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

                                  FORM 10-QSB/A

(Mark One)

|X|   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2004

                                       or

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

       For the transition period from _______________ to _______________

                        Commission File Number: 333-44586


                             Thomas Equipment, Inc.
        -----------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)


               Delaware                                 58-356680
   (State or other jurisdiction                     (I.R.S. Employer
 of incorporation or organization)                 Identification No.)


                 1818 North Farwell Avenue, Milwaukee, WI 53202
                    (Address of principal executive offices)


                                 (312) 224-8812
                           ---------------------------
                           (Issuer's telephone number)

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

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

      State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 21,250,000 shares of common
stock, $.0001 par value per share, as of September 30, 2005.

      Transitional Small Business Disclosure Format (Check one): Yes |_| No |X|

<PAGE>

                                            Statement Regarding This Amendment

We are amending our Form 10-QSB for the period ended December 31, 2004, as
previously filed on February 15, 2005 and amended on April 4, 2005, as a result
of comments received from the staff of the Securities and Exchange Commission in
connection with the filing of our Registration Statement on Form SB-2. We have
expanded the footnote disclosure related to our debt and made other
modifications to the footnotes. In addition, we have restated the manner in
which the acquisition of assets from our Predecessor is disclosed in the
Statement of Cash Flows. We have also revised our Discussion of Financial
Position and Results of Operations to present separately the discussions of our
results and those of our predecessor. We have also provided information, as of
October 3, 2005, on the status of our loans from Laurus Master Fund, Ltd. In all
other material respects, this Amended Quarterly Report on Form 10-QSB/A is
unchanged from the Quarterly Report on Form 10-QSB/A previously filed by the
Company on April 4, 2005.

This amendment should also be read in conjunction with our Annual Report on Form
10-K for the fiscal year ended June 30, 2005 and our Registration Statement on
Form S-1, filed on October 3, 2005, together with any subsequent amendments
thereof.


                                       2
<PAGE>

ITEM 1.   FINANCIAL STATEMENTS

                             THOMAS EQUIPMENT, INC.

                           CONSOLIDATED BALANCE SHEET
                             AS OF DECEMBER 31, 2004
                           (Unaudited - in thousands)

================================================================================

ASSETS

Current assets:
  Cash                                                                   $   741
  Accounts receivable, net of allowance for doubtful accounts of $74      10,820
  Inventories, net                                                        24,479
  Prepaid expenses                                                           741
  Other assets                                                               272
                                                                         -------
                                                                          37,053

Property, plant and equipment                                             12,376

Deferred finance costs                                                     1,004

Other assets                                                                 632
                                                                         -------

                                                                         $51,065
                                                                         =======

                                                                    (continued-)


                                       3
<PAGE>

                             THOMAS EQUIPMENT, INC.

                           CONSOLIDATED BALANCE SHEET
                             AS OF DECEMBER 31, 2004
                           (Unaudited - in thousands)

                                                                    (continued-)

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities

Current liabilities:
  Convertible credit facility                                          $ 10,828
  Trade payables                                                          7,188
  Warranty liability                                                        148
  Other payables and accrued liabilities                                  5,889
  Current portion of long term debt                                       1,121
  Current portion of convertible long term debt                           1,242
  Current portion of capital lease obligations                              103
                                                                       --------
                                                                         26,519

Long term debt                                                            1,121
Convertible long term debt                                                3,140
Capital lease obligations                                                 5,088

Redeemable preferred stock                                                8,303

Commitments and Contingencies (Note 14)

Shareholders' Equity
Common stock                                                                  2
Additional paid in capital                                               15,138
Accumulated deficit                                                      (8,155)
Accumulated other comprehensive loss                                        (91)
                                                                       --------
                                                                          6,894
                                                                       --------
                                                                       $ 51,065
                                                                       ========

================================================================================

See accompanying notes to consolidated financial statements.


                                       4
<PAGE>

                             THOMAS EQUIPMENT, INC.

           CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS
           (Unaudited - in thousands, except share and per share data)

<TABLE>
<CAPTION>
====================================================================================================================================
                                                            Successor       |
                                                             Business       |                   Predecessor Business
                                                           ------------     |   ----------------------------------------------------
                                                           Three Months     |   Three Months        Three Months        Six Months
                                                               Ended        |       Ended              Ended              Ended
                                                            December 31,    |   September 30,       December 31,       December 31,
                                                              2004          |       2004                2003               2003
                                                           ------------     |   ------------        ------------       ------------
<S>                                                        <C>                  <C>                 <C>                <C>
Sales                                                      $     14,416     |   $     13,857        $     11,928       $     26,578
                                                                            |
Cost of sales                                                    12,141     |         11,770              10,664             23,076
                                                           ------------     |   ------------        ------------       ------------
                                                                            |
Gross profit                                                      2,275     |          2,087               1,264              3,502
                                                                            |
Operating expenses:                                                         |
Selling expenses                                                  1,361     |          1,797               1,499              3,071
General and administrative expenses                               1,219     |          1,911               1,265              2,320
Research and development                                            245     |            310                 355                355
Provision for doubtful receivables                                   74     |             41                 827                963
Stock based compensation                                          6,431     |             --                  --                 --
Other (income) expense                                              216     |           (884)               (629)              (659)
                                                           ------------     |   ------------        ------------       ------------
                                                                  9,546     |          3,175               3,317              6,050
                                                           ------------     |   ------------        ------------       ------------
                                                                            |
Operating loss                                                   (7,271)    |         (1,088)             (2,053)            (2,548)
                                                                            |
Net financial expense (income)                                      884     |            499                 (23)                33
                                                           ------------     |   ------------        ------------       ------------
                                                                            |
Net loss before income taxes                                     (8,155)    |         (1,587)             (2,030)            (2,581)
                                                                            |
Provision for income taxes                                           --     |             15                  17                 33
                                                           ------------     |   ------------        ------------       ------------
                                                                            |
Net loss                                                   $     (8,155)    |   $     (1,602)       $     (2,047)      $     (2,614)
                                                           ============     |   ============        ============       ============
                                                                            |
Basic and diluted loss per share                           $      (0.41)    |   $      (0.19)       $      (0.77)      $      (0.99)
                                                           ============     |   ============        ============       ============
Weighted average shares outstanding                          20,000,000     |      8,643,000           2,643,000          2,643,000
                                                           ============     |   ============        ============       ============
                                                                            |
Reconciliation of Comprehensive Loss:                                       |
                                                                            |
Net Loss                                                   $     (8,155)    |   $     (1,602)       $     (2,047)      $     (2,614)
Other comprehensive loss - foreign currency                                 |
     translation                                                    (91)    |            726                 926                900
                                                           ------------     |   ------------        ------------       ------------
Total comprehensive loss                                   $     (8,246)    |   $     (2,328)       $     (2,973)      $     (3,514)
                                                           ============     |   ============        ============       ============
====================================================================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.


                                       5
<PAGE>

                             THOMAS EQUIPMENT, INC.

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
           (Unaudited - in thousands, except share and per share data)

<TABLE>
<CAPTION>
====================================================================================================================================

                                                       Common Stock          Additional                   Currency
                                                 ------------------------     Paid-In      Accumulated   Translation
                                                   Shares        Amount       Capital        Deficit      Adjustment       Total
                                                 ----------    ----------    ----------    ----------     ----------     ----------

<S>                                              <C>           <C>           <C>           <C>            <C>            <C>
Balances, October 1, 2004 (Inception)                    --    $       --    $       --    $       --     $       --     $       --

Common stock issued in exchange for
net liabilities in a recapitalization             1,075,000            --            --            --             --             --

Contribution of services by founders                     --            --           322            --             --            322

Common stock sold On October 11, 2004 to
founders for cash                                16,945,000             2         2,127            --             --          2,129

Stock based compensation related to
common stock sold to founders                            --            --         5,520            --             --          5,520

Common stock sold on November 9, 2004 to
Laurus for cash                                   1,980,000            --            20            --             --             20

Stock-based compensation related to
common stock sold on November 9, 2004 to
Laurus                                                   --            --           911            --             --            911

Warrants for 2,200,000 common shares
issued to Laurus on November 9, 2004 in
connection with financing                                --            --         2,178            --             --          2,178

Option for 4,020,000 common shares issued
to Laurus on November 9, 2004 in
connection with financing                                --            --         4,060            --             --          4,060

Currency translation adjustment                          --            --            --            --            (91)           (91)

Net loss for the period                                  --            --            --        (8,155)            --         (8,155)
                                                 ----------    ----------    ----------    ----------     ----------     ----------

Balances, December 31, 2004                      20,000,000    $        2    $   15,138    $   (8,155)    $      (91)    $    6,894
                                                 ==========    ==========    ==========    ==========     ==========     ==========

====================================================================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.


                                       6
<PAGE>

                             THOMAS EQUIPMENT, INC.

                      CONSOLIDATED STATEMENT OF CASH FLOWS
                           (Unaudited - in thousands)

<TABLE>
<CAPTION>
====================================================================================================================================

                                                                                Successor        |
                                                                                Business         |          Predecessor Business
                                                                               ------------      |    ------------------------------
                                                                                  Three          |       Three              Six
                                                                                 Months          |      Months            Months
                                                                                  Ended          |       Ended             Ended
                                                                               December 31,      |    September 30,     December 31,
                                                                                   2004          |       2004               2003
                                                                               ------------      |    -------------     ------------
<S>                                                                              <C>                    <C>               <C>
Cash Flows From Operating Activities:                                                            |
   Net loss                                                                      $ (8,155)       |      $ (1,602)         $ (2,614)
     Adjustments to reconcile net loss to net cash provided by                                   |
     (used in) operating activities:                                                             |
        Stock compensation                                                          6,431        |            --                --
        Amortization of debt discount and premium                                     503        |            --                --
        Depreciation and amortization                                                 403        |           531               782
        Gain on sale of property, plant and equipment                                  --        |            (3)              (28)
        Contribution of services                                                      322        |            --                --
        Provision for doubtful receivables                                             74        |            --                --
   Net change in working capital items                                             (3,183)       |        (1,111)            2,595
   Net change in employee future benefit liabilities                                   --        |             8                23
                                                                                 --------        |      --------          --------
Net Cash Provided By (Used In) Operating Activities                                (3,605)       |        (2,177)              758
                                                                                 --------        |      --------          --------
                                                                                                 |
Cash Flows From Investing Activities:                                                            |
   Cash paid for acquisition of assets of Thomas                                  (18,119)       |            --                --
   Insurance claim received                                                            --        |            --               587
   Proceeds on sale of property, plant and equipment                                   --        |            20                45
   Purchase of property, plant and equipment                                           --        |          (292)             (783)
                                                                                 --------        |      --------          --------
Net Cash Used In Investing Activities                                             (18,119)       |          (272)             (151)
                                                                                 --------        |      --------          --------
                                                                                                 |
Cash Flows From Financing Activities:                                                            |
   Proceeds from debt issuance related to assets acquired                          15,970        |            --                --
   Net repayments relating to advances from affiliated companies                       --        |          (588)           (1,093)
   Increase in bank advances                                                           --        |         2,277               367
   Deferred financing costs                                                        (1,049)       |            --                --
   Proceeds from sale of common stock                                               2,149        |            --                --
   Additional advances under the credit facility                                    5,512        |            --                --
   Payments on capital lease obligations                                             (127)       |            --                --
                                                                                 --------        |      --------          --------
Net Cash  Provided By (Used In) Financing Activities                               22,455        |         1,689              (726)
                                                                                 --------        |      --------          --------
                                                                                                 |
Net Increase (Decrease) In Cash                                                       731        |          (760)             (119)
                                                                                                 |
Effect Of Exchange Rate Changes On Cash                                                10        |            23                85
                                                                                                 |
Cash, Beginning Of Period                                                              --        |           823                80
                                                                                 --------        |      --------          --------
                                                                                                 |
Cash, End Of Period                                                              $    741        |      $     86          $     46
                                                                                 ========        |      ========          ========
====================================================================================================================================
</TABLE>

                                                                    (continued-)


                                        7
<PAGE>

                             THOMAS EQUIPMENT, INC.

                      CONSOLIDATED STATEMENT OF CASH FLOWS
                           (Unaudited - in thousands)

                                                                    (-continued)

<TABLE>
<S>                                                                              <C>                    <C>               <C>
Supplemental Disclosure Of Cash Flow Information -
   Interest Paid                                                                 $  232          |      $   15            $   85
                                                                                 ======          |      ======            ======
                                                                                                 |
Supplemental Disclosures Of Non-Cash Investing And Financing                                     |
Activities:                                                                                      |
   Stock based compensation                                                      $6,431          |      $   --            $   --
                                                                                 ======          |      ======            ======
   Debt discounts                                                                $6,154          |      $   --            $   --
                                                                                 ======          |      ======            ======
   Property and equipment acquired under capital leases                          $5,254          |      $   --            $   --
                                                                                 ======          |      ======            ======

================================================================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.


                                       8
<PAGE>

1. Organization and description of the business

      We manufacture and distribute through a worldwide network of dealers and
distributors a full line of skid steer and mini skid steer loaders as well as
attachments, mobile screening plant and mini excavators for the industrial and
construction industry. We also manufacture a complete line of potato harvesting
and handling equipment for the agricultural industry. We have a sole
manufacturing facility in Centreville, New Brunswick, Canada and also operate
six retail stores in New Brunswick, Prince Edward Island, Maine, Colorado and
Illinois.

2. Acquisitions

      On October 11, 2004, we (Thomas Equipment, Inc. or "TEQI," formerly Maxim
Mortgage Corporation, a Delaware corporation) entered into an Agreement and Plan
of Reorganization with Thomas Equipment 2004 Inc. ("TE2004"), a Canadian
corporation and Thomas Ventures Inc. ("TVI"), a Delaware corporation (both
TE2004 and TVI were formed in 2004 for the purposes of the asset acquisition
described below). Under the terms of the agreement, we acquired 100% of the
common stock of TE2004 and TVI in exchange for the issuance by us of 16,945,000
common shares. Although TEQI was the legal acquirer, TE2004 was considered the
accounting acquirer and as such the acquisition was accounted for as a
recapitalization. Immediately prior to the reorganization, TEQI had 1,075,000
shares of common stock outstanding (after a 1-40 reverse split) and no net
assets or liabilities. The officers and directors of TE2004 and TVI assumed
similar positions with TEQI. As a result, the accompanying condensed
consolidated financial statements represent the results of operations and cash
flows of the accounting acquirer (TE2004) from the date of inception, October 1,
2004.

Acquisition of Assets of Thomas Equipment Limited

      On November 9, 2004, TE2004 acquired the fixed assets and inventory of
Thomas Equipment Limited ("Thomas Equipment Limited" an unrelated Company)
effective as of October 1, 2004. The acquisition was accounted for by the
purchase method in accordance with Financial Accounting Standards Board
Statement No. 141 ("SFAS 141") and the results of operations are included in
these consolidated financial statements from the date of acquisition. The
aggregate purchase price (including capital leases), calculated in accordance
with SFAS 141, was $37.2 million.

      The following is a summary of the assets acquired at the date of
acquisition, at fair value:

Assets acquired:
      Inventory                                                          $24,543
      Fixed assets                                                        12,639
                                                                         -------
      Assets acquired                                                    $37,182
                                                                         =======

      Subsequent to December 31, 2004, the purchase price was finalized which
resulted in an increase to inventory of $2,425 and an increase to fixed assets
of $948, which amounts are included above. The adjustments related to the
finalization of the inventory balances based on the final inventory count and
the allocation of transaction costs. The fair values assigned to the assets
acquired were determined by management based on a review of the related
accounting records of Thomas Equipment Limited, physical inspection, counts and
evaluations of the assets and review of an analysis completed by an independent
third party valuation firm.

