<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
                  MARCH 31, 2003 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.)


                  7660 Woodway, Suite 200, Houston, Texas 77063
              ---------------------------------------------------
              (Address of principal executive offices) (Zip code)


                                 (713) 369-0550
               --------------------------------------------------
               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 May 13, 2003 were 19,633,340 shares of Common Stock outstanding.

<PAGE>

                           ALLIS-CHALMERS CORPORATION

                                    FORM 10-Q

                  For the Quarterly Period Ended March 31, 2003

                                TABLE OF CONTENTS


Part I.           Financial Information

Item 1:           Financial Statements                                        3

                  Consolidated Statements of Operations for the three
                    months ended March 31, 2003 and 2002                      3

                  Consolidated Balance Sheets as of March 31, 2003
                    and December 31, 2002                                     4

                  Consolidated Statements of Cash Flows for the three
                  months ended March 31, 2003 and 2002                        5

                  Notes to Consolidated Financial Statements                  6

Item 2:           Management's Discussion and Analysis of Financial
                    Condition and Results of Operations                      14

Item 4:           Controls and Procedures                                    18

Part II.          Other Information                                          19

Item 1:           Legal Proceedings                                          19

Item 3:           Default on Senior Securities                               19

Item 6:           Exhibits and Reports on Form 8-K                           19

Signatures                                                                   20

Certifications                                                               21

                                       2
<PAGE>

PART I.  FINANCIAL INFORMATION
         ---------------------

ITEM 1.  FINANCIAL STATEMENTS
-----------------------------

<TABLE>
                              ALLIS-CHALMERS CORPORATION
                         CONSOLIDATED STATEMENTS OF OPERATIONS
                           (in thousands, except per share)
<CAPTION>

                                                              Three Months Ended
                                                                   March 31,
                                                             2003              2002
                                                         ------------     ------------
                                                         (thousands, except per share)
<S>                                                      <C>              <C>
Sales                                                    $     6,999      $     3,253
Cost of sales                                                  4,995            2,614
                                                         ------------     ------------
   Gross Margin                                                2,004              639

Marketing and administrative expense                             981              840
                                                         ------------     ------------

   Income/ (loss) from operations                              1,023             (201)

Other Income (expense)
   Interest income                                                --               30
   Interest expense                                             (637)            (423)
   Other                                                          12                1
   Minority interest                                            (187)             (17)
                                                         ------------     ------------

Net income/(loss) before income taxes                            211             (610)
                                                         ------------     ------------

   Provision for income taxes                                     --              (30)

Net income/ (loss)                                               211             (640)
                                                         ------------     ------------

   Preferred stock dividend                                     (394)             (58)

Net income/ (loss) attributed to common shares           $      (183)     $      (698)
                                                         ============     ============

Net income/ (loss) per common share                      $     (0.01)     $     (0.04)
                                                         ------------     ------------

Weighted average number of common shares outstanding
     Basic                                                    19,633           16,274
                                                         ============     ============

    Diluted                                                   19,633           16,274
                                                         ============     ============

This interim statement is unaudited.

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

                                          3
</TABLE>
<PAGE>

<TABLE>
                                  ALLIS-CHALMERS CORPORATION
                                  CONSOLIDATED BALANCE SHEETS
                                 (in thousands, except shares)
<CAPTION>

                                                                   March 31,      December 31,
                                                                     2003             2002
                                                                 ------------     ------------
<S>                                                              <C>              <C>
Assets
Cash and cash equivalents                                        $       257      $       146
Trade receivables, net                                                 5,885            4,409
Lease deposit                                                            424              525
Lease receivable, current                                                180              180
Prepaids and other current assets                                      1,013              317
                                                                 ------------     ------------

    Total current assets                                               7,759            5,577

Property, plant and equipment, net                                    16,856           17,124
Goodwill                                                               7,829            7,829
Other intangible assets, net                                           2,518            2,650
Debt issuance costs, net                                                 413              515
Lease receivable                                                       1,058            1,042
Other assets                                                              41               41
                                                                 ------------     ------------

    Total assets                                                 $    36,474      $    34,778
                                                                 ============     ============

Liabilities and Shareholders' Equity

Current maturities of long-term debt                             $    13,565      $    13,890
Trade accounts payable                                                 3,686            2,106
Accrued employee benefits and payroll taxes                              320              280
Accrued interest                                                       1,085              811
Accrued expenses                                                       1,303            1,506
                                                                 ------------     ------------

   Total current liabilities                                          19,959           18,593

Accrued postretirement benefit obligations                               660              670
Long-term debt, less current portion                                   7,273            7,231
Other long-term liabilities                                              270              270

Minority interest                                                      1,771            1,584
Redeemable warrants                                                    1,500            1,500
Redeemable convertible preferred stock                                 4,215            3,821

Shareholders' equity:
Common stock, $.15 par value (110,000,000 shares authorized;
19,633,340 issued and outstanding at March 31, 2003 and at
December 31, 2002)                                                     2,945            2,945
Capital in excess of par value                                         6,843            7,237
Accumulated (deficit)                                                 (8,962)          (9,173)
                                                                 ------------     ------------

Total shareholders' equity                                               826            1,009
                                                                 ------------     ------------

Total liabilities and shareholders' equity                       $    36,474      $    34,779
                                                                 ============     ============

This interim statement is unaudited.

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

                                              4
</TABLE>
<PAGE>

<TABLE>
                                        ALLIS-CHALMERS CORPORATION
                                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                                              (in thousands)
<CAPTION>

                                                                                 Three Months Ended
                                                                                      March 31,
                                                                                      ---------
                                                                                2003             2002
                                                                            ------------     ------------
<S>                                                                         <C>              <C>
Cash flows from operating activities:
Net income (loss)                                                           $       211      $      (640)
Adjustments to reconcile net (loss) to net
       cash provided (used) by operating activities:
Depreciation expense                                                                464              381
Amortization expense                                                                234              110
Amortization of discount on debt                                                    183              100
Minority interest in income of subsidiary                                           187               17
Changes in working capital:
     Decrease (increase) in accounts receivable                                  (1,476)              67
     Decrease (increase) in due from related party                                   --               23
     Decrease (increase) in lease deposit                                           101               --
     Decrease (increase) in other current assets                                   (696)              24
     (Decrease) increase in accounts payable                                      1,580             (251)
     (Decrease) increase in accrued interest                                        274              (31)
     (Decrease) increase in accrued expenses                                       (203)             (43)
     (Decrease) increase in other long-term liabilities                              --              136
     (Decrease) increase in accrued employee benefits and payroll taxes              30             (400)
                                                                            ------------     ------------

Net cash provided (used) by operating activities                                    889             (381)

Cash flows from investing activities:
    Acquisition of Jens, net of cash acquired                                        --           (7,762)
    Acquisition of Strata, net of cash acquired                                      --             (177)
    Purchase of equipment                                                          (196)             (54)
                                                                            ------------     ------------

Net cash (used) by investing activities                                            (196)          (7,993)

Cash flows from financing activities:
     Proceeds from issuance of long-term debt                                        --            9,005
     Repayments of long-term debt                                                  (582)              --
     Debt issuance costs                                                             --             (539)
                                                                            ------------     ------------

Net cash provided (used) by financing activities                                   (582)           8,466
                                                                            ------------     ------------

Net increase (decrease) in cash and cash equivalents                                111               92

Cash and cash equivalents at beginning of year                                      146              152
                                                                            ------------     ------------

Cash and cash equivalents at end of period                                  $       257      $       244
                                                                            ============     ============

Supplemental information - interest paid                                    $       454      $       424
                                                                            ============     ============

This interim statement is unaudited.

