SB-2/A

           As filed with the Securities and Exchange Commission on June 13, 2005

                                      An Exhibit List can be found on page II-2.

                                                     Registration No. 333-124217

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

                           --------------------------
                               AMENDMENT NO. 1 TO
                                    FORM SB-2
                             REGISTRATION STATEMENT
                                      UNDER
                           THE SECURITIES ACT OF 1933
                           --------------------------

                             THOMAS EQUIPMENT, INC.
                 (Name of small business issuer in its charter)

                                                                                      
               Delaware                                  3531                               58-3565680
    (State or other Jurisdiction of          (Primary Standard Industrial      (I.R.S. Employer Identification No.)
    Incorporation or Organization)           Classification Code Number)



                            1818 North Farwell Avenue
                               Milwaukee, WI 53202
                                 (312) 224-8812

          (Address and telephone number of principal executive offices
                        and principal place of business)

                                 David M. Marks,
                                    Chairman
                            1818 North Farwell Avenue
                               Milwaukee, WI 53202
                                 (312) 224-8812
            (Name, address and telephone number of agent for service)

                           --------------------------
                                   Copies to:
                              Thomas A. Rose, Esq.
                       Sichenzia Ross Friedman Ference LLP
                     1065 Avenue of the Americas, 21st Flr.
                            New York, New York 10018
                                 (212) 930-9700
                              (212) 930-9725 (fax)
                           --------------------------

                Approximate date of proposed sale to the public:
     From time to time after this Registration Statement becomes effective.

      If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933 check the following box: |X|

      If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]

      If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

      If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

      If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

                           --------------------------






                         CALCULATION OF REGISTRATION FEE
====================================================================================================================================
                                                                           Proposed Maximum     Proposed Maximum      Amount of
        Title of each class of securities               Amount to be      Offering Price Per       Aggregate         Registration
                 to be registered                        Registered           Security(1)        Offering Price          Fee
- --------------------------------------------------- --------------------- -------------------- ------------------- -----------------
                                                                                                           
Common Stock, $.01 par value (2)                           12,985,000             $4.50            $58,432,500          $6,877.50
Common Stock, $.01 par value (3)                            4,020,000             $6.00            $24,120,000           2,838.92
Common Stock, $.01 par value(4)                             4,000,000             $6.00            $24,000,000          $2,824.80
Common Stock, $.01 par value                                5,980,000             $6.00            $35,880,000          $4,223.08
- --------------------------------------------------- --------------------- -------------------- ------------------- -----------------
Total                                                      26,985,000               n/a           $142,432,500         *$16,764.30
====================================================================================================================================



     * Previously paid

(1)   Estimated solely for purposes of calculating the registration fee in
      accordance with Rule 457(c) and Rule 457(g) under the Securities Act of
      1933, using the average of the high and low price as reported on the
      Over-The-Counter Bulletin Board on April 19, 2005, which was $4.50 per
      share.

(2)   Includes a good faith estimate of shares of common stock issuable upon the
      conversion of convertible debentures.

(3)   Includes a good faith estimate of shares of common stock issuable upon the
      exercise of common stock purchase option.

(4)   Includes a good faith estimate of shares of common stock issuable upon the
      exercise of common stock purchase warrants.

      The registrant amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until the registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a)
may determine.



The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.

PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION, DATED JUNE 13, 2005

                             Thomas Equipment, Inc.
                           Up to 26,985,000 Shares of
                                  Common Stock

         This prospectus relates to the resale by the selling stockholders of up
to 26,985,000 shares of our common stock. The selling stockholders may sell
common stock from time to time in the principal market on which the stock is
traded at the prevailing market price or in negotiated transactions. The selling
stockholders may be deemed underwriters of the shares of common stock which they
are offering.

         We are not selling any shares of common stock in this offering and
therefore will not receive any proceeds from this offering. We will, however,
receive the sale price of any common stock we sell to the selling stockholders
upon exercise of warrants or options. All costs associated with this
registration will be borne by us.

         Our common stock is currently traded on the Over-The-Counter Bulletin
Board under the symbol TEQI. As of June 8, 2005, the closing price of our common
stock was $3.60.

            Investing in our common stock involves substantial risks.
                    See "Risk Factors," beginning on page 10

         Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

                  The date of this Prospectus is June 13, 2005



                               PROSPECTUS SUMMARY

         The following summary highlights selected information contained in this
prospectus. This summary does not contain all the information you should
consider before investing in the securities. Before making an investment
decision, you should read the entire prospectus carefully, including the "Risk
Factors" section, the financial statements and the notes to the financial
statements.

         As used throughout this prospectus, the terms "Thomas Equipment," "we,"
"us," "our", "successor" or "successor company" refer to Thomas Equipment, Inc.,
a Delaware corporation. The terms "Thomas Equipment Limited", "predecessor" or
"predecessor company" refer to Thomas Equipment Limited, an unaffiliated
company, whose business and certain assets we acquired effective October 1,
2004. The historical financial statements for the periods prior to October 1,
2004 and summaries thereof appearing in this prospectus are those of our
predecessor company.

                             Thomas Equipment, Inc.

         We operate through two business segments, Thomas Equipment and
Pneutech.

         Thomas Equipment manufactures and distributes through a worldwide
network of dealers and distributors a full line of skid steer and mini skid
steer loaders as well as attachments, mobile screening plants and six models of
mini excavators. In addition to our industrial and construction products, Thomas
manufactures a complete line of potato harvesting and handling equipment. Thomas
Equipment also operates six retail stores, three in Atlantic Canada, one in
Presque Isle, Maine, one in Aurora, Colorado and one in Chicago, Illinois.

         Pneutech and its subsidiaries are engaged in the fluid power industry
providing distribution and manufacturing of pneumatic and hydraulic components
and systems for the industrial market, distribution and manufacturing of
hydraulic components and systems for the mobile market and manufacturing of
hydraulic cylinders and metal gaskets for the industrial market. Pneutech is a
strategic supplier to Thomas, as well as 15,000 other active customers. During
the year ended June 30, 2004, Pneutech supplied Thomas with approximately $4
million in hydrostatic transmission equipment (8% of Pneutech's sales and 8% of
Thomas' cost of sales during that period). Pneutech maintains nine manufacturing
and distribution facilities in Canada and one manufacturing plant in South
Korea. It has a diverse array of capabilities in the distribution of fluid power
components as well as manufacturing spiral wound metal gaskets and steel
components.

         Our principal executive offices are located at 1818 North Farwell
Avenue, Milwaukee, Wisconsin 53202. Our telephone number is (312) 224-8812.

                                  The Offering

                                                   
Common stock outstanding before the offering          21,250,000 shares

Common stock offered by selling
stockholders........................................  Up to 26,985,000 shares assuming full
                                                      conversion of convertible debentures and
                                                      exercise of outstanding common stock
                                                      purchase warrants and options by the
                                                      selling stockholders. This number would
                                                      represent approximately 55.9% of our
                                                      total outstanding stock, assuming the
                                                      issuance of all such shares.

Common stock to be outstanding
after the offering..................................  Up to 42,255,000 shares.

Use of proceeds.....................................  We will not receive any proceeds from
                                                      the sale of the common stock hereunder.
                                                      We will, however, receive the sale price
                                                      of any common stock we sell to the
                                                      selling stockholders upon exercise of
                                                      warrants or options. See "Use of
                                                      Proceeds" for a complete description.

OTCBB Symbol........................................  TEQI




                                       3


                         Summary of Recent Transactions

Reorganization of Maxim Mortgage Corporation to Thomas Equipment, Inc.

         On October 11, 2004, Thomas Equipment, Inc., formerly Maxim Mortgage
Corporation, entered into an Agreement and Plan of Reorganization with Thomas
Equipment 2004 Inc., and Thomas Ventures Inc., both of which were formed in 2004
for the purposes of the asset acquisition described below. Prior to the
reorganization, Maxim Mortgage Corporation had no active business operations.
Under the terms of the agreement, we acquired 100% of the common stock of Thomas
Equipment 2004 and Thomas Ventures in exchange for the issuance by us of
16,945,000 common shares (approximately 94% of the outstanding shares
immediately after the reorganization).

         Immediately prior to the reorganization, Thomas Equipment 2004, Inc.
issued an aggregate of 12,945,000 shares of its common stock to 13 accredited
investors, including certain of our officers, directors and principal
stockholders, for an aggregate consideration of $451,000, and Thomas Ventures,
Inc. issued an aggregate of 4,000,000 shares of its common stock to four
accredited investors, including our principal stockholder, for an aggregate
consideration of $2,000,000.

Acquisition of Operating Assets from Predecessor Business - Thomas Equipment
Limited

         On November 9, 2004, Thomas Equipment 2004 acquired the business, fixed
assets and inventory of Thomas Equipment Limited, an unrelated company, for
$37,182,000 (including transaction costs), effective as of October 1, 2004. The
acquisition was made pursuant to an Agreement of Purchase and Sale of Assets
between Thomas Equipment 2004 and Thomas Equipment Limited, made as of October
1, 2004

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

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


         o        A secured convertible revolving note with a principal amount
                  not to exceed $16,000,000, including the minimum borrowing
                  amount;


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

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

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

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

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

Acquisition of Operating Businesses - Pneutech, Inc. and Subsidiaries


         On February 28, 2005, we acquired 100% of the common stock of Pneutech,
in exchange for the issuance by us of a total of 1,082,641 shares of our common
stock and warrants to purchase 211,062 shares of common stock, exercisable at
$3.00 per share. Upon the closing, Pneutech also redeemed 929 preference shares
and 530,000 special shares owned by 3156176 Canada, Inc. for an aggregate of
$508,000. Clifford Rhee, the President and a member of the Board of Directors of
Thomas and Pneutech is the beneficial owner of 3156176 Canada, Inc., which was
the owner of approximately 47% of the common shares, 929 preference shares and
530,000 special shares of Pneutech. Mr. Rhee received 467,767 shares of our
common stock in exchange for his common shares in Pneutech.



                                       4


Roynat Merchant Capital Inc.


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


         o        Roynat Merchant Capital was paid $2,259,000 in consideration
                  for the cancellation of its Pneutech preferred shares and
                  payment of accrued dividends thereon;

         o        Roynat Merchant Capital was paid $1,008,000 in consideration
                  for the cancellation of warrants previously issued by Pneutech
                  to Roynat Merchant Capital;

         o        Roynat Merchant Capital was paid $3,227,000 in full
                  satisfaction of all amounts due pursuant to a convertible
                  debenture issued by Pneutech to Roynat Merchant Capital;


         o        we sold a subordinated debenture to Roynat Capital Inc. with a
                  face amount of $5,343,000; and


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

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

Laurus Master Fund, Ltd.

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

         o        we issued an additional secured convertible term note in the
                  principal amount of $1,900,000 to Laurus;

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

         o        the payments on the previously issued secured convertible term
                  note in the principal amount of $6,000,000 were delayed until
                  July 1, 2005, at which time the initial monthly payment in the
                  amount of $206,896 is due and is due each month thereafter
                  until the note is paid in full.

For a complete description of each of the foregoing transactions, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Overview."


                                       5


SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA

(In thousands of U.S. dollars, except share and per share data)

         The following three pages contain selected financial information
related to (a) the successor company Thomas Equipment (since our inception on
October 1, 2004), (b) our predecessor company Thomas Equipment Limited, (c)
Pneutech which we acquired on February 28, 2005, and (d) pro forma combined
condensed statement of operations information as if Pneutech had been acquired
as of July 1, 2003. For a more detailed discussion of the businesses and the
acquisitions you should refer to the overview section in Management's Discussion
and Analysis.


         The summary historical financial data of the Predecessor as of June 30,
2004 and 2003 and for each of the years then ended has been derived from the
audited financial statements of our predecessor company. The summary historical
financial data of the Predecessor for the three and nine months ended March 31,
2004 and the three months ended September 30, 2004 have been derived from the
unaudited interim financial statements of our predecessor company which have
been prepared on a basis consistent with the Predecessor's audited annual
financial statements.

         The summary historical financial data of the Successor as of March 31,
2005 and for the three and six months ended March 31, 2005 has been derived from
our unaudited consolidated interim financial statements. In the opinion of
management, such unaudited financial data reflect all adjustments, consisting
only of normal and recurring adjustments, necessary for a fair presentation of
the results for those periods. The results of operations for the interim periods
are not necessarily indicative of the results to be expected for the full year
or any future period.


         The summary historical financial data of Pneutech as of October 31,
2004 and 2003 and for each of the two years then ended has been derived from the
audited financial statements of Pneutech.

         The audited financial statements of the Predecessor as of June 30, 2004
and 2003 and for each of the two years in the period ended June 30, 2004, the
unaudited consolidated financial statements of the Successor as of March 31,
2005 and for the six months ended March 31, 2005 and the audited consolidated
financial statements of Pneutech as of October 31, 2004 and for each of the two
years in the period then ended are included elsewhere in this prospectus.


         The summary pro forma combined condensed statement of operations
information has been derived from the unaudited pro forma combined condensed
statement of operations included elsewhere in this prospectus, which has been
prepared by our management from our financial statements, from the historical
financial statements of our predecessor, Thomas Equipment Limited, and the
historical financial statements of Pneutech, which are also included in this
prospectus. The unaudited pro forma combined condensed statement of operations
reflects adjustment as if the acquisition of Pneutech had occurred on July 1,
2003. The pro forma adjustments are based upon estimates and certain assumptions
that management believes are reasonable in the circumstances. The summary pro
forma financial data is for informational purposes only and should not be
considered indicative of actual results that would have been achieved had the
acquisition of Pneutech actually been consummated on July 1, 2003 and do not
purport to indicate results of operations as of any future date or for any
future period.


         The following data should be read in conjunction with the "Unaudited
Pro Forma Combined Condensed Statement Of Operations," "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the financial
statements of our predecessor company, the financial statements of Pneutech and
our consolidated financial statements included elsewhere in this prospectus.

         Because the following is only a financial summary, it does not contain
all the financial information that may be important to you. Therefore, you
should carefully read all the information in this prospectus, including the
financial statements from which this information was derived and their
explanatory notes and Management's Discussion and Analysis, before making an
investment decision.


                                       6


      THOMAS EQUIPMENT AND PREDECESSOR BUSINESS (THOMAS EQUIPMENT LIMITED)



                              -----Successor Business-----| -----------------------------Predecessor Business--------------------
                                Unaudited      Unaudited  |   Unaudited      Unaudited      Unaudited
                              Three Months    Six Months  | Three Months    Three Months   Nine Months        Year         Year
                                 Ended          Ended     |     Ended          Ended          Ended          Ended        Ended
                               March 31,      March 31,   |  September 30,   March 31,      March 31,       June 30,     June 30,
                                  2005          2005      |      2004           2004          2004            2004         2003
                              -----------     ----------  | --------------   ---------      ---------       --------     --------
                                                                                                  
Statement of Operations Data:                             |
        Revenues              $     17,036  $     31,452  | $     13,857    $     12,622   $     39,199  $     55,705  $     49,274
        Gross profit                 2,266         4,540  |        2,087           1,720          5,221         8,146         5,659
        Operating loss              (1,707)       (8,930) |       (1,088)         (1,591)        (4,139)       (6,916)         (982)
        Net loss                    (3,744)      (11,902) |       (1,602)         (1,594)        (4,207)      (11,555)       (1,020)
  Common Share Data:                                      |
          Net loss per share -                            |
              Basic and                                   |
                diluted              (0.18)        (0.59) |        (0.19)          (0.60)         (1.59)        (4.16)        (0.39)
         Common shares                                    |
           outstanding          20,435,393    20,214,088  |    8,643,000       2,643,000      2,643,000     2,774,507     2,643,000
                                                          |
Balance Sheet Data:                                       |
          Total assets        $     93,652            --  |           --              --             --  $     51,186  $     51,945
          Working capital                                 |
            (deficit)                3,503            --  |           --              --             --       (25,223)       23,202
          Shareholders' equity                            |
            (deficit)               13,386            --  |           --              --             --       (11,766)      (21,667)



                                       7


                                    PNEUTECH


                                                     Year Ended    Year Ended
                                                     October 31,   October 31,
                                                        2004         2003
                                                     -----------   -----------
Statement of Operations Data:
     Revenues                                         $ 49,040     $ 37,971
     Gross profit                                       10,882        8,197
     Operating income                                    1,849        1,144
     Net income (loss)                                     192         (328)
  Common Share Data:
       Net income (loss) per share
          - Basic and diluted                             6.31       (13.27)
       Common shares
           outstanding                                  30,452       24,721

Balance Sheet Data:
       Total assets                                   $ 35,075     $ 28,593
       Working capital                                   1,306        1,875
       Shareholders' equity                              4,381        3,859


                   REMAINDER OF PAGE LEFT INTENTIONALLY BLANK


                                       8


               UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

The following information is derived from our unaudited pro forma combined
condensed statement of operations, included elsewhere in this prospectus, as if
the acquisition of Pneutech had occurred on July 1, 2003. Certain pro forma
adjustments and eliminations have been reflected to account for the combination
and are described in the notes to the unaudited pro forma combined condensed
statement of operations.
                                                          Year Ended
                                                           June 30,
                                                             2004
                                                        -------------
Statement of Operations Data:
     Revenues                                           $      97,559
     Gross profit                                              17,218
     Operating income (loss)                                 (12,315)
     Net income (loss)                                       (23,415)

  Common Share Data:
     Net loss per share - Basic*                               (1.10)
     Common shares outstanding*                            21,250,000

*        Common shares outstanding used herein are those of the combined Thomas
         Equipment and Pneutech as if the acquisition of Pneutech had occurred
         at the beginning of the period presented. No affect of dilutive shares
         are included as such shares would be antidilutive.

                   REMAINDER OF PAGE LEFT INTENTIONALLY BLANK


                                       9


  Amounts reported throughout this prospectus derived from specific financial
statements are translated to U.S. dollars at various period end rates or average
 period rates. Other amounts not related to results of operations or financial
     condition have been translated into U.S. dollars at the March 31, 2005
          translation rate of $0.822 U.S. dollars per Canadian dollar

     As noted in the financial summary above, the financial statements and
   Management's Discussion and Analysis of Financial Condition and Results of
  Operations amounts are stated in thousands. Amounts in all other sections of
                 this prospectus are stated in whole dollars .

RISK FACTORS

         This investment has a high degree of risk. Before you invest you should
carefully consider the risks and uncertainties described below and the other
information in this prospectus. Each of the following risks may materially and
adversely affect our business, results of operations and financial condition.
These risks may cause the market price of our common stock to decline, which may
cause you to lose all or a part of the money you paid to buy our common stock.

         We provide the following cautionary discussion of risks, uncertainties
and possible inaccurate assumptions relevant to our business and our products.
These are factors that we think could cause our actual results to differ
materially from expected results.

Risks Relating to Our Business

Thomas Equipment Limited, Our Predecessor, Was in Poor Financial Condition and
Had a History of Operating Losses Which Raised Substantial Doubt About its
Ability to Continue as a Going Concern at the Date We Acquired Their Operating
Business and Certain Assets.

         As described in Thomas Equipment Limited's financial statements, Thomas
Equipment Limited was not generating sufficient cash flows to cover its
operating costs and to fund investments in working capital and additions to
property, plant and equipment. Thomas Equipment Limited also had a working
capital deficit and shareholder's deficiency at October 1, 2004, the date we
acquired their business and certain assets. For the year ended June 30, 2004,
Thomas Equipment Limited had sales of $55,705,000 and a net loss of $11,555,000.
In their report dated January 7, 2005, Thomas Equipment Limited's independent
registered public accountants, PricewaterhouseCoopers LLP indicated that the
financial statements were affected by conditions and events that cast
substantial doubt on Thomas Equipment Limited's ability to continue as a going
concern. If we are unable to overcome these financial difficulties, our success
in the future may also be in jeopardy.

      We Have Experienced Significant Losses Since October 1, 2004, and Must
Obtain Needed Capital Through Operations or Other Sources or We Will be Required
to Curtail or Cease Certain Operations

         Since our acquisition of this business on October 1, 2004 we have also
experienced negative cash flows in our first six months of operations which is
likely to continue until such time as our receivables become due and their
collection will begin to offset the cash used in paying our operating expenses.
For the three months ended December 31, 2004, we had sales of $14,633,000 and a
net loss of $8,158,000,which included non-cash items totaling approximately
$7,500,000 consisting primarily of stock based compensation, depreciation and
amortization of debt discount related to the issuance of warrants. For the three
months ended March 31, 2005, we had sales of $17,036,000 and a net loss of
$3,744,000, which included non-cash items totaling approximately $1,900,000
consisting primarily of depreciation and amortization of debt discount. Our
ability to continue as a going concern and to meet our obligations as they fall
due is dependant upon timely collection of receivables, our ability to secure
additional financing as required and upon attaining profitable operations. While
we believe we have sufficient funding in place to enable us to continue as a
going concern for at least the next 12 months, there is no assurance that our
collections will be timely or that we will have access to available borrowings
if needed in the future. The failure to obtain any such needed capital could
cause us to curtail or cease particular operations.


                                       10


We Have in The Past And May in the Future Acquire Other Businesses Which Could
be Difficult to Integrate, Thereby Reducing Our Opportunities for Success.

         We recently completed the acquisitions of Thomas Equipment 2004 and
Pneutech. In the future, we may acquire or make strategic investments in other
complementary businesses. We have limited experience in acquiring or investing
in other businesses and we may not be successful in completing, financing, or
integrating an acquired business into our existing operations.

         Any such acquisitions could involve the dilutive issuance of equity
securities or the incurrence of debt. In addition, although we have not
experienced any of these problems to date, the acquisition of businesses pose
numerous additional risks, such as:

         o        unanticipated costs associated with the acquisition or
                  investment;

         o        diversion of management time and resources;

         o        problems in assimilating and integrating the new business
                  operations;

         o        potential loss of key customers or personnel of an acquired
                  company;

         o        increased legal and compliance costs; and

         o        unanticipated liabilities of an acquired company.

         Further, although an acquired company may have already developed and
marketed products, we can not assure you that the products will continue to be
successful, that product enhancements will be made in a timely fashion or that
pre-acquisition due diligence will have identified all possible issues that
might arise with respect to the acquired company or its products and that could
materially and adversely affect our business.

We Face Intense Competition from Multinational Manufacturers, Which Could
Materially and Adversely Affect Pricing Policies and Resultant Profitability.

         Thomas Equipment's construction equipment product lines face
competition in each of our markets. In general, each line competes with a small
group of companies, all of which are larger than Thomas Equipment. In addition,
the agriculture equipment industry has become significantly consolidated, which
affects our ability to compete. The agriculture equipment markets in North
America are highly competitive and require substantial capital outlays. We
compete within these equipment markets based primarily on products sold, price,
quality, service and distribution. From time to time, the intensity of
competition results in price discounting in a particular industry or region.
Such price discounting puts pressure on margins and can negatively impact
operating profit. Outside of the United States and Canada, certain competitors
enjoy competitive advantages inherent to operating in their home countries.

          Our outlook depends on a forecast of our share of industry sales. An
unexpected reduction in that share could result from pricing or product
strategies pursued by competitors, unanticipated product or manufacturing
difficulties, a failure to price the product competitively, or an unexpected
buildup in competitors' new machine or dealer owned rental fleets, leading to
severe downward pressure on machine rental rates and/or used equipment prices.
The environment also remains very competitive from a pricing standpoint.
Additional price discounting would result in lower than anticipated price
realization.

Our Sales Growth is Tied to Global Economic Conditions and Changes in Interest
Rates and Currency Exchange Rates Could Affect Our Anticipated Revenue.

         We are exposed to market risk from changes in interest rates as well as
fluctuations in currency. A worldwide economic recovery is now underway. If
interest rates rise significantly, this recovery could be less robust than
assumed, likely weakening our machinery sales.

         We currently do not engage in hedging transactions that would mitigate
losses from changes in interest rates or currency fluctuation which could result
in higher than expected costs or lower than expected sales.


                                       11


We Rely Heavily on Commodities in the Manufacturing of Our Equipment and Price
Fluctuations Can Have a Material and Adverse Affect on the Cost Structure of Our
Business.

         We are exposed to fluctuations in market prices for commodities,
especially steel. Due to increasing global demand for steel, coupled with steel
supply constraints, the cost of steel increased significantly during 2004 (the
world steel price index rose approximately 125% between June 2003 and June
2004). At this time, we are unable to predict the potential impact of future
increases in steel costs on the cost of our products, or our ability, if any, to
increase the selling price of our products to cover such costs. We have not yet
established arrangements to hedge commodity prices and, where possible, to limit
near-term exposure to fluctuations in raw material prices. As a result, the cost
to manufacture our products may rise at a time when we are unable to increase
the selling price of such products.

Our Business is Subject to Environmental Regulations, with Which the Failure to
Comply Could Result in Substantial Penalties.

         We are regulated by various local and international environmental laws
governing our use of substances and control of emissions in all our operations.
Compliance with these laws could have a material impact on our capital
expenditures, earnings, or competitive position. Our failure or inability to
comply with the applicable laws and regulations could result in monetary or
other penalties, resulting in unanticipated expenditures or restrictions on our
ability to operate.

We Are Dependent on Third-Party Dealers for Much of Our Thomas Equipment Sales,
Which Could Reduce Our Ability to Gain a Foothold in the Marketplace.

         We are attempting to build the Thomas brand through direct retail
sales, dealer networks and major supply agreements with companies such as United
Rental, the largest US equipment rental chain. Dealers carry inventories of both
new and rental equipment and adjust those inventories based on their assessments
of future needs. Such adjustments can impact our results either positively or
negatively. The current outlook assumes dealers will reduce inventories slightly
in the coming year; more drastic reductions would adversely affect sales.

We Have Recently Entered Into a Supply Agreement with Hyundai Heavy Industries
Co., Ltd., the Loss of Which Would Result in Significantly Lower Sales Than
Anticipated.

         In February 2005, we entered into an agreement with Hyundai Heavy
Industries Co., Ltd. pursuant to which we were engaged as the sole and exclusive
supplier of private label skid loaders, accessories and parts to be sold by
Hyundai throughout the world. The initial term of the agreement with Hyundai is
for two years and will be automatically renewed for successive terms of one year
unless terminated. We anticipate sales to Hyundai to represent a substantial
portion of our skid loader sales for the foreseeable future, although there is
no minimum sales requirement contained in the agreement. The termination of the
Hyundai agreement for any reason or a volume of sales which is materially below
our anticipated levels would result in substantially lower sales revenue for
Thomas Equipment overall.

A Disruption Or Termination Of Our Relationships With Certain Suppliers Could
Have A Material Adverse Effect On Our Operations.

      Certain of the components included in our products are obtained from a
limited number of suppliers, including in particular the engines used for our
skid loaders. Disruption or termination of supplier relationships could have a
material adverse effect on our operations. We believe that alternative sources
could be obtained, if necessary, but the inability to obtain sufficient
quantities of the components or the need to develop alternative sources, if and
as required in the future, could result in delays or reductions in product
shipments which in turn may have an adverse effect on our operating results and
customer relationships.

We May Face Product Liability Claims, Which Could Result In Losses In Excess of
Our Insurance Coverage or in Our Inability to Obtain Adequate Insurance Coverage
in the Future.


                                       12


      Like most manufacturing companies, we may be subject to significant claims
for product liability and may have difficulty in obtaining product liability
insurance or be forced to pay high premiums. We currently have product liability
insurance and have not been subject to material claims for product liability.
However, there can be no assurance that we will be able to obtain adequate
insurance in the future or that our present or future insurance would prove
adequate to cover potential product claims.

Our Sales Are Subject to Numerous Political Factors, Including Terrorist Attacks
Which Could Cause Unanticipated Declines in Sales.

Political factors in the United States and abroad have a major impact on global
companies. Our business outlook assumes that there will be no major terrorist
attacks. If there is a major terrorist attack, confidence could be undermined,
causing a sharp drop in economic activities and our sales. Attacks in major
developed economies would be the most disruptive.

Risks Relating to Our Current Financing Arrangements

There are a Large Number of Shares Underlying Warrants that May Be Available For
Future Sale and the Sale of These Shares May Depress the Market Price of Our
Common Stock.

         As of the date of this prospectus, we had 21,250,000 shares of common
stock issued and outstanding and we had convertible notes which could require
the issuance of approximately 17,000,000 additional shares of common stock to
Laurus Master Fund, Ltd., convertible preferred stock which is convertible into
8,333,333 shares of common stock and options and warrants which could require
the issuance of 10,814,395 additional shares of common stock. Of these shares,
26,985,000 including the shares issuable upon conversion of the convertible
notes and upon exercise of certain of our warrants and option, are being
registered hereunder. Upon registration such shares may be sold without
restriction. The sale of these shares may adversely affect the market price of
our common stock.

The Issuance of Shares Upon Conversion of the Convertible Notes and Exercise of
Outstanding Warrants and Options May Cause Immediate and Substantial Dilution to
Our Existing Stockholders.

         The issuance of shares upon conversion of the convertible notes and
exercise of warrants and options may result in substantial dilution to the
interests of other stockholders since the selling stockholders may ultimately
convert and sell the stock at a price lower than the current market prices.
Although Laurus may not convert their convertible notes and/or exercise their
warrants if such conversion or exercise would cause them to beneficially own
more than 9.99% of our outstanding common stock, this restriction does not
prevent Laurus from converting and/or exercising some of their holdings, selling
the shares obtained and then converting the rest of their holdings. In this way,
Laurus could sell more than this limit while never holding more than this limit.

If We Are Required for any Reason to Repay Our Outstanding Secured Convertible
Notes to Laurus at an Unexpected Time, We Could Deplete Our Working Capital. Our
Inability to Repay the Secured Convertible Notes, If Required, Could Result in
Legal Action Against Us, Which Could Require the Sale of Substantial Assets.

         In November 2004, we entered into various agreements, as subsequently
amended, with Laurus for the sale of up to $27,900,000 principal amount of
secured promissory notes. The $7,900,000 of secured convertible term notes are
due and payable, with interest, on a monthly basis over a three-year period,
unless sooner converted into shares of our common stock. The secured revolving
note and minimum borrowing note in the maximum amount of $20,000,000 are due in
three years, unless sooner converted into shares of our common stock. Any event
of default such as our failure to repay the principal or interest when due, our
failure to pay any taxes when due, our failure to perform under and/or commit
any breach of the security agreements or any ancillary agreement, any event of
default under any other indebtedness by us or any of our subsidiaries could
require the early repayment of the secured convertible notes at a rate of 115%,
including a default interest rate on the outstanding principal balance of the
notes if the default is not cured within the specified grace period. If we are
required to repay the secured convertible notes, we would be required to use our
limited working capital and we would need to raise additional funds. If we were
unable to repay the notes when required, the note holders could commence legal
action against us and foreclose on all of our assets to recover the amounts due.
Any such action would require us to curtail or cease operations.


                                       13


If an Event of Default Occurs under the Security Agreement, Secured Convertible
Notes, Warrants, Stock Pledge Agreement or Subordination Agreement, the
Investors Could Take Possession of all Our and Our Subsidiaries' Assets.

     In connection with the security agreement we entered into in November 2004,
as subsequently amended, we executed a stock pledge agreement in favor of Laurus
granting them a first priority security interest in the common stock of our
subsidiaries, all of our and our subsidiaries' goods, inventory, contractual
rights and general intangibles, receivables, documents, instruments, chattel
paper, and intellectual property. The security agreement and stock pledge
agreement state that if an event of default occurs under any agreement with the
lenders, the lenders have the right to take possession of the collateral, to
operate our business using the collateral, and have the right to assign, sell,
lease or otherwise dispose of and deliver all or any part of the collateral, at
public or private sale or otherwise to satisfy our obligations under these
agreements.

If we Sell any Securities at an Effective Price below the Conversion Price of
Our Laurus Debentures or Exercise Price of Our Laurus Warrants, Such Conversion
and Exercises Prices Will be Lowered, Resulting in Additional Dilution to
Shareholders

         We have allocated and registered in this offering approximately
16,000,000 shares of common stock to cover the conversion of the debentures and
exercise of warrants by Laurus. If we engage in a lower priced transaction than
our current financing arrangements with Laurus while the convertible debentures
or warrants are outstanding, then the conversion price of the debentures and
exercise price of the warrants will be adjusted to the lower transaction price
and we may be required to issue additional shares of common stock to Laurus. If
this occurs, the number of shares which are registered pursuant to this
prospectus may not be adequate. Accordingly, we may be required to file a
subsequent registration statement covering additional shares. If the shares we
have allocated and are registering herewith are not adequate and we are required
to file an additional registration statement, we may incur substantial costs in
connection therewith.


If we Sell any Securities at an Effective Price below $3.00 Per Share, the
Exercise Price of Our Roynat Warrants Will be Lowered, Resulting in Additional
Dilution to Shareholders


         We have allocated and registered in this offering 1,000,000 shares of
common stock to cover the exercise of warrants by Roynat Merchant Capital. If we
engage in a lower priced transaction than $3.00 per share while the Roynat
warrants are outstanding, then the exercise price of the warrants will be
adjusted to account for the dilution to Roynat and we may be required to issue
additional shares of common stock to Roynat. If this occurs, the number of
shares which are registered pursuant to this prospectus may not be adequate.
Accordingly, we may be required to file a subsequent registration statement
covering additional shares. If the shares we have allocated and are registering
herewith are not adequate and we are required to file an additional registration
statement, we may incur substantial costs in connection therewith.

We Are Required To Redeem or Purchase Our Subsidiary's Preference Shares, Which
Will Require Us to Pay $8,303,000, Which May Not be Available or Which Would
Reduce Working Capital


         In connection with our acquisition of the assets of Thomas Equipment
Limited, our wholly-owned subsidiary, Thomas Equipment 2004 Inc. issued
Preference Shares having a value of $8,220,000 to McCain Foods Limited, the
owner of Thomas Equipment Limited. We may redeem the preference shares at any
time and are required to purchase them from McCain on April 26, 2006, if not
previously redeemed. We may be unable to pay such amount due to unavailability
of sufficient working capital. In such event, we would be required to raise
additional capital which may not be available on reasonable terms or at all or
we could become subject to legal suit by McCain for payment of all amounts due
to them.



                                       14


Our common stock may be subject to the "penny stock" rules of the SEC and the
trading market in our securities is limited, which makes transactions in our
stock cumbersome and may reduce the value of an investment in our stock.

         The Securities and Exchange Commission has adopted Rule 3a51-1 which
establishes the definition of a "penny stock," for the purposes relevant to us,
as any equity security that has a market price of less than $5.00 per share or
with an exercise price of less than $5.00 per share, subject to certain
exceptions. For any transaction involving a penny stock, unless exempt, Rule
15g-9 requires:

         o        that a broker or dealer approve a person's account for
                  transactions in penny stocks; and

         o        the broker or dealer receive from the investor a written
                  agreement to the transaction, setting forth the identity and
                  quantity of the penny stock to be purchased

         In order to approve a person's account for transactions in penny
stocks, the broker or dealer must:

         o        obtain financial information and investment experience
                  objectives of the person; and

         o        make a reasonable determination that the transactions in penny
                  stocks are suitable for that person and the person has
                  sufficient knowledge and experience in financial matters to be
                  capable of evaluating the risks of transactions in penny
                  stocks.

        The broker or dealer must also deliver, prior to any transaction in a
penny stock, a disclosure schedule prescribed by the SEC relating to the penny
stock market, which, in highlight form:

         o        sets forth the basis on which the broker or dealer made the
                  suitability determination; and

         o        that the broker or dealer received a signed, written agreement
                  from the investor prior to the transaction.

         Generally, brokers may be less willing to execute transactions in
securities subject to the "penny stock" rules. This may make it more difficult
for investors to dispose of our common stock and cause a decline in the market
value of our stock.

         Disclosure also has to be made about the risks of investing in penny
stocks in both public offerings and in secondary trading and about the
commissions payable to both the broker-dealer and the registered representative,
current quotations for the securities and the rights and remedies available to
an investor in cases of fraud in penny stock transactions. Finally, monthly
statements have to be sent disclosing recent price information for the penny
stock held in the account and information on the limited market in penny stocks.

Forward-Looking Statements

         Information in this prospectus contains "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These
forward-looking statements can be identified by the use of words such as
"believes," "estimates," "could," "possibly," "probably," "anticipates,"
"projects," "expects," "may," "will," or "should" or other variations or similar
words. No assurances can be given that the future results anticipated by the
forward-looking statements will be achieved. The following matters constitute
cautionary statements identifying important factors with respect to those
forward-looking statements, including certain risks and uncertainties that could
cause actual results to vary materially from the future results anticipated by
those forward-looking statements. Among the key factors that have a direct
bearing on our results of operations are the effects of various governmental
regulations, fluctuations in currency exchange rates or interest rates, the
fluctuation of our direct costs and the costs and effectiveness of our operating
strategy.


                                       15


                                 USE OF PROCEEDS

         This prospectus relates to shares of our common stock that may be
offered and sold from time to time by the selling stockholders. We will not
receive any proceeds from the sale of shares of common stock in this offering.
However, we will receive the sale price of any common stock we sell to the
selling stockholders upon exercise of the option and/or warrants. We expect to
use the proceeds received from the exercise of the option and/or warrants, if
any, for general working capital purposes.

            MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information

         Our common stock is currently quoted on the Over-The-Counter Bulletin
Board under the symbol TEQI. For the periods indicated, the following table sets
forth the high and low bid prices per share of common stock. The below prices
represent inter-dealer quotations without retail markup, markdown, or commission
and may not necessarily represent actual transactions. All prices have been
adjusted for a one-for-40 reverse stock split effected in October 2004.

                                                            2005
                                                  -------------------------
Common Stock                                      High         Low
- ------------------------------------------------- ------------ ------------
Second Quarter Through June 8, 2005               $6.10        $3.00
First Quarter Ended March 31, 2005                $8.00        $3.90

                                                  -------------------------
                                                            2004
                                                  -------------------------
Common Stock                                      High         Low
- ------------------------------------------------- ------------ ------------
Fourth Quarter Ended December 31, 2004            $5.00        $0.40
Third Quarter Ended September 30, 2004            $2.00        $1.20
Second Quarter Ended June 30, 2004                $2.40        $1.20
First Quarter Ended March 31, 2004                $2.40        $0.40

                                                            2003
                                                  -------------------------
Common Stock                                      High         Low
- ------------------------------------------------- ------------ ------------
Fourth Quarter Ended December 31, 2003            $2.80        $0.80
Third Quarter Ended September 30, 2003            $2.40        $1.20
Second Quarter Ended June 30, 2003                $8.00        $1.60
First Quarter Ended March 31, 2003                $3.20        $0.40

         As of June 1, there were approximately 233 stockholders of record of
our common stock. Our registrar and transfer agent is Interwest Stock Transfer,
Inc.

Dividend Policy

         We have not adopted any policy regarding the payment of dividends on
our common stock. We do not intend to pay any cash dividends on our common stock
in the foreseeable future. All cash resources are expected to be invested in
developing our business. We are not permitted to pay dividends on our common
stock except with the prior consent of Laurus.


                                       16


                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

         The following discussion and analysis of the financial condition and
results of our operations relates to the successor company Thomas Equipment
since our inception on October 1, 2004, and to our predecessor company Thomas
Equipment Limited and therefore covers periods prior and subsequent to our
acquisition of the business and assets of the predecessor company. We acquired
Pneutech on February 28, 2005 and its results of operations from that date are
included in our operating results.

         The financial statements underlying the discussion that follows are
those of the Predecessor as of June 30, 2004 and 2003 and for each of the two
years in the period ended June 30, 2004, the consolidated financial statements
of the Successor as of March 31, 2005 and for the six months ended March 31,
2005 and the consolidated financial statements of Pneutech as of October 31,
2004 and for each of the two years in the period then ended, which are included
elsewhere in this prospectus. The discussion should be read in conjunction with
those financial statements and the notes thereto.

         Amounts reported throughout this discussion derived from specific
financial statements are translated at various period end rates or average
period rates. Other amounts not related to results of operations or financial
condition have been translated to U.S. dollars at the March 31, 2005 rate of
$0.822 per Canadian dollar.

         This discussion contains forward-looking statements that involve risks
and uncertainties. All statements regarding future events, our future financial
performance and operating results, our business strategy and our financing plans
are forward-looking statements. In many cases, you can identify forward-looking
statements by terminology, such as "may," "will," "should," "expects,"
"intends," "plans," "anticipates," "believes," "estimates," "predicts,"
"potential" or "continue," or the negative of such terms and other comparable
terminology. These statements are only predictions. Known and unknown risks,
uncertainties and other factors could cause our actual results to differ
materially from those projected in the forward-looking statements. In evaluating
these statements, you should specifically consider various factors, including,
but not limited to, those set forth under "Risk Factors" and elsewhere in this
registration statement.

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

Overview
- --------------------------------------------------------------------------------

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

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

         Pneutech, established in 1973, and its subsidiaries are engaged in the
fluid power industry providing distribution and manufacturing of pneumatic and
hydraulic components and systems for the industrial market, distribution and
manufacturing of hydraulic components and systems for the mobile market and
manufacturing of hydraulic cylinders and metal gaskets for the industrial
market. Pneutech is a strategic supplier to Thomas Equipment, as well as 15,000
other active customers. During the year ended June 30, 2004, Pneutech supplied


                                       17


Thomas with approximately $4 million in hydrostatic transmission equipment (8%
of Pneutech's sales and 8% of Thomas' cost of sales during that period).
Pneutech maintains nine manufacturing and distribution facilities in Canada and
one manufacturing plant in South Korea. It has a diverse array of capabilities
in the distribution of fluid power components as well as manufacturing spiral
wound metal gaskets and steel components.

         Although a significant portion of our sales are transacted in the U.S.,
Korea and Europe, most of our assets and operations are in Canada and, as a
result, our functional currency for recording transactions is the Canadian
dollar, which is then translated into U.S. dollars for reporting purposes.

Reorganization of Maxim Mortgage Corporation to Thomas Equipment, Inc.

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

         Maxim Mortgage Corporation had no active business operations;

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

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

         Under the terms of the agreement, we acquired 100% of the common stock
of Thomas Equipment 2004 and Thomas Ventures in exchange for the issuance by us
of 16,945,000 common shares (approximately 94% of the outstanding shares
immediately after the reorganization). Although we were the legal acquirer,
Thomas Equipment 2004 has been identified as the accounting acquirer and as such
the acquisition has been accounted for as a recapitalization. The officers and
directors of Thomas Equipment 2004 and Thomas Ventures assumed similar positions
with us. As a result, our consolidated financial statements represent the
results of operations and cash flows of the accounting acquirer from the date of
its inception, October 1, 2004.

         Immediately prior to the reorganization:


         Thomas Equipment 2004, Inc. issued an aggregate of 12,945,000 shares of
its common stock to 13 accredited investors for an aggregate consideration of
$451. Of such shares, 8,746,706 shares were purchased for $87 by Frank Crivello,
a principal stockholder, 100,000 shares were purchased by Crivello Team Inc.,
500,000 shares were purchased for $5 by David Marks, our Chairman and a
principal stockholder, and 2,875,294 shares were for $28 purchased by a
corporation controlled by Clifford Rhee, our President and a principal
stockholder.


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

         Management has estimated, using the price that the highest paying
founding shareholder paid and an analysis of the market price of the stock
immediately after the reorganization, that the fair value of the shares was
$0.50. The difference resulted in an immediate expense of $5,461.

Acquisition of Operating Assets from Predecessor Business - Thomas Equipment
Limited

         On November 9, 2004, Thomas Equipment 2004 acquired, effective as of
October 1, 2004, the business, fixed assets and inventory of Thomas Equipment
Limited, an unrelated company for $37,182, including $5,254 in capital leases.
Thomas Equipment Limited is considered to be a predecessor business of ours. As
a result, we have included discussions of its results of operations for the
periods prior to the acquisition.


                                       18


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

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

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


         o        $16,198 was paid in cash upon the closing of the acquisition;


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

         o        $8,370 was paid on closing from the proceeds of the sale by
                  Thomas Equipment 2004 to McCain Foods Limited, the parent of
                  Thomas Equipment Limited of 1,000 Thomas Equipment 2004
                  preference shares; and


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


         o        $5,254 in capital lease obligations were entered into with
                  McCain Foods Limited.

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

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

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

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

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

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

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

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

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

         Concurrently with the closing of the acquisition of the Thomas
Equipment Limited assets, we entered into agreements with Laurus Master Funds,
Ltd, a Cayman Islands corporation, pursuant to which we sold convertible debt,


                                       19


an option and a warrant to purchase common stock to Laurus in a private offering
pursuant to exemption from registration under Section 4(2) of the Securities Act
of 1933. The securities sold to Laurus included the following:

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

         o        A secured revolving note with a principal amount not to exceed
                  $16,000, including the minimum borrowing amount;

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

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

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

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

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


         The principal amount of the secured convertible term note, which was
increased from $16,000 to $20,000 as discussed below, is repayable at the rate
of $207 per month together with accrued but unpaid interest, commencing on July
1, 2005. Such amounts may be paid, at the holder's option (i) in cash with a 3%
premium; or (ii) in shares of common stock, assuming the shares of common stock
are registered under the Securities Act of 1933. If paid in shares of common
stock the number of shares to be issued shall equal the total amount due,
divided by $1.50. If the average closing price of the common stock for five
consecutive trading days prior to an amortization date is equal to or greater
than $1.65, we may require the holder to convert into common stock an amount of
principal, accrued interest and fees due under the term note equal to a maximum
of 25% of the aggregate dollar trading volume of the common stock for the 22
consecutive trading days prior to a notice of conversion. The term note may be
redeemed by us in cash by paying the holder 103% of the principal amount, plus
accrued interest. The holder of the term note may require us to convert all or a
portion of the term note, together with interest and fees thereon at any time.
The number of shares to be issued shall equal the total amount to be converted,
divided by $1.50.


