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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

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FORM 10-K

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|ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
|------------------------------------------------------------------------------------

For the fiscal year ended July 31, 2001

Commission File Number 0-26230

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WESTERN POWER & EQUIPMENT CORP.(Exact name of Registrant as specified in its charter)

DELAWARE(State or other jurisdiction of incorporation or organization)

91-1688446(I.R.S. Employer Identification Number)6407-B N.E. 117TH AVENUE
VANCOUVER, WA(Address of principal executive offices)

98662(Zip Code)


Registrant's telephone number, including area code:(360) 253-2346

Securities
registered pursuant to Section 12(b) of the Act: None

Securities
registered pursuant to Section 12(g) of the Act:

Common Stock, $.001 par value(Title of Class)

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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 / /  No /x/

Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulations S-K is not contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to the
Form 10-K. /x/

As
of October 31 2001: (a) 3,403,162 shares of Common Stock, $.001 par value, of the registrant (the "Common Stock") were outstanding; (b) 615,748 shares of
Common Stock were held by non-affiliates ; and (c) the aggregate market value of the Common Stock held by non-affiliates was $135,464.56 based on the closing sale price of $0.22 per share on
October 31, 2001.

Portions
of the Registrant's Proxy Statement to be filed in connection with its Annual Meeting of Shareholders are incorporated by reference in Part III.

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PART I

ITEM 1. BUSINESS

General

Western Power & Equipment Corp., a Delaware corporation (the "Company"), is engaged in the sale, rental, and servicing of light, medium-sized, and heavy
construction, agricultural, and industrial equipment, parts, and related products which are manufactured by Case Corporation ("Case") and certain other manufacturers. The Company believes, based upon
the number of locations owned and operated, that it is one of the largest independent dealers of Case construction equipment in the United States. Products sold, rented, and serviced by the Company
include backhoes, excavators, crawler dozers, skid steer loaders, forklifts, compactors, log loaders, trenchers, street sweepers, sewer vacuums, and mobile highway signs.

The
Company operates out of facilities located in the states of Washington, Oregon, Nevada, California, and Alaska. The equipment distributed by the Company is furnished to
contractors, governmental agencies, and other customers, primarily for use in the construction of residential and commercial buildings, roads, levees, dams, underground power projects, forestry
projects, municipal construction, and other projects.

The
Company's strategy had focused on acquiring additional existing distributorships and rental operations, opening new locations as market conditions warrant, and increasing sales at
its existing locations. In such connection, it had sought to operate additional Case or other equipment retail distributorships, and sell, lease, and service additional lines of construction equipment
and related products not manufactured by Case. For the past three years, the Company has concentrated on consolidating or closing its stores to improve operating efficiency and profitability. See
"Business Strategy."

History and Acquisitions

The Company commenced business in November 1992 with the acquisition from Case of seven retail distribution facilities located in Oregon and Washington. The
Company became a subsidiary of American United Global, Inc. ("AUGI"), simultaneous with such acquisition. AUGI holds 36 percent of the outstanding shares of the Company as of July 31, 2001.

In
September 1994 and February 1996, in two different transactions, the Company acquired from Case four retail construction equipment stores located in California and Nevada. In
addition, in June 1996 and January 1997, the Company made two additional acquisitions of distributorships of predominantly non-competing lines of equipment, with locations in California, Oregon,
Washington, and Alaska. From fiscal 1993 through fiscal 1997, the Company also opened nine new stores in the states served by the acquired stores, ending fiscal year 1997 with 23 stores.

In
fiscal 1998, the Company acquired four additional facilities through acquisition, located in California and Alaska. The pre-existing Alaska facility was discontinued as it was
combined with the acquired Alaska facility. In addition, in fiscal 1998 the Company opened one new store in Washington. On December 11, 1997, the Company acquired substantially all of the operating
assets used by Case in connection with its business of servicing and distributing Case agricultural equipment at a facility located in Yuba City, California.

On
April 30, 1998, the Company acquired substantially all of the operating assets of Yukon Equipment, Inc. (Yukon) in connection with Yukon's business of servicing and distributing
construction, industrial, and agricultural equipment in Alaska. Yukon has facilities in Anchorage, Fairbanks, and Juneau, Alaska.

2

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In fiscal 1999, the Company closed three of its smaller facilities and began servicing the territories served by these small stores by larger facilities in the region.

The
Company consolidated four facilities in the first quarter of fiscal 2000 into larger stores in each region. One branch office in Washington was sold during the third quarter while
two temporary locations were established in Southern California. The closures are intended to increase efficiencies and reduce costs. The two branches in California were established in an effort to
assist Case Corporation in a dealership transition for Southern California.

The
Company consolidated one branch in Washington during the first quarter of fiscal 2001 and sold the two branches in Southern California in the third quarter of fiscal 2001. There
were 18 branches as of the end of fiscal year 2001.

Business Strategy

The Company's strategy is to streamline the Company's structure and close or consolidate stores and operations to increase efficiency and profitability. The
Company is concentrating its efforts on making all of its ongoing operations profitable and in capitalizing on its existing operations' strengths to restore profitability. The Company has selectively
pared down its product offerings to reduce inventory carrying costs and to improve turnover in the remaining product lines that it offers.

The
Company's business strategy includes efforts to expand sales at its existing locations. The Company will continue to seek to improve its product line and generate incremental
sales increases by adding equipment and parts produced by manufacturers other than Case, where appropriate. The Company will also seek to increase sales of parts and serviceboth of which
have considerably higher margins than equipment sales. This increase will be accomplished through targeted sales efforts to parts and service customers and the continued diversification of our parts
product lines and the servicing of equipment produced by manufacturers other than Case, where appropriate. The Company plans to continue emphasis of its fleet of rental equipment. As the cost of
purchasing equipment escalates, short and long-term rental will become increasingly attractive to the Company's customers.

The
Company's business strategy had previously focused on acquiring additional existing distributorships and rental operations, opening new locations, and increasing sales at its
existing locations. The Company reduced its acquisition activity in fiscal years 1999 through 2001 due to market conditions. When market conditions improve and opportunities arise, the Company intends
to make strategic acquisitions of other authorized Case construction equipment retail dealers located in established or growing markets, as well as dealers or distributors of construction, industrial,
or agricultural equipment, and related parts, manufactured by companies other than Case. In addition to acquisitions, in the future the Company may open new retail outlets and opportunities and
conditions permit. The strategy in opening additional retail outlets has been to test market areas by placing sales, parts, and service personnel in the target market. If the results are favorable, a
retail outlet is opened with its own inventory of equipment. This approach reduces both the business risk and the cost of market development.

Products

Case Construction Equipment.

The construction equipment (the "Equipment") sold, rented, and serviced by the Company generally consists of: backhoes (used to dig large, wide and deep
trenches); excavators (used to dig deeply for the construction of foundations, basements, and other projects); log loaders (used to cut, process and load logs); crawler dozers (bulldozers used for
earth moving, leveling and shallower digging than excavators); wheel loaders (used for loading trucks and other carriers with excavated dirt, gravel and rock); roller compactors (used to compact roads
and other surfaces); trenchers (a smaller machine

3

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that digs trenches for sewer lines, electrical power and other utility pipes and wires); forklifts (used to load and unload pallets of materials); and skid steer loaders (smaller version of a wheel
loader, used to load and transport small quantities of materiale.g., dirt and rocks around a job site). Selling prices for these units range from $15,000 to $350,000 per
piece of Equipment.

Under
the terms of standard Case dealer agreements, the Company is an authorized Case dealer for sales of Equipment and related parts and services at locations in Oregon, Washington,
Nevada, northern California, and Alaska (the "Territory"). The dealer agreements have no defined term or duration, but are reviewed on an annual basis by both parties, and can be terminated without
cause at any time either by the Company on 30 days' notice or by Case on 90 days' notice. Although the dealer agreements do not prevent Case from arbitrarily exercising its right of termination, based
upon Case's established history of dealer relationships and industry practice, the Company does not believe that Case would terminate its dealer agreements without good cause.

The
dealer agreements do not contain requirements for specific minimum purchases from Case. In consideration for the Company's agreement to act as dealer, Case supplies to the Company
items of Equipment for sale and lease, parts, cooperative advertising benefits, marketing brochures related to Case products, access to Case product specialists for field support, the ability to use
the Case name and logo in connection with the Company's sales of Case products, and access to Case floor plan financing for Equipment purchases. Such floor planning arrangement currently provides the
Company with interest free credit terms on new equipment purchases ranging from one to six months, depending upon the type of equipment floored, after which interest commences to accrue monthly at an
annual rate equal to 2% over the prime rate of interest. The invoice price of each item of Equipment is payable at the earlier of the time of its sale by the Company or six months after the date of
shipment to the Company by Case.

Other Products.

Although the principal products sold, rented, and serviced by the Company are manufactured by Case, the Company also sells, rents, and services equipment and
sells related parts (e.g., tires, trailers, and
compaction equipment) manufactured by others. Approximately 50% and 42% of the Company's net sales for fiscal year 2001 and fiscal 2000, respectively, resulted from sales, rental, and servicing of
products manufactured by companies other than Case. Manufacturers other than Case represented by the Company offer various levels of supplies and marketing support along with purchase terms which vary
from cash upon delivery to interest-free, 12-month flooring.

The
Company's distribution business is divided into three general categories of activity: (i) Equipment sales, (ii) Equipment rentals, and (iii) Product Support.

Equipment Sales.

At each of its distribution outlets, the Company maintains a fleet of various new and used Equipment for sale. The Equipment purchased for each outlet is
selected by the Company's marketing staff based upon the types of customers in the geographical areas surrounding each outlet, historical purchases as well as anticipated trends. Subject to applicable
limitations in the Company's manufacturers' dealer contracts, each distribution outlet has access to the Company's full inventory of Equipment.

The
Company provides only the standard manufacturer's limited warranty for new Equipment, generally a one-year parts and service repair warranty. Customers can purchase extended
warranty contracts.

The
Company sells used Equipment that has been reconditioned in its own service shops. It generally obtains such used Equipment as "trade-ins" from customers who purchase new items of

4

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Equipment and from Equipment previously rented and not purchased. Unlike new Equipment, the Company's used Equipment is generally sold "as is" and without a warranty.

Equipment Rental.

The Company maintains a separate fleet of Equipment that it holds solely for rental. Such Equipment is generally held in the rental fleet for 12 to 36 months
and then sold as used Equipment with appropriate discounts reflecting prior rental usage. As rental Equipment is taken out of the rental fleet, the Company adds new Equipment to its rental fleet as
needed. The rental charges vary, with different rates for different types of Equipment rented. In October 1998, the Company opened its first rental-only store, located in the Seattle, Washington area,
under the name Western Power Rents. This store
was consolidated with the Company's Auburn, Washington store in August 2000. Rentals have decreased to 15% of revenue in fiscal year 2001 from 17% of revenue in fiscal year 2000. See Sales and
Marketing below.

