma basis, as if we had acquired EWCO and
Haines Road as of January 1, 2003:

                                                    2003
                                     ------------------------------------
                                                 $                GM%
                                          --------------    -------------
                                           (dollars in thousands)
EWCO Tubular......................   $           12,935              1.0
EWCO SpaceRak.....................               12,027             10.1
Haines Road.......................                9,674             13.4
Less Acquisition Adjustments......              (1,028)          (303.1)
                                          --------------    -------------
Total.............................   $           33,608             10.0
                                          ==============    =============


     Our pro  forma  gross  margin  percentage  for 2003  reflects  a  decrease,
primarily due to the decreases in average  revenue per ton described  above,  an
increase in costs of materials at Haines Road,  primarily  due to higher  priced
inventories  on hand at the  beginning  of the  year,  and a $9 per ton,  or 2%,
increase in average  manufacturing  costs for EWCO's  steel  storage rack system
products, due to a change in product mix toward products requiring greater labor
to produce,  and an  approximately  $20 per ton,  or 16.4%,  increase in average
manufacturing  costs for Haines Road  products,  due to fixed costs being spread
over lower volume.

Selling, General and Administrative Expenses

     The following  table  reflects total  selling,  general and  administrative
expenses,  including  depreciation,  for 2003 on a pro forma basis, as if we had
acquired EWCO and Haines Road as of January 1, 2003:

                                      2003
                                 ---------------------------------------
                                        $                Sales %
                                   --------------    ----------------
                                           (dollars in thousands)
 Tarpon..........................  $     650                 N/A
 EWCO............................      2,546                9.6%
 Haines Road.....................        948                8.5%
 Consolidating adjustment........         24                0.1%
 Haines adjustment...............       (27)              (0.1%)
                                   --------------    ----------------
 Total...........................  $    4,141             11.1%
                                   ==============    ================

     Our pro forma total selling, general and administrative expense,  including
depreciation,  for 2003 reflects increases primarily attributable to at EWCO (a)
approximately  $439,000 in  increased  salaries,  payroll  taxes and  recruiting
expenses,  due to increased  headcount and salary  increases,  (b) approximately
$245,000 in increased bad debt expenses in 2003,  (c)  approximately  $40,000 in
increased  health insurance  expenses,  (d)  approximately  $37,000 in increased
legal  expenses,   (e)   approximately   $28,000  in  increased  rent,  and  (f)
approximately  $26,000 in increased travel and related  expenses,  and at Haines
Road: (a) approximately  $72,000 in increased  foreign exchange losses,  and (b)
approximately  $11,000 in increased  professional  fees.  These  increases  were
partially  offset by an  approximately  $116,000  decrease in Tarpon's  selling,
general and administrative  expense,  primarily due to approximately $106,000 in
decreased  consulting  expenses and approximately  $26,000 in abandoned projects
expenses  in  2002  that  were  not  incurred  in  2003.  Selling,  general  and
administrative  expenses decreased as a percentage of net sales primarily due to
the effect of increased sales.

Interest and Other Expenses

     Pro forma interest expense for 2003 was approximately $1,248,000, primarily
due to increased  borrowings in connection with the Haines Road  acquisition and
increased borrowings at EWCO and Haines Road in 2003.

Income Taxes

     Tarpon and has not  recognized a potential tax benefit from its net losses,
because of the  uncertainty  regarding our ability to realize future tax benefit
of our  net  operating  loss  carryforwards.  EWCO  was an S  corporation  until
December 31, 2003,  but the pro forma  statements  provide for an  approximately
$54,000  tax  credit  for EWCO on its 2003  losses as if it had been  subject to
federal income taxes.  Tarpon's  acquisition  of Steelbank's  stock results in a
limitation on its use of Steelbank's net operating loss carryforwards.


Liquidity and Capital Resources

Overview

     At December 31, 2006 we had a working  capital  deficit of  $9,848,000,  as
compared with a working capital deficit at December 31, 2005 of $11,083,000. The
working  capital  deficit  is  due  in  part  to the  recording  of  our  senior
indebtedness  and our  noteholder  indebtedness  as current  due to  defaults at
December 31, 2006 and 2005.  Certain of these  defaults  have been waived and we
anticipate that all of these defaults will be waived within the near future (see
note 14, Subsequent Events), allowing us to reflect certain amounts due to these
lenders as  long-term  indebtedness,  but there can be no assurance of the same.
The reduction in the working  capital  deficit at the end of 2006 as compared to
the end of 2005 was due to the retirement of certain mortgages on property owned
by Steelbank,  which were paid in November  2006. In addition,  the 2006 working
capital deficit  reflects a decrease in accounts payable and accrued expenses of
$1.4 million and increases of $878,000 and $474,000 in accounts  receivable  and
other current assets,  offset by decreases in cash and cash  equivalents of $5.9
million and inventories of $160,000.

     Our primary needs for liquidity in 2006 are: (1) working capital  including
increases in accounts receivable and inventories of steel and finished products,
(2) payment of  obligations  under our senior  indebtedness  and our  noteholder
indebtedness,  (3) capital  expenditures for equipment and (4) funding for sales
and marketing activities.

     At the present time we have insufficient liquidity to meet the above needs.
We expect to shortly complete a private placement commenced in January 2007, and
to carry out a public offering, in each case of our equity securities, but there
can be assurance of the same. In the absence of these activities, we will not be
able to meet our  obligations  and will not be able to continue to operate  ours
businesses.

Sources and Uses of Cash

     We have  incurred  losses  and  negative  cash flows in each year since our
inception.  We financed our  activities  with funds  received  from sales of our
common  shares,   notes,   warrants  and  bank  loans.  As  of  April  2,  2007,
approximately $293,000 was available for borrowing under EWCO's revolving credit
facility  and   approximately   $197,000  was  available  for  borrowing   under
Steelbank's revolving credit facility.

     On December 13, 2005, we entered into a Securities  Purchase Agreement with
Laurus  Master  Fund,  Ltd.  in  connection  with  the  private  placement  of a
convertible  note in the principal  amount of $6,000,000  due December 13, 2008.
The net proceeds were for working capital purposes and acquisition activities.

         In February 2005, we concluded an initial public offering of our common
stock and received $14,748,750 after underwriting commissions and before
expenses of $2,802,857.


Tarpon Industries, Inc.

Year Ended December 31, 2006

Cash Flows From Operating Activities

     Net cash used in operations in 2006 was $4,780,000. Cash was used primarily
by (1) $10.0 million of losses before  depreciation and amortization,  accretion
of note discounts and impairment,  (2) $876,000 increase in accounts receivable,
(3)  $371,000  increase in prepaid  expenses  and other  current  assets and (4)
$300,000  decrease in accounts payable and accrued  expenses.  Cash was provided
from operations by a decrease in inventory of $153,000.

Cash Flows From Investing Activities

     Our investing activities in 2006 used approximately $1,330,000,  consisting
of the payment of $985,000 of FENCEMaster  obligations  and $346,000 for capital
expenditures.

Cash Flows From Financing Activities

     Our  financing  activities  provided  $318,000  of cash in  2006.  Cash was
provided  by  $4,691,000  from  the  sale of the  Haines  Road  real  estate  in
connection  with the sale and  leaseback  transaction  completed  in November of
2006,  net  borrowings  on credit  facilities  of $444,000 and net proceeds from
issuance of bridge notes of $585,000.  Cash was used for  repayment of long-term
obligations of $2,201,000 and repayment of short-term obligations of $3,201,000.


Tarpon Industries, Inc.

Year Ended December 31, 2005

Cash Flows From Operating Activities

     Net cash used in operations in 2005 was $165,000.  Cash was used  primarily
to  fund  losses  before  depreciation,   amortization,  bad  debt  expense  and
impairment loss of $3,504,000. Cash provided from operations included a decrease
in inventory of $768,000 and increases in accounts  payable and accrued expenses
of $3,025,000.  The increase in accounts  payable  related to the lengthening of
payment periods with our suppliers and the growth of payables as a result of the
Haines Road acquisition.

Cash Flows From Investing Activities

     Our investing activities in 2005 used approximately $9,082,000,  consisting
of $9,093,000 for  acquisitions and $1,105,000 for capital  expenditures.  These
uses were offset by $1,100,000 of proceeds  related to  FENCEMaster,  a customer
who filed for bankruptcy for which we were a secured creditor.

Cash Flows From Financing Activities

     Our financing  activities  provided  $16,127,000 of cash in 2005.  Cash was
provided by  $13,472,000  from the initial  public  offering of common  stock in
February 2005,  net  borrowings on credit  facilities of $1,575,000 and proceeds
from issuance of long-term debt of $7,735,000. Cash was used for financing costs
of $1,287,000,  repayment of long-term  obligations of $926,000 and repayment of
short-term obligations of $5,433,000.


Financing Arrangements

EWCO Credit Facility

     EWCO has a credit  facility  with LaSalle Bank  Midwest  N.A.,  including a
revolving  credit  line for up to  $9,000,000,  subject to a  borrowing  base on
eligible inventory and receivables,  originally  maturing August 31, 2007, and a
$1,394,000 term loan. The term loan is payable in equal monthly  installments of
principal based on a five year  amortization  ending August 1, 2009, but matures
August 31, 2007 if the revolving  credit facility is not renewed.  The loans are
secured by all of EWCO's assets of  approximately  $15.8 million and a guarantee
by Tarpon. The principal amount outstanding bears interest,  payable monthly, at
the bank's prime rate.

     The loan  agreement  requires  EWCO to  maintain  a  minimum  debt  service
coverage  ratio  (generally  net  income  adjusted  for  depreciation,   capital
expenditures, and cash distributions and advances, divided by principal payments
of debt) of at least 1.50 to 1.00.  EWCO's  debt  service  coverage  ratio as of
December 31, 2006 was 3.44 to 1.00.  The loan  agreement  also requires EWCO to
maintain minimum  tangible net worth of ($1,855,000)  plus 80% of its net income
for the  preceding  fiscal  year,  starting  with net  income  for 2006.  EWCO's
tangible net worth as of December 31, 2006 was  ($34,000).  The loan  agreement
also  generally  prohibits  dividends and limits EWCO's  ability to make capital
expenditures  in excess of  $1,500,000  during the 12 months  after our  initial
public offering and $750,000 a year after such 12-month period.

     While  EWCO was in  compliance  with its  financial  loan  covenants  as of
September  30,  2006,  LaSalle Bank issued a notice of default to EWCO on August
15, 2006 indicating EWCO was in default on at least one of its covenants  during
the period from  November  2005 through June 2006.  On October 2, 2006,  LaSalle
reaffirmed  EWCO's  default,  citing  that (i) EWCO had  failed to meet its debt
service  coverage test on occasion  during the period from November 2005 through
June 2006, (ii) that Tarpon had breached its subordination agreement for payment
on debt due Laurus Master Trust, a junior  creditor,  while  Tarpon's  Steelbank
subsidiary was in technical default to LaSalle Business Credit,  (iii) that EWCO
had breached its loan agreement relating to permitted application of proceeds of
a $6 million  loan from  Laurus,  and that (iv) EWCO has been  unable to pay its
obligations  as they become due.  These  circumstances,  as well as other events
such as the  withdrawal  of the firm's  independent  accountants,  constituted a
material adverse change in the loan collateral and the business condition of the
obligor. From October 1, 2006 forward, EWCO's loans will bear interest at a rate
of prime plus two percent (2%). LaSalle had agreed to waive any default interest
through  September 30, 2006.  Due to violation of its debt service  covenants as
well as the Company's going concern qualification,  the debt has been classified
as a current liability.

     EWCO  must pay a 0.25%  unused  line of credit  fee each  month and is also
subject  to a 1%  prepayment  fee if the  loans  are  prepaid  any  time  before
maturity.  As of December 31, 2006,  approximately  $5,943,000  was  outstanding
under the revolving  credit  facility,  approximately  $790,000 was  outstanding
under the term loan,  and  approximately  $128,000 was  available  for borrowing
under the revolving credit facility  without  violating any of the existing debt
covenants.

Steelbank Credit Facility

     On February 17, 2005,  Steelbank entered into a Loan Agreement with LaSalle
Business Credit, a division of ABN AMRO Bank N.V., Canada Branch (the "Lender").
This  credit  facility  provides  for a  revolving  credit  line in the  maximum
principal  amount of Cdn.  $8,000,000,  subject  to a  borrowing  base  based on
eligible  inventory and receivables,  originally  maturing on February 17, 2008,
and a term loan in the  principal  amount of Cdn.  $2,100,000.  Principal on the
term loan is payable in sixty equal  monthly  installments  of $35,000  Canadian
dollars  beginning  on April 1,  2005.  The term loan bears  interest,  which is
payable  monthly in arrears,  at a floating rate equal to the Lender's  Canadian
prime  rate plus an  applicable  margin of between  1.00% and 1.50%.  The entire
amount of the term loan  facility  will mature on March 1, 2010.  Borrowings  of
Canadian dollars under the revolving credit facility bear interest at a floating
rate equal to the  Lender's  Canadian  prime rate plus an  applicable  margin of
between 0.75% and 1.25%.  Borrowings of U.S.  dollars under the revolving credit
facility bear interest at a floating rate equal to the Lender's U.S. prime rate.
Under certain circumstances, Steelbank has the option to convert all or any part
of its Canadian or United States borrowings to an interest rate equal to a Libor
rate  plus an  applicable  margin  of  between  2.25%  and  2.75% or a  Banker's
Acceptance rate plus an applicable  margin of between 2.25% and 2.75%.  Interest
on the revolving credit facility is payable monthly in arrears.  The obligations
under the Loan  Agreement  are  unconditionally  guaranteed  by Tarpon,  and are
secured  by a  security  interest  in  substantially  all  of the  tangible  and
intangible assets of Steelbank,  approximating $10.5 million,  and Tarpon, other
than Tarpon's common shares of Eugene Welding Company.  Steelbank's  obligations
under the Loan  Agreement  are also secured by a pledge of all the capital stock
of Steelbank pursuant to a share pledge agreement between Tarpon and the Lender.

     The Loan Agreement contains customary covenants that will limit the ability
of Steelbank to, among other things,  guarantee additional  indebtedness,  incur
indebtedness,  create liens,  pay dividends,  make certain types of investments,
enter into transactions with affiliates,  make capital expenditures in excess of
$500,000  Canadian  dollars in any fiscal year,  sell  assets,  merge with other
companies or enter into any transaction outside the ordinary course of business.

     The  loan  agreement  also  requires   compliance  with  several  financial
covenants,  including  adjusted  net worth of at least  (Cdn.  $4,864,381).  For
quarters ending on or after June 30, 2005, the minimum adjusted net worth of the
previous  quarter  will be  increased  by 75% of the net income for that quarter
(ignoring quarters in which there is a loss). It also requires Steelbank Tubular
to maintain  debt service  coverage  ratio  (generally  net income  adjusted for
depreciation and amortization,  non-cash transactions,  and capital expenditures
divided  by the total of all  principal  payments  of  long-term  debt,  capital
leases,  subordinated debt and all payments in respect of any distribution),  of
at least 1.25 to 1.00. It also requires  Steelbank to maintain interest coverage
(generally  net income  adjusted for interest  expense,  bank fees and net costs
under interest rate contracts, taxes, depreciation and amortization and non-cash
items  divided by interest  expense plus bank fees and net costs under  interest
rate contracts),  of at least 1.50 to 1.00.  Steelbank used the borrowings under
the  credit   facility  to  provide  partial  funding  for  the  acquisition  of
substantially all of the assets and business of the Haines Road facility and the
cash  portion  of the  Haines  Road real  estate,  to pay  transaction  fees and
expenses, to refinance Steelbank's  full-recourse  factoring arrangement and for
general working capital purposes of Steelbank.

     On October 2, 2006,  LaSalle  Business  Credit, a division of ABN AMRO Bank
N.V.,  Canada  Branch,  issued a notice of default to Steelbank,  as a result of
Steelbank's failure to meet its adjusted net worth covenant and its debt service
coverage ratio covenants. From and after October 1, 2006, Steelbank's loans will
bear  interest  at a rate of two per  cent  (2%) per  annum,  in  excess  of the
interest rate otherwise  payable.  LaSalle had agreed to waive default  interest
through September 30, 2006. As a result of these violations, and a going concern
qualification, its debt has been reclassified to current.

     Each  month,  Steelbank  must pay a .50%  unused  line of credit fee and an
administrative   fee  of   approximately   $1,700.   As  of  December  31,  2006
approximately  $2,861,000 was outstanding  under the Revolving  Credit Facility,
approximately  $1,171,000 was outstanding  under the term loan and approximately
$89,000  was  available  for  borrowing  without  violating  any  existing  debt
covenant.

Steelbank Mortgages

     On May 18, 2005,  Steelbank  Tubular,  Inc.  purchased the Haines Road real
estate assets,  for $4,638,000  (Cdn.  $5,870,000),  including  closing fees and
expenses,  consisting of approximately  $530,000 (Cdn.  $670,000) in cash, a one
year first mortgage totaling $2,765,000 (Cdn. $3,500,000) jointly secured by the
Haines  Road real  estate  and a  guarantee  from the  Company  payable in equal
monthly  installments of principal and interest based on a 25 year  amortization
period and  bearing  interest  at 1.25% above  Canadian  prime rate,  as well as
second and third  mortgages  from  Bolton,  payable  August 18,  2006,  totaling
$948,000 (Cdn.  $1,200,000) and $395,000 (Cdn.  $500,000) with interest  payable
monthly at 8% and 10%, respectively,  per annum. On November 22, 2006, Steelbank
completed a sale and  leaseback  of the Haines  Road real estate  assets for net
proceeds of $4,691,000 (Cdn.  $5,378,000),  resulting in the payoff of all three
mortgages and net proceeds to the Company of $342,000 (Cdn. $391,000).

Laurus Convertible Note

     On December  13,  2005,  the Company  entered  into a  Securities  Purchase
Agreement  (the  "Agreement")  with  Laurus  Master  Fund,  Ltd.  ("Laurus")  in
connection  with the private  placement of a convertible  term note (the "Note")
issued by the Company in the  principal  amount of  $6,000,000  due December 13,
2008  and  common  stock  purchase  warrants  (the  "Warrants").   The  Note  is
collateralized  by all present and future assets of Tarpon and its subsidiaries,
including the equity interests of EWCO and Steelbank, subject to a subordination
agreement  between  Tarpon ABN AMRO Bank,  N.V.,  Canadian  Province and LaSalle
Bank,  Midwest,  N.A.  The Note is  payable  in equal  monthly  installments  of
principal  totaling  $187,500  commencing  on April 1, 2006 through the maturity
date and bears interest at prime plus 2% (10.25% at September 30, 2006). As part
of the Agreement,  the monthly payments of principal and interest, under certain
conditions,  are  convertible  into shares of the  Company's no par value common
stock at a fixed  conversion  price of $3.27 per share. The Warrants provide for
the  purchase of up to 390,000  shares of common  stock at an exercise  price of
$3.81 until December 13, 2012.

     Laurus cannot receive shares upon exercise of the warrants, upon payment of
principal and interest on the note,  or upon  conversion of the Note which would
exceed the  difference  between  4.99% of the issued and  outstanding  shares of
common  stock  and the  number  of  shares  beneficially  owned  by  Laurus,  as
determined in accordance with Section 13(d) of the Exchange Act, as amended, and
Regulation 13d-3. This limitation  automatically  becomes null and void upon the
occurrence, and during the continuance, of an event of default as defined in the
note,  or upon 75 days prior  written  notice to the Company,  except that at no
time shall the  number of shares of common  stock  beneficially  owned by Laurus
exceed 19.99% of the outstanding shares of common stock.  Further, the number of
common shares  issuable by the Company and acquirable by Laurus at a price below
$2.85 per share pursuant to the terms of the note,  the warrant,  the agreement,
any related  agreement or otherwise cannot exceed 927,560 shares of common stock
(subject to appropriate  adjustment for stock splits, stock dividends,  or other
similar  recapitalizations  affecting the common stock),  unless the issuance of
such excess amount of common stock is first approved by the  stockholders of the
Company.

     In  connection  with  this  financing,   the  Company  recorded   discounts
aggregating   approximately   $1,681,000,   of  which   approximately   $608,000
represented the value of 390,000 warrants using the Black-Scholes  model with an
interest rate of 4.4%,  volatility  of 60%, zero  dividends and expected term of
seven years; and  approximately  $1,073,000  represented the conversion  feature
inherent  in the  instrument.  Such  discounts  are  being  amortized  using the
effective  interest  method over the term of the related  debt.  The  conversion
feature  itself was deemed to be a derivative  under FASB Statement No. 133. The
Company  estimated the fair value of the conversion  feature to be $93,000 as of
September 30, 2006, $269,000 as of June 30, 2006, $873,000 as of March 31, 2006,
and $817,000 as December 31,  2005.  The $962,000  decrease in value during nine
months ended September 30, 2006 is shown as a "Gain from derivatives" within the
Statement of Operations.  In addition,  the Company  incurred fees in connection
with this financing aggregating approximately $1,685,000,  including warrants to
purchase up to 300,000  shares of common stock to Joseph  Gunnar and Company,  a
related party,  recorded as deferred financing costs and amortized over the life
of the note. The 300,000  warrants were valued at  approximately  $432,000 using
the Black-Scholes model using the same assumptions described above, except for a
term of five years.  The warrants  were deemed to be a derivative  instrument as
they can be put back to the Company, and, therefore the corresponding  liability
was marked to market and  recorded at a fair value of  $126,000 as of  September
30,  2006,  $219,000  as of June 30,  2006,  $411,000  as of March 31,  2006 and
$366,000 as of December 31, 2005. The $240,000 decrease in value during the nine
months ended  September 30, 2006 is shown under "Gain from  derivatives"  within
the Statement of Operations. These warrants are exercisable through December 13,
2010 at $3.27 per share.  Although the stated  interest rate of the  convertible
note is the prime rate plus 2%, as a result of the aforementioned  discounts and
fees, the effective interest rate of the Note is approximately 41.8% per annum.

     On May 24, 2006, the Company  executed an Omnibus  Amendment to the Secured
Convertible  Term Note between the Company and the Laurus  Master Trust  whereby
the Company executed its payment  obligation of principal due May 1, 2006 in the
amount  of  $187,500  in  common  shares  of  Tarpon  stock  in  lieu  of  cash.
Accordingly,  Tarpon  and  Laurus  agreed  to  amend  the  terms  of the  Senior
Convertible Term Note, and 153,688 shares were issued at $1.22 per share.

     On August 17,  2006,  Tarpon  reached  an  agreement  with the Laurus  fund
whereby  Tarpon  would offer  100,000  shares of Tarpon  common  stock valued at
$190,000  ($1.90 per share) to Laurus in exchange  for Laurus  amending  certain
provisions  of its loan  agreement.  In addition,  Tarpon agreed to award Laurus
warrants  for  shares  valued at  $190,000  ($1.90  per share) in the event that
Tarpon were to raise  equity.  The agreement  provided  that the loan  agreement
would be  amended  such  that an event of  default  with  LaSalle  Bank  Midwest
(LaSalle)  and/or LaSalle  Business Credit  (LaSalle) which is not declared as a
default  by  LaSalle,  would not give rise to  default  interest  due to Laurus.
Because  LaSalle did not declare the Company in default  until  October 2, 2006,
default  interest  was  therefore  not due  Laurus  for the three  months  ended
September  30, 2006.  An equity raise is being  pursued by Tarpon with a closing
date  anticipated  in February  2007.  Thus, in the quarter ended  September 30,
2006,  Tarpon reversed the default  interest  liability  relieved of $769,000 to
interest expense.  The consideration given in shares of $190,000 was recorded as
a financing expense.

New Accounting Pronouncements

     In February 2006, the Financial  Accounting Standards Board ("FASB") issued
Statement of Financial  Accounting  Standard  ("SFAS") No. 155  "Accounting  for
Certain Hybrid  Financial  Instruments - An amendment of FASB Statements No. 133
and 140".  This  Statement  requires  evaluation of all interests in securitized
financial  assets  to  determine  whether  they  represent  either  freestanding
derivatives or contain  embedded  derivatives.  These  interests were previously
exempted from such evaluation.  SFAS No. 155 permits any hybrid instrument, such
as  an  interest  in  securitized   financial  assets   containing  an  embedded
derivative,  to be  accounted  at fair  value  as  opposed  to  bifurcating  and
accounting for the embedded derivative  separate from the host instrument.  This
Statement also eliminates  restrictions on a qualifying special purpose entity's
ability  to  hold  passive  derivative  financial   instruments   pertaining  to
beneficial  interests that are, or contain, a derivative  financial  instrument.
Tarpon  will adopt this  Statement  in the first  quarter of 2007,  and does not
expect the adoption to have a material impact on Tarpon's  financial position or
results of operations.  This  statement is effective for fiscal years  beginning
after  September  15,  2006.  We are  currently  assessing  the  impact  of this
statement on our financial statements.

     In June  2006,  the FASB  issued  Interpretation  No.  48  "Accounting  for
Uncertainty in Income taxes - An interpretation of FASB Statement No. 109" ("FIN
48").  This  Interpretation  provides a  comprehensive  model for the  financial
statement recognition, measurement, presentation and disclosure of uncertain tax
positions taken or expected to be taken in income tax returns. Tarpon will adopt
this  Interpretation  in the first quarter of 2007. The cumulative  effects,  if
any, of applying FIN 48 will be recorded as an adjustment to retained  earnings.
Tarpon is  currently  assessing  the impact of this  Interpretation  on Tarpon's
financial position and results of operations.

     In September 2006, the FASB issued SFAS No. 157 "Fair Value  Measurements".
This  Statement  replaces  multiple  existing  definitions  of fair value with a
single definition,  establishes a consistent framework for measuring fair value,
and expands financial statement  disclosures  regarding fair value measurements.
This Statement applies only to fair value measurements that are already required
or permitted  by other  accounting  standards  and does not require any new fair
value measurements.  SFAS 157 is effective for fiscal years beginning subsequent
to November 15, 2007.

     In September 2006, the SEC issued Staff  Accounting  Bulletin No. 108 ("SAB
108").  "Considering  the Effects of Prior Year  Misstatements  when Quantifying
Misstatements  in Current Year  Financial  Statements."  SAB 108  requires  that
public companies  utilize a dual-approach to assessing the quantitative  effects
of financial misstatements. This dual approach includes both an income statement
focused assessment and a balance sheet focused assessment.  Financial statements
would require adjustment when a misstatement is material.  Correcting prior year
financial  statements for immaterial  errors would not require  previously filed
reports  to be  amended.  It is not  expected  that SAB 108 will have a material
impact on the Company's financial condition or the results of its operations.

     In May 2005,  the FASB issued SFAS No. 154,  "Accounting  Changes and Error
Corrections." SFAS No. 154 requires retrospective  application to prior periods'
financial statements for voluntary changes in accounting principle, unless it is
impracticable to determine either the period-specific  effects or the cumulative
effect  of  the  change.   This  statement  also  requires  that   retrospective
application  of  a  change  in  accounting  principle,   such  as  a  change  in
non-discretionary  profit-sharing  payments resulting from an accounting change,
should be recognized in the period of the accounting  change.  SFAS No. 154 also
requires that a change in accounting estimate effected by a change in accounting
principle.  The  provisions  of this  statement  were  effective for the Company
beginning  January  1,  2006.  The  Company's  financial  position,  results  of
operations  or cash flows will only be impacted by SFAS No. 154 if it implements
changes in accounting  principles that are addressed by the standard or corrects
accounting errors in future periods.


Critical Accounting Policies and Use of Estimates

     Our  discussion  and  analysis of our  financial  condition  and results of
operations  are  based on the  related  financial  statements,  which  have been
prepared in accordance  with  accounting  principles  generally  accepted in the
United  States of  America.  The  preparation  of the  financial  statements  in
accordance with accounting principles generally accepted in the United States of
America  requires  our  management  to make  estimates  that affect the reported
amounts of assets and  liabilities,  the  disclosure  of  contingent  assets and
liabilities at the date of the financial  statements and the reported amounts of
revenues  and  expenses  during  the  reporting  period.  Our  most  significant
estimates relate to accounting for business  combinations,  including intangible
assets  acquired,  impairment  of  long-lived  assets,  allowances  for doubtful
accounts  and valuing  options and  warrants  granted to  non-employees.  Actual
results could differ from these estimates.  We evaluate our estimates  primarily
based on historical  experience,  business knowledge and various  assumptions we
believe to be reasonable under the circumstances.  These estimates are evaluated
by management and revised as circumstances change. We believe that the following
critical accounting policies and estimates affect our more significant estimates
and judgments used in the preparation of our financial statements.

     Business Combinations and Intangible Assets

     We have adopted SFAS No. 141,  "Business  Combinations,"  and SFAS No. 142,
"Goodwill  and other  Intangible  Assets.  "SFAS No. 141  requires  all business
combinations  to be accounted for using the purchase  method of  accounting  and
that  certain  intangible  assets  acquired  in a business  combination  must be
recognized as assets  separate from  goodwill.  In arriving at the fair value of
assets and  liabilities  acquired in our  acquisitions  of EWCO and Steelbank we
have assumed that book values  approximate  fair values,  with the  exception of
equipment  obtained in the  purchase of EWCO,  which was written down due to the
fair value of the assets acquired and liabilities  assumed exceeding the cost of
EWCO, and EWCO and Steelbank inventories, which were written up to resale value.
Adjustments  to  fair  values  of the  assets  and  liabilities  acquired  would
generally  change  the value of  goodwill  recognized  in the  acquisition  by a
corresponding amount.

     SFAS No. 142  addresses the  recognition  and  measurement  of goodwill and
other  intangible  assets  subsequent  to their  acquisition.  SFAS No. 142 also
addresses the initial  recognition and measurement of intangible assets acquired
outside of a business combination, whether acquired individually or with a group
of other assets.  This statement provides that intangible assets with indefinite
lives and goodwill  will not be amortized  but will be tested at least  annually
for impairment and whenever events or changes in circumstances indicate that the
carrying  value of the asset may not be  recovered.  If impairment is indicated,
then the asset will be written down to its fair value,  typically based upon its
future expected undiscounted cash flows. As of December 31, 2005, our intangible
asset consisted of goodwill, customer base and covenants not to compete relating
to the Steelbank acquisition. Goodwill will not be amortized, but will be tested
for   impairment,   at  least  annually  and  whenever   events  or  changes  in
circumstances indicate that the carrying amounts may not be recoverable.

     Long-lived   assets  include   property,   intangible   assets  subject  to
amortization,  and certain other assets. The carrying values of these assets are
periodically   reviewed  for  impairment  or  whenever   events  or  changes  in
circumstances  indicate  that the carrying  amounts may not be  recoverable.  We
evaluate  impairment by comparing the fair value of the  intangible  assets with
indefinite  lives and goodwill with their  carrying  values.  We determine  fair
value of goodwill using the sum of the  undiscounted  cash flows projected to be
generated by the acquired  business giving rise to that goodwill.  This requires
us to make long-term  forecasts of our future  revenues and costs related to the
assets subject to review.  These forecasts require  assumptions about demand for
our  products  and  services,   future  market  conditions,   and  technological
developments.  For  example,  in  evaluating  the  fair  value  of the  goodwill
recognized in  connection  with the  Steelbank  acquisition,  we have assumed no
annual growth in revenues.

     If actual results differ from our estimates,  including if expected  future
cash flows from the acquired business  significantly decline, and the fair value
of goodwill is less than its carrying  value, we would reduce the carrying value
of our goodwill to fair value and recognize an impairment expense in that amount
in our  income  statement  in the  period  in  which it is  determined  that the
carrying  amount is not  recoverable  because it  exceeds  the fair value of the
goodwill.  Recoverability  of  assets  to be  held  and  used is  measured  by a
comparison of the carrying amount of an asset to estimated  undiscounted  future
cash flows  expected to result  from its use and  eventual  disposition.  If the
carrying  amount  of an asset  exceeds  its  estimated  future  cash  flows,  an
impairment  charge is recognized  for the amount by which the carrying  value of
the asset exceeds its fair value.  If a readily  determinable  market price does
not exist,  fair  value is  estimated  using  undiscounted  expected  cash flows
attributable to the assets.

