### ** **

### **UNITED STATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington, DC  20549**

 

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**FORM 10-Q**

 

**QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15(d) OF**

**THESECURITIES EXCHANGE ACT OF 1934**

 

**For the quarterly period ended April 30, 2008**

**Commission File No. 000-1409171**

 

**TITAN MACHINERY INC.**

(Exact name of registrant as specified in itscharter)

 

| **Delaware**                                                      | **No. 45-0357838**              |
|-------------------------------------------------------------------|--------------------------------------|
| (State  or Other Jurisdiction of

Incorporation  or Organization) | (IRS  Employer

Identification  No.) |

 

**4876Rocking Horse Circle**

**Fargo, ND58104-6049**

(Address ofPrincipal Executive Offices)

 

Registrant’stelephone number **(701) 356-0130**

 

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Indicate by check mark whether the registrant (1) has filed allreports required to be filed by Section 13 or 15(d) of the ExchangeAct of 1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days.  YES  x    NO  o

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company. See the definitions of“large accelerated filer,” “accelerated filer,” and “smaller reporting company”in Rule 12b-2 of the Exchange Act. (Check one):

 

| Large accelerated filer  o                     |   | Accelerated filer o          |
|------------------------------------------------|--------|-----------------------------------|
|                                           |   |                              |
| Non-accelerated filer o                        |   | Smaller reporting  company x |
| (Do not check if a  smaller reporting company) |   |                              |

 

Indicate by check mark whether the registrant is a shell company (asdefined in Rule 12b-2 of the Exchange Act).  YES o     NO  x

 

The number of shares outstanding of the registrant’s common stock as ofJune 1, 2008 was: Common Stock, $0.00001 par value, 17,632,184 shares.

 

 

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**TITAN MACHINERY INC.**

**QUARTERLY REPORT ON FORM 10-Q**

 

**Table of Contents**

 
| **PART I.**  |               | **FINANCIAL INFORMATION**                                                                       |
|-------------------|--------------------|-------------------------------------------------------------------------------------------------|
|              |               |                                                                                            |
|              | ITEM 1.            | FINANCIAL STATEMENTS                                                                            |
|              |               |                                                                                            |
|              |               | Consolidated  Balance Sheets as of April 30, 2008 and January 31, 2008                |
|              |               |                                                                                            |
|              |               | Consolidated  Statements of Operations for the three months ended April 30, 2008 and  2007 |
|              |               |                                                                                            |
|              |               | Consolidated  Statements of Cash Flows for the three months ended April 30, 2008 and  2007 |
|              |               |                                                                                            |
|              |               | Notes  to Consolidated Financial Statements                                                     |
|              |               |                                                                                            |
|              | ITEM 2.            | MANAGEMENT’S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS     |
|              |               |                                                                                            |
|              | ITEM 3.            | QUANTITATIVE  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                     |
|              |               |                                                                                            |
|              | ITEM 4.            | CONTROLS AND PROCEDURES                                                                         |
|              |               |                                                                                            |
| **PART II.** |               | **OTHER INFORMATION**                                                                           |
|              |               |                                                                                            |
|              | ITEM 1.            | LEGAL PROCEEDINGS                                                                               |
|              |               |                                                                                            |
|              | ITEM 1A.           | RISK FACTORS                                                                                    |
|              |               |                                                                                            |
|              | ITEM 2.            | UNREGISTERED  SALES OF EQUITY SECURITIES AND USE OF PROCEEDS                                    |
|              |               |                                                                                            |
|              | ITEM 3.            | DEFAULTS  UPON SENIOR SECURITIES                                                                |
|              |               |                                                                                            |
|              | ITEM 4.            | SUBMISSION  OF MATTERS TO A VOTE OF SECURITY HOLDERS                                            |
|              |               |                                                                                            |
|              | ITEM 5.            | OTHER INFORMATION                                                                               |
|              |               |                                                                                            |
|              | ITEM 6.            | EXHIBITS                                                                                        |
|              |               |
|              | Signatures         |
|              |               |
|              | Exhibit Index |
|                   |                    |                                                                                                 |  |  |

 

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**PART I. – FINANCIAL INFORMATION**

 

**ITEM 1.     FINANCIALSTATEMENTS**

 

**TITAN MACHINERY INC.**

**CONSOLIDATED BALANCE SHEETS**

** **
| ** **                                                                                                                                                                       | ** ** | **April 30,** | ** **  | **January 31,** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------|-------------|----------------------|------------|
| ** **                                                                                                                                                                       | ** ** | **2008**           | ** **  | **2008**             | ** ** |
| ** **                                                                                                                                                                       | ** ** | **(Unaudited)**    | ** **  | ** **           | ** ** |
| **ASSETS**                                                                                                                                                                       |       |               |        |                 |       |
| ** **                                                                                                                                                                       |       |               |        |                 |       |
| CURRENT ASSETS                                                                                                                                                                   |       |               |        |                 |       |
| Cash and cash  equivalents                                                                                                                                                       |       | $                  | 41,968,933  |                 | $          | 42,802,505 |   |
| Receivables, net                                                                                                                                                                 |       | 28,170,302         |        | 22,061,275           |       |
| Inventories                                                                                                                                                                      |       | 140,655,034        |        | 145,766,866          |       |
| Prepaid expenses                                                                                                                                                                 |       | 341,271            |        | 215,312              |       |
| Income taxes  receivable                                                                                                                                                         |       | —             |        | 1,074,216            |       |
| Deferred income  taxes                                                                                                                                                           |       | 1,068,000          |        | 1,027,000            |       |
|                                                                                                                                                                             |       |               |        |                 |       |
| Total current  assets                                                                                                                                                            |       | 212,203,540        |        | 212,947,174          |       |
|                                                                                                                                                                             |       |               |        |                 |       |
| INTANGIBLES AND  OTHER ASSETS                                                                                                                                                    |       |               |        |                 |       |
| Parts inventory  in excess of amounts expected to be sold currently                                                                                                              |       | 1,780,000          |        | 1,480,000            |       |
| Goodwill                                                                                                                                                                         |       | 8,478,554          |        | 8,271,133            |       |
| Intangible  assets, net of accumulated amortization                                                                                                                              |       | 317,570            |        | 337,242              |       |
| Other                                                                                                                                                                            |       | 330,949            |        | 311,581              |       |
|                                                                                                                                                                             |       | 10,907,073         |        | 10,399,956           |       |
|                                                                                                                                                                             |       |               |        |                 |       |
| PROPERTY AND  EQUIPMENT, net of accumulated depreciation                                                                                                                         |       | 16,903,567         |        | 16,022,336           |       |
|                                                                                                                                                                             |       |               |        |                 |       |
|                                                                                                                                                                             |       | $                  | 240,014,180 |                 | $          | 239,369,466 |   |
|                                                                                                                                                                             |       |               |        |                 |       |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY**                                                                                                                                   | ** ** | ** **         | ** **  | ** **           | ** ** |
|                                                                                                                                                                             |       |               |        |                 |       |
| CURRENT  LIABILITIES                                                                                                                                                             |       |               |        |                 |       |
| Accounts payable                                                                                                                                                                 |       | $                  | 13,789,144  |                 | $          | 9,244,064 |   |
| Floorplan notes  payable                                                                                                                                                         |       | 96,773,485         |        | 105,847,648          |       |
| Current  maturities of long-term debt                                                                                                                                            |       | 3,465,961          |        | 5,653,840            |       |
| Customer  deposits                                                                                                                                                               |       | 25,735,043         |        | 19,309,533           |       |
| Accrued expenses                                                                                                                                                                 |       | 5,438,104          |        | 6,137,842            |       |
| Income taxes  payable                                                                                                                                                            |       | 1,240,533          |        | —               |       |
|                                                                                                                                                                             |       |               |        |                 |       |
| Total current  liabilities                                                                                                                                                       |       | 146,442,270        |        | 146,192,927          |       |
|                                                                                                                                                                             |       |               |        |                 |       |
| LONG-TERM  LIABILITIES                                                                                                                                                           |       |               |        |                 |       |
| Long-term debt,  less current maturities                                                                                                                                         |       | 10,519,986         |        | 13,082,795           |       |
| Deferred income  taxes                                                                                                                                                           |       | 1,897,000          |        | 1,865,000            |       |
| Other long term  liabilities                                                                                                                                                     |       | 1,513,943          |        | 811,689              |       |
|                                                                                                                                                                             |       | 13,930,929         |        | 15,759,484           |       |
|                                                                                                                                                                             |       |               |        |                 |       |
| SUBORDINATED  DEBENTURES                                                                                                                                                         |       | —             |        | 1,300,000            |       |
|                                                                                                                                                                             |       |               |        |                 |       |
| STOCKHOLDERS’  EQUITY                                                                                                                                                       |       |               |        |                 |       |
| Common stock,  par value $.00001 per share, authorized - 25,000,000 shares; issued and  outstanding - 13,449,880 at April 30, 2008 and 13,440,654 at  January 31, 2008 |       | 134                |        | 134                  |       |
| Additional  paid-in-capital                                                                                                                                                      |       | 58,316,496         |        | 58,179,695           |       |
| Retained  earnings                                                                                                                                                               |       | 21,324,351         |        | 17,937,226           |       |
|                                                                                                                                                                             |       | 79,640,981         |        | 76,117,055           |       |
|                                                                                                                                                                             |       |               |        |                 |       |
|                                                                                                                                                                             |       | $                  | 240,014,180 |                 | $          | 239,369,466 |   |

 

See Notes to ConsolidatedFinancial Statements

 

