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

                                    FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
ACT OF 1934 For the quarterly period ended June 30, 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)

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

                                       N/A

              (Former name, former address and former fiscal year,
                         if changed since last report)

     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 whether the registrant is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

     The number of the  registrant's  common shares  outstanding  as of June 30,
2006 was 4,801,982.


<PAGE>

                             TARPON INDUSTRIES, INC.

                          QUARTERLY REPORT ON FORM 10-Q

                       FOR THE QUARTER ENDED JUNE 30, 2006

                                TABLE OF CONTENTS

                                                                         PAGE

PART I - FINANCIAL INFORMATION............................................2
    ITEM 1.    FINANCIAL STATEMENTS.......................................2
    ITEM 2.    MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF
               FINANCIAL  CONDITION  AND RESULTS OF OPERATIONS............21
    ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES
               ABOUT MARKET RISK..........................................31
    ITEM 4.    CONTROLS AND PROCEDURES....................................32

PART II - OTHER INFORMATION...............................................34
    ITEM 1.    LEGAL PROCEEDINGS..........................................34
    ITEM 2.    DEFAULTS UPON SENIOR SECURITIES............................34
    ITEM 5.    OTHER INFORMATION..........................................34
    ITEM 6.    EXHIBITS...................................................34

<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                             TARPON INDUSTRIES, INC.

INDEX TO FINANCIAL STATEMENTS

                                                                           Page
Tarpon Industries, Inc.
Consolidated Balance Sheets --- June 30, 2006 and December 31, 2005......   3
Consolidated Statements of Operations --- For the Three and
   Six Months Ended June 30, 2006 and 2005.....,.........................   4
Consolidated Statements of Cash Flows --- For the Six Months
   Ended June 30, 2006 and 2005..........................................   5
Notes to Consolidated Financial Statements...............................   6

<PAGE>

Explanatory Note

This  report  on Form  10-Q for the six  months  ended  June  30,  2006 has been
submitted to the Company's registered  independent public accountants for review
as required by Regulation S-X. The Company believes that it has responded to the
comments of its registered  independent  public  accountants with regard to this
Report.   However,  the  registered  independent  public  accountants  have  not
indicated their  concurrence  with the filing of this Report because their final
review  procedure  is not  complete,  and in the  absence  of the  filing  of an
amendment to the Company's  Report on Form 10-Q for the three months ended March
31, 2006 to effect the  inclusion of default  interest for such period (see Note
7, last paragraph).  The default interest in question has been reflected in this
Report for the six month  period  ended June 30, 2006 as well as the three month
period ended June 30, 2006.  The Company  proposes to promptly file an amendment
to its Report on Form 10-Q for the three  months ended March 31, 2006 to reflect
such default interest.  If such registered  independent  public accountants have
any  further  comments  concerning  this  Report on Form 10-Q at such time,  the
Company will consider the same and file an amendment to this Report that may the
occasioned thereby.

<PAGE>

                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                                       June 30, 2006         December 31, 2005
                                                                                      ----------------       ------------------
ASSETS:                                                                                 (unaudited)
CURRENT ASSETS:
<S>                                                                                <C>                    <C>
Cash and cash equivalents                                                          $          408,799     $          7,317,364
Accounts receivable (less allowance for doubtful accounts for 2006 of
     $307,137 and for 2005 of $192,901                                                      8,526,693                7,730,029
Inventories                                                                                 8,291,945                6,919,638
Unbilled revenue                                                                            1,578,855
Other current assets                                                                          792,865                  367,681
                                                                                      ----------------       ------------------
       Total current assets                                                                19,599,157               22,334,712

Property plant and equipment - net                                                         10,655,536               11,139,700
Deferred financing costs                                                                    1,333,108                1,973,754
Goodwill                                                                                            -                2,808,800
Intangible assets, net of amortization                                                              -                  693,590
Other assets                                                                                        -                   55,365
                                                                                      ----------------       ------------------
TOTAL ASSETS                                                                       $       31,587,801     $         39,005,921
                                                                                      ================       ==================

LIABILITIES AND SHAREHOLDERS' EQUITY / (DEFICIT):
CURRENT LIABILITIES:
Short-term debt                                                                    $       10,530,454     $         11,344,379
Current maturities on long-term debt                                                        8,617,131                9,250,944
Accounts payable - trade                                                                   10,527,078               11,270,836
Customer advance payments                                                                   2,371,769                  121,068
Other current liabilities                                                                   2,077,328                1,430,401
                                                                                      ----------------       ------------------
       Total current liabilities                                                           34,123,760               33,417,628

Long-term debt less current maturities                                                          6,522                   10,242
Other long-term liabilities                                                                   219,000                  382,667
                                                                                      ----------------       ------------------
TOTAL LIABILITIES                                                                          34,349,282               33,810,537

SHAREHOLDERS' EQUITY / (DEFICIT):
Preferred shares; no par value, authorized; no shares issued at June 30,
       2006 and at December 31, 2005                                                                -                        -
Common shares; no par value, 20,000,000 shares authorized at June 30,
       2006 and at December 31, 2005; issued and outstanding, 4,801,982 shares
       at June 30, 2006 and 4,640,130 shares at December 31, 2005                          15,899,763               15,625,625
Accumulated deficit                                                                      (19,264,394)             (10,720,870)
Accumulated other comprehensive income                                                        603,150                  290,629
                                                                                      ----------------       ------------------
          Total shareholders' equity / (deficit)                                          (2,761,481)                5,195,384
                                                                                      ----------------       ------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY /(DEFICIT)                              $       31,587,801     $         39,005,921
                                                                                      ================       ==================
</TABLE>


<PAGE>


                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (unaudited)
<TABLE>
<CAPTION>

                                                     Three Months Ended June 30,         Six Months Ended June 30,
                                                     ---------------------------         -------------------------
                                                        2006             2005              2006              2005
                                                    -------------    --------------    -------------     -------------
REVENUES:
<S>                                              <C>              <C>               <C>               <C>
Sales, net of customer discounts                 $    21,484,931  $     15,086,908  $    38,492,095   $    29,105,264

Cost of goods sold                                    20,022,119        14,192,483       35,515,282        27,426,915
                                                    -------------    --------------    -------------     -------------

          Gross Profit                                 1,462,812           894,425        2,976,813         1,678,349

OPERATING EXPENSES:
Selling, general and administrative expenses           2,419,911         2,121,866        5,331,931         4,480,482
Impairment                                             4,326,177                 -        4,326,177                 -
                                                    -------------    --------------    -------------     -------------
          Total operating expense                      6,746,088         2,121,866        9,658,108         4,480,482


OPERATING LOSS                                       (5,283,276)       (1,227,441)      (6,681,295)       (2,802,133)

OTHER (INCOME) EXPENSE:
Miscellaneous (income) expense                           (4,729)            27,989         (48,737)            41,352
Financing costs                                           21,911            14,776           43,549            29,691
Gain on derivatives                                    (794,000)                 -        (693,000)                 -
Foreign exchange (gain) loss                            (64,837)            71,114         (51,464)          (53,346)
                                                    -------------    --------------    -------------     -------------
          Total other (income) expense                 (841,655)           113,879        (749,652)            17,697
                                                    -------------    --------------    -------------     -------------

INTEREST EXPENSE, NET:
Interest                                               1,255,697           186,818        2,646,916           458,148
Interest income                                          (9,109)              (44)         (35,035)           (4,849)
                                                    -------------    --------------    -------------     -------------
          Total interest expense, net                  1,246,588           186,774        2,611,881           453,299
                                                    -------------    --------------    -------------     -------------

LOSS BEFORE INCOME TAXES                             (5,688,209)       (1,528,094)      (8,543,524)       (3,273,129)
INCOME TAX PROVISION (BENEFIT)                                 -          (60,295)                -         (195,621)
                                                    -------------    --------------    -------------     -------------

NET LOSS                                         $   (5,688,209)  $    (1,467,799)  $   (8,543,524)   $   (3,077,508)
                                                    =============    ==============    =============     =============

NET LOSS PER COMMON SHARE - BASIC AND DILUTED    $        (1.22)  $         (0.32)  $        (1.84)   $        (0.82)
                                                    =============    ==============    =============     =============

WEIGHTED AVERAGE NUMBER OF COMMON SHARES               4,671,384         4,640,130        4,655,843         3,740,386
OUTSTANDING
                                                    =============    ==============    =============     =============
</TABLE>
<PAGE>