     During  the  fourth  quarter  of 2005,  the  Company  completed  its annual
impairment test and recorded an impairment loss of $1.1 million.  The impairment
relates to the Steelbank  operation.  Fair value was  determined  based upon the
discounted  cash  flows of  Steelbank  using a  discount  rate  averaging  15.5%
dependant on the Steelbank's  residual growth rate of 3%. The market  comparable
approach  consisted  of an  earnings  multiple  of 4.9 times  forecasted  EBITDA
(operating  income  less - interest,  taxes,  depreciation,  and  amortization).
Future cash flows and EBITDA are affected by future operating performance, which
will be impacted by economic conditions,  many of which are beyond the Company's
control.   Steelbank  can  be  significantly  impacted  by  adverse  changes  in
assumptions.   Considerable   judgment  is  often   involved  in  making   these
determinations.  The use of different  assumptions could result in significantly
different  results.  Management  believes  its  assumptions  and  estimates  are
reasonable  and  appropriate,  however  actual  results  could differ from those
estimates. The company also evaluated its definite life intangibles and recorded
and adjustment to Steelbank customer lists of $794,000.

     Because  sales  and  earnings  for  Steelbank  continued  to fall  short of
forecasts in 2006,  the Company  conducted and  impairment  test for the quarter
ended  June 30,  2006,  resulting  in an  impairment  charge  for the  remaining
carrying  value of goodwill and  intangible  assets  ($2,924,000  and  $652,000,
respectively)  totaling  $3,576,000.  The  Company  also  completed  its  annual
impairment  test  during the fourth  quarter  of 2006,  resulting  in no further
impairment charges.

     Bad Debts

     We maintain a reserve for known and unknown bad debts.  We evaluate  credit
risk and the  adequacy  of our  reserve by  monitoring  the age of our  accounts
receivable and the credit worthiness of our customers.  In addition,  we monitor
the  overall  status of the  industries  where our  products  and  services  are
utilized.  Typically,  this reserve is not subject to  significant  fluctuations
from period to period.  However,  if we incur an unusual  amount of bad debt, it
could alter our exposure and the related  reserve.  At December 31, 2006 our Bad
Debt reserves were $269,000,  an increase of $76,000 from December 31, 2005. Bad
Debt  expense  for 2006 was $20,000  compared  to  $972,000  in 2005,  which was
affected by the bankruptcy of FENCEMaster ($925,000).

     Options, Warrants, and Convertible Debt

     The Company elected the modified prospective transition method for adopting
SFAS 123R.  Under this method,  the  provisions of SFAS 123R apply to all awards
granted  or  modified  after the date of  adoption.  We must  account  for stock
options and warrants  granted to non-employees  using the fair value method.  We
use the  Black-Scholes  valuation  model for  determining  the fair value of our
options and warrants.  That model requires us to make assumptions  regarding the
expected life of the security, the expected volatility of our stock price during
the period,  the risk free interest rate and the dividend  yield.  Varying these
assumptions can have a significant  impact on our option and warrant  valuations
and related expenses.  The valuation methodology used an assumed term based upon
the  stated  term of ten  years,  adjusted  down for  estimated  forfeitures,  a
risk-free  rate of  return  represented  by the  U.S.  Treasury  Bond  rate  and
volatility as determined by comparing the Company's risk profile with comparable
public companies.  A dividend yield of 0% was used because the Company has never
paid a dividend and does not anticipate paying dividends in the future.

     The  provisions of SFAS 123R also apply to awards  granted prior to January
1, 2006  that did not vest  before  January  1, 2006  (transition  awards).  The
compensation  cost for the portion of the transition  awards that had not vested
by January  1, 2006 is based on the  grant-date  fair value of these  transition
awards as calculated for pro forma disclosures under the provisions of SFAS 123.
Compensation  cost  for  these  transition  awards  are  attributed  to  periods
beginning January 1, 2006 and use the Black-Scholes  method used under SFAS 123,
except  that an  estimate  of  expected  forfeitures  is used rather than actual
forfeitures.


Contractual Obligations

     The following  information is provided as of December 31, 2006 with respect
to  our  known  contractual   obligations  specified  in  the  following  table,
aggregated by type of contractual obligation:
<TABLE>
<CAPTION>

                                                                             Payments due by period

                                                            Less                                           More
                                                            than 1           1 - 3          3 - 5          than 5
                                                 Total      year             years          years          years
Contractual Obligations                                                  (dollars in thousands)
<S>                         <C>                 <C>         <C>          <C>             <C>           <C>
Short-Term debt obligations (1)..............   $   9,579   $  9,579     $     --        $    --       $     --
Long-term debt obligations (2)...............       7,597      6,272        1,235             90             --
Operating lease obligations..................       4,588        540          883            848          2,317
Purchase obligations (3).....................       5,059      5,059                         --             --
                                                   5,059
</TABLE>

(1)  We are required to pay interest on our short-term debt obligations shown in
     the table  above  while they are  outstanding  (assuming  the debt  remains
     outstanding) of $974,000.

(2)  We are required to pay interest on our long-term debt obligations  shown in
     the table  above  while they are  outstanding  (assuming  the debt  remains
     outstanding)  of $640,000 within one year,  $121,000  between one and three
     years,  $32,000 between three and five years,  and $0 due in more than five
     years. The long term debt obligations are reflective of the stated terms of
     the underlying agreements.

(3)  Purchase  obligations consist primarily of purchase orders executed for raw
     material inventories.

Off Balance Sheet Arrangements

     We do not have any  transactions  that are  considered  off  balance  sheet
arrangements for purposes of financial reporting.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We are exposed to risks  associated with changes in foreign currency rates,
interest  rates and  commodity  prices.  We have not used  derivative  financial
instruments to hedge these risks during the periods shown.

     Our Canadian operations are accounted for in Canadian dollars, converted to
the U.S.  dollar  equivalent  based on published  exchange  rates for the period
reported and are, therefore, subject to risk of exchange rate fluctuations.

     We are exposed to interest rate risk under our credit facilities because of
the variable  interest  rates  charged on those  facilities.  See  "Management's
Discussion  and  Analysis of  Financial  Condition  and Results of  Operations -
Liquidity and Capital Resources."

     We are subject to commodity price risk, primarily with respect to purchases
of steel.  Purchased steel represents the most significant portion of EWCO's and
Steelbank's  cost of  goods  sold.  As a  result,  fluctuations  in the  cost of
purchased  steel,  which  can  be  volatile  and  cyclical  in  nature,  have  a
significant  impact on our margins both  positively  and  negatively.  Our steel
costs rose significantly during 2003 and 2004, peaking mid year 2004. In the 4th
quarter  2004,  steel prices  began to decline.  Steel prices for our base steel
coil continued to abate during 2005, stabilizing in the 4th quarter. Prices then
increased  gradually  during 2006 before  declining in the 4th quarter.  We have
generally  been  successful  in  passing  these  higher  steel  costs  on to our
customers  because our competitors  increased their prices too, but we might not
be able to continue to do so in the future.  We  currently  seek to minimize the
potential  adverse  impact of  commodity  price risks of our steel  inventory by
minimizing the amount of steel  inventory we carry.  However,  opportunities  to
purchase  larger  quantities at below market value are  considered  and reviewed
against current market conditions. We try to coordinate our steel purchases with
our sales and  production  forecast,  generally  resulting in a one to two month
supply of steel.

     The  tables  below  provide   information  about  Tarpon's   (consolidated)
financial  instruments that are sensitive to changes in interest rates,  foreign
currency  exchange rates,  or both,  consisting of debt  obligations,  including
Canadian dollar-denominated debt obligations.  The tables provide information by
functional currency and present such information in U.S. dollar equivalents. For
these financial instruments,  the tables present principal cash flows based upon
the stated  terms of the  underlying  agreements  and related  weighted  average
interest rates by expected  maturity dates.  Weighted average variable rates are
based on current rates for the applicable  period.  Weighted average fixed rates
are based on the contract  rates.  The  information is presented in U.S.  dollar
equivalents  which is our  reporting  currency.  The  actual  cash  flows of the
instruments are denominated in U.S.  dollars (U.S. $) and Canadian dollars (Cdn.
$), as indicated in parenthesis.
<TABLE>
<CAPTION>

                                                                (000's OMITTED)

                                                                                             There                  Fair
                                       2006       2007       2008       2009       2010       after      Total      Value
<S>                 <C>                            <C>          <C>        <C>                            <C>         <C>
Short Term Debt:
Variable Rate (U.S.$)                   $5,943                                                            $5,943      $5,943
Average Interest rate                    10.3%                                                             10.3%
Variable Rate (Cdn.$)
                                        $2,861                                                            $2,861      $2,861
Average interest rate                     9.5%                                                              9.5%
Fixed Rate (U.S.$)                                   $775                                                   $775        $775
Average Interest rate                               12.0%                                                  12.0%
Long-Term Debt
Variable Rate (U.S. $)                             $5,904       $511       $232                           $6,647      $6,647
Average interest rate                               10.3%      10.3%      10.3%                            10.3%
Variable Rate (Cdn. $)                               $360       $360       $360        $91                $1,171      $1,171
Average interest rate                                9.5%       9.5%       9.5%       9.5%                  9.5%
Fixed Rate (U.S. $)                                    $8         $2                                         $10         $10
Average interest rate                                5.2%       5.2%                                        5.2%

</TABLE>

     The conversion  feature of our convertible  debt and certain stock warrants
are  considered  derivates  under SFAS 133, and their  valuation is sensitive to
changes in our stock price.

     The tables below provide  information  about the Company's  steel inventory
that is sensitive to changes in commodity prices, specifically steel prices. The
tables present the carrying amount and fair value as of the indicated date.

<TABLE>
<CAPTION>

                                              December 31, 2006                               December 31, 2005
                                      Carrying                    Fair                 Carrying                 Fair
                                       Amount                    Value                  Amount                 Value
                                                            (U.S. $ equivalent in thousands)
<S>                           <C>                       <C>                       <C>                    <C>
Steel Inventories             $           6,759,562     $           6,759,562     $      6,919,638       $     6,919,638

</TABLE>




<PAGE>


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

TARPON INDUSTRIES, INC.
INDEX TO FINANCIAL STATEMENTS


Tarpon Industries, Inc.                                                    Page


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM......................61
CONSOLIDATED BALANCE SHEETS..................................................62
CONSOLIDATED STATEMENTS OF OPERATIONS........................................63
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)....................65
CONSOLIDATED STATEMENTS OF CASH FLOWS........................................66
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM......................97
EUGENE WELDING CO............................................................98
BALANCE SHEETS...............................................................98
LIABILITIES AND SHAREHOLDER'S EQUITY.........................................98
STATEMENTS OF OPERATIONS.....................................................99
SHAREHOLDER'S EQUITY........................................................100
STATEMENT OF CASH FLOWS.....................................................101
NOTES TO FINANCIAL STATEMENTS...............................................102

<PAGE>

                    TARPON INDUSTRIES, INC. AND SUBSIDIARIES
                 (Formerly known as Wall St. Acquisitions, Inc.)
<TABLE>
<CAPTION>

                           CONSOLIDATED BALANCE SHEETS
                                                                                                    December 31,
                                                                                              2006                 2005
                                                                                        ----------------    -----------------
ASSETS
 Current Assets
<S>                                                                                      <C>                <C>
  Cash and cash equivalents                                                               $      1,75,711    $       7,317,364
  Accounts receivable (less allowance for doubtful accounts of
   $269,186 and $192,201, respectively)                                                         8,608,275            7,730,029
  Inventories, net                                                                              6,759,562            6,919,638
  Other current assets                                                                            841,259              367,681
                                                                                         ----------------    -----------------
   Total current assets                                                                   $    17,584,807     $     22,334,712

  Property, plant and equipment-net                                                             5,145,792           11,139,700
  Deferred financing costs, net of amortization                                                 1,385,585            1,973,754
  Goodwill                                                                                             --            2,808,800
  Intangible assets, net of amortization                                                               --              693,590
  Other assets                                                                                         --               55,365
                                                                                         ----------------    -----------------
TOTAL ASSETS                                                                             $     24,116,184     $     39,005,921
                                                                                         ================    =================

LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
 Current Liabilities
  Short term debt                                                                        $      9,578,648     $     11,344,379
  Term debt, classified as current                                                              6,458,328            9,250,944
  Accounts payable - trade                                                                     10,147,486           11,270,836
  Accrued expenses                                                                              1,248,295            1,551,469
                                                                                         ----------------    -----------------
   Total current liabilities                                                                   27,432,757           33,417,628


  Long-term debt, less current maturities                                                           2,643               10,243
  Other long-term liabilities                                                                     108,000              382,667
                                                                                         ----------------    -----------------
TOTAL LIABILITIES                                                                              27,543,400           33,810,537


 Commitments and Contingencies (Notes 6, 7 and 11)

 Shareholders' (Deficit) Equity
  Preferred shares; no par value 2,000,000 shares authorized;
   no shares issued at December 31, 2006 and 2005                                                      --                   --
  Common shares; no par value, authorized 20,000,000 shares at
   December 31, 2006, and 2005; issued and outstanding,
   4,993,712 shares at December 31, 2006, and
   4,640,130 shares at December 31, 2005                                                       16,856,821           15,625,625
  Accumulated deficit                                                                        (20,713,749)         (10,720,870)
  Accumulated other comprehensive income                                                          429,712              290,629
                                                                                         ----------------    -----------------
 Total shareholders' (deficit) equity                                                         (3,427,216)            5,195,384
                                                                                         ----------------    -----------------
TOTAL LIABILITIES AND SHAREHOLDERS' (DEFICIT)
                                                                                         ----------------    -----------------
EQUITY                                                                                   $     24,116,184     $     39,005,921
</TABLE>

     The accompanying notes are an integral part of these consolidated financial
statements.

<PAGE>

                    TARPON INDUSTRIES, INC. AND SUBSIDIARIES
                 (Formerly known as Wall St. Acquisitions, Inc.)


                      CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>

                                                                                   Year Ended December 31,
                                                                           2006                 2005                2004
                                                                      ----------------      --------------     ---------------
REVENUES
<S>                                                                <C>                   <C>                <C>
 Sales, net of customer discounts                                  $       75,330,908    $     60,850,620   $      37,621,629
COST OF GOODS SOLD                                                         69,530,073          56,530,833          33,945,905
                                                                      ----------------      --------------     ---------------

Gross Profit                                                                5,800,835           4,319,787           3,675,724

OPERATING EXPENSES
 Selling, general and administrative expenses                               9,290,829           9,692,698           3,862,869
 Impairment charges                                                         4,326,177           1,894,000                  --
 Loss on disposal of property and equipment                                   183,982                  --                  --
                                                                      ----------------      --------------     ---------------
  Total operating expenses                                                 13,800,988          11,586,698           3,862,869
                                                                      ----------------      --------------     ---------------

OPERATING LOSS                                                            (8,000,153)         (7,266,911)           (187,145)

OTHER INCOME (EXPENSE)
 Miscellaneous  income (expense)                                              157,156             (55,248)           (455,690)
 Financing costs                                                            (157,869)
 Gain from derivatives                                                      1,059,874             322,000                  --
 Foreign currency exchange gain (loss)                                         35,505             630,077           (185,645)
                                                                      ----------------      --------------     ---------------
  Total other income (expense)                                              1,094,466             896,829           (641,335)
                                                                      ----------------      --------------     ---------------

INTEREST EXPENSE, NET
 Interest expense                                                           3,122,720           1,074,938           1,237,020
 Interest income                                                             (35,328)            (34,442)                  --
                                                                      ----------------      --------------     ---------------
  Interest expense, net                                                     3,087,392           1,040,496           1,237,020

LOSS BEFORE INCOME TAXES                                                  (9,992,879)         (7,410,578)         (2,065,500)
INCOME TAX (BENEFIT)                                                               --           (101,088)            (70,986)
                                                                      ----------------      --------------     ---------------
NET LOSS                                                           $      (9,992,879)    $    (7,309,490)   $     (1,994,514)
                                                                      ================      ==============     ===============

NET LOSS PER COMMON SHARE -
 BASIC AND DILUTED                                                 $           (2.08)    $         (1.74)   $          (1.63)
                                                                      ================      ==============     ===============
WEIGHTED AVERAGE NUMBER OF
 COMMON SHARES OUTSTANDING                                                  4,813,505           4,193,955           1,227,300
</TABLE>


     The accompanying notes are an integral part of these consolidated financial
statements.

<PAGE>


                    TARPON INDUSTRIES, INC. AND SUBSIDIARIES
                 (Formerly known as Wall St. Acquisitions, Inc.)

            CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>

                                         Number                                             Accumulated             Total
                                           Of                                                  Other            Shareholders'
                                         Common         Common         Accumulated         Comprehensive            Equity
                                         Shares         Shares           Deficit               Income             (Deficit)
                                         ------         ------           -------               ------             ---------
<S>                <C>                  <C>             <C>              <C>                                             <C>
Balance at January 1, 2004              1,219,732    $  1,429,369      $ (1,416,866)      $              --      $       12,503
Stock issued for
consulting services                        10,000          50,000                 --                     --              50,000

Issuance of warrants                           --         651,583                 --                     --             651,583
Net loss                                       --              --        (1,994,514)                     --         (1,994,514)
Foreign currency
translation adjustment                         --              --                 --                241,242             241,242
                                       -----------    ------------    ---------------    -------------------   -----------------
Comprehensive loss                                                                                                  (1,753,272)
                                       -----------    ------------    ---------------    -------------------   -----------------
Balance at December 31, 2004            1,229,732       2,130,952        (3,411,380)                241,242         (1,039,186)

Issuance of warrants                           --       1,245,600                 --                     --           1,245,600
Shares issued to
Steelbank owners                           60,636         303,180                 --                     --             303,180
Initial Public Offering                 3,349,762      16,387,500                 --                     --          16,387,500
Discounts, commissions, fees
and other IPO costs                            --     (4,441,607)                 --                     --         (4,441,607)
Net loss                                       --              --        (7,309,490)                     --         (7,309,490)
Foreign currency
translation adjustment                         --              --                 --                 49,387              49,387
                                       -----------    ------------    ---------------    -------------------   -----------------
Comprehensive loss                             --              --                 --                     --         (7,260,103)
                                       -----------    ------------    ---------------    -------------------   -----------------
Balance at December 31, 2005            4,640,130  $   15,625,625  $    (10,720,870)  $             290,629   $       5,195,384

Issuance of warrants                           --         531,000                 --                     --             531,000
Issuance of options                            --         147,407                 --                     --             147,407
Issuance of shares
as compensation                            65,166         112,800                 --                     --             112,800
Shares issued to Laurus
on conversion of debt                     155,177         187,500                 --                     --             187,500
Shares issued to Laurus for
amendment to loan agreement               100,000         190,000                 --                     --             190,000
Shares issued to Director for
payment of interest to Laurus              33,239          62,489                 --                     --              62,489
Net loss                                       --              --        (9,992,879)                     --         (9,992,879)
Foreign currency
translation adjustment                         --              --                 --                139,083             139,083
                                       -----------    ------------    ---------------    -------------------   -----------------
Comprehensive loss                             --              --                 --                     --         (9,853,796)
                                       -----------    ------------    ---------------    -------------------   -----------------
Balance at December 31, 2006            4,993,712     $16,856,821     $ (20,713,749)     $          429,712    $    (3,427,216)
                                       ===========    ============    ===============    ===================   =================
</TABLE>

     The accompanying notes are an integral part of these financial statements.


<PAGE>


                    TARPON INDUSTRIES, INC. AND SUBSIDIARIES
                 (Formerly known as Wall St. Acquisitions, Inc.)

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                                         Year Ended December 31,
                                                                           --------------------------------------------------
                                                                                 2006              2005             2004
                                                                           ----------------    --------------    ------------

CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                        <C>              <C>               <C>
 Net loss                                                                   $  (9,992,879)   $   (7,309,490)   $ (1,994,514)
 Adjustments to reconcile net loss to net cash used in
  operating activities
 Depreciation and amortization                                                     929,352           939,091       1,240,016
 Accretion of note discount and other charges                                    1,268,088            80,960              --
 Impairment charges                                                              4,326,177         1,894,000              --
 Bad debt expense                                                                   19,767           972,427         377,620
 Gain from derivatives                                                         (1,059,874)         (322,000)              --
 Unrealized foreign currency loss (gain)                                           142,619         (472,447)         172,344
 Shares based option expense                                                       145,282           424,200              --
 Warrant expense                                                                   531,000                --              --
 Stock issued as compensation                                                      112,800                --              --
 Stock issued for payment of interest                                               62,489                --              --
 Loss on disposal of property and equipment                                        149,613                --              --
 Other                                                                                  --                --          51,265
 Changes in operating assets and liabilities which provided (used) cash:
 Accounts receivable                                                             (895,840)         (340,117)     (2,597,793)
 Inventories decrease                                                              152,620           767,788     (2,629,290)
 Prepaid expenses and other current assets                                       (371,349)           175,794       (369,872)
 Accounts payable and accrued expenses                                           (300,273)         3,024,579       2,450,664
                                                                             --------------    --------------    ------------
  Net cash used in operating activities                                        (4,780,408)         (165,215)     (3,299,570)
                                                                             --------------    --------------    ------------
CASH FLOWS FROM INVESTING ACTIVITIES
 Proceeds from sale of property                                                  4,690,901                --              --
 Proceeds from FENCEMaster                                                              --         1,116,214              --
 Payment of FENCEMaster obligations                                              (984,733)                --              --
 Acquisitions, net of cash received                                                     --       (9,093,446)       (565,510)
 Capital and other expenditures                                                  (345,719)       (1,105,469)       (118,728)
                                                                             --------------    --------------    ------------
  Net cash provided by in investing activities                                 (3,360,449)       (9,082,701)       (684,238)
                                                                             --------------    --------------    ------------
CASH FLOW FROM FINANCING ACTIVITIES
 Proceeds from issuance of common shares (net of
  issuance costs of $1,276,434 in 2005)                                                 --        13,472,316              --
 Initial public offering expenditures                                                   --                --     (1,220,459)
 Financing costs                                                                        --       (1,286,850)       (519,494)
 Borrowing on bank loans                                                           444,236         1,574,536       5,132,249
 Repayment of bank loans                                                                --                --     (2,968,299)
 Proceeds from 2004 note financing                                                      --                --       2,150,000
 Proceeds from issuance of long-term debt                                               --         7,735,062       1,394,000
 Repayment of long-term obligations                                            (2,200,973)         (925,593)       (708,968)
 Proceeds from issuance of short-term obligations                                  584,800           991,464       1,171,931
 Repayment of short-term obligations                                           (3,200,788)        (5,433,445)      (211,820)
                                                                             --------------    --------------    ------------
  Net cash used in financing activities                                        (4,872,825)        16,127,490       4,219,140
                                                                             --------------    --------------    ------------
IMPACT OF FOREIGN CURRENCY EXCHANGE ON CASH                                      (148,969)           180,004              --
(DECREASE) INCREASE IN CASH AND CASH                                         --------------    --------------    ------------
 EQUIVALENTS                                                                   (5,941,653)         7,059,578         235,332
CASH AND CASH EQUIVALENTS AT,
 BEGINNING OF YEAR                                                               7,317,364           257,786          22,454
                                                                             --------------    --------------    ------------
CASH AND CASH EQUIVALENTS, END OF YEAR                                      $    1,375,711  $      7,317,364  $      257,786
                                                                             ==============    ==============    ============
</TABLE>

     The accompanying notes are an integral part of these consolidated financial
statements.


<PAGE>


                    TARPON INDUSTRIES, INC. AND SUBSIDIARIES
                 (Formerly known as Wall St. Acquisitions, Inc.)

Supplemental Disclosure of Cash Flows Information:
<TABLE>
<CAPTION>
                                                                              Year Ended December 31,
                                                            ----------------------------------------------------------
                                                                    2006                 2005               2004
<S>                                                         <C>                   <C>                <C>
Cash paid during the year for interest                      $        1,616,831    $        456,694   $        380,563
Non-cash investing and financial transactions:
 Success fee obligation for acquisitions                    $               --    $             --   $        400,000
 Obligations incurred in Steelbank acquisition              $               --    $             --   $      1,312,480
Stock issued as payment of debt                             $          187,500    $             --   $             --
 Stock issued for consulting services                       $               --    $             --   $         50,000
 Issuance of stock warrants                                 $               --    $      1,253,400   $        651,583
 Acquisition of land and building with debt                 $               --    $      4,461,600   $             --

</TABLE>






























     The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   Company and Summary of Significant Accounting Policies

     A summary of the significant  accounting policies in the preparation of the
accompanying financial statements follows.

Company and Industry

     Tarpon  Industries,  Inc. (formerly known as Wall St.  Acquisitions,  Inc.)
(the "Company" "we" "us") was  incorporated in Michigan on January 16, 2002. The
Company  completed  two  acquisitions  in 2004,  Eugene  Welding Co., or "EWCO,"
acquired in April 2004, and  Steelbank,  Inc., or  "Steelbank,"  acquired in May
2004. EWCO  manufactures  structural steel tubing and steel storage rack systems
at two manufacturing facilities in Michigan, north of Detroit. In February 2005,
the Company,  through Steelbank  completed the acquisition of the assets,  other
than the land and  building,  of the Haines Road  facility of Bolton  Steel Tube
Co., Ltd., or "Haines Road", and in May 2005 we completed the acquisition of the
land and  building.  The Haines Road  facility,  located near  Toronto,  Ontario
Canada,  manufactures  primarily  mechanical  steel  tubing.  As a result of the
acquisition,  Steelbank,  Inc.  combined  with  the  Haines  Road  business  and
relocated to Haines Road. On April 6, 2005, Steelbank,  Inc. changed its name to
Steelbank Tubular, Inc.

     The  Company  changed its name from Wall St.  Acquisitions,  Inc. to Tarpon
Industries, Inc. in March 2004.

Consolidation

     The consolidated  financial  statements include the accounts of the Company
and  its  wholly-owned   subsidiaries,   EWCO  and  Steelbank.  All  significant
inter-company  transactions and balances have been eliminated. The assets of the
acquired  subsidiaries  have  been  adjusted  to fair  values  as of the date of
acquisition  and goodwill has been  recognized  for the  difference  between the
purchase  price  and  fair  value  of  the  assets  acquired  for  the  acquired
subsidiaries. The Company operates in two segments. (See Note 13).

Cash and Cash Equivalents

     Cash and cash equivalents consist of demand deposits,  cash on hand and all
highly liquid investments purchased with an original maturity of three months or
less.  Periodically  throughout each year, the Company may maintain  balances in
excess of federally  insured limits.  At December 31, 2006 and 2005, the Company
maintained   balances  in  excess  of  the  $100,000  limit  of  $1,177,170  and
$7,063,961, respectively.

Accounts Receivable and Concentration of Credit Risk

     Accounts  receivable are due within 30 to 60 days and are stated at amounts
due from customers net of an allowance for doubtful  accounts.  No collateral or
other security is required to support accounts that are outstanding  longer than
the contractual terms are considered past due. Accounts receivable are stated at
the amount management expects to collect from outstanding balances.  The Company
determines  its  allowance  for  doubtful  accounts by  considering  a number of
factors,  including  the length of time an account  is past due,  the  Company's
previous loss history,  the customer's current ability to pay its obligation and
the condition of the general economy and the industry as a whole.  Balances that
are still  outstanding  after the Company has  attempted  reasonable  collection
efforts are written off through a charge to the valuation allowance and a credit
to trade accounts receivable.

     The Company had one major  customer in 2006,  2005 and 2004 that  accounted
for 15%, 14% and 22% of net sales,  respectively.  This same customer  accounted
for  approximately  30%, 24% and 44% of accounts  receivable  as of December 31,
2006,  2005 and 2004,  respectively.  The loss of this  customer  would  have an
adverse impact on short-term operating results.

Revenue Recognition

     For sales of  products  and  scrap,  revenue  is  recognized  when there is
persuasive  evidence  that an  arrangement  exists,  the  product  is shipped to
customers,  the selling price is fixed or  determinable  and  collectibility  is
reasonably  probable.  Scrap sales are  reported as a reduction in cost of goods
sold.  Shipping  and  handling  costs are  included in cost of goods sold in the
consolidated statements of operations.

Inventories

     Inventories  are  valued at the lower of cost or  market  value,  with cost
being determined using the first-in first-out, (FIFO) method. Management reviews
inventories  monthly to determine  whether a valuation reserve should be made to
adjust the inventory to its net realizable value.

     The Company had four suppliers in 2006 that accounted for approximately 17%
of net purchases. In 2005, four suppliers accounted for 34% of net purchases and
in 2004 four suppliers accounted for 73% of net purchases.

Property, Plant and Equipment

     Property,  plant  and  equipment  are  stated  at  cost.  Depreciation  and
amortization   is  computed  for   financial   statement   purposes   using  the
straight-line method over the following estimated useful lives:

   Machinery and equipment                               5 - 10 years
   Leasehold improvements                                Term of lease
   Computer equipment                                    3 - 7 years
   Computer software                                     2 years
   Transportation equipment                              5 years
   Furniture and fixtures                                5 - 7 years
   Buildings                                             20 - 30 years


     Expenditures  for repairs and maintenance are charged to operations.  Major
betterments  and  improvements  that  increase  the  useful  life of  plant  and
equipment  are  capitalized.  Gains and losses on the  disposition  of property,
plant and equipment are recognized at the time of disposal.

Federal Income Taxes

     Deferred  income  taxes are  provided  for  temporary  differences  between
financial  statement  income  and tax  return  income  under the  provisions  of
Statement  of Financial  Accounting  Standard  No. 109,  "Accounting  for Income
Taxes,"  which  requires  deferred  income taxes to be computed on the liability
method and deferred tax assets are recognized only when realization is probable.
Such deferred income tax asset and liability  computations  are based on enacted
tax laws and rates  applicable to periods in which the  differences are expected
to affect taxable income. Valuation allowances are established when necessary to
reduce  deferred tax assets to the amount  expected to be  realized.  Income tax
expense is the tax payable or  refundable  for the year plus or minus the change
during the year in deferred tax assets and liabilities.  The principal  deferred
tax asset arises from net operating loss carry forwards.  The principal deferred
tax liabilities arise from deferred compensation,  depreciation, derivatives and
foreign exchange gains.


Stock Options

     The Company elected the modified prospective transition method for adopting
SFAS 123R.  Under this method,  the  provisions of SFAS 123R apply to all awards
granted  or  modified  after the date of  adoption.  We must  account  for stock
options and warrants  granted to non-employees  using the fair value method.  We
use the  Black-Scholes  valuation  model for  determining  the fair value of our
options and warrants.  That model requires us to make assumptions  regarding the
expected life of the security, the expected volatility of our stock price during
the period,  the risk free interest rate and the dividend  yield.  Varying these
assumptions can have a significant  impact on our option and warrant  valuations
and related expenses.  The valuation methodology used an assumed term based upon
the  stated  term of ten  years,  adjusted  down for  estimated  forfeitures,  a
risk-free  rate of  return  represented  by the  U.S.  Treasury  Bond  rate  and
volatility as determined by comparing the Company's risk profile with comparable
public companies.  A dividend yield of 0% was used because the Company has never
paid a dividend and does not anticipate paying dividends in the future.

     The  provisions of SFAS 123R also apply to awards  granted prior to January
1, 2006  that did not vest  before  January  1, 2006  (transition  awards).  The
compensation  cost for the portion of the transition  awards that had not vested
by January  1, 2006 is based on the  grant-date  fair value of these  transition
awards as calculated for pro forma disclosures under the provisions of SFAS 123.
Compensation  cost  for  these  transition  awards  are  attributed  to  periods
beginning January 1, 2006 and use the Black-Scholes  method used under SFAS 123,
except  that an  estimate  of  expected  forfeitures  is used rather than actual
forfeitures. The expected forfeiture rate of 50% is based on forfeiture activity
through December 31, 2006.

     The  Company  recognized  as an  operating  expense,  non-cash  share-based
compensation  cost in the  amount of  $145,000  in 2006.  This had the effect of
decreasing  net income by $.03 per diluted  share.  As of December 31, 2006, the
total  remaining  unrecognized  compensation  cost related to  non-vested  stock
options  amounted to $136,000,  which will be recognized over a weighted average
period of 1.7 years. The total fair value of options that vested during 2006 was
$33,000.

     SFAS 123R requires the Company to present pro forma information for periods
prior  to  the  adoption  as if the  Company  had  accounted  for  all  employee
share-based  awards under the fair value method of that statement.  For purposes
of pro forma disclosure,  the estimated fair value of the share-based  awards at
the date of the grant is amortized to expense over the requisite service period,
which generally equals the vesting period.  The following table  illustrates the
effect on net loss and loss per share for the year ended December 31, 2005 as if
the Company had applied the fair value  recognition  provisions  of SFAS 123R to
its stock-based employee compensation plans:

                                                                 2005
                                                          -------------------
  Net loss                                              $         (7,310,000)
  Deduct:  Share-based employee compensation
   expense had fair value method been applied           $           (735,000)
                                                          -------------------
  Pro forma net loss                                    $         (8,045,000)
                                                          ===================
  Net loss per common share - basic and diluted         $              (1.74)
  Pro forma effect of share-based expense               $              (0.18)
                                                         --------------------
  Pro forma net loss per common share -
   basic and diluted                                    $              (1.92)
                                                          ===================


     The fair value of options  granted was estimated at the date of grant using
the  Black-Scholes  option  pricing  model with the  following  weighted-average
assumptions for option grants during the twelve month period ending December 31,
2005:  risk-free interest rate of 3.78% for options issued during 2005; dividend
yield of 0%;  volatility  factors of the expected  market price of the Company's
common  stock of 60% for all  options  granted in 2005;  and a  weighted-average
expected life of the options of five years.

