**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**FORM
      10-Q**





(Mark
      One)




x
            
            QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
                ACT OF
                1934




For
      the
      quarterly period ended **April
      30, 2007**


or




o
            
            TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
                ACT




**** For
      the
      transition period from  to




****Commission
      File Number**001-31756**







**Argan,
                Inc.**(Exact
                Name of registrant as Specified in Its
                Charter)





**Delaware**
            **13-1947195**(State
                or other Jurisdiction of Incorporation
              or
                Organization)
            (I.R.S.
                Employer Identification No.)








**One
                Church Street, Suite****401,
                Rockville MD 20850**(Address
                of Principal Executive Offices) (Zip
                Code)





**(301)
                315-0027**(Registrant’s
                telephone number, including area
                code)





(Former
                Name, Former Address and Former Fiscal Year,
              if
                Changed Since Last Report)





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





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





Large accelerated filer o
            Accelerated filer o
            Non-accelerated filer þ




Indicate
      by check mark whether the Registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes
o No þ








Common
      Stock, par value $0.15 per share, outstanding at June 11, 2007: 11,094,012.











**ARGAN,
      INC.**




**INDEX**




**Page
                  No.**PART
                  I. FINANCIAL INFORMATION
              3Item
                  1.
              Financial
                  Statements (unaudited)
              3Condensed
                  Consolidated Balance Sheets - April 30, 2007 and January 31,
                  2007
              3Condensed
                  Consolidated Statements of Operations for the Three MonthsEnded
                  April 30, 2007 and 2006
              4Condensed
                  Consolidated Statements of Cash Flows for the Three MonthsEnded
                  April 30, 2007 and 2006
              5Notes
                  to Condensed Consolidated Financial Statements
              6Item
                  2.
              Management’s
                  Discussion and Analysis of Financial Conditionand
                  Results of Operation
              11Item
                  3.
              Quantitative
                  and Qualitative Disclosures about Market Risk
              21Item
                  4.
              Controls
                  and Procedures
              21PART
                  II. OTHER INFORMATION
              21Item
                  1.
              Legal
                  Proceedings
              21Item
                  1a.
              Risk
                  Factors
              22Item
                  2.
              Unregistered
                  Sales of Equity Securities and Use of Proceeds
              22Item
                  3.
              Defaults
                  Upon Senior Securities
              22Item
                  4.
              Submission
                  of Matters to a Vote of Security Holders
              22Item
                  5.
              Other
                  Information
              22Item
                  6.
              Exhibits
              22SIGNATURES
              23


2


PART
      I.
      FINANCIAL INFORMATION


ITEM
      1.
      FINANCIAL STATEMENTS


**ARGAN,
                INC.****Condensed
                Consolidated Balance Sheets****(Unaudited)**April
                30,
            
            January
                31,2007
            
            2007**ASSETS****CURRENT
                ASSETS:**Cash
                and cash equivalents
            
            $
            32,640,000
            
            $
            25,393,000Accounts
                receivable, net of allowance for doubtful accounts of
                $213,000at
                4/30/07 and $137,000 at 1/31/2007
            
            
            23,266,000
            
            
            23,030,000Receivable
                from affiliated entity
            
            
            146,000
            
            
            155,000Investments
                available for sale
            
            
            1,705,000
            
            
            2,283,000Escrowed
                cash
            
            
            15,196,000
            
            
            15,031,000Estimated
                earnings in excess of billings
            
            
            4,136,000
            
            
            12,003,000Current
                deferred tax asset
            
            
            959,000
            
            
            -Inventories,
                net of reserves of $116,000 at 04/30/2007 and $104,000at
                01/31/2007
            
            
            2,640,000
            
            
            2,387,000Prepaid
                expenses and other current assets
            
            
            1,018,000
            
            
            643,000**TOTAL
                CURRENT ASSETS**
            
            
            81,706,000
            
            
            80,925,000Property
                and equipment, net of accumulated depreciation of$2,656,000
                at 4/30/2007 and $2,379,000 at 1/31/2007
            
            
            3,070,000
            
            
            3,250,000Other
                assets
            
            
            276,000
            
            
            313,000Goodwill
            
            
            23,981,000
            
            
            23,981,000Other
                intangible assets, net
            
            
            10,597,000
            
            
            12,661,000**TOTAL
                ASSETS**
            
            $
            119,630,000
            
            $
            121,130,000**LIABILITIES
                AND STOCKHOLDERS’ EQUITY****CURRENT
                LIABILITIES:**Accounts
                payable
            
            $
            42,755,000
            
            $
            44,248,000Due
                to affiliates
            
            
            35,000
            
            
            7,000Accrued
                expenses
            
            
            6,326,000
            
            
            5,873,000Estimated
                loss on uncompleted contracts
            
            
            189,000
            
            
            -Billings
                in excess of cost and earnings
            
            
            17,769,000
            
            
            15,705,000Current
                portion of long-term debt
            
            
            2,583,000
            
            
            2,586,000**TOTAL
                CURRENT LIABILITIES**
            
            
            69,657,000
            
            
            68,419,000Deferred
                income tax liability
            
            
            1,382,000
            
            
            1,471,000Other
                liabilities
            
            
            31,000
            
            
            14,000Long-term
                debt
            
            
            6,069,000
            
            
            6,715,000**TOTAL
                LIABILITIES**
            
            
            77,139,000
            
            
            76,619,000**STOCKHOLDERS'
                EQUITY**Preferred
                stock, par value $0.10 per share; 500,000 shares
                authorized;no
                shares issued and outstanding
            
            
            -
            
            
            -Common
                stock, par value $0.15 per share;12,000,000
                shares authorized; 11,097,245 sharesissued
                at 4/30/2007 and 1/31/2007 and 11,094,012shares
                outstanding at 4/30/2007 and 1/31/2007
            
            
            1,664,000
            
            
            1,664,000Warrants
                outstanding
            
            
            849,000
            
            
            849,000Additional
                paid-in capital
            
            
            57,199,000
            
            
            57,190,000Accumulated
                other comprehensive loss
            
            
            (22,000
            )
            
            (8,000
            )Accumulated
                deficit
            
            
            (17,166,000
            )
            
            (15,151,000
            )Treasury
                stock at cost; 3,233 shares at 4/30/2007 and 1/31/2007
            
            
            (33,000
            )
            
            (33,000
            )**TOTAL
                STOCKHOLDERS' EQUITY**
            
            
            42,491,000
            
            
            44,511,000**TOTAL
                LIABILITIES AND STOCKHOLDERS' EQUITY**
            
            $
            119,630,000
            
            $
            121,130,000






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




3


**ARGAN,
                  INC.****Condensed
                  Consolidated Statements of Operations****(Unaudited)**Three
                  months ended April 30,2007
              
              2006Net
                  salesPower
                  industry services
              
              $
              43,354,000
              
              $
              -Nutraceutical
                  products
              
              
              4,949,000
              
              
              5,829,000Telecom
                  infrastructure services
              
              
              2,129,000
              
              
              3,133,000Net
                  Sales
              
              
              50,432,000
              
              
              8,962,000Cost
                  of salesPower
                  industry services
              
              
              43,245,000
              
              
              -Nutraceutical
                  products
              
              
              4,166,000
              
              
              4,386,000Telecom
                  infrastructure services
              
              
              1,843,000
              
              
              2,323,000Gross
                  profit
              
              
              1,178,000
              
              
              2,253,000Selling,
                  general and administrative expenses
              
              
              4,561,000
              
              
              1,976,000(Loss)
                  income from operations
              
              
              (3,383,000
              )
              
              277,000Interest
                  expense and amortization ofsubordinated
                  debt issuance costs
              
              
              204,000
              
              
              261,000Other
                  income, net
              
              
              (633,000
              )
              
              (2,000
              )(Loss)
                  income from operations beforeincome
                  taxes
              
              
              (2,954,000
              )
              
              18,000Income
                  tax benefit (expense)
              
              
              939,000
              
              
              (36,000
              )Net
                  loss
              
              $
              (2,015,000
              )
              $
              (18,000
              )Basic
                  and diluted loss per share
              
              $
              (0.18
              )
              $
              -Weighted
                  average number of shares outstanding – basic and diluted
              
              
              11,094,000
              
              
              3,814,000


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




4


**ARGAN,
                INC.************************Condensed
                Consolidated Statements of Cash
                Flows************************(Unaudited)**Three
                Months ended April 30,2007
            
