We intend for this discussion to provide the reader with information that will assist in understanding our financial statements, the changes in certain key items in those financial statements from year to year, and the primary factors that accounted for those changes, as well as how certain accounting principles affect our financial statements. The discussion also provides information about the financial results of the various segments of our business to provide a better understanding of how those segments and their results affect the financial condition and results of operations of the Company as a whole. To the extent that our analysis contains statements that are not of a historical nature, these statements are forward-looking statements, which involve risks and uncertainties. See "Special Note Regarding Forward-Looking Statements". The following should be read in conjunction with our Consolidated Financial Statements and the related Notes included elsewhere in this filing.

Overview

Cycle Country Accessories Corp. (a Nevada corporation) was incorporated in the State of Nevada on August 15, 2001 as a C corporation. The initial capitalization consisted of 3,625,000 shares of common stock. On August 21, 2001, we entered into an agreement to purchase all of the outstanding common stock of Cycle Country Accessories Corp. (an Iowa corporation) for $4,500,000 in cash and 1,375,000 shares of our common stock. Cycle Country Accessories Corp. (an Iowa corporation) was originally incorporated on August 8, 1983 and is headquartered in Milford, Iowa. Since both Companies were under common control by virtue of majority ownership and common management by the same three individuals, this transaction was accounted for in a manner similar to a pooling of interests. We used the proceeds from a $4,500,000 term note entered into with a commercial lender to purchase all of the outstanding common stock of Cycle Country Accessories Corp. (an Iowa corporation). Additionally, any proceeds from the sale of stock received from the exercise of any of the previously issued 2,000,000 outstanding warrants were to be applied to any outstanding balance on the Note (see Liquidity and Capital Resources).

On August 21, 2001, Cycle Country Accessories Corp. (an Iowa corporation) acquired its operating facility, which consisted of land and building with a fair value of $1,500,000, from certain stockholders. The consideration given was comprised of $300,000 in cash and 390,000 shares of common stock of Cycle Country Accessories Corp. (a Nevada corporation). On August 14, 2001, Cycle Country Accessories Corp. (an Iowa corporation) merged with Okoboji Industries Corporation. Since both Companies were owned and managed by the same three individuals, this transaction was also accounted for in a manner similar to a pooling of interests.

As a result of the transactions described above, we are the Successor Company to the business activities of the aforementioned companies.

In March of 2002, Perf-Form Products, Inc. was purchased for $462,100 in cash and 22,500 shares of common stock for a total purchase price of approximately $528,800.

In June of 2002, the Company acquired Weekend Warrior. The purchase was made for 10,000 shares of common stock.

On April 29, 2005, we consummated an Agreement and Plan of Merger (the "Agreement") with the Selling Shareholders through which we acquired Simonsen Iron Works. The terms of the Agreement provided that the Selling Shareholders exchanged 100% of the outstanding shares of Simonsen for cash consideration of $7,000,000 and $8,000,000 worth of our common stock, which amounted to 2,179,280 shares.

On November 14, 2007 the company sold its Milford, Iowa property to the company's founders, Jim and Jan Danbom in exchange for all of their Cycle Country common shares. The company now leases approximately 90% of the facility from the Danboms under a three year triple net lease that contains two one year renewal options. The annual lease cost is $185,104 payable in monthly installments.

We are one of the world's largest manufacturers of accessories for all terrain vehicles ("ATVs"). We manufacture a complete line of branded products, including snowplow blades, lawnmowers, spreaders, sprayers, tillage equipment, winch mounts, baskets and an assortment of other ATV accessory products. These products custom fit essentially all ATV models from Honda, Yamaha, Kawasaki, Suzuki, Polaris, Arctic Cat and Bombardier. We design, engineer, assemble, and manufacture a majority of the accessory products at our Spencer facility. Our Milford facility serves as our light manufacturing, warehousing, and shipping facility. We completed the relocation of our corporate headquarters during the first quarter of fiscal 2007 to our Spencer facility from our Milford facility.

