# UNITED STATESSECURITIES AND
EXCHANGE COMMISSIONWashington, D.C. 20549

# FORM 10-KSB

# ANNUAL REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934

# For the fiscal year
ended December 31, 2004

Commission file number 0-31198

Stellar International Inc. (Name of small business issuer in its charter)

|                                                |                                     
|----------------------------------------------- | ------------------------------------
|Ontario, Canada                                 | Not Applicable                      
|(Jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.)

|                                            |              
|------------------------------------------- | -------------
|544 Egerton Street, London, Ontario, Canada | N5W 3Z8      
|(Address of principal executive offices)    | (Postal Code)

Issuers telephone number (519) 434-1540

Securities registered under Section12(b) of the Exchange Act:

|                    |                                          
|------------------- | -----------------------------------------
|Title of each class | Name of each exchange on which registered
|                    |                                          

|               |               
|-------------- | --------------
|Not Applicable | Not Applicable
|               |               

Securities registered under Section
12(g) of the Exchange Act:

|               
|---------------
|Common Shares  
|Title of Class)

Check
whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of
the Exchange Act during the past 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 ___.

Check
if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B
contained in this form, and no disclosure will be contained, to the best of
registrants knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-KSB [X]

State
issuers revenues from all sources for its most recent fiscal year $1,832,325(Cdn.).

---



As
of March 1, 2005, the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the average bid and asked price of such
common equity, as of such date, was $37,901,574 (Cdn.)

As
of December 31, 2004, 22,802,373 Common Shares were outstanding.

Transitional
small business disclosure format (check one): Yes __      No X

-2-

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General

In
this annual report, Stellar and the Company refer to Stellar
Pharmaceuticals Inc. (formerly Stellar International Inc.), an Ontario, Canada
corporation. All dollar amounts in this annual report are stated in Canadian Dollars
unless stated otherwise. Certain terms used in this annual report are defined below in the
section entitled Glossary. The names of products referred to in this annual
report are the trademarks or registered trademarks of their respective owners. All rights
reserved.

# Forward-Looking
Statements

Readers
are cautioned that actual results may differ materially from the results projected in any
forward-looking statements included in this annual report, which involve a
number of risks or uncertainties. Forward-looking statements are statements that are not
historical facts, and include statements regarding the Companys planned research and
development programs, anticipated future losses, revenues and market shares, planned
clinical trials, expected future expenditures, the Companys intention to raise new
financing, sufficiency of working capital for continued operations, and other statements
regarding anticipated future events and the Companys anticipated future performance.
Forward-looking statements generally can be identified by the words expected,
intends, anticipates, feels, continues,
planned, plans, potential, with a view to,
and similar expressions or variations thereon, or that events or conditions
will, may, could or should occur, or
comparable terminology referring to future events or results.

The
Companys actual results could differ materially from those anticipated in these
forward-looking statements as a result of numerous factors, including those listed under
Risks and Uncertainties in Item 6 of this annual report, any of which could
cause actual results to vary materially from current results or the Companys
anticipated future results. The Company assumes no responsibility to update the
information contained herein.

# Exchange Rate for
Canadian Dollar

The
accounts for Stellar are maintained in Canadian dollars which is the Companys
functional currency. All dollar amounts contained herein are expressed in Canadian
dollars, except as otherwise indicated. As at February 28, 2005, the exchange rate for
Canadian dollars/United States dollars was $1.00 (Cdn.) = $0.8121 (U.S.).

Set
forth below are the exchange rates for the Canadian dollar equivalent expressed in United
States currency during 2004, 2003 and 2002.

Years ended December 31, 2004, 2003 and 2002

|               |  |  |     
|-------------- |  |  | ----
|              
|               |  |  | 2004
|              
|At End of Year |  |  | 0.80
|              
|Average        |  |  | 0.76
|              
|High           |  |  | 0.84
|              
|Low            |  |  | 0.71
|              

-3-

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# Enforceability of
Certain United States Judgments

The
Company is a Province of Ontario, Canada corporation and a substantial part of its assets

are located outside of the United States. The Companys directors and officers are
neither citizens nor residents of the United States, and all or a substantial part of the
assets of such persons may be located outside the United States. As a result, it may be
difficult to affect service of process within the United States upon the Company and such
persons or to realize against the Company or such persons within the United States upon
judgments of courts of the United States predicated upon civil liabilities under the
United States federal securities laws. Fogler, Rubinoff LLP, Canadian counsel for the
Company, has advised that there is doubt as to whether courts in the Province of Ontario
would (i) enforce judgments of United States courts obtained in actions against the
Company or such persons predicated upon the civil liability provisions of the United
States federal securities laws or (ii) enforce, in original actions, liabilities against
the Company or such persons predicated solely upon such statutory provisions.

# PART I

# Item 1.      Description of
Business.

# Overview

Stellar
is a Canadian pharmaceutical company involved in the development and marketing of high
quality, cost-effective, polysaccharide-based therapeutic products used in the treatment
of osteoarthritis and certain types of cystitis. Stellar also intends to develop
additional healthcare products aimed at niche pharmaceutical markets. Stellars
product development strategy focuses on seeking novel applications in markets where its
products demonstrate true cost effective therapeutic advantages. Stellar also intends to
build revenues through in-licensing products for Canada and international markets that are
focused on similar niche markets.

Stellar
has developed and currently markets the following three medical products: (i)
NeoVisc®, (ii) Uracyst® and (iii) the Uracyst® Test Kit. NeoVisc, a 3
injection sodium hyaluronate therapy, was developed to provide a cost-effective
alternative treatment to the over 3 million Canadians suffering from osteoarthritis.
Uracyst, a chondroitin sulfate-based therapy, and the Uracyst Test Kit were developed to
identify defective bladder linings and provide symptomatic relief to the over 40,000
patients in Canada diagnosed with interstitial cystitis. Each of these products has
received regulatory approval in Canada. Uracyst and the Uracyst Test Kit are patented in
the United States and in Canada with international patents pending.

Stellar
markets its products in Canada through its own commissioned and salaried sales force. The
Companys focus on product development continues to be two fold utilizing
in-licensing and out-licensing for immediate impact on revenue stream. These activities
enable Stellar to fund its own in-house product development for future growth stability.
Stellar, through its out-licensing partners, intends to conduct clinical trials necessary
to obtain the required regulatory approvals for its products in foreign markets.

Effective
December 2001, Stellar entered into a strategic licensing agreement with G. Pohl-Boskamp
GmbH & Co. (Pohl-Boskamp) for the sale of Uracyst products in Europe. In
December of 2003, Pohl-Boskamp received approval to begin selling Uracyst in Europe.

In
June 2003, Stellar entered into distribution agreements with CMI Canada Medical Inc. and
BurnsAdler Pharmaceuticals to sell Stellars products in the Middle East, Latin
America and the Caribbean.

In
October 2003, the Company entered into an exclusive distribution agreement with
Matritech, Inc., to sell NMP22®BladderChek® (BladderChek) in the
Canadian market. BladderChek is a unique point of care diagnostic, used in the diagnosis
and monitoring of bladder cancer. In October 2004, Stellar commenced selling BladderChek
in Canada.

-4-

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In
March 2004, the Company entered into supply and license agreements with SJ
Pharmaceuticals, Inc. (now Leitner Pharmaceuticals Inc.)(Leitner) of Bristol,
Tennessee. Under these agreements, Leitner was granted an exclusive license to use certain
of the Companys methods and technical know-how for the purposes of developing,
marketing and selling NeoVisc and Uracyst products in the United States. In addition to an
upfront payment made to the Company upon signing, these agreements will provide Stellar
with milestone payments and an ongoing royalty stream from future sales of these products
in the United States. Leitner will be responsible for conducting clinical trials and
obtaining regulatory approvals for these products in the United States.

In
June 2004, Stellar entered into a NeoVisc licensing agreement with Triptibumis Sdn. Bhd.
for Malaysia, Singapore and Brunei. The first shipment to this market was initiated in
October 2004. Although this agreement covers a relatively small market, Stellar pursued
this agreement to further its global expansion.

In
August 2004, the Company entered into a licensing agreement with Pharmore GmbH for the
sale of NeoVisc in the German market. This agreement is expected to provide Stellar with
access to the large European viscosupplement market. Stellar also believes that this
agreement will facilitate its efforts to obtain a CE mark for NeoVisc, a prerequisite to
pursuing further opportunities in other European countries.

In
September 2002, Stellar was granted the exclusive Canadian marketing and distribution
rights to sell Skelite® by Millenium Biologix Inc. Skelite is a bone void filler that
is resorbed by the natural remodeling process and replaced with new bone during the
healing period. Stellar commenced sales of Skelite in Canada in January 2004.

Stellar
was incorporated under the Business Corporations Act (Ontario) on November 14, 1994. The
Companys registered office and executive offices are located at 544 Egerton Street,
London, Ontario, Canada N5W 3Z8. The Companys telephone number is (519) 434-1540,
its facsimile number is (519) 434-4382 and its e-mail address is
stellar@stellarint.com. In December 2004, the Company applied for a name change to
Stellar Pharmaceuticals Inc., which change became effective January 1, 2005.

# Glossary

hyaluronate
or HA A naturally occurring polysaccharide, which by virtue of its
viscosity and elasticity, acts as a lubricating and shock absorbing component in synovial
fluids. HA is the active ingredient in NeoVisc.

interstitial cystitis 
or IC  -  A chronic inflammation of the bladder wall.

NeoVisc® A 2 mL pre-filled syringe of sterile 1.0% sodium hyaluronate solution used for
the temporary replacement of synovial fluid in osteoarthritic joints. NeoVisc is the
Companys proprietary product for the treatment for osteoarthritis.

osteoarthritis
or OA A degenerative disease associated with long-term wear
primarily on weight bearing joints.

polysaccharide
 A carbohydrate containing a large number of saccharide (sugar) groups. Starch is a
common type of polysaccharide.

-5-

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synovial
fluid  A clear viscid fluid, the function of which is to lubricate the
joint.

TPD The Therapeutic Products Directorate of Health Canada, which, among other
functions, regulates medical devices and other therapeutic products used in Canada.

FDA The Food and Drug Administration of the United States, which, among other
functions, regulates medical devices and other therapeutic products used in the United
States.

Uracyst® A sterile 2.0% sodium chondroitin sulfate solution. Uracyst products are the
Companys proprietary treatments for certain forms of IC and non-common cystitis. The
products are instilled by catheter directly into a patients bladder.

Uracyst®
Test Kit The Companys proprietary test kit that confirms the
existence of bladder lining defects in IC patients and identifies those patients who
should respond positively to Uracyst.

# Development Strategy

Stellar
focuses its product development activity around naturally occurring, well-studied (human
body) chemicals and seeks novel applications in markets where its products demonstrate
cost-effective therapeutic advantages. By using this development strategy, management of
Stellar believes it can bring products with niche applications to unsatisfied,
under-serviced markets with relatively low regulatory risk. In addition, management of the
Company believes that a focus on in-licensing additional products focused on these same
niche pharmaceutical markets improves its ability to compete with larger companies and
gain significant market share for its products and licensed-in products.

# Competition Generally

The
pharmaceutical industry is highly competitive and is characterized by rapidly changing
technology. The Company competes with other companies to market its products aimed at
treating similar conditions. Many of these companies have substantially greater resources
than the Company. There can be no assurance that the Company will continue to be able to
compete with such companies or that developments by others will not render the
Companys products or technologies non-competitive or obsolete. In order to maintain
and improve its position in the industry, the Company must continue to enhance its current
products, develop or acquire new products and product extensions and implement a
comprehensive international sales and distribution marketing strategy. The Companys
competition comes from a variety of sources, including companies, which target all, or a
portion of the Companys current product offerings. See  Products and
Markets. Also, many current and potential competitors of the Company may have
greater name and brand recognition and more extensive customer bases that could be
leveraged to gain market share to the Companys detriment. In addition, competitors
may be able to complete the regulatory approval process sooner than the Company, and
therefore market their products earlier than the Company can market certain of its
products. If the Company is not able to compete effectively against current and future
competitors, such failure may result in fewer customer orders, reduced gross margins and
profitability and loss of market share, any of which would materially  affect the
Company.

-6-

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# Competitive Advantages
of Stellar

Management
believes that Stellars main competitive advantages include:

|(i) |  | the ability to conduct research and development and produce products in a
               cost-effective manner;
|--- |  | ---------------------------------------------------------------------------------------------------------------

|(ii) |  | a focus on the development of formulations and technologies targeted at smaller
               market niches that larger multi-national pharmaceutical companies have largely
               ignored because of size;
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(iii) |  | the ability to offer cost-effective pricing while maintaining acceptable gross
               profit margins;
|----- |  | -------------------------------------------------------------------------------------------------------------

|(iv) |  | the patents it holds for certain of its products; and
|---- |  | -----------------------------------------------------

|(v) |  | the ability to identify market needs and develop new niche products.
|--- |  | --------------------------------------------------------------------

# Products and Markets

Stellar
has developed and currently markets the following three medical products: (i) NeoVisc,
(ii) Uracyst and (iii) the Uracyst Test Kit. Each of these products is presently approved
for use in Canada and the Companys sales are primarily in Canada. In addition,
Stellar has signed an agreement for the distribution of two medical products Skeliteand BladderChek. Stellar commenced selling Skelite in January 2004 and BladderChek
in October 2004.