            2006**CASH
                FLOWS FROM OPERATING ACTIVITIES:**Net
                loss
            
            $
            (2,015,000
            )
            $
            (18,000
            )Adjustments
                to reconcile net loss to net cash provided by operating
                activities:Depreciation
                and other amortization
            
            
            324,000
            
            
            247,000Amortization
                of debt issuance costs
            
            
            -
            
            
            129,000Amortization
                of purchased intangibles
            
            
            2,064,000
            
            
            331,000Deferred
                income taxes
            
            
            (1,048,000
            )
            
            (39,000
            )Non-cash
                stock option compensation expense
            
            
            14,000
            
            
            -Gain
                on sale of property and equipment
            
            
            (1,000
            )
            
            (2,000
            )Changes
                in operating assets and liabilities:Accounts
                receivable, net
            
            
            (236,000
            )
            
            (1,039,000
            )Restricted
                cash for surety bond
            
            
            (165,000
            )
            
            -Estimated
                earnings in excess of billings
            
            
            7,867,000
            
            
            505,000Inventories,
                net
            
            
            (253,000
            )
            
            140,000Prepaid
                expenses and other current assets
            
            
            (375,000
            )
            
            (24,000
            )Accounts
                payable and accrued expenses
            
            
            (1,040,000
            )
            
            620,000Billings
                in excess of estimated earnings
            
            
            2,064,000
            
            
            31,000Due
                to (from) affiliates
            
            
            37,000
            
            
            (110,000
            )Estimated
                loss on uncompleted contracts
            
            
            189,000
            
            
            -Other
            
            
            (6,000
            )
            
            12,000Net
                cash provided by operating activities
            
            
            7,420,000
            
            
            783,000**CASH
                FLOWS FROM INVESTING ACTIVITIES:**Proceeds
                from sale of investments
            
            
            575,000
            
            
            -Proceeds
                from sale of property and equipment
            
            
            1,000
            
            
            3,000Purchases
                of property and equipment
            
            
            (100,000
            )
            
            (273,000
            )Net
                cash provided by (used in) investing activities
            
            
            476,000
            
            
            (270,000
            )**CASH
                FLOWS FROM FINANCING ACTIVITIES:**Proceeds
                from debt
            
            
            2,112,000
            
            
            1,605,000Principal
                payments on debt
            
            
            (2,761,000
            )
            
            (2,030,000
            )Net
                cash used in financing activities
            
            
            (649,000
            )
            
            (425,000
            )**NET
                INCREASE IN CASH AND CASH EQUIVALENTS**
            
            
            7,247,000
            
            
            88,000**CASH
                AND CASH EQUIVALENTS AT BEGINNING OF PERIOD**
            
            
            25,393,000
            
            
            5,000**CASH
                AND CASH EQUIVALENTS AT END OF PERIOD**
            
            $
            32,640,000
            
            $
            93,000**SUPPLEMENTAL
                CASH FLOW INFORMATION**Cash
                paid for interest and income taxes is as follows:Interest
            
            $
            244,000
            
            $
            128,000Income
                taxes
            
            $
            1,131,000
            
            $
            8,000Non-cash
                investing and financing activities are as follows:Net
                increase in unrealized investment loss
            
            $
            3,000
            
            $
            -Net
                decrease in fair value of interest rate swaps
            
            $
            (17,000
            )
            $
            -




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


5




**ARGAN,
      INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(Unaudited)**





**NOTE
      1- DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION**




***Business***




Argan,
      Inc. (AI or the Company) conducts its operations through its wholly owned
      subsidiaries, Gemma Power Systems, LLC and subsidiaries (GPS) which was acquired
      in December 2006, Vitarich Laboratories, Inc. (VLI) which was acquired in August
      2004, and Southern Maryland Cable, Inc. (SMC) which was acquired in July 2003.
      Through GPS, the Company provides a full range of development, consulting,
      engineering, procurement, construction, commissioning, operating and maintenance
      services to the power energy market for a wide range of customers including
      public utilities, independent power project owners, municipalities, public
      institutions and private industry. Through VLI, the Company develops,
      manufactures and distributes premium nutritional supplements, whole-food dietary
      supplements and personal care products. Through SMC, the Company provides
      telecommunications infrastructure services including project management,
      construction and maintenance to the Federal Government, telecommunications
      and
      broadband service providers, as well as electric utilities primarily in the
      Mid-Atlantic region.





AI
      operates in three reportable segments.




***Basis
      of presentation***




The
      condensed consolidated balance sheet as of April 30, 2007, the condensed
      consolidated statements of operations for the three months ended April 30,
      2007
      and 2006, and the condensed consolidated statements of cash flows for the three
      months ended April 30, 2007 and 2006, are unaudited. In the opinion of
      management, the accompanying financial statements contain all adjustments,
      which
      are of a normal and recurring nature, considered necessary to present fairly
      the
      financial position of the Company as of April 30, 2007 and the results of its
      operations and its cash flows for the interim periods presented. The Company
      prepares its interim financial information using the same accounting principles
      as it does for its annual financial statements.




These
      financial statements do not include all disclosures associated with annual
      financial statements and, accordingly, should be read in conjunction with the
      footnotes contained in the Company’s consolidated financial statements for the
      year ended January 31, 2007, together with the independent registered public
      accounting firm’s report, included in the Company’s Annual Report on Form
      10-KSB, as filed with the Securities and Exchange Commission (SEC). The results
      of operations for any interim period are not necessarily indicative of the
      results of operations for any other interim period or for a full fiscal
      year.




***Reclassifications***




Certain
      amounts in the prior year financial statements have been reclassified to conform
      with the presentation in the current year financial statements.




**NOTE
      2 - RECENT ACCOUNTING STANDARDS**




In
      September 2006, the Financial Accounting Standards Board (“FASB”) issued
      Statement of Financial Accounting Standard (“FAS”) No. 157, “Fair Value
      Measurements.” This Standard defines fair value, establishes a framework for
      measuring fair value in generally accepted accounting principles and expands
      disclosures about fair value measurements. The Company plans to adopt FAS 157
      on
      February 1, 2008, as required. The adoption of FAS 157 is not expected to have
      a
      material impact the Company’s financial condition and results of
      operations.




6


In
      February 2007, the FASB issued FAS No. 159, “The Fair Value Option for Financial
      Assets and Financial Liabilities.” FAS 159 permits companies to measure many
      financial instruments and certain other items at fair value at specified
      election dates. The provisions of FAS 159 will be effective for the Company
      beginning February 1, 2008. The Company does not expect FAS 159 to have a
      significant impact on the consolidated financial statements.




**NOTE
      3 - ESTIMATED LOSS ON UNCOMPLETED CONTRACTS**




During
      the three months ended April 30, 2007, the Company experienced an unexpected
      increase in costs related to one of the GPS contracts. Unexpected costs include
      labor productivity being below expectations and previous experience, labor
      rate
      increases due to overtime requirements to meet the completion date, and
      engineering issues resulting in considerable rework and additional materials.
      The Company anticipates that upon completion the contract which is 95% complete
      at April 30, 2007, may incur a forecasted loss of approximately $4.1 million,
      of
      which as of April 30, 2007 $3.9 million has been recognized, primarily during
      the three months ended April 30, 2007. At January 31, 2007, the project was
      estimated to be 90% complete with a forecasted gross margin of approximately
      $1.4 million. The Company has recorded an estimated loss for this contract
      as of
      April 30, 2007 and January 31, 2007 of $189,000 and zero,
      respectively.




**NOTE
      4 - INVENTORIES**




Inventories
      are stated at the lower of cost or market (net realizable value). Cost is
      determined on the first-in, first-out (FIFO) method. Appropriate consideration
      is given to obsolescence, excessive inventory levels, product deterioration,
      and
      other factors in evaluating net realizable value.