Product Support.

The Company operates a service center and yard at each retail distribution outlet for the repair and storage of Equipment. Both warranty and non-warranty
service work is performed, with the cost of warranty work being reimbursed by the manufacturer following the receipt of invoices from the Company. The Company employs approximately 120
manufacturer-trained service technicians who perform Equipment repair, preparation for sale, and other servicing activities. Equipment servicing is one of the higher profit margin businesses operated
by the Company. The Company has expanded this business by hiring additional personnel and developing extended warranty contracts to be purchased by customers for Equipment sold and serviced by the
Company, and independently marketing such contracts to its customers. The Company services items and types of Equipment that include those that are neither sold by the Company nor manufactured by
Case.

The
Company purchases parts for use in its Equipment service business, as well as for sale to other customers who are independent servicers of Case Equipment. Generally, parts
purchases are made on standard net 30-day terms. The Company employs one or more persons who take orders from customers for parts purchases at each retail distribution outlet. The Company provides
only the standard manufacturer's warranty on the parts that it sells, which is generally a 90-day replacement guaranty.

Sales and Marketing

The Company's customers are typically residential and commercial building general contractors, road and bridge contractors, sewer and septic contractors,
underground utility contractors, persons engaged in the forestry industry, equipment rental companies and state and municipal authorities. The Company estimates that it has approximately 19,000
customers, with most being small business owners, none of which accounted for more than 3% of its total sales in the fiscal year ended July 31, 2001.

For
fiscal years 2001, 2000, and 1999, the revenue breakdown by source for the business operated by the Company were approximately as follows:

FY 2001

FY 2000

FY 1999Equipment Sales

60
%
59
%
60
%Equipment Rental

15
%
17
%
16
%Product Support

25
%
24
%
24
%100
%
100
%
100
%


5

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The
Company advertises its products in trade publications and appears at trade shows throughout its Territory. It also encourages its salespersons to visit customer sites and offer
Equipment demonstrations when requested.

The
Company's sales and marketing activities do not result in any significant backlog of orders. Although the Company accepts orders from customers for future delivery following
manufacture by Case or other manufacturers, during fiscal 2001 a majority of its sales revenues resulted from products sold directly out of inventory, or the providing of services upon customer
request.

The
Company employed approximately 52 Equipment salespersons on July 31, 2001. All of the Company's sales personnel are employees of the Company, and all are under the general
supervision of C. Dean McLain, the President of the Company. Each Equipment salesperson is assigned a separate exclusive territory, the size of which varies based upon the number of potential
customers and anticipated volume of sales, as well as the geographical characteristics of each area.

On
July 31, 2001, the Company employed 6 product support salespersons who sell the Company's parts and repair services to customers in assigned territories. The Company has no
independent distributors or non-employee sales representatives.

Suppliers

The Company purchases of its inventory of equipment and parts from Case and other manufacturers. No supplier other than Case accounted for more than 10% of
such inventory purchases during fiscal 2001. While maintaining its commitment to Case to primarily purchase Case Equipment and parts as an authorized Case dealer, the Company plans to expand the
number of products and increase the aggregate dollar value of those products which the Company purchases from manufacturers other than Case in the future.

Competition

The Company competes with distributors of construction, agricultural, and industrial equipment and parts manufactured by companies other than Case on the basis
of price, the product support (including technical service) that it provides to its customers, brand name recognition for its products, the accessibility and number of its distribution outlets, and
the overall quality of the products that it sells. The Company's management believes that it is able to effectively compete with distributors of products produced and distributed by such other
manufacturers primarily on the basis of overall product quality and the superior product support and other customer services provided by the Company.

Case's
two major competitors in the manufacture of full lines of construction equipment of comparable sizes and quality are Caterpillar Corporation and Deere & Company. In addition,
other manufacturers produce specific types of equipment which compete with Case Equipment and other Equipment distributed by the Company. These competitors and their product specialties include, but
are not limited to, JCB Corporationbackhoes, Kobelco Corporationexcavators, Dresser Industrieslight and medium duty dozers, Komatsu Corporationwheel
loaders and crawler dozers, and Bobcat, Inc.skid steer loaders.

The
Company is currently the only Case dealer for construction equipment in Alaska, northern Nevada, and in the northern California area (other than Case-owned distribution outlets),
and is one of two Case dealers in Oregon and Washington. However, Case has the right to establish other dealerships in the future in the same territories in which the Company operates. In order to
maintain and improve its competitive position, revenues and profit margins, the Company plans to increase its sales of products produced by companies other than Case.

6

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Environmental Standards and Government Regulation

The Company's operations are subject to numerous rules and regulations at the federal, state, and local levels which are designed to protect the environment
and to regulate the discharge of materials into the environment. Based upon current laws and regulations, the Company believes that its policies, practices, and procedures are properly designed to
prevent unreasonable risk of environmental damage and the resultant financial liability to the Company. No assurance can be given that future changes in such laws, regulations, or interpretations
thereof, changes in the nature of the Company's operations, or the effects of former occupants' past activities at the various sites at which the Company operates, will not have an adverse impact on
the Company's operations.

The
Company is subject to federal environmental standards because in connection with its operations it handles and disposes of hazardous materials, and discharges sewer water in its
equipment rental and servicing operations. The Company's internal staff is trained to keep appropriate records with respect to its handling of hazardous waste, to establish appropriate on-site storage
locations for hazardous waste, and to select regulated carriers to transport and dispose of hazardous waste. Local rules and regulations also exist to govern the discharge of waste water into sewer
systems.

Employees

At July 31, 2001, the Company employed 308 full-time employees. Of that number, 14 are in corporate administration, 28 are involved in administration at the
branch locations, 80 are employed in Equipment sales and rental, and 186 are employed in product support. At July 31, 2001, approximately 16 of the Company's service technicians and parts employees at
the Sacramento, California operation were being represented by Operating Engineers Local Union No. 3 of the International Union of Operating Engineers, AFL-CIO under the terms of a five-year contract
expiring August 31, 2001. As of July 2001, approximately 6 service technicians and 3 parts employees employed at the Springfield, Oregon operation were represented in collective bargaining agreements
through Operating Engineers Local Union No. 701 of the Operating Engineers. The Company believes that its relations with its employees are generally satisfactory.

Insurance

The Company currently has general, product liability, and umbrella insurance policies covering the Company with limits, terms, and conditions which the Company
believes to be consistent with reasonable business practice, although there is no assurance that such coverage will prove to be adequate in the future. An uninsured or partially insured claim, or a
claim for which indemnification is not available, could have a material adverse effect upon the Company's business, results of operations, and financial condition.

Forward-Looking Statements

Information included above relating to projected growth and future results and events constitutes forward-looking statements. Actual results in future periods
may differ materially from the forward-looking statements due to a number of risks and uncertainties, including but not limited to fluctuations in the construction, agricultural, and industrial
sectors; the success of the Company's entry into new markets; the success of the Company's expansion of its equipment rental business; rental industry conditions and competitors; competitive pricing;
the Company's relationship with its suppliers; relations with the Company's employees; the Company's ability to manage its operating costs; the continued availability of financing; governmental
regulations and environmental matters; risks associated with regional, national, and world economies. Any forward-looking statements should be considered in light of these factors.

7

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ITEM 2. PROPERTIES

The following table sets forth information as to each of the properties which the Company owns or leases (all of which are retail sales, rental, service,
storage, and repair facilities except as otherwise noted) at July 31, 2001. The Store located in Kent, Washington was closed in the first quarter of fiscal 2001.

|Location and Use                                                    |  | Lessor                             |  | Expiration
Date |  | Annual
Rental                        |  | Size/Square
Feet                           |  | Purchase
Options
|------------------------------------------------------------------- |  | ---------------------------------- |  | --------------- |  | ------------------------------------ |  | ------------------------------------------ |  | ----------------
|1745 N.E. Columbia Blvd.
Portland, Oregon 97211                     |  | Carlton O. Fisher, CNJ Enterprises |  | 12/31/2010      |  | $84,0001 plus
CPI
adjustments        |  | Approx. 4 acres; building 17,622
sq. ft.   |  | No              
|1665 Silverton Road, N.E.
Salem, Oregon 97303                       |  | LaNoel Elston
Myers Living Trust   |  | 07/10/2004      |  | $36,0001                             |  | Approx. 1 acre;
buildings 14,860
sq. ft.   |  | No              
|1702 North 28th Street
Springfield, Oregon 97477                    |  | McKay
Investment
Company           |  | Month-to-
Month |  | $73,2001                             |  | Approx. 5 acres;
building 17,024
sq. ft.   |  | No              
|West 7916 Sunset Hwy.
Spokane, Washington 99204                     |  | U.S. Bank                          |  | 09/30/2003      |  | $69,6001                             |  | Approx. 5 acres;
building 19,200
sq. ft.   |  | No              
|12406 Mukilteo Speedway
Mukilteo, Washington 98275                  |  | Phil & Jana
Pickering              |  | 10/31/2008      |  | $114,0001                            |  | Approx. 2.1 acres;
building 13,600
sq. ft. |  | No              
|620 N. Oregon Ave
Pasco, Washington 99301                           |  | Dress Bros.
Partnership            |  | Month-to-
Month |  | $66,0001                             |  | Approx. 3 acres;
building 10,000
sq. ft.   |  | No              
|6407-B NE 117th Ave
Vancouver, Washington 98662
(Executive Offices) |  | McLain-Rubin
Realty Company,
LLC3  |  | 03/31/2006      |  | $98,400                              |  | Building 8,627
sq. ft.                     |  | No              
|2702 W. Valley Hwy No.
Auburn, Washington 98001                     |  | Avalon Island LLC                  |  | 11/30/2015      |  | $204,0001                            |  | Approx. 8 acres;
building 33,000
sq. ft.   |  | No              
|500 Prospect Lane
Moxee, Washington 98936
(Subleased to 3rd Party)  |  | Owned                              |  | N/A             |  | N/A                                  |  | Approx. 1.5
acres; building
4,320 sq. ft.  |  | N/A             
|1455 Glendale Ave.
Sparks, Nevada 89431                             |  | McLain-Rubin
Realty Company,
LLC3  |  | 01/31/2007      |  | $276,0002                            |  | Approx. 5 acres;
building 22,475
sq. ft.   |  | No              
|25886 Clawiter Road
Hayward, California 94545                       |  | Fred Kewel II,
Agency              |  | 11/30/2004      |  | $108,9031                            |  | Approx. 2.8
acres; building
21,580 sq. ft. |  | No              
|3540 D Regional Parkway
Santa Rosa, California 95403                |  | Soiland                            |  | 02/28/05        |  | $45,4501 plus
annual CPI
adjustments |  | Approx. 1.25
acres; building
5,140 sq. ft. |  | No              