NeoVisc

NeoVisc
is a 2 mL pre-filled syringe of sterile 1.0% sodium hyaluronate solution used for the
temporary replacement of synovial fluid in osteoarthritic joints. NeoVisc is classified in
Canada by the TPD as a medical device under the Medical Devices Regulations of
the Food and Drugs Act (Canada). NeoVisc is packaged, sold and marketed as a 3 injection
therapy. The product is administered weekly by injection directly into the affected joint.
This type of injection is referred to as an intra-articular injection.

This
administration process, referred to as viscosupplementation, is a relatively new therapy
for the treatment of osteoarthritis, having gained Canadian approval in 1992 and United
States approval in 1997. However, viscosupplementation has been used for many years in the
veterinarian market. Replacing or supplementing the joint fluid provides symptomatic
relief from the pain of osteoarthritis for up to 6 to 8 months before a repeat set of
injections is required.

Osteoarthritis
and Treatment Options. Osteoarthritis is a degenerative disease associated with
long-term wear on weight bearing joints. With no known cure, it is estimated that OA
affects an estimated 33% of persons over 45 years of age, and approximately 85% over the
age of 70. The Canadian Arthritis Association estimates that 3 million Canadians suffer
from the osteo form of arthritis. Stellar estimates the number of American OA
sufferers at over 30 million. The aggregate number of patients with OA is expected to grow
significantly as the average age of the population increases.

Current
OA remedies focus on symptomatic relief and postponement of surgical intervention. These
remedies include:

|(i) |  | Drugs: |  | Pain killers such as aspirin, acetaminophen and other
                non-steroidal anti-inflammatory drugs (NSAID), such as naproxen and diclofenac,
                as well as new COX/2 Inhibitors;
|--- |  | ------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(ii) |  | Steroidal |  | 
|---- |  | --------- |  | 

| |  | Anti-Flammmatory: |  | Corticosteroids are also used to treat the inflammation associated with the disease and
| |  | ----------------- |  | ---------------------------------------------------------------------------------------

-7-

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|(iii) |  | Joint Replacement: |  | Surgical replacement with artificial joints.
|----- |  | ------------------ |  | --------------------------------------------

Products
such as NeoVisc have added a fourth non-pharmacological option in obtaining symptomatic
improvements by supplementing the synovial fluid in the affected joint. NeoVisc can also
be used in conjunction with drug treatments like NSAIDs, thereby reducing the overall cost
of treatment, increasing clinical benefits and delaying or avoiding steroid use and joint
replacement.

Role
of Hyaluronate. The active ingredient in NeoVisc is hyaluronate, also referred to as
hyaluronic acid or HA. HA is a naturally occurring polysaccharide found throughout the
human body, which has been shown to play an important role in such biological processes as
cell differentiation, tissue hydration and proteoglycans organization. Injected HA also
provides an anti-inflammatory and analgesic effect. HA also plays a fundamental role in
human joints, where by virtue of its viscosity, elasticity and other rheological
properties, acts as a lubricating and shock absorbing component in joint fluids, and as an
ocular lubricant. HA products are currently being used in eye surgery, wound healing,
intra-articular injections and as an adjunct to certain grafting procedures.

Marketing
Strategy. Purchase decisions in the prescription pharmaceutical market are influenced
by the prescribing physician, pharmacist and end use patient/customer. State and private
health care plans and patient user groups may also play a role in product/therapy
selection, especially where the cost of therapy is high. In treating OA, it is typically
the physician that decides which therapeutic option is best for the patient and which
related products to use.

Stellars
marketing and sales strategy focuses on those physicians currently prescribing HA
viscosupplements. Stellar has created a database focused on orthopaedic surgeons,
rheumatologists, sports medicine specialists and select general practitioners in Canada.
Direct marketing to the physicians in this database has been, and will continue to be,
effective in persuading treating physicians and specialists already using
viscosupplementation to convert to NeoVisc or recommend it to their patients. Management
of the Company believes that NeoVisc is at least as effective as any other competitive
product and is the lowest cost intra-articular therapy currently on the market.
Stellars strategy is to demonstrate that NeoVisc is the most cost-effective
viscosupplement therapy available.

Competitive
Analysis. The major competitive product to NeoVisc in Canada and the United States is
Synvisc®, which is manufactured and sold by Genzyme Corp. Synvisc is a 3 injection
dosage regime, which has been available in Canada since 1992 and in the United States
since 1997. Synvisc is the dominant product in the viscosupplementation market. Management
of Stellar estimates Synviscs market share at over 70% in the United States and 65%
in Canada.

If
approved for sale in the United States, NeoVisc would also compete with Fidia, SpAs
product, marketed under the trade name Hyalgan® by Sanofi-Synthelabo Inc.
and Seikagakus product Supartz® marketed by Smith and Nephew,
Orthovisc®, manufactured by Anika Therapeutics, Inc. and marketed by Johnson &
Johnson. In Canada, NeoVisc also competes with Suplasyn®, manufactured by Bioniche
Life Sciences Inc (Bioniche). With little to differentiate these HA products
for use in the treatment of degenerative joint disease, management of the Company believes
that Stellars lower patient cost and high quality will allow NeoVisc to effectively
penetrate the market and obtain a significant share in Canada and, if approved for sale,
the United States.

-8-

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Uracyst
and the UracystTest Kit

Stellar
developed Uracyst a sterile 2.0% sodium chondroitin sulfate solution available in a 20 mL
vial and the Uracyst Test Kit, comprising Uracyst 2.0% and Solution K, a 3.0% potassium

chloride solution. Uracyst and the Uracyst Test Kit are used in the diagnosis and
treatment of certain forms of IC and non-common cystitis. The Uracyst Test Kit contains a
100 mL pouch of Solution K and a 20 mL vial of Uracyst. These products are instilled by
catheter directly into a patients bladder.

Uracyst
provides symptomatic relief for patients suffering from IC and non-common cystitis
(including radiation-induced cystitis and hemorrhagic cystitis) by supplementing and
replenishing deficiencies in the glycosaminoglycan (GAG) lining of the bladder
wall. This GAG lining acts as a protective barrier against irritants and toxins
(e.g., micro crystals, carcinogens and acid) in the urine and serves as an
important defense mechanism against bacterial adherence. Many researchers believe that a
large number of IC patients (over 70%) have leaky or deficient GAG layers in
their bladders.

When
Solution K is instilled in an IC patients bladder with GAG deficiencies, the patient
experiences pronounced IC like symptoms. Instilling Uracyst into the bladder of those
patients responding positively to the test neutralizes the irritations. This test allows
the clinician to determine which IC patient has a leaking GAG layer and therefore
determine which IC patient will more likely respond positively to Uracyst to control IC
symptoms.

Uracyst
is typically instilled in patients weekly for 6 weeks, then once a month until symptoms
resolve. Because these types of cystitis are typically chronic diseases of no known cause,
patients will usually require re-treatment after a variable period of time when symptoms
recur.

The
Company has been issued a patent in the United States and Canada for the use of the
Uracyst Test Kit and Uracyst treatments and has international patents pending. Uracyst and
the Uracyst Test Kit are both classified in Canada by TPD as medical devices under the
Medical Devices Regulations of the Food and Drugs Act (Canada).

In
order to obtain the necessary clinical work for the approval of Uracyst, Stellar entered
into an agreement with Dr. Gary Steinhoff of Vancouver, British Columbia. Under this
agreement, Dr. Steinhoff agreed to perform such work, on behalf of Stellar, in
consideration for a declining variable royalty payable until August 31, 2008. The royalty
is based upon a percentage of Uracyst net sales. The royalty percentage for the period
which began on September 1, 2003 and ends on August 31, 2008 is 2%. Dr. Steinhoff is not
otherwise affiliated with Stellar or any of its officers, directors or principal
shareholders.

In
December 2001, the Company entered into a license agreement (the European
License) with Pohl-Boskamp of Hohenlockstedt, Germany. Under the European License,
Pohl-Boskamp was granted the exclusive right to manufacture market and sell the
Companys Uracyst product line in Europe. In consideration for the grant of such
exclusive right, Pohl-Boskamp made cash payment to Stellar upon execution of the European
License and at the time of Pohl-Boskamps first sale of Uracyst products in Europe,
which occurred in December of 2003. Pohl-Boskamp is also obligated to pay the Company a
royalty based on the quarterly net sales of Uracyst products by Pohl-Boskamp and its
affiliates and sublicensees. Subject to extension in the case of patented improvements to
the Uracyst product line, the term of the European License is scheduled to expire on
December 21, 2008. In June 2003, Stellar entered into two distribution agreements.
The first agreement is with CMI Canada Medical Inc. (located in Oshawa, Ontario Canada),
to distribute Stellars products in the Middle East. The second agreement is with
BurnsAdler Pharmaceuticals (located in Charlotte, North Carolina), to distribute NeoVisc
in Latin America and the Caribbean.

Interstitial
Cystitis and Treatment Options. Interstitial cystitis is a chronic
inflammation of the bladder wall. Unlike common cystitis, IC is not caused by bacteria and
does not respond to conventional antibiotic therapy. IC can affect people of any age, race
or sex, but is more frequently diagnosed in women.

-9-

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Interstitial
cystitis causes some or all of the following symptoms:

| |  | Frequency: |  | Day and/or  night  frequency  of  urination  (up to 60 times a day in severe  cases).  In early or very mild
                cases, frequency is sometimes the only symptom.
| |  | ---------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Urgency: |  | Pain, pressure or spasms may also accompany the sensation of having to urinate immediately.
| |  | -------- |  | -------------------------------------------------------------------------------------------

| |  | Pain: |  | Can be abdominal, urethral or vaginal.  Pain is also frequently associated with sexual intercourse.
| |  | ----- |  | ---------------------------------------------------------------------------------------------------

| |  | Other |  | Some patients also report experiencing symptoms such as muscle and joint pain, migraines,
                allergic reactions, colon and stomach problems, as well as the more common symptoms of IC
                described above.
| |  | ----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

At
present, there is no cure for IC nor is there an effective treatment, which works for
everyone. The following treatments have been used to relieve the symptoms of IC in some
people: (i) diet, (ii) bladder distention, (iii) instilled dimethylsulfoxide (DMSO),
heparin or HA, (iv) anti-inflammatory drugs, (v) antispasmodic drugs, (vi) antihistamines
and (vii) muscle relaxants.

In
severe cases, several types of surgery have been performed including bladder augmentation
and urinary diversion. Products available for treating IC vary in their effectiveness.
Most work for short periods of time and, in general, are effective in about 30% to 40% of
patients. Some therapies can take up to 6 months of active treatment before patients start
to show symptomatic improvement.

Market
For Uracyst and the Uracyst Test Kit. Data on the number of IC patients being treated
and the method of treatment is not readily available in Canada or the United States. Many
products such as dimethylsulfoxide (DMSO) and heparin are not used exclusively to treat
IC. This lack of detailed end-use product and prescription data make it difficult to
define the size of the IC market. A United States epidemiology study published in February
1999 conservatively estimates the number of people with interstitial cystitis in the
United States at approximately 700,000. The number of people in Canada with IC is
estimated by Stellar to be 70,000.

Marketing
Strategy. Stellar currently markets Uracyst and Uracyst Test Kits directly to
physicians and pharmacies (although in many cases the patient is the ultimate purchaser)
in Canada. Stellar intends to focus its promotion to a core group of urologists currently
treating interstitial cystitis, largely in major Canadian urban centers (i.e., all
Provincial capitals and cities with medical teaching centers). Management estimates that
there are over 550 practicing urologists in Canada and 7,500 in the United States. This
well-defined target audience makes direct marketing an effective strategy for Stellar.
Pursuant to the European License, Stellar markets its Uracyst product line in Europe
through the European Licensee.

Stellars
sales efforts emphasize the patented Uracyst Test Kits ability to determine those IC
patients who are GAG deficient, and then demonstrate the potential to treat these same
patients with Uracyst. This ability is important as GAG replenishment therapy can take up
to 6 months before patients start to show substantial symptomatic improvement. Sales
efforts also promote the ongoing clinical work that Stellar has undertaken with Uracyst,
which shows a response rate of over 60% and an excellent safety profile.

Management
believes that the monthly maintenance therapy cost of Uracyst is less than that of all
other active treatments. Stellar expects to gain acceptance more readily from both
physicians and patients as the most cost-effective therapy for treating GAG-deficient IC
patients. Cost is an

important factor in selecting a treatment option, as most patients
will be on and off GAG replacement therapy for an indeterminate amount of time. In
addition, Stellars unique test kit provides Stellar with a substantial competitive
advantage over its competitors.

-10-

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Competitive
Analysis. The treatment of IC is a relatively small niche market supplied by smaller
pharmaceutical companies. Because of low efficacy rates and relatively expensive treatment
costs, management believes the treatment of IC remains an unsatisfied market with no
dominant competitive product. Alza Corporation and Shire Pharmaceutical Corporation are
the two major suppliers to the IC market.