We are recognized as a leader in the manufacturing of high quality ATV accessory products. This reputation has enabled us to develop key, long-term relationships with ATV manufacturers and

distributors. We sell our products to 9 distributors in the United States, most of which have sold our products continuously for the past 26 years. The distributors call on and sell Cycle Country products to virtually every ATV dealer in North America. Similar strategic arrangements have also been developed internationally. We currently have 11 international distributors distributing our products to over 30 countries.

The success of Cycle Country can be attributed to not only providing quality products at reasonable prices, but more importantly the superior service that follows the sale. We at Cycle Country strive to provide products and services, as good or better, than we expect for ourselves.

We are also the largest manufacturer of golf car hubcaps in the world. We estimate that we maintain 70% of the Original Equipment Manufacturer hubcap business. We have always sold directly to golf car manufacturers and we believe that we have an excellent distribution network that reaches the after market throughout the United States, Europe and Asia.

We are continuing our growth in the lawn and garden industry with our Weekend Warrior products. Our market research continues to tell us that the manufacturers of garden tractors and utility vehicles need accessories similar to those available in the ATV industry. Our pull-behind products, 3-point implements, and other branded and private label accessories can be used with lawn and garden tractors and utility vehicles. We sell our products to several equipment manufacturers, dealers and retail outlets within the lawn and garden and utility vehicle markets. We continue to work with other manufacturers, dealers, and retail outlets to introduce these accessories into their product lines.

Additionally, we are successfully continuing to provide contract manufacturing services at our Spencer facility (Simonsen Iron Works, Inc.) to outside manufacturers. We intend to continue growing this market by promoting the capabilities and unique manufacturing processes the Spencer facility can provide to other manufacturers.

Critical Accounting Policies and Estimates

The Company's discussion and analysis of its financial condition and results of operations are based upon its Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates the estimates including those related to bad debts and inventories. The Company bases its estimates on historical experiences and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value

of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The Company believes the following critical accounting policies affect the more significant judgments and estimates used in the preparation of the Consolidated Financial Statements:

Accounts Receivable - Trade credit is generally extended to customers on a short-term basis. These receivables do not bear interest, although a finance charge may be applied to balances more than 30 days past due. Trade accounts receivable are carried on the books at their estimated collectible value. Individual trade accounts receivable are periodically evaluated for collectibility based on past credit history and their current financial condition. Trade accounts receivable are charged against the allowance for doubtful accounts when such receivables are deemed to be uncollectible.

Allowance for Doubtful Accounts - the Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. If the financial condition of the Company's customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowance may be required.

Reserve for Inventory - the Company records valuation reserves on its inventory for estimated excess and obsolete inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future product demand and market conditions. If future product demand or market conditions are less favorable than those projected by management, additional inventory reserves may be required.

Depreciation of Long-Lived Assets - the Company assigns useful lives for long-lived assets based on periodic studies of actual asset lives and the intended use for those assets. Any change in those assets lives would be reported in the statement of operations as soon as any change in estimate is determined.

Goodwill and Other Intangibles - Goodwill represents the excess of the purchase price over the fair value of the assets acquired. The Company accounts for goodwill in accordance with Statement of Financial Accounting Standard (SFAS) no. 142, "Goodwill and Other Intangible Assets". SFAS No. 142 requires the use of a non- amortization approach to account for purchased goodwill and certain intangibles. Under the non-amortization approach, goodwill and certain intangibles are not amortized into results of operations, but instead are reviewed for impairment at least annually and written down and charged to results of operations in the periods in which the recorded value is determined to be greater than the fair value. The Company has reviewed the goodwill recorded at September 30, 2008 and found no impairment.

Accrued Warranty Costs - the Company records a liability for the expected cost of warranty-related claims as its products are sold. The Company provides a one-year warranty on all of its products except the snowplow blade, which has a limited lifetime

warranty. The amount of the warranty liability accrued reflects the Company's estimate of the expected future costs of honoring its obligations under the warranty plan. The estimate is based on historical experiences and known current events. If future estimates of expected costs were to be less favorable, an increase in the amount of the warranty liability accrued may be required.