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

         Upon an issuance of shares of common stock below the fixed conversion
price, the fixed conversion price of the notes will be reduced accordingly. The
conversion price of the secured convertible notes may be adjusted in certain
circumstances such as if we pay a stock dividend, subdivide or combine
outstanding shares of common stock into a greater or lesser number of shares, or
take such other actions as would otherwise result in dilution. 115% of the full
principal amount of the convertible notes are due upon default under the terms
of the convertible notes. Laurus has contractually agreed to restrict its
ability to convert the convertible notes if such conversion would exceed the
difference between the number of shares of common stock beneficially owned by
the holder or issuable upon exercise of the warrant and the option held by such
holder and 9.99% of our outstanding shares of common stock.

         On January 26, 2005, Thomas Equipment and Laurus amended certain terms
of the original agreements to increase the maximum principal amount of the
secured revolving note to $20,000. In addition, we issued Laurus a common stock


                                       20


purchase warrant exercisable to purchase 400,000 shares of our common stock for
a period of seven years at a price of $2.25 per share.

Acquisition of Operating Businesses - Pneutech, Inc. and Subsidiaries


         On February 28, 2005, we acquired 100% of the common stock of Pneutech,
in exchange for the issuance by us of a total of 1,082,641 shares of our common
stock and warrants to purchase 211,062 shares of common stock, exercisable at
$3.00 per share. Based on the market price of our common stock when the terms of
the Pneutech acquisition were agreed and announced, the common stock was valued
at $3,470. The warrants were valued at $260 using the Black-Scholes option
pricing model, based on the value of our common stock when the acquisition terms
were agreed and announced. An additional 167,359 shares of common stock were
issued as of the closing in exchange for the cancellation of approximately $494
of debt owed by Pneutech. We also paid $6,589 to repay certain Pneutech debt and
preferred stock and to redeem outstanding stock warrants.

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


Roynat Merchant Capital Inc.

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

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

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

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


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


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

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

Laurus Master Fund, Ltd.

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

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

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


                                       21



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

         The principal amount of the secured convertible term note is repayable
at the rate of $66 per month together with accrued but unpaid interest,
commencing on July 1, 2005. Such amounts may be paid, at the holder's option (i)
in cash with a 3% premium; or (ii) in shares of common stock, assuming the
shares of common stock are registered under the Securities Act of 1933. If paid
in shares of common stock the number of shares to be issued shall equal the
total amount due, divided by $1.50. If the average closing price of our common
stock for five consecutive trading days prior to an amortization date is equal
to or greater than $1.65, we may require the holder to convert into common stock
an amount of principal, accrued interest and fees due under the term note equal
to a maximum of 25% of the aggregate dollar trading volume of the common stock
for the 22 consecutive trading days prior to a notice of conversion. The term
note may be redeemed by us in cash by paying the holder 103% of the principal
amount, plus accrued interest. The holder of the term note may require us to
convert all or a portion of the term note, together with interest and fees
thereon at any time. The number of shares to be issued shall equal the total
amount to be converted, divided by $1.50.


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


         115% of the full principal amount of the convertible note is due upon
default under the terms of the convertible note. Laurus has contractually agreed
to restrict its ability to convert all convertible notes if such conversion
would exceed the difference between the number of shares of common stock
beneficially owned by the holder or issuable upon exercise of the warrant and
the option held by such holder and 9.99% of the outstanding shares of common
stock of Thomas Equipment.


RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------

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

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

RESULTS OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 2004 COMPARED TO 2003

     The information contained in this section, "For the year ended June 30,
  2004 compared To 2003" is related to our predecessor and is the only section
     in this MD&A that has been reviewed with management of that predecessor
                       business, Thomas Equipment Limited.

Going Concern

         The financial statements of the predecessor business, Thomas Equipment
Limited, have been prepared on a going concern basis which contemplates the
realization of assets and the satisfaction of liabilities and commitments in the


                                       22


normal course of business for the foreseeable future. This company was not
generating sufficient cash flows to cover its operating costs and to fund
investments in working capital and additions to property, plant and equipment,
and also had a working capital deficit and shareholder's deficiency at the date
the business was acquired by Thomas Equipment.


         These conditions cast substantial doubt upon the validity of the going
concern assumption. Thomas Equipment Limited's parent, McCain Foods Limited has
committed to provide financial support to ensure Thomas Equipment Limited is
able to settle its obligations after the sale of its business, fixed assets and
inventory to Thomas Equipment. However this commitment is limited to Thomas
Equipment Limited's remaining obligations as they become due, and does not
involve any continued financial support of the business now operated by Thomas
Equipment.


         As a result, the ability of Thomas Equipment to continue as a going
concern and to meet its obligations as they fall due is dependant upon our
ability to secure additional financing as required and upon attaining profitable
operations (see Liquidity and Capital Resources section below for further
discussion on this matter).

Market Conditions and Company Developments in 2004

         In 2004, Thomas Equipment Limited continued to operate under
challenging market conditions. The weakness of the U.S. dollar negatively
impacted Thomas Equipment Limited's financial performance, as the majority of
Thomas Equipment Limited's costs and expenses were incurred in Canadian dollars.
In addition, escalating raw material costs, particularly steel (the world steel
price index rose approximately 125% between June 2003 and June 2004) put
pressure on gross margins and the uncertainty of raw material costs is expected
to continue to remain a challenge for Thomas Equipment in the future.

         Thomas Equipment Limited's market share in the Canadian loader market
for 2004 was approximately 3.76% compared to approximately 3.50% in 2003, based
on information obtained from the Association of Equipment Manufacturers.

         2004 represented a vital year for Thomas Equipment Limited in terms of
innovation. The new to market T900 Screen, which is less expensive and more
mobile compared to a competitor's similar product was developed to meet the
needs and wants of customers. Product lines were also expanded to include a
variety of loaders and mini skids (T320, T205, T250/ T255, 35DT).



- ----------------------------------------------------------------------------------------------------------------
For the year ended June 30                   2003                   2004                         % Change
- ----------------------------------------------------------------------------------------------------------------
                                                                                               2003 to 2004
                                                                                 
Revenues                                      $49,274      100.0%    $55,705      100.0%           13.1%
  Cost of Goods                                43,615       88.5%     47,559       85.4%            9.0%
Gross Profit                                    5,659       11.5%      8,146       14.6%           43.9%
  Selling Expenses                              5,810       11.8%      6,179       11.1%            6.4%
  G&A Expenses                                  3,551        7.2%      5,472        9.8%           54.1%
  Research and Development                        134        0.3%      1,052        1.9%          685.1%
  Provision for Doubtful Accounts                 197        0.4%      1,657        3.0%          741.0%
  Other Expense (Income)                       (3,051)      (6.2%)       702        1.3%          123.0%
Operating Loss                                   (982)      (2.0%)    (6,916)     (12.4%)         604.3%
  Net Financial (Income) Expense                  (34)        --       4,574        8.2%            *
  Provision for Income Taxes                       72        0.1%         65        0.1%          (9.72%)
Net Loss                                       (1,020)      (2.1%)   (11,555)     (20.7%)       1,032.8%
- ----------------------------------------------------------------------------------------------------------------

         * Percentage too large to be meaningful


                                       23


Revenues

   Revenues increased by 13% to $55,705 for the year ended June 30, 2004
   compared to $49,274 for fiscal 2003. Overall sales volumes in 2004 remained
   relatively unchanged from 2003, although the product mix changed due to a
   decision in fiscal 2004 to reduce the number of loaders being sold through
   the auction channel, and focus on enhancing stronger dealer relationships to
   allow Thomas Equipment Limited to increase its overall profitability on its
   sales. By the end of fiscal 2004, Thomas Equipment Limited had entirely
   exited the sale of loaders through the auction channel.

   The primary reasons for the increase in revenues relates to selling price
   increases to compensate for escalating raw material increases (price
   increases ranged between 3% - 5% depending on geographical location and
   product line), coupled with the weakening of the U.S. dollar, as
   approximately 35% of Thomas Equipment Limited sales were denominated in
   non-US dollar currencies (primarily the Euro and Canadian dollar) whose
   relative value increased compared to the previous year.

Cost of Sales and Gross Profit

   Cost of sales increased by 9% to $47,559 for the year ended June 30, 2004
   compared to $43,615 for fiscal 2003 mainly due to a 40% increase in Thomas
   Equipment Limited's cost of steel (which accounts for approximately 10% of
   Thomas Equipment Limited's cost of sales) coupled with the weakening of the
   U.S. dollar which increased manufacturing costs, as those costs are primarily
   incurred in Canadian dollars.

   As a result of the above, gross profit margin increased by 43.9% to $8,146
   for the year ended June 30, 2004 compared to $5,659 for fiscal 2003.

Selling Expenses


   Selling expenses increased by 6.4% to $6,179 for the year ended June 30, 2004
   compared to $5,810 for fiscal 2003. As a percentage of revenues, selling
   costs decreased from 11.8% in 2003 to 11.1% in 2004. This decrease primarily
   related to Thomas Equipment Limited's focus on its dealer network versus the
   use of auctions in 2003.


General and Administrative Expenses

   General and administrative expenses which consist of administrative expenses,
   insurance, legal and other non-manufacturing related expenses, increased by
   54.1%, or $1,921, to $5,472 in fiscal 2004 compared to $3,551 for fiscal
   2003. The increase in these costs is due in part to the weakening of the U.S.
   dollar as the majority of these costs are incurred in Canadian dollars. This
   was coupled with higher product liability insurance premiums and deductible
   costs, higher legal fees resulting from marketing the company for sale,
   completion of an environmental audit and more aggressive attempts to collect
   delinquent accounts, and higher employee benefit costs due to the reduction
   in the discount rate used to determine the annual benefit cost.

Research and Development Costs

   Research and development costs, including outsourced engineering costs,
   increased by $918 from $134 in fiscal 2003 to $1,052 in fiscal 2004 in an
   effort to expand and improve Thomas Equipment Limited's product lines.

Provision for Doubtful Accounts

   Thomas Equipment Limited's provision for doubtful accounts expense increased
   by $1,460, or 741% to $1,657 in fiscal 2004 from $197 in fiscal 2003. The
   terms of Thomas Equipment Limited's trade and financing receivables extend
   for periods of between 6 - 18 months before they start to become due for
   payment. During the first quarter of 2004 (September 30, 2003), the number
   and magnitude of overdue accounts started to increase relating to sales from
   as early as mid 2002, when the U.S. economy, and to a certain extent the
   world, was in an economic recession. As a result, during the second quarter
   of 2004, management performed a detailed review and investigation of their
   aged receivables and determined that an increase in the provision was


                                       24



   required to reserve for the accounts that were becoming overdue. This was
   continually monitored throughout the year and collection efforts were stepped
   up in an attempt to collect these overdue accounts. See critical accounting
   policies below for a description of the policy and the risk of actual results
   being different than estimates used in determining a provision for doubtful
   accounts.


Other Income (Expense), Net

   Other income (expense) consisted primarily of restructuring charges & foreign
   currency gains and losses, and amounted to a net expense of $702 in 2004
   compared to a net income of $3,051 in 2003. Significant reasons for this
   change are as follows:

         o        Thomas Equipment Limited recorded a restructuring charge of
                  approximately $886 in 2004 related to severance costs
                  associated with a decision to terminate certain employees. The
                  restructuring program's goal was to reduce annual costs by
                  approximately $1,500 (including salaries, benefits and
                  travel).

         o        A foreign exchange loss of $106 was recorded in 2004 versus a
                  gain of $3,061 in 2003 on foreign currency forward exchange
                  contracts entered into to manage some of the company's foreign
                  exchange risk on its U.S. dollar sales. The gain in fiscal
                  2003 was primarily caused by the weakening of the U.S. dollar
                  against the Canadian dollar over the course of fiscal 2003 as
                  the fair value of Thomas Equipment Limited's foreign exchange
                  contracts was greater on June 30, 2003 compared to June 30,
                  2002. In fiscal 2004, many of the contracts with positive fair
                  values matured resulting in a relatively small net loss for
                  the year.

Net Financial Income (Expense)

   Net financial expense, consisting of interest income (expense) and dividends
   on preferred stock, amounted to an expense of $4,574 in 2004 compared to an
   income of $34 in 2003. In 2004, Thomas Equipment Limited recorded a dividend
   of $4,565 which comprised significantly all of the change from 2003. In
   fiscal 2003, prior to the adoption of SFAS 150, the dividends on the
   preferred stock was recorded as dividends in the consolidated statement of
   shareholder's deficiency. As most of the Thomas Equipment Limited's financial
   support from the McCain group was in the form of preferred shares throughout
   fiscal 2003 and most of 2004, interest charges from affiliates within the
   McCain group only amounted to $256 in 2004 and $134 in 2003. Other net
   interest income amounted to $247 in 2004 and $165 in 2003 which primarily
   came from receivables.

Provision for Income Taxes

   Thomas Equipment Limited has historically experienced operating losses, and
   as Thomas Equipment Limited's management were uncertain as to whether Thomas
   Equipment Limited would be able to utilize these tax losses before they
   expire, they provided a reserve for the income tax benefits associated with
   Thomas Equipment Limited's net future tax assets which primarily relate to
   its cumulative net operating losses. The amounts recorded as an income tax
   expense related to large corporation taxes and income taxes incurred by its
   European subsidiary, Thomas Europe NV.

Net Loss

   As a result of the above Thomas Equipment Limited reported a net loss of
   $11,555, for fiscal 2004, compared to a net loss of $1,020 for fiscal 2003.

Comprehensive Loss

   Thomas Equipment Limited recorded losses for currency translation adjustments
   of $165 and $2,369 for fiscal 2004 and 2003, respectively, related to the
   translation of its accounts to U.S. dollars for reporting purposes.


                                       25


RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2005 COMPARED TO
MARCH 31, 2004

The information contained in this section is that of the successor Thomas
Equipment, Inc. for the three months ended March 31, 2005 and that of our
predecessor, Thomas Equipment Limited, for the three months ended March 31,
2004.



- -----------------------------------------------------------------------------------------------------
For the three months ended March 31,
(unaudited)                           2004                    2005                        % Change
- -----------------------------------------------------------------------------------------------------
                                                                                        2004 to 2005
                                                                            
Revenues                            $ 12,622        100.0%    $ 17,036        100.0%       35.0%
  Cost of Goods                       10,902         86.4%      14,770         86.7%       35.5%
Gross Profit                           1,720         13.6%       2,266         13.3%       31.7%
  Selling Expenses                     1,561         12.4%       1,759         10.3%       12.7%
  G&A Expenses                         1,588         12.6%       1,931         11.3%       21.6%
Provision for Doubtful Accounts          265          2.1%          57          0.3%      (78.5%)
  Stock Based Compensation                --         --             --         --          --
  Other (Income) expense                (103)        (0.8%)        226          1.3%      319.4%
Operating Loss                        (1,591)       (12.6%)     (1,707)       (10.0%)      (7.3%)
Net Financial (Income) Expense           (14)        --          2,037         12.0%          *
  Provision for Income Taxes              17         --             --         --             *
Net Loss                              (1,594)       (12.6%)     (3,744)       (22.0%)    (134.9%)
- -------------------------------------------------------------------------------------------------

- -------------------------------------------------------------------------------------------------

      *  Percentage too large  to be meaningful

Revenues

   Results include $4,876 from the acquisition of Pneutech Inc., accounting for
   most of the change in the quarter. For the three months ended March 31, 2005,
   revenues increased by 35% to $17,036 net of intercompany sales of $222
   compared to Thomas Equipment Limited's $12,622 for the same period in 2004.
   Excluding Pneutech overall sales volumes in the quarter ended March 31, 2005
   remained relatively unchanged from the same period in 2004. However, the
   product mix changed due to a decision in fiscal 2004 to reduce the number of
   loaders and screeners being sold through the auction channel, and focus on
   enhancing stronger dealer relationships to allow Thomas Equipment Limited to
   increase its overall profitability on its sales. By July 1, 2004, Thomas
   Equipment Limited had entirely exited the sale of loaders through the auction
   channel as noted above. The impact of this decision was to decrease revenues
   by approximately $1,200 for the quarter ended March 31, 2005. Selling prices
   were increased to compensate for escalating raw material increases
   (approximately 3%). The impact of this increase was approximately $400. As
   approximately 35% of sales were denominated in non U.S. dollar currencies
   (primarily the Euro and the Canadian dollar), the weakening of the U.S.
   dollar, increased reported sales in the quarter ended March 31, 2005 by
   approximately $400 compared to the quarter ended March 31, 2004, as the
   relative value of these non U.S. dollar denominated sales increased compared
   to the previous year.

Cost of Sales and Gross Profit

   Cost of sales includes $3,808 from the acquisition of Pneutech Inc.,
   accounting for most of the change in the quarter. For the three months ended
   March 2005, cost of sales increased 35.5% to $14,770 net of intercompany cost
   of goods of $220 compared to Thomas Equipment Limited's $10,902 for the same
   period in 2004. As a percentage of sales, costs of sales were 86.4% for the
   three months ended March 31, 2004 compared to 86.7% for the same period in
   2005. This slight increase is mainly due to an increase in the price of steel
   (approximately $400).


                                       26


Selling Expenses

   Selling expenses include $339 from the acquisition of Pneutech Inc.,
   accounting for most of the change in the quarter. For the three months ended
   March 2005, selling expenses increased 12.7% to $1,759 compared to $1,561 for
   the same period in 2004. As a percentage of sales, selling costs decreased to
   10.3% in 2005 from 12.4% in Thomas Equipment Limited's year ended June 30,
   2004. This decrease primarily resulted from additional expenditures in 2004
   as Thomas Equipment Limited exited from auction sales and focused on
   increasing dealer sales.

General and Administrative Expenses

   General and Administrative expenses include $573 from the acquisition of
   Pneutech Inc. For the three months ended March 2005, General and
   Administrative expenses increased 21.6% to $1,931 compared to Thomas
   Equipment Limited's $1,588 for the same period in 2004. As a percentage of
   sales, general and administrative costs decreased to 11.3% from 12.6%, mainly
   due to the reduction in staff count initiated in July 2004.

Provision for Doubtful Accounts

   Provision for doubtful accounts expense decreased significantly by 78.5% to
   $57 for the quarter ending March 2005 compared to Thomas Equipment Limited's
   $265 for the same period in 2004. The reason for this decrease is a result of
   the 2004 provision being increased to compensate for the accounts that were
   becoming overdue, as determined by the management review during the quarter
   ended March 31, 2004.

Other Income (Expense), Net

   Other income (expense), consisting of foreign currency losses and other
   miscellaneous expenses, amounted to an expense of $226 in the quarter ended
   March 31, 2005 from Thomas Equipment Limited's net other income of $103 for
   the same quarter ended in 2004. In 2004 Thomas Equipment Limited had a
   foreign exchange gain on foreign currency forward exchange contracts entered
   into to manage some of the company's foreign exchange risk on its U.S. dollar
   sales. The gain in 2004 was primarily caused by the 4.4% weakening of the
   U.S. dollar against the Canadian dollar between June 2003 and March 2004 as
   the fair value of Thomas Equipment Limited's foreign exchange contracts was
   greater on March 31, 2004 compared to June 30, 2003. In fiscal 2004, many of
   the contracts with positive fair values were exercised resulting in a small
   net loss for fiscal year 2004. We did not enter into, nor do we have, any
   such contracts in the quarter ended March 31, 2005.

Net Financial Income (Expense)

   Net financial income (expense), consisting of interest income (expense),
   amortization of debt discounts and debt premiums and dividends on preferred
   stock, amounted to an expense of $2,037 in the quarter ended March 31, 2005
   compared to an income of $14 in same quarter ended in 2004. In the current
   fiscal year we entered into various debt agreements which resulted in
   financing charges consisting of amortization of deferred financing costs,
   warrant, stock option and premium amortization of approximately $1,224 (an
   effective interest rate of 8%); dividends on preferred shares of
   approximately $163 (an effective interest rate of 8%) and interest charges on
   issued debt of $650.

   During the same period in 2004 most of the Thomas Equipment Limited's
   financial support from the McCain group was in the form of preferred shares
   resulting in interest charges from affiliates within the McCain group offset
   by other net interest income which primarily came from receivables.

Provision for Income Taxes

   During the third quarter 2005, we experienced a loss for tax purposes. Thomas
   Equipment Limited had historically experienced operating losses, and as
   Thomas Equipment Limited's management were uncertain as to whether Thomas
   Equipment Limited would be able to utilize these tax losses before they
   expire, they provided a reserve for the income tax benefits associated with
   Thomas Equipment Limited's net future tax assets which primarily related to
   its cumulative net operating losses. We have adopted the same policy to
   reserve such net tax assets until such time profitability is reasonably
   assured and it becomes more likely than not that we will be able to utilize
   such assets.


                                       27


Net Loss

   As a result of the above, we reported a net loss of $3,744 for the quarter
   ended March 31, 2005 compared to Thomas Equipment Limited's net loss of
   $1,594 for same period in 2004.

Comprehensive Loss


   For the quarter ended March 31, 2005 we recorded a gain for currency
   translation adjustments of $176 compared to Thomas Equipment Limited's gain
   of $269 for the same period in 2004 related to the translation of accounts to
   U.S. dollars for reporting purposes.


PRO FORMA RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED MARCH 31, 2005
COMPARED TO MARCH 31, 2004

Unlike the operating results for the three months ended March 31, 2005, which
are our standalone results, the results of operations for the nine months ended
March 31, 2005 are a pro forma combination of our results for the six months
ended March 31, 2005 and those of our predecessor, Thomas Equipment Limited, for
the three months ended September 30, 2004. The pro forma amounts for the nine
months ended March 31, 2005 do not include any adjustments for operating
differences between us and Thomas Equipment Limited. Significant differences
exist in "net financial (income) expense" where we have a significantly
different borrowing structure and in "other (income) expense," as Thomas
Equipment Limited recognized gains (losses) on the revaluation of foreign
currency contracts that we currently do not use. As a result the pro forma
results of operations for the nine months ended March 31, 2005 are not
necessarily indicative of what our results would have been for the nine months
had we operated for the entire nine months under our current operating
structure.



- ---------------------------------------------------------------------------------------------------------------------------------
For the nine months ended March 31
(unaudited)

                                                            Predecessor                     Pro
                                  Predecessor                Historical   Successor        Forma
                                   Historical                 For the     Historical      For the
                                  For the Nine                 Three     For the Six        Nine
                                     Months                    Months        Months        Months
                                     Ended                     Ended         Ended         Ended
                                    March 31,              September 30,    March 31,     March 31,                  % Change
                                      2004                      2004          2005          2005                   2004 to 2005
- ---------------------------------------------------------------------------------------------------------------------------------
                                                                                                  
Revenues                            $ 39,199        100.0%    $ 13,857      $ 31,452      $ 45,309        100.0%       15.6%
  Cost of Goods                       33,978         86.7%      11,770        26,912        38,682         85.4%       13.8%
Gross Profit                           5,221         13.3%       2,087         4,540         6,627         14.6%       26.9%
  Selling Expenses                     4,632         11.8%       1,797         3,120         4,917         10.9%        6.2%
  G&A Expenses                         4,263         10.9%       2,221         3,346         5,567         12.3%       30.6%
Provision for Doubtful Accounts        1,228          3.1%          41           131           172          0.4%      (86.0%)
 Stock Based Compensation                 --           --           --         6,431         6,431         14.2%         *
  Other (Income) Expense                (763)        (1.9%)       (884)          442          (442)        (1.0%)     (42.1%)
Operating Loss                        (4,139)       (10.6%)     (1,088)       (8,930)      (10,018)       (22.1%)    (142.0%)
 Net Financial (Income) Expense           19           --          499         2,972         3,471         (7.7%)        *
  Provision for Income Taxes              49           --           15            --            15           --       (69.4)
Net Loss                              (4,207)       (10.7%)     (1,602)      (11,902)      (13,504)       (29.8%)    (221.0%)
- ----------------------------------------------------------------------------------------------------------------------------------

- ----------------------------------------------------------------------------------------------------------------------------------

     *  Percentage too large to be meaningful


                                       28


Revenues


   Results include $4,876 from the acquisition of Pneutech Inc., accounting for
   most of the change for the period. For the pro forma nine months ended March
   31, 2005, revenues increased by 15.6% to $45,309 compared to Thomas Equipment
   Limited's $39,199 for the same period in 2004. While overall sales volumes in
   the nine months ended March 31, 2005 remained relatively unchanged from the
   same period in 2004, the product mix changed due to a decision in fiscal 2004
   to reduce the number of loaders and screeners being sold through the auction
   channel, and focus on enhancing stronger dealer relationships to allow Thomas
   Equipment Limited to increase its overall profitability on its sales. By July
   1, 2004, Thomas Equipment Limited had entirely exited the sale of loaders
   through the auction channel as noted above.


   The primary reason for the increase in revenues relates to selling price
   increases to compensate for escalating raw material increases (price
   increases ranged between 3% - 5% depending on geographical location and
   product line), coupled with the weakening of the U.S. dollar, as
   approximately 35% of our sales are denominated in non-US dollar currencies
   (primarily the Euro and Canadian dollar) whose relative value increased
   compared to the previous year.

Cost of Sales and Gross Profit


   Cost of sales includes $3,808 from the acquisition of Pneutech Inc.,
   accounting for most of the change for the period. For the pro forma nine
   months ended March 31, 2005 cost of sales increased by 13.8% to $38,682
   compared to Thomas Equipment Limited's $33,978 for the same period in 2004.
   As a percentage of sales, pro forma cost of sales for the nine months ended
   March 31, 2005 was 85.4% as compared to 86.7% for the same period in 2004.
   The main reason for the decrease in cost of sales as a percentage of sales
   from 2004 relates to the decision, in fiscal 2004 to cease selling through
   the less profitable auction channels thus decreasing cost of sales as a
   percentage of sales by approximately 2%. This was partially offset by the
   increase in the cost of steel of approximately 40% (which accounts for
   approximately 10% of total cost of sales) during the pro forma nine months
   ended March 31, 2005 compared to the same period in 2004. As a result of the
   above, gross profit margin increased by 26.9% to $6,627 for the pro forma
   nine months ended March 31, 2005 compared to Thomas Equipment Limited's
   $5,521 for the same period in 2004.


Selling Expenses


   Selling expenses include $339 from the acquisition of Pneutech Inc.,
   accounting for most of the change for the period. For the pro forma nine
   months ended March 31, 2005, selling expenses increased by 6.2% to $4,917
   compared to $4,632 for the same period in 2004. As a percentage of revenues,
   selling costs decreased to 10.9% in 2005 from 11.8% in 2004. The decrease as
   a percentage of revenues was due to additional expenditures in 2004 resulting
   from Thomas Equipment Limited's decision to exit the auction sales business
   and focus on increasing dealer sales.


General and Administrative Expenses

   General and administrative expenses include $573 from the acquisition of
   Pneutech Inc. For the pro forma nine months ended March 31, 2005 general and
   administrative expenses increased by 30.6%, to $5,567 compared to $4,263 for
   the same period in 2004. Current year expenses include initial reporting
   requirement for accounting and legal fees of approximately $1,000. The three
   months ended September 30, 2004 of the predecessor include increased costs
   related to higher product liability insurance and deductible costs, pension
   curtailment expenses and legal costs associated with marketing Thomas
   Equipment Limited for sale as well as the impact of the weaker U.S. dollar as
   the majority of these costs are incurred in Canadian dollars.

Provision for Doubtful Accounts


   Provision for doubtful accounts expense decreased significantly by 86% to
   $172 for the proforma nine months ended March 31, 2005 from Thomas Equipment
   Limited's $1,228 for the same period in 2004. The reason for this decrease is
   a result of the 2004 provision being increased to compensate for the accounts
   that were becoming overdue, as determined by the predecessor's management
   review during the quarter ended March 31, 2004.



                                       29


Stock Based Compensation

   At our inception and during the second quarter of fiscal year 2005 we issued
   16,945,000 shares to our founders for $2,451 or an average of $0.14 per share
   and sold 1,980,000 shares to Laurus for $20. Management has estimated, using
   the price that the highest paying founding shareholder paid and an analysis
   of the market price of the stock immediately after the reorganization, that
   the fair value of the shares was $0.50. We have recorded $6,431 as an
   immediate expense for the difference in the values.

Other Income (Expense), Net


   Other income (expense), consisting primarily of foreign currency gains and
   losses, severance accruals (predecessor's 2004 only) and other miscellaneous
   items, amounted to an expense of $442 in the pro forma nine months ended
   March 31, 2005 compared to Thomas Equipment Limited's income of $763 in 2004.
   In the nine months ended March 31, 2004 and the three months ended September
   30, 2004 Thomas Equipment Limited, had net revaluation gains on its foreign
   currency forward exchange contracts entered into to manage some of the
   company's foreign exchange risk on its U.S. dollar sales due to the weakening
   of the U.S. dollar against the Canadian dollar over these periods, more so in
   2004. We did not enter into, or have, any such contracts since our inception
   in October 2004. The foreign exchange gains in 2004 were partly offset by
   special termination benefit costs of $791 recorded by Thomas Equipment
   Limited in the three months ended September 30, 2004 in connection with the
   group of employees whose positions were terminated in July 2004.


Net Financial Income (Expense)

   Net financial income (expense), consisting of interest income (expense),
   amortization of debt discounts and debt premiums and dividends on preferred
   stock, amounted to an expense of $3,471 for the pro forma nine months ended
   March 31, 2005 compared to a net expense of $19 for the same period in 2004.
   In 2004, we entered into various debt agreements which resulted in financing
   charges consisting of amortization of deferred financing costs, warrants,
   stock option and premiums of approximately $2,176 (an effective interest rate
   of 8%); dividends on preferred shares of approximately $256 (an effective
   interest rate of 8%) and interest charges on issued debt of $1,040 (an
   effective interest rate of 8%).

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

Provision for Income Taxes

   During the three months ended September 30, 2004 and the six months ended
   March 31, 2005, Thomas Equipment Limited and Thomas Equipment, respectively,
   experienced operating and tax losses. Thomas Equipment Limited had
   historically experienced operating losses, and as Thomas Equipment Limited's
   management were uncertain as to whether Thomas Equipment Limited would be
   able to utilize these tax losses before they expire, they provided a reserve
   for the income tax benefits associated with Thomas Equipment Limited's net
   future tax assets which primarily relate to its cumulative net operating
   losses. We have adopted the same policy to reserve such net tax assets until
   such time profitability is reasonable assured and it becomes more likely than
   not that we will be able to utilize such assets.

Net Loss


   As a result of the above Thomas Equipment and Thomas Equipment Limited
   reported a combined net loss of $13,504 for the pro forma nine months ended
   March 31, 2005 compared to Thomas Equipment Limited's net loss of $4,207 for
   the same period in 2004.



                                       30


Comprehensive Loss


   Currency translation adjustments amounted to a loss of $776 for the pro forma
   nine months ended March 31, 2005 compared to Thomas Equipment Limited's loss
   of $633 for the same period in 2004 related to the translation of accounts to
   U.S. dollars for reporting purposes.


FISCAL 2005 FORWARD LOOKING OUTLOOK

Revenues

   On a pro forma basis, our revenues for the year ended June 30, 2004 were
   $97,559. For fiscal 2005, we have not significantly altered the revenue
   generating activities as a result of our acquisition of Thomas Equipment
   Limited's operations and our acquisition of Pneutech. We do expect to make
   further changes in our relationships with dealers which we believe will have
   more of an effect on our expense structure than on revenues. Our primary
   focus will be to increase revenues through the expansion of our dealer
   network and entrance into new markets.

   On February 3, 2005, through our wholly-owned subsidiary, Thomas Equipment
   2004 Inc., we entered into an agreement with Hyundai Heavy Industries Co.,
   Ltd. pursuant to which we were engaged as the sole and exclusive supplier of
   private label skid loaders, accessories and parts to be sold by Hyundai
   throughout the world. The products will be painted and labeled pursuant to
   the directions of Hyundai. Hyundai reserved the right to also sell its own
   brand of skid steers and related products. The products will be sold to
   Hyundai at specified prices which are subject to increase on an annual basis.
   The initial term of the agreement with Hyundai is for two years and will be
   automatically renewed for successive terms of one year, unless either party
   provides a written notice of termination at least three months prior to the
   termination date. As a result of the exclusive global supply agreement with
   Hyundai, we expect to achieve significant increases in revenues starting in
   the 2nd quarter of fiscal 2006 and beyond.

Cost of Sales and Gross Profit


   On a pro forma basis, our cost of sales and gross profit for the year ended
   June 30, 2004 were $80,341 and $17,218, respectively, reflecting a gross
   margin of 17.6% We do not expect any significant changes to our gross margin
   in 2005.


Selling Expenses

   On a pro forma basis, our selling expenses for the year ended June 30, 2004
   were $9,101 or 9.3% of revenues. We expect our selling expenses to remain
   relatively consistent, as a percentage of revenues, in the future but they
   may increase slightly as we spend more resources in developing new markets.

General and Administrative Expenses

   On a pro forma basis, our general and administrative expenses for the year
   ended June 30, 2004 were $14,001. Upon the acquisition of Thomas Equipment
   Limited's business, we discontinued the use of a defined benefit plan, and
   are now utilizing a defined contribution (matching) pension plan which will
   fix the expected fiscal 2005 contributions at approximately $150, based on
   current employee participation (under Thomas Equipment Limited's defined
   benefit plan, its costs were affected by variables such as plan earnings,
   actuarial gains and losses, and assumptions over discount rates). Insurance
   premiums and deductible expenses will continue to be a significant expense
   and may increase slightly as we receive new ratings after our disassociation
   from Thomas Equipment Limited's parent. Other expense items will remain
   stable except that we will have approximately $200 additional transition and
   integration expenses associated with our acquisitions and being a public
   company.

Research and Development Costs

   Research and development expenses are expected to remain relatively unchanged
   at approximately $1,050 in fiscal 2005.


                                       31


Net Financial Income (Expense)

   We anticipate the use of long-term receivable financing will be discontinued
   this fiscal year but we will have significant interest and financing expenses
   associated with borrowings that were required to acquire the assets from
   Thomas Equipment Limited and to acquire Pneutech, which we expect to consist
   of: (i) a decrease in interest costs by approximately $2,000 which primarily
   relates to the fact that Thomas Equipment Limited incurred a large dividend
   expense in fiscal 2004, and (ii) an increase of approximately $6,500 in
   amortization of non-cash debt premiums and discounts and amortization of
   deferred financing costs.

Critical Accounting Policies and Estimates
- --------------------------------------------------------------------------------

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

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

     o  Revenue Recognition

     o  Allowance for Doubtful Accounts

     o  Warranty Obligations

Revenue recognition

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

Allowance for doubtful accounts

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

Product warranties

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


                                       32


Recent Accounting Pronouncements
- --------------------------------------------------------------------------------

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

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

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

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

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

SFAS 143 'Accounting for Asset Retirement Obligations'

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

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

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


                                       33


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

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

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

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

SFAS 123(R) 'Share-Based Payments'


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


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

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

Liquidity and Capital Resources
- --------------------------------------------------------------------------------

SIX MONTHS ENDED MARCH 31, 2005 FOR THOMAS EQUIPMENT, INC.

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


                                       34



As discussed below, we have also experienced negative cash flows in our first
six months of operations which is likely to continue until such time as our
receivables become due and their collection will begin to offset the cash used
in paying our operating expenses. At March 31, 2005 we had cash on hand of
$1,111 and availability under our convertible credit facilities and other credit
facilities of approximately $1,080.


At April 30, 2005 we had approximately $7,233 cash on hand including working
capital obtained through the sale of preferred Shares (disclosed below) and an
availability of approximately $2,500 under our credit facilities at Thomas
Equipment and an availability of approximately $1,100 under our credit
facilities at Pneutech. Coupled with combined (i.e. Pneutech and Thomas
Equipment) receivables of approximately $26,000 at April 15, 2005 we believe we
have sufficient resources to fund our operations for at least the next twelve
months. As such we do not believe, in the short-term, we will have the same
difficulties and concerns about our ability to continue as a going concern as
our predecessor.

During the six months from inception on October 1, 2004 through March 31, 2005,
we had a net loss of $11,902 which included non-cash items totaling $9,426,
consisting of stock based compensation, depreciation and amortization of debt
discount related to the issuance of warrants. However, as we only acquired
inventory and property, plant and equipment along with Thomas Equipment
Limited's business and the fact that we only took over operations effective
October 1, 2004, our sales terms to customers resulted in collecting $16,177
from sales while our receivables increased to $25,269 which include receivables
from the Pneutech acquisition of $12,168. Offsetting a portion of the low level
of cash received was an increase in trade payables and other accrued liabilities
of $14,779. As a result net cash used in operating activities was $5,899.

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


Net cash used in investing activities was $25,576 of which $722 was used for the
purchase of new machinery and equipment while $17,782 was used in the
acquisition of assets from Thomas Equipment Limited and $7,072 was used in the
acquisition of Pneutech.

Net cash provided by financing activities was $32,245 consisting primarily of
$2,149 in proceeds from the sale of our common stock principally to founders and
$30,345 in net borrowings under our debt and credit facilities, which was used
primarily to fund the acquisition of assets from Thomas Equipment Limited and
the acquisition of Pneutech. At March 31, 2005 the significant portion of our
debt and redeemable preferred stock have terms of 18 to 36 months with interest
rates ranging from 4% to 8.2%. Except for the redeemable preferred stock
($8,220), which is due on April 26, 2006, $7,900 and $18,504 of debt is
convertible into shares of our common stock at $2.25 and $1.50 per share,
respectively. Upon conversion, the lender may not own more than 9.99% of our
common shares outstanding.


As our debt is substantially payable in U.S. dollars and our functional currency
is the Canadian dollar, changes in exchange rates between the two currencies
could have a positive or negative impact on the amount and our ability to repay
such debt. In addition, our convertible debts have prepayment penalties ranging
from 3% to 5% for early payment or payments in cash (as the lender wishes to be
paid through conversion to common shares).

In connection with the acquisition of Thomas Equipment Limited's assets we
entered into two-year capital leases of $5,254 for the purchase of land and
buildings from Thomas Equipment Limited. The terms of the capital leases require
minimum annual payments of $493 plus taxes, maintenance and certain other
expenses. We have the right at any time prior to the expiration of the leases to
purchase the properties for $4,953 (translated to U.S. dollars on March 31,
2005). Similarly, Thomas Equipment Limited has the right to require us to
purchase the properties subject to certain provisions such as a favorable
environmental study.


                                       35


Subsequent financing activities


On April 19, 2005, we entered into agreements with several accredited investors
for the sale of an aggregate of 25,000 shares of series A preferred stock (the
"Preferred Stock"), and warrants to purchase an aggregate of 2,083,333 shares of
common stock exercisable at a price of $3.75 per share at any time during a
period of five years (the "Warrants"). The securities were sold for an aggregate
cash consideration of $25,000. The securities were issued in a private placement
transaction pursuant to Section 4(2) and Regulation D under the Securities Act
of 1933, as amended. The Company also agreed to cause a resale registration
statement covering the common stock issuable upon conversion of the Preferred
Stock and exercise of the Warrants to be effective within six months of the
closing date.


The Preferred Stock is convertible into 8,333,333 shares of common stock at the
rate of $3.00 per share and pays a dividend of 5% per annum in cash. The
Preferred Stock may be converted at anytime upon five days notice by the
Preferred Stockholders. The Company can require the holders to convert up to 20%
of their Preferred Stock per month, if the common stock trades at an average
price of $6.00 per share for 20 consecutive days, with average volume of 150,000
shares per day. At any time commencing after three years from the closing date,
the Company can redeem the Preferred Stock. If the redemption occurs in the
fourth year after issuance, the redemption amount shall be 200% of the stated
value. If the redemption occurs during the fifth year after issuance, the
redemption amount shall be 225% of the stated value. The holder can require the
Company to redeem the Preferred Stock at 110% of the stated value, together with
accrued dividends, after five years or upon certain events, including:

      o     failure to deliver common stock when required;

      o     failure to effect registration of the common stock; or

      o     a bankruptcy event.

The Company paid the placement agent of the offering a fee of 6% of the
aggregate proceeds, together with warrants to purchase 500,000 shares of common
stock at an exercise price of $3.00 per share for a period of five years.

On June 13, 2005, we filed an amended Registration Statement on Form SB-2, to
register up to 26,985,000 shares of common stock to be sold in a secondary
offering by certain selling stockholders. We will not receive any proceeds from
the sale of shares of common stock in the offering. However, we will receive the
sale price of any common stock we sell to the selling stockholders upon exercise
of the option and/or warrants that they hold. We expect to use the proceeds
received from the exercise of the option and/or warrants, if any, for general
working capital purposes.

YEAR ENDED JUNE 30, 2004 OF THE PREDECESSOR BUSINESS (THOMAS EQUIPMENT LIMITED)

The financial statements of the predecessor business, Thomas Equipment Limited,
have been prepared on a going concern basis which contemplates the realization
of assets and the satisfaction of liabilities and commitments in the normal
course of business for the foreseeable future. This company was not generating
sufficient cash flows to cover its operating costs and to fund investments in
working capital and additions to property, plant and equipment. Thomas Equipment
Limited also had a working capital deficit and shareholder's deficiency at the
date the business was acquired by Thomas Equipment

These conditions cast substantial doubt upon the validity of the going concern
assumption. Thomas Equipment Limited's parent, McCain Foods Limited has
committed to provide financial support as required to ensure Thomas Equipment
Limited is able to settle its remaining liabilities after the sale of its
business to Thomas Equipment 2004 as they fall due. This commitment does not
extend to Thomas Equipment (see above for a discussion of Liquidity and Capital
Resources for Thomas Equipment since its inception and the acquisition of Thomas
Equipment Limited's assets).

On October 1, 2004, Thomas Equipment Limited sold its inventory and fixed assets
to us and leased certain land and buildings to us under two year capital leases.

During the year ended June 30, 2004, Thomas Equipment Limited had a net loss of
$11,555 which included non-cash items totaling $1,310, consisting of
amortization of property, plant, equipment and other assets and a gain on sale


                                       36


of property, plant and equipment. Thomas Equipment Limited had a positive change
in non-cash working capital items of $3,538 resulting from collection of
receivables and an increase in trade payables. As a result, net cash used in
operating activities during the quarter was $6,683.

Net cash used in investing activities was $684 of which $1,759 was used for the
purchase of new property plant and equipment while $471 was realized from the
sale of property plant and equipment and $604 was received from a fire insurance
claim.

Net cash provided by financing activities was $8,106 consisting of repayments of
$1,930 in bank advances and $10,036 of proceeds from the issuance of shares and
advances, net of the redemption of preferred shares, from affiliated companies
of Thomas Equipment Limited. As of June 30, 2004, the advances had interest
rates ranging from 2.34% to 6.45% and were due on demand.

Thomas Equipment Limited had certain open hedge positions that were liquidated
after the sale of its business to Thomas Equipment. At June 30, 2004 the value
of these positions resulted in a liability of $262.


                                       37


Off-Balance Sheet Arrangements
- --------------------------------------------------------------------------------

We currently have no off balance sheet arrangements.

Qualitative and Quantitative Disclosures about Market Risk
- --------------------------------------------------------------------------------

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

Interest Rates

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

We considered the historical volatility of short term interest rates and
determined that it was reasonably possible that an adverse change of 100 basis
points could be experienced in the near term. Based on our borrowings at March
31, 2005, a hypothetical 1.00% (100 basis-point) increase in interest rates
would result in additional expenses of approximately $95 for the quarter or an
annual increase in expenses of approximately $380.

Foreign Currency Fluctuations

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

Pneutech has costs and revenues primarily denominated in Canadian dollars and
the Korean WON, while Thomas Equipment has significant revenues denominated in
U.S. dollars and its costs are primarily incurred in Canadian dollars and is
therefore exposed to risks arising from currency fluctuations between these two
currencies.

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


                                       38


                             DESCRIPTION OF BUSINESS

Overview

         Thomas Equipment, Inc. operates through two business segments, Thomas
Equipment and Pneutech. Thomas Equipment manufactures and distributes through a
worldwide network of dealers and distributors a full line of skid steer and mini
skid steer loaders as well as attachments, mobile screening plants and six
models of mini excavators. In addition to our industrial and construction
products, Thomas also operates six retail stores, three in Atlantic Canada, one
in Presque Isle, Maine, one in Aurora, Colorado and one in Chicago, Illinois.

         Thomas Equipment Limited, our predecessor, originated in 1943 as a
manufacturer of farm equipment. In 1964, Thomas Equipment Limited was acquired
by McCain Foods Limited. In 1969, Thomas Equipment Limited further diversified
its product line with the development of the world's first hydrostatic drive
skid steer loader. Today, we manufacture a full line of skid steer loaders,
attachments, screening plants, excavators, and other agricultural and industrial
equipment.

         Pneutech, established in 1973, and its subsidiaries are engaged in the
fluid power industry providing distribution and manufacturing of pneumatic and
hydraulic components and systems for the industrial market, distribution and
manufacturing of hydraulic components and systems for the mobile market and
manufacturing of hydraulic cylinders and metal gaskets for the industrial
market. Pneutech is a strategic supplier to Thomas, as well as 15,000 other
active customers. During the year ended June 30, 2004, Pneutech supplied Thomas
with approximately $4 million in hydrostatic transmission equipment (8% of
Pneutech's sales and 8% of Thomas' cost of sales during that period). Pneutech
maintains nine manufacturing and distribution facilities in Canada and one
manufacturing plant in South Korea. It has a diverse array of capabilities in
the distribution of fluid power components as well as manufacturing spiral wound
metal gaskets and steel components.