Alza
Corporation has marketed Elmiron® (pentosan polysulfate sodium) in Canada since 1993.
Elmiron is used as an oral GAG replenishment therapy. Alza Corporation has been active in
the market providing comprehensive materials and services to physicians and IC patients.
Side effects from the use of Elmiron are difficult to manage for some patients and can
include hair loss, diarrhea and extreme to mild gastrointestinal discomfort.

Shire
Pharmaceutical Corporations RIMSO 50® (also known as DMSO) was previously a
market leader for urinary tract diseases, but has seen its market eroded by generic DMSO
selling for a fraction of its price. Since DMSO may be used in treatments for diseases or
symptoms other than IC, it is difficult to find exact usage data for DMSO in the treatment
of IC. DMSO works to desensitize the bladder wall and has numerous negative side effects.
The principal side effects include discomfort and an emission of a strong, unpleasant odor
(similar to garlic) for up to 48 hours after an instillation. DMSO, although not favored
by patients, remains a product of choice for many urologists.

Elmiron
has a typical cost of about $150 month as compared to $80 month for DMSO and $65 month for
Uracyst.

# Skelite

Stellar
has acquired the exclusive Canadian marketing and distribution rights to Skelitefrom Millenium Biologix Inc. Skelite has been approved by both the FDA in the United
States and TPD in Canada, as synthetic bone void filler. Stellars right to market
and distribute Skelite expires on December 31, 2007, and may be renewed by Stellar for an
additional three-year period.

Skelite
is a novel, 100% synthetic, resorbable bone void filler consisting of 67% silicon
stabilized tricalcium phosphate (TCP) + 33% hydroxyapatite. Skelite contains a
multi-directional, interconnected porosity similar in structure to human cancellous bone
allowing for the integration of tissue and fluids. This product provides a bone void
filler that is resorbed by the natural remodeling process and replaced with new bone
during the healing period. Orthopedic surgeons use this product, with or without bone
marrow, to pack into bony voids or gaps of the skeletal system (i.e., the extremities,
spine and pelvis). The defects may be surgically created osseous defects or osseous
defects created from traumatic injury to the bone.

Bone Graft Treatment
Options.Bone grafting materials are primarily divided into three categories: autologous, allograft
and synthetics.

For
more than a century, bone fracture repair has been augmented with the use of autologous
(taken from patients own body) cancellous bone grafting. The advantages are that
autologous grafts provide the three requisite properties: the scaffolds for
osteoconduction, the growth factors for osteoinduction and the progenitor stem cells for
osteogenesis. The disadvantages are procurement (harvesting) site morbidity, longer
operating times and limited availability.

-11-

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Allograft
(taken from other human donors) bone material is processed bone taken from cadavers. Many
countries have some form of bone donor programs whereby bone material is harvested upon
death from patients who have given prior consent. However, to combat the risks of disease
transmission and histoincompatible response, this bone material is subject to harsh
processing techniques that diminish the mechanical properties (osteoconduction) and the
biological (osteoinductive) properties. There are national bone banks and many hospitals
have instituted their own bone bank. The costs for allograft range from minimal to
extensive and the supply of material is still limited.

Synthetic
alternatives for bone graft procedures have been available since the 1990s. These new
materials, currently used in about 10% of the 2.2 million bone graft procedures worldwide,
offer the advantages of unlimited availability and safety. Newer materials offer the
improved osteoconductive characteristics necessary for bone and tissue integration.

Marketing.       
          The rising cost of healthcare in hospitals has resulted in purchasers (i.e.,
          materials management departments and state/provincial/private plans) reducing
          the number of products covered and restricting the entry of new products. New
          products must offer real competitive benefits and cost advantages. Skelite is
          expected to offer the high quality that is important to orthopedic surgeons and
          the cost attractiveness demanded by the purchaser. While orthopaedic surgeons
          can use Skelitein many procedures, it is expected that Skelitewill be initially used in trauma and hip/knee revisions. Stellar has had
          limited success in its first year in the Canadian market with Skelite. Larger
          hospital formularies generally are slow to add new products such as Skelite.
          Stellars focus on smaller hospitals has been more effective in generating
          interest with respect to Skelite.

Competitive
Analysis. Skelite competes directly with other synthetic bone graft products.
ProOsteon® (Interpore Cross), DynaGraft® (GenSci) and Osteoset® (Wright
Medical Technology) are available in Canada. Stellar management feels that the positive
attributes demonstrated in the animal studies and more recent case studies by Skelite
coupled with Skelites cost advantages, have resulted in growing acceptance of
Skelite by orthopedic surgeons and purchasers of medical supplies.

# BladderChek

Stellar
has licensed BladderChek for the Canadian market from Matritech, USA. The initial term of
this licence began on January 1, 2004 and expires on December 31, 2008. Stellar may extend
the term for an additional one-year period. The BladderChek test is a simple to use,
point-of-care, in vitro diagnostic test for bladder cancer, and provides results (within
30 minutes) while the patient is in the physicians office. By placing four drops of
urine on the BladderChek test cassette, a physician is able to detect the presence of
elevated NMP22.

The
scientists that developed BladderChek, discovered that high levels of the nuclear matrix
protein, NMP22, in urine frequently indicated the presence of cancer. This protein is
found in the nuclei of cells where they contribute to nuclear structure and regulate
important cell functions. NMP22 is elevated in bladder cancer cells 20 to 80 fold and is
released into the urine of bladder cancer patients.

Market
Overview:In the United States, more than one million patients receive a diagnostic
work up for bladder cancer each year. Another 10 million are at risk for the disease. According to
data released by the American Cancer Society in 2001, 54,300 new cases of
bladder cancer (2.5:1 men: women) are diagnosed each year.

-12-

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If
diagnosed in its early stages, the five-year bladder cancer survival rate exceeds 90
percent. However, 12,400 people in the United States died of bladder cancer in 2001. Many
died because the disease was not caught in its earliest stages

The
estimate for Canada is 270,000 opportunities for use (diagnosis and monitoring) for
BladderChek.

Market
Growth:BladderChek, a third generation urine based biomarker, was able to correctly
identify cancers not seen by cystoscopy and provides more accurate and clinically useful
information than cytology. Stellar commenced selling BladderChek in October 2004 directly
to hospitals and urology clinics where the overall value of a point of care device has
been well received.

BladderChek
is being sold at a competitive price to cytology, which Stellar believes will create more
interest and faster adoption. Although still early in the launch phase, BladderChek is
initially being well received in Canada.

# Sales and Distribution

Stellar
currently has seven commissioned and salaried sales representatives and one sales agent,
promoting its products in key Canadian centres. These sales representatives primarily
target medical physicians, pharmacies, hospitals and patient support groups. Stellar is
building a sales network across Canada to generate NeoVisc and Uracyst sales. See
 Human Resources. Marketing and sales efforts are coordinated from
Stellars London, Ontario main office. One of Stellars immediate corporate
goals is to establish a stronger network of representatives selling its products and
in-licensed products in Canada.

As
discussed above, Stellars product line has been out-licensed to companies in the
United States, Europe, Middle East, Latin America, Caribbean, Malaysia, Singapore and
Brunei.

# Customers

The
Company has historically derived the majority of its revenues from a small number of major
customers, although the composition of this group of customers has changed from year to
year. In the event that one or more of these major customers significantly reduce or
terminate their purchases of the Companys products, the Companys results of
operations and financial condition could be materially adversely affected. The Company has
not, however, received any indication from any of its current major customers that it
intends to discontinue its relationship with the Company or to reduce its purchases of the
Companys products.

# Human Resources

Stellar
currently employs fifteen full-time employees and has a contractual arrangement with one
independent commission sales agent. Eight of the Companys full-time employees are
located at the Companys main office in London Ontario, Canada. The other seven
full-time employees of the Company sell the Companys products in major urban areas
throughout Canada. The Company plans to add additional staff in the areas of sales,
marketing, regulatory affairs and administration over the next 18 to 24 months. Management
of the Company believes that its relations with its employees are good.

-13-

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The
Company is substantially dependent on the services of its key senior management personnel.
The Company has entered into an employment agreement with Peter Riehl, the Chief Executive
Officer. See Item 10 of this annual report. Loss of the services of Mr.Riehl, or any other
key management employee, would have a material adverse effect on the Company. The Company
does not maintain key man life insurance on the life of Mr. Riehl. In addition, the
Companys future success will depend in part upon its continuing ability to hire,
train, motivate and retain key senior management and skilled technical and marketing
personnel. The market for qualified personnel has historically been, and the Company
expects that it will continue to be, intensely competitive.

# Manufacturing

Stellar
currently out sources the manufacturing of its products, other than Uracyst offered for
sale in Europe, to a special sterile facility, operated by Dalton Chemical Laboratories
Inc (Dalton). This facility, which is in compliance with applicable Health
Canada, TPD division medical device guidelines and current Good Manufacturing Practice
(cGMP) regulations, has sufficient excess capacity at present to meet the
Companys short and long term objectives. The Companys products offered for
sale in Europe are manufactured by Pohl-Boskamp and its sublicensees. See - Products
and Markets.

Under
this supply agreement (the Supply Agreement) with Dalton, Stellar started to
source product from Daltons facility during the second quarter of 2004. The Supply
Agreement provides for Dalton to supply all of the Companys clinical and commercial
production requirements well into the future. Dalton is a cGMP manufacturing facility that
has the capability to meet domestic and international manufacturing regulations. Stellar
believes the Supply Agreement will cause its production costs to improve based on the
economies of scale projected. Dalton will be used as Stellars manufacturer for the
United States market once in receipt of the necessary FDA approvals. A significant
interruption in the supply of any of the Companys products could impair the
successful marketing of such products.

Dalton
is a contract pharmaceutical manufacturer that supplies chemistry and analytical services
to the biotechnology and pharmaceutical industries in the areas of medicinal chemistry,
fine chemical manufacturer customer peptides and antisense oligo production. Dalton has a
site establishment license and provides cGMP manufacturing and sterile filling
capabilities to its customers at any stage of the regulatory process (Phase I, II, III or
commercial).

The
Company has established non-contractual supply arrangements for its raw materials with
several sources. Stellar currently purchases the HA used in NeoVisc from Lifecore
Biomedical and the chondroitin sulfate used in the formulation of Uracyst from Bioiberica,
a Spanish supplier. In the event of an interruption in the supply of these raw materials
from such suppliers, Stellar believes that it would be able to secure similar raw
materials at competitive prices from other suppliers located worldwide.

The
manufacture of the Companys products involves the handling and use of substances
that are subject to various environmental laws and regulations that impose limitations on
the discharge of pollutants into the soil, air and water, and establish standards for
their storage and disposal. The Company believes that the manufacturers of its products
are in material compliance with such environmental laws and regulations.

The
sale and use of the Companys products entails risk of product liability and the
Company presently carries product liability insurance. There can be no assurance that,
despite testing by the Company, as well as testing in use by current and potential
customers and regulatory agencies, defects will not be found in new products after
commencement of commercial shipments. The occurrence of such defects could result in the
loss of, or delay in, market acceptance of the Companys products, which could have a
material adverse effect on the Company. Furthermore, litigation, regardless of its
outcome, could result in substantial costs to the Company, divert managements
attention and resources from the Companys operations and result in negative
publicity that might impair the Companys on-going marketing efforts.

-14-

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# Patent and Proprietary
Protection

Where
deemed appropriate, Stellar may file patent applications for technologies, which it owns
or in respect of which it has acquired a license and, if necessary, then further developed
to make such technologies marketable. Such applications may cover composition of matter,
the production of active ingredients and their novel applications.

The
Company retains independent patent counsel where appropriate. Management of the Company
believes that the use of outside patent specialists ensures prompt filing of patent
applications, as well as the ability to access specialists in various areas of patents and
patent law to ensure complete patent filing.

The
patent position relating to medical devices and drug development is uncertain and involves
many complex legal, scientific and factual questions. While the Company intends to protect
its valuable proprietary information and believes that certain of its information is novel
and patentable, there can be no assurance that: (i) any patent application owned by or
licensed to the Company will issue to patent in all countries; (ii) proceedings will not
be commenced seeking to challenge the Companys patent rights or that such challenges
will not be successful; (iii) proceedings taken against a third party for infringement of
patent rights will be successful; (iv) processes or products of the Company will not
infringe upon the patents of third parties; or (v) the scope of patents issued to or
licensed by the Company will successfully prevent third parties from developing similar
and competitive products. It is not possible to predict how any litigation may affect the
Companys efforts to develop, manufacture or market products. The cost of litigation
to uphold the validity and prevent infringement of the patents owned by or licensed to the
Company may be significant.

Issues
may arise with respect to claims of others to rights in the patents or patent applications
owned by or licensed to the Company. As the industry expands, and more patents are issued,
the risk increases that the Companys processes and products may give rise to claims
that they infringe the patents of others. Actions could be brought against the Company or
its commercial partners claiming damages or an accounting of profits and seeking to enjoin
them from clinically testing, manufacturing and marketing the affected product or process.
If any such action were successful, in addition to any potential liability for damages,
the Company or its commercial partners could be required to obtain a license in order to
continue to manufacture or market the affected product or use the affected process. There
can be no assurance that the Company or its commercial partners could prevail in any such
action or that any license required under any such patent would be made available or, if
available, would be available on acceptable terms. If no license is available, the
Companys ability to commercialize its products may be negatively affected. There may
be significant litigation in the industry regarding patents and other intellectual
property rights and such litigation could consume substantial resources. If required, the
Company may seek to negotiate licenses under competitive or blocking patents, which it
believes are required for it to commercialize its products.