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

                                                    5
</TABLE>
<PAGE>

NOTES TO FINANCIAL STATEMENTS

NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT 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, 2002,
and the Current Report on Form 8-K filed on February 19, 2003.

All normal and recurring adjustments considered necessary for a fair
presentation of the results of operations have been included in the unaudited
financial statements. In addition, all non-recurring adjustments necessary to
prevent the financial statements from being misleading 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.

ORGANIZATION OF BUSINESS

The Company was incorporated in 1913 under Delaware law. The Company reorganized
in bankruptcy in 1988, and sold all of its major businesses. In May 2001, the
Company consummated a merger in which the Company acquired OilQuip Rentals, Inc.
(OilQuip) and its wholly owned subsidiary, Mountain Compressed Air, Inc.
("Mountain Air"), in exchange for shares of its common stock, which upon
issuance represented over 85% of its outstanding common stock. In February 2002,
the Company acquired approximately 81% of the capital stock of Jens' Oilfield
Service, Inc. ("Jens'") and all of the capital stock of Strata Directional
Technology, Inc. ("Strata").

Through Mountain Air, Jens' and Strata, and through additional acquisitions in
the oil and natural gas drilling services industry, the Company intends to
exploit opportunities in the oil and natural gas service and rental industry.
Currently, the Company receives 80% to 85% of its revenues from natural gas
drilling services and the balance from oil drilling services; however, most of
the Company's services can be utilized for either activity.

GOING CONCERN

A substantial portion of the Company's debt is due on June 30, 2003. The Company
is in the process of seeking to refinance such debt, and believes that it will
be able to do so by June 30, 2003. However, as a result of the uncertainty of
such financing, the Company's auditors qualified their opinion regarding our
annual financial statements for the year ended December 31, 2002, to include a
"going concern" exception. See "Managements Discussion and Analysis of Financial
Condition and Results of Operations - Financial Condition and Liquidity."

The presentation of our financial condition in our financial statements is
premised upon the assumption that the Company will continue operations and based
upon the Company's current financial condition there is a risk the Company may
not be to continue its operations.

USE OF ESTIMATES

The preparation of 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 reported amounts 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. Future events and their effects cannot be perceived
with certainty. Accordingly, the Company's accounting estimates require the
exercise of judgment. While management believes that the estimates and
assumptions used in the preparation of the consolidated financial statements are
appropriate, actual results could differ from those estimates. Estimates are
used for, but are not limited to, determining the following: allowance for

                                       6
<PAGE>

doubtful accounts reserves, recoverability of long-lived assets, useful lives
used in depreciation and amortization, income taxes and related valuation
allowances, and insurance and legal accruals. The accounting estimates used in
the preparation of the consolidated financial statements may change as new
events occur, as more experience is acquired, as additional information is
obtained and as the Company's operating environment changes.

NEW ACCOUNTING PRONOUNCEMENTS

In July 2002, the FASB issued SFAS No. 146, ACCOUNTING FOR COSTS ASSOCIATED WITH
EXIT OR DISPOSAL ACTIVITIES ("SFAS No. 146"). SFAS No. 146 requires companies to
recognize costs associated with exit or disposal activities when they are
incurred rather than at the date of commitment to an exit or disposal plan. The
provisions of SFAS No. 146 will apply to any exit or disposal activities
initiated by the Company after December 31, 2002. SFAS No. 146 is not expected
to have a material effect on the results of operations or financial position of
the Company.

SFAS No. 147, ACQUISITIONS OF CERTAIN FINANCIAL INSTITUTIONS, was issued in
December 2002 and is not expected to apply to the Company's current or planned
activities.

In December 2002, the FASB approved SFAS No. 148, ACCOUNTING FOR STOCK-BASED
COMPENSATION - TRANSITION AND DISCLOSURE - AN AMENDMENT OF FASB STATEMENT NO.
123 ("SFAS No. 148"). SFAS No. 148 amends SFAS No. 123 to provide alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition, SFAS No. 148
amends the disclosure requirements of SFAS No. 123 to require prominent
disclosures in both annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect of the method
used on reported results. SFAS No. 148 is effective for financial statements for
fiscal years ending after December 15, 2002. The Company will continue to
account for stock based compensation using the methods detailed in the
stock-based compensation accounting policy as disclosed in Company's Annual
Report on From 10-K for the year ended December 31, 2002.

In April 2003, the FASB issued SFAS No. 149, AMENDMENT OF STATEMENT NO. 133
ON DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES ("SFAS No. 149").  SFAS No.
149 amends certain portions of SFAS No. 133 and is effective for all contracts
entered into or modified after June 30, 2003 on a prospective basis. SFAS No.
149 is not expected to have a material effect on the results of operations or
financial position of the Company because the Company currently has no
derivatives or hedging contracts.

NOTE 2 - ACQUISITIONS

The Company completed two acquisitions and related financing on February 6,
2002.

The Company purchased 81% of the outstanding stock of Jens Oil Field Service,
Inc. ("Jens"). Jens supplies highly specialized equipment and operations to
install casing and production tubing required to drill and complete oil and gas
wells. The Company also purchased substantially all the outstanding common stock
and preferred stock of Strata Directional Technology, Inc. ("Strata"). Strata
provides high-end directional and horizontal drilling services for specific
targeted reservoirs that cannot be reached vertically.

The purchase price for Jens and Strata was (i) $10,250,000 in cash, (ii) a
$4,000,000 note payable due in four years, (iii) $1,000,000 for a non-compete
agreement payable for five years, (iv) 7,957,712 shares of common stock of the
Company, (v) 3,500,000 shares of a newly created Series A 10% Cumulative
Convertible Preferred Stock of the Company ("Series A Preferred Stock") and (vi)
an additional payment of $841,000 based upon Jens' working capital on February
1, 2002. In May 2002, the Company purchased the remaining minority interest in
Strata in exchange for 87,500 shares of the Company common stock.