Inventories
      consist of the following:




April
                  30, 2007
              
              January
                  31, 2007Raw
                  materials
              
              $
              2,427,000
              
              $
              2,264,000Work-in
                  process
              
              
              105,000
              
              
              100,000Finished
                  goods
              
              
              224,000
              
              
              127,000Less:
                  Reserves
              
              
              (116,000
              )
              
              (104,000
              )Inventories,
                  net
              
              $
              2,640,000
              
              $
              2,387,000





**NOTE
      5- INTANGIBLE ASSETS** ****




The
      Company’s intangible assets consist of the following at April 30,
      2007:




**Estimated
                Useful Life**
            
            **Gross
                Carrying Amount**
            
            **Accumulated
                Amortization**
            
            **Net
                Carrying**
              **Amount**Amortized
                intangible assets:Contractual
                Customer
              Relationships
            
            
            5-7
                years
            
            $
            2,854,000
            
            $
            1,589,000
            
            $
            1,265,000Customer
                Relationships - GPS
            
            
            1-2
                years
            
            
            6,678,000
            
            
            2,602,000
            
            
            4,076,000Proprietary
                Formulas
            
            
            3
                years
            
            
            1,813,000
            
            
            1,660,000
            
            
            153,000Non-Compete
                Agreement
            
            
            5
                years
            
            
            2,334,000
            
            
            1,002,000
            
            
            1,332,000Trade
                Name - GPS
            
            
            15
                years
            
            
            3,643,000
            
            
            96,000
            
            
            3,547,000Unamortized
                intangible assets:Trade
                Name
            
            
            Indefinite
            
            
            224,000
            
            
            --
            
            
            224,000Total
                other intangible assets
            
            
            
            
            $
            17,546,000
            
            $
            6,949,000
            
            $
            10,597,000Goodwill
            
            
            Indefinite
            
            $
            23,981,000
            
            $
            --
            
            $
            23,981,000







7


Amortization
      expense for the three months ended April 30, 2007, aggregated $1,772,000,
      $115,000, $116,000 and $61,000 for Contractual Customer Relationships,
      Proprietary Formulas, Non-Compete Agreement and Trade Name, respectively.
      Amortization expense for the three months ended April 30, 2006, aggregated
      $126,000, $115,000 and $90,000 for Contractual Customer Relationships,
      Proprietary Formulas and Non-Compete Agreement, respectively.




**NOTE
      6 - RELATED PARTY TRANSACTIONS**




The
      Company leases administrative, manufacturing and warehouse facilities from
      an
      individual who is the former shareholder of VLI. SMC’s administrative and
      maintenance facilities were rented from a former officer through July 2006.
      The
      total expense under these arrangements was $45,000 and $76,000 for the three
      months ended April 30, 2007 and 2006, respectively.




AI
      entered into a supply agreement with an entity owned by the former shareholder
      of VLI whereby the supplier committed to sell to AI and AI committed to purchase
      on an as-needed basis, certain organic products. VLI made $47,000 and $17,000
      in
      purchases under the supply agreement for the three months ended April 30, 2007
      and 2006, respectively.




The
      Company also sells its products in the normal course of business to an entity
      in
      which the former owner of VLI has an ownership interest. VLI had approximately
      $117,000 and $129,000 in sales with this entity for the three months ended
      April
      30, 2007 and 2006. At April 30, 2007 and 2006, the affiliated entity owed
      $146,000 to VLI.




**NOTE
      7 - DEBT**




On
      December 11, 2006, Argan amended its financing arrangements with the Bank.
      The
      amended financing arrangement includes an amended 3-year term loan for VLI
      in
      the amount of $1.4 million with interest at LIBOR plus 3.25% (The original
      term
      loan was in the amount of $1.5 million with interest at LIBOR plus 3.45%,
      pursuant to an amended financing arrangement dated May 2006. On August 31,
      2006,
      the Company borrowed $1.5 million under the 3-year Term Loan and paid the
      remaining principal and interest due on the subordinated note with Thomas).
      The
      financing arrangements also provide for a new 4-year term loan used in the
      acquisition of GPS in the amount of $8.0 million with interest at LIBOR plus
      3.25% and a revolving loan with a maximum amount of $4.25 million available
      until May 31, 2008, with interest at LIBOR plus 3.25%.




The
      financing arrangements provide for the measurement at the Company’s fiscal year
      end and at each of the Company’s fiscal quarter ends (using a rolling 12-month
      period) of certain financial covenants including requiring that the ratio of
      total funded debt to EBITDA not to exceed 2.25 to 1 for the year ending January
      31, 2007 and not to exceed 2 to 1 for future quarters, requiring a fixed charge
      coverage ratio of not less than 1.25 to 1, and requiring the ratio of senior
      funded debt to EBITDA not to exceed 1.75 to 1 for the year ended January 31,
      2007 and not to exceed 1.50 to 1 for future quarters. The Bank’s consent
      continues to be required for acquisitions and divestitures. The Company
      continues to pledge the majority of the Company’s assets to secure the financing
      arrangements.




The
      amended financing arrangement contains a subjective acceleration clause which
      allows the Bank to declare amounts outstanding under the financing arrangements
      due and payable if certain material adverse changes occur. The Company believes
      that it will continue to comply with its financial covenants under the financing
      arrangement. If the Company’s performance does not result in compliance with any
      of its financial covenants, or if the Bank seeks to exercise its rights under
      the subjective acceleration clause referred to above, the Company would seek
      to
      modify its financing arrangement, but there can be no assurance that the Bank
      would not exercise their rights and remedies under the financing arrangement
      including accelerating payment of all outstanding senior debt due and
      payable.




At
      April
      30, 2007, the Company was in compliance with the covenants of its amended
      financing arrangements.




8


**NOTE
      8 - INCOME TAXES**




The
      estimated annual effective income tax rate as of April 30, 2007 was 39%. For
      the
      three months ended April 30, 2006, the effective income tax rate was 200%.
      The
      effective tax rate for the three months ended April 30, 2006, was increased
      by
      the impact of the amortization of issuance cost for subordinated debt which
      is
      treated as a permanent difference for income tax reporting purposes during
      the
      fiscal year ending 2007.




The
      Company adopted the provisions of FASB Interpretation No. 48, “Accounting for
      Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109” (“FIN
      48”), on February 1, 2007. FIN 48 clarifies the accounting for uncertainty in
      income taxes recognized in an enterprise’s financial statements in accordance
      with FASB Statement 109, “Accounting for Income Taxes,” and prescribes a
      recognition threshold and measurement process for financial statement
      recognition and measurement of tax positions taken or expected to be taken
      in a
      tax return. FIN 48 also provides guidance on derecognition, classification,
      interest and penalties, accounting in interim periods, disclosure and
      transition. The Company has concluded that there is no material effect as a
      result of adopting this standard.




The
      Company is subject to income taxes in the U.S. federal jurisdiction and various
      state jurisdictions. Tax regulations within each jurisdiction are subject to
      the
      interpretation of the related tax laws and regulations and require significant
      judgment to apply. With few exceptions, the Company is no longer subject to
      U.S.
      federal, state and local income tax examinations by tax authorities for the
      years before 2003.




Interest
      and penalties, if incurred, related to unrecognized tax benefits would be
      recognized as a component of income tax expense. At April 30, 2007 and January
      31, 2007, no interest and penalties were accrued on unrecognized tax benefits
      since these amounts were not material.




**NOTE
      9 - SEGMENT REPORTING**




The
      Company has three reportable operating segments. Operating segments are defined
      as components of an enterprise about which separate financial information is
      available that is evaluated regularly by the chief operating decision maker,
      or
      decision making group, in deciding how to allocate resources and assessing
      performance.




The
      Company’s three reportable segments are power industry services, telecom
      infrastructure services and nutraceutical products. The Company conducts its
      operations through its wholly owned subsidiaries - GPS, VLI and SMC. The “Other”
column includes the Company’s corporate and unallocated expenses.




The
      Company’s operating segments are organized in separate business units with
      different management, customers, technology and services. The respective
      segments account for the respective businesses using the accounting policies
      in
      Note 2 to the Company’s Form 10-KSB.