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)
<TABLE>
<CAPTION>

                                                                                         Six Months Ended June 30,
                                                                                          2006              2005
                                                                                      -------------     --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                                <C>               <C>
Net Loss                                                                           $   (8,543,524)   $    (3,077,508)
Adjustments to reconcile net loss to net cash used in operating activities:
     Depreciation and amortization                                                         505,312            334,257
     Accretion of note discount and other charges                                        1,142,687                  -
     Unrealized foreign currency gain                                                            -           (24,374)
     Stock option expense                                                                   64,513                  -
     Non-employee stock options                                                                  -            424,200
     Stock issued as compensation                                                           20,000
     Deferred tax benefit                                                                        -          (194,916)
    Gain on derivative instrument                                                        (693,000)                  -
     Impairment                                                                          4,326,177                  -
     Changes in assets and liabilities:
          Accounts receivable (increase) decrease                                        (676,795)          1,574,498
          Refundable federal income taxes increase                                               -           (91,999)
          Inventory (increase) decrease                                                (1,264,490)          1,061,135
          Unbilled revenue increase                                                    (1,578,855)                  -
          Other current assets (increase) decrease                                       (425,184)             51,821
          Customer advance payments increase                                             2,250,701                  -
          Accounts payable and other current liabilities increase (decrease)               887,902        (2,361,600)
                                                                                      -------------     --------------
               Net cash used in operating activities                                   (3,984,556)        (2,304,486)

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition costs                                                                         (30,531)        (8,151,820)
Payments of FenceMaster obligations                                                      (984,733)                  -
Capital expenditures                                                                     (282,245)          (138,429)
                                                                                      -------------     --------------
                                                                                       (1,297,509)        (8,290,249)
     Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common shares (net of issuance costs paid in 2005 of                   -         13,512,121
$1,154,485)
Financing costs                                                                                  -           (20,000)
Net (payments) borrowings on credit facilities                                         (1,030,727)            708,587
Proceeds from issuance of long-term debt                                                         -          1,714,524
Repayment of short-term obligations                                                              -          (341,467)
Repayment of long-term obligations                                                       (543,266)        (4,420,743)
                                                                                      -------------     --------------
     Net cash (used in) provided by financing activities                               (1,573,993)       (11,153,022)

IMPACT OF FOREIGN CURRENCY EXCHANGE ON CASH                                               (52,507)            (8,220)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                   (6,908,565)            550,067
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                           7,317,364            257,786
                                                                                      -------------     --------------
CASH AND CASH EQUIVALENTS, END OF PERIOD                                           $       408,799   $        807,853
                                                                                      =============     ==============

Supplemental disclosure of cash flow information:
     Cash paid during the period for interest                                      $       803,106   $        458,148
                                                                                      =============     ==============
Non-cash transactions:
     Success fee obligation for acquisition                                        $             -   $        200,000
                                                                                      =============     ==============
     Stock issued as compensation                                                  $        20,000                  -
                                                                                      =============     ==============
     Stock issued as payment of debt                                               $       187,500   $        303,180
                                                                                      =============     ==============
     Accrued initial public offering expenditures                                  $             -   $        427,913
                                                                                      =============     ==============
     Issuance of debt to purchase land and building                                $             -   $      4,141,488
                                                                                      =============     ==============
</TABLE>

<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)

1. Financial Statement Presentation

     The  unaudited  interim  consolidated  financial  statements in this report
reflect all adjustments which are, in our opinion, necessary to fairly state the
results for the interim periods presented. All adjustments that are material are
of a normal  recurring  nature.  Our operating  results for the six-month period
ended June 30,  2006 do not  necessarily  indicate  the  results  that should be
expected  for  the  year  ending  December  31,  2006.  The  unaudited   interim
consolidated  financial statements should be read together with the consolidated
financial  statements  and related  notes  included in our Annual Report on Form
10-K for the year ended December 31, 2005.

2. Recent Accounting Pronouncements

     In June 2006, The Financial  Accounting  Standards  Board  ("FASB")  issued
Interpretation   No.  48,   Accounting  for   Uncertainty  in  Income   Taxes-an
interpretation  of FASB  Statement  No. 109.  This  interpretation  prescribes a
recognition  threshold and  measurement  attribute  for the financial  statement
recognition and measurement of a tax position taken or expected to be taken in a
tax return, and provides guidance on derecognition, classification, interest and
penalties,  accounting in interim  periods,  disclosure,  and  transition.  This
interpretation  is effective for fiscal years beginning after December 15, 2006.
We are currently  assessing the impact of this  interpretation  on our financial
statements.

3. Financial Position

     The accompanying 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. The Company has sustained losses
of  approximately  $19.3  million from its inception on January 16, 2002 through
June 30,  2006 and has  negative  working  capital  of $14.4  million  and is in
violation of its debt covenants as of June 30, 2006. If the Company is unable to
significantly  decrease its losses and obtain  additional  financing  needed for
growth and to meet vendor payments, its financial resources will not be adequate
to satisfy its operating and capital requirements over the next twelve months.

     As of June 30, 2006,  the Company had not  completed the sale and leaseback
of its Haines Road property due to environmental matters described more fully in
note 6. In the event a transaction  is not  consummated,  the Company's cash and
debt position would not enable it to repay  mortgages  totaling $4.6 million due
August 18, 2006. If the Company is unable to negotiate a transaction  or stay of
obligation to satisfy the mortgages,  it will be in default, which could disrupt
operations.

     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  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.

4. Acquisitions

     In February 2005, Steelbank,  Inc.  ("Steelbank"),  a subsidiary of Tarpon,
completed the  acquisition of  substantially  all of the assets,  other than the
real  estate,  of the Haines  Road  facility  from Bolton  Steel Tube Co.,  Ltd.
("Bolton"),  pursuant to an Asset Purchase Agreement  originally entered into in
July 2004, as amended.  The aggregate  purchase price including expenses related
to the Haines Road acquisition 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 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 7.

     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 April 6, 2006,  Tarpon signed an agreement to purchase the assets of J&J
Tube  Inc.  While we intend to  pursue  this  transaction,  we do not view it as
probable unless we are able to raise additional funds.

     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).

     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 intangibles                                  1,212,000
Land and buildings                                 4,638,000
                                              -----------------
Total assets acquired                      $      14,828,000
                                              =================


5. Goodwill and Intangible Assets

     In the fourth  quarter of 2005,  the  Company  completed  its annual  asset
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 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 change in goodwill is as follows:

         Balance at December 31, 2005                  $ 2,808,800
         Foreign currency impact                           114,907
         Impairment                                    (2,923,707)
                                                       -----------
         Balance at June 30, 2006                      $        -
                                                      =============

     The  Company's  intangible  assets  are  valued  based  on  an  independent
appraisal and consist of the following:

                                                      Covenant Not
                                   Customer Base      To Compete        Total
                                   -------------      ----------        -----
Balance at December 31, 2005       $   408,654       $    284,936   $   693,590
Foreign currency impact                 16,141             11,096        27,237
Amortization                          (34,694)           (33,663)      (68,357)
Impairment                           (390,101)         ( 262,369)     (652,470)
                                   -----------       ------------   -----------
Balance at June 30, 2006           $         -       $          -   $         -
                                   ===========       ============   ===========


6. Details of Balance Sheet

     UNBILLED REVENUE:

                                   June 30, 2006        December 31, 2005
                                   ----------------     ------------------
                                   $      1,578,855     $           -

     In  2006,   the  Company   undertook   several  large  racking  design  and
     construction projects for large specialty retail customers. These projects,
     led by the Company's SpaceRak division,  were completed in phases including
     engineering and design,  construction,  installation  and  completion,  and
     final  inspection  including  sign off by the customer  prior to release of
     final  payment.  At June 30,  2006,  the  Company had  completed  two major
     racking  projects  including  the  installation  phase and had incurred all
     project related costs while awaiting final  installation  and customer sign
     off.  Unbilled  revenue  represents  the earned  revenue  that had not been
     invoiced as of June 30.