Although
the scope of patent protection ultimately afforded by the patents and patent applications
owned by or licensed to the Company is difficult to quantify, management of the Company
believes that such patents will afford adequate protection for it to ensure exclusivity in
the conduct its business operations as described herein. The Company also intends to rely
upon trade secrets, confidential and unpatented proprietary know-how, and continuing
technological innovation to develop and maintain its competitive position. To protect
these rights, the Company whenever possible requires all employees and consultants to
enter into confidentiality agreements with the Company. There can be no assurance,
however, that these agreements will provide meaningful protection for the Companys
trade secrets, know-how or other proprietary information in the event of any unauthorized
use or disclosure. Further, in the absence of patent protection, the Companys
business may be adversely affected by competitors who independently develop substantially
equivalent or superior technology.

-15-

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# Regulatory Considerations

Product
Regulation

The
Canadian health care industry is regulated by TPD. This agency has a role similar to that
of the FDA and has responsibility for regulating drugs for both human and animal use,
cosmetics, radiation-emitting and other medical devices, and other products affecting
human health. A manufacturer is required to follow the cGMP regulations in the manufacture
of such products. Regulations imposed by federal, provincial, state and local authorities
in Canada and the United States are a significant factor in the conduct of the
development, manufacturing and eventual marketing activities for any proposed product.

Stellar
has received a license to manufacture and sell NeoVisc, Uracyst and the Uracyst Test Kit
in Canada from the TPD. These products are regulated under the Medical Devices Regulations
of the Food and Drugs Act (Canada) and the regulations promulgated thereunder by TPD to
ensure the safety and efficacy of medical devices for the Canadian public. The Company is
in material compliance with all such regulations and was granted ISO 13485 certification
in July 2003.

Under
the European License, Pohl-Boskamp is required to cause all Uracyst products offered for
sale in Europe to be manufactured in accordance with all applicable laws including,
without limitation, Council Directive 90/385/EEC of 20 June 1990 and Council Directive
93/42/EEC of 14 June 1993 concerning medical devices. See - Products and
Markets.

Stellar
intends to market its products in the United States and, as such, it is important that a
quality assurance program be designed to also comply with the FDAs Medical Device
cGMP regulations. The Company intends to apply to have NeoVisc, Uracyst and the Uracyst
Test Kit approved under the Pre-Market Approval (PMA) program of the FDA for
marketing in the United States. The FDA GMP regulations require significant documentation
on all relevant procedures of the manufacturing and quality control of each product
submitted for approval.

Management
of Stellar believes that the best strategic approach for the Company to take, with respect
to the initiation of its United States approvals, is to take advantage of the
pre-consultation process with the FDA reviewers, prior to the submission of the PMA
application. A detailed and comprehensive scientific and medical package will be prepared
by the Company for this consultation process and will include, among other things, the
safety and efficacy information collected from the Canadian market. It is expected that
substantial evidence to establish the chemical and physical equivalency of the
Companys products to existing products marketed in the United States will also be
included. The FDA requires the completion of the clinical trials for the safety and
efficacy of each therapeutic product before it will issue a PMA. Accordingly, the Company
with its United States licensee has filed for and received an Investigational Device
Exemption (IDE), from the FDA and expects to start clinical trials in the
United States during 2005 for NeoVisc and Uracyst.

Open
label trials of Uracyst have been completed and published in The Canadian Journal of
Urology. The Company is currently working with an American clinic in establishing an
animal model to further demonstrate the role of Uracyst in the treatment of cystitis. In
connection with the FDA approval process, Stellar anticipates that it will utilize such
American clinic to perform additional services.

-16-

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Stellar
anticipates that the FDA approvals required to market NeoVisc and Uracyst in the United
States will be obtained no later than the end of 2006. There can be no assurance, however,
that such FDA approvals will be obtained or that Stellar will be able to successfully
market its products in the United States. Stellar expects that the costs associated with
obtaining such FDA approvals will be approximately $3,500,000 (Cdn.) and $2,500,000
(Cdn.), respectively. As discussed below under - Future Product Development,
funding of these FDA approvals will be the responsibility of Leitner.

Pricing
and Reimbursement

As
pressures for cost containment increase, particularly in Canada and the United States,
there can be no assurance that the prices the Company can charge for its products will be
as favorable as historical pharmaceutical product prices. Reimbursement by government and
managed care organizations, and other healthcare payers, has become increasingly
important, as has the listing of new products on large formularies, such as those of
pharmaceutical benefit providers and group buying organizations. The failure of one or
more products to be included on formulary lists, or to be reimbursed by government or
managed care organizations, could have a negative impact on the Companys results of
operation and financial condition.

Other
Laws and Regulations

Stellars
operations are or may be subject to various federal, provincial, state and local laws,
regulations and recommendations relating to the marketing of products and relationships
with treating physicians, data protection, safe working conditions, laboratory and
manufacturing practices, the export of products to certain countries and the purchase,
storage, movement, use and disposal of hazardous or potentially hazardous substances.
Although the Company believes its safety procedures comply with the standards prescribed
by federal, provincial, state and local regulations, the risk of contamination, injury or
other accidental harm cannot be eliminated completely. IN the event of an accident, the
Company could be held liable for any damages that result. The amount of such damages could
have a materially adverse effect on the Companys results of operations, financial
condition or liquidity.

# Future Product
Development

Stellar
believes that a well-targeted research and development program constitutes an essential
part of its activities. Stellar is currently developing a number of new product line
extensions, with the intention of expanding the indications for its current products,
NeoVisc and Uracyst, and, ultimately, expanding into other product areas. However,
Stellars efforts will be focused initially on developing strategic partners to
assist Stellar in gaining regulatory approval in the United States for its NeoVisc and
Uracyst related products. The United States submissions will be a priority for the
Company, as management believes that the United States market offers significant
opportunities for the sale of the Companys products. The registration for all
current products will likely require completion of clinical trials. Clinical work, done in
Canada and the United States, can then be used for submissions for entry into other
countries. In March 2004, Stellar entered into licence and supply agreements with Leitner
for the development, marketing and sale of NeoVisc and Uracyst products in the United
States. Under these agreements, Leitner also is required to fund the cost of the
Companys FDA approval process for NeoVisc and Uracyst.

For
the years ended December 31, 2004 and 2003, the Company expended approximately $718,878
and $128,624, respectively on in-house research and development activities.

-17-

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# Item 2.      Description of
Property.

During
October 2004, the Company moved its main office to 544 Egerton Street in London, Ontario,
Canada by purchasing the property and building located at such address for $450,000
(Cdn.). In connection therewith, the Company incurred additional costs of $168,989 for
renovations to the office, packaging and warehouse space of approximately 10,600 square
feet in the aggregate contained in the building. Stellar believes that its existing
property is in good condition and suitable for the conduct of its business.

# Item 3.      Legal
Proceedings.

Stellar
may periodically become subject to legal proceedings and claims arising in connection in
business. The Company does not believe that there were any claims outstanding against it
as of March 1, 2005 that will have a material adverse effect on the Companys results
of operations, financial condition and liquidity.

# Item 4.      Submission of
Matters to a Vote of Security Holders.

Not
applicable.

# PART II

# Item 5.      Market for
Common Equity and Related Stockholder Matters.

# Market Information

Since
December 2002, the Companys common shares (Common Shares) have traded on
the OTC Bulletin Board service of the National Association of Securities Dealers, Inc.
(the OTC Bulletin Board). The Common Shares currently trade thereon under the
symbol SLXCF. The following table sets forth the high and low per share sale
price expressed in United States Dollars for the Common Shares as reported by the OTC
Bulletin Board.

|     |  |               
|---- |  | --------------
|     |  |               
|2004 |  | First Quarter 
|     |  | Second Quarter
|     |  | Third Quarter 
|     |  | Fourth Quarter
|2003 |  | First Quarter 
|     |  | Second Quarter
|     |  | Third Quarter 
|     |  | Fourth Quarter

On March 1, 2005, the last
reported per share sale price for the Common Shares on the OTC Bulletin Board was $1.65 (USD).

-18-

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Since
December 2000, the Common Shares have been listed and traded on the TSX Venture Exchange.
The Common Shares are currently listed and trade on Tier 2 of the TSX Venture Exchange
under the symbol SLX. The following table sets forth the high and low per
share sale price expressed in Canadian Dollars for the Common Shares as reported by the
TSX Venture Exchange.

|     |  |               
|---- |  | --------------
|     |  |               
|2004 |  | First Quarter 
|     |  | Second Quarter
|     |  | Third Quarter 
|     |  | Fourth Quarter
|2003 |  | First Quarter 
|     |  | Second Quarter
|     |  | Third Quarter 
|     |  | Fourth Quarter

# Holders

As
at January 1, 2005, there were 31 holders of record of the Common Shares.

# Dividends

The
Company currently intends to retain future earnings, if any, for use in its business. The
Company does not anticipate paying dividends on the Common Shares in the foreseeable
future. Any determination to pay any future dividends will remain at the discretion of the
board of directors of the Company (the Board of Directors) and will be made
taking into account Stellars financial condition and other factors deemed relevant
by the Board of Directors.

# Equity Compensation Plan
Information

The
table set forth below provides information as of December 31, 2004 with respect to Common
Shares that may be issued under the Companys existing equity plans. For additional
information, see Item 10 of this annual report.

|                      |                       |                      |                      
|--------------------- | --------------------- | -------------------- | ---------------------
|Plan category         | Number of  securities | Weighted-average     | Number of securites  
|                      | to be issued upon     | exercise price of    | remaining available  
|                      | exercise of           | outstanding options, | for future issuance  
|                      | outstanding options,  | warrants and rights  | under equity         
|                      | warrants and rights   | in Canadian Dollars  | compensation plans   
|                      |                       |                      | (excluding securities
|                      |                       |                      | reflected in column  
|                      |                       |                      | (a))                 
|                      | (a)                   | (b)                  | (c)                  
|Equity compensation   |                       |                      |                      
|plans approved by     |                       |                      |                      
|security holders      | -                     | -                    | -                    
|Equity compensation   |                       |                      |                      
|plans not approved by | 1,590,000             | .98                  | 1,042,841            
|Total                 | 1,590.000             | .98                  | 1,042,841            
|                      |                       |                      |                      

-19-

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# Exchange Controls and
Other Limitations Affecting Security Holders.

Canada
has no system of exchange controls. There are no exchange restrictions on borrowing from
citizens or residents of foreign countries nor on the remittance of dividends, interest,
royalties or similar payments, management fees, loan repayments, settlement of trade debts
or the repatriation of capital.

Under
the Investment Canada Act (the ICA Act), a Canadian federal statute, certain
non-Canadian individuals, governments, corporations or other entities who wish
to acquire a Canadian business (as defined in the ICA Act) or establish a
new Canadian business (as defined in the ICA Act) may be required to file
either a notification or an application for review with a governmental agency known as
Industry Canada. The ICA Act further requires that certain acquisitions of
control of a Canadian business by a non-Canadian must be reviewed and approved
by the Minister responsible for the ICA Act on the basis that he is satisfied that the
acquisition is likely to be of net benefit to Canada. Only acquisitions of
control are reviewable under the ICA Act; however, the ICA Act provides detailed rules for
the determination of whether control has been acquired and, pursuant to those rules, the
acquisition of one-third or more of the voting shares of the Company may, in some
circumstances, be considered to constitute an acquisition of control. Failure to comply
with the review provisions of the ICA Act could result in, among other things, an
injunction or a court order directing disposition of assets or shares.

There
are no limitations on the rights of non-Canadian residents or non-Canadian shareholders to
hold or vote the Common Shares contained in the Companys Articles of Incorporation,
as amended, or By-Laws, as amended.

# Taxation

Dividends

In
general, dividends paid by a corporation resident in Canada to non-residents of Canada are
subject to Canadian withholding tax. The rate of withholding tax under the Income Tax Act
(Canada) (the Tax Act) on dividends is twenty-five percent (25%). Such rate
may be reduced under the provisions of a relevant international tax treaty to which Canada
is a party. The Canada-United States Income Tax Convention (1980) (the U.S.
Treaty) provides for a general reduction in the rate of Canadian withholding tax to
fifteen percent (15%) on dividends paid on shares of a corporation resident in Canada to
residents of the United States, and also provides that where the beneficial owner of the
dividends is a corporation resident in the United States. Notwithstanding the foregoing, a
reduced rate of (i) ten percent (10%) applies to dividends from a non-resident owned
investment corporation if the recipient is a corporation that is the beneficial owner of
at least ten percent (10%) of the voting shares of the corporation paying the dividends
and (ii) five percent (5%) applies if the recipient is a corporation resident in the
United States that is the beneficial owner of at least ten percent (10%) of the voting
shares of the corporation paying the dividends.