                                       7
<PAGE>

In connection with the acquisition of Strata and Jens, the Company's bank
provided financing of $12,728,396 consisting of revolving credit facilities in
the amount of $3,500,000, term facilities in the amount of $5,696,396 and a
subordinated loan in the amount of $3,000,000.

In connection with the Strata purchase, the Company authorized the creation of
Series A Preferred Stock. 3,500,000 shares of Series A Preferred Stock were
issued to the seller, Energy Spectrum. The Series A Preferred Stock has
cumulative dividends at ten percent (10%) per annum payable in cash or
additional Series A Preferred Stock. Additionally, the Series A Preferred Stock
is convertible into common stock of the Company. The Series A Preferred Stock is
also subject to mandatory redemption on or before February 4, 2004 or earlier
from the net proceeds of new equity sales and optional redemption by the Company
at any time. The redemption price of the Series A Preferred Stock is $1.00 per
share. In addition, in connection with the Strata acquisition, Energy Spectrum
was issued warrants for 1,312,500 shares of Company common stock at an exercise
price of $0.15 per share.

The acquisitions were accounted for using the purchase method of accounting.
Goodwill and other identifiable intangible assets of $4,668,000 were recorded
with the acquisition of Strata and other identifiable intangible assets of
$1,235,000 were recorded with the acquisition of Jens.

The Company issued to the banks warrants for 1,165,000 shares of common stock at
an exercise price of $0.15 per share and 335,000 warrants to purchase common
stock at a $1.00 per share in connection with their subordinated debt financing.
All of these warrants are subject to redemption by the Company at the option of
the warrant holders for $1,500,000 after three years.

The following unaudited pro forma consolidated summary financial information
illustrates the effects of the acquisitions of Jens and Strata on the Company's
results of operations, based on the historical statements of operations, as if
the transactions had occurred as of the beginning of the period ended March 31,
2002.

                                                  Three Months Ended
                                                  ------------------
                                                       March 31,
                                                       ---------
                                                          2002
                                                          ----
                                                     (in thousands)

Revenues                                                $ 4,404

Operating income /(loss)                                $  (140)

Net income/ (loss)                                      $  (757)

Income (loss) per share                                 $ (0.05)


NOTE 3 - LONG-TERM DEBT

Long-term debt is primarily a result of the costs of the acquisitions of certain
assets of Mountain Air, Jens' Oilfield Service, Inc. and Strata Directional
Technology, Inc.

Substantially all of the Company's assets are pledged as collateral to the
outstanding debt agreements.

The debt agreements are as follows:

                                       8
<PAGE>

MOUNTAIN AIR

LINE OF CREDIT WITH WELLS FARGO - At March 31, 2003, Mountain Air had a $500,000
line of credit at Wells Fargo bank, of which $421,000 is outstanding. The
committed line of credit is due on June 30, 2003. Interest accrues at a rate
equal to the Prime rate plus 0.5% to 1.25% (5.50% at March 31, 2003) for the
committed portion. Additionally, the Company pays a 0.5% fee for the uncommitted
portion.

NOTES PAYABLE TO WELLS FARGO - TERM NOTE - A term loan in the original amount of
$3,550,000 at variable interest rates related to the Prime or LIBOR rates (6.00%
at March 31, 2003), interest payable monthly, with monthly principal payments of
$35,000 due on the last day of the month. The maturity date of the loan is June
30, 2003 and the balance at March 31, 2003 is $2,287,000.

NOTE PAYABLE TO WELLS FARGO - SUBORDINATED DEBT AND AMORTIZATION OF REDEEMABLE
WARRANT - Subordinated debt in the amount of $2,000,000 with 12% interest
payable monthly commencing on January 31, 2003. The principal will be due on
June 30, 2003. In connection with incurring the debt, the Company issued
redeemable warrants valued at $600,000, which have been recorded as a discount
to the subordinated debt and as a liability (see REEDEMABLE WARRANTS below). The
discount is amortizable over three years as additional interest expense.

NOTE PAYABLE TO WELLS FARGO - EQUIPMENT TERM LOAN - A delayed draw term loan in
the amount of $282,291 at LIBOR plus 0.5% interest payable quarterly commencing
on November 30, 2001 (interest rate of 4.75% at March 31, 2003). The principal
will be due on June 30, 2003. The balance as of March 31, 2003 is $146,000.

NOTE PAYABLE TO SELLER OF MADSCO - A note to the seller of MADSCO assets in the
amount of $2,200,000 at 5.75% simple interest. The principal and interest are
due on February 6, 2006.

JENS'

NOTE PAYABLE TO WELLS FARGO - TERM NOTE - A term loan in the amount of
$4,042,396 at a floating interest rate (7.25% at March 31, 2003) with monthly
principal payments of $67,373. The maturity date of the loan is February 1,
2007. The balance at March 31, 2003 was $3,162,000. The debt is classified as
current on the accompanying consolidated balance sheet due to the defaults on
certain loan covenants as described below.

NOTE PAYABLE TO WELLS FARGO - REAL ESTATE NOTE - A real estate loan in the
amount of $532,000 at floating interest rate (7.25% at March 31, 2003) with
monthly principal payments of $14,778. The principal will be due on February 1,
2005. The balance at March 31, 2003 was $343,000. The debt is classified as
current on the accompanying consolidated balance sheet due to the defaults on
certain loan covenants as described below.

LINE OF CREDIT WITH WELLS FARGO - At March 31, 2003, Jens had a $1,000,000 line
of credit at Wells Fargo bank, of which $17,000 was outstanding. The committed
line of credit is due on January 31, 2005. Interest accrues at a floating rate
plus 3% (7.25% at March 31, 2003) for the committed portion. Additionally, the
Company pays a 0.5% fee for the uncommitted portion. The debt is classified as
current on the accompanying consolidated balance sheet due to the defaults on
certain loan covenants as described below.

SUBORDINATED NOTE PAYABLE TO SELLER OF JENS' -A subordinated seller's note in
the amount of $4,000,000 at 7.5% simple interest. At March 31, 2003, $300,000 of
interest was accrued and was included in accrued interest. The principal and
interest are due on January 31, 2006. The note is subordinated to the rights of
Wells Fargo.

                                       9
<PAGE>

NOTE PAYABLE TO SELLER OF JENS' FOR NON-COMPETE AGREEMENT - In conjunction with
the purchase of Jens' (Note 2), the Company agreed to pay a total of $1,234,560
to the Seller of Jens' in exchange for a non-compete agreement signed
simultaneously. The Company is to make monthly payments of $20,576 through the
period ended January 31, 2007. As of March 31, 2003, the balance was
approximately $947,000, including $247,000 classified as short-term.