Distributor Rebate Payable - Effective April 1, 2007, the Company implemented a new distributor rebate program based on quarterly sales orders that includes a much broader range of eligible products. The Company records a liability for the expected cost of offering the quarterly rebate program to certain eligible distributors. The rebate liability is calculated and recognized as eligible ATV accessory products are ordered and recorded into our system as sales orders that meet delivery and other program requirements. The Program provides for a tiered rebate structure ranging from 1% to 7% based on orders for eligible products placed during each quarterly period that meet program requirements. The Program rebate is provided to the applicable distributors as a credit against future purchases of the Company's products. Prior to April 1, 2007, the Company recorded a liability for the expected cost of offering an annual rebate program to certain eligible distributors. The rebate liability was calculated and recognized as eligible ATV accessory products were sold based upon factors surrounding the activity and prior experience of the eligible distributors. The Program provided for a 7% rebate on purchases of certain eligible products during the Program period if certain pre-determined cumulative purchase levels were obtained. The Program rebate was provided to the applicable distributors as a credit against future purchases of the Company's products.

Accounting for Income Taxes - the Company is required to estimate income taxes in each of the jurisdictions in which it operates. This process involves estimating actual current tax exposure for the Company together with assessing temporary differences resulting from differing treatment of items, such as property, plant and equipment depreciation, for tax and accounting purposes. Actual income taxes could vary from these estimates due to future changes in income tax law or results from final tax exam reviews. At September 30, 2008, the Company assessed the need for a valuation allowance on its deferred tax assets. A valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Based upon the historical operating profits and the near certainty regarding sufficient near term taxable income, management believes that there is no need to establish a valuation allowance. Should the Company determine that it would not be able to realize all or part of its net deferred tax assets in the future, a valuation allowance may be required.

Results of Operations - Year ended September 30, 2008 vs Year ended September 30, 2007

        OVERALL.




                   Fiscal Year 2008     Fiscal Year 2007     Increase       Increase
                                                           (Decrease) $    (Decrease) %


Revenue               $17,513,941        $14,214,250       $ 3,299,691      23.21

Cost of goods sold    $13,215,382        $9,332,869        $ 3,882,513      41.60%

Gross profit          $ 4,298,559        $ 4,881,381       $ (582,822)      (11.94%)

Gross profit %             24.5 %              34.3%                        (9.80%)

The increase in revenues for the twelve months ended September 30, 2008 was mainly attributable to an increase in ATV Accessories sales of 41% as compared to the twelve months ended September 30, 2007. The decrease in gross profit as a percentage of revenue was mainly attributable to an increase in cost of materials, basically steel costs that were not able to be passed on to the dealer. Cycle Country was also aggressive in its marketing and granted additional sales discounts and allowances.

While Cycle Country is known for its snowplow blades and the blades have historically been the largest component of our total revenue, our new business plan acknowledges the seasonality of our sales and places major emphasis on aggressive development of new products, new markets, and product innovations to vigorously grow revenues and reduce our seasonality. The increase in Wheel Cover revenues can be attributed to continued success of our 'SS' wheel cover and our new 'Beadlock A/T ' wheel cover released during the third quarter of fiscal 2007, as well as increased sales to OEMs and distributors.

                   Fiscal Year 2008     Fiscal Year 2007     Increase       Increase
                                                           (Decrease) $    (Decrease) %

Selling, general
and
administrative
expenses              $4,763,859        $4,018,875         744,984        18.5%

As a percentage of revenue, selling, general, and administrative expenses were 27% for the fiscal year ended September 30, 2008 compared to 28% for the fiscal year ended September 30, 2007.

BUSINESS SEGMENTS As more fully described in Note 14 to the Consolidated Financial Statements, the Company operates four reportable business segments: ATV Accessories, Plastic Wheel Covers, Weekend Warrior (formerly Lawn and Garden), and Contract Manufacturing. ATV accessories is vertically integrated and utilizes a two- step distribution method, we are vertically integrated in our Plastic Wheel Cover segment and utilize both direct and two-step distribution methods, Weekend Warrior utilizes a single-step distribution method, and our Contract Manufacturing segment deals directly with other OE manufacturers and businesses in various industries.

Our newest markets, golf car accessories and UTV (side-by-side) accessories feature products designed to enhance the look and functionality of golf cars and utility vehicles. Brush guards, kick plates, steering column covers, blades, and a safari rack, all in black or chrome diamond plate are some of the accessories we developed and took to market in fiscal 2007. While Cycle Country is known for its snowplow blades and the blades have historically been the largest component of our total revenue, our new business plan acknowledges the seasonality of our sales and places major emphasis on aggressive development of new products, new markets, and product innovations to vigorously grow revenues and reduce our seasonality.