Goodwill and Intangible Assets

     The  Company   follows   the   provisions   of  SFAS  No.  141,   "Business
Combinations,"  and SFAS No. 142,  "Goodwill and other Intangible  Assets." SFAS
No.  141  requires  all  business  combinations  to be  accounted  for using the
purchase method of accounting and that certain  intangible  assets acquired in a
business  combination must be recognized as assets separate from goodwill.  SFAS
No. 142 provides that intangible  assets with indefinite lives and goodwill will
not be  amortized  but will be  tested  at least  annually  for  impairment  and
whenever events or changes in circumstances  indicate that the carrying value of
the asset may not be  recovered.  If the asset is  impaired,  it will be written
down to its fair value.

Translation of Foreign Currencies

     The financial  statements of the foreign  entity  consolidated  into Tarpon
Inc, consolidated financial statements were translated into United States dollar
equivalents at exchange rates as follows:  balance sheet accounts for assets and
liabilities were consolidated at year-end rates,  equity at historical rates and
income statement  accounts at average exchange rates for the year. The resulting
translation  gains and losses are reflected in accumulated  other  comprehensive
gain or losses in the  statement  of  stockholders'  equity  (deficit).  Foreign
currency transaction gains and losses are reflected in net earnings.

     The Company recognized $36,000 of foreign currency transaction gains during
2006.  During  2005,  the  Company  recognized   $630,000  of  foreign  currency
transaction gains,  $473,000 of which resulted from an inter-company loan, which
was  designated  as a long-term  investment  in  December  2005 and is no longer
subject to gains or losses.  In 2004, the Company  recognized  foreign  currency
transaction losses totaling $186,000.


Deferred Financing Costs

     Deferred  financing  costs  represent  fees  paid  (in the  form of cash or
warrants) to third  parties that provided  services in connection  with securing
financing.  These costs are amortized  using the effective  interest rate method
over the term of the respective loan.

Convertible Debt and Related Discount

     The Company has  allocated  the proceeds  received  from  convertible  debt
instruments between the underlying debt instruments and the detachable warrants,
and has  recorded  the  conversion  feature as a liability  in  accordance  with
Statement of Financial  Accounting  Standards ("SFAS") No. 133,  "Accounting for
Derivative  Instruments".  The conversion  feature and  registration  right were
considered to be an embedded derivative interest within the terms of SFAS No.133
as its fair value can be separated from the convertible  note and its conversion
is independent of the underlying note value. The conversion  liability is marked
to market each reporting  period with the resulting gains or losses shown on the
Statement of Operations. The Company has also recorded the resulting discount on
debt  related to the  warrants  and  conversion  feature and is  amortizing  the
discount  using the  effective  interest rate method over the three year life of
the debt. The discount is classified as a deferred  financing  cost, as describe
above.

Fair Value of Financial Instruments

     The Company's balance sheets include the following  financial  instruments:
accounts  receivable,  accounts  payable,  lines of credit,  notes  payable  and
derivatives.  The Company  considers the carrying  amounts of current assets and
liabilities  in the  financial  statements to  approximate  fiar velue for those
financial  instruments,  because of the relatively  short period of time between
their origination and their expected realization or payment. The carrying amount
of the lines of credit and notes  payable  approximate  fiar value  because  the
obligations generally bear interest at a floating rate. The derivates are marked
to market quarterly.

Net Loss Per Share

     Net loss per share is computed in  accordance  with SFAS No. 128  "Earnings
Per Share" by dividing losses  available to common  shareholders by the weighted
average  number of common  shares  outstanding  during each year and considers a
dual presentation and reconciliation of "basic" and "diluted" per share amounts.
"Diluted" reflects the potential dilution of all common stock equivalents except
in cases where the effect would be anti-dilutive.

Use of Estimates

     The preparation of the consolidated financial statements in conformity with
accounting  principles  generally  accepted  in the  United  States  of  America
requires  management to make estimates and assumptions  that affect the reported
amounts  of assets and  liabilities  and  disclosure  of  contingent  assets and
liabilities  at the  date  of the  consolidated  financial  statements  and  the
reported  amounts of revenues and expenses  during the  reporting  year.  Actual
results could differ from these estimates.

Recent Accounting Pronouncements

     In February 2006, the Financial  Accounting Standards Board ("FASB") issued
Statement of Financial  Accounting  Standard  ("SFAS") No. 155  "Accounting  for
Certain Hybrid  Financial  Instruments - An amendment of FASB Statements No. 133
and 140".  This  Statement  requires  evaluation of all interests in securitized
financial  assets  to  determine  whether  they  represent  either  freestanding
derivatives or contain  embedded  derivatives.  These  interests were previously
exempted from such evaluation.  SFAS No. 155 permits any hybrid instrument, such
as  an  interest  in  securitized   financial  assets   containing  an  embedded
derivative,  to be  accounted  at fair  value  as  opposed  to  bifurcating  and
accounting for the embedded derivative  separate from the host instrument.  This
Statement also eliminates  restrictions on a qualifying special purpose entity's
ability  to  hold  passive  derivative  financial   instruments   pertaining  to
beneficial  interests that are, or contain, a derivative  financial  instrument.
Tarpon  will adopt this  Statement  in the first  quarter of 2007,  and does not
expect the adoption to have a material impact on Tarpon's  financial position or
results of operations.  This  statement is effective for fiscal years  beginning
after September 15, 2006.

     In June  2006,  the FASB  issued  Interpretation  No.  48  "Accounting  for
Uncertainty in Income taxes - An interpretation of FASB Statement No. 109" ("FIN
48").  This  Interpretation  provides a  comprehensive  model for the  financial
statement recognition, measurement, presentation and disclosure of uncertain tax
positions taken or expected to be taken in income tax returns. Tarpon will adopt
this  Interpretation  in the first quarter of 2007. The cumulative  effects,  if
any, of applying FIN 48 will be recorded as an adjustment to retained  earnings.
Tarpon is  currently  assessing  the impact of this  Interpretation  on Tarpon's
financial position and results of operations.

     In September 2006, the FASB issued SFAS No. 157 "Fair Value  Measurements".
This  Statement  replaces  multiple  existing  definitions  of fair value with a
single definition,  establishes a consistent framework for measuring fair value,
and expands financial statement  disclosures  regarding fair value measurements.
This Statement applies only to fair value measurements that are already required
or permitted  by other  accounting  standards  and does not require any new fair
value measurements.  SFAS 157 is effective for fiscal years beginning subsequent
to November 15, 2007. The Company will be required to adopt SFAS No. 157 for the
first quarter of 2008.

     In February 2007, the FASB issued Statement No. 159, "The Fair Value Option
for Financial Assets and Financial  Liabilities,  including an amendment of FASB
Statement No. 115" ("SFAS 159").  SFAS 159 permits entities to choose to measure
many  financial  instruments  and certain other items at fair value that are not
currently required to be measured at fair value.  Unrealized gains and losses on
items for which the fair value option has been elected are reported in earnings.
SFAS 159 does not  affect  any  existing  accounting  literature  that  requires
certain  assets  and  liabilities  to be  carried  at fair  value.  SFAS  159 is
effective  for fiscal  years  beginning  after  November  15,  2007.  Management
currently  does not expect  adoption of SFAS 159 will have a material  effect on
the Company's financial position or results of operations.  The Company plans to
adopt SFAS 159 on January 1, 2008.

Reclassification

     Certain  amounts in prior periods have een  reclassified  to conform to the
2006 financial statement presentation.


2.   Financial Position

     The accompanying  consolidated financial statements have been prepared on a
going  concern  basis,  which  contemplates  the  realization  of assets and the
satisfaction  of liabilities in the ordinary  course of business.  However,  the
Company  has  sustained  net  losses of  approximately  $20.7  million  from its
inception on January 16, 2002 through December 31, 2006 and has negative working
capital of $9.8  million and is in default of its loan  agreements  with LaSalle
and Laurus,  its  primary  lenders as of December  31,  2006.  If the Company is
unable to significantly decrease its losses or obtain additional financing,  its
financial  resources  will not be adequate to satisfy its  operating and capital
requirements for the next 12 months.

     Based on its current  business plans,  the Company believes that it will be
able to fund its  operating  losses,  capital  expenditures,  debt  payments and
working capital  requirements  for the next 12 months.  The estimated  length of
time that its cash  resources  will sustain  operations  is based on  management
assumptions.  These  estimates and assumptions are subject to change as a result
of actual  experience.  The  Company  may not be able to  attain  profitability.
Failure to generate  sufficient  revenues,  achieve  certain other business plan
objectives or raise additional funds could have a material adverse effect on the
Company's results of operations,  cash flows and financial  position,  including
its ability to continue  operating  as a going  concern in the normal  course of
business.

     Management's plans include continued cost reductions,  improved receivables
and  inventory  management,  maintaining  of margins as steel prices  fluctuate,
continuing  the  development  of its  customers  and  markets  through its sales
initiatives and completing the equity raise and  restructuring  of its debt that
it is currently in process.

     There can be no  assurance  that the  Company  will be able to achieve  its
business plan objectives or that it will be able to generate cash flows from its
operations.  If the  Company  is  unable to  generate  adequate  funds  from its
operations  or raise  additional  funds it may not be able to repay its existing
debt or fund  its  operations.  The  consolidated  financial  statements  do not
include any adjustments  relating to the  recoverability  and  classification of
asset carrying  amounts or the amount and  classification  of  liabilities  that
might be necessary should the Company be unable to continue as a going concern.

3.   Acquisitions

EWCO

     In April 2004, the Company  completed the  acquisition of 100% of the stock
of Eugene Welding Co., which  manufactures  and sells  structural and mechanical
steel tubing and steel storage rack systems at two  manufacturing  facilities in
Michigan north of Detroit.  The aggregate  purchase price for EWCO was $699,490.
The Company  acquired EWCO for $415,450 in cash paid to its sole shareholder for
all of the then  outstanding  EWCO  shares.  The  Company  paid a  consultant  a
$200,000   success  fee  in  connection   with  the   acquisition  and  incurred
approximately  $84,040 in expenses  related to the  acquisition,  which has been
added to the cost of the acquisition.

     In April 2004 and in connection  with its  acquisition of EWCO, the Company
entered  into an  employment  agreement  with  EWCO's then  President  and Chief
Executive  Officer.  In August  2004,  the Company  entered  into a  Termination
Agreement with him, pursuant to which he resigned from all of his positions with
the Company,  and agreed to the following:  render  consulting  services for one
year, a release of claims, keep the Company's information confidential,  and not
to  compete  for a  period  of  two  years  following  the  termination  of  his
consultation.  His  compensation  under the  agreement  includes  (1) payment of
$100,000 a year for two years,  (2)  payment for his  current  health  insurance
coverage for 18 months,  (3) payment of his country club dues for 2004 and 2005,
up to  $5,000  a year,  (4)  reimbursement  of his  attorney  fees  incurred  in
connection with the negotiation of legal matters up to $9,850 and (5) payment of
the  outstanding  principal and interest on the loan in connection with the 2003
GMC Sierra  pick-up  truck  currently  used by him, two years of  insurance  and
transfer title to him for the vehicle.

Steelbank

     In May 2004, the Company  completed the acquisition of 100% of the stock of
Steelbank,  Inc., which acts as a distributor and sales  representative  for the
sale of  structural  and  mechanical  steel  tubing  and is based in a suburb of
Toronto, Ontario, Canada. The acquisition complemented the Company's acquisition
of EWCO by providing a sales  organization for EWCO's products.  Because much of
Steelbank's value to the Company is the value of its sales  organization and not
the value of its assets,  a majority of the purchase price has been allocated to
goodwill. The aggregate purchase price for Steelbank was $1,656,563. The Company
acquired  Steelbank  by paying  approximately  $54,263  (Cdn.  $75,000) in cash,
issuing a promissory  note in the  principal  amount of  approximately  $574,300
(Cdn.  $800,000),  and by issuing  additional  promissory notes in the aggregate
principal amount of  approximately  $290,750 (Cdn.  $405,000).  The Company also
paid Cdn. $62,500 of the holders' legal and other expenses at maturity, agreeing
to issue a number of its common shares equal to  approximately  $303,180 divided
by the $5.00 public  offering price of its shares in its initial public offering
(recorded in notes payable - other). Additionally, the Company paid a consultant
a  $200,000  success  fee  in  connection  with  the  acquisition  and  incurred
approximately  $268,018 in expenses related to the  acquisition,  which has been
added to the cost of the acquisition.  Canadian dollars are translated into U.S.
dollars as of the acquisition date of May 14, 2004.

     The  results  of  operations  of EWCO and  Steelbank  are  included  in the
consolidated  statement  of  operations  from April 2, 2004,  and May 14,  2004,
respectively.

     The following table  summarizes the final  allocation of the purchase price
to the assets acquired and liabilities assumed at the date of acquisition:

                                            EWCO                Steelbank
                                     -----------------     -------------------
  Current Assets                   $         9,972,486   $           1,805,420
  Property, plant and equipment                573,891                  62,175
  Goodwill                                          --               1,106,279
  Other intangible assets                           --                 410,000
  Other assets                                  75,800                      --
  Current liabilities                      (9,380,408)             (1,727,311)
  Long term liabilities                      (542,279)                      --
                                     -----------------     -------------------
  Net assets acquired              $           699,490   $           1,656,563
                                     =================     ===================

     The following unaudited proforma consolidated information is provided as if
the  acquisitions  of EWCO and Steelbank had occurred as of the beginning of the
applicable  period.  The  unaudited  proforma  information  should  be  read  in
conjunction with the related  historical  information,  and does not reflect any
benefits from  synergies  that might be achieved from  combining  operations and
does not  reflect  the  actual  results  that  would  have  occurred,  nor is it
necessarily   indicative  of  future  results  of  operations  of  the  combined
companies.  The unaudited pro forma amounts include  adjustments  that are based
upon available information and various assumptions that the Company believes are
reasonable.

                                                         Year ended December 31,
                                                        Pro forma and Unaudited
                                                                 2004
                                                         ----------------------
Net sales                                               $        51,037,000
Net loss before taxes                                           (1,340,000)
Net loss                                                        (1,328,000)
Net loss per common share - basic and diluted                        (1.08)
Weighted average number of common shares outstanding              1,227,300


Haines Road

     The aggregate  purchase price including expenses related to the Haines Road
acquisition   transaction  was  approximately   $10,190,000  (Cdn.  $12,489,000)
consisting of (1) approximately  $9,211,000 (Cdn.  $11,289,000)  payable in cash
and (2)  approximately  $979,000 (Cdn.  $1,200,000)  in a secured,  subordinated
promissory  note,  either  payable  15 months  after  closing  or by  offsetting
adjustments  made after closing or for purchases by Bolton Steel Tube Co., LTD.,
("Bolton")  from Haines  Road.  The  purchase  price was  allocated  as follows:
$9,689,000 (Cdn. $11,875,000) for the assets acquired, a $200,000 success fee in
connection  with the  transaction,  payable to  Bainbridge  Advisors,  a related
party,  over 24 months,  and  approximately  $301,000 in expenses related to the
transaction.  The Company  funded a portion of the purchase  price with proceeds
from the initial public offering and from a term loan described in Note 6.

     Pursuant  to a  guarantee  between  Tarpon and  Bolton,  Tarpon  guaranteed
Steelbank's  obligations under the secured subordinated promissory note. As part
of the  transaction,  Tarpon  agreed not to compete  with Bolton with respect to
hot-dipped galvanized products for a period of six months after closing.  Bolton
also agreed not to compete with Tarpon on the  pre-galvanized  tubing market for
six months. The six month non-compete agreements expired on August 17, 2005.

     On May 18, 2005,  Steelbank  purchased the Haines Road real estate  assets,
including  closing  fees  and  expenses,   for  $4,638,000  (Cdn.   $5,870,000),
consisting  of  (1)  approximately   $530,000  (Cdn.   $670,000)  in  cash,  (2)
approximately  $2,765,000  (Cdn.  $3,500,000)  in a  one  year  mortgage  bridge
financing,  and (3) seller financing of approximately $948,000 (Cdn. $1,200,000)
and  $395,000  (Cdn.  $500,000)  payable  August  18,  2006 in second  and third
mortgage financing, respectively.

     The  Company  had  leased  the Haines  Road real  estate  during the period
between  the  acquisition  closing  date and the real estate  closing  date at a
monthly rent of approximately $62,300 (Cdn. $75,000).

     On November 22,  2006,  the Company  completed a sale and  leaseback of the
Haines Road real estate  assets with Agellan  Investment,  Inc., a Canadian real
estate   developer,   which  generated   gross  proceeds  of  $4,961,000   (Cdn.
$5,675,000),  from which all three  mortgages were retired.  The transaction was
recorded  as a sale  with a loss of  $179,911  (Cdn.  $206,230).  The  lease was
accounted for as an operating lease.

     The following  table  summarizes the assets acquired in connection with the
acquisition of Haines Road converted at the exchange rate in effect at the dates
of acquisition:

                                                   Haines Road
                                             -------------------------

  Current assets                         $                  1,183,000
  Property, plant, and equipment                            5,356,000
  Goodwill                                                  2,439,000
  Other intangible assets                                   1,212,000
  Land and buildings                                        4,638,000
                                             -------------------------
Total assets acquired                    $                 14,828,000
                                             =========================

     The following  unaudited pro forma consolidated  information is provided as
if the  acquisition  of the Haines Road facility and EWCO had occurred as of the
beginning of the applicable period. For 2004, the pro forma data includes Haines
Road and EWCO as if the Company owned them for the full year. The pro forma data
for 2004 and 2005 includes  Steelbank as of its May 14, 2004  acquisition  date.
The  unaudited  pro forma  information  should be read in  conjunction  with the
related historical information, and does not reflect any benefits from synergies
that might be achieved from combining operations and does not reflect the actual
results that would have  occurred,  nor is it  necessarily  indicative of future
results of operations of the combined companies. The unaudited pro forma amounts
include  adjustments  that are based  upon  available  information  and  various
assumptions that the Company believes are reasonable.
<TABLE>
<CAPTION>

                                                                                   Year ended December 31,
                                                                                   Pro forma and Unaudited
                                                                                  2005                    2004
                                                                            ------------------     -------------------
<S>                                                                      <C>                    <C>
Net sales                                                                $         63,616,000   $          63,202,000
Net income (loss) before taxes                                                    (7,360,000)                 348,000
Net income (loss)                                                                 (7,120,000)                   23000
Net loss per common share - basic and diluted                                          (1.53)                      --
Weighted average number of common shares outstanding                                4,640,130               4,640,130
</TABLE>


Midwest Tube Mill, Inc. Agreement

     On August 30, 2005, MTM Acquisition Company ("MTM  Acquisition"),  a wholly
owned  subsidiary  of  Tarpon  Industries,   formed  for  the  purpose  of  this
acquisition, entered into an Asset Purchase Agreement ("Agreement") with Midwest
Tube Mills,  Inc.  ("Midwest"),  a manufacturer of mechanical steel tubing,  and
certain  stockholders of Midwest,  for the acquisition of  substantially  all of
Midwest's  assets and business  (the  "Transaction").  In the fourth  quarter of
2005,  the  Company  wrote  off  $192,000  of  due  diligence  costs  due to the
uncertainty  of  completing  the  transaction.  On March 28,  2006,  the Company
informed  Midwest that it would terminate the Agreement based on MTM's inability
to provide audited financial statements.

4.   Goodwill and Intangible Assets

     In the fourth quarter of 2005, the Company completed an impairment test for
all business  units and recorded  impairment  charges  related to the  Steelbank
acquisition  in the amount $1.1 million to goodwill and $794,000 to the customer
list  intangible.  The  impairment  resulted  from lower  sales and higher  than
expected  customer  turnover,  as  well as  rapidly  increasing  material  costs
compared  with the original  business  case  supporting  the carrying  values of
goodwill and intangibles.

     The Company  conducts  impairment  tests on an annual basis, but also on an
interim basis where impairment indicators arise. Steelbank sales and earnings in
2006 have been below forecasts  utilized in the impairment test completed in the
fourth  quarter  2005,  largely due to similar  factors  mentioned  above.  As a
result,  the Company  conducted an impairment  test as of the quarter ended June
30, 2006 and concluded that the carrying value of goodwill and intangible assets
exceeded their fair values,  resulting in an additional  impairment loss of $3.6
million.  The fair value of the Steelbank  reporting  unit and  intangibles  was
estimated  using the expected  present  value of future cash flows.  The Company
also   concluded  that   Steelbank's   real  estate  was  impaired  due  to  the
environmental  issues previously  mentioned,  resulting in an impairment loss of
$750,000.

The change in goodwill is as follows:

                                         2006                   2005
                                     -----------------     ------------------
Beginning balance January 1         $       2,808,800   $          1,279,810
Acquisition of Haines Road                         --              2,460,122
Foreign currency impact                       114,907                168,868

Impairment                                (2,923,707)            (1,100,000)

                                     -----------------     ------------------
Ending balance December 31          $              --   $          2,808,800
                                     =================     ==================


     The Company's  intangibles assets are valued based on independent appraisal
and consist of the following:
<TABLE>
<CAPTION>

                                                                                   Covenant
                                                              Customer              not to
                                                                base                compete               Total
                                                          -----------------     ----------------     -----------------
<S>                <C>                                 <C>                   <C>                  <C>
Balance at January 1, 2005                             $            89,223   $          347,415   $           436,638
Additions                                                        1,212,000                   --             1,212,000
Foreign currency impact                                             59,988                8,585                68,573
Amortization                                                     (158,557)             (71,064)             (229,621)
Impairment charges                                               (794,000)                   --             (794,000)
                                                          -----------------     ----------------     -----------------
Balance at December 31, 2005                                       408,654              284,936               693,590
Additions
Foreign currency impact                                             16,141               11,096                27,237
Amortization                                                      (34,694)             (33,663)              (68,357)

Impairment charges                                               (390,101)            (262,369)             (652,470)
                                                          -----------------     ----------------     -----------------
Balance at December 31, 2006                           $                --   $               --   $                --
                                                          =================     ================     =================
</TABLE>


5.   Details of Balance Sheet

     The  following  sets forth the  components  of the  Company's  inventory at
December 31 of the respective years:

                     INVENTORIES:             2006                   2005
                                    -------------------     -----------------
        Raw material             $           3,643,846   $         3,548,251
        Work-in-process                        481,858               303,096
        Finished goods                       2,325,008             2,882,126
        Supplies                               308,850               186,165
                                    -------------------     -----------------
        Total                    $           6,759,562   $         6,919,638
                                    ===================     =================

     The following  table sets forth the  components of the Company's  property,
plant and equipment at December 31 of the respective years:
<TABLE>
<CAPTION>

                 PROPERTY PLANT AND EQUIPMENT:                               2006                   2005
                                                                       ------------------      ----------------
<S>                                                                 <C>                     <C>
Machinery and equipment                                             $          5,979,418    $        5,891,036
Building                                                                              --             2,479,175
Leasehold improvements                                                           214,454               437,195
Computer equipment                                                               343,580               285,406
Land                                                                                  --             2,649,939
Transportation equipment                                                          47,035                56,147
Furniture and fixtures                                                            67,742                74,683
Construction in progress                                                              --                80,865
                                                                       ------------------      ----------------
 Total                                                                         6,652,229            11,954,446
Less accumulated depreciation and amortization                               (1,506,437)             (814,746)
                                                                       ------------------      ----------------
 Net property, plant and equipment                                  $          5,145,792    $       11,139,700
                                                                       ==================      ================
</TABLE>

     In  November  2006  Agellan  Investment,   Inc.,  a  Canadian  real  estate
developer, reached an agreement with Tarpon to purchase the Haines Road land and
building and to lease back the manufacturing site to Steelbank.  The closing for
the sale was  completed on November  22,  2006,  resulting in a loss of $179,911
(Cdn.  $206,230),  classified  as Loss on Disposal of Property and  Equipment in
2006.

     Each year, the Company reviews its long term assets, other than intangibles
for impairment.  Upon review,  if an asset is deemed to be impaired,  management
makes the  appropriate  valuation  to write down the asset  value to fair market
value.  In June of 2006, the Company  determined  that the carrying value of the
Steelbank real estate was impaired,  due to the environmental  issues previously
mentioned, resulting in an impairment loss of $750,000 in 2006.

6.   Debt

     The following  table sets forth the  components  of the  Company's  debt at
December 31 of the respective years:
<TABLE>
<CAPTION>

Short Term Debt

                                                                                     2006                2005
                                                                                ---------------     ---------------
<S>                                                                          <C>                 <C>
      EWCO Revolving Credit Facility                                         $       5,943,115   $       6,016,786
      Steelbank Revolving Credit Facility                                            2,860,533           2,356,418
      First Mortgage on Haines Road Real Estate                                             --           2,971,175
      Bridge loan payable                                                              775,000                  --
                                                                                ---------------     ---------------
      Total                                                                  $       9,578,648   $      11,344,379
                                                                                ===============     ===============

Term Debt, Classified as Current

                                                                                      2006                 2005
                                                                                ---------------      ---------------
         EWCO term loan                                                      $         789,933    $       1,068,733
         Steelbank term loan                                                         1,171,307            1,531,530
         Second mortgage on Haines Road real estate                                         --            1,029,600
         Third mortgage on Haines Road real estate                                          --              429,000
         Convertible debt (less discount of $1,135,570 in 2006
         and $818,980 in 2005)                                                       4,489,430            5,181,020
         Other                                                                          10,301               21,304
                                                                                ---------------      ---------------
         Subtotal                                                                    6,460,971            9,261,187

         Less current portion, of long-term debt                                   (6,458,328)          (9,250,944)

                                                                                ---------------      ---------------
         Long-term portion of long-term debt                                 $           2,643    $          10,243
                                                                                ===============      ===============


</TABLE>

     Maturities of long-term  debt and capital lease  obligations  for the years
ending December 31 are based on the stated terms of the underlying agreements as
follows:

                2007            6,271,848
                2008              641,833
                2009              592,723
                2010               90,138
                             ------------
                Total        $  7,596,542
                             ============

EWCO Credit Facility - Terms and Default

     Eugene  Welding  Company  ("EWCO"),  a subsidiary  of Tarpon,  has a credit
facility with LaSalle Bank Midwest,  N.A. which includes a revolving credit line
up to $9,000,000 with borrowings  based upon eligible  inventory and receivables
and which matures  August 31, 2007,  and a $1,394,000  term loan  amortizable in
equal monthly  installments  of principal over five years ending August 1, 2009.
The term loan matures August 31, 2007 in the event the revolving  credit line is
not renewed.  Please see note 14, Subsequent  Events,  for an explanation of the
"Waiver and Fourth  Amendment to Loan Agreement and  Reafirmation  of Guarantee,
executed March 30, 2007.

     Both the  revolving  credit  line and term loan are  secured  by all of the
assets of EWCO,  approximately  $ 15.8 million as of December  31,  2006,  and a
guarantee  by Tarpon.  Interest on both loans was at the bank's  prime rate plus
until  October  2,  whereupon  the rate was  increased  to  prime  plus  2-1/2%,
following formal  notification by the bank of default,  citing that (i) EWCO had
failed to meet its debt service coverage test on occasion during the period from
November 2005 through June 2006, (ii) that Tarpon had breached its subordination
agreement for payment on debt due Laurus Master Trust, a junior creditor,  while
Tarpon's  Steelbank  subsidiary  was in  technical  default to LaSalle  Business
Credit,  (iii) that EWCO had breached its loan  agreement  relating to permitted
application of proceeds of a $6 million loan from Laurus, and that (iv) EWCO has
been unable to pay its obligations as they become due. These  circumstances,  as
well  as  other  events  such  as  the  withdrawal  of  the  firm's  independent
accountants,  constituted a material  adverse change in the loan  collateral and
the  business  condition of the obligor.  From October 1, 2006  forward,  EWCO's
loans will bear interest at a rate of prime plus 2-1/2% (total effective rate of
10.75% at December 31, 2006).  LaSalle had agreed to waive any default  interest
through  September 30, 2006.  Due to violation of its debt service  covenants as
well as the Company's going concern qualification,  the debt has been classified
as a current liability.


Steelbank Credit Facility - Terms and Default

     On February 17, 2005,  Steelbank entered into a Loan Agreement with LaSalle
Business  Credit  ("Lender"),  a division of ABN AMRO Bank N.V.,  Canada Branch,
which provides for (1) a revolving credit line maturing February 17, 2008 in the
maximum principal amount of Cdn.  $8,000,000 with borrowings based upon eligible
inventory and  receivables,  and (2) a term loan in the principal amount of Cdn.
$2,100,000.  Borrowings in Canadian  dollars under the revolving credit facility
bear interest at a floating rate equal to the Lender's  Canadian prime rate plus
an  applicable  margin of between  0.75% and 1.25% (9.5% at December 31,  2006).
Borrowings  in U.S.  dollars  under the  revolving  credit  facility  are at the
Lender's U.S. prime rate. The term loan matures March 1, 2010.  Principal on the
term  loan is  payable  in sixty  equal  monthly  installments  of Cdn.  $35,000
beginning on April 1, 2005.  The term loan bears  interest,  payable  monthly in
arrears,  at a floating rate equal to the Lender's  Canadian  prime rate plus an
applicable margin of between 0.75% and 1.25%

     Under certain circumstances, Steelbank has the option to convert all or any
part of its Canadian or United States  borrowings to an interest rate equal to a
LIBOR rate plus an  applicable  margin of between  2.25% and 2.75% or a Banker's
Acceptance  rate plus an  applicable  margin of between 2.25% and 2.75% (9.5% on
December 31, 2006). Interest on the revolving credit facility is payable monthly
in arrears.

     The obligations under the loan agreement are unconditionally  guaranteed by
Tarpon and are secured by a security interest in substantially all of the assets
of  Steelbank,  approximating  $10.5  million,  and Tarpon,  other than Tarpon's
common shares of EWCO. Steelbank's obligations under the Loan Agreement are also
secured by a pledge of all the capital  stock of  Steelbank  pursuant to a share
pledge agreement between Tarpon and its Lender.

     The  loan  agreement  also  requires   compliance  with  several  financial
covenants including adjusted net worth of at least Cdn. $4,841,765. For quarters
ending on or after  September  30, 2005,  the minimum  adjusted net worth of the
previous  quarter  will be  increased  by 75% of the net income for that quarter
(ignoring  quarters in which there is a loss), and the required minimum adjusted
net worth for purposes of this was $4,864,381.  The loan agreement also requires
Steelbank  to  maintain a debt  service  coverage  ratio  (generally  net income
adjusted for depreciation and amortization,  non-cash transactions,  and capital
expenditures  divided by the total of all principal  payments of long-term debt,
capital  leases,   subordinated   debt  and  all  payments  in  respect  of  any
distribution),  of at least 1.25 to 1.00. It also requires Steelbank to maintain
interest coverage (generally net income adjusted for interest expense, bank fees
and  net  costs  under  interest  rate  contracts,   taxes,   depreciation   and
amortization  and non-cash items divided by interest  expense plus bank fees and
net costs under interest rate  contracts),  of at least 1.50 to 1.00.  Steelbank
used the borrowings under the credit facility to provide partial funding for the
acquisition of  substantially  all of the assets and business of the Haines Road
facility and Haines Road real estate,  to pay transaction fees and expenses,  to
refinance  Steelbank's  full-recourse  factoring  arrangement  and  for  general
working capital purposes of Steelbank.

     Steelbank's loan agreement contains other covenants which include limits on
Steelbank's ability to incur or guarantee additional indebtedness, create liens,
pay dividends,  make certain types of investments,  enter into transactions with
affiliates,  make capital  expenditures in excess of Cdn. $500,000 in any fiscal
year,  sell assets,  merge with other  companies  or enter into any  transaction
outside the ordinary course of business.

     Due to  violation  of its debt  service  and  minimum  adjusted  net  worth
covenants as well as the  Company's  going concern  qualification,  the debt has
been classified as a current liability.

     On October 2, 2006,  LaSalle  Business  Credit, a division of ABN AMRO Bank
N.V.,  Canada  Branch,  issued a notice of default to Steelbank,  as a result of
Steelbank's failure to meet its adjusted net worth covenant and its debt service
coverage ratio covenants. From and after October 1, 2006, Steelbank's loans will
bear  interest  at a rate of two per  cent  (2%) per  annum,  in  excess  of the
interest rate otherwise  payable.  LaSalle had agreed to waive default  interest
through September 30, 2006.