1

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**TITAN MACHINERY INC.**

**CONSOLIDATED STATEMENTS OFOPERATIONS (UNAUDITED)**

** **
| ** **                               | ** ** | **Three Months Ended  April 30,** | ** **  |
|------------------------------------------|------------|----------------------------------------|-------------|
| ** **                               | ** ** | **2008**                               | ** **  | **2007** | ** ** |
| ** **                               | ** ** | ** **                             | ** **  | **(Restated)** | ** ** |
| REVENUE                                  |       |                                   |        |   |   |
| Equipment                                |       | $                                      | 120,913,483 |   | $ | 61,102,629 |   |
| Parts                                    |       | 21,504,016                             |        | 12,324,957 |   |
| Service                                  |       | 8,944,228                              |        | 5,393,335 |   |
| Other, including  trucking and rental    |       | 1,220,185                              |        | 1,005,789 |   |
| TOTAL REVENUE                            |       | 152,581,912                            |        | 79,826,710 |   |
|                                     |       |                                   |        |   |   |
| COST OF REVENUE                          |       |                                   |        |   |   |
| Equipment                                |       | 107,917,916                            |        | 54,889,589 |   |
| Parts                                    |       | 15,793,709                             |        | 9,149,679 |   |
| Service                                  |       | 3,417,730                              |        | 2,217,923 |   |
| Other, including  trucking and rental    |       | 853,207                                |        | 750,750 |   |
| TOTAL COST OF  REVENUE                   |       | 127,982,562                            |        | 67,007,941 |   |
|                                     |       |                                   |        |   |   |
| GROSS PROFIT                             |       | 24,599,350                             |        | 12,818,769 |   |
|                                     |       |                                   |        |   |   |
| OPERATING  EXPENSES                      |       | 18,181,942                             |        | 10,046,741 |   |
|                                     |       |                                   |        |   |   |
| INCOME FROM  OPERATIONS                  |       | 6,417,408                              |        | 2,772,028 |   |
|                                     |       |                                   |        |   |   |
| OTHER INCOME  (EXPENSE)                  |       |                                   |        |   |   |
| Interest and  other income               |       | 310,374                                |        | 13,658 |   |
| Floorplan  interest expense              |       | (721,589                               | )           | (879,331 | ) |
| Subordinated  debt interest expense      |       | (20,917                                | )           | (409,118 | ) |
| Interest expense  other                  |       | (292,149                               | )           | (246,280 | ) |
|                                     |       |                                   |        |   |   |
| INCOME BEFORE INCOME  TAXES              |       | 5,693,127                              |        | 1,250,957 |   |
|                                     |       |                                   |        |   |   |
| PROVISION FOR  INCOME TAXES              |       | (2,306,000                             | )           | (478,663 | ) |
|                                     |       |                                   |        |   |   |
| NET INCOME                               |       | $                                      | 3,387,127   |   | $ | 772,294 |   |
| ** **                               | ** ** | ** **                             | ** **  | ** ** | ** ** |
| ADJUSTMENTS TO  INCOME:                  |       |                                   |        |   |   |
| Amortization of  syndication fees        |       | —                                 |        | (5,296 | ) |
| Unpaid  accumulated preferred dividends  |       | —                                 |        | (25,594 | ) |
| ** **                               | ** ** | ** **                             | ** **  | ** ** | ** ** |
| INCOME AVAILABLE  TO COMMON STOCKHOLDERS |       | $                                      | 3,387,127   |   | $ | 741,404 |   |
|                                     |       |                                   |        |   |   |
| EARNINGS PER  SHARE - BASIC              |       | $                                      | 0.25        |   | $ | 0.17 |   |
| EARNINGS PER  SHARE - DILUTED            |       | $                                      | 0.24        |   | $ | 0.12 |   |
|                                     |       |                                   |        |   |   |
| WEIGHTED AVERAGE  SHARES - BASIC         |       | 13,449,179                             |        | 4,344,753 |   |
| WEIGHTED AVERAGE  SHARES - DILUTED       |       | 13,854,738                             |        | 6,967,837 |   |

 

See Notes to Consolidated Financial Statements

 

2

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**TITAN MACHINERY INC.**

**CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)**

** **
| ** **                                                                                                            | ** ** | **Three Months Ended  April 30,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------|------------|
| ** **                                                                                                            | ** ** | **2008**                               | ** ** | **2007** | ** ** |
| ** **                                                                                                            | ** ** | ** **                             | ** ** | **(Restated)** | ** ** |
| OPERATING  ACTIVITIES                                                                                                 |       |                                   |       |   |   |
| Net income                                                                                                            |       | $                                      | 3,387,127  |   | $ | 772,294 |   |
| Adjustments to  reconcile net income to net cash from operations                                                      |       |                                   |       |   |   |
| Depreciation                                                                                                          |       | 833,881                                |       | 523,304 |   |
| Amortization                                                                                                          |       | 19,672                                 |       | 26,133 |   |
| Gain on sale of  equipment                                                                                            |       | (15,825                                | )          | — |   |
| Deferred income  taxes                                                                                                |       | (9,000                                 | )          | — |   |
| Net change in  other assets                                                                                           |       | (19,368                                | )          | 3,920 |   |
| Stock based  compensation expense                                                                                     |       | 136,800                                |       | — |   |
| Changes in  assets and liabilities, net of purchase of agricultural dealerships assets  and assumption of liabilities |       |                                   |       |   |   |
| Receivables                                                                                                           |       | (6,109,027                             | )          | 1,864,399 |   |
| Inventories                                                                                                           |       | (1,532,498                             | )          | 530,474 |   |
| Prepaid expenses                                                                                                      |       | (125,959                               | )          | (110,166 | ) |
| Floorplan notes  payable                                                                                              |       | 783,007                                |       | (500,101 | ) |
| Accounts payable                                                                                                      |       | 4,545,080                              |       | 2,126,946 |   |
| Other long-term  liabilities                                                                                          |       | 702,254                                |       | — |   |
| Customer  deposits                                                                                                    |       | 6,252,490                              |       | (2,086,882 | ) |
| Accrued expenses                                                                                                      |       | (699,738                               | )          | (778,391 | ) |
| Income taxes                                                                                                          |       | 2,314,749                              |       | (77,225 | ) |
|                                                                                                                  |       |                                   |       |   |   |
| NET CASH FROM  OPERATING ACTIVITIES                                                                                   |       | 10,463,645                             |       | 2,294,705 |   |
|                                                                                                                  |       |                                   |       |   |   |
| INVESTING  ACTIVITIES                                                                                                 |       |                                   |       |   |   |
| Property and  equipment purchases                                                                                     |       | (1,384,174                             | )          | (851,586 | ) |
| Net proceeds  from sale of equipment                                                                                  |       | 157,485                                |       | — |   |
| Purchase of  equipment dealerships, net of cash purchased                                                             |       | (3,940,380                             | )          | (5,126,577 | ) |
|                                                                                                                  |       |                                   |       |   |   |
| NET CASH USED  FOR INVESTING ACTIVITIES                                                                               |       | (5,167,069                             | )          | (5,978,163 | ) |
|                                                                                                                  |       |                                   |       |   |   |
| FINANCING  ACTIVITIES                                                                                                 |       |                                   |       |   |   |
| Net change in  non-manufacturer floorplan payable                                                                     |       | (79,461                                | )          | (2,151,506 | ) |
| Proceeds from  long-term debt borrowings and subordinated debentures                                                  |       | 58,013                                 |       | 1,869,491 |   |
| Principal  payments on long-term debt and subordinated debentures                                                     |       | (6,108,700                             | )          | (831,967 | ) |
| Net change in  subordinated debt interest accrual                                                                     |       | —                                 |       | (84,161 | ) |
|                                                                                                                  |       |                                   |       |   |   |
| NET CASH USED  FOR FINANCING ACTIVITIES                                                                               |       | (6,130,148                             | )          | (1,198,143 | ) |
|                                                                                                                  |       |                                   |       |   |   |
| NET CHANGE IN  CASH AND CASH EQUIVALENTS                                                                              |       | (833,572                               | )          | (4,881,601 | ) |
|                                                                                                                  |       |                                   |       |   |   |
| CASH AND CASH  EQUIVALENTS AT BEGINNING OF PERIOD                                                                     |       | 42,802,505                             |       | 7,572,000 |   |
|                                                                                                                  |       |                                   |       |   |   |
| CASH AND CASH  EQUIVALENTS AT END OF PERIOD                                                                           |       | $                                      | 41,968,933 |   | $ | 2,690,399 |   |

 

See Notes to Consolidated Financial Statements

 

3

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** **
| ** **                                                                                                                                                      | ** ** | **Three Months Ended April 30,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------|------------|
| ** **                                                                                                                                                      | ** ** | **2008**                              | ** ** | **2007** | ** ** |
|                                                                                                                                                            |       |                                  |       |   |   |
| SUPPLEMENTAL  DISCLOSURES OF CASH FLOW INFORMATION                                                                                                              |       |                                  |       |   |   |
| Cash paid during  the period                                                                                                                                    |       |                                  |       |   |   |
| Income taxes,  net of refunds                                                                                                                                   |       | $                                     | —     |   | $ | 551,000 |   |
| Interest                                                                                                                                                        |       | 1,054,398                             |       | 1,601,319 |   |
| ** **                                                                                                                                                      | ** ** | ** **                            | ** ** | ** ** | ** ** |
| SUPPLEMENTAL  DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES                                                                                         |       |                                  |       |   |   |
| Dividends on  preferred redeemable stock charged to retained earnings                                                                                           |       | $                                     | —     |   | $ | 25,594 |   |
| ** **                                                                                                                                                      | ** ** | ** **                            | ** ** | ** ** | ** ** |
| Acquisition of  equipment dealership assets in exchange for cash and assumption of  liabilities including purchase accounting adjustments on prior acquisitions |       |                                  |       |   |   |   |   |
| Accounts receivable                                                                                                                                        |       | $                                     | —     |   | $ | (112,788 | ) |
| Inventories                                                                                                                                                     |       | (3,433,379                            | )          | (8,107,415 | ) |
| Property and  equipment                                                                                                                                         |       | (472,600                              | )          | (772,685 | ) |
| Goodwill                                                                                                                                                        |       | (207,421                              | )          | (2,500,000 | ) |
| Floorplan notes  payable                                                                                                                                        |       | —                                |       | 3,148,704 |   |
| Accounts payable                                                                                                                                                |       | —                                |       | 1,255,932 |   |
| Customer  deposits                                                                                                                                              |       | 173,020                               |       | 130,000 |   |
| Long term debt                                                                                                                                                  |       | —                                |       | 1,000,000 |   |
| Accrued expenses                                                                                                                                                |       | —                                |       | 831,675 |   |
|                                                                                                                                                            |       |                                  |       |   |   |
| Cash paid for  dealerships                                                                                                                                      |       | $                                     | (3,940,380 | ) | $ | (5,126,577 | ) |

 

See Notes to Consolidated Financial Statements

 

4

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TITAN MACHINERYINC.

NOTES TOCONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

**NOTE 1 -****           BUSINESS ACTIVITY ANDSIGNIFICANT ACCOUNTING POLICIES**

 

*Basisof Presentation*

 

The unaudited financialstatements included herein have been prepared pursuant to the rules andregulations of the Securities and Exchange Commission for interimreporting.  Accordingly, they do notinclude all the information and footnotes required by accounting principlesgenerally accepted in the United States of America for complete financialstatements. In the opinion of management, all adjustments (consisting of normalrecurring accruals) considered necessary for a fair presentation have beenincluded. Operating results for the three month period ended April 30,2008 are not necessarily indicative of the results that may be expected for theyear ended January 31, 2009.  Theinformation contained in the balance sheet as of January 31, 2008 wasderived from the Company’s audited financial statements for the year thenended.