Impacting the gross profit as a percentage of revenue was changes to allocations of burden and factory overhead among our various business segments as management regrouped certain expense items and recalculated the burden and overhead rates of the company.

Looking ahead to fiscal 2009 we project a modest growth in revenues with gross profits for our ATV Accessories ranging in the 40% to 45% range. With a minimum of 12 new products due to be released next year, continued focus on accessories for the double-digit growing Utility Vehicles, Asian ATV imports, and Golf Cars, stronger efforts to attain more just-in-time (JIT) agreements for our raw material, and continue our concerted effort to actively market and build name recognition with dealers, management believes that sales for ATV accessories will again increase year over year and profit percentages will be maintained.

As a percentage of revenue, selling, general, and administrative expenses were 27.2% for the fiscal year ended September 30, 2008 compared to 28.3% for the fiscal year ended September 30, 2007. The significant changes in operating expenses for the twelve months ended September 30, 2008 as compared to the twelve months ended September 30, 2007 were: officers salary increased $117,000 due to our departure with contracted officer Randy Kempf and our CFO, Dave Davis. New advertising initiatives such as a television commercial promoting our Weekend Warrior products, new Contract Manufacturing brochures and video, contributed to the increase in advertising expense for the fiscal year ended September 30, 2008 compared to the fiscal year ended September 30, 2007. Other professional fees increased as management engaged a consulting firm to provide analysis and processes documentation needed for compliance with Sarbanes-Oxley. The SOX consulting fees for fiscal 2008 totaled approximately $126,000. During the latter part of the second quarter, additional streamlining and consolidation of manufacturing and assembly processes, consolidation of our engineering, research & development to one location, and additional consolidation of administrative and customer service tasks provided additional cost and expense reductions during the third and fourth quarters of fiscal 2008. Management believes these accomplishments will help alleviate the additional expenses the Company will continue to incur over the next year as a result of continued Sarbanes-Oxley work, finishing the implementation and training of a new full scale manufacturing/distribution and accounting software program.

Liquidity and Capital Resources

Overview

Cash flows provided by operating activities of continuing operations and previous build-up of cash balances provided us with our source of liquidity during the twelve months ended September 30, 2008.

Cash and cash equivalents were $194,576 as of September 30, 2008 compared to $454,848 as of September 30, 2007. Until required for operations, our policy is to invest any excess cash reserves in bank deposits, money market funds, and certificates of deposit.

In fiscal 2008 we made approximately $1,280,108 in capital expenditures, and paid approximately $684,879 of long-term debt principal. For the fiscal year of 2009 management expects total capital expenditures to be within normal depreciation numbers and thus be neutral to cash flow.

Working Capital

       Net working capital was $5,531,102 at September 30, 2008
compared to $6,853,024 at September 30, 2007.  The significant
changes in working capital are as follows:


                         Balance               Balance           Increase/     Percent
                    September 30, 2008    September 30, 2007    (Decrease)      Change

Cash and cash
equivalents            $194,576              $   454,848        $   (260,272)   -57.2%

Accounts
receivable              2,935,647              2,235,856             699,791     31.8%

Inventories             5,110,499              5,270,644            (160,145)    -3.0%

Deferred income taxes     345,920                100,302             245,618    244.9%

Prepaid expenses          209,617                227,437             (17,820)    -7.8%

Accounts payable          577,278                195,499             381,799    195.3%

Accrued expenses          725,082                588,210             136,872     23.3%

Deferred gain             360,802                   -                360,802       -

Line of credit          1,000,000                   -              1,000,000       -


Current
portion of
bank notes
payable                   811,053                623,697             187,356     30.0%

Contractual Obligations and Other Commercial Commitments

The following table sets forth information concerning our
obligations and commitments to make contractual future payments,
such as debt agreements, purchase obligations and contingent
commitments.