8

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|1751 Bell Avenue
Sacramento, California 95838     |  | McLain-Rubin
Realty Company,
LLC3 |  | 09/30/2007 |  | $228,0002 |  | Approx. 8 acres;
building 35,940
sq. ft.   |  | No 
|------------------------------------------------- |  | --------------------------------- |  | ---------- |  | --------- |  | ------------------------------------------ |  | ---
|2535 Ellis Street
Redding, Oregon 96001           |  | Hart Enterprises                  |  | 02/15/2002 |  | $33,600   |  | Approx. 2 acres;
building 6,200
sq. ft.    |  | Yes
|1041 S Pershing Ave
Stockton, CA 95206            |  | Stockton Further
Processing       |  | 03/14/2006 |  | $44,400   |  | Approx. .5 acres;
building 1,794
sq. ft.   |  | Yes
|723 15th Street
Clarkston, Washington 99403       |  | Mark Flerchinger                  |  | 11/02/2002 |  | $18,600   |  | Approx. 1.2
acres; building
3,750 sq. ft.  |  | Yes
|3199 E. Onstott Road
Yuba City, California 95991  |  | McLain-Rubin
Realty III3          |  | 09/30/2007 |  | $66,0002  |  | Approx. 13
acres; building
23, 900 sq. ft. |  | No 
|2020 E. Third Avenue
Anchorage, Alaska 99501      |  | Owned                             |  | N/A        |  | N/A       |  | Approx. 4 acres;
building 15,650
sq. ft.   |  | N/A
|3511 International Street
Fairbanks, Alaska 99701 |  | Airport Rentals                   |  | 11/30/2009 |  | $74,400   |  | Approx. 1.5
acres; building
8,500 sq. ft.  |  | No 

---

The
Company's operating facilities at July 31, 2001 were separated into ten "hub" outlets, eight "sub-stores", Washington. In addition the Company maintains its headquarters
operations in Vancouver, Washington. The hub stores are the main distribution centers located in Auburn, and Spokane, Washington; Portland and Springfield, Oregon; Sparks, Nevada; Hayward, Buena Park
and Sacramento, California; and Anchorage, Alaska; and the sub-stores are the smaller facilities located in Mukilteo, Pasco and Clarkston, Washington; Salem, Oregon; Santa Rosa, Stockton, Redding, and
Yuba City, California; and Fairbanks, Alaska.

The
rental store in Kent was closed in the first quarter of fiscal year 2001 and the operations combined with the operations in Auburn, Washington. The stores in Escondido and
Fontana, California were sold in the third quarter of fiscal 2001.

All
of the leased and owned facilities used by the Company are believed to be adequate in all material respects for the needs of the Company's current and anticipated business
operations.

In
the first quarter of fiscal year 2001, the Company renegotiated the terms of the Sacramento, Yuba City, and Sparks leases to shorten the terms of the leases. These leases were then
reclassified as operating leases.

9

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ITEM 3. LEGAL PROCEEDINGS

The Company is involved in various legal proceedings which are incidental to the industry and for which certain matters are covered in whole or in part by
insurance or, otherwise, the Company has recorded accruals for estimated settlements. Management believes that any liability which may result from these proceedings will not have a material adverse
effect on the Company's business, results of operations, and financial condition.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT(1)

Name

Officer Since

Age

Position Held With the RegistrantC. Dean McLain

1993

48

Chairman, President, and Chief Executive Officer(2)Mark J. Wright

1997

45

Vice President of Finance, Chief Financial Officer, Treasurer, and Secretary


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10

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PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company's stock is traded on the NASDAQ National Market System (until May 20, 1999) and the NASDAQ SmallCap Market (since May 20, 1999) under the symbol
WPEC. The high and low closing prices for the Company's common stock for the years ended July 31, 2000 and July 31, 2001 were as follows:

High

LowFiscal 20001st QuarterAugust 1, 1999 through October 31, 1999

$
2.750

$
1.0002nd QuarterNovember 1, 1999 through January 31, 2000

$
1.938

$
1.0003rd QuarterFebruary 1, 2000 through April 30, 2000

$
8.500

$
1.0634th QuarterMay 1, 2000 through July 31, 2000

$
10.000

$
4.188Fiscal 20011st QuarterAugust 1, 2000 through October 31, 2000

$
6.440

$
2.0002nd QuarterNovember 1, 2000 through January 31, 2001

$
4.594

$
0.2813rd QuarterFebruary 1, 2001 through April 30, 2001

$
2.063

$
0.5504th QuarterMay 1, 2001 through July 31, 2001

$
1.500

$
0.370


The
number of shareholders of record of the Company's Common Stock on October 31, 2001 was 33 and the number of beneficial holders of the Company's Common Stock is estimated by
management to be approximately 310 holders.

The
Company has never paid cash dividends on its Common Stock and it does not anticipate that it will pay cash dividends or alter its dividend policy in the foreseeable future. The
payment of dividends by the Company on its Common Stock will depend on its earnings and financial condition, and such other factors as the Board of Directors of the Company may consider relevant. The
Company currently intends to retain its earnings to assist in financing the development of its business.

II1

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ITEM 6. SELECTED FINANCIAL DATA

The following selected financial data have been derived from the audited financial statements of the Company. See notes to Consolidated Financial Statements in
Part IV, Item 14(a)(1) for information concerning the effect of acquisitions completed by the Company during the periods reflected.

|                                                                    |              | Fiscal Year Ended July 31, |        
|------------------------------------------------------------------- | ------------ | -------------------------- | -------
|
|
|Net sales                                                           |              | $                          | 139,902
|Gross profit                                                        |              | $                          | 9,820  
|                                                                    | (% of sales) |                            |        
|Selling, general and administrative                                 |              | $                          | 12,840 
|                                                                    | (% of sales) |                            |        
|(Loss) income before income taxes                                   |              |                            | (7,537 
|                                                                    | (% of sales) |                            |        
|Tax rate (%)                                                        |              |                            | 0.2    
|Net (loss) income                                                   |              | $                          | (7,842 
|Net (loss) income per common share                                  |              | $                          | (2.30  
|Shares used in basic earnings per share calculations                |              |                            | 3,403  
|Net (loss) income per diluted common share                          |              | $                          | (2.30  
|Shares used in diluted earnings per share calculations              |              |                            | 3,403  
|Working capital deficit                                             |              | $                          | (20,102
|Long-term debt (including capital leases and deferred lease income) |              | $                          | 3,469  
|Stockholders' equity                                                |              | $                          | 6,751  
|Total assets                                                        |              | $                          | 93,092 

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements and Notes thereto appearing elsewhere in this
annual report. Certain matters discussed herein contain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those
projected, including, but not limited to, projected sales levels, expense reductions, reduced interest expense, and increased inventory turnover, one or more of which may not be realized.

General

The Company acquired its first seven retail distribution stores in November 1992. The Company expanded to 18 stores in four states by the end of fiscal 1996,
to 23 stores in five states by the end of fiscal 1997, and to 27 stores in five states by the end of fiscal 1998. In fiscal 1999, the Company closed its Milton-Freewater, Oregon store, its Elko,
Nevada store, and its Juneau, Alaska store. At the end of fiscal 2001, the Company had 18 stores in operation.

II2

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For the last three years, the Company has concentrated on consolidating or closing stores to improve operating efficiency and profitability. Store activity for the last three years is
summarized as follows:

Fiscal
Year

No. of Stores at
Beginning of Year

No. of Stores
Opened

No. of Stores
Closed/Sold

No. of Stores
Acquired

No. of Stores at
End of Year1999

27

0

3

0

242000

24

2

5

0

212001

21

0

3

0

18


Subsequent
to the end of fiscal 2001, the Company has closed three additional stores. The Company is evaluating additional store closures or sales. In addition, in the future the
Company may open and acquire additional distribution outlets for Case products, as well as for products which may be manufactured by other companies as circumstances permit. The Company's results can
be impacted by the timing of, and costs incurred in connection with, new store openings and acquisitions as well as the costs of closing existing stores.

Results of Operations

Fiscal Year 2001, as Compared with Fiscal Year 2000

The Company reported net revenue for fiscal 2001 of $139,902,000 compared with net revenue of $155,637,000 for fiscal 2000. Stores opened longer than 12 months
showed an overall revenue decrease of 7.4 percent from prior year revenue reflecting a general softening in economic conditions in the northwest (resulting in lower sales volume) along with increased
competitive pressures (which negatively affected average sales prices of equipment the Company sold). The Company consolidated four of its facilities during fiscal 2000 into larger facilities in the
region in order to reduce costs and leverage existing, larger facilities in the region to cover the territories previously served by the closed facilities.

The
Company had a net loss for fiscal 2001 of $7,842,000 or $2.30 per share compared with a net loss of $7,198,000 or $2.18 per share in fiscal 2000. In the fourth quarter of fiscal
2001, the Company recognized an inventory charge of approximately $4,106,000 to provide allowances in recognition of decreasing market prices for aged equipment inventory in the fourth quarter. In
fiscal 2000, the Company recognized a fourth quarter inventory charge of approximately $2,547,000 to provide allowances in recognition of decreasing market prices on aged equipment inventory in the
last half of the year.

Gross
margin was 7.0 percent during fiscal 2001 which is lower than the 7.4 percent gross margin during fiscal 2000. Margins decreased in fiscal 2001 due mainly to the additional
equipment reserve accrued for in the fourth quarter of fiscal 2001. Management continues to place a high priority on improving overall gross margins by working to increase higher margin service,
parts, and rental revenues, focusing more sales efforts on specialty and niche product lines, and by obtaining higher prices for new and used equipment.

II3

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Selling,
general, and administrative expenses were $12,840,000 or 9.2 percent of revenues for fiscal 2001 compared to $13,534,000 or 8.7 percent of sales for fiscal 2000. The increase
in selling, general, and administrative expenses as a percent of revenues resulted in part from the decrease in revenue volume and in parts due to the costs of store closures during the year.

Interest
expense for fiscal 2001 was $5,982,000, down from $6,069,000 in fiscal 2000 due in part to an decrease in interest rates and lower inventory levels. The Company has a $50
million inventory flooring and operating line of credit facility through Deutsche Financial Services ("DFS"). The agreement was amended in the first quarter of fiscal 2001 with terms maturing December
31, 2001 and with a floating rate based on prime with rates between 0.75% under prime to 2.25% over prime depending on the amount of total debt leverage of the Company. Management has used this
facility to allow the Company to take advantage of more purchase discounts and to lower overall interest expense. SeeLiquidity and Capital Resourcesbelow for a description of the status of the DFS facility.

Fiscal Year 2000, as Compared with Fiscal Year 1999

The Company reported net revenue for fiscal 2000 of $155,637,000 compared with net revenue of $163,650,000 for fiscal 1999. Stores opened prior to fiscal 1998
showed an overall revenue decrease of 4.9 percent from prior year revenue reflecting a general softening in economic conditions in the northwest along with increased competitive pressures. The Company
consolidated five of its facilities during fiscal 2000 into larger facilities in the region in order to reduce costs and leverage existing, larger facilities in the region to cover the territories
previously served by the closed facilities.