     INVENTORIES:

                                     June 30, 2006        December 31, 2005
                                   ----------------     --------------------
      Raw Materials                $     3,578,941      $       3,548,251
      Work in Process                    1,458,962                303,096
      Finished Goods                     3,060,262              2,882,126
      Supplies                             193,780                186,165
                                   ----------------     --------------------
                TOTAL              $     8,291,945      $       6,919,638
                                   ================     ====================

     PROPERTY, PLANT AND EQUIPMENT:

                                         June 30, 2006        December 31, 2005
                                        ---------------      ------------------
    Land                                 $    2,392,888       $   2,649,939
    Building and leasehold improvements       2,807,286           2,916,370
    Machinery and equipment                   6,226,946           5,891,036
    Computer equipment                          348,951             285,406
    Transportation equipment                     57,442              56,147
    Furniture and fixtures                       77,076              74,683
    Construction in progress                     37,174              80,865
                                         ---------------     ------------------
         Total                               11,947,763          11,954,446
    Accumulated depreciation
      and amortization                      (1,292,227)           (814,746)
                                         ---------------     ------------------
    Net Property, Plant and Equipment    $   10,655,536      $   11,139,700
                                         ===============     ==================

     In  March  2006,  the  Company  entered  into  an  agreement  with  Agellan
     Investments,  Inc.  ("Agellan")  to sell all the land and  buildings of the
     Company's  Steelbank  operations  located in Mississauga,  Ontario for Cdn.
     $6.4 million and lease back the facility for  operations.  Proceeds were to
     be used to retire existing  mortgages on the property and to provide modest
     working capital.  During the quarter ended June 30, 2006,  Agellan,  in the
     course of its due diligence,  hired an  environmental  engineering  firm to
     survey  the site.  The  engineering  firm  discovered  contaminants  on the
     property,  a fact previously  undisclosed to the Company.  Remediation cost
     estimates range between $0.5 million and $1.2 million. The Company is still
     in  discussions  with  Agellan  to  consummate  a  transaction.  Based upon
     discussions with the prospective  purchaser and real estate  professionals,
     management determined the fair value of the property was below the carrying
     value of the property.  Accordingly,  an impairment  charge of $750,000 has
     been recorded during the quarter ended June 30, 2006.

     7. Debt

     Short Term Debt

                                       June 30, 2006        December 31, 2005
                                      ----------------     --------------------
   EWCO revolving credit facility       $    3,467,053       $     6,016,786
   Steelbank revolving credit facility       3,997,068             2,356,418
   First mortgage on Haines Road
     real estate                             3,066,333             2,971,175
                                      ----------------     --------------------
      TOTAL                            $    10,530,454       $    11,344,379
                                      ================     ====================

     Long Term Debt

                                       June 30, 2006        December 31, 2005
                                      ----------------     --------------------
    EWCO term loan                     $       929,333       $    1,068,733
    Steelbank term loan                      1,406,633            1,531,530
    Second mortgage on Haines Road
      real estate                            1,071,720            1,029,600
    Third mortgage on Haines Road
      real estate                              446,550              429,000
    Convertible debt (less discounts of
      $870,963 and $818,980, respectively)   4,754,037            5,181,020
    Other                                       15,380               21,303
                                      ----------------     --------------------
           Total                             8,623,653            9,261,186
    Current portion                        (8,617,131)          (9,250,944)
                                      ----------------     --------------------
    Long-term portion                 $          6,522     $         10,242
                                      ================     ====================

     Annual  maturities of long-term debt and capital lease obligations based on
the stated terms of the underlying agreements are as follows:

                              2006            $      2,847,504
                              2007                   2,503,530
                              2008                   2,571,408
                              2009                     607,435
                              2010                      93,776
                                                 --------------
                              TOTAL           $      8,623,653
                                                 ==============


     EWCO Credit Facility

     Eugene  Welding  Company  ("EWCO"),  a subsidiary  of Tarpon,  has a credit
facility with LaSalle Bank Midwest,  N.A. which provides for a revolving  credit
line up to $9,000,000,  subject to a borrowing base based on eligible  inventory
and receivables, originally maturing August 31, 2007; and a $1,394,000 term loan
payable  in  equal  monthly  installments  of  principal  based  on a five  year
amortization  ending  August 1, 2009,  but  maturing  August 31, 2007 should the
revolving credit line not be renewed.

     Both the  revolving  credit  line and term loan are  secured  by all of the
assets of EWCO,  approximating  $15.2  million,  and a guarantee by Tarpon.  The
principal amount  outstanding bears interest payable monthly at the bank's prime
rate (8.25% at June 30, 2006).

     Both loan  agreements  require  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.  Both loan  agreements  also  require EWCO to
maintain minimum  tangible net worth of ($1,130,000)  plus 80% of its net income
for the preceding fiscal year (not reduced for losses), starting with net income
for 2005.  EWCO's debt  service  coverage  ratio as of June 30, 2006 was 0.89 to
1.0, and thus, the Company was not in compliance with this test. EWCO's tangible
net worth as of June 30, 2006 was ($1,063,206), surpassing the minimum required.
However,  as a result of EWCO's  non-compliance  with its debt service coverage,
EWCO was technically in default as of June 30, 2006.

     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 its  initial  public  offering  and in excess of  $750,000  in the
subsequent 12-month period.

     The EWCO  credit  agreement  also  provides  that it is  subject to default
interest  charges  in the  event  that any of its  related  obligors,  including
Steelbank or Laurus are in default.  At June 30, 2006 Steelbank was  technically
in  default  regarding  its  covenants,  and  Tarpon  Industries  was in default
regarding the Laurus Senior  Convertible  Term Note,  EWCO's debt to LaSalle was
technically  in  default,  and  accordingly,  is  considered  to  be  a  current
obligation.  EWCO is therefore subject to default interest equivalent to two per
cent (2%) per annum and  recorded  $25,000 and $16,000 in expenses  respectively
for the first and second quarters of 2006, respectively.

     EWCO must also 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. Approximately $109,000 was available for borrowing under the revolving
credit  facility  as of June  30,  2006,  assuming  revision  of  existing  debt
covenants.

Steelbank Credit Facility

     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 in the maximum  principal amount
of Cdn.  $8,000,000 and subject to a borrowing base based on eligible  inventory
and receivables originally maturing on February 17, 2008, and (2) 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 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
1.00% and 1.50%  (7.5% at June 30,  2006).  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% (7.5%
at June 30,  2006).  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
(8.25% at June 30, 2006).

     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 assets of Steelbank,
approximating  $17.2 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 Lender.

     The Loan  Agreement  contains  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
Cdn.  $500,000 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.  $4,841,765.  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), and the required minimum adjusted
net worth was $5,066,112. 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 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.

     At June 30, 2006,  Steelbank's debt service coverage ratio was 0.39 to 1.00
compared with a required ratio of 1.25 to 1.00, and its interest  coverage ratio
was 1.67 to 1.00 compared with required 1.50 to 1.00.  Hence,  Steelbank was not
in compliance with its debt service coverage covenant. Additionally, Steelbank's
adjusted net worth was Cdn.  $4,267,038,  below the covenant minimum as adjusted
at June 30, 2006 of  $5,066,112.  Therefore,  Steelbank was also in violation of
its tangible net worth  covenant,  resulting from losses  sustained in the first
six months of 2006 and in prior  periods.  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. As a result
of the technical defaults, Steelbank is also subject to default interest charges
equivalent  to two per cent  (2%)  per  annum,  and  accordingly  Steelbank  has
recorded $15,000 in each of the first and second quarters in 2006, respectively.
The Company has  negotiated a waiver for default  interest  applied to the first
and second quarters of 2006

     Each  month,  Steelbank  must pay a 0.50%  unused line of credit fee and an
administrative fee of approximately  $1,700. As of June 30, 2006,  approximately
$740,000  was  available  for  borrowing,  assuming  revision of  existing  debt
covenants.


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, 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 (7.25% at June 30, 2005), 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.  As  of  June  30,  2006,
approximately $3,066,000 (Cdn. $3,447,000) and the entire balances of $1,072,000
(Cdn. $1,200,000) and $446,000 (Cdn. $500,000) were outstanding under the first,
second, and third mortgages, respectively.

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 June 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 $271,000 as of
June 30, 2006, $873,000 as of March 31, 2006, and $817,000 as December 31, 2005.
The  $546,000  decrease in value  during six months ended June 30, 2006 is shown
under "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 $219,000 as of June 30,  2006,  $411,000 as of March
31, 2006 and $366,000 as of December 31,  2005.  The $147,000  decrease in value
during the six months ended June 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 principle 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.

     As of June 30, 2006,  the Company,  while  current with respect to interest
payments due Laurus,  was in default on its principle  payment due June 1, 2006.
Additionally,  the Company was  technically  in default on the entire  amount of
principle  as of  January  1, 2006,  and as a result,  was  subject to a default
interest  penalty  at a rate of two per cent  per  month  times  the  amount  of
principle  outstanding  according to terms provided under the Senior Convertible
Term Note agreement.  The note is subject to default interest should the company
be in violation of any condition  relating to its  indebtedness.  As a result of
Steelbank's non-compliance with its loan Covenant to LaSalle Bank as of December
31, 2005,  the Company was  technically in default on the Laurus note and liable
for default interest.  Accordingly, the Company has recorded default interest of
$428,000 and $341,000 in the first and second quarters, respectively.