      During the negotiation of the asset acquisition, the Company and the
vendor agreed to a lease for the manufacturing facility and three sales offices.
Although it was the Company's original intention to purchase these leased
assets, we elected to accept the vendor's offer of a lease alternative. The
terms of the capital leases require minimum annual payments of $498 (based on
the December 31, 2004 exchange rate) plus taxes, maintenance and certain other
expenses. We have the right at any time prior to the expiration of the leases to
purchase the properties for $5,003 (translated to U.S. dollars on December 31,
2004). Similarly, Thomas Equipment Limited has the right to require us to
purchase the properties subject to certain provisions such as a favorable
environmental study (Note 9).


                                       9
<PAGE>

      The purchase price of the assets was funded with cash consideration
totalling $18,119 which was sourced from loans received from Laurus Master Fund,
Ltd. (see Notes 7 and 8) and cash received from our founders for common stock.
The balance of the purchase price of $19,063 was financed with the vendor
(Thomas Equipment Limited) and its parent company (McCain Foods Limited), with a
vendor take back note of $2,260 (see Note 6); capital lease financing provided
by the vendor of $5,254 (see Note 9); the sale of preferred shares of our
subsidiary TE2004 of $8,370 to McCain (see Note 10); and the balance of $3,179
was a short term note payable to the vendor due in three payments starting one
month after closing and then each of the two following months.

      The difference between our value, and allocation, of the purchase price
and that which Thomas Equipment Limited reported in their financial statements
primarily arises from third party costs we incurred in connection with the
transaction and the use of a different discount rate with respect to the capital
lease obligations.

3. Basis of presentation and summary of significant accounting policies

Basis of presentation

      The accompanying unaudited consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and the instructions
to Form 10-QSB and Rule 310 of Regulation SB of the Securities and Exchange
Commission (the "SEC"). Accordingly, these consolidated financial statements do
not include all of the footnotes required by accounting principles generally
accepted in the United States of America. In management's opinion, all
adjustments (consisting of normal and recurring adjustments) considered
necessary for a fair presentation have been included. Operating results for the
three months ended December 31, 2004 are not necessarily indicative of the
results that may be expected for the year ending June 30, 2005.

      The accompanying unaudited consolidated financial statements, as of and
for the three months ended December 31, 2004, are those of Thomas Equipment,
Inc. the successor. The statements of operations and of cash flows include the
accounts of Thomas Equipment Limited, our predecessor, for the three months
ended September 30, 2004 and for the three and six months ended December 31,
2003.

Accounting Policies

      The following accounting policies are those of the Successor, which do not
differ from those of the Predecessor during all periods presented.

Principles of consolidation

      The consolidated financial statements include the accounts of TEQI and its
wholly owned subsidiaries TVI, TE2004 and Thomas Europe NV from October 1, 2004,
the date that TE2004 acquired the business operations and certain assets of
Thomas Equipment Limited. All inter-company accounts and transactions have been
eliminated in consolidation.

Use of estimates

      In preparing our consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America,
management is required to make estimates and assumptions that affect the
reported amounts in the financial statements and the accompanying notes. The
reported amounts of revenues and expenses during the reporting period may be
affected by the estimates and assumptions we are required to make. Estimates
that are critical to the accompanying consolidated financial statements include
the amortization periods for debt issuance costs and the valuation, and
amortization, of discounts arising from warrants and options on convertible
securities, as well as estimates that arise from the provisions for doubtful
accounts, warranties and inventory obsolescence, contingent liabilities, the
valuation of deferred income tax assets, assumptions used in stock-based
compensation calculations and estimating depreciation of tangible assets. The
markets for our products are characterized by intense competition and price
competition, all of which could impact the future realizability of our assets.
Management bases its estimates and judgements on historical experience and on
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgements about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results could differ from these estimates. Estimates and
assumptions are reviewed periodically and the effects of revisions are reflected
in the financial statements in the period they are determined to be necessary.


                                       10
<PAGE>

Translation of foreign currencies

      Our functional currency is the Canadian dollar. Our foreign currency
transactions and balances are translated into Canadian dollars using the
temporal method. Under this method, monetary assets and liabilities denominated
in foreign currencies are translated into Canadian dollars at rates of exchange
prevailing at the balance sheet date. Revenue and expenses are translated into
Canadian dollars at the rate of exchange prevailing at the transaction date. The
resulting foreign currency exchange gains and losses are included in earnings
for the periods presented.

      Assets and liabilities are then translated into United States dollars
(reporting currency) at the exchange rate in effect at each period end.
Revenues, expenses, gains and losses are translated into United States dollars
at the average rate of exchange prevailing during the period. All translation
effects of exchange rate changes are included as a separate component of
stockholders' equity.

Revenue recognition

      In accordance with Staff Accounting Bulletin 104 - Revenue Recognition in
Financial Statements ("SAB 104"), revenue is generally recognized and earned
when all of the following criteria are satisfied: a) persuasive evidence of
sales arrangements exist; b) delivery has occurred; c) the sales price is fixed
or determinable, and d) collectibility is reasonably assured.

      Delivery and sales of equipment and service parts are recorded when title
and all risks of ownership are transferred to the independent dealer,
distributor, OEM or retail customer which generally occurs when the equipment or
parts are shipped to the customer or dealer. No right of return exists on sales
of equipment except for goods sold under buy back arrangements (see below) which
are not recorded as sales.

      In some circumstances, goods are shipped to dealers and distributors on a
consignment basis under which title and risk of ownership are not transferred to
the dealers and distributors. Accordingly, sales revenues are not recorded until
a retail customer has purchased the goods.

      To assure that collectibility is reasonably assured we perform ongoing
credit evaluations of all of our customers and generally do not require
collateral as we believe we have collection measures in-place to limit the
potential for significant losses.

      We make appropriate provisions based on experience for costs such as
doubtful receivables, sales incentives and product warranty costs. Generally,
sales incentives are granted only at the time of sale as a price reduction and
are immediately recorded as a reduction of revenues.

      Our standard invoice terms are established by marketing region. When a
sale is made to a dealer, the dealer is responsible for payment even if the
product is not sold to an end customer and that dealer must make payment within
the standard terms to avoid interest costs. Late payment interest of 12% p.a.
charged to customers who have overdue accounts is not recognized until received.

      Although we currently have no significant arrangements, financing revenue
will be recorded over the terms of the related receivables using the interest
method.


                                       11
<PAGE>

Buy back arrangements

      Sales contracts are entered into with a dealer/distributor that carries
inventory for rental activities. These contracts include a guaranteed buy back
value of 65% - 70% of the original sales value at the end of the three year
period if the dealer/distributor has not sold the equipment to a retail
customer. These transactions are not recorded as sales, but are instead
accounted for as operating leases with net proceeds on the initial transfer of
the equipment to the dealer/distributor recorded as a liability on the balance
sheet. The liability is subsequently reduced on a pro rata basis over the
three-year period to the amount of the guaranteed buy back value at that date,
with corresponding credits to sales in the consolidated statement of operations.

      The equipment will be included on the balance sheet at cost and amortized
on a straight-line basis over its estimated useful life of three years with
corresponding debits to cost of sales. The deferred revenue and unamortized
carrying value of the equipment is removed from the balance sheet and included
in sales and costs of sales respectively in the consolidated statement of
operations if the dealer/distributor resells the equipment to a retail customer
during the buy back period.

Trade-ins and used equipment

      Used equipment received under a trade in is valued at its estimated net
realizable value with the difference between the trade-in allowance and the net
realizable value being recognized as a reduction in revenues for the associated
sale. Trade-in allowances are generally only granted at the time of a new sale.
To date we have not accepted a significant amount of trade-ins.

Allowance for doubtful accounts

      The allowance for doubtful accounts is evaluated on a regular basis and
adjusted based upon management's best estimate of probable losses inherent in
receivables, based on historical experience, including the historical loss
experience of the predecessor company. Receivables are determined to be past due
if they have not been paid by the payment due dates. Debts are written off
against the allowance when deemed to be uncollectible. Subsequent recoveries, if
any, are credited to the allowance when received.

Product warranties

      At the time a sale to a dealer is recognized, the company records the
estimated future warranty costs. These costs are estimated based on historical
warranty claims, including the historical warranty experience of the predecessor
company. Warranty provisions are included as a component of cost of sales.

Shipping and handling costs

      Shipping and handling costs related to finished goods are reported as a
component of cost of sales in the consolidated statement of operations.

Cash and cash equivalents

      Cash and cash equivalents include cash on hand and balances with banks,
net of bank overdrafts, and highly liquid temporary money market instruments
with original maturities of three months or less. Bank borrowings are considered
to be financing activities.

Inventory

      Inventories are valued at the lower of cost and net realizable value with
cost being determined on a standard cost basis, which approximates the first-in,
first-out basis and includes the cost of materials, direct labor and
manufacturing overhead. Used equipment is valued at net realizable value.


                                       12
<PAGE>

      We evaluate our inventory for excess and obsolescence on a quarterly
basis. In preparing our evaluation we look at the expected demand for our
products for the next six to twelve months in order to determine whether or not
such raw materials, WIP and finished goods require an increase in the inventory
reserve in order to record the inventory at net realizable value. After
discussions with the senior management team, a reserve is established so that
inventory is appropriately stated at the lower of cost or net realizable value.

Property, plant and equipment

      Property, plant and equipment are carried at cost less accumulated
depreciation. Depreciation is provided from the date assets are put into service
at rates to depreciate the carrying cost of the property, plant and equipment
over their estimated useful lives on a straight-line basis as follows:

      Property and plant under capital leases, excluding land     10-20 years
      Production machinery and equipment                          10-15 years
      Office furniture and equipment                                  8 years
      Computer equipment                                              3 years
      Automotive equipment                                            3 years

      We evaluate the carrying value of property, plant and equipment when
events and circumstances warrant such a review. If the carrying values of the
assets are considered to be impaired, a loss is recognized based on the amount
by which the carrying value exceeds the fair market value of the asset.

Long-lived assets

      Statement of Financial Accounting Standards (SFAS) 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets" requires that long-lived
assets, including certain identifiable intangibles, be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying value of
the assets in question may not be recoverable. We have reviewed long lived
assets during the quarter ended December 31, 2004 and determined that no
impairment loss need be recognized.

Deferred finance charges

      Deferred finance charges are amortized over the terms of the related party
credit facilities, using the effective interest method.

Redeemable preferred shares

      Preferred shares of our subsidiary that are redeemable at the option of
the holder have been classified as a liability in the consolidated balance sheet
and dividends paid or accrued on these shares have been classified as a
financial expense in our consolidated statements of operations.

Debt with detachable warrants and/or beneficial conversion

      We account for the issuance of detachable stock purchase warrants in
accordance with Accounting Principles Board Opinion 14 ("APB 14"), whereby we
separately measure the fair value of the debt and the detachable warrants and
allocate the proceeds from the debt on a pro-rata basis to each. The resulting
discount from the fair value of the debt allocated to the warrants, which is
accounted for as paid-in capital, is amortized over the estimated life of the
debt.

      In accordance with the provisions of Emerging Issues Task Force Issue 98-5
("EITF 98-5") and EITF 00-27, we allocate a portion of the proceeds received to
any embedded beneficial conversion feature, based on the difference between the
effective conversion price of the proceeds allocated to the convertible debt and
the fair value of the underlying common stock on the date the debt is issued. In
the event the convertible debt also had detachable stock purchase warrants, we
first allocate proceeds to the stock purchase warrants and the debt and then
allocate the resulting debt proceeds between the beneficial conversion feature,
which is accounted for as paid-in capital, and the initial carrying amount of
the debt. The discount resulting from the beneficial conversion feature is
amortized over the estimated life of the debt.


                                       13
<PAGE>

Advertising costs

      Advertising costs of $162 for the three months ended December 31, 2004
were expensed as incurred and reported as a component of selling expenses.

Research and development costs

      Research and development costs for the three months ended December 31,
2004 were $245.

Income taxes

      We utilize Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," which requires the recognition of deferred tax
assets and liabilities for the expected future tax consequences of events that
have been included in the consolidated financial statements or tax returns.
Under this method, deferred income taxes are recognized for the tax consequences
in future years of differences between the tax bases of assets and liabilities
and their financial reporting amounts at each period end based on enacted tax
laws and statutory tax rates applicable to the periods in which the differences
are expected to affect taxable income. Valuation allowances are established,
when necessary, to reduce deferred tax assets to the amounts expected to be
realized.

      We have recorded a full valuation allowance against the benefits that
would result from losses incurred to date, based on a history of losses from the
predecessor owner of the assets purchased, as we are unable to determine if the
losses will be utilized.

Net loss per share

      We compute net loss per share in accordance with Statement of Financial
Accounting Standards No. 128 "Earnings per Share" ("SFAS 128") and SEC Staff
Accounting Bulletin No. 98 ("SAB 98"). Under the provisions of SFAS 128 and SAB
98, basic net loss per share is computed by dividing the net loss available to
common stockholders for the period by the weighted average number of common
shares outstanding during the period. Diluted net loss per share is computed by
dividing the net loss for the period by the number of common and common
equivalent shares outstanding during the period. During the period when they
would be anti-dilutive, common stock equivalents (consisting of options to
purchase 4,020,000 common shares, warrants to purchase 2,200,000 common shares
and debt convertible into up to 14,666,667 common shares) are not considered in
the computations. Because the Company has incurred net losses for all periods,
basic loss per share and diluted loss per share are the same.

Stock - based compensation

      We account for equity instruments issued to employees for services based
on the fair value of the equity instruments issued, and account for equity
instruments issued to those other than employees based on the fair value of the
consideration received or the fair value of the equity instruments, whichever is
more reliably measurable.

New pronouncements

SFAS 123(R) 'Share-Based Payments'

      In December 2004, the Financial Accounting Standards Board issued
Statement No. 123 ("SFAS 123 (R)"), Share-Based Payments. SFAS 123 (R) requires
all entities to recognize compensation expense in an amount equal to the fair
value of shared-based payments such as stock options granted to employees. We
will be required to apply SFAS 123 (R) on a modified prospective method. Under
this method, we are required to record compensation expense (as previous awards
continue to vest) for the unvested portion of previously granted awards that
remain outstanding at the date of adoption. In addition, we may elect to adopt
SFAS 123 (R) by restating previously issued financial statements, basing the
amounts on the expense previously calculated and reported in the pro forma
disclosures that had been required by SFAS 123. SFAS 123 (R) is effective for
the first reporting period beginning after December 31, 2005. We do not believe
that the adoption of SFAS 123 (R) will have a material impact on our
consolidated financial statements as there are only 30,000 options, issued to
employees, to purchase 30,000 shares of common stock outstanding at December 31,
2004.


                                       14
<PAGE>

SFAS 153 'Exchanges of Nonmonetary Assets an Amendment of APB Opinion No. 29'

      In December 2004, FASB Statement No. 153 was issued amending APB Opinion
No. 29 to eliminate the exception allowing nonmonetary exchanges of similar
productive assets to be measured based on the carrying value of the assets
exchanged as opposed to being measured at their fair values. This exception was
replaced with a general exception for exchanges of nonmonetary assets that do
not have commercial substance. A nonmonetary exchange has commercial substance
if the future cash flows of the entity are expected to change significantly as a
result of the exchange. The provisions of this statement are effective for
nonmonetary asset exchanges occurring in fiscal periods beginning after June 15,
2005. The adoption of this statement is not expected to have a material impact
on our consolidated financial statements.