The
Company had a net loss for fiscal 2000 of $7,198,000 or $2.18 per share compared with a net loss of $1,815,000 or $0.55 per share in fiscal 1999. In fiscal 2000, the Company
recognized a fourth quarter inventory charge of approximately $2,547,000 to provide allowances to recognize decreasing market prices on aged equipment inventory in the last half of fiscal 2000. In
addition, the Company recorded a valuation allowance of $2,956,000 related to its deferred tax asset.

Gross
margin was 7.4 percent during fiscal 2000 which is lower than the 8.9 percent gross margin during fiscal 1999. Margins decreased in fiscal 2000 due primarily to continued
competitive pressures and the fourth quarter equipment reserve. Management continues to place a high priority on improving overall gross margins by working to increase higher margin service, parts,
and rental revenues, focusing more sales efforts on specialty and niche product lines, and by obtaining higher prices for new equipment.

Selling,
general, and administrative expenses were $13,534,000 or 8.7 percent of revenues for fiscal 2000 compared to $12,586,000 or 7.7 percent of sales for fiscal 1999. The increase
in selling, general, and administrative expenses as a percent of revenues resulted in part from lower than expected revenue levels and the costs of closing stores during the year.

Interest
expense for fiscal 2000 was $6,069,000, up from $5,454,000 in fiscal 1999 due in part to an increase in interest rates. The Company has a $50 million inventory flooring and
operating line of credit facility through DFS. The facility is a floating rate facility at rates as low as 50 basis points under the prime rate. Prime interest rates have increased from those in
fiscal 1999. Management has used this facility to allow the Company to take advantage of more purchase discounts and to lower overall interest expense.

Liquidity and Capital Resources

The Company's primary needs for liquidity and capital resources are related to its inventory for sale and its rental and lease fleets, store openings, and
acquisitions of additional stores. The Company's primary source of internal liquidity has been from its operations. As more fully described below, the Company's primary sources of external liquidity
are equipment inventory floor plan financing

II4

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arrangements provided to the Company by the manufacturers of the products the Company sells, and DFS and, with respect to acquisitions, secured loans from Case.

Under
inventory floor planning arrangements the manufacturers of products sold by the Company provide interest free credit terms on new equipment purchases for periods ranging from
one to twelve months, after which interest commences to accrue monthly at rates ranging from zero percent to two percent over the prime rate of interest. Principal payments are typically made under
these agreements at scheduled intervals and/or as the equipment is rented, with the balance due at the earlier of a specified date or sale of the equipment. At July 31, 2001, the Company was indebted
under manufacturer provided floor planning arrangements in the aggregate amount of $14,237,000.

The
Company has a $50 million inventory flooring and operating line of credit through DFS. Amounts are advanced against the Company's assets, including accounts receivable, parts, new
equipment, rental fleet, and used equipment. The agreement was amended as of October 31, 2000 with terms maturing December 31, 2001 and with a floating rate based on prime with rates between 0.75%
under prime to 2.25% over prime depending on the amount of total debt leverage of the Company. This amendment waived all prior defaults under the agreement and established revised financial covenants
to be measured at the Company's second and fourth quarters. In addition, the amendment included several, periodic mandatory reductions in the credit limit. The Company expects to use this borrowing
facility to
lower flooring related interest expense by using advances under such line to finance inventory purchases in lieu of financing provided by suppliers, to take advantage of cash purchase discounts from
its suppliers, to provide operating capital for further growth, and to refinance some its acquisition related debt at a lower interest rate. Borrowings are collateralized by the Company's assets,
including accounts receivable, parts inventory, new and used equipment inventory and rental fleet equipment. As of July 31, 2001, approximately $53,384,000 was outstanding under the DFS credit
facility.

At
July 31, 2001, the Company was in technical default of the leverage covenant and the minimum tangible net worth covenant in the DFS Loan Agreement. As of October 31, 2001 the
Company has requested but has not obtained a waiver letter for the period July 31, 2001 or thereafter. Although DFS has not called the debt due to such defaults, there is no guarantee that DFS will
not call this debt at any time after July 31, 2001.

During
the year ended July 31, 2001, cash and cash equivalents decreased by $54,000. The Company had positive cash flow from operating activities during the year of $13,261,000. The
Company's cash flow from operating activities consisted primarily of an inventory reduction of $8,545,000, accounts receivable reduction of $3,052,000, and depreciation of $9,835,000 offset by the net
loss of $7,842,000 and gains on the disposal of fixed assets of $2,016,000. Purchases of fixed assets during the period were related mainly to the ongoing replacement of aged operating assets. The
Company paid down its short-term financing by $14,287,000 during the year.

The
Company's cash and cash equivalents of $770,000 as of July 31, 2001 and available credit facilities are considered sufficient to support current levels of operations for at least
the next twelve months.

Risk Factors

Inventory

Controlling inventory is a key ingredient to the success of an equipment distributor because the equipment industry is characterized by long order cycles, high
ticket prices, and the related exposure to "flooring" interest. The Company's interest expense may increase if inventory is too high or interest rates rise. The Company manages its inventory through
company-wide information and inventory sharing systems wherein all locations have access to the Company's entire inventory. In addition, the

II5

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Company closely monitors inventory turnover by product categories and places equipment orders based upon targeted turn ratios.

Inflation

All of the products and services provided by the Company are either capital equipment or included in capital equipment, which are used in the construction,
agricultural, and industrial sectors. Accordingly, the Company's sales are affected by inflation or increased interest rates which tend to hold down new construction, and consequently adversely affect
demand for the construction and industrial equipment sold and rented by the Company. In addition, although agricultural equipment sales are less than 2% of the Company's total revenues, factors
adversely affecting the farming and commodity markets also can adversely affect the Company's agricultural equipment related business.

Economic Conditions

The Company's business can also be affected by general economic conditions in its geographic markets as well as general national and global economic conditions
that affect the construction, agricultural, and industrial sectors. An erosion in North American and/or other countries' economies could adversely affect the Company's business. Market specific
factors could also adversely affect one or more of the Company's target markets and/or products.

Seasonality; Fluctuations in Results

Historically, sales of our products have varied substantially from quarter to quarter due to the seasonality of the construction business. We attempt to
accurately forecast orders for our products and commence purchasing prior to the receipt of such orders. However, it is highly unlikely that we will consistently accurately forecast the timing and
rate of orders. This aspect of our business makes our planning inexact and, in turn, affects our shipments, costs, inventories, operating results and cash flow for any given quarter. In addition, our
quarterly operating results are affected by competitive pricing, announcements regarding new product developments and cyclical conditions in the industry. Accordingly, we may experience wide quarterly
fluctuations in our operating performance and profitability, which may adversely affect our stock price even if our year-to-year performance is more stable, which it also may not be. In addition, many
of our products require significant manufacturing lead-time, making it difficult to order products on short notice. If we are unable to satisfy unexpected customer orders, our business and customer
relationships could suffer and result in the loss of future business.

Inventory Lead-Times; Potential Write-Downs

To be competitive in certain of its markets, particularly markets for products with long lead time, the Company will be required to build up inventories of
certain products in anticipation of future orders. There can be no assurance that the Company will not experience problems of obsolete, excess, or slow-moving inventory if it is not able to properly
balance inventories against the prospect of future orders, and the Company's operations may, therefore, be adversely affected by inventory write-downs from time to time. In periods of general economic
slowdown or slowdowns in the construction sector we could be especially affected by such problems.

Potential Write-downs of Goodwill and Intangibles

Goodwill and other intangible assets are reviewed for impairment whenever an event or change in circumstances indicates that the carrying amount may not be
recoverable. If the carrying value of the Company's intangible assets exceeds the expected undiscounted future cash flows, a loss would be

II6

---

recognized to the extent the carrying amount of assets exceeds their fair values. This loss may negatively impact the Company's results of operation.

Competition

Many of the Company's existing and potential competitors have substantially greater marketing, financial, and service resources than we have. In addition, some
of the Company's competitors have broader product offerings, placing the Company at a disadvantage to some of its competitors. In addition, the Company believes that some of its competitors have
obtained and maintained business that loses money"loss leading"in order to maintain a competitive advantage with regard to specific customers or products. If the Company's
competitors were to use such tactics in the future, the Company would be unable to maintain its market position without incurring a negative impact on its profitability.

Cyclicality of Industry

The construction equipment industry is always very competitive. Advances in technology may reduce the cost for current or potential competitors to gain market
share, particularly for lower priced products. We cannot guarantee that sales of our products will continue at current volumes or prices in
any event, but especially if our current competitors or new market entrants introduce new products with better features, better performance, or lower prices or having other characteristics that are
more attractive than our own. Competitive pressures or other factors also may result in significant price competition that could have a material adverse effect on our results of operations.

Dependence Upon Third-Party Manufacturers

All of our products are supplied by third parties. From time to time, we experience delays and disruptions in our supply chain. To date, these delays and
disruptions have not materially adversely affected our business, but they could do so in the future. Wherever possible, we try to assure ourselves of adequate inventory supply, but we do not always
succeed. To the extent that we experience significant supply or quality control problems with our vendors, these problems can have a significant adverse effect on our ability to meet future delivery
commitments to our customers.

Currently,
Case Corporation provides approximately 50% of our products. Case dealer contracts are non-exclusive and terminable by either party upon minimum notice. There can be no
assurances that Case will continue to supply the Company with products or continue its relationship with the Company. If we are unable to obtain Case products or to continue our relationship with
Case, we will likely experience reductions in product and service sales and increased expenses. Our operations will be negatively affected if we experience inadequate supplies of any key products.

Recent Accounting Pronouncements

On June 29, 2001, the Financial Accounting Standards Board (FASB or the "Board") unanimously voted in favor of issuing two Statements: Statement No. 141
(FAS141), Business Combinations, and Statement No. 142 (FAS 142), Goodwill and OtherIntangible Assets. FAS 141 primarily addresses the accounting for the cost of an acquired business (i.e., the
purchase price allocation), including any subsequent adjustments to its cost. FAS 141 supercedes APB 16, Business Combinations. The most significant changes made by FAS 141 are:



II7

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FAS
141 is effective for all business combinations (as defined in the Statement) initiated after June 30, 2001 and for all business combinations accounted for by the purchase method
that are completed after June 30, 2001 (that is, the date of acquisition is July 1, 2001, or later).