Thomas Equipment Business Segment

         We manufacturer a full line of skid loaders, attachments, mini skid
steers, and screening plants, as well as a full line of mini excavators and
equipment trailers. We also manufacture a complete line of potato harvesting and
handling equipment. Thomas Equipment has approximately a 10% share of the
worldwide mini skid market, and is considered the market leader in the U.S. with
its 400 series screening plant model.

Our major product lines are:

         o        Skid steer loaders - nine models. Thomas skid steers are
                  available in many power levels and come standard with a
                  five-year warranty, the longest in the industry. Models range
                  from the basic 85 series with 19.8 horsepower to the T320
                  track loader with 87.4 horsepower turbo charged diesel engine
                  and range in base list prices from $15,880 to $47,000.

         o        Mini skid steer loaders - three models. To maximize
                  versatility and revenue opportunities the Thomas Equipment
                  mini skid has a wide variety of attachments such as pallet
                  forks, tree forks, hydraulic breakers, trenchers, snow
                  blowers, angle brooms, grapple forks, dozer blades, sod
                  rollers, augers, earth tillers and more. Mini skid steer
                  loaders come in two models and range in base list prices from
                  $12,545 to $17,500.

         o        Excavators - six models. Thomas Equipment mini excavators come
                  in many models to meet our customer's needs. Excavators come
                  in six models and power supplies range from the 17 hp
                  Mitsubishi to the 58.2 horsepower Kubota diesel. Base list
                  prices range from $22,990 to $76,962

         o        Screen plants - three models. Thomas screening machines are
                  available in three models the 300, 400, and 900. Base list
                  prices range from $27,175 to $75,000. These machines enable
                  contractors to screen topsoil; sand, loam, gravel, road base,
                  drainage rock, mulch and other materials.

         Thomas Equipment products can be manufactured based on customer
specific requirements and country specific standards. Most product models have
multiple operating weight capacities. We also maintain inventory of used
equipment that is typically acquired as a trade-in during the purchase of new
equipment.


                                       39


Marketing and Distribution

We sell through the following channels:

         o        Wholesale to distributors and equipment rental companies,

         o        Retail store sales to local customer base, and

         o        International sales to Europe, South America, Australia,
                  Africa, the Middle East, and Asia.

         o        OEM sales to Hyundai and Kubota

         Our sales and marketing team consists of U.S., Canadian and European
field consultants. Each of the six retail branches operates with two to eight
full and part-time employees.

         We operate retail stores in Florenceville, New Brunswick; Grand Falls,
New Brunswick; Summerside, Prince Edward Island; Presque Isle, Maine; Aurora,
Colorado and Chicago, Illinois. Each store sells a slightly different product
mix based upon the local customer demands. Store hours fluctuate between 8 and
14 hours per day, depending on the season. To supplement the Thomas Equipment
product offerings, store locations also market third-party branded products. In
addition, locations sell used equipment that is typically acquired through
customer trade-ins.

Hyundai

         In February 2005, we entered into an agreement with Hyundai Heavy
Industries Co., Ltd. pursuant to which we were engaged as the sole and exclusive
supplier of private label skid loaders, accessories and parts to be sold by
Hyundai throughout the world. The products will be painted and labeled pursuant
to the directions of Hyundai. Hyundai reserved the right to also sell its own
brand of skid steers and related products. The products will be sold to Hyundai
at specified prices which are subject to increase on an annual basis. We have
agreed to stock replacement parts and accessories for a period of at least 10
years. The initial term of the agreement with Hyundai is for two years and will
be automatically renewed for successive terms of one year, unless either party
provides a written notice of termination at least three months prior to the
termination date.

Industry and Competition

         We compete with the following multinational equipment manufacturers:
Ingersoll-Rand, John Deere, Caterpillar, Case, New Holland, and Gehl. Each of
these companies are substantially larger and better capitalized, however, we
believe we offer flexibility of product offerings and customization services.

         Agricultural machinery purchases are often affected by weather and
climatic conditions. The agricultural machinery market is highly consolidated,
with the top four companies accounting for approximately 87% of the total market
value. In coming years, the agricultural equipment market is expected to grow
significantly, especially the sector focused on replacement parts. We believe
growth will be driven by new technologies designed to maximize harvesting speed
and efficiency, while minimizing crop loss.

         The construction machinery industry is highly consolidated, with the
top five companies accounting for over 60% of the market value. The construction
machinery industry is affected by economic conditions, interest rates, and
certain commodity prices (such as those applicable to pulp, paper, and saw log)
which influence sales. The growth of the earthmoving sector has been driven by
innovations in compact bulldozers and equipment. The construction trends of new
homes also have a direct impact on sales of related machinery. It should be
noted that increased consumer confidence in and strengthening of the U.S.
economy has caused mortgage rates to increase, a trend that will continue as
long as the economy continues to improve.

Backlog

         Our approximate backlog of orders at May 31, 2005, was approximately
$50 million. These backlog figures are based on orders received. While the major
portion of our products are built in advance of order and either shipped or
assembled from stock, orders for specialized machinery or specific customer


                                       40



application are submitted with extensive lead times and are often subject to
revision, deferral, cancellation or termination. We estimate that approximately
95% of the backlog will be shipped during the next twelve months. In order to
accommodate the substantial increase in our backlog, we are expanding our
production facilities, which will be completed by July of this year.


Dealer and Product Financing

Canadian

Sales to dealers are made at a standard 25% discount off the Thomas Industrial
Price List. A further 5% discount is offered for full payment within 15 days of
invoicing or 3% for payment within 45 days. Approximately 40% of the current
dealers take advantage of one type of cash discount. Some dealers also have
established their own inventory financing through outside commercial lenders.
Balances carried by dealers are currently financed in house. Discussions are
underway, but not yet concluded, with a third party finance company. The in
house plan finances only the cost of the equipment; all taxes and freight are
under standard terms. This inventory financing tool currently offers interest
free financing for the first six months and will finance the product for up to
eighteen months or whenever it is sold whichever occurs sooner within the final
twelve month period being charged interest at a rate of prime plus 2.5%. To
maintain the status of the floor plan 5% curtailment fees are due and payable in
months seven and twelve of the plan. Full payment, or transfer to DORY, of the
floor plan is due at the end of eighteen months from the date of the original
invoice.

         Although the following programs do not account for a significant
portion of our receivables, dealers can also finance inventory assets utilized
in rental activities through either a Dealer Own Rental Yard (DORY) or a Direct
Independent Rental Yard (DIRY) arrangement. The DORY is a facility available to
all dealers. At any time during or at the end of a standard floor plan
arrangement the dealer can move to a DORY. The standard finance term under a
DORY is to extend the total term to thirty six months. Interest rates of prime
plus 1% are fixed at each twelve month anniversary and monthly payments are
calculated to retire the obligation over a maximum of thirty six months. DORY
transactions can also be entered into at the time the equipment is received from
the factory. Cash transactions, paid in advance, result in a 34% discount and
financed purchases carry the same 25% from list discount as the standard floor
plan. DORY financing from the time of order is financed over thirty six months
at interest rates of prime less 1%. As with the standard floor plan the total
obligation is due if the equipment is sold during the DORY financed period.

         The DIRY program is similar to the DORY. It offers a cash discount of
29% off list and the same 25% off list for financed purchases. This program
offers interest free financing for the first twelve months and then prime plus
2% for the next two years (36 month plan) or prime plus 2.5% for the next three
years (48 month plan). The maximum financing term under this program is forty
eight months.

         Both the DORY and DIRY programs are currently in house but negotiations
are underway for a third party to provide this service.

United States

         The in house floor plan conditions and terms are the same with the
exception that the interest rate after six months is prime plus 2.25% and there
is no 5% curtailment at seven months only the 5% at twelve months. An agreement
is in place with Northstar Trade Finance to provide, as dealers and distributors
are approved, floor plan financing going forward. The Northstar program calls
for interest free terms for the first six months and the next six months at
prime plus 2.25% with full payment required at time of sale or twelve months
whichever occurs sooner. The in house DORY financing is prime less 0.75% if
established at the time of the order and at prime plus 1.25% if as a result of a
transfer from a floor plan. The in house DIRY program offers interest free
financing for the first 12 months and prime plus 2.25% for the next two years or
prime plus 3.25% for the next three years. Currently Thomas Equipment is
negotiating with a third party finance company to provide both DORY and DIRY
structured finance to dealers and rental houses.

         There is no floor plan, DORY or DIRY facilities in place for sales made
outside North America.


                                       41


Manufacturing

         Component parts needed in the manufacture of our equipment are
primarily produced by Thomas Equipment. We obtain raw materials (principally
steel), component parts that we do not manufacture (mostly engines and
hydraulics) and supplies from third party suppliers. Substantially all such
materials and components used are available from a number of sources. We are not
dependent on any supplier that cannot be replaced and have not experienced
difficulty in obtaining necessary materials.

Research and Development

        We attempt to maintain and strengthen our market position through
internal development of new products that meet specific customer needs and
incremental improvements to existing products. Our research and development
includes the designing and testing of new and improved products as well as the
development of prototypes. For the year ended June 30, 2004, we expended
approximately $1,052,000 for research and development activities.

Trademarks

         We possess rights under a number of Canadian trademarks relating to our
products and business. As well as certain trademark rights in the United States.
While we consider the trademarks and service marks important in the operation of
our business, including the Thomas and Thomas Equipment name, our business is
not dependent, in any material respect, on any single patent or trademark or
group of patents or trademarks.

Employees


         As of March 31, 2005, we had 328 employees, of which 167 were hourly
employees and 161 were salaried employees. None of our employees are represented
by unions. We believe relations with our employees are good.


Description of Property

         Thomas Equipment operates six retail stores, two in New Brunswick,
Canada, one in Prince Edward Island, Canada, and three in the United States. Our
sole manufacturing facility comprising approximately 137,000 square feet is
located in New Brunswick, Canada, where we also have an executive office.

         In connection with the purchase of assets from Thomas Equipment
Limited, we entered into a two-year lease agreement with Thomas Equipment
Limited, pursuant to which we leased three properties located in Centreville,
Florenceville and Grand Falls, New Brunswick. The annual lease payment for all
three properties is $468,000, payable at the rate of $39,000 per month. Pursuant
to the lease, we have a right at any time prior to the expiration of the lease
term to purchase the leased properties. In addition, Thomas Equipment Limited
has a right to require us to purchase the leased properties at the expiration of
the lease. The purchase price for the properties will be $4,899,000.

         We also entered into a two-year lease agreement with Thomas Equipment
Limited, pursuant to which we leased a property located in Presque Isle, Maine.
The annual lease payment for the property is $30,000, payable at the rate of
$2,500 per month. Pursuant to the lease, we have a right at any time prior to
the expiration of the lease term to purchase the leased property. In addition,
Thomas Equipment Limited has a right to require us to purchase the leased
property at the expiration of the lease. The purchase price for the property
will be $104,000.

Pneutech Business Segment

         We manufacture and distribute a full line of pneumatic and hydraulic
components and systems for the industrial and mobile market. We also manufacture
hydraulic cylinders and metal gaskets for the industrial market. Pneutech, Inc.
has three wholly-owned subsidiaries, Hydramen Fluid Power, Ltd., Rousseau
Controls, Inc., and Samsung Industry Co., Ltd. Pneutech has over thirty-one
years of experience in the field of fluid power and specializes in the design,
engineering, manufacture and distribution of pneumatic and hydraulic systems and
components for all automation and motion control applications.


                                       42


         Pneutech's manufacturing and distribution facilities are located in
Montreal, Toronto, Quebec City, Chicoutimi, Trois Rivieres and British Columbia.
Pneutech has provided customers with turnkey solutions to realize the most
complex motion and control applications, while supplying value-added services
since 1973.

Distribution

         Pneutech is a full-line stocking distributor of Parker Hannifin,
Schrader Bellows, Ingersoll-Rand, Aro, Piab, Humphrey, Staubli and other leading
brand pneumatic and hydraulic components. Each Pneutech location has on-line,
real-time access to every warehouse providing an integrated distribution network
to assure customers dependable and expedient service with just-in-time delivery.

Manufacturing

         Backed by an experienced team of engineers and technical
representatives, we manufacture products for the aluminum, automotive,
hydro-electric, pulp and paper, steel foundries, and other manufacturing
industries in domestic and global markets. We have the ability to custom design
and engineer to meet customers' industrial specifications and application needs.

Customer Service

         Pneutech's primary goal is to provide its customers with quality
service, systems and components. In working closely with its customers, Pneutech
strives to accommodate all their technical needs and industrial requirements.
This fundamental goal of customer service as a priority, is achieved through the
internal corporate culture at Pneutech of training all employees in the areas of
product knowledge, technical assistance, customer service and support.
Externally, Pneutech continues to avail itself of technical training from its
suppliers to ensure a thorough understanding of the products it represents.

         Pneutech regularly sends their team of engineers to specialized
technical programs abroad in order for them to hone their skills and enhance
their expertise to become proficient in the latest technology available. It is
the application of technological knowledge gained that permits Pneutech to
maintain its leadership position in the field of fluid power and motion control.

Hydramen Fluid Power, Ltd.

         Since 1986, Hydramen Fluid Power has been designing and manufacturing
welded hydraulic cylinders. The welded cylinders are widely used on mobile
hydraulics such as dump trucks, telescoping applications on utility vehicles and
recycling trucks to name a few. Hydramen is engaged in full aftermarket sales
and service of its products as well as other makes and models.

Rousseau Controls, Inc.

         Rousseau Controls was formed in 1948 to serve a growing need for fluid
power components in the Montreal area. Once the company was established and a
complete line of components obtained for representation, it became apparent that
customers also required application engineering assistance. A further need was
for the assembly of these components into customer-engineered systems to
interface with customers' requirements. Thus, the manufacturing department,
including an engineering group, was formed.

         Rousseau Controls specializes in the design and fabrication of
hydraulic and pneumatic equipment as well as electrically-operated and/or
electronically controlled systems. These projects are usually produced for a
customer's specific needs. Normally we do not perform the function of a general
contractor and usually when involved in new construction, act as a
sub-contractor. Rousseau provides engineering assistance to its customers in
their applications and will undertake consulting engineering services when
requested.


                                       43


Samsung Industry Co. Ltd.

         Samsung Industry Co. Ltd., located in Busan, South Korea, is one of
Asia's premier manufacturers of spiral wound metal gaskets and gland packing.
Since 1985, the company has been engaged in sales and service of sealing
products to various oil & gas refineries and petrochemical plants. The company
has long-term supply contracts with major corporations such as Daiwoo Heavy
Industries and Hyundai HHI-Ship Building Division.

Marketing and Distribution

         Pneutech has manufacturing facilities in Mississauga (30,000 square
feet), Barrie, Ontario (10,000 square feet), Montreal, Quebec (49,000 square
feet), and Busan South Korea (70,000 square feet); with sales and service
offices in Windsor, Ontario; Kitimat, British Columbia, Quebec City, Chicoutimi
and Trois Rivieres, Quebec and Moncton, New Brunswick.

         Pneutech is Parker Hannifin's largest Canadian hydraulics distributor
and their sixth largest North American hydraulics distributors. Pneutech is one
of only two accredited full line hydraulics and pneumatic technology centers in
Canada which provides Pneutech with the capacity to design, engineer and
assemble the entire range of hydraulic systems and achieve significant
purchasing leverage.

Customers

         Pneutech's active customers are in excess of 15,000 with the top five
customers (Camoplast f/k/a Bombardier, Alcan, Thomas, Prodomax and Denharco)
accounting for approximately 18% of Pneutech's business. Customers are generally
in Canada and primarily in the automotive, oil and gas, heavy equipment,
hydraulics, injection molding and power generation industries.

Backlog


         As of December 31, 2004, Pneutech had a backlog of orders of
approximately $20 million.


Research and Development

         For the year ended October 31, 2004, Pneutech spent approximately
$186,000 on research and development activities. Pneutech applies and has
received for several years, R&D tax credits from the Canadian Government based
on meeting certain criteria.

Trademarks

         We possess rights under a number of Canadian trademarks relating to our
products and business. While we consider the trademarks and service marks
important in the operation of our business, our business is not dependent, in
any material respect, on any single patent or trademark or group of patents or
trademarks.

Employees


         As of March 31, 2005, Pneutech had 203 employees, of which 102 worked
in manufacturing and distribution, 69 worked in sales and service, 14 worked in
finance and administration and 18 worked in management. None of our employees
are represented by unions. We believe relations with our employees are good.


Description of Property

         Pneutech has manufacturing facilities in Mississauga (30,000 square
feet - monthly rent of $17,000, Barrie, Ontario (10,000 square feet monthly rent
- - monthly rent of $7,500), Montreal, Quebec (49,000 square feet - monthly rent
of $25,000), and Busan South Korea (70,000 square feet -owned); with sales and
service offices in Windsor, Ontario for, - monthly rent of $1,000); Kitimat,
British Columbia (owned), Quebec City (owned), Chicoutimi (owned) and Trois
Rivieres, Quebec - monthly rent of $1,000 and Moncton, New Brunswick - monthly
rent of $1,000.

Legal Proceedings

         We are a defendant from time to time in actions for product liability
and other matters arising out of our ordinary business operations. We believe
that these actions will not have a material adverse effect on our consolidated
financial position or results of operations.


                                       44


MANAGEMENT

Directors and Officers

         Our current directors and officers are as follows:

Name (1) (2)                     Age      Position
- ----                             ---      --------
Clifford Rhee                    43       President, Secretary and Director
David M. Marks                   37       Chairman of the Board
Luigi Lo Basso                   52       Chief Financial Officer
Kenneth Shirley                  52       Director
James E. Patty                   50       Director

(1)      We do not have a separately designated executive committee, nominating
         committee or audit committee of the Board of Directors.

(2)      Our executive officers hold office until their successors are elected
         and qualified, or until their death, resignation or removal.

         The background and principal occupations of each director and executive
officer are as follows:

Clifford Rhee

         Mr. Rhee has been our President, Secretary and a director since
November 2004. From 1994 through the present, Mr. Rhee has served as President &
Chief Executive Officer of Pneutech Rousseau Group, a leading fluid power
company. Prior to that, Mr. Rhee worked for Honeywell Corporation (formerly
AlliedSignal Aerospace Corporation) from 1987 through 1994, first as a Manager
of Sales and Marketing and then as General Manager of the Atlantic Support
Division. Mr. Rhee received a B.S. in Mechanical Engineering from McGill
University in 1986 and his Certified Management Accounting degree from McGill in
1988. He is a member of the Canadian Professional Engineers and a Board member
of Distribution Advisory Council (Parker Hannifin Corporation).

David M. Marks

         Mr. Marks has been our Chairman since November 2004. Since 1994, he has
served as the Trustee of the Irrevocable Children's Trust, Irrevocable
Children's Trust No.2 and Phoenix Business Trust, where he oversees all trust
investments. The Trusts currently have an ownership or investment interest in
commercial properties, private residences, natural resources,
telecommunications, and technology companies, and other business and investment
ventures. Mr. Marks has responsibilities for strategic planning and management
that begin pre-acquisition and extend through ownership and disposition. Since
April 2005, Mr. Marks has served as managing member of Farwell Equity Partners,
LLC, a company with the sole purpose of holding securities of Thomas Equipment.
Mr. Marks has been a board member of Ventures-National, Inc. (d/b/a Titan
General Holdings, Inc.) since 2000 and has been chairman since May 2005. Mr.
Marks previously served as chairman of Ventures-National from August 2002
through May 2003. Mr. Marks received a B.S. in economics from the University of
Wisconsin in 1990.

Luigi Lo Basso

         Mr. Lo Basso has been our Chief Financial Officer since November 2004.
From April 2004 through the present, Mr. Lo Basso has been Chief Financial
Officer of Pneutech Rousseau Group. From 1998 through 2003, Mr. Lo Basso served
as Deputy Chief Financial Officer for Bell Canada International, Canada's
largest telecommunications company. Mr. Lo Basso was responsible for developing,
implementing and controlling all budgets and business plans and was actively
involved in all financial, administrative and operational decisions. From 1994
through 1998, he served as General Manager for Bell Sygma International, a
premier provider of telecommunications operating and management solutions
worldwide, in Uruguay. From 1974-1994 he also served in various senior financial
positions for Bell Canada International. Mr. Lo Basso received a B.S. in
Mathematics from Concordia University in 1974 and his master of Business
Administration from Concordia in 1981.


                                       45


Kenneth Shirley

         Mr. Shirley has been a director of Thomas since November 2004. Mr.
Shirley served as the President, CEO, and Director of Titan General Holdings,
Inc. from December 2003 until December 16, 2004. In 2000, Mr. Shirley formed his
own management and consulting business, Pyxis Partnership, through which he has
assisted in the operations of a number of companies. Prior to forming Pyxis, Mr.
Shirley held management positions in several companies - General Electric, AT&T/
Lucent, Multi Circuits and Hadco. Mr. Shirley completed a two year Manufacturing
Management Program with General Electric Company which is their equivalent to a
business degree while working in the Mobile Radio Division in 1974.

James E. Patty

         Mr. Patty has been a director of Thomas since November 2004. Mr. Patty
is also the CEO and Founder of Global Business Solutions Inc., an International
investment, management and outsourcing firm based in Campbell, California. From
May 1999 to June 2001, Mr. Patty was President and Chief Executive Officer of
VPNet Technologies (Milpitas, CA). From March 1998 to May 1999, Mr. Patty was
Vice President of GET Manufacturing, an electronic manufacturing services
company headquartered in China. From March 1996 to February, 1998 Mr. Patty was
Chief Operating Officer and Senior Vice President of Alphasource Manufacturing
Services, an international EMS company headquartered in Bangkok, Thailand. Mr.
Patty has had additional International Executive level management and
engineering experience with ATI, Maxtor, Motorola, and Four Phase Systems.

EXECUTIVE COMPENSATION

         The following table sets forth information concerning the total
compensation that we have paid or that has accrued on behalf of our chief
executive officer and other executive officers with annual compensation
exceeding $100,000 during the fiscal years ended June 30, 2004, 2003 and 2002.

                          Executive Compensation Table



                                                                       | Long-Term                   |                |
                                                                       | Compensation                |                |
                                                                       | --------------------------- | -------------  |
                                Annual Compensation                    | Awards                      | Payouts        |
                                -------------------------------------- | --------------------------- | -------------  |
                                                        Other          |                Securities   |                | All
                                                        Annual         | Restricted     Under-lying  |                | Other
Name and                                                Compen-        | Stock          Options/     | LTIP           | Compen-
Principal Position      Year    Salary ($)  Bonus ($)   sation ($)     | Award(s) ($)   SARs (#)     | Payouts ($)    | sation ($)
- ----------------------- ------- ----------- ----------- -------------- | -------------- ------------ | -------------  | -----------
                                                                                                
Clifford Rhee,           2004    -0-         -0-         -0-           |  -0-            0           |  -0-           |  -0-
     President (1)                                                     |                             |                |
Joel Arberman,           2004    -0-         -0-         -0-           |  -0-            0           |  -0-           |  -0-
  Former CEO (2)         2003    $104,745    -0-         -0-           |  -0-            0           |  -0-           |  -0-
                         2002    $110,600    -0-         -0-           |  -0-            0           |  -0-           |  -0-


(1)      Mr. Rhee did not become president until November 2004. Mr. Rhee's
         employment agreement is described below.

(2)      The year ends for Mr. Arberman's compensation were December 31, 2004,
         2003 and 2002, as reported in our annual reports filed for those years,
         which would have approximated his salary for the years ended June 30,
         2004, 2003 and 2002.

- - Personal benefits received by our executive officers are valued below the
levels which would otherwise require disclosure under the rules of the U.S.
Securities and Exchange Commission.


                                       46


- - We do not currently provide any contingent or deferred forms of compensation
arrangements, annuities, pension or retirement benefits to our directors,
officers or employees.

Director Compensation

         Members of our Board of Directors who are not otherwise employed by us
will receive a fee of $1,000 per month. In addition, they will annually receive
options to purchase 10,000 shares of common stock at an exercise price equal to
the fair market value of the stock at the time of grant. Our Chairman of the
Board will receive a fee of $5,000 per month, together with annual options to
purchase 10,000 shares of common stock at an exercise price equal to the fair
market value of stock at the time of the grant.

Options Grants

         We made no grants of stock options during the fiscal year ended June
30, 2004 to any of the named executive officers.

Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values

         The following table provides information concerning the number and
value of stock options exercised during the fiscal year ended June 30, 2004, and
held at the end of such fiscal year, by the named executive officers.

Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values



(a)                     (b)                 (c)                 (d)                     (e)
                                                                Number of Securities
                                                                Underlying              Value of Unexercised
                                                                Unexercised             In-the-Money
                                                                Options/SARs at         Options/SARs at
                                                                June 30, 2004 (#)       June 30, 2004 ($)

                        Shares Acquired                         Exercisable/            Exercisable/
Name                    on Exercise (#)     Value Realized ($)  Unexercisable           Unexercisable
- -----------------------------------------------------------------------------------------------------------------
                                                                            
None


Executive Employment Agreements


         We have an employment agreement with our President, Clifford Rhee.
Pursuant to the agreement effective October 1, 2004, Mr. Rhee is employed as our
President for a term of three years, although his employment by Thomas may be
terminated at any time. Mr. Rhee is entitled to receive an annual base salary of
$228,000, as well as customary benefits and reimbursements. In consideration for
services provided by Mr. Rhee in connection with the acquisition of our assets
from Thomas Equipment Limited, including Mr. Rhee's personal guarantee and
pledge of assets in support of various obligations we made to Thomas Equipment
Limited, Mr. Rhee received a one-time payment of $600,000. Of this amount
$300,000 is deemed to be a retention bonus which Mr. Rhee is obligated to repay
on a pro-rata basis if he terminates the employment agreement prior to the
expiration of the three year term. Mr. Rhee provided a personal guarantee in the
amount of $246,600 to the Minister of Business of New Brunswick, in support of
the Minister of Business New Brunswick's loan guarantee provided for the benefit
of Thomas. In addition, a company controlled by Mr. Rhee pledged its ownership
in Pneutech, which has since been converted into 467,767 shares of common stock
of Thomas, to McCain Foods Limited. This pledge supports a guarantee of all
obligations of Thomas and Thomas Equipment 2004 to redeem or purchase the 1,000
preference shares issued to McCain. Mr. Rhee was instrumental in identifying the
Thomas Equipment Limited assets as a business opportunity and negotiating for
their purchase by Thomas.


Benefit Plans

Employee Stock Incentive Plan

         The 2005 Stock Option Plan was adopted by the board of directors in
March 2005. The Plan provides for the issuance of up to 1,500,000 options.

         Under the plan, options may be granted which are intended to qualify as
incentive stock options, or ISOs, under Section 422 of the Internal Revenue Code


                                       47


of 1986, as amended, or which are not intended to qualify as incentive stock
options thereunder, or Non-ISOs. The 2005 Stock Option Plan and the right of
participants to make purchases thereunder are intended to qualify as an
"employee stock purchase plan" under Section 423 of the Internal Revenue Code of
1986, as amended. The 2005 Stock Option Plan is not a qualified deferred
compensation plan under Section 401(a) of the Internal Revenue Code and is not
subject to the provisions of the Employee Retirement Income Security Act of
1974.

Purpose

         The primary purpose of the 2005 Stock Option Plan is to attract and
retain the best available personnel for us in order to promote the success of
our business and to facilitate the ownership of our stock by employees. The
ability of a company to offer a generous stock option program has now become a
standard feature in the industry in which we operate.

Administration

         The 2005 Stock Option Plan is administered by our board of directors,
as the board of directors may be composed from time to time. All questions of
interpretation of the 2005 Stock Option Plan are determined by the board, and
its decisions are final and binding upon all participants. Any determination by
a majority of the members of the board of directors at any meeting, or by
written consent in lieu of a meeting, shall be deemed to have been made by the
whole board of directors.

         Notwithstanding the foregoing, the board of directors may at any time,
or from time to time, appoint a committee of at least two members of the board
of directors, and delegate to the committee the authority of the board of
directors to administer the plan. Upon such appointment and delegation, the
committee shall have all the powers, privileges and duties of the board of
directors, and shall be substituted for the board of directors, in the
administration of the plan, subject to certain limitations.

         Members of the board of directors who are eligible employees are
permitted to participate in the 2005 Stock Option Plan, provided that any such
eligible member may not vote on any matter affecting the administration of the
2005 Stock Option Plan or the grant of any option pursuant to it, or serve on a
committee appointed to administer the 2005 Stock Option Plan. In the event that
any member of the board of directors is at any time not a "disinterested
person", as defined in Rule 16b-3(c)(3)(i) promulgated pursuant to the
Securities Exchange Act of 1934, the plan shall not be administered by the board
of directors, and may only by administered by a committee, all the members of
which are disinterested persons, as so defined.

Eligibility

         Under the 2005 Stock Option Plan, options may be granted to key
employees, officers, directors or consultants of ours, as provided in the 2005
Stock Option Plan.

Terms of Options

         The term of each option granted under the plan shall be contained in a
stock option agreement between us and the optionee and such terms shall be
determined by the board of directors consistent with the provisions of the plan,
including the following:

         (a) Purchase Price. The purchase price of the common shares subject to
each ISO shall not be less than the fair market value, or in the case of the
grant of an ISO to a principal stockholder, not less than 110% of fair market
value of such common shares at the time such option is granted. The purchase
price of the common shares subject to each Non-ISO shall be determined at the
time such option is granted, but in no case less than 85% of the fair market
value of such common shares at the time such option is granted.

         (b) Vesting. The dates on which each option (or portion thereof) shall
be exercisable and the conditions precedent to such exercise, if any, shall be
fixed by the board of directors, in its discretion, at the time such option is
granted.


                                       48


         (c) Expiration. The expiration of each option shall be fixed by the
board of directors, in its discretion, at the time such option is granted;
however, unless otherwise determined by the board of directors at the time such
option is granted, an option shall be exercisable for ten (10) years after the
date on which it was granted (the "Grant Date"). Each option shall be subject to
earlier termination as expressly provided in the 2005 Stock Option Plan or as
determined by the board of directors, in its discretion, at the time such option
is granted.

         (d) Transferability. No option shall be transferable, except by will or
the laws of descent and distribution, and any option may be exercised during the
lifetime of the optionee only by him. No option granted under the plan shall be
subject to execution, attachment or other process.

         (e) Option Adjustments. The aggregate number and class of shares as to
which options may be granted under the plan, the number and class of shares
covered by each outstanding option and the exercise price per share thereof (but
not the total price), and all such options, shall each be proportionately
adjusted for any increase or decrease in the number of issued common shares
resulting from split-up, spin-off or consolidation of shares or any like capital
adjustment or the payment of any stock dividend.

         Except as otherwise provided in the 2005 Stock Option Plan, any option
granted hereunder shall terminate in the event of a merger, consolidation,
acquisition of property or stock, separation, reorganization or liquidation of
us. However, the optionee shall have the right immediately prior to any such
transaction to exercise the option in whole or in part notwithstanding any
otherwise applicable vesting requirements.

         (f) Termination, Modification and Amendment. The 2005 Stock Option Plan
(but not options previously granted under the plan) shall terminate ten (10)
years from the earlier of the date of its adoption by the board of directors or
the date on which the plan is approved by the affirmative vote of the holders of
a majority of the outstanding shares of our capital stock entitled to vote
thereon, and no option shall be granted after termination of the plan. Subject
to certain restrictions, the plan may at any time be terminated and from time to
time be modified or amended by the affirmative vote of the holders of a majority
of the outstanding shares of our capital stock present, or represented, and
entitled to vote at a meeting duly held in accordance with the applicable laws
of the State of Delaware.

Aggregated Option Exercises in Last Fiscal Year And Fiscal Year-end Option
Values

         There were no option exercises in the last fiscal year.

Security Ownership of Certain Beneficial Owners and Management

         The following table sets forth certain information, as of March 20,
2005 with respect to the beneficial ownership of the outstanding common stock by
(i) any holder of more than five (5%) percent; (ii) each of our directors and
named executive officers; and (iii) our directors and named executive officers
as a group. Except as otherwise indicated, each of the stockholders listed below
has sole voting and investment power over the shares beneficially owned.



                                                                                   Percentage of        Percentage of
                                                                                   Common Stock         Common Stock
                                                      Common Stock                 Ownership Before     Ownership After
Name of Beneficial Owner (1)                          Beneficially Owned           Offering             Offering
- ----------------------------------------------------- ---------------------------- -------------------- ---------------------
                                                                                                
Clifford Rhee                                           3,343,061(2)               15.7%                 6.9%
David M. Marks                                         10,996,706(3)(4)            51.7%                22.8%
Kenneth Shirley                                            10,000(3)               *                    *
James E. Patty                                             10,000(3)               *                    *
Farwell Equity Partners, LLC                           10,986,706(4)               51.7%                22.8%
4237901 Canada Inc.                                     2,875,294(2)               13.5%                 6.0%
Laurus Master Fund, Ltd.                                2,358,488(5)                9.9%                56.7%
- ----------------------------------------------------- ---------------------------- -------------------- ---------------------
All officers and directors as a group (4 persons)                                  67.6%                29.8%



                                       49


      *  Less than 1%.

      (1)   Except as otherwise indicated, the address of each beneficial owner
            is c/o Thomas Equipment, Inc., 1818 North Farwell Avenue, Milwaukee,
            WI 53202.

      (2)   Includes 2,875,294 shares owned by 4237901 Canada Inc., a
            corporation controlled by Clifford Rhee.

      (3)   Includes 10,000 shares issuable upon exercise of currently
            exercisable options.


      (4)   David Marks is the managing member of Farwell Equity Partners, LLC,
            and has sole investment and dispositive power with respect to all
            shares owned by such entity. Frank Crivello is the majority owner of
            the membership interests of such entity.

      (5)   Does not include 2,750,000 shares issuable upon exercise of warrants
            exercisable at a price of $2.25 per share, 4,020,000 shares issuable
            upon exercise of an option exercisable at an aggregate exercise
            price equal to the par value of such shares, or up to 18,600,000
            shares issuable upon conversion of the maximum convertible debt
            which may be outstanding to Laurus. Laurus has contractually agreed
            to restrict its ability to convert or exercise its warrants and
            receive shares of our common stock such that the number of shares of
            common stock held by it and its affiliates after such conversion or
            exercise does not exceed 9.99% of the then issued and outstanding
            shares of common stock. Laurus Capital Management, L.L.C. may be
            deemed a control person of the shares owned by such entity. David
            Grin and Eugene Grin are the principals of Laurus Capital
            Management, L.L.C.

Securities Authorized for Issuance Under Equity Compensation Plans

         The following table shows information with respect to each equity
compensation plan under which our common stock is authorized for issuance as of
the fiscal year ended June 30, 2004.



- ------------------------------------ ------------------------ ----------------------- ---------------------------
Plan category                        Number of securities     Weighted average        Number of securities
                                     to be issued upon        exercise price of       remaining available for
                                     exercise of              outstanding options,    future issuance under
                                     outstanding options,     warrants and rights     equity compensation plans
                                     warrants and rights                              (excluding securities
                                                                                      reflected in column (a)
- ------------------------------------ ------------------------ ----------------------- ---------------------------
                                     (a)                      (b)                     (c)
- ------------------------------------ ------------------------ ----------------------- ---------------------------
                                                                             
Equity  compensation plans approved
by security                          -0-                      -0-                     N/A
 Holders
- ------------------------------------ ------------------------ ----------------------- ---------------------------
Equity   compensation   plans   not
approved by security
 Holders                             -0-                      -0-                     N/A
- ------------------------------------ ------------------------ ----------------------- ---------------------------
Total
- ------------------------------------ ------------------------ ----------------------- ---------------------------



                                       50


CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


         On December 22, 2004, we entered into an Agreement and Plan of
Amalgamation with 4274458 Canada, Inc., a corporation wholly-owned by us, and
Pneutech, Inc., as amended effective February 28, 2005. Under the terms of the
agreement which closed on February 28, 2005, we acquired 100% of the common
stock of Pneutech in exchange for the issuance by us of a total of 1,082,641
shares of our common stock and warrants to purchase 211,062 shares of our common
stock, exercisable at $3.00 per share. An additional 167,359 shares of common
stock were issued as of the closing in exchange for the cancellation of
approximately CD$612,000 of debt owed by Pneutech to unaffiliated third parties.
Upon the closing, Pneutech also redeemed 929 preference shares and 530,000
special shares owned by 3156176 Canada, Inc. for an aggregate of $508,000.
Clifford Rhee, our President and a member of our Board of Directors is the
beneficial owner of 3156176 Canada, Inc., which was the owner of approximately
47% of the common shares, 929 preference shares and 530,000 special shares of
Pneutech. Neither Mr. Rhee nor any other officer, director or principal
stockholder of Thomas received any benefits or other consideration in connection
with the acquisition of Pneutech. Mr. Rhee received 467,767 shares of our common
stock in exchange for his common shares in Pneutech, except as disclosed above.
Mr. Rhee was also the President and a member of the Board of Directors of
Pneutech prior to its acquisition by Thomas. Mr. Rhee generally negotiated on
behalf of Pneutech, in concert with the other principal stockholder of Pneutech,
while David Marks, chairman of Thomas, negotiated on behalf of Thomas. Mr.
Rhee's conflict of interest was disclosed to the shareholders of Pneutech.


         On November 1, 2004, we entered into a consulting agreement with Frank
Crivello to act as a non-exclusive consultant to us in the areas of mergers and
acquisitions, business development and capital needs for a period of one year.
Mr. Crivello is paid a fee of $10,000 per month for such services. Mr. Crivello
is a member of Farwell Equity Partners, LLC, a principal stockholder of Thomas
Equipment.

INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

         Our Bylaws provide that Thomas shall, to the fullest extent permitted
by Section 145 of the General Corporation Law of the State of Delaware,
indemnify any and all persons whom it shall have power to indemnify against any
and all of the costs, expenses, liabilities or other matters incurred by them by
reason of having been officers or directors of Thomas, any subsidiary of Thomas
or of any other corporation for which any and all persons who acted as officer
or director at the request of Thomas.

         Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act" or "Securities Act") may be permitted to directors,
officers or persons controlling us pursuant to the foregoing provisions, or
otherwise, we have been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable.

DESCRIPTION OF SECURITIES

Capital Structure


         Our authorized capital consists of 200,000,000 shares of common stock,
par value $.01 per share and 5,000,000 shares of preferred stock, par value
$.0001 per share. As of the date of this prospectus, we had 21,250,000 shares of
common stock outstanding and no shares of preferred stock outstanding.

         In connection with the acquisition of assets from Thomas Equipment
Limited, our subsidiary, Thomas Equipment 2004 Inc. issued 1,000 shares of its
preferred shares. The shares are redeemable for $8,220,000 plus accrued but
unpaid dividends at our option at any time or by the holder on or after April
26, 2006. We are required to purchase the shares from the holder on April 26,
2006, if not earlier redeemed. The preferred shares carry a cumulative dividend
of 8% per annum increasing to 12% after eighteen months from the date of
acquisition. The holder of these shares has the right to be an observer at our
board meetings.



                                       51


Common Stock

         Holders of our common stock: (i) have equal ratable rights to dividends
from funds legally available therefor, when, as and if declared by the Board of
Directors; (ii) are entitled to share ratably in all of our assets available for
distribution to stockholders upon liquidation, dissolution or winding up of our
affairs; (iii) do not have preemptive, subscription or conversion rights, nor
are there any redemption or sinking fund provisions applicable thereto; and (iv)
are entitled to one vote per share on all matters on which stockholders may vote
at all shareholder meetings. The common stock does not have cumulative voting
rights, which means that the holders of more than fifty percent of the common
stock voting for election of directors can elect one hundred percent of our
directors if they choose to do so.

Preferred Stock

         Our Articles of Incorporation authorize 5,000,000 shares of preferred
stock, $.0001 par value per share. Our Board of Directors, without any action by
stockholders, is authorized to divide the authorized shares of preferred stock
into series and to designate the rights, qualifications, preferences,
limitations and terms of the shares of any series of preferred stock, including
but not limited to dividend, redemption, voting rights and preferences. The
ability of our Board of Directors to designate and issue such shares could
impede or deter an unsolicited tender offer or takeover proposal and the
issuance of additional shares having preferential rights could affect adversely
the voting power and other rights of holders of our common stock.

      On April 15, 2005, our Board of Directors approved a Certificate of
Designation for 30,000 shares of series A preferred stock, of which 25,000 were
issued on April 19, 2005. The series A preferred stock issued is convertible
into 8,333,333 shares of common stock at the rate of $3.00 per share and pays a
dividend of 5% per annum in cash. The series A preferred stock may be converted
at anytime upon five days notice by the preferred stockholders. We can require
the holders to convert up to 20% of their series A preferred stock per month, if
the common stock trades at an average price of $6.00 per share for 20
consecutive days, with average volume of 150,000 shares per day. At any time
commencing after three years from April 19, 2005, we can redeem the series A
preferred stock. If the redemption occurs in the fourth year after issuance, the
redemption amount shall be 200% of the stated value. If the redemption occurs
during the fifth year after issuance, the redemption amount shall be 225% of the
stated value. The holder can require us to redeem the series A preferred stock
at 110% of the stated value, together with accrued dividends, after five years
or upon certain events, including:

         o        failure to deliver common stock when required;

         o        failure to effect registration of the common stock; or

         o        a bankruptcy event.

Transfer Agent

         Interwest Transfer Co., Inc. 1981 E. 4800 South, Suite 100, Salt Lake
City Utah 84117, is the transfer agent and registrar for our securities.


                                       52


                              SELLING STOCKHOLDERS

         The following table sets forth the common stock ownership of the
selling stockholders as of March 20, 2005, including the number of shares of
common stock issuable to the selling stockholders upon the conversion of
convertible notes or exercise of options or warrants held by the selling
stockholders. Other than as set forth in the following table, the selling
stockholders have not held any position or office or had any other material
relationship with us or any of our predecessors or affiliates within the past
three years.



- ---------------------- ---------------- -------------- -------------- ------------ --------------- ----------- ---------------
                         Total Shares      Total
                          of Common      Percentage
                         Stock, and       of Common
                       those Issuable      Stock,
                            Upon          Assuming       Shares of      Beneficial Percentage of   Beneficial    Percentage
                        Conversion or       Full       Common Stock     Ownership   Common Stock    Ownership    of Common
                         Exercise of     Conversion     Included in    Before the   Owned Before    After the   Stock Owned
        Name             Securities     and Exercise    Prospectus      Offering      Offering      Offering   After Offering
- ---------------------- ---------------- -------------- -------------- ------------ --------------- ----------- ---------------
                                                                                               
Laurus Master            27,350,000         56.3%          Up to       2,358,488       9.99%           --            --
 Fund Ltd. (1)                                          21,735,000
                                                         shares of
                                                        common stock
- ---------------------- ---------------- -------------- -------------- ------------ --------------- ----------- ---------------
Roynat Merchant           1,000,000         4.5%         1,000,000     1,000,000        4.5%           --            --
Capital Inc.(2)
- ---------------------- ---------------- -------------- -------------- ------------ --------------- ----------- ---------------
Farwell Equity           10,986,706         51.7%        1,690,000    10,986,706       51.7%       9,296,706       43.7%
Partners, LLC (3)
- ---------------------- ---------------- -------------- -------------- ------------ --------------- ----------- ---------------
JAVL Investments,          200,000            *           200,000       200,000          *             --            --
LLC(4)
- ---------------------- ---------------- -------------- -------------- ------------ --------------- ----------- ---------------
Lloyd R. Milliken          50,000             *           50,000        50,000           *             --            --
- ---------------------- ---------------- -------------- -------------- ------------ --------------- ----------- ---------------
Frank Crivello, SEP       2,010,000         9.5%         2,010,000     2,010,000        9.5%           --
IRA
- ---------------------- ---------------- -------------- -------------- ------------ --------------- ----------- ---------------
Redwood Consultants,                          *                                                        --            --
LLC(5)(6)                  135,000                        135,000       135,000          *
- ---------------------- ---------------- -------------- -------------- ------------ --------------- ----------- ---------------
Lucci Financial                               *                                          *             --            --
Group, LLC(6)(7)           50,000                         50,000        50,000
- ---------------------- ---------------- -------------- -------------- ------------ --------------- ----------- ---------------
Maureen Simon(6)           12,500             *           12,500        12,500           *             --            --
- ---------------------- ---------------- -------------- -------------- ------------ --------------- ----------- ---------------
Angela Williams(6)                            *                                          *             --            --
                            2,500                          2,500         2,500
- ---------------------- ---------------- -------------- -------------- ------------ --------------- ----------- ---------------
Jimmy A. Perez(6)          25,000             *           25,000        25,000           *             --            --
- ---------------------- ---------------- -------------- -------------- ------------ --------------- ----------- ---------------
Richard Tessi(6)           12,500             *           12,500        12,500           *             --            --
- ---------------------- ---------------- -------------- -------------- ------------ --------------- ----------- ---------------
Richard Pissano(6)         12,500             *           12,500        12,500           *             --            --
- ---------------------- ---------------- -------------- -------------- ------------ --------------- ----------- ---------------
Guy Crawford               50,000             *           50,000        50,000           *             --            --
- ---------------------- ---------------- -------------- -------------- ------------ --------------- ----------- ---------------


         The number and percentage of shares beneficially owned is determined in
accordance with Rule 13d-3 of the Securities Exchange Act of 1934, and the
information is not necessarily indicative of beneficial ownership for any other
purpose. Under such rule, beneficial ownership includes any shares as to which
the selling stockholder has sole or shared voting power or investment power and
also any shares, which the selling stockholder has the right to acquire within
60 days. The actual number of shares of common stock issuable upon the
conversion of the convertible preferred stock is subject to adjustment depending
on, among other factors, the future market price of the common stock, and could
be materially less or more than the number estimated in the table.