4. Inventories, net

                                                               December 31, 2004
                                                               -----------------
      Raw materials and spare parts                                       $9,213
      Work in process                                                      1,664
      Finished goods - new                                                11,398
      Finished goods - used                                                1,908
      Packaging and supplies                                                 296

                                                               -----------------
                                                                         $24,479
                                                               =================

5. Property and equipment

<TABLE>
<CAPTION>
                                                                      December 31, 2004
                                                        -------------------------------------------

                                                                        Accumulated         Net Book
                                                         Cost           Depreciation         Value
                                                        -------         ------------        --------

<S>                                                     <C>               <C>               <C>
      Property and plant under capital leases           $ 5,488           $   137           $ 5,351
      Production machinery and equipment                  6,047               156             5,891
      Office furniture and equipment                         59                 2                57
      Computer equipment                                    288                23               265
      Automotive equipment                                  328                27               301
      Construction in process                               511                --               511
                                                        -------           -------           -------
                                                        $12,721           $   345           $12,376
                                                        =======           =======           =======
</TABLE>


                                       15
<PAGE>

6. Long term debt

Note payable to Thomas Equipment Limited, bearing interest at 4%,
with annual principal repayments plus interest, maturing on
October 31, 2006. Funds were used to finance the acquisition of
Thomas Equipment Limited assets.                                        $ 2,242


Less: current portion                                                    (1,121)
                                                                        -------
                                                                        $ 1,121
                                                                        =======
Principal repayments are as follows, for the fiscal years ending
June 30:

2005                                                                    $    --
2006                                                                      1,121
2007                                                                      1,121

7. Convertible long term debt

Term loan, with Laurus Master Funds Ltd. ("Laurus,"), bearing
interest at U.S. prime plus 3% (8.2% at December 31, 2004)
with monthly principal repayments of $207 per month plus
interest. Funds were used to finance the acquisition of
Thomas Equipment Limited assets.  As security, the Company
has provided a general security agreement on Thomas
Equipment, Inc.  See Note 17 for a discussion of the status
of this loan.                                                           $ 6,000

Debt discount, net of amortization of $79, related to
4,020,000 options to purchase shares of common stock and
2,200,000 warrants to purchase common stock issued to
Laurus.  The options and warrants have an exercise price of
$0.01 per share and $2.25 per share, respectively, and are
exercisable at any time.  The warrants expire on November 9,
2011. The proceeds allocated to the options and warrants of
$4,060 and $2,178, respectively, were credited to additional
paid in capital and the resulting discount from the related
debts is being amortized over the term of those debts of
three years.  The value assigned to the options and warrants
was allocated between the convertible long term debt and the
convertible credit facility based on the value of the debt.
The options and warrants were valued using the Black-Scholes
option pricing model based on the market price of the common
shares at the time the options and warrants were issued (Note 12)        (1,660)

Premium: the principal may be prepaid at our option with a 5%
premium, plus accrued interest.                                              42
                                                                        -------
                                                                          4,382
                                                                        -------

Less current portion                                                     (1,242)
                                                                        -------
                                                                        $ 3,140
                                                                        -------

Principal repayments start in July 2005 and are as follows, for
the fiscal years ending June 30:

2005                                                                    $     0
2006                                                                      2,484
2007                                                                      2,484
2008                                                                      1,032

      The principal repayments and interest payments for the term loans can be
made in cash or common stock at the option of the holder. Payments in cash are
subject to a 3% premium (though no premium is charged if the payments are added
to the convertible credit facility). Payments in common stock have a fixed
conversion price of $1.50 per common share.

      The term loan can be converted to common stock at any time, at the option
of the holder, at a conversion price of $1.50 per common share.


                                       16
<PAGE>

8. Convertible credit facility

      Effective November 9, 2004, the company entered into a three-year $16,000
revolving credit facility agreement with Laurus Master Fund Ltd. ("Laurus").
Included in the total credit facility is a secured convertible minimum borrowing
note of $8,000. The purpose of the credit facility was to provide TE2004 with
funds to purchase the inventory and fixed assets of Thomas Equipment Limited and
other general corporate purposes. The credit facility is secured by
substantially all of our assets. See Note 17 for a discussion of the status of
this credit facility.

      On January 26, 2005, we received an increase in the credit facility with
Laurus from $16,000 to $20,000. Laurus charged a fee of $128 and received
warrants to purchase 400,000 common shares at an exercise price of $2.25 per
share.

      The revolving loan bears interest at the greater of 7.5% or The Wall
Street Journal published US prime rate plus 3%. We are also required to pay fees
of 0.30% per annum on the average monthly unused amount of the revolving
facility and a 1% per month fee on the balance in excess of the borrowing limit.

      The credit facility provides for borrowings utilizing an asset based
formula using eligible receivables, inventory, and fixed assets, less any
reserves. At December 31, 2004, the amount of available borrowings pursuant to
the formula was as follows:

      Available borrowings supported by asset base                 $15,958
      Less: amount borrowed under revolving credit facility         14,945
                                                                   -------
      Excess availability                                          $ 1,013
                                                                   =======

      Laurus may require us to convert into common stock all or a portion of the
amount outstanding under the credit facility, together with interest and fees
thereon, at any time at a conversion price of $1.50 per common share. Laurus has
contractually agreed not to convert any portion of the credit facility if
exercising the conversion option results in Laurus holding in excess of 9.99% of
our outstanding shares of common stock.

Amount borrowed under the revolving credit facility.                    $14,945
Funds were used to finance the acquisition of Thomas Equipment
Limited assets and to fund operations since the acquisition.

      Debt discount related to 4,020,000 options to purchase
      shares of common stock and 2,200,000 warrants to purchase
      common stock, issued to Laurus. The options and warrants
      have an exercise price of $0.01 per share and $2.25 per
      share, respectively, and are exercisable at any time. The
      warrants expire on November 9, 2011. The proceeds allocated
      to the options and warrants of $4,060 and $2,178,
      respectively, were credited to additional paid in capital
      and the resulting discount from the related debts is being
      amortized over the term of those debts of three years. The
      value assigned to the options and warrants was allocated
      between the convertible long term debt and the convertible
      credit facility based on the value of the debt. The options
      and warrants were valued using the Black-Scholes option
      pricing model based on the market price of the common
      shares at the time the options and warrants were issued
      (Note 12)                                                          (4,184)

      Premium: the principal may be prepaid at our option with a
      5% premium, plus accrued interest.                                     67
                                                                        -------
                                                                        $10,828
                                                                        =======


                                       17
<PAGE>

      Any principal repayments and interest payments on $8,000 of this
outstanding balance of the credit facility can be made in cash or common stock.
Payments in cash are subject to a 3% premium (though no premium is charged if
the payment s are added to the convertible credit facility). Payments in common
stock have a fixed conversion price of $1.50 per common share.

      As security, the Company has provided a general security agreement on all
of our assets.

9. Capital lease obligations

      Under the terms of the Purchase Agreement between with Thomas Equipment
Limited, we entered into two two-year capital lease agreements with Thomas
Equipment Limited. Pursuant to the leases, we have the right at any time prior
to the expiration of the lease terms to purchase the leased properties for
$5,003 (based on the December 31, 2004 exchange rate). In addition, Thomas
Equipment Limited has a right to require us to purchase the leased properties at
the expiration of the leases. The leases requires payment consisting of annual
payments of $498 plus realty taxes, maintenance, heat and certain other
expenses. We have recorded there leases as a capital leases with future minimum
repayments as follows:

                  2005     $   498
                  2006       4,505

      We used a discount rate of approximately 8% in the capital lease
accounting which represents our effective borrowing rate at the time the leases
were entered into (Thomas Equipment Limited used a different discount rate which
approximated their effective borrowing rate).

10. Redeemable preferred shares

      The Company has 5,000,000 shares of preferred stock authorized, $0.0001
par value. At December 31, 2004, no shares were issued and outstanding.

      In connection with the financing of the asset acquisition from Thomas
Equipment Limited (Note 2), we issued to the parent of Thomas Equipment Limited,
1,000 shares of redeemable preferred stock of our subsidiary Thomas Equipment
2004 Inc.. The preferred shares carry a cumulative dividend of 8% per annum. We
are required to purchase the preferred shares from the holder on April 26, 2006,
if not earlier redeemed. A default rate of 12% is due if we fail to redeem by
April 26, 2006. The face amount of the shares is $8,303 (translated at December
31, 2004) which we determined to also be their fair value at the time of
issuance as the dividend rate approximated the market rate we would pay for
similar financing. The holder of these shares has the right to be an observer at
our board meetings.

11. Common stock

      At December 31, 2004, we have 200,000,000 authorized shares of common
stock, par value $0.0001, 20,000,000 shares issued and outstanding.

      In October, 2004, immediately prior to the reorganization, we completed a
1 for 40 reverse stock split. After the reverse stock split, Maxim's
shareholders retained 1,075,000 shares of common stock in the reorganization,
which has been recorded at the value of the net assets (liabilities) assumed
which amounted to $0.

      We issued 16,945,000 shares to our founders for $2,451 (which includes non
cash service contributions of $322) or an average of approximately $0.14 per
share. The fair value of the common stock was estimated to be $0.47 per share,
based on the cash price of $0.50 paid by certain of our founders and the trading
price of the shares immediately after the reorganization of $0.45. The
difference resulted in an immediate expense of $5,520 which consisted of the
common stock fair value of $7,971 less stock subscription consideration of
$2,129 in cash and non cash service contributions of $322.


                                       18
<PAGE>

      On November 9, 2004, in connection with the issuance of debt and obtaining
the credit facility, we sold 1,980,000 shares to Laurus for $20. Based on the
estimated fair value of $0.47, we recorded $911 of "stock-based compensation"
expense for this issuance.

12. Stock options and warrants

      We use the Black-Scholes option pricing model to value options and
warrants, based on the market price of our common stock at the time the options
or warrants are issued.

      On November 9, in connection with the issuance of debt and obtaining the
credit facility, we issued an option to purchase 4,020,000 shares of common
stock and 2,200,000 warrants to purchase common stock to Laurus. The options and
warrants have an exercise price of $0.01 per share and $2.25 per share,
respectively, and are exercisable at any time. The warrants expire on November
9, 2011. The proceeds allocated to the options and warrants of $4,060 and
$2,178, respectively, were credited to additional paid in capital and the
resulting discount from the related debts is being amortized over the term of
those debts of three years. The value assigned to the options and warrants was
allocated between the convertible long term debt and the convertible credit
facility based on the value of the debt.

13. Segment information

      Our principal operations relate to the manufacturing, sale and
distribution through a worldwide network of dealers, distributors and retailers
of skid steer and mini skid steer loaders, attachments, parts, mobile screening
plants and mini excavators for the industrial and construction industry and
potato harvesting and handling equipment for the agriculture industry. Because
of the integrated nature of our sole manufacturing operation and common
administrative and marketing support functions, the business is treated by
management as a single operating segment for the purpose of making operating
decisions and assessing performance.

      Revenues by destination and product group were as follows:

<TABLE>
<CAPTION>
                                                Successor      |
                                                Business       |                     Predecessor Business
                                              -------------    |     ----------------------------------------------------
                                              Three Months     |     Three Months        Three Months        Six Months
                                                 Ended         |        Ended               Ended               Ended
                                               December 31,    |    September 30,       December 31,        December 31,
                                                  2004         |        2004                2003                2003
                                               ------------    |    -------------       ------------        ------------
<S>                                              <C>                   <C>                 <C>                 <C>
Canada                                           $ 1,908       |       $ 2,883             $ 1,781             $ 5,770
USA                                                6,591       |         7,177               6,157              14,321
Europe                                             4,287       |         2,517               3,411               5,359
Rest of world                                      1,630       |         1,280                 579               1,128
                                                 -------       |       -------             -------             -------
                                                               |
Total sales to external customers                $14,416       |       $13,857             $11,928             $26,578
                                                 =======       |       =======             =======             =======
                                                               |
                                                               |
Industrial and construction                      $13,923       |       $12,147             $10,269             $22,409
Agriculture                                          493       |         1,710               1,659               4,169
                                                 -------       |       -------             -------             -------
                                                               |
Total sales to external customers                $14,416       |       $13,857             $11,928             $26,578
                                                 =======       |       =======             =======             =======
</TABLE>


      During the periods presented, no single customer accounted for more than
      10% of our revenues.


                                       19
<PAGE>

      Property, plant and equipment by geographical area as of December 31, 2004
      were as follows:

      Canada                                                       $12,270
      USA                                                              106
                                                                   -------

      Total                                                        $12,376
                                                                   =======

      During the three months ended December 31, 2004 we recorded sales to
Samsung Industry, Co. Ltd., a company controlled by one our officers, of
approximately $517. At December 31, 2004, the receivable from this related party
was approximately $440.

      During the period ended December 31, 2004, we purchased product from
Rousseau Controls, a company controlled by one of our officers, of approximately
$836. At December 31, 2004, the payable to this related party was approximately
$328.

      These related party transactions were in the normal course of business at
customary terms and prices.

14. Other contingencies and commitments

Litigation

      We are potentially subject to various claims and litigation arising out of
the ordinary course and conduct of our business including product liability,
intellectual property, labour and employment, environmental and tax matters. We
do not consider our exposure to such claims and litigation to be material to the
consolidated financial statements.

Warranties

      Our products are sold with a one year comprehensive bumper to bumper
warranty except for loader sales in North America and Australia, which have a
three year bumper to bumper warranty, followed by a power train warranty in
years four and five. We generally determine our total warranty liability by
applying historical claims rate experience to the estimated amount of equipment
that has been sold and is still under warranty based on dealer inventories and
retail sales. The historical claims rate is primarily determined by a review of
claims costs and current quality developments.

Other commitments

      We have entered into operating lease agreements to lease certain premises
and office equipment. The annual rent of premises consists of a minimum rent
plus realty taxes, maintenance, heat and certain other expenses. Minimum rent
payable for premises and office equipment in the aggregate and for each of the
next five years is as follows:

           2005                                        $134
           2006                                          73
           2007                                          20
           2008                                          15
           2009                                          15

Guarantees

We have entered into an arrangement with a dealer / distributor under which
sales to that dealer / distributor will include a guaranteed buy back value at
the end of a three year period if that dealer / distributor has not sold the
equipment to a retail customer. There is no potential liability at the balance
sheet date as no sales have been made to the dealer / distributor.


                                       20
<PAGE>

15. Financing expense

      Capital leases                                                  $101
      Credit facility                                                  105
      Amortization of deferred financing costs                          58
      Amortization of debt discount                                    394
      Amortization of debt premiums                                    109
      Note payable                                                      22
      Dividends on subsidiary's preferred shares                        95

                                                                      ----
                                                                      $884
                                                                      ====

16. Fair value and financial risks

Fair value

Our financial instruments include cash and short term deposits, bank advances,
trade accounts and financing receivables and accounts payable. Due to the
short-term maturity of cash and short-term deposits, bank advances, trade
accounts receivable, accounts payable and accrued liabilities, the carrying
values of these instruments are reasonable estimates of their fair values.

Credit risk

Our financial assets that are exposed to credit risk consist primarily of cash,
trade accounts and financing receivables.

We are exposed to normal credit risk from customers. Trade accounts and
financing receivables have significant concentrations of credit risk in the
industrial and construction industry and, on a geographical basis, in the USA as
disclosed in Note 13.

Interest rate risk

We are exposed to interest rate risk as future changes in the prevailing level
of interest rates affect the cash flows associated with financing receivables
and debt obligations. We have not entered into any financial instrument
contracts to hedge the interest rate exposure associated with these items.

Foreign currency risk

Our foreign currency translation policy is described in Note 3. We do not enter
into foreign currency futures and forwards contracts to manage exposure to
foreign currency fluctuations. As at December 31, 2004, our exposure in
non-Canadian dollars was: receivables of $5,600, payables of $1,500, credit
facilities of $15,646 and cash of $450.


                                       21
<PAGE>

17. Subsequent events

Laurus Master Fund, Ltd.