Steelbank Mortgages

     On May 18, 2005, Steelbank purchased the Haines Road real estate assets for
$4,638,000 (Cdn. $5,870,000), including closing fees and expenses. Financing for
the purchase consisted of approximately  $530,000 (Cdn. $670,000) in cash, a one
year first mortgage totaling  $2,765,000 (Cdn.  $3,500,000) due May 15, 2006 and
jointly  secured by the  property and a guarantee  from Tarpon  payable in equal
monthly  installments of principal and interest based on a 25 year  amortization
period and  bearing  interest  at 1.25%  above  Canadian  prime  rate  (7.25% at
September  30,  2005).  The  property  was also  financed  by a second and third
mortgage  from the former  owner,  Bolton,  payable  August 18,  2006,  totaling
$948,000  (Cdn.  $1,200,000)  and $395,000  (Cdn.  $500,000)  respectively  with
interest payable monthly at 8% and 10%, respectively, per annum.

     In November 2006 Agellan Investment, Inc., a Canadian real estate developer
reached an  agreement  with Tarpon to purchase the Haines Road land and building
and to lease  back the  manufacturing  site to  Steelbank.  Although  all  three
mortgages were past due, the mortgagors agreed to extensions on their respective
due dates for the purpose of enabling Steelbank to sell the property to Agellan.
All three  mortgages  were  retired  from the sales  proceeds  at the closing on
November 22, 2006.


Convertible Debt

     On December  13,  2005,  the Company  entered  into a  Securities  Purchase
Agreement  (the  "Agreement")  with  Laurus  Master  Fund,  Ltd.  ("Laurus")  in
connection  with the private  placement of a convertible  term note (the "Note")
issued by the Company in the  principal  amount of  $6,000,000  due December 13,
2008  and  common  stock  purchase  warrants  (the  "Warrants").   The  Note  is
collateralized  by all present and future assets of Tarpon and its subsidiaries,
including the equity interests of EWCO and Steelbank, subject to a subordination
agreement  between  Tarpon ABN AMRO Bank,  N.V.,  Canadian  Province and LaSalle
Bank,  Midwest,  N.A.  The Note is  payable  in equal  monthly  installments  of
principal  totaling  $187,500  commencing  on April 1, 2006 through the maturity
date and bears interest at prime plus 2% (10.25% at December 31, 2006).  As part
of the Agreement,  the monthly payments of principal and interest, under certain
conditions,  are  convertible  into shares of the  Company's no par value common
stock at a fixed  conversion  price of $3.27 per share. The Warrants provide for
the  purchase of up to 390,000  shares of common  stock at an exercise  price of
$3.81 until December 13, 2012.

     Laurus cannot receive shares upon exercise of the warrants, upon payment of
principal and interest on the note,  or upon  conversion of the Note which would
exceed the  difference  between  4.99% of the issued and  outstanding  shares of
common  stock  and the  number  of  shares  beneficially  owned  by  Laurus,  as
determined in accordance with Section 13(d) of the Exchange Act, as amended, and
Regulation 13d-3. This limitation  automatically  becomes null and void upon the
occurrence, and during the continuance, of an event of default as defined in the
note,  or upon 75 days prior  written  notice to the Company,  except that at no
time shall the  number of shares of common  stock  beneficially  owned by Laurus
exceed 19.99% of the outstanding shares of common stock.  Further, the number of
common shares  issuable by the Company and acquirable by Laurus at a price below
$2.85 per share pursuant to the terms of the note,  the warrant,  the agreement,
any related  agreement or otherwise cannot exceed 927,560 shares of common stock
(subject to appropriate  adjustment for stock splits, stock dividends,  or other
similar  recapitalizations  affecting the common stock),  unless the issuance of
such excess amount of common stock is first approved by the  stockholders of the
Company.

     In  connection  with  this  financing,   the  Company  recorded   discounts
aggregating   approximately   $1,681,000,   of  which   approximately   $608,000
represented the value of 390,000 warrants using the Black-Scholes  model with an
interest rate of 4.4%,  volatility  of 60%, zero  dividends and expected term of
seven years; and  approximately  $1,073,000  represented the conversion  feature
inherent  in the  instrument.  Such  discounts  are  being  amortized  using the
effective  interest  method over the term of the related  debt.  The  conversion
feature  itself was deemed to be a derivative  under FASB Statement No. 133. The
Company  estimated the fair value of the conversion  feature to be $13,000 as of
December 31, 2006 and $817,000 as December  31, 2005.  The $804,000  decrease in
value  during  the  year  ended  December  31,  2006 is  shown  as a "Gain  from
derivatives"  within the  Statement  of  Operations.  In  addition,  the Company
incurred  fees in  connection  with  this  financing  aggregating  approximately
$1,685,000,  including warrants to purchase up to 300,000 shares of common stock
to Joseph Gunnar and Company,  a related party,  recorded as deferred  financing
costs and amortized over the life of the note. The 300,000  warrants were valued
at  approximately   $432,000  using  the  Black-Scholes  model  using  the  same
assumptions  described above, except for a term of five years. The warrants were
deemed to be a  derivative  instrument  as they can be put back to the  Company,
and, therefore the corresponding  liability was marked to market and recorded at
a fair value of $108,000 as of December 31, 2006 and $366,000 as of December 31,
2005. The $258,000 decrease in fair value during 2006 is included in the overall
"Gain from derivatives"  within the Statement of Operations.  These warrants are
exercisable  through  December 13, 2010 at $3.27 per share.  Although the stated
interest rate of the convertible  note is the prime rate plus 2%, as a result of
the  aforementioned  discounts and fees, the effective interest rate of the Note
is approximately 41.8% per annum.

     On May 24, 2006, the Company  executed an Omnibus  Amendment to the Secured
Convertible  Term Note between the Company and the Laurus  Master Trust  whereby
the Company executed its payment  obligation of principal due May 1, 2006 in the
amount  of  $187,500  in  common  shares  of  Tarpon  stock  in  lieu  of  cash.
Accordingly,  Tarpon  and  Laurus  agreed  to  amend  the  terms  of the  Senior
Convertible Term Note, and 153,688 shares were issued at $1.22 per share.

     On August 17,  2006,  Tarpon  reached  an  agreement  with the Laurus  fund
whereby  Tarpon  would issue  100,000  shares of Tarpon  common  stock valued at
$190,000  ($1.90 per share) to Laurus in exchange  for Laurus  amending  certain
provisions of its loan agreement. In addition,  Tarpon agreed to award Laurus an
additional  100,000 shares  contingent on Tarpon  completing a successful equity
raise. The agreement provided that the loan agreement would be amended such that
an event of default with LaSalle Bank Midwest  (LaSalle) and/or LaSalle Business
Credit  (LaSalle) which is not declared as a default by LaSalle,  would not give
rise to default  interest  due to Laurus.  Because  LaSalle  did not declare the
Company in default until October 2, 2006, default interest was therefore not due
Laurus until the fourth quarter of 2006.

     On  February  28,  2007,  the  Company  entered  into a debt  restructuring
agreement with Laurus.  Please see note 14,  Subsequent  Events,  for additional
information.


Bridge Notes

     On December 7, 2006 Tarpon closed a private  placement Bridge Loan offering
aggregating  $775,000 and netting the Company $562,000 after payment of fees and
commissions.  The Bridge Loan Notes carry interest at 12% and are repayable from
proceeds  of a  secondary  stock  offering  initiated  in  January  of 2007.  In
connection with this private placement, 775,000 warrants were issued to the note
holders and 96,875  warrants were issued to designees of the placement  agent to
purchase  common stock of Tarpon at an exercise price of $0.80.  The Company has
estimated  the  fair  value  of  these   warrants  to  be  $333,000   using  the
Black-Scholes  Option  Pricing  Model  with an  estimated  term  of 4.94  years,
risk-free interest rate of 4.64%, dividend yield of 0% and volatility of 70%.


7.   Leases

     Facilities and equipment are leased under  arrangements  that are accounted
for as  operating  leases.  Total  rental  expense was  $405,000,  $513,000  and
$261,000 for the years ended December 31, 2006, 2005 and 2004, respectively.

The  following  is a schedule of annual  future  minimum  lease  payments  under
operating  leases with  remaining  non-cancellable  lease terms in excess of one
year as of December 31, 2006:

            Year                          Amount
            ----                          ------
            2007                     $        540,411
            2008                              443,033
            2009                              439,510
            2010                              423,483
            2011                              424,627
            Thereafter                      2,317,175
                                        --------------
            Total                    $      4,588,239
                                        ==============


8.   Income Taxes

     There was no income tax expense for the year ended  December 31,  2006.  In
2005 and in 2004,  the  Company  recorded a benefit  of  $101,088  and  $70,986,
respectively.  The benefit is due to a refund  related to a  reduction  in prior
period tax expense in the United States. As a result of the valuation allowances
applied to the net  operating  losses and other net  deferred  tax  assets,  the
Company  did not report any other net income tax  benefits  for any of the three
years ended December 31, 2006, 2005, and 2004.

     A reconciliation  of income taxes computed using the federal statutory rate
to the taxes reported in the statements of operations is as follows:
<TABLE>
<CAPTION>

                                                                       Year Ended December 31,
                                                     ------------------------------------------------------------
                                                              2006                 2005                2004
                                                         ----------------     ---------------     ---------------
<S>                                                   <C>                  <C>                 <C>
Net loss before income taxes                          $      (9,992,879)   $     (7,410,578)   $     (2,065,500)
Federal statutory rate                                               34%                 34%                 34%
Tax benefit computed at federal statutory rate               (3,397,579)         (2,519,597)           (702,270)

Effect of nondeductible expense                                   11,594              14,622              14,743
Effect of non taxable income                                          --            (15,507)                  --
Foreign Tax rate differential                                         --                  --             (9,101)
Valuation allowance                                            3,417,485           2,330,922             625,642
Provision for prior years                                       (31,500)              88,472                  --
                                                         ----------------     ---------------     ---------------
Reported income tax benefits                          $               --   $       (101,088)   $        (70,986)
                                                         ================     ===============     ===============


Deferred tax assets and liabilities consist of the following amount as of December 31:

                                                                       Year Ended December 31,
                                                     -------------------------------------------------------------
                                                              2006                 2005                2004
                                                         ----------------     ---------------     ----------------
Net operating loss carry-forwards                    $         5,788,172   $       2,991,162   $        1,083,879
Allowance for doubtful accounts                                   64,344              36,415               22,600
Property and equipment                                         (337,166)            (80,944)               28,501
Deferred compensation                                            141,750             184,936                   --
Intangible assets                                              1,881,863             678,007                   --
Gain on financial instrument                                   (469,837)           (109,480)                   --
Foreign exchange losses (gains)                                (165,375)           (165,375)               63,400
Deferred tax assets                                            6,903,751           3,534,721            1,198,380
Valuation allowance                                          (6,903,751)         (3,535,721)          (1,198,380)
                                                         ----------------     ---------------     ----------------
Net deferred tax asset                               $                --   $              --   $               --
                                                         ================     ===============     ================

</TABLE>

     Due to the  historical  losses  incurred by the Company,  a full  valuation
allowance  for the net  deferred  tax assets has been  provided.  If the Company
achieves  profitability,  these net operating  losses may be available to offset
future income taxes. The Company's net operating loss  carry-forward at December
31, 2006 was approximately $17.0 million, and expires as follows:

     Year                        Amount
     ----                        ------

     2015                $         1,246,400
     2022                            760,400
     2023                            535,800
     2024                          1,338,900
     2025                          4,951,500
     2026                          8,173,200
                              ---------------
                         $        17,006,200
                              ===============


     The components of (loss) before income taxes are as follows:
<TABLE>
<CAPTION>

                                                        Year Ended December 31,
                                     ---------------------------------------------------------------
                                              2006                 2005                  2004
                                         ----------------     ----------------     -----------------
<S>                                  <C>                   <C>                  <C>
United States                        $       (4,588,765)   $      (4,384,253)   $       (1,798,451)
Foreign                                       (5,404,114          (3,026,325)             (267,049)
                                         ----------------     ----------------     -----------------
                                     $       (9,992,879)   $      (7,410,578)   $       (2,065,500)
                                         ================     ================     =================


The components of income tax (benefit) expense by country are as follows:

                                                         Year Ended December 31,
                                     ---------------------------------------------------------------
                                              2006                 2005                  2004
                                         ----------------     ----------------     -----------------
United States                         $               --   $        (131,079)   $                --
Foreign                                               --               29,992              (70,986)
                                         ----------------     ----------------     -----------------
                                      $               --   $        (101,087)   $          (70,986)
                                         ================     ================     =================
</TABLE>


9.   Related Party Transactions

     In April 2004, the Company entered into a Management  Consulting  Agreement
with Bainbridge Advisors, Inc., an advisory firm owned by the former Chairman of
the Board, President and Chief Executive Officer and his son. On April 15, 2005,
the Company amended the Management  Consulting  Agreement to (1) make a one-time
payment of $50,000 in consideration of certain advisory services rendered to the
Company that were not originally  contemplated by the parties,  (2) increase the
monthly fee from $15,000 to $20,000,  effective  April 2005,  and (3) revise the
calculation of the maximum  success fee to provide that the maximum  success fee
shall be $300,000 plus 0.2% of the enterprise value of an acquisition,  but only
to the extent that the enterprise value of such transaction exceeds $50,000,000.
On December 8, 2005,  this agreement was amended in accordance with the original
agreement  for an  additional  one  year  term  commencing  April 7,  2007.  The
following table summarizes the compensation earned by the former Chairman of the
Board,  President  and Chief  Executive  Officer and his son,  individually  and
through Bainbridge Advisors, Inc.
<TABLE>
<CAPTION>

                                                                        December 31,
                                                 ------------------------------------------------------------
                                                         2006                2005                 2004
                                                     --------------     ----------------     ----------------
<S>                                              <C>                 <C>                  <C>
Advisory services and expenses                   $         261,656   $          320,740   $          163,900
Salaries and benefits                                           --                   --              130,177
Success fees                                                    --              200,000              400,000
                                                     --------------     ----------------     ----------------
Total                                            $         261,656   $          520,740              694,077
                                                     ==============     ================     ================
</TABLE>


     During 2006,  2005 and 2004,  the Company  paid the former  Chairman of the
Board,  President  and Chief  Executive  Officer and his son,  individually  and
through Bainbridge Advisors, Inc. $295,640, $659,629 and $330,163, respectively.
In addition, non-cash stock options were granted in an amount valued at $333,300
in 2005.

     As of December 31, 2006, liabilities included $105,485 of advisory fees and
expenses, due to Bainbridge Advisors, Inc., classified in accounts payable.

     In February 2006, the board of directors agreed to accelerate the payout of
the success fees to Bainbridge Advisors,  Inc. The total amount to be paid would
not increase,  but the total payment term would be reduced from twelve months to
five months for the remaining  success fee related to the  acquisition of Haines
Road. The payment of such success fees, earned in 2005, was completed in June of
2006.

     Between  January and August 2004, the Company  engaged one of its directors
to provide consulting services to the Company concerning its operations, general
management  and  business  development,  at times  and  places  and in an amount
determined by mutual  agreement.  The Company  accrued $22,000 in fees for these
services  including  $10,000  payable  in common  shares at the  closing  of its
initial public  offering.  The Company  subsequently  paid $12,000 in cash, with
2,000 common shares issued to this director in February 2005.

     Joseph Gunnar and Company,  LLC ("Gunnar") was the lead  underwriter in the
Company's  2005 initial  public  offering,  and since such time has assisted the
Company in various financing transactions. Gunnar customers hold collectively, a
significant amount of its common stock.  Gunnar is entitled to participate as an
outside  observer on the Company's board of directors from which it can exercise
significant  influence over the activities of the Company.  For its services for
bridge  financing  in 2004,  Gunnar  received a cash fee of $200,000 and 100,000
warrants  subsequently,  increased  to 120,890  warrants  as a result of certain
anti-dilution  privileges  contained within the Company's warrant agreement.  It
also  received cash  payments of $83,500 in 2004.  The original  warrants had an
exercise price of $ 6.25 with a term of 5 years.  The revised exercise price was
reset to $5.17 as a result of the  issuance  of  additional  warrants.  The 2004
warrants  when  issued had a fair market  value of  $101,966.  In  exchange  for
serving as the  underwriter  for the Company's  Initial Public offering (IPO) in
2005,  Gunnar received a cash fee of $1,638,750.  For its assistance in securing
the convertible  note financing (Note 6), Gunnar received a cash fee of $600,000
and 300,000 warrants with an exercise price of $3.27 with a fair market value of
$432,000. The Gunnar warrants can be put back to the Company, and were deemed to
be a derivative instrument and classified as a liability.  At December 31, 2006,
these  warrants  were marked to market with a value of $108,000 with gain on the
instrument  recorded to gain from  derivatives.  In  connection  with the bridge
financing in December 2006,  Gunnar  received 96,875 warrants with a fair market
value of $33,906 and earned  additional fees of $78,500.  Gunnar also receives a
retainer  payable monthly in the amount of $7,500 which expire in December 2007.
The following table summarizes the compensation earned by Gunnar:
<TABLE>
<CAPTION>

                                                                        December 31,
                                                 ------------------------------------------------------------
                                                         2006                2005                 2004
                                                     --------------     ----------------     ----------------
<S>                                               <C>                <C>                  <C>
Fees and Expenses                                 $        168,500   $          690,000   $          283,500
Initial Public Offering                                         --            1,638,750                   --
Warrant Expense - Gunnar and designees            $         33,906   $          432,000   $          101,966
                                                     --------------     ----------------     ----------------
  Total                                           $        202,406   $        2,760,750   $          385,466
                                                     ==============     ================     ================
</TABLE>


10.  Stock Options and Warrants

     As of October 22, 2004,  the board of  directors  and  shareholders  of the
Company  adopted the Tarpon  Industries,  Inc. 2004 Stock Option Plan.  The plan
allows the Company to grant  incentive  stock  options and  non-qualified  stock
options to the directors,  officers, employees,  consultants and advisors of the
Company to purchase up to an aggregate of 650,000 common  shares.  This plan was
approved by the Company's shareholders in June 2005.

     During 2005, the Company granted options for 441,785 shares, exercisable at
$5.50 per share,  to  consultants,  officers,  employees  and  directors  of the
Company.  During 2006, the Company granted  options for 110,000  shares,  50,000
issued to James Bradshaw,  Chairman and Chief Executive Officer,  exercisable at
$2.45  per  share,  40,000  issued  to J.  Stanley  Baumgartner,  former  Chiefr
Financial Officer,  exercisable at $1.75 and 10,000 each issued to new directors
Tracy  Shellaberger  and Gerald Stein,  exercisable at $2.60 and $0.88 per share
respectively.  All options that have been granted under the plan to officers and
employees  of the Company  vest in  cumulative  annual  installments  over three
years.  Options  issued to  consultants  and  directors  vest  immediately  upon
issuance.  No options were  granted  during 2004 or 2003 and no options have yet
been exercised.

Activity under this plan is shown in the following tables:

<TABLE>
<CAPTION>

                                                          2006                                         2005
                                                          ----                                         ----
                                                          Weighted                                   Weighted
                                                          Average       Aggregate                     Average      Aggregate
                                                          Exercise      Intrinsic(1)                 Exercise      Intrinsic (1)
Shares Subject to Option                 Shares            Price          Value        Shares          Price        Value
-------------------------------------------------------------------------------------------------------------------------------
<S>                                       <C>        <C>                                           <C>
Outstanding at beginning of               415,085    $          5.50       --                --    $          --       --
Period
New Grants (based on fair
Value of common stock at                   70,000    $          2.24       --           441,785    $        5.50       --
dates of grant
Exercised                                      --    $            --       --                --    $          --       --
Expired                                        --    $            --       --                --    $          --       --
Forfeited                               (141,895)    $          5.50       --          (26,700)    $        5.50       --
                                       -----------                                   -----------
Outstanding at end of period              343,190    $          4.81       --           415,085     $       5.50       --
Exercisable at end of period              204,397    $          5.09       --           140,000     $       5.50       --
</TABLE>

(1)  The  intrinsic  value of a stock  option is the amount by which the current
     market value of our  underlying  common stock exceeds the exercise price of
     the option.

     The  estimated  fair value as of the date options were granted  during 2006
presented using the Black Scholes option-pricing model, was as follows:

<TABLE>
<CAPTION>

                                                            2006
                                                        --------------
  Weighted Average Estimated Fair Value Per
<S>                                                     <C>                <C>
   Share of Options Granted During the Period           $        1.08
  Assumptions
   Amortized dividend yield                                     0.00%
   Common Stock price volatility                               70.00%
   Risk free rate of return                                     5.00%
   Expected option term (in years)                                  5
</TABLE>


     The following table summarizes information about stock options at December
31, 2006:
<TABLE>
<CAPTION>

                                     OPTIONS OUTSTANDING                               OPTIONS EXERCISABLE
                                        Weighted                                           Weighted           Weighted
                                        Average             Weighted                       Average             Average
 Range of Exercise                     Remaining            Average                       Remaining           Exercise
       Prices            Shares     Contractual Life     Exercise Price     Shares     Contractual Life         Price
--------------------- ------------- ----------------- -- --------------- ------------- ----------------- -- --------------
<S>        <C>           <C>                    <C>   <C>                     <C>                  <C>   <C>
  $0.88 to $5.50         343,190                8.48  $            4.81       204,397              8.32  $           5.09

</TABLE>


     At December 31, 2006,  options  covering  130,215 shares were available for
future grants under the 2004 Plan.

     The following  table  provides  additional  information  about  outstanding
warrants categorized by exercise price and fair value at date of grant using the
Black-Scholes model:

<TABLE>
<CAPTION>
                                                  Warrants            Expiration         Exercise
Party                                            Outstanding             Date             Price
<C>                                                  <C>               <C>   <C>     <C>                <C>
2004 Gunnar - Bridge Financing                       123,614           12/31/2010    $          1.25
2004 Private Placement                               893,806           12/13/2012    $          2.33
2005 Gunner - IPO                                    243,360           04/05/2009    $          0.98
2005 Gunnar - Laurus
Convertible Note                                     300,000           04/05/2009    $          0.91
2005 Laurus Warrants Associated
with Convertible Note                                390,000           02/17/2010    $          3.08
2006 Bridge Note Holders                             775,000           12/07/2011    $          0.80
2006 Gunnar - Bridge Financing                        96,875           12/07/2011    $          0.80
                                             ----------------
Total                                              2,822,655
                                             ================
</TABLE>


11.  Contingencies

     As of December 31, 2004, the Michigan  Department of Environmental  Quality
("MDEQ")  notified  the  Company  that it had  concluded  that the Company was a
"major  source"  for certain  air  emissions  and that the Company had failed to
apply for a Renewable  Operating Permit  ("ROP")for air emissions not covered by
its Permit to Install  ("Permit"),  then in effect.  The  Company  applied for a
revised  Permit to obviate the need for a ROP and received the revised Permit in
December  2004.  The  MDEQ  and  the  Company  negotiated  a  resolution  of the
violations  alleged  by  MDEQ,  and the  Company  paid a  settlement  amount  of
approximately  $31,000 to  resolve  the  violations  alleged by the MDEQ in July
2004. Subsequently, in October 2005, MDEQ Water Bureau cited EWCO for not having
separate Storm Water Pollution  Prevention  Plans for each physical  location in
Marysville along with other minor infractions.  Since that time,  separate plans
were  developed and submitted to the MDEQ for their  approval.  The Company paid
approximately  $28,000 as of December 31, 2005 to  remediate  the issue and does
not anticipate any further expenses.

     The  Company  from time to time is a party to  various  litigation  matters
arising in the ordinary  course of business.  The ultimate  legal and  financial
liability of this litigation cannot be estimated with certainty,  but management
believes,  based on their  examination of these matters,  experience to date and
discussions  with counsel,  that the ultimate  liability will not be material to
the Company's business, financial condition or results of operations.


12.  Employee benefit plans

     EWCO has three  separate  401(k)  plans.  Two of these  plans  cover  union
employees  who have  attained  18 years of age with six months of  service.  The
participants can contribute up to 15% of their compensation. EWCO matches 50% of
the employee contributions based on the collective bargaining agreement,  not to
exceed 5% of compensation.  The employer  contributions for these two plans were
$67,227 and $10,679,  respectively, in 2006, $51,564 and $6,815 respectively, in
2005 and $39,644 and $6,924 respectively, in 2004.

     The third 401(k) plan is for  employees who are not covered by a collective
bargaining agreement, who have attained 18 years of age and who have 1,000 hours
and six months of service.  The  participants  can contribute up to 15% of their
salary and are eligible for an employer discretionary contribution. EWCO matches
50% of the employee  contributions  up to 5% of employees'  wages.  The employer
matching contributions were $33,759, $26,151 and $17,797 in 2006, 2005 and 2004,
respectively. No discretionary contributions were made in 2006, 2005 or 2004.

     The Company's  union  employees have a contributory  pension plan for which
the Company withholds from the employee and remits to the union on their behalf.
At the end of December 31, 2006,  2005 and 2004,  all withheld  amounts had been
paid to the union on the employees' behalf.


13.  Segment and Geographic Information

     The Company operates in business segments that are distinguished  primarily
on geographic  location.  The EWCO United States operation  includes  mechanical
tube production as well as engineered racking system  production.  The Steelbank
Canadian  operation  includes   mechanical  tube  production  with  emphasis  on
galvanized tube. The products and services, customer base, distribution channel,
manufacturing  process,  procurement  and economic  characteristics  are similar
throughout all of the Company's  operations.  The following table sets forth the
Company's segment data.
<TABLE>
<CAPTION>

                                                  Year Ended December 31, 2006
                               -------------------------------------------------------------------------

                                        EWCO           Steelbank        Other (A)          Total
                                 ---------------    -------------    --------------   --------------
<S>                             <C>              <C>              <C>                 <C>
External revenues               $    53,825,705  $    21,505,203  $             --    $  75,330,908
Inter-segment sales                     697,318          212,324         (909,642)               --
Depreciation and
amortization                            117,687          811,666                --          929,353
Operating profit (loss)               1,478,149      (4,543,976)       (4,750,344)      (7,816,171)
Total assets                         15,774,471       10,469,277       (2,127,564)       24,116,184
Capital expenditures                     36,184          309,535                --          345,719

                                                  Year Ended December 31, 2005
                               -------------------------------------------------------------------------
                                        EWCO
                                        Tube           Steelbank          Other (A)          Total
                                 ---------------    -------------    --------------   --------------
External revenues               $     43,028,462  $       17,822,158  $            --  $ 60,850,620
Inter-segment sales                      578,865                  --        (578,865)            --
Depreciation and
amortization                             109,873             866,926         (37,708)       939,091
Operating profit (loss)              (1,039,283)         (2,706,169)      (3,521,459)   (7,266,911)
Total assets                          14,864,631          20,205,972        3,935,318    39,005,921
Capital expenditures                     170,736             934,733               --     1,105,469

                                                  Year Ended December 31, 2004
                              --------------------------------------------------------------------------
                                        EWCO
                                        Tube           Steelbank          Other (A)          Total
                                 ---------------    -------------    --------------   --------------
External revenues               $     32,354,528  $     5,267,101     $          --    $ 37,621,629
Inter-segment sales                      698,532               --         (698,532)              --
Depreciation and
amortization                              84,190           19,091            37,708         140,989
Operating profit (loss)                  569,079          152,560         (908,784)       (187,145)
Total assets                          15,544,384        4,782,327         1,381,082      21,707,793
Capital expenditures                     110,034            8,694                --         118,728
</TABLE>


(A)  Other represents information for the Company's parent company, Tarpon which
     is not allocated into the operating segments.

     Revenues by country for the year ended December 31 are as follows:
<TABLE>
<CAPTION>

                                                2006                  2005                 2004
<S>                                    <C>                   <C>                   <C>
United States                          $        60,229,000   $        49,732,000   $       32,484,000
Canada                                          15,102,000            11,119,000            5,138,000
                                          -----------------     -----------------     ----------------
Totals                                 $        75,331,000   $        60,851,000   $       37,622,000
                                          =================     =================     ================

     Long-lived assets by geographic region as of December 31 are as follows:

                                                2006                  2005                  2004
United States (EWCO)                   $           463,000   $           629,000   $          568,000
Canada                                           4,682,000            14,013,000            1,821,000
                                          -----------------     -----------------     ----------------
Totals                                 $         5,145,000   $        14,642,000   $        2,389,000
                                          =================     =================     ================
</TABLE>

     Revenues  by  geographic  area  were  determined  based on  origin of sale.
Geographic  data on  long-lived  assets is based on  physical  location of those
assets.


14.  Subsequent Events

     On  February  28,  2007,  the  Company  entered  into a debt  restructuring
agreement with Laurus, amended on March 20, 2007, whereby the Company would make
payments of interest and principal in arrears from the  anticipated  proceeds of
three  separate  equity  financing  transactions  scheduled  during  the  period
starting  January 25 and ending not later  than  August 1, 2007.  The  agreement
calls for payments to Laurus during this period of $125,000  toward  interest in
"Raise 1" (completed  March 23,  2007),  $125,000  toward  interest and $250,000
toward  principal in "Raise 2",  scheduled to occur not later than May 1 and 33%
of gross proceeds, which are estimated at $4 million, in "Raise 3", scheduled to
occur not later than August 1, 2007.  Immediately  after the completion of Raise
2, Laurus will waive all existing defaults,  as well as default fees and default
interest  accrued on the note.  Upon the  consummation  of Raise 3,  Laurus will
extend the maturity of the Convertible Note for three years, reset the principal
payments to a five year amortization  schedule,  amend the default interest rate
to 12% per annum and reset the equity blocker to 9.99%.  If, however,  a minimum
of $1.7  million is not paid down on the  principal  by December  31,  2007,  an
amount  equal to the default  charges  waived after Raise 2 will be added to the
principal amount of the Convertible Note on January 1, 2008.

     On March 30, 2007, the Company  executed a "Waiver and Fourth  Amendment to
Loan  Agreement and  Reaffirmation  of Guaranty" with LaSalle Bank Midwest N.A.,
Eugene Welding Company's lender. The agreement (1) waives all existing events of
default and amends the Loan  Agreement to adjust the interest  rate to the prime
rate plus 1.5% immediately  following the completion of Raise 3 and then subject
to a grid structure on July 1, 2008,  which permits further rate reductions tied
to debt  service  coverage  and  excess  availability  and (2)  establishes  new
financial  covenants  for  Tangible  Net Worth and EBITDA,  with a Debt  Service
Coverage  covenant to become effective for the calendar quarter ending March 31,
2008.

     The Company  began an equity  financing  during the first  quarter of 2007,
with an initial  closing  occurring in January of 2007 raising gross proceeds of
$602,000 and netting $565,000 to the Company. Raise 1, as noted previously,  was
completed on March 23, 2007,  grossing $1.9 million and netting  $582,000 to the
Company  after the repayment of bridge notes,  dated  December 7, 2006,  and the
scheduled payment to Laurus.  Raise 2 is scheduled to occur no later than May 1,
2007 and Raise 3 is scheduled to occur no later than August 1, 2007.


15.  QUARTERLY INFORMATION (unaudited)

     The following is a summary of Tarpon's quarterly  operating results for the
year ended December 31, 2006, 2005 and 2004:

Year Ending December 31, 2006
<TABLE>
<CAPTION>

                                                                                Quarter
                                                          First            Second            Third           Fourth
                                                                 (in thousands, except per share data)
<S>                                                 <C>              <C>               <C>              <C>
Net sales........................................   $       17,050   $        21,485   $       19,995   $      16,801
Gross profit.....................................            1,302             1,463            1,824           1,212
Net income (loss)................................          (2,855)           (5,688)             (447)       (1,1030)*
Net income (loss) per common share
- basic and diluted..............................           (0.62)            (1.22)            (0.09)          (0.20)

     *The fourth quarter includes two significant  adjustments that affect prior
quarters as follows:

     o The reversal of default interest in the amount of $337,500

     o The  correction  of the  amortization  of deferred  finance  costs in the
       amount of $828,639


Year Ended December 31, 2005
                                                                                Quarter
                                                          First           Second            Third            Fourth
                                                                 (in thousands, except per share data)
Net sales........................................   $       14,018   $       15,086   $        15,341   $      16,406
Gross profit.....................................              784              894             1,258           2,014
Nit (loss).......................................          (1,610)          (1,468)           (1,413)         (2,819)
Net (loss) per common share
- basic and diluted..............................   $       (0.57)   $       (0.32)   $        (0.30)   $      (0.61)


Year Ended December 31, 2004
                                                                                 Quarter
                                                          First           Second            Third            Fourth
                                                                  (in thousands, except per share data)
Net sales.........................................   $          --   $       11,993   $        12,959   $      12,670
Gross profit......................................              --            1,502             1,453             795
Net (loss)........................................           (165)            (213)             (591)         (1,026)
Net (loss) per common share
- basic and diluted...............................   $      (0.14)   $       (0.17)   $        (0.48)   $      (0.83)
</TABLE>


     The Company  acquired EWCO and Steelbank in the second quarter of 2004. The
Company acquired Haines Road in the first quarter of 2005.