                                       53


*  Less than 1%.

(1)      Laurus Capital Management, L.L.C. may be deemed a control person of the
         shares owned by such entity. David Grin and Eugene Grin are the
         principals of Laurus Capital Management, L.L.C. The shares of common
         stock that are being registered includes: (i) 2,750,000 common stock
         purchase warrants exercisable at $2.25 per share; (ii) an option to
         purchase 4,020,000 shares of common stock exercisable at $0.01 per
         share, (iii) up to 3,511,111 shares underlying $7,900,000 principal
         amount of convertible term notes; and (iv) up to 13,333,333 shares
         underlying $20,000,000 principal amount convertible promissory
         revolving notes.

(2)      All of such shares are issuable upon exercise of currently exercisable
         warrants. Roynat is owned by The Bank of Nova Scotia.

(3)      David Marks has sole investment and dispositive power with respect to
         the shares owned by Farwell Equity Partners, LLC.

(4)      Jeffrey Araj is the control person of such entity through his control
         of investment and disposition decision rights.

(5)      Jens Dalsgaard is the control person of such entity through his control
         of investment and disposition decision rights.

(6)      All of such shares are issuable upon exercise of warrants with an
         exercise price of $4.00 per share. Such warrants were issued in
         consideration of services provided to Thomas Equipment by Redwood
         Consultants, LLC.

(7)      Michael Lucci is the control person of such entity through his control
         of investment and disposition decision rights.


                                       54


                              PLAN OF DISTRIBUTION

         We are registering the shares of common stock on behalf of the selling
stockholders. We are paying all costs, expenses and fees in connection with the
registration of shares offered by this prospectus. Brokerage commissions, if
any, attributable to the sale of shares will be borne by the selling
stockholders.

         Each selling stockholder of the common stock and any of their pledgees,
assignees and successors-in-interest may, from time to time, sell any or all of
their shares of common stock on the Over-the-Counter Bulletin Board or any other
stock exchange, market or trading facility on which the shares are traded or in
private transactions. These sales may be at fixed or negotiated prices. A
selling stockholder may use any one or more of the following methods when
selling shares:

         o        ordinary brokerage transactions and transactions in which the
                  broker-dealer solicits purchasers;

         o        block trades in which the broker-dealer will attempt to sell
                  the shares as agent but may position and resell a portion of
                  the block as principal to facilitate the transaction;

         o        purchases by a broker-dealer as principal and resale by the
                  broker-dealer for its account;

         o        an exchange distribution in accordance with the rules of the
                  applicable exchange;

         o        privately negotiated transactions;

         o        settlement of short sales;

         o        broker-dealers may agree with the selling stockholders to sell
                  a specified number of such shares at a stipulated price per
                  share;

         o        a combination of any such methods of sale;

         o        through the writing or settlement of options or other hedging
                  transactions, whether through an options exchange or
                  otherwise; or

         o        any other method permitted pursuant to applicable law.

         The selling stockholders may also sell shares under Rule 144 under the
Securities Act of 1933, as amended, if available, rather than under this
prospectus.

         Broker-dealers engaged by the selling stockholders may arrange for
other broker-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the selling stockholders (or, if any broker-dealer
acts as agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. Each selling stockholder does not expect these commissions and
discounts relating to its sales of shares to exceed what is customary in the
types of transactions involved.

         In connection with the sale of our common stock or interests therein,
the selling stockholders may enter into hedging transactions with broker-dealers
or other financial institutions, which may in turn engage in short sales of the
common stock in the course of hedging the positions they assume. The selling
stockholders may also sell shares of our common stock short and deliver these
securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities. The selling
stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).


                                       55


         The selling stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. Each selling stockholder has
informed us that it does not have any agreement or understanding, directly or
indirectly, with any person to distribute the common stock.

         We are required to pay certain fees and expenses incurred incident to
the registration of the shares. We have agreed to indemnify the selling
stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.

         Because the selling stockholders may be deemed to be "underwriters"
within the meaning of the Securities Act, they will be subject to the prospectus
delivery requirements of the Securities Act. In addition, any securities covered
by this prospectus which qualify for sale pursuant to Rule 144 under the
Securities Act may be sold under Rule 144 rather than under this prospectus.
Each selling stockholder has advised us that they have not entered into any
agreements, understandings or arrangements with any underwriter or broker-dealer
regarding the sale of the resale shares. There is no underwriter or coordinating
broker acting in connection with the proposed sale of the resale shares by the
selling stockholders.

         We agreed to keep this prospectus effective until the earlier of (i)
the date on which the shares may be resold by the selling stockholders without
registration and without regard to any volume limitations by reason of Rule
144(e) under the Securities Act or any other rule of similar effect or (ii) all
of the shares have been sold pursuant to the prospectus or Rule 144 under the
Securities Act or any other rule of similar effect. The resale shares will be
sold only through registered or licensed brokers or dealers if required under
applicable state securities laws. In addition, in certain states, the resale
shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.

         Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the resale shares may not simultaneously
engage in market making activities with respect to our common stock for a period
of two business days prior to the commencement of the distribution. In addition,
the selling stockholders will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, including Regulation M,
which may limit the timing of purchases and sales of shares of our common stock
by the selling stockholders or any other person. We will make copies of this
prospectus available to the selling stockholders and have informed them of the
need to deliver a copy of this prospectus to each purchaser at or prior to the
time of the sale.

Penny Stock Rule

         The Securities and Exchange Commission has adopted Rule 15g-9 which
establishes the definition of a "penny stock," for the purposes relevant to us,
as any equity security that has a market price of less than $5.00 per share or
with an exercise price of less than $5.00 per share, subject to certain
exceptions. For any transaction involving a penny stock, unless exempt, the
rules require:

         o        that a broker or dealer approve a person's account for
                  transactions in penny stocks; and

         o        the broker or dealer receive from the investor a written
                  agreement to the transaction, setting forth the identity and
                  quantity of the penny stock to be purchased.

         In order to approve a person's account for transactions in penny
stocks, the broker or dealer must

         o        obtain financial information and investment experience
                  objectives of the person; and


                                       56


         o        make a reasonable determination that the transactions in penny
                  stocks are suitable for that person and the person has
                  sufficient knowledge and experience in financial matters to be
                  capable of evaluating the risks of transactions in penny
                  stocks.

         The broker or dealer must also deliver, prior to any transaction in a
penny stock, a disclosure schedule prescribed by the Commission relating to the
penny stock market, which, in highlight form:

         o        sets forth the basis on which the broker or dealer made the
                  suitability determination; and

         o        that the broker or dealer received a signed, written agreement
                  from the investor prior to the transaction.

         Disclosure also has to be made about the risks of investing in penny
stocks in both public offerings and in secondary trading and about the
commissions payable to both the broker-dealer and the registered representative,
current quotations for the securities and the rights and remedies available to
an investor in cases of fraud in penny stock transactions. Finally, monthly
statements have to be sent disclosing recent price information for the penny
stock held in the account and information on the limited market in penny stocks.


                                       57


                                  LEGAL MATTERS

         The validity of the shares of common stock being offered hereby will be
passed upon for us by Sichenzia Ross Friedman Ference LLP, New York, New York.

                                     EXPERTS

          The financial statements as of June 30, 2004 and 2003 and for each of
the three years in the period ended June 30, 2004 included in this Prospectus
have been so included in reliance on the report of PricewaterhouseCoopers LLP,
independent registered public accounting firm, given on the authority of said
firm as experts in auditing and accounting.

         The consolidated financial statements of Pneutech, Inc. as of October
31, 2004, and for the years ended October 31, 2004 and 2003 included in this
Prospectus have been so included in reliance on the report of Kingery & Crouse,
P.A., independent registered public accounting firm, given on the authority of
said firm as experts in auditing and accounting.

                CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                      ACCOUNTING AND FINANCIAL DISCLOSURE

         On December 6, 2004, we re-engaged Kingery & Crouse, P.A. as our
principal independent accountant. Our board of directors has approved the
appointment of Kingery & Crouse, P.A. as our new principal independent
accountants.

         Prior to engaging Kingery & Crouse, P.A. we did not consult with them
regarding either:

         1. the application of accounting principles to any specified
         transaction, either completed or proposed, or the type of audit opinion
         that might be rendered on our financial statements, and neither a
         written report was provided to our company nor oral advice was provided
         that Kingery & Crouse, P.A. concluded was an important factor
         considered by our company in reaching a decision as to our accounting,
         auditing or financial reporting issue; or

         2. any matter that was either the subject of disagreement or an event,
         as defined in Item 304(a)(1)(iv)(A) of Regulation S-B and the related
         instruction to Item 304 of Regulation S-B, or a reportable event, as
         that term is explained in Item 304(a)(1)(iv)(A) of Regulation S-B.

         On November 9, 2004, as a result of the acquisition of Thomas, we
dismissed Kingery & Crouse, P.A. as our principal independent accountant. From
the date of Kingery & Crouse, P.A.'s appointment through the date of their
dismissal on November 9, 2004, there were no disagreements between our company
and Kingery & Crouse, P.A. on any matter listed under Item 304 Section
(a)(1)(iv) A to E of Regulation S-B, including accounting principles or
practices, financial statement disclosure or auditing scope or procedures which,
if not resolved to the satisfaction of Kingery & Crouse, P.A. would have caused
them to make reference to the matter in its reports on our financial statements.

         We provided Kingery & Crouse, P.A. with a copy of the Current Report on
Form 8-K disclosing this matter on November 9, 2004, prior to its filing with
the SEC, and requested that they furnish us with a letter addressed to the SEC
stating whether they agreed with the statements made in the Current Report on
Form 8-K, and if not, stating the aspects with which they agreed. A copy of the
letter provided by Kingery & Crouse, P.A., dated November 11, 2004, is included
as an exhibit to the registration statement of which this prospectus forms a
part.


                                       58


                              AVAILABLE INFORMATION

         We have filed a registration statement on Form SB-2 under the
Securities Act of 1933, as amended, relating to the shares of common stock being
offered by this prospectus, and reference is made to such registration
statement. This prospectus constitutes the prospectus of Thomas Equipment, Inc.
filed as part of the registration statement, and it does not contain all
information in the registration statement, as certain portions have been omitted
in accordance with the rules and regulations of the Securities and Exchange
Commission.

         We are subject to the informational requirements of the Securities
Exchange Act of 1934, which requires us to file reports, proxy statements and
other information with the Securities and Exchange Commission. Such reports,
proxy statements and other information may be inspected at public reference
facilities of the SEC at Judiciary Plaza, 450 Fifth Street N.W., Washington D.C.
20549. Copies of such material can be obtained from the Public Reference Section
of the SEC at Judiciary Plaza, 450 Fifth Street N.W., Washington, D.C. 20549 at
prescribed rates. Because we file documents electronically with the SEC, you may
also obtain this information by visiting the SEC's Internet website at
http://www.sec.gov.


                                       59


                          INDEX TO FINANCIAL STATEMENTS

                                                                                                           
Unaudited Financial Statements of Thomas Equipment Inc. (since inception, October 1, 2004)                    F-2
   For The Three and Six Months Ended March 31, 2005 And Predecessor Statements For The
   Three Months Ended September 30, 2004 And For The Three and Nine Months Ended
   March 31, 2004

Audited Financial Statements of Thomas Equipment Limited (the predecessor business) For                       F-25
   The Years Ended June 30, 2004 and 2003

Audited Financial Statements of Pneutech, Inc. For the Years Ended October 31, 2004 and 2003                  F-62

Unaudited Pro forma Combined Condensed Statement of Operations For the Year Ended June 30, 2004               F-84





                                      F-1


THOMAS EQUIPMENT, INC.
Consolidated Financial Statements
Unaudited
March 31, 2005

TABLE OF CONTENTS

- --------------------------------------------------------------------------------



                                                                                     Page
                                                                                     ----
                                                                                  
Consolidated Financial Statements:

Balance Sheet as of March 31, 2005.                                                  F-3

Statements of Operations for the three and six months ended March 31, 2005 and
   predecessor F-5 statements for the three months ended September 30, 2004 and
   for the three and nine months ended March 31, 2004

Statements of Stockholders' Equity for the six months ended March 31, 2005           F-6

Statements of Cash Flows for the six months ended March 31, 2005 and                 F-7
   predecessor statements for the three months ended September 30, 2004
   and for the three and nine months ended March 31, 2004

Notes to Financial Statements                                                        F-9




                                      F-2


                             THOMAS EQUIPMENT, INC.

                               Successor Business

                           CONSOLIDATED BALANCE SHEET
                              AS OF MARCH 31, 2005
                  (Unaudited - in thousands, except share data)

- --------------------------------------------------------------------------------

ASSETS

Current assets:
  Cash                                                                  $ 1,111
  Accounts receivable, net of allowance for doubtful accounts of $577    25,269
  Inventories                                                            36,475
  Prepaid expenses                                                        1,804
  Other assets                                                              235
                                                                        -------
                                                                         64,894

Property, plant and equipment, net                                       19,695

Deferred finance costs                                                    1,455

Other assets                                                              2,384

Goodwill                                                                  5,224
                                                                        -------
                                                                        $93,652
                                                                        =======

                                                                    (continued-)


                                      F-3


                             THOMAS EQUIPMENT, INC.

                               Successor Business

                           CONSOLIDATED BALANCE SHEET
                              AS OF MARCH 31, 2005
                           (Unaudited - in thousands)

                                                                    (-continued)

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities

Current liabilities:
  Credit facilities                                                    $  9,762
  Convertible credit facility                                            13,690
  Trade payables                                                         19,844
  Warranty liability                                                        420
  Other payables and accrued liabilities                                  6,671
  Current portion of long term debt                                       8,419
  Current portion of convertible long term debt                           2,448
  Current portion of capital lease obligations                              137
                                                                       --------
                                                                         61,391

Long term debt                                                            1,360
Convertible long term debt                                                3,783
Capital lease obligations                                                 4,965
Deferred taxes                                                              547
Redeemable preferred stock of subsidiary                                  8,220

Stockholders' Equity:
Common stock                                                                213
Additional paid in capital                                               25,125
Accumulated deficit                                                     (11,902)
Accumulated other comprehensive income (loss)                               (50)
                                                                       --------
                                                                         13,386
                                                                       --------
                                                                       $ 93,652
                                                                       ========

- --------------------------------------------------------------------------------

See accompanying notes to consolidated financial statements.


                                      F-4


                             THOMAS EQUIPMENT, INC.

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

- --------------------------------------------------------------------------------


                                                Successor Business         |                Predecessor Business
                                           -----------------------------   |   ------------------------------------------------
                                               Three                       |                        Three              Nine
                                              Months          Six Months   |      Three             Months            Months
                                               Ended             Ended     |   Months Ended         Ended             Ended
                                             March 31,         March 31,   |     September         March 31,         March 31,
                                               2005              2005      |     30, 2004           2004               2004
                                           ------------      ------------  |   ------------      ------------      ------------
                                                                                                    
Sales                                      $     17,036      $     31,452  |   $     13,857      $     12,622      $     39,199
                                                                           |
Cost of sales                                    14,770            26,912  |         11,770            10,902            33,978
                                           ------------      ------------  |   ------------      ------------      ------------
                                                                           |
Gross profit                                      2,266             4,540  |          2,087             1,720             5,221
                                                                           |
Operating expenses:                                                        |
Selling                                           1,759             3,120  |          1,797             1,561             4,632
General and administrative                        1,931             3,346  |          2,221             1,588             4,263
Provision for doubtful receivables                   57               131  |             41               265             1,228
Stock based compensation                             --             6,431  |             --                --                --
Other (income) expense                              226               442  |           (884)             (103)             (763)
                                           ------------      ------------  |   ------------      ------------      ------------
                                                  3,973            13,470  |          3,175             3,311             9,360
                                           ------------      ------------  |   ------------      ------------      ------------
                                                                           |
Operating loss                                   (1,707)           (8,930) |         (1,088)           (1,591)           (4,139)
                                                                           |
Other expenses -                                                           |
Net financial expense (income)                    2,037             2,972  |            499               (14)               19
                                           ------------      ------------  |   ------------      ------------      ------------
                                                                           |
Net loss before income taxes                     (3,744)          (11,902) |         (1,587)           (1,577)           (4,158)
                                                                           |
Provision for income taxes                           --                --  |             15                17                49
                                           ------------      ------------  |   ------------      ------------      ------------
                                                                           |
Net loss                                   $     (3,744)     $    (11,902) |   $     (1,602)     $     (1,594)     $     (4,207)
                                           ============      ============  |   ============      ============      ============
                                                                           |
Weighted average shares outstanding          20,435,393        20,214,088  |      8,643,000         2,643,000         2,643,000
                                           ------------      ------------  |   ------------      ------------      ------------
                                                                           |
Basic and diluted loss per share           $      (0.18)     $      (0.59) |   $      (0.19)     $      (0.60)     $      (1.59)
                                           ============      ============  |   ============      ============      ============
                                                                           |
Reconciliation of Comprehensive Loss:                                      |
Net loss                                   $     (3,744)     $    (11,902) |   $     (1,602)     $     (1,594)     $     (4,207)
Other comprehensive income (loss) -                                        |
foreign currency translation                        176               (50) |           (726)              269              (633)
                                           ------------      ------------  |   ------------      ------------      ------------
Total comprehensive loss                   $     (3,568)     $    (11,952) |   $     (2,328)     $     (1,325)     $     (4,840)
                                           ============      ============  |   ============      ============      ============


- --------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.


                                      F-5


                             THOMAS EQUIPMENT, INC.

                               Successor Business

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

- --------------------------------------------------------------------------------



                                               Common Stock       Additional                      Other
                                           ----------------------  Paid-In     Accumulated    Comprehensive
                                             Shares     Amount     Capital       Deficit          Loss         Total
                                           -----------------------------------------------------------------------------
                                                                                              
BALANCES, OCTOBER 1, 2004 (Inception)               --      $ --      $    --      $      --           $  --    $    --

Contribution of services                            --        --          322             --              --        322

Common stock sold to founders for cash      16,945,000       169        1,960             --              --      2,129

Stock-based compensation related to
common stock sold to founders                       --        --        5,461             --              --      5,461

Common stock sold to Laurus for cash         1,980,000        20           --             --              --         20

Stock-based compensation related to
common stock sold to Laurus for cash                --        --          970             --              --        970

Common stock issued in exchange for net
liabilities in a recapitalization            1,075,000        11         (11)             --              --         --

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

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

Warrants for 400,000 common shares issued
to Laurus in connection with financing              --        --        1,542             --              --      1,542

Acquisition of Pneutech:
   Common stock issued                       1,082,641        11        3,459             --              --      3,470
   Warrants for 211,062 common shares               --        --          260             --              --        260

Common stock issued in repayment of
Pneutech debt                                  167,359         2          492             --              --        494

Warrants for 150,000 common shares issued
to Laurus in connection with financing              --        --          488             --              --        488

Warrants for 1,000,000 common shares
issued to Roynat US in connection with
financing                                           --        --        2,649             --              --      2,649

Warrants for 250,000 common shares issued
in connection with professional services            --        --        1,295             --              --      1,295

Foreign exchange translation loss                   --        --           --             --            (50)       (50)

Net loss                                            --        --           --       (11,902)              --   (11,902)

                                           -----------------------------------------------------------------------------
BALANCES, MARCH 31, 2005                    21,250,000      $213      $25,125      $(11,902)           $(50)    $13,386
                                           =============================================================================


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

See accompanying notes to consolidated financial statements.


                                      F-6


                             THOMAS EQUIPMENT, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                           (Unaudited - in thousands)




                                                               Successor    |
                                                                Business    |   Predecessor Business
                                                              ------------- |  -----------------------
                                                                            |    Three         Nine
                                                                Six Months  |    Months        Months
                                                                   Ended    |    Ended         Ended
                                                                  March 31, |  September     March 31,
                                                                    2005    |  30, 2004        2004
                                                                --------    |  --------      --------
                                                                                    
CASH FLOWS FROM OPERATING ACTIVITIES:                                       |
Net loss                                                        $(11,902)   |  $ (1,602)     $ (4,207)
Adjustments to reconcile net loss to net cash used in                       |
  operating activities:                                                     |
    Stock compensation                                             6,431    |        --            --
    Amortization of debt discount and premium                      1,332    |        --            --
    Depreciation and amortization                                    764    |       531         1,209
    Gain on sale of property, plant and equipment                     --    |        (3)          (29)
    Contribution of services                                         322    |        --            --
    Allowance for doubtful accounts                                  577    |        --            --
Net change in working capital items                               (3,423)   |    (1,111)         (382)
Net change in employee future benefit liabilities                     --    |         8            33
                                                                --------    |  --------      --------
NET CASH USED IN OPERATING ACTIVITIES                             (5,899)   |    (2,177)       (3,376)
                                                                --------    |  --------      --------
                                                                            |
CASH FLOWS FROM INVESTING ACTIVITIES:                                       |
  Cash paid for acquisition of assets of Thomas                  (17,782)   |        --            --
  Cash paid for acquisition of Pneutech, Inc.                     (7,072)   |        --            --
  Insurance claim received                                            --    |        --           587
  Proceeds on sale of property, plant and equipment                   --    |        20            47
  Purchase of property, plant and equipment                         (722)   |      (292)         (977)
                                                                --------    |  --------      --------
NET CASH USED IN INVESTING ACTIVITIES                            (25,576)   |      (272)         (343)
                                                                --------    |  --------      --------
                                                                            |
CASH FLOWS FROM FINANCING ACTIVITIES:                                       |
  Proceeds from debt issuance                                     30,345    |        --            --
  Net repayments of advances from affiliated companies                --    |      (588)        4,339
  Increase in bank advances                                           --    |     2,277          (779)
  Proceeds from sales of common stock                              2,149    |        --            --
  Payments on capital lease obligations                             (249)   |        --            --
                                                                --------    |  --------      --------
NET CASH PROVIDED BY FINANCING ACTIVITIES                         32,245    |     1,689         3,560
                                                                --------    |  --------      --------
                                                                            |
NET INCREASE (DECREASE) IN CASH                                      770    |      (760)         (159)
                                                                            |
EFFECT OF EXCHANGE RATE CHANGES ON CASH                              341    |        23            86
                                                                            |
CASH, BEGINNING OF PERIOD                                             --    |       823            80
                                                                --------    |  --------      --------
                                                                            |
CASH, END OF PERIOD                                             $  1,111    |  $     86      $      7
                                                                ========    |  ========      ========



                                                                    (continued-)


                                      F-7


                             THOMAS EQUIPMENT, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                           (Unaudited - in thousands)

                                                                    (-continued)




                                                                 Successor       |
                                                                 Business        |      Predecessor Business
                                                             ------------------- | -------------------------------
                                                                                 |    Three            Nine
                                                                                 | Months Ended    Months Ended
                                                               Six Months Ended  |   September       March 31,
                                                                March 31, 2005   |  30, 2004          2004
                                                                                            
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -                               |
  Interest paid                                                    $   801       |    $ 42           $  12
                                                                   =======       |    ====           =====
                                                                                 |
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING                     |
ACTIVITIES:                                                                      |
   Stock based compensation                                        $ 6,431       |    $ --           $  --
                                                                   =======       |    ====           =====
   Debt discounts                                                  $10,918       |    $ --           $  --
                                                                   =======       |    ====           =====
   Debt premiums                                                   $   751       |    $ --           $  --
                                                                   =======       |    ====           =====
   Property and equipment acquired under capital leases            $ 5,254       |    $ --           $  --
                                                                   =======       |    ====           =====
   Warrants issued for professional services                       $ 1,295       |    $ --           $  --
                                                                   =======       |    ====           =====



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

See accompanying notes to consolidated financial statements.


                                      F-8


                             THOMAS EQUIPMENT, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           (Unaudited - in thousands except share and per share data)

1. Organization and description of the business

We have two business segments, Thomas Equipment and Pneutech.

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


Pneutech and its subsidiaries (Rousseau, Hydramen and Samsung Industry), which
we acquired on February 28, 2005, are engaged in the fluid power industry
providing distribution and manufacturing of pneumatic and hydraulic components
and systems for the industrial market, distribution and manufacturing of
hydraulic components and systems for the mobile market and manufacturing of
hydraulic cylinders and metal gaskets for the industrial market. Pneutech
maintains nine manufacturing and distribution facilities in Canada and one
manufacturing plant in South Korea.


2.    Acquisitions

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

Acquisition of Assets of Thomas Equipment Limited

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

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


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

Consideration paid:
       Cash paid                                                         $16,398
       Cash paid for transaction costs                                     1,384
       Payables accrued for transaction costs                                337
       Deferred payable to vendor                                          3,179
       Note payable to vendor                                              2,260
       Capital lease obligations assumed                                   5,254
       Preferred shares of subsidiary issued to vendor                     8,370
                                                                         -------
       Consideration paid                                                $37,182
                                                                         =======



                                      F-9


                             THOMAS EQUIPMENT, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           (Unaudited - in thousands except share and per share data)

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

Acquisition of Pneutech Inc.

On February 28, 2005, we acquired 100% of the common stock of Pneutech, in
exchange for 1,082,641 shares of our common stock and warrants to purchase
211,062 shares of common stock, exercisable at $3.00 per share. The common stock
issued was valued at $3.50 per share, based on the market price of our common
stock on the date of the agreement. Clifford Rhee, the President and a member of
our Board of Directors, had a controlling interest in Pneutech. As a result, the
fair value of the shares issued and the resulting allocation to goodwill in
Pneutech has been reduced by the proportionate share of his post-combination
ownership percentage. An additional 167,359 shares of our common stock were
issued to an unrelated party as of the closing in exchange for the cancellation
of approximately $494 of debt owed by Pneutech.

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


                                                                            
Net assets acquired
       Working capital                                                         $  3,476
       Property and equipment                                                     7,868
       Other assets                                                                 502
       Goodwill                                                                   5,127
       Long term debt and other liabilities                                      (5,582)
                                                                               --------
       Net assets acquired                                                     $ 11,391
                                                                               ========

Consideration paid:
       Common shares (1,082,641) issued to Pneutech shareholders               $  3,470
       Warrants for common shares (211,062) issued to Pneutech shareholders         260
       Cash paid to redeem Pneutech debenture and preferred shares                5,343
       Cash paid to redeem Pneutech accrued dividends                               238
       Cash paid to redeem Pneutech preference and special shares                   508
       Cash paid to redeem Pneutech common stock warrants                         1,008
       Common shares (167,359) issued to redeem Pneutech debt                       494
       Cash paid for transaction costs                                               70
                                                                               --------
       Consideration                                                           $ 11,391
                                                                               ========




Upon the closing, Pneutech also redeemed 929 preference shares and 530,000
special shares owned by 3156176 Canada, Inc. for an aggregate of $508. Clifford
Rhee, the President and a member of our Board of Directors is the beneficial
owner of 3156176 Canada, Inc., which was the owner of approximately 47% of the
common shares, 929 preference shares and 530,000 special shares of Pneutech. Mr.
Rhee is also the President and a member of the Board of Directors of Pneutech
and continues to serve as President of both TEQI and Pneutech. The members of
our Board were appointed as members of the Pneutech Board. Because Mr. Rhee had
a controlling interest in Pneutech, the fair value increase in the assets
acquired and the allocation to goodwill in Pneutech has been reduced by the
proportionate share of his post-combination ownership percentage.


                                      F-10


                             THOMAS EQUIPMENT, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           (Unaudited - in thousands except share and per share data)

The results of operations and financial position of Pneutech have been included
in our consolidated financial statements since the acquisition date. The
following unaudited pro forma financial information for the three and nine
months ended March 31, 2005 and 2004 includes the historical and pro forma
effects of the October 1, 2004 acquisition of the business and certain assets of
Thomas Equipment Limited and the February 28, 2005 acquisition of Pneutech Inc.
and its subsidiaries, together with other pro forma adjustments, as if these
transactions had taken place at the beginning of the periods presented.

The unaudited pro forma financial information is not necessarily indicative of
what the results of operations actually would have been if the transactions had
in fact occurred at the beginning of the periods presented. Moreover, they are
not intended to be indicative of future results of operations or financial
position.

(in thousands, except per share data)



                                               Three        Three        Nine         Nine
                                               Months       Months       Months       Months
                                               Ended        Ended        Ended        Ended
                                              March 31,    March 31,    March 31,    March 31,
                                                2005         2004         2005         2004
                                              ---------    ---------    ---------    ---------
                                                                         
Sales                                        $  25,073     $ 23,952     $ 85,435     $ 71,472
                                             =========     ========     ========     ========

Net income (loss)                            $  (4,808)    $ (1,198)    $(15,601)    $ (6,726)
                                             =========     ========     ========     ========

Earnings per share: basic and diluted        $   (1.80)    $  (0.45)    $  (5.86)    $  (2.52)
                                             =========     ========     ========     ========


3. Basis of presentation and summary of significant accounting policies

Basis of presentation

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

The accompanying unaudited consolidated financial statements, as of and for the
three and six months ended March 31, 2005, are those of Thomas Equipment, Inc.
the successor. The statements of operations and of cash flows include the
accounts of Thomas Equipment Limited, our predecessor, for the three months
ended September 30, 2004 and for the three and nine months ended March 31, 2004.

Accounting Policies


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



                                      F-11


                             THOMAS EQUIPMENT, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           (Unaudited - in thousands except share and per share data)

Principles of consolidation

The consolidated financial statements include the accounts of TEQI and its
wholly owned subsidiaries TVI, TE2004 and Thomas Europe NV from October 1, 2004,
the date that TE2004 acquired the business operations and certain assets of
Thomas Equipment Limited. The accounts of Pneutech and its subsidiaries are
included from March 1, 2005, the date that TEQI acquired Pneutech. All
inter-company accounts and transactions have been eliminated in consolidation.

Use of estimates

In preparing our consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America, management is
required to make estimates and assumptions that affect the reported amounts in
the financial statements and the accompanying notes. The reported amounts of
revenues and expenses during the reporting period may be affected by the
estimates and assumptions we are required to make. Estimates that are critical
to the accompanying consolidated financial statements arise from the provisions
for doubtful accounts and warranties. Management bases its estimates and
judgements on historical experience and on various other factors that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgements about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results could differ
from these estimates.

Translation of foreign currencies

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

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

Revenue recognition

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

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

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

We make appropriate provisions based on experience for costs such as doubtful
receivables, sales incentives and product warranty costs.


                                      F-12


                             THOMAS EQUIPMENT, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           (Unaudited - in thousands except share and per share data)

Although we currently have no significant arrangements, financing revenue will
be recorded over the terms of the related receivables using the interest method.
Late payment interest of 12% p.a. charged to customers who have overdue accounts
is not recognized until received.

Buy back arrangements

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

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

Trade-ins and used equipment

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

Allowance for doubtful accounts

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

Product warranties

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

Shipping and handling costs

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

Cash and cash equivalents

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


                                      F-13


                             THOMAS EQUIPMENT, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           (Unaudited - in thousands except share and per share data)

Inventory

Inventory is valued at the lower of cost and net realizable value with cost
being determined on an average cost basis. The cost of goods in process includes
the cost of raw materials, direct labour and manufacturing overhead. Used
equipment is valued at net realizable value.

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

Property, plant and equipment

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

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

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

Long-lived assets

Statement of Financial Accounting Standards (SFAS) 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" requires that long-lived assets,
including certain identifiable intangibles, be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying value of the
assets in question may not be recoverable. We have reviewed long lived assets
during the quarter ended March 31, 2005 and determined that no impairment loss
need be recognized.

Deferred finance charges

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


                                      F-14


                             THOMAS EQUIPMENT, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           (Unaudited - in thousands except share and per share data)

Redeemable preferred shares

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

Advertising costs

Advertising costs of $308 for the six months ended March 31, 2005 were expensed
as incurred and reported as a component of selling expenses.

Research and development costs

Research and development costs of $520 for the six months ended March 31, 2005
were expensed as incurred and include salaries, contractor fees, building costs,
utilities and administrative expenses.

Income taxes

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

We have recorded a full valuation allowance against the benefits that would
result from losses incurred to date, based on a history of losses from the
predecessor owner of the assets purchased, as we are unable to determine if the
losses will be utilized. However, at Pneutech there were timing differences
related to property, plant and equipment which resulted in a net liability at
March 31, 2005.

Net loss per share

We compute net loss per share in accordance with Statement of Financial
Accounting Standards No. 128 "Earnings per Share" ("SFAS 128") and SEC Staff
Accounting Bulletin No. 98 ("SAB 98"). Under the provisions of SFAS 128 and SAB
98, basic net loss per share is computed by dividing the net loss available to
common stockholders for the period by the weighted average number of common
shares outstanding during the period. Diluted net loss per share is computed by
dividing the net loss for the period by the number of common and common
equivalent shares outstanding during the period. During the period when they
would be anti-dilutive, common stock equivalents (consisting of common stock
options and warrants) are not considered in the computations.

Stock - based compensation

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

We have adopted Statement of Financial Accounting Standards No. 148 ("SFAS
148"). "Accounting for Stock-Based Compensation - Transition and Disclosure"
This statement amends Statement of Financial Accounting Standards No. 123 ("SFAS
123"), "Accounting for Stock Based Compensation." It provides alternative
methods of transition for an entity that voluntarily changes to the fair value
based method of accounting for employee stock-based compensation. It also amends
the disclosure provisions of SFAS 123 to require prominent disclosure about the
effects on reported net income of an entity's accounting policy decisions with
respect to stock-based employee compensation. As permitted by SFAS 123 and
amended by SFAS 148, the Company continues to apply the intrinsic value method
under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued
to Employees," to account for stock-based employee compensation arrangements.


                                      F-15


                             THOMAS EQUIPMENT, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           (Unaudited - in thousands except share and per share data)

New pronouncements

SFAS 123(R) `Share-Based Payments'

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

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

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

4.    Inventories

Raw materials and spare parts                                            $ 8,402
Work in process                                                            2,503
Finished goods - new                                                      23,311
Finished goods - used                                                      1,973
Packaging and supplies                                                       286
                                                                         -------
                                                                         $36,475
                                                                         =======

5. Property, plant and equipment



                                                            Accumulated
                                                 Cost       Depreciation    Net Book Value

                                                                     
Land                                           $ 1,364                        $ 1,364
Property and plant under capital leases          8,581        $   270          8,311
Production machinery and equipment               7,949            357          7,592
Office furniture and equipment                     639             16            623
Computer equipment                                 679             62            617
Automotive equipment                               743             59            684
Construction in process                            504             --            504
                                               -------        -------        -------
                                               $20,459        $   764        $19,695
                                               =======        =======        =======



                                      F-16


                             THOMAS EQUIPMENT, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           (Unaudited - in thousands except share and per share data)

6.     Long term debt

                                                                                               
Note payable to Thomas Equipment Limited, bearing interest at 4%, with annual
principal repayments plus interest, maturing on October 31, 2006                                  $ 2,219

Debenture payable to Roynat US, bearing interest at 15% (effective rate of approximately 125%),
due December 30, 2005, repaid April 19, 2005                                                        5,343
     Unamortized debt discount (note 12)                                                           (2,384)
                                                                                                  -------
                                                                                                    2,959
                                                                                                  -------

Various loans with interest rates ranging from Canadian prime rate plus 1.5% to 8.45% (Canadian
prime was 5.75% at March 31, 2005), amortized from 2007 to 2009, repayable in monthly instalments
of principal of $28 plus interest                                                                     524

Samsung Industries - various loans with interest rates ranging from 4.12% to
12.00% repayable through 2012                                                                       2,997

Private loans with interest rates ranging from 3% to 8%, with regular principal
and interest payments providing for repayment by 2006                                               1,080
                                                                                                  -------

Total                                                                                               9,779
Less: current portion                                                                              (8,419)
                                                                                                  -------
                                                                                                  $ 1,360
                                                                                                  =======

Principal repayments are as follows, for the fiscal years ending June 30:
2005                                                                                              $   852
2006                                                                                                8,352
2007                                                                                                1,930
2008                                                                                                  247
2009                                                                                                  223
thereafter                                                                                            559




The debenture payable to Roynat US and the Samsung Industries loans were repaid
on April 19, 2005 with part of the proceeds from the sale of preferred stock and
warrants (see note 17).

7. Convertible long term debt

                                                                                               
Term loan, with Laurus Master Funds Ltd. ("Laurus," a related party), bearing interest at US
prime plus 3% (8.2% at March 31, 2005) with monthly principal repayments of $207 per month plus
interest                                                                                          $ 6,000
    Unamortized debt discount and premium (note 12)                                                (1,295)
                                                                                                  -------
                                                                                                    4,705
                                                                                                  -------
Term loan, with Laurus Master Funds Ltd. ("Laurus," a related party), bearing interest at US        1,900
prime plus 3% (8.2% at March 31, 2005) with monthly principal repayments of $66 per month plus
interest
    Unamortized debt discount and premium (note 12)                                                  (374)
                                                                                                  -------
                                                                                                    1,526
                                                                                                  -------

Less current portion                                                                               (2,448)
                                                                                                  -------
                                                                                                  $ 3,783
                                                                                                  =======

Principal repayments start in July 2005 and are as follows, for the fiscal years ending June 30:
2005                                                                                              $     0
2006                                                                                                3,270
2007                                                                                                3,270
2008                                                                                                1,360




                                      F-17


                             THOMAS EQUIPMENT, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           (Unaudited - in thousands except share and per share data)

The principal repayments and interest payments for the term loans can be made in
cash or common stock at the option of the holder. All principal and interest
cash payments are subject to a premium of 3%. Payments in common stock have a
fixed conversion price of $2.25 per common share.

The term loans can be converted to common stock at any time, at the option of
the holder, at a conversion price of $2.25 per common share.

8. Convertible credit facility - related party and other credit facilities

Effective November 9, 2004, the company entered into a three-year revolving
credit facility agreement with Laurus Master Funds Ltd. ("Laurus"). The purpose
of the credit facility was to provide TE2004 with funds to purchase the
inventory and fixed assets of Thomas Equipment Limited and other general
corporate purposes. The credit facility is secured by substantially all of our
assets.

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

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

The credit facility provides for borrowings utilizing an asset based formula
using eligible receivables, inventory, and fixed assets, less any reserves. At
March 31, 2005, the amount of available borrowings pursuant to the formula was
as follows:

Available borrowings supported by asset base                             $18,660
Less: amount borrowed under revolving credit facility                     18,504
                                                                         -------
Excess availability                                                      $   156
                                                                         =======

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

Amount borrowed under the revolving credit facility                     $18,504
       Unamortized debt discount and premium (note 11)                   (4,814)
                                                                        -------
                                                                        $13,690
                                                                        =======


                                      F-18


                             THOMAS EQUIPMENT, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           (Unaudited - in thousands except share and per share data)

Any principal repayments and interest payments on $8,000 of this outstanding
balance of the credit facility can be made in cash or common stock. All
principal and interest cash payments are subject to a premium of 5%. Payments in
common stock have a fixed conversion price of $1.50 per common share.

Other credit facilities

Subsidiaries' lines of credit                                            $ 9,762
                                                                         =======

The subsidiary companies have authorized operating lines of credit at Canadian
prime rate plus 0.3% and 1.5% (4.55% and 5.75% at March 31, 2005) totalling
$10,686, of which, $924 is unused at March 31, 2005. As security, the subsidiary
companies have pledged property, general security agreements, assignments of
inventory and book debts, guarantees by related companies and shareholders, and
an assignment of fire and theft insurance.

9. Capital lease obligations

Under the terms of the Purchase Agreement with Thomas Equipment Limited, we
entered into two-year capital lease agreements with Thomas Equipment Limited.
Pursuant to the leases, we have the right at any time prior to the expiration of
the leases to purchase the leased properties for $4,953 (based on the March 31,
2005 exchange rate). In addition, Thomas Equipment Limited has a right to
require us to purchase the leased properties at the expiration of the leases.
The leases require annual payments of $493 plus realty taxes, maintenance, heat
and certain other expenses. We have recorded the leases as capital leases with
future minimum repayments as follows:

   Fiscal year ending June 30:
   2005                                                                  $   123
   2006                                                                      493
   2007                                                                    5,077
                                                                         -------
                                                                           5,693
   Less: amounts representing interest                                       591
                                                                         -------
                                                                         $ 5,102
                                                                         =======

10.   Redeemable preferred shares

The Company has 5,000,000 shares of preferred stock authorized, $0.0001 par
value. At March 31, 2005, no shares were issued and outstanding. On April 19,
2005, as described in Note 17, we sold 25,000 preferred shares.

In connection with the financing of the asset acquisition from Thomas Equipment
Limited (note 2), we issued to the parent of Thomas Equipment Limited, 1,000
shares of redeemable preferred stock of our subsidiary Thomas Equipment 2004
Inc.. The shares are currently redeemable for their face amount of $8,220
(translated at March 31, 2005) plus accrued but unpaid dividends, at our option
at any time. We are required to purchase the preferred shares from the holder on
April 26, 2006, if not earlier redeemed. The preferred shares carry a cumulative
dividend of 8% per annum increasing to 12% after April 26, 2006. The holder of
these shares has the right to be an observer at our board meetings.

11.   Common stock

At March 31, 2005, we have 200,000,000 authorized shares of common stock, par
value $0.01, 21,250,000 shares issued and outstanding.


                                      F-19


                             THOMAS EQUIPMENT, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           (Unaudited - in thousands except share and per share data)

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

We issued 16,945,000 shares to our founders for $2,451 or an average of $0.14
per share. Management has estimated, using the price that the highest paying
founding shareholder paid and an analysis of the market price of the stock
immediately after the reorganization, that the fair value of the shares was
$0.50. The difference resulted in an immediate expense of $5,461.

On November 9, 2004, in connection with the issuance of debt and obtaining the
credit facility, we sold 1,980,000 shares to Laurus for $20. Based on a fair
value of $0.50, we recorded $970 of "stock-based compensation" expense for this
issuance.

On February 28, 2005, we issued 1,082,641 shares in connection with the
acquisition of Pneutech and 167,359 shares to repay certain debt owed by
Pneutech.

12. Stock options and warrants

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


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


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

On January 31, 2005, in connection with investor relations services, we issued
warrants to Redwood Consultants to purchase 250,000 common shares at an exercise
price of $4 per share. The warrants are exercisable at any time and expire on
January 31, 2008. The warrants were valued at $1,295, which amount was credited
to additional paid-in capital and is being recognized as an expense over the
estimated life of the services of one year.

On February 28, 2005, in connection with the acquisition of Pneutech and as part
of the purchase price consideration, we issued warrants to the former Pneutech
shareholders to purchase 211,062 common shares at an exercise price of $3 per
share. The warrants are exercisable at any time and expire on February 28, 2010.
The warrants were valued at $260, which was recorded as part of the
consideration paid for the acquisition of Pneutech.

Also on February 28, 2005, in connection with the sale to Laurus of an
additional secured convertible term note with a principal amount of $1,900, we
issued to Laurus warrants to purchase 150,000 common shares at an exercise price
of $2.25 per share. The warrants are exercisable at any time and expire on
February 28, 2012. The proceeds allocated to the warrants of $480 were credited
to additional paid-in capital and the resulting discount from the related debt
is being amortized over the term of that debt of 32 months.


                                      F-20


                             THOMAS EQUIPMENT, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           (Unaudited - in thousands except share and per share data)

Also on February 28, 2005, in connection with the acquisition of Pneutech and
the sale of a $5,247 principal amount debenture to Roynat US, we issued to
Roynat US warrants to purchase 1,000,000 common shares at an exercise price of
$3 per share. The warrants are exercisable at any time and expire on August 28,
2006. The proceeds allocated to the warrants of $2,649 were credited to
additional paid-in capital and the resulting discount from the related debt is
being amortized over the term of that debt of ten months. As described in Note
17, the debenture was repaid on April 19, 2005 and the unamortized discount at
that date was expensed.

On April 19, 2005, in connection with the sale of preferred stock, we issued
additional common stock warrants, as described in Note 17.