 

*Nature of Business*

 

Titan Machinery Inc. (the“Company”) is engaged in the retail sale, service and rental of agriculturaland industrial machinery through stores in North Dakota, South Dakota,Minnesota, Nebraska and Iowa.

 

*Estimates*

 

The preparation offinancial statements in conformity with accounting principles generallyaccepted in the United States of America requires management to make estimatesand assumptions that affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the date of the financialstatements and the reported amounts of revenue and expenses during thereporting period. Actual results could differ from those estimates.

 

*Principles of Consolidation*

 

The consolidatedfinancial statements include the accounts of the Company and its wholly-ownedsubsidiary, Transportation Solutions, LLC. All significant accounts,transactions and profits between the consolidated companies have beeneliminated in consolidation.

 

*Recently Issued Accounting Pronouncements*

 

In September 2006, the Financial AccountingStandards Board (“FASB”) issued Statement of Accounting Standards  (“SFAS”) No. 157, Fair ValueMeasurements (“SFAS 157”).  This standarddefines fair value, establishes a framework for measuring fair value, andexpands disclosures about fair value measurements.  This standard applies under other accountingpronouncements that require or permit fair value measurements, but does notrequire any new fair value measurements. SFAS 157 is effective for financial statements issued for fiscal yearsbeginning after November 15, 2007, which is the year beginning February 1,2008 for the Company.  The Companyadopted SFAS 157 effective February 1, 2008. The adoption of SFAS 157 forfinancial assets and liabilities held by the Company did not have a materialeffect on the Company’s financial statements or notes thereto.

 

In February 2008, the FASB issued FSP FAS 157-2,Effective Date of FASB Statement No. 157 (“FAS 157-2”), which permits aone year deferral of the application of SFAS 157 for all non-financial assetsand non-financial liabilities, except those that are recognized or disclosed atfair value in the financial statements on a recurring basis (at leastannually). The Company will adopt SFAS 157-2 for non-financial assets andnon-financial liabilities on February 1, 2009 and does not expect theprovisions to have a material effect on its results of operations, financialposition or cash flows.

 

In February 2007,the FASB issued SFAS No. 159, The Fair Value Option for Financial Assetsand Financial Liabilities (“SFAS 159”). SFAS 159 provides companies with an option to report selected financialassets and liabilities at fair value and establishes presentation anddisclosure requirements designed to facilitate comparisons between companiesthat choose

 

5

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different measurementattributes for similar types of assets and liabilities.  SFAS 159 is effective for fiscal yearsbeginning after November 15, 2007. The Company has elected not to apply the fair value option to thespecified financial assets and liabilities, and accordingly, the adoption ofSFAS 159 had no financial statement impact.

 

In December 2007,the FASB issued SFAS No. 141 (Revised 2007), Business Combinations (“SFAS141R”).  SFAS 141R provides additionalguidance on improving the relevance, representational faithfulness, andcomparability of the financial information that a reporting entity provides inits financial reports about a business combination and its effects.  SFAS 141R applies prospectively to businesscombinations for which the acquisition date is on or after the beginning of thefirst annual reporting period beginning on or after December 15,2008.  The Company is in the process ofevaluating the effect that the adoption of this standard will have on theCompany’s financial statements.

 

In December 2007,the FASB issued SFAS No. 160, Noncontrolling Interests in ConsolidatedFinancial Statements (“SFAS 160”).   SFAS 160 applies to all entities that prepare consolidated financialstatements and have an outstanding noncontrolling interest in one or moresubsidiaries.  SFAS 160 amends AccountingResearch Bulletin No. 51 to establish accounting and reporting standardsfor the noncontrolling interest in a subsidiary and for the deconsolidation ofa subsidiary.  SFAS 160 is effective forfiscal years, and interim periods within those fiscal years, beginning on orafter December 15, 2008.   TheCompany is in the process of evaluating the effect that the adoption of thisstandard will have on the Company’s financial statements.

 

On December 21, 2007the SEC staff issued Staff Accounting Bulletin No. 110 (“SAB 110”), which,effective January 1, 2008, amends and replaces SAB 107, Share-Based Payment.SAB 110 expresses the views of the SEC staff regarding the use of a “simplified”method in developing the expected life assumption in accordance with FASBStatement No. 123(R), Share-Based Payment. The use of the “simplified”method, was scheduled to expire on December 31, 2007. SAB 110 extends theuse of the “simplified” method in certain situations. The SEC staff does notexpect the “simplified” method to be used when sufficient information regardingexercise behavior, such as historical exercise data or exercise informationfrom external sources, becomes available. The Company plans to track and capture employee exercise behavior in thefuture as a basis for our valuation assumptions.  The Company currently uses simplifiedestimates as no options have yet been exercised.

 

*Earnings Per Share*

 

Basic earnings per sharewere computed by dividing income available to common stockholders by theweighted average number of shares of common stock outstanding during theyear.  Accumulated preferred dividendsand amortization of syndication fees were subtracted from net income to arriveat income available to common stockholders.

 

Diluted earnings pershare were computed by dividing income available to common stockholders plusassumed conversions by the weighted-average common shares outstanding afteradjusting for potential dilution related to the conversion of all dilutivesecurities into common stock.  Allpotentially dilutive securities were included in the computation of dilutedearnings per share.

 

The components of basicearnings per share are as follows:

 
| ** **                                | ** ** | **Three Months Ended April 30,** | ** ** |
|-------------------------------------------|------------|---------------------------------------|------------|
| **Basic - Earnings Per Share**            |       | **2008**                              | ** ** | **2007** |   |
|                                      |       |                                  |       |   |   |
| Net Income                                |       | $                                     | 3,387,127  |   | $ | 772,294 |   |
| Less: Amortization of syndication fees    |       | —                                |       | (5,296 | ) |
| Less: Preferred stock dividends - unpaid  |       | —                                |       | (25,594 | ) |
| Income available to common stockholders   |       | $                                     | 3,387,127  |   | $ | 741,404 |   |
|                                      |       |                                  |       |   |   |
| Basic weighted-average shares outstanding |       | 13,449,179                            |       | 4,344,753 |   |
|                                      |       |                                  |       |   |   |
| Basic - Earnings Per Share                |       | $                                     | 0.25       |   | $ | 0.17 |   |

 

6

----

 

The components of dilutedearnings per share are as follows:

 
| ** **                                                                     | ** ** | **Three Months Ended April 30,** | ** ** |
|--------------------------------------------------------------------------------|------------|---------------------------------------|------------|
| **Diluted - Earnings Per Share**                                               | ** ** | **2008**                              | ** ** | **2007** | ** ** |
|                                                                           |       |                                  |       |   |   |
| Income available  to common stockholders                                       |       | $                                     | 3,387,127  |   | $ | 741,404 |   |
| Plus: Income  impact of assumed conversions Preferred stock dividends - unpaid |       | —                                |       | 25,594 |   |
| Preferred stock  - amortization of syndication fees                            |       | —                                |       | 5,296 |   |
| Interest on  convertible debentures net of tax effect                          |       | —                                |       | 80,581 |   |
| Income available  to common stockholders plus assumed conversions              |       | $                                     | 3,387,127  |   | $ | 852,875 |   |
|                                                                           |       |                                  |       |   |   |
| Diluted  weighted-average shares outstanding:                                  |       |                                  |       |   |   |
| Basic  weighted-average shares outstanding                                     |       | 13,449,179                            |       | 4,344,753 |   |
| Plus:  Incremental shares from assumed conversions                             |       |                                  |       |   |   |
| Convertible  debentures                                                        |       | —                                |       | 2,006,667 |   |
| Convertible  preferred shares                                                  |       | —                                |       | 466,673 |   |
| Warrants                                                                       |       | 109,394                               |       | 116,910 |   |
| Options                                                                        |       | 296,165                               |       | 32,834 |   |
| Diluted  weighted-average shares outstanding                                   |       | 13,854,738                            |       | 6,967,837 |   |
|                                                                           |       |                                  |       |   |   |
| Diluted - EPS                                                                  |       | $                                     | 0.24       |   | $ | 0.12 |   |

 

**NOTE 2 -  INVENTORIES**

 
| ** **                   | ** ** | **April 30,** | ** **  | **January 31,** | ** ** |
|------------------------------|------------|--------------------|-------------|----------------------|------------|
| ** **                   | ** ** | **2008**           | ** **  | **2008**             | ** ** |
|                         |       |               |        |                 |       |
| New equipment                |       | $                  | 76,514,001  |                 | $          | 78,409,999 |   |
| Used equipment               |       | 37,637,323         |        | 44,478,010           |       |
| Parts, tires and attachments |       | 23,612,910         |        | 20,462,680           |       |
| Work in process              |       | 2,890,800          |        | 2,416,177            |       |
|                         |       |               |        |                 |       |
|                         |       | $                  | 140,655,034 |                 | $          | 145,766,866 |   |

 

In addition to the aboveamounts, the Company has estimated that a portion of its parts inventory willnot be sold in the next operating cycle. Accordingly, these balances have beenclassified as noncurrent assets.

 

**NOTE 3 -  LINE OF CREDIT**

 

The Company had noamount outstanding on the line of credit with Bremer Bank National Associationat April 30, 2008 and January 31, 2008. The agreement provides foravailable borrowings of $12,000,000 and carries a variable interest rate ofprime minus .25% (4.75% at April 30, 2008) with monthly interest paymentsdue, and has a maturity date of August 1, 2008. The line is secured bysubstantially all assets of the Company and a personal guarantee by our ChiefExecutive Officer.