<PAGE>


                               EUGENE WELDING CO.

                                 BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                                            March 31,         December 31,
                                                                                              2004                2003
                                     ASSETS

CURRENT ASSETS:
<S>                                                                                    <C>                <C>
Cash and cash equivalents............................................................  $         431,739  $         269,555
Accounts receivable (less allowance for doubtful
accounts of $ at March 31, $ at December 31,
and $ at December 31,................................................................          4,868,290          3,847,022
Inventories .........................................................................          4,370,151          5,117,905
Prepaid expenses ....................................................................            142,705            249,038
                                                                                         ----------------    ---------------
Total current assets ................................................................          9,812,885          9,483,520
Property, plant equipment - Net......................................................            910,989            937,926
OTHER ASSETS:
Note receivable - other .............................................................             45,607             45,607
Deferred tax asset ..................................................................             75,800                 --
                                                                                         ----------------    ---------------
Total other assets ..................................................................            121,407             45,607
                                                                                         ----------------    ---------------
TOTAL ASSETS ........................................................................  $      10,845,281  $      10,467,053
                                                                                         ================    ===============
                      LIABILITIES AND SHAREHOLDER'S EQUITY

CURRENT LIABILITIES:
Note payable - bank..................................................................  $       4,035,485  $       4,065,315
Accounts payable ....................................................................          3,507,750          3,958,350
Accounts payable - inter-Company ....................................................            143,677                 --
Distributions payable ...............................................................                 --             19,616
Accrued expenses ....................................................................            678,079            436,512
Income taxes payable.................................................................            135,713                 --
Current maturities on long-term debt ................................................            209,704            240,487
                                                                                         ----------------    ---------------
Total current liabilities ...........................................................  $       8,710,408  $       8,720,280

LONG-DEBT, LESS CURRENT MATURITIES:..................................................            486,179            534,528
COMMITMENTS AND CONTINGENCIES DEFERRED
INCOME TAXES: .......................................................................             56,100                 --
SHAREHOLDER'S EQUITY:................................................................
Common shares: par value $ per share; authorized,
Shares; issued and outstanding,  shares at March 31,
200? and shares at December 31, 200? And 200?........................................                400                400
Shareholder note receivable .........................................................        (2,933,144)        (2,933,144)
Retained earnings ...................................................................          4,525,338          4,144,989
                                                                                         ----------------    ---------------
Total shareholder's equity ..........................................................          1,592,594          1,212,245
                                                                                         ----------------    ---------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY...........................................  $      10,845,281  $      10,467,053
                                                                                         ================    ===============
</TABLE>


     The accompanying notes are an integral part of the financial statements
<PAGE>



                               EUGENE WELDING CO.

                            STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>

                                                                                  Three
                                                                                  Months
                                                                                  Ended
                                                                                March 31,
                                                                                   2004
REVENUES:
<S>                                                                      <C>                     <C>
Sales................................................................    $          10,606,365
Less discounts allowed................................................                  57,584
                                                                            -------------------
Net revenues.........................................................               10,548,781
COST OF GOODS SOLD:
Materials............................................................                5,937,979
Direct labor.........................................................                  713,215
Manufacturing overhead...............................................                2,485,814
                                                                            -------------------
Total cost of goods sold.............................................                9,137,008
Gross profit.........................................................                1,411,773
OTHER OPERATING EXPENSES:
Selling, general and administrative expenses.........................                  814,027
Depreciation and amortization........................................                   35,445
Loss on disposal of property and equipment...........................                       --
                                                                            -------------------
Total operating expenses.............................................                  849,472
                                                                            -------------------
OPERATING INCOME (LOSS):.............................................                  562,301
OTHER INCOME (EXPENSE)
Miscellaneous income/(expense).......................................                 (14,549)
Interest expense .....................................................                (51,390)
Interest and dividend income .........................................                      --
Total other income (expense) .........................................                (65,939)
INCOME (LOSS) BEFORE INCOME TAXES:....................................                 496,362
PROVISION FOR INCOME TAXES:
Income tax expense...................................................                  135,713
Deferred income taxes................................................                 (19,700)
                                                                            -------------------
Provision for income taxes...........................................                  116,013
                                                                            -------------------
NET INCOME (LOSS)....................................................    $             380,349
                                                                            ===================
</TABLE>


     The accompanying notes are an integral part of the financial statements




<PAGE>


                               EUGENE WELDING CO.

                              SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>

                                           Number
                                             Of                                            Shareholder             Total
                                           Common         Common          Retained            Note             Shareholder's
                                           Shares         Shares          Earnings         Receivable             Equity
<S>                <C>                            <C>   <C>          <C>              <C>                 <C>
Balance at January 1, 2003.............           40    $       400  $     5,493,673  $      (2,933,144)  $          2,560,929
Net loss...............................                                  (1,260,154)                               (1,260,154)
Shareholder distributions..............                                     (88,530)                                  (88,530)
                                         ------------   ------------    -------------    ----------------    ------------------
Balance at  December 31, 2003..........           40            400        4,144,989         (2,933,144)             1,212,245
Net income.............................                                      380,349                                   380,349
                                         ------------   ------------    -------------    ----------------    ------------------
Balance at March 31, 2004..............           40    $       400  $     4,525,338  $      (2,933,144)  $          1,592,594
                                         ============   ============    =============    ================    ==================
</TABLE>


     The accompanying notes are an integral part of the financial statements

<PAGE>


                               EUGENE WELDING CO.
<TABLE>
<CAPTION>

                             STATEMENT OF CASH FLOWS
                                                                                         Three
                                                                                         Months
                                                                                         Ended
                                                                                        March 31,
                                                                                          2004
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                             <C>                    <C>
 Net income (loss).........................................................     $             380,349  $
Adjustments to reconcile net income (loss) to net cash
 Provided by (used in) operations:.........................................
Depreciation and amortization..............................................                    35,445
Loss on disposals of property and equipment................................                        --
Deferred income taxes......................................................                  (19,700)
Changes in assets and liabilities:
Accounts receivable (increase) decrease....................................               (1,021,268)
Inventory (increase) decrease..............................................                   747,753
Prepaid expenses (increase) decrease.......................................                   106,332
Note receivable - other (increase).........................................                        --
Refundable taxes increase (decrease).......................................                        --
Distributions payable (decrease)...........................................                  (19,616)
 Accounts payable and accrued expenses
  increase (decrease)......................................................                  (65,354)
Accrued income taxes increase..............................................                   135,713
                                                                                   -------------------
Cash provided by (used in) operations......................................     $             279,654  $
CASH FLOWS FROM INVESTING ACTIVITIES:
 Purchase of property and equipment........................................                   (8,506)
                                                                                   -------------------
 Net cash used in investing activities.....................................                   (8,506)
CASH FLOWS FROM FINANCING ACTIVITIES:
 Net (repayments) borrowings under lines of credit.........................                  (29,830)
 Proceeds from long-term debt..............................................                    13,057
 Principal payments on long-term debt......................................                  (92,191)
 Shareholder distributions.................................................                        --
                                                                                    -------------------
 Cash provided by (used for) financing activities..........................                 (108,964)
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS...........................................................                   162,184
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD........................................................                   269,555
                                                                                   -------------------
CASH AND CASH EQUIVALENTS
END OF PERIOD..............................................................     $             431,739  $
                                                                                   ===================
Supplemental Cash Flow Information:
 Non-cash transaction - Note Receivable
  Shareholder..............................................................     $                  --  $
                                                                                   ===================
Cash paid during the period for interest...................................     $              51,390  $
                                                                                   ===================
Non-cash exchange of note for receivable...................................     $                  --  $
                                                                                   ===================
</TABLE>

     The accompanying notes are an integral part of the financial statements
<PAGE>

                               EUGENE WELDING CO.

                          NOTES TO FINANCIAL STATEMENTS

1.   Organization

     Eugene  Welding Co. (the  "Company")  is a Michigan  corporation  formed in
1954. The Company  manufactures  structural  steel tubing and steel storage rack
systems at two  manufacturing  facilities  in  Michigan,  north of  Detroit.  We
currently manufacture  structural steel tubing, which is used as a component for
products in original  equipment  manufacturer  automotive,  boating,  industrial
equipment,  construction,   agricultural,  steel  service  center,  leisure  and
recreational  vehicle markets,  such as trailer hitches,  storage racks, boating
trailers,  boat hoists,  fork lifts,  scaffolding,  farm  implement  components,
recreational  vehicles,  exercise  equipment  and  barbecues.  In  addition,  we
manufacture   steel   storage   rack   systems,   including   selective   racks,
drive-in/through  racks, push back racks,  cantilevered racks,  archival storage
systems and order picking systems used in the home center,  retail distribution,
public warehouse and commercial and industrial distribution markets.

2.   Summary of Significant Accounting Policies

Cash and Cash Equivalents

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

Accounts Receivable and Concentration of Credit Risk

     Periodically  throughout each year, the Company maintained a balance in one
bank account in excess of the federally insured limit of $100,000.

     Accounts  receivable are due within 30 to 60 days and are stated at amounts
due  from  customers  net  of  an  allowance  for  doubtful  accounts.  Accounts
outstanding  longer than the  contractual  terms are  considered  past due.  The
Company  determines its allowance by considering a number of factors,  including
the length of time an account is past due, the Company's  previous loss history,
the  customer's  current  ability to pay its obligation and the condition of the
general economy and the industry as a whole. Accounts receivable are written off
when they  become  uncollectible  and  payments  subsequently  received  on such
receivables are credited to the allowance for doubtful accounts.

     The Company had two major  customers  in the three  months  ended March 31,
2004 that accounted for ten percent or more of net sales in those periods. Sales
to these customers amounted to approximately 36%. Accounts  receivable  balances
due from two  significant  customers at March 31,  2004,  and December 31, 2003,
were 23% and 31% of total accounts receivable, respectively.

Revenue Recognition

     For sales of  products  and scrap,  revenue is  recognized  at the time the
product is shipped to  customers.  Scrap sales are  recognized as a reduction in
cost of goods sold.

Income Taxes

     Through   December  31,  2003,  the  Company,   with  the  consent  of  its
shareholders,   had  elected  under  the  Internal  Revenue  Code  to  be  an  S
corporation.  In lieu of  corporation  income taxes,  the  shareholders  of an S
corporation  are taxed on their  proportionate  share of the  Company's  taxable
income.  Therefore,  no  provision  or  liability  for federal  income  taxes is
included in these  financial  statements for twelve month periods ended December
31, 2003,  2002, or 2001. EWCO ceased to be taxed as an S corporation  effective
January 1, 2004,  and since that date has  recognized a provision  for corporate
income taxes.

     Beginning  January  1,  2004  when  the  Company  ceased  to be  taxed as a
Subchapter  S  Corporation,  deferred  income  taxes  are  provided  for  timing
differences  between financial  statement income and tax return income under the
provisions of Statement of Financial  Accounting  Standards No. 109, "Accounting
for Income  Taxes," which requires  deferred  income taxes to be computed on the
asset and  liability  method and  deferred tax assets are  recognized  only when
realization   is  certain.   Such  deferred   income  tax  asset  and  liability
computations  are based on enacted tax laws and rates  applicable  to periods in
which the  differences  are expected to affect  taxable  income.  The  principal
timing difference arises from non-deductible reserves and use of accelerated tax
depreciation for tax purposes.

     The effect of such difference is included  annually on the income statement
and on the balance sheet as an adjustment to deferred income taxes. At March 31,
2004, deferred income tax assets in the amount of $19,700 were calculated.

Inventories

     Inventories  are  valued at the lower of cost or  market  value,  with cost
being determined on the average cost method.  Major classes of inventory consist
of the following:

                                          March 31
                                           2004
                                   -------------------
   Raw materials..............  $           2,346,152
   Work in process............                617,766
   Finished goods.............              1,303,331
   Supplies...................                102,902
                                   -------------------
   Total......................  $           4,370,151
                                   ===================

     Property and Equipment

     Property and  equipment  are stated at cost.  The  principal  categories of
property, plant and equipment are as follows:

                                                                March 31,
                                                                  2004
                                                            ------------------
                                                               (unaudited)
Machinery and equipment...............................  $           5,888,928
Leasehold improvements................................                856,348
Computer equipment....................................                775,619
Transportation equipment..............................                588,482
Furniture and fixtures................................                115,126
                                                            ------------------
  Total...............................................              8,224,503
Less accumulated depreciation and amortization........              7,313,514
                                                            ------------------
Net property, plant and equipment                       $             910,989
                                                            ==================


     The  Company's  policy is to  compute  depreciation  and  amortization  for
financial  statement purposes using  straight-line and accelerated  methods over
the following estimated useful lives:

     Machinery and equipment                          5 - 10 years
     Leasehold improvements                           life of lease
     Computer equipment                               3 - 7 years
     Transportation equipment                         5 years
     Furniture and fixtures                           5 - 7 years


     Expenditures  for repairs and  maintenance  are charged to  operations  and
major betterments are capitalized.

Use of Estimates

     The  preparation  of financial  statements  in conformity  with  accounting
principles   generally  accepted  in  the  United  States  of  America  requires
management to make estimates and assumptions that affect the reported amounts of
assets and  liabilities  and disclosure of contingent  assets and liabilities at
the date of the financial  statements  and the reported  amounts of revenues and
expenses  during the reporting  period.  Actual  results could differ from these
estimates.

3.   Shareholder Note Receivable

     Shareholder  note receivable  consists of a demand note receivable from the
Company's  shareholder  in the amount of  $2,933,144,  which was  recorded as an
offset against retained earnings.

     This note bears interest at 1% over the prevailing bank prime lending rate,
payable  monthly.  The Company fully  reserved the interest  revenue due on this
note for the three month period ended March 31, 2004 and year ended December 31,
2003.

4.   Note Receivable - Other

     Note  receivable - other at December 31, 2003 consists of a note receivable
from a customer,  pursuant to the customer's  reorganization plan. This note was
written off as uncollectible after March 31, 2004

5.   Note Payable - Bank

     The  Company  had a  demand  revolving  credit  facility  with a  bank  for
$5,000,000,  bearing  interest at the prevailing prime lending rate plus 1/2% at
March 31, 2004 and 0% at December 31, 2003.  Borrowings under this facility were
secured  by all  assets  of the  Company,  and  were  further  supported  by the
individual  guarantee of the  Company's  stockholder.  In  aggregate,  the total
obligation  of the  guarantor  was not to exceed  $912,846.  This  facility  was
cross-liened and cross defaulted with the Company's  installment note due to the
bank  (see Note 6).  At  December  31,  2003,  the  Company  has  borrowings  of
$4,065,315, respectively against the facility. As of December 31, 2003 there was
$964,515  and  $934,685,  respectively  of unused  availability  for the  credit
facility.  The loan  agreements  required it to maintain  minimum  debt  service
coverage and debt to tangible net worth ratios.  They also limited the Company's
ability to pay dividends or incur additional debt.

     At December 31, 2003, the Company was in default of certain  financial loan
covenants.  Subsequent  to the  balance  sheet  date,  the  Company and the bank
entered into an agreement  whereby the bank agreed to forebear,  until March 31,
2004,  from  taking  any  action to  collect  upon  this note and the  Company's
installment note (see Note 6), subject to certain  conditions.  These conditions
include  increasing  the  interest  rates on these  borrowings  to 1/2% over the
prevailing  prime  lending  rate.  Subsequent  to  the  year-end  the  note  was
refinanced with the bank.


<PAGE>
                               EUGUNE WELDING CO.

                    NOTES TO FINANCIAL STATEMENTS (continued)

<TABLE>
<CAPTION>

6. Long-Term Debt

                                                                                      March 31,
                                                                                         2004
                                                                                     -------------
A financing arrangement with a finance Company,
  payable in monthly installments of $17,165,
  including finance charges of 5.995%,
<S>                <C>                                                              <C>               <C>
  through February 2004.........................................................    $            --
A capital lease payable in monthly installments
  of $3,586, including financial costs at 7.38%
  through April 2003............................................................                 --
A capital lease payable in monthly installments of
  $5,062, including finance costs at 6.64%,
  through April 2003............................................................                 --
A capital lease payable in monthly installments
  of $3,562, including finance costs at 7.38%,
  through April 2004............................................................              3,562
A capital lease payable in monthly installments
  of $219, including finance costs at 14.04%,
  through August 2006...........................................................              5,352
A capital lease payable in monthly installments
  of $199, including finance costs at 10.71%,
  through November 2006.........................................................              5,510
An installment note payable to a transportation
  Company in monthly installments of $1,000,
  bearing no interest, through April 2005.......................................             13,057
An installment note payable to a bank in monthly installments
  of $15,214, plus interest at 4.5% and 4.25% at March 31,
  2004 and December 31, 2003, respectively, through August 2007.
  This note is secured by all assets of the Company and was
  further supported by the individual guarantee of the
  Company's stockholder until April 2004. In aggregate, the total
  obligation of the guarantor is not to exceed $912,846. This note
  is cross liened and cross Defaulted with the Company's
  revolving credit facility (see Note 5)........................................            638,992
A secured equipment note payable to a bank in monthly
  installments of  $668, including interest at 5.24%,
  through April 2008............................................................             29,410
                                                                                      -------------
   Total......... ..............................................................    $       695,883
Less current portion............................................................            209,704
                                                                                       -------------
Long-term portion...............................................................    $       486,179
                                                                                       =============
</TABLE>
<PAGE>

                               EUGENE WELDING CO.

                    NOTES TO FINANCIAL STATEMENTS (continued)


Maturities  of long-term  debt for the three months ending March 31, 2004 are as
follows:

          2005........................... $ 209,704
          2006...........................   193,953
          2007...........................   192,517
          2008...........................    99,044
          2009...........................       665
                                          ---------------
                                          $ 695,883
                                          ===============


7.   Income Taxes

     EWCO was an S corporation until December 31, 2003. As such did not record a
provision for current or deferred income taxes. As a result of its change to a C
corporation,  it is now subject to income  taxes on its taxable  income,  had no
deferred tax assets, liabilities or operating loss carry-forwards before January
01, 2004.

Income tax expense includes the following:


                                                         March 31, 2004
                                                    ------------------------
Current federal income tax expense              $                   135,713
Deferred federal income tax expense                                (19,700)
                                                    ------------------------
Total income tax expense                        $                   116,013
                                                    ========================


Deferred tax asset and (liabilities) consist of the following:

     Deferred tax assets (liabilities) consist of the following:

                                                         March 31, 2004
                                                   ------------------------
Property and equipment........................  $                 (56,100)
Accounts receivable and other.................                      75,800
                                                   ------------------------
Net deferred tax assets.......................                      19,700
Valuation allowance...........................                          --
                                                   ------------------------
Net deferred tax asset........................  $                   19,700
                                                   ========================

<PAGE>
                               EUGENE WELDING CO.

                    NOTES TO FINANCIAL STATEMENTS (continued)

     A  reconciliation  of actual  federal  income tax  expense to the  expected
amounts  computed by applying the statutory tax rate percent to earnings  before
income taxes is as follows:

                                                            Three Months Ended
                                                              March 31, 2004
                                                       ------------------------
Net income (loss) before income taxes...........    $                  496,362
Federal statutory rate..........................                           34%
                                                       ------------------------
Tax computed at federal statutory rate..........                       168,763
Increase or decrease in taxes from:
Effect of conversion to C corporation status....                      (52,750)
                                                       ------------------------
Reported income taxes...........................    $                  116,013
                                                       ========================


8.   Commitments and Contingencies

     The Company leases  facilities  and equipment used in its operations  under
lease agreements expiring through October 2006. The operating lease requires the
Company to pay the  taxes,  insurance  and  maintenance  expense  related to the
leased property. Rent expense, including month-to-month rentals was $102,900 for
the three months  ended March 31, 2004.  Minimum  future  lease  payments  under
non-cancelable leases at March 31, 2004 are summarized as follows:

            Year Ended December 31,
         ----------------------------------------

          2004............................. $  223,343
          2005.............................    293,191
          2006.............................    234,659
          2007.............................     16,548
          2008.............................     11,658
          2009.............................      5,829
                                            ---------------
                                            $  785,228
                                            ===============


9.   Employee Benefit Plans

     The Company has three separate 401(k) plans. Two of these plans cover union
employees who have attained 18 years of age with three months of service and 500
hours.  The  participants  can contribute up to 15% of their  compensation.  The
Company matches the employee  contributions  based on the collective  bargaining
agreement,  not to exceed 5 percent of compensation.  The employer contributions
for these two plans for the  three  months  ended  March 31,  2004 and the years
ended December 31, 2003,  2002,  and 2001,  were $16,270,  $69,846,  $67,995 and
$76,721, respectively.

     The third 401(k) plan is for  employees who are not covered by a collective
bargaining  agreement,  who have  attained  18 years of age,  and who have 1,000
hours and six months of service.  The  participants  can contribute up to 15% of
their salary and are eligible for an employer  discretionary  contribution.  The
Company matches the employee contributions 50% up to 5% of employees' wages. The
employer  matching  contributions  for the three months ended March 31, 2004 and
the year ended December 31, 2003,  2002,  and 2001,  were $5,703,  $26,912,  and
$31,102 respectively.

10.  Product Sales

     Products  sold to external  customers  were as follows for the three months
ended March 31, 2004, and the years ended December 31, 2003, 2002, and 2001.
<TABLE>
<CAPTION>

                                                      Three Months              Year Ended
                                                     Ended March 31            December 31,
                                                          2004                     2003
                                                  ---------------------     -------------------
Manufactured by us:
<S>                                           <C>                        <C>
Structural Steel Tubing.....................  $              4,916,144   $          12,418,466
Mechanical Steel Tubing.....................                   304,877                 628,043
Steel Storage Rack Systems..................                 5,318,567              13,372,884
                                                  ---------------------     -------------------
Total.......................................  $             10,539,588   $          26,419,393
                                                  =====================     ===================
Manufactured by others:
Mechanical Steel Tubing.....................  $                  9,193   $              22,278
                                                  =====================     ===================
</TABLE>


11.  Subsequent Events

     In November 2003, the Company's  sole  shareholder  signed a Stock Purchase
Agreement to sell all of the issued and  outstanding  stock of the  Company.  In
April  2004,  Tarpon  Industries,  Inc.  and the  Company  acquired  100% of the
Company's outstanding common shares pursuant to the agreement described above.

     On April 21,  2004,  Tarpon  Industries  acquired  100% of the  outstanding
common  shares of EWCO from its sole  shareholder,  who was its Chief  Executive
Officer from April to August  2004.  Tarpon  acquired  EWCO for $415,450 in cash
paid to its sole shareholder for all of the then outstanding EWCO shares.  Prior
to the acquisition,  EWCO redeemed 90% of the then  outstanding  shares from him
for $3,603,144,  of which $670,000 was represented by a promissory note that was
paid out of the proceeds of our initial  public  offering in February  2005. The
remaining  $2,933,144  of the  redemption  price was retained by EWCO to repay a
note to EWCO from the former sole  shareholder  relating to his  acquisition  of
EWCO in 2001.

     On April 6, 2004, the Company  refinanced its credit facility with Comerica
Bank,  including a revolving credit facility for up to $6,000,000 secured by its
accounts receivable,  inventory and its equipment. The revolving credit facility
was due on demand and was based on a borrowing base based on qualifying accounts
receivable and inventories.

     In August 2004, the Company  refinanced  its credit  facility with Standard
Federal Bank, N.A.,  including a revolving credit facility for up to $7,000,000,
which was increased to $9,000,000 in December 2004,  subject to a borrowing base
based on eligible  inventory and  receivables,  originally  maturing  August 31,
2007,  a  $1,394,000  term  loan.  The term  loan is  payable  in equal  monthly
installments  of principal  based on a five year  amortization  ending August 1,
2009,  but  matures  August 31,  2007 if the  revolving  credit  facility is not
renewed.  The  loans are  secured  by all of EWCO's  personal  property  and are
guaranteed by Tarpon. The principal amount  outstanding bears interest,  payable
monthly,  at the bank's prime rate, plus, until completion of our initial public
offering,  0.375%  (at a total of  5.63%  as of  December  31,  2004).  The loan
agreement  requires EWCO to maintain a minimum debt service  coverage  ratio and
minimum  tangible net worth.  It also generally  prohibits  dividends and limits
EWCO's ability to make capital expenditures. EWCO paid a 1% closing fee and must
pay a 0.25% unused line of credit fee.  EWCO is also subject to a 1%  prepayment
fee if the loans are prepaid any time before maturity.  As of December 31, 2004,
$6,711,387 was outstanding  under the revolving credit  facility,  approximately
$1,348,000 was outstanding under the term loan, and approximately $1,375,000 was
available for borrowing under the revolving credit facility.


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

     In October of 2006, Grant Thorton LLP, our previous independent  registered
accounting firm, resigned as our auditors. On October 31, 2006, we announced the
appointment  of Rehmann  Robson,  a division  of The Rehmann  Group,  LLC as our
independent registered accounting firm.


ITEM 9A. CONTROLS AND PROCEDURES

     Our  management  has  evaluated,  with the  participation  of our principal
executive and principal financial officers,  the effectiveness of our disclosure
controls and procedures as of December 31, 2006.  Based on their  evaluation and
review, our principal  executive and principal financial officers have concluded
that these  controls  and  procedures,  as  designed  and  implemented,  are not
operating  effectively.  There  was no  change  in  our  internal  control  over
financial reporting  identified in connection with such evaluation that occurred
during our fourth  fiscal  quarter ended  December 31, 2006 that has  materially
affected,  or is reasonably  likely to materially  affect,  our internal control
over financial reporting, except that we hired additional staff, which will help
improve our internal controls over financial reporting.

     Disclosure  controls and procedures  are our controls and other  procedures
that are designed to ensure that  information  required to be disclosed by us in
the  reports  that  we  file or  submit  under  the  Exchange  Act is  recorded,
processed,  summarized  and reported,  within the time periods  specified in the
Securities and Exchange  Commission's rules and forms.  Disclosure  controls and
procedures  include,  without  limitation,  controls and procedures  designed to
ensure that  information  required to be  disclosed by us in the reports that we
file or submit under the Exchange Act is  accumulated  and  communicated  to our
management,  including our principal executive and principal financial officers,
as appropriate to allow timely decisions regarding required disclosure.

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

     Our former  Independent  Registered  Public  Accounting  Firm  identified a
variety  of  material   weaknesses  in  our  internal  controls  over  financial
reporting.   These  material  weaknesses  stem  in  significant  part  from  the
acquisition policy which we are following in which private,  unrelated companies
are being  combined.  A material  weakness  is a  significant  deficiency,  or a
combination  of  significant  deficiencies,  that  results in more than a remote
likelihood  that a material  misstatement  of the  annual or  interim  financial
statements  will not be prevented or detected.  The material  weaknesses  are as
follows:

A.   A lack of formalized accounting policies and procedures,  including written
     procedures for monthly, quarterly and annual closing of financial books and
     records.
B.   A  lack  of  common  systems  or a  common  chart  of  accounts  an  use of
     spreadsheets to perform consolidations, which resulted in errors.
C.   Insufficient  resources or knowledge to adequately  complete the process of
     documenting,  testing,  and evaluating our internal controls over financial
     reporting as required by the Sarbanes-Oxley Act.
D.   Insufficient  process to ensure financial  statements  adequately  disclose
     information required by Generally Accepted Accounting Principles (GAAP).
E.   Account  reconciliations  and  supporting  documentation  not prepared on a
     timely basis.
F.   Duties and control  activities  within the finance  function  have not been
     appropriately segregated.
G.   The  Company  does not have a formal  process  to ensure  that  appropriate
     system access is granted.
H.   A lack of adequate process to identify and ensure that non-standard journal
     entries are subject to an appropriate level of review.
I.   The Company's  invoicing system relies on certain manual controls which may
     not be sufficient to minimize the risk of incorrect revenue recognition.
J.   Insufficient process to ensure that all required SEC filings are made.
K.   A lack of controls over the authorization, issuance and recording of equity
     transactions  and an overall lack of knowledge of stock-based  compensation
     accounting initially resulting in errors in the recording of expense, which
     were corrected in the audit process.
L.   Insufficient  familiarity with historical accounting entries as a result of
     continued turnover in key positions within the accounting department.
M.   A lack of periodic reviews over account reconciliations.

     The Company is required to comply with the  provisions of Sections 302, 906
and 404 of the Sarbanes-Oxley Act. Section 404 requires the Company to document,
test, and evaluate its internal  controls over financial  reporting and have its
independent  auditor  conduct  an  evaluation  of  and  report  on  management's
evaluation process in the near future. In addition,  we will also be required to
audit  and  report on the  effectiveness  of  internal  controls.  All  material
weaknesses  identified  in this  process  are  required to be  disclosed  in the
Company's  reporting  with the  Securities and Exchange  Commission  (SEC).  Our
experience with is documentation,  testing and audit process has identified that
significant  resources are required to complete  this exercise and  considerable
costs  are  incurred.  We do no  believe  that  the  Company  currently  has the
resources or knowledge to adequately complete this process which could result in
a failure to file the appropriate reports with the SEC.

     As  a  public  Company,  we  have  significant  requirements  for  enhanced
financial  reporting  and  internal  controls.  We are taking steps to unify the
financial  reporting  of  all  of  our  component  companies,  to  increase  our
accounting  and  information  technology  staff  and to put  in  place  internal
controls concerning accounting entries and adjustments, with full documentation,
which are responsive to issues raised by our  independent  auditors,  and, as of
this time, we have made progress on these points We have hired  additional staff
and are in the initial  planning phase of upgrading our  information  technology
systems.  We expect these steps to be completed by December 31, 2007,  but it is
possible that they might not be completed by then.

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


ITEM 9B. OTHER INFORMATION

     None.


                                    PART III


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The  following  table  sets forth the names and ages of our  directors  and
executive officers and the positions they hold with us as of April 2, 2007:

  Name                       Age    Position
  James W. Bradshaw          55     Chief Executive Officer, Chairman of
                                    the Board of Directors (Class I), Secretary
  Patrick J. Hook            40     President, Chief Operating Officer
  Michael A. Ard             49     Director (Class III)
  Tracy L. Shellabarger      49     Director (Class III)
  Gerald Stein               77     Director (Class II)

     James W.  Bradshaw.  Mr.  Bradshaw  joined us in 2005 as Vice  President of
Mechanical  Tubing,  based at Steelbank  and became Chief  Executive  Officer in
April 2006. Prior to joining us, Mr. Bradshaw was a consultant with Greybrooke &
Associates,  Inc. From 2002 to 2003,  he was  President and General  Manager for
International  Technical Coating,  Inc., a steel wire manufacturing company with
130 employees and customers  including Home Depot and Lowes.  From 1992 to 1997,
Mr.  Bradshaw was  President  and Chief  Operating  Officer of American Tube and
Pipe, a $120 million  steel pipe and tubing  company which was purchased by Tyco
International  Ltd. in 1997. Earlier in his career, he served as General Manager
for Wheatland Tube Company, and President of Reeves Southeastern Corporation.

     Patrick J. Hook.  Mr. Hook has served as our President and Chief  Operating
Officer  since  February  2005.  Mr.  Hook  served  as  Operations  Manager  for
Copperweld, Inc., Chicago Division, a steel tubing manufacturer,  from September
2001 to  February  2005.  In this  capacity,  Mr. Hook was  responsible  for all
operating  activities  for the Chicago and Bedford Park divisions of Copperweld.
From  March  2001 to  September  2001,  Mr.  Hook  served  as Plant  Manager  of
Copperweld's  Birmingham  Division.  From November 1999 to March 2001,  Mr. Hook
reported directly to the Copperweld U. S. Structural Division Vice President. In
this capacity,  Mr. Hook was  responsible for integrating the operations of four
U.S.  Structural Steel Tubing Divisions that were acquired through  acquisition.
From August 1997 through  October  1999,  Mr. Hook was the Plant  Manager of LTV
Corporation - Youngstown  Division,  a steel  manufacturer.  Mr. Hook's previous
experience  includes  several  positions of increasing  responsibilities  in the
engineering  and operating  arenas while  employed with LTV Steel at the Indiana
Harbor Works Division.  Mr. Hook received a B.S. in mechanical  engineering from
Michigan  Technological  University  and  is a  graduate  of the  University  of
Michigan Executive  Manufacturing  Program. Mr. Hook is a member of the Tube and
Pipe Association,  International  and of the Tube and Pipe Producing  Technology
Council.

