<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549
                                    Form 10-Q

         (Mark One)

              [X]   QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                    SECURITIES  EXCHANGE ACT OF 1934 FOR THE QUARTERLY  PERIOD
                    ENDED JUNE 30, 2001 OR

              [ ]   TRANSITION  REPORT  PURSUANT  TO  SECTION 13 OR 15(d) OF THE
                    SECURITIES  EXCHANGE  ACT OF 1934 FOR THE  TRANSITION
                    PERIOD   FROM _______________ TO _______________

              Commission file number 1-2199

                           ALLIS-CHALMERS CORPORATION
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

                Delaware                                   39-0126090
    -------------------------------                     ----------------
    (State or other jurisdiction of                     (I.R.S. Employer
     incorporation or organization)                    Identification No.)

                        8150 Lawndale, Houston, TX 77012
           4180 Cherokee Drive, Brookfield, WI 53045 (Former address)
           ----------------------------------------------------------
               (Address of principal executive offices) (Zip code)

                                 (713) 928-6200
               --------------------------------------------------
               Registrant's telephone number, including area code

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

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [X] No [ ]

At August 3, 2001 were 1,988,128 shares of Common Stock outstanding.


<PAGE>
2

PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

ALLIS-CHALMERS CORPORATION AND CONSOLIDATED SUBSIDIARIES

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
                                                                 Three Months Ended           Six Months Ended
                                                                       June 30                     June 30
                                                             ------------------------     --------------------------
                                                                2001          2000           2001          2000
                                                             ----------    ----------     ---------     -----------
                                                                           (thousands, except per share)

<S>                                                         <C>            <C>            <C>          <C>
Sales                                                       $     2,001    $        0     $    2,607   $         0
Cost of sales                                                     1,412             0          1,881             0
                                                            -----------    ----------     ----------   -----------

    Gross Margin                                                    589             0            726             0

Marketing and administrative expense                                631           111            918           172
                                                            -----------    ----------     ----------   -----------

    Income/(Loss) from Operations                                   (42)         (111)          (192)         (172)

Other income (expense)
    Interest income                                                   1             0              1             0
    Interest expense                                               (258)            0           (352)            0
    Other                                                            28             0              2             0
                                                            -----------    ----------     ----------   -----------


    Net Income/(Loss)                                       $      (271)   $     (111)    $     (541)  $      (172)
                                                            ===========    ==========     ==========   ===========

    Net Income/(Loss) per Common Share                      $      (.23)   $  (111.00)    $     (.92)  $   (172.00)
                                                            ===========    ==========     ==========   ===========
</TABLE>




This interim statement is unaudited.

The accompanying Notes are an integral part of the Financial Statements.


<PAGE>
                                                                               3


ALLIS-CHALMERS CORPORATION AND CONSOLIDATED SUBSIDIARIES

STATEMENT OF FINANCIAL CONDITION

<TABLE>
<CAPTION>
                                                                                June 30,          December 31,
                                                                                 2001                 2000
                                                                              -----------         ------------
                                                                                           (thousands)
<S>                                                                           <C>                  <C>

Assets
------
Cash and cash equivalents                                                     $       228          $         4
Trade receivables, net                                                              1,616                    -
Inventories, net                                                                       80                    -
Common stock subscribed                                                                 -                1,838
Due from related party                                                                 80                  104
Other current assets                                                                  823                   20
                                                                              -----------          -----------

       Total Current Assets                                                         2,827                1,966

Net property, plant and equipment                                                   8,289                    -
                                                                              -----------          -----------
Goodwill and other intangibles, net                                                 4,329                    -
Other assets                                                                            -                  394
                                                                              -----------          -----------

       Total Assets                                                           $    15,445          $     2,360
                                                                              ===========          ===========

Liabilities and Shareholders' Equity
------------------------------------
Current maturities of long-term debt                                          $     1,094          $         -
Trade accounts payable                                                                435                   12
Accrued employee benefits                                                             440                    -
Other current liabilities                                                             374                    -
                                                                              -----------          -----------

       Total Current Liabilities                                                    2,343                   12

Accrued postretirement benefit obligations                                            875                    -
Long-term debt                                                                      7,441                    -

Shareholders' equity  (See Note 6)
   Common stock ($.15 par value at June 30, 2001;
     $.01 par value at December 31, 2000, authorized
     2,000,000 shares, outstanding 1,988,128
     at June 30, 2001; and 9,875 shares at December 31, 2000)                         298                    -
   Capital in excess of par value                                                   5,656                2,975
   Accumulated deficit                                                             (1,168)                (627)
                                                                              -----------          -----------

       Total Shareholders' Equity                                                   4,786                2,348
                                                                              -----------          -----------

       Total Liabilities and Shareholders' Equity                             $    15,445          $     2,360
                                                                              ===========          ===========
</TABLE>


This interim statement is unaudited.

The accompanying Notes are an integral part of the Financial Statements.