 

7

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**NOTE 4 -  LONG TERM DEBT**

 
| ** **                                                                                                                                                                                                                                      | ** ** | **April 30,** | ** ** | **January 31,** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------|------------|----------------------|------------|
| ** **                                                                                                                                                                                                                                      | ** ** | **2008**           | ** ** | **2008**             | ** ** |
| Fixed rate note  payable to Bremer Bank, 8.0% interest rate, Monthly payments of $162,000  including interest, to August 2012. Secured by substantially all assets  and a personal guarantee by the Company’s Chief Executive Officer |       | $                  | 7,113,458  |                 | $          | 7,450,998 |   |
|                                                                                                                                                                                                                                            |       |               |       |                 |       |
| Fixed rate note  payable to Bremer Bank, 8.0% interest rate. Monthly payments of $40,000 to  December 2012. Secured by substantially all assets and a personal  guarantee by the Company’s Chief Executive Officer                    |       | 1,883,401          |       | 1,925,326            |       |
|                                                                                                                                                                                                                                            |       |               |       |                 |       |
| Variable rate  notes payable to CNH Capital America LLC (CNH), variable rates at prime plus  0.3% (5.3% at April 30, 2008).Total monthly installment payments of  $28,310, maturing August 2012. Secured by rental fleet equipment.   |       | 1,259,788          |       | 1,952,440            |       |
|                                                                                                                                                                                                                                            |       |               |       |                 |       |
| Non-interest  bearing note payable under non-compete agreement, due in monthly installments  which are capped at $3,333 per month, actual payment calculated from related  store profits                                                        |       | 196,771            |       | 210,152              |       |
|                                                                                                                                                                                                                                            |       |               |       |                 |       |
| Non-interest bearing  notes to CNH, in varying monthly installments, various maturity dates through  February 2010, secured by parts                                                                                                       |       | 865,674            |       | 1,162,146            |       |
|                                                                                                                                                                                                                                            |       |               |       |                 |       |
| Non-interest  bearing notes to CNH, monthly payments of $22,624 maturing June 2010,  secured by parts. Variable interest rate at prime + 1.6% rate beginning  July 2008                                                               |       | 588,232            |       | 656,104              |       |
|                                                                                                                                                                                                                                            |       |               |       |                 |       |
| Non-interest  bearing note to CNH, monthly payments of $27,147 maturing October 2009,  secured by parts. Variable interest rate at prime + 1.6% rate beginning  November 2008                                                         |       | 488,640            |       | 570,080              |       |
|                                                                                                                                                                                                                                            |       |               |       |                 |       |
| Fixed rate notes  payable to Ford Motor Credit and GMAC, (5.99% to 9.85%), due in monthly  installments including interest and various maturity dates through  December 2012, secured by vehicles                                          |       | 324,668            |       | 291,428              |       |
|                                                                                                                                                                                                                                            |       |               |       |                 |       |
| Fixed rate note  to Avoca Implement and Greenfield Implement 10.0%, monthly payments of  $18,920. Matures January 2011, secured by equipment                                                                                               |       | 720,954            |       | 759,080              |       |
|                                                                                                                                                                                                                                            |       |               |       |                 |       |
| Fixed rate note  to Textron Financial, 7.09%, monthly payments of $4,969 Matures  January 2018, secured by company asset                                                                                                                   |       | 544,361            |       | 549,583              |       |
|                                                                                                                                                                                                                                            |       |               |       |                 |       |
| Notes paid in  full during three month period ended April 30, 2008                                                                                                                                                                         |       | —             |       | 3,209,298            |       |
|                                                                                                                                                                                                                                            |       |               |       |                 |       |
|                                                                                                                                                                                                                                            |       | 13,985,947         |       | 18,736,635           |       |
| Less current  maturities                                                                                                                                                                                                                        |       | (3,465,961         | )          | (5,653,840           | )          |
|                                                                                                                                                                                                                                            |       |               |       |                 |       |
|                                                                                                                                                                                                                                            |       | $                  | 10,519,986 |                 | $          | 13,082,795 |   |

 

8

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Under covenants of theabove Bremer Bank note payable and a Bremer Bank floorplan agreement, theCompany has agreed, among other things, to (1) comply with equipment andparts inventory turn ratios; and (2) maintain various financial ratiolevels.

 

Additionally, undercovenants of the above notes payable with CNH Capital America LLC and a CNHCapital America LLC floorplan agreement, the Company has agreed, among otherthings, to maintain various financial ratio levels and to submit certainfinancial information.

 

As of April 30,2008, the Company was in compliance with all of the above covenants.

 

Long-term debt maturitiesare as follows:

 
| **12 Months Ending April 30,** | ** ** | **Amount** | ** ** |
|-------------------------------------|------------|------------|------------|
|                                |       |       |       |
| 2009                                |       | $          | 3,465,961  |   |
| 2010                                |       | 3,204,185  |       |
| 2011                                |       | 2,853,445  |       |
| 2012                                |       | 2,579,280  |       |
| 2013                                |       | 1,464,345  |       |
| Thereafter                          |       | 418,731    |       |
|                                |       | $          | 13,985,947 |   |

 

**NOTE 5 -  FLOORPLAN NOTES PAYABLE**

 

Floorplan notespayable with a bank and manufacturers carry various interest rates ranging from4.75 percent to 9.0 percent and are secured by substantially all assets of theCompany.  The Bremer Bank floorplan notepayable, with a balance of $315,080 at April 30, 2008, is secured by thepersonal guarantee of the Company’s Chief Executive Officer. Repayment termsvary by individual notes, but generally payments are made from sales proceedsor rental revenue from the related inventories.

 

**NOTE 6 -  SUBORDINATED DEBENTURES**

 
| ** **                                                                                                                                                                                    | ** ** | **April 30,** | ** ** | **January 31,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------|------------|----------------------|------------|
| ** **                                                                                                                                                                                    | ** ** | **2008**           | ** ** | **2008**             | ** ** |
|                                                                                                                                                                                          |       |               |       |                 |       |
| 10% debentures  to former owners of H.C. Clark Implement Co., interest payments due annually,  balance due May 2010, unsecured, subordinated to bank and manufacturer  debt              |       | $                  | —     |                 | $          | 550,000 |   |
|                                                                                                                                                                                          |       |               |       |                 |       |
| 9% debentures to  Vern Anderson, former owner of Vern Anderson Inc., interest payments due  quarterly, balance due December 2010, unsecured, subordinated to bank  and manufacturer debt |       | —             |       | 450,000              |       |
|                                                                                                                                                                                          |       |               |       |                 |       |
| 10% debentures  to Bernard Smith, former owner of Smith International, interest payments due  annually, balance due March 2010, unsecured, subordinated to bank and  manufacturer debt        |       | —             |       | 300,000              |       |
|                                                                                                                                                                                          |       |               |       |                 |       |
|                                                                                                                                                                                          |       | $                  | —     |                 | $          | 1,300,000 |   |

 

9

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**NOTE 7 -  COMMON STOCK OPTIONS AND WARRANTS**

 

*CommonStock Warrants*

 

InApril 2003, the Company issued stock warrants to Cherry Tree Securities,LLC, whose chairman is a director of the Company, for 11,917 shares of commonstock at an exercise price of $3.00 per share. The warrants terminate on April 7,2013.  In August 2004 the Companyissued an additional 6,071 stock warrants to Cherry Tree Securities at anexercise price of $3.50 per share.  Thesewarrants terminate on July 1, 2014.

 

In addition, the Companyissued stock warrants in April 2005 to an outside party for 115,650 sharesof common stock at an exercise price of $3.50 per share. These warrants expireon April 7, 2013.

 

The following is asummary of outstanding stock purchase warrants as of April 30, 2008:

 
| ** **       | ** ** | ** ** | ** ** | **Exercise** | ** ** | **Fair Value** | ** ** | ** **               | ** ** |
|------------------|------------|------------|------------|--------------|------------|----------------|------------|--------------------------|------------|
| **Issue Date**   | ** ** | **Number** | ** ** | **Price**    | ** ** | **Assigned**   | ** ** | **Purpose  of Issuance** |       |
| April 2003  |       | 11,917     |       | $            | 3.00       |           | $          | 11,200                   |       | Facilitate preferred stock issuance |   |
| August 2004 |       | 6,071      |       | $            | 3.50       |           | $          | 6,600                    |       | Facilitate preferred stock issuance |   |
| April 2005  |       | 115,650    |       | $            | 3.50       |           | $          | 126,000                  |       | Subordinated debt financing transaction |   |

 

Outstanding stockwarrants are valued using the Black-Scholes option pricing model. Assumptionsused to value the warrants are similar to those used in valuing the stockoptions as described below. Warrants issued in conjunction with a debt offeringare valued and classified as Additional Paid-In Capital per APB 14 *Accounting for Convertible Debt and Debt Issued with Stock PurchaseWarrants*.

 

*StockAward Plans*

 

The Company implemented the2005 Equity Incentive Plan, a stock-based compensation plan, during the yearended January 31, 2006.   In August 2007,the Plan was amended to increase the number of shares available under the planfrom 500,000 to 1,000,000 shares.  Thepurpose of the Plan is to provide incentive compensation to participants forservices that have been or will be performed for continuing as employees ormembers of the Board of Directors of the Company. Under the Plan, the Companymay grant options/restricted stock for up to 1,000,000 shares of common stockunder all forms of awards. The Company has elected to account for stock optionsand restricted stock using the fair value method under SFAS 123(R).  Shares issued for option exercises may beeither authorized but unissued shares, or shares of treasury stock acquired inthe open market.

 

The following table summarizesstock option activity for the three months ended April 30, 2008:

 
| ** **                                  | ** ** | ** **    | ** ** | ** **   | ** ** | **Weighted**    | ** ** | ** **    | ** ** |
|---------------------------------------------|------------|---------------|------------|--------------|------------|-----------------|------------|---------------|------------|
| ** **                                  | ** ** | ** **    | ** ** | **Weighted** | ** ** | **Average**     | ** ** | ** **    | ** ** |
| ** **                                  | ** ** | ** **    | ** ** | **Average**  | ** ** | **Remaining**   | ** ** | **Aggregate** | ** ** |
| ** **                                  | ** ** | **Number of** | ** ** | **Exercise** | ** ** | **Contractual** | ** ** | **Intrinsic** | ** ** |
| ** **                                  | ** ** | **Options**   | ** ** | **Price**    | ** ** | **Term**        | ** ** | **Value**     | ** ** |
|                                        |       |          |       |         |       |            |       |          |       |
| Outstanding at  January 31, 2008       |       | 483,252       |       | $            | 7.43       |            |       |          |       |   |
| Granted                                     |       | 10,000        |       | 16.40        |       |            |       |          |       |
| Exercised                                   |       | —        |       | —       |       |            |       |          |       |
| Outstanding at  April 30, 2008         |       | 493,252       |       | $            | 7.61       |            | 8.92       |          | $          | 5,228,210 |   |
|                                        |       |          |       |         |       |            |       |          |       |
| Options  exercisable at April 30, 2008 |       | 59,086        |       | $            | 4.42       |            | 7.82       |          | $          | 814,694 |   |

 

10

----

 