9


The
      following information is for the three months ended April 30, 2007, except
      for
      total assets and goodwill which is as of April 30, 2007 :




Power
                Industry Services
            
            Nutraceutical
              Products
            
            Telecom
              Infrastructure
              Services
            
            Other
            
            ConsolidatedNet
                sales
            
            $
            43,354,000
            
            $
            4,949,000
            
            $
            2,129,000
            
            $
            --
            
            $
            50,432,000Cost
                of sales
            
            
            43,245,000
            
            
            4,166,000
            
            
            1,843,000
            
            
            --
            
            
            49,254,000Gross
                profit
            
            
            109,000
            
            
            783,000
            
            
            286,000
            
            
            --
            
            
            1,178,000Selling,
                general andadministrativeexpenses
            
            
            2,552,000
            
            
            1,170,000
            
            
            358,000
            
            
            481,000
            
            
            4,561,000Loss
                from operations
            
            
            (2,443,000
            )
            
            (387,000
            )
            
            (72,000
            )
            
            (481,000
            )
            
            (3,383,000
            )Interest
                expense
            
            
            (167,000
            )
            
            (35,000
            )
            
            (2,000
            )
            
            --
            
            
            (204,000
            )Other
                income, net
            
            
            626,000
            
            
            --
            
            
            --
            
            
            7,000
            
            
            633,000Loss
                beforeincome
                taxes
            
            $
            (1,984,000
            )
            $
            (422,000
            )
            $
            (74,000
            )
            $
            (474,000
            )
            
            (2,954,000
            )Income
                tax benefit
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            939,000Net
                loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            (2,015,000
            )Depreciation
                andamortization
            
            $
            53,000
            
            $
            144,000
            
            $
            123,000
            
            $
            4,000
            
            $
            324,000Amortization
                ofintangibles
            
            $
            1,733,000
            
            $
            305,000
            
            $
            26,000
            
            
            --
            
            $
            2,064,000Goodwill
            
            $
            16,476,000
            
            $
            6,565,000
            
            $
            940,000
            
            
            --
            
            $
            23,981,000Total
                Assets
            
            $
            97,684,000
            
            $
            15,995,000
            
            $
            4,246,000
            
            $
            1,705,000
            
            $
            119,630,000Fixed
                assetadditions
            
            $
            4,000
            
            $
            85,000
            
            $
            11,000
            
            $
            --
            
            $
            100,000







The
      following information is for the three months ended April 30, 2006, except
      for
      total assets and goodwill which is as of April 30, 2006 :




Nutraceutical
              Products
            
            Telecom
              Infrastructure
              Services
            
            Other
            
            ConsolidatedNet
                sales
            
            $
            5,829,000
            
            $
            3,133,000
            
            $
            --
            
            $
            8,962,000Cost
                of sales
            
            
            4,386,000
            
            
            2,323,000
            
            
            --
            
            
            6,709,000Gross
                profit
            
            
            1,443,000
            
            
            810,000
            
            
            --
            
            
            2,253,000Selling,
                general and administrativeexpenses
            
            
            1,087,000
            
            
            414,000
            
            
            475,000
            
            
            1,976,000Income
                (loss) from operations
            
            
            356,000
            
            
            396,000
            
            
            (475,000
            )
            
            277,000Interest
                expense and amortizationof
                subordinated
              debt
                issuancecosts
            
            
            (127,000
            )
            
            (19,000
            )
            
            (115,000
            )
            
            (261,000
            )Other
                income, net
            
            
            --
            
            
            2,000
            
            
            --
            
            
            2,000Income
                (loss) before income taxes
            
            $
            229,000
            
            $
            379,000
            
            $
            (590,000
            )
            
            18,000Income
                tax expense
            
            
            
            
            
            
            
            
            
            
            
            (36,000
            )Net
                loss
            
            
            
            
            
            
            
            
            
            
            $
            (18,000
            )Depreciation
                and amortization
            
            $
            134,000
            
            $
            112,000
            
            $
            130,000
            
            $
            376,000Amortization
                of intangibles
            
            $
            305,000
            
            $
            26,000
            
            $
            --
            
            $
            331,000Goodwill
            
            $
            6,565,000
            
            $
            940,000
            
            $
            --
            
            $
            7,505,000Total
                assets
            
            $
            17,959,000
            
            $
            5,165,000
            
            $
            549,000
            
            $
            23,673,000Fixed
                asset additions
            
            $
            96,000
            
            $
            177,000
            
            $
            --
            
            $
            273,000





10




**NOTE
      10 - CONTINGENCIES**




On
      March
      22, 2005, WFC filed a civil action against the Company, and its executive
      officers. The suit was filed in the Superior Court of the State of California
      for the County of Los Angeles. WFC purchased the capital stock of the Company's
      wholly owned subsidiary, Puroflow Incorporated, pursuant to the terms of the
      Stock Purchase Agreement dated October 31, 2003. WFC alleged that the Company
      and its executive officers breached the Stock Purchase Agreement between WFC
      and
      the Company and engaged in misrepresentations and negligent conduct with respect
      to the Stock Purchase Agreement. WFC sought declaratory relief, compensatory
      and
      punitive damages in an amount to be proven at trial as well as the recovery
      of
      attorney's fees. This action was removed to the United States District Court
      for
      the Central District of California.




This
      case
      was scheduled for trial on April 10, 2007. On March 15, 2007, the District
      Court
      granted the Company and its executive officers' motion for summary judgment,
      thereby dismissing WFC's lawsuit against the Company and its executive officers
      in its entirety. WFC has filed a notice of appeal and the Company will
      vigorously contest WFC’s appeal.




Although
      the Company has reviewed WFC’s claim and believes that substantially all of the
      claims are without merit, the Company has recorded an accrual of approximately
      $100,000 and $286,000 at April 30, 2007 and January 31, 2007, respectfully,
      for
      subsequent legal services and estimated legal fees related to potential ongoing
      legal costs of the WFC claim that it considers to be probable and that can
      be
      reasonably estimated. It is possible however, that the ultimate resolution
      of
      WFC’s claim could result in a material adverse effect on the Company’s results
      of operations for a particular reporting period.




In
      the
      normal course of business, the Company has pending claims and legal proceedings.
      It is the opinion of the Company’s management, based on information available at
      this time, that none of the other current claims and proceedings will have
      a
      material effect on the Company’s consolidated financial statements.




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




The
      following discussion summarizes the financial position of Argan, Inc. and its
      subsidiaries as of April 30, 2007, and the results of operations for the
      three months ended April 30, 2007, and should be read in conjunction with
      (i) the unaudited condensed consolidated financial statements and notes
      thereto included elsewhere in this Quarterly Report on Form 10-Q and
      (ii) the consolidated financial statements and accompanying notes to our
      Annual Report on Form 10-KSB for the fiscal year ended January 31, 2007 filed
      with the Securities and Exchange Commission on April 26, 2007.





**Cautionary
      Statement Regarding Forward Looking Statements**


The
      Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for
      certain forward-looking statements. We have made statements in this Quarterly
      Report on Form 10-Q that may constitute “forward-looking statements”. The words
“believe,” “expect,” “anticipate,” “plan,” “intend,” “foresee,” “should,”
“would,” “could,” or other similar expressions are intended to identify
      forward-looking statements. These forward-looking statements are based on our
      current expectations and beliefs concerning future developments and their
      potential effects on us. There can be no assurance that future developments
      affecting us will be those that we anticipate. All comments concerning our
      expectations for future revenues and operating results are based on our
      forecasts for our existing operations and do not include the potential impact
      of
      any future acquisitions. These forward-looking statements involve significant
      risks and uncertainties (some of which are beyond our control) and assumptions.
      They are subject to change based upon various factors, including but not limited
      to the risks and uncertainties summarized below:





11


**•**
            
            cyclical
                changes in demand for our products and services;**•**
            
            cyclical
                nature of the individual markets in which our customers
                operate;**•**
            
            That
                the dollar amount of our backlog, as stated at any given time, is
                not
                indicative of our future earnings;**•**
            
            delays
                or difficulties related to our projects including additional costs,
                reductions in revenues or the payment of liquidated
                damages;**•**
            
            the
                effect of our percentage-of-completion accounting
                policies;**•**
            
            changes
                in the estimates and assumptions we use to prepare our financial
                statements;**•**
            
            our
                ability to obtain surety bonds or other means of credit support for
                projects;**•**
            
            our
                ability to obtain waivers or amendments with our lenders or sureties,
                or
                to collateralize letters of credit or surety bonds upon non-compliance
                with covenants in our Credit Facility or surety indemnity
                agreements;**•**
            
            compliance
                with certain debt covenants, which as a result, may interfere with
                our
                ability to successfully execute our business plan;**•**
            
            our
                indebtedness, which could adversely affect our financial condition
                and
                impair our ability to fulfill our obligations under our financing
                arrangements;**•**
            
            various
                legal, regulatory and litigation risk including but not limited to,
                class
                action lawsuits, regulatory activities and associated periodic reviews
                of
                the SEC and Public Company Accounting Oversight Board;**•**
            
            the
                nature of our contracts, particularly fixed-price
                contracts;**•**
            
            the
                failure to meet schedule or performance requirements of our
                contracts;**•**
            
            our
                dependence on subcontractors;**•**
            
            possible
                cost escalations associated with our fixed-price
                contracts;**•**
            
            our
                ability to obtain new contracts for large-scale projects and the
                timing of
                the performance of these contracts;**•**
            