<PAGE>
4


ALLIS-CHALMERS CORPORATION AND CONSOLIDATED SUBSIDIARIES

STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                     Six Months Ended
                                                                                          June 30
                                                                                ----------------------------
                                                                                    2001             2000
                                                                                -----------       ----------
                                                                                         thousands
<S>                                                                             <C>            <C>
Cash flows from operating activities:
   Net loss                                                                     $    (541)     $     (172)
   Adjustments to reconcile net loss to net cash
     (used) by operating activities:

      Depreciation and amortization                                                   322               -
      Changes in operating assets and liabilities:
        Trade receivables, net                                                       (604)              -
        Inventories                                                                    17               -
        Trade accounts payable                                                        471               -
        Other current items                                                          (495)            249
        Other                                                                          (6)              -
                                                                                ---------      ----------

        Net cash provided (used) by operating activities                             (836)             77

Cash flows from investing activities:

    Acquisitions, net of cash acquired                                             (9,730)           (310)
    Capital expenditures                                                             (141)              -
    Proceeds from sale of equipment                                                 3,549               -
                                                                                ---------      ----------

        Net cash (used) by investing activities                                    (6,322)           (310)

Cash flows from financing activities:

    Proceeds from issuance of long-term debt                                        5,866              -
    Proceeds from issuance of common stock                                          1,838             250
    Debt issuance costs                                                              (190)              -
    Payments of long-term debt                                                       (132)              -
                                                                                ---------      ----------

        Net cash provided by financing activities                                   7,382             250
                                                                                ---------      ----------

Net increase in cash and cash equivalents                                             224              17

Cash and cash equivalents at beginning of period                                        4               -
                                                                                ---------      ----------

Cash and cash equivalents at end of period                                      $     228      $       17
                                                                                =========      ==========

Supplemental information - interest paid                                        $     258      $        -
                                                                                =========      ==========
</TABLE>



<PAGE>
                                                                               5


ALLIS-CHALMERS CORPORATION AND CONSOLIDATED SUBSIDIARIES

STATEMENT OF CASH FLOWS (CONTINUED)

Non-cash investing and financing transactions in connection with the acquisition
  of Mountain Air assets:

                  Fair value of net assets acquired              $ (9,970)
                  Goodwill and other intangibles                   (2,656)
                  Note payable to prior owner                       2,200
                  Other adjustments                                   579
                                                                 --------

                  Net cash paid to acquire subsidiary            $ (9,847)
                                                                 --------

Non-cash investing transactions in connection with the merger of Allis-Chalmers
  and OilQuip Rentals, Inc.:

                  Value of common stock exchanged                   2,779
                  Fair value of net assets, less cash received     (1,102)
                  Goodwill and other intangibles                   (1,560)
                                                                 --------

                  Net cash received in acquisition                    117
                                                                 --------
                  Business acquisitions, net of cash received    $ (9,730)
                                                                 ========


This interim statement is unaudited.

The accompanying Notes are an integral part of the Financial Statements.


<PAGE>
6

NOTES TO FINANCIAL STATEMENTS

NOTE 1 - ACCOUNTING POLICIES

This interim financial data should be read in conjunction with the consolidated
financial statements and related notes, management's discussion and analysis and
other information included in Allis-Chalmers Corporation's ("Allis-Chalmers" or
the "Company") Annual Report on Form 10-K for the year ended December 31, 2000,
and the Current Reports on Forms 8-K and 8-K/A filed on May 15, 2001 and July
17, 2001, respectively.

On May 9, 2001, OilQuip Rentals, Inc., an oil and gas rental company
("OilQuip"), merged into a subsidiary of Allis-Chalmers. In the merger, all of
OilQuip's outstanding common stock was converted into 400,000 shares of
Allis-Chalmers' common stock and the right to receive the remaining 9,600,000
shares of Allis-Chalmers' common stock upon the filing of an amendment to the
Amended and Restated Certificate of Incorporation ("Certificate") to authorize
the issuance of such shares.

For legal purposes, Allis-Chalmers acquired OilQuip, the parent company of
Mountain Compressed Air, Inc. ("MCA"). However, for accounting purposes OilQuip
was treated as the acquiring company in a reverse acquisition of Allis-Chalmers.
As a result, the fixed assets, goodwill and other intangibles of Allis-Chalmers
are increased by $2,515,000. Goodwill and other intangibles are being amortized
over 10 years and the fixed assets are being depreciated over 10 years, except
for a building which is being depreciated over 20 years.

OilQuip was incorporated on February 4, 2000 to find and acquire targets to
operate as subsidiaries.

During the period February 4, 2000 (Inception) to February 6, 2001, OilQuip had
been in the development stage. OilQuip's activities through February 6, 2001
consisted of developing its business plan, raising capital and negotiating with
potential acquisition targets.

On February 6, 2001, OilQuip, through its subsidiary MCA, acquired certain
assets of Mountain Air Drilling Service Co., Inc. ("Mountain Air"), whose
business consists of providing equipment and trained personnel in the four
corner areas of the southwestern United States. MCA primarily provides
compressed air equipment and trained operators to companies in the business of
drilling for natural gas.

Use Of Estimates

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements. Actual results could differ from those estimates.

All adjustments considered necessary for a fair presentation of the results of
operations have been included in the unaudited financial statements. The results
of operations for any interim period are not necessarily indicative of the
Company's operating results for a full year.


<PAGE>
                                                                               7

New Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board finalized FASB Statement
No. 141, Business Combinations ("SFAS 141"), and No. 142, Goodwill and Other
Intangible Assets ("SFAS 142"). SFAS 141 requires the use of the purchase method
of accounting and prohibits the use of the pooling-of-interests method of
accounting for business combinations initiated after June 30, 2001. SFAS 141
also requires that the Company recognize acquired intangible assets apart from
goodwill if the acquired intangible assets meet certain criteria. SFAS 141
applies to all business combinations initiated after June 30, 2001 and for
purchase business combinations completed on or after July 1, 2001. It also
requires, upon adoption of SFAS 142, that the Company reclassify the carrying
amounts of intangible assets and goodwill based on the criteria in SFAS 141.