STRATA

NOTES PAYABLE TO WELLS FARGO - TERM NOTE - A term loan in the amount of
$1,654,000 at a floating interest rate (7.75% at March 31, 2003) with monthly
principal payments of $27,567. The maturity date of the loan is February 1,
2005. In addition to the monthly principal payments, in June 2002, the Company
entered into a direct financing lease with a third party whereby a portion of
assets were sold by Strata. The payments from that third party, which are
expected to exceed $15,000 a month, are to be directly applied to the principal
of this note. The note payable balance at March 31, 2003 was $963,000. The debt
is classified as current on the accompanying balance sheet due to the
circumstances surrounding defaults on certain loan covenants as described below.

VENDOR FINANCING - In 1996 and as amended in 2000 and 2002, Strata entered into
a short-term vendor financing agreement with a major supplier of drilling motors
for drilling motor rentals, motor lease costs and motor repair costs. The
agreement, as amended, provides for repayment of all amounts due no later than
September 30, 2003. Payment of the interest on the note is due monthly; however,
the Company may make payments with respect to principal and interest at any time
without bonus or penalty. The vendor financing incurs interest at a rate of
8.0%. As of March 31, 2003, the outstanding balance, including accrued interest,
was approximately $350,000.

LINE OF CREDIT WITH WELLS FARGO - At March 31, 2003, Strata has a $2,500,000
line of credit at Wells Fargo bank, of which $1,389,000 was outstanding. The
committed line of credit is due on January 31, 2005. Interest accrues at a
floating interest rate plus 1/2% (7.75% at March 31, 2003) for the committed
portion. Additionally, the Company pays a 0.5% fee for the uncommitted portion.
The debt is classified as current on the accompanying balance sheet due to the
circumstances surrounding defaults on certain loan covenants as described below.

NOTE PAYABLE WITH FORMER SHAREHOLDER - A note payable dated June 30, 1998, to a
former shareholder of Strata Directional Technology, Inc., bearing interest at
8% and payable in 60 equal monthly installments of $2,030 each. The note matures
and will be paid in full prior to June 30, 2003. The balance at March 31, 2003
is approximately $12,000.

ALLIS-CHALMERS

NOTES PAYABLE TO WELLS FARGO - SUBORDINATED DEBT AND AMORTIZATION OF REDEEMABLE
WARRANT - Subordinated debt secured to partially finance the acquisitions of
Jens' and Strata in the amount of $3,000,000 at 12% interest payable monthly.
The principal will be due on January 31, 2005. In connection with incurring the
debt, the Company issued redeemable warrants valued at $900,000, which have been
recorded as a discount to the subordinated debt and as a liability (see
REEDEMABLE WARRANTS below). The discount is amortizable over three years
beginning February 6, 2002 as additional interest expense. The debt is
classified as current on the accompanying balance sheet due to the defaults on
certain loan covenants as described below.

NOTES PAYABLE TO CERTAIN FORMER DIRECTORS - The Allis-Chalmers Board established
an arrangement by which to compensate former and continuing Board members who
had served from 1989 to March 31, 1999 without compensation. Pursuant to the
arrangement in 1999, Allis-Chalmers issued promissory notes totaling $325,000 to
current or former directors and officers. The notes bear interest at the rate of
5%, compounded quarterly, and are due March 28, 2005. At March 31, 2003, the
notes are recorded at $374,000, including accrued interest.

                                       10
<PAGE>

REDEEMABLE WARRANTS - Associated with the issuance of the $2 million
Subordinated debt recorded by Mountain Air and the $3 million Subordinated debt
recorded by Allis-Chalmers (collectively, the "subordinated debt"), the Company
has issued redeemable warrants that are exercisable into a maximum of 1,165,000
shares of the Company's common stock at an exercise price of $0.15 per share
("Warrants A and B") and non-redeemable warrants that are exercisable into a
maximum of 335,000 shares of the Company's common stock at $1.00 per share
("Warrant C"). Warrants A and B are subject to cash redemption provisions
("puts") of $600,000 and $900,000, respectively, at the discretion of the
warrant holders beginning at the earlier of the final maturity date of the
subordinated debt or three years from the closing of the subordinated debt
(January 31, 2004 and January 31, 2005, respectively). Warrant C does not
contain any such puts or provisions. In addition, previously issued warrants to
purchase common stock of Mountain Air were cancelled. The Company has recorded a
liability of $600,000 at Mountain Air and $900,000 at Allis-Chalmers for a total
of $1,500,000 and is amortizing the effects of the puts to interest expense over
the life of the related subordinated debt instruments.

On July 16, 2002, the Company's lenders declared the Company and its
subsidiaries to be in default under numerous credit agreements with Wells Fargo
Bank and its affiliates (the "Bank Lenders"). The defaults resulted primarily
from failures to meet financial covenants as a result of decreased revenues. As
a result of these defaults the Bank Lenders imposed default interest rates
retroactive to April 1, 2002, resulting in an increase of approximately $15,000
in monthly interest payments. Additionally, the Bank Lenders suspended interest
payments (aggregating $300,000 through March 31, 2003) on a $4.0 million
subordinated seller note issued to Jens Mortensen in connection with the Jens'
acquisition, which resulted in Jens' default under the terms of the subordinated
seller note, and suspended interest payments (aggregating $150,000 through
December 31, 2002) on a $3.0 million subordinated bank note issued in connection
with the Jens' acquisition, which resulted in Jens' default under the terms of
such note. Pursuant to the terms of inter-creditor agreements between the
lenders, the holders of such obligations are precluded from taking action to
enforce such obligations without the consent of the Bank Lenders.

Effective January 1, 2003 the Company entered into Amendment and Forbearance
Agreements (the "Forbearance Agreements"), which amended certain operating
covenants. In addition the Bank Lenders agreed to forbear from taking action
(but did not waive the underlying defaults) with respect to the alleged defaults
for a period of six months ending June 30, 2003 (the "Forbearance Period").The
Company has made all outstanding principal and interest payments on all senior
debt to the Bank Lenders. On June 30, 2003, $4,882,000 of debt owed by Mountain
Air will become due and the forbearance with respect to Jens' and Strata's debts
to the Bank Lenders will expire. If the Company is unable to renegotiate or
refinance the Company debt, the Bank Lenders will have the right to accelerate
all amounts due them (which totaled $14,264,000, at March 31 2003), and to
foreclose on the assets securing their loans, which constitute substantially all
of the assets of the Company. Accordingly, the bank debt and the subordinated
seller note are recorded as current liabilities on the Company's financial
statements.