-20-

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Capital
Gains

A
non-resident of Canada is not subject to tax under the Tax Act in respect of a capital
gain realized upon the disposition of a share of a public corporation for purposes of the
Tax Act unless the share represents taxable Canadian property to the holder thereof. A
share of a public corporation will be taxable Canadian property to the holder thereof if,
at any time during the period of sixty (60) months immediately preceding a disposition,
the non-resident, persons with whom the non-resident did not deal at arms length, or
the non-resident together with persons with whom he did not deal at arms length,
owned (or had an option in respect of or had an interest in) twenty-five percent (25%) or
more of the issued shares of any class or series of the corporation or if, upon ceasing to
be a resident of Canada, the holder elected that the share be taxable Canadian property.
The Company is a public corporation for purposes of the Tax Act.

The
U.S. Treaty provides that, in general, a resident of the United States will not be subject
to tax on any capital gains realized by him on the disposition of shares that are taxable
Canadian property unless (i) such resident has or had (within the twelve-month period
preceding the disposition) a permanent establishment in Canada and such shares formed part
of the business property of that permanent establishment, (ii) such shares formed part of
the personal property pertaining to a fixed base which is or was available (within a
twelve-month period preceding the disposition) to such resident for the purpose of
performing independent personal services, (iii) the value of the shares is derived
principally from real property situated in Canada or (iv) the shareholder is an individual
who was resident in Canada for 120 months in any twenty-year period preceding the
disposition and at any time during the ten-year period immediately preceding the
disposition and who owned the shares of the corporation at the time he or she ceased to be
a resident of Canada.

Estate
and Gift Tax

At
present, Canada does not impose any estate or gift tax.

# Recent Sales of
Unregistered Securities

In
February 2004, Stellar issued 4,088,794 Common Shares to SJ Strategic Investments LLC, a
Tennessee limited liability company (SJ), for aggregate gross proceeds of
approximately $4 million. At such time, this issuance represented approximately 19.9% of
the issued and outstanding Common Shares, on a non-diluted basis.

In
connection with the aforesaid issuance, SJ also obtained the right to subscribe for
additional Common Shares in the future from time to time in order to maintain its
percentage equity ownership interest in Stellar, subject to adjustment in certain
circumstances and regulatory approval. SJ was further granted the right to participate as
a selling shareholder in future offerings of Common Shares. In addition, Peter Riehl,
Stellars President and Chief Executive Officer and his spouse, entered into an
agreement with SJ pursuant to which they have granted rights of first refusal to SJ in
respect of the sale of securities in Stellar owned by them.

The
Common Shares were acquired by SJ for investment purposes only, and not with the purpose
of influencing control or direction over Stellar. SJ has advised Stellar that it may
acquire further Common Shares or dispose of its holdings of Common Shares as investment
conditions warrant.

Exemption
from the registration provisions of the United States Securities Act of 1993, as amended
(the Securties Act), for the issuance described above was claimed under
Section 4(2) of the Securities Act and the rules and regulations promulgated thereunder on
the basis that such issuance did not involve any public offering, the purchaser was
sophisticated with access to the kind of information registration would provide and that
such purchaser acquired such securities without a view towards distribution thereof.

-21-

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In
December 2003, Stellar entered into a financial advisory and consulting agreement with LMT
Financial Inc., a company controlled by the wife of Arnold Tenney. Mr. Tenney currently
serves as Chairman of the Board of Stellar. In consideration for services provided under
this agreement, LMT Financial Inc. earned a fee of $120,000 (Cdn.) in 2004. This fee was
satisfied in full through four (4) quarterly issuances of 50,000 Common Shares during
2004. LMT Financial Inc. was also granted an option by the Company. See Item 12 of this
annual report.

Exemption
from the registration provisions of the Securities Act for the issuances described above
was claimed under Regulation S of the Securities Act on the basis that such issuances were
affected by means of offshore transactions to a non-U.S. person in accordance with all
applicable conditions required by such regulation.

# Issuer Purchases of
Equity Securities.

During
the fourth quarter of 2004, neither Stellar nor any affiliated purchaser (as
defined in Rule 10b-18 promulgated under the United States Securities Exchange Act of
1934, as amended) (the Exchange Act) purchased any Common Shares.

# Item 6.     
Managements Discussion and Analysis or Plan of Operation

# General

The
following discussion and analysis should be read in conjunction with the Companys
financial statements and notes thereto appearing elsewhere in this annual report. Such
discussion and analysis contains forward-looking statements. The Companys actual
results may differ significantly from those projected in the forward-looking statements.
The Companys consolidated financial statements have been prepared in accordance with
United States generally accepted accounting principles (GAAP). All dollar
amounts are expressed in Canadian dollars.

# Critical Accounting
Policies and Estimates

The
preparation of financial statements in conformity with United States GAAP requires
management to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date of the
financial reporting period. Actual results could differ from those estimates. These
estimates are reviewed periodically, and, as adjustments become necessary, they are
reported in earnings in the period in which they become known.

# Recent Accounting
Pronouncements

Recent
accounting pronouncements followed by the Company under United States. GAAP are summarized
below.

Recent accounting pronouncements
followed by the Company under U.S. GAAP are summarized below.

-22-

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|(i) |  | SFAS No. 123(R). SFAS No. 123(R), Share-Based Payment, issued in
          December 2004, is a revision of FASB Statement 123, Accounting for Stock-Based
          Compensation and supersedes APB Opinion No. 25, Accounting for Stock Issued to
          Employees, and its related implementation guidance. The Statement focuses
          primarily on accounting for transactions which an entity obtains employee
          services in share-based payment transactions. SFAS No. 123 (Revised 2004)
          requires a public entity to measure the cost of employee services received in
          exchange for an award of equity instruments based on the grant-date fair value
          of the award. That cost will be recognized over the period during which an
          employee is required to provide service in exchange for the award. Effective
          January 1, 2003, the Company adopted the statement to account for its employee
          stock options under the fair market value method. See Note 8  Capital
          Stock.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(iii) |  | SFAS No. 151. SFAS No. 151, Inventory Costs, an amendment to
          Accounting Research Bulletin No. 43, Inventory Pricing, to clarify the
          accounting for abnormal amounts of idle facility expense, freight, handling
          costs and wasted material. This Statement requires that those items be
          recognized as current-period charges regardless of whether they meet the
          criterion of so normal. Additionally, this Statement requires that
          allocation of fixed production overheads to the costs of conversion be based on
          the normal capacity of the production facilities. The provisions of SFAS No. 151
          will become effective for fiscal years beginning after June 15, 2005. The
          Company has not determined the impact of adopting this standard.
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(iv) |  | SFAS No. 153. SFAS No. 153, Exchanges of Nonmonetary Assets,
          an amendment to Accounting Principles Board Opinion No. 29. Accounting for
          Nonmonetary Transactions, is based on the principle that exchanges of
          nonmonetary assets should be measured based on the fair value of the assets
          exchanged. The guidance in that Opinion, however, included certain exceptions to
          that principle. This Statement amends Opinion 29 to eliminate the exception for
          nonmonetary exchanges of similar productive assets and replaces it with a
          general exception for exchanges in which the future cash flows of the entity are
          not expected to change significantly as a result of the exchange. The provisions
          of SFAS No. 153 will become effective for nonmonetary asset exchanges in fiscal
          periods beginning after June 15, 2005. The Company has not determined the impact
          of adopting this standard.
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Year
Ended December 31, 2004 Compared to Year Ended December 31, 2003 (in Canadian Dollars)

# Revenues

For
the year ended December 31, 2004, total revenues from all sources increased 65.2% to
$1,832,325 compared to $1,109,431 in the same period during 2003. Included in total
revenues were licensing fee revenues of $267,220 ($2003-$13,400) and royalty revenues of
$139,754 (2003-$269), which brings actual sales of Stellar products for 2004, to
$1,422,160 (2003-$1,095,129), an increase of 30.0% over 2003.

During
2004, the Companys operating loss was $1,345,109 as compared to $807,920 in 2003.

-23-

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# Cost of Sales

For
the year ended December 31, 2004, cost of sales were $340,123 compared to $ 216,609 for

the same period in 2003 or 24.0% of product sales, compared to 19.9% in 2003. The increase
in cost of goods sold is directly related to the move in our manufacturing and the normal
transitional costs associated in the startup. The Company does not expect this to be an
ongoing increase and expects to derive cost benefits in 2005 from its new manufacturing
processes.

# Research and Development

Stellar
continues to invest in research necessary to expand its products into international
markets. In 2004, the Company incurred $718,878 in manufacturing development costs
associated with the move of its manufacturing processes to Dalton. These costs are
amortized in Stellars Canadian statement as deferred manufacturing development
costs, but under United States GAAP they cannot be amortized.

Many
of the Companys clinical programs were put on hold until out-licensing agreements
were in place and manufacturing validations completed. Stellars agreements with
Leitner will need clinical trials for Stellars products to be conducted in order to
obtain regulatory approvals in the United States for both Uracyst and NeoVisc. Stellar
expects these clinical trials to start early in 2005 at Leitners cost.

Business
Development

For
the year ended December 31, 2004, the Company had one-time costs of $26,984 which related
directly to the launch of Stellars two new in-licensed products, Skelite and
BladderChek, in the Canadian market. The costs for business development increased to
$40,305 in 2004 from $19,360 in 2003. These costs have been expensed to selling, general
and administrative.

# Selling, general and
administrative expenses

Selling,
general and administrative expenses for the year ended December 31, 2004 were $2,185,329
compared to $1,523,815 for 2003. This increase includes the costs of non-cash expenses for
Common Shares issued to consultants of $184,142 and options granted to employees,
directors and consults for $179,688. In addition, the Company had non-recurring costs of
$68,788, of which $41,444 was related to licensing and consulting agreements, the
remaining $27,344 related to the move to the Companys new manufacturing site. During
2004, the Company started cash reimbursement to members of the Board of Directors, which
totaled $32,667.

In
2004, the Company made a commitment to increase sales and marketing activity to improve
in-market sales. This resulted in direct selling costs increasing by $154,575, which
includes costs for increased market sales development and the addition of sales
representatives in the Canadian market. These costs have all been expensed to selling,
general and administrative.

The
management of Stellar felt these expenditures were essential for the Companys growth
and will aid in meeting Stellars long-term goals. In addition, there have also been
increased costs associated with investor relations activities with $167,819 being expensed
in 2004, in comparison to $54,627 in 2003, for a total increase of $113,192.

Change
in the formats of Stellars Uracyst and NeoVisc products, necessitated revisions of
new marketing and sales materials, which added non re-occurring costs of $19,198 to the
selling, general and administrative expenses.

-24-

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# Interest income and
expense

Interest
revenue was $96,117 for the year ended December 31, 2004 as compared to $4,119 for 2003.
These amounts include reinvestment of dividends and interest received on a short-term
loan. Funds will be maintained in liquid investments.

Year
Ended December 31, 2003 Compared to Year Ended December 31, 2002 (in Canadian Dollars)

# Revenues

For
the year ended December 31, 2003, total revenue increased 29.8% to $1,109,431, compared to
$854,705 in 2002. In-market growth for current products was negatively impacted by the
SARS outbreak. Stellar conservatively estimates lost sales in March, April, May and June
2003 to be in excess of $250,000. Sales force activities continued to have a positive
impact on product revenues. NeoVisc gross sales grew by 27.2% and Uracyst gross sales grew
by 43.7%.

The
operating loss for the year 2003 was $807,920 as compared to a net loss in 2002 of
$812,339. During 2003, Stellar incurred non-cash expenses for consulting of $312,273
(issued Common Shares), up 656.1% over 2002. In 2003, Stellar also had increased expenses
associated with its in-licensing and out-licensing efforts including business development
and legal fees. These fees increased by 87.3% over 2002. Stellar also incurred ongoing
expenses for improvements to its manufacturing facility, which included upgrading our
quality systems. These expenditures were necessary for the Company to continue to grow and
meet its long term goals.

# Cost of Sales

During
2003, cost of sales amounted to 19.5% of product sales. This represented a 1.2% reduction
when compared to 2002, as Stellar continued to benefit from improved efficiencies in its
manufacturing processes.

# Research and Development

Stellar
continued to invest in research necessary to expand its products into international
markets. However, clinical trial investment was put on hold due to out-licensing
discussions. In June 2003, Stellar announced two in-licensing agreements for the
distribution of the Companys products in Latin America, Mexico, the Caribbean, and
the Middle East. These agreements are not expected to have a major impact on income until
the products covered thereby, have received specific country regulatory approval. These
approvals are expected by mid-2004.

Uracyst
was launched in Europe in December of 2003 resulting in a second milestone payment.
Royalty revenues from this agreement are expected throughout 2004.

In
September 2003, Stellar in-licensed BladderChek for the Canadian market Stellar expects to
launch this product in early 2004, once Canadian regulatory approval has been completed.

In
December of 2003, all validations were completed with Skelite, an in-licensed product from
Millenium Biologix Inc. This product was launched in Canada on January 29, 2004. Stellar
has been encouraged with the early physician interest in Skelite and expects it to perform
well in 2004.