The following table summarizesrestricted stock activity for the three months ended April 30, 2008:

 
| ** **                            | ** ** | ** ** | ** ** | **Weighted**    | ** ** |
|---------------------------------------|------------|------------|------------|-----------------|------------|
| ** **                            | ** ** | ** ** | ** ** | **Average**     | ** ** |
| ** **                            | ** ** | ** ** | ** ** | **Remaining**   | ** ** |
| ** **                            | ** ** | ** ** | ** ** | **Contractual** | ** ** |
| ** **                            | ** ** | **Shares** | ** ** | **Term**        | ** ** |
| Outstanding at  January 31, 2008 |       | 76,506     |       | 3.22            |       |
| Granted                               |       | 9,426      |       |            |       |
| Forfeited                             |       | (200       | )          |            |       |
| Issued                                |       | 0          |       |            |       |
| Outstanding at  April 30, 2008   |       | 85,732     |       | 2.62            |       |

 

Thefair value of each stock-based award granted is estimated using theBlack-Scholes pricing model. The following assumptions were made in estimatingfair value:

 
| **Assumption**           | ** ** | **Fixed Plan** | ** ** |
|--------------------------|------------|----------------|------------|
| Dividend Yield           |       | 0              | %          |
| Risk-free interest rate  |       | 3.2 - 4.9      | %          |
| Expected life of options |       | 5 - 10 years   |       |
| Expected volatility      |       | 14 - 37        | %          |

 

Prior to the Company’s initial public offering theexpected volatility was based upon management’s best estimate of the value of theshares based upon the Company’s internal market.  The Company currently estimates itsvolatility using our quoted market price. The expected life of options represents the period of time that optionsgranted are expected to be outstanding.  Thefollowing is a summary of the status of options outstanding and exercisable at April 30,2008 under the fixed share-based payment plan:

 
| ** **   | ** ** | ** ** | ** ** | **Weighted**    | ** ** | ** **   | ** ** | ** **      | ** ** |
|--------------|------------|------------|------------|-----------------|------------|--------------|------------|-----------------|------------|
| ** **   | ** ** | ** ** | ** ** | **Average**     | ** ** | **Weighted** | ** ** | ** **      | ** ** |
| ** **   | ** ** | ** ** | ** ** | **Remaining**   | ** ** | **Average**  | ** ** | **Exercisable** | ** ** |
| **Exercise** | ** ** | ** ** | ** ** | **Contractual** | ** ** | **Exercise** | ** ** | **Options**     | ** ** |
| **Price**    | ** ** | **Number** | ** ** | **Life**        | ** ** | **Price**    | ** ** | **Number**      | ** ** |
| $            | 4.00       |       | 9,250      |            | 6.8 years  |         | $          | 4.00            |       | 9,250 |   |
| 4.50         |       | 119,002    |       | 7.9 years       |       | 4.50         |       | 49,836          |       |
| 7.50         |       | 80,000     |       | 9.2 years       |       | 7.50         |       | —          |       |
| 8.50         |       | 181,000    |       | 9.6 years       |       | 8.50         |       | —          |       |
| 9.35         |       | 94,000     |       | 9.6 years       |       | 9.35         |       | —          |       |
| 16.40        |       | 10,000     |       | 9.8 years       |       | 16.40        |       | —          |       |
|              |            |            |            |                 |            |              |            |                 |            |  |  |

 

The weighted averagegrant date fair value of options granted during the three months ended April 30,2008 was $7.86.  The weighted averagegrant date fair value of restricted stock granted during the three months endedApril 30, 2008 was $17.48.  Compensation cost charged to operations under theequity incentive plan was $136,800 for the three months ended April 30,2008 and $0 for the three months ended April 30, 2007.  The income tax benefit recognized from all stockbased compensation arrangements was $36,500 for the three months ended April 30, 2008 and $0 for the threemonths ended April 30, 2007.  Forthe three months ended April 30, 2008 and 2007, no options wereexercised.  As of April 30, 2008,there was $1,126,280 of unrecognized compensation cost on non-vested stockoptions. That cost is expected to be recognized over a weighted-average periodof 4.5 years.  As of April 30, 2008,there was $549,280 of unrecognized compensation cost on non-vested restrictedstock. That cost is expected to be recognized over a weighted-average period of2.1 years.

 

11

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**NOTE 8 -  BUSINESS COMBINATIONS**

 

The Company continued toimplement its strategy of consolidating dealerships in desired market areas.Below is a summary of the acquisitions completed for the three months ended April 30,2008. In certain of its business combination transactions the Companyrecognizes goodwill. Factors contributing to the recognition of goodwillinclude an evaluation of enterprise value, historical financial performance,estimated industry potential within the market and the market territoryrelationship to other existing and future planned Company locations.  Pro forma results are not presented as theacquisitions are not considered material, individually or in aggregate, to theCompany.

 

*CeresEquipment*

 

On February 1, 2008,the Company acquired certain assets of Ceres Equipment, Inc.  The Dealership is located in Roseau,Minnesota and is contiguous to existing markets.  The acquisition increases the Company’smarket share in the northwest area of Minnesota. The total cash purchase pricefor the dealership was $3,940,380.  TheCompany expects the allocation of the purchase price will be finalized duringthe fiscal year ending January 31, 2009. The allocation ofthe purchase price is presented in the following table:

 
| ** **                | ** ** | ** **          | ** ** | **Prior Acquisition** | ** ** | ** ** | ** ** |
|---------------------------|------------|---------------------|------------|-----------------------|------------|------------|------------|
| ** **                | ** ** | ** **          | ** ** | **Purchase**          | ** ** | ** ** | ** ** |
| ** **                | ** ** | **Ceres Equipment** | ** ** | **Adjustments**       | ** ** | **Totals** | ** ** |
| Inventories               |       | $                   | 3,499,901  |                  | $          | (66,522    | )          | $ | 3,433,379 |   |
| Property and equipment    |       | 472,600             |       |                  |       | 472,600    |       |
| Goodwill                  |       | 140,899             |       | 66,522                |       | 207,421    |       |
|                      |       |                |       |                  |       |       |       |
|                      |       | $                   | 4,113,400  |                  | $          | —     |       | $ | 4,113,400 |   |
|                      |       |                |       |                  |       |       |       |
| Other liabilities assumed |       | $                   | 173,020    |                  | —     |       | $          | 173,020 |   |
|                      |       |                |       |                  |       |       |       |
|                      |       | $                   | 173,020    |                  | $          | —     |       | $ | 173,020 |   |
|                      |       |                |       |                  |       |       |       |
| Consideration given       |       | $                   | 3,940,380  |                  | $          | —     |       | $ | 3,940,380 |   |

 

Of the total goodwill of$140,899 recorded in the acquisition transactions during the three months endedApril 30, 2008, $140,899 is expected to be deductible for tax purposes.

 

**NOTE 9 -  FAIR VALUE OF FINANCIAL STATEMENTS**

 

Thefair value of a financial instrument is generally defined as the amount atwhich the instrument could be exchanged in a current transaction betweenwilling parties, other than in a forced liquidation sale. Quoted market pricesare generally not available for the Company’s financial instruments.Accordingly, fair values are based on judgments regarding anticipated cashflows, future expected loss experience, current economic conditions, riskcharacteristics of various financial instruments and other factors. Theseestimates involve uncertainties and matters of judgment, and therefore cannotbe determined with precision. Changes in assumptions could significantly affectthe estimates. As explained in Note 1, actual results could differ from theestimates.

 

The carrying amount of cash, receivables, payables,short-term debt and other current liabilities approximates fair value becauseof the short maturity and/or frequent repricing of those instruments. Basedupon current borrowing rates with similar maturities, the fair value of the long-termdebt approximates the carrying value as of April 30, 2008 and January 31,2008.

 

12

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**NOTE 10 -  SUBSEQUENT EVENTS**

 

On May 1, 2008, theCompany acquired an agricultural equipment dealership in Blairstown, Iowa forapproximately $2.0 million in cash. Under the agreement, the Company acquired 100% of the outstanding stockof Quad County Implement, Inc.  Theacquisition expands the Company’s presence in market areas contiguous toexisting dealerships.

 

On May 21, 2008, theCompany received approximately $78.7 million (net of underwriter fees of $4.4million and estimated offering expenses of approximately $0.5 million) as aresult of its public offering of 4.83 million shares of common stock, including650,000 shares offered by selling stockholders, priced at $20.00 per share.

 

On May 28, 2008, theCompany acquired the assets of Mid-Land Equipment Company, L.C., with sixconstruction equipment dealerships, for approximately $14.4 million.  The dealerships are located in Des Moines,Davenport, Clear Lake and Cedar Rapids, Iowa, and Omaha and Lincoln,Nebraska.  The construction equipmentstores are contiguous to existing construction equipment stores in South Dakotaand overlay the existing nine agricultural locations in Iowa.

 

**NOTE 11 -  RESTATEMENT OF FINANCIAL STATEMENTS**

 

The Company restated itsfinancial statements for the years ended January 31, 2007, January 31,2006, and January 31, 2005 to correct various accounting errors and/ordisclosure omissions that were identified during the SEC’s review of theCompany’s registration statement for its initial public offering.  As a result, the financial statementsincluded in this Quarterly Report are presented as restated solely for theperiod ended April 30, 2007, as the Company has not previously presentedrestated information for that period.

 

The Company madeadjustments to reclassify syndication costs (previously a component withinstockholders’ equity), netting the syndication costs against the offering proceedsto which they relate (preferred stock or long-term debt), and recordedamortization of the syndication costs over the life of the underlyingsecurity.  The Company also recorded aliability for unpaid and undeclared accumulated preferred dividends upon thedetermination that they were probable of being incurred.

 

Corrections also resultedin restatements involving changes to the Statement of Cash Flows to correctlyreport the inventory floor planned, with non-manufacturers as financing cashinflow, and the repayment of non-manufacturer floorplanning as financing cashoutflow.

 

Lastly, the restatedfinancial statements were revised to include earnings per share amounts andrelated disclosures.