8. 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 June 30, 2006.

     The  Company  recognized  as an  operating  expense,  non-cash  stock-based
compensation  cost in the amount of $34,000 in the second quarter and $65,000 in
the six months ended June 30, 2006. This had the effect of decreasing net income
by $34,000,  or $0.01 per diluted share, for the quarter,  and $65,000,  or $.01
per diluted  share for the six months ended June 30, 2006.  As of June 30, 2006,
the total remaining  unrecognized  compensation cost related to non-vested stock
options  amounted to $144,000,  which will be recognized over a weighted average
period of 1.6 years.  The total fair value of  options  that  vested  during the
three   months  and  six  months  ended  June  30,  2006  were  $0  and  $94,000
respectively.

     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
stock-based  awards under the fair value method of that statement.  For purposes
of pro forma disclosure,  the estimated fair value of the stock-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 income and  earnings per share for the three months and six months
ended June 30, 2005 as if the  Company  had  applied the fair value  recognition
provisions  of SFAS  123R to its  stock-based  employee  compensation  plans (in
thousands, except per share amounts):


                                         (in thousands except per share data)

                                      Three Months           Six Months Ended
                                      Ended 6/30/2005          6/30/2005
                                      -------------------   ------------------
    Net Loss:
    As Reported                         $       (1,468)     $         (3,078)
    Effect of Stock-based Compensation                -                     -
    Expense - net of tax                           (61)                  (89)
                                      -------------------   ------------------
         Pro Forma                      $       (1,529)     $         (3,167)
                                      ===================   ==================

         Loss Per Share:
         Basic - As Reported            $        (0.32)     $          (0.82)
         Basic - Pro Forma              $        (0.33)     $          (0.85)
         Diluted - As Reported          $        (0.32)     $          (0.82)
         Diluted - Pro Forma            $        (0.33)     $          (0.85)

     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 the six months ended June 30, 2006, the Company granted options
for 50,000 shares, all issued on April 26, 2006 to James Bradshaw,  Chairman and
Chief Executive  Officer,  exercisable at $2.45 per share. 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>

                                                Three Months Ended June 30, 2006            Six Months Ended June 30, 2006
                                                --------------------------------            ------------------------------
                                                           Weighted                                      Weighted
         Shares Subject to Option            Shares        Average       Aggregate       Shares          Average      Aggregate
                                                           Exercise      Intrinsic (1)                   Exercise     Intrinsic (1)
                                                           Price         Value                           Price        Value
------------------------------------------- ---------- -- ------------ -------------- ------------- -- ------------ --------------
<S>                                           <C>      <C>                                 <C>      <C>
Outstanding at beginning of period            323,190  $         5.50       --             415,085  $         5.50       --
New Grants (based on fair value of
     common stock at dates of grant            50,000  $         2.45       --              50,000  $         2.45       --
Exercised                                          --  $           --       --                  --  $           --       --
Expired                                            --  $           --       --                  --  $           --       --
Forfeited                                    (60,000)  $         5.50       --           (151,895)  $         5.50       --
                                            ----------                                -------------
Outstanding at end of period                  313,190  $         5.01       --             313,190  $         5.01       --
Exercisable at end of period                  161.063  $         5.50       --             161.063  $         5.50       --

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

                                                Three Months Ended June 30, 2005            Six Months Ended June 30, 2005
                                                --------------------------------            ------------------------------
                                                           Weighted                                     Weighted
         Shares Subject to Option            Shares        Average      Aggregate       Shares          Average      Aggregate
                                                           Exercise     Intrinsic (1)                   Exercise     Intrinsic (1)
                                                           Price        Value                           Price        Value
------------------------------------------- ---------- -- ------------ -------------- ------------- -- ------------ --------------
Outstanding at beginning of period                 --  $           --       --                  --  $           --       --
New Grants (based on fair value of
     common stock at dates of grant           346,785  $         5.50       --             346,785  $         5.50       --
Exercised                                          --  $           --       --                  --  $           --       --
Expired                                            --  $           --       --                  --  $           --       --
Forfeited                                          --  $           --       --                  --  $           --       --
                                            ----------                                -------------
                                            ----------                                -------------
Outstanding at end of period                  346,785  $         5.50       --             346,785  $         5.50       --
Exercisable at end of period                       --  $           --       --                  --  $           --       --

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

         The total fair value of vested shares on June 30, 2006 was $94,000.
</TABLE>

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

<TABLE>
<CAPTION>

                                                          Three                Three              Six                Six
                                                          Months               Months             Months             Months
                                                          Ended                Ended              Ended              Ended
                                                        6/30/2006            6/30/2005          6/30/2006          6/30/2005
                                                       -------------     ------------------     -----------     ------------
Weighted Average Estimated Fair Value Per
<S>                                                 <C>               <C>                   <C>              <C>
     Share of Options Granted During the Period     $      1.08       $         N/A         $      1.08      $     3.03
Assumptions:
     Amortized dividend yield                             0.00%                 N/A               0.00%            0.00%
     Common Stock price volatility                        60.00%                N/A               60.00%          60.00%
     Risk free rate of return                             5.00%                 N/A               5.00%            3.78%
     Expected option term (in years)                        3                   N/A                 3                5
</TABLE>

     The following table summarizes  information about stock options at June 30,
2006:
<TABLE>
<CAPTION>

                               OPTIONS OUTSTANDING                                 OPTIONS EXERCISABLE
                               -------------------                                 -------------------
   Range of                    Weighted Average      Weighted                  Weighted Average        Weighted
   Exercise                       Remaining          Average                     Remaining             Average
   Prices        Shares        Contractual Life      Exercise Price  Shares    Contractual Life        Exercise Price
--------------- ---------- -------------------- --- --------------- --------- -------------------- --- ---------------

<C>              <C>              <C>           <C>                 <C>              <C>           <C>
$2.45            313,190          7.94          $        5.01       161,063          8.64          $        5.50
to $5.50
</TABLE>

     At June 30, 2006, options covering 150,215 shares were available for future
grants under the 2004 Plan.

9. Comprehensive Loss

     Our Comprehensive losses are as follows:
<TABLE>
<CAPTION>

                                                    Three Months Ended June 30,           Six Months Ended June 30,
                                                    ---------------------------           -------------------------

                                                        2006               2005              2006               2005
                                                        ----               ----              ----               ----

<S>                                              <C>                <C>               <C>                <C>
Net Loss                                         $    (5,089,865)   $    (1,467,799)  $   (7,476,978)    $   (3,077,508)
Other comprehensive income (loss):
     Foreign currency translation  adjustments            329,194           (14,774)          312,521           (33,138)
                                                    --------------     --------------    --------------     -------------
Comprehensive Loss                               $    (4,760,671)   $    (1,482,573)  $   (7,164,457)    $   (3,110,646)
                                                    ==============     ==============    ==============     =============
</TABLE>

10. Related Party Transactions

     In April 2004, the Company entered into a Management  Consulting  Agreement
with Bainbridge  Advisors,  Inc., an advisory firm primarily 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,
and (2) increase the monthly fee from $15,000 to $20,000,  effective April 2005,
and (3) to 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
extended 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>

                                              Three Months Ended June 30,        Six Months Ended June 30,
                                              ---------------------------        -------------------------

                                                  2006              2005             2006             2005
                                                  ----              ----             ----             ----

<S>                                         <C>              <C>               <C>             <C>
Advisory Services and Expenses              $       67,250   $         72,142  $     136,192   $       182,908
Stock Options                                            -                  -              -           333,300
Success Fees                                             -                  -              -           200,000
                                               ------------     --------------    -----------     -------------
     TOTAL                                  $       67,250   $         72,142  $     136,192   $       516,208
                                               ============     ==============    ===========     =============
</TABLE>

     During the six month period ending June 30, 2006 and 2005, the Company paid
the former Chairman of the Board,  President and Chief Executive Officer and his
son,  individually and through Bainbridge Advisors,  Inc. $280,640 and $373,103,
respectively.