SFAS 142 requires, among other things, the companies no longer amortize
goodwill, but instead test goodwill for impairment at least annually. In
addition, SFAS 142 requires that the Company identify reporting units for the
purposes of assessing potential future impairments of goodwill, reassess the
useful lives of other existing recognized intangible assets, and cease
amortization of intangible assets with an indefinite useful life. An intangible
asset with an indefinite useful life should be tested for impairment in
accordance with the guidance in SFAS 142. SFAS 142 is required to be applied in
fiscal years beginning after December 15, 2001 to all goodwill and other
intangible assets recognized at the date, regardless of when those assets were
initially recognized. SFAS 142 requires the Company to complete a transitional
goodwill impairment test six months from the date of adoption. The Company is
also required to reassess the useful lives of other intangible assets within the
first interim quarter after adoption of SFAS 142.

The Company's previous business combinations were accounted for using the
purchase method. As of June 30, 2001, the net carrying amount of goodwill is
$4,100,000 and other intangible assets is $230,000. Amortization expense during
the six-month period ended June 30, 2001 was $91,000. Currently, the Company is
assessing but has not yet determined how the adoption of SFAS 141 and SFAS 142
will impact its financial position and results of operations.

NOTE 2 - POSTRETIREMENT OBLIGATIONS--PENSION PLAN

In 1994, the Company's independent pension actuaries changed the assumptions for
mortality and administrative expenses used to determine the liabilities of the
Allis-Chalmers Consolidated Pension Plan (the "Consolidated Plan"). Primarily as
a result of the changes in mortality assumptions to reflect decreased mortality
rates of the Company's retirees, the Consolidated Plan was underfunded on a
present value basis. In the first quarter of 1996, the Company made a required
cash contribution to the Consolidated Plan in the amount of $205,000. The
Company did not, however, have the financial resources to make the other
required payments during 1996 and 1997. Given the inability of the Company to
fund such obligations with its current financial resources, in February 1997,
the Company applied to the Pension Benefit Guaranty Corporation ("PBGC") for a
"distress" termination of the Consolidated Plan under section 4041(c) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"). The PBGC

<PAGE>
8


approved the distress termination application in September 1997 and agreed to a
plan termination date of April 14, 1997. The PBGC became trustee of the
terminated Consolidated Plan on September 30, 1997.

Upon termination of the Consolidated Plan, the Company and its subsidiaries
incurred a liability to the PBGC for an amount equal to the Consolidated Plan's
unfunded benefit liabilities. Allis-Chalmers and its subsidiaries also had
liability to the PBGC, as trustee of the terminated Consolidated Plan, for the
outstanding balance of the Consolidated Plan's accumulated funding deficiencies.
The PBGC estimated that the unfunded benefit liabilities and the accumulated
funding deficiencies (together, the "PBGC Liability") total approximately $67.9
million. Effective March 31, 1999, the Company issued 585,100 shares to the PBGC
reducing the pension liability by the estimated fair market value of the shares
to $66.9 million.

In September 1997, the Company and the PBGC entered into an agreement in
principle for the settlement of the PBGC Liability which required, among other
things, satisfactory resolution of the Company's tax obligations with respect to
the Consolidated Plan under Section 4971 of the Internal Revenue Code of 1986,
as amended ("Code"). Section 4971(a) of the Code imposes, for each taxable year,
a first-tier tax of 10% on the amount of the accumulated funding deficiency
under a plan like the Consolidated Plan. Section 4971(b) of the Code imposes an
additional, second-tier tax equal to 100% of such accumulated funding deficiency
if the deficiency is not "corrected" within a specified period. Liability for
the taxes imposed under Section 4971 extends, jointly and severally, to the
Company and to its commonly-controlled subsidiary corporations.

Prior to its termination, the Consolidated Plan had an accumulated funding
deficiency in the taxable years 1995, 1996, and 1997. Those deficiencies
resulted in estimated first-tier taxes under Code Section 4971(a) of
approximately $900,000.

On July 16, 1998, the Company and the Internal Revenue Service ("IRS") reached
an agreement in principal to settle the Company's tax liability under Code
Section 4971 for $75,000. Following final IRS approval, payment of this amount
was made on August 11, 1998.

In June 1999, but effective as of March 31, 1999, the Company and the PBGC
entered into an agreement for the settlement of the PBGC Liability (the "PBGC
Agreement"). Pursuant to the terms of the PBGC Agreement, the Company issued
585,100 shares of its common stock to the PBGC, or 35% of the total number of
shares issued and outstanding on a fully-diluted basis, and the Company has a
right of first refusal with respect to the sale of the shares of common stock
owned by the PBGC. In conjunction with the share issuance, the Company reduced
the pension liability to the PBGC based on the estimated fair market value of
the shares issued on the effective date of March 31, 1999. In accordance with
the terms of the PBGC Agreement, the Company was required to and has (i)
decreased the size of the Board of Directors of the Company (the "Board") to
seven members; (ii) caused a sufficient number of then current directors of the
Company to resign from the Board and all committees thereof; and (iii) caused
three designees of the PBGC, to be elected to the Board. The PBGC has caused the
Company to amend its By-laws ("By-laws") to conform to the terms of the PBGC
Agreement. Furthermore,

<PAGE>
                                                                               9


the Company agreed to pay the PBGC's reasonable professional fees on the 90th
day after a Release Event (as defined below). During the term of the PBGC
Agreement, the Company agreed not to issue or agree to issue any common stock of
the Company or any "common stock equivalent" for less than fair value (as
determined by a majority of the Board). The Company also agreed not to merge or
consolidate with any other entity or sell, transfer or convey more than 50% of
its property or assets without majority Board approval and agreed not to amend
its Certificate or By-laws. In connection with the Merger, substantially all of
the covenants set forth in the PBGC Agreement were terminated.