      On January 26, 2005, we received an increase in the credit facility with
Laurus of $4,000 which increased the credit facility from $16,000 to $20,000.
Laurus charged a fee of $128 and received warrants to purchase 400,000 common
shares with an exercise price of $2.25.

      On January 26, 2005, in connection with an increase in the credit facility
with Laurus from $16,000 to $20,000, we issued to Laurus warrants to purchase
400,000 common shares at an exercise price of $2.25 per share. The warrants are
exercisable at any time and expire on January 26, 2012. The proceeds allocated
to the warrants of $1,542 were credited to additional paid-in capital and the
resulting discount from the related debt is being amortized over the remaining
term of that debt of 33 months.

      On February 28, 2005, we received an additional term loan from Laurus of
$1,900 (see below).

Consulting services

      On January 31, 2005, in connection with investor relations services, we
issued warrants to Redwood Consultants to purchase 250,000 common shares at an
exercise price of $4 per share. The warrants are exercisable at any time and
expire on January 31, 2008. Because the value of the services to be provided
could not be reliably measured, we used the fair value of the warrants of
$1,295, which amount was credited to additional paid-in capital and is being
recognized as an expense over the estimated life of the services of one year.

Acquisition of Pneutech Inc.

      On February 28, 2005, we acquired 100% of the common stock of Pneutech, in
exchange for 1,082,640 shares of our common stock and warrants to purchase
211,062 shares of common stock, exercisable at $3.00 per share. The common stock
issued was valued at $3.50 per share, based on the market price of our common
stock on December 22, 2004, the date the terms of the acquisition were agreed to
and announced. Clifford Rhee, the President and a member of our Board of
Directors, had a controlling interest in Pneutech. As a result, the fair value
of the shares issued and the resulting allocation to goodwill in Pneutech has
been reduced by the proportionate share of his post-combination ownership
percentage. An additional 167,360 shares of our common stock were issued to an
unrelated party as of the closing in exchange for the cancellation of
approximately $494 of debt owed by Pneutech.

      As part of the consideration paid for the acquisition of Pneutech, we:

      o     Redeemed 929 preference shares and 530,000 special shares owned by
            3156176 Canada, Inc. for an aggregate of $508. Clifford Rhee, the
            President and a member of the Board of Directors of Thomas and
            Pneutech is the beneficial owner of 3156176 Canada, Inc., which was
            the owner of approximately 47% of the common shares, and all of the
            929 preference shares and 530,000 special shares of Pneutech. Mr.
            Rhee received 467,767 shares of our common stock in exchange for his
            common shares in Pneutech;

      o     Repaid Roynat Capital $2,259 in consideration for the cancellation
            of its Pneutech preferred shares and payment of accrued dividends
            thereon;

      o     Repaid Roynat Capital $1,008 in consideration for the cancellation
            of warrants previously issued by Pneutech to Roynat Capital;


                                       22
<PAGE>

The following is a summary of the net assets acquired at the date of
acquisition, at fair value:

<TABLE>
<S>                                                                                      <C>
      Net assets acquired
             Trade receivables                                                           $ 11,943
             Inventories                                                                    9,302
             Prepaids and other assets                                                      1,200
             Bank indebtedness                                                             (9,612)
             Accounts payable                                                              (8,782)
             Accrued and other liabilities                                                 (1,599)
             Property and equipment                                                         7,868
             Other assets                                                                     502
             Goodwill                                                                       5,127
             Notes payable                                                                 (8,374)
                                                                                         --------
             Net assets acquired                                                         $  7,575
                                                                                         ========

      Consideration paid:
             Common shares (1,082,640) issued to Pneutech shareholders                   $  3,470
             Warrants for common shares (211,062) issued to Pneutech shareholders             260
             Cash paid to redeem Pneutech preference shares and special shares                508
             Cash paid to redeem Pneutech preferred shares                                  2,259
             Cash paid to redeem Pneutech common stock warrants                             1,008
             Cash paid for transaction costs                                                   70
                                                                                         --------
             Consideration                                                               $  7,575
                                                                                         ========
</TABLE>

      Concurrently with the closing of the Pneutech acquisition on February 28,
2005, we entered into the following refinancing transactions

      o     Redeemed notes payable totaling $494 by issuing 167,360 common
            shares;

      o     Repaid Roynat Capital $3,227 in full satisfaction of all amounts due
            pursuant to a convertible debenture issued by Pneutech to Roynat
            Capital;

      o     Sold a subordinated debenture to Roynat Merchant Capital Inc. with a
            face amount of $5,343; and issued warrants to Roynat Merchant
            Capital Inc. to purchase 1,000,000 shares of common stock at an
            exercise price of $3.00 per share. The subordinated debenture was
            due and payable in full on December 30, 2005 and bore interest at
            the stated rate of 15% per annum. The subordinated debenture was
            repaid in full in April 2005.

      The redemption of the preference shares, special shares, preferred shares,
common stock warrants and the repayment of the Roynat Capital debenture were
funded by the sale of the subordinated debenture to Roynat Merchant Capital Inc.
and a loan from Laurus.

      Because Mr. Rhee had a controlling interest in Pneutech, the fair value
increase in the assets acquired and the allocation to goodwill in Pneutech has
been reduced by the proportionate share of his post-combination ownership
percentage.

      Concurrently with the Closing of the Pneutech acquisition, we and Laurus
amended certain terms of the original agreements, including the following:

      o     we issued an additional secured convertible term note in the
            principal amount of $1,900 to Laurus;

      o     we issued Laurus a common stock purchase warrant exercisable to
            purchase 150,000 shares of common stock for a period of seven years
            at a price of $2.25 per share; and


                                       23
<PAGE>

      o     the payments on the previously issued secured convertible term note
            in the principal amount of $6,000 shall not commence until July 1,
            2005, at which time the initial monthly payment in the amount of
            $207 shall be due and shall be due each month thereafter until the
            note is paid in full.

      As of October 3, 2005, we are not currently in compliance with our
obligations to register the shares of common stock issuable to Laurus. However,
Laurus has waived, through October 15, 2005, the imposition of all penalties
under the Registration Rights Agreement and its right to accelerate payment of
our obligations. In consideration for this waiver, we paid Laurus a fee of $898,
which was less than the damages we would have incurred while not in compliance
through October 15, 2005. Because non-compliance did not occur until July 22,
2005, (subsequent to year end), this amount will be recorded in our first
quarter of fiscal 2006 (quarter ended September 30, 2005). In addition, as this
amount was included in an over-advance from Laurus under our revolving credit
facility with them, the fee will not have a material impact on our Liquidity.
Upon the expiration of the waiver, assuming our Registration Statement is not
then effective, we will incur penalties in the amount of 2% per month of the
original principal amount due under the notes of $22,000. If our registration
statement never becomes effective and we are required to pay penalties to Laurus
of 2% per month from October 15, 2005 until the option and warrants sold to
Laurus expire at the end of their seven year life, the penalties would aggregate
approximately $32,000. In addition, our failure to comply with the Laurus
registration obligations after October 15, 2005 will constitute an event of
default which will entitle Laurus, in its sole discretion, to demand payment in
full of all obligations due to them, together with a 15% premium on the
principal amount of notes then outstanding. We and Laurus have had discussions
concerning the status of the obligations and Laurus has not given any indication
that they intend to demand payment of the obligations due to them. However, any
such demand would be detrimental to our financial condition as we do not have
sufficient cash to repay the Laurus obligations. Further, we granted a security
interest to Laurus in substantially all of our assets. Any attempt by Laurus to
foreclose on our assets could cause us to curtail our current operations.


                                       24
<PAGE>

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

      The following discussion and other sections of this Form 10-Q contain
forward-looking statements that involve a number of risks and uncertainties.
These forward-looking statements are made pursuant to the "safe-harbor"
provisions of the Private Securities Litigation Reform Act of 1995 and are made
based on management's current expectations or beliefs, as well as assumptions
made by, and information currently available to, management. All statements
regarding future events, our future financial performance and operating results,
our business strategy and our financing plans are forward-looking statements. In
many cases, you can identify forward-looking statements by terminology, such as
"may," "will," "should," "expects," "intends," "plans," "anticipates,"
"believes," "estimates," "predicts," "potential," or "continue," or the negative
of such terms and other comparable terminology. These statements are only
predictions. Known and unknown risks, uncertainties and other factors could
cause our actual results to differ materially from those projected in the
forward-looking statements.

      THE INFORMATION CONTAINED IN THIS FORM 10-Q IS NOT A COMPLETE DESCRIPTION
OF OUR BUSINESS OR THE RISKS ASSOCIATED WITH AN INVESTMENT IN US. READERS ARE
REFERRED TO DOCUMENTS FILED BY THOMAS WITH THE SECURITIES AND EXCHANGE
COMMISSION, SPECIFICALLY OUR MOST RECENT FORM SB-2 AND OTHER FILINGS, WHICH
IDENTIFY IMPORTANT RISK FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER FROM
THOSE CONTAINED IN THE FORWARD-LOOKING STATEMENTS.

           UNLESS OTHERWISE MARKED ALL AMOUNTS ARE IN U.S. DOLLARS IN
                   THOUSANDS, EXCEPT SHARE AND PER SHARE DATA

Overview

      Thomas Equipment, Inc. has two business segments, Thomas Equipment and
Pneutech.

      Thomas Equipment 2004 Inc acquired the business, fixed assets and
inventory of Thomas Equipment Limited from McCain Foods Limited effective
October 1, 2004, and manufactures and distributes through a worldwide network of
dealers and distributors a full line of skid steer and mini skid steer loaders
as well as attachments, mobile screening plants and six models of mini
excavators. In addition to industrial and construction products, Thomas
Equipment manufactures a complete line of potato harvesting and handling
equipment, and also operates six retail stores, three in Atlantic Canada, one in
Presque Isle, Maine, one in Aurora, Colorado and one in Lynnwood, Illinois.
Thomas Equipment Limited originated in 1943 as a manufacturer of farm equipment
and in 1964, was acquired by McCain Foods Limited. In 1969, Thomas Equipment
Limited further diversified its product line with the development of the world's
first hydrostatic drive skid steer loader. Today, this business manufactures a
full line of skid steer loaders, attachments, screening plants, excavators, and
other agricultural and industrial equipment as noted above.

      Pneutech, established in 1973 and which we acquired on February 28, 2005,
and its subsidiaries are engaged in the fluid power industry providing
distribution and manufacturing of pneumatic and hydraulic components and systems
for the industrial market, distribution and manufacturing of hydraulic
components and systems for the mobile market and manufacturing of hydraulic
cylinders and metal gaskets for the industrial market. Pneutech is a strategic
supplier to Thomas Equipment, as well as 15,000 other active customers. Pneutech
maintains nine manufacturing and distribution facilities in Canada and one
manufacturing plant in South Korea. It has a diverse array of capabilities in
the distribution of fluid power components as well as manufacturing spiral wound
metal gaskets and steel components.

      Although a significant portion of our sales are transacted in the U.S.,
Korea and Europe, most of our assets and operations are in Canada and, as a
result, our functional currency for recording transactions is the Canadian
dollar, which is then translated into U.S. dollars for reporting purposes.
Amounts reported throughout this discussion derived from specific financial
statements are translated at various period end rates or average period rates.
Other amounts not related to results of operations or financial condition have
been translated to U.S. dollars at the December 31, 2004 rate of $0.8303 per
Canadian dollar.


                                       25
<PAGE>

Reorganization of Maxim Mortgage Corporation to Thomas Equipment, Inc.

      On October 11, 2004, Thomas Equipment, Inc., formerly Maxim Mortgage
Corporation, entered into an Agreement and Plan of Reorganization with Thomas
Equipment 2004 Inc. and Thomas Ventures Inc., both of which were formed in 2004
for the purposes of the asset acquisition described below. Prior to the
reorganization:

      Maxim Mortgage Corporation had no active business operations;

      Clifford Rhee, our president and a principal stockholder, was the sole
      officer and director of Thomas Equipment 2004, Inc.; and

      David Marks, our Chairman and a principal stockholder, was the sole
      officer and director of Thomas Ventures, Inc.

      Immediately before the acquisition of Thomas Equipment 2004 and Thomas
Ventures, we had minimal business operations and sought a new line of business
to create value for our shareholders. Prior to November 2004, Clifford Rhee,
then president of Pneutech Inc. and currently president of Thomas Equipment and
Pneutech became aware that Thomas Equipment Limited had an interest in disposing
of the Thomas Equipment Limited assets. The purchase price for the assets was
based upon the net book value of the assets. Mr. Rhee negotiated for the
purchase of the assets by Pneutech, but funding for the acquisition by Pneutech
was not available. It was determined by Mr. Rhee that funding would be more
readily available if the company were publicly traded. Mr. Rhee initially
considered including both Pneutech and the Thomas Equipment Limited assets in a
public vehicle, but ultimately determined it would be more practical to include
only the Thomas Equipment Limited assets. After a period of time operating
Thomas Equipment and Pneutech as separate entities, it was determined that the
entities should be combined, since Pneutech was already a supplier to Thomas
Equipment.

      Under the terms of the agreement, we acquired 100% of the common stock of
Thomas Equipment 2004 and Thomas Ventures in exchange for the issuance by us of
16,945,000 common shares (approximately 94% of the outstanding shares
immediately after the reorganization). The average share price paid for the
16,945,000 shares of Thomas Equipment 2004 and Thomas Ventures exchanged for
shares of Thomas Equipment stock was $.0775. Current officers, directors and
principal stockholders of Thomas Equipment, who beneficially own in the
aggregate approximately 77% of the outstanding common stock of Thomas Equipment,
owned the following aggregate shares of common stock of Thomas Equipment 2004,
Inc. and Thomas Ventures, Inc.:

                                                                       Average
      Name                                                Shares    Price Paid
      --------------------------------------------    ----------    -----------
      Frank P. Crivello                               10,336,706        $.1874
      Frank P. Crivello SEP IRA                        2,010,000        $.0124
      4237901 Canada Inc. (owned by Clifford Rhee)     2,875,294          $.01
      David Marks                                        500,000          $.01

      Although we were the legal acquirer, Thomas Equipment 2004 has been
identified as the accounting acquirer and as such the acquisition has been
accounted for as a recapitalization. The officers and directors of Thomas
Equipment 2004 and Thomas Ventures assumed similar positions with us. As a
result, our consolidated financial statements represent the results of
operations and cash flows of the accounting acquirer from the date of its
inception, October 1, 2004.

      Immediately prior to the reorganization:


                                       26
<PAGE>

      Thomas Equipment 2004, Inc. issued an aggregate of 12,945,000 shares of
its common stock to 13 accredited investors for an aggregate consideration of
$129. Of such shares, 8,746,706 shares were purchased for $87 by Frank Crivello,
a principal stockholder, 100,000 shares were purchased by Frank Crivello's
spouse for $1, 500,000 shares were purchased for $5 by David Marks, our Chairman
and a principal stockholder, and 2,875,294 shares were purchased for $28 by a
corporation controlled by Clifford Rhee, our President and a principal
stockholder.

      Thomas Ventures, Inc. issued an aggregate of 4,000,000 shares of its
common stock to four accredited investors, for an aggregate consideration of
$2,000. Of such shares, 160,000 shares were purchased by the Frank Crivello SEP
IRA, and 3,590,000 shares were purchased by Frank Crivello.

      The fair value of the common stock was estimated to be $0.47 per share,
based on the cash price of $0.50 paid by certain of our founders and the trading
price of the shares immediately after the reorganization of $0.45. The
difference between the consideration received and the fair value resulted in an
immediate expense of $5,520.