NOTE 4 - SHAREHOLDERS' EQUITY

On March 6, 2002, we issued 3,500,000 shares of Series A 10% Cumulative
Convertible Preferred Stock, (the "Preferred Stock"), to Energy Spectrum
Partners, LP. ("Energy Spectrum") in connection with the acquisition (the
"Strata Acquisition") from Energy Spectrum of substantially all of the common
stock and preferred stock of Strata Directional Technology, Inc.

In accordance with the Certificate of Designation, Preferences and Rights of the
Preferred Stock (the "Certificate") the Preferred Stock is convertible into a
number of shares of our common stock determined by dividing the "Liquidation
Value" of the Preferred Stock, which is $1.00 per share, by the "Conversion
Price" of the Preferred Stock. The Conversion Price was initially $0.75, but in
accordance with the Certificate was reduced on February 1, 2003, to an amount
equal to 75% of the market price calculated in accordance with the Certificate,
or $0.19.

                                       11
<PAGE>

By letter agreement dated February 19, 2003, a copy of which is attached as an
exhibit to Form 8-K filed on February 19, 2003, Energy Spectrum agreed to
increase the Conversion Price to $0.50, to vote for an amendment to our
Certificate of Incorporation to reflect the increase in the Conversion Price,
and that prior to the amendment of the Company's Certificate of Incorporation if
any Preferred Stock is converted into our common stock the Conversion Price for
such conversion shall be $0.50. The letter agreement reduces the number of
shares of common stock into which the Preferred Stock is convertible from
18,421,053 to 7,000,000 shares.

The Conversion Price is subject to adjustment pursuant to Section 11 of
Certificate in the event of a stock split, stock dividend, reclassification, or
similar event, or in the event any other distribution is made in respect of our
common stock. Section 11 also provides that in the event we sell shares of our
common stock for less than the Conversion Price, the Conversion Price will be
reduced to such sales price.

In connection with the Strata Acquisition, we issued to Energy Spectrum a
warrant to purchase 437,500 shares of our common stock at an exercise price of
$0.15 per share, and we agreed that if we did not redeem all but one share of
the Preferred Stock on or prior to February 6, 2003, we would issue Energy
Spectrum an additional warrant to purchase 875,000 shares of our common stock at
an exercise price of $0.15 per share. On February 19, 2003, we issued such
warrant, a copy of which is attached as an exhibit to the Form 8-K filed on
February 19, 2003. The warrant was valued in accordance with the Black-Scholes
valuation model and $306,000 was recorded as an additional preferred stock
dividend in the period ended March 31, 2003.


NOTE 5 -  SEGMENT INFORMATION

The Company has three segments, Casing Services (Jens), Directional Drilling
Services (Strata) and Compressed Air Drilling Services (Mountain Air). All of
the segments provide services to the petroleum industry. The revenues and
operating income by segment are presented below:

                                       12
<PAGE>

                                                    Three Months Ended March 31,
                                                   -----------------------------
                                                       2003              2002
                                                   ------------     ------------
                                                          (in thousands)

Revenues:
     Casing Services                               $     2,509      $     1,170
     Directional Drilling Services                       3,480              950
     Compressed Air Drilling Services                    1,010            1,133
                                                   ------------     ------------

Total revenues                                     $     6,999      $     3,253

Operating income/ (loss):
     Casing Services                                     1,239              316
     Directional Drilling Services                         256              (34)
     Compressed Air Drilling Services                     (107)             (34)

     General Corporate                                    (365)            (449)
                                                   ------------     ------------

Total operating income/(loss)                            1,023             (201)

Depreciation and Amortization Expense:
     Casing Services                                       345              207
     Directional Drilling Services                          62               51
     Compressed Air Drilling Services                      261              222

     General Corporate                                      30               12
                                                   ------------     ------------

Total depreciation & amortization expense                  698              492

Interest Expense:
     Casing Services                                       163              195
     Directional Drilling Services                          63               31
     Compressed Air Drilling Services                      243              187

     General Corporate                                     168               10
                                                   ------------     ------------

Total interest expense                                     637              423

Capital Expenditures:
     Casing Services                                        62               --
     Directional Drilling Services                           8               --
     Compressed Air Drilling Services                      115               51

     General Corporate                                      11                3
                                                   ------------     ------------

Total capital expenditures                                 196               54

At March 31, 2003 the total assets for the Casing Services, Directional Drilling
Services, Compressed Air Drilling Services and General Corporate segments are
$16,160,000, $9,975,000, $9,190,000 and $1,149,000, respectively.

                                       13
<PAGE>

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

BACKGROUND
----------

The Company were incorporated in 1913 under Delaware law. The Company
reorganized in bankruptcy in 1988, and sold all of our major businesses. In May
2001, the Company consummated a merger in which the Company acquired OilQuip
Rentals, Inc. (OilQuip) and its wholly owned subsidiary, Mountain Compressed
Air, Inc. ("Mountain Air"), in exchange for shares of our common stock, which
upon issuance represented over 85% of our outstanding common stock. In February
2002, the Company acquired approximately 81% of the capital stock of Jens'
Oilfield Service, Inc. ("Jens'") and all of the capital stock of Strata
Directional Technology, Inc. ("Strata").

Through Mountain Air, Jens' and Strata, and through additional acquisitions in
the oil and natural gas drilling services industry, we intend to exploit
opportunities in the oil and natural gas service and rental industry. Currently,
we receive 80% to 85% of our revenues from natural gas drilling services and the
balance from oil drilling services; however, most of our services can be
utilized for either activity.

CRITICAL ACCOUNTING POLICIES
----------------------------

We have identified the policies below as critical to our business operations and
the understanding of our results of operations. The impact and any associated
risks related to these policies on our business operations is discussed
throughout Management's Discussion and Analysis of Financial Condition and
Results of Operations where such policies affect our reported and expected
financial results. For a detailed discussion on the application of these and
other accounting policies, see Note 1 in the Notes to the Consolidated Financial
Statements. Note that our preparation of this Quarterly Report on Form 10-Q
requires us to make estimates and assumptions that affect the reported amount of
assets and liabilities, disclosure of contingent assets and liabilities at the
date of our financial statements, and the reported amounts of revenue and
expenses during the reporting period. There can be no assurance that actual
results will not differ from those estimates.

REVENUE RECOGNITION. Our revenue recognition policy is significant because our
revenue is a key component of our results of operations. In addition, our
revenue recognition policy determines the timing of certain expenses, such as
commissions and royalties. We follow very specific and detailed guidelines in
measuring revenue; however, certain judgments affect the application of our
revenue policy. Revenue results are difficult to predict, and any shortfall in
revenue or delay in recognizing revenue could cause our operating results to
vary significantly from quarter to quarter and could result in future operating
losses. Revenues are recognized by the Company and its subsidiaries as services
are provided.