Payments Due During Fiscal Years Ending September 30,


                    Total          2009           20010-2011    2012-2013     Thereafter
Contractual
Obligations:

  Long term debt
   obligations      $6,993,500     $2,081,000     $1,945,000    $1,077,500

Unrecorded
Contractual
Obligations:          $143,000       $143,000           -             -

  Purchase
   obligations      $  107,500       $107,500           -             -             -

The long term debt obligations consist of three bank notes payable, each with a different length of term, which is discussed in more detail below. In addition the company has a 1 million dollar line of credit that was in use at year end September 30, 2008. The amounts included in the table represent both principal and interest based on current bank amortization schedules.

Purchase obligations include all legally binding contracts such as firm commitments for inventory purchases, as well as capital expenditures, and legally binding service contracts. Purchase orders for inventory and other services are not included in the table above. Purchase orders represent authorizations to purchase rather than binding agreements. For the purposes of this table, contractual obligations for purchase of goods or services are defined as agreements that are enforceable and legally binding and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Our purchase orders are based on our current inventory needs and are fulfilled by our suppliers within short time periods.

The expected timing for payment of the obligations discussed above is estimated based on current information. Timing of payments and actual amounts paid may be different depending on the timing of receipt of goods or services or changes to agreed-upon amounts for some obligations.

On May 13, 2008, the Company and its commercial lender amended the original secured credit agreement dated August 21, 2001. Under the terms of the new amendment to the secured credit agreement, Note One and Note Two discussed above were amended. The Notes, going forward, are payable in monthly installments from May 2008 until April 2017 for Note One and until April 2011 for Note Two, which include principal and interest (6.125% as of September 30, 2008 and 7.375% as of September 30, 2007) for Note One and principal and interest (6.125% as of September 30, 2008 and 7.375% as of September 30, 2007) for Note Two, with a final payment upon maturity on April 25, 2017, for Note One and April 25, 2011, for Note Two.

The interest rate is fixed for Note Two and is fixed for Note One until April 2011, after which the interest rate will be reset to prime + 0.50% every 60 months. However, the interest rate for Note One can never exceed 10.5% or be lower than 5.5%. The monthly payment is $33,449 and $42,049 for Note One and Note Two,

respectively.

Line of Credit

On April 28, 2006, the Company and its commercial lender amended the original secured credit agreement dated August 21, 2001. Under the terms of the amended secured credit agreement, the Company has a Line of Credit for the lesser of $1,000,000 or 80% of eligible accounts receivable and 35% of eligible inventory. The Line of Credit bears interest at prime plus 0.50% (5.5% at September 30, 2008) and is collateralized by all of the Company's assets. The variable interest rate can never exceed 10.5% or be lower than 5.5%. The Line of Credit matured on December 31, 2008 and Cycle Country is working with the bank to renew the Line.

The secured credit agreement contains conditions and covenants that prevent or restrict the Company from engaging in certain transactions without the consent of the commercial lender and require the Company to maintain certain financial ratios, including term debt coverage and maximum leverage. During the fiscal year ended September 30, 2008, the Company has met all of its bank covenant terms except the long term debt coverage ratio. As of the issuance of this report, Cycle Country has requested and received a one-time waiver from the bank. In addition, the Company is required to maintain a minimum working capital and shall not declare or pay any dividends or any other distributions.

Warrants

The Company has 40,000 previously issued warrants outstanding to purchase one share of the Company's common stock per warrant at $4.00 per share which do not expire until June 9, 2010. For the twelve months ended September 30, 2008, none of the 40,000 warrants were exercised. The proceeds are to be applied to the outstanding balance on the Notes.

Capital Resources

Management believes that the Company's operations are not expected to require significant capital expenditures during fiscal year 2009.Management believes that existing cash balances, cash flow to be generated from operating activities and available borrowing capacity under its line of credit agreement will be sufficient to fund normal operations, and capital expenditure requirements, for at least the next twelve months. At this time management is not aware of any factors that would have a materially adverse impact on cash flow during this period.

Special Note Regarding Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 (the "Reform Act") provides a safe harbor for forward-looking statements made by or on behalf of the Company. The Company and its representatives may, from time to time, make written or verbal forward-looking statements, including statements contained in the Company's filings with the Securities and Exchange Commission and in its reports to . . .