Acquisition of Operating Assets from Predecessor Business - Thomas Equipment
Limited

      On November 9, 2004, Thomas Equipment 2004 acquired, effective as of
October 1, 2004, the business, fixed assets and inventory of Thomas Equipment
Limited, a wholly-owned subsidiary of McCain Foods Limited, an unrelated
company, for $37,182. Thomas Equipment Limited is considered to be a predecessor
business of ours. As a result, we have included discussions of its results of
operations for the periods prior to the acquisition.

      Prior to acquisition, Thomas Equipment Limited was not generating
sufficient cash flows to cover its operating costs and to fund investments in
working capital and additions to property, plant and equipment, and also had a
working capital deficit and shareholder's deficit at the date acquired. We have
obtained a flexible borrowing base in connection with the acquisition of Thomas
Equipment Limited's business and certain of its assets to fund our operations
which we believe will provide us with sufficient resources to operate for the
next twelve months (see discussion of Liquidity and Capital Resources below).

      The acquisition was made pursuant to an Agreement of Purchase and Sale of
Assets between Thomas Equipment 2004 and Thomas Equipment Limited, made as of
October 1, 2004. The purchase price paid was $37,182, paid as follows:

      o     $200 was paid upon execution of the acquisition agreement on October
            11, 2004;

      o     $16,267 was paid in cash upon the closing of the acquisition;

      o     $2,260 is payable in two equal, annual payments (commencing one year
            after the closing), pursuant to a promissory note which bears
            interest at 4% per annum;

      o     $8,370 received for 1,000 Thomas Equipment 2004 preference shares
            that were sold on closing to McCain Foods Limited, the parent of
            Thomas Equipment Limited; and

      o     $3,179 was due in installments for inventory at October 1, 2004 in
            excess of $20.2 million. These installments have been paid.

      o     $5,254 in capital lease obligations were entered into with Thomas
            Equipment Limited.

      o     $1,652 was paid for transaction costs related to the acquisition.

      In connection with the foregoing, the following agreements were also
entered into:


                                       27
<PAGE>

      o     Customary non-competition, non-solicitation and confidentiality
            agreements were granted by Thomas Equipment Limited and McCain
            Foods.

      o     Thomas Equipment and Thomas Equipment 2004 entered into two two-year
            lease agreements with Thomas Equipment Limited, pursuant to which we
            leased three properties from Thomas Equipment Limited in
            Centreville, Florenceville and Grand Falls, New Brunswick and a
            property in Presque Isle, Maine.

      o     Thomas Equipment 2004 sold to McCain 1,000 preference shares for a
            price of $8,370. The holder of the preference shares is entitled to
            receive dividends at the rate of 8% per annum, payable annually on a
            cumulative basis. The preference shares are redeemable at the option
            of Thomas Equipment 2004 or the holder, for CD$10,000 ($8,303 at
            December 31, 2004), plus accrued and unpaid dividends. We are
            required to purchase the shares from McCain on April 26, 2006, if
            not earlier redeemed.

      o     A corporation controlled by Clifford Rhee, our new President,
            together with Igor Kent, Mr. Rhee's business partner, have jointly
            agreed to guarantee the obligations of Thomas Equipment 2004 to
            redeem McCain's preference shares in Thomas Equipment 2004.

      In connection with the foregoing, the Company has also agreed with McCain,
for certain periods of time:

      o     to retain Clifford Rhee as President and Chief Executive Officer of
            the Company; and

      o     not to reorganize, dissolve, make a voluntary assignment for the
            benefit of creditors or otherwise take action to seek protection
            from creditors.

      Concurrently with the closing of the acquisition of the Thomas Equipment
Limited assets, we entered into agreements with Laurus Master Fund, Ltd, a
Cayman Islands corporation, pursuant to which we sold convertible notes, an
option and a warrant to purchase common stock to Laurus in a private offering
pursuant to exemption from registration under Section 4(2) of the Securities Act
of 1933. The securities sold to Laurus were:

      o     A secured convertible minimum borrowing note with a principal amount
            of $8,000, which is convertible to common stock at a price of $1.50
            per share;

      o     A secured convertible revolving note with a principal amount not to
            exceed $16,000, including the minimum borrowing amount, which is
            convertible to common stock at a price of $1.50 per share;

      o     A secured convertible term note with a principal amount of $6,000,
            which is convertible to common stock at a price of $1.50 per share;

      o     A common stock purchase warrant to purchase 2,200,000 shares of
            common stock of Thomas Equipment, at a purchase price of $2.25 per
            share, exercisable for a period of seven years;

      o     An option to purchase 4,020,000 shares of common stock of Thomas
            Equipment, at a purchase price of $.01 per share; and

      o     1,980,000 shares of our common stock for a total purchase price of
            $20.

      We are permitted to borrow an amount based upon eligible accounts
receivable, inventory and fixed assets, as defined in the agreements with
Laurus. We must pay certain fees for any unused portion of the credit facility
or in the event the facility is terminated prior to expiration. Our obligations
under the notes are secured by all of our assets. The notes mature on November
9, 2007. Annual interest on the notes is equal to the "prime rate" published in
The Wall Street Journal from time to time, plus 3.0%, provided, that, such
annual rate of interest may not be less than 7.5%, subject to certain downward
adjustments resulting from certain increases in the market price of our common
stock.


                                       28
<PAGE>

      The $6,000 principal amount of the secured convertible term note is
repayable at the rate of $207 per month together with accrued but unpaid
interest, commencing on July 1, 2005. Such amounts may be paid, at the holder's
option (i) in cash with a 3% premium (though no premium is charged if the
payments are added to the convertible credit facility); or (ii) in shares of
common stock, assuming the shares of common stock are registered under the
Securities Act of 1933. If paid in shares of common stock the number of shares
to be issued shall equal the total amount due, divided by $1.50. If the average
closing price of the common stock for five consecutive trading days prior to an
amortization date is equal to or greater than $1.65, we may require the holder
to convert into common stock an amount of principal, accrued interest and fees
due under the secured convertible term note equal to a maximum of 25% of the
aggregate dollar trading volume of the common stock for the 22 consecutive
trading days prior to a notice of conversion. The term note may be redeemed by
us in cash by paying the holder 105% of the principal amount, plus accrued
interest. The holder of the secured convertible term note may require us to
convert all or a portion of the secured convertible term note, together with
interest and fees thereon at any time. The number of shares to be issued shall
equal the total amount to be converted, divided by $1.50.

      The $8,000 principal amount of the secured convertible minimum borrowing
note, together with accrued interest thereon is payable on November 9, 2007. The
secured convertible minimum borrowing note may be redeemed by us in cash by
paying the holder 105% of the principal amount, plus accrued interest. The
holder of the term note may require us to convert all or a portion of the term
note, together with interest and fees thereon at any time. The number of shares
to be issued shall equal the total amount to be converted, divided by $1.50.

      Upon an issuance of shares of common stock below the fixed conversion
price, the fixed conversion price of the notes will be reduced accordingly. The
conversion price of the secured convertible notes may be adjusted in certain
circumstances such as if we pay a stock dividend, subdivide or combine
outstanding shares of common stock into a greater or lesser number of shares, or
take such other actions as would otherwise result in dilution. Laurus has
contractually agreed to restrict its ability to convert the secured convertible
notes if such conversion would exceed the difference between the number of
shares of common stock beneficially owned by the holder or issuable upon
exercise of the warrant and the option held by such holder and 9.99% of our
outstanding shares of common stock.

      On January 26, 2005, Thomas Equipment and Laurus amended certain terms of
the original agreements to increase the maximum principal amount of the secured
convertible revolving note to $20,000. In addition, we issued Laurus a common
stock purchase warrant exercisable to purchase 400,000 shares of our common
stock for a period of seven years at a price of $2.25 per share.

Acquisition of Operating Businesses - Pneutech, Inc. and Subsidiaries

      On February 28, 2005, we acquired 100% of the common stock of Pneutech, in
exchange for the issuance by us of a total of 1,082,640 shares of our common
stock and warrants to purchase 211,062 shares of common stock, exercisable at
$3.00 per share. Based on the market price of our common stock when the terms of
the Pneutech acquisition were agreed and announced, the common stock was valued
at $3,470. The warrants were valued at $260 using the Black-Scholes option
pricing model, based on the value of our common stock when the acquisition terms
were agreed and announced. An additional 167,360 shares of common stock were
issued as of the closing in exchange for the cancellation of approximately $494
of debt owed by Pneutech. We also paid $6,494 to repay certain Pneutech debt and
preferred stock and to redeem outstanding stock warrants.

      Upon the closing, Pneutech also redeemed all of its 929 preference shares
and 530,000 special shares, which were owned by 3156176 Canada, Inc., for an
aggregate of $508. Clifford Rhee, the President and a member of the Board of
Directors of Thomas and Pneutech is the beneficial owner of 3156176 Canada,
Inc., which was the owner of approximately 47% of the common shares, and all of
the 929 preference shares and 530,000 special shares of Pneutech. Mr. Rhee
received 467,767 shares of our common stock in exchange for his common shares in
Pneutech. Neither Mr. Rhee nor any other officer, director or principal
stockholder of Thomas received any benefits or other consideration in connection
with the acquisition of Pneutech, except as disclosed above. Since the closing
of the acquisition, Mr. Rhee continues to serve as President of both the Company
and Pneutech. Clifford Rhee, David Marks, Kenneth Shirley and James Patty, the
members of our Board of Directors, were appointed as members of the Pneutech
board upon the closing. Mr. Rhee generally negotiated on behalf of Pneutech, in
concert with the other principal stockholder of Pneutech, while David Marks,
chairman of Thomas, negotiated on behalf of Thomas. Mr. Rhee's conflict of
interest was disclosed to the shareholders of Pneutech.


                                       29
<PAGE>

Roynat Merchant Capital Inc.

      Concurrently with the acquisition of Pneutech, in order to refinance
existing debt of Pneutech and to fund the acquisition by us, we entered into
financing agreements with Roynat Merchant Capital Inc. Roynat Capital Inc., an
affiliate of Roynat Merchant Capital, had provided financing to Pneutech which
was terminated upon the closing of the acquisition. In connection therewith, on
the closing the following transactions occurred:

      o     Roynat Capital was paid $2,259 in consideration for the cancellation
            of its Pneutech preferred shares and payment of accrued dividends
            thereon;

      o     Roynat Capital was paid $1,008 in consideration for the cancellation
            of warrants previously issued by Pneutech to Roynat Capital;

      o     Roynat Capital was paid $3,227 in full satisfaction of all amounts
            due pursuant to a convertible debenture issued by Pneutech to Roynat
            Capital;

      o     we sold a subordinated debenture to Roynat Merchant Capital Inc.
            with a face amount of $5,343; and

      o     we issued warrants to Roynat Merchant Capital Inc. to purchase
            1,000,000 shares of common stock at an exercise price of $3.00 per
            share.

      The subordinated debenture was due and payable in full on December 30,
2005 and bore interest at the stated rate of 15% per annum. The subordinated
debenture was repaid in full in April 2005.

Laurus Master Fund, Ltd.

      Concurrently with the acquisition of Pneutech, we amended certain terms of
the original agreements with Laurus, as follows:

      o     we issued to Laurus an additional secured convertible term note in
            the principal amount of $1,900, which is convertible to common stock
            at a price of $1.50 per share;

      o     we issued to Laurus a common stock purchase warrant for 150,000
            shares of common stock exercisable for a period of seven years at a
            price of $2.25 per share; and

      o     the payments on the previously issued secured convertible term note
            in the principal amount of $6,000 were delayed until July 1, 2005,
            at which time the initial monthly payment in the amount of $207 is
            due and shall be due each month thereafter until the note is paid in
            full.

      The principal amount of the secured convertible term note is repayable at
the rate of $66 per month together with accrued but unpaid interest, commencing
on July 1, 2005. Such amounts may be paid, at the holder's option (i) in cash
with a 3% premium (though no premium is charged if the payments are added to the
convertible credit facilities); or (ii) in shares of common stock, assuming the
shares of common stock are registered under the Securities Act of 1933. If paid
in shares of common stock the number of shares to be issued shall equal the
total amount due, divided by $1.50. If the average closing price of our common
stock for five consecutive trading days prior to an amortization date is equal
to or greater than $1.65, we may require the holder to convert into common stock
an amount of principal, accrued interest and fees due under the secured
convertible term note equal to a maximum of 25% of the aggregate dollar trading
volume of the common stock for the 22 consecutive trading days prior to a notice
of conversion. The secured convertible term note may be redeemed by us in cash
by paying the holder 105% of the principal amount, plus accrued interest. The
holder of the term note may require us to convert all or a portion of the
secured convertible term note, together with interest and fees thereon at any
time. The number of shares to be issued shall equal the total amount to be
converted, divided by $1.50.


                                       30
<PAGE>

      Upon an issuance of shares of common stock below the fixed conversion
price, the fixed conversion price of the secured convertible notes will be
reduced accordingly. The conversion price of the secured convertible notes may
be adjusted in certain circumstances such as if we pay a stock dividend,
subdivide or combine outstanding shares of common stock into a greater or lesser
number of shares, or take such other actions as would otherwise result in
dilution.

      Laurus has contractually agreed to restrict its ability to convert all
convertible notes if such conversion would exceed the difference between the
number of shares of common stock beneficially owned by the holder or issuable
upon exercise of the warrant and the option held by such holder and 9.99% of our
outstanding shares of common stock.

      As of October 3, 2005, we are not currently in compliance with our
obligations to register the shares of common stock issuable to Laurus. However,
Laurus has waived, through October 15, 2005, the imposition of all penalties
under the Registration Rights Agreement and its right to accelerate payment of
our obligations. In consideration for this waiver, we paid Laurus a fee of $898,
which was less than the damages we would have incurred while not in compliance
through October 15, 2005. Because non-compliance did not occur until July 22,
2005, (subsequent to year end), this amount will be recorded in our first
quarter of fiscal 2006 (quarter ended September 30, 2005). In addition, as this
amount was included in an over-advance from Laurus under our revolving credit
facility with them, the fee will not have a material impact on our Liquidity.
Upon the expiration of the waiver, assuming our Registration Statement is not
then effective, we will incur penalties in the amount of 2% per month of the
original principal amount due under the notes of $22,000. If our registration
statement never becomes effective and we are required to pay penalties to Laurus
of 2% per month from October 15, 2005 until the option and warrants sold to
Laurus expire at the end of their seven year life, the penalties would aggregate
approximately $32,000. In addition, our failure to comply with the Laurus
registration obligations after October 15, 2005 will constitute an event of
default which will entitle Laurus, in its sole discretion, to demand payment in
full of all obligations due to them, together with a 15% premium on the
principal amount of notes then outstanding. We and Laurus have had discussions
concerning the status of the obligations and Laurus has not given any indication
that they intend to demand payment of the obligations due to them. However, any
such demand would be detrimental to our financial condition as we do not have
sufficient cash to repay the Laurus obligations. Further, we granted a security
interest to Laurus in substantially all of our assets. Any attempt by Laurus to
foreclose on our assets could cause us to curtail our current operations.


                                       31
<PAGE>

RESULTS OF OPERATIONS

      Although the revenue generating activities of Thomas Equipment Limited,
the predecessor business, remained significantly intact after the acquisition,
there have been changes in our distribution strategy, cost structure, and
financing activities. Additionally, unlike the predecessor business, we do not
currently engage in hedging transactions although we may do so in the future. As
a result, we believe that the expenses of the predecessor business are not
representative of our current business, financial condition or results of
operations. Accordingly, where practicable we have included various forward
looking statements regarding effects of our new operating structure.

      Because of the integrated nature of Thomas Equipment's manufacturing
operations and common administrative and marketing support functions, the Thomas
Equipment business is treated by management as a single operating segment for
the purpose of making operating decisions and assessing performance.