     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, which were paid in full as of June 30, 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 issued 2,000 common shares 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.
Gunnar 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 7), Gunnar received a cash fee of $600,000
and 300,000  warrants with an exercise price of $3.27 and 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, 2005,
these  warrants were marked to market with a value of $366,000 and a gain on the
instrument  was  recorded  to gain from  derivatives.  Gunnar  also  receives  a
retainer payable monthly in the amount of $7,500 which expires in December 2006.
The following table summarizes the compensation earned by Gunnar:

<TABLE>
<CAPTION>
                                          Three Months Ended June 30,        Six Months Ended June 30,
                                          ----------------------------       --------------------------
                                                2006              2005             2006             2005
                                                ----              ----             ----             ----

<S>                                     <C>              <C>               <C>             <C>
Fees and Expenses                       $       22,500   $         22,500  $       46,000  $        79,926
Initial Public Offering                              -                  -               -        1,638,750
                                           ------------     --------------    ------------    -------------
     TOTAL                              $       22,500   $         22,500  $       46,000  $     1,718,676
                                           ============     ==============    ============    =============
</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.  The
Company has not incurred  additional  costs during the six months ended June 30,
2006 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. Income Taxes

     Tarpon has not recognized  potential U.S. or Canadian  federal tax benefits
from its net losses because of the uncertainty  regarding its ability to realize
future tax benefits of its net operating loss carryforwards.  The potential loss
carryforward  at June 30, 2006 is  approximately  $13.3 million.  If the Company
achieves profitability, the net operating loss carryforwards may be available to
offset future income taxes.

13. Segment and Geographic Information

     The Company operates in business segments that are distinguished  primarily
by 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>

                                                           Three Months Ended June 30, 2006
                                                           --------------------------------
                                             EWCO             Steelbank         Other (2)            TOTAL
                                             ----             ---------         ---------            -----

<S>                                   <C>                <C>               <C>                 <C>
External Revenues                     $     15,369,381   $      6,115,550  $              -    $    21,484,931
Inter-Segment Sales                             21,390            211,357         (232,747)                  -
Depreciation and Amortization                   28,460            229,609                 -            258,069
Operating Loss                               (142,803)        (4,159,138)         (981,335)        (5,283,276)
Total Assets                                15,170,420         17,229,285         (811,904)         31,587,801
Capital Expenditures                                 -            282,245                 -            282,245


                                                           Three Months Ended June 30, 2005
                                                           --------------------------------
                                             EWCO            Steelbank         Other (2)             TOTAL
                                             ----            ---------         ---------             -----

External Revenues                     $      9,558,549  $       5,528,359  $             -     $   15,086,908
Inter-Segment Sales                             30,429                  -         (30,429)                  -
Depreciation and Amortization                   26,584             78,657                -            105,241
Operating Profit (Loss)                      (755,806)              5,317        (476,952)        (1,227,441)
Total Assets                                12,808,107         21,658,277      (2,450,738)         32,015,646
Capital Expenditures                            13,734             18,762                -             32,496


                                                            Six Months Ended June 30, 2006
                                                            ------------------------------
                                             EWCO             Steelbank         Other (2)            TOTAL
                                             ----             ---------         ---------            -----

External Revenues                     $     27,246,034   $     11,246,061  $              -    $   38,492,095
Inter-Segment Sales                            208,795            211,357         (420,152)                 -
Depreciation and Amortization                   57,432            447,880                 -           505,312
Operating Loss                                (60,342)        (4,292,687)       (2,328,266)       (6,681,295)
Total Assets                                15,170,420         17,229,285         (811,904)        31,587,801
Capital Expenditures                                 -            282,245                 -           282,245

                                                            Six Months Ended June 30, 2005
                                                            ------------------------------
                                             EWCO             Steelbank         Other (2)            TOTAL
                                             ----             ---------         ---------            -----

External Revenues                     $     21,062,272   $      8,042,992  $              -    $   29,105,264
Inter-Segment Sales                            273,731                  -         (273,731)                 -
Depreciation and Amortization                   70,938            301,027          (37,708)           334,257
Operating Loss                             (1,014,240)          (252,007)       (1,535,886)       (2,802,133)
Total Assets                                12,808,107         21,658,277       (2,450,738)        32,015,646
Capital Expenditures                            37,556            100,873                 -           138,429
</TABLE>


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

     Revenues  by country  for the three and six months  ended June 30, 2006 and
2005 are as follows:

<TABLE>
<CAPTION>

                           Three Months Ended June 30,            Six Months Ended June 30,
                           ---------------------------            -------------------------
                               2006               2005               2006               2005
                               ----               ----               ----               ----

<S>                     <C>                <C>               <C>                <C>
United States           $     16,969,460   $     11,105,933  $      30,803,452  $      23,061,966
Canada                         4,515,471          3,980,975          7,688,643          6,043,298
                           --------------     --------------    ---------------    ---------------
     TOTAL              $     21,484,931   $     15,086,908  $      38,492,095  $      29,105,264
                           ==============     ==============    ===============    ===============
</TABLE>


14. Subsequent Event

     Waiver of Default  Interest - In mid August the  Company  received  waivers
from the Laurus Master Trust and from LaSalle  Business  Credit  division of ABN
AMRO Bank N.V.  ("LaSalle") for default  interest  expense recorded in the first
and second quarters of 2006.

     Under the terms of the Laurus Senior Convertible Term Note (the "Note"), in
the  event  that  the  Company  or any of its  subsidiaries  fails  to meet  any
conditions  of its  respective  loan  covenants,  the Company is deemed to be in
default on the Note and accordingly is liable for default  interest expense at a
rate of two per cent (2%) per  month  times the  amount of Note  principle  plus
accrued interest outstanding. As of December 31, 2005 and through June 2006, the
Steelbank  subsidiary  of the  Company  was  not in  compliance  with  covenants
relating to its revolving  credit line. As a result,  the Company was liable for
default  interest on the Note in the amount of  $428,000  and  $341,000  for the
first and second quarters in 2006 respectively.

     On August 16, 2006  Laurus  granted a waiver to the Company for the default
interest  provision of the Note under  circumstances  whereby the Company or its
subsidiaries  fails to meet its respective loan covenants,  but not in the event
of default on payments. In exchange for granting this waiver, the Company agreed
to transfer to Laurus 100,000 shares of common stock, and an additional  100,000
shares should the Company raise equity at a future date.

     On August 14, LaSalle  granted a waiver for default  interest for the first
and second  quarters in 2006.  Steelbank  had recorded  default  interest in the
amount of $15,000 for each quarter respectively.

     As a result  of  waivers  granted,  the  Company  expects  to  relieve  its
liability for default  interest  accrued up through the time of the grant and to
record a gain in the third quarter 2006.

ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

Cautionary Statement Regarding Forward Looking Statements

     Management's discussion and analysis should be read in conjunction with the
unaudited interim consolidated  financial statements and the accompanying notes.
As you read the material  below,  we urge you  carefully  consider our financial
statements and related information provided herein.

     Some of the statements in this report contain forward  looking  statements.
Forward  looking  statements  include  statements  relating  to  performance  in
"Management's  discussion  and  Analysis of Financial  Condition  and Results of
Operations."  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 our company and or its officers,  including  statements preceded
by or including  forward looking  terminology such as "may",  "will",  "should",
"expect",  "anticipate",  "believe",  "plan", "intend",  "propose",  "estimate",
"continue",  "predict"  or other  similar  expressions  with  respect to various
matters.  Our actual results may differ  materially  from those projected in the
forward looking statements due to numerous factors, particularly those discussed
in the  "Risk  Factors"  in our  annual  report  on Form 10K for the year  ended
December 31, 2005.  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 otherwise.

Overview of Recent Operations

     During the second  quarter of 2006,  the Company had net  revenues of $21.5
million and a net loss of $5.1 million or ($1.08) per share compared with second
quarter  2005 net  revenues of $15.1  million and a net loss of $1.5  million or
($0.32) per share. The second quarter 2006 net loss of $5.1 million included:

o    Impairment of goodwill and intangibles of $3,576,000
o    Impairment of the Haines Road real estate of $750,000
o    Penalty interest of $372,000
o    Amortization of finance costs and accretion of note discounts,  recorded as
     interest expense, of $486,000
o    Severance costs of $144,000
o    Gain on derivative instruments of $794,000

     For the first six months of 2006, the Company had revenues of $38.5 million
and a loss of $8.5 million or ($1.83) per share.  This compares with revenues of
$29.1  million and a loss of $3.1 million or ($0.82) per share for the first six
months of 2005.