IMPAIRMENT OF LONG-LIVED ASSETS. Long-lived assets, which include property,
plant and equipment, goodwill and other intangibles, comprise a significant
amount of the Company's total assets. The Company makes judgments and estimates
in conjunction with the carrying value of these assets, including amounts to be
capitalized, depreciation and amortization methods and useful lives.
Additionally, the carrying values of these assets are reviewed for impairment or
whenever events or changes in circumstances indicate that the carrying amounts
may not be recoverable. An impairment loss is recorded in the period in which it
is determined that the carrying amount is not recoverable. This requires the
Company to make long-term forecasts of its future revenues and costs related to
the assets subject to review. These forecasts require assumptions about demand
for the Company's products and services, future market conditions and
technological developments. Significant and unanticipated changes to these
assumptions could require a provision for impairment in a future period.

GOODWILL AND OTHER INTANGIBLES - The Company has recorded approximately
$10,479,000 of goodwill and other identifiable intangible assets. The Company
performs purchase price allocations when it makes a business combination.
Business combinations and subsequent purchase price allocations have been

                                       14
<PAGE>

recorded for purchase of the Mountain Air, Strata and Jens' operating segments.
The excess of the purchase price after allocation of fair values to tangible
assets are allocated to goodwill and other identifiable intangibles.
Subsequently, the Company has performed its initial impairment tests and annual
valuation tests in accordance with Financial Accounting Standards Board No. 141,
BUSINESS COMBINATIONS, and Financial Accounting Standards Board No. 142,
GOODWILL AND OTHER INTANGIBLE ASSETS. These valuations required the use of
third-party valuation experts who in turn developed assumptions to value the
carrying value of the individual reporting units. Significant and unanticipated
changes to these assumptions could require a provision for impairment in a
future period.

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

Results of operations for 2003 and 2002 reflect the business operations of
Allis-Chalmers and its subsidiaries Mountain Compressed Air, which provides air
drilling services to natural gas exploration operations ("Compressed Air
Drilling Services"), Jens' Oilfield Service, Inc., which supplies highly
specialized equipment and operations to install casing and production tubing
required to drill and complete oil and gas wells ("Casing Services"), and Strata
Directional Technology, Inc., which provides high-end directional and horizontal
drilling services for specific targeted reservoirs that cannot be reached
vertically ("Directional Drilling Services"). The results from these operations
are included from February 1, 2002.

THREE MONTHS ENDED MARCH 31, 2003 COMPARED TO MARCH 31, 2002:
-------------------------------------------------------------

HISTORICAL COMPARISON

Sales for the three months ended March 31, 2003 totaled $6,999,000. In the
comparable period of 2002, revenues were $3,253,000. Revenues for the three
months ended March 31, 2003 for the Casing Services, Directional Drilling
Services, and Compressed Air Drilling Services segments were $2,509,000,
$3,480,000 and $1,010,000, respectively. Revenues for the three months ended
March 31, 2002 for the Casing Services, Directional Drilling Services, and
Compressed Air Drilling Services segments were $1,170,000, $950,000 and
$1,138,000, respectively. The sales for the Casing Services and Directional
Drilling segments for 2002 were from February 1, 2002 through March 31, 2002.
Revenues for the first quarter of 2003 increased over the first quarter of 2002
due to the increased activity in the drilling market and our continued efforts
to increase market share in the Casing Services and Directional Drilling
Services segments.

Gross margin ratio, as a percentage of sales, was 28.6% in the first quarter of
2003 compared with 19.6 % in the first quarter of 2002. The gross margin
increased in the first quarter of 2003 as compared to the first quarter of 2002,
which included sales form February 1, 2002 through March 31, 2002 for the Casing
Services and Directional Drilling segments, the increased was due to an increase
in market share and increased pricing in the Casing Services and Directional
Drilling Services segments.

General and administrative expense was $981,000 in the first quarter of 2003
compared with $840,000 in the first quarter of 2002. The general and
administrative expenses increased in 2003 compared to 2002 due to the
accelerated amortization of debt issuance cost. The general and administrative
expenses for the Casing Services and Directional Drilling segments for the
period ended March 31, 2002 were from February 1, 2002 through March 31, 2002.

Operating income for the three months ended March 31, 2003 totaled $1,023,000.
In March 31, 2002, the operating (loss) was ($201,000). Operating income (loss)
for the three months ended March 31, 2003 for the Casing Services, Directional
Drilling Services, Compressed Air Drilling Services and General Corporate
segments were $1,239,000, $256,000, ($107,000) and ($365,000), respectively.
Operating income (loss) for the three months ended March 31, 2002 for the Casing
Services, Directional Drilling Services, Compressed Air Drilling Services and
General Corporate segments were $316,000, ($34,000), ($34,000) and ($449,000),
respectively. The operating income (loss) for the Casing Services and
Directional Drilling segments were from February 1, 2002 through March 31, 2002.

                                       15
<PAGE>

We had net income of $211,000, or 0.01 per common share, for the first quarter
of 2003 compared with a loss of ($640,000), or (0.06) per common share, for the
first quarter of 2002.

SCHEDULE OF CONTRACTUAL OBLIGATIONS

The following table summarizes the Company's obligations and commitments to make
future payments under its notes payable, operating leases, employment contracts
and consulting agreements for the periods specified as of March 31, 2003.

<TABLE>
<CAPTION>
                                             Payments due by Period
                                             ----------------------------------------------------------------------
                                                                                                         AFTER 5
CONTRACTUAL OBLIGATIONS                           TOTAL          1 YEAR       2-3 YEARS     4-5 YEARS     YEARS
                                                  -----          ------       ---------     ---------     -----
<S>                                          <C>             <C>            <C>            <C>           <C>
Note payable                                 $   20,773,000  $  13,890,000  $   3,064,000  $  3,819,000  $       -
Interest Payments on note payable                 1,747,000      1,181,000        260,000       306,000          -
Operating Lease                                   2,885,000      1,232,000      1,589,000        64,000          -
Employment Contracts                              1,854,000      1,180,000        674,000             -          -

Total Contractual Cash Obligations           $   27,259,000  $  17,483,000  $   5,587,000  $  4,189,000  $       -
                                             --------------- -------------- -------------- ------------- ----------
</TABLE>

FINANCIAL CONDITION AND LIQUIDITY
---------------------------------

Cash and cash equivalents totaled $257,000 at March 31, 2003, an increase from
$146,000 at December 31, 2002. Cash flows provided by operations totaled
$889,000 in the first quarter of 2003 compared to the $381,000 utilized in the
prior year.