FAS
142 primarily addresses the accounting for goodwill and intangible assets subsequent to their acquisition (i.e., the post-acquisition accounting). FAS 142 supercedes APB 17,
Intangible Assets. The most significant changes made by FAS 142 are:



FAS
142 is effective for fiscal years beginning after December 15, 2001 to all goodwill and other intangible assets recognized in an entity's statement of financial position at that
date, regardless of when those assets were initially recognized. Early application is permitted for entities with fiscal years beginning after March 15, 2001 provided that the first interim period
financial statements have not been issued previously. In all cases, the provisions of FAS 142 should be applied at the beginning of a fiscal year. Retroactive application is not permitted.

On
October 3, 2001, the FASB issued Statement of Financial Accounting Standards No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144). SFAS 144
supersedes SFAS 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS 144 applies to all long-lived assets (including discontinued operations) and
consequently amends Accounting Principles Board Opinion No. 30 (APB 30), "Reporting Results of OperationsReporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transaction." SFAS 144 develops one accounting model for long-lived assets that are to be disposed of by sale. SFAS 144 requires that long-lived assets
that are to be disposed of by sale be measured at the lower of book value or fair value less cost to sell. Additionally, SFAS 144 expands the scope of discontinued operations to include all components
of an entity with operations that (1) can be distinguished from the rest of the entity and (2) will be eliminated from the ongoing operations of the entity in a disposal transaction. The provisions of
this Statement are effective for financial statements issued for fiscal years beginning after December 15, 2001, and interim periods within those fiscal years, with early application encouraged.

The
Company is in the process of evaluating the effect of SFAS 142 and 144 on its financial statements.

Dividend Policy

The Company has never paid cash dividends on its Common Stock and it does not anticipate that it will pay cash dividends or alter its dividend policy in the
foreseeable future. The payment of dividends by the Company on its Common Stock will depend on its earnings and financial condition, and such other factors as the Board of Directors of the Company may
consider relevant. The Company currently intends to retain its earnings to assist in financing the growth of its business.

Merger Agreement; Asset Sale Agreement

On May 14, 2001, the Company announced that its merger with Supply Point, Inc., based in San Jose, California, closed, subject to certain conditions including
the approval of Deutsche Financial Services, its chief lender, and Case Corporation. The closing documents are being held in escrow subject to such conditions. The Company currently does not know
whether these conditions will be satisfied.

II8

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On September 18, 2001, the Company announced that it had entered into an agreement to sell substantially all of assets and liabilities of the equipment distribution business owned by
Western Power & Equipment Corp. (Oregon), a wholly owned subsidiary, to e*machinery.net, inc. (EMAC) for $500,000 in cash, a seven-year, 7% promissory note for $700,000, and 1.2 million shares of EMAC
restricted common stock. Closing is subject to a number of conditions including, but not limited to, due diligence, approval of Case Corporation, and Deutsche Financial Services. There is no assurance
that the transaction will be consummated.

Forward Looking Statements

Information included within this section relating to growth projections and future results and events constitutes forward-looking statements. Actual results in
future periods may differ materially from the forward-looking statements because of a number of risks and uncertainties, including but not limited to fluctuations in the construction, agricultural,
and industrial sectors; the success of the Company's entry into new markets; the success of the Company's expansion of its equipment rental business; rental industry conditions, and competitors;
competitive pricing; the Company's relationship with its suppliers; relations with the Company's employees; the Company's ability to manage its operating costs; the continued availability of
financing; governmental regulations and environmental matters; risks
associated with regional, national, and world economies; and implementation and consummation of the merger transaction (see Letter of Intent to Merge above). Any forward-looking statements should be
considered in light of these factors.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market risk from changes in interest rates. Market risk is the potential loss arising from adverse changes in market rates and prices
such as interest rates. For fixed rate debt, interest rate changes affect the fair value of financial instruments but do not impact earnings or cash flows. Conversely for floating rate debt, interest
rate changes generally do not affect the fair market value but do impact future earnings and cash flows, assuming other factors are held constant. At July 31, 2001, the Company had variable rate floor
plan payables, notes payable, and long-term debt of approximately $67.8 million. Holding other variables constant, the pre-tax earnings and cash flow impact for the next year resulting from a one
percentage point increase in interest rates would be approximately $0.7 million. The Company's policy is not to enter into derivatives or other financial instruments for trading or speculative
purposes.

II9

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following financial statements and financial schedule are attached to this Report on Form 10-K following Part IV, Item 14:

Consolidated Statements of Operations for the years ended July 31, 2001, 2000, and 1999

F-1Consolidated Balance Sheets as of July 31, 2001 and 2000

F-2Consolidated Statements of Stockholders' Equity for the years ended July 31, 2001, 2000, and 1999

F-3Consolidated Statements of Cash Flows for the years ended July 31, 2001, 2000, and 1999

F-4Notes to Consolidated Financial Statements

F-5Report of Independent Accountants

F-18Financial Statement Schedule:Report of Independent AccountantsFinancial Statement Schedule

F-19Schedule IIValuation and Qualifying Accounts

F-20


ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

II10

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PART III

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

Information with respect to Directors of the Company is incorporated herein by reference to "Proposal 1: Election of Directors" continuing through "Report of
the Compensation Committee on Executive Compensation" in the Company's Proxy Statement for the Annual Meeting of Shareholders to be filed pursuant to Regulation 14A not later than 120 days after the
end of the fiscal year covered by this Form 10-K. The information required by this Item with respect to the Company's Executive Officers follows Part I, Item 4A of this document.

ITEM 11.    EXECUTIVE COMPENSATION

Information with respect to Executive Compensation is incorporated herein by reference to "Compensation of Executive Officers" in the Company's Proxy Statement
for the Annual Meeting of Shareholders to be filed pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this Form 10-K.

ITEM 12.    PRINCIPAL STOCKHOLDERS

Information with respect to Security Ownership of Certain Beneficial Owners and Management is incorporated herein by reference to "Security Ownership of
Certain Beneficial Owners" and "Security Ownership of Directors and Executive Officers" in the Company's Proxy Statement for the Annual Meeting of Shareholders to be filed pursuant to Regulation 14A
not later than 120 days after the end of the fiscal year covered by this Form 10-K.

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information with respect to Certain Relationships and Related Transactions is incorporated herein by reference to "Board Compensation, Attendance and
Committees, Certain Transactions" in the Company's Proxy Statement for the Annual Meeting of Shareholders to be filed pursuant to Regulation 14A not later than 120 days after the end of the fiscal
year covered by this Form 10-K.

III1

---



PART IV

ITEM 14.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

|(a) |  | 1. |  | Financial Statements.                                                                             |  |                                                                                                                                                                                                                  
|--- |  | -- |  | ------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  |    |  | Consolidated Statements of Operations
for the years ended July 31, 2001, 2000, and 1999           |  | F-1                                                                                                                                                                                                              
|    |  |    |  | Consolidated Balance Sheets as of July 31, 2001 and 2000                                          |  | F-2                                                                                                                                                                                                              
|    |  |    |  | Consolidated Statements of Stockholders' Equity
for the years ended July 31, 2001, 2000, and 1999 |  | F-3                                                                                                                                                                                                              
|    |  |    |  | Consolidated Statements of Cash Flows
for the years ended July 31, 2001, 2000, and 1999           |  | F-4                                                                                                                                                                                                              
|    |  |    |  | Notes to Consolidated Financial Statements                                                        |  | F-5                                                                                                                                                                                                              
|    |  |    |  | Report of Independent Accountants                                                                 |  | F-18                                                                                                                                                                                                             
|    |  | 2. |  | Financial Statement Schedule.                                                                     |  |                                                                                                                                                                                                                  
|    |  |    |  | Report of Independent AccountantsFinancial Statement Schedule                                    |  | F-19                                                                                                                                                                                                             
|    |  |    |  | Schedule IIValuation and Qualifying Accounts                                                     |  | F-20                                                                                                                                                                                                             
|    |  | 3. |  | Exhibits.                                                                                         |  |                                                                                                                                                                                                                  
|
|    |  |    |  | 3.1                                                                                               |  | Certificate of Incorporation of Registrant.(2)                                                                                                                                                                   
|    |  |    |  | 3.2                                                                                               |  | By-laws of Registrant.(2)                                                                                                                                                                                        
|    |  |    |  | 10.1                                                                                              |  | 1995 Employee Stock Option Plan.(3)                                                                                                                                                                              
|    |  |    |  | 10.2                                                                                              |  | Second Amended and Restated Stock Option Plan for Non-Employee Directors.(3)                                                                                                                                     
|    |  |    |  | 10.3                                                                                              |  | Case New Dealer Agreement Package.(1)                                                                                                                                                                            
|    |  |    |  | 10.4                                                                                              |  | Lease AgreementHayward, California.(2)                                                                                                                                                                          
|    |  |    |  | 10.5                                                                                              |  | Lease AgreementAuburn, Washington.(7)                                                                                                                                                                           
|    |  |    |  | 10.6                                                                                              |  | Loan Agreement, dated January 17, 1997, between Registrant and Case Credit Corp. including related promissory notes.(5)                                                                                          
|    |  |    |  | 10.7                                                                                              |  | Security Agreement, dated January 17, 1997, made by Registrant in favor of Case Credit Corporation to secure payment for and collateralized by all assets acquired by Registrant from Sahlberg Equipment, Inc.(5)
|    |  |    |  | 10.8                                                                                              |  | Loan and Security Agreement dated as of June 5, 1997 between Registrant and Deutsche Financial Services Corporation.(6)                                                                                          
|    |  |    |  | 10.9                                                                                              |  | Asset Purchase Agreement, dated April 30, 1998, between Yukon Equipment, Inc. and Registrant.(8)                                                                                                                 
|    |  |    |  | 10.10                                                                                             |  | Employment Agreement dated May 1, 1998 between Maurice Hollowell and Registrant.(8)                                                                                                                              
|    |  |    |  | 10.11                                                                                             |  | Employment Agreement dated August 1, 2000 between C. Dean McLain and Registrant.                                                                                                                                 
|    |  |    |  | 10.12                                                                                             |  | Consulting Agreement dated August 1, 2000 by and between Registrant and Robert M. Rubin.                                                                                                                         

IV1

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| |  |  |  | 10.13 |  | Commercial Lease dated October 1, 2000 between McLain-Rubin Realty Company III, LLC and Registrant for Yuba City, California facility.                
| |  |  |  | ----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  |  | 10.14 |  | Commercial Lease dated October 1, 2000 between McLain-Rubin Realty Company III, LLC and Registrant for Sacramento, California facility.               
| |  |  |  | 10.15 |  | Commercial Lease, dated as of October 1, 2000 between McLain-Rubin Realty Company, LLC and Registrant for the Sparks, Nevada facility.                
| |  |  |  | 10.16 |  | Commercial Lease, dated as of April 1, 2001 between McLain-Rubin Realty Company II, LLC and Registrant for the Vancouver, Washington corporate office.
| |  |  |  | 21.   |  | Subsidiaries of the Company.                                                                                                                          
| |  |  |  | 23.   |  | Consent of Independent Accountants.                                                                                                                   

---

(b)Reports on Form 8-K.