The discussion that follows of Results of Operations is in the following
sections:

      o     Results of operations for the three months ended December 31, 2004
            (successor);

      o     Results of operations for the three months ended December 31, 2003
            (predecessor);

      o     Results of operations for the three months ended September 30, 2004
            (predecessor);

      o     Results of operations for the six months ended December 31, 2003
            (predecessor);

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 2004

      The information contained in this section is that of the successor Thomas
Equipment, Inc. for the three months ended December 31, 2004 (unaudited)

      ------------------------------------------------------------------
            For the three months ended December 31, 2004 (unaudited)
      ------------------------------------------------------------------
      Revenues                                  14,416           100.0%
        Cost of Sales                           12,141            84.2%
      Gross Profit                               2,275            15.8%
        Selling Expenses                         1,361             9.4%
        G&A Expenses                             1,219             8.5%
        Research and Development                   245             1.7%
        Provision for Doubtful Accounts             74             0.5%
        Stock Based Compensation                 6,431            44.6%
        Other (Income) Expense                     216             1.5%
      Operating Loss                            (7,271)          (50.4%)
        Net Financial (Income) Expense             884             6.1%
        Provision for Income Taxes                  --              --
      Net Loss                                  (8,155)          (56.6%)
      ------------------------------------------------------------------

Revenues

      For the three months ended December 31, 2004, revenues were $14,416.
Overall sales volumes in the three months ended December 31, 2004 remained
relatively unchanged from the same period (for the predecessor) in 2003.
However, the product mix changed due to a decision by the predecessor in fiscal
2004 to reduce the number of loaders and screeners being sold through the
auction channel, and focus on enhancing stronger dealer relationships to allow
Thomas Equipment Limited to increase its overall profitability on its sales. By
July 1, 2004, Thomas Equipment Limited had entirely exited the sale of loaders
through the auction channel. The impact of this decision was to increase
revenues by approximately $800 for the quarter ended December 31, 2004. Selling
prices were increased to compensate for escalating raw material increases (price
increases ranged between 3% - 5% depending on geographical location and product
line). The impact of this increase was approximately $400. As approximately 35%
of sales were denominated in non U.S. dollar currencies (primarily the Euro and
the Canadian dollar), the weakening of the U.S. dollar, increased reported sales
in the quarter ended December 31, 2004 by approximately $1,000, as the relative
value of these non U.S. dollar denominated sales increased.


                                       32
<PAGE>

Cost of Sales and Gross Profit

      Cost of sales was $12,141 for the three months ended December 31, 2004. As
a percentage of sales, costs of sales were 84.2% for the three months ended
December 31, 2004. Thomas Equipment Limited's decision, in 2003, to stop selling
via auction channels decreased cost of sales as a percentage of sales by
approximately 6%. This was partially offset by an increase in the our total cost
of sales of approximately 3% due to rising steel prices which account for
approximately 10% of our total cost of sales. As a result of the above, the
gross profit margin was $2,275 for the three months ended December 31, 2004.

Selling Expenses

      Selling expenses were $1,361 for the three months ended December 31, 2004.
As a percentage of sales, selling costs were 9.4% in 2004.. Costs decreased
primarily as a result of Thomas Equipment Limited's decision to exit from
auction sales and to focus on increasing dealer sales.

General and Administrative Expenses

      General and administrative expenses, consisting of administrative
expenses, insurance, legal and other non-manufacturing related expenses,
remained relatively stable and were $1,219 for the three months ended December
31, 2004, mainly due to the reduction in staff count initiated in July 2004.

Research and Development Costs

      Research and development costs were $245 for the quarter ended December
31, 2004. The amount spent during the second quarter of fiscal 2005 is
consistent with our plans for fiscal 2005.

Provision for Doubtful Accounts

      Provision for doubtful accounts expense was $74 for the three months ended
December 31, 2004.

Stock Based Compensation

      At our inception and during the quarter ended December 31, 2004, we issued
16,945,000 shares to our founders for $2,451 or an average of $0.14 per share
and sold 1,980,000 shares to Laurus for $20. The fair value of the common stock
was estimated to be $0.47 per share, based on the cash price of $0.50 paid by
certain of our founders and the trading price of the shares immediately after
the reorganization of $0.45. We have recorded $6,431 as an immediate expense for
the difference in the values.

Other (Income) Expense, Net

      Other (income) expense, consisting of foreign currency losses and other
miscellaneous expenses, amounted to an expense of $216 in the quarter ended
December 31, We did not enter into, nor do we have, any foreign exchange
contracts in the quarter ended December 31, 2004.

Net Financial (Income) Expense

      Net financial (income) expense, consisting of interest (income) expense,
amortization of debt discounts and debt premiums and dividends on preferred
stock, amounted to an net expense of $884 in the quarter ended December 31,
2004. In 2004, we entered into various debt agreements which resulted in
financing charges consisting of amortization of deferred financing costs,
warrant, stock option and premium amortization of approximately $560 (an
effective interest rate of 8%); dividends on preferred shares of approximately
$95 (an effective interest rate of 8%) and interest charges on issued debt of
$229.


                                       33
<PAGE>

Provision for Income Taxes

      During the three months ended December 31, 2004, we experienced an
operating loss for tax purposes. Thomas Equipment Limited had historically
experienced operating losses, and as Thomas Equipment Limited's management were
uncertain as to whether Thomas Equipment Limited would be able to utilize these
tax losses before they expire, they provided a reserve for the income tax
benefits associated with Thomas Equipment Limited's net future tax assets which
primarily related to its cumulative net operating losses. We have adopted the
same policy to reserve such net tax assets until such time profitability is
reasonably assured and it becomes more likely than not that we will be able to
utilize such assets.

Net Loss

      As a result of the above we reported a net loss of $8,155 for the three
months ended December 31, 2004.

Comprehensive Loss

      For the three months ended December 31, 2004 we recorded losses for
currency translation adjustments of $91 related to the translation of accounts
to U.S. dollars for reporting purposes.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 2003

      The information contained in this section is that of our predecessor,
Thomas Equipment Limited, for the three months ended December 31, 2003
(unaudited).

      -------------------------------------------------------------------
            For the three months ended December 31, 2003 (unaudited)
      -------------------------------------------------------------------
      Revenues                                 $ 11,928            100.0%
        Cost of Sales                            10,664             89.4%
      Gross Profit                                1,264             10.6%
        Selling Expenses                          1,499             12.6%
        G&A Expenses                              1,265             10.6%
        Research and Development                    355              3.0%
        Provision for Doubtful Accounts             827              6.9%
        Stock Based Compensation                     --               --
        Other (Income) Expense                     (629)            (5.3%)
      Operating Loss                             (2,053)           (17.2%)
        Net Financial (Income) Expense              (23)              --
        Provision for Income Taxes                   17               --
      Net Loss                                   (2,047)           (17.2%)
      -------------------------------------------------------------------

Revenues

      For the three months ended December 31, 2003, revenues were $11,928.

Cost of Sales and Gross Profit

      Cost of sales for the three months ended December 31, 2003 were $10,664.
As a percentage of sales, costs of sales were 89.4% for the three months ended
December 31, and the gross profit margin was $1,264.


                                       34
<PAGE>

Selling Expenses

      Selling expenses were $1,499 for the three months ended December 31, 2003.
As a percentage of sales, selling costs were 12.6%, reflecting additional
expenditures as Thomas Equipment Limited exited from auction sales and focused
on increasing dealer sales.

General and Administrative Expenses

      General and administrative expenses, consisting of administrative
expenses, insurance, legal and other non-manufacturing related expenses, were
$1,265 for the three months ended December 31, 2003.

Research and Development Costs

      Research and development costs were $355 for the three months ended
December 31, 2003, reflecting higher-than-normal expenditures as Thomas
Equipment Limited essentially had no such costs in the first quarter of fiscal
2004.

Provision for Doubtful Accounts

      Provision for doubtful accounts expense was $827 for the three months
ended December 31, 2003, reflecting an increase in the provision to compensate
for accounts that were becoming overdue, as determined by the management review
during the quarter ended December 31, 2003.

Other (Income) Expense, Net

      Other (income) expense, consisting of foreign currency gains and losses
and other miscellaneous expenses, amounted to net other income of $629 for the
three months ended December 31, 2003. In 2003 Thomas Equipment Limited had a
foreign exchange gain on foreign currency forward exchange contracts entered
into to manage some of the company's foreign exchange risk on its U.S. dollar
sales. The gain in 2003 was primarily caused by the 4.4% weakening of the U.S.
dollar against the Canadian dollar between June 2003 and December 2003 as the
fair value of Thomas Equipment Limited's foreign exchange contracts was greater
on December 31, 2003 compared to June 30, 2003.

Net Financial (Income) Expense

      Net financial (income) expense amounted to a net income of $23 in the
three months ended December 31, 2003. During this period in 2003, most of the
Thomas Equipment Limited's financial support from the McCain group was in the
form of preferred shares resulting in interest charges from affiliates within
the McCain group offset by other net interest income which primarily came from
receivables.

Provision for Income Taxes

      During the three months ended December 31, 2003, Thomas Equipment Limited
experienced an operating loss for tax purposes. Thomas Equipment Limited had
historically experienced operating losses, and as Thomas Equipment Limited's
management were uncertain as to whether Thomas Equipment Limited would be able
to utilize these tax losses before they expire, they provided a reserve for the
income tax benefits associated with Thomas Equipment Limited's net future tax
assets which primarily related to its cumulative net operating losses.

Net Loss

      As a result of the above, Thomas Equipment Limited reported a net loss of
$2,047 for the three months ended December 31, 2003.


                                       35
<PAGE>

Comprehensive Loss

      For the three months ended December 31, 2003, Thomas Equipment Limited
recorded a loss of $926 related to the translation of accounts to U.S. dollars
for reporting purposes.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2004

      The information contained in this section is that of our predecessor,
Thomas Equipment Limited, for the three months ended September 30, 2004
(unaudited).

      -------------------------------------------------------------------
            For the three months ended September 30, 2004 (unaudited)
      -------------------------------------------------------------------
      Revenues                                 $ 13,857           100.0%
        Cost of Sales                            11,770            84.9%
      Gross Profit                                2,087            15.1%
        Selling Expenses                          1,797            13.0%
        G&A Expenses                              1,911            13.8%
        Research and Development                    310             2.2%
        Provision for Doubtful Accounts              41             0.3%
        Other (Income) Expense                     (884)           (6.4%)
      Operating Loss                             (1,088)           (7.8%)
        Net Financial (Income) Expense              499             3.6%
        Provision for Income Taxes                   15             0.1%
      Net Loss                                   (1,602)          (11.5%)
      -------------------------------------------------------------------

Revenues

      For the three months ended September 30, 2004, Thomas Equipment Limited's
revenue was $13,857.

Cost of Sales and Gross Profit

      Cost of sales was $11,770 for the three months ended September 30, 2004.
As a percentage of sales, costs of sales for the three months ended September
30, 2004 was 84.9% and the gross profit margin was $2,087 or 15.1%.

Selling Expenses

      Selling expenses were $1,797 for the three months ended September 30,
2004. As a percentage of revenues, selling costs were 13.0%

General and Administrative Expenses

      General and administrative expenses, consisting of administrative
expenses, insurance, legal and other non-manufacturing related expenses, were
$1,911 for the three months ended September 30, 2004. These expenses reflected
higher product liability insurance and deductible costs, pension curtailment
expenses and legal costs associated with marketing Thomas Equipment Limited for
sale as well as the impact of the weaker U.S. dollar as the majority of these
costs are incurred in Canadian dollars.

Research and Development Costs

      Research and development costs for the three months ended September 30,
2004 were $310.


                                       36
<PAGE>

Provision for Doubtful Accounts

      Provision for doubtful accounts expense was $41 for the three months ended
September 30,2004.

Other (Income) Expense, Net

      Other (income) expense, consisting primarily of foreign currency gains and
losses, and other miscellaneous items, amounted to a net income of $884 in the
three months ended September 30, 2004. In the three months ended September 30,
2004 Thomas Equipment Limited, had net revaluation gains on its foreign currency
forward exchange contracts entered into to manage some of the company's foreign
exchange risk on its U.S. dollar sales due to the weakening of the U.S. dollar
against the Canadian dollar over the period. The foreign exchange gains in 2004
were partly offset by special termination benefit costs of $791 recorded by
Thomas Equipment Limited in the three months ended September 30, 2004 in
connection with the group of employees whose positions were terminated in July
2004.

Net Financial (Income) Expense

      Net financial (income) expense, amounted to an expense of $499 for the
three months ended September 30, 2004. During 2004, most of Thomas Equipment
Limited's financial support from the McCain group was in the form of preferred
shares resulting in interest charges from affiliates within the McCain group
offset by other net interest income which primarily came from receivables.

Provision for Income Taxes

      During the three months ended September 30, 2004, Thomas Equipment Limited
experienced operating and tax losses. Thomas Equipment Limited had historically
experienced operating losses, and as Thomas Equipment Limited's management were
uncertain as to whether Thomas Equipment Limited would be able to utilize these
tax losses before they expire, they provided a reserve for the income tax
benefits associated with Thomas Equipment Limited's net future tax assets which
primarily relate to its cumulative net operating losses.

Net Loss

      As a result of the above, Thomas Equipment Limited reported a net loss of
$1,602 for the three months ended September 30, 2004.

Comprehensive Loss

      Currency translation adjustments amounted to a loss of $726 for the three
months ended September 30, 2004 related to the translation of accounts to U.S.
dollars for reporting purposes.


                                       37
<PAGE>

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 2003

      The information contained in this section is that of our predecessor,
Thomas Equipment Limited, for the six months ended December 31, 2003
(unaudited).

      -------------------------------------------------------------------
             For the six months ended December 31, 2003 (unaudited)
      -------------------------------------------------------------------
      Revenues                                    $ 26,578        100.0%
        Cost of Sales                               23,076         86.8%
      Gross Profit                                   3,502         13.2%
        Selling Expenses                             3,071         11.6%
        G&A Expenses                                 2,320          8.7%
        Research and Development                       355          1.3%
        Provision for Doubtful Accounts                963          3.6%
        Other (Income) Expense                        (659)        (2.5%)
      Operating Loss                                (2,548)        (9.6%)
        Net Financial (Income) Expense                  33          0.1%
        Provision for Income Taxes                      33          0.1%
      Net Loss                                      (2,614)        (9.8%)
      -------------------------------------------------------------------

Revenues

      For the six months ended December 31, 2003, Thomas Equipment Limited's
revenue was $26,578.

Cost of Sales and Gross Profit

      Cost of sales was $23,076 for the six months ended December 31, 2003. As a
percentage of sales, costs of sales for the six months ended December 31, 2003
was 86.8% and the gross profit margin was $3,502 or 13.2%.

Selling Expenses

      Selling expenses were $3,071 for the six months ended December 31, 2003.
As a percentage of revenues, selling costs were 11.6%

General and Administrative Expenses

      General and administrative expenses, consisting of administrative
expenses, insurance, legal and other non-manufacturing related expenses, were
$2,320 for the six months ended December 31, 2003.

Research and Development Costs

      Research and development costs for the six months ended December 31, 2003
were $355.

Provision for Doubtful Accounts

      Provision for doubtful accounts expense was $963 for the six months ended
December 31,2003, reflecting an increase in the provision to compensate for
accounts that were becoming overdue, as determined by the management review
during the quarter ended December 31, 2003.

Other (Income) Expense, Net

      Other (income) expense, consisting primarily of foreign currency gains and
losses, and other miscellaneous items, amounted to a net income of $659 in the
six months ended December 31, 2003. In the six months ended December 31, 2003,
Thomas Equipment Limited, had net revaluation gains on its foreign currency
forward exchange contracts entered into to manage some of the company's foreign
exchange risk on its U.S. dollar sales due to the weakening of the U.S. dollar
against the Canadian dollar over the period.