     Michael A. Ard.  Mr. Ard has served as our Class III director and as EWCO's
director  since October 2004. He has served as Director of Sales and  Marketing,
Storage  Condo  Division,  of  Aardex  Corporation,  a  commercial  real  estate
developer,  since March 2003.  He served as Western Area Sales  Manager of LiDCO
Limited,  a start-up medical device  manufacturer  and distributor,  from August
2001 to August 2002. He served as Director of Global  Marketing,  from June 1998
to July 2001,  and as U.S.  Area  Manager,  from  February 1996 to June 1998, of
Deltex Medical Group, a start-up  cardiac monitor  manufacturer and distributor.
Mr. Ard received a B.S. degree in broadcast  communications  from the University
of Florida.

     Tracy L. Shellabarger.  Mr. Shellabarger joined our Board of Directors as a
Class III director in January 2006. From 1994 to 2004, Mr.  Shellabarger  served
as Chief  Financial  Officer for Steel  Dynamics,  Inc., a publicly traded steel
manufacturer.  During his tenure at Steel  Dynamics,  Mr.  Shellabarger  led its
finance, accounting, tax, insurance, and legal efforts, spearheading the initial
public  offering  and driving  sales to more than $2 billion.  Prior to his role
with Steel Dynamics, from 1987 to 2004, Mr. Shellabarger served as Controller of
a division of Nucor Corporation, a Fortune 400 steel manufacturer. He also spent
more than seven years with former "Big 8" accounting  firm Touche Ross & Company
as a tax  manager.  Mr.  Shellabarger  earned a Bachelor  of  Science  Degree in
Accounting  from  the  University  of  North  Carolina,  Chapel  Hill,  and is a
certified public accountant (CPA) and member of the AICPA.

     Gerald Stein.  Mr. Stein joined our Board as a Class II director on October
2006. Mr. Stein began his professional career at Motorola,  where he planned and
established a worldwide  distribution  and  manufacturing  organization  for the
company's 2-way radio communications product line. His responsibilities included
international  market  development,  licensing and product development and joint
venture start-up programs. Subsequently, as Senior Vice President of Allied Tube
& Conduit, a $750 million  manufacturer of mechanical tubing, he created a fence
and fire protection sprinkler division.  In addition,  he built an international
organization, created and developed unique products--particularly in the defense
industry,  and initiated  lobbying efforts to bring about government  control of
steel imports. He was instrumental in the sale of the company to Tyco Industries
in 1986. Currently,  Mr. Stein is president of Marketing Business  Implementers,
Inc. a Chicago based company he founded in 1989. That company performs  business
evaluations and develops marketing strategies for manufacturers and distributors
of industrial steel products.  Gerald Stein is not related to Stephan Stein, the
Chief Operating officer of the Placement Agent.

     Messrs.  Ard,  Shellabarger  and Stein are the sole  members  of our Audit,
Compensation and Nominating Committees.

     Effective December 1, 2006, the Company retained Riscica Associates,  Inc.,
a financial and strategic  consulting firm, as its financial  advisor to support
the Company in certain of the functions  normally performed by a chief financial
officer pending the hiring by the Company of a new Chief Financial Officer.  The
Riscica Associates,  Inc. work is led by Robert J. Riscica, a Managing Director,
and supported by Kenneth C. Riscica, its Chief Executive Officer.


Meetings and Committees of the Board of Directors

     During the year ended  December  31, 2006,  our Board of Directors  held 12
meetings.  Our board of directors has determined that Mr. Ard, Mr. Shellabarger,
who was elected a director on February 6, 2006,  and Mr. Stein,  who was elected
as a director on October 12, 2006, are independent as independence is defined in
the American Stock Exchange's listing standards.


Audit Committee

     Our Board of Directors has  established a  separately-designated,  standing
Audit  Committee  that consists of three  directors and is  established  for the
purpose of  overseeing  our  accounting  and financial  reporting  processes and
audits of our financial statements.  Mr. Ard, Mr. Shellabarger and Mr. Stein are
the current members of this committee.

     The Audit Committee is scheduled to meet at least quarterly and:

o    is directly  responsible for the appointment,  compensation,  retention and
     oversight of the work of our independent public accounting firm,

o    approves the engagement of our independent public accounting firm to render
     audit or non-audit  services before the services begin;  this  pre-approval
     authority may be delegated to one or more members of the Audit Committee,

o    takes,  or  recommends  that the full Board  takes,  appropriate  action to
     oversee the independence of our independent public accounting firm,

o    reviews audit and other reports from our independent public accounting firm
     and provides it with access to report on any and all appropriate matters,

o    reviews and  discusses  the audited  financial  statements  and the matters
     required to be  discussed  by SAS 61 with  management  and the  independent
     accountants,

o    recommends to the Board whether the audited financial  statements should be
     included in our Annual Report on Form 10-K,

o    reviews with  management  and the  independent  accountants  the  quarterly
     financial information before we file our Form 10-Qs,

o    discusses with management and the  independent  accountants the quality and
     adequacy of our internal controls,

o    establishes  procedures  for (1) the receipt,  retention,  and treatment of
     complaints  received  by  us  regarding  accounting,   internal  accounting
     controls,  or auditing matters, and (2) confidential,  anonymous submission
     by our employees of concerns regarding questionable  accounting or auditing
     matters,

o    reviews  related party  transactions  required to be disclosed in our proxy
     statement for potential  conflict of interest  situations  and approves all
     such transactions, and

o    discusses with  management the status of pending  litigation as it pertains
     to the financial  statements and disclosure and other areas of oversight as
     the committee deems appropriate.

During the year ended December 31, 2006, our Audit Committee held six meetings.

Audit Committee Financial Expert

     Our Board of  Directors  has  determined  that Tracy L.  Shellabarger,  who
serves on our Audit Committee,  is a financial expert and meets the criteria for
independence,  as described  in the  Securities  and  Exchange  Act of 1934,  as
amended.

Compensation Committee

     Our Board of Directors has a standing Compensation Committee which consists
of three  directors.  Mr. Ard,  Mr. Stein and Mr.  Shellabarger  are the current
members of this committee.  Each of Mr. Stein, Mr. Ard and Mr.  Shellabarger are
"independent" as such term is defined in the American Stock  Exchange's  listing
standards,   as  those  standards  have  been  modified  or  supplemented.   The
Compensation  Committee  makes  recommendations  to the Board of Directors  with
respect  to  compensation  arrangements  and  plans for our  senior  management,
officers and directors,  and administers our 2005 Stock Option Plan.  During the
year ended December 31, 2006, the Compensation Committee held no meetings.

Nominating Committee

     Our Board of Directors has a standing  Nominating  Committee which consists
of three  directors.  Mr. Ard,  Mr. Stein and Mr.  Shellabarger  are the current
members of this committee.  The Nominating Committee  identifies  individuals to
become  Board  members and selects,  or  recommends  for the Board's  selection,
director nominees to be presented for shareholder approval at the annual meeting
of  shareholders  or to fill any  vacancies.  During the year ended December 31,
2006, the Nominating Committee held no meetings.

     The Nominating  Committee's  policy is to consider any director  candidates
recommended  by  shareholders.  Such  recommendations  must be made  pursuant to
timely notice in writing to our  Secretary,  at Tarpon  Industries,  Inc.,  2420
Wills  Street,  Marysville,  Michigan  48040.  To be timely,  the notice must be
received at our offices at least 120 days before the  anniversary of the mailing
of our proxy statement  relating to the previous Annual Meeting of Shareholders.
The notice  must set forth (1) with  respect to the  director  candidate,  among
other things,  information about the candidate's name, age, principal occupation
or employment,  shares owned, independence,  other boards on which the candidate
serves, transactions, relationships, arrangements and understandings between the
candidate  and us and  between  the  candidate  and the  shareholder  giving the
notice,  and any other  information  relating to the candidate  that we would be
required  to  disclose  in our  proxy  statement,  and (2) with  respect  to the
shareholder  giving  the  notice,  among  other  things,  information  about the
shareholder's name, address, shares owned and the period they have been held.

     The   Nominating   Committee   has  not   established   specific,   minimum
qualifications for recommended  nominees or specific qualities or skills for one
or more of our directors to possess.  The Nominating Committee uses a subjective
process for  identifying  and  evaluating  nominees for  director,  based on the
information  available  to, and the  subjective  judgment of, the members of the
Nominating Committee and our then current needs, although the committee does not
believe  there  would be any  difference  in the  manner  in which it  evaluates
nominees  based  on  whether  the  nominee  is  recommended  by  a  shareholder.
Historically,  our  directors  have been existing  directors,  associates of our
founder or an owner of a business we acquired.

Section 16(a) Beneficial Ownership Reporting Compliance

     Section 16(a) of the Securities  Exchange Act of 1934 requires our officers
and directors,  and persons who own more than ten percent of a registered  class
of our equity securities,  to file reports of ownership and changes in ownership
with the Securities  and Exchange  Commission.  Officers,  directors and greater
than ten-percent shareholders are required by Securities and Exchange Commission
regulation to furnish us with copies of all Section 16(a) reports they file. Our
officers and directors and persons who own more than ten percent of a registered
class of our equity  securities  were not subject to these  filing  requirements
until the February 14, 2005 effective date of our initial public offering. Based
solely on review of the copies of such  reports  furnished  to us during or with
respect to fiscal 2005 through  December 31,  2005,  or written  representations
that no Forms 5 were  required,  we believe  that during 2005 from  February 14,
2005 through December 31, 2005, all Section 16(a) filing requirements applicable
to our officers,  directors and greater than ten-percent  beneficial owners were
complied with.

Code of Business Conduct and Ethics

     We adopted a Code of  Business  Conduct  and  Ethics in  October  2004 that
applies to all of our employees, officers and directors, including our principal
executive officer,  principal financial officer, principal accounting officer or
controller,  or  persons  performing  similar  functions.  Our Code of  Business
Conduct and Ethics  contains  written  standards  that we believe are reasonably
designed to deter  wrongdoing  and to promote  (1) honest and  ethical  conduct,
including  the  ethical  handling of actual or  apparent  conflicts  of interest
between  personal and  professional  relationships,  (2) full,  fair,  accurate,
timely,  and  understandable  disclosure in reports and  documents  that we file
with, or submit to, the Securities and Exchange  Commissions and in other public
communications we make, (3) compliance with applicable  governmental laws, rules
and regulations,  (4) the prompt internal reporting of violations of the code to
an appropriate  person or persons named in the code, and (5)  accountability for
adherence to the code made to our  Secretary at Tarpon  Industries,  Inc.,  2420
Wills Street, Marysville, Michigan 48040.


ITEM 11. EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

     The following  discussion and analysis of compensation  arrangements of our
named executive  officers for 2006 should be read together with the compensation
tables and related disclosures set forth below.

     The primary  objectives of our board of directors with respect to executive
compensation are to attract and retain the best possible  executive  talent,  to
tie annual and long-term cash and stock  incentives to achievement of measurable
corporate and individual  performance  objectives,  to be affordable  within the
context of our operating expense model, to be fairly and equitably  administered
and to reflect  our  values.  Overall,  the total  compensation  opportunity  is
intended to create an executive compensation program that is based on comparable
public companies and any other considerations that we deem to be relevant.

Compensation Components

     Base Salary.  Base salaries for our executives are established based on the
scope  of  their  responsibilities,   taking  into  account  competitive  market
compensation  paid by other  companies  for  similar  positions.  Generally,  we
believe  that  executive  base  salaries  should be in the range of salaries for
executives in similar positions and with similar  responsibilities at comparable
companies in line with our compensation  philosophy.  Base salaries are reviewed
by our  compensation  committee  annually,  and  take  into  account  individual
responsibilities, performance and experience.

     Annual Bonus.  In addition to base salaries,  we believe  performance-based
cash bonuses are important in providing  incentives to achieve  corporate goals.
Cash bonuses are intended to reward individual  performance  during the year and
can therefore be highly  variable from year to year. The goals for our executive
officers  are  communicated  to them  after  being  determined  by our  board of
directors. In 2007, the goals will be established by the compensation committee.
Our  compensation  committee has not yet  determined  the corporate  performance
goals it will apply in determining our executive officers' bonuses for 2007.

     Long-Term  Incentive  Program.  We believe that  long-term  performance  is
achieved through an ownership culture that encourages  long-term  performance by
our executive  officers through our grants of stock-based  awards. Our long-term
equity  incentive  compensation  is currently  exclusively  in the form of stock
options to acquire our common stock,  issued in conjunction with our Amended and
Restated 2004 Stock Option Plan (the "Stock Option Plan").  Our equity incentive
plan was established to provide our employees, including our executive officers,
with incentives to help align those employees'  incentives with the interests of
our stockholders.  We have granted awards to our employees primarily through our
Stock Option Plan. In 2006, certain of our named executive officers were granted
options  pursuant  to our Stock  Option  Plan in the  amounts  indicated  in the
section below entitled "Grants of Plan Based Awards."

     In the past,  our practice  has been to review  annually  equity  awards to
existing employees, including our executive officers, and make additional awards
if  appropriate.  With  respect to newly hired  employees,  including  executive
officers,  we typically grant options upon the  commencement of employment or at
the first meeting of the board of directors following such employee's hire date.
Like our other pay  components,  we intend  that the annual  aggregate  value of
these awards will be set in line with that of comparable companies.

     In 2006,  we  granted  options  to  purchase  a total of  90,000  shares as
follows:  50,000 to James W. Bradshaw, our Chief Executive Officer and 40,000 to
J.  Stanley  Baumgartner,  our  former  Chief  Financial  Officer.  Our board of
directors  does  not  apply a rigid  formula  in  allocating  stock  options  to
executive officers as a group or to any particular  executive officer.  Instead,
our board of directors  exercises  its judgment and  discretion  and  considers,
among  other  things,  the role and  responsibility  of the  executive  officer,
competitive  factors, the amount of stock-based equity compensation already held
by the executive officer, the non-equity  compensation received by the executive
officer and the total number of options to be granted to all participants during
the year. The number of stock options granted to each named executive officer is
set forth in the "Grants of Plan-Based  Awards Table." The value of such grants,
as determined in accordance with FAS 123(R) for each individual  named executive
officer is set forth in the column "Option Awards" in the "Summary  Compensation
Table."

     We do not have specific  share  retention and ownership  guidelines for our
executive officers.

     Stock Appreciation  Rights. To date no stock appreciation  rights have been
awarded to any of our executive officers.  However, our compensation  committee,
in its discretion,  may in the future elect to make such grants to our executive
officers if it deems it advisable.

     Restricted  Stock Grants or Awards.  We did not grant  restricted  stock or
restricted  stock  awards to any of our  executive  officers  in the year  ended
December 31, 2006. However, our compensation committee,  in its discretion,  may
in the future elect to make such grants to our executive officers if it deems it
advisable.

     Other  Compensation.  All of our executive  officers may participate in our
health programs, such as medical and dental coverage, and our 401(k) programs.

     The  compensation   committee,   which  is  comprised  solely  of  "outside
directors"  as defined for purposes of Section  162(m) of the  Internal  Revenue
Code, may elect to adopt plans or programs providing for additional  benefits if
the compensation committee determines that doing so is in our best interests.

     Stock Ownership  Guidelines.  We have not currently adopted stock ownership
guidelines.  We may  implement  guidelines  regarding  the issuance of new stock
option  awards  in  the  future  in  order  to  assure  that  our  officers  are
appropriately incentivized.

Equity Incentive Plan

     Amended and Restated 2004 Stock Option Plan

     Our board of directors adopted the Stock Option Plan, which was amended and
restated in 2007 and approved by our  shareholders at a meeting held on February
12, 2007.

     Awards.  The Stock Option Plan  provides  for the grant of incentive  stock
options and non-qualified stock options  (collectively,  "stock awards"), all of
which  may  be  granted  to  employees  (including  officers),   directors,  and
consultants; provided, however, that incentive stock options may only be granted
to employees.

     Share Reserve.  The aggregate number of shares of our common stock that may
be issued  pursuant  to stock  awards  under the Stock  Option  Plan  (including
incentive stock options) is 1,000,000 shares.

     Administration.  Subject  to  the  terms  of the  Stock  Option  Plan,  our
compensation  committee determines  recipients,  dates of grant, the numbers and
types of stock awards to be granted,  and the terms and  conditions of the stock
awards, including the period of their exercisability and vesting. Subject to the
limitations set forth below, the compensation  committee will also determine the
exercise price of stock options granted.

     Stock  Options.  Incentive  and  non-qualified  stock  options  are granted
pursuant to incentive and non-qualified  stock option agreements  adopted by the
compensation committee. The compensation committee determines the exercise price
for a stock  option,  within the terms and  conditions of the Stock Option Plan,
provided  that the exercise  price of an incentive  stock option  cannot be less
than 100% of the fair market  value of our common stock on the date of grant and
the exercise  price of a  non-qualified  stock option cannot be less than 85% of
the fair  market  value of our  common  stock on the date of  grant.  All  stock
options  granted  under the Stock Option Plan vest at the rate  specified by the
compensation committee.

     The  compensation  committee  determines the term of stock options  granted
under the Stock Option Plan, up to a maximum of ten years (except in the case of
incentive stock options granted to any person who, at the time of grant, owns or
is deemed to own stock  possessing  more than 10% of our total  combined  voting
power or that of any of our affiliates,  in which case the term of the incentive
stock  option must not exceed  five  years).  Unless the terms of an  optionee's
stock option agreement provide otherwise, if an optionee's relationship with us,
or any of our  affiliates,  ceases for any reason other than disability or death
or for cause, the optionee may exercise any vested stock options for a period of
three months  following  the  cessation  of service.  If an  optionee's  service
relationship  with us, or any of our  affiliates,  ceases due to  disability  or
death,  the optionee or a  beneficiary  may  exercise  any vested  options for a
period of 12 months from the date of death or disability.  In no event, however,
may a stock option be exercised beyond the expiration of its term.

     Acceptable  consideration  for the purchase of common stock issued upon the
exercise of a stock option will be determined by the compensation  committee and
may include (a) cash or check,  (b) the tender of common stock  previously owned
by the  optionee,  and  (c)  other  legal  consideration  approved  by the  plan
administrator.

     Unless  the  compensation  committee  provides  otherwise,   stock  options
generally  are  not  transferable  except  by will or the  laws of  descent  and
distribution,  and in the  case of  non-qualified  stock  options,  pursuant  to
certain trusts or by gift to certain family members.

     Changes  to Capital  Structure.  In the event that there is a change in our
capital structure,  such as a stock split,  appropriate adjustments will be made
to (i) the  number of shares  reserved  under the Stock  Option  Plan,  (ii) the
maximum  number of options that can be granted in a fiscal  year,  and (iii) the
number of shares and exercise  price, if applicable,  of all  outstanding  stock
awards.

401(k) Plan

     We maintain a defined  contribution  employee  retirement  plan,  or 401(k)
plan, for our employees. Our executive officers are also eligible to participate
in the 401(k) plan on the same basis as our other employees.  The 401(k) plan is
intended to qualify as a tax-qualified plan under Section 401(k) of the Internal
Revenue Code. The 401(k) plan provides that each  participant  may contribute up
to 15% of his or her pre-tax  compensation,  up to the statutory limit, which is
$15,500 for calendar year 2007. Participants that are 50 years or older can also
make  "catch-up"  contributions,  which in  calendar  year  2007 may be up to an
additional $5,000 above the statutory limit.

     Under the  401(k)  plan,  each  participant  is fully  vested in his or her
deferred  salary  contributions,  when  contributed.  We do  not  make  matching
contributions.  Participant  contributions  are held and  invested by the plan's
trustee.

Summary Compensation Table

     The following table sets forth information regarding compensation earned by
our Chief  Executive  Officer,  our Chief  Financial  Officer and certain  other
executive officers during the year ended December 31, 2006:


<PAGE>
<TABLE>
<CAPTION>

                                                                                        Non-Equity    Change
                                                                                        Incentive     in        All Other
                                                                  Stock       Option    Plan Compen-  Pension   Compen-
   Name and Principal Position      Year      Salary      Bonus   Awards      Awards    sation        Value     sation      Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                                 <C>         <C>                             <C>                             <C>
James W. Bradshaw, Chief            2006        183,077          0
Executive Officer (1)

Patrick J. Hook, President          2006        204,231

                                    2005        186,798     30,331              121,200                              404

J. Peter Farquhar, Former           2006        202,634          0                    0                                0
Chairman  of  the  Board,   Chief
Executive Officer and Secretary     2005        224,122          -              181,800                         5,457(6)
(until  February 2005) President
(2)                                 2004         21,333          0                    0                        22,000(6)

J. Stanley Baumgartner, Jr.,        2006         91,781          0                    0                                0
Former Chief Financial  Officer
(3)

John A. Mayfield, Former Chief      2006         50,481          0                    0                                0
Financial Officer (4)

James T. House, Former Chief        2006        105,116          0                    0                                0
Financial Officer
                                    2005        157,370     25,000              121,200                       153,179 (7)

                                    2004         58,301          -                    -                                -

Gary D. Lewis, former Chairman      2004         82,306          0                    0
of the Board, President and
Chief Executive  Officer (until
April 2004)(5)
                                                                                                              563,900(8)

Charles A. Vanella, former          2004                         0                    0
President and Chief Executive
Officer (April to August  2004);
President and Chief Executive
Officer of EWCO
                                                119,922                                                       227,692(9)
</TABLE>


<PAGE>



(1)  Mr. Bradshaw became our Chief Executive Officer in April 2006.

(2)  Mr. Farquhar  became our Chief Executive  Officer in August 2004 and ceased
     to act as such on April 23, 2006. The  compensation  shown in the table for
     fiscal 2004 represents  compensation paid to him in all capacities in 2004.
     The compensation shown in the table for fiscal 2006 represents compensation
     for 2006 services  rendered plus payments  received in connection  with Mr.
     Farquhar's Termination Agreement.

(3)  Mr.  Baumgartner  became our Chief  Financial  Officer in June 2006 serving
     until December 18, 2006.

(4)  Mr. Mayfield  became our Chief  Financial  officer in November 2005 serving
     until March 2006.

(5)  Mr.  Lewis  resigned as our  Chairman of the Board,  President,  Treasurer,
     Chief Executive Officer and as one of our directors in April 2004 effective
     upon the  acquisition  of EWCO and we entered into a Management  Consulting
     Agreement with Bainbridge Advisors, Inc. at the same time. Mr. Lewis is the
     President, Chief Executive Officer and majority owner of Bainbridge,  which
     we currently  retain for acquisition  and other  consulting  services.  See
     "Compensation   Committee  Interlocks  and  Insider  Participation"  for  a
     description of our Management Consulting Agreement with Bainbridge. We also
     paid Mr. Lewis  $350,000 for his services to us in 2002 and $45,390 for his
     services to us in 2001 and reimbursed him for automobile lease payments and
     excess mileage charges in the amount of $11,140 in 2004, $9,552 in 2003 and
     $8,987 in 2002.

(6)  Amounts for 2004 for Mr. Farquhar,  represent $12,000 in director fees paid
     him prior to his employment as CEO and we issued 2,000 of our common shares
     to Mr.  Farquhar  in February  2005 in payment  for  $10,000 of  consulting
     services he  rendered  to us in 2004  before he became our Chief  Executive
     Officer.  Amounts for 2005 for Mr. Farquhar  represent  $3,000 for director
     fees paid to him prior to his  employment as CEO and $2,457 for 401(K) plan
     Company matched amounts.

(7)  Mr.  House  resigned  as CFO in  December  2005.  The  amount  of  $150,650
     represents severance and consulting compensation as part of his termination
     agreement. The remaining amount of $2,529 represents 401(K) matched amounts
     from the Company.

(8)  Amounts for 2004 for Mr. Lewis include an aggregate of $563,900  payable to
     Mr.  Lewis  under  the  Management  Consulting  Agreement  with  Bainbridge
     Advisors,  Inc., including  retainers,  success fees in connection with our
     acquisitions of EWCO and Steelbank (which are payable in installments), and
     reimbursement  of legal fees,  insurance costs and other fees and expenses,
     but not including the stock option granted to designees of Bainbridge.

(9)  Amounts for 2004 for Mr. Vanella,  include an aggregate of $225,427 payable
     under a  Termination  Agreement  with Mr.  Vanella,  and $2,265 in matching
     contributions paid by us into our 401(k) plan.


Compensation Committee Interlocks and Insider Participation

     During  fiscal 2006 J. Peter  Farquhar  served as one of the members of our
Compensation  Committee.  He was replaced on the Committee by Tracy Shellabarger
in February 2006. Mr.  Farquhar did not  participate in any Committee  decisions
regarding his own compensation.

     None  of our  directors  had  any  other  relationship  with  us  requiring
disclosure by us pursuant to Securities and Exchange  Commission rules regarding
disclosure of related-party transactions.

     In  April  2004,  we  entered  into  a  Management   Consulting   Agreement
(subsequently  amended on April 15, 2005 and  December 8, 2005) with  Bainbridge
Advisors,  Inc., an advisory firm primarily  owned by Gary D. Lewis,  our former
Chairman of the Board,  President and Chief Executive Officer.  Mr. Lewis is the
President,  Chief Executive Officer and majority owner of Bainbridge.  Mr. Lewis
founded  Tarpon,  then known as Wall St.  Acquisitions,  Inc., and served as its
Chairman of the Board and Chief  Executive  Officer and as one of its  directors
from its inception in January 2002 until the closing of our initial acquisition,
EWCO,  in April 2004 and served as its  President  from January 2003 until April
2004. He had been primarily  responsible for implementing our business strategy,
including identifying the EWCO, Haines Road and Steelbank acquisitions.

     The initial term of the initial  Management  Consulting  Agreement  expired
April 7, 2007  (subsequently  extended on December 8, 2005 for an additional one
year term commencing  April 7, 2007) and has not been extended.  Pursuant to the
agreement,  Bainbridge,  primarily  through Gary D. Lewis,  provided  consulting
services  for us  concerning  the  integration  of the  EWCO,  Haines  Road  and
Steelbank  acquisitions,  the  further  development  and  implementation  of our
business and financing plans and strategy,  our expansion and acquisition  plans
and other areas, all to the extent we and Bainbridge mutually agreed. Tarpon was
required  to pay  the  advisory  and  transaction  fees  even  if it did not use
Bainbridge for the allotted hours under the agreement.

     In exchange for Bainbridge's  consulting  services,  we paid Bainbridge (1)
$15,000 a month,  increased  to $20,000 a month  effective  April 2005,  (2) all
reasonable  expenses  incurred by Bainbridge in connection  with the  agreement,
including (a) fees and expenses of legal counsel retained at our direction,  (b)
legal  fees up to  $7,500  in  connection  with  preparing  the  agreement,  (c)
out-of-pocket costs incurred in performing the agreement, and (d) up to $5,000 a
year for  professional  liability  errors and  omissions  insurance  relating to
Bainbridge's  services, (3) 4% of the total consideration paid in an acquisition
approved by our board,  with a minimum of $200,000 and a maximum of $300,000 for
each transaction,  provided that the $300,000 maximum shall be increased by 0.2%
of the  enterprise  value of any  transaction,  but only to the extent that such
transaction  exceeds  $50,000,000,  (4) a  stock  option  to  Bainbridge  or its
designees to purchase  110,000  common shares at an exercise  price of $5.50 per
share,  which was granted to Gary D. Lewis and his son in February 2005, and (5)
a one-time  payment of $50,000 in  consideration  of certain  advisory  services
rendered to the Company that were not  originally  contemplated  by the parties.
The success fee was generally paid over 12 months after closing, except that the
fee for the EWCO, Haines Road and Steelbank acquisitions, totaling $600,000, are
payable  $22,222 a month  until the  February  17,  2005  closing of our initial
public offering,  when the remaining amount will be paid equally over the period
ending 24 months from the closing.  To the extent  payments  exceeded  $60,000 a
month,  the excess was  deferred  until the next month in which it could be paid
and not exceed $60,000 a month.

     We have also agreed to indemnify Gary D. Lewis, obtain additional directors
and officers insurance  coverage and reimburse him for legal fees incurred,  all
in connection  with certain  services  performed by Mr. Lewis in his capacity as
one of our former  officers.  We expect the legal fees and additional  insurance
premiums paid by us to be approximately $11,130.


Grants of Plan Based Awards

     All  options  granted  to  our  named   executive   officers  in  2006  are
non-qualified stock options. The exercise price per share of each option granted
to our named  executive  officers was  determined  in good faith by our board of
directors  on the date of the  grant.  All of the stock  options  granted to our
named executive officers in 2006 were granted under our Stock Option Plan.

     The following  table sets forth  certain  information  regarding  grants of
plan-based  awards to our named  executive  officers  for the fiscal  year ended
December 31, 2006:

<PAGE>

<TABLE>
<CAPTION>

                                       Grants of Plan-Based Awards
                                                          Estimated Future        All Other    All Other
                       Estimated Future Payouts Under     Payouts Under Equity    Stock        Option
                      Non-Equity Incentive Plan Awards    Incentive Plan Awards   Awards(1):   Awards:
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                         Grant Date
                                                                                     Number     Number of   Exercise of  Fair Value
                                                                                     of Shares  Securities  Base Price   of Stock
                  Grant                                                              of Stock   Underlying  of Option    and Options
    Name          Date      Threshold  Target  Maximum  Threshold   Target  Maximum  or Units   Options     Awards       Awards
------------------------------------------------------------------------------------------------------------------------------------
<S>               <C>   <C>                                                                        <C>         <C>
James W.          04/26/06       -        -       -         -         -        -        -          50,000      2.45
Bradshaw
                                 -        -       -         -         -        -        -         200,000

J. Peter
Farquhar              -          -        -       -         -         -        -        -            -         -             -

Patrick Hook                     -        -       -         -         -        -        -         110,000

J. Stanley
Baumgartner, Jr.  06/26/06       -        -       -         -         -        -      40,000      40,000      1.75

John A. Mayfield      -          -        -       -         -         -        -        -            -         -             -

</TABLE>

<PAGE>


Outstanding Equity Awards At 2006 Fiscal Year-End

     The following table sets forth certain information  regarding equity awards
granted to our named executive officers outstanding as of December 31, 2006:

<TABLE>
<CAPTION>
                                                                                                    Stock Awards
                                         Option Awards                                               Equity       Incentive
                                                                                                     Incentive      Plan
                                                                                            Market    Plan        Awards:
                                                                                            Value    Awards:      Market
                                                                                              of     Number       or Payout
                                                 Equity                          Numbers    Shared     of         Value of
                                               Incentive                          of          or     Unearned     Unearned
                                                  Plan                           Shares     Units    Shares,      Shares,
                 Number of      Number of       Awards:                          or Units     of     Units, or    Units or
                Securities     Securities      Number of                         of Stock   Stock     Other        Other
                Underlying     Underlying      Securities                         That       That    Rights       Rights
Name and        Unexercised    Unexercised     Underlying  Option   Option        Have       Have     That         That
Principal         Options        Options        Unearned   Exercise Expiration     Not        Not    Have Not     Have Not
Position        Exercisable   Unexercisable     Options    Price    Date         Vested     Vested   Vested       Vested
----------------------------------------------------------------------------------------------------------------------------

<S>                        <C>        <C>             <C>    <C>     <C>   <C>
James W.                   0          50,000          0      2.45    04/26/16         -        -          -           -
Bradshaw,
Chief                      0         200,000          0
Executive
Officer

J. Peter              26,667       33,333(1)          0      5.50    02/17/15         -        -           -           -
Farquhar,
Chief
Executive
Officer

Patrick Hook,         13,333          26,667          0      5.50    02/17/15         -        -           -           -
President

J. Stanley                 0       40,000(2)          0      1.75    06/26/16 40,000(2)        0           0           0
Baumgartner,
Jr., Chief
Financial
Officer

John A.                    0       40,000(3)          0      5.50    11/14/15         -        -           -           -
Mayfield,
Chief
Financial
Officer

James T. House             0      40,000 (4)          0      5.50     2/17/15         -        -           -           -
</TABLE>

(1)  On February 17, 2005, Mr. Farquhar was granted an option to purchase 50,000
     shares of Common  Stock  which was to vest  ratably on February  17,  2006,
     February 17, 2007, and February 17, 2008. Mr. Farquhar resigned in April of
     2006; as a result,  only one-third of the option to purchase  50,000 shares
     vested and Mr. Farquhar  forfeited the balance.  Mr. Farquhar also received
     an option to purchase 10,000 shares of Common Stock on February 17, 2005 in
     connection  with his  service as a director  for the  Company.  This option
     vested upon issuance.