The
Company field a current report on Form 8-K on May 14, 2001 regarding the Company's conditional closing of its merger with Supply Point, Inc. The Company filed a current report on
Form 8-K on September 24, 2001 regarding the Company signing an agreement to sell substantially all of its assets to e-machinery.net, Inc.

(c)Exhibits

See (a)(3) above.

(d)Additional Financial Statement Schedules

See
(a)(2) above.

IV2

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WESTERN POWER & EQUIPMENT CORP.  CONSOLIDATED STATEMENTS OF OPERATIONS  (in thousands, except per share data)

|                                                                  |                  | Year Ended July 31, |        
|----------------------------------------------------------------- | ---------------- | ------------------- | -------
|
|Net revenue                                                       |                  | $                   | 139,902
|Cost of goods sold                                                |                  |                     | 130,082
|                                                                  |                  |                     |        
|Gross profit                                                      |                  |                     | 9,820  
|Selling, general and administrative expenses                      |                  |                     | 12,840 
|                                                                  |                  |                     |        
|                                                                  |                  |                     | (3,020 
|Other income (expense):                                           |                  |                     |        
|                                                                  | Interest expense |                     |        
|                                                                  | Other income     |                     |        
|                                                                  |                  |                     |        
|Loss before income taxes                                          |                  |                     | (7,537 
|Provision (benefit) for income taxes                              |                  |                     | 305    
|                                                                  |                  |                     |        
|Net loss                                                          |                  | $                   | (7,842 
|                                                                  |                  |                     |        
|Basic loss per common share                                       |                  | $                   | (2.30  
|                                                                  |                  |                     |        
|Average Outstanding Common Shares for Basic EPS                   |                  |                     | 3,403  
|                                                                  |                  |                     |        
|Diluted loss per common share                                     |                  | $                   | (2.30  
|                                                                  |                  |                     |        
|Average Outstanding Common Shares And Equivalents for Diluted EPS |                  |                     | 3,403  
|                                                                  |                  |                     |        

See
accompanying notes to consolidated financial statements.

F1

---



WESTERN POWER & EQUIPMENT CORP.  CONSOLIDATED BALANCE SHEETS  (Dollars in thousands)

|                                                                               |                                                                                                                       | July 31,
2001                              |       | July 31,
2000 |       
|------------------------------------------------------------------------------ | --------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ----- | ------------- | ------
|ASSETS                                                                         |                                                                                                                       |                                            |       |               |       
|Current assets:                                                                |                                                                                                                       |                                            |       |               |       
|                                                                               | Cash and cash equivalents                                                                                             |                                            | $     | 770           |       
|                                                                               | Accounts receivable, less allowance for doubtful accounts of $948 and $563                                            |                                            |       | 14,295        |       
|                                                                               | Inventories                                                                                                           |                                            |       | 44,867        |       
|                                                                               | Prepaid expenses                                                                                                      |                                            |       | 298           |       
|                                                                               | Income taxes receivable                                                                                               |                                            |       |              |       
|                                                                               | Deferred income taxes                                                                                                 |                                            |       | 2,541         |       
|                                                                               |                                                                                                                       |                                            |       |               |       
|                                                                               |                                                                                                                       | Total current assets                       |       |               | 62,771
|                                                                               |                                                                                                                       |                                            |       |               |       
|Fixed assets (net):                                                            |                                                                                                                       |                                            |       |               |       
|                                                                               | Property, plant and equipment                                                                                         |                                            |       | 5,584         |       
|                                                                               | Rental equipment fleet                                                                                                |                                            |       | 22,027        |       
|                                                                               | Lease equipment fleet                                                                                                 |                                            |       |              |       
|                                                                               |                                                                                                                       |                                            |       |               |       
|                                                                               |                                                                                                                       | Total fixed assets                         |       |               | 27,611
|                                                                               |                                                                                                                       |                                            |       |               |       
|Intangibles and other assets, net of accumulated amortization of $808 and $683 |                                                                                                                       |                                            | 2,720 |               |       
|                                                                               |                                                                                                                       |                                            |       |               |       
|                                                                               |                                                                                                                       | Total assets                               |       | $             | 93,102
|                                                                               |                                                                                                                       |                                            |       |               |       
|LIABILITIES & STOCKHOLDERS' EQUITY                                             |                                                                                                                       |                                            |       |               |       
|Current liabilities:                                                           |                                                                                                                       |                                            |       |               |       
|                                                                               | Borrowings under floor plan financing                                                                                 |                                            | $     | 14,237        |       
|                                                                               | Short-term borrowings                                                                                                 |                                            |       | 53,384        |       
|                                                                               | Convertible Debt                                                                                                      |                                            |       | 182           |       
|                                                                               | Accounts payable                                                                                                      |                                            |       | 11,591        |       
|                                                                               | Accrued payroll and vacation                                                                                          |                                            |       | 1,754         |       
|                                                                               | Other accrued liabilities                                                                                             |                                            |       | 1,716         |       
|                                                                               | Capital lease obligations                                                                                             |                                            |       | 18            |       
|                                                                               |                                                                                                                       |                                            |       |               |       
|                                                                               |                                                                                                                       | Total current liabilities                  |       |               | 82,882
|                                                                               |                                                                                                                       |                                            |       |               |       
|Deferred income taxes                                                          |                                                                                                                       |                                            | 2,541 |               |       
|Capital lease obligations                                                      |                                                                                                                       |                                            | 920   |               |       
|Long-term borrowings                                                           |                                                                                                                       |                                            | 8     |               |       
|Deferred income                                                                |                                                                                                                       |                                            |      |               |       
|                                                                               |                                                                                                                       |                                            |       |               |       
|                                                                               |                                                                                                                       | Total liabilities                          |       |               | 86,351
|                                                                               |                                                                                                                       |                                            |       |               |       
|Commitments and contingencies                                                  |                                                                                                                       |                                            |       |               |       
|Stockholders' equity:                                                          |                                                                                                                       |                                            |       |               |       
|                                                                               | Preferred stock-10,000,000 shares authorized; none outstanding                                                        |                                            |       |              |       
|                                                                               | Common stock, $.001 par valueAuthorized, 20,000,000 shares Outstanding, 3,403,162 and 3,353,162 shares, respectively |                                            |       | 4             |       
|                                                                               | Additional paid-in capital                                                                                            |                                            |       | 15,894        |       
|                                                                               | Accumulated deficit                                                                                                   |                                            |       | (8,303        | )     
|                                                                               | Less common stock in treasury, at cost (130,300 and 180,300 shares, respectively)                                     |                                            |       | (844          | )     
|                                                                               |                                                                                                                       |                                            |       |               |       
|                                                                               |                                                                                                                       | Total stockholders' equity                 |       |               | 6,751 
|                                                                               |                                                                                                                       |                                            |       |               |       
|                                                                               |                                                                                                                       | Total liabilities and stockholders' equity |       | $             | 93,102
|                                                                               |                                                                                                                       |                                            |       |               |       

See accompanying notes to consolidated financial statements.

F2

---



WESTERN POWER & EQUIPMENT CORP.  CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY  (Dollars in thousands)

|                           |  | Common Stock |  |   |   |  |   |        |   |   |       
|-------------------------- |  | ------------ |  | - | - |  | - | ------ | - | - | ------
|
|Balance at July 31, 1998   |  | 3,303,462    |  | $ | 4 |  | $ | 16,072 |   | $ | 8,553 
|Net loss                   |  |             |  |   |  |  |   |       |   |   | (1,815
|                           |  |              |  |   |   |  |   |        |   |   |       
|Balance at July 31, 1999   |  | 3,303,162    |  |   | 4 |  |   | 16,072 |   |   | 6,738 
|Issuance of Treasury Stock |  | 50,000       |  |   |   |  |   | (67    | ) |   |       
|Net loss                   |  |              |  |   |   |  |   |        |   |   | (7,198
|                           |  |              |  |   |   |  |   |        |   |   |       
|Balance at July 31, 2000   |  | 3,353,162    |  |   | 4 |  |   | 16,005 |   |   | (460  
|Issuance of Treasury Stock |  | 50,000       |  |   |   |  |   | (111   | ) |   |       
|Net loss                   |  |              |  |   |   |  |   |        |   |   | (7,842
|                           |  |              |  |   |   |  |   |        |   |   |       
|Balance at July 31, 2001   |  | 3,403,162    |  | $ | 4 |  | $ | 15,894 |   | $ | (8,303
|                           |  |              |  |   |   |  |   |        |   |   |       

See
accompanying notes to consolidated financial statements.

F3

---



WESTERN POWER & EQUIPMENT CORP.  CONSOLIDATED STATEMENTS OF CASH FLOWS  (In thousands)

|                                                 |                                                                                 | Year Ended July 31,                                                    |                                
|------------------------------------------------ | ------------------------------------------------------------------------------- | ---------------------------------------------------------------------- | -------------------------------
|
|Cash flows from operating activities:            |                                                                                 |                                                                        |                                
|                                                 | Net loss                                                                        |                                                                        | $                              
|                                                 | Adjustments to reconcile net loss to net cash provided by operating activities: |                                                                        |                                
|                                                 |                                                                                 | Depreciation                                                           |                                
|                                                 |                                                                                 | Gain on disposal of fixed assets                                       |                                
|                                                 |                                                                                 | Amortization                                                           |                                
|                                                 |                                                                                 | Changes in assets and liabilities (excluding effects of acquisitions): |                                
|                                                 |                                                                                 |                                                                        | Accounts receivable            
|                                                 |                                                                                 |                                                                        | Inventories                    
|                                                 |                                                                                 |                                                                        | Prepaid expenses               
|                                                 |                                                                                 |                                                                        | Deferred income taxes          
|                                                 |                                                                                 |                                                                        | Accounts payable               
|                                                 |                                                                                 |                                                                        | Accrued payroll and vacation   
|                                                 |                                                                                 |                                                                        | Other accrued liabilities      
|                                                 |                                                                                 |                                                                        | Income taxes receivable/payable
|                                                 |                                                                                 |                                                                        | Deferred lease income          
|                                                 |                                                                                 |                                                                        | Other assets/liabilities       
|                                                 |                                                                                 |                                                                        |                                
|Net cash provided by operating activities        |                                                                                 |                                                                        | 13,261                         
|                                                 |                                                                                 |                                                                        |                                
|Cash flow from investing activities:             |                                                                                 |                                                                        |                                
|                                                 | Purchase of fixed assets                                                        |                                                                        |                                
|                                                 | Purchase of rental equipment                                                    |                                                                        |                                
|                                                 | Sale of rental equipment                                                        |                                                                        |                                
|                                                 | Proceeds on sale of fixed assets                                                |                                                                        |                                
|                                                 | Sale (purchase) of leased equipment fleet                                       |                                                                        |                                
|                                                 | Covenant not to compete                                                         |                                                                        |                                
|                                                 | Purchase of other assets                                                        |                                                                        |                                
|                                                 |                                                                                 |                                                                        |                                
|                                                 |                                                                                 | Net cash provided by (used in) investing activities                    |                                
|                                                 |                                                                                 |                                                                        |                                
|Cash flows from financing activities:            |                                                                                 |                                                                        |                                
|                                                 | Principal payments on capital leases                                            |                                                                        |                                
|                                                 | Treasury stock sales                                                            |                                                                        |                                
|                                                 | Inventory floor plan financing                                                  |                                                                        |                                
|                                                 | Short-term financing                                                            |                                                                        |                                
|                                                 | Convertible debt issuance                                                       |                                                                        |                                
|                                                 | Long-term debt repayments                                                       |                                                                        |                                
|                                                 |                                                                                 |                                                                        |                                
|                                                 |                                                                                 | Net cash used in financing activities                                  |                                
|                                                 |                                                                                 |                                                                        |                                
|(Decrease) increase in cash and cash equivalents |                                                                                 |                                                                        | (54                            
|Cash and cash equivalents at beginning of year   |                                                                                 |                                                                        | 824                            
|                                                 |                                                                                 |                                                                        |                                
|Cash and cash equivalents at end of year         |                                                                                 | $                                                                      | 770                            
|                                                 |                                                                                 |                                                                        |                                

See
accompanying notes to consolidated financial statements.