            The
                effect on our reputation and financial exposure due to the failure
                of our
                partners to perform their contractual obligations;**•**
            
            our
                dependence on a few significant customers;**•**
            
            delays
                and/or defaults in customer payments;**•**
            
            potential
                professional liability, product liability, warranty and other potential
                claims, which may not be covered by insurance;**•**
            
            the
                presence of competitors with greater financial resources and the
                impact of
                competitive products, services and pricing;**•**
            
            work
                stoppages and other labor problems;**•**
            
            our
                liquidity position;**•**
            
            a
                determination to write-off a significant amount of our intangible
                assets;**•**
            
            our
                ability to successfully identify, integrate and complete
                acquisitions;**•**
            
            our
                failure to attract and retain qualified personnel;**•**
            
            our
                ability to retain key members of our management;**•**
            
            our
                competitors’ ability to develop or otherwise acquire equivalent or
                superior technology;**•**
            
            general
                economic conditions;**•**
            
            future
                changes in accounting standards or interpretations;**•**
            
            inability
                to maintain an effective system of internal control, which could
                result in
                inaccurate reporting of our financial results or an inability to
                prevent
                fraud;**•**
            
            provisions
                in our articles of incorporation and by-laws and rights agreement
                could
                make it more difficult to acquire us and may reduce the market price
                of
                our common stock;**•**
            
            changes
                in the U.S. economy and global markets as a result of terrorists’
                actions;**•**
            
            increases
                in employee-related costs and expenses including healthcare and other
                employee benefits such as unemployment insurance and workers’
                compensation; and**•**
            
            our
                dependency on technology in our operations and the possible impact
                of
                system and information technology
                interruptions.





12


Should
      one or more of these risks or uncertainties materialize, or should any of our
      assumptions prove incorrect, actual results may vary in material respects from
      those projected in the forward-looking statements. We undertake no obligation
      to
      publicly update or revise any forward-looking statements, whether as a result
      of
      new information, future events or otherwise. For a more detailed discussion
      of
      some of the foregoing risk and uncertainties, see “Item 1 — Description of
      Business — Risk Factors” in our Annual Report on Form 10-KSB as filed with the
      Securities and Exchange Commission on April 26, 2007, as well as the other
      reports and registration statements filed by us with the SEC and under “Forward
      Looking Statements” on our website. These documents are available free of charge
      from the SEC or from our corporate headquarters. Our annual, quarterly, and
      current reports and amendments thereto, filed with the SEC are available on
      our
      website. For more information about us and the announcements we make from time
      to time, visit our website at *www.arganinc.com* .




**GENERAL**




Argan,
      Inc. (the “Company,” “we,” “us,” or “our”) conduct our operations through our
      wholly owned subsidiaries, Gemma Power Systems, LLC (“GPS”) that we acquired in
      December 2006, Vitarich Laboratories, Inc. (“VLI”) that we acquired in August
      2004 and Southern Maryland Cable, Inc. (“SMC”) that we acquired in July 2003.
      Through GPS, we provide a full range of development, consulting, engineering,
      procurement, construction, commissioning, operating and maintenance services
      to
      the energy market for a wide range of customers including public utilities,
      independent power project owners, municipalities, public institutions and
      private industry. Through SMC, we provide telecommunications infrastructure
      services including project management, construction and maintenance to the
      Federal Government, telecommunications and broadband service providers as well
      as electric utilities. Through VLI, we develop, manufacture and distribute
      premium nutritional products.




**CRITICAL
      ACCOUNTING POLICIES**




The
      preparation of our consolidated financial statements requires us to make
      estimates and judgments that affect the reported amounts of assets, liabilities
      and equity and disclosure of contingent assets and liabilities at the date
      of
      the financial statements and the reported amounts of revenues and expenses
      during the reporting period. These estimates, particularly estimates relating
      to
      revenue recognition, valuation of net deferred tax assets, and litigation and
      contingencies, have a material impact on our financial statements and are
      discussed in detail throughout our analysis of the results of operations
      discussed below.




In
      addition to evaluating estimates relating to the items discussed above, we
      also
      consider other estimates and judgments, including, but not limited to, those
      related to revenue recognition, allowance for doubtful accounts, inventory
      valuation, intangible assets and provision for income taxes. We base our
      estimates on historical experience and various other assumptions that we believe
      are reasonable under the circumstances, the results of which form the basis
      for
      making judgments about the carrying value of assets, liabilities and equity
      that
      are not readily apparent from other sources. Actual results and outcomes could
      differ from these estimates and assumptions.




For
      a
      more detailed explanation of the judgments made in these areas and a discussion
      of our accounting estimates and policies, refer to “Critical Accounting
      Estimates” included in Item 7 and “Summary of Significant Accounting
      Policies” (Note 2) included in our Annual Report on Form 10-KSB for the year
      ended January 31, 2007. As discussed in the notes to the Consolidated Financial
      Statements, we have adopted FASB Interpretation No. 48, “Accounting for
      Uncertainty in Income Taxes” (“FIN 48”). Other than this change, there have been
      no significant changes to our critical accounting estimates during the three
      months ended April 30, 2007.




13


**BACKLOG**




Backlog
      represents the total accumulation of new work awarded less the amount of revenue
      recognized to date on contracts at a specific point in time. We believe backlog
      is an indicator of future earnings potential. Although backlog reflects business
      that we consider to be firm, cancellations or reductions may occur and may
      reduce backlog and future revenue. We have a significant number of customers
      that consistently extend or add to the scope of existing contracts. We do not
      include any estimate of this ongoing work in backlog until awarded.




At
      April
      30, 2007, the Company had entered into power industry service contracts for
      the
      construction of seven facilities, representing a total backlog of $204 million
      compared to contracts of six facilities representing a total backlog of $171
      million at January 31, 2007. Management anticipates these facilities will be
      completed at various dates through fiscal year 2009.





**CONSOLIDATED
      RESULTS OF OPERATIONS**


The
      following summarizes the results of our operations for the three months ended
      April 30, 2007 compared to the three months ended April 30, 2006.





Three
                months Ended April 30,2007
            
            2006Net
                salesPower
                industry services
            
            $
            43,354,000
            
            $
            --Nutraceutical
                products
            
            
            4,949,000
            
            
            5,829,000Telecom
                infrastructure services
            
            
            2,129,000
            
            
            3,133,000Net
                sales
            
            
            50,432,000
            
            
            8,962,000Cost
                of salesPower
                industry services
            
            
            43,245,000
            
            
            --Nutraceutical
                products
            
            
            4,166,000
            
            
            4,386,000Telecom
                infrastructure services
            
            
            1,843,000
            
            
            2,323,000Gross
                profit
            
            
            1,178,000
            
            
            2,253,000Selling,
                general and administrative expenses
            
            
            4,561,000
            
            
            1,976,000(Loss)
                income from operations
            
            
            (3,383,000
            )
            
            277,000Interest
                expense
            
            
            (204,000
            )
            
            (261,000
            )Other
                income, net
            
            
            633,000
            
            
            2,000(Loss)
                income before income taxes
            
            
            (2,954,000
            )
            
            18,000Income
                tax benefit (expense)
            
            
            939,000
            
            
            (36,000
            )Net
                loss
            
            $
            (2,015,000
            )
            $
            (18,000
            )Basic
                and diluted loss per share
            
            $
            (0.18
            )
            $
            --Weighted
                average shares outstanding - basic
              and
                diluted
            
            
            11,094,000
            
            
            3,814,000




**Comparison
      of the Results of Operations for the three months ended April 30, 2007 to the
      Results of Operations for the three months ended April 30, 2006.**





**Net
      Sales**


Net
      sales
      of power industry services were $43.4 million for the three months ended April
      30, 2007, compared to no sales for power industry services for the three months
      ended April 30, 2006. The increase in net sales of power industry services
      is
      due to the acquisition of GPS on December 8, 2006.





14


Net
      sales
      of nutraceutical products were $4.9 million for the three months ended April
      30,
      2007, compared to net sales of nutraceutical products of $5.8 million for the
      three months ended April 30, 2006. The decrease in net sales of nutraceutical
      products of $880,000 or 15% is due primarily to decreased sales to two of VLI’s
      largest customers, Tri Vita Corporation and Rob Reiss Companies which was offset
      in part by sales increases to Cyberwize.com and Renew for Life.