 

13

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Below are summaries ofthe financial statement line items that were affected by the restatementsdescribed above:

** **

Statement Of Operations

 
| ** **                              | ** ** | **Three months ended April 30,**       | ** ** |
|-----------------------------------------|------------|---------------------------------------------|------------|
| ** **                              | ** ** | **2007**                                    | ** ** | **2007** | ** ** | **2007** | ** ** |
| ** **                              | ** ** | **(As originally reported  and unaudited)** | ** ** | **(As restated  and unaudited)** | ** ** | **(Effect of change)** | ** ** |
| Revenue                                 |       | $                                           | 79,826,710 |   | $ | 79,826,710 |   | $ | — |   |
| Cost of revenue                         |       | 67,007,941                                  |       | 67,007,941 |   | — |   |
| Gross profit                            |       | 12,818,769                                  |       | 12,818,769 |   | — |   |
| Operating expenses                      |       | 10,046,741                                  |       | 10,046,741 |   | — |   |
| Income from operations                  |       | 2,772,028                                   |       | 2,772,028 |   | — |   |
| Other income (expense)                  |       | (1,500,651                                  | )          | (1,521,071 | ) | (20,420 | ) |
| Income before income taxes              |       | 1,271,377                                   |       | 1,250,957 |   | (20,420 | ) |
| Provision for income taxes              |       | (478,663                                    | )          | (478,663 | ) | — |   |
| Net income                              |       | 792,714                                     |       | 772,294 |   | (20,420 | ) |
| Adjustments to income                   |       |                                        |       |   |   |   |   |
| Amortization of syndication fees        |       | —                                      |       | (5,296 | ) | (5,296 | ) |
| Unpaid accumulated preferred dividends  |       | —                                      |       | (25,594 | ) | (25,594 | ) |
| Income available to common stockholders |       | $                                           | 792,714    |   | $ | 741,404 |   | $ | (51,310 | ) |
|                                    |       |                                        |       |   |   |   |   |
| Earnings per share - basic              |       | $                                           | —     |   | $ | 0.17 |   | $ | 0.17 |   |
| Earnings per share - diluted            |       | $                                           | —     |   | $ | 0.12 |   | $ | 0.12 |   |

 

14

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Statement of CashFlows 

 
| ** **                                                                                                            | ** ** | **Three months ended April 30,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                                                                                            | ** ** | **2007**                                             | ** ** | **2007** | ** ** | **2007** | ** ** |
| ** **                                                                                                            | ** ** | **(As originally reported**                | ** ** | **(As restated)** | ** ** | **(Effect of change)** | ** ** |
| ** **                                                                                                            | ** ** | **and unaudited)**                              | ** ** | **and unaudited)** | ** ** | ** ** | ** ** |
| OPERATING  ACTIVITIES                                                                                                 |       |                                                 |       |   |   |   |   |
| Net income                                                                                                            |       | $                                                    | 792,714    |   | $ | 772,294 |   | $ | (20,420 | ) |
| Adjustments to  reconcile net income to net cash from operations                                                      |       |                                                 |       |   |   |   |   |
| Depreciation                                                                                                          |       | 523,304                                              |       | 523,304 |   | — |   |
| Amortization                                                                                                          |       | 9,633                                                |       | 26,133 |   | 16,500 |   |
| Net change in  other assets                                                                                           |       | —                                               |       | 3,920 |   | 3,920 |   |
| Changes in  assets and liabilities, net of purchase of agricultural dealerships assets  and assumption of liabilities |       |                                                 |       |   |   |   |   |
| Receivables                                                                                                           |       | 1,864,399                                            |       | 1,864,399 |   | — |   |
| Inventories                                                                                                           |       | 2,703,431                                            |       | 530,474 |   | 2,172,957 |   |
| Prepaid expenses                                                                                                      |       | (110,166                                             | )          | (110,166 | ) | — |   |
| Floorplan notes  payable                                                                                              |       | (4,824,564                                           | )          | (500,101 | ) | (4,324,463 | ) |
| Accounts payable                                                                                                      |       | 2,126,946                                            |       | 2,126,946 |   | — |   |
| Customer  deposits                                                                                                    |       | (2,086,882                                           | )          | (2,086,882 | ) | — |   |
| Accrued expenses                                                                                                      |       | (778,391                                             | )          | (778,391 | ) | — |   |
| Income taxes                                                                                                          |       | (77,225                                              | )          | (77,225 | ) | — |   |
| NET CASH FROM  (USED FOR) OPERATING ACTIVITIES                                                                        |       | 143,199                                              |       | 2,294,705 |   | (2,151,506 | ) |
| INVESTING  ACTIVITIES                                                                                                 |       |                                                 |       |   |   |   |   |
| Property and  equipment purchases                                                                                     |       | (851,586                                             | )          | (851,586 | ) | — |   |
| Purchase of  equipment dealerships net of cash purchased                                                              |       | (5,126,577                                           | )          | (5,126,577 | ) | — |   |
| NET CASH USED  FOR INVESTING ACTIVITIES                                                                               |       | (5,978,163                                           | )          | (5,978,163 | ) | — |   |
| FINANCING  ACTIVITIES                                                                                                 |       |                                                 |       |   |   |   |   |
| Net change in  non-manufacturer floorplan payable                                                                     |       | —                                               |       | (2,151,506 | ) | 2,151,506 |   |
| Proceeds from  long-term debt borrowings and subordinated debentures                                                  |       | 1,869,491                                            |       | 1,869,491 |   | — |   |
| Principal  payments on long-term debt                                                                                 |       | (831,967                                             | )          | (831,967 | ) | — |   |
| Net change in  subordinated debt interest accrual                                                                     |       | (84,161                                              | )          | (84,161 | ) | — |   |
| NET CASH FROM  FINANCING ACTIVITIES                                                                                   |       | 953,363                                              |       | (1,198,143 | ) | 2,151,506 |   |
| NET CHANGE IN  CASH                                                                                                   |       | (4,881,601                                           | )          | (4,881,601 | ) | — |   |
| CASH AT BEGINNING  OF PERIOD                                                                                          |       | 7,572,000                                            |       | 7,572,000 |   | — |   |
|                                                                                                                  |       |                                                 |       |   |   |   |   |
| CASH AT END OF  PERIOD                                                                                                |       | $                                                    | 2,690,399  |   | $ | 2,690,399 |   | $ | — |   |

 

15

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

** **

Thefollowing discussion and analysis of our financial condition and results ofoperations should be read in conjunction with our interim consolidatedfinancial statements and related notes included in Item 1 of Part 1 ofthis Quarterly Report, and the audited consolidated financial statements andnotes thereto and Management’s Discussion and Analysis of Financial Conditionand Results of Operations contained in our Annual Report on Form 10-K forthe year ended January 31, 2008.

 

**Critical AccountingPolicies**

** **

Therehave been no material changes in the Company’s Critical Accounting Policies, asdisclosed in its Annual Report on Form 10-K for the year ended January 31,2008.

 

**Overview**

** **

Weown and operate one of the largest networks of full service agricultural andconstruction equipment stores in North America. We are the world’s largestretail dealer of Case IH Agriculture equipment and a major retail dealer of NewHolland Agriculture, Case Construction and New Holland Construction equipmentin the U.S. We sell and rent agricultural and construction equipment, sellparts, and service the equipment operating in the areas surrounding our stores.

 

16

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** **

**The Company’s net income was$3.4 million, or $0.24 per diluted share, in the quarter ended April 30,2008, compared to $0.8 million, or $0.12 per diluted share, in the quarterended April 30, 2007.  Significantfactors impacting the quarter were:**

** **

***·***                  Strong revenue growth due to acquisitions andsame-store sales;

*** ***

***·***                  Increase in gross profits due to increased revenues;and

*** ***

***·***                  Increase in operating expenses due to increasedrevenues but lower as a percentage of sales.

*** ***

**Results of Operations**

** **

Comparativefinancial data for each of the Company’s four sources of revenue are expressedbelow. The results for these periods include the operating results of theacquisitions made during these periods. The period-to-period comparisonsincluded below are not necessarily indicative of future results (dollars inthousands):

 
| ** **                            | ** ** | **Three Months Ended April 30,** | ** ** |
|---------------------------------------|------------|------------------------------------------------------|------------|
| ** **                            | ** ** | **2008**                                             | ** ** | **2007** | ** ** | **% Change** | ** ** |
| Equipment                             |       |                                                 |       |   |   |   |   |
| Revenue                               |       | $                                                    | 120,914    |   | $ | 61,103 |   | 97.9 |   |
| Cost of revenue                       |       | 107,918                                              |       | 54,890 |   | 96.6 |   |
| Gross profit                          |       | $                                                    | 12,996     |   | $ | 6,213 |   | 109.2 |   |
| Parts                                 |       |                                                 |       |   |   |   |   |
| Revenue                               |       | $                                                    | 21,504     |   | $ | 12,325 |   | 74.5 |   |
| Cost of revenue                       |       | 15,794                                               |       | 9,150 |   | 72.6 |   |
| Gross profit                          |       | $                                                    | 5,710      |   | $ | 3,175 |   | 79.8 |   |
| Service                               |       |                                                 |       |   |   |   |   |
| Revenue                               |       | $                                                    | 8,944      |   | $ | 5,393 |   | 65.8 |   |
| Cost of revenue                       |       | 3,418                                                |       | 2,218 |   | 54.1 |   |
| Gross profit                          |       | $                                                    | 5,526      |   | $ | 3,175 |   | 74.0 |   |
| Other, including  trucking and rental |       |                                                 |       |   |   |   |   |
| Revenue                               |       | $                                                    | 1,220      |   | $ | 1,006 |   | 21.3 |   |
| Cost of revenue                       |       | 853                                                  |       | 751 |   | 13.6 |   |
| Gross profit                          |       | $                                                    | 367        |   | $ | 255 |   | 43.9 |   |

 

17

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Thefollowing table sets forth our statements of operations data expressed as apercentage of net revenue for the periods indicated:

 
| ** **                            | ** ** | **Three Months Ended April 30,** | ** ** |
|---------------------------------------|------------|------------------------------------------------------|------------|
| ** **                            | ** ** | **2008**                                             | ** ** | **2007** | ** ** |
| Revenue                               |       |                                                 |       |   |   |
| Equipment                             |       | 79.2                                                 | %          | 76.5 | % |
| Parts                                 |       | 14.1                                                 | %          | 15.4 | % |
| Service                               |       | 5.9                                                  | %          | 6.8 | % |
| Other, including  trucking and rental |       | 0.8                                                  | %          | 1.3 | % |
| Total revenue                         |       | 100                                                  | %          | 100 | % |
|                                  |       |                                                 |       |   |   |
| Cost of Revenue                       |       |                                                 |       |   |   |
| Equipment                             |       | 70.7                                                 | %          | 68.8 | % |
| Parts                                 |       | 10.4                                                 | %          | 11.4 | % |
| Service                               |       | 2.2                                                  | %          | 2.8 | % |
| Other, including  trucking and rental |       | 0.6                                                  | %          | 0.9 | % |
| Total cost of  revenue                |       | 83.9                                                 | %          | 83.9 | % |
| Gross profit                          |       | 16.1                                                 | %          | 16.1 | % |
| Operating  expenses                   |       | 11.9                                                 | %          | 12.6 | % |
| Income from  operations               |       | 4.2                                                  | %          | 3.5 | % |