F4

---



Western Power & Equipment Corp.

Notes to Consolidated Financial Statements(Dollars in thousands, except per share and options data)

1.  Summary of Significant Accounting Policies



The Company is engaged in the sale, rental, and servicing of light, medium, and heavy construction and industrial, and agricultural equipment and related parts
in Washington, Oregon, California, Nevada, and Alaska. Case serves as the manufacturer of the single largest portion of the Company's products.

The
consolidated financial statements include the accounts of the Company and its Oregon subsidiary after elimination of all intercompany accounts and transactions.

The
accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal
course of business. As discussed in note 5 below, the Company has significant borrowings that require, among other things, compliance with certain financial ratios on a quarterly basis. As s result of
losses incurred during the last year, the Company was not in compliance with the financial ratio covenants under its credit facility with Deutsch Financial Services (DFS). The Company requested, but
did not receive a waiver of such non-compliance. There can be no assurance that the Company will be able to meet the financial ratio
covenants in the future, which could result in DFS calling the debt at any time and requiring the Company to discontinue operations.

The
Company is in discussions with DFS regarding renewal or extension of the current credit facility. In addition, the Company is exploring alternative financing arrangements with
other potential lenders. The Company's continuation as a going concern is dependent, in part, upon its ability to successfully establish the necessary financing arrangements and to comply with the
terms thereof.

Subsequent
breaches of any of the terms and conditions of the current DFS credit facility or any renewal or replacement thereof could result in acceleration of the Company's
indebtedness, in which case the debt would become immediately due and payable. Based upon the Company's current projections, it does not believe that it will comply with the existing financial
covenants unless they are modified or waived. If there is no modification or waiver, the Company may not be able to repay its debt or borrow sufficient funds to refinance it. Even if new financing is
available, it may not be on terms that are acceptable to the Company.

The
Company is concentrating its efforts on making all of its ongoing operations profitable and in capitalizing on its existing operations' strengths to restore profitability. The
Company has selectively pared down the number of stores it operates and its product offerings to reduce overall costs and to improve turnover in the remaining product lines that it offers. Subsequent
to July 31, 2001, the Company has sold or closed, or is in the process of closing, three additional stores.

On
September 18, 2001, the Company announced that it had entered into an agreement to sell substantially all of the assets and liabilities of the equipment distribution business owned
by Western Power & Equipment Corp. (Oregon), a wholly owned subsidiary, to e*machinery.net, inc. (EMAC) for $500 in cash, a seven-year, 7% promissory note for $700, and 1.2 million shares of EMAC
restricted common stock. Closing is subject to a number of conditions including, but not limited to, due diligence, approval of Case Corporation, and Deutsche Financial Services. There is no assurance
that the transaction will be consummated.

F5

---



For financial reporting purposes, the Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash
equivalents, which balances may, at times, exceed the federally insured limits.



In accordance with the borrowing agreement with Deutsche Financial Services (DFS), the Company has a cash account restricted by DFS for the purpose of paying
down the line of credit. Restricted cash included in the cash balances totaled $242 and $543 at July 31, 2001 and 2000, respectively.



Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out (FIFO) method for parts inventories and the specific
identification method for equipment inventories.



The Company's acquisition strategy has been focused on existing businesses with established market share in a contiguous geographic area. Items with an
indeterminate useful life, such as name recognition, geographical location and presence represent value to the Company. The Company uses estimates of the useful life of these intangible assets ranging
from twenty to forty years. These lives are based on the factors influencing the acquisition decision and on industry practice. The Company reviews for asset impairment on a periodic basis and
whenever events or changes in circumstances indicate that the carrying amount of the intangible asset may not be recoverable. Based on this review, no write-down for impairment loss on intangible
assets has been recorded during the three-year period ended July 31, 2001.



Property, plant, and equipment are stated at cost less accumulated depreciation. Depreciation and amortization are computed using the straight-line method over
the estimated useful lives of the assets, ranging from 5 to 20 years. Expenditures for replacements and major improvements are capitalized. Expenditures for repairs, maintenance, and routine
replacements are charged to expenses as incurred. The cost of assets retired or otherwise disposed of and the related accumulated depreciation are eliminated from the accounts; any resulting gain or
loss is included in the results of operations.

At
each balance sheet date, management assesses whether there has been permanent impairment in the value of long-lived assets. The amount of any such impairment is determined by
comparing anticipated undiscounted future cash flows from operating activities with the associated carrying value. The factors considered by management in performing this assessment include current
operating results, trends and prospects, as well as the effects of obsolescence, demand, competition, and other economic factors.



Revenue on equipment and parts sales is recognized upon shipment of products and passage of title. Rental and service revenue is generally recognized at the
time such services are provided.

The
Company has entered into sales contracts under which the customer may require the Company to repurchase equipment at specified dates and specified prices. The Company records the
proceeds from such sales contracts as deferred lease income. The difference between the sale contract amount and the repurchase obligation is recognized as revenue over the period of the repurchase

F6

---

obligation. The remaining repurchase obligation is recorded as a sale if and when the customer does not exercise the repurchase option. At July 31, 2001, no repurchase obligations were in existence.



The Company expenses all advertising costs as incurred. Total advertising expense for the years ended July 31, 2001, 2000 and 1999 was $221, $320, and $311
respectively.



The Company recognizes deferred tax assets and liabilities based upon differences between the financial reporting and tax bases of the assets and liabilities
using the enacted tax rates and laws that are expected to be in effect when the differences are expected to be recovered. The Company provides a valuation allowance for deferred tax assets for which
it does not consider realization of such assets to be more likely than not.



In April 1998, the Board of Directors authorized the repurchase of up to 350,000 shares of the Company's common stock in the open market, subject to normal
trading restrictions. Under this program, the Company purchased a total of 230,300 shares of common stock at a cost of $1.49 million in fiscal year 1998. Currently, the Company uses shares of treasury
stock to issue shares upon exercise of outstanding stock options and/or for private placements of common stock.



Certain amounts in the 2000 financial statements have been reclassified to conform with the 2001 presentation. These reclassifications had no impact on net
loss or cash flows as previously reported.



The recorded amounts of cash and cash equivalents, accounts receivable, short-term borrowings, accounts payable and accrued liabilities as presented in the
financial statements approximate fair value because of the short-term nature of these instruments. The recorded amount of short and long-term borrowings approximates fair value as the actual interest
rates approximate current competitive rates.



Basic net income (loss) per common share is computed using the average number of common shares outstanding during the period. Diluted net income (loss) per
share is computed using the average number of common shares and common share equivalents outstanding during the period, unless inclusion of common share equivalents would be antidilutive.



A capital lease obligation of $1,942 was incurred in February 1999 when the Company entered into a 20-year lease for the Sparks, Nevada facility. In the first
quarter of fiscal 2001 certain capital leases were converted to operating leases resulting in a gain of $720.

Year ended July 31,2001

2000

1999Cash paid (received) during the year for:Interest

$
5,887

$
5,922

$
5,922Income taxes, net of refunds


(12
)

219


(834
)


F7

---

During
fiscal year 2001, the Company's obligations under various guaranteed buyback obligations were terminated resulting in elimination of leased equipment assets of $4,975 and
deferred income of $5,982 from the prior fiscal year. In fiscal year 2001, in lieu of payment for certain professional services provided to the Company, the Company issued 50 shares of its common
stock for $213 to the provider of such professional services.



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 fiscal periods presented. Actual results could differ from those estimates.



Business Combinations and Goodwill and Other Intangible Assets

The
Financial Accounting Standards Board (FASB) recently announced the issuance of No. 141, "Business Combinations" and No. 142, "Goodwill and Other Intangible Assets." The Company
has goodwill for which amortization has been recorded against in prior periods. The impact of the future adoption of FAS 142 has yet to be determined. Amortization of goodwill per quarter is $31;
amortization of goodwill for the year would be $125. The Company will need to review the potential impairment of carrying values of goodwill to determine if there will be a write-down. Currently,
goodwill is valued at $2,650.

On
October 3, 2001, the FASB issued Statement of Financial Accounting Standards No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144). SFAS 144
supersedes SFAS 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS 144 applies to all long-lived assets (including discontinued operations) and
consequently amends Accounting Principles Board Opinion No. 30 (APB 30), "Reporting Results of OperationsReporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transaction." SFAS 144 develops one accounting model for long-lived assets that are to be disposed of by sale. SFAS 144 requires that long-lived assets
that are to be disposed of by sale be measured at the lower of book value or fair value less cost to sell. Additionally, SFAS 144 expands the scope of discontinued operations to include all components
of an entity with operations that (1) can be distinguished from the rest of the entity and (2) will be eliminated from the ongoing operations of the entity in a disposal transaction. The provisions of
this Statement are effective for financial statements issued for fiscal years beginning after December 15, 2001, and interim periods within those fiscal years, with early application encouraged. The
Company is in the process of evaluating the effect of SFAS 144 on its financial statements.

2.  Related Party Transactions

The real property and improvements used in connection with the Sacramento Operations, and upon which the Sacramento Operation is located, were sold by Case for
$1,500 to the McLain-Rubin Realty Company, LLC ("MRR"), a Delaware limited liability company the owners of which are Messrs. C. Dean McLain, the President and a director of the Company, and Robert M.
Rubin, the Chairman and a director of the Company. Simultaneous with its acquisition of the Sacramento Operation real property and improvements, MRR leased such real property and improvements to the
Company under the terms of a 20-year commercial lease agreement dated March 1, 1996 with the Company paying an initial annual rate of $168. As of October 1, 2000, the Company entered into a
renegotiated 7-year lease with an initial annual rate of $228. In addition to base rent, the Company is responsible for the

F8

---

payment of all related taxes and other assessments, utilities, insurance and repairs (both structural and regular maintenance) with respect to the leased real property during the term of the lease.
The new lease qualifies for treatment as an operating lease.