13.   Segment information

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

Revenues by destination and product group were as follows:



                             Successor Business        |               Predecessor Business
                        ------------------------------ |  ----------------------------------------------------
                            Three                      |                          Three              Nine
                           Months          Six Months  |        Three             Months            Months
                            Ended             Ended    |     Months Ended         Ended             Ended
                          March 31,         March 31,  |       September         March 31,         March 31,
                            2005              2005     |       30, 2004           2004               2004
                        ------------      ------------ |     ------------      ------------      ------------
                                                                                  
Thomas Equipment        $12,160           $26,576      |     $13,857           $12,622           $39,199
Pneutech                  4,876             4,876      |          --                --                --
                        -------           -------      |     -------           -------           -------
                        $17,036           $31,452      |     $13,857           $12,622           $39,199
                        =======           =======      |     =======           =======           =======
                                                       |
Canada                  $ 5,981           $ 7,890      |     $ 2,883           $ 1,268           $ 7,038
USA                       5,067            11,440      |       7,177             8,493            22,814
Europe                    5,043             9,330      |       2,517               964             6,323
Rest of world               945             2,792      |       1,280             1,897             3,024
                        -------           -------      |     -------           -------           -------
Total sales to                                         |
external customers      $17,036           $31,452      |     $13,857           $12,622           $39,199
                        =======           =======      |     =======           =======           =======
                                                       |
Industrial and                                         |
construction            $16,913           $30,836      |     $12,147           $12,551           $34,960
Agriculture                 123               616      |       1,710                71             4,239
                        -------           -------      |     -------           -------           -------
                                                       |
Total sales to                                         |
external customers      $17,036           $31,452      |     $13,857           $12,622           $39,199
                        =======           =======      |     =======           =======           =======



                                      F-21


                             THOMAS EQUIPMENT, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           (Unaudited - in thousands except share and per share data)

Property, plant and equipment by geographical area as of March 31, 2005 were as
follows:

Canada                                                                   $14,847
USA                                                                           66
Korea                                                                      4,782
                                                                         -------

Total                                                                    $19,695
                                                                         =======

14.   Contingencies and commitments

Litigation

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

Warranties

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

Other commitments

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

   Fiscal years ending June 30:
   2005                                                           $ 213
   2006                                                             749
   2007                                                             540
   2008                                                             398
   2009                                                             326

Guarantees

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

15.   Financing expense

         Capital leases                                          $  187
         Credit facility - related party                            818
         Amortization of deferred financing costs                   121
         Amortization of debt discount - related party            1,176
         Amortization of debt premium                               156
         Note payable - related party                                44
         Dividends on preferred shares - related party              256
         Amortization of warrants for consulting services           109
         Other                                                      105
                                                                 ------
         Total                                                   $2,972
                                                                 ======


                                      F-22


                             THOMAS EQUIPMENT, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           (Unaudited - in thousands except share and per share data)

16. Fair value and financial risks

Fair value

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

Credit risk

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

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

Interest rate risk

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

Foreign currency risk

Our foreign currency translation policy is described in Note 3. We do not enter
into foreign currency futures and forwards contracts to manage exposure to
foreign currency fluctuations. As at March 31, 2005, our exposure in
non-Canadian dollars was: receivables of $14,331, payables of $11,517, credit
facilities of $18,504 and cash of $1,227.

17.   Recent events

On April 19, 2005, we entered into agreements with several accredited investors
for the sale of an aggregate of 25,000 shares of series A preferred stock (the
"Preferred Stock"), and warrants to purchase an aggregate of 2,083,333 shares of
common stock exercisable at a price of $3.75 per share at any time during a
period of five years (the "Warrants"). The securities were sold for an aggregate
cash consideration of $25,000,000. The securities were issued in a private
placement transaction pursuant to Section 4(2) and Regulation D under the
Securities Act of 1933, as amended. The Company also agreed to cause a resale
registration statement covering the common stock issuable upon conversion of the
Preferred Stock and exercise of the Warrants to be effective within six months
of the closing date.

The Preferred Stock is convertible into 8,333,333 shares of common stock at the
rate of $3.00 per share and pays a dividend of 5% per annum in cash. The
Preferred Stock may be converted at anytime upon five days notice by the
Preferred Stockholders. The Company can require the holders to convert up to 20%
of their Preferred Stock per month, if the common stock trades at an average
price of $6.00 per share for 20 consecutive days, with average volume of 150,000
shares per day. At any time commencing after three years from the closing date,
the Company can redeem the Preferred Stock. If the redemption occurs in the
fourth year after issuance, the redemption amount is 200% of the stated value.
If the redemption occurs during the fifth year after issuance, the redemption
amount is 225% of the stated value. The holder can require the Company to redeem
the Preferred Stock at 110% of the stated value, together with accrued
dividends, after five years or upon certain events, including:

         o        failure to deliver common stock when required;

         o        failure to effect registration of the common stock; or

         o        a bankruptcy event.


                                      F-23


                             THOMAS EQUIPMENT, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           (Unaudited - in thousands except share and per share data)

The Company paid the placement agent of the offering a fee of 6% of the
aggregate proceeds, together with warrants to purchase 500,000 shares of common
stock at an exercise price of $3.00 per share for a period of five years. The
warrants are exercisable at any time and expire on April 19, 2010.

The proceeds received from the sale of the preferred stock and the warrants were
used to repay the debenture to Roynat US, certain Samsung Industries long term
debt and for general working capital purposes.

On June 13, 2005, we filed an amended Registration Statement on Form SB-2, to
register up to 26,985,000 shares of common stock to be sold in a secondary
offering by certain selling stockholders. We will not receive any proceeds from
the sale of shares of common stock in the offering. However, we will receive the
sale price of any common stock we sell to the selling stockholders upon exercise
of the option and/or warrants that they hold. We expect to use the proceeds
received from the exercise of the option and/or warrants, if any, for general
working capital purposes.


                                      F-24


           Thomas Equipment Limited (a predecessor of Thomas Equipment, Inc.)

           Consolidated Financial Statements

           June 30, 2004
           (in thousands of United States dollars)


                                      F-25


THOMAS EQUIPMENT LIMITED (a predecessor of Thomas Equipment, Inc.)
Consolidated Financial Statements
June 30, 2004

TABLE OF CONTENTS

- --------------------------------------------------------------------------------




                                                                                                        Page
                                                                                                        ----
                                                                                                     
Consolidated Balance Sheet as of June 30, 2004 and 2003                                                 F-28

Consolidated  Statements  of Common and Other  Shareholder's  Deficiency  for the year ended June       F-29
30, 2004 and 2003

Consolidated Statements of Loss and Comprehensive Loss for the years ended June 30, 2004 and 2003       F-30

Consolidated Statements of Cash Flows for the years ended June 30, 2004 and 2003                        F-31

Notes to Consolidated Financial Statements for the year ended June 30, 2004                             F-32



- --------------------------------------------------------------------------------


                                      F-26


[PRICEWATERHOUSECOOPERS LETTERHEAD]

January 7, 2005

Auditors' Report

To the Shareholder of
Thomas Equipment Limited

We have audited the accompanying consolidated balance sheets of Thomas Equipment
Limited (a predecessor of Thomas Equipment, Inc.) as of June 30, 2004 and 2003
and the related consolidated statements of loss and comprehensive loss, common
and other shareholder's deficiency, and cash flows for each of the years in the
two-year period ended June 30, 2004. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform an audit to obtain reasonable assurance whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at June 30, 2004 and
2003 and the results of its operations and its cash flows for each of the years
in the two-year period ended June 30, 2004 in accordance with accounting
principles generally accepted in the United States of America.

These financial statements are affected by conditions and events that cast
substantial doubt on the Company's ability to continue as a going concern as
described in note 2 to the consolidated financial statements.

PricewaterhouseCoopers LLP

Chartered Accountants


                                      F-27


Thomas Equipment Limited (a predecessor of Thomas Equipment, Inc.)
Consolidated Balance Sheet
At June 30, 2004 and 2003
- --------------------------------------------------------------------------------

(in thousands of United States dollars, except for number of shares)

Going concern (note 2)



                                                                                           2004         2003
                                                                                              $            $
                                                                                               
Assets
Current assets
Cash                                                                                        823           80
Accounts receivable, net of allowance for doubtful accounts of $1,694 (2003 - $888)      11,014       16,975
Financing receivables (note 5)                                                            2,982          345
Inventories (note 4)                                                                     20,256       19,037
Income taxes recoverable                                                                     33           33
Due from affiliated companies (note 13)                                                     161          220
Prepaid expenses                                                                            436          247
Foreign exchange contracts (note 19)                                                        171        1,567
                                                                                        -------      -------
                                                                                         35,876       38,504

Financing receivables (note 5)                                                            3,938        1,565

Property, plant and equipment (note 6)                                                   10,805       10,331

Other assets (note 7)                                                                       567        1,545
                                                                                        -------      -------
                                                                                         51,186       51,945
                                                                                        =======      =======
Liabilities
Current liabilities
Bank advances, bearing interest at 7% at June 30, 2003                                       --        1,921
Trade payables                                                                            6,869        5,138
Warranty liability (note 10)                                                                924          637
Severance accrual (note 15)                                                                 891           --
Other payables and accrued liabilities                                                    1,553        1,483
Deferred revenue (note 7)                                                                    29           --
Foreign exchange contracts (note 19)                                                        125          243
Due to affiliated companies (note 13)                                                       880          685
Advances from affiliated companies (note 8)                                              49,828        5,195
                                                                                        -------      -------

                                                                                         61,099       15,302
Deferred revenue (note 7)                                                                 1,213        1,403

Foreign exchange contracts (note 19)                                                        334          969

Employee future benefit liabilities (note 9)                                                306          279
                                                                                        -------      -------
                                                                                         62,952       17,953
                                                                                        -------      -------
Mandatorily redeemable preferred shares, redeemable at par (note 12)                         --       55,659
Contingencies and commitments (note 10)

Shareholder's Deficiency

Capital stock (note 11)
Preferred shares, Class A and B                                                           1,160        1,160
Common shares, 8,643,000 (2003 - 2,643,000) issued and outstanding                       30,220        8,599

Deficit                                                                                 (40,763)     (29,208)

Accumulated other comprehensive loss
Cumulative translation adjustment                                                        (2,383)      (2,218)
                                                                                        -------      -------
                                                                                        (11,766)     (21,667)
                                                                                        -------      -------
                                                                                         51,186       51,945
                                                                                        =======      =======


The accompanying notes are an integrated part of these financial statements


                                      F-28


Thomas Equipment Limited (a predecessor of Thomas Equipment, Inc.)
Consolidated Statement of Common and Other Shareholder's Deficiency
For the years ended June 30, 2004 and 2003
- --------------------------------------------------------------------------------

(in thousands of United States dollars, except for number of shares)



                                                                                                              Accumulated
                                                                                                                 other
                                                                                                             comprehensive
                                                Preferred Shares                                                 income
                                          Class A               Class B         Common Shares       Deficit      (loss)       Total
                                 ---------------------------------------------------------------  ---------  --------------  -------
                                     Number       $       Number        $      Number         $           $           $           $
                                                                                                 
Balance - July 1, 2002              746,332     496    1,000,000      664   2,643,000     8,599     (23,890)        151     (13,980)

Currency translation adjustment          --      --           --       --          --        --          --      (2,369)     (2,369)

Net loss for the year                    --      --           --       --          --        --      (1,020)         --      (1,020)

Dividends                                --      --           --       --          --        --      (4,298)         --      (4,298)
                                 ---------------------------------------------------------------------------------------------------

Balance - June 30, 2003             746,332     496    1,000,000      664   2,643,000     8,599     (29,208)     (2,218)    (21,667)

Currency translation adjustment          --      --           --       --          --        --          --        (165)       (165)

Net loss for the year                    --      --           --       --          --        --     (11,555)         --     (11,555)

Shares issued                            --      --           --       --   6,000,000    21,621          --          --      21,621
                                 ---------------------------------------------------------------------------------------------------

Balance - June 30, 2004             746,332     496    1,000,000      664   8,643,000    30,220     (40,763)     (2,383)    (11,766)
                                 ===================================================================================================


The accompanying notes are an integrated part of these financial statements


                                      F-29


Thomas Equipment Limited (a predecessor of Thomas Equipment, Inc.)
Statement of Loss and Comprehensive Loss
For the years ended June 30, 2004 and 2003
- --------------------------------------------------------------------------------

(in thousands of United States dollars, except for number of shares)

Going concern (note 2)



                                                         2004         2003
                                                            $            $

                                                             
Sales                                                  55,705       49,274

Cost of sales                                         (47,559)     (43,615)
                                                      -------      -------

Gross profit                                            8,146        5,659

Selling expenses                                       (6,179)      (5,810)
General and administrative expenses                    (6,524)      (3,685)
Provision for doubtful receivables (note 22)           (1,657)        (197)
Other income (expense) (note 15)                         (702)       3,051
                                                      -------      -------

Operating loss                                         (6,916)        (982)

Net financial income (expense) (note 14)               (4,574)          34
                                                      -------      -------

Loss before income taxes                              (11,490)        (948)

Provision for income taxes (note 16)                      (65)         (72)
                                                      -------      -------

Net loss for the year                                 (11,555)      (1,020)
                                                      =======      =======

Basic and diluted loss per common share (note 21)       (4.16)       (0.39)


                                                         2004         2003
                                                            $            $
                                                              
Net loss for the year                                 (11,555)      (1,020)

Other comprehensive loss:
      Currency translation adjustment                    (165)      (2,369)
                                                      -------      -------

Comprehensive loss                                    (11,720)      (3,389)
                                                      =======      =======


The accompanying notes are an integrated part of these financial statements


                                      F-30


Thomas Equipment Limited (a predecessor of Thomas Equipment, Inc.)
Consolidated Statement of Cash Flows
For the years ended June 30, 2004 and 2003
- --------------------------------------------------------------------------------

(in thousands of United States dollars)



                                                                                    2004        2003
                                                                                       $           $
                                                                                         
Cash provided by (used in)

Operating activities
Net loss for the year                                                            (11,555)      (1,020)
Items not affecting cash
      Amortization of property, plant and equipment                                1,235        1,041
      Amortization of other assets                                                   387          190
      Gain on sale of property, plant and equipment                                 (312)          (7)
Net change in non-cash working capital items related to operations (note 17)       3,538       (1,533)
Net change in employee future benefit liabilities                                     24           18
                                                                                 -------       ------

Cash (used in) provided by operating activities                                   (6,683)      (1,311)
                                                                                 -------       ------

Investing activities
Purchase of property, plant and equipment                                         (1,759)        (951)
Proceeds on sale of property, plant and equipment                                    471           10
Proceeds received from insurance claim                                               604          133
                                                                                 -------       ------

Cash used in investing activities                                                   (684)        (808)
                                                                                 -------       ------

Financing activities
Proceeds from issue of share capital (note 11)                                    21,621           --
Proceeds from issuance of preferred shares, Class E                                   --           --
Redemption of preferred shares, Class E                                          (55,916)          --
Net proceeds (repayments) relating to advances from affiliated companies          44,331        3,988
Repayment of long-term debt                                                           --           (9)
(Decrease) increase in bank advances                                              (1,930)       1,721
Preferred dividends paid on Class E shares                                            --       (4,298)
                                                                                 -------       ------

Cash provided by (used in) financing activities                                    8,106        1,402
                                                                                 -------       ------

Net change in cash during the year                                                   739         (717)

Foreign exchange impact on cash                                                        4           15

Cash - Beginning of year                                                              80          782
                                                                                 -------       ------

Cash - End of year                                                                   823           80
                                                                                 =======       ======

Cash flows from operating activities include
Income taxes paid                                                                     84           84
Income taxes recovered                                                                16           91
Interest received                                                                     95          162
Interest paid                                                                        217          129
Preferred dividends paid on Class E shares                                         4,565        4,298


The accompanying notes are an integrated part of these financial statements


                                      F-31


Thomas Equipment Limited (a predecessor of Thomas Equipment, Inc.)
Notes to Consolidated Financial Statements
For the year ended June 30, 2004
- --------------------------------------------------------------------------------

(in thousands of United States dollars, except for number of shares and per
share amounts)

1     Organization and description of the business

      The Company, a wholly-owned subsidiary of McCain Foods Limited,
      manufactures and distributes through a worldwide network of dealers and
      distributors a full line of skid steer and mini skid steer loaders as well
      as attachments, mobile screening plant and mini excavators for the
      industrial and construction industry. The Company also manufactures a
      complete line of potato harvesting and handling equipment for the
      agricultural industry. Approximately 80% of the Company's sales are
      generated through wholesale distribution worldwide. The Company has a sole
      manufacturing facility in Centreville, New Brunswick, Canada and also
      operates six retail stores in New Brunswick, Prince Edward Island, Maine,
      Colorado, and Illinois.

2     Basis of financial statement preparation and going concern

      The consolidated financial statements have been prepared in accordance
      with generally accepted accounting principles on a going concern basis
      which contemplates the realization of assets and the satisfaction of
      liabilities and commitments in the normal course of business for the
      foreseeable future.

      During the year ended June 30, 2004, the Company incurred a loss of
      $11,555 (2003 - $1,020) and is not generating sufficient cash flows to
      cover operating costs and to fund investments in working capital and
      additions to property, plant and equipment. Also at June 30, 2004 the
      Company had a working capital deficit of $25,223 and a shareholder's
      deficiency of $11,766. These conditions cast substantial doubt upon the
      validity of the going concern assumption. The Company's ability to meet
      its obligations as they fall due is dependent upon the continued financial
      support of its shareholder and creditors, its ability to secure additional
      financing as required and upon attaining profitable operations.

      On October 1, 2004, the Company sold its business and certain assets to
      Thomas Equipment 2004 Inc. for $33,403 (note 20). The Company's parent,
      McCain Foods Limited has committed to provide whatever financial support
      is required to ensure the Company, Thomas Equipment Limited, is able to
      meet its remaining liabilities after the sale as they fall due and to
      continue as a going concern for the foreseeable future. This commitment
      does not extend to Thomas Equipment 2004 Inc.

3     Summary of significant accounting policies

      These consolidated financial statements have been prepared in accordance
      with accounting principles generally accepted in the United States of
      America ("U.S. GAAP") as required by Rule 3-10 of Regulation S-B of the
      Securities and Exchange Commission ("SEC") and in United States dollars in
      accordance with the instructions in Rule 3-20(b) of Regulation S-X of the
      SEC. The Company's functional currency is the Canadian dollar. The
      significant accounting policies are set out below:


                                      F-32


Thomas Equipment Limited (a predecessor of Thomas Equipment, Inc.)
Notes to Consolidated Financial Statements (continued)
For the year ended June 30, 2004
- --------------------------------------------------------------------------------

(in thousands of United States dollars, except for number of shares and per
share amounts)

3     Summary of significant accounting policies (continued)

      Basis of consolidation

      These consolidated financial statements include the accounts of Thomas
      Equipment Limited and its wholly owned subsidiaries MacBan Equipment Ltd.,
      Thomas Equipment International Inc., and Thomas Europe NV (together "the
      Company"). The purchase method has been used to account for all
      acquisitions. On June 21, 2004, the Company sold McBan Equipment Ltd., a
      dormant company, to its parent, McCain Foods Limited for proceeds of $1
      which resulted in a loss before income taxes of $3.

      Revenue recognition

      In accordance with Staff Accounting Bulletin No. 104 "Revenue Recognition
      in Financial Statements" revenue is generally recognized and earned when
      all of the following criteria are satisfied: a) persuasive evidence of a
      sales arrangement exists; b) the sales price is fixed or determinable; and
      c) collectability is reasonably assured and delivery has occurred.

      Sales of equipment and service parts are recorded when title and all risks
      of ownership are transferred to the independent dealer, distributor or
      retail customer. This transfer generally occurs when goods are shipped to
      the dealer, distributor or retail customer.

      In some circumstances goods are shipped to dealers and distributors on a
      consignment basis under which title and risk of ownership are not
      transferred to the dealers and distributors. Accordingly, sales revenues
      are not recorded until a retail customer has purchased the goods. In all
      cases, when a sale is recorded by the Company, no significant uncertainty
      exists surrounding the purchaser's obligation to pay. No right of return
      exists on sales of equipment except for goods sold under buy back
      arrangements which are not recorded as sales.

      The Company makes appropriate provisions based on experience for costs
      such as doubtful receivables, sales incentives and product warranty.
      Receivables are determined to be past due if they have not been paid by
      the payment due date. Debts are written off when deemed to be
      uncollectible.

      Financing revenue is recorded over the terms of the related receivables
      using the interest method and is not recognized until received. Similarly
      late payment penalty interest of 12% p.a. charged to customers who have
      overdue accounts is not recognized until received. Until that time the
      deferred interest revenue is included as a component of accounts payable
      and accrued liabilities.

      Buy back arrangements

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


                                      F-33


3     Summary of significant accounting policies (continued)

      Buy back arrangements (continued)

      The equipment is included on the balance sheet at cost and amortized on a
      straight-line basis over their estimated useful lives of 3 years with
      corresponding debits to cost of sales. The deferred revenue and
      unamortized carrying value of the equipment are removed from the balance
      sheet and included in sales and cost of sales respectively in the
      Consolidated Statement of Loss if the dealer / distributor resells the
      equipment to a retail customer during the buy back period.

      The Company also sells equipment to dealers in the United States for
      retail activities. These sales are subject to State imposed buy back
      provisions under certain conditions (principally upon termination of the
      dealers contract by the Company and bankruptcy of the dealer.) Revenue
      from these sales transactions is recognized at time of sale as they
      satisfy the right of return conditions under Staff Accounting Bulletin No.
      104 "Revenue Recognition in Financial Statements".

      Sales incentives

      Sales incentive costs for allowances and financing programs are accounted
      for when the dealers sell the equipment to a retail customer. Such sales
      incentives and allowances given in the form of cash consideration are
      reflected as a reduction in sales. The cost of providing interest free
      financing periods to dealers and distributors under floor and rental plan
      arrangements is reflected as a component of cost of sales with an
      offsetting reduction to the face amount of the related financing
      receivables. The discount is amortized to income over the related interest
      free financing periods and is reflected as notional interest income within
      net financial expenses.

      Advertising costs

      Advertising costs are expensed as incurred and reported as a component of
      selling expenses and amounted to $782 for the year ended June 30, 2004
      (2003 -$828).

      Product warranties

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

      Shipping and handling costs

      Shipping and handling costs related to finished goods are reported as a
      component of cost of sales in the Consolidated Statement of Loss.


                                      F-34


3     Summary of significant accounting policies (continued)

      Cash and cash equivalents

      Cash comprises cash on hand and demand deposits. Cash equivalents are
      short-term highly liquid investments with original maturities of 90 days
      or less, that are readily convertible to known amounts of cash and which
      are subject to an insignificant risk of change in value. The Company's
      parent, McCain Foods Limited through its subsidiary McCain Finance
      (Canada) Ltd, has an arrangement with its bankers whereby cash balances
      may be netted with bank advances for its Canadian entities for the purpose
      of calculating interest under a CD$100,000 long-term revolving credit
      facility agreement. McCain Finance (Canada) Ltd recharges Thomas Equipment
      Limited for interest on its bank borrowings at the Bank of Nova Scotia
      prime rate plus 2%.

      Inventories

      Inventories are valued at the lower of cost and net realizable value. Cost
      is determined on a standard cost basis which approximates the first-in,
      first-out basis and includes a portion of factory overhead.

      Property, plant and equipment

      Property, plant and equipment are carried at cost, net of government
      grants, less accumulated amortization and impairment allowances.
      Amortization is provided from the date assets are put into service at
      rates to amortize the carrying cost of the property, plant and equipment
      over their estimated useful lives on a straight-line method, as follows:

           Land improvements                                           20 years
           Buildings                                                   20 years
           Production, machinery and equipment                    5 to 15 years
           Office furniture and equipment                         3 to 15 years
           Computer equipment                                           3 years
           Automotive equipment                                         3 years

      In accordance with Statement of Financial Accounting Standard (SFAS) 144,
      "Accounting for the impairment or disposal of long-lived assets", the
      Company evaluates the carrying value of property, plant and equipment when
      events and circumstances indicate that the carrying value of the assets
      may not be recoverable. If the carrying value of the assets are considered
      to be impaired, a loss is recognized based on the amount by which the
      carrying value exceeds the fair market value of the asset.

      Research and development costs

      Research and development costs are expensed as incurred and include
      salaries, contractor fees, building costs, utilities and administrative
      expenses.


                                      F-35


3     Summary of significant accounting policies (continued)

      Income taxes

      The Company uses the liability method to account for future income taxes.
      Under the liability method, future income taxes are recognized for the
      future income tax consequences attributable to differences between the
      financial statements carrying values and their respective income tax bases
      as well as tax losses and other loss reductions (temporary differences).
      Future income tax assets and liabilities are measured using substantially
      enacted income tax rates expected to apply to taxable income in the years
      in which temporary differences are expected to be recovered or settled.
      The effect on future income tax assets and liabilities of a change in tax
      rates is included in income in the period in which the change occurs. The
      amount of future income tax assets recognized is limited to the amount
      that is more likely than not to be realized.

      Pensions and other post-employment benefits

      Benefit obligations for defined benefit plans are determined by
      independent actuaries using the projected benefit method prorated on
      service and management's best estimate of expected plan investment
      performance, salary escalation, retirement ages of employees, expected
      health care costs, and other actuarial factors.

      Benefit charge or credit consists of the aggregate of the actuarially
      computed cost of pension benefits provided in respect of the current
      year's service; imputed interest on the accrued benefit obligation reduced
      by the expected long-term return on plan assets; amortization of past
      service costs; and the amortization of experience gains or losses, in
      excess of 10% of the greater of the accrued benefit plan obligation and
      the market value of plan assets at the beginning of the year. Other
      experience gains and losses and past service costs are amortized over the
      average remaining service period of employees.

      Plan assets are valued at market value for the purposes of calculating the
      expected long-term return.

      Translation of foreign currencies

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

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


                                      F-36


3     Summary of significant accounting policies (continued)

      Financial instruments

      Derivatives are contracts that require or provide the opportunity to
      exchange cash flows or payments determined by applying certain rates,
      indices or changes therein to notional contracted amounts. The Company
      uses forward foreign exchange contracts to manage financial risks
      associated with foreign exchange rate movements. These derivatives are
      used as economic hedges of anticipated foreign currency transactions and
      cash flows associated with settlement of these anticipated transactions.

      Beginning in 2001, the Company elected not to adopt the optional hedge
      accounting provisions of the FASB Statements No's. 133 and 138,
      "Accounting for Derivative Instruments and Hedging Activities".
      Accordingly, beginning in 2001, all derivatives are recorded on the
      balance sheet at fair value and the resulting unrealized gains and losses
      are recognized in other income (expense) in the Consolidated Statement of
      Loss as they arise and not concurrently with the recognition of the
      transactions being hedged.

      Mandatorily redeemable preferred shares

      With effect from July 1, 2003 the Class E redeemable preferred shares were
      classified as liabilities, and dividends paid in 2004 were classified as a
      financial expense in the Consolidated Statement of Loss in accordance with
      SFAS 150 "Accounting for Certain Financial Instruments with
      Characteristics of Both Liabilities and Equity" (see following page).

      In prior years the Class E redeemable preferred shares were reported
      separately from liabilities and shareholder's deficiency on the
      Consolidated Balance Sheet and dividends paid on these shares were
      reflected as a charge against the deficit in accordance with Staff
      Accounting Bulletin Topic 3 "Senior Securities",

      Use of estimates

      The preparation of the financial statements in conformity with accounting
      principles generally accepted in the United States of America, requires
      management to make estimates and assumptions that affect the valuation of
      accounts and financing receivables, inventories, future income taxes,
      property, plant and equipment, the reported amounts for accrued
      liabilities and pension costs and disclosure of contingent assets and
      liabilities at the date of the financial statements and the reported
      amounts of revenues and expenses during the reporting period. These
      estimates are based on management's best knowledge of current events and
      actions the Company may undertake in the future. Actual results could
      differ from those estimates.

      Recently adopted accounting standards

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

      In January 2003, the FASB issued FASB Interpretation No. 46 (revised in
      December 2003 as FIN 46R), which addresses how a business enterprise
      should evaluate whether it has a controlling financial interest in an
      entity through means other than voting rights and accordingly should
      consolidate the entity. The Company is required to apply FIN 46R to all
      variable interests in VIE's commencing in fiscal 2004. For variable
      interests in VIE's created before January 1, 2004, the assets, liabilities
      and non-controlling interests of the VIE initially


                                      F-37


3     Summary of significant accounting policies (continued)

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

      are measured at their carrying amounts with any difference between the net
      amount added to the balance sheet and any previously recognized interest
      being recognized as the cumulative effect of an accounting change. If
      determining the carrying amounts is not practicable, fair value at the
      date FIN 46R first applies may be used to measure the assets, liabilities
      and non-controlling interest of the VIE. The application of FIN 46R to
      variable interests in VIE's had no effect on the Company's financial
      statements as the Company has no variable interests in VIE's.

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

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

      SFAS 143 `Accounting for Asset Retirement Obligations'

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

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

      In November 2002, FASB Interpretation No. 45 was issued which enhances the
      disclosures to be made by a guarantor in its interim and annual financial
      statements about its obligations under guarantees issued. The
      Interpretation also clarifies that a guarantor is required to recognize,
      at inception of a guarantee, a liability for the fair value of the
      obligation undertaken. The initial recognition and measurement provisions
      of the Interpretation were applicable to guarantees issued or modified
      after December 31, 2002 and the disclosure requirements were effective for
      financial statements of interim or annual periods ending after December
      15, 2002. The Company entered into a sales contract with a dealer /
      distributor which is being accounted for pursuant to Interpretation No. 45
      (see note 10).


                                      F-38


3     Summary of significant accounting policies (continued)

      Recently adopted accounting standards (continued)

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

      In December 2003, FASB Statement No. 132 (revised) was issued which
      prescribes the required employers' disclosures about pension plans and
      other postretirement benefit plans; but it does not change the measurement
      or recognition of those plans. The Statement retains and revises the
      disclosure requirements contained in the original Statement 132. It also
      requires additional disclosures about the assets, obligations, cash flows,
      and net periodic benefit cost of defined benefit pension plans and other
      postretirement benefit plans. The Statement generally is effective for
      fiscal years ending after December 15, 2003. The Company's disclosures in
      note 9 incorporate the requirements of Statement 132 (revised).

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

      In June 2002, FASB Statement No. 146 was issued which addresses financial
      accounting and reporting for costs associated with exit or disposal
      activities and nullifies EITF Issue No. 94-3, "Liability Recognition for
      Certain Employee Termination Benefits and Other Costs to Exit an
      Activity". The provisions of Statement 146 were effective for exit or
      disposal activities initiated after December 31, 2002, with early
      application encouraged. The Company undertook a restructuring of its
      operations during fiscal year 2004 which is being accounted for pursuant
      to Statement 146 (see note 15).

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

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


                                      F-39


4     Inventories

                                                        2004          2003
                                                           $             $

      Raw materials and spare parts                    8,708         7,599
      Work in process                                  1,621         2,301
      Finished goods                                   9,713         8,929
      Packaging and supplies                             214           208
                                                      ------        ------

                                                      20,256        19,037
                                                      ======        ======

5     Financing receivables

                                                              2004        2003
                                                                 $           $

      Floor plan receivables                                 5,080       1,034
      Rental plan receivables                                1,926         885
                                                             -----       -----

                                                             7,006       1,919

      Discount reflecting interest free financing periods      (86)         (9)
                                                             -----       -----

                                                             6,920       1,910

      Less current portion                                  (2,982)       (345)
                                                             -----       -----

                                                             3,938       1,565
                                                             =====       =====

      The Company offers `in house' financing terms to certain customers under
      floor and rental plan arrangements. At June 30, 2004, floor and rental
      plan receivables include accrued interest receivable of $52 (2003 - $nil).

      Commencing April 2003, inventory balances carried by dealers and
      distributors in North America are available for financing by the Company
      through floor plan arrangements. This inventory financing tool offers
      interest free financing to dealers and distributors for the first six
      months and the Company will finance the equipment for up to eighteen
      months with the final twelve month period being charged interest at rates
      varying between Bank of Nova Scotia prime ("prime") plus 2.25% to prime
      plus 2.5%. To maintain the status of the floor plan, 5% curtailment fees
      are due and payable to the Company in months seven and twelve of the plan
      for Canadian dealers / distributors and in month twelve for US dealers /
      distributors. The curtailment fees are applied against the outstanding
      balance of the receivable. If the equipment is sold by the dealer /
      distributor to a retail customer, the full amount of the receivable is due
      immediately, otherwise full payment is due at the end of eighteen months
      from the date of the original invoice. Total sales under these financing
      arrangements amounted to $7,892 in 2004 (2003 - $982).

      Commencing October 2002, inventory balances carried by dealers and
      distributors for rental activities are also available for financing by the
      Company through rental plan arrangements. At any time during or at the end
      of a standard floor plan arrangement the dealer / distributor can move to
      a rental plan arrangement. Rental plans are also available at the time the
      equipment is shipped to the dealer / distributor. The standard finance
      term is to extend the total term to a maximum of sixty months. Interest
      rates are charged at prime less 1% for loaders ordered direct from the
      factory on to a rental plan and prime plus 1.25% for dealers /
      distributors converted from a floor plan to a rental plan. At the time of
      conversion an additional 5% curtailment fee is also due and payable.
      Dealers / distributors are not allowed to resell these loaders for the
      shorter of six months or 300 hours of use. Total sales under these
      financing arrangements amounted to $1,434 in 2004 (2003 - $880).


                                      F-40


5     Financing receivables (continued)

      Commencing July 2003, the Company also offers rental plan financing to
      independent rental yards whereby the first year is interest free and a
      subsequent two year extension is available for a rate equal to prime plus
      2.25% or a three year extension at prime plus 3.25%. On this program the
      rental yard must keep the unit for at least one year and if it accumulates
      more than 400 hours of use the total obligation is due and payable in
      full. As with the standard floor plan, the total obligation under rental
      plans is due if the equipment is sold by the dealer / distributor during
      the financing period. Total sales under these financing arrangements
      amounted to $290 in 2004.

      The Company evaluates and assesses dealers / distributors on an ongoing
      basis as to their credit worthiness and generally retains a security
      interest in the goods associated with these trade receivables. The Company
      is obligated to repurchase goods sold to a dealer / distributor upon
      cancellation or termination of the dealer / distributor's contract for
      such causes as change in ownership, closeout of the business or default.

6     Property, plant and equipment

                                                       Accumulated
                                               Cost   amortization          Net
                                                  $              $            $
      June 30, 2004
      Land and improvements                     175             64          111
      Buildings                               6,209          2,100        4,109
      Production machinery and equipment     10,607          5,274        5,333
      Office furniture and equipment            291            238           53
      Computer equipment                      1,816          1,545          271
      Automotive equipment                    1,238            870          368
      Construction in progress                  560             --          560
                                             ------         ------       ------

                                             20,896         10,091       10,805
                                             ======         ======       ======

      June 30, 2003
      Land and improvements                     174             58          116
      Buildings                               6,148          1,804        4,344
      Production machinery and equipment      9,474          4,712        4,762
      Office furniture and equipment            286            224           62
      Computer equipment                      1,633          1,379          254
      Automotive equipment                    1,035            748          287
      Construction in progress                  506             --          506
                                             ------         ------       ------

                                             19,256          8,925       10,331
                                             ======         ======       ======

      Amortization of property, plant and equipment amounted to $1,235 (2003 -
      $1,041). Amortization charges are included in cost of sales, selling
      expenses and general and administrative expenses. The net gain on sale of
      property, plant and equipment of $312 (2003 - gain $7) is included in cost
      of sales.


                                      F-41


7     Other assets

                                                            2004      2003
                                                               $         $

      Insurance claims receivable                             --       601
      Equipment on operating leases, net                     541       889
      Foreign exchange contracts (note 19)                    26        55
                                                            ----     -----

                                                             567     1,545
                                                            ====     =====

      Insurance claim receivable

      The insurance claim relates to a fire at the Company's premises in 2001.
      The total proceeds collected under the insurance claim amounted to $865 of
      which $128 was collected in 2002, $133 in 2003 and $604 in 2004.

      Operating leases

      Operating leases relate to equipment sold to dealers and distributors for
      rental activities under sales contracts containing guaranteed buy back
      provisions. Net equipment sold subject to outstanding guaranteed buy back
      provisions totalled $1,125 and $1,108 at June 30, 2004 and 2003
      respectively. The accumulated amortization on this equipment was $584 and
      $219 at June 30, 2004 and 2003 respectively. The corresponding
      amortization expense was $387 in 2004 and $190 in 2003. The sales value of
      the equipment sold subject to outstanding guaranteed buy back provisions
      totalled $1,529 and $1,509 at June 30, 2004 and 2003 respectively.
      Deferred revenue relating to these sales amounted to $1,242 and $1,403 at
      June 30, 2004 and June 30, 2003 respectively.

      Research and development costs

      In the year ended June 30, 2004, the Company incurred research and
      development costs of $1,052 (2003 - $134) which were expensed as incurred
      and reported as a component of general and administrative expenses. No
      amounts were deferred during the current or prior year.

8     Advances from affiliated companies



                                                                               2004        2003
                                                                                  $           $
                                                                                   
      McCain Finance (Canada) Ltd. - unlimited revolving credit facility     10,750      5,195

      Day & Ross Inc. - demand interest bearing promissory note              39,078         --
                                                                             ------     ------

                                                                             49,828      5,195
                                                                             ======     ======


      The amount borrowed from McCain Finance (Canada) Ltd. at June 30, 2004
      under the revolving credit facility bearing interest at U.S. dollar libor
      plus 0.95% was repayable on September 30, 2004. The interest rate at June
      30, 2004 equated to 2.34%. The amount borrowed at June 30, 2003 under the
      revolving credit facility bearing interest at 6.45% per annum, matured
      July 31, 2003. Accrued interest at June 30, 2004 amounted to $nil. (2003 -
      $nil).


                                      F-42


8     Advances from affiliated companies (continued)

      The amount borrowed from Day & Ross Inc. at June 30, 2004 represented a
      demand promissory note issued on redemption of the Class E preferred
      shares (note 12) bearing interest at the Bank of Nova Scotia prime rate
      plus 1.50%. The interest rate at June 30, 2004 equated to 5.25%. Accrued
      interest at June 30, 2004 amounted to $39 and is included in other
      payables and accrued liabilities.

      Although it is not the Company's intention to repay these advances within
      one year from the Balance Sheet date, they have been classified as current
      liabilities as these affiliated companies have the right to demand
      repayment of any portion or all of the advances within one year.

9     Employee benefit plans

      Description of benefit plans

      The Company provides retirement benefits for a majority of its employees
      under several multiemployer defined benefit plans administered by the
      Company's parent McCain Foods Limited ("MFL"). The defined benefit pension
      plans are final pay plans and provide for partial indexing of benefits.
      The other benefit plans provide for additional vacation at retirement,
      dependant upon age and years of service and a waiver of health and dental
      care premiums for employees on long-term disability.

      The cost of defined benefit pensions earned by employees is actuarially
      determined using the projected benefit method prorated on service and
      management's best estimate of expected plan investment performance, salary
      escalation and retirement ages of employees.

      Total cash payments

      Employer funding contributions to the defined benefit pension plans are
      all made annually by MFL which in turn recharges the Company for its share
      of the pension expense for the year. Funding payments for the other
      benefit plans are made annually by the Company. The total cash payments in
      relation to these employee benefits plans were as follows:

                                                           2004       2003
                                                              $          $

      Cash payments directly to beneficiaries for the
           unfunded other benefit plans                      10        13
      Funding payments to pension plans made by MFL       1,612       376
                                                          -----     -----

                                                          1,622       389
                                                          =====     =====

      Funding payments expected to be paid to the pension plans during fiscal
      2005 by MFL on behalf of the Company are estimated to be $204. As a result
      of the sale of the Company's business (note 20), the settlement of
      employee entitlements expected to be paid by MFL in fiscal 2006 are
      estimated to be $12,435.


                                      F-43


9     Employee benefit plans (continued)

      The Company measures its accrued benefit obligations and the fair value of
      plan assets for accounting purposes as at June 30 each year. The last
      actuarial valuation date for funding purposes was June 2003. The plans are
      valued for funding purposes every three years.

      The Company's net benefit plan cost for the defined benefit plans is as
      follows:



                                                                                     Pensions plans
                                                                                   ------------------

                                                                                     2004        2003
                                                                                        $           $
                                                                                            
      Current service cost                                                            510         358
      Interest cost                                                                   757         600
      Actual return on plan assets                                                 (1,390)        (25)
      Actuarial (gains) losses on obligation                                          297         245
      Plan amendments                                                                  --          --
                                                                                   ------      ------

      Benefit cost incurred before adjustments to recognize the
      long-term nature of employee future benefit costs                               174       1,178

      Adjustments to recognize the long-term nature of employee future benefit
      costs:
           Difference between expected return and actual return on plan
           assets for the year                                                        719        (507)
           Difference between actuarial gain/loss recognized for the year
           and actual actuarial gain/loss for the year                               (294)       (239)
           Difference between amortization of past service costs for the
           year and actual plan amendments for the year                                 5          --
                                                                                   ------      ------

      Benefit cost recognized                                                         604         432
                                                                                   ======      ======



                                      F-44


9     Employee benefit plans (continued)



                                                                                  Other benefits
                                                                                ------------------

                                                                                  2004     2003
                                                                                     $        $
                                                                                       
      Current service cost                                                          16       15
      Interest cost                                                                 17       17
      Actuarial gains on obligation                                                (13)     (23)
                                                                                   ---      ---

      Benefit cost incurred before adjustments to recognize the
      long-term nature of employee future benefit costs                             20        9

      Adjustments to recognize the long-term nature of employee future benefit
      costs:
           Difference between actuarial gain/loss recognized for the year
           and actual actuarial gain/loss for the year                              13       23
                                                                                   ---      ---

      Benefit cost recognized                                                       33       32
                                                                                   ===      ===


      Defined benefit pension plan assets consist of:



                                                                                  2004    2003
                                                                                     %       %

                                                                                      
      Common equities                                                               69      72
      Bonds and preferred shares                                                    30      28
      Cash and cash equivalents                                                      1      --
                                                                                   ---     ---

                                                                                   100     100
                                                                                   ===     ===


      Thomas Equipment Limited is a participating company in the Retirement
      Benefit Plan for the employees of McCain Canadian Employers (the "Pension
      Plan"). McCain Foods Limited, as administrator of the Pension Plan, has
      appointed several investment managers to manage the assets of the Pension
      Plan in accordance with its Statement of Investment Policies and Goals
      ("SIP&G"). Under the SIP&G, Pension Plan assets may be invested in cash
      and cash equivalents, common equities, bonds, preferred shares, and hedge
      funds. The asset mix guidelines are as follows:



                                                                                 Market value
                                                                              ------------------

                                                                               Minimum  Maximum
                                                                                     %        %
                                                                                      
      Cash and cash equivalents                                                     --      60
      Common equities                                                               20      80
      Bonds and preferred shares                                                    20      75
      Hedge funds                                                                   --      10



                                      F-45


9     Employee benefit plans (continued)

      Notwithstanding the above, the maximum cumulative investment in
      non-Canadian equities, cash, bonds or preferred shares (whether made
      directly or through the use of derivatives) is 60%. Investments need not
      be denominated in Canadian dollars as long as the total unhedged exposure
      of the Pension Plan to currencies other than the Canadian dollar is not
      more than 35% of the Pension Plan market value.

      Investments in real estate, commodities, commodity futures contracts,
      mortgages, gold or gold certificates, put or uncovered call options,
      clearing corporation put or call options, or securities of any issuer for
      the purpose of exercising control or management are prohibited.
      Notwithstanding this, a maximum of 10% of assets may be invested in units
      of pool funds that may make such investments that would otherwise be
      prohibited.

      Not more than 5% of plan assets can be invested in any security, the
      resale of which is restricted by law or contract, and not more than 10% of
      plan assets can be invested in any one security (except for securities
      issued by the Government of Canada or short-term securities and
      certificates of deposit issued or guaranteed by a major Canadian bank).

      The Investment Manager is permitted to deviate from the permitted
      investments provided that any such deviation does not substantially
      increase the risk of the investment portfolio, is considered to be a
      prudent act, justified by the prospect of increased return or enhanced
      diversification, and if notification of any such deviation is made to
      McCain Foods Limited within 30 days.

      The expected long-term rate of return on plan assets is 6.5% determined
      based on a target asset mix of 60% equities and 40% bonds and preferred
      shares, an underlying long-term inflation assumption of 2.5%, and an
      estimated real-return of 5% on equities and 2.5% on bonds and preferred
      shares.

      McCain Foods Limited matches the employee members' contributions on a
      monthly basis and any shortfall determined by the tri-annual actuarial
      valuation is funded at that time. For the executive employees plan, McCain
      Foods Limited makes a lump sum contribution each year based on an
      estimated wind up actuarial valuation of that Plan prepared by the
      Company's actuary.


                                      F-46


9     Employee benefit plans (continued)

      The following table sets forth the status of the Company's principal
      defined benefit plans as of June 30, 2004 and 2003.



                                                              Pension plans             Other benefits
                                                           -------------------         -----------------
                                                             2004         2003         2004         2003
                                                                $            $            $            $
                                                                                         
      Change in benefit obligation

      Accrued benefit obligation at beginning of year      10,137        7,893          253          230
      Benefits paid by MFL                                   (341)        (350)         (10)         (13)
      Current service cost                                    510          358           16           15
      Interest cost                                           757          600           17           17
      Employee contributions                                  347          272           --           --
      Actuarial experience (gains) losses                     297          245          (13)         (23)
      Foreign exchange                                        113        1,119            4           27
                                                           ------       ------          ---          ---

      Accrued benefit obligation at end of year            11,820       10,137          267          253
                                                           ======       ======          ===          ===

      Change in plan assets

      Fair value of plan assets at beginning of year        8,310        7,065           --           --
      Actual return on plan assets                          1,390           25           --           --
      Employer contributions by MFL                         1,612          376           10           13
      Employee contributions                                  347          272           --           --
      Benefits paid                                            --           --          (10)         (13)
      Benefits paid by MFL                                   (341)        (350)          --           --
      Foreign exchange                                        102          922           --           --
                                                           ------       ------          ---          ---

      Fair value of plan assets at end of year             11,420        8,310           --           --
                                                           ======       ======          ===          ===

      Funded status - plan deficit                           (400)      (1,827)        (267)        (253)

      Unamortized net actuarial (gains) losses                716        1,131          (39)         (26)
      Unamortized past service cost                            95           99           --           --
      Net amount recognized by MFL                           (411)         597           --           --
                                                           ------       ------          ---          ---

      Net amount recognized                                    --           --         (306)        (279)
                                                           ======       ======          ===          ===


      The net amount recognized is shown on the face of the consolidated balance
sheet as an accrued benefit liability.