(2)  On June 26, 2006, Mr.  Baumgartner was granted an option to purchase 40,000
     shares of Common Stock and 40,000 shares of Common  Stock.  Both the option
     and the stock issuance were subject to a vesting  schedule,  which provided
     for vesting  ratably on June 26, 2007,  June 26, 2008 and June 26, 2009. At
     the time Mr.  Baumgartner  resigned in December 2006, no part of the option
     or the stock grant had vested and he has forfeited rights to both.

(3)  Mr.  Mayfield  resigned  prior to the vesting of any of his stock  options,
     which were forfeited.

(4)  Mr. House resigned prior to the vesting of any of his stock options,  which
     were forfeited.


Option Exercises and Stock Vested

     No options were exercised by our named executive officers in 2006.

Pension Benefits

     We do not currently  maintain  qualified or  non-qualified  defined benefit
plans.

Non-qualified Deferred Compensation

     We do not currently maintain  non-qualified  defined  contribution plans or
other deferred compensation plans.

Employee Agreements and Potential Payments Upon Termination or Change in Control

     The following  summaries set forth the employment  agreements and potential
payments  payable to our executive  officers upon termination of employment or a
change in control of us under their current employment  agreements and our other
compensation programs.

     James W.  Bradshaw.  We entered into an employment  agreement with James W.
Bradshaw  on April 26,  2006,  which  provides  for a term of two years and then
continues from year to year unless  terminated by either party.  Mr.  Bradshaw's
base salary is $200,000 per year. Mr.  Bradshaw  received  $20,000 of our common
stock as of the date of commencement  of the employment  agreement and an option
to purchase  50,000  shares of common  stock under our Stock  Option  Plan.  Mr.
Bradshaw  is  eligible  to  participate  in all fringe  benefits  offered by us,
including,  without limitation,  major medical and dental insurance and a 401(k)
plan. If Mr. Bradshaw's  employment  agreement is terminated due to his death or
disability,  or for cause,  Mr. Bradshaw shall be entitled only to reimbursement
of   expenses,   unpaid   compensation   actually   earned  and   accrued,   and
indemnification.  If Mr.  Bradshaw  is  terminated  without  cause,  he shall be
entitled to  severance  equal to aggregate  compensation  paid to him during the
preceding  12 months,  plus medical and dental  benefits  for such  period.  Mr.
Bradshaw  has  agreed not to  compete  with us for a period of 1 year  following
termination of his employment with us.

     Patrick J. Hook. In February 2005, we entered into an employment  agreement
with  Patrick J. Hook,  pursuant to which he is employed  as our  President  and
Chief Operating  Officer  beginning  February 2005, or in such other position as
the board of directors  determines,  for a period ending  February,  2008, which
term will automatically  renew for one additional year unless either party gives
the other at least 180 days notice of  termination.  Mr. Hook's annual salary is
currently  $210,000,  which may be increased by the board of directors.  We also
paid him a bonus of  $30,331,  equal to the lost  bonus for 2004 from his former
employer. Pursuant to this agreement, effective at the February 17, 2005 closing
date of our initial public  offering,  we granted Mr. Hook an option to purchase
40,000 common shares  exercisable  at $5.50 a share,  110% of our initial public
offering  price.  Mr.  Hook is also  entitled to  participate  in any bonus plan
established by the Compensation Committee of the board of directors. Mr. Hook is
entitled to various  fringe  benefits  under the  agreement,  including a $750 a
month car allowance,  a cell phone,  four weeks of vacation,  reimbursement  for
books and tuition for an M.B.A.  program and one year of salary and  benefits if
his employment  under the agreement is terminated  without  cause.  Mr. Hook has
agreed not to compete with us during specified periods following the termination
of his employment.

     J. Stanley  Baumgartner,  Jr.. We entered into an employment agreement with
J. Stanley  Baumgartner,  Jr. as of June 7, 2006 to be Chief Financial  Officer,
the term of which began on June 26, 2006. Mr. Baumgartner's employment agreement
provides  for a term of 2  years.  Mr.  Baumgartner's  annual  base  salary  was
$175,000  and he was  eligible  for  bonuses at the  discretion  of the Board of
Directors. Mr. Baumgartner was issued 40,000 shares of our common stock upon the
commencement  of his  employment and has also been granted an option to purchase
40,000 shares of our common stock,  vesting in 3 equal annual installments at an
exercise price of $1.75. On November 27, 2006 Mr. Baumgartner advised us that he
would be resigning.  He indicated that he had received an unsolicited  offer and
had  accepted a position in New England and desired to return his family to that
area. We and Mr.  Baumgartner  agreed to a December 18, 2006 termination date of
his  employment.  Mr.  Baumgartner  indicated that after  termination,  he would
remain  available to consult with us, our advisors and our current and potential
investors, without charge, until we retain a successor.

     J. Peter  Farquhar.  On January 12,  2005,  we entered  into an  employment
agreement  with J. Peter Farquhar  effective as of August 20, 2004,  pursuant to
which he was employed as our Chairman of the Board,  Chief Executive Officer and
Secretary  for a  period  to end on  January  12,  2007  or his  earlier  death,
disability or termination for cause. Mr.  Farquhar's annual salary was $100,000,
but the  portion due for the period from August 20, 2004 to January 12, 2005 was
deferred  until  after the  February  17,  2005  closing of our  initial  public
offering. Pursuant to this agreement, effective at the February 17, 2005 closing
date of our  initial  public  offering,  we granted  Mr.  Farquhar  an option to
purchase 50,000 common shares  exercisable at $5.50 a share, 110% of our initial
public  offering  price.  Mr.  Farquhar was entitled to various fringe  benefits
under the agreement,  including  $5,000,000 of directors and officers  liability
insurance.  He was also  entitled to an amount equal to his  one-year  aggregate
compensation  and  medical  and  dental  benefits  if his  employment  under the
agreement is terminated  without cause.  If his employment is terminated  within
six  months  after a change in  control,  he is  entitled  to two  times  annual
aggregate  compensation and medical and dental benefits for 24 months.  In April
of 2005, Mr.  Farquhar agreed to devote all of his business time to the Company,
and as a  result,  in  April  2005,  we  amended  and  restated  Mr.  Farquhar's
employment   agreement  to  appropriately   compensate  him  for  his  increased
commitment to the Company.  Under the amended and restated employment agreement,
Mr.  Farquhar  continued  to be entitled to all of the rights under his original
employment  agreement,  except that (1) the agreement was amended  provided that
upon expiration,  it would renew on the same terms and conditions  unless either
party provides the other party with 180 days' written notice of termination, (2)
Mr. Farquhar's annual salary was increased to $250,000, effective as of the date
of such amended and restated employment agreement, (3) Mr. Farquhar was entitled
to receive a  discretionary  bonus of up to 50% of his salary,  as determined by
the Compensation Committee,  (4) Mr. Farquhar was entitled to certain additional
fringe  benefits  under the amended and restated  agreement,  including a $750 a
month allowance for automobile expenses and four weeks of paid vacation, (5) Mr.
Farquhar had the right to terminate the employment agreement for good reason, in
which case he would be entitled to  severance  payments  equal to his  aggregate
salary and benefits for one year,  and (6) in the event that that the Company or
its  subsidiaries  consummated a  transaction  in which they acquire 100% of the
outstanding  common stock or substantially  all of the assets of a Company,  the
Company was required to pay Mr.  Farquhar's  membership  initiation  fee, annual
dues  and  monthly   membership  fees  at  country  club,   subject  to  certain
limitations.  In addition, Mr. Farquhar's covenant not to compete was amended to
provided  that he would not  engage in  activity  that is  reasonably  likely to
compete  with the Company or its  subsidiaries  and he agreed not to be employed
by,  consult with, or have any interest in, any entity which conducts a business
in which the Company or its  subsidiaries  were  engaged  during the term of his
employment  agreement.  On April 23,  2006,  J. Peter  Farquhar,  then our Chief
Executive Officer, ceased to act as such. On April 26, 2006, we and Mr. Farquhar
entered into a Termination  Agreement.  The Termination  Agreement provides that
Mr. Farquhar's  compensation,  partially at a reduced level, will continue until
January 31, 2007 and that he will render consulting services until such date. We
agreed to continue our indemnification  obligations to Mr. Farquhar as set forth
in the Termination Agreement and Mr. Farquhar provided us a release.

     John A. Mayfield. In November 2005, we entered into an employment agreement
with John A. Mayfield,  pursuant to which he was employed as our Chief Financial
Officer beginning December 2005, for a period to end December,  2008, subject to
an automatic one year renewal of termination.  Mr.  Mayfield's annual salary was
$175,000,  and an annual  bonus of up to 50% of the  annual  base  compensation.
Pursuant to this agreement, we granted Mr. Mayfield an option to purchase 40,000
common shares  exercisable at $5.50 a share, 110% of our initial public offering
price.  Mr.  Mayfield  was  also  entitled  to  participate  in any  bonus  plan
established  by the  Compensation  Committee  of the  Board  of  Directors.  Mr.
Mayfield was entitled to various fringe benefits under the agreement,  including
a $500 a month car allowance, a cell phone, four weeks of vacation, and one year
of salary and benefits if his  employment  under the  agreement  was  terminated
without cause.  Mr. Mayfield has agreed not to compete with us during  specified
periods  following the  termination of his  employment.  Mr.  Mayfield  resigned
effective  upon the filing of our Report on Form 10-K for the fiscal  year ended
December 31, 2005.

     James T. House.  On July 8, 2004, we entered into an  employment  agreement
with James T. House,  pursuant to which he was  employed as our Chief  Financial
Officer  beginning  August 2004,  for a period to end July 8, 2007.  Mr. House's
annual  salary was  $160,000,.  Pursuant  to this  agreement,  effective  at the
February 17, 2005 closing date of our initial  public  offering,  we granted Mr.
House an option to purchase  40,000 common shares  exercisable at $5.50 a share,
110% of our initial public  offering price.  Pursuant to the agreement,  we also
paid Mr. House a $25,000  signing bonus on the February 17, 2005 closing date of
our initial  public  offering and agreed that he was entitled to  participate in
any  bonus  plan  established  by the  Compensation  Committee  of the  board of
directors.  Mr.  House  was  entitled  to  various  fringe  benefits  under  the
agreement,  including a $500 a month car allowance and one year of salary if his
employment  under the  agreement was  terminated  without  cause.  Mr. House has
agreed not to compete with us during specified periods following the termination
of his  employment.  This  agreement was terminated on December 30, 2005 and Mr.
House became a consultant until April 15, 2006 at a fee of $13,333 per month.

     Charles A. Vanella. In April 2004 and in connection with our acquisition of
EWCO, we entered into an employment agreement with Charles A. Vanella,  pursuant
to which he was employed as our President and Chief Executive Officer. In August
2004,  we entered into a Termination  Agreement  with Mr.  Vanella,  pursuant to
which he resigned from all of his positions with us, agreed to render consulting
services to us for one year,  agreed to a release of claims,  agreed to keep our
information  confidential  and agreed not to compete with us for a period of two
years following the termination of his consultation.  Mr. Vanella's compensation
under the agreement  includes (1) payment of $100,000 a year for two years,  (2)
payment for his current health insurance  coverage for 18 months, (3) payment of
his country club dues for 2004 and 2005, up to $5,000 a year,  and (4) continued
use of his truck and payment of premiums for insurance on his truck. In December
of 2004, as part of an extension of the promissory note made by EWCO in favor of
Mr. Vanella, we agreed to pay up to approximately  $9,000 of legal fees incurred
by Mr. Vanella in connection  with his separation from the Company and agreed to
pay the approximately $24,500 balance owing on a truck and transfer title to the
truck to him in approximately two years.

Non-Employee Director Compensation

     The following table sets forth a summary of the compensation we paid to our
non-employee directors in 2006:


<PAGE>

<TABLE>
<CAPTION>

                                                                                      Change in Pension
                                                                                          Value and
                                Fees                                                     Nonqualified
                              Earned or                                Non-Stock           Deferred             All
                                Paid         Stock       Option      Incentive Plan      Compensation          other
           Name                 Cash        Awards       Awards       Compensation         Earnings         Compensation     Total
           ----                 ----        ------       ------       ------------         --------         ------------     -----
<S>               <C>                        <C>
James W. Bradshaw (1)                        8,000          -              -                  -                  -
J. Peter Farquhar (1)                          -         10,000            -
Tracy Shellaberger                           8,000       10,000            -                  -                  -
Michael A. Ard                                 -         10,000            -                  -                  -
Gerald Stein (2)                               -         10,000            -                  -                  -
Dr. Robert Pry (2)                             -         10,000            -                  -                  -

</TABLE>

<PAGE>


(1)  James W. Bradshaw  replaced J. Peter  Farquhar on our board of directors in
     April 2006.

(2)  Gerald Stein  replaced Dr.  Robert Pry on our board of directors in October
     2006.

     On February 6, 2006, the board of directors  adopted,  the Outside Director
Compensation  Plan  (the  "Plan").  The  purpose  of the Plan is to enable us to
adequately compensate our outside directors by providing such individuals with a
combination  of  cash   compensation   and  equity-based   long-term   incentive
compensation awards.

Principal provisions of the Plan

     The following summary of the Plan, as adopted by the Board of Directors and
approved by  shareholders on February 12, 2007, is qualified by reference to the
full text of the Plan.

                           Director Compensation Plan
<TABLE>
<CAPTION>

-------------------------------------------- -------------------------------- ----------------------------------------
<S>                                                       <C>
Name and Position                            Dollar Value ($)                 Number of Units
-------------------------------------------- -------------------------------- ----------------------------------------
Non-Employee Directors
-------------------------------------------- -------------------------------- ----------------------------------------
         On election                                                          Options to  purchase  10,000  shares of
                                                                              the  Company's  common  stock,   vested
                                                                              immediately   and   exercisable  for  a
                                                                              period of ten years,  with an  exercise
                                                                              price  of 100% of  market  value at the
                                                                              date of issue
-------------------------------------------- -------------------------------- ----------------------------------------
         Monthly                             Cash retainer of $1,000
-------------------------------------------- -------------------------------- ----------------------------------------
         May 31 of each year                                                  For  directors in good standing for the
                                                                              current  and  previous  year,  a  stock
                                                                              grant  of  $8,000   of  the   Company's
                                                                              common  stock  at  the  current  market
                                                                              price
-------------------------------------------- -------------------------------- ----------------------------------------
         Per in person Board        meeting  $1,000
-------------------------------------------- -------------------------------- ----------------------------------------
         Per telephone conference            $250
-------------------------------------------- -------------------------------- ----------------------------------------
         For special projects                Fee   to   be   agreed   to  an
         requested by the Board              approved by the Board
-------------------------------------------- -------------------------------- ----------------------------------------
Committee Chairs                             $500 and  $1,000  for the Audit
                                             Committee Chair
-------------------------------------------- -------------------------------- ----------------------------------------
Employee Directors                                                            May 31 of each year, for directors in
                                                                              good standing for the current and
                                                                              previous year, stock grant of $8,000
                                                                              of Company common stock at current
                                                                              market price as of May 31 of that year
-------------------------------------------- -------------------------------- ----------------------------------------
</TABLE>


Administration

     The Plan may be administered by the board of directors or the  compensation
committee.  The Board of  Directors  and the  Compensation  Committee,  in their
respective  roles,  are referred to as the  "Granting  Authority".  The Granting
Authority  designates the persons to be granted awards from among those eligible
and the type and amount of awards to be granted and has  authority  to interpret
the Plan, adopt, alter and repeal administrative regulations,  and determine and
amend the terms of awards.

Eligibility

     Awards   under   the   Plan  may   only  be  made  to   outside   directors
(non-employees).  Outside directors are automatically  granted cash compensation
and common stock pursuant to the terms specified in the Plan.

Automatic awards to Outside Directors

     The Plan provides for the automatic grant of cash  compensation  and common
stock to outside directors on the terms provided above.

Stockholder approval of compensation paid to an employee Director.

     In connection with his promotion to Chief Executive Officer of the Company,
we issued Mr. James W. Bradshaw  8,163 shares of our Common Stock.  The American
Stock Exchange Rules require shareholder approval when issuing equity to certain
employees.  However,  equity  issuances to certain  employees in connection with
their  hiring by the  Company  are exempt from this rule.  As Mr.  Bradshaw  was
previously  employed by the Company in a different  position,  this issuance was
not  exempt  from  shareholder  approval.  Therefore,  we  sought  and  received
shareholders  approval  of this  issuance to Mr.  Bradshaw at a meeting  held on
February 12, 2007.

Limitations on Directors' Liability and Indemnification Agreements

     As permitted by Michigan law, we have adopted provisions in our amended and
restated  certificate  of  incorporation  that limit or  eliminate  the personal
liability  of  directors  for a  breach  of  their  fiduciary  duty of care as a
director. The duty of care generally requires that, when acting on behalf of the
corporation,  a director  exercise an informed  business  judgment  based on all
material  information  reasonably  available  to him  or  her.  Consequently,  a
director will not be personally  liable to us or our  stockholders  for monetary
damages for breach of fiduciary duty as a director,  except for liability for: o
any breach of the director's duty of loyalty to us or our stockholders;

     o    any act or  omission  not in good faith or that  involves  intentional
          misconduct or a knowing violation of law;

     o    any act  related to  unlawful  stock  repurchases  or  redemptions  or
          payments of dividends; or

     o    any transaction from which the director  derived an improper  personal
          benefit.

     These  limitations of liability do not limit or eliminate our rights or any
stockholder's  rights to seek non-monetary  relief, such as injunctive relief or
rescission. These provisions will not alter a director's liability under federal
securities laws.

     As permitted by Michigan law, our bylaws also provide that:

     o    we will  indemnify our directors  and executive  officers,  subject to
          certain  exceptions,  and may indemnify our other officers,  employees
          and agents, to the fullest extent permitted by law;

     o    subject  to  certain  exceptions,  we  will  advance  expenses  to our
          directors and executive officers in connection with a legal proceeding
          to the fullest extent permitted by law; and

     o    the rights provided in our bylaws are not exclusive.

     The limitation of liability and  indemnification  provisions in our amended
and restated certificate of incorporation and bylaws may discourage stockholders
from  bringing a lawsuit  against our directors and officers for breach of their
fiduciary  duty.  They may also reduce the  likelihood of derivative  litigation
against our directors and officers, even though an action, if successful,  might
benefit us and other  stockholders.  Further, a stockholder's  investment may be
adversely  affected to the extent that we pay the costs of settlement and damage
awards  against  directors  and  officers as  required by these  indemnification
provisions.  Currently,  there is no pending litigation or proceeding  involving
any of our directors, officers or employees for which indemnification is sought,
and we are not aware of any threatened  litigation that may result in claims for
indemnification.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Principal Holders of Our Voting Securities

     The  following  table sets forth  certain  information  with respect to the
beneficial  ownership  of shares of Common  Stock as of April 1, 2007,  based on
information  obtained from the persons named below,  by (i) each person known to
the Company to beneficially own more than 5% of the outstanding shares of Common
Stock,  (ii) each executive  officer and director of the Company,  and (iii) all
officers and directors of the Company as a group:


                                                     Amount          Percentage
                                                   Nature of             Of
                                                 Common Shares         Common
                                                  Beneficially         Shares
                                                     Owned            Owned (1)
                                                  ------------       ----------
Name

James W. Bradshaw                                     24,830 (2)         *
Patrick Hook                                          26,667 (3)         *
Michael A. Ard                                        14,420 (4)         *
Tracy L. Shellabarger                                 44,489 (4)         *
Gerald Stein                                          10,000 (5)         *
Gary D. Lewis
c/o Bainbridge Advisors, Inc.
P.O. Box 36940
Grosse Pointe, Michigan 48323                        389,751 (6)      7.4%


All directors and executive officers
as a group  (6 persons)                              120,406 (7)      2.4%


* Less than 1%

(1)  Based on 4,993,712 common shares outstanding as of April 1, 2007.

(2)  Includes  options  to  purchase  16,667  shares  of Common  Stock  that Mr.
     Bradshaw has the right to acquire within 60 days of April 1, 2007. Does not
     include options to purchase  233,333 shares of Common Stock,  which are not
     exercisable within 60 days of April 1, 2007.

(3)  Includes  options to purchase  26,667  shares of Common Stock that Mr. Hook
     has the right to acquire within 60 days of April 1, 2007.  Does not include
     options  to  purchase  123,333  shares  of  Common  Stock,  which  are  not
     exercisable within 60 days of April 1, 2007.

(4)  Includes  options  to  purchase  10,000  shares  of Common  Stock  that Mr.
     Shellabarger has the right to acquire within 60 days of April 1, 2007.

(5)  Includes  options to purchase  10,000 shares of Common Stock that Mr. Stein
     has the right to acquire within 60 days of April 1, 2007.

(6)  Includes (a) 309,751  common shares owned jointly with his wife,  with whom
     he shares voting and investment power and (b) 80,000 common shares that Mr.
     Lewis has the right to acquire  within 60 days of April 1,  2007.  Does not
     include (a) 8,371  common  shares  owned by an adult son, who does not live
     with him, (b) 8,371 common shares owned by his adult daughter, who does not
     live with him, (c) 41,858 common shares owned, or 30,000 common shares that
     Mr. Lewis's adult son Gary N. Lewis has the right to acquire within 60 days
     of April 1, 2007. Mr. Lewis  disclaims  beneficial  ownership of the common
     shares held by his adult children.

(7)  Includes  options  to  purchase  63,334  shares  of Common  Stock  that all
     executive  officers  and  directors  as a group  have the right to  acquire
     within 60 days of April 1, 2007.


ITEM 13. CERTAIN RELATIONSHIPS & RELATED TRANSACTIONS

     See "Executive Compensation - Compensation Committee Interlocks and Insider
Participation" for a description of relationships between us and Gary D. Lewis.


ITEM 14. PRINCIPAL ACCOUNTANT'S FEES & SERVICES

     Rehmann  Robson is our  independent  accountants  and has  reported  on the
financial  statements in this 2006 Annual  Report.  Grant Thorto LLP, our former
independent  accountants,  reported on the consolidated financial statements for
2005.

     The following  table  presents  aggregate fees billed for each of the years
ended  December 31, 2006 and 2005 for  professional  services  rendered by Grant
Thornton LLP in the following categories:

                                   Year Ended December 31,
                             -------------------------------------

                                      2006               2005
Audit fees (1)                $      381,000      $       630,000
Audit-Related Fees            $       83,000      $       142,000
Tax Fees (2)                  $        2,000      $             0
All Other Fees                $           11      $             0

(1)  Consists of fees for the audit of our annual financial  statements,  review
     of interim  financial  statements and other services provided in connection
     with our Registration  Statement on Form S-1 in connection with our initial
     public offering. Our financial statements were not audited before 2004.

(2)  Consists of tax return preparation fees.

     In  accordance  with Section  10A(i) of the Exchange  Act,  before  Rehmann
Robson is engaged by us to render audit or non-audit services, the engagement is
approved  by our  Audit  Committee.  None of the  audit-related,  tax and  other
services  described  in the table  above were  approved  by the Audit  Committee
pursuant to Rule 2-01(c)(7)(i)(C) of Regulation S-X.

Audit Committee Report

     Our Audit  Committee  has:  reviewed and  discussed  our audited  financial
statements for the year ended December 31, 2006 with our management;

     o    discussed  with our  independent  auditors the matters  required to be
          discussed by SAS 61 (Codification of Statements on Auditing Standards,
          AU 380), as it has been modified or supplemented;

     o    received the written  disclosures  and the letter from our independent
          accountants  required by  Independence  Standards Board Standard No. 1
          (Independence Standards Board Standard No. 1, Independence Discussions
          with Audit Committees), as it has been modified or supplemented; and

     o    discussed   with   our   independent   accountants   our   independent
          accountants' independence.

     Based on the review and discussions described above in this paragraph,  our
Audit Committee recommended to our Board of Directors that the audited financial
statements for the year ended December 31, 2006 be included in our Annual Report
on Form 10-K for the year ended December 31, 2006 for filing with the Securities
and Exchange Commission.

     Management is responsible  for the Company's  financial  reporting  process
including  its  system  of  internal   control,   and  for  the  preparation  of
consolidated   financial   statements  in  accordance  with  generally  accepted
accounting  principles.  The Company's  independent auditors are responsible for
auditing those financial statements. Our responsibility is to monitor and review
these  processes.  It is not the Audit  Committees'  duty or  responsibility  to
conduct auditing or accounting reviews or procedures. The Audit Committee is not
employees of the Company and we may not be, and may not represent  them to be or
to serve as,  accountants  or auditors by  profession or experts in the field of
accounting  or auditing.  Therefore,  the Audit  Committee  has relied,  without
independent  verification,  on  management's  representation  that the financial
statements  have been prepared with integrity and  objectivity and in conformity
with accounting  principles  generally  accepted in the United States of America
and on the representations of the independent  auditors included in their report
on the Company's financial statements.  The Audit Committees' oversight does not
provide us with an independent basis to determine that management has maintained
appropriate  accounting  and  financial  reporting  principles  or policies,  or
appropriate  internal controls and procedures designed to assure compliance with
accounting standards and applicable laws and regulations. Furthermore, the Audit
Committees'  considerations  and discussions with management and the independent
auditors do not assure that the Company's financial  statements are presented in
accordance with generally accepted accounting principles,  that the audit of our
Company's financial statements has been carried out in accordance with generally
accepted auditing standards or that our Company's independent accountants are in
fact "independent."

Michael A. Ard

Tracy L. Shellabarger

Gerald Stein

<PAGE>


                                     PART IV


ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES


     (a.) Financial Statements

     Our financial  statements for the following years and entities are included
in response to item 8 of this report:

Tarpon Industries, Inc.                                                    Page


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM....................61
CONSOLIDATED BALANCE SHEETS................................................62
CONSOLIDATED STATEMENTS OF OPERATIONS......................................63
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)..................65
NOTES TO FINANCIAL STATEMENTS..............................................
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM....................97
EUGENE WELDING CO..........................................................98
BALANCE SHEETS.............................................................98
LIABILITIES AND SHAREHOLDER'S EQUITY.......................................98
STATEMENTS OF OPERATIONS...................................................99
SHAREHOLDER'S EQUITY......................................................100
STATEMENT OF CASH FLOWS...................................................101
NOTES TO FINANCIAL STATEMENTS.............................................102


     (b.) Financial Statement Schedules.

     Schedule Page

     Schedule II - Tarpon Valuation and Qualifying Accounts and Reserves for the
     years S-1 ended December 31, 2006, 2005, 2004 and 2003.

     Schedule II - EWCO Valuation and  Qualifying  Accounts and Reserves for the
     threeS-2 month period ended March 31, 2004 and the years ended December 31,
     2003.


     (c.) Exhibits.

     The  exhibits  to this  report are as set forth in the "Index to  Exhibits"
immediately  following the Financial  Statement  Schedules in this report.  Each
management  contract or compensatory  plan or arrangement filed as an exhibit to
this report is identified in the "Index to Exhibits"  with an asterisk after the
exhibit number.




<PAGE>


                                   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.

                                    TARPON INDUSTIRES, INC.
                                    (Registrant)

Dated: April 17, 2007               By: /s/ James W. Bradshaw
                                        --------------------------------------
                                               James W. Bradshaw
                                          Its: Chief Executive Officer
                                          And Chief Financial Officer


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


        Signature                         Title                      Date

                                Chief Executive Officer
/s/James W. Bradshaw                and a Director              April 17, 2007
---------------------------     (Principal Executive Officer)
    James W. Bradshaw


/s/Tracy Shellabarger            Director                        April 17, 2007
---------------------------
    Tracy Shellabarger


/s/Michael A. Ard                Director                        April 17, 2007
---------------------------
      Michael A. Ard


/s/Gerald Stein                 Director                        April 17, 2007
---------------------------
       Gerald Stein



<PAGE>


                      SCHEDULE II - TARPON INDUSTRIES, INC.
                 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
              For the years ended December 31, 2006, 2005 and 2004
<TABLE>
<CAPTION>

                                             Column B              Column C Additions              Column D           Column E
                                           --------------    ------------- ---- ------------     -------------      -------------

                                                                (1, 4)              (2)              (3)
                                                             -------------      ------------     -------------
                                              Balance
                                           at Beginning       Charged to         Charge to                           Balance at
                                                of            Costs and            Other                               End of
                                              Period           Expenses          Accounts         Deductions           Period
                                           --------------    -------------      ------------     -------------      -------------
Allowance for Doubtful Accounts

<S>                 <C> <C>             <C>               <C>                <C>              <C>                <C>
Year ended December 31, 2006            $        192,901  $       516,978    $           --   $       440,693    $       269,187
Year ended December 31, 2005            $        290,001  $     1,000,018    $     (20,645)   $     1,076,473    $       192,901
Year ended December 31, 2004            $             --  $       379,972    $      243,130   $       346,692    $       290,001

Tax Valuation Allowance

Year ended December 31, 2006            $      3,534,721  $     3,369,030    $           --   $            --    $     6,903,751
Year ended December 31, 2005            $      1,198,380  $     2,336,341    $           --   $            --    $     3,534,721
Year ended December 31, 2004            $        481,734  $       716,646    $           --   $            --    $     1,198,380
</TABLE>


Note: (1) Reserve of additional uncollectible accounts
Note: (2) Acquisition of Steelbank's and EWCO's net assets
Note: (3) Write-off uncollectible accounts, net of recoveries
Note: (4) Increase in valuation  allowance for net operating losses and deferred
          tax assets should the Company not achieve profitability in future
          years


<PAGE>

                        SCHEDULE II - EUGENE WELDING CO.
                 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
                  For the three months ended March 31, 2004 and
                     for the years ended December 31, 2003.

                         Allowance for Doubtful Accounts

<TABLE>
<CAPTION>

                                            Column                    Column C                       Column            Column
                                               B        -------------------------------------          D                E
                                                                     Additions
                                                        -------------------------------------
                                                                (2)                 (3)
                                          Balance at          Charged             Charged                             Balance
                                           Beginning         To Costs            To Other              (1)               At
                                              Of                And               Accts.,          Deductions,         End of
                                            Period           Expenses            Describe           Describe           Period
                                         --------------    --------------      --------------    ----------------    -------------
Three month period ended
<S>   <C> <C>                         <C>               <C>                 <C>               <C>                 <C>
March 31, 2004                        $        321,941  $        199,276    $             --  $          298,229  $       222,988
Year ended
December 31, 2003                               38,099           283,842                  --                  --          321,941

Inventory reserve for obsolescence:
Three month period ended
March 31, 2004                        $             --  $             --    $             --  $               --  $            --
Year ended
December 31, 2003                                   --                --                  --                  --               --

</TABLE>

Note: (1) Write-off uncollectible accounts, net of recoveries
Note: (2) Reserve of additional uncollectible accounts, net of recoveries.
Note: (3) Write-off obsolete, excess inventory, net of recoveries.

<PAGE>


                                  EXHIBIT INDEX

Exhibit        Description

1.1  Investment  Banking  Agreement,  dated as of April 5, 2004,  between Tarpon
     Industries,  Inc. and Joseph Gunnar & Co., LLC.,  incorporated by reference
     to Exhibit  10.27 to the  Registrant's  registration  statement on Form S-1
     (file no. 333-120117) filed on November 1, 2004.

1.2  Form of Underwriting Agreement, incorporated by reference to Exhibit 1.1 to
     amendment  no. 3 to the  Registrant's  registration  statement  on Form S-1
     (file no. 333-120117) filed on February 11, 2005.

1.3  Form of Lead Underwriters' Warrant Agreement,  incorporated by reference to
     Exhibit 1.2 to amendment no. 3 to the Registrant's  registration  statement
     on Form S-1 (file no. 333-120117) filed on February 11, 2005.

3(i).1 Amended and  Restated  Articles of  Incorporation  of Tarpon  Industries,
     Inc.,  incorporated  by  reference  to  Exhibit  3(i)  to the  Registrant's
     registration  statement on Form S-1 (file no. 333-120117) filed on November
     1, 2004.

3(ii).1 Amended and 3 Restated Bylaws of Tarpon Industries,  Inc.,  incorporated
     by reference to Exhibit to the Registrant's  registration statement on Form
     S-1 (file no. 333-120117) filed on November 1, 2004.

4.1  Specimen  Stock  Certificate,  incorporated  by reference to Exhibit 4.1 to
     amendment  no. 1 to the  Registrant's  registration  statement  on Form S-1
     (file no. 333-120117) filed on January 14, 2005.