In order to satisfy and discharge the PBGC Liability, the PBGC Agreement
provides that the Company must either: (i) receive, in a single transaction or
in a series of related transactions, debt financing which makes available to the
Company at least $10 million of borrowings or (ii) consummate an acquisition, in
a single transaction or in a series of related transactions, of assets and/or a
business where the purchase price (including funded debt assumed) is at least
$10 million ("Release Event"). If the 585,100 shares are disposed of by the PBGC
prior to a Release Event and the final satisfaction and discharge of the PBGC
liability, then the liability will be accreted by the estimated fair market
value, $1,024,000, of the shares issued to the PBGC. The merger with OilQuip
(the "Merger") on May 9, 2001 (as described in Note 1) constituted a Release
Event, which satisfied and discharged the PBGC Liability.

In connection with the PBGC Agreement, and as additional consideration for
settling the PBGC Liability, the following agreements, each dated as of March
31, 1999 were also entered into: (i) a Registration Rights Agreement between the
Company and PBGC (the "Registration Rights Agreement"); and (ii) a Lock-Up
Agreement by and among the Company, the PBGC, AL-CH Company, L.P., a Delaware
limited partnership ("AL-CH"), Wells Fargo Bank, as trustee under that certain
Amended and Restated Retiree Health Trust Agreement for UAW Retired Employees of
Allis-Chalmers Corporation (the "UAW Trust"), and Firstar Trust Company, as
trustee under that certain Amended and Restated Retiree Health Trust Agreement
for Non-UAW Retired Employees of Allis-Chalmers Corporation (the "Non-UAW
Trust") (the "Lock-Up Agreement").

The Registration Rights Agreement grants each holder of Registrable Shares
(defined in the Registration Rights Agreement to basically mean the shares of
common stock issued to the PBGC under the PBGC Agreement) the right to have
their shares registered pursuant to the Securities Act of 1933, as amended, on
demand or incidental to a registration statement being filed by the Company. In
order to demand registration of Registrable Shares, a request for registration
by holders of not less than 20% of the Registrable Shares is necessary. The
Company may deny a request for registration of such shares if the Company
contemplates filing a registration statement within 90 days of receipt of notice
from the holders. The Registration Rights Agreement also contains provisions
that allow the Company to postpone the filing of any registration statement for
up to 180 days. The Registration Rights Agreement contains indemnification
language similar to that usually contained in agreements of this kind. In
connection with the Merger, the PBGC agreed to waive certain rights to have its
shares registered on Registration Statements on Forms S-1 and S-2 for a twelve
(12) month period after the Merger.


<PAGE>
10


The Lock-Up Agreement governs the transfer and disposition of shares of the
Company's common stock and the voting of such shares, as well as grants the PBGC
a right of sale of its shares prior to AL-CH, the UAW Trust and the Non-UAW
Trust.

Pursuant to the Lock-Up Agreement, unless the Board has terminated the common
stock transfer restrictions set forth in Article XIII of the Company's
Certificate, AL-CH, the UAW Trust and the Non-UAW Trust each agreed that, during
the period commencing on March 31, 1999 and ending on the third anniversary of
the Release Event, it will not, directly or indirectly, sell, transfer, assign
or dispose of any shares of Company stock it beneficially owns. Commencing with
the third anniversary of the Release Event and continuing until the fifth
anniversary of the Release Event, each of AL-CH, the UAW Trust and the Non-UAW
Trust agreed not to sell, transfer or dispose of any shares of Company stock
without first giving the PBGC an opportunity to sell all or any portion of the
shares of Company stock the PBGC owns. The foregoing right of the PBGC applies
to the sale of Company stock in a public offering or otherwise.

The Lock-Up Agreement also contains a voting component. During the term of the
Lock-Up Agreement, each party to the agreement agreed to vote, at any meeting of
the Company stockholders and in any written consent, all shares of Company stock
owned by it in favor of the election as directors of the Company the persons
nominated by the Nominating Committee of the Board and to refrain from taking
any action contrary to or inconsistent with such obligation. During the term of
the Lock-Up Agreement, each party to the agreement further agreed not to vote
its shares of Company stock or take any other action to amend the Company's
Certificate or By-laws in a manner that is inconsistent with, or in breach of,
the PBGC Agreement. Each party further agreed that it will vote all of its
shares (i) in favor of certain specified amendments to the Company's
Certificate, (ii) for the election of the persons designated by the PBGC (each,
a PBGC Director) to serve on the Board and (iii) in favor of the election of
Company directors who are committed to cause, and who do cause, one PBGC
Director to be appointed to the Nominating Committee of the Board and one PBGC
Director to be appointed as the Chairman of the Compensation Committee of the
Board. In connection with the Merger, the Lock-Up Agreement was terminated in
its entirety.

The acquisition environment has been unfavorable since a cash contribution was
made to the Company in 1989 and remained very difficult for the Company during
2001. The problems continued to include the Company's lack of cash for
investment, limited availability of debt financing for acquisitions and the
financial exposure associated with the Consolidated Plan. The Merger provides
additional cash for investment, additional debt financing availability and has
expunged the PBGC Liability.


<PAGE>
                                                                              11


NOTE 3 - ACQUISITIONS

On January 25, 2001, OilQuip formed a subsidiary, MCA, a Texas corporation. On
February 6, 2001, MCA acquired the business and certain assets of Mountain Air,
a private company, for $10,000,000 (including a $200,000 deposit paid in 2000)
in cash and a $2,200,000 promissory note to the sellers (with interest at 5 3/4
percent and principal and interest due February 6, 2006). The acquisition was
accounted for using the purchase method of accounting. Goodwill of $2,656,000
was recorded with the acquisition.

On May 9, 2001, OilQuip merged into a subsidiary of Allis-Chalmers. In the
Merger, all of OilQuip's outstanding common stock was converted into 400,000
shares of Allis-Chalmers' common stock and the right to receive the remaining
9,600,000 shares of Allis-Chalmers' common stock upon the filing of an amendment
to the Amended and Restated Certificate of Incorporation to authorize the
issuance of such shares. The acquisition was accounted for using the purchase
method of accounting. Goodwill of $1,560,000 was recorded with the Merger.