Comparison  of  Operating  Results for the Three  Months Ended June 30, 2006 and
2005

Net Revenues

     Listed in the table below are the net revenues and tonnage  shipped for the
three months ended June 30, 2006 and 2005:

<TABLE>
<CAPTION>

                                                      Three Months Ended June 30,
                                                      ---------------------------
                                             2006                                    2005
                                   Net Revenues          Tonnage           Net Revenues          Tonnage
                                   ------------          -------           ------------          -------

<S>                          <C>                             <C>     <C>                             <C>
EWCO Tubular                 $           5,934,426           7,592   $           5,077,853           6,170
EWCO SpaceRak                            9,223,598           6,752               4,480,696           3,492
Steelbank Tubular (3)                    6,326,907           5,844               5,528,359           5,050
                                -------------------    ------------     -------------------    ------------
     TOTAL                   $          21,484,931          20,188   $          15,086,909          14,712
                                ===================    ============     ===================    ============
</TABLE>


     (3)  Tonnage shipped is not available for consolidated Steelbank,  prior to
          purchase  of  Haines  Road;   therefore,   tonnage  reported  reflects
          information  since the  acquisition of Haines Road,  which occurred in
          February 2005.

     Net revenue for the second quarter of 2006 increased approximately 42% over
the same period in 2005 from $15.1 million to $21.5  million,  while volume on a
tonnage basis increased 37%.

     EWCO Tubular sales volume  (tonnage)  increased 23% in Q2 2006 over Q2 2005
as a result of growth in the  Company's end markets  served and increased  sales
initiatives  to improve  volume as well as  reposition  the customer base from a
historical  concentration on the Recreational  Vehicle ("RV") sector (previously
about  80%  of  tubing  sales)  to a  broader  customer  base  including  OEM's,
agriculture, greenhouse manufacturers and distributors, most of whom can provide
higher margins than the RV sector.  Second quarter revenues of $5.9 million were
16.4% higher than 2005, as revenue on a per ton basis declined by 5.5% from $823
in the second quarter of 2005 to $782 in the second quarter of 2006. The decline
in sales per ton  reflected  the overall  market's  response to declining  steel
costs. Despite lower sales price per ton, EWCO Tubing margins improved year over
year as a result of repositioning the customer base.

     Sales of EWCO's SpaceRak,  an engineering  project driven business,  saw an
increase in sales of  approximately  105.8% in Q2 2006 to $9.2 million  compared
with $4.5 million in Q2 2005. The sales increase was driven by increased selling
efforts to promote the Company's value added engineering design capability,  the
ability to attract large projects from national customers with multi-sites,  and
improvement in pricing.  As a result,  sales volume increased 93% year over year
from 3.5 thousand tons in Q2 2005 to 6.8 thousand tons in Q2 2006, while revenue
per ton  increased  by 6.4% from  $1,283 in Q2 2005 to $1,366 in Q2 2006.  Large
national  customers  accounted  for more than 20% of Q2 2006 sales  whereas  the
Company did not have such contracts in Q2 2005.

     Steelbank  Tubular  sales were $6.3 million in Q2 2006,  an increase of 14%
over Q2 2005 sales of $5.5.  Sales tonnage over the same period  increased 15.7%
to 5.8 thousand  tons in Q2 2006  compared  with 5.1  thousand  tons in Q2 2005.
Sales revenues and volumes  reflected the Company's success in increasing market
penetration  in  traditional  market  segments  such as fencing  and  greenhouse
manufacture while expanding to leisure products and equipment as well as tier II
automotive parts manufacturers. Revenue on a per ton basis declined by 1.1% from
$1,095 in 2005 to $1,083 in 2006 largely reflecting the same trend in hot rolled
steel prices during the same respective periods.

Cost of Goods Sold and Gross Profit

     Gross  profit for the three  months ended June 30, 2006 was $1.5 million or
6.8% of sales  compared  with $0.9  million or 5.9% of sales for the same period
ended 2005.  The main  driver was growth in volume and  improved  efficiency  in
manufacturing labor and overhead.

     While selling  prices were  increased in Q2 2006,  steel costs rose rapidly
during the quarter,  faster than announced  price increases could be implemented
for tubing sales.

     For  SpaceRak  sales,  larger jobs had higher  material  content  including
purchased  (pass  thru)  part  sales with  lower  margins,  although  production
efficiencies were achieved.

Selling, General and Administrative Expense

     Selling,  general and  administrative  expense  including  depreciation and
amortization  was $2.4 million or 11.3% of sales in Q2 2006  compared  with $2.1
million or 14.1% of sales in Q2 2005. The $0.3 million  increase in cost in 2006
was driven primarily by increases in bad debt expense of $136,000,  professional
services of $236,000 and salaries and wages of $206,000.

Impairment

     The Company  incurred  two types of  impairment  in Q2 2006.  Goodwill  and
intangibles   related  to  the  Steelbank  and  Haines  Road  acquisitions  were
determined to be impaired based upon an evaluation of these assets  conducted in
Q2 2006  in  accordance  with  provisions  of  SFAS  144.  This  resulted  in an
impairment charge of $3.7 million (see Note 5 "Goodwill and Intangible Assets").

     Additionally,  the Company  incurred an  impairment  charge  related to the
Haines Road location in Mississauga,  Ontario. The Company learned that the site
contained environmental contaminants,  which according to Canadian law would not
require remediation as long as Tarpon (Steelbank) continued to own the property.
However, if the property were sold, remediation would be required. At the end of
Q2 2006, the property was under contract for sale. The prospective  buyer, which
initiated an environmental  survey as part of its due diligence,  discovered the
presence of  contaminants.  The  prospective  buyer is still in  negotiations to
purchase the site,  albeit at a reduced value. By comparing the reduced value to
the  carrying  value,  the  Company  determined  the Haines Road real estate was
impaired by approximately $750,000 (see Note 6 "Details of Balance Sheet").

Other Income and Expense

     Other  income and  expense in Q2 2006 was income in the amount of  $842,000
compared with expense of $114,000 in Q2 2005. In Q2 2006 the Company  realized a
gain on  derivatives  in the amount of $794,000  associated  with the  decreased
value of the conversion feature of the Laurus Senior Convertible Term Note.

Interest Expense

     Net interest  expense  rose to  $1,247,000  in Q2 2006 from  $187,000 in Q2
2005.  In addition to  increases  in total debt  outstanding  and  increases  in
interest rates, Q2 2006 was impacted by penalty interest totaling $372,000 .

Income Taxes

     We have not recognized a potential tax benefit from our net losses, because
of the  uncertainty  regarding our ability to realize  future tax benefit of our
net operating loss carry forwards. This potential loss carry forward if utilized
would be approximately $3.2 million.

     EWCO was an S  corporation  until  December  31,  2003.  As a result of its
change to a C  corporation,  EWCO is now subject to income  taxes on its taxable
income and has no  operating  loss carry  forwards  for  taxable  losses  before
January 1, 2004.

Net Loss

     Net loss increased to $5.7 million for the three months ended June 30, 2006
compared with a loss of $1.5 million for the three months ended June 30, 2005 as
a result of the factors cited above.

Comparison  of Operating  Results for the Six Month  Periods Ended June 30, 2006
and 2005

Net Revenues

     Listed in the table below are net revenues and tonnage  shipped for the six
months ended June 30, 2006 and 2005:
<TABLE>
<CAPTION>

                                                       Six Months Ended June 30,
                                                       -------------------------
                                             2006                                    2005
                                   Net Revenues          Tonnage           Net Revenues          Tonnage
                                   ------------          -------           ------------          -------

<S>                          <C>                            <C>      <C>                            <C>
EWCO Tubular                 $          11,678,375          15,318   $          10,249,753          12,385
EWCO SpaceRak                           15,356,302          11,281              10,812,519           7,961
Steelbank Tubular (3)                   11,457,418          10,605               8,042,992           6,891
                                -------------------    ------------     -------------------    ------------
     TOTAL                   $          38,492,095          37,204   $          19,105,264          27,237
                                ===================    ============     ===================    ============
</TABLE>

     (3)  Tonnage shipped is not available for consolidated Steelbank,  prior to
          purchase  of  Haines  Road;   therefore,   tonnage  reported  reflects
          information  since the  acquisition of Haines Road,  which occurred in
          February 2005.