Net
      sales
      of telecommunications infrastructure services were $2.1 million for the three
      months ended April 30, 2007 compared to $3.1 million for the three months ended
      April 30, 2006. A decrease in net sales of telecommunications infrastructure
      services of $1.0 million or 32%. The decrease is due primarily to decreased
      revenues for services to SMC’s three largest customers, Verizon Communications,
      Inc., Southern Maryland Electrical Cooperative, Electronic Data Systems, Corp.
      Sales decreased due to current lower contractual levels of activity with each
      of
      SMC’s major customers. (See discussion on seasonality below.)





**Cost
      of Sales**


For
      the
      three months ended April 30, 2007, cost of sales for power industry services
      were $43.2 million or 99.8% of net sales for power industry services compared
      to
      no cost of sales related to power industry services for the three months ended
      April 30, 2006. The increase is due to the acquisition of GPS on December 8,
      2006.





For
      the
      three months ended April 30, 2007, cost of sales for nutraceutical products
      were
      $4.2 million or 84.2% of net sales for nutraceutical products compared to $4.4
      million or 75.2% of net sales for nutraceutical products for the three months
      ended April 30, 2006. VLI experienced a higher percentage of cost of sales
      during the three months ended April 30, 2007 due to product mix among customers
      resulting from lower margin customers having an increased share of total
      sales.





For
      the
      three months ended, April 30, 2007, cost of sales for telecommunications
      infrastructure services was $1.8 million or 86.6% of net sales of
      telecommunications infrastructure services compared to $2.3 million or 74.2%
      of
      net sales for telecommunications infrastructure services for the three months
      ended April 30, 2006. SMC experienced an increase in percentage of cost of
      sales
      due to lower margin on certain outside plant projects. The increase in cost
      of
      sales as a gross margin percentage is due to unchanged fixed costs compared
      to
      lower sales for the quarter.





**Gross
      Profit**


During
      the three months ended April 30, 2007, the Company experienced an unexpected
      increase in costs related to one of the GPS contracts. Unexpected costs include
      labor productivity being below expectations and previous experience, labor
      rate
      increases due to overtime requirements to meet the completion date, and
      engineering issues resulting in considerable rework and additional materials.
      The Company anticipates that upon completion the contract which is 95% complete
      at April 30, 2007, will incur a forecasted loss of approximately $4.1 million,
      of which as of April 30, 2007 $3.9 million has been recognized, primarily during
      the three months ended April 30, 2007. The remaining amount has been accrued
      as
      a liability at April 30, 2007. At January 31, 2007, the project was estimated
      to
      be 90% complete with a forecasted gross
      margin of
      approximately $1.4 million. The Company has recorded an estimated loss for
      this
      contract as of April 30, 2007 and January 31, 2007 of $189,000 and zero,
      respectively.




**Selling,
      General and Administrative Expenses**


For
      the
      three months ended April 30, 2007, selling, general and administrative expenses
      were approximately $4.6 million or 9.0% of consolidated net sales compared
      to
      approximately $2.0 million or 22% of consolidated net sales for the three months
      ended April 30, 2006. An increase of $2.6 million in expenses was due primarily
      to the acquisition of GPS which was acquired on December 8, 2006 and had
      approximately $2.8 million in selling, general and administrative expenses
      for
      the three months ended April 30, 2007 due primarily to amortization of purchased
      intangibles totaling $1.7 million.





15


**Other
      Income, Net**


We
      had
      other income, net of $633,000 for the three months ended April 30, 2007 compared
      to other income, net of $2,000 for the three months ended April 30, 2006. Other
      income increased primarily due to an increase in interest and investment income
      from cash and cash equivalents and investments held for sale. We acquired a
      significant amount of cash and investments held for sale when we acquired GPS
      on
      December 8, 2006.





**Income
      Tax Benefit (Expense)**


Our
      consolidated effective income tax benefit rate was 39% for the three months
      ended April 30, 2007 compared to a 200% effective income tax rate for the three
      months ended April 30, 2006.





During
      the three months ended April 30, 2006, the Company recorded amortization of
      issuance cost for subordinated debt which is treated as permanent difference
      for
      income tax reporting purposes.





**Comparison
      of the Unaudited Results of Operations for the three months ended April 30,
      2007
      to the Unaudited Pro Forma Results of Operations for the three months ended
      April 30, 2006**




The
      following summarizes the results of our operations for three months ended April
      30, 2007 compared to unaudited pro forma results of operations for the three
      months ended April 30, 2006 as if the acquisition of GPS, the new bank financing
      of $8.0 million and the private offering of 2,853,335 shares, was completed
      on
      February 1, 2006.




The
      unaudited pro forma statement of operations does not purport to be indicative
      of
      the results that would have actually been obtained if the acquisition of GPS
      occurred on February 1, 2006 or that may be obtained in the future. GPS
      previously reported its results of operations using a calendar year-end. No
      material events occurred subsequent to these reporting periods that would
      require adjustment to our unaudited pro forma statements of operations.




Three
                Months Ended April 30,2007
            
            2006unaudited
            
            unauditedNet
                sales
            
            
            
            (Pro
                forma)Power
                industry services
            
            $
            43,354,000
            
            $
            10,156,000Nutraceutical
                products
            
            
            4,949,000
            
            
            5,829,000Telecom
                infrastructure services
            
            
            2,129,000
            
            
            3,133,000Net
                sales
            
            
            50,432,000
            
            
            19,118,000Cost
                of salesGeneral
                Power Services
            
            
            43,245,000
            
            
            10,039,000Nutraceutical
                products
            
            
            4,166,000
            
            
            4,386,000Telecom
                infrastructure services
            
            
            1,843,000
            
            
            2,323,000Gross
                profit
            
            
            1,178,000
            
            
            2,370,000Selling
                and general and administrative expenses
            
            
            4,561,000
            
            
            2,614,000Loss
                from operations
            
            $
            (3,383,000
            )
            $
            (244,000
            )





16




**Net
      Sales**




Net
      sales
      of power industry services were $43.4 million for the year ended April 30,
      2007,
      compared to $10.2 million in pro forma net sales of power industry services
      in
      the year ended April 30, 2006. The increase in pro forma net sales of power
      industry services is primarily due to increased sales from new projects started
      during the year ended January 31, 2007 in Carleton, Nebraska for an ethanol
      facility, three biodiesel projects and a peaking facility in Wallingford,
      CT.




Net
      sales
      of nutraceutical products were $4.9 million for the three months ended April
      30,
      2007, compared to net sales of nutraceutical products of $5.8 million for the
      three months ended April 30, 2006. The decrease in net sales of nutraceutical
      products of $880,000 or 15% is due primarily to decreased sales to two of VLI’s
      largest customers, Tri Vita Corporation and Rob Reiss Companies which was offset
      in part by sales increases to Cyberwize.com and Renew for Life.





Net
      sales
      of telecommunications infrastructure services were $2.1 million for the three
      months ended April 30, 2007 compared to $3.1 million for the three months ended
      April 30, 2006. A decrease in net sales of telecommunications infrastructure
      services of $1.0 million or 32%. The decrease is due primarily to decreased
      revenues for services to SMC’s three largest customers, Verizon Communications,
      Inc., Southern Maryland Electrical Cooperative, Electronic Data Systems, Corp.
      Sales decreased due to current lower contractual levels of activity with each
      of
      SMC’s major customers. (See discussion on seasonality below.)





**Cost
      of Sales**




For
      the
      three months ended April 30, 2007, pro forma cost of sales for power industry
      services were $43.2 million or 99.8% of pro forma net sales for power industry
      services compared to $10.0 million or 98.9% pro forma net sales related to
      power
      industry services for the three months ended April 30, 2006. The increase is
      due
      primarily to the net effect of significant changes in the accounting estimate
      of
      two construction projects.




For
      the
      three months ended April 30, 2007, cost of sales for nutraceutical products
      were
      $4.2 million or 84.2% of net sales for nutraceutical products compared to $4.4
      million or 75.2% of net sales for nutraceutical products for the three months
      ended April 30, 2006. VLI experienced a higher percentage of cost of sales
      during the three months ended April 30, 2007 due to product mix among customers
      resulting from lower margin customers having an increased share of total sales.
      The increase in cost of sales as a gross margin percentage is due to unchanged
      fixed costs compared to lower sales for the quarter.