                                      F-47


9     Employee benefit plans (continued)

      Estimated future benefits expected to be paid taking into account the sale
      of the Company's business on October 1, 2004 (note 21) are as follows:

                                        Pension
                                          plans      Other benefits     Total
                                              $              $              $

           2005                             144              5            149
           2006                               -              4              4
           2007                               -              4              4
           2008                               -              4              4
           2009                               -              4              4
           Five years thereafter              -              9              9
                                            ---             --            ---

                                            144             30            174
                                            ===             ==            ===

      Details of the Company's pension plans with accumulated benefit
      obligations in excess of plan assets and pension plans with plan assets in
      excess of accumulated benefit obligations are set out below:



                                                             2004                                      2003
                                           -------------------------------------------------------------------------------------

                                                   Assets     Accumulated                    Assets     Accumulated
                                                exceeding        benefits                 exceeding        benefits
                                              accumulated       exceeding               accumulated       exceeding
                                                 benefits          assets     Total        benefits          assets     Total
                                                        $               $         $               $               $         $
                                                                                                     
      Accumulated benefit obligation                  349           9,744    10,093               -           8,186     8,186
      Effect of salary increase                       258           1,469     1,727               -           1,951     1,951
                                                      ---          ------    ------             ---          ------    ------

      Accrued (projected) benefit
           obligation                                 607          11,213    11,820               -          10,137    10,137

      Fair value of plan assets                       686          10,734    11,420               -           8,310     8,310
                                                      ---          ------    ------             ---          ------    ------

      Funded status - surplus (deficit)                79            (479)     (400)              -          (1,827)   (1,827)
                                                      ===          ======    ======             ===          ======    ======


      No valuation allowance was required at June 30, 2004 (2003 - $nil)


                                      F-48


9     Employee benefit plans (continued)

      The significant assumptions used in accounting for the Company's employee
      future benefits are as follows (weighted average):



                                                                   Pension benefit
                                                                        plans             Other benefits
                                                                 ----------------------  -------------------

                                                                      2004      2003       2004      2003
                                                                         %         %          %         %
                                                                                          
      Accrued benefit obligation as of June 30
           Discount rate                                               6.5       6.5        6.5       6.5
           Rate of compensation increase                               4.0       4.5        4.0       4.5

      Benefit costs for year ended June 30
           Discount rate                                               6.5       7.0        6.5       7.0
           Expected long-term rate of return on plan assets            6.5       7.5          -         -
           Rate of compensation increase                               4.5       4.5        4.5       4.5


      In determining the expected cost of health care benefit plans, it was
      assumed that health care costs would increase by 10% per annum for the
      next four years and 6% per annum thereafter.

10    Contingencies and commitments

      Contingencies

      The Company is involved in and potentially subject to various claims and
      litigation arising out of the ordinary course and conduct of its business
      including product liability, intellectual property, labour and employment,
      environmental and tax matters. Management does not consider the Company's
      exposure to such claims and litigation to be material to the consolidated
      financial statements.

      The Company's products are sold with a one year comprehensive bumper to
      bumper warranty except for loader sales in North America and Australia,
      which have a three year bumper to bumper warranty, followed by a
      powertrain warranty in years four and five. The Company generally
      determines its total warranty liability by applying historical claims rate
      experience to the estimated amount of equipment that has been sold and is
      still under warranty based on dealer inventories and retail sales. The
      historical claims rate is primarily determined by a review of past claims
      costs and current quality developments. A reconciliation of the changes in
      the warranty liability is as follows:

                                                         Warranty liability
                                                        --------------------

                                                          2004       2003
                                                             $          $

      Balance - beginning of year                          637        411
      Payments                                            (668)      (574)
      Accruals for warranties                              947        730
      Foreign exchange                                       8         70
                                                          ----       ----

      Balance - end of year                                924        637
                                                          ====       ====


                                      F-49


10    Contingencies and commitments (continued)

      Commitments

      At June 30, 2004, the Company had no capital commitments to purchase
      property, plant and equipment.

      The Company has operating leases for buildings and office equipment. The
      expense for the year ended June 30, 2004 was $154 (2003 - $82) and the
      future minimum lease payments at June 30, 2004 are as follows:

                                                                          $

            Year ending June 30, 2005                                   169
                                 2006                                   147
                                 2007                                    80
                                 2008                                    72
                                 2009                                    72
                           Thereafter                                    93
                                                                        ---

                                                                        633
                                                                        ===

      Guarantees

      The Company has entered into sales contracts with a dealer / distributor
      which include a guaranteed buy back value at the end of a three year
      period if that dealer / distributor has not sold the equipment to a retail
      customer. The total potential outstanding obligation under these
      arrangements at June 30, 2004 was $1,012 which is accrued by default
      within the deferred revenue of $1,242.

11    Capital Stock



                                                                                                  2004                  2003
                                                                                                     $                     $
                                                                                                                 
      Authorized
           900,000  6% non-cumulative, non-voting Class A preferred shares with a
           par value of $1 each, redeemable at par at the option of the Company at
           any time

           1,000,000  9% non-cumulative , non-voting Class B preferred shares with a
           par value of $1 each, redeemable at par at the option of the Company at
           any time

           Unlimited common shares without nominal or par value

      Issued and fully paid
               746,322  Class A preferred shares                                                   496                   496
             1,000,000  Class B preferred shares                                                   664                   664
             8,643,000  (2003 - 2,643,000) common shares                                        30,220                 8,599
                                                                                                ------                 -----

                                                                                                31,380                 9,759
                                                                                                ======                 =====



                                      F-50


11    Capital Stock (continued)

      Each class of preferred shares is subject to certain rights, privileges,
      restrictions and conditions. The Class A and Class B shares rank on a
      parity with each other in all respects except as to dividend rate and in
      all respects rank in preference and priority to the common shares.

      On June 23, 2004, the Company issued 6,000,000 common shares without par
      value for proceeds of $21,621 to its parent, McCain Foods Limited. The
      proceeds were used to pay the preferred dividends on the Class E preferred
      shares and the balance was applied against the demand promissory note
      issued to Day & Ross Inc.

12    Mandatorily redeemable preferred stock



                                                                                                  2004                  2003
                                                                                                     $                     $
                                                                                                                
      Authorized
           25,000 (2003 - 100,000) cumulative, retractable, non-voting Class E
           preferred shares with a par value of $1,000 each, redeemable at par
           at the option of the holder and the Company at any time. Dividends
           are payable on issued shares at the Bank of Nova Scotia prime rate
           plus 4%

      Issued and fully paid
           Nil (2003 - 75,000,000) Class E preferred shares                                         --                55,659
                                                                                                   ===                ======


      On October 25, 2001 the Company issued at par, 75,000,000 Class E
      preferred shares to Day & Ross Inc., an affiliated company. On June 23,
      2004 Day & Ross Inc. redeemed these shares for their par value. The
      Company paid the redemption price by way of a demand non-interest bearing
      promissory note (note 8).

      In the event of liquidation, dissolution or winding up of the Company or
      other distribution of assets or property, each holder of the Class E
      shares shall be entitled to receive from the assets and property of the
      Company, for each Class E share the redemption amount thereof together
      with all accrued but unpaid dividends thereon before any amount shall be
      paid or any assets or property of the Company distributed to the holders
      of any Class A or B preferred shares, or common shares which all rank
      junior to the Class E shares.


                                      F-51


13    Related party transactions

      The Company is a member of the McCain Foods Limited group and has
      transactions with other members of the group in the normal course of
      business measured at the exchange amount as summarized below:



                                                                                       2004               2003
                                                                                          $                  $
                                                                                                   
      Included in sales:
           McCain Foods Limited                                                         167                183
           McCain Produce Inc.                                                          227                 54
           McCain Fertilizer Ltd.                                                        28                 55
           McCain South Africa (Pty) Ltd.                                               157                 --
           McCain Foods Inc.                                                             --                 --
           McCain Argentina S.A.                                                         10                 16
                                                                                      -----              -----

                                                                                        589                308
                                                                                      =====              =====

      Included in cost of sales:
           Freight expense - Day & Ross Inc.                                          2,057              1,958

      Included in general and administrative expenses:
           Management fees - McCain Foods Limited                                       523                439

      Included in financial expenses:
           Interest expense - McCain Finance (Canada) Ltd.                              217                134
           Dividends paid on Class E preferred shares - Day & Ross Inc.               4,565              4,298
           Interest expense - Day & Ross Inc.                                            39                 --


      Details of capital transactions with affiliated companies are set out in
      notes 11 and 12.

      All forward foreign exchange contracts are entered into with McCain
      Eurocentre, the treasury centre for the McCain group. Back-to-back
      contracts are then entered into by McCain Eurocentre with third party
      financial institutions. Details of the outstanding forward foreign
      exchange contracts with McCain Eurocentre at June 30, 2004 are set out in
      note 19.

      At June 30, 2004, the Company had the following amounts due from
      affiliated companies.



                                                                                                    2004                2003
                                                                                                       $                   $
                                                                                                                   
      Due from affiliated companies:
           McCain Fertilizer Limited                                                                    -                  4
           McCain Foods Limited                                                                        21                 22
           McCain Argentina S.A.                                                                       18                 22
           McCain South Africa (Pty) Ltd.                                                             120                168
           McCain Produce Company Inc.                                                                  2                  4
                                                                                                      ---                ---
                                                                                                      161                220
                                                                                                      ===                ===



                                      F-52


13    Related party transactions (continued)



                                                                                                  2004                  2003
                                                                                                     $                     $
                                                                                                                 
      Due to affiliated companies:

           McCain Fertilizer Limited                                                                 4                    --
           McCain International Inc.                                                               502                    --
           Day & Ross Inc.                                                                          64                   143
           McCain USA Inc.                                                                          --                     5
           McCain Foods USA Inc.                                                                   128                   119
           McCain Foods (GB) Limited                                                                25                    40
           McCain Foods Limited                                                                    153                   378
           McCain Finance (Canada) Ltd.                                                              4                    --
                                                                                                ------                 -----

                                                                                                   880                   685
                                                                                                ------                 -----

      Advances from affiliated companies: (note 8)

           McCain Finance (Canada) Ltd.                                                         10,750                 5,195
           Day & Ross Inc.                                                                      39,078                    --
                                                                                                ------                 -----

                                                                                                49,828                 5,195
                                                                                                ------                 -----

                                                                                                50,708                 5,880
                                                                                                ======                 =====


14    Net financial income (expense)



                                                                                                  2004                 2003
                                                                                                     $                    $
                                                                                                                 
      Dividends on Class E preferred shares                                                     (4,565)                  --
      Interest charges from affiliated companies                                                  (256)                (134)
      Interest income on receivables                                                                95                  168
      Notional interest income on financing receivables at 6% p.a.                                 177                    2
      Bank charges and other interest                                                              (25)                  (2)
                                                                                                ------                 ----

                                                                                                (4,574)                  34
                                                                                                ======                 ====

15    Other income (expense)

                                                                                                  2004                 2003
                                                                                                     $                    $

      Restructuring charges                                                                       (886)                  --
      Foreign exchange gains (losses)                                                              106                3,061
      Other                                                                                         78                  (10)
                                                                                                  ----                -----

                                                                                                  (702)               3,051
                                                                                                  ====                =====



                                      F-53


15    Other income (expense) (continued)

      The restructuring charges in the year ended June 30, 2004 relate to
      severance costs associated with a decision to terminate the employment of
      23 employees in connection with a restructuring of the Company's
      operations, which was completed in July 2004. These liabilities are
      expected to be settled within a two year period.

16    Income taxes

      Provision for income taxes comprises the following:



                                                                                    2004              2003
                                                                                       $                 $
                                                                                                  
      Current                                                                         65                72
      Future                                                                          --                --
                                                                                     ---               ---

                                                                                      65                72
                                                                                     ===               ===


      The following table reconciles income taxes calculated at the basic
      Canadian corporate income tax rates with the income tax provision.



                                                                                  2004                2003
                                                                                     %                   %
                                                                                                
      Canadian federal income tax rate                                            23.1                25.1
      Canadian provincial income tax rate                                         12.9                13.6
      Manufacturing and processing credit                                         (0.9)               (2.7)
      Large corporation taxes                                                     (0.6)               (7.6)
      Dividends reported as interest expense                                     (13.9)                --
      Effect of other permanent non-deductible items                              (0.3)               (2.9)
      Unrecognized benefit of losses and temporary differences                   (21.4)             (106.2)
      Unrealized losses on financial instruments                                   0.3                70.0
      Other                                                                        0.3                 3.1
                                                                                 -----              ------

      Effective income tax rate                                                   (0.5)               (7.6)
                                                                                 =====              ======



                                      F-54


16    Income taxes (continued)

      The tax effects of temporary differences and net operating losses that
      give rise to future income tax assets and liabilities are as follows:



                                                                                  2004                   2003
                                                                                     $                      $
                                                                                                   
      Property, plant and equipment                                             (1,134)                  (623)
      Net operating losses carried forward                                      12,569                  9,304
      Employee future benefits                                                     107                     98
      Foreign exchange contracts                                                  (326)                   351
      Accruals                                                                     774                    522
      Other                                                                        158                    139
                                                                               -------                 ------

      Net future income tax assets before valuation allowance                   12,148                  9,791

      Valuation allowance                                                      (12,148)                (9,791)
                                                                               -------                 ------

      Net future income tax assets                                                  --                     --
                                                                               =======                 ======


      At June 30, 2004, the Company had available net operating loss carry
      forwards for income tax purposes of approximately $35,922 (2003 -
      $27,408). These potential future income tax benefits are available to be
      carried forward and applied against taxable income in future years and
      expire as follows:



                                                                                      $

                                                                              
            Year ending of June 30, 2006                                          2,221
                                    2007                                          7,521
                                    2008                                         10,620
                                    2009                                          3,578
                                    2010                                          3,749
                                    2014                                          8,233
                                                                                 ------

                                                                                 35,922
                                                                                 ======



                                      F-55


16    Income taxes (continued)

      As at June 30, 2004, the Company also had federal investment tax credits
      of approximately $1,148 (2003 - $1,055) available to be carried forward
      and used to reduce federal income tax payable in future years which expire
      as follows:



                                                                                       $
                                                                               
           Year ending June 30, 2005                                                  13
                                2006                                                  44
                                2007                                                  42
                                2008                                                  --
                                2009                                                  20
                                2010                                                  19
                                2011                                                 723
                                2012                                                 186
                                2013                                                  18
                                2014                                                  83
                                                                                  ------
                                                                                   1,148

           Valuation allowance                                                    (1,148)
                                                                                  ------

           Investment tax credits recoverable                                         --
                                                                                  ======


      Future taxable income of $39,961 is required to realize the net future
      income tax assets and investment taxes recoverable balances. The tax
      benefit of these assets has not been recognized in these financial
      statements as it is uncertain whether the Company will be able to utilize
      them before they expire.

17    Net change in non-cash working capital items related to operations



                                                                   2004             2003
                                                                      $                $

                                                                             
      Accounts and financing receivables                          1,138            3,315
      Foreign exchange contracts                                    672           (3,168)
      Inventories                                                (1,018)            (301)
      Equipment on operating lease                                  (31)            (813)
      Due from affiliated companies                                  61              669
      Prepaid expenses                                             (186)             115
      Income taxes recoverable / payable                              1               84
      Accounts payable and accrued liabilities                    2,888           (2,427)
      Deferred revenue                                             (174)           1,022
      Due to affiliated companies                                   187              (29)
                                                                  -----           ------

      Net change in non-cash working capital items                3,538           (1,533)
                                                                  =====           ======



                                      F-56


18    Segment information

      The Company's principal operations relate to the manufacture, sale and
      distribution through a worldwide network of dealers, distributors and
      retailers of skid steer and mini skid steer loaders, attachments, parts,
      mobile screening plants and mini excavators for the industrial and
      construction industry and potato harvesting and handling equipment for the
      agriculture industry.

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

      Revenues by destination and product group for the years ended June 30,
      were as follows:



                                                                   2004            2003
                                                                      $               $
                                                                            
      Canada                                                     10,317           9,042
      USA                                                        31,862          32,007
      Europe                                                      8,849           6,701
      Rest of world                                               4,677           1,524
                                                                 ======          ======

      Total sales to external customers                          55,705          49,274
                                                                 ------          ------

      Industrial and construction                                52,149          45,906
      Agriculture                                                 3,556           3,368
                                                                 ------          ------

      Total sales to external customers                          55,705          49,274
                                                                 ======          ======


      Sales to the USA include auction sales of Industrial and Construction
products to the following major customers:



                                                                   2004            2003
                                                                      $               $
                                                                            
      Customer A                                                  3,967           6,414
      Customer B                                                  2,322           6,027
                                                                 ======          ======


      Capital assets by geographical area for the years ended June 30, were as
follows:



                                                                    2004          2003
                                                                       $             $
                                                                          
      Canada                                                      10,627        10,204
      USA                                                            178           127
                                                                  ------        ------

      Total                                                       10,805        10,331
                                                                  ======        ======



                                      F-57


19    Financial instruments

      Fair value

      The Company's financial instruments include cash and short-term deposits,
      bank advances, trade accounts and financing receivables, accounts payable,
      advances from affiliates and foreign exchange contracts.

      Due to the short-term maturity of cash and short-term deposits, bank
      advances, trade accounts receivable, accounts payable and accrued
      liabilities and advances from affiliates, the carrying values of these
      instruments are reasonable estimates of their fair value.

      The fair value of the long-term financing receivables cannot be determined
      due to the nature of the receivables and uncertainty as to the duration of
      the financing period.

      The fair value of forward foreign exchange contracts are estimated based
      on the amount that the Company would receive or be required to pay if
      forced to settle these contracts at the year-end using year-end forward
      rates. The Company has no intention to settle these contracts before
      maturity.



                                                                        June 30
                                                                   ------------------

                                                                   2004          2003
                                                                      $             $
                                                                            

      Financial assets                                              197         1,622
      Financial liabilities                                        (459)       (1,212)
                                                                   ----        ------

                                                                   (262)          410
                                                                   ====        ======


      Credit risk

      The Company's financial assets that are exposed to credit risk consist
      primarily of cash, trade accounts and financing receivables and derivative
      contracts. The Company does not believe it is subject to any significant
      concentration of credit risk.

      Cash is invested with major financial institutions.

      The Company is exposed to normal credit risk from customers. Trade
      accounts and financing receivables have significant concentrations of
      credit risk in the industrial and construction industry and on a
      geographical basis in the USA as disclosed in note 18. All auction sales
      are to two customers in the USA as disclosed in note 18.


                                      F-58


19    Financial instruments (continued)

      The Company is exposed to credit risk in the event of non-performance by
      its counterparties on its foreign exchange contracts and swap contracts.
      The Company does not anticipate non-performance by any of the
      counterparties, as it deals through the treasury centre of its parent,
      McCain Foods Limited, which in turn deals with counterparties who are
      major financial institutions and have a minimum A rating. The Company
      anticipates the counterparties will satisfy their obligations under the
      contracts. The relative market positions with each external counterparty
      are monitored by McCain Foods Limited's treasury centre to ensure an
      adequate diversification of risk.

      Interest rate risk

      The Company is exposed to interest rate risk as future changes in the
      prevailing level of interest rates affects the cash flows associated with
      the financing receivables (note 5) and the advances from affiliated
      companies (note 8). The Company has not entered into any financial
      instrument contracts to hedge the interest rate exposure associated with
      these items.

      Currency risk

      The Company enters into contracts to purchase or sell foreign currencies
      in order to convert known foreign currency assets and liabilities and
      known or highly expected foreign currency revenues and expenses into
      domestic currencies to reduce the Company's exposure to fluctuations in
      foreign currencies.

      The contractual amounts of the Company's forward foreign exchange
      contracts at June 30, 2004 are as follows:

                                                              Nominal value
                                                                          $

            Maturing monthly in     2005                             15,426
                                    2006                              8,911
                                    2007                              7,009
                                                                     ------

                                                                     31,346
                                                                     ======

      The major foreign currencies exposures hedged relate to United States
      dollars and Euros.


                                      F-59


20    Subsequent events

      On October 1, 2004, the Company entered into a definitive agreement to
      sell its business and certain assets, to Thomas Equipment 2004 Inc. (a
      Canadian corporation, wholly owned by Thomas Equipment Inc., a US publicly
      traded company), effective October 1, 2004. As a result of this sale, the
      Company is considered to be a predecessor (as defined by the United States
      Securities and Exchange Commission) of Thomas Equipment, Inc.

      This transaction closed on November 9, 2004. Details of the sale are as
      follows:



                                                                                                                           $
                                                                                                                   
      Sale proceeds:
           Deposit received on entering into definitive agreement                                                        198
           Cash received on closing                                                                                   15,396
           Redeemable, retractable, non-voting preferred shares in Thomas Equipment 2004 Inc.                          7,926
           Promissory note                                                                                             2,140
           Deferred consideration                                                                                      2,967
           Capital lease of property, plant and equipment                                                              4,776
                                                                                                                      ------

                                                                                                                      33,403

      Net assets disposed of:
           Property, plant and equipment                                                                              11,255
           Inventory                                                                                                  22,148
                                                                                                                      ------

      Gain on disposal                                                                                                    --
                                                                                                                      ======


      The preferred shares in Thomas Equipment 2004 Inc. are redeemable at par
      plus accrued but unpaid dividends at the option of that company at any
      time or by the holder on or after the eighteenth month anniversary of the
      issuance of the shares. These preferred shares carry a cumulative dividend
      of 8% per annum increasing to 12% after eighteen months. The Company sold
      these preferred shares to its parent, McCain Foods Limited on November 9,
      2004 at par.

      The promissory note carries interest at 4% per annum and is receivable
      over two years in equal instalments commencing one year after closing.

      The deferred consideration is receivable in the three equal monthly
      payments of $989 commencing December 9, 2004.

      Under the terms of the sale agreement the Company entered into a two year
      capital lease agreement with Thomas Equipment 2004 Inc. to lease these
      properties for an annual lease payment of $476. Pursuant to the lease,
      Thomas Equipment 2004 Inc. has the right at any time prior to the
      expiration of the lease term to purchase the leased properties for $4,776
      being their net book value as at September 30, 2004. In addition, the
      Company has a right to force Thomas Equipment 2004 Inc. to purchase the
      leased properties at the expiration of the lease for the same amount.


                                      F-60


21    Basic and diluted loss per common share



                                                                                 2004               2003
                                                                                    $                  $
                                                                                         
      Net loss available to common shareholders                               (11,555)            (1,020)

      Weighted average number of common shares outstanding                  2,774,507          2,643,000

      Basic and diluted loss per common shares                                  (4.16)             (0.39)


22       Provision for doubtful receivables



                                                                                  2004              2003
                                                                                     $                 $
                                                                                              
      Balance at start of year                                                     888               772
      Receivables written off in year                                             (863)             (180)
      Increase in provision in year                                              1,657               197
      Foreign exchange                                                              12                99
                                                                                 -----               ---

      Balance at end of year                                                     1,694               888
                                                                                 =====               ===



                                      F-61


Pneutech Inc.

Consolidated Financial Statements
October 31, 2004


                                      F-62


PNEUTECH INC.

Consolidated Financial Statements

As of October 31, 2004 and for the Years Ended October 31, 2004 and 2003

TABLE OF CONTENTS
                                                                          Page
                                                                          ----


Independent Auditors' Report                                              F-64

Balance Sheet                                                             F-65

Statements of Operations                                                  F-66

Statements of Stockholders' Equity                                        F-67

Statements of Cash Flows                                                  F-68

Notes to the Consolidated Financial Statements                            F-69


- --------------------------------------------------------------------------------


                                      F-63


KINGERY
& CROUSE PA
- ----------------------------
CERTIFIED PUBLIC ACCOUNTANTS

INDEPENDENT AUDITORS' REPORT

To the Stockholders and Board of Directors of Pneutech Inc. and Subsidiaries:

We have audited the accompanying consolidated balance sheet of Pneutech Inc.
and subsidiaries (the "Company"), as of October 31, 2004, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the years ended October 31, 2004 and 2003. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall consolidated financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of the
Company as of October 31, 2004, and the consolidated results of its operations
and cash flows for the years ended October 31, 2004 and 2003, in conformity with
accounting principles generally accepted in the United States of America.

March 31, 2005
Tampa, FL

           2801 WEST BUSCH BOULEVARD, SUITE 200, TAMPA, FLORIDA 33618
           PHONE: 813.874.1280 | FAX: 813.874.1292 | WWW.TAMPACPA.COM


                                      F-64


Pneutech Inc.
Consolidated Balance Sheet
(in thousands)



October 31                                                                     2004
- -----------------------------------------------------------------------------------
                                                                         
Assets
Current
    Cash and cash equivalents                                               $     1
    Restricted cash (Note 6)                                                    364
    Accounts receivable, net of allowance for doubtful accounts of $397      12,712
    Other receivable                                                            204
    Inventories                                                               8,935
    Prepaid expenses and other current assets                                   841
                                                                            -------
                                                                             23,057

Property and equipment (Note 5)                                               6,764
Deferred finance charges, net of accumulated amortization of $81                326
Other assets                                                                    543
Goodwill                                                                      4,385
                                                                            -------

                                                                            $35,075
                                                                            =======

Liabilities
Current
    Bank indebtedness (Note 6)                                              $ 9,410
    Accounts payable and accruals                                             9,555
    Income taxes payable                                                         75
    Current portion of long term debt                                         2,711
                                                                            -------
                                                                             21,751

Long term debt (Note 8)                                                       2,359
Other financial liabilities (Note 9)                                          5,032
Other liabilities                                                               105
Payable to stockholder (Note 10)                                                901
Deferred income taxes                                                           546
                                                                            -------
                                                                             30,694
                                                                            -------

Commitments and Contingencies (Notes 12 and 13)

Stockholders' Equity
Capital stock (Note 11)                                                       3,396
Retained earnings                                                               307
Other comprehensive income                                                      678
                                                                            -------
                                                                              4,381
                                                                            -------

                                                                            $35,075
                                                                            =======


See accompanying notes to consolidated financial statements


                                      F-65


Pneutech Inc.
Consolidated Statements of Operations
(in thousands except share and per share data)



Years ended October 31                                          2004         2003
- ---------------------------------------------------------------------------------
                                                                   
Sales                                                       $ 49,040     $ 37,971

Cost of sales                                                 38,158       29,774
                                                            --------     --------

Gross profit                                                  10,882        8,197
                                                            --------     --------

Operating expenses:
Selling and marketing                                          3,576        3,282
General and administrative                                     5,457        3,771
                                                            --------     --------
                                                               9,033        7,053
                                                            --------     --------

Operating income                                               1,849        1,144

Financing expense                                              1,631        1,594
                                                            --------     --------

Income (loss) before income taxes                                218         (450)

Provision for income taxes (benefit)                              26         (122)
                                                            --------     --------

Net income (loss)                                           $    192     $   (328)
                                                            ========     ========

Net income (loss) per share:
   Basic and diluted                                        $   6.31     $ (13.27)
                                                            ========     ========

Weighted average number of shares:
   Basic and diluted                                          30,452       24,721
                                                            ========     ========

Reconciliation of Comprehensive Income:

Net income (loss)                                           $    192     $   (328)
Other comprehensive gain - foreign currency translation          330          335
                                                            --------     --------
Total comprehensive income                                  $    522     $      7
                                                            ========     ========


See accompanying notes to consolidated financial statements


                                      F-66


Pneutech Inc.
Consolidated Statements of Stockholders' Equity
(in thousands)



- ----------------------------------------------------------------------------------------------------------

                                                 Capital Stock                       Other
                                              -------------------     Retained   Comprehensive
                                               Number      Amount     Earnings       Income        Total
                                               ------      ------     --------       ------        -----
                                                                                 
Balances, November 1, 2002                    24,721.12   $ 1,473      $   443      $    13     $ 1,929

Stock repurchased                             (7,612.83)     (760)          --           --        (760)

Issuances of common stock to employees
for cash                                         858.32       377           --           --         377

Debt discount related to warrants
issued in connection with financing               --          950           --           --         950

Foreign currency translation gain                 --           --           --          335         335

Stock issued for acquisition of
subsidiary                                     3,045.19     1,356           --           --       1,356

Net loss for the year                             --           --         (328)          --        (328)
                                              ---------   -------      -------      -------     -------

Balances, October 31, 2003                    21,011.80     3,396          115          348       3,859

Foreign currency translation gain                 --           --           --          330         330

Net income for the year                           --           --          192           --         192
                                              ---------   -------      -------      -------     -------

Balances, October 31, 2004                    21,011.80   $ 3,396      $   307      $   678     $ 4,381
                                              =========   =======      =======      =======     =======


See accompanying notes to consolidated financial statements


                                      F-67


Pneutech Inc.
Consolidated Statements of Cash Flows
(in thousands)



Years Ended October 31                                                         2004         2003
- --------------------------------------------------------------------------------------------------
                                                                                   
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)                                                           $   192      $  (328)
Adjustments to reconcile net income (loss) to net cash
   provided by (used in) operating activities:
     Deferred income taxes                                                     (210)        (198)
     Gain on sale of equipment                                                  (56)          --
     Depreciation and amortization                                            1,238          467
     Amortization of debt discount                                              190           --
   (Increase) decrease in non-cash working capital items, net (Note 15)          98         (700)
                                                                            -------      -------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                           1,452         (759)
                                                                            -------      -------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Cash paid to acquire net assets of subsidiaries                               --         (402)
   Purchase of property and equipment                                        (2,141)        (428)
   Purchase of long term investments                                           (336)          --
   Acquisition costs in excess of identifiable assets                           (15)        (120)
   Proceeds from sale of property and equipment                                 591           --
                                                                            -------      -------
NET CASH USED IN INVESTING ACTIVITIES                                        (1,901)        (950)
                                                                            -------      -------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from debt issuance                                                2,026        2,091
   Repayment of subordinated debt                                                --       (1,901)
   Proceeds from issuance of common shares                                       --          377
   Repurchase of common shares                                                   --         (760)
   Proceeds from issuance of preferred shares                                    --        1,901
   Proceeds from issuance of stock warrants                                      --          950
   Advances from stockholder                                                    111           (1)
   Repayment of long term debt                                               (1,876)        (583)
                                                                            -------      -------
NET CASH PROVIDED BY FINANCING ACTIVITIES                                       261        2,074
                                                                            -------      -------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                           (188)         365
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS                     --         (176)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                    189           --
                                                                            -------      -------
CASH AND CASH EQUIVALENTS, END OF YEAR                                      $     1      $   189
                                                                            =======      =======

SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION
   Interest paid                                                            $ 1,246      $ 1,097
                                                                            =======      =======
   Income taxes paid                                                        $   209      $   102
                                                                            =======      =======

SUPPLEMENTARY DISCLOSURES OF NON-CASH INVESTING
AND FINANCING ACTIVITIES
   Debt discount and capital stock                                          $    --      $   950
                                                                            =======      =======
   Stock issued for acquisition                                             $    --      $ 1,356
                                                                            =======      =======


See accompanying notes to consolidated financial statements


                                      F-68


Pneutech Inc.
Notes to Consolidated Financial Statements
October 31, 2004
- --------------------------------------------------------------------------------
(in thousands)

1. Organization and description of the business

Pneutech Inc. ("Pneutech") and its subsidiaries (together "we" or "our") are
primarily distributors of hydraulic seals, sealing products, pneumatic equipment
and components and processes as well as manufacturers of sealing products,
gaskets and hydraulic cylinders.

We have operating locations in Mississauga, Windsor and Barrie, Ontario;
Kitimat, British Columbia; Montreal, Quebec City, Chicoutimi, and Trois
Rivieres, Quebec; Moncton, New Brunswick; and Busan, South Korea.

2.   Subsequent event

On December 22, 2004, as amended effective February 28, 2005, Pneutech entered
into an Agreement and Plan of Amalgamation (the "Agreement"), with Thomas
Equipment, Inc., a Canadian corporation ("Thomas"), and 4274458 Canada, Inc., a
Canadian corporation wholly-owned by Thomas. Under the terms of the Agreement,
which was completed on February 28, 2005 (the "Closing"), Thomas acquired 100%
of the common stock of Pneutech, in exchange for the issuance by Thomas of
1,082,639 shares of Thomas' common stock, and warrants to purchase 211,062
shares of Thomas' common stock, exercisable at $3.00 per share.

Upon the Closing, Pneutech redeemed all of its outstanding 929 preference
shares, 500,000 special preference shares and 30,000 special shares owned by
3156176 Canada, Inc., for an aggregate of $517, the stated value of the shares
(see Note 9). Clifford Rhee, the President and a member of the Board of
Directors of Thomas, is the beneficial owner of 3156176 Canada, Inc., which was
the owner of approximately 47% of the common shares, and all of the outstanding
preference shares, special preference shares and special shares of Pneutech. Mr.
Rhee is also the President and a member of the Board of Directors of Pneutech.
Upon the Closing of the acquisition of Pneutech by Thomas, Mr. Rhee continued to
serve as President of both Thomas and Pneutech, and the members of Thomas' Board
were appointed as members of the Pneutech Board.

Concurrently with the acquisition of Pneutech by Thomas, Thomas entered into
financing agreements with Roynat Merchant Capital Inc. ("Roynat US"). Roynat
Capital Inc. ("Roynat Capital") an affiliate of Roynat US, had provided
financing to Pneutech (see Note 9) which was terminated upon the Closing. In
connection therewith, the subordinated debenture and preferred shares held by
Roynat Capital were redeemed for their face amounts, together with payment of
accrued interest and dividends thereon (see Note 9). Warrants to purchase
9,440.08 common shares held by Roynat Capital were also redeemed (see Notes 9
and 11). In addition, Thomas issued 167,359 shares of its common stock to
extinguish a note payable by Pneutech with an outstanding face amount of $503
(see Note 8).

3. Summary of significant accounting policies

Basis of presentation

The accompanying consolidated financial statements have been prepared in U.S.
dollars and in accordance with accounting principles generally accepted in the
United States of America.


                                      F-69


Pneutech Inc.
Notes to Consolidated Financial Statements (continued)
October 31, 2004
- --------------------------------------------------------------------------------
(in thousands)

3. Summary of significant accounting policies (continued)

Principles of consolidation

The accompanying consolidated financial statements include the accounts of all
companies in which Pneutech has a controlling interest. All inter-company
accounts and transactions have been eliminated in consolidation.

The companies included in the consolidated financial statements are as follows:

         Pneutech
         Rousseau Controls Inc. ("Rousseau")
         Samsung Industry Co., Ltd. ("Samsung")
         Hydramen Fluid Power Limited. ("Hydramen")

Rousseau was acquired as of October 29, 2002 and Samsung and Hydramen were
acquired as of October 31, 2003. Accordingly, the Consolidated Statement of
Operations for the year ended October 31, 2003 includes only the results of
operations of Pneutech and Rousseau.

The 2003 results of operations for Samsung and Hydramen would not have been
material to our 2003 results of operations or financial condition had they been
included.

Use of estimates

In preparing the consolidated financial statements, management is required to
make estimates and assumptions that affect the reported amounts in the financial
statements and the accompanying notes. The reported amounts of revenues and
expenses during the reporting period may be affected by the estimates and
assumptions we are required to make.

These estimates include assessing the collectability of accounts receivable, the
use and recoverability of inventory, the realization of deferred tax assets, the
allocation of purchase price in acquisitions, tax contingencies, useful lives
for depreciation and amortization periods of tangible and intangible assets, and
long-lived asset impairments, among others. Management bases its estimates and
judgements on historical experience and on various other factors that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgements about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results could differ
from these estimates.

Translation of foreign currencies

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


                                      F-70


3. Summary of significant accounting policies (continued)

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

Revenue recognition

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

We make appropriate provisions based on experience for costs such as doubtful
receivables, sales incentives and product warranty.

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

Inventory

Inventory is valued at the lower of cost and net realizable value with cost
being determined on an average cost basis. The cost of goods in process includes
the cost of raw materials, direct labor and manufacturing overhead.

Shipping and handling costs

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

Other financial liabilities

Certain financial liabilities (see Note 9) have been classified in accordance
with their substance rather than their form and as such, are being carried as
financial liabilities rather than equity. All "dividends" on such items (which
were $194 in 2004) are accrued and treated as financing expenses in the
consolidated statements of operations.

Deferred finance charges

Deferred finance charges are amortized to interest expense over the life of the
related debt using the effective interest rate method.


                                      F-71


3. Summary of significant accounting policies (continued)

Cash and cash equivalents

Cash and cash equivalents include cash on hand and balances with banks and
highly liquid investments with original maturities of 90 days or less, that are
readily convertible to known amounts of cash and which are subject to an
insignificant risk of change in value.

Property and equipment

Property and equipment are carried at cost, less accumulated depreciation and
amortization.

Rates and bases of depreciation applied to write-off the cost of property and
equipment less estimated salvage value of property and equipment over their
estimated lives are as follows:

    Buildings                                  5%,  declining balance
    Computer equipment                        30%,  declining balance
    Furniture and equipment                   20%,  declining balance
    Machinery and equipment                   20%,  declining balance and
                                         15 years,  straight-line
    Automotive equipment                      30%,  declining balance

Leasehold improvements are amortized on a straight-line basis over the terms of
the respective leases.

Goodwill

Goodwill is evaluated for impairment based on management's assessment as to
actual results compared with budgeted efficiencies gained since the acquisition
dates, prospects of future profitability, and evaluation of asset values. Based
on this evaluation by management, it was determined that goodwill was not
impaired as of October 31, 2004.

Long-lived assets

Statement of Financial Accounting Standards (SFAS) No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" requires that long-lived assets,
including certain identifiable intangibles, be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying value of the
assets in question may not be recoverable. The Company has reviewed long lived
assets and determined that no impairment allowance was necessary.

Advertising costs

Advertising costs are expensed as incurred and reported as a component of
selling and marketing expenses. These expenses were $100 and $89 for the years
ended October 31, 2004 and 2003, respectively.


                                      F-72


3. Summary of significant accounting policies (continued)

Research and development costs

Research and development expenses are expensed as incurred. These expenses,
which are included in general and administrative expenses, were $186 and $181
for the years ended October 31, 2004 and 2003, respectively.

Income taxes

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

Net income (loss) per share

We compute net income (loss) per share in accordance with SFAS No. 128 "Earnings
per Share" ("SFAS No. 128") and SEC Staff Accounting Bulletin No. 98 ("SAB 98").
Under the provisions of SFAS No. 128 and SAB 98, basic net income per share is
computed by dividing the net income available to common stockholders for the
period by the weighted average number of common shares outstanding during the
period. Common stock equivalents (warrants) that are exercisable for little or
no cash consideration are considered outstanding common shares and included in
the computation of basic net income per share, unless they would be
anti-dilutive. Diluted net income (loss) per share is computed by dividing the
net income (loss) for the period by the number of common and common equivalent
shares outstanding during the period. During the period when they would be
anti-dilutive, common stock equivalents (consisting of common stock warrants)
are not considered in the computations.

New pronouncements

FAS 123(R) `Share-Based Payments'

In December 2004, the Financial Accounting Standards Board issued Statement No.
123 ("FAS 123 (R)"), Share-Based Payments. FAS 123 (R) requires all entities to
recognize compensation expense in an amount equal to the fair value of
share-based payments such as stock options granted to employees. We will be
required to apply FAS 123 (R) on a modified prospective method. Under this
method, we are required to record compensation expense (as previous awards
continue to vest) for the unvested portion of previously granted awards that
remain outstanding at the date of adoption. In addition, we may elect to adopt
FAS 123 (R) by restating previously issued financial statements, basing the
amounts on the expense previously calculated and reported in the pro forma
disclosures that had been required by FAS 123. FAS 123 (R) is effective for the
first reporting period beginning after June 15, 2005. We do not believe that the
adoption of FAS 123 (R) will have a material impact on our consolidated
financial statements.


                                      F-73


Recently adopted accounting standards

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

In January 2003, the FASB issued FASB Interpretation No. 46 (revised in December
2003 as FIN 46R), which addresses how a business enterprise should evaluate
whether it has a controlling financial interest in an entity through means other
than voting rights and accordingly should consolidate the entity. The Company is
required to apply FIN 46R to all variable interests in VIE's commencing in
fiscal 2004. For variable interests in VIE's created before January 1, 2004, the
assets, liabilities and non-controlling interests of the VIE initially are
measured at their carrying amounts with any difference between the net amount
added to the balance sheet and any previously recognized interest being
recognized as the cumulative effect of an accounting change. If determining the
carrying amounts is not practicable, fair value at the date FIN 46R first
applies may be used to measure the assets, liabilities and non-controlling
interest of the VIE. The application of FIN 46R to variable interests in VIE's
had no effect on the Company's financial statements as the Company has no
variable interests in VIE's.

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

FASB Statement No. 150 was issued in May 2003 and establishes standards for the
classification and measurement of certain financial instruments with
characteristics of both liabilities and equity and includes required disclosures
for financial instruments within its scope. This Statement is effective for
instruments entered into or modified after May 31, 2003 and is otherwise
effective as of July 1, 2003, except for mandatorily redeemable financial
instruments of non-public companies. For such mandatorily redeemable financial
instruments, the Statement is effective for the Company as of January 1, 2004.
The application of Statement 150 resulted in the classification of the Class A
preferred shares, special preference shares, special shares and preference
shares as liabilities in the Consolidated Balance Sheet. Dividends paid or
accrued on these shares in 2004 were treated as interest.

SFAS 143 `Accounting for Asset Retirement Obligations'

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

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


                                      F-74


Recently adopted accounting standards (continued)

In November 2002, FASB Interpretation No. 45 was issued which enhances the
disclosures to be made by a guarantor in its interim and annual financial
statements about its obligations under guarantees issued. The Interpretation
also clarifies that a guarantor is required to recognize, at inception of a
guarantee, a liability for the fair value of the obligation undertaken. The
initial recognition and measurement provisions of the Interpretation were
applicable to guarantees issued or modified after December 31, 2002 and the
disclosure requirements were effective for financial statements of interim or
annual periods ending after December 15, 2002. The adoption of FIN 45 had no
effect on the Company's financial statements.

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

In December 2003, FASB Statement No. 132 (revised) was issued which prescribes
the required employers' disclosures about pension plans and other postretirement
benefit plans; but it does not change the measurement or recognition of those
plans. The Statement retains and revises the disclosure requirements contained
in the original Statement 132. It also requires additional disclosures about the
assets, obligations, cash flows, and net periodic benefit cost of defined
benefit pension plans and other postretirement benefit plans. The Statement
generally is effective for fiscal years ending after December 15, 2003. The
application of Statement 132 had no effect on the Company's financial
statements.

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

In June 2002, FASB Statement No. 146 was issued which addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies EITF Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity". The provisions of
Statement 146 were effective for exit or disposal activities initiated after
December 31, 2002, with early application encouraged. The application of
Statement 146 had no effect on the Company's financial statements.

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

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


                                      F-75


4.   Acquisition and consolidation

Effective October 31, 2003, Pneutech acquired 100% of the common shares of
Samsung and of Hydramen. The following is a summary of the fair values assigned
to the net assets acquired and the consideration paid.

                                                       Samsung      Hydramen
                                                       -------      --------

Working capital                                        $   591      $   438
Investments                                                435           --
Property and equipment                                   1,634          228
Long term debt                                          (1,067)        (138)
                                                       -------      -------
                                                         1,593          528
                                                       -------      -------

Common shares issued (3,045.19)                          1,356           --
Cash paid, including transaction costs                     237          354
Notes payable to vendor                                     --          226
                                                       -------      -------
                                                         1,593          580
                                                       -------      -------

Amounts attributed to goodwill                         $    --      $    52
                                                       =======      =======

5.   Property and equipment

                                                  Accumulated
                                                  Depreciation/        Net Book
                                    Cost          Amortization          Value
                                   ------         ------------         --------

Land                               $   948          $    --            $   948
Buildings                            3,250              477              2,773
Computer equipment                   1,931            1,464                467
Furniture and equipment              1,462              987                475
Leasehold improvements                 247              143                104
Machinery and equipment              3,137            1,421              1,716
Automotive equipment                   527              246                281
                                   -------          -------            -------
                                   $11,502          $ 4,738            $ 6,764
                                   =======          =======            =======

6.   Bank indebtedness

We have revolving lines of credit totaling $10,869, of which $1,459 was unused
at October 31, 2004. Interest rates on these lines of credit are generally at
the bank's prime rate plus a spread ranging from 0.30% to 1.5% (4.55% to 5.75%
at October 31, 2004). As security, we have pledged restricted cash (term
deposits), property, general security agreements, inventories and accounts
receivable, guarantees by stockholders and an assignment of fire and theft
insurance.