NOTE 4  -  LEASE COMMITMENTS

On February 6, 2001, MCA, a subsidiary of OilQuip, completed the purchase of
certain assets pursuant to an Asset Purchase Agreement with Mountain Air. A
portion of the purchased equipment was sold to a leasing company. The leasing of
the equipment is being accounted for as an operating lease. Lease payments
totaling $3,480,000 will be made over a period of six years.

The Company rents office space on a five-year lease, which expires February 5,
2006. Rent expense for the second quarter of 2001 was $18,000. The Company has
no further lease obligations.

NOTE 5 - LONG-TERM DEBT

Long-term debt is primarily a result of the cost of the acquisition of certain
assets of Mountain Air.

     o    A term loan in the amount of $3,550,000 at 8%, interest payable
          monthly, with quarterly principal payments of $147,916.67 due on the
          last day of April, July, October and January. The maturity date of the
          loan is February 7, 2004.

     o    A sellers note in the amount of $2,200,000 at 5.75% simple interest.
          The principal and interest are due on February 6, 2004.

     o    Subordinated debt in the amount of $2,000,000 at 12% interest payable
          quarterly commencing on April 1, 2001. The principal will be due upon
          on January 31, 2004.

In addition to the above acquisition debt, there is also debt resulting from the
Board's decision to establish an arrangement by which to compensate former and
continuing Board members who had served from 1989 to March 31, 1999 without
compensation. The Company issued

<PAGE>
12


promissory notes in the amount of $25,000 each to seven current or former
directors and $150,000 to John T. Grigsby, Jr. a former director and current
Executive Vice President and Chief Financial Officer of the Company. The notes
bear interest at the rate of five percent (5%) and are due March 28, 2005;
however, the notes may be prepaid at any time at the discretion of the Company.
In addition, the notes are canceled in the event of a subsequent bankruptcy of
the Company.

NOTE 6 - SHAREHOLDERS' EQUITY

The changes in shareholders' equity in 2001 were as follows:

         OilQuip Rentals, Inc. balance 12/31/00                 $2,348,000
         Fair Value of Warrants Issued in Conjunction
           with MCA Acquisition                                    200,000
         Allis-Chalmers - OilQuip Merger/Reorganization          2,779,000
         Retained Earnings Six Months ended June 30               (541,000)
                                                               -----------
           Total Shareholders' Equity                           $4,786,000

For legal purposes, Allis-Chalmers acquired OilQuip, the parent company of MCA.
However, for accounting purposes OilQuip was treated as the acquiring company in
a reverse acquisition of Allis-Chalmers. The business combination was accounted
for as a purchase. As a result, $2,779,000, the value of the Allis-Chalmers
common stock outstanding at the date of acquisition, was added to shareholders'
equity, which reflects the recapitalization of Allis-Chalmers and the
reorganization of the combined company.

On May 31, 2001, the Board granted to Leonard Toboroff, a director of
Allis-Chalmers, subject to shareholder approval of certain amendments to the
Certificate, an option to purchase 500,000 shares of common stock at $0.50 per
share. The option was granted for services provided by Mr. Toboroff to OilQuip
prior to the Merger, including providing financial advisory services, assisting
in OilQuip's capital structure and assisting OilQuip in finding strategic
acquisition opportunities. The Board was apprised of Mr. Toboroff's services to
OilQuip prior to its approval of the Merger.

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS

On May 9, 2001, OilQuip Rentals, Inc., an oil and gas rental company
("OilQuip"), merged into a subsidiary of Allis-Chalmers. In the Merger, all of
OilQuip's outstanding common stock was converted into 400,000 shares of
Allis-Chalmers' common stock and the right to receive the remaining 9,600,000
shares of Allis-Chalmers' common stock upon the filing of an amendment to the
Amended and Restated Certificate of Incorporation to authorize the issuance of
such shares.

For legal purposes, Allis-Chalmers acquired OilQuip, the parent company of MCA.
However, for accounting purposes OilQuip was treated as the acquiring company in
a reverse acquisition of Allis-Chalmers. As a result the fixed assets, and
goodwill and other intangibles of Allis-Chalmers are increased by $2,515,000.
Goodwill and other intangibles are being amortized over

<PAGE>
                                                                              13


10 years and the fixed assets are being depreciated over 10 years, except for
the buildings which is being depreciated over 20 years.

Results of Operations

Results of operations for 2001 and 2000 reflect the business operations of
OilQuip. The operations of Houston Dynamic Service, Inc., a Allis Chalmers
subsidiary which is involved in the machinery repair and service business
("HDS"), is included from the date of the Merger on May 9, 2001.

During the period February 4, 2000 (Inception) to December 31, 2000, OilQuip was
in the developmental stage. OilQuip's activities for 2000 consisted of
developing its business plan, raising capital and negotiating with potential
acquisition targets. Therefore, the results for operations for 2000 had no
sales, cost of sales, or marketing and administrative expenses that would be
reflective of the ongoing company.

Three months ended June 30, 2001:

Sales in the second quarter of 2001 totaled $2,001,000 in line with
expectations. The reason for the increase from the prior year was the Merger in
May 2001.

Pro forma sales in the second quarter of 2001 totaled $2,563,000 a significant
decrease from $3,069,000 in the second quarter of 2000. Sales at HDS decreased
to $1,222,000 compared with $1,598,000 in the prior year. HDS continues to be
affected by volatile market conditions that prevail in the oil related fields of
refining, processing, chemicals and petrochemical operating throughout the Gulf
Coast. Sales at MCA decreased to $1,341,000 compared with $1,471,000 in the
prior year due to difficulties experienced by MCA customers in obtaining
drilling permits. The permitting process has now returned to a normal schedule.