-25-

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During 2003, Stellar worked with Dr. Robert Hurst of the University of
Oklahoma on animal studies involving Uracyst. Dr. Hurst produced experimental evidence to
further the understanding of certain properties of Uracyst. These results are expected to
be published by Dr. Hurst in 2004.

# Selling, general and
administrative expenses

For
the year ended December 31, 2003, selling, general and administrative expenses increased
by $336,776 mainly due to $312,272 in non-cash expenses, share issuance fees, legal fees
and consulting fees, which increased by over $53,000 compared to 2002. In addition,
Stellar continued to make expenditures to expand its infrastructure to support long-term
commercial objectives. A portion of these expenses were incurred to meet necessary quality
standards that resulted in Stellar receiving its ISO 13485 registration in July 2003.

# Interest income and
expense

Stellar
has managed its current positive cash position generating over $4,119 in investment income
in 2003 as compared to $17,100 in 2002.

# Liquidity and Capital
Resources

Cash,
cash equivalents and short-term investments totaled $3,172,870 at December 31, 2004 as
compared with $255,237 at December 31, 2003. During 2004, the Company received aggregate
exercise proceeds of $4,923,758 for 4,088,794 Common Shares issued in a private placement
of $4,057,474 for 550,667 Common Shares issued upon exercise of warrants for $192,734 and
1,415,000 Common Shares issued upon exercise of options for $673,550. There are 1,590,000
stock options outstanding.

At
March 1, 2005, the Company did not have any outstanding indebtedness for borrowed money.

The
Company entered into an agreement to acquire a building for $450,000. In addition,
renovations to the building were $160,989. The Company moved into the upper office area of
the building on October 22, 2004 and intends to have the packaging plant area of the
building operational by mid-2005. The Company financed the purchase from its own available
cash resources.

While
the Company has generated royalty revenue and revenue from the distribution of
pharmaceutical products in Canada, such revenue has not been sufficient to fund the
Companys research, development and marketing activities. Accordingly, the Company
continued to incur losses in 2004 and drew from its holdings of cash, cash equivalents and
short-term investments. However the Company does expect to be profitable in 2005 and to be
able to fund its future growth from the sale of its products, milestone payments and
royalty income resulting from out-licensing agreements for at least the next 24 months.

The
Company may seek additional funding, primarily by way of one or more equity offerings, to
carry out its business plan and to minimize risks to its operations. The market for equity
financings for companies such as Stellar is challenging, and there can be no assurance
that additional funding by way of equity financing will be available. Any additional
equity financing may result in significant dilution to the existing shareholders at the
time of such financing. The Company may also seek additional funding from other sources,
including technology licensing, co-development collaborations, and other strategic
alliances, which, if obtained, may reduce the Companys interest in its projects or
products. There can be no assurance, however, that any alternative sources of funding will
be available.

-26-

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# Risks and Uncertainties

Stellar
is subject to risks, events and uncertainties, or risk factors, associated
with being both a publicly-traded company operating in the biopharmaceutical industry, and
as an enterprise with several projects in the research and development stage. Such risk
factors could cause reported financial information to not necessarily be indicative of
future operating results or of future financial position. The Company cannot predict all
of the risk factors, nor can it assess the impact, if any, of such risk factors on the
Companys business or the extent to which any factor, or combination of factors, may
cause future results or financial position to differ materially from those reported or
those projected in any forward-looking statements. Accordingly, reported financial
information and forward-looking statements should not be relied upon as a prediction of
future actual results.

Some
of the risks and uncertainties affecting the Company, its business, operations and results
include, but are not limited to, the Companys dependence on a few customers and a
few suppliers, the loss of any of which would negatively impact the Companys
operations; the need to develop and commercialize new products which will require further
time consuming and costly research and development, the success of which cannot be
assured; the Companys dependency on third parties for manufacturing, materials and
for research, development and commercialization assistance and support; the Companys
dependency on assurances from third parties regarding licensing of proprietary technology
owned by others; government regulation and the need for regulatory approvals for both the
development and commercialization of products, which are not assured; uncertainty that the
Companys products will be accepted in the marketplace; rapid technological change
and competition from pharmaceutical companies, biotechnology companies and universities,
which may make the Companys technology or products obsolete or uncompetitive; the
need to attract and retain skilled employees; risks associated with claims of infringement
of intellectual property and of proprietary rights; risks inherent in manufacturing
(including upscaling) and marketing; product liability and insurance risks; risks
associated with clinical trials, including the possibility that trials may be terminated
early, delayed or unsuccessful; exchange rate fluctuations; political, economic and
environmental risks; the need for performance by buyers and suppliers of products; the
Companys dependency on performance by its licensees regarding the sale of our
licensed out products NeoVisc and Uracyst; and the risk of unanticipated expenses or
unanticipated reductions in revenue, or both, any of which could cause the Company to
reduce, delay or divest one or more of its research, development or marketing programs.

Off-Balance Sheet
Arrangements

The
Company, as part of its ongoing business, does not participate in transactions that
generate relationships with unconsolidated entities or financial partnerships, such as
entities often referred to as structured finance or special purpose entities
(SPEs), which would have been established for the purpose of facilitating
off-balance sheet arrangements or other contractually narrow or limited purposes. As of
March 1, 2005, the Company was not involved in any material unconsolidated SPE
transactions.

-27-

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Item 7.     Financial Statements.

The
financial statements of the Company for 2004, including the notes thereto, together with
the report thereon of Mintz & Partners, LLP Chartered Accountants and from Kraft
Berger Grill Swartz & Cohen, LLP for 2003, are attached to the end of this annual
report and are hereby incorporated herein by reference.

Item 8.     Changes In
 and Disagreements with Accountants on Accounting and Financial Disclosure.

Not
applicable.

# Item 8A.      Controls and
Procedures.

Within
the 90-day period prior to the Companys filing of this annual report, an evaluation
was carried out under the supervision and with the participation of the Companys
management, including its Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of the Companys disclosure controls and
procedures (as defined in Rule 13a-15 and 15d-15 under the Exchange Act. Based upon that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded that those
disclosure controls and procedures were adequate to ensure that information required to be
disclosed by the Company in the reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported, within the time periods specified in the
rules and regulations promulgated there under. There have been no significant changes in
the Companys internal controls or in other factors that could significantly affect
these controls subsequent to the date of their evaluation.

# Item 8B.      Other
Information.

Not
applicable.

# PART III

# Item 9.      Directors,
Executive Officers, Promoters and Control Persons; Compliance With Section 16(a) of the Exchange Act.

# Directors and Executive
Officers

The
following table sets forth certain information with respect to the directors and executive
officers of Stellar as of March 1, 2005.

-28-

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|                     |  |    
|-------------------- |  | ---
|Name                 |  | Age
|Peter Riehl          |  | 59 
|Arnold Tenney        |  | 62 
|Steven H. Goldman    |  | 49 
|John J. Kime         |  | 62 
|David A. Rosenkrantz |  | 47 
|Doug Froom           |  | 60 
|Janice M. Clarke     |  | 44 

Set
forth below are brief biographies of the Companys directors and officers. All of the
directors and executive officers of the Company have held their principal occupations
indicated below for the past five years unless otherwise noted.

Peter
Riehl, President, Chief Executive Officer and Director. Peter Riehl joined the Company
in 1996. Mr. Riehl has over 30 years experience in the Canadian and international
pharmaceutical markets. He was a former director of sales and marketing for Fisons Corp.
Ltd. in Canada responsible for the commercial side of their pharmaceutical business in
Canada. His experience covers sales, marketing, business development and logistics in the
pharmaceutical industry. In 1993, Mr. Riehl was Chairman of the prescription drug sector
of the Canadian Wholesale Drug Association. He is also a former director of sales and
marketing for Bioniche Life Sciences Inc. Mr. Riehl has been involved in numerous
professional and industry related training programs and has a Diploma in Business
Administration from Conestoga College, Kitchener and studied marketing at York University,
Toronto.

Arnold
Tenney, Chairman of the Board and Financial Advisor.Arnold S. Tenney was Chief
Executive Officer of ARC International Corporation from 1978 to 2000. ARC International
Corporation was a developer of indoor ice arenas and tennis clubs, as well as an
investment company involved in entertainment and cable television whose shares were traded
on the American Stock Exchange until its liquidation in 2000. Mr. Tenney was a director
and Chairman of the Board of Cabletel Communications from 1985 to 2000, which is a leading
supplier of broadband equipment to the cable television industry whose shares currently
trade on both the Toronto and American Stock Exchanges. Mr. Tenney was a director of
Ballantyne of Omaha, Inc. from 1988 to 2000 and served as Chairman of the Board from 1992
to 2000. Ballantyne of Omaha, Inc. is a leading manufacturer of commercial motion picture
projection equipment whose shares trade on the American Stock Exchange. Mr. Tenney served
as a director for Phillip Services Inc., a Canadian metal recycling company, from 1998 to
2000. He served in the capacity as a representative of Mr. Carl Icahn.

Steven
H. Goldman, Corporate Secretary and Director. Steven H. Goldman has been a director of
the Company since August 31, 2000. Mr. Goldman is a senior partner with the Toronto
law firm of Goldman, Rosen LLP and has been legal counsel to the Company since 1997. Mr.
Goldman has a B.A. from Carleton University (Presidents Medal, 1976) and a LL.B.
from Queens University. He has been practicing law in Toronto since 1982.

John
J. Kime, Director. John J. Kime has been a director of the Company since December
2000. Mr. Kime has been the President and Chief Executive Officer of the London Economic
Development Corporation since 1998. The London Economic Development Corporation is a
public/private partnership with primary responsibility for economic development activities
in London, Ontario, Canada. From 1991 to 1998, Mr. Kime served as Director of
International Development for Big O Incorporated, a company primarily engaged
in the design and manufacture of control and containment systems for water, chemicals and
other substances. Mr. Kime has a B.A. from the University of Western Ontario and is a
chartered accountant. Mr. Kime is also a director of Cancer Care Ontario, Canada.

-29-

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David
A. Rosenkrantz, Director. Mr. Rosenkrantz is Chairman of Patica Corporation, a
small-cap merchant bank based in Toronto, which focuses on junior growth companies and
President of Patica Securties Ltd. He has over fifteen years experience in investment and
merchant banking. Mr. Rosenkrantz has been involved in private and public financing and
merger and acquisition transactions involving health care, real estate, oil and gas, and
high technology companies. Mr. Rosenkrantz is a graduate of Carleton University and
obtained his MBA from York University.

W.
          Douglas Froom, Director. Mr. Froom is presently retired but brings with him
          over 35 years experience in the pharmaceutical and biotechnology industry. He
          has been General Manager for Procter and Gamble pharmaceuticals in both Canada
          and the United Kingdom and more recently served as Vice President of Business
          Development for Allelix Biopharmaceuticals and Synsorb Biotech Inc.

Janice
M. Clarke, Chief Financial Officer.Ms. Clarke has over twenty years of office
administration and financial management experience with proven abilities to implement and
manage various financial systems and office procedures.  Ms. Clarke joined Stellar
International Inc. in August 2000 and currently manages their administrative and
financial processes.

# Board of Directors

The
Board of Directors consists of six members. Directors serve for terms of one year or until
their successors are duly elected or appointed.

# Committees of the Board
of Directors

The
Company has established an Audit Committee and a Compensation Committee of the Board of
Directors.

Audit
Committee

The
Audit Committee consists of Messrs. Rosenkrantz, Goldman and Kime, and is responsible for
recommending the firm to be appointed as auditors to audit financial statements and to
perform services related to the audit; reviewing the scope and results of the audit with
the auditors, reviewing with management and the auditors the Companys annual
operating results; and considering the adequacy of the internal accounting procedures and
the effect of such procedures on the auditors independence. Mr. Kime who chairs this
committee is a chartered accountant and provides financial expertise to the Audit
Committee. Each Audit Committee member is an independent director of the Company.

Compensation
Committee

The
Compensation Committee consists of Messrs. Rosenkrantz and Kime, and is responsible for
evaluating, reviewing and supervising the procedures of the Company with regard to human
resources; assessing the performance of the officers of the Company; reviewing annually
the remuneration of the officers; and recommending to the Board of Directors general
remuneration policies regarding salaries, bonuses and other forms of remuneration for the
directors and executive officers of the Company.

-30-

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# Audit Committee
Financial Expert

The
Board of Directors has determined that Mr. Kime is an audit committee financial expert as
defined by Item 401(h) of Regulation S-K of the Exchange and is independent within the
meaning of Item 7(d)(3)(iv) of Schedule 14A of the Exchange Act.

# Compliance with Section
16(a) of the Exchange Act

Section
16(a) of the Exchange Act, requires Stellars executive officers, directors and
persons who beneficially own more than 10% of the Common Shares (reporting
persons) to file initial reports of ownership and reports of changes of ownership
with the United States Securities and Exchange Commission. Executive officers, directors
and greater than 10% beneficial owners are required to furnish Stellar with copies of all
Section 16(a) forms they file.

The
Company believes that certain of its officers and directors failed to file reports
required by Section 16 (a) of the Exchange Act during 2004. The Company expects that these
reports will be filed during 2005.

# Code of Ethics

The
Company has not adopted a code of ethics in light of its limited number of executive
officers.