For
      the
      three months ended, April 30, 2007, cost of sales for telecommunications
      infrastructure services was $1.8 million or 86.6% of net sales of
      telecommunications infrastructure services compared to $2.3 million or 74.2%
      of
      net sales for telecommunications infrastructure services for the three months
      ended April 30, 2006. SMC experienced an increase in percentage of cost of
      sales
      due to lower margin on certain outside plant projects.





17


**Gross
      Profit**


During
      the three months ended April 30, 2007, the Company experienced an unexpected
      increase in costs related to one of the GPS contracts. Unexpected costs include
      labor productivity being below expectations and previous experience, labor
      rate
      increases due to overtime requirements to meet the completion date, and
      engineering issues resulting in considerable rework and additional materials.
      The Company anticipates that upon completion the contract which is 95% complete
      at April 30, 2007, will incur a forecasted loss of approximately $4.1 million,
      of which as of April 30, 2007 $3.9 million has been recognized, primarily during
      the three months ended April 30, 2007. The remaining amount has been accrued
      as
      a liability at April 30, 2007. At January 31, 2007, the project was estimated
      to
      be 90% complete with a forecasted gross margin of approximately $1.4 million.
      The Company has recorded an estimated loss for this contract as of April 30,
      2007 and January 31, 2007 of $189,000 and zero, respectively.




**Selling,
      General and Administrative Expenses**




For
      the
      three months ended April 30, 2007, selling, general and administrative expenses
      were approximately $4.6 million or 9.0% of consolidated pro forma net sales
      compared to approximately $2.6 million or 13.7% of consolidated pro forma net
      sales for the three months ended April 30, 2006. The increase of $1.9 million
      in
      expenses was due primarily to amortization of purchased intangibles related
      to
      GPS.




**LIQUIDITY
      AND CAPITAL RESOURCES**




**Cash
      Position and Indebtedness**




We
      had
      working capital of $12.1 million at April 30, 2007 compared to working capital
      of $12.5 million at January 31, 2007. This decrease is due primarily to an
      increase in billings in excess of cost and earnings. Cash and cash equivalents
      as of April 30, 2007 were $32.6 million compared to $25.4 million as of January
      31, 2007. We also have an available balance of $4.3 million under our financing
      arrangements with the Bank.




**Cash
      Flows**




Net
      cash
      provided by operations for the three months ended April 30, 2007, was $7.4
      million compared with $783,000 of cash provided by operations for the three
      months ended April 30, 2006 primarily due to the collection of receivables
      from
      five GPS projects.




The
      Company’s non-cash expenses increased during the three months ended April 30,
      2007 compared to the three months ended April 30, 2006. Depreciation and
      amortization increased by $77,000 to $324,000 for the three months ended April
      30, 2007 from $247,000 for the same period one year ago. Amortization of
      purchased intangibles increased by $1.7 million to $2.0 million for the three
      months ended April 30, 2007 from $331,000 for the three months ended April
      30,
      2006. All of the aforementioned increases in non-cash expenses are primarily
      due
      to the acquisition of GPS.




During
      the three months ended April 30, 2007, estimated earnings in excess of billings
      provided cash of $7.9 million, primarily due to payments received on several
      construction projects. The estimated earnings in excess of billings were due
      to
      the large power industry services contract ongoing in Carleton, Nebraska.




During
      the three months ended April 30, 2007, net cash provided by investing activities
      was $476,000 compared to net cash used in investing activities of $270,000
      for
      the three months ended April 30, 2006. The increase is the result of proceeds
      received from the sale of investments and a decrease in budgeted purchases
      of
      property, plant and equipment.




For
      the
      three months ended April 30, 2007, net cash used in financing activities was
      $649,000 compared to $425,000 used in financing activities for the three months
      ended April 30, 2006. The increase is the result of an increase in principal
      payments on debt due to the amended financing arrangements established in
      December 2006 at the time of the GPS acquisition.




18


The
      financing arrangements provide for the measurement at the Company’s fiscal year
      end and at each of the Company’s fiscal quarter ends (using a rolling 12-month
      period) of certain financial covenants including requiring that the ratio of
      total funded debt to EBITDA not to exceed 2.25 to 1 for the year ending January
      31, 2007 and not to exceed 2 to 1 for future quarters, requiring a fixed charge
      coverage ratio of not less than 1.25 to 1, and requiring the ratio of senior
      funded debt to EBITDA not to exceed 1.75 to 1 for the year ended January 31,
      2007 and not to exceed 1.50 to 1 for future quarters. The Bank’s consent
      continues to be required for acquisitions and divestitures. The Company
      continues to pledge the majority of the Company’s assets to secure the financing
      arrangements.




The
      amended financing arrangement contains a subjective acceleration clause which
      allows the Bank to declare amounts outstanding under the financing arrangements
      due and payable if certain material adverse changes occur. The Company believes
      that it will continue to comply with its financial covenants under the financing
      arrangement. If the Company’s performance does not result in compliance with any
      of its financial covenants, or if the Bank seeks to exercise its rights under
      the subjective acceleration clause referred to above, the Company would seek
      to
      modify its financing arrangement, but there can be no assurance that the Bank
      would not exercise their rights and remedies under the financing arrangement
      including accelerating payment of all outstanding senior debt due and
      payable.





At
      April
      30, 2007, the Company was in compliance with the covenants of its amended
      financing arrangements.





Management
      believes that cash on hand, cash generated from the Company’s future operations
      combined with capital resources available under its renewed line of credit
      is
      adequate to meet the Company’s future operating cash needs. Any future
      acquisitions, other significant unplanned costs or cash requirements may require
      the Company to raise additional funds through the issuance of debt and equity
      securities. There can be no assurance that such financing will be available
      on
      terms acceptable to the Company, or at all. If additional funds are raised
      by
      issuing equity securities, significant dilution to the existing stockholders
      may
      result.





**Earnings
      before Interest, Taxes, Depreciation and Amortization (Non-GAAP
      Measurement)**





We
      present Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)
      to provide investors with a supplemental measure of our operating performance.
      The following table shows the calculation of EBITDA:




Three
                months ended April 30,2007
            
            2006Net
                loss
            
            $
            (2,015,000
            )
            $
            (18,000
            )Interest
                expense and amortization of
              Subordinated
                debt issuance costs
            
            
            204,000
            
            
            261,000Tax
                (benefit) expense
            
            
            (939,000
            )
            
            36,000Depreciation
                and amortization
            
            
            324,000
            
            
            247,000Amortization
                of intangible assets
            
            
            2,064,000
            
            
            331,000EBITDA
            
            $
            (362,000
            )
            $
            857,000




Management
      uses EBITDA, a non-GAAP financial measure, for planning purposes, including
      the
      preparation of operating budgets and to determine appropriate levels of
      operating and capital investments. Management also believes that EBITDA provides
      additional insight for analysts and investors in evaluating the Company's
      financial and operational performance and in assisting investors in comparing
      the Company's financial performance to those of other companies in the Company's
      industry. However, EBITDA is not intended to be an alternative to financial
      measures prepared in accordance with GAAP and should not be considered in
      isolation from our GAAP results of operations. Pursuant to the requirements
      of
      SEC Regulation G, a detailed reconciliation between the Company's GAAP and
      non-GAAP financial results is provided above and investors are advised to
      carefully review and consider this information as well as the GAAP financial
      results that are disclosed in the Company's SEC filings.




19


**Customers**




During
      the three
      months ended April 30, 2007, the majority of our revenues were provided by
      a
      broad range of engineering, procurement and construction services to the power
      industry. Certain of our more significant customer relationships included six
      power industry service customers, Renewable Bio Fuels, Port Neches (RBF), ALTRA
      Nebraska, LLC (ALTRA), Green Earth Fuels of Houston, LLC (GEF), CMEEC - Pierce
      Repowering (PR), Roseville Energy Park (REP) and GEF Houston #2 (GEF2). RBF,
      ALTRA, GEF, PR, REP, and GEF2 accounted for 17.3%, 16.6%, 16.6%, 14.3%, 10.0%
      and 9.9% of consolidated net sales for the three months ended April 30, 2007.
      Total revenues from power industry services accounted for 86% of consolidated
      net sales. In addition, we had sales from VLI, who provides nutritional and
      whole-food supplements as well as personal care products to customers in the
      global nutrition industry. VLI sales accounted for 10% of revenues. No customer
      at VLI contributed more than 2% to our revenues. SMC provided services to
      telecommunications and utility customers as well as to the Federal Government,
      which accounted for in the aggregate, 4% of revenues.