                                       38
<PAGE>

Net Financial (Income) Expense

      Net financial (income) expense, amounted to an expense of $33 for the six
months ended December 31, 2003. During 2003, most of Thomas Equipment Limited's
financial support from the McCain group was in the form of preferred shares
resulting in interest charges from affiliates within the McCain group offset by
other net interest income which primarily came from receivables.

Provision for Income Taxes

      During the six months ended December 31, 2003, Thomas Equipment Limited
experienced operating and tax losses. Thomas Equipment Limited had historically
experienced operating losses, and as Thomas Equipment Limited's management were
uncertain as to whether Thomas Equipment Limited would be able to utilize these
tax losses before they expire, they provided a reserve for the income tax
benefits associated with Thomas Equipment Limited's net future tax assets which
primarily relate to its cumulative net operating losses.

Net Loss

      As a result of the above, Thomas Equipment Limited reported a net loss of
$2,614 for the six months ended December 31, 2003.

Comprehensive Loss

      Currency translation adjustments amounted to a loss of $900 for the six
months ended December 31, 2003 related to the translation of accounts to U.S.
dollars for reporting purposes.


                                       39
<PAGE>

Critical Accounting Policies and Estimates

      The preparation of financial statements in conformity with United States
generally accepted accounting principles requires the management of Thomas
(Thomas Equipment and Pneutech) to make estimates and assumptions that affect
the reported amount of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates. Our management routinely makes judgments and
estimates about the effects of matters that are inherently uncertain.

Our critical accounting policies are those where we have made the most
difficult, subjective or complex judgments in making estimates, and/or where
these estimates can significantly impact our financial results under different
assumptions and conditions. Our critical accounting policies are:

      o     Revenue Recognition

      o     Allowance for Doubtful Accounts

      o     Warranty Obligations

      o     Inventory Obsolescence

Revenue recognition

      In accordance with Staff Accounting Bulletin 104 - Revenue Recognition in
Financial Statements ("SAB 104"), revenue is generally recognized and earned
when all of the following criteria are satisfied a) persuasive evidence of sales
arrangements exist; b) delivery has occurred; c) the sales price is fixed or
determinable, and d) collectibility is reasonably assured. It is the fourth
criteria that requires us to make significant estimates. In those cases where
all four criteria are not met, we defer recognition of revenue until the period
these criteria are satisfied. In some cases where collectibility is an issue, we
defer revenue recognition until the cash is actually received.

Allowance for doubtful accounts

      The allowance for doubtful accounts is evaluated on a regular basis and
adjusted based upon management's best estimate of probable losses inherent in
receivables, based on historical experience. For the current period we used the
historical loss experience of the predecessor company. Receivables are
determined to be past due if they have not been paid by the payment due dates.
Debts are written off against the allowance when deemed to be uncollectible.
Subsequent recoveries, if any, are credited to the allowance when received.

Product warranties

      At the time a sale to a dealer is recognized, the company records the
estimated future warranty costs. These costs are estimated based on historical
warranty claims. For the current period we used the historical warranty
experience of the predecessor company. Warranty provisions are included as a
component of cost of sales.

Inventory obsolescence

      We evaluate our inventory for excess and obsolescence on a quarterly
basis. In preparing our evaluation, we look at the expected demand for our
products for the next six to twelve months in order to determine whether or not
such raw materials, WIP and finished goods require a change in the inventory
reserve in order to record the inventory at net realizable value. After
discussions with the senior management team, a reserve is established so that
inventory is appropriately stated at the lower of cost or net realizable value.


                                       40
<PAGE>

Recent Accounting Pronouncements

      The following recent accounting pronouncements primarily relate to Thomas
Equipment from October 1, 2004 forward (the date of inception and the
acquisition of Thomas Equipment Limited's business). However certain
pronouncements were adopted in Thomas Equipment Limited's (our predecessor's)
financial statements and the effects of adoption on their financial statements
have also been included below.

FIN 46 'Consolidation of Variable Interest Entities' (VIE's)

      In January 2003, the FASB issued FASB Interpretation No. 46 (revised in
December 2003 as FIN 46R), which addresses how a business enterprise should
evaluate whether it has a controlling financial interest in an entity through
means other than voting rights and accordingly should consolidate the entity. We
are required to apply FIN 46R to all variable interests in VIE's commencing in
fiscal 2004. For variable interests in VIE's created before January 1, 2004, the
assets, liabilities and non-controlling interests of the VIE initially are
measured at their carrying amounts with any difference between the net amount
added to the balance sheet and any previously recognized interest being
recognized as the cumulative effect of an accounting change. If determining the
carrying amounts is not practicable, fair value at the date FIN 46R first
applies may be used to measure the assets, liabilities and non-controlling
interest of the VIE. The application of FIN 46R to variable interests in VIE's
had no effect on our financial statements as neither Thomas Equipment Limited or
Thomas Equipment have variable interests in VIE's.

SFAS 150 'Accounting for Certain Financial Instruments with Characteristics of
both Liabilities and Equity'

      FASB Statement No. 150 was issued in May 2003 and establishes standards
for the classification and measurement of certain financial instruments with
characteristics of both liabilities and equity and includes required disclosures
for financial instruments within its scope. This Statement is effective for
instruments entered into or modified after May 31, 2003 and is otherwise
effective as of July 1, 2003, except for mandatorily redeemable financial
instruments of non-public companies. For such mandatorily redeemable financial
instruments, the Statement was effective for Thomas Equipment Limited as of
January 1, 2004. The application of Statement 150 resulted in the
reclassification of the Class E preferred shares in Thomas Equipment Limited
from the temporary equity section to the liabilities section of the Consolidated
Balance Sheet for the period July 1, 2003 to the date of their redemption (June
23, 2004) and dividends paid on these shares in 2004 were treated as interest as
opposed to a charge to the deficit.

SFAS 143 'Accounting for Asset Retirement Obligations'

      In June 2001, FASB Statement No. 143 was issued which requires the Company
to record the fair value of an asset retirement obligation as a liability in the
period in which it incurs a legal obligation associated with the retirement of
tangible long-lived assets that result from the acquisition, construction,
development and/or normal use of the assets. The Company also would record a
corresponding asset that is depreciated over the life of the asset. Subsequent
to the initial measurement of the asset retirement obligation, the obligation
would be adjusted at the end of each period to reflect the passage of time and
changes in the estimated future cash flows underlying the obligation. The
Company was required to adopt Statement 143 on July 1, 2003. The adoption of
Statement 143 had no effect on Thomas Equipment Limited's financial statements.

FIN 45 'Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness to Others, an interpretation of
FASB Statements No. 5, 57 and 107 and a rescission of FASB Interpretation No.
34'

      In November 2002, FASB Interpretation No. 45 was issued which enhances the
disclosures to be made by a guarantor in its interim and annual financial
statements about its obligations under guarantees issued. The Interpretation
also clarifies that a guarantor is required to recognize, at inception of a
guarantee, a liability for the fair value of the obligation undertaken. The
initial recognition and measurement provisions of the Interpretation were
applicable to guarantees issued or modified after December 31, 2002 and the
disclosure requirements were effective for financial statements of interim or
annual periods ending after December 15, 2002. Thomas Equipment Limited entered
into a sales contract with a dealer / distributor which is being accounted for
pursuant to Interpretation No. 45.


                                       41
<PAGE>

SFAS 132 'Employers' Disclosures about Pensions and Other Postretirement
Benefits'

      In December 2003, FASB Statement No. 132 (revised) was issued which
prescribes the required employers' disclosures about pension plans and other
postretirement benefit plans; but it does not change the measurement or
recognition of those plans. The Statement retains and revises the disclosure
requirements contained in the original Statement 132. It also requires
additional disclosures about the assets, obligations, cash flows, and net
periodic benefit cost of defined benefit pension plans and other postretirement
benefit plans. The Statement generally is effective for fiscal years ending
after December 15, 2003. Thomas Equipment Limited incorporated the requirements
of Statement 132 (revised) in their financial statements for fiscal year 2004.
We did not continue the use of a defined benefit plan after the acquisition of
Thomas Equipment Limited's business, and as such the adoption of this Statement
did not have an effect on our financial statements.

SFAS 146 'Accounting for Costs Associated with Exit or Disposal Activities'

      In June 2002, FASB Statement No. 146 was issued which addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies EITF Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity". The provisions of
Statement 146 were effective for exit or disposal activities initiated after
December 31, 2002, with early application encouraged. Thomas Equipment Limited
undertook a restructuring of its operations during fiscal year 2004 which was
accounted for pursuant to Statement 146, as discussed above.

      SFAS 123(R) 'Share-Based Payments'

      In December 2004, the Financial Accounting Standards Board issued
Statement Number 123 ("FAS 123 (R)"), Share-Based Payments. FAS 123 (R) requires
all entities to recognize compensation expense in an amount equal to the fair
value of shared-based payments such as stock options granted to employees. The
Company will be required to apply FAS 123 (R) on a modified prospective method.
Under this method, the Company is required to record compensation expense (as
previous awards continue to vest) for the unvested portion of previously granted
awards that remain outstanding at the date of adoption. In addition, the Company
may elect to adopt FAS 123 (R) by restating previously issued financial
statements, basing the amounts on the expense previously calculated and reported
in the pro forma disclosures that had been required by FAS 123. FAS 123 (R) is
effective for the first reporting period beginning after June 15, 2005. The
Company does not believe that the adoption of FAS 123 (R) will have a material
impact on the financial statements as there are only 30,000 options, issued to
directors, to purchase 30,000 shares of common stock outstanding at December 31,
2004.

SFAS 153 'Exchanges of Nonmonetary Assets an Amendment of APB Opinion No. 29'

      In December 2004, FASB Statement No. 153 was issued amending APB Opinion
No. 29 to eliminate the exception allowing nonmonetary exchanges of similar
productive assets to be measured based on the carrying value of the assets
exchanged as opposed being measured at their fair values. This exception was
replaced with a general exception for exchanges of nonmonetary assets that do
not have commercial substance. A nonmonetary exchange has commercial substance
if the future cash flows of the entity are expected to change significantly as a
result of the exchange. The provisions of this statement are effective for
nonmonetary asset exchanges occurring in fiscal periods beginning after June 15,
2005. The adoption of this statement is not expected to have a material impact
on our financial statements.


                                       42
<PAGE>

Liquidity and Capital Resources

QUARTER ENDED DECEMBER 31, 2004 FOR THOMAS EQUIPMENT, INC.

      Prior to our acquisition of the operations and certain assets of Thomas
Equipment Limited, they were not generating sufficient cash flows to cover their
operating costs and to fund investments in working capital and additions to
property, plant and equipment. Thomas Equipment Limited also had a working
capital deficit and shareholder's deficiency at the date we acquired their
business and certain assets.

      As discussed below, we have also experienced negative cash flows in our
first quarter of operations which is likely to continue until such time as our
receivables become due and their collection will begin to offset the cash used
in paying our operating expenses. In connection with our founding and the
acquisition of Thomas Equipment Limited's business and certain of its assets we
received approximately $2,149 in proceeds from the sale of our common stock and
secured $26,489 in convertible borrowings and the sale of redeemable preferred
stock during the three months ended December 31, 2004. At December 31, 2004 we
had cash on hand of $741 and availability under our convertible credit
facilities of approximately $1,013. In January 2005, we negotiated a $4,000
increase in our credit facility.

      At March 15, 2005 we had approximately $1,000 of cash on hand and an
availability of approximately $1,000 under our credit facilities at Thomas
Equipment and an availability of approximately $1,000 under our credit
facilities at Pneutech. Coupled with combined (i.e.: Pneutech and Thomas
Equipment) receivables of approximately $24,000 at March 15, 2005 we believe we
have sufficient resources to fund our operations for at least the next twelve
months. As such we do not believe, in the short-term, we will have the same
difficulties and concerns about our ability to continue as a going concern as
our predecessor. However, our agreements with our significant creditor, and
minority shareholder, Laurus, provide significant penalties and default
provisions if our registration statement is not declared effective by June 22,
2005. See below under the heading "Laurus Master Fund, Ltd." for a discussion of
the current status of our Laurus loans.

      During the three months from inception on October 1, 2004 through December
31, 2004, we had a net loss of $8,155 which included non-cash items totaling
$7,733, consisting of stock based compensation and depreciation and amortization
of debt discount related to the issuance of warrants. However, as we only
acquired inventory and property, plant and equipment along with Thomas Equipment
Limited's business and the fact that we only took over operations effective
October 1, 2004, our sales terms to customers resulted in collecting only $3,813
in cash from sales while our receivables increased to $10,820. Offsetting a
portion of the low level of cash received were an increase in trade payables of
$7,188. As a result net cash used in operating activities during the quarter was
$3,605.

      Changes in demand for our products and currency exchange rates will affect
the amount of cash we realize on sales and the costs of our operations thereby
affecting our cash provided by or (used in) operating activities. Similarly, as
substantially all of our debt has variable interest rates, a change in interest
rates will affect our cash flows from operations.

      Net cash used in investing activities was $18,119 which was used in the
acquisition of assets from Thomas Equipment Limited.

      Net cash provided by financing activities was $22,455 consisting of
$15,970 of debt used to acquire the assets of Thomas Equipment Limited, $2,149
in proceeds from the sale of our common stock principally to founders and $5,512
in additional borrowing under our credit facilities. At December 31, 2004 our
debt and redeemable preferred stock have terms of 18 to 36 months with interest
rates ranging from 4% to 8.2%. Except for the redeemable preferred stock
($8,303), which is due on June 26, 2006, $8,171 and $14,945 of debt is
convertible into shares of our common stock at $2.25 and $1.50 per share,
respectively. Upon conversion, the lender may not own more than 9.99% of our
common shares outstanding.


                                       43
<PAGE>

      As our debt is substantially payable in U.S. dollars and our functional
currency is in Canadian dollars, changes in exchange rates between the two
currencies could have a positive or negative impact on the amount and our
ability to repay such debt. In addition, the convertible debts have prepayment
penalties of 5% for early payment or payments in cash (as the lender wishes to
be paid through conversion to common shares).

      In connection with the acquisition of Thomas Equipment Limited's assets we
entered into a two two-year capital leases of $5,254 for the purchase of land
and buildings from Thomas Equipment Limited. The terms of the capital leases
require minimum monthly payments of $498 plus taxes, maintenance and certain
other expenses. We have the right at any time prior to the expiration of the
leases to purchase the properties for $4,776 (as translated to U.S. dollars on
October 1, 2004). Similarly, Thomas Equipment Limited has the right to require
us to purchase the properties subject to certain provisions such as a favorable
environmental study.

Subsequent financing activities

Roynat Merchant Capital Inc.

      Concurrently with the acquisition of Pneutech, we entered into financing
agreements with Roynat Merchant Capital Inc. ("Roynat US"). RoyNat Capital Inc.
("Roynat Capital"), an affiliate of Roynat US, had provided financing to
Pneutech which was terminated upon the closing. In connection therewith, on the
closing the following transactions occurred:

      o     Roynat Capital was paid $2,259 in consideration for the cancellation
            of its Pneutech preferred shares and payment of accrued dividends
            thereon;

      o     Roynat Capital was paid $1,008 in consideration for the cancellation
            of warrants previously issued by Pneutech to Roynat Capital;

      o     Roynat Capital was paid $3,227 in full satisfaction of all amounts
            due pursuant to a convertible debenture issued by Pneutech to Roynat
            Capital;

      o     we sold a subordinated debenture to Roynat US for $5,343; and

      o     we issued warrants to Roynat US to purchase 1,000,000 shares of
            common stock at an exercise price of $3.00 per share.

Laurus Master Fund, Ltd.