# Item 10.      Executive
Compensation.

# Summary Compensation
Table

The
Company does not have a long-term incentive plan or pension plan and has never granted
stock appreciation rights to any of its directors, officers or employees.

The
following table sets forth all compensation earned during each of the three years included
in the period ended December 31, 2004 by the Chief Executive Officer of Stellar, such
individual being the only executive officer of Stellar whose total annual salary, bonus
and other annual compensation exceeded $100,000 (USD).

|Name and          | Year | Annual Compensation | Long Term |         |   
|----------------- | ---- | ------------------- | --------- | ------- | --
|
|                 
|                  |      |                     |           | Salary  |   
|                  |      |                     |           | ($)(Cdn | .)
|                 
|Peter Riehl,      |      | 2004                |           | 140,000 |   
|President & Chief |      | 2003                |           | 100,000 |   
|Executive Officer |      | 2002                |           | 100,000 |   
|                 

-31-

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# Employment Agreements
and Termination of Employment

Effective
as of September 1, 2000, Stellar entered into separate employment agreements with Peter
Riehl and with Samuel Hahn. Under Mr. Riehls employment agreement, Mr. Riehl agreed
to serve as a director of Stellar and is employed as the President and Chief Executive
Officer of Stellar. Under Mr. Hahns employment agreement, Mr. Hahn agreed to serve
as a director of Stellar and was employed as the Vice-President, Chief Scientific Officer
and Interim Chief Financial Officer of Stellar. In October 2003, Stellar and Mr. Hahn
entered into a new agreement, replacing his employment agreement. Under his new agreement,
Mr. Hahn acts as a scientific consultant for Stellar and is paid an annual fee of $50,000
for a period of two years. Mr. Hahn will not be entitled to participate in any further
stock options grants made by the Corporation. Mr. Hahn has agreed to not compete with the
Company for a period of 18 months from the date of the termination of his employment
agreement.

Effective
September 1, 2004, Mr. Riehls employment agreement provides for a gross annual
remuneration of $175,000, plus standard dental and life insurance benefits. Mr. Riehl is
also entitled to be reimbursed for all Company-related travel and other out-of-pocket
expenses. Pursuant to his employment agreement, Mr. Riehl is further entitled to receive
an annual bonus, at the discretion of the Board of Directors, in the form of cash and/or
stock options, based upon the achievement of certain performance goals to be established
by the Compensation Committee of the Board of Directors. The employment agreement is for
renewable automatically for successive one year terms unless and until notice of intent to
terminate is given by either Mr. Riehl or Stellar at least 3 months prior to the
expiration of the term. Notwithstanding the foregoing, in the event that Mr. Riehls
employment is terminated, other than for cause, by the Company, Mr. Riehl is entitled to a
lump sum payment equal to 200% of his then current base salary. In the event of any such
termination, any unvested stock options held by the Mr. Riehl will immediately vest. Mr.
Riehl has agreed to not compete with the Company for a period of 2 years from the date of
the termination of his employment, irrespective of the cause of such termination.

# Stock Option Plan

The
Company has established a stock option plan for the directors, executive officers,
employees and consultants of the Company and any subsidiaries of the Company that may be
formed (the Plan) in order to attract and retain competent persons motivated
to work toward ensuring the Companys success and to encourage such persons to
acquire Common Shares. Individuals who are eligible to be selected to receive options
under the Plan are directors, executive officers, employees and consultants of the Company
and subsidiaries of the Company. The Board of Directors administers the Plan and has the
power to amend, modify, suspend or terminate the Plan, subject to any necessary regulatory
approvals.

All
of the options granted under the Plan may be exercised within a maximum period of three
and one-half years following the date of grant thereof. Subject to the Plan, the Board of
Directors designates the recipients of options and determines the number of Common Shares
covered by each option, the date of vesting of each option, the exercise price of each
option, the expiry date and any other terms relating thereto, in each case, in accordance
with the applicable legislation of the securities regulatory authorities. The price at
which the Common Shares may be purchased pursuant to the Plan may not be lower than the
closing price of the Common Shares on the principal stock exchange where the Common Shares
are listed on the date of grant. On April 29, 2004, the Company increased the number of
options in the plan to 4,157,841 from 2,852,000; the maximum number of Common Shares that
are issuable under the Plan may not exceed 4,157,841. The maximum number of Common Shares
that may be granted to any person may not exceed 5% of the outstanding Common Shares.

-32-

---



As
at February 28, 2005, the number of Common Shares which remain available for issuance
under the Plan is 2,632,841, of which 1,042,841 Common Shares remain available for option
grants.

The
Plan has not been approved by the Companys shareholders.

# Option Grants in Last
Fiscal Year

An
option to purchase 35,000 Common Shares at $2.00 with an expiry date of April 7, 2007, was
granted to Mr. Riehl during the fiscal year ended December 31, 2004.

# Compensation of Directors

In
2004, the directors of the Company were entitled to receive cash compensation for serving
in such capacity. The director acting as Chairman of the Board receives $10,000 annually.
All other directors receive $6,000 annually. In addition, members of the Audit Committee
receive $4,000 annually and members of the Compensation Committee receive $1,000 annually.
Board members are eligible to participate in the Plan.

Each
of Messrs. Tenney, Riehl, Kime, Froom, Rosenkrantz and Goldman has been granted an option
under the Plan to purchase 25,000 Common Shares in consideration for serving as a director
of the Company. In addition Messrs. Tenney and Riehl received an additional option to
purchase 10,000 Common Shares for their duties as Chairman of the Board and Chief
Executive Officer, respectively. Mr. Goldman received an additional option to purchase
5,000 Common Shares for his duties as Secretary. Each such option provides for an exercise
price of $2.05 per share and an expiry date of April 2, 2007.

# Aggregated Option
Exercises and Fiscal Year-End Option Value Table

The
following table sets forth information concerning each exercise of options by Mr; Riehl
during the year ended December 31, 2004.

|            |              |                |                   |                     
|----------- | ------------ | -------------- | ----------------- | --------------------
|           
|Name        | Securities   | Value Realized | Unexercised       | Value of Unexercised
|            | Acquired on  | ($) (Cdn.)     | Options at        | In-the-Money Options
|            | Exercise (#) |                | December 31, 2004 | at December 31, 2004
|            |              |                | (#)               | ($) (Cdn.)          
|            |              |                | Exercisable/      | Exercisable/        
|            |              |                | Unexercisable     | Unexercisable       
|           
|Peter Riehl | 245,000      | 379,750        | 85,000/0          | -$0- / -$0 -        
|           

# Indemnification of
Directors

The
Company has agreed to indemnify each of its directors to the fullest extent permitted by
Ontario, Canada corporate law for all costs, liabilities and expenses incurred by each
director, including legal fees, in respect of claims to which a director is made a party
by reason of being or having been a director of the Company or any subsidiary thereof,
provided such director acted honestly and in good faith with a view to the best interests
of the Company and, in the case of a criminal or administrative proceeding enforced by
monetary penalty, such director had reasonable grounds for believing that his conduct was
lawful.

-33-

---



# Directors and
Officers Liability Insurance

The
Company maintains insurance for the benefit of its directors and officers against
liability in their respective capacities as directors and officers. The annual premium
payable by the Company in respect of such insurance is $ 38,610 and the total amount of
insurance purchased for the directors and officers as a group is $1,000,000. The directors
and officers are not required to pay any premium in respect of the insurance. The
insurance policy does not contain deductibility provisions.

# Item 11.      Security
Ownership of Certain Beneficial Owners and Management.

The
following table sets forth, as at March 1, 2005, certain information as to (i) each
person, who to the knowledge of the Company, is the beneficial owner of more than five
percent (5%) of any class of the Companys voting securities and (ii) each class of
equity securities of the Company or any of its subsidiaries (other than directors
qualifying shares) beneficially owned by (A) each director of the Company and the Chief
Executive Officer and (B) all directors and executive officers of the Company as a group.

|               |                          |                      |                 
|-------------- | ------------------------ | -------------------- | ----------------
|               |                          | Amount and           |                 
|               | Name and Address of      | Nature of Beneficial |                 
|Title of Class | Beneficial Owner         | Ownership            | Percent of Class
|              
|Common Shares  | Peter Riehl              | 3,499,741(1)         | 15.3%           
|               | 14 Exmoor Pl.            |                      |                 
|               | London, Ontario          |                      |                 
|               | Canada N5X 3W2           |                      |                 
|              
|Common Shares  | Arnold Tenney            | 914,200(2)           | 4.0%            
|               | c/o LMT Financial        |                      |                 
|               | 31 Maple Avenue          |                      |                 
|               | Toronto, Ontario         |                      |                 
|               | Canada M4W 2T8           |                      |                 
|              
|Common Shares  | Steven H. Goldman        | 628,669(3)           | 2.8%            
|               | 22 Vesta Dr.             |                      |                 
|               | Toronto, Ontario         |                      |                 
|               | Canada M5P 2Z5           |                      |                 
|              
|Common Shares  | John J. Kime             | 150,000(4)           | 0.7%            
|               | 138 Hunt Club Dr.        |                      |                 
|               | London, Ontario          |                      |                 
|               | Canada N6H 3Y7           |                      |                 
|              
|Common Shares  | David A. Rosenkrantz     | 608,333(6)           | 2.7%            
|               | c/o Patica Corporation   |                      |                 
|               | 105 Adelaide Street West |                      |                 
|              

-34-

---



|              |                              |               |      
|------------- | ---------------------------- | ------------- | -----
|              | Toronto, Ontario             |               |      
|              | Canada M5H 1P9               |               |      
|             
|Common Shares | Doug Froom                   | 128,600(5)    | 0.6% 
|              | 4216 Spruce Ave.             |               |      
|              | Burlington, Ontario          |               |      
|              | Canada  L7L 1L2              |               |      
|             
|Common Shares | Janice Clarke                | 102,222(8)    | 0.4% 
|              | 8664 Parkhouse Drive         |               |      
|              | Mt. Brydges, Ontario         |               |      
|              | Canada N0L 1W0               |               |      
|             
|Common Shares | SJ Strategic Investments LLC | 5,188,794(7)  | 22.8%
|              | 340 Edgemont Ave             |               |      
|              | Suite 500                    |               |      
|              | Bristol, Tennessee           |               |      
|              | U.S.A  37620                 |               |      
|             
|Common Shares | All directors and executive  | 5,903,0375(9) | 26.5%
|              | officers                     |               |      
|              | (7 individuals)              |               |      
|             

|(1) | Includes (i) 1,681,454 Common Shares owned by Mr. Riehls wife and (ii)
          currently exercisable options on 60,000 Common Shares granted under the Plan
           See Item 10. Executive Compensation.  Stock Option
          Plan.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Includes (i) 422,700 Common Shares owned by LMT Financial Inc, a company owned
          by Mr. Tenneys wife ; (ii) 126,500 Common Shares owned by Arnmart
          Investments Limited, a company to which Mr. Tenney holds and equity interest;
          (iii) 80,000 Common Shares owned by Mr. Tenneys wife; (iv) currently
          exercisable options on 35,000 Common Shares granted under the Plan; (v)
          currently exercisable options on 250,000 Common Shares which were granted
          outside of the Plan and Item 12. Certain Relationships and Related
          Transactions. See Item 10. Executive Compensation.  Stock
          Option Plan,
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Includes (i) 58,690 Common Shares held by Mr. Goldmans in his RRSP and
          (ii) currently exercisable options on 80,000 Common Shares granted under the
          Plan. See Item 10. Executive Compensation.  Stock Option Plan.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Includes currently exercisable options on 65,000 Common Shares granted under the
          Plan. See Item 10. Executive Compensation.  Stock Option Plan.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Includes (i) currently exercisable options on 25,000 Common Shares granted
          under the Plan See Item 10. Executive Compensation  Stock Option
          Plan
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Includes (i) 453,333 Common Shares owned by Mr. Rosenkrantzs wife and (ii)
          currently exercisable options on 130,000 Common Shares granted under the Plan.
          See Item 10. Executive Compensation.  Stock Option Plan
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Shares are directly owned by SJ, with John M. Gregory as the managing member
          deemed to have sole voting and dispositive power over the shares. Joan P.
          Gregory, Susan Gregory and James M. Gregory are deemed to be indirect beneficial
          owners of shares due to their financial interest in SJ.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) | Includes (i) currently exercisable options on 90,000 Common Shares granted under
          the Plan. See Item 10. Executive Compensation.  Stock Option
          Plan,
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(9) | Includes (i) currently exercisable options on 485,000 Common Shares granted
          under the Plan and (ii) currently exercisable options on 250,000 Common Shares
          granted outside of the Plan. See Item 10. Executive
          Compensation.  Stock Option Plan and  "Item 12.  Certain Relationships
          and Related Transactions."
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

-35-

---



# Item 12.      Certain
Relationships and Related Transactions.

As
discussed in Item 5 of this annual report, the Company entered a fiscal advisory and
consulting agreement on December 17, 2003, with LMT Financial Inc. a company controlled by
Mr. Tenneys wife, for services provided in 2004. Mr. Tenney currently serves as
Chairman of the Board of Stellar In addition to the Common Shares issued to LMT Financial
Inc., LMT Financial Inc. was granted an option to acquire up to 200,000 Common Shares, at
an exercise price of $0.75 per share in 2003.