 

*Three Months Ended April 30,2008 Compared to Three Months Ended April 30, 2007*

* *

*Revenue*

 
| ** **                            | ** ** | **Three months ended   April 30, 2008** | ** ** | **Three months ended   April 30, 2007** | ** ** | **Increase** | ** ** | **Percent   change** | ** ** |
|---------------------------------------|------------|------------------------------------------------------------------|------------|------------------------------------------------------------------|------------|--------------|------------|---------------------------|------------|
| ** **                            | ** ** | **(dollars in thousands)**                             | ** ** |
| Total revenue                         |       | $                                                                | 152,582    |                                                             | $          | 79,827       |       | $                         | 72,755     |   | 91.1 | % |
| Equipment                             |       | $                                                                | 120,914    |                                                             | $          | 61,103       |       | $                         | 59,811     |   | 97.9 | % |
| Parts                                 |       | $                                                                | 21,504     |                                                             | $          | 12,325       |       | $                         | 9,179      |   | 74.5 | % |
| Service                               |       | $                                                                | 8,944      |                                                             | $          | 5,393        |       | $                         | 3,551      |   | 65.8 | % |
| Other, including  trucking and rental |       | $                                                                | 1,220      |                                                             | $          | 1,006        |       | $                         | 214        |   | 21.3 | % |

 

The increase in revenuefor the three months ended April 30, 2008 was due to acquisitionscontributing to current period revenue and same-store sales growth.  Acquisitions contributed $43.4 million intotal revenue, or 59.6% of the increase while same-store sales growthcontributed $29.4 million, or 40.4% of the increase.  Same-store sales increased 37.4% over theprior year, which is indicative of the strong market for our products,particularly in the area of equipment sales. We believe equipment sales were strong in the three months ended April 30,2008 due to the growth in global demand for agricultural commodities and thepositive impact this commodity demand has had on farm income.  We anticipate favorable market conditionswill continue for fiscal 2009, assuming normal weather conditions.

 

18

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* *

*Cost of Revenue*

 
| ** **                            | ** ** | **Three months ended   April 30, 2008** | ** ** | **Three months ended   April 30, 2007** | ** ** | **Increase** | ** ** | **Percent   change** | ** ** |
|---------------------------------------|------------|------------------------------------------------------------------|------------|------------------------------------------------------------------|------------|--------------|------------|---------------------------|------------|
| ** **                            | ** ** | **(dollars in thousands)**                             | ** ** |
| Total cost of  revenue                |       | $                                                                | 127,983    |                                                             | $          | 67,008       |       | $                         | 60,975     |   | 91.0 | % |
| Equipment                             |       | $                                                                | 107,918    |                                                             | $          | 54,889       |       | $                         | 53,029     |   | 96.6 | % |
| Parts                                 |       | $                                                                | 15,794     |                                                             | $          | 9,150        |       | $                         | 6,644      |   | 72.6 | % |
| Service                               |       | $                                                                | 3,418      |                                                             | $          | 2,218        |       | $                         | 1,200      |   | 54.1 | % |
| Other, including  trucking and rental |       | $                                                                | 853        |                                                             | $          | 751          |       | $                         | 102        |   | 13.6 | % |

 

Theincrease in cost of revenue for the three months ended April 30, 2008 wasprimarily due to increased revenue. Acquisitions contributed $36.0 million in total cost of revenue, or59.0% of the increase, while same-store sales growth contributed $25.0 million,or 41.0% of the increase.  As apercentage of revenue, cost of revenue was 83.9%, matching the prior fiscalyear’s three month results.

 

*Gross Profit*

 
| ** **                            | ** ** | **Three months ended   April 30, 2008** | ** ** | **Three months ended   April 30, 2007** | ** ** | **Increase** | ** ** | **Percent   change** | ** ** |
|---------------------------------------|------------|------------------------------------------------------------------|------------|------------------------------------------------------------------|------------|--------------|------------|---------------------------|------------|
| ** **                            | ** ** | **(dollars in thousands)**                             | ** ** |
| Total gross  profit                   |       | $                                                                | 24,599     |                                                             | $          | 12,819       |       | $                         | 11,780     |   | 91.9 | % |
| Equipment                             |       | $                                                                | 12,996     |                                                             | $          | 6,214        |       | $                         | 6,782      |   | 109.1 | % |
| Parts                                 |       | $                                                                | 5,710      |                                                             | $          | 3,175        |       | $                         | 2,535      |   | 79.8 | % |
| Service                               |       | $                                                                | 5,526      |                                                             | $          | 3,175        |       | $                         | 2,351      |   | 74.0 | % |
| Other, including  trucking and rental |       | $                                                                | 367        |                                                             | $          | 255          |       | $                         | 112        |   | 43.9 | % |

 

The$11.8 million increase in gross profit for the three months ended April 30,2008 was primarily due to increased revenue. Acquisitions contributed $7.4 million to the gross profit comparison forthe three months ending April 30, 2008, which was 62.7% of the totalincrease in gross profit, while increases in same-store sale gross profitsprovided the remaining $4.4 million, or 37.3%, of the gross profitimprovement.  Gross profit margins were16.1% for both the current and previous year quarters.

 

*Operating Expenses*

 
| ** **          | ** ** | **Three months ended   April 30, 2008** | ** ** | **Three months ended   April 30, 2007** | ** ** | **Increase** | ** ** | **Percent   change** | ** ** |
|---------------------|------------|------------------------------------------------------------------|------------|------------------------------------------------------------------|------------|--------------|------------|---------------------------|------------|
| ** **          | ** ** | **(dollars in thousands)**                             | ** ** |
| Operating  expenses |       | $                                                                | 18,182     |                                                             | $          | 10,047       |       | $                         | 8,135      |   | 81.0 | % |
|                     |            |                                                                  |            |                                                                  |            |              |            |                           |            |  |  |  |

 

Theincrease in operating expenses was primarily due to the additional costsassociated with acquisitions.  As apercentage of total revenue, operating expenses decreased to 11.9% for thefirst quarter of fiscal 2009 from 12.6% for the first quarter of fiscal2008.   This decrease was primarilydriven by the strong sales in the current quarter resulting in improved fixedoperating expense utilization as a percentage of sales.

 

19

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* *

*Other Income (Expense)*

 
| ** **                 | ** ** | **Three months ended   April 30, 2008** | ** ** | **Three months ended   April 30, 2007** | ** ** | **Increase/  (Decrease)** | ** ** | **Percent   change** | ** ** |
|----------------------------|------------|------------------------------------------------------------------|------------|------------------------------------------------------------------|------------|---------------------------|------------|---------------------------|------------|
| ** **                 | ** ** | **(dollars in thousands)**                             | ** ** |
| Interest and  other income |       | $                                                                | 310        |                                                             | $          | 14                        |       | $                         | 296        |   | 2114.3 | % |
| Floorplan  interest        |       | $                                                                | (722       | )                                                                | $          | (879                      | )          | $                         | (157       | ) | (17.9 | )% |
| Interest expense           |       | $                                                                | (313       | )                                                                | $          | (655                      | )          | $                         | (342       | ) | (52.2 | )% |

 

Interest and otherincome increased in the current quarter due to the higher level of cash andcash equivalents in the current three month period compared to the prior yearthree month period.  The decrease ininterest expense was primarily due to lower debt levels resulting from theretirement of all subordinated debentures as well as the early extinguishmentof a portion of our long-term debt.  Thisdebt reduction will continue to result in lower interest expense throughoutfiscal 2009 compared to that of fiscal year 2008.

 

*Provision for IncomeTaxes*

 
| ** **                  | ** ** | **Three months ended   April 30, 2008** | ** ** | **Three months ended   April 30, 2007** | ** ** | **Increase** | ** ** | **Percent   change** | ** ** |
|-----------------------------|------------|------------------------------------------------------------------|------------|------------------------------------------------------------------|------------|--------------|------------|---------------------------|------------|
| ** **                  | ** ** | **(dollars in thousands)**                             | ** ** |
| Provision for  income taxes |       | $                                                                | 2,306      |                                                             | $          | 479          |       | $                         | 1,827      |   | 381.4 | % |
|                             |            |                                                                  |            |                                                                  |            |              |            |                           |            |  |  |  |

 

The effective tax rateincreased to 40.5% for the three months ended April 30, 2008 from 37.6%for the three months ended April 30, 2007. The increase in the effective tax rate from the prior year primarilyreflects the changing mix of sales originating in states with higher taxrates.  The mix change is significantlyimpacted by current and prior year acquisitions.

 

**Liquidity and CapitalResources**

** **

*Cash Flow from OperatingActivities*

* *

For the three monthsended April 30, 2008, our cash flow provided by operating activities was$10.5 million.  Our cash flows fromoperations were primarily the result of our reported net income of $3.4million, an increase in floorplan notes of $0.8 million, an increase incustomer deposits of $6.3 million, an increase in our current income taxpayable of $2.3 million, an increase in accounts payable of $4.5 million and anadd back of non-cash depreciation and amortization of $0.9 million.  This amount was principally offset by anincrease in receivables of $6.1 million and an increase in inventories of $1.5million.  The large increase in customerdeposits and receivables is representative of our growth through acquisitionsand strong fiscal 2009 first quarter sales activity.

 

For the three monthsended April 30, 2007, our cash flow provided by operating activities was$2.3 million.  Our cash flows fromoperations were primarily the result of our reported net income of $0.8million, a receivables decrease of $1.9 million, an inventory decrease of $0.5million and an increase in accounts payable of $2.1 million.  This amount was principally offset by adecrease in floorplan notes payable of $0.5 million, a decrease in accruedexpenses of $0.8 million and a decrease in customer deposits of $2.1 million.

 

*Cash Flow from InvestingActivities*

* *

For the three monthsended April 30, 2008, cash used for investing activities was $5.2 million.  Our cash used for investing activitiesprimarily consisted of equipment dealership purchases of $3.9 million andpurchases of property and equipment for $1.4 million.

 

For the three monthsended April 30, 2007, cash used for investing activities was $6.0million.  Our cash used for investingactivities related to purchases of equipment dealerships of $5.1 million andpurchases of property and equipment of $0.9 million.

 

*Cash Flow from FinancingActivities*

* *

For the three monthsended April 30, 2008, cash used for financing activities was $6.1million.  Cash used for financingactivities was primarily the result of principal payments on long-term debt andsubordinated debentures of $6.1 million.