During
      the three months ended April 30, 2006, we did not have revenues from the power
      industry. Revenues consisted of sales from the nutritional and whole-food
      supplements as well as personal care products to customers in the global
      nutrition industry and services to telecommunications and utilities customers
      as
      well as to the Federal Government, through a contract with EDS. Certain of
      our
      more significant customers during the three months ended April 30, 2006 were
      with TriVita corporation (TVC), Rob Reiss Companies (RRC), Verizon
      Communications, Inc. (VZ), Southern Maryland Electrical Cooperative (SMECO),
      EDS, CyberWize.com, Inc. (C) and Orange Peel Enterprises, Inc. (OPE). TVC,
      RRC,
      C and OPE are VLI customers. SMC’s significant customers are VZ, SMECO, and EDS.
      TVC, RRC, C and OPE accounted for approximately 22%, 13%, 6% and 5% of
      consolidated net sales during the three months ended April 30, 2006. VZ, SMECO
      and EDS accounted for approximately 11%, 11% and 6% of consolidated net sales
      during the three months ended April 30, 2006. Combined TVC, RRC, VZ, SMECO,
      EDS,
      C and OPE accounted for approximately 74% of consolidated net sales during
      the
      three months ended April 30, 2006.




**Seasonality**




The
      Company's power
      industry services and telecom infrastructure services operations are expected
      to
      have seasonally weaker results in the first and fourth quarters of the year,
      and
      may produce stronger results in the second and third quarters. This seasonality
      is primarily due to the effect of winter weather on construction and outside
      plant activities as well as reduced daylight hours and customer budgetary
      constraints. Certain customers tend to complete budgeted capital expenditures
      before the end of the year, and postpone additional expenditures until the
      subsequent fiscal period.




**RECENT
      ACCOUNTING STANDARDS**




In
      September 2006, the Financial Accounting Standards Board (“FASB”) issued
      Statement of Financial Accounting Standard (“FAS”) No. 157, “Fair Value
      Measurements.” This Standard defines fair value, establishes a framework for
      measuring fair value in generally accepted accounting principles and expands
      disclosures about fair value measurements. The Company plans to adopt FAS 157
      on
      February 1, 2008, as required. The adoption of FAS 157 is not expected to have
      a
      material impact the Company’s financial condition and results of
      operations.




20


In
      February 2007, the FASB issued FAS No. 159, “The Fair Value Option for Financial
      Assets and Financial Liabilities.” FAS 159 permits companies to measure many
      financial instruments and certain other items at fair value at specified
      election dates. The provisions of FAS 159 will be effective for the Company
      beginning February 1, 2008. The Company does not expect FAS 159 to have a
      significant impact on the consolidated financial statements.




**ITEM
      3. QUANTITATIVE AND
      QUALITATIVE DISCLOSURES ABOUT MARKET RISK**




We
      have
      not used any material derivative financial instruments during the three months
      ended April 30, 2007 and 2006. We are exposed to market risk for changes in
      interest rates for borrowings under the new financing arrangements as discussed
      above. Borrowings under the financing arrangement bear interest at LIBOR plus
      an
      additional margin and therefore are subject to fluctuations in interest
      rates.




**ITEM
      4. CONTROLS AND
      PROCEDURES**




**Evaluation
      of disclosure controls and procedures.** Our
      management, with the participation of our chief executive officer and chief
      financial officer, evaluated the effectiveness of our disclosure controls and
      procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange
      Act)
      as of April 30, 2007. Management recognizes that any controls and procedures,
      no
      matter how well designed and operated, can provide only reasonable assurance
      of
      achieving their objectives, and management necessarily applies its judgment
      in
      evaluating the cost-benefit relationship of possible controls and procedures.
      Based on the evaluation of our disclosure controls and procedures as of April
      30, 2007, our chief executive officer and chief financial officer concluded
      that, as of such date, our disclosure controls and procedures were effective
      at
      the reasonable assurance level.




**Changes
      in internal controls.** No
      change
      in our internal control over financial reporting (as defined in Rules 13a-15(f)
      and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended
      April 30, 2007 that has materially affected, or is reasonably likely to
      materially affect, our internal control over financial reporting.







**PART
      ll**


**OTHER
      INFORMATION**







**ITEM
      1.** **LEGAL
      PROCEEDINGS**




On
      March
      22, 2005, WFC filed a civil action against the Company, and its executive
      officers. The suit was filed in the Superior Court of the State of California
      for the County of Los Angeles. WFC purchased the capital stock of the Company's
      wholly owned subsidiary, Puroflow Incorporated, pursuant to the terms of the
      Stock Purchase Agreement dated October 31, 2003. WFC alleged that the Company
      and its executive officers breached the Stock Purchase Agreement between WFC
      and
      the Company and engaged in misrepresentations and negligent conduct with respect
      to the Stock Purchase Agreement. WFC sought declaratory relief, compensatory
      and
      punitive damages in an amount to be proven at trial as well as the recovery
      of
      attorney's fees. This action was removed to the United States District Court
      for
      the Central District of California.




This
      case
      was scheduled for trial on April 10, 2007. On March 15, 2007, the District
      Court
      granted the Company and its executive officers' motion for summary judgment,
      thereby dismissing WFC's lawsuit against the Company and its executive officers
      in its entirety. WFC has filed a notice of appeal and the Company will
      vigorously contest WFC’s appeal.




Although
      the Company has reviewed WFC’s claim and believes that substantially all of the
      claims are without merit, the Company has recorded an accrual of approximately
      $100,000 and $286,000 at April 30, 2007 and January 31, 2007, respectfully,
      for
      subsequent legal services and estimated legal fees related to potential ongoing
      legal costs of the WFC claim that it considers to be probable and that can
      be
      reasonably estimated. It is possible however, that the ultimate resolution
      of
      WFC’s claim could result in a material adverse effect on the Company’s results
      of operations for a particular reporting period.




21


In
      the
      normal course of business, the Company has pending claims and legal proceedings.
      It is the opinion of the Company’s management, based on information available at
      this time, that none of the other current claims and proceedings will have
      a
      material effect on the Company’s consolidated financial statements.




**ITEM
      1A.** **RISK
      FACTORS**




Our
      Annual Report on Form 10-KSB for the year ended January 31, 2007, under Item
      1
      Description of Business, Risk Factors includes a detailed discussion of our
      risk
      factors. There have been no material revisions to the Risk Factors as filed
      in
      our Annual Report Form 10-KSB for the year ended January 31, 2007.


**ITEM
                  2.**
              **UNREGISTERED
                  SALES OF EQUITY SECURITIES AND USE OF****PROCEEDS**None.**ITEM
                  3.**
              **DEFAULTS
                  UPON SENIOR SECURITIES**None.**ITEM
                  4.**
              **SUBMISSION
                  OF MATTERS TO A VOTE OF SECURITY HOLDERS**None.**ITEM
                  5.**
              **OTHER
                  INFORMATION**None.**ITEM
                  6.**
              **EXHIBITS****Exhibit
                  No.**
              **Title**Exhibit:
                  31.1
              Certification
                  of Chief Executive Officer, pursuant to Rule13a-14(c)
                  under the Securities Exchange Act of 1934Exhibit:
                  31.2
              Certification
                  of Chief Financial Officer, pursuant to Rule13a-14(c)
                  under the Securities Exchange Act of 1934Exhibit:
                  32.1
              Certification
                  of Chief Executive Officer, pursuant to18
                  U.S.C. Section 1350Exhibit:
                  32.2
              Certification
                  of Chief Financial Officer, pursuant to18
                  U.S.C. Section 1350





22


**SIGNATURES**





Pursuant
      to the requirements of the Securities Exchange Act of 1934, the registrant
      has
      duly caused this report to be signed on its behalf by the undersigned,
      thereunto, duly authorized.




**ARGAN,
              INC.**June
                12, 2007
            By:
            /s/ Rainer
              BosselmannRainer
              BosselmannChairman
                of the Board and Chief Executive
                Officer


June
                12, 2007
            By:
            /s/ Arthur
              F.
              TrudelArthur
              F. TrudelSenior
                Vice President, Chief Financial Officer and
                Secretary




23