10.1 Stock Purchase  Agreement,  dated as of November 23, 2003,  between Charles
     Vanella and Wall St.  Acquisitions,  Inc. (now known as Tarpon  Industries,
     Inc.),  including First Amendment to Share Purchase Agreement,  dated as of
     February 1, 2004, Second Amendment to Share Purchase Agreement, dated as of
     February 18, 2004, Third Amendment to Share Purchase Agreement, dated as of
     March 23, 2004, and Fourth Amendment to Share Purchase Agreement,  dated as
     of  April  2,  2004,  incorporated  by  reference  to  Exhibit  2.1  to the
     Registrant's registration statement on Form S-1 (file no. 333-120117) filed
     on November 1, 2004.

10.2 Redemption Agreement, dated as of April 2, 2004, between Eugene Welding Co.
     and  Charles  Vanella,  incorporated  by  reference  to Exhibit  2.2 to the
     Registrant's registration statement on Form S-1 (file no. 333-120117) filed
     on November 1, 2004.

10.3 Share Purchase Agreement, dated as of April 2, 2004, among BST Acquisitions
     Ltd., Tarpon Industries, Inc., Jeffrey Greenberg, Mark D. Madigan and Barry
     Seigel,  incorporated  by  reference  to  Exhibit  2.3 to the  Registrant's
     registration  statement on Form S-1 (file no. 333-120117) filed on November
     1, 2004

10.4 Amending  Agreement,  dated as of May 5, 2004, among Barry Seigel,  Jeffrey
     Greenberg and Mark Madigan,  BST  Acquisition  Ltd. and Tarpon  Industries,
     Inc.,  incorporated  by reference to Exhibit 2.4 to amendment  no. 1 to the
     Registrant's registration statement on Form S-1 (file no. 333-120117) filed
     on January 14, 2005.

10.5 Second  Amending  Agreement,  dated as of December  10,  2004,  among Barry
     Seigel,  Jeffrey  Greenberg and Mark Madigan,  BST Acquisition Ltd., Tarpon
     Industries,  Inc. and Steelbank Inc.,  incorporated by reference to Exhibit
     2.5 to amendment no. 1 to the Registrant's  registration  statement on Form
     S-1 (file no. 333-120117) filed on January 14, 2005.

10.6 Asset  Purchase  Agreement,   dated  as  of  June  21,  2004,  between  BST
     Acquisition,  Ltd.  and Bolton  Steel Tube Co.,  Ltd.,  including  forms of
     notes,  incorporated  by  reference  to  Exhibit  2.4 to  the  Registrant's
     registration  statement on Form S-1 (file  no.333-120117) filed on November
     1, 2004.

10.7 Form of Real Estate Purchase Agreement between 1387746 Ontario Inc. and BST
     Acquisition Ltd., incorporated by reference to Exhibit 2.7 to amendment no.
     1 to  the  Registrant's  registration  statement  on  Form  S-1  (file  no.
     333-120117) filed on January 14, 2005.

10.8 First  Amending  Agreement  dated as of December 15, 2004,  between  Bolton
     Steel Tube Co. Ltd.,  BST  Acquisition,  Ltd.  and Winston  Penny and Henry
     Koura,  incorporated  by reference to Exhibit 2.8 to amendment no. 1 to the
     Registrant's registration statement on Form S-1 (file no. 333-120117) filed
     on January 14, 2005.

10.9 Second Amending  Agreement,  dated as of February 11, 2005,  between Bolton
     Steel Tube Co. Ltd.,  BST  Acquisition,  Ltd.  and Winston  Penny and Henry
     Koura, incorporated by reference to Exhibit 2.3 to the Registrant's Current
     Report on Form 8-K, dated February 17, 2005.

10.10 Guarantee,  dated as of February 17, 2005,  executed by Tarpon Industries,
     Inc. in favor of Bolton Steel Tube Co., Ltd.,  incorporated by reference to
     Exhibit 2.4 to the Registrant's  Current Report on Form 8-K, dated February
     17, 2005.

10.11 Asset Purchase Agreement dated as of August 30, 2005, by and among Midwest
     Tube Mills,  Inc.,  Richard L. Russell,  individually and as Trustee of the
     Richard  L.  Russell  2004  Annuity  Trust,  and MTM  Acquisition  Company,
     incorporated by reference to Exhibit 2 to the  Registrant's  Form 8-K filed
     August 30, 2005.

10.12 Amended and Restated  Asset  Purchase  Agreement  dated as of November 11,
     2005,  by and among C&W  Manufacturing,  Inc.,  David  Perkins  and Deborah
     Carpenter, individually, and FM, Inc., incorporated by reference to Exhibit
     2 to the Registrant's Form 8-K filed November 11, 2005.

10.13 Loan and Security Agreement,  dated as of August 11, 2004 between Standard
     Federal Bank N.A. and Eugene Welding Co., including forms of Revolving Note
     and Term Note, incorporated by reference to Exhibit 4.2 to the Registrant's
     registration  statement on Form S-1 (file no. 333-120117) filed on November
     1, 2004.

10.14 Continuing  Unconditional Guaranty of Tarpon Industries,  Inc. to Standard
     Federal Bank,  N.A.,  dated August 11, 2004,  incorporated  by reference to
     Exhibit 4.3 to the  Registrant's  registration  statement on Form S-1 (file
     no. 333-120117) filed on November 1, 2004

10.15 Securities  Pledge  Agreement,  dated  August  11,  2004,  between  Tarpon
     Industries, Inc. and Standard Federal Bank, N.A., incorporated by reference
     to Exhibit 4.4 to the Registrant's registration statement on Form S-1 (file
     no. 333-120117) filed on November 1, 2004.

10.16 Subordination Agreement,  dated August 11, 2004 between Charles A. Vanella
     and Standard Federal Bank,  N.A.,  incorporated by reference to Exhibit 4.5
     to  the  Registrant's   registration   statement  on  Form  S-1  (file  no.
     333-120117) filed on November 1, 2004

10.17 Subordination  Agreement,  dated August 11, 2004 between An and Dander and
     Standard  Federal Bank,  N.A.,  incorporated by reference to Exhibit 4.6 to
     the Registrant's  registration  statement on Form S-1 (file no. 333-120117)
     filed on November 1, 2004

10.18 Subordination  Agreement,  dated August 11, 2004  between  Rivas Jonah and
     Standard  Federal Bank,  N.A.,  incorporated by reference to Exhibit 4.7 to
     the Registrant's  registration  statement on Form S-1 (file no. 333-120117)
     filed on November 1, 2004.

10.19 Subordination  Agreement,  dated August 11, 2004,  between Joseph Gunnar &
     Co., LLC, as agent of the note holders,  and Standard  Federal Bank,  N.A.,
     incorporated by reference to Exhibit 4.8 to the  Registrant's  registration
     statement on Form S-1 (file no. 333-120117) filed on November 1, 2004.

10.20 Factoring  Agreement,  dated  as  of  May  14,  2004,  between  Greenfield
     Commercial Credit, Inc. and Steelbank,  Inc.,  incorporated by reference to
     Exhibit 4.9 to the  Registrant's  registration  statement on Form S-1 (file
     no. 333-120117) filed on November 1, 2004.

10.21 Security  Agreement,   dated  as  of  May  14,  2004,  between  Greenfield
     Commercial Credit, Inc. and Steelbank,  Inc.,  incorporated by reference to
     Exhibit 4.10 to the Registrant's  registration  statement on Form S-1 (file
     no. 333-120117) filed on November 1, 2004.

10.22 Guarantee,  dated as of May 14,  2004,  from  Tarpon  Industries,  Inc. to
     Greenfield  Commercial Credit,  Inc.,  incorporated by reference to Exhibit
     4.11 to the  Registrant's  registration  statement  on Form S-1  (file  no.
     333-120117) filed on November 1, 2004.

10.23 Subordination  Agreement,  dated May 2004 among Anand Dhanda, Riyaz Jinnah
     and  Greenfield  Commercial  Credit,  Inc.,  incorporated  by  reference to
     Exhibit 4.12 to the Registrant's  registration  statement on Form S-1 (file
     no. 333-120117) filed on November 1, 2004.

10.24 Subordination Agreement, dated as of May 14, 2004, between Joseph Gunnar &
     Co., LLC, as agent of the note holders,  and Greenfield  Commercial Credit,
     Inc.,  incorporated  by  reference  to  Exhibit  4.13  to the  Registrant's
     registration  statement on Form S-1 (file no. 333-120117) filed on November
     1, 2004.

10.25 Subordination  Agreement,  dated as of May 14, 2004,  among Barry  Seigel,
     Jeffrey Greenberg,  Mark Madigan and Greenfield  Commercial  Credit,  Inc.,
     incorporated by reference to Exhibit 4.14 to the Registrant's  registration
     statement on Form S-1 (file no. 333-120117) filed on November 1, 2004.

10.26 Amendment to Loan and Security Agreement,  dated December 24, 2004 between
     Standard  Federal Bank N.A. and Eugene Welding Company,  including  amended
     revolving note,  incorporated by reference to Exhibit 4.15 to amendment no.
     1 to  the  Registrant's  registration  statement  on  Form  S-1  (file  no.
     333-120117) filed on January 14, 2005.

10.27 Loan  Agreement,  dated as of  February  17,  2005,  by and among  LaSalle
     Business  Credit,  a  division  of ABN AMRO Bank  N.V.,  Canada  Branch and
     Steelbank   Inc.,   incorporated  by  reference  to  Exhibit  10.1  to  the
     Registrant's Current Report on Form 8-K, dated February 17, 2005.

10.28 Guarantee,  dated as of February 17, 2005,  executed by Tarpon Industries,
     Inc. in favor of LaSalle Business Credit, a division of ABN AMRO Bank N.V.,
     Canada   Branch,   incorporated   by  reference  to  Exhibit  10.2  to  the
     Registrant's Current Report on Form 8-K, dated February 17, 2005.

10.29 General  Security  Agreement,  dated as of February 17, 2005,  executed by
     Steelbank Inc. in favor of LaSalle  Business Credit, a division of ABN AMRO
     Bank N.V., Canada Branch,  incorporated by reference to Exhibit 10.3 to the
     Registrant's Current Report on Form 8-K, dated February 17, 2005.

10.30 General  Security  Agreement,  dated as of February 17, 2005,  executed by
     Tarpon Industries,  Inc. in favor of LaSalle Business Credit, a division of
     ABN AMRO Bank N.V.,  Canada  Branch,  incorporated  by reference to Exhibit
     10.4 to the  Registrant's  Current  Report on Form 8-K,  dated February 17,
     2005.

10.31 Share Pledge Agreement,  dated as of February 17, 2005, executed by Tarpon
     Industries,  Inc. in favor of LaSalle  Business  Credit,  a division of ABN
     AMRO Bank N.V., Canada Branch, incorporated by reference to Exhibit 10.5 to
     the Registrant's Current Report on Form 8-K, dated February 17, 2005.

10.32 Form of Promissory  Note made by Eugene Welding Co. in favor of Charles A.
     Vanella,  including  Guaranty of Tarpon Industries,  Inc.,  incorporated by
     reference  to  Exhibit  10.1  to  amendment  no.  1  to  the   Registrant's
     registration  statement on Form S-1 (file no.  333-120117) filed on January
     14, 2005.

10.33 Form of First  Amendment to Promissory  Note made by Eugene Welding Co. in
     favor of Charles A. Vanella,  incorporated  by reference to Exhibit 10.2 to
     amendment  no. 1 to the  Registrant's  registration  statement  on Form S-1
     (file no. 333-120117) filed on January 14, 2005.

10.34 Stock Pledge  Agreement  between Eugene Welding Co. and Charles A. Vanella
     and Cusmano & Co., P.C., effective April 2, 2004, incorporated by reference
     to  Exhibit  10.3  to  amendment  no.  1 to the  Registrant's  registration
     statement on Form S-1 (file no. 333-120117) filed on January 14, 2005.

10.35 Lease  Agreement,  dated October 22, 2001,  between Eugene Welding Co. and
     the  Charles J. Loznak  Trust,  concerning  its  Marysville  and  Marlette,
     Michigan  facilities,  incorporated  by  reference  to Exhibit  10.1 to the
     Registrant's registration statement on Form S-1 (file no. 333-120117) filed
     on November 1, 2004.

10.36 Form of Promissory  Note made by Steelbank  Inc. in favor of Barry Seigel,
     Jeffrey  Greenberg  and  Mark  Madigan,  in  the  principal  amount  of Cdn
     $800,000,  incorporated  by reference to Exhibit 10.5 to amendment no. 1 to
     the Registrant's  registration  statement on Form S-1 (file no. 333-120117)
     filed on January 14, 2005

10.37 Form of Promissory  Note made by Steelbank  Inc. in favor of each of Barry
     Seigel, Jeffrey Greenberg and Mark Madigan, each in the principal amount of
     Cdn $135,000,  incorporated by reference to Exhibit 10.6 to amendment no. 1
     to  the  Registrant's   registration   statement  on  Form  S-1  (file  no.
     333-120117) filed on January 14, 2005.

10.38 General Security Agreement,  dated May 14, 2004, made by Steelbank Inc. to
     and  in  favor  of  Barry  Seigel,  Jeffrey  Greenberg  and  Mark  Madigan,
     incorporated  by  reference  to  Exhibit  10.7 to  amendment  no.  1 to the
     Registrant's registration statement on Form S-1 (file no. 333-120117) filed
     on January 14, 2005.

10.39 Securities Pledge  Agreement,  dated May 14, 2004, made by BST Acquisition
     Ltd. and Steelbank Inc. to and in favor of Barry Seigel,  Jeffrey Greenberg
     and Mark  Madigan,  incorporated  by reference to Exhibit 10.8 to amendment
     no. 1 to the  Registrant's  registration  statement  on Form S-1  (file no.
     333-120117) filed on January 14, 2005.

10.40 Guarantee,  dated May 14, 2004,  made by Steelbank Inc. to and in favor of
     Barry Seigel, Jeffrey Greenberg and Mark Madigan, incorporated by reference
     to  Exhibit  10.9  to  amendment  no.  1 to the  Registrant's  registration
     statement on Form S-1 (file no. 333-120117) filed on January 14, 2005.

10.41 Lease Agreement, dated July 1, 2001, between Ciriaco Forgione and Filomena
     Forgione  and  Tube  Distributors,  Inc.  (assigned  to  Steelbank,  Inc.),
     concerning its Mississauga,  Ontario facility, incorporated by reference to
     Exhibit 10.2 to the Registrant's  registration  statement on Form S-1 (file
     no. 333-120117) filed on November 1, 2004.

10.42 Tarpon Industries,  Inc. 2004 Stock Option Plan, incorporated by reference
     to Exhibit  10.3 to the  Registrant's  registration  statement  on Form S-1
     (file no. 333-120117) filed on November 1, 2004.

10.43 Forms  of  Stock  Option  Agreement  under  the 2004  Stock  Option  Plan,
     incorporated by reference to Exhibit 10.4 to the Registrant's  registration
     statement on Form S-1 (file no. 333-120117) filed on November 1, 2004.

10.44 Employment  Agreement,   dated  as  of  January  12,  2004,  among  Tarpon
     Industries, Inc., Eugene Welding Co. and J. Peter Farquhar, incorporated by
     reference  to  Exhibit  10.13  to  amendment  no.  1  to  the  Registrant's
     registration  statement on Form S-1 (file no.  333-120117) filed on January
     14, 2005.

10.45 Amended and  restated  employment  agreement,  dated as of April 15, 2005,
     among Tarpon Industries,  Inc., Eugene Welding Co., Steelbank Tubular, Inc.
     and J. Peter  Farquhar,  incorporated  by reference to Exhibit 10.14 to the
     Registrant's  Annual  Report on Form 10-K for the year ended  December  31,
     2004.

10.46 Employment  Agreement,  dated as of July 8, 2004, among Tarpon Industries,
     Inc.,  Eugene Welding Co. and James T. House,  incorporated by reference to
     Exhibit 10.6 to the Registrant's  registration  statement on Form S-1 (file
     no. 333-120117) filed on November 1, 2004.

10.47 Employment  Agreement,  dated May 14, 2004,  between  Steelbank,  Inc. and
     Jeffrey  Greenberg,  incorporated  by  reference  to  Exhibit  10.7  to the
     Registrant's registration statement on Form S-1 (file no. 333-120117) filed
     on November 1, 2004.

10.48 Employment Agreement, dated May 14, 2004, between Steelbank, Inc. and Mark
     D. Madigan,  incorporated by reference to Exhibit 10.8 to the  Registrant's
     registration  statement on Form S-1 (file no. 333-120117) filed on November
     1, 2004.

10.49 Employment  Agreement,  dated May 14, 2004,  between  Steelbank,  Inc. and
     Barry Seigel, incorporated by reference to Exhibit 10.9 to the Registrant's
     registration  statement on Form S-1 (file no. 333-120117) filed on November
     1, 2004.

10.50 Employment  Agreement,  dated as of November 1, 2002,  between EWCO and C.
     David   Weaver,   incorporated   by  reference  to  Exhibit  10.10  to  the
     Registrant's registration statement on Form S-1 (file no. 333-120117) filed
     on November 1, 2004.

10.51 Employment  Agreement,   dated  as  of  February  1,  2005,  among  Tarpon
     Industries,  Inc., Eugene Welding Company,  Steelbank Inc., BST Acquisition
     Ltd.  and Patrick  Hook,  incorporated  by  reference  to Exhibit  10.19 to
     amendment  no. 2 to the  Registrant's  registration  statement  on Form S-1
     (file no. 333-120117) filed on February 3, 2005.

10.52 Termination  Agreement,  dated  as of  September  3,  2004,  among  Tarpon
     Industries, Inc., Eugene Welding Co., Steelbank, Inc., BST Acquisition Ltd.
     and Charles A. Vanella,  incorporated  by reference to Exhibit 10.11 to the
     Registrant's registration statement on Form S-1 (file no. 333-120117) filed
     on November 1, 2004.

10.53 Management  Consulting  Agreement,  dated  April 7, 2004,  between  Tarpon
     Industries,  Inc. and  Bainbridge  Advisors,  Inc.  and First  Amendment to
     Management  Consulting  Agreement,  dated as of October 13, 2004, effective
     April  7,  2004,   incorporated  by  reference  to  Exhibit  10.12  to  the
     Registrant's registration statement on Form S-1 (file no. 333-120117) filed
     on November 1, 2004.

10.54 Second amendment to Management and Consulting Agreement, dated as of April
     15, 2005,  between Tarpon  Industries,  Inc., Eugene Welding Co., Steelbank
     Tubular,  Inc. and Bainbridge Advisors,  Inc.  Incorporated by reference to
     Exhibit 10.22 to the  Registrant's  Annual Report on Form 10-K for the year
     ended December 31, 2004

10.55 Agency Agreement,  dated as of March 25, 2004,  between Tarpon Industries,
     Inc.  and  Joseph  Gunnar  & Co.,  LLC,  concerning  2004  note  financing,
     incorporated by reference to Exhibit 10.13 to the Registrant's registration
     statement on Form S-1 (file no. 333-120117) filed on November 1, 2004

10.56 Form of Warrant  to  Purchase  Common  Stock of Tarpon  Industries,  Inc.,
     issued  to  purchasers  of  notes  in  February,   March  and  April  2004,
     incorporated by reference to Exhibit 10.14 to the Registrant's registration
     statement on Form S-1 (file no. 333-120117) filed on November 1, 2004.

10.57 Form of Warrant  to  Purchase  Common  Stock of Tarpon  Industries,  Inc.,
     issued to designees of Joseph Gunnar & Co., LLC, the placement agent in our
     April 2004 note  financing,  incorporated  by reference to Exhibit 10.15 to
     the Registrant's  registration  statement on Form S-1 (file no. 333-120117)
     filed on November 1, 2004.

10.58 Form of Tarpon  Industries,  Inc. 8% Junior Secured Promissory Note issued
     in  February,  March and April 2004,  incorporated  by reference to Exhibit
     10.16 to the  Registrant's  registration  statement  on Form S-1  (file no.
     333-120117) filed on November 1, 2004.

10.59 Form of Agency Appointment  Agreement,  dated as of April 5, 2004, between
     Joseph  Gunnar & Co., LLC and each of the  purchasers of our notes in April
     2004,  incorporated  by  reference  to  Exhibit  10.17 to the  Registrant's
     registration  statement on Form S-1 (file no. 333-120117) filed on November
     1, 2004.

10.60 General  Security  Agreement,  dated as of April 5, 2004,  between  Tarpon
     Industries,  Inc. and Joseph  Gunnar & Co., LLC, as  representative  of the
     note   holders,   incorporated   by  reference  to  Exhibit  10.18  to  the
     Registrant's registration statement on Form S-1 (file no. 333-120117) filed
     on November 1, 2004.

10.61 Guaranty,  dated as of April 5, 2004,  from  Eugene  Welding Co. to Joseph
     Gunnar & Co., LLC, as representative  of the note holders,  incorporated by
     reference to Exhibit 10.19 to the  Registrant's  registration  statement on
     Form S-1 (file no. 333-120117) filed on November 1, 2004.

10.62 General  Subordinated  Security  Agreement,  dated as of  April  5,  2004,
     between Eugene Welding Co. and Joseph Gunnar & Co., LLC, as  representative
     of the note  holders,  incorporated  by reference  to Exhibit  10.20 to the
     Registrant's registration statement on Form S-1 (file no. 333-120117) filed
     on November 1, 2004.

10.63 Guaranty,  dated as of May 18, 2004,  from Eugene  Welding Co. to Riyaz H.
     Jinnah and Anand M. Dhanda,  incorporated  by reference to Exhibit 10.21 to
     the Registrant's  registration  statement on Form S-1 (file no. 333-120117)
     filed on November 1, 2004.

10.64 General Subordinated  Security Agreement,  dated as of April 2004, between
     Eugene Welding Co. and Riyaz H. Jinnah and Anand M. Dhanda, incorporated by
     reference to Exhibit 10.22 to the  Registrant's  registration  statement on
     Form S-1 (file no. 333-120117) filed on November 1, 2004.

10.65 Guaranty, dated as of May 18, 2004, from Steelbank,  Inc. to Joseph Gunnar
     &  Co.,  LLC,  as  representative  of the  note  holders,  incorporated  by
     reference to Exhibit 10.23 to the  Registrant's  registration  statement on
     Form S-1 (file no. 333-120117) filed on November 1, 2004.

10.66 General Subordinated Security Agreement, dated as of May 18, 2004, between
     Steelbank, Inc. and Joseph Gunnar & Co., LLC, as representative of the note
     holders,  incorporated  by reference to Exhibit  10.24 to the  Registrant's
     registration  statement on Form S-1 (file no. 333-120117) filed on November
     1, 2004.

10.67 Guaranty,  dated as of May 18,  2004,  from  Steelbank,  Inc.  to Riyaz H.
     Jinnah and Anand M. Dhanda,  incorporated  by reference to Exhibit 10.25 to
     the Registrant's  registration  statement on Form S-1 (file no. 333-120117)
     filed on November 1, 2004.

10.68 General Subordinated Security Agreement, dated as of May 14, 2004, between
     Steelbank,  Inc. and Riyaz H. Jinnah and Anand M. Dhanda,  incorporated  by
     reference to Exhibit 10.26 to the  Registrant's  registration  statement on
     Form S-1 (file no. 333-120117) filed on November 1, 2004.

10.69 Form of  Promissory  Note to be made by BST  Acquisition  Ltd. in favor of
     Bolton Steel Tube Co. Ltd.,  incorporated  by reference to Exhibit 10.36 to
     amendment  no. 2 to the  Registrant's  registration  statement  on Form S-1
     (file no. 333-120117) filed on February 3, 2005.

10.70 Form of General Security Agreement to be made between BST Acquisition Ltd.
     and Bolton Steel Tube Co. Ltd.,  incorporated by reference to Exhibit 10.37
     to amendment no.2 to the  Registrant's  registration  statement on Form S-1
     (file no. 333-120117) filed on February 3, 2005.

10.71 Form of Guarantee to be made by Tarpon Industries, Inc. in favor of Bolton
     Steel  Tube  Co.  Ltd.,  incorporated  by  reference  to  Exhibit  10.38 to
     amendment  no. 2 to the  Registrant's  registration  statement  on Form S-1
     (file no. 333-120117) filed on February 3, 2005.

10.72 Form of Lock-up  Agreement  between  Joseph  Gunnar & Co.,  LLC and Tarpon
     Industries,   Inc.  shareholders  and  holders  of  options  and  warrants,
     incorporated  by  reference  to  Exhibit  10.40 to  amendment  no. 3 to the
     Registrant's registration statement on Form S-1 (file no. 333-120117) filed
     on February 11, 2005.

10.73 Subordination  Agreement,  dated  May 18,  2005,  by and  among  Steelbank
     Tubular,  Inc.,  Tarpon  Industries,  Inc., The Equitable Trust Company and
     LaSalle  Business  Credit,  a  division  of ABN Amro  N.V.  Canada  Branch,
     incorporated  by  reference to Exhibit  10.1 to the  Registrant's  Form 8-K
     filed May 18, 2005.

10.74 Commitment  Letter,  dated  May 12,  2005,  by and  among  First  National
     Corporation,  on behalf of The Equitable Trust Company,  Steelbank Tubular,
     Inc. and Tarpon Industries, Inc., incorporated by reference to Exhibit 10.2
     to the Registrant's Form 8-K filed May 18, 2005.

10.75 Charge/Mortgage, dated May 18, 2005, by Steelbank Tubular Inc. in favor of
     The Equitable  Trust Company,  incorporated by reference to Exhibit 10.3 to
     the Registrant's Form 8-K filed May 18, 2005.

10.76 General  Security  Agreement,  dated  as of  May  18,  2005,  executed  by
     Steelbank   Tubular,   Inc.  in  favor  of  The  Equitable  Trust  Company,
     incorporated  by  reference to Exhibit  10.4 to the  Registrant's  Form 8-K
     filed May 18, 2005.

10.77 Guarantee and Postponement of Claim, dated as of May 18, 2005, executed by
     Tarpon   Industries,   Inc.  in  favor  of  The  Equitable  Trust  Company,
     incorporated  by  reference to Exhibit  10.5 to the  Registrant's  Form 8-K
     filed May 18, 2005.

10.78 Securities  Purchase  Agreement,  dated as of December  13,  2005,  by and
     between Tarpon Industries,  Inc. and Laurus Master Fund, Ltd., incorporated
     by reference to Exhibit 99.1 to the  Registrant's  Form 8-K filed  December
     13, 2005.

10.79 Secured  Convertible  Promissory  Note,  dated as of  December  13,  2005,
     executed by Tarpon  Industries,  Inc. in favor of Laurus Master Fund, Ltd.,
     incorporated  by  reference to Exhibit  99.2 to the  Registrant's  Form 8-K
     filed December 13, 2005

10.80 Common Stock Purchase Warrant, dated as of December 13, 2005, incorporated
     by reference to Exhibit 99.3 to the  Registrant's  Form 8-K filed  December
     13, 2005.

10.81 Subsidiary  Guaranty,  dated as of  December  13,  2005,  executed  by the
     wholly-owned  subsidiaries  of Tarpon  Industries,  Inc.,  incorporated  by
     reference to Exhibit 99.4 to the  Registrant's  Form 8-K filed December 13,
     2005.

10.82 Stock Pledge  Agreement,  dated as of December 13, 2005,  incorporated  by
     reference to Exhibit 99.5 to the  Registrant's  Form 8-K filed December 13,
     2005.

10.83 Master Security Agreement,  dated as of December 13, 2005, incorporated by
     reference to Exhibit 99.6 to the  Registrant's  Form 8-K filed December 13,
     2005.

10.84 Registration  Rights  Agreement,  dated as of December 13, 2005, by Tarpon
     Industries,  Inc. in favor of Laurus  Master Fund,  Ltd.,  incorporated  by
     reference to Exhibit 99.7 to the  Registrant's  Form 8-K filed December 13,
     2005.

10.85 Grant of Security  Interest in Trademarks,  dated as of December 13, 2005,
     by  Tarpon  Industries,   Inc.  in  favor  of  Laurus  Master  Fund,  Ltd.,
     incorporated  by  reference to Exhibit  99.8 to the  Registrant's  Form 8-K
     filed December 13, 2005.

10.86 First Amendment to Loan Agreement and  Reaffirmation  of Guarantee,  dated
     December  13, 2005,  by and between  Steelbank  Tubular,  Inc. and ABN AMRO
     Bank,  N.V.,  Canada  Branch,  and reaffirmed by Tarpon  Industries,  Inc.,
     incorporated  by  reference to Exhibit  99.9 to the  Registrant's  Form 8-K
     filed December 13, 2005.

10.87 Second Amendment to Loan Agreement and  Reaffirmation  of Guaranty,  dated
     December  13,  2005,  by and between  Eugene  Welding Co. and LaSalle  Bank
     Midwest N.A., and reaffirmed by Tarpon  Industries,  Inc.,  incorporated by
     reference to Exhibit 99.10 to the Registrant's  Form 8-K filed December 13,
     2005.

10.88 Security  Agreement,  dated  December  13,  2005,  by and  between  Tarpon
     Industries,  Inc. and LaSalle Bank Midwest N.A.,  incorporated by reference
     to Exhibit 99.11 to the Registrant's Form 8-K filed December 13, 2005.

10.89 Subordination  Agreement,  dated December 13, 2005, by and between LaSalle
     Bank Midwest N.A. and ABN AMRO Bank, N.V., Canada Branch,  and consented to
     by Tarpon Industries, Inc. and its subsidiaries,  incorporated by reference
     to Exhibit 99.12 to the Registrant's Form 8-K filed December 13, 2005.

10.90 Director  Compensation  Plan adopted by the Board of Directors on February
     6, 2006,  incorporated by reference to Registrant's Form 8-K filed February
     9, 2006.

10.91 Agreement dated March 20, 2006 between  Agellan  Investments and Steelbank
     Tubular,  Inc.  for the sale and  leaseback  of its  Mississauga,  Ontario,
     incorporated  by reference to Exhibit  99.2 of the  Registrant's  report on
     Form 8-K dated March 20, 2006.

10.92 Asset  Purchase  Agreement  dated as of April 4, 2006 by and among J And J
     Tube, Inc., Ken Jimerson,  Kevin Jimmerson,  and J And J Acquisition Corp.,
     incorporated  by  reference to Exhibit  99.1 to the  Registrant's  Form 8-K
     filed April 6, 2006.

10.93 Employment Agreement dated April 26, 2006 between Tarpon Industries,  Inc.
     and James W.  Bradshaw,  incorporated  by  reference to Exhibit 99.3 to the
     Registrant's Form 8-K filed April 27, 2006.

10.94 Employment  Agreement dated June 7, 2006 between Tarpon  Industries,  Inc.
     and J. Stanley Baumgartner,  Jr., incorporated by reference to Exhibit 99.1
     to the Registrant's Form 8-K filed June 9, 2006.

10.95 Agency Agreement dated August 15, 2006 between Tarpon Industries, Inc. and
     Joseph Gunnar & Co., Ltd.

10.96 Letter Agreement by and between Tarpon Industries,  Inc. and Laurus Master
     Fund,  Ltd.  dated February 28, 2007  incorporated  by reference to Exhibit
     99.1 to the Registrant's Form 8-K filed March 6, 2007.

10.97 Amendment dated March 20, 2007 by and between Tarpon Industries,  Inc. and
     Laurus Master Fund,  Ltd.  incorporated by reference to Exhibit 99.1 to the
     Registrant's Form 8-K filed March 26, 2007.

10.98 Commitment  Letter  dated March 20, 2007 by and among  Tarpon  Industries,
     Inc.,  LaSalle Bank Midwest N.A. and LaSalle Business Credit, a Division of
     ABN AMRO Bank,  N.V.  incorporated  by  reference  to  Exhibit  99.2 to the
     Registrant's Form 8-K filed March 26, 2007.

10.99 Fourth  Amendment  to Loan and  Reaffirmation  of  Guaranty  by and  among
     LaSalle  Bank  Midwest,  N.A.,  Eugene  Welding  Company,  Inc.  and Tarpon
     Industries,  Inc.  dated March 30, 2007  incorporated  by  reference to the
     Registrant's Form 8-K filed April 2, 2007.

16.1 Letter from Grant  Thornton  dated  September  13,  2006,  incorporated  by
     reference to Exhibit 99.2 to the  Registrant  Form 8-K filed  September 13,
     2006.

16.2 Letter  from Grant  Thornton  dated  November  27,  2006,  incorporated  by
     reference to Exhibit 99.2 to the  Registrant's  Form 8-K filed November 28,
     2006.

21.1 Subsidiaries  of Tarpon  Industries,  Inc.  incorporated  by  reference  to
     Exhibit 21.1 of the Registrant's report on Form 10-K dated March 31, 2006

32.1 Certifications  of 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.