                                      F-76


7.   Income taxes

Significant components of the Company's net non-current deferred income tax
liability at October 31, 2004 are as follows:

Property, plant and equipment                                             $ 716
Deferred financing costs                                                    169
Premium paid on retirement of debt                                         (159)
Investment tax credits                                                     (116)
Unused capital losses                                                       (64)
                                                                          -----
                                                                          $ 546
                                                                          =====

The provision (benefit) for income taxes consists of the following as of October
31:

                                                         2004              2003
                                                        -----             -----

Current                                                 $ 236             $  75
Deferred                                                 (210)             (197)
                                                        -----             -----
                                                        $  26             $(122)
                                                        =====             =====

The Company's federal investment tax credits are available to be carried forward
and used to reduce federal income tax payable in future years; these credits
expire as follows:

            2012                                   $  9
            2013                                     63
            2014                                     69


                                      F-77


8.   Long term debt

                                                                                          
Demand term loan,  prime rate plus 1.5% (5.75% at October 31, 2004),  amortized to 2009,
repayable in monthly instalments of principal of $5 plus interest. (a)                       $  251

Demand term loan,  prime rate plus 1.5% (5.75% at October 31, 2004),  amortized to 2006,
repayable in monthly instalments of principal of $23 plus interest. (a)                         384

Vehicle loan, 7.9%, repayable monthly including interest, through 2007                            9

Samsung  Industries - various  loans with  interest  rates ranging from 4.12% to 12.00%,
repayable through 2012                                                                        2,684

Private loan with  interest  rate of 6% with  regular  principal  and interest  payments
providing for repayment by 2005. (b)                                                            503

Private loans with interest rate of 6%, providing for repayment in 2006. (c)                    394

Private  loans with  interest  rates  ranging from 3% to 8%, with regular  principal and
interest payments providing for repayment by 2006                                               845
                                                                                             ------
                                                                                              5,070
Less: current portion                                                                         2,711
                                                                                             ------
                                                                                             $2,359
                                                                                             ======



(a) As security for the demand term loans, Pneutech has provided a General
Security Agreement, an assignment of inventory and book debts, an assignment of
fire and theft insurance, and a guarantee of stockholders.

(b) As described in Note 2, on February 28, 2005, the loan was extinguished by
the issuance of 167,359 common shares of Thomas. The extinguishment of this debt
will be accounted for as a capital contribution by Thomas to Pneutech.
Accordingly, none of this amount has been classified as current in these
financial statements.

(c) The notes were issued as part of the consideration for the acquisition of
Rousseau. In addition to interest and repayment of principal, the notes permit
the holders to convert the notes, or part thereof, at any time prior to
maturity, into common stock of Pneutech or Rousseau, at a price to be determined
by the Board of Directors of Pneutech or Rousseau, respectively.

Estimated principal repayments for each of the next five years are as follows:

            2005                                   $ 2,711
            2006                                       835
            2007                                       179
            2008                                       252
            2009                                       169


                                      F-78


9.   Other financial liabilities

                                                                             
              Subordinated debenture, net of unamortized discount of $506       $ 2,778
         250  Class A preferred shares, net of unamortized discount of $315       1,737
     500,000  Special preference shares                                             410
      30,000  Special shares                                                         25
         929  Preference shares                                                      82
                                                                                -------
                                                                                $ 5,032
                                                                                =======



Pneutech is authorized to issue an unlimited number of Class A preferred shares,
special preference shares, special shares and preference shares, without par
value.

         o        Class A preferred shares are non-voting, entitled to
                  cumulative dividends at a rate of 10% per year, and redeemable
                  at their stated capital.

         o        Special preference shares are non-voting, non-participating,
                  and redeemable at their stated capital.

         o        Special shares are non-voting and redeemable at their stated
                  capital.

         o        Preference shares are voting, entitled to cumulative dividends
                  at a rate not to exceed 6% per year, and redeemable at their
                  stated capital.

As described in Note 2, effective February 28, 2005, Pneutech was acquired by
Thomas. In connection with that acquisition, all of the above obligations were
repaid or redeemed from the proceeds of a capital contribution by Thomas. As
described in Note 2, the 929 preference shares, 500,000 special preference
shares and 30,000 special shares were owned by 3156176 Canada, Inc. For other
amounts payable to this stockholder, see Note 10.

The subordinated debenture and the 250 Class A preferred shares were previously
issued to Roynat Capital. Prior to its repayment, the debenture bore interest at
10% payable monthly (effective interest rate of 17%), with principal repayments
scheduled to commence on November 15, 2005, maturing October 15, 2008. Prior to
their redemption, the Class A preferred shares were entitled to cumulative
dividends of 10% per year (effective interest rate of 17%) and the Preference
shares were entitled to cumulative dividends of 6% per year.

Concurrent with the issuance to Roynat Capital of the above subordinated
debenture and Class A preferred shares, we sold to Roynat Capital warrants to
purchase 9,440.08 shares of our common stock, equivalent to 31% of the common
stock on a fully diluted basis. The warrants had an aggregate exercise price of
one dollar.

The total proceeds received from Roynat Capital were allocated among the
subordinated debenture, the Class A preferred shares and the warrants, based on
their relative fair values. Before their redemption as discussed above, the
resulting discount from the face amount of the subordinated debenture and the
Class A preferred shares was being amortized over the estimated life of those
obligations of five years. The total amortization for the year ended October 31,
2004 was $190.


                                      F-79


10.  Payable to stockholder

                                                                                      
Subordinated debt, 15%, no set terms of repayment                                        $575

Note advances and payables to the stockholder,  net,  non-interest  bearing,  no set
terms of repayment                                                                        326
                                                                                         ----
                                                                                         $901
                                                                                         ====



Subordinated debt represents our direct unsecured obligations to a stockholder
with no specified repayment date. The rights of the stockholder are subordinate
to the claims of certain other creditors.

For the years ended October 31, 2004 and 2003, the stockholder received
approximately $188 and $119, respectively, of interest, management fees and
other expenses.

11. Common stock and warrants to purchase common stock

We are authorized to issue an unlimited number of common shares without par
value. At October 31, 2004, 21,011.80 common shares were issued and outstanding.

As described in Note 9, we issued 9,440.08 warrants to purchase common stock to
Roynat Capital. Each warrant entitled the holder to receive one common share on
or before October 15, 2008, at an aggregate exercise price for all warrants of
one dollar. At October 31, 2004, no warrants had been exercised. As described in
Note 2, on February 28, 2005, the warrants were re-purchased for $1,026.

In connection with the purchase of Rousseau, we issued various notes to certain
of the selling stockholders. As described in Note 8, certain of those notes,
with an aggregate face amount of $394 at October 31, 2004, entitle the holder to
purchase common stock of Pneutech or Rousseau, at a price to be determined by
the Board of Directors of Pneutech or Rousseau, respectively, up to the face
amount of the notes outstanding.

12.  Commitments

We have various operating lease agreements for premises, requiring a minimum
rent plus realty taxes, maintenance, heat and certain other expenses. Minimum
rent payable for the next five years is as follows:

       2005                                                        $ 481
       2006                                                          459
       2007                                                          362
       2008                                                          360
       2009 and thereafter                                           238

In addition, we have other operating leases, with expected payments over the
next five years as follows:

       2005                                                        $ 254
       2006                                                          151
       2007                                                           60
       2008                                                            4
       2009                                                            0


                                      F-80


12.  Commitments (continued)

Rent expense during the years ended October 31, 2004 and 2003 was $748 and $568,
respectively.

13.   Contingencies

Acquisition of subsidiaries

(a)      In connection with the purchase of Rousseau on October 29, 2002, the
         following acquisition contingencies exist:

         o        On the fourth anniversary of the closing date, the balance of
                  any obsolete inventory identified at the closing date which
                  has not been sold, together with interest at 6% per annum,
                  shall be set off against the balance of payments on certain
                  Notes issued to effect the acquisition. At October 31, 2004,
                  the remaining obsolete inventory aggregated $113.

         o        For each of the three years following the closing date,
                  certain of the selling stockholders are entitled to an amount,
                  payable annually, equal to 75% of the annual gross margin (as
                  defined) of Rousseau in excess of $3,694 up to a maximum of
                  $219 per year. For the years ended October 31, 2004 and 2003,
                  no amounts were payable.

         o        Any research and development tax credits that may be received
                  by Rousseau with respect to applications it has made for the
                  period up to May 1, 2002 shall be set off against any of the
                  above adjustments.

(b)      In connection with the purchase of Hydramen on October 31, 2003, a
         potential adjustment to the purchase price will be made for the
         following:

         o        The selling stockholders are entitled to an amount, payable
                  annually, equal to 25% of the annual gross margin (as defined)
                  of Hydramen in excess of $1,149 per year, up to a maximum
                  total adjustment of $205. For the year ended October 31, 2004,
                  no amount was payable.

Litigation

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


                                      F-81


14. Financial instruments and risks

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

Credit risk

We are exposed to normal credit risk from customers. Trade accounts receivable
have significant concentrations of credit risk in the industrial and
construction industry and on a geographical basis in Canada, the USA and Korea.
We perform ongoing credit evaluations of our customers' financial condition and
generally do not require collateral, with the exception of floor plan
receivables, as we believe we have measures in place to limit our exposure to
loss. For the year ended October 31, 2004, ten customers accounted for 26% of
our total revenues. At October 31, 2004, two of these customers accounted for
30% of our trade accounts receivable balance.

Interest rate risk

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

Foreign currency risk and forward exchange contracts

Our foreign currency translation policy is described in Note 3. We have not
entered into any significant foreign currency futures and forward contracts to
manage our exposure to foreign currency fluctuations, though we may do so in the
future.

At October 31, 2004, restricted cash includes $364, receivables include $5,074,
accounts payable include $5,101, bank indebtedness includes $426 and long term
debt includes $2,684 which will be settled in currencies other than our
functional currency, the Canadian dollar.


                                      F-82


15. Net change in non-cash working capital items related to operations



                                                                          2004         2003
                                                                       -------      -------
                                                                              
      (Increase) decrease in non-cash working capital assets:
        Accounts receivable                                            $(2,492)     $(1,052)
        Inventory                                                         (435)        (236)
        Prepaid expenses                                                  (298)          94
        Deferred costs                                                    (134)        (174)
                                                                       -------      -------
                                                                        (3,359)      (1,368)
                                                                       -------      -------

      Increase (decrease) in non-cash working capital liabilities:
        Bank advances, net                                                 751         (430)
        Accounts payable                                                 2,566          771
        Income taxes payable                                                43          327
        Other payables and accrued liabilities                              97           --
                                                                       -------      -------
                                                                         3,457          668
                                                                       -------      -------

      (Increase) decrease in non-cash working capital items, net       $    98      $  (700)
                                                                       =======      =======



                                      F-83


                             THOMAS EQUIPMENT, INC.
              PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
                                   (Unaudited)

The following unaudited pro forma combined condensed statement of operations for
the year ended June 30, 2004 includes the historical and pro forma effects of
the acquisition of Pneutech, Inc. and subsidiaries, which we acquired on
February 28, 2005.

In connection with the acquisition of Pneutech, we obtained a term loan of
$1,900,000 from Laurus and sold a subordinated debenture to Roynat US with a
principal amount of $5,247. Roynat Capital, an affiliate of Roynat US, had
provided financing to Pneutech which was terminated upon the closing. In
connection therewith, Roynat Capital was paid $6,494 for the cancellation of
Pneutech preferred shares and debentures, together with accrued dividends and
interest thereon and cancellation of warrants previously issued by Pneutech to
Roynat Capital. In addition to the pro forma effects of these borrowings, the
pro forma statement of operations also includes the historical and pro forma
effects of the issuance of 1,250,000 shares of common stock in connection with
the acquisition.

The following unaudited pro forma combined condensed statement of operations has
been prepared by our management from the historical financial statements of our
predecessor, Thomas Equipment Limited, and the historical financial statements
of Pneutech. The unaudited pro forma combined condensed statement of operations
reflect adjustments as if the acquisition of Pneutech had occurred on July 1,
2003. See "Note 1 - Basis of Presentation." The pro forma adjustments described
in the accompanying notes are based upon estimates and certain assumptions that
management believes are reasonable in the circumstances.

Prior to its acquisition, Pneutech had a fiscal year end of October 31. The pro
forma statement of operations for Pneutech for the year ended June 30, 2004 has
been derived from Pneutech's audited statement of operations for its fiscal year
ended October 31, 2004 included elsewhere in this prospectus, as adjusted to add
its statement of operations for the period July 1, 2003 to October 31, 2003
based on Pneutech's unaudited internal financial statements for that period and
to subtract its statement of operations for the period July 1, 2004 to October
31, 2004 based on Pneutech's unaudited internal financial statements for that
period.

The unaudited pro forma combined condensed statement of operations is not
necessarily indicative of what the results of operations actually would have
been if the acquisition had occurred on July 1, 2003. Moreover, it is not
intended to be indicative of future results of operations. The unaudited pro
forma combined condensed statement of operations should be read in conjunction
with our historical financial statements as of March 31, 2005, those of Thomas
Equipment Limited for the year ended June 30, 2004 and Pneutech as of and for
the year ended October 31, 2004 and related notes thereto, which are included
elsewhere in this prospectus.


                                      F-84


                             THOMAS EQUIPMENT, INC.
              PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
                        FOR THE YEAR ENDED JUNE 30, 2004
           (Unaudited - in thousands except share and per share data)



                                                                                       Thomas
                                            Pneutech      Pneutech,                  Equipment
                              Pneutech,    Additions    Subtractions  Pneutech,       Limited                         Combined Pro
                             Year Ended   July 1, 2003  July 1, 2004  Pro forma    (Predecessor)     Elims.           forma Year
                               October     to October    to October   June 30,    Year ended June      And            ended June
                              31, 2004      31, 2003      31, 2004      2004          30, 2004      Adjusts.    Ref   30, 2004
                             ----------   ------------  ------------- ---------   ---------------- ----------        -------------
                                                                                                  
Sales                        $   49,040    $ 13,958      $ (17,290)    $ 45,708      $   55,705     $  (3,854)    A    $   97,559
Cost of sales                    38,158      11,982        (13,579)      36,561          47,559        (3,779)    B        80,341
                             ----------    --------      ---------    ---------      ----------      ---------         ----------

Gross profit                     10,882       1,976         (3,711)       9,147           8,146           (75)             17,218
                             ----------    --------      ---------    ---------      ----------      ---------         ----------

General and administrative        5,457       1,470         (1,809)       5,118           8,883            --              14,001
Selling                           3,576         441         (1,095)       2,922           6,179            --               9,101
Stock based compensation             --          --             --           --              --         6,431     C         6,431
                             ----------    --------      ---------    ---------      ----------      ---------         ----------
                                  9,033       1,911         (2,904)       8,040          15,062         6,431              29,533
                             ----------    --------      ---------    ---------      ----------      ---------         ----------
Income (loss) from operations     1,849          65           (807)       1,107          (6,916)       (6,506)           (12,315)

   Net financial expense          1,631         481           (557)       1,555           4,574         4,905     D        11,034
                             ----------    --------      ---------    ---------      ----------      ---------         ----------

Net income (loss) before
  income taxes                      218       (416)           (250)        (448)        (11,490)      (11,411)            (23,349)

Income tax expense (benefit)         26        (96)             71           1               65            --                  66
                             ----------    -------       ---------    ---------      ----------      ---------         ----------

Net income (loss)            $      192    $  (320)      $    (321)   $    (449)     $  (11,555)     $(11,411)         $  (23,415)
                             ==========    =======       =========    =========      ==========      =========         ==========
Loss per share*              $     0.15                               $   (0.36)     $    (0.58)                       $    (1.10)
                             ==========                               =========      ==========                        ==========
Common shares outstanding*    1,250,000                               1,250,000      20,000,000                        21,250,000
                             ==========                               =========      ==========                        ==========


* Common shares outstanding used herein are those of the combined Thomas
Equipment, Inc. and Pneutech as if the acquisition of Pneutech and Thomas
Equipment Limited had occurred at the beginning of the periods presented. For
Pneutech the number of shares used are the number which has been used to acquire
Pneutech. For Thomas Equipment Limited the number of shares used are those of
its successor, Thomas Equipment, Inc. No affects of dilutive shares are included
as the pro forma combined results of operations would have resulted in a net
loss and therefore such shares would be antidilutive.


                                      F-85


                             THOMAS EQUIPMENT, INC.
                          NOTES TO UNAUDITED PRO FORMA
                   COMBINED CONDENSED STATEMENT OF OPERATIONS
                                 (in thousands)

1. BASIS OF PRESENTATION

          The accompanying unaudited pro forma combined condensed statement of
operations presents the historical results of operations for the year ended June
30, 2004 of our predecessor company, Thomas Equipment Limited, and Pneutech,
Inc. and subsidiaries for the year ended October 31, 2004 with adjustments to
bring the Pneutech statements of operations to those of Thomas Equipment
Limited's year end, adjustments for certain expenses recorded for the October 1,
acquisition of the business and certain assets of Thomas Equipment Limited and
other pro forma adjustments as if these transactions had taken place on July 1,
2003 in a transaction accounted for as a purchase in accordance with accounting
principles generally accepted in the United States of America.

        Certain reclassifications have been made to the historical financial
statements to condense and conform to the pro forma combined condensed financial
statement presentation.

2. PRO FORMA ADJUSTMENTS

     The following adjustments give pro forma effect to the transaction:

                                                                                                          
(a) To eliminate inter-company sales                                                                         $3,854
                                                                                                             ------

(b)     To eliminate inter-company cost of sales                                                              3,854
        Additional depreciation expense on the fair value increase to fixed assets as a result of
        the Pneutech and Thomas Equipment Limited acquisitions.                                                (75)
                                                                                                             ------
                                                                                                             $3,779
                                                                                                             ------

(c)     To record stock based compensation costs associated with the October 1, 2004 issuance of
        shares at a discount from the fair value of such shares issued to the founders of Thomas
        Equipment, Inc. and to Laurus.                                                                       $6,431
                                                                                                             ------

(d)     Annual amortization of debt premium and discount costs related to the
        issuance of warrants related to the borrowings from the Pneutech and
        Thomas Equipment Limited acquisitions                                                                 6,548

        Deferred financing costs expensed upon refinancing                                                      326

        Elimination of Thomas Equipment Limited (predecessor) dividend on its preferred stock.               (4,574)

        Thomas Equipment, Inc additional interest expense for Thomas Equipment and
        Pneutech related new and existing debt                                                                2,605
                                                                                                             ------
                                                                                                             $4,905
                                                                                                             ------




                                      F-86


- --------------------------------------------------------------------------------
You should rely only on the information contained in this prospectus. We have
not authorized anyone to provide you with information different from the
information contained in this prospectus. This document may only be used where
it is legal to sell the securities. The information in this document may only
be accurate on the date of this document.

                                TABLE OF CONTENTS

                                                    Page
                                                    ----

Prospectus Summary                                   X
Summary Historical and Pro Forma
  Financial Data                                     X
Risk Factors                                         X
Use of Proceeds
Market for Common Equity and Related
   Stockholder Matters                               X
Dividend Policy                                      X
Management's Discussion and Analysis                 X
Business                                             X
Management                                           X
Executive Compensation                               X
Certain Relationships and Related Transactions       X
Security Ownership of Certain Beneficial
   Owners and Management                             X
Description of Securities                            X
Plan of Distribution                                 X
Selling Stockholders                                 X
Legal Matters                                        X
Experts                                              X
Available Information                                X
Index to Financial Statements                        X

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------

                                26,985,000 SHARES
                                     OF OUR
                                  COMMON STOCK


                             THOMAS EQUIPMENT, INC.


                                ________________

                                   PROSPECTUS
                                ________________


                                 ________, 2005

- --------------------------------------------------------------------------------


                     INFORMATION NOT REQUIRED IN PROSPECTUS

Item 24.  Indemnification of Directors and Officers.

         Our Articles of Incorporation limit, to the maximum extent permitted by
Delaware law, the personal liability of directors for monetary damages for
breach of their fiduciary duties as directors. Our Bylaws provide that we shall
indemnify our officers and directors and may indemnify our employees and other
agents to the fullest extent permitted by Delaware law.

         Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify a director, officer, employee or agent made a party to
an action by reason of the fact that he or she was a director, officer employee
or agent of the corporation or was serving at the request of the corporation
against expenses actually and reasonably incurred by him or her in connection
with such action if he or she acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to, the best interests of the
corporation and with respect to any criminal action, had no reasonable cause to
believe his or her conduct was unlawful.

         Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling us pursuant
to the foregoing provisions, we have been advised that in the opinion of the
Commission, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.

Item 25.  Other Expenses of Issuance and Distribution.

         The following table sets forth an itemization of all estimated
expenses, all of which we will pay, in connection with the issuance and
distribution of the securities being registered:

         Nature of Expense                                    Amount
         -----------------                              -------------------
         SEC Registration fee                              $ 20,000.00
         Accounting fees and expenses                       *50,000.00
         Legal fees and expenses                            *75,000.00
         Printing and related expenses                      *10,000.00
                                                        -------------------
                               TOTAL                      *$ 155,000.00
                                                        ===================

            * Estimated.


                                      II-1


Item 26.  Recent Sales of Unregistered Securities.

         Except as set forth below, there were no sales of unregistered
securities by Thomas Equipment, Inc. during the past three (3) years:

         On November 9, 2004, we issued 16,945,000 shares of our common stock in
exchange for all of the issued and outstanding shares of Thomas Equipment 2004
Inc. and Thomas Ventures, Inc. The shares were issued to 15 accredited investors
in a transaction exempt under Rule 506 of Regulation D promulgated under Section
4(2) of the Securities Act of 1933, as amended.

         On November 9, 2004, we entered into agreements with Laurus Master
Funds, Ltd, a Cayman Islands corporation, pursuant to which we sold convertible
debt, an option and a warrant to purchase common stock of Thomas to Laurus in a
private offering pursuant to exemption from registration under Section 4(2) of
the Securities Act of 1933, as amended. The agreements with Laurus were amended
on January 26, 2005 and February 28, 2005. The securities sold to Laurus include
the following:

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


         o        A secured convertible revolving note with a principal amount
                  not to exceed $20,000,000, including the minimum borrowing
                  amount;


         o        Secured convertible term notes with an aggregate principal
                  amount of $7,900,000;

         o        Common stock purchase warrants to purchase 2,750,000 shares of
                  common stock of Thomas, at a purchase price of $2.25 per
                  share, exercisable for a period of seven years;

         o        An option to purchase 4,020,000 shares of common stock of
                  Thomas Equipment Inc, at a purchase price equal to the par
                  value of such shares; and

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

         On December 22, 2004, we entered into an Agreement and Plan of
Amalgamation with 4274458 Canada, Inc., a corporation wholly-owned by us, and
Pneutech, Inc., as amended effective February 28, 2005. Under the terms of the
agreement which closed on February 28, 2005, we acquired 100% of the common
stock of Pneutech, in exchange for the issuance by us of a total of 1,082,641
shares of our common stock and warrants to purchase 211,062 shares of common
stock, exercisable at $3.00 per share issued to 27 stockholders in an offering
exempt from registration pursuant to Regulation S. An additional 167,359 shares
of common stock were issued as of the closing in exchange for the cancellation
of approximately CD$612,000 of debt owed by Pneutech to 11 unrelated parties in
an offering exempt from registration pursuant to Regulation S.

         On February 28, 2005, we entered into financing agreements with Roynat
Merchant Capital Inc.. In connection therewith, we sold a subordinated debenture
to Roynat Merchant Capital with a principal amount of CDN $6,500,000 and we
issued warrants to Roynat Merchant Capital to purchase 1,000,000 shares of
common stock at an exercise price of $3.00 per share. The sales were made in a
private offering pursuant to exemption from registration under Section 4(2) of
the Securities Act of 1933, as amended.

         On April 19, 2005, we entered into agreements with 15 institutional
accredited investors for the sale of an aggregate of 25,000 shares of series A
preferred stock and warrants to purchase an aggregate of 2,083,333 shares of
common stock exercisable at a price of $3.75 per share at any time during a
period of five years. The securities were sold for an aggregate cash
consideration of $25,000,000. The securities were issued in a private placement
transaction pursuant to Section 4(2) and Regulation D under the Securities Act
of 1933. We paid the placement agent of the offering a fee of 6% of the
aggregate proceeds, together with warrants to purchase 500,000 shares of common
stock at an exercise price of $3.00 per share for a period of five years.


                                      II-2


Item 27.  Exhibits.

         The following exhibits are included as part of this Form SB-2.
References to "us" in this Exhibit List mean Thomas Equipment, Inc., a Delaware
corporation.



Exhibit
Number                                                         Description
                   
3.1                   Certificate of Incorporation of Thomas Equipment, Inc., incorporated by reference to Exhibit
                      3.1 of the Company's registration statement Form SB-2, filed August 25, 2000.
3.2                   Bylaws of Thomas Equipment, Inc., incorporated by reference to Exhibit 3.1 of the Company's
                      registration statement Form SB-2, filed August 25, 2000.
3.3                   Amended and Restated Certificate of Designation for Series A Preferred Stock incorporated by
                      reference to Exhibit 4.1 to Form 8-K filed on April 20, 2005
3.4                   Amendment to Certificate of Incorporation of Thomas Equipment, Inc., incorporated by
                      reference to Exhibit 3.2 of the Company's registration statement Form SB-2 (file no.
                      333-72826).
4.1                   Security and Purchase  Agreement,  dated as of November 9, 2004,  by and among Laurus  Master
                      Fund, Ltd., Thomas Equipment, Inc. and Thomas Ventures, Inc.(1)
4.2                   Security  Agreement,  dated as of November 9, 2004,  between  Laurus  Master  Fund,  Ltd. and
                      Thomas Equipment 2004 Inc.(1)
4.3                   General Security Agreement,  dated as of November 9, 2004, by Thomas Equipment 2004, Inc., in
                      favor of Laurus Master Fund, Ltd.(1)
4.4                   Guarantee,  dated as of November 9, 2004, by Thomas  Equipment 2004, Inc., in favor of Laurus
                      Master Fund, Ltd.(1)
4.5                   Intellectual  Property Security Agreement,  dated as of November 9, 2004, by and among Laurus
                      Master Fund, Ltd., Thomas Equipment, Inc. and Thomas Ventures, Inc.(1)
4.6                   Secured Revolving Note issued to Laurus Master Fund, Ltd., dated November 9, 2004.(1)
4.7                   Secured  Convertible  Minimum  Borrowing  Note  issued to Laurus  Master  Fund,  Ltd.,  dated
                      November 9, 2004.(1)
4.8                   Secured Convertible Term Note issued to Laurus Master Fund, Ltd., dated November 9, 2004.(1)
4.9                   Common Stock Purchase Warrant issued to Laurus Master Fund, Ltd., dated November 9, 2004.(1)
4.10                  Option issued to Laurus Master Fund, Ltd., dated November 9, 2004.(1)
4.11                  Registration  Rights  Agreement,  dated as of November 9, 2004, by and between  Laurus Master
                      Fund, Ltd. and Thomas Equipment, Inc.(1)
4.12                  Stock Pledge  Agreement,  dated as of November 9, 2004,  by and between  Laurus  Master Fund,
                      Ltd. and Thomas Equipment, Inc.(1)
4.13                  Stock Pledge  Agreement,  dated as of November 9, 2004,  by and between  Laurus  Master Fund,
                      Ltd. and Thomas Equipment 2004 Inc.(1)
4.14                  Shareholders'  Agreement,  dated as of October 1, 2004, by and among Thomas Equipment,  Inc.,
                      Thomas Equipment 2004 Inc. and McCain Foods Limited(1)
4.15                  Amendment  Agreement,  dated as of February 28, 2005, by and among Laurus Master Fund,  Ltd.,
                      Thomas Equipment, Inc. and Thomas Ventures, Inc.(2)
4.16                  Secured Convertible Term Note issued to Laurus Master Fund, Ltd., dated February 28, 2005.(2)
4.17                  Common Stock Purchase Warrant issued to Laurus Master Fund, Ltd., dated February 28, 2005.(2)
4.18                  Reaffirmation  and  Ratification  Agreement,  dated  as  of  February  28,  2005,  by  Thomas
                      Equipment,  Inc.,  Thomas  Ventures,  Inc. and Thomas  Equipment 2004 Inc. in favor of Laurus
                      Master Fund, Ltd.(2)



                                      II-3


                   
4.19                  Subordination  and  Intercreditor  Agreement by and among by Thomas  Equipment,  Inc., Thomas
                      Ventures,  Inc. and Thomas  Equipment  2004 Inc.,  Pneutech  Inc.,  Rousseau  Controls  Inc.,
                      Hydraman  Fluid Power  Limited and Roynat  Merchant  Capital  Inc. in favor of Laurus  Master
                      Fund, Ltd.(2)
4.20                  Subscription  Agreement between Roynat Merchant Capital Inc., Thomas Equipment,  Inc., Thomas
                      Equipment  2004 Inc.,  Thomas  Ventures,  Inc.,  Pneutech  Inc.,  Rousseau  Controls Inc. and
                      Hydraman Fluid Power Limited, dated as of February 28, 2005 (2)
4.21                  Debenture in the Amount of CD$6,500,000 in favor of Roynat  Merchant  Capital Inc.,  dated as
                      of February 28, 2005(2)
4.22                  Common Stock Purchase  Warrant in favor of Roynat Merchant Capital Inc., dated as of February
                      28, 2005(2)
4.23                  Registration  Right Agreement  between Thomas  Equipment,  Inc. and Roynat  Merchant  Capital
                      Inc., dated as of February 28, 2005(2)
4.24                  General Security  Agreement between Roynat Merchant Capital Inc., Thomas Equipment,  Inc. and
                      Thomas Ventures, Inc., dated as of February 28, 2005(2)
5.1                   Sichenzia Ross Friedman Ference LLP Opinion and Consent (filed herewith).
10.1                  Plan and Agreement of Reorganization,  by and among Thomas Equipment,  Inc., Thomas Ventures,
                      Inc. and its shareholders, and Thomas Equipment 2004 Inc.
                      and its shareholders, dated as of October 11, 2004 (3)
10.2                  Agreement  of Purchase and Sale of Assets,  dated as of October 1, 2004,  by and among Thomas
                      Equipment 2004 Inc. and Thomas Equipment Ltd.(1)
10.3                  Lease between Thomas  Equipment  Limited,  Thomas  Equipment,  Inc. and Thomas Equipment 2004
                      Inc. for Presque Isle, Maine property, dated as of October 1, 2004(1)
10.4                  Lease between Thomas  Equipment  Limited,  Thomas  Equipment,  Inc. and Thomas Equipment 2004
                      Inc. for New Brunswick properties, dated as of October 1, 2004(1)
10.5                  Employment  Agreement  between  Thomas  Equipment,  Inc.,  Thomas  Equipment  2004  Inc.  and
                      Clifford Rhee, effective as of October 1, 2004.(1)
10.6                  Amended and  Restated  Agreement  and Plan of  Amalgamation,  among Thomas  Equipment,  Inc.,
                      4274458 Canada, Inc. and Pneutech, Inc., dated as of February 28, 2005(2)
10.7                  Agreement by and between Hyundai Heavy  Industries Co., Ltd. and Thomas  Equipment 2004 Inc.,
                      dated as of February 3, 2005(4)
10.8                  Agreement between Thomas Equipment 2004 and Kubota Europe S.A.S.
10.9                  Agreement between Thomas Equipment, Inc. and Frank Crivello, dated as of November 1, 2004
16.1                  Letter from Kingery & Crouse, P.A., dated November 11, 2004.(1)
23.1                  Consent of Kingery & Crouse, P.A.
23.2                  Consent of PricewaterhouseCoopers LLP
23.3                  Consent of Sichenzia Ross Friedman Ference LLP (included as part of Exhibit 5.1)



1. Filed as an exhibit to the Registrant's Form 8-K dated as of November 9,
2004, and incorporated herein by reference.

2. Filed as an exhibit to the Registrant's Form 8-K dated as of February 28,
2005, and incorporated herein by reference.

3. Filed as an exhibit to the Registrant's Form 8-K dated as of October 12,
2004, and incorporated herein by reference.

4. Filed as an exhibit to the Registrant's Form 8-K dated as of February 3,
2005, and incorporated herein by reference.

Item 28.  Undertakings.

         The undersigned registrant hereby undertakes to:

         (1) File, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to:

                  (i) Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");

                  (ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information in
the registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of the


                                      II-4


securities offered would not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum offering range may be
reflected in the form of a prospectus filed with the Commission pursuant to Rule
424(b) under the Securities Act if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the effective
registration statement, and

                  (iii) Include any additional or changed material information
on the plan of distribution.

         (2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.

         (3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.

         (4) For purposes of determining any liability under the Securities Act,
treat the information omitted from the form of a prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in the form
of a prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act as part of this registration statement as of the
time it was declared effective.

         (5) For determining any liability under the Securities Act, treat each
post-effective amendment that contains the form of a prospectus as a new
registration statement for the securities offered in the registration statement,
and that offering of the securities at that time as the initial bona fide
offering of those securities.

         Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.

         In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.


                                      II-5


                                   SIGNATURES

         In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorizes this registration
statement to be signed on its behalf by the undersigned, in the City of
Milwaukee, State of Wisconsin, on June 13, 2005.

                             THOMAS EQUIPMENT, INC.

                             By:/s/Clifford M. Rhee,
                                   President

                                POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS:

         That the undersigned officers and directors of Thomas Equipment, Inc, a
Delaware corporation, do hereby constitute and appoint Andrew Hidalgo the lawful
attorney in-fact and agent with full power and authority to do any and all acts
and things and to execute any and all instruments which said attorney and agent,
determine may be necessary or advisable or required to enable said corporation
to comply with the Securities Act of 1933, as amended, and any rules or
regulations or requirements of the Securities and Exchange Commission in
connection with this Registration Statement. Without limiting the generality of
the foregoing power and authority, the powers granted include the power and
authority to sign the names of the undersigned officers and directors in the
capacities indicated below to this Registration Statement, and to any and all
instruments or documents filed as part of or in conjunction with this
Registration Statement or amendments or supplements thereof, and each of the
undersigned hereby ratifies and confirms that said attorney and agent, shall do
or cause to be done by virtue thereof. This Power of Attorney may be signed in
several counterparts.

         IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney and pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed below by the following
persons in the capacities on April 21, 2005.



      Signature                            Title                           Date
      ---------                            -----                           ----
                                                                 
/s/ CLIFFORD RHEE
- -----------------------
By: Clifford M. Rhee                President and Director             June 13, 2005
                                    (Principal Executive Officer)

/s/LUIGI LO BASSO
- -----------------------
By:  Luigi Lo Basso                 Chief Financial Officer            June 13, 2005
                                    (Principal Financial Accounting
                                    Officer)
/s/DAVID MARKS
- -----------------------
By:  David M. Marks                 Chairman of the Board and          June 13, 2005
                                    Director

/s/ KENNETH SHIRLEY
- -----------------------
By: Kenneth Shirley                 Director                           June 13, 2005

/s/JAMES E. PATTY
- -----------------------
By: James E. Patty                  Director                           June 13, 2005



                                      II-6

EX-5.1

                                                                     EXHIBIT 5.1

                       SICHENZIA ROSS FRIEDMAN FERENCE LLP
                     1065 Avenue of the Americas, 21st Flr.
                               New York, NY 10018

                            Telephone: (212) 930-9700
                            Facsimile: (212) 930-9725

                                  June 13, 2005

VIA ELECTRONIC TRANSMISSION

Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549

         RE:      Thomas Equipment, Inc. Form SB-2
                  Registration Statement (File No. 333-124217)

Ladies and Gentlemen:

         We refer to the above-captioned registration statement on Form SB-2
(the "Registration Statement") under the Securities Act of 1933, as amended (the
"Act"), filed by Thomas Equipment, Inc., a Delaware corporation (the "Company"),
with the Securities and Exchange Commission.

         We have examined the originals, photocopies, certified copies or other
evidence of such records of the Company, certificates of officers of the Company
and public officials, and other documents as we have deemed relevant and
necessary as a basis for the opinion hereinafter expressed. In such examination,
we have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as certified copies or photocopies and the
authenticity of the originals of such latter documents.

         Based on our examination mentioned above, we are of the opinion that
26,985,000 shares of common stock being offered pursuant to the Registration
Statement are duly authorized and will be, when issued in the manner described
in the Registration Statement, legally and validly issued, fully paid and
non-assessable.

         We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to our firm under "Legal Matters" in
the related Prospectus. In giving the foregoing consent, we do not hereby admit
that we are in the category of persons whose consent is required under Section 7
of the Act, or the rules and regulations of the Securities and Exchange
Commission.


                                        /s/ Sichenzia Ross Friedman Ference LLP

EX-10.9

================================================================================
                                                             Crivello Group, LLC
                                                                 3408 Dover Road
                                                    Pompano Beach, Florida 33062
                                                           Phone: (954)-532-0240
                                                             Fax: (954)-301-0202
                                                            Cell: (414)-788-6186
                                                              frank@crivello.com

November 1, 2004

Mr. Clifford Rhee President Thomas Equipment, Inc.
1818 North Farwell Avenue
Milwaukee, Wisconsin 53202

Dear David:

      I am pleased to set forth the terms of the retention of Frank Crivello
("Crivello") by Thomas Equipment, Inc. (collectively with its affiliates the
"Company").

      1. Crivello will assist the Company as the Company's non-exclusive
consultant in connection with the following proposed activities:

      (a)   providing advice as to the structure of debt and equity financing of
            the Company;

      (b)   otherwise assisting the Company with advancing its business
            objectives, including analyzing the Company's business and capital
            structure models;

      (c)   acting as the Company's non-exclusive advisor, finder, and agent in
            connection with any Acquisition or Merger ("M&A"); and

      (d)   acting as a representative of the Company before closure; and as the
            Company's liaison after the acquisition or merger; and assist with
            the integration of the acquisition into the parent Company and its
            subsidiaries when requested by the Company. As used in this
            Agreement, the term "M&A" shall mean (i) public and/or private
            acquisition for the Company (ii) stock or asset acquisition for the
            Company (iii) any merger, consolidation, reorganization,
            recapitalization, business combination, or other transaction
            pursuant to which the Company is acquired by, or combined with, any
            third party which shall be introduced to the Company by Crivello
            during the term of this Agreement (any such entity, a "Target") or
            (d) the acquisition, directly or indirectly, by the Company (or by
            one or more persons acting together with the Company pursuant to a
            written agreement or otherwise), in a single transaction or a series
            of transaction, of (A) all or substantially all of the assets of the
            Target or (B) shares of the Target's capital stock. Crivello's
            services will include advice with respect to valuation and
            structuring of any M&A, assisting the Company in the Company's
            efforts to obtain financing for any M&A, and assisting the Company
            in negotiations relating to any M&A.




      2. In connection with Crivello's activities on the Company's behalf,
Crivello will familiarize himself with the business, operations, properties,
financial condition, and prospects of the Company. In connection with Crivello's
role as the Company's consultant, I would expect my services to include such
additional financial advisory and related services as may be mutually agreed
upon by Crivello and the Company. The retention by the Company of Crivello as
consultant as heretofore described shall be for a period of one year from the
date hereof.

      3. In connection with Crivello's activities on the Company's behalf, the
Company will cooperate with Crivello and will furnish Crivello with all
information and data concerning the Company (the "Information") which Crivello
deems appropriate and will provide Crivello with access to the Company's
officers, directors, employees, independent accountants, and legal counsel. The
Company represents and warrants that all Information made available to Crivello
by the Company will, at all times during the period of engagement of Crivello
hereunder, be complete and correct in all material respects and will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading in the light of the circumstances under which such
statements are made. The Company further represents and warrants that any
projections provided by it to Crivello will have been prepared in good faith and
will be based upon assumptions which, in light of the circumstances under which
they are made, are reasonable. The Company acknowledges and agrees that, in
rendering its services hereunder, Crivello will be using and relying on the
Information without independent verification thereof by Crivello or independent
appraisal by Crivello of any of the Company's assets. Crivello does not assume
responsibility for any information regarding the Company. Any advice rendered by
Crivello pursuant to this Agreement may not be disclosed publicly without our
prior written consent.

      4. In consideration of his services pursuant to this Agreement, Crivello
shall be entitled to receive, and the Company agrees to pay Crivello $10,000 per
month.

      5. In addition to the fees described in Paragraph 4 above, the Company
agrees to promptly reimburse Crivello for expenses incurred in connection with
its retention hereunder when incurred or promptly thereafter.

      6. The Company agrees to indemnify Crivello in accordance with the
indemnification provisions (the "Indemnification Provisions") attached to this
Agreement as Annex A, which Indemnification Provisions are incorporated herein
and made a part hereof.

      7. Either party hereto may terminate this Agreement at any time upon 30
days' prior written notice, without liability or continuing obligation, except
as set forth in the following sentence. Neither termination of this Agreement
nor completion of the assignment contemplated hereby shall affect: (i) any
compensation earned by Crivello up to the date of termination or completion, as
the case may be, including the entirety of the consulting fees referenced in
Paragraph 3 hereof; (ii) the reimbursement of expenses incurred by Crivello up
to the date of termination or completion, as the case may be, (iii) the
provisions of Paragraphs 3 through 7 of this Agreement and (iv) the
Indemnification Provisions attached as Annex A hereto which are incorporated
herein, all of which shall remain operative and in full force and effect.



================================================================================
                                                             Crivello Group, LLC
                                                                 3408 Dover Road
                                                    Pompano Beach, Florida 33062
                                                           Phone: (954)-532-0240
                                                             Fax: (954)-301-0202
                                                            Cell: (414)-788-6186
                                                              frank@crivello.com

      8. The validity and interpretation of this Agreement shall be governed by
the law of the State of Florida applicable to agreements made and to be fully
performed therein. The Company irrevocably submits to the jurisdiction of any
court of the State of Florida or the United States District Court for the
Southern District of Florida for the purpose of any suit, action, or other
proceeding arising out of this Agreement, or any of the agreements or
transactions contemplated hereby, which is brought by or against the Company and
(i) hereby irrevocably agrees that all claims in respect of any such suit,
action, or proceeding may be heard and determined in any such court and (ii) to
the extent that the Company has acquired, or hereafter may acquire, any immunity
from jurisdiction of any such court or from any legal process therein, the
Company hereby waives, to the fullest extent permitted by law, such immunity.
The Company hereby waives, and agrees not to assert in any such suit, action, or
proceeding, in each case, to the fullest extent permitted by applicable law, any
claim that (a) the Company is not personally subject to the jurisdiction of any
such court, (b) the Company is immune from any legal process (whether through
service or notice, attachment prior to judgment, attachment in aid of execution,
execution, or otherwise) with respect to the Company's property or (c) any such
suit, action, or proceeding is brought in an inconvenient forum.

      9. The benefits of this Agreement shall inure to the respective successors
and assigns of the parties hereto and of the indemnified parties hereunder and
their successors and assigns and representatives, and the obligations and
liabilities assumed in this Agreement by the parties hereto shall be binding
upon their respective successors and assigns.

      10. For the convenience of the parties hereto, any number of counterparts
of this Agreement may be executed by the parties hereto. Each such counterpart
shall be, and shall be deemed to be, an original instrument, but all such
counterparts taken together shall constitute one and the same Agreement. This
Agreement may not be modified or amended except in writing signed by the parties
hereto.

                [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]





      If the foregoing correctly sets forth our Agreement, please sign the
enclosed copy of this letter in the space provided and return it to us.

                                        Very truly yours,



                                        /s/ FRANK CRIVELLO
                                        ----------------------------------------
                                        Frank Crivello

Confirmed and Agreed to:
this 1st day of November, 2004

THOMAS EQUIPMENT INC.


By: /s/ DAVID MARKS
   --------------------------------
   Name:  David Marks
   Title: Chairman



================================================================================
                                                             Crivello Group, LLC
                                                                 3408 Dover Road
                                                    Pompano Beach, Florida 33062
                                                           Phone: (954)-532-0240
                                                             Fax: (954)-301-0202
                                                            Cell: (414)-788-6186
                                                              frank@crivello.com

                                                                         Annex A

                           INDEMNIFICATION PROVISIONS

      Thomas Equipment, Inc., a Utah corporation (the "Company"), agrees to
indemnify and hold harmless Frank Crivello ("Crivello") against any and all
losses, claims, damages, obligations, penalties, judgments, awards, liabilities,
costs, expenses, and disbursements (and any and all actions, suits, proceedings,
and investigations in respect thereof and any and all legal and other costs,
expenses, and disbursements in giving testimony or furnishing documents in
response to a subpoena or otherwise), including, without limitation the costs,
expenses, and disbursements, as and when incurred, of investigating, preparing,
or defending any such action, suit, proceeding, or investigation (whether or not
in connection with litigation in which Crivello is a party), directly or
indirectly, caused by, relating to, based upon, arising out of, or in connection
with Crivello's acting for the Company, including, without limitation, any act
or omission by Crivello in connection with its acceptance of or the performance
or non-performance of its obligations under the letter agreement dated March 15,
2003, between Crivello and the Company, as it may be amended from time to time
(the "Agreement"); provided, however, such indemnity agreement shall not apply
to any portion of any such loss, claim, damage, obligation, penalty, judgment,
award, liability, cost, expense, or disbursement to the extent it is found in a
final judgment by a court of competent jurisdiction (not subject to further
appeal) to have resulted primarily and directly from the willful misconduct of
Crivello. The Company also agrees that Crivello shall not have any liability
(whether direct or indirect, in contract or tort or otherwise) to the Company
for or in connection with the engagement of Crivello, except to the extent that
any such liability is found in a final judgment by a court of competent
jurisdiction (not subject to further appeal) to have resulted primarily and
directly from Crivello's willful misconduct.

      These Indemnification Provisions shall be in addition to any liability
which the Company may otherwise have to Crivello or the persons indemnified
below in this sentence and shall extend to the following: Crivello , its
affiliated entities, directors, officers, employees, legal counsel, agents, and
controlling persons (within the meaning of the federal securities laws). All
references to Crivello in these Indemnification Provisions shall be understood
to include any and all of the foregoing.