     For the six  months  ended June 30,  2006  revenue  increased  32% to $38.5
million with volume on a tonnage basis  increasing 37% over the same period last
year.  The increase in revenue  results from the  acquisition  of Haines Road in
February 2005 and more  aggressive  marketing of tubing sales at EWCO Tubing and
Steelbank  as well as a  dramatic  increase  in the  number and size of jobs (as
indicated by an approximate  41% increase in tonnage sold) in racking systems at
EWCO SpaceRak.

     EWCO Tubular sales volume  (tonnage)  increased 24% in the first six months
of 2006 over the first six months of 2005 as a result of growth in the Company's
end markets served and increased sales  initiatives to improve volume as well as
reposition  the customer base from a historical  concentration  on the RV sector
(previously  about 80% of tubing  sales) to a broader  customer  base  including
OEM's, agriculture,  greenhouse manufacturers and distributors, most of whom can
provide higher margins than the RV sector.  Revenues of $11.7 million were 13.7%
higher  than 2005 as revenue on a per ton basis  declined by 8.2% to $762 in the
first six months of 2006 from $828 in the first six months of 2005.  The decline
in sales per ton  reflected  the overall  market's  response to declining  steel
costs. Despite lower sales price per ton, EWCO Tubing margins improved year over
year as a result of repositioning the customer base.

     Sales of EWCO's SpaceRak,  an engineering  project driven business,  saw an
increase  in sales of  approximately  42.0% in the first  six  months of 2006 to
$15.4 million  compared with $10.2 million in the first six months of 2005.  The
sales increase was driven by increased  selling efforts to promote the Company's
value added engineering design capability, the ability to attract large projects
from national  customers with  multi-sites,  and  improvement  in pricing.  As a
result sales  volume  increased  41.7% year over year from 8.0 thousand  tons in
2005 to 11.3 thousand  tons in 2006,  while revenue per ton increased by 0.2% to
$1,361 in 2006 from $1,358 in 2005.

     Steelbank Tubular sales were $11.5 million in the first six months of 2006,
an increase of 42.5% over sales of $6.9 million in the first six months of 2005.
Sales tonnage over the same period increased 53.9% to 10.6 thousand tons in 2006
compared with 6.9 thousand tons in 2005.  Sales  revenues and volumes  reflected
the Company's  success in increasing  market  penetration in traditional  market
segments such as fencing and greenhouse  manufacture  while expanding to leisure
products  and  equipment  as well as tier  II  automotive  parts  manufacturers.
Revenue  on a per ton basis  declined  by 7.5% to $1,080 in 2006 from  $1,167 in
2005 largely  reflecting  the same trend in hot rolled  steel prices  during the
same respective periods.

Cost of Goods Sold and Gross Profit

     Gross profit  increased to $3.0 million from $1.7 million for the six month
periods ended June 30, 2006 and 2005,  respectively.  Gross margins increased to
7.7%  compared  with 5.8% for the six months  ended 2005.  The increase in gross
profit  dollars was driven by increases in sales volumes and the addition of the
Haines Road acquisition which was purchased in February 2005.

     The sharp  increase in gross  margin was  attributable  to better  leverage
against  steel  cost  increases  and  higher  sales  volumes,   enabling  better
utilization  of labor and overhead  manufacturing  costs which are more fixed in
nature.  Material  costs  were  68.5% of sales in the first  six  months of 2006
compared with 70.2% in 2005. Material costs as a percent of sales were higher in
2005 largely as a result of the Company's  concentration in certain lower margin
market sectors such as Recreational  Vehicle.  In 2006 the Company has broadened
its market presence to include higher margin industries such as distributors and
manufactures of fencing, gates and panels, and leisure products. The Company has
also  increased  its SpaceRak  business as a larger  percentage of total company
sales.  SpaceRak  gross margins tend to be 300 to 400 basis points higher margin
than that of tubing  sales.  Finally,  the  Company  was  successful  in putting
through price increases in the current market as compared with a year ago.

Selling, General and Administrative Expense

     Selling,  general and  administrative  costs  increased  to $5.3 million or
13.9% of sales during the first six months of 2006 from $4.5 million or 15.4% of
sales  during the first six months of 2005.  These costs  reflect an increase in
salaries and wages of $700,000  associated with the acquired  operations of EWCO
and Haines Road and providing staff to integrate  businesses and grow our sales.
These expenses will remain high as a percentage of revenues  unless and until we
can increase sales to absorb these costs. Additionally,  an increase of $116,000
in bad debt expenses drove the overall increase in SG&A expense in 2006.

Impairment

     The Company  incurred  two types of  impairment  in Q2 2006.  Goodwill  and
intangibles   related  to  the  Steelbank  and  Haines  Road  acquisitions  were
determined to be impaired based upon an evaluation of these assets  conducted in
Q2 2006  in  accordance  with  provisions  of  SFAS  142.  This  resulted  in an
impairment charge of $3.7 million (see Note 5 "Goodwill and Intangible Assets").

     Additionally,  the Company  incurred an  impairment  charge  related to the
Haines Road location in Mississauga,  Ontario. The Company learned that the site
contained environmental contaminants,  which according to Canadian law would not
require remediation as long as Tarpon (Steelbank) continued to own the property.
However, if the property were sold, remediation would be required. At the end of
Q2 2006, the property was under contract for sale. The prospective  buyer, which
initiated an environmental  survey as part of its due diligence,  discovered the
presence of  contaminants.  The  prospective  buyer is still in  negotiations to
purchase the site,  albeit at a reduced value.  Using estimates by environmental
firms, the Company determined the Haines Road land was impaired by approximately
$750,000 (see Note 6 "Details of Balance Sheet").

Other Income and Expense

     Other  income and  expense  resulted  in income for the first six months of
2006 in the amount of $750,000  compared  with  expense in 2005 of $18,000.  The
increase  in  other  income  in 2006 was  primarily  due to a  $693,000  gain on
derivatives   associated  with  the  conversion   feature  of  the  Senior  Term
Convertible Note due to the Laurus Master Trust.

Interest Expense

     Interest expense  increased in 2006 to $2.6 million in the six months ended
June 30, 2006  compared with $458,000 in 2005. In addition to increases in total
debt  outstanding and increases in interest  rates,  the Company was impacted by
penalty interest of $840,000.

Income Taxes

     We have not recognized a potential tax benefit from our net losses, because
of the  uncertainty  regarding our ability to realize  future tax benefit of our
net operating loss carry forwards. This potential loss carry forward if utilized
would be approximately $3.2 million.

     EWCO was an S  corporation  until  December  31,  2003.  As a result of its
change to a C  corporation,  EWCO is now subject to income  taxes on its taxable
income and has no  operating  loss carry  forwards  for  taxable  losses  before
January 1, 2004.

Net Losses

     Net losses  increased $5.4 million to $8.5 million for the six months ended
June 30, 2006 versus $3.1 million for the six months ended June 30, 2005 for the
reasons set forth above.

Liquidity and Capital Resources

     As of June 30, 2006,  we had a net  operating  working  capital  deficit of
approximately   $14.5   million,   including   cash  and  cash   equivalents  of
approximately  $409,000,  accounts  receivable  of  approximately  $8.5 million,
inventories of approximately $8.3 million, unbilled revenue of $1.6 million, and
total current operating  liabilities of approximately  $34.1 million,  including
accounts  payable of  approximately  $10.5 million and other accrued expenses of
$4.4 million.  Other current  liabilities  at June 30, 2006 include $7.5 million
outstanding  on revolving  credit  facilities and a first mortgage on the Haines
Road facility of  approximately  $3.1  million,  as well as  approximately  $5.1
million of term loans  reclassified  as current  due to the Company not being in
compliance with certain financial covenants.

     The Company has  approximately  $13.4 million of debt  maturing  within the
next twelve months.  The Company is anticipating one or more acquisitions  which
will require a presently  unknown amount of cash and which the Company  believes
are required to make its  operations  more  efficient and which will also better
utilize its  resources.  The Company is seeking to obtain  financing for working
capital  needs,  to  refinance  its short  term  debts and to  finance  possible
acquisitions,  on terms favorable to the Company. There can be no assurance that
such  financing can be obtained,  failing which the  Company's  unmet  financing
needs may have a material  adverse effect on its  operations and  continuance of
business operations.

Cash Flows From Operating Activities

     Net cash used by the  Company's  operations  during the first six months of
2006 was approximately $5.0 million. Cash was used primarily by (1) $8.0 million
of losses  before  depreciation  and  amortization,  (2)  $677,000  increase  in
accounts receivable, primarily due to increased sales, (3) $1.6 million increase
in unbilled  revenue  earned on larger  construction  type projects and (4) $1.3
million  increase in  inventories  (excluding  the  acquisition of Haines Road).
These uses were partially  offset by a $2.3 million increase in customer advance
payments  used to finance  material  costs  associated  with large  orders and a
$888,000 increase in accounts payable and other current liabilities.