Net trade receivables at March 31, 2003 were $5,885,000. This increased
significantly from the December 31, 2002 balance of $4,409,000 due to the
increase in operating activity.

Net property, plant and equipment were $16,856,000 at March 31, 2003, Capital
expenditures for the three months ended March 31, 2003 were $196,000. Capital
expenditures for the year 2003 are projected to be approximately $500,000.

Trade accounts payable at March 31, 2003 were $3,606,000. This increased
significantly from the December 31, 2002 balance of $2,106,000 due to the
increase in operating activity without an adequate improvement in cash flows.

Other current liabilities, excluding the current portion of long-term debt, were
$2,708,000 including interest in the amount of $1,085,000, accrued salary and
benefits in the amount of $320,000, and accrued expenses of $1,303,000. All of
these balance sheet accounts increased significantly from the December 31, 2002
balances due to the increase in revenues.

Long-term debt was $21,498,000 at March 31, 2003 including current maturities.

In addition to the debt discussed above, the Company had available lines of
credit totaling $3,288,000 at March 31, 2003, of which $1,338,000 was available
and unused.

                                       16
<PAGE>

On July 16, 2002, the Company's lenders declared the Company and its
subsidiaries to be in default under numerous credit agreements with Wells Fargo
Bank and its affiliates (the "Bank Lenders"). The defaults resulted primarily
from failures to meet financial covenants as a result of decreased revenues.
Effective January 1, 2003 the Company entered into Amendment and Forbearance
Agreements (the "Forbearance Agreements"), which amended certain operating
covenants. In addition the Bank Lenders agreed to forbear from taking action
(but did not waive the underlying defaults) with respect to the alleged defaults
for a period of six months ending June 30, 2003 (the "Forbearance Period").

The Company has made all outstanding principal and interest payments on all
senior debt to the Bank Lenders and we believe we will be able to continue to
make such payments for the foreseeable future based upon our current revenue and
cash flow forecasts. We also believe the Company will be able to comply with the
terms of the Forbearance Agreements during the Forbearance Period. However, on
approximately June 30, 2003, $4,312,000 of debt owed by Mountain Air will become
due and the forbearance with respect to Jens' and Strata's debts to the Bank
Lenders will expire. We are seeking to replace or renegotiate our obligations
with the Bank Lenders, and in connection with any amendment to our existing
obligations we will seek a waiver of past defaults.

We believe that we will be able to refinance or renegotiate our outstanding debt
by June 30, 2003; however, if we are unable to renegotiate or refinance the
outstanding debt, the Bank Lenders will have the right to accelerate all amounts
due them (which totaled approximately $13,318,000, at March 31, 2003), and to
foreclose on the assets securing their loans, which constitute substantially all
of the assets of the Company. In such event, we may be unable to continue
operations. Accordingly, the bank debt is recorded as current liabilities on the
Company's financial statements, and as a result the Company had a working
capital deficit of $12,369,000 at March 31, 2003. Because of the foregoing
risks, our auditors have qualified their opinion regarding our annual financial
statements for the year ended December 31, 2002, to include a "going concern"
exception which indicates that their evaluation of our financial condition is
premised upon the assumption that we will continue operations and that based
upon our current financial condition there is a risk that we may not be able to
do so. Our financial statements for the quarter ended March 31, 2003 are subject
to the same assumption and risk.

Our long-term capital needs are to refinance our existing debt, provide funds
for existing operations, redeem the Series A Preferred Stock and to secure funds
for acquisitions in the oil and gas equipment rental and services industry. In
order to pay our debts as they become due, including the amounts due to the Bank
Lenders described above we will require additional financing, which may include
the issuance of new warrants or other equity or debt securities, as well as
secured and unsecured loans. Any new issuance of equity securities would further
dilute existing shareholders.

By letter agreement dated February 19, 2003, Energy Spectrum agreed to increase
the Conversion Price to $0.50, to vote for an amendment to our Certificate of
Incorporation to reflect the increase in the Conversion Price, and that prior to
the amendment of the Company's Certificate of Incorporation if any Preferred
Stock is converted into our common stock the Conversion Price for such
conversion shall be $0.50. The letter agreement reduces the number of shares of
common stock into which the Preferred Stock is convertible from 18,421,053 to
7,000,000 shares.

In connection with the Strata Acquisition, we issued to Energy Spectrum a
warrant to purchase 437,500 shares of our common stock at an exercise price of
$0.15 per share, and we agreed that if we did not redeem all but one share of
the Preferred Stock on or prior to February 6, 2003, we would issue Energy
Spectrum an additional warrant to purchase 875,000 shares of our common stock at
an exercise price of $0.15 per share. On February 19, 2003, we issued such
warrant.

                                       17
<PAGE>

FORWARD LOOKING STATEMENTS

This Report on Form 10-Q contains forward-looking statements (within the meaning
of Section 27A of the Securities Act of 1933 (the "Securities Act") and Section
21E of the Securities Exchange Act of 1934) regarding our business, financial
condition, results of operations and prospects. Words such as expects,
anticipates, intends, plans, believes, seeks, estimates and similar expressions
or variations of such words are intended to identify forward-looking statements,
but are not the exclusive means of identifying forward-looking statements in
this Report on Form 10-Q.

Although forward-looking statements in this Report on Form 10-Q reflect the good
faith judgment of our management, such statements can only be based on facts and
factors we currently know about. Consequently, forward-looking statements are
inherently subject to risks and uncertainties, and actual results and outcomes
may differ materially from the results and outcomes discussed in the
forward-looking statements. Factors that could cause or contribute to such
differences in results and outcomes include, but are not limited to, those
discussed elsewhere in this Report on Form 10-Q, in our Annual Report on Form
10K (including without limitation in the "Risk Factors" Section), and in our
other SEC filings and publicly available documents. Readers are urged not to
place undue reliance on these forward-looking statements, which speak only as of
the date of this Report on Form 10-Q. We undertake no obligation to revise or
update any forward-looking statements in order to reflect any event or
circumstance that may arise after the date of this Report on Form 10-Q.

ITEM 4.  Controls and Procedures

         (b). Evaluation of disclosure controls and procedures. Our chief
         executive officer and our chief accounting officer, after evaluating
         the effectiveness of the Company's "disclosure controls and procedures"
         (as defined in Exchange Act Rules 13a-14(c) and 15d-14(c)) as of a date
         (the "Evaluation Date") within 90 days prior to the filing date of this
         quarterly report, have concluded that, as of the Evaluation Date, our
         disclosure controls and procedures were adequate to ensure that
         material information relating to the registrant and its consolidated
         subsidiaries would be made known to them by others within those
         entities.

         (b). Changes in internal controls. To our knowledge, there are no
         significant changes in the Company's internal controls or in other
         factors that could significantly affect internal controls subsequent to
         the Evaluation Date.