Gross margin, as a percentage of sales, was 29.4% in the second quarter of 2001.

Marketing and administrative expense was $631,000 in the second quarter of 2001.
The primary reason for the increase from the prior year was the Merger in May
2001. A significant portion of the Company's administrative expenses relates to
expenses for Securities and Exchange Commission and other governmental reporting
as well as legal, accounting and audit, tax, insurance and other corporate
requirements of a publicly held company.

The Company incurred a net loss of $271,000, or $.23 per common share, in the
second quarter of 2001 compared with a loss by OilQuip of $111,000, or $111.00
per common share, in the same period of 2000.

Six months ended June 30, 2001:

Sales in the first six months of 2001 totaled $2,607,000. The reason for the
increase from the prior year was the Merger in May 2001.


<PAGE>
14


Pro forma sales in the first half of 2001 totaled $4,999,000, a slight decrease
from $5,208,000 in the first half of 2000. Sales at HDS increased to $2,559,000
compared with $2,422,000 in the prior year. HDS continues to be affected by
volatile market conditions that prevail in the oil related fields of refining,
processing, chemical and petrochemical operating throughout the Gulf coasts.
Sales at MCA decreased to $2,440,000 compared with $2,786,000 in the prior year
due to difficulties experienced by MCA customers in obtaining drilling permits.
The permitting process has now returned to a normal schedule.

Gross margin, as a percentage of sales, was 27.8% in the first half of 2001.

Pro forma gross margin, as a percentage of sales was 29.4% in the first half of
2001. Additional sales offset the additional cost of depreciation and equipment
lease to improve the margin results from actual.

Marketing and administrative expense was $918,000 in the first half of 2001
compared with $172,000 in the prior year. Amortization expense was $90,000 as a
result of OilQuip's acquisition of MCA and the merger between Allis-Chalmers and
OilQuip. The primary reason for the increase from the prior year was the Merger
in May 2001. A significant portion of the Company's administrative expenses
relates to expenses for Securities and Exchange Commission and other
governmental reporting as well as legal, accounting and audit, tax, insurance
and other corporate requirements of a publicly held company.

Pro forma marketing and expense was $1,728,000 in the first half of 2001.
Amortization expense was $160,000 as a result of OilQuip's acquisition of MCA
and the Merger. A significant portion of the Company's administrative expenses
relates to expenses for Securities and Exchange Commission and other
governmental reporting as well as legal, accounting and audit, tax, insurance
and other corporate requirements of a publicly held company.

The Company incurred a net loss of $541,000, or $.92 per common share, in the
first half of 2001 compared with a loss by OilQuip of $172,000, or $72.00 per
common share, in the same period of 2000.

The Company incurred a pro forma net loss of $704,000, or $.06 per common share,
for the six months ended June 30, 2001.

Financial Condition and Liquidity

Cash and cash equivalents totaled $228,000 at June 30, 2001, an increase from
$4,000 for OilQuip at December 31, 2000 mainly due to the merger and the
acquisition of MCA.

Other current assets include a lease deposit in the amount of $701,000, a result
of the sale/leaseback to help finance MCA's acquisition of certain assets of
Mountain Air.


<PAGE>
                                                                              15


Net trade receivables at June 30, 2001 were $1,616,000. This increased
significantly from the December 31, 2000 balance for OilQuip due to the
acquisition of certain assets of Mountain Air and the Merger.

Inventory at June 30, 2001 was $80,000, consistent with HDS' normal inventory,
which has always been minimal. MCA carries no inventory.

Net property, plant and equipment was $8,289,000 at June 30, 2001, as a result
of the MCA acquisition of certain assets of Mountain Air and the Merger in May
2001. Included is $2.7 million of replacement parts for which no depreciation
has been taken. When put into service, depreciation will be taken on these
replacement parts. Minimal purchases were made after the acquisition and Merger.

Trade accounts payable at June 30, 2001 were $435,000. This increased
significantly from the December 31, 2000 balance due to the acquisition of
certain assets of Mountain Air and the Merger in May, 2001.

Other current liabilities, excluding the current portion of long term debt, were
$815,000 consisting of taxes in the amount of $136,000, accrued salary and
benefits in the amount of $441,000, and legal and professional expenses in the
amount of $70,000. Included in salary and benefits is deferred compensation in
the amount of $161,000 due the president of the Company. All of these balance
sheet accounts increased significantly from December 31, 2000 balances for
OilQuip due to the Merger in May 2001.

Long term debt was $7,441,000 at June 30, 2001. Long-term debt is primarily a
result of the cost of the acquisition of certain assets of Mountain Air which
was consummated in February 2001:

     o    A term loan in the amount of $3,550,000 at 8%, interest payable
          monthly, with quarterly principal payments of $147,916.67 due on the
          last day of April, July, October and January. The maturity date of the
          loan is February 7, 2004.

     o    A sellers note in the amount of $2,200,000 at 5.75% simple interest.
          The principal and interest are due on February 6, 2004.

     o    Subordinated debt in the amount of $2,000,000 at 12% interest payable
          quarterly commencing on April 1, 2001. The principal will be due upon
          on January 31, 2004.

An addition to the above acquisition debt, there is also debt resulting from the
Board's decision to establish an arrangement by which to compensate former and
continuing Board members who had served from 1989 to March 31, 1999 without
compensation. The Company issued promissory notes in the amount of $25,000 each
to seven current or former directors and $150,000 to John T. Grigsby, Jr. a
former director and current Executive Vice President and Chief Financial Officer
of the Company. The notes bear interest at the rate of five percent (5%) and are
due March 28, 2005; however, the notes may be prepaid at any time at the
discretion of

<PAGE>
16


the Company. In addition, the notes are canceled in the event of a subsequent
bankruptcy of the Company.