      On November 9, 2004, we entered into agreements with Laurus Master Fund,
Ltd, a Cayman Islands corporation, pursuant to which we sold convertible debt,
an option and a warrant to purchase our common stock to Laurus in a private
offering pursuant to exemption from registration under Section 4(2) of the
Securities Act of 1933, as amended. Concurrently with the closing of the
Pneutech acquisition, we and Laurus amended certain terms of the original
agreements, including the following:

      o     we issued an additional secured convertible term note in the
            principal amount of $1,900 to Laurus;

      o     we issued Laurus a common stock purchase warrant exercisable to
            purchase 150,000 shares of common stock for a period of seven years
            at a price of $2.25 per share; and

      o     the payments on the previously issued secured convertible term note
            in the principal amount of $6,000 shall not commence until July 1,
            2005, at which time the initial monthly payment in the amount of
            $207 shall be due and shall be due each month thereafter until the
            note is paid in full.


                                       44
<PAGE>

      As of October 3, 2005, we are not currently in compliance with our
obligations to register the shares of common stock issuable to Laurus. However,
Laurus has waived, through October 15, 2005, the imposition of all penalties
under the Registration Rights Agreement and its right to accelerate payment of
our obligations. In consideration for this waiver, we paid Laurus a fee of $898,
which was less than the damages we would have incurred while not in compliance
through October 15, 2005. Because non-compliance did not occur until July 22,
2005, (subsequent to year end), this amount will be recorded in our first
quarter of fiscal 2006 (quarter ended September 30, 2005). In addition, as this
amount was included in an over-advance from Laurus under our revolving credit
facility with them, the fee will not have a material impact on our Liquidity.
Upon the expiration of the waiver, assuming our Registration Statement is not
then effective, we will incur penalties in the amount of 2% per month of the
original principal amount due under the notes of $22,000. If our registration
statement never becomes effective and we are required to pay penalties to Laurus
of 2% per month from October 15, 2005 until the option and warrants sold to
Laurus expire at the end of their seven year life, the penalties would aggregate
approximately $32,000. In addition, our failure to comply with the Laurus
registration obligations after October 15, 2005 will constitute an event of
default which will entitle Laurus, in its sole discretion, to demand payment in
full of all obligations due to them, together with a 15% premium on the
principal amount of notes then outstanding. We and Laurus have had discussions
concerning the status of the obligations and Laurus has not given any indication
that they intend to demand payment of the obligations due to them. However, any
such demand would be detrimental to our financial condition as we do not have
sufficient cash to repay the Laurus obligations. Further, we granted a security
interest to Laurus in substantially all of our assets. Any attempt by Laurus to
foreclose on our assets could cause us to curtail our current operations.

Off-Balance Sheet Arrangements

      We currently have no off balance sheet arrangements.

Qualitative and Quantitative Disclosures about Market Risk

      We are exposed to certain market risks which exist as part of our ongoing
business operations. We currently do not engage in derivative and hedging
transactions to mitigate the affects of the risks below. In the future, we may
enter into foreign currency forward contracts to manage foreign currency risk.
Because the operating structure of our business is different from that of our
predecessor, Thomas Equipment Limited, we have described only those risks as
they apply to our current operating environment. Thomas Equipment Limited did
engage in certain derivative and hedging transactions, as well as borrowing
activities through its parent - all of which affected the degree to which market
risks affected Thomas Equipment Limited

Interest Rates

      Because our debt is primarily tied to borrowing rates in the United
States, changes in U.S. interest rates would affect the interest paid on our
borrowings and/or earned on our cash and cash equivalents. Based on our overall
interest rate exposure at December 31, 2004, a near-term change in interest
rates, based on historical small movements, would not materially affect our
operations or the fair value of interest rate sensitive instruments. Our debt
instruments have variable interest rates and terms and, therefore, a significant
change in interest rates could have a material adverse effect on our financial
position or results of operations if we are unable to change the prices we
charge to customers for our products.

      We considered the historical volatility of short term interest rates and
determined that it was reasonably possible that an adverse change of 100 basis
points could be experienced in the near term. Based on our borrowings at
December 31, 2004, a hypothetical 1.00% (100 basis-point) increase in interest
rates would result in additional expenses of approximately $45 for the quarter
or an annual increase in expenses of approximately $180.


                                       45
<PAGE>

Foreign Currency Fluctuations

      Our exposure to foreign currency translation gains and losses arises from
the translation of our statements from our functional currency, the Canadian
dollar, into U.S. dollars for reporting purposes. To date, translation gains and
losses have not been material.

      We currently do not engage in hedging transactions to manage these risks.
However, we may do so in the future.

ITEM 3. Controls And Procedures.

Disclosure Controls and Procedures

      We carried out an evaluation of the effectiveness of the design and
operation of our disclosure controls and procedures pursuant to Rule 13a-15 of
the Securities Exchange Act of 1934 (the "Exchange Act") under the supervision
and with the participation of our chief executive officer, chief financial
officer and other members of our management team. Our disclosure controls and
procedures are designed to provide reasonable assurance of achieving their
objectives. Although we hired a considerable number of the staff from the
predecessor business, we have new management and are using financial accounting
consultants. Any system of controls can provide only reasonable, and not
absolute, assurance that the objectives of the control system are met. In
addition, the design of any control system is based in part upon certain
assumptions about the likelihood of future events. Because of these and other
inherent limitations of control systems, there can be no assurance that any
design will succeed in achieving its stated goals under all potential future
conditions. Based upon the evaluation of the effectiveness of the design and
operation of our disclosure controls and procedures, the chief executive officer
and chief financial officer concluded that our disclosure controls and
procedures were effective as of December 31, 2004 in timely alerting them to
material information required to be included in our Exchange Act filings.

Management's Report on Internal Control Over Financial Reporting

      We will be required by the Sarbanes-Oxley Act to include an assessment of
our internal control over financial reporting and attestation from an
independent registered public accounting firm in our Annual Report on Form 10-K
beginning with our filing for our fiscal year ending as early as June 30, 2006
and as late as June 30, 2008, depending on the market value of our common stock
held by non-affiliates.

Changes in Internal Control Over Financial Reporting

      There have been no changes in our internal controls over financial
reporting during the quarter ended December 31, 2004, which have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.


                                       46
<PAGE>

                           PART II - OTHER INFORMATION

ITEM 1. Legal Proceedings.

      In January 2005, TE2004 and Clifford Rhee were served in a legal action by
Neil D'Souza, the former President and CEO of Thomas Equipment Limited. Mr.
D'Souza claims he was offered employment by TE2004 in connection with the
acquisition of the assets of Thomas Equipment Limited, which offer of employment
was not honored. Mr. D'Souza claims damages of approximately $409,000, plus
additional unspecified amounts. The Company intends to defend to vigorously
defend this action.

ITEM 2. Unregistered Sales Of Equity Securities And Use Of Proceeds.

      On November 9, 2004, the Company entered into agreements with Laurus
Master Funds, Ltd, a Cayman Islands corporation ("Laurus"), pursuant to which
the Company sold convertible debt, an option and a warrant to purchase common
stock of the Company to Laurus in a private offering pursuant to exemption from
registration under Section 4(2) of the Securities Act of 1933, as amended. The
securities being sold to Laurus include the following:

      o     A secured convertible minimum borrowing note with a principal amount
            of $8,000,000

      o     A secured revolving note with a principal amount not to exceed
            $16,000,000 which was subsequently amended to $20,000,000;

      o     A secured convertible term note with a principal amount of
            $6,000,000;

      o     A common stock purchase warrant to purchase 2,200,000 shares of
            common stock of the Company, at a purchase price of $2.25 per share,
            exercisable for a period of seven years;

      o     An option to purchase 4,020,000 shares of common stock of the
            Company, at a purchase price equal to the par value of such shares,
            exercisable for a period of seven years; and

      o     1,980,000 shares of our common stock for a total purchase price of
            $19,800.

      The Company is permitted to borrow an amount based upon its eligible
accounts receivable, inventory, and fixed assets, as defined in the agreements
with Laurus. The Company must pay certain fees for any unused portion of the
credit facility or in the event the facility is terminated prior to expiration.
The Company's obligations under the notes are secured by all of the assets of
the Company, including but not limited to inventory, accounts receivable and a
pledge of the stock of TE2004 and Ventures. The notes mature on November 9,
2007. Annual interest on the Notes is equal to the "prime rate" published in The
Wall Street Journal from time to time, plus 3.0%, provided, that, such annual
rate of interest may not be less than 7.5%, subject to certain downward
adjustments resulting from certain increases in the market price of the
Company's common stock. Interest on the Notes is payable monthly in arrears on
the first day of each month, commencing on December 1, 2004.

      The principal amount of the secured convertible term note is repayable at
the rate of $207,000 per month together with accrued but unpaid interest,
commencing on July 1, 2005. Such amounts may be paid, at the holder's option (i)
in cash with a 3% premium (though no premium is charged if the payments are
added to the convertible credit facility); or (ii) in shares of common stock,
assuming the shares of common stock are registered under the Securities Act of
1933. If paid in shares of common stock the number of shares to be issued shall
equal the total amount due, divided by $1.50. If the average closing price of
the common stock for five consecutive trading days prior to an amortization date
is equal to or greater than $1.64, the Company may require the holder to convert
into common stock an amount of principal, accrued interest and fees due under
the term note equal to a maximum of 25% of the aggregate dollar trading volume
of the common stock for the 22 consecutive trading days prior to a notice of
conversion. The term note may be redeemed by the Company in cash by paying the
holder 105% of the principal amount, plus accrued interest. The holder of the
term note may require the Company to convert all or a portion of the term note,
together with interest and fees thereon at any time. The number of shares to be
issued shall equal the total amount to be converted, divided by $1.50.


                                       47
<PAGE>

      The principal amount of the secured convertible minimum borrowing note,
together with accrued interest thereon is payable on November 9, 2007. The
secured convertible minimum borrowing note may be redeemed by the Company in
cash by paying the holder 105% of the principal amount, plus accrued interest.
The holder of the term note may require the Company to convert all or a portion
of the term note, together with interest and fees thereon at any time. The
number of shares to be issued shall equal the total amount to be converted,
divided by $1.50

      Upon an issuance of shares of common stock below the fixed conversion
price, the fixed conversion price of the notes will be reduced accordingly. The
conversion price of the secured convertible notes may be adjusted in certain
circumstances such as if we pay a stock dividend, subdivide or combine
outstanding shares of common stock into a greater or lesser number of shares, or
take such other actions as would otherwise result in dilution.

      115% of the full principal amount of the convertible notes are due upon
default under the terms of convertible notes. Laurus has contractually agreed to
restrict its ability to convert the convertible notes such that the difference
between the number of shares of common stock beneficially owned by the holder or
issuable upon exercise of the warrant and the option held by such holder will
not exceed 9.99% of the outstanding shares of common stock of the Company.

ITEM 3. Defaults Upon Senior Securities.

      None.

ITEM 4. Submission Of Matters To A Vote Of Security Holders.

      There were no matters submitted to a vote of security holders during the
      period covered by this report.

ITEM 5. Other Information.

      None.

ITEM 6. Exhibits.

Exhibit Number                              Description
--------------------------------------------------------------------------------
4.1                 Security and Purchase Agreement, dated as of November 9,
                    2004, by and among Laurus Master Fund, Ltd., Thomas
                    Equipment, Inc. and Thomas Ventures, Inc.*

4.2                 Security Agreement, dated as of November 9, 2004, between
                    Laurus Master Fund, Ltd. and Thomas Equipment 2004, Inc.*

4.3                 General Security Agreement, dated as of November 9, 2004,
                    by Thomas Equipment 2004, Inc., in favor of Laurus Master
                    Fund, Ltd.*

4.4                 Guarantee, dated as of November 9, 2004, by Thomas
                    Equipment 2004, Inc., in favor of Laurus Master Fund, Ltd.*

4.5                 Intellectual Property Security Agreement, dated as of
                    November 9, 2004, by and among Laurus Master Fund, Ltd.,
                    Thomas Equipment, Inc. and Thomas Ventures, Inc.*

4.6                 Secured Revolving Note issued to Laurus Master Fund, Ltd.,
                    dated November 9, 2004.*

4.7                 Secured Convertible Minimum Borrowing Note issued to
                    Laurus Master Fund, Ltd., dated November 9, 2004.*

4.8                 Secured Convertible Term Note issued to Laurus Master
                    Fund, Ltd., dated November 9, 2004.*


                                       48
<PAGE>

4.9                 Common Stock Purchase Warrant issued to Laurus Master
                    Fund, Ltd., dated November 9, 2004.*

4.10                Option issued to Laurus Master Fund, Ltd., dated November
                    9, 2004.*

4.11                Registration Rights Agreement, dated as of November 9,
                    2004, by and between Laurus Master Fund, Ltd. and Thomas
                    Equipment, Inc.*

4.12                Stock Pledge Agreement, dated as of November 9, 2004, by
                    and between Laurus Master Fund, Ltd. and Thomas Equipment,
                    Inc.*

4.13                Stock Pledge Agreement, dated as of November 9, 2004, by
                    and between Laurus Master Fund, Ltd. and Thomas Equipment
                    2004, Inc.*

4.14                Shareholders' Agreement, dated as of October 1, 2004, by
                    and among Thomas Equipment, Inc., Thomas Equipment 2004,
                    Inc. and McCain Food Limited*

10.1                Plan and Agreement of Reorganization, by and among Thomas
                    Equipment, Inc., Thomas Ventures, Inc. and its
                    shareholders, and Thomas Equipment 2004, Inc. and its
                    shareholders, dated as of October 11, 2004 (previously
                    filed as exhibit to Form 8-K, filed on October 12, 2004
                    and incorporated herein by reference).*

10.2                Agreement of Purchase and Sale of Assets, dated as of
                    October 1, 2004, by and among Thomas Equipment 2004, Inc.
                    and Thomas Equipment Ltd.*

10.3                Lease between Thomas Equipment Ltd., Thomas Equipment,
                    Inc. and Thomas Equipment 2004, for Presque Isle, Maine
                    property, dated as of October 1, 2004*

10.4                Lease between Thomas Equipment Ltd., Thomas Equipment,
                    Inc. and Thomas Equipment 2004, for New Brunswick
                    properties, dated as of October 1, 2004*

10.5                Employment Agreement between Thomas Equipment, Inc.,
                    Thomas Equipment 2004, Inc. and Clifford Rhee, effective
                    as of October 1, 2004.*

16.1                Letter from Kingery & Crouse, P.A., dated December 9,
                    2004.*

31.1                Certification by Chief Executive Officer pursuant to Rule
                    13a-14(a) or 15d-14(a), as adopted pursuant to Section 302
                    of the Sarbanes-Oxley Act of 2002

31.2                Certification by Chief Financial Officer pursuant to Rule
                    13a-14(a) or 15d-14(a), as adopted pursuant to Section 302
                    of the Sarbanes-Oxley Act of 2002

32.1                Certification by Chief Executive Officer pursuant to 18
                    U.S.C. Section 1350, as adopted pursuant to Section 906 of
                    the Sarbanes-Oxley Act of 2002

32.2                Certification by Chief Financial Officer pursuant to 18
                    U.S.C. Section 1350, as adopted pursuant to Section 906 of
                    the Sarbanes-Oxley Act of 2002

99.1                Press Release of Thomas Equipment, Inc., dated November 9,
                    2004.*

*  All such exhibits were filed with Form 8-K filed on November 15, 2004.

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.

                                  THOMAS EQUIPMENT, INC.


Dated:   October 7, 2005          By: /s/ Clifford M. Rhee
                                  --------------------------------------------
                                  Clifford M. Rhee,
                                  President (Principal Executive Officer)


Dated:   October 7, 2005          By: /s/ Luigi Lo Basso
                                  --------------------------------------------
                                  Luigi Lo Basso,
                                  Chief Financial Officer
                                  (Principal Financial and Accounting Officer)


                                       49