                                       18
<PAGE>

PART II.  OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 3. DEFAULT UPON SENIOR SECURITIES

On July 16, 2002, the Company's lenders declared the Company and it's
subsidiaries to be in default under numerous credit agreements with Wells Fargo
Bank and its affiliates (the "Bank Lenders"). The defaults resulted primarily
from failures to meet financial covenants as a result of decreased revenues. As
a result of these defaults the Bank Lenders imposed default interest rates
retroactive to April 1, 2002, resulting in an increase of approximately $15,000
in monthly interest payments. Additionally the Bank Lenders suspended interest
payments (aggregating $300,000 through March 31, 2003) on a $4.0 million
subordinated seller note issued to the Bank Lenders in connection with the Jens'
acquisition, which resulted in Jens' default under the terms of the subordinated
seller note, and suspended interest payments (aggregating $150,000 through
December 31, 2002) on a $3.0 million subordinated bank note issued in connection
with the Jens' acquisition, which resulted in Jens' default under the terms of
such note. Pursuant to the terms of inter-creditor agreements between the
lenders, the holders of such obligations are precluded from taking action to
enforce such obligations without the consent of the Bank Lenders.

Effective January 1, 2003 the Company entered into Amendment and Forbearance
Agreements (the "Forbearance Agreements"), which amended certain operating
covenants. In addition the Bank Lenders agreed to forbear from taking action
(but did not waive the underlying defaults) with respect to the alleged defaults
for a period of six months ending June 30, 2003 (the "Forbearance Period"). See
"Item 3 in Managements Discussion and Analysis of Financial Condition and
Results of Operations".

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 February 19, 2003,
reporting the amendment to the terms of the Series A 10% Cumulative Convertible
Preferred Stock and the issuance of a stock purchase warrant to Energy Spectrum.

                                       19
<PAGE>

                                    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/ Munawar H. Hidayatallah
                                                    ---------------------------
                                                    Munawar H. Hidayatallah
                                                    Chief Executive Officer
                                                    And Chairman

May 13, 2003

                                       20
<PAGE>

                                 CERTIFICATIONS

I, Munawar H. Hidayatallah, Chief Executive Officer of the Company, certify
that:

(1)      I have reviewed this quarterly report on Form 10-Q of Allis-Chalmers
         Corporation;

(2)      Based on my knowledge, this quarterly report does not contain any
         untrue statement of material fact or omit to state a material fact
         necessary to make the statements made, in light of the circumstances
         under which such statements were made, not misleading with respect to
         the period covered by this quarterly report;

(3)      Based on my knowledge, the financial statements, and other financial
         information included in this quarterly report, fairly present in all
         material respects the financial condition, results of operations and
         cash flows of the registrant as of, and for, the periods presented in
         this quarterly report;

(4)      The registrant's other certifying officer and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
         we have:

         (a)    designed such disclosure controls and procedures to ensure that
                material information relating to the registrant, including its
                consolidated subsidiaries, is made known to us by others within
                those entities, particularly during the period in which this
                quarterly report is being prepared;

         (b)    evaluated the effectiveness of the registrant's disclosure
                controls and procedures as of a date within 90 days prior to the
                filing date of this quarterly report (the "Evaluation Date");
                and

         (c)    presented in this quarterly report our conclusions about the
                effectiveness of the disclosure controls and procedures based on
                our evaluation as of the Evaluation Date;

(5)      The registrant's other certifying officer and I have disclosed, based
         on our most recent evaluation, to the registrant's auditors and the
         audit committee of registrant's board of directors (or persons
         performing the equivalent functions):

         (a)    all significant deficiencies in the design or operation of
                internal controls which could adversely affect the registrant's
                ability to record, process, summarize and report financial data
                and have identified for the registrant's auditors any material
                weaknesses in internal controls; and

         (b)    any fraud, whether or not material, that involves management or
                other employees who have a significant role in the registrant's
                internal controls; and

(6)      The registrant's other certifying officer and I have indicated in this
         quarterly report whether or not there were significant changes in
         internal controls or in other factors that could significantly affect
         internal controls subsequent to the date of our most recent evaluation,
         including any corrective actions with regard to significant
         deficiencies and material weaknesses.

Date:   May 13, 2003                          By:  /s/ Munawar H. Hidayatallah
                                                   ---------------------------
                                                   Munawar H. Hidayatallah
                                                   Chief Executive Officer

                                       21
<PAGE>

                                 CERTIFICATIONS

I, Todd C. Seward, Chief Accounting Officer of the Company, certify that:

(1)      I have reviewed this quarterly report on Form 10-Q of Allis-Chalmers
         Corporation;

(2)      Based on my knowledge, this quarterly report does not contain any
         untrue statement of material fact or omit to state a material fact
         necessary to make the statements made, in light of the circumstances
         under which such statements were made, not misleading with respect to
         the period covered by this quarterly report;

(3)      Based on my knowledge, the financial statements, and other financial
         information included in this quarterly report, fairly present in all
         material respects the financial condition, results of operations and
         cash flows of the registrant as of, and for, the periods presented in
         this quarterly report;

(4)      The registrant's other certifying officer and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
         we have:

         (a)    designed such disclosure controls and procedures to ensure that
                material information relating to the registrant, including its
                consolidated subsidiaries, is made known to us by others within
                those entities, particularly during the period in which this
                quarterly report is being prepared;

         (b)    evaluated the effectiveness of the registrant's disclosure
                controls and procedures as of a date within 90 days prior to the
                filing date of this quarterly report (the "Evaluation Date");
                and

         (c)    presented in this quarterly report our conclusions about the
                effectiveness of the disclosure controls and procedures based on
                our evaluation as of the Evaluation Date;

(5)      The registrant's other certifying officer and I have disclosed, based
         on our most recent evaluation, to the registrant's auditors and the
         audit committee of registrant's board of directors (or persons
         performing the equivalent functions):

         (a)    all significant deficiencies in the design or operation of
                internal controls which could adversely affect the registrant's
                ability to record, process, summarize and report financial data
                and have identified for the registrant's auditors any material
                weaknesses in internal controls; and

         (b)    any fraud, whether or not material, that involves management or
                other employees who have a significant role in the registrant's
                internal controls; and

(6)      The registrant's other certifying officer and I have indicated in this
         quarterly report whether or not there were significant changes in
         internal controls or in other factors that could significantly affect
         internal controls subsequent to the date of our most recent evaluation,
         including any corrective actions with regard to significant
         deficiencies and material weaknesses.

Date:   May 13, 2003                               By:  /s/ Todd C. Seward
                                                        ------------------------
                                                        Todd C. Seward
                                                        Chief Accounting Officer

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