      If any action, suit, proceeding, or investigation is commenced, as to
which Crivello proposes to demand indemnification, it shall notify the Company
with reasonable promptness; provided, however, that any failure by Crivello to
notify the Company shall not relieve the Company from its obligations hereunder.
Crivello shall have the right to retain counsel of its own choice to represent
it, and the Company shall pay the fees, expenses, and disbursements of such
counsel; and such counsel shall, to extent consistent with its professional
responsibilities, cooperate with the Company and any counsel designated by the
Company. The Company shall be liable for any settlement of any claim against
Crivello made with the Company's written consent, which consent shall not be
unreasonably withheld. The Company shall not, without the prior written consent
of Crivello , settle or compromise any claim, or permit a default or consent to
the entry of any judgment in respect thereof, unless such settlement,
compromise, or consent includes, as an unconditional term thereof, the giving by
the claimant to Crivello of an unconditional release from all liability in
respect of such claim.



      In order to provide for just and equitable contribution, if a claim for
indemnification pursuant to these Indemnification Provisions is made, but it is
found in a final judgment by a court of competent jurisdiction (not subject to
further appeal) that such indemnification may not be enforced in such case, even
though the express provisions hereof provide for indemnification in such case,
then the Company, on the one hand, and Crivello , on the other hand, shall
contribute to the losses, claims, damages, obligations, penalties, judgments,
awards, liabilities, costs, expenses, and disbursements to which the indemnified
persons may be subject in accordance with the relative benefits received by the
Company, on the one hand, and Crivello, on the other hand, and also the relative
fault of the Company, on the one hand, and Crivello on the other hand, in
connection with the statements, acts, or omissions which resulted in such
losses, claims, damages, obligations, penalties, judgments, awards, liabilities,
costs, expenses, or disbursements and the relevant equitable considerations
shall also be considered. No person found liable for a fraudulent
misrepresentation shall be entitled to contribution from any person who is not
also found liable for such fraudulent misrepresentation. Notwithstanding the
foregoing, Crivello shall not be obligated to contribute any amount hereunder
that exceeds the amount of fees previously received by Crivello pursuant to the
Agreement.

      Neither termination nor completion of the engagement of Crivello referred
to above shall affect these Indemnification Provisions which shall then remain
operative and in full force and effect.

EX-23.1

[LOGO]  KINGERY
        & CROUSE PA
- ----------------------------
CERTIFIED PUBLIC ACCOUNTANTS

                    CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

June 13, 2005

Thomas Equipment, Inc.
1818 North Farwell Avenue
Milwaukee, WI 53202

Gentlemen:

We consent to the inclusion in this Registration Statement of Thomas Equipment,
Inc. on Form SB-2 of our report dated March 31, 2005 on our audits of the
consolidated financial statements of Pneutech Inc., which covered the
consolidated balance sheet as of October 31, 2004 and the results of their
operations and cash flows for each of the two years then ended. We also consent
to the reference to our firm under the caption "Experts" in this Registration
Statement.

Kingery & Crouse, P.A.

Tampa, FL

           2801 WEST BUSCH BOULEVARD, SUITE 200, TAMPA, FLORIDA 33618
           PHONE: 813.874.1280 | FAX: 813.874.1292 | WWW.TAMPACPA.COM

EX-23.2

[PricewaterhouseCoopers LOGO]

                                                     PricewaterhouseCoopers LLP
                                                     Chartered Accountants
                                                     300 Brunswick House
                                                     44 Chipman Hill, PO Box 789
                                                     Saint John, New Brunswick
                                                     Canada E2L 4B9
                                                     Telephone +1 (506) 632 1810
                                                     Facsimile +1 (506) 632 8997

                         CONSENT OF INDEPENDENT AUDITORS

We hereby consent to the use in this Registration Statement of Thomas Equipment,
Inc., on Form SB-2 our report dated January 7, 2005 relating to the consolidated
of financial statements of Thomas Equipment Limited, as of June 30, 2004 and
2003 and the related consolidated statements of loss and comprehensive loss,
common and other shareholder's deficiency, and cash flows for each of the years
in the three year period ended June 30, 2004. We also consent to the reference
to us under the heading "Experts" in such Registration Statement.


/s/ PricewaterhouseCoopers LLP


Saint John, New Brunswick, Canada
June 13, 2005


PricewaterhouseCoopers refers to the Canadian firm of PricewaterhouseCoopers LLP
and the other member firms of PricewaterhouseCoopers International Limited, each
of which is a separate and independent legal entity.

CORRESP

SICHENZIA ROSS FRIEDMAN FERENCE LLP

1065 Avenue of the Americas, 21st Flr.

New York, NY 10018

Telephone: (212) 930-9700

Facsimile: (212) 930-9725

June 13, 2005

Securities and Exchange Commission

450 Fifth Street, N.W.

Judiciary Plaza

Washington, D.C. 20549

Attn: Peggy Fisher, Esq.

Jay Mumford, Esq.

Ms. Tara Harkins

Ms. Michele Gohlke

Re:      Thomas Equipment, Inc.

 Registration Statement on Form SB-2

            Amendment No. 1

            File No. 333-124217

Ladies and Gentlemen:

We are counsel to Thomas Equipment, Inc., a Delaware corporation (the “Company”), which has today filed Amendment No. 1 to its Registration Statement on Form SB-2, Registration No. 333-124217 (as amended, the “Registration Statement”). This letter responds to your letter dated May 20, 2005, relating to comments of the Staff in connection with the above-referenced submission.

The responses to the Staff’s comments attached hereto are numbered to relate to the corresponding comments in your letter. Where applicable, the revised pages or sections of the Registration Statement have been referenced. Unless otherwise indicated, all page references contained herein are to the pages of the Registration Statement. For your convenience, four copies of the Registration Statement, marked against the initial filing of the Registration Statement, have been forwarded to the Staff.

1

We appreciate your timely consideration of these matters in your review of the filing referenced above. If you or others have any questions or would like additional information, please contact me at 212-930-9700.

Very truly yours,

/s/ Thomas A. Rose

cc: David Marks,

Chairman

2

Thomas Equipment Inc.

Registration Statement on Form SB-2: Registration No. 333-124217

Responses to SEC Comment Letter 05-20-2005

#	Comment	Response
Summary
1	Expand the summary to include a brief description of the series of transactions that recently look place so that the risk factors that refer to those transactions make sense to investors. Include a cross reference to disclosure to be included later in the filing that provides all material information about each of these transactions, including the business purpose, and explains in reasonable detail how and when the selling shareholders and officers and directors obtained their shares and what consideration they paid for them on an aggregate and per share basis. For each transaction, disclose clearly all sources and uses of funds. For each securities issuance, disclose all material terms, and identify the security holders. We note the disclosure that begins on page 15 and believe it should be significantly revised in response to these comments. It should also identify the officers, directors, and beneficial owners who received more than 5 percent of the shares in each transaction. We may have further comments.	We have revised the summary to include a brief description of the seriesof transactions that recently took place and added a cross-reference to the complete discussion. We have expanded the full description to provide the requested information.
2	Please explain more specifically what you mean when you say "Pneutech is a strategic supplier to Thomas Equipment," and quantify the percentage of sales attributable to sales to Thomas, if material.	We have added a sentence to describe the product supplied and the amount of sales to Thomas.

3

Financial Summary - Page 4 Thomas Equipment and Predecessor Business (Thomas Equipment Limited) - Page 4
3	Revise the introductory paragraph to tell investors the periods for which you derived the information presented from your audited financial statements of the predecessor business and Pneutech, Inc. Indicate the source of the unaudited periods of the predecessor and successor businesses.	Revised accordingly. See additional discussion included in the introduction to this section of the prospectus.
4	Your financial summary includes the historical results of the predecessor and successor businesses. In this regard, revise your common share data to include the historical earning per share and weighted average common shares outstanding for each period presented.	Revised accordingly.
5	Revise your financial summary information to include the results of operations of the predecessor business for the period July 1, 2004 to September 30, 2004 and label as "unaudited".	Revised accordingly.
Pnuetech - Page 5
6	Your financial summary includes the historical results of Pneutech Inc. In this regard, revise your common share data to include their historical earning per share and weighted average common shares outstanding for each period presented.	Revised accordingly.
7	Revise to present the summarized balance sheet data for Pneutech, Inc. as of October 31, 2003 or tell us supplementally why you believe such information is not necessary.	Although this information is not included elsewhere in the prospectus, we now have included the balance sheet data in the summary.

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Risk Factors - Page 7 Thomas Equipment Limited. Our Predecessor - Page 7
8	Please quantify here and on page 17 the amount of liability remaining and the amount of financial support McCain Foods has agreed to provide to the company.	These liabilities and commitments relate solely to Thomas Equipment Limited and McCain and do not relate to the assets as currently owned by the Company. Consequently, we do not believe it would be material or appropriate to disclose such information in the Company’s registration statement. We have removed this information and provided information which we believe is more pertinent to the Company.
Our Sales Growth is Tied to Global Economic Conditions - Page 8
9	Please revise this risk factor to describe how the factors you describe specifically impact your business, rather than how general economic trends affect industry in general.	The risk factor has been revised to reflect only factors affecting the Company, rather than industry in general.
10	You state you do not engage in hedging transactions here and on page 36, yet at the top of page 17, you describe hedging activities. Please revise to reconcile.	The wording on page 17 has been revised to clarify that “Additionally, unlike the predecessor business, we do not currently engage in hedging transactions although we may do so in the future“
We Are Dependent On Third Party Dealers - Page 9
11	Please briefly describe your relationship with United Rental and file any agreements with them. Also, it appears that this risk factor is printed twice, please delete one.	United Rental was used as an example as they do not account for a significant amount of our sales. As such, the disclosure on page 9 has been revised to more clearly reflect this. The duplicate risk factor has been removed.

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We Have Recently Entered Into a Supply Agreement with Hvundai - Page 9
12	Please quantify what you mean by "substantial portion" of your revenues, when there is no minimum commitment for Hyundai.	To date, orders from Hyundai comprise approximately 57% of the Company's current backlog of approximately $70,000,000. The Company anticipates that such orders will increase in the future as the Company’s capacity to produce products for Hyundai is increased, although of course there can be no assurance of any specific amounts since there is no commitment from Hyundai, as disclosed in the risk factor. The Company will disclose in future filings the actual percentage of sales made to Hyundai, assuming such sales are in excess of 10%, as historical information becomes available. The Company has determined not to include the approximate percentage of orders to date since these are merely orders compiled by the Company, not sales, and the booking of actual sales are subject to proper audit and review procedures.
If Our Subsidiary's Preference Shareholder - Page 12
13	Please identify the Preference Shareholder, and explain what the consequences to you would be if you are unable to pay the redemption amount. For example, could the Preference Shareholder seize any assets?	The Preference Shareholder has been identified. Since the obligations to McCain are not secured, the only recourse of McCain is to seek payment of amounts due to them through litigation. They have no rights to foreclose on any of the Company’s assets. The risk factor has been revised to reflect their recourse. The disclosure has also been amended to clarify that we are required to purchase the preferred shares from McCain on April 26, 2006, if we have not earlier redeemed them.

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Management's Discussion and Analysis - Page 15
14	See our first comment regarding this series of transactions. In addition, you should include the following disclosure. • Identify Maxim Mortgage Corporation as a shell corporation, if true • Disclose Mr. Rhee's role in this series of transactions • Identify the principals of Thomas Ventures • Disclose who received the 16.945 million shares in the reorganization • Identify the officers and directors of Thomas Equipment at the time of the reorganization • Explain how the acquisitions of Thomas Equipment Limited and Pneutech were funded • Quantify what was paid to Mr. Rhee and any other officer, director, or major shareholder in the Pneutech acquisition • Identify which members of "the Company's" Board were appointed as members of the Pneutech Board • Explain how your officers, directors, and 5 percent holders obtained their shares and what consideration they paid. We note they hold 67.6% of the current outstanding shares.	We have revised the overview section to include a brief description of the seriesof transactions that recently took place. We have also expanded to provide the requested information.

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15	Revise to include a section which provides a description of the basis of presentation during all periods presented (including the pro forma financial statements) in the filing. Your discussion should include a description of the predecessor and successor periods. Ensure that the periods presented are labeled as "predecessor" and "successor". Please include a similar discussion also in your basis of presentation footnote to the Thomas Equipment, Inc.'s consolidated financial statements.	Revised accordingly.
Acquisition of Operating Business - Pneutech. Inc. and Subsidiaries - Page 16
16	Revise to disclose the value of the shares issued as consideration in the Acquisition of Pneutech, Inc. and subsidiaries and the method used to value those shares.	Discussion has been added to disclose that the shares were valued based on the market price of our common stock on the date (December 22, 2004) the terms of the acquisition were agreed to and announced.
Results of Operations for the Year Ended June 30. 2003 Compared to June 30, 2002.
17	Revise to include the MD&A of Thomas Equipment Limited for the year ended June 30, 2003 compared to June 30, 2002 as you include consolidated financial statements for these respective periods.	The financial statements for Thomas Equipment Limited (the predecessor business) for the year ended June 30, 2002 have been deleted (as Regulation S-B Item 310 requires audited financial statements for the two most recent fiscal years i.e., the years ended June 30, 2004 and 2003). Accordingly, a comparison of the year ended June 30, 2003 to the year ended June 30, 2002 is no longer relevant.

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Results of Operations for the Six Months Ended December 31. 2004 Compared To December 31. 2003 - Page 24
18	We note that you have presented combined results of operations for the six months ended December 31, 2004 that consists of the successor's results of operations from October 1, 2004 to December 31, 2004 and the predecessor's results of operations for the period July 1, 2004 to September 31, 2004. We also note you compare such combined results of operations for the six months ended December 31,2004 to the predecessor's historical results operations for the six months ended December 31, 2003. Revise to remove your MD&A discussion for the three and six month period ended December 30,2004 and 2003 and include a separate discussion of your historical operating results for the Predecessor for the period July 1, 2004 to September 30, 2004 and the Successor for the period October 1, 2004 to December 31, 2004.	The MD&A discussion for the six months ended December 31, 2004 has been replaced by an updated discussion for the nine months ended March 31, 2005. This discussion compares the pro forma results for the nine months ended March 31, 2005 with the predecessor’s results for the comparable period.
Results of Operations for Thomas Equipment Limited and Pneutech for the year ended June 30, 2004 and Fiscal 2Q05 Forward Looking Outlook - Page 26
19	We note that you have provided forward-looking information primarily in regards to the operations of Thomas Equipment Ltd. Revise this section to include any such meaningful forward-looking information in regards to the operating results of Pneutech, Inc. for the near term and how their historical results may change in the future since you acquired them.	The forward looking information has been revised and, as appropriate, includes consideration of changes at Pneutech.

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20	Revise this section to include a MD&A discussion of your pro forma operating results for the year ended June 30, 2004 as the information provided appears to include only forward-looking information.	This section has been revised to focus only on forward-looking information.
Revenues- Page 26
21	We note you have entered into an exclusive two-year supply agreement with Hyundai Heavy Industries that you expect to achieve significant increases in revenues starting in the 2nd quarter of 2006 and beyond. Revise to discuss, in detail, the significant terms of the supply arrangement and quantify the expected increase in revenues.	Because Hyundai is not committed to any minimum amount of purchases, we do not believe it is appropriate to require the Company to quantify the increase in revenues. We believe stating that the Company expects significant increases provides sufficient guidance to an investor. The Company will provide historical information as it becomes available. The disclosure has been revised to disclose the material terms of the Hyundai agreement.
Cost of Sales and Gross Profit - Page 26
22	You state your goal is to achieve a 22% gross margin. Revise to clarify what you mean by "optimizing internal manufacturing capabilities and by maximizing our corporate vertical supply channels" which will help to achieve this goal.	We have deleted this reference to the 22% gross margin.
Subsequent Financing Activities - Page 34
23	You state you repaid the Roynat subordinated debenture in April of 2005, please disclose where you obtained the proceeds to make such repayment and why your board decided to repay that particular debt.	This disclosure is not included here in the amended registration statement, as the Company has included information from its most recent quarterly report. However, we have revised the information concerning this matter at the beginning of MD&A, where it is discussed in detail.

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24	Disclose the interest rate on the Roynat debt.	This disclosure is not included here in the amended registration statement, as the Company has included information from its most recent quarterly report. However, we have revised the information concerning this matter at the beginning of MD&A, where it is discussed in detail.
25	Disclose all material terms of the Laurus Master Fund financing.	This disclosure is not included here in the amended registration statement, as the Company has included information from its most recent quarterly report. However, we have revised the information concerning this matter at the beginning of MD&A, where it is discussed in detail.
26	Clarify how many shares of common stock each share of series A preferred stock is convertible into. Supplementally advise whether any of the accredited investors are selling shareholders in this offering.	The existing discussion of the series A preferred stock discloses that the preferred is convertible to common stock at a rate of $3 per share. The disclosure has been amended to clarify that the face amount of the preferred stock is $25,000,000 and is thus convertible to 8,333,333 shares of common stock. None of the accredited investors to whom the preferred stock was sold is a selling shareholder in this offering.

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Description of Business - Page 37
27	We note the article dated April 27, 2005, stating that sales backlog has grown to US$69 million for shipments during 2005. Expand the appropriate disclosure to discuss, along with your plans to expand production capacity.	We have revised the Backlog section accordingly.
28	We also note that you entered into an exclusive distribution agreement with W.L. Gore Corporation that you anticipate will generate annual revenues of US$12.5 million. Expand the appropriate disclosure to discuss, and file the distribution agreement as an exhibit.	As we do not anticipate that sales through W.L. Gore will exceed 5% of the Company’s revenues, we do not believe that the contract is material. It is merely an example of one of many distribution agreements to which the Company is or will be a party.
Management - Page 45
29	Expand the biography for Mr. Marks to also discuss his role in Farwell Equity Partners. Also expand to provide more information about the trusts.	Mr. Marks’ biography has been expanded accordingly.
Executive Employment Agreements - Page 42
30	Please disclose Mr. Rhee's compensation in the Executive Compensation Table on Page 46.	As disclosed in the footnote to the Executive Compensation Table, Mr. Rhee was not employed by Thomas Equipment Inc. until November 2004. Accordingly, he received no compensation during the periods covered by the Table.
31	Please expand the disclosure to explain what Mr. Rhee's personal guarantee and pledge of assets covered. Also please explain how much Mr. Rhee had at risk in such guarantee and pledge and what services Mr. Rhee provided in the acquisition.	The disclosure has been revised accordingly.

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Certain Relationships and Related Transactions - Page 52
32	Revise the disclosure to explain in much greater detail the agreement and plan of amalgamation and the benefits all affiliates received in connection with the various transactions which took place leading up to the Pneutech acquisition, including the material terms regarding share issuances to officers, directors, and 5 percent holders. Please expand to explain Mr. Rhee's involvement in this transaction in detail. File the agreement as an exhibit.	The disclosure related to the Pneutech acquisition has been expanded accordingly. However, since the prior transactions related to stock issuances to current officers, directors and 5% stockholders occurred at a time before they were affiliates of the Company, we do not believe such transactions are required to be disclosed hereunder. We have, however, revised the disclosure in the MD&A- Overview to include the requested information. The agreement has previously been included as Exhibit 10.6 to the registration statement.
33	Please describe the term of the consulting agreement with Mr. Crivello and file it as an exhibit.	The term of the agreement with Mr. Crivello has been disclosed and the contract is filed herewith as an exhibit.
34	Disclose the relationship of your Board Chairman with Farwell Equity Partners and the equity issuance to that entity.	There has not been any issuance by the Company to Farwell Equity Partners. The shares owned by Farwell were issued to Messrs. Marks and Crivello and Mr. Crivello’s IRA in connection with the initial acquisition of the Thomas Equipment Limited assets from McCain Foods in November 2004. Messrs. Marks and Crivello then created Farwell as a holding company for their Thomas shares and transferred such shares to Farwell in April 2005. We do not believe their form of ownership is a “certain transaction” or in any way material to an investor. The ownership of Farwell has been clearly disclosed in the Beneficial Ownership table.
35	Disclose other transactions with affiliates and related parties noted in the footnotes to the financial statements. For example (and this is only one example), we note you issued 16,945,000 shares to your founders for $2,819,000, or an average of $0.20 per share. Expand to discuss this and other transactions, identifying the parties, the number of shares each received, and the consideration paid.	We have included information responsive to this comment in the expanded description of the transactions contained at the beginning of MD&A.

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Description of Securities - Page 52
36	Reconcile the disclosure here with the recent issuance of series A preferred stock.	We have revised the disclosure to describe the issued shares of series A preferred stock.
Selling Stockholders - Page 55
37	In footnote 1, expand to state the number of shares to be issued in the transactions described in (iii) and (iv).	The maximum shares issuable upon conversion of the promissory notes have been disclosed in footnote 1.
Index to Financial Statements - Page F-1.
38	Please update the financial statements and pro forma information, as necessary, as required by Item 310(a) of Regulation S-B.	The financial statements and pro forma information have been updated.
Unaudited Consolidated Financial Statements of Thomas Equipment. Inc. - Page F-7 Consolidated Statement of Cash Flows - Page F-7
39	Confirm to us that the Successor Consolidated Statement of Cash Flows presents the changes in assets and liabilities between your opening balance sheet on October 1,2004, consisting of the assets acquired and liabilities assumed, and the balance sheet on December 31, 2004. Refer to paragraph 17(c) of SFAS 95.	The Successor Consolidated Statement of Cash Flows presents the changes in assets and liabilities between the opening balance sheet on October 1, 2004 (consisting of the acquired net assets and liabilities of zero) and the balance sheet on December 31, 2004. Accordingly, the statement of cash flows reflects the closing on November 9, 2004 of the acquisition (effective as of October 1, 2004) of the inventory and fixed assets of Thomas Equipment Limited as investing activities and the issuance of debt that was used primarily to fund that acquisition as a financing activity.

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40	It is unclear to us how the line items "equipment acquired on acquisition" for $7,223,000 and "other assets acquired on acquisition" for $20,053,000 within investing activities agrees to the consideration discussed in note 2 to the financial statements. Please revise or advise us.	The disclosure has been modified to disclose the “Cash paid for acquisition of assets of Thomas”, which amounts are also disclosed in Note 2.
Notes to the Consolidated Financial Statements - Page F-9 Note 2: Acquisitions - Page F-9
41	We note from pages F-6 and F-17 that you issued 16,945,000 shares of common stock to your founders at $0.20 per share for $2.8 million and recognized $5.5 million as stock compensation for the difference in the fair value of the shares and the issuance price. It is unclear to us how you accounted for the proceeds from the issuance on the Statements of Cash Flows. Clarify to us the nature of the line item "Proceeds from Stock Subscription" shown in financing activities.	The line item in the Statement of Cash Flows has been modified to disclose "Proceeds from sales of common stock", together with the cash proceeds of $2.15 million.
42	We note effective October 1, 2004, Thomas Equipment 2004 Inc. acquired the business, fixed assets and inventory of Thomas Equipment Ltd and you have accounted for the acquisition as a purchase under SFAS 141. Tell us supplementally and revise your note to address the following:

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	- In a tabular format, detail the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition	As disclosed in Note 2, we acquired the fixed assets and inventories of Thomas Equipment Limited. No other assets or liabilities were acquired or assumed.
	- Expand in great detail to discuss the consideration that was paid or liabilities assumed that total to the purchase price of $33.7 million. Any cash paid should agree to the Consolidated Statements of Cash Flows and be labeled as cash paid for acquisition, net of cash acquired.	The disclosure of the consideration paid has been re-formatted to separately disclose the cash paid and the transaction costs, as well as the other consideration paid.
	- Separately quantify the total direct costs of the acquisition.	Done, as discussed above.
	Refer to the guidance in paragraph 51 of SFAS 141.
Basis of Presentation - Page F-10
43	Revise this note to clearly define that as of December 31, 2004 and the three months ended December 31, 2004 are that of the "Successor Business". Also, label the consolidated balance sheet on page F-3 with "Successor Business".	The note (in the March 31, 2005 financial statements included in the amended filing) has been revised and the March 31, 2005 balance sheet has been labeled.
44	It should be clear to investors if the successor entity has adopted the significant accounting policies of the predecessor. To the extent the successor entity's accounting policies has changed, those changes should be discussed in detail and highlighted as adopted by the successor. Please revise your filing accordingly.	A sentence has been added after the Basis of Presentation, to clarify that the Accounting Policies are those of the successor, which do not differ from those of the predecessor.

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Revenue Recognition - Page F-11
45	We note from your revenue recognition policy that you sell equipment to distributors and dealers. Tell us supplementally and revise your filing to address the following:
	• Describe to us the nature and significant terms of these arrangements with distributors and dealers, including any post shipment obligations or acceptance provisions and how you account for such obligations.	Since our acquisition of the predecessor’s assets we have entered into only one special arrangement for buybacks with distributors or dealers. There has been no significant activity under the agreement through the date of the financial statements. We do not currently have any other post shipment obligations. As discussed in our response to comment 47, the amount of receivables currently recorded that have interest free terms, the costs associated with them or their age are not significant.
	• We see on page F-12 that you give sales incentives in the form of cash and interest free financing. Describe to us the nature of your sales incentives and how you account for them in accordance with EITF 01-09.	Sales incentives are generally given at the time of a sale. In very isolated instances, we may in the future award a special post-sale incentive but these are not under any specific agreement. At such time as we enter into a sales incentive agreement or program that is based on cumulative volume or similar arrangements or we begin giving regular discretionary incentives, we will appropriately accrue the costs.
	• Explain to us if you grant price concessions and price protection to your distributors and dealers and if so, tell us how you account for price concessions.	We currently do not enter any price protection or concession agreements.
46	Expand your revenue recognition policy to include equipment sales made to retail and OEM customers.	The note summarizing our revenue recognition policy summarizes the conditions under which revenue is generally recognized (SAB 104) and has been modified to include a specific reference to OEM customers. Accordingly, that note now states “sales of equipment and service parts are recorded when title and all risks of ownership are transferred to the independent dealer, distributor, OEM or retail customer.” We do not believe any additional disclosure related to retail and OEM customers is required.

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47	We note on page 39 that you enter into agreements related to product financing with your distributors and dealers that are located in the United States and Canada. We further note that you have accounts receivable of $10,820,000 outstanding as of December 31, 2004. Tell us supplementally and revise your filing to identify the amount of the receivables attributable to distributor and dealer financing and the terms of such receivables.	As of March 31, 2005, our accounts receivable of $25,269,000 includes approximately $1,300,000 (5%) of accounts receivable related to distributor and dealer financing. As discussed on page 39, we are negotiating for a third party to provide this financing going forward. We do not believe that the amounts of these receivables or the associated interest costs, either at March 31, 2005 or in the future, are material to our operations and in fact they will be eliminated prior to any such receivable aging beyond one-year and therefore do not believe they warrant separate disclosure.
Buy back arrangements - Page F-11
48	We note that the predecessor entity entered into buy back arrangements with distributors and dealers that in turn enter into leases for such equipment with its customers. We note that these arrangements provide for a guaranteed buy back value of 65%-70% of the original sales price. Tell us supplementally why you believe it is appropriate to defer the net proceeds received from the distributor as a liability that is reduced on a pro-rata basis over the three year buy back period since you may owe your distributor 65%-70% of the original sale's price at the end of the leasing arrangement. Tell us supplementally how you considered the guidance in EITF 95-1.	EITF 95-1 requires that “… the net proceeds upon the equipment’s initial transfer should be recorded as a liability in the manufacturer’s balance sheet. The liability is then subsequently reduced on a pro rata basis over the period to the first exercise date of the guarantee, to the amount of the guaranteed residual value at that date, with corresponding credits to revenue in the manufacturer’s income statement.” We believe that our accounting policy and the policy followed by the predecessor, conforms with that guidance.

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Property, plant and equipment - Page F-12
49	Please clarify to us what you mean by "impairment allowances" and how your accounting for impairment is in accordance with SFAS 144.	We are aware that any impairment loss that may be recognized establishes a new cost basis and does not represent an “allowance”. Accordingly, the references to “impairment allowances” have been removed.
Note 4. Inventories - Page F-15
50	Please tell us supplementally and revise to include an accounting policy note for inventories that discloses the costing method you use to value inventories and the amount of reserve for inventory obsolescence at December 31, 2004.	The March 31, 2005 unaudited financial statements include an accounting policy note for inventories, including a policy for the obsolescence and used equipment. The reserve for inventory excess or obsolescence at March 31, 2005 was approximately $800,000 (2%).
51	We note from page 38 you maintain used equipment inventory and also retail locations sell used equipment that is typically acquired through customer trade-ins. Revise to include an accounting policy note related to used equipment and disclose the amount of used equipment at December 31, 2004.	An accounting policy related to used equipment has been added to note 3. Disclosure of the amount of used equipment inventory has been added to note 4. Significantly all the used equipment recorded is related to the acquisition of the predecessor’s assets. While we have engaged in acquiring such equipment through trade-ins, the amounts related to trade-ins have not been significant. However, we have added a policy for such instances.

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Note 6: Convertible long term debt - Page F-15
52	We note that you have a note payable to Thomas Equipment Limited and a term loan with Laurus Master Funds Ltd ("Laurus") reflected on your consolidated balance sheet at December 31, 2004. Tell us supplementally and revise your filing to disclose if these loans were assumed in the acquisition or entered into subsequent to October 1, 2004. If subsequent to October 1, 2004, clearly disclose the nature and terms of the loans. Also, tell us how such loans were originally recorded by you including why a premium was recorded.	The note payable to Thomas Equipment Limited was issued as part of the consideration for the assets acquired. The term loan with Laurus was part of the funding obtained by us to effect the acquisition of assets from Thomas Equipment Limited and was not assumed in the acquisition. The disclosure of the terms of these loans has been expanded and is included in Notes 6 and 7 to our March 31, 2005 financial statements included in the prospectus. Because Laurus may receive a premium if it elects to receive, or we elect to pay in cash, interest and principal payments in cash, rather than in common stock, the amount of the potential liability for that premium was recorded as part of the carrying value of the debt and is being amortized to expense over the life of the debt.
Note 7: Convertible credit facility - related party - Page F-16
53	It appears from your disclosure that you entered into a credit facility with Laurus Master Funds Ltd ("Laurus") to finance the acquisition of Thomas Equipment Limited. Also, in connection with issuance of the convertible debt and credit facility it appears that Laurus was issued stock options and warrants. In this regard, tell us supplementally and revise your filing to disclose the following:
	• How you recorded the financing of the acquisition including the issuance of stock options and warrants.	As discussed below, the options and warrants issued in connection with the financing obtained from Laurus were valued using the Black-Scholes option pricing model. The proceeds received were allocated among the instruments issued based on their estimated fair values. The resulting discounts from the face amount of the debt instruments are being amortized over the life of those debts.

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• Tell us if you recorded a beneficial conversion feature at the time you recorded the acquisition financing related to the warrants. Refer to guidance in EITF 98-5 and EITF 00-27 No beneficial conversion feature existed related to the acquisition financing provided by Laurus in November 2004. The effective conversion price of the term loan ($6,000,000) and revolving loan ($16,000,000) from Laurus, after recognizing the debt discount related to the value allocated to the options ($4,060,000) and warrants ($2,178,000), exceeded the market price of our common stock on the date the instruments were issued, as follows -      Loan  Facility Proceeds (face amount)   6,000,000  16,000,000 Allocated to options/warrants  1,701,000          4,537,000 Initial carrying amount of debt  4,299,000        11,463,000   Conversion price per share               $2.25                 $1.50 Number of shares                        2,666,667         10,666,667 Effective conversion price                $1.61                  $1.07 Market price - 11/09/2004                  $1.01                  $1.01   We received an increase in the credit facility ($4,000,000) with Laurus and an additional term loan ($1,900,000) from Laurus on January 26, 2005 and February 28, 2005, respectively. Those transactions also involved the sale of warrants to Laurus, as follows -        Loan  Facility Proceeds (face amount)              1,900,000          4,000,000 Allocated to warrants                    488,000          1,542,000 Initial carrying amount of debt  1,412,000          2,458,000   Conversion price per share               $2.25                 $1.50 Number of shares                           844,445           2,666,667 Effective conversion price                $1.67                  $0.92 Market price                                        $6.00                  $7.50   Because the conversion prices remained the same as in the initial financing but the market price of our common stock had increased significantly, EITF 98-5 and 00-27 would, prima facie, require that the entire amount of the proceeds that would otherwise be allocated to the term loan and credit facility ($3,870,000) should be recognized as the intrinsic value of the beneficial conversion feature and credited to additional paid-in capital.   We have not recorded the beneficial conversion feature because we do not believe that recording the debt at zero and immediately increasing our equity by $3,870,000 is appropriate in our current circumstances. We are aware that this does not comply with the EITF consensus. However, we are particularly concerned about understating our debt and increasing our equity in our financial statements, when those financial statements are being included in an offering document and the intent of the Company is to repay the debt in the very near term (with the premium penalty) through either an additional equity offering or more traditional line of credit, without conversion features. We believe that there is a fundamental difference between the warrants and options, on the one hand, and the beneficial conversion feature, on the other. Allocating part of the debt proceeds to the options and warrants is appropriate because those instruments are separate (detachable) from the debt, can be exercised (or sold) separately and survive repayment of the debt. Conversely, the beneficial conversion feature is not separate from the debt and provides no benefit if the debt is repaid (which we have the right to do and expect to do so). Allocating part (in this case, all) of the proceeds that otherwise would be allocated to the debt to the beneficial conversion feature, while it may conform to the letter of the EITF consensus, does not, we believe, improve our financial reporting. Additionally, the effective interest expense charged to earnings as a result of accretion of the discount resulting from the proceeds allocated to the options and warrants appears fairly commensurate with our estimate of the fair value of such debt. We recognize that we have not followed the EITF consensus but we believe that is appropriate in the circumstances.

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	• How you accounted for the issuance of the warrants and stock options, and determined the value assigned to such issuances.	As discussed in Note 12 to our March 31, 2005 financial statements (which are now included in the prospectus) the warrants and options issued to Laurus were valued using the Black-Scholes option pricing model. The proceeds received from Laurus for the warrants, options and related debt and credit facilities were allocated among those instruments, based on their estimated fair values. The resulting discount from the face (redemption) amount of the debt and credit facilities (reflecting the portion of the proceeds which was allocated to the warrants and options, which amounts were credited to additional paid-in capital) is being amortized over the life of the debt and credit facility.
	We may have further comment based on your response.
Note 9. Redeemable preferred shares - Page F-17
54	We note that you issued 1,000 redeemable preferred shares in connection with the acquisition of Thomas Equipment Ltd. for approximately $7,926,000 and such shares have been classified as a long-term liability (classified outside of permanent equity). We further note from page 12 that these securities are redeemable at the option of the holder at any time after April 1, 2006. In this regard, tell us supplementally and revise your filing to address the following: • How you determined the fair value of the preferred shares at the date of issuance. • How you account for the difference between the redemption value and the carrying value. Refer to the guidance in EITF Topic D-98. • Tell us how you considered the accounting guidance in SAB Topic 5-Q.	As part of the consideration paid, McCain Foods Limited (the parent of Thomas Equipment Ltd.), received C$10,000,000 face amount of redeemable preferred shares issued by our subsidiary TE 2004 Inc. Based on their terms, including the right of McCain to attend meetings of our Board of Directors, we considered those shares to have a fair value equal to their face amount. Accordingly, there is no difference between the redemption value and the carrying value of the shares. Because the shares are denominated in Canadian dollars, their carrying amount in our financial statements fluctuates based on changes in the US$ / C$ exchange rate. Under the terms of an agreement between the company, TE 2004 and McCain, we are required to purchase the preferred shares from McCain after 18 months, if they have not been previously redeemed. Accordingly, we do not expect that the increase in the interest rate on the preferred stock from 8% to 12% (which is effective after 18 months) will, in fact, have any effect.

Note 10: Common Stock - Page F-17
55	We note that you issued 1,980,000 in shares of common stock to Laurus in connection with the financing of the acquisition of Thomas Equipment Ltd that had a fair value of $.59 per share. Tell us supplementally and revise your filing to clearly discuss how you determine the fair value of the shares and accounted for the shares in connection with the acquisition financing.	The fair value of the shares of $0.50 (the Canadian dollar equivalent of $0.59 was inadvertently disclosed previously) was determined based on (i.e., equal to) the highest cash price paid by certain of the founding shareholders. The difference between the deemed fair value of the shares and the amount paid by Laurus was recognized as an expense when the shares were issued.
	Clarify that the shares were issued at $.20 and not at $20 as disclosed.	The shares were sold to Laurus for their par amount of $0.01 (one penny) per share, resulting in proceeds of $19,800 or, in thousands of dollars, $20.
Note 17: Recent Events - Page F-21
56	Reference is made to your disclosure in regards to the acquisition of Pneutech, Inc. (Pneutech) on February 28, 2005. Revise your filing to include the cost of the acquired entity as well as the disclosures required by paragraph 57 of SFAS 141. Also, specifically tell us and revise the note to include how you determined the value of the shares of common stock and warrants issued in connection with the acquisition.	The prospectus has been revised to include our March 31, 2005 consolidated financial statements. Those financial statements include the acquisition of Pneutech as of February 28, 2005. Accordingly, the information related to the Pneutech acquisition, including the purchase price and its allocation, is now included in Note 2 to those financial statements. That Note also discusses the value of the shares of common stock and warrants issued in connection with the acquisition.
57	Tell us in detail how you accounted for the redemption of the 929 preference shares and 530,000 special shares owned by 3156176 Canada, Inc. and if this transaction was a condition of the closing of the acquisition.	The transactions related to the acquisition of Pneutech, the redemption of Pneutech’s preference and special shares, and the financing transactions with Roynat Capital and Roynat US were negotiated contemporaneously and closed simultaneously. The Pneutech preference shares and special shares were redeemed in cash for their carrying (and stated) amounts. The funding of these payments by Thomas has been included in the purchase price of the acquisition.

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58	We also note in conjunction with the Pneutech acquisition that you entered into several transactions with Roynat Capital and Roynat U.S. Tell us supplementally and revise to address the following comments:
	• We note that you paid $6,685,000 in cash for the cancellation of Pneutech preferred shares, accrued dividends, warrants, and the repayment of an outstanding debentures. Tell us if these transactions were a condition of the closing of the acquisition and therefore, included in the purchase price of the acquisition.	As noted above, the redemption of the Roynat Capital financing (including the debenture, preferred shares and warrants) and its replacement with financing provided by Roynat US was negotiated in concert with the acquisition of Pneutech. The unamortized discount on the books of Pneutech related to the preferred stock and debentures was expensed on Pneutech’s books immediately prior to the acquisition and the cost of re-purchasing the warrants was charged to paid-in capital on Pneutech’s books. The funding of these payments by Thomas has been included in the purchase price of the acquisition.
	• Tell us how you determined the value of the warrants and accounted for the issuance to Roynat US.	As discussed in Note 12 to our March 31, 2005 financial statements (which are now included in the prospectus) the warrants issued to Roynat US were valued using the Black-Scholes option pricing model. The proceeds received from Roynat US for the warrants and the debenture (discussed below) were allocated between the warrants and the debenture, based on their fair values. The resulting discount from the face (redemption) amount of the debenture (reflecting the portion of the proceeds allocated to the warrants, which amount was credited to paid in capital) is being amortized over the life of the debenture. The debenture was repaid on April 19, 2005, from part of the proceeds of the sale of preferred stock and warrants. The remaining unamortized discount was immediately expensed on that date. Because of the uncertainty inherent in the completion of the preferred stock sale until the closing of that transaction on April 19, 2005, the company did not change its estimate of the period over which the discount should be amortized (i.e., the subsequent repayment of the debenture was deemed to be a Type II subsequent event).
	• Describe to us how you accounted for the sale of subordinated debentures to Roynat US. We further note your disclosure on page 10 that you issued a $5,397,000 convertible debenture to Roynat. Clarify to us if you "sold" this borrowing or if you issued a subordinated debenture	As discussed above, the proceeds received from Roynat US for the subordinated debenture and the warrants were allocated between those instruments, based on their fair values, with the resulting discount from the face (redemption) amount of the debenture being amortized to income. Please comment further if you believe there is a distinction that needs to be clarified between “selling” and “issuing” a debenture.

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Audited. Financial Statements of Thomas Equipment Limited - Page F-22 General
59	We note that Thomas Equipment Limited was a wholly-owned subsidiary of McCain Foods Limited prior to your acquisition of the business. Please confirm to us that the separate financial statements of Thomas Equipment Limited reflects all of the expenses that the Parent incurred on your behalf and that your results of operations would not have been materially different if you had operated as an unaffiliated company. Examples of such expenses include officer and employee salaries, rent or depreciation, advertising, accounting and legal and other selling, general and administrative expenses. If these expenses are common costs, tell us supplementally and revise your filing to provide an explanation of the allocation method used and management's assertion that the method use is reasonable. Refer to SAB Topic 1-B.	The separate financial statements of Thomas Equipment Limited reflect management charges from McCain Foods Limited, which were designed to allocate all central head office costs (e.g., IT costs, legal counsel etc) across the operating subsidiaries within the McCain group. As far as we are aware, there are no expenses that McCain incurred specifically on behalf of Thomas Equipment Limited and not recharged them for them, such as those items listed in SAB Topic 1-B. As the predecessor company was also heavily financed by the McCain group in the past, it is difficult to say that the results of operations would not have been materially different if they had operated as an unaffiliated company, as the company would unlikely have been able to borrow on the same terms.
Pro Forma Combined Condensed Financial Statements - Page F-80
60	In order to enhance a readers understanding, revise your introductory paragraph to include a brief discussion of the terms of each transaction that you are presenting within your pro forma combined financial statements. For instance, revise to include a brief discussion of the Pneutech acquisition and additional acquisition financing that was obtained such as your agreement entered into with Roynat Capital, Roynat U.S., and Laurus Master Fund, Ltd.	The introduction has been revised to include a brief description of the acquisition financing.
Pro Forma Combined Condensed Balance Sheet - Page F-81
61	Please revise your pro forma financial statements to include a separate pro forma adjustment for each item to which you are adjusting the historical financial information. For instance, the pro forma adjustments should be presented gross on the face of the pro-forma statements.	The pro forma combined condensed balance sheet is no longer included in the prospectus, as the acquisition of Pneutech was completed on February 28, 2005 and Pneutech is included in our March 31, 2005 balance sheet.

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Notes to Unaudited Pro Forma Combined Condensed Financial Statements - Page F-83 Note 1. Basis of Presentation - Page F-83
62	We note that Thomas Equipment Ltd has a fiscal year end of June 30 and Pneutech, Inc. has a fiscal year end of October 31st. We also note your disclosure that the pro forma combined statement of operations for the fiscal year ended June 30, 2004 includes Pneutech, Inc.'s historical operations for the year ended October 31, 2004 that have been adjusted to those of Thomas Equipment Limited's year end. In this regard, please revise your introductory paragraph on page F-80 to further clarify to the reader how you conformed the financial information of Pneutech. Inc. to arrive at their operating results for the fiscal year ended June 30, 2004 as presented in the combined condensed statements of operations on page F-82.	The introductory paragraph has been revised.
Note 2- Pro Forma Adjustments - Page F-83
63	Please revise your filing to disclose in the notes a schedule showing the purchase price of the Pneutech acquisition and the calculation of the purchase price and its components, including the purchase price allocation. Please clearly identify the following: (i) net tangible assets and liabilities acquired; (ii) identified intangible assets and (iii) fair value adjustments to net tangible and intangible assets and liabilities. In addition, provide in detail the reason for the significant amount allocated to goodwill and the reason for the significant premium paid for the acquisition.	The prospectus has been revised to include our March 31, 2005 consolidated financial statements. Those financial statements include the acquisition of Pneutech as of February 28, 2005. Accordingly, the information related to the Pneutech acquisition, including the purchase price and its allocation, is now included in Note 2 to those financial statements.
64	It is unclear to us what you mean by “the fair value increase and allocation to goodwill in Pneutech has been reduced by the proportionate share of your director’s post combination ownership" which is included in your pro forma adjustment 2(a). We note your disclosure on page F-21 that you acquired 100% of the common stock of Pneutech and redeemed preference shares and special shares for $530 000 held by 3156176 Canada Inc., an affiliated entity owned by one of a member of your board of directors. Please revise or advise us.	Clifford Rhee, our President and the President of Pneutech, owned 47% of the common shares of Pneutech and, subsequent to our acquisition of Pneutech, owns 6.9% of our common shares. Although not specifically required, we followed the analogy of EITF 88-16 in not recognizing any step-up in the basis of the net assets acquired, to the extent of his continuing interest in those net assets. The effect of this adjustment was to reduce the amount of goodwill recognized in the purchase price allocation by 6.9% and to reduce the value attributed to the common shares issued to effect the transaction by a like amount.
Exhibits
65	It does not appear that your opinion of counsel is filed with this filing. Please ensure that all exhibits are filed on EDGAR.	The opinion of counsel is filed as an exhibit with this filing.
66	It appears that your certificate of incorporation which is incorporated by reference to Exhibit 3.1 of your registration statement Form SB-2, filed August 25, 2000 only allows you to issue 20,000,000 shares of common stock rather than the 200.000.000 you have listed in your description of securities notwithstanding your one-for-40 reverse stock split effected in October 2004. Also, this certificate does not appear to allow you to issue five million shares of preferred as issued pursuant to your certificate of designations filed as an exhibit to Form 8-K filed April 20, 2005. Please explain or reconcile.	An amendment was filed to the certificate of incorporation and filed as an exhibit to the Company’s registration statement (file no. 333-72826). The exhibit index to this amendment has been revised to incorporate the amendment as an exhibit to this filing.