In addition, the Board granted options to purchase 2,000 shares of the Company's
common stock to the seven directors and an option to purchase 10,000 shares to
Mr. Grigsby. The option price was determined to be $2.75 per share. The options
vested immediately and may be exercised any time prior to March 28, 2010.

The A-C Reorganization Trust, pursuant to the Plan of Reorganization, funds all
costs incurred by Allis-Chalmers which relate to implementation of the Plan of
Reorganization. Such costs include an allocated share of certain expenses for
Company employees, professional fees and certain other administrative expenses.

For a discussion of the Consolidated Plan, the PBGC Liability, the PBGC
Agreement, the Lock-Up Agreement, the Registration Rights Agreement and the
Merger, see Note 2 to the Financial Statements above.

The Environmental Protection Agency ("EPA") and certain state environmental
protection agencies have requested information in connection with several
potential hazardous waste disposal sites in which products manufactured by the
Company before consummation of the Plan of Reorganization were disposed. The EPA
has claimed that the Company is liable for cleanup costs associated with several
additional sites. In addition, certain third parties have asserted that the
Company is liable for cleanup costs or associated EPA fines in connection with
additional sites. In each instance the environmental claims asserted against the
Company involve its prebankruptcy operations. Accordingly, the Company has taken
the position that all cleanup costs or other liabilities related to these sites
were discharged in the bankruptcy. No environmental claims have been asserted
against the Company involving its postbankruptcy operations.

The Company's principal sources of cash in the second quarter included earnings
from the operations of HDS and MCA. The cash requirements needed for the
administrative expenses associated with being a publicly held company are
significant, and the Company will continue to use cash generated by operations
to fund such expenses.

Following the Merger on May 9, 2001, the Company has announced its intent to
investigate acquisition opportunities in the natural gas exploration and
drilling industry and intends to use HDS as a centralized fabrication and
machining facility for its operations. Except to the extent the Company is able
to consummate acquisitions using its stock as consideration, additional funds
will be required to consummate any acquisitions. As a result of the Merger on
May 9, 2001, the Company will also have funds from the operations of OilQuip to
the extent OilQuip generates cash flow, and may have the ability to raise
additional funds. However, to date, management has not determined the impact of
the Merger on its ability to obtain additional funds, and there can be no
assurance that any such additional funds will be available.


<PAGE>
                                                                              17


PART II.  OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits: None.

(b)  Reports on Form 8-K: A report on Form 8-K was filed on May 15,
     2001, reporting the Merger. On July 17, 2001, the Company filed an
     amendment to the 8-K to include financial statements and pro forma
     statements relating to the Merger.



<PAGE>
18



                           UNAUDITED SUMMARY PRO FORMA

                    COMBINED CONDENSED FINANCIAL INFORMATION

The accompanying pro forma consolidated financial statements present the
historical financial information of Allis-Chalmers, as adjusted for the merger
with OilQuip, pursuant to the merger agreement. OilQuip was formed in February
2000 to fund and acquire targets to operate as subsidiaries. In February 2001,
OilQuip, through its subsidiary MCA, acquired the assets of Mountain Air, and
OilQuip is currently a holding company for MCA. The operations of
Allis-Chalmers' wholly-owned subsidiary HDS and OilQuip's wholly-owned
subsidiary MCA comprise the continuing operations of Allis-Chalmers.

Our summary unaudited pro forma combined condensed financial information has
been derived from the audited and unaudited financial statements of the entities
being combined. This data is not necessarily indicative of the combined results
of operations or financial position that would have occurred if the merger had
occurred at the beginning of each period presented or on the dates indicated,
nor is it necessarily indicative of our future operating results or financial
position. The data set forth below should be read in conjunction with our
(audited) financial statements (and unaudited interim financial statements),
including the notes thereto.

The accompanying pro forma consolidated statement of operations for the six
months ended June 30, 2001 and 2000 combines the historical financial
information of OilQuip for the six months ended June 30, 2001 and 2000 with the
historical financial information of Allis-Chalmers for the period of January 1,
2001 through May 9, 2001, and the six-month period ended June 30, 2000, and
Mountain Air for the period of January 1, 2001 through February 7, 2001, and the
six-month period ended June 30, 2000, as if the acquisition had occurred at
January 1, 2000 and January 1, 2000, respectively.


<PAGE>

                                                                              19



                   ALLIS-CHALMERS CORPORATION AND SUBSIDIARIES
        UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENT OF OPERATIONS
                               AS OF JUNE 30, 2001
               (IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                                          PRO FORMA             PRO FORMA
                              ALLIS-CHALMERS         OILQUIP       MOUNTAIN AIR          ADJUSTMENTS              TOTAL
                              --------------         -------       ------------          -----------              -----
<S>                             <C>               <C>             <C>                   <C>                   <C>
Sales                           $    2,559        $      1,947    $          493        $          -          $       4,999
Cost of Sales                        1,790               1,374               214                  150(3,4)            3,528
                                ----------        ------------    --------------        -------------         -------------
Gross Profit                           769                 573               279                 (150)                1,471
Marketing and
Administrative Expense                 833                 660               165                   70(2,5)            1,728
                                ----------       -------------    --------------        -------------        --------------

Income (Loss) from
Operations                             (64)                (87)              114                 (220)(2,3,4,5)        (257)