Cash Flows From Investing Activities

     The Company's  investing  activities used approximately $1.3 million in the
first six months of 2006. Cash was used primarily for the payment of FenceMaster
obligations of $985,000 and $282,000 for capital expenditures.

Cash Flows From Financing Activities

     The Company's financing  activities used approximately $1.6 million of cash
flows in the first six months of 2006.  Cash was used for principal  payments on
the  Company's  revolving  credit  facilities  of $1.0 million and term notes of
$543,000.

Existing Financing Arrangements

     For information on the Company's existing financing arrangements,  refer to
Note 6 in the Tarpon  Industries,  Inc. and Subsidiaries - Notes to Consolidated
Financial Statements Contained elsewhere in this report on Form 10-Q.

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  and tax
valuation  allowances.  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,  Steelbank  and
Haines Road, 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,  Steelbank and Haines Road  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.  The Company  completed  its annual
impairment test in the fourth quarter of 2005 and recorded an impairment loss of
$1.1 million to its goodwill and $794,000 to its customer list intangibles.  The
Company's  results for the three  months and six months ended June 30, 2006 were
below the  forecasts  utilized in testing  for  goodwill  impairment  during the
fourth  quarter  of 2005.  As a  result,  the  Company  recorded  an  additional
impairment  loss of $2.9  million to its  goodwill  and $652,000 to its customer
list  intangibles,  thus  eliminating  the  remaining  carrying  values of those
assets. See note 5, Goodwill and Intangible Assets.

     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 and Haines Road  acquisitions,  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.

Bad Debts

     We  maintain  a reserve  for 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.

Grants of Options and Warrants

     The Company  adopted  Statement of Financial  Accounting  Standards No. 123
(revised 2004),  Share-Based  Payment ("SFAS 123R"),  effective January 1, 2006.
SFAS 123R requires the recognition of the fair value of stock-based compensation
in the Company's  financial  statements.  Prior to January 1, 2006,  the Company
applied the requirements of APB Opinion No. 25 ("APB 25"), "Accounting for Stock
Issued  to  Employees,"  and  related  interpretations  in  accounting  for  its
stock-based  plans.  Under  APB  25,  generally  no  compensation   expense  was
recognized  for the  Company's  stock-based  plans since the  exercise  price of
granted  employee stock options was greater than or equal to the market value of
the underlying common stock on the date of grant.

     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. The Company continues to use the
Black Scholes model for determining stock option  valuations.  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.

     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.

Contractual Obligations

     As of June 30,  2006,  EWCO and  Steelbank  were in  violation  of  certain
financial  covenants  of their loan  agreements,  resulting  primarily  from the
losses  sustained this year. The companies have not obtained a waiver from their
lenders to waive the  violation  as of June 30, 2006.  Accordingly,  the related
debt has been shown as current as of June 30, 2006.  Management believes that it
will be successful in its negotiations  with its lenders to revise the financial
covenants to levels that are attainable by the Company; however, there can be no
assurance that an agreement will be reached.

     There have been no other material  changes  outside the ordinary  course of
business in the contractual  obligations  disclosed in our Annual Report on Form
10-K for the fiscal year ended December 31, 2005 under the caption  "Contractual
Obligations".

ITEM 3. 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 for any purpose during the periods shown.

     Our Canadian  operations,  Steelbank and Haines Road,  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
Haines  Road'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.

     Significant  changes in the cost of steel products can cause changes in the
buying  patterns of customers.  In a declining  market,  many  customers  become
conservative,  reduce steel purchases and drive down  inventories.  The opposite
tends to occur in a rising market.  2005 was the  continuation  of the declining
steel market that began late in the third quarter of 2004 and bottomed  early in
the fourth  quarter of 2005.  Steel  prices  remained  relatively  stable in the
fourth quarter of 2005 and began  trending  upward in the first quarter of 2006.
It was  anticipated  that steel  imports  would begin to have an impact on steel
prices  late in the first  quarter,  but this did not  occur  due to  world-wide
demand for steel.

     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 our 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 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>
                                  June 30, 2006
                             Expected Maturity Dates
                             -----------------------
                         (U.S.$ equivalent in thousands)
                                                                                                There-                   Fair
                                     2006         2007          2008         2009        2010   after        Total       Value
                                     ----         ----          ----         ----        ----   -------       -----      ----
Short-term Debt:
<S>                     <C>      <C>         <C>           <C>          <C>          <C>                  <C>
     Variable Rate (U.S.$)       $    3,467                                                               $ 3,467     $    3,578
          Average Interest Rate       8.25%
     Variable Rate (Cdn.$)       $    7,063                                                               $ 7,063     $    7,063
          Average Interest Rate       7.39%
Long-term Debt:
     Variable Rate (U.S.$)       $    1,452  $      2,529  $     2,341  $       232                       $ 6,554     $    6,554
          Average Interest Rate       9.61%         9.58%        9.58%        8.25%
     Fixed Rate (U.S.$)          $        5  $          8  $         2                                    $    15     $       15
          Average Interest Rate       7.03%         5.24%        5.24%
     Variable Rate (Cdn.$)       $      188  $        375  $       375  $       375  $      94            $ 1,407     $    1,407
          Average Interest Rate       7.00%         7.00%        7.00%        7.00%
     Fixed Rate (Cdn.$)          $    1,518                                                               $ 1,518     $    1,518
          Average Interest Rate       8.59%
</TABLE>

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

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

                                                     June 30, 2006
                                          (U.S.$ equivalent in thousands)
                                   Carrying Amount               Fair Value
                                   ---------------               ----------
Steel Inventories...........          $8,292                      $8,292


ITEM 4. 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 June 30,  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 the  quarter  ended June 30,  2006 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 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 Independent  Registered Public Accounting Firm has 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  and 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.

     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  Registered  Public
Accounting Firm 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, 2006, 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.


                           PART II - OTHER INFORMATION

ITEM 1. 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 2. DEFAULTS UPON SENIOR SECURITIES

     The company is not in compliance with certain financial  covenants with its
lending  institutions,  for which it has  obtained  non-binding  commitments  to
adjust such covenants and maintain  compliance.  See notes 5 and 6 in the Tarpon
Industries,  Inc. and Subsidiaries - Notes to Consolidated  Financial Statements
contained elsewhere in this report on Form 10-Q.

ITEM 5. OTHER INFORMATION

Risk Factors

     Please  refer to,  and  carefully  consider,  the "Risk  Factors  and Risks
Related to Our  Business"  section  listed in our Annual Report on Form 10-K for
the year ended December 31, 2005,  together with the cautionary  statement under
the caption "Cautionary  Statement Regarding Forward Looking Statements" and the
other  information  included in this report For information on significant risks
affecting  our  business,  including,  but not  limited  to,  our losses and the
financing  requirements  we are  experiencing.  If any of these  risks  actually
occur,  our  business,  financial  condition or results of  operations  could be
materially adversely affected.

ITEM 6. EXHIBITS

Exhibit        Description
-------        -----------

       31.1    Certifications  of  Chief  Executive  Officer  Pursuant  to  Rule
               13a-14(a),   as  Adopted   Pursuant   to   Section   302  of  the
               Sarbanes-Oxley Act of 2002.

       31.2    Certifications  of  Chief  Financial  Officer  Pursuant  to  Rule
               13a-14(a),   as  Adopted   Pursuant   to   Section   302  of  the
               Sarbanes-Oxley Act of 2002.

       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.

<PAGE>

                                   SIGNATURES

     Pursuant to the  requirements  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 INDUSTRIES, INC.
                                             (Registrant)

Dated:  August 21, 2006                      By:/s/ James W. Bradshaw
                                                ------------------------------
                                                James W. Bradshaw
                                                Its:  Chief Executive Officer

<PAGE>


                                  EXHIBIT INDEX

Exhibit        Description
-------        -----------

       31.1    Certifications  of  Chief  Executive  Officer  Pursuant  to  Rule
               13a-14(a),   as  Adopted   Pursuant   to   Section   302  of  the
               Sarbanes-Oxley Act of 2002.

       31.2    Certifications  of  Chief  Financial  Officer  Pursuant  to  Rule
               13a-14(a),   as  Adopted   Pursuant   to   Section   302  of  the
               Sarbanes-Oxley Act of 2002.

       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.