 

20

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For the three monthsended April 30, 2007, cash used for financing activities was $1.2million.  Cash used for financingactivities was primarily the result of the net reduction in non-manufacturerfloorplan payable of $2.2 million and principal payments on long-term debt of$0.8 million.  Partially offsetting thecash used from financing activities were proceeds from long-term debt andsubordinated debentures of $1.9 million.

 

**Sources of Liquidity**

** **

Our primary sources ofliquidity are cash reserves, cash flow from operations, proceeds from ourpublic offerings, proceeds from the issuance of debt and borrowings under ourcredit facilities.  We expect thatongoing requirements for debt service and capital expenditures will be fundedfrom these sources.

 

**Adequacy of CapitalResources**

** **

Our primary uses of cashhave been to fund our strategic acquisitions, finance the purchase ofinventory, meet debt service requirements and fund operating activities,working capital, payments due under building space operating leases andmanufacturer floorplan payable.

 

Based on our currentoperational performance, we believe our cash flow from operations, the proceedsfrom our public offerings, available cash and available borrowings under theexisting credit facilities will adequately provide our liquidity needs for, ata minimum, the next 12 months.

 

**Certain InformationConcerning Off-Balance Sheet Arrangements**

** **

We do not have anyrelationships with unconsolidated entities or financial partnerships, such asentities often referred to as structured finance or special purpose entities,which would have been established for the purpose of facilitating off-balancesheet arrangements or other contractually narrow or limited purposes. We are,therefore, not exposed to any financing, liquidity, market or credit risk thatcould arise if we had engaged in these relationships. In the normal course ofour business activities, we lease rental equipment under operating leases.

 

21

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# **PRIVATE SECURITIES LITIGATION REFORM ACT**

#  

The Private Securities Litigation Reform Act of 1995provides a “safe harbor” for forward-looking statements. Such “forward-looking”information is included in this Form 10-Q, including the MD&A section,as well as in our Form 10-K for the year ended January 31, 2008 thatwas filed with the Securities and Exchange Commission, and in other materialsfiled or to be filed by the Company with the Securities and Exchange Commission(as well as information included in oral statements or other written statementsmade or to be made by the Company).

 

Forward-lookingstatements include all statements based on future expectations and specificallyinclude, among other things, all statements relating to (i) our beliefsthat our market share is growing, (ii) our beliefs with respect to marketconditions, and (iii) our expectations and beliefs with respect to theuses and adequacy of our capital resources. Any statements that are not based upon historical facts, including theoutcome of events that have not yet occurred and our expectations for futureperformance, are forward-looking statements. The words “potential,” “believe,” “estimate,” “expect,” “intend,” “may,”“could,”  “will,” “plan,” “anticipate,”and similar words and expressions are intended to identify forward-lookingstatements.  Such statements are basedupon the current beliefs and expectations of our management.  Such forward-looking information involvesimportant risks and uncertainties that could significantly affect anticipatedresults in the future and, accordingly, such results may differ from thoseexpressed in any forward-looking statements made by or on behalf of theCompany.  These risks and uncertaintiesinclude, but are not limited to those matters identified and discussed in ourAnnual Report on Form 10-K under the section titled “Risk Factors”.

 

**ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKETRISK**

 

We are exposed to marketrisk from changes in interest rates. Market risk is the potential loss arisingfrom adverse changes in market rates and prices such as interest rates. Forfixed rate debt, interest rate changes affect the fair value of financialinstruments but do not impact earnings or cash flows. Conversely, for floatingrate debt, interest rate changes generally do not affect the fair market valuebut do impact future earnings and cash flows, assuming other factors are heldconstant. During fiscal 2007, we renegotiated and/or signed several new creditfacilities. Many of these credit agreements are floating rate facilities nowcontaining minimum rates of interest to be charged. We have also entered intofixed rate financing. Based upon balances and interest rates as of April 30,2008, holding other variables constant, a one percentage point increase ininterest rates for the next 12-month period would decrease pre-tax earnings andcash flow by approximately $306,000. Conversely, a one percentage pointdecrease in interest rates for the next 12-month period would result in anincrease to pre-tax earnings and cash flow of approximately $306,000. At April 30,2008, we had variable rate floorplan notes payable of $96.8 million, of whichapproximately $29.3 million was interest-bearing, variable notes payable andlong-term debt of $1.3 million, and fixed rate notes payable and long-term debtof $12.7 million.

 

Our policy is not toenter into derivatives or other financial instruments for trading orspeculative purposes.

 

**ITEM 4.**CONTROLS ANDPROCEDURES**

 

*(a)*                               *Evaluation ofdisclosure controls and procedures*. After evaluating the effectiveness of the Company’sdisclosure controls and procedures pursuant to Rule 13a-15(b) of theSecurities Exchange Act of 1934 (“the Exchange Act”) as of the end of theperiod covered by this quarterly report, our chief executive officer and chieffinancial officer with the participation of the Company’s management, haveconcluded that the Company’s disclosure controls and procedures are effectiveto ensure that information that is required to be disclosed by the Company inreports that it files under the Exchange Act is recorded, processed, summarizedand reported within the time periods specified in the rules of theSecurities Exchange Commission. Our chief executive officer and chief financialofficer with the participation of the Company’s management, have also concludedthat the Company’s disclosure controls and procedures are effective to ensurethat information required to be disclosed in reports filed or submitted underthe Exchange Act is accumulated and communicated to management, including ourprincipal executive officer and principal financial officer, to allow timelydecisions regarding required disclosures.

 

Basedon evaluations occurring prior to the end of the period covered by thisquarterly report, our chief executive officer and chief financial officerconcluded that certain internal control deficiencies existed.  In 

 

22

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lightof these deficiencies, management took the actions, as discussed below, priorto and during the first quarter to address such deficiencies.

 

*(b)**                              **Changes in internalcontrols*. Therehas not been any change in the Company’s internal control over financialreporting (as defined in Rules 13a-15(f) as promulgated by theSecurities and Exchange Commission under the Act) during its most recentlycompleted fiscal quarter that has materially affected, or is reasonably likelyto materially affect, the Company’s internal control over financialreporting.  During the first quarter offiscal 2009, the Company continued to implement the actions identified in its Form 10-Qfor the Company’s third quarter of fiscal 2008 relating to remediating pastcontrol deficiencies.

 

### **PART II.- OTHER INFORMATION**

###  

| **ITEM 1.** | **LEGAL PROCEEDINGS** |
|-------------|-----------------------|

 

We are currently not aparty to any material pending legal proceedings.

 
| **ITEM 1A.** | **RISK FACTORS** |
|--------------|------------------|

 

In addition to the other information set forth in thisreport, including the important information in “Private Securities LitigationReform Act,” you should carefully consider the “Risk Factors” discussed in our Form 10-Kfor the year ended January 31, 2008 as filed with the United StatesSecurities and Exchange Commission. Those factors, if they were to occur, could cause our actual results todiffer materially from those expressed in our forward-looking statements inthis report, and materially adversely affect our financial condition or futureresults.  Although we are not aware ofany other factors that we currently anticipate will cause our forward-lookingstatements to differ materially from our future actual results, or materiallyaffect the Company’s financial condition or future results, additional risksand uncertainties not currently known to us or that we currently deem to beimmaterial might materially adversely affect our actual business, financialcondition and/or operating results.

 

There have been no material changes to the riskfactors described in our Form 10-K for the year ended January 31, 2008.

 
| **ITEM 2.** | **UNREGISTERED SALES OF EQUITY SECURITIES AND USE  OF PROCEEDS** |
|-------------|------------------------------------------------------------------|

 

On December 11,2007, we closed the initial public offering of our common stock, pursuant towhich we sold 5,442,395 shares of our common stock and selling stockholderssold 1,457,605 shares.  We filed a Registration Statement on Form S-1in connection with the IPO (SEC File No. 333-145526) that was declaredeffective on December 6, 2007, as well as a Registration Statement on Form S-1relating to an increase in the proposed maximum aggregate offering price (SECFile No. 333-147859).  We received net proceeds, after expenses, fromthe IPO of approximately $41.8 million. Offering expenses related to the IPOincluded an underwriting discount of approximately $3.2 million and otheroffering expenses of approximately $1.2 million.  During the three-monthperiod ended April 30, 2008, we used $1.3 million of the net proceeds fromthe IPO to repay subordinated debt held by former owners of acquireddealerships, $4.8 million to repay term debt held primarily by CNH Capital andformer owners of acquired dealerships, and approximately $3.9 million toacquire certain assets of Ceres Equipment, Inc.  We intend to use theremaining proceeds from the IPO  to fund potential acquisitions of CNHagricultural and construction equipment dealerships and for general corporatepurposes, including working capital needs.

 
| **ITEM 3.** | **DEFAULTS UPON SENIOR SECURITIES** |
|-------------|-------------------------------------|

 

None.

 
| **ITEM 4.** | **SUBMISSION OF MATTERS TO A VOTE OF SECURITY  HOLDERS** |
|-------------|----------------------------------------------------------|

 

None.

 

23

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| **ITEM 5.** | **OTHER  INFORMATION** |
|-------------|------------------------|

 

None.

 
| **ITEM 6.** | **EXHIBITS** |
|-------------|--------------|

 

(a)           Exhibits - See Exhibit Index on page followingsignatures

 

24

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**SIGNATURES**

 

Pursuant to therequirements of Section 13 or 15(d) of the Securities Exchange Act of1934, the Company has duly caused this Report to be signed on its behalf by theundersigned, thereunto duly authorized.

 

Dated:  June 16, 2008
| ** ** | **TITAN MACHINERY INC.** |
|------------|--------------------------|
|       |                     |   |
|       |                     |   |
|       | By                       |   | /s/ Peter J.  Christianson |
|       |                     |   | Peter J. Christianson |
|       |                     |   | President and Chief  Financial Officer |
|       |                     |   | (Principal Financial  Officer) |

 

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EXHIBIT INDEX

TITAN MACHINERYINCORPORATED

FORM 10-Q

 
| **Exhibit No.** | ** ** | **Description**                                                                                                         |
|----------------------|------------|-------------------------------------------------------------------------------------------------------------------------|
| **31.1               |       | Certification of  President and Chief Executive Officer Pursuant to Section 302 of the  Sarbanes-Oxley Act of 2002 |
| **31.2               |       | Certification of Chief Financial Officer Pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002                |
| **32.1               |       | Certification of President and Chief Executive  Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002  |
| **32.2               |       | Certification of Chief Financial Officer Pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002                |

 

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**Filed herewith

 

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