Other Income (Expense)
   Interest Income                       3                   1                 -                    -                     4
   Interest Expense                    (19)               (347)                -                  (87)(6)              (453)
   Other                            66,876(1)                2                 -              (66,876)(1)                 2
                                ----------        -------------   --------------        -------------         -------------
Net Income/(Loss)               $   66,796        $       (431)   $          114        $     (67,183)         $       (704)
                                ==========        =============   ==============        =============          ============
Basic and Diluted Income
(Loss) per Share                                                                                               $       (.06)
                                                                                                               ============
Outstanding:                                                                                                     11,588,128
                                                                                                               ============
</TABLE>



<PAGE>
20

                   ALLIS-CHALMERS CORPORATION AND SUBSIDIARIES
        UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENT OF OPERATIONS
                               AS OF JUNE 30, 2000
               (IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
                                                                                          PRO FORMA             PRO FORMA
                              ALLIS-CHALMERS         OILQUIP       MOUNTAIN AIR          ADJUSTMENTS              TOTAL
                             ----------------   ---------------  ----------------      ---------------        -------------
<S>                             <C>               <C>             <C>                   <C>                   <C>
Sales                           $    2,422        $          -    $        2,786        $          -          $       5,208
Cost of Sales                        1,716                   -             1,137                  645(3,4)            3,498
                                ----------        ------------    --------------        -------------         -------------
Gross Profit                           706                   -             1,649                 (645)                1,710

Marketing and
Administrative Expense                 779                 172               379                  155(2,5)            1,485
                                ----------       -------------    --------------        -------------        --------------

Income (Loss) from
Operations                             (73)               (172)            1,270                 (800)(2,3,4,5)         225

Other Income (Expense)
   Interest Income                       2                   -                 8                    -                    10
   Interest Expense                    (15)                  -                 -                 (434)(6)              (449)
   Other                                 -                   -                 7                    -                     7
                                ----------        -------------   --------------        -------------         -------------
Net Income/(Loss)               $      (86)       $       (172)   $        1,285        $      (1,234)         $       (207)
                                ==========        =============   ==============        =============          ============
Basic and Diluted Income
(Loss) per Share                                                                                               $       (.02)
                                                                                                               ============
Outstanding:                                                                                                     11,588,128
                                                                                                               ============
</TABLE>


<PAGE>
                                                                              21


                   ALLIS-CHALMERS CORPORATION AND SUBSIDIARIES
          NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCAL STATEMENTS

Note 1 - Basis Of Presentation

The accompanying pro forma consolidated financial statements are presented to
reflect the merger of OilQuip and Allis-Chalmers, accounted for as a reverse
acquisition, with the pre-merger operation of Allis-Chalmers and OilQuip
becoming the ongoing operations of the combined entities.

In February 2001, OilQuip, through its subsidiary MCA acquired the assets of
Mountain Air. OilQuip is currently a holding company for MCA.

The accompanying pro forma consolidated statements of operations combines the
historical operations of Allis-Chalmers, OilQuip and Mountain Air for the six
months ended June 30, 2001 and the six months ended June 30, 2000 as if the
acquisition had occurred at January 1, 2001 and January 1, 2000 of the period
presented, respectively.

The accompanying pro forma results for the six months ended June 30, 2001 and
2000, respectively, are comparable.

Note 2 - Pro Forma Adjustment.

Certain assets of Mountain Air were acquired on February 7, 2001 by MCA, which
is a subsidiary of OilQuip. Mountain Air's operational data is for the period
January 1, 2001 through February 6, 2001. Pro forma adjustments for the
following equipment lease expense, depreciation and amortization expense have
been made for the period January 1 through February 6, 2001.

1.       See Allis-Chalmers Note 2 - Post Retirement Obligation-Pension Plan.
         Pension liability discharge triggered by the Merger of Allis-Chalmers
         and OilQuip.

2.       For legal purposes, Allis-Chalmers acquired OilQuip, the parent company
         of MCA. However, for accounting purposes OilQuip was treated as the
         acquiring company in a reverse acquisition of Allis-Chalmers. As a
         result the fixed assets, and goodwill and other intangibles of
         Allis-Chalmers are increased by $2,515,000. Goodwill and other
         intangibles are being amortized over 10 years and the fixed assets are
         being depreciated over 10 years and the building over 20 years.

3.       The equipment lease expense of certain assets acquired in the sale of
         Mountain Air, which became part of a sale/leaseback to help finance the
         acquisition.

4.       Additional depreciation expense on assets acquired and adjusted to fair
         value from the purchase of certain assets of Mountain Air and
         additional corporate administrative expenses.


<PAGE>

22


5.       Amortization expense for goodwill and other intangibles, net, as a
         result of the acquisition of certain assets of Mountain Air. Goodwill
         is being amortized over 20 years.

6.       Interest costs as a result of the cost of the acquisition of certain
         assets of Mountain Air.

         o        A term loan in the amount of $3,550,000 at 8%, interest
                  payable monthly, with quarterly principal payments of
                  $147,916.67 due on the last day of April, July, October and
                  January. The maturity date of the loan is February 7, 2007.

         A sellers note in the amount of $2,200,000 at 5.75% simple interest.
         The principal and interest are due on February 6, 2004.

         o        Subordinated debt in the amount of $2,000,000 at 12% with
                  interest payable monthly and principal due in 2004.

         o        Deferred financing costs are being amortized over 6 years, the
                  length of the term loan.


<PAGE>
                                                                              23


                                    SIGNATURE

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

                                                 Allis-Chalmers Corporation
                                                 --------------------------
                                                         (Registrant)

                                                 /s/ John T. Grigsby, Jr.
                                                 ----------------------------
                                                 John T. Grigsby, Jr.
                                                 Executive Vice President and
                                                 Chief Financial Officer

August 14, 2001