# Item 13.      Exhibits and
Reports on Form 8-K.

(a)
          Exhibits

|Exhibit No. | Description of Exhibit                                    | Sequential Page
|----------- | --------------------------------------------------------- | ---------------
|            |                                                           | Number         
|2.1         | Articles of Incorporation of the Company                  | *              
|2.2         | First Articles of Amendment                               | *              
|2.3         | Second Articles of Amendment                              | *              
|2.4         | By-Laws of the Company                                    | *              
|3.1         | Specimen Form of Common Share Certificate                 | **             
|10.1        | United States Patent No. 6,083,933                        | *              
|10.2        | Canadian Patent No. 2,269,260                             | *              
|10.3        | License Agreement dated December 21, 2001 between the     | *              
|            | Company and G. Pohl-Boskamp GmbH & Co.                    |                
|10.4        | Consulting agreement dated February 21, 2001 between the  | *              
|            | Company and LMT Financial Inc.                            |                
|10.5        | Contract Services Agreement Inc. dated October 10, 2003   | **             
|            | between the Company and Dalton Chemical Laboratories Inc. |                
|10.6        | Amended Agreement dated January 1, 2004 between the       | ***            
|            | Company and LMT Financial Inc.                            |                
|10.7        | Licence Agreements dated March 24, 2004 between the       | ***            
|            | Company and SJ Pharmaceuticals Inc.                       |                
|10.8        | Supply Agreements dated March 24, 2004 the Company and SJ | ***            
|            | Pharmaceuticals Inc                                       |                
|10.9        | Amending Consulting Agreement dated December 10, 2004     | ***            
|            | between the Company & LMT Financial Inc.                  |                

-36-

---



|Exhibit No. | Description of Exhibit                   | Sequential Page
|----------- | ---------------------------------------- | ---------------
|            |                                          | Number         
|99.1        | Certification of Chief Executive Officer |                
|99.2        | Certification of Chief Financial Officer |                

|* |  | Filed as an exhibit to Amendment No. 1 to the Company's Registration Statement on Form 10-SB dated February 4, 2002.
|- |  | --------------------------------------------------------------------------------------------------------------------

|** |  | Filed as an exhibit to Amendment No. 2 to the Company's Registration Statement on Form 10-SB dated April 26, 2003.
|-- |  | ------------------------------------------------------------------------------------------------------------------

|*** |  | Filed as an exhibit to Amendment No. 3 to the Company's Registration Statement on Form 10-SB dated March 31, 2004.
|--- |  | ------------------------------------------------------------------------------------------------------------------

| |  | Filed as an exhibit to Amendment No. 4 to the Companys Registration Statement on Form
          10-SB to be filed
| |  | ------------------------------------------------------------------------------------------------------------------

|(b) |  | Reports on Form 8-K
|--- |  | -------------------

| |  | Not applicable.
| |  | ---------------

# Item 14.       Principal Accountant Fees and Services.

# Fees for Services
Provided by Independent Auditors

Fees
for all services provided by Mintz & Partners, LLP in 2004 and Kraft, Berger, Grill,
Swartz & Cohen LLP in 2003, the Companys independent auditors, for 2004 and 2003
were as follows:

# Audit Fees.

Fees
for services for fiscal years 2003 related to the annual financial statement audits and
reviews of quarterly financial statements filed in the reports on Form 10-Q and statutory
audits were approximately $39,500. In 2004, the Company changed their auditors to Mintz
& Partners, LLP with a branch office located in London, Ontario, Canada. Their fees
for services for fiscal years 2004 related to the annual financial statement audits and
reviews of quarterly financial statements filed in the reports on Form 10-Q and statutory
audits will be approximately $65,000.

# Audit-Related Fees.

In
addition to the Audit Fees, the company paid Kraft, Berger, Grill, Swartz & Cohen LLP
approximately $1,000 in each of 2003 and 2002 for tax advice services and review issues
with regards to out-licensing agreements, employee benefit issues and research &
development credits.

-37-

---



# Tax Fees.

Mintz
& Partners, LLP fees for tax services for 2004 are estimated to be $2,500. Kraft,

Berger, Grill, Swartz & Cohen LLP fees for tax services in 2003 and 2002 were $1,500
and $1,750, respectively.

# All Other Fees.

The
Company generally does not engage Mintz & Partners, LLP for other
services.

# Pre-Approval Policy for
Services of Independent Auditors

As
part of its duties, the Audit Committee is required to pre-approve audit and non-audit
services preformed by the independent auditors in order to assure that the provision of
such services does not impair the auditors independence. On an annual basis, the
Audit Committee will review and provide pre-approval for certain types of services that
may be provide by the independent auditors without obtaining specific approval from the
Audit Committee. If a type of service to be provided by the independent auditors has not
received pre-approval during this annual process, it will require specific pre-approval
form the Audit Committee. The Audit Committee does not delegate to management its
responsibilities to pre-approve services performed by the independent auditors.

The
Audit Committee of the board has appointed Mintz & Partners, LLP to be the
companys independent auditors for the fiscal year ending December 31, 2004.

-38-

---



# SIGNATURES

In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.

|                      |                                    
|--------------------- | -----------------------------------
|Date:  March 30, 2005 | Stellar Pharmaceuticals Inc.       
|                      | By:   /s/ Arnold Tenney            
|                      | ___________________________________
|                      | Name:  Arnold Tenney               
|                      | Title: Chairman of the Board       

In
accordance with the Exchange Act, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.

|                       |                                          
|---------------------- | -----------------------------------------
|                       |                                          
|Date:  March 30, 2005  | By:   /s/ Arnold Tenney                  
|                       | _____________________________________    
|                       | Name: Arnold Tenney                      
|                       | Title: Chairman of the Board             
|Date:  March 30 2005   | By:   /s/ Peter Riehl                    
|                       | _____________________________________    
|                       | Name:  Peter Riehl                       
|                       | Title: President, Chief Executive Officer
|                       | and Director                             
|Date:  March 30, 2005  | By:   /s/ David A. Rosenkrantz           
|                       | _____________________________________    
|                       | Name:  David A. Rosenkrantz              
|                       | Title: Director                          
|Date:  March 30, 2005  | By:   /s/ Steven H. Goldman              
|                       | _____________________________________    
|                       | Name:  Steven H. Goldman                 
|                       | Title: Secretary and Director            
|Date :  March 30, 2005 | By:   /s/ John J. Kime                   
|                       | _____________________________________    
|                       | Name:  John J. Kime                      
|                       | Title: Director                          
|Date:  March 30, 2005  | By:   /s/ W. Douglas Froom               
|                       | _____________________________________    
|                       | Name:  W. Douglas Froom                  
|                       | Title: Director                          
|Date:  March 30, 2005  | By:   /s/ Janice M. Clarke               
|                       | _____________________________________    
|                       | Name:  Janice M. Clarke                  
|                       | Title: Chief Financial Officer           

---



# CERTIFICATION

# Pursuant to Rule 13a-14

I, Peter Riehl, the Chief Executive
Officer of Stellar Pharmaceuticals Inc. (the Company), certify that:

|1. | I have reviewed this annual report on Form 10-KSB of Stellar International Inc.
|-- | -------------------------------------------------------------------------------

|2. | Based on my knowledge, this annual report does not contain any untrue statement
          of a material fact or omit to state a material fact necessary to make the
          statements made, in light of the circumstances under which such statements were
          made, not misleading with respect to the period covered by this annual report;
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. | Based on my knowledge, the financial statements, and other financial information
          included in this annual report, fairly present in all material respects the
          financial condition, results of operations and cash flows of the registrant as
          of, and for, the periods presented in this annual report;
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4. | The registrants other certifying officer and I, are responsible for
          establishing and maintaining disclosure controls and procedures (as defined in
          Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|a) |  | Designed such disclosure controls and procedures to ensure that material
               information relating to the registrant, including its consolidated subsidiaries,
               is made known to us by others within those entities, particularly during the
               period in which this annual report is being prepared;
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|b) |  | Evaluated the effectiveness of the registrants disclosure controls and
               procedures as of a date within 90 days prior to the filing date of this annual
               report (the Evaluation Date); and
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|c) |  | Presented in this annual report our conclusions about the effectiveness of the
               disclosure controls and procedures based on our evaluation as of the Evaluation
               Date;
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. | The registrants other certifying officer and I have disclosed, based on
          our most recent evaluation, to the registrants auditors and the audit
          committee of registrants board of directors (or persons performing the
          equivalent function):
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|a) |  | All significant deficiencies in the design or operation of the internal controls
               which could adversely affect the registrants ability to record, process,
               summarize and report financial data and have identified for the
               registrants auditors any material weaknesses in internal controls; and
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|b) |  | Any fraud, whether or not material, that involves management or other employees
               who have a significant role in the registrants internal controls; and
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

|6. | The registrants other certifying officer and I have indicated in this
          annual report whether or not there were significant changes in internal controls
          or in other factors that could significantly affect internal controls subsequent
          to the date of our most recent evaluation, including any corrective actions with
          regard to significant deficiencies and material weaknesses.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                      |                                      
|--------------------- | -------------------------------------
|                      |                                      
|Date:  March 31, 2005 | By:   /s/ Peter Riehl                
|                      | _____________________________________
|                      | Peter Riehl                          
|                      | Chief Executive Officer              

---



# CERTIFICATIONPursuant to Rule 13a-14

# 

I, Janice Clarke, the Chief Financial
Officer of Stellar Pharmaceuticals Inc. (the Company), certify that:

|1. | I have reviewed this annual report on Form 10-KSB of Stellar International Inc.
|-- | -------------------------------------------------------------------------------

|2. | Based on my knowledge, this annual report does not contain any untrue statement
          of a material fact or omit to state a material fact necessary to make the
          statements made, in light of the circumstances under which such statements were
          made, not misleading with respect to the period covered by this annual report;
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. | Based on my knowledge, the financial statements, and other financial information
          included in this annual report, fairly present in all material respects the
          financial condition, results of operations and cash flows of the registrant as
          of, and for, the periods presented in this annual report;
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4. | The registrants other certifying officer and I are responsible for
          establishing and maintaining disclosure controls and procedures (as defined in
          Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|a. |  | Designed such disclosure controls and procedures to ensure that material
          information relating to the registrant, including its consolidated subsidiaries,
          is made known to us by others within those entities, particularly during the
          period in which this annual report is being prepared;
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|b. |  | Evaluated the effectiveness of the registrants disclosure controls and
          procedures as of a date within 90 days prior to the filing date of this annual
          report (the Evaluation Date); and
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|c. |  | Presented in this annual report our conclusions about the effectiveness of the
          disclosure controls and procedures based on our evaluation as of the Evaluation
          Date;
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. | The registrants other certifying officer and I have disclosed, based on
          our most recent evaluation, to the registrants auditors and the audit
          committee of registrants board of directors (or persons performing the
          equivalent function):
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|a. |  | All significant deficiencies in the design or operation of the internal
          controls which could adversely affect the registrants ability to record,
          process, summarize and report financial data and have identified for the
          registrants auditors any material weaknesses in internal controls; and
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|b. |  | Any fraud, whether or not material, that involves management or other employees
          who have a significant role in the registrants internal controls; and
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

|6. | The registrants other certifying officer and I have indicated in this
          annual report whether or not there were significant changes in internal controls
          or in other factors that could significantly affect internal controls subsequent
          to the date of our most recent evaluation, including any corrective actions with
          regard to significant deficiencies and material weaknesses.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                      |                                      
|--------------------- | -------------------------------------
|                      |                                      
|Date:  March 31, 2005 | By:   /s/ Janice M. Clarke           
|                      | _____________________________________
|                      | Janice M. Clarke                     
|                      | Chief Financial Officer              

---



Exhibit 99.1

# CERTIFICATIONPursuant to 18 United
States Code Section 1350

# 

The Undersigned hereby certifies that
to his knowledge the annual report of Stellar Pharmaceuticals Inc. (the
Company) filed with the Securities and Exchange Commission on the date hereof
fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange
Act of 1934 and that the information contained in such report fairly presents, in all
material respects, the financial condition and results of operations of the Company.

|                      |                                      
|--------------------- | -------------------------------------
|                      |                                      
|Date:  March 31, 2005 | By:  /s/Peter Riehl                  
|                      | _____________________________________
|                      | Peter Riehl                          
|                      | Chief Executive Officer              

---



Exhibit 99.2

# CERTIFICATIONPursuant to 18 United
States Code Section 1350

# 

The Undersigned hereby certifies that
to her knowledge the annual report of Stellar Pharmaceuticals Inc. (the
Company) filed with the Securities and Exchange Commission on the date hereof
fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange
Act of 1934 and that the information contained in such report fairly presents, in all
material respects, the financial condition and results of operations of the Company.

|                      |                                      
|--------------------- | -------------------------------------
|                      |                                      
|Date:  March 31, 2005 | By:  /s/Janice M. Clarke             
|                      | _____________________________________
|                      | Janice M. Clarke                     
|                      | Chief Financial Officer              

---