On
December 11, 1997, the real property and improvements used in connection with Case's Yuba City, California operation, was purchased by McLain-Rubin Realty Company III, LLC ("MRR
III"), a Delaware limited liability company, the owners of which are Messrs. C. Dean McLain, the President and a director of the Company, and Robert M. Rubin, the Chairman and a director of the
Company. Simultaneous with its acquisition of the Yuba City, California real property and improvements, MRR III leased such real property and improvements to the Company under the terms of a 20-year
commercial lease agreement dated effective December 11, 1997 with the Company paying an initial annual rate of $54. As of October 1, 2000, the Company entered into a renegotiated 7-year lease with an
initial annual rate of $66. In addition to base rent, the Company is responsible for the payment of all related taxes and other assessments, utilities, insurance, and repairs (both structural and
regular maintenance) with respect to the leased real property during the term of the lease. The new lease qualifies for treatment as an operating lease.

In
February 1999, the real property and improvements used in connection with the Company's Sparks, Nevada operation and upon which such operation is located, were sold to McLain-Rubin
Realty, L.L.C. (MRR) under the terms of a real property purchase and sale agreement. MRR is a Delaware limited liability company the owners of which are Messrs. C. Dean McLain, the President and
Chairman of the Company, and Robert M. Rubin, a director of the Company. The sale price was $2,210 in cash at closing. Subsequent to the closing of the sale, the Company entered into a 20-year
commercial lease agreement with MRR for the Sparks, Nevada facility at an initial rental rate of $252 per year. The lease is a net lease with payment of insurance, property taxes and maintenance costs
paid by the Company. The sale resulted in a deferred gain which will be amortized over the life of the lease pursuant to generally accepted accounting principles. As of October 1, 2000, the Company
entered into a renegotiated 7-year lease with an initial annual rate of $276. The new lease qualifies for treatment as an operating lease and the remainder of the deferred gain which was previously
being amortized over the life of the cancelled lease was all recognized in the first quarter of fiscal year 2001.

On
April 1, 2000, the Company entered into a lease with McLain-Rubin Realty Company II, LLC ("MRR II"), a Delaware limited liability company, the owners of which are Messrs. C. Dean
McLain, the President and a director of the Company, and Robert M. Rubin, the Chairman and a director of the Company, for a 5-year lease on its Vancouver, Washington corporate office with an annual
rate of $98. In addition to base rent, the Company is responsible for the payment of all related taxes and other assessments, utilities, insurance, and repairs (both structural and regular
maintenance) with respect to the leased real property during the term of the lease. The lease qualifies for treatment as an operating lease.

3.  Inventories

Inventories consist of the following:

July 31,
2001

July 31,
2000Equipment (net of reserve allowances of $7,489 and $4,770 respectively):New equipment

$
28,163

$
40,148Used equipment


7,425


7,442Parts (net of reserve allowance of $282 and $522 respectively)


9,279


10,707$
44,867

$
58,297


F9

---

4.  Fixed Assets

Fixed assets consist of the following:

July 31,
2001

July 31,
2000Property, plant, and equipment:Land

$
500

$
500Buildings


1,717


5,334Machinery and equipment


3,997


4,030Office furniture and fixtures


2,377


2,360Computer hardware and software


1,453


1,869Vehicles


1,964


1,428Leasehold improvements


958


55012,966


16,071Less: accumulated depreciation


(7,382
)

(6,621
)Property, plant, and equipment (net)

$
5,584

$
9,450Rental equipment fleet

$
28,889

$
32,493Less: accumulated depreciation


(6,862
)

(6,417
)Rental equipment (net)

$
22,027

$
26,076Leased equipment fleet

$


$
5,481Less: accumulated depreciation





(506
)Leased equipment fleet

$


$
4,975


5.  Borrowings

The Company has inventory floor plan financing arrangements with Case Credit Corporation, an affiliate of Case, for Case inventory and with other finance
companies affiliated with other equipment manufacturers. The terms of these agreements generally include a one-month to six-month interest free term followed by a term during which interest is
charged. Principal payments are generally due at the earlier of sale of the equipment or twelve to forty-eight months from the invoice date.

The
Company has a $50,000 inventory flooring and operating line of credit through Deutsche Financial Services (DFS). The agreement was amended as of October 31, 2000 with terms
maturing December 31, 2001 and with a floating rate based on prime with rates between 0.75% under prime to 2.25% over prime depending on the amount of total debt leverage of the Company. This
amendment waived all prior defaults under the agreement and established revised financial covenants to be measured at the Company's second and fourth quarters. In addition, the amendment included
several, periodic mandatory reductions in the credit limit. Amounts may be advanced against the Company's assets, including accounts receivable, parts, new equipment, rental fleet, and used equipment.
Interest payments on the outstanding balance are due monthly.

F10

---

All floor plan debt is classified as current since the inventory to which it relates is generally sold within twelve months of the invoice date. The following table summarizes the
inventory floor plan financing arrangements:

July 31,Maturity
DateInterest Rate

2001

2000Case Credit Corporation

Prime + 2% (7.00%)

8 - 48 months

$
14,237

$
14,768Deutsche Financial Services

Prime + 2.25% (7.25%)

12 - 36 months


53,384


67,671$
67,621

$
82,439


At
July 31, 2001 and July 31, 2000, the Company was in technical default of the leverage covenant and the minimum tangible net worth covenant in the Deutsche Financial Services Loan
Agreement. There is no guarantee that Deutsche Financial Services will not call this debt at any time after July 31, 2001. If DFS does call the debt, it will become immediately due and payable in full
and the Company would not be able to continue operations. In addition, if the Company is unable to renew the DFS credit facility after December 31, 2001 or replace it with an equivalent or better
credit facility, there are no assurances that the Company will have adequate credit facilities to continue its business.

In
December 2000, the Company completed the sale of $182 principal amount of 10% convertible promissory notes due December 31, 2001. The notes are convertible, at the option of the
holders, into common stock at a minimum conversion price of $1.50 per. The Company may, at its option, redeem the notes at the principal amount plus accrued interest any time prior to December 31,
2001.

6.  Income Taxes

The provision (benefit) for income taxes is comprised of the following:

Year EndedJuly 31,
2001

July 31,
2000

July 31,
1999Current:Federal

$
278

$
180

$
(978
)State


27


26


(157
)305


206


(1,135
)Deferred:Federal


-0-


500


29State


-0-


73


5-0-


573


34Total provision (benefit) for income taxes

$
305

$
779

$
(1,101
)


F11

---

The
principal reasons for the variation from the customary relationship between income taxes at the statutory federal rate and that shown in the statement of operations were as
follows:

Year EndedJuly 31,
2001

July 31,
2000

July 31,
1999Statutory federal income tax rate

(34.0
)%
(34.0
)%
(34.0
)%State income taxes, net of federal income tax benefit

(4.3
)%
(2.9
)%
(5.2
)%Valuation allowance

38.3
%
46.1
%
0.0
%Other

4.0
%
2.9
%
1.5
%4.0
%
12.1
%
(37.7
)%


Temporary
differences and carry forwards which give rise to a significant portion of deferred tax assets and liabilities were as follows:

Year EndedJuly 31,
2001

July 31,
2000Deferred assets:Inventory

$
2,734

$
1,739Accounts receivable


373


219Accrued vacation and bonuses


83


127NOL Carryforward


5,997


3,069Other accruals


75


75Current Deferred Tax Asset


9,262


5,229LessValuation Allowance


(6,721
)

(2,956
)Net Current Deferred Tax Asset


2,541


2,273Deferred liabilities:Fixed Assets


(2,385
)

(2,159
)Goodwill and intangibles


(156
)

(114
)Long-term Deferred Tax Liability


(2,541
)

(2,273
)Net Deferred Tax Asset

$
0

$
0


The
Company has recorded a valuation allowance to reflect the estimated amount of deferred tax assets that may not be realized due to the expiration of net operating losses and tax
credit carryovers. The valuation allowance primarily related to federal and state net operating losses, which may not be realized. The ultimate realization of deferred tax assets is dependent upon the
generation of future
taxable income during the periods in which those temporary differences become deductible. The Company considers projected future taxable income and tax planning strategies in making this assessment.
Based on the historical taxable income and projections for future taxable income over the periods that the deferred tax assets are deductible, the Company believes it is more likely than not that the
Company will not realize the benefits of these deductible differences in the near future.

F12

---

7.  Stockholders' Equity



Under the Company's 1995 Employee Stock Option Plan, key employees, officers, directors, and consultants of the Company can receive incentive stock options and
non-qualified stock options to purchase up to an aggregate of 1,500,000 shares of the Company's common stock. The plan provides that the exercise price of incentive stock options be at least equal to
100 percent of the fair market value of the common stock on the date of grant. With respect to non-qualified stock options, the plan requires that the exercise price be at least 85 percent of fair
value on the date such option is granted. Outstanding options expire no later than ten years after the date of grant.

In
December 1995, the Board of Directors adopted a stock option plan for non-employee directors under which each non-employee director is entitled to receive on August 1 of each year
beginning August 1, 1996, options to purchase 2,500 shares of the Company's common stock at the fair market value of the stock at the date of grant. In January 1998, the Company's shareholders
approved an amendment to this plan increasing the number of shares for which options are granted yearly to non-employee directors from 2,500 to 5,000. Outstanding options expire no later than ten
years after the date of grant.

During
2001 no options were exercised.

During
1995, the Financial Accounting Standards Board issued SFAS 123, "Accounting for Stock Based Compensation," which defines a fair value method of accounting for an employee stock
option or similar equity instrument. That pronouncement encourages all entities to adopt that method of accounting for all compensation costs related to stock options issued to all employees under
these plans, but permits companies to continue using the intrinsic value method of accounting prescribed by the Accounting Principles Board Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to
Employees." Entities electing to remain with the accounting in APB 25 must make pro forma disclosures of net income and earnings per share, as if the fair value based method of accounting defined in
this statement has been applied.

The
Company has elected to account for its stock based compensation under APB 25; however, as required by SFAS 123, the Company has computed for pro forma disclosure purposes the
value of options granted during fiscal years 2001, 2000, and 1999 using the Black-Scholes option pricing model. The weighted average assumptions used for stock option grants for fiscal years 2001,
2000, and 1999 were:

FY00

FY99

FY99Risk free interest rate

4.35
%
4.85-5.45
%
4.85-5.45
%Expected dividend yield

0
%
0
%
0
%Expected life

4 years

4 years

4 yearsExpected volatility

116.21
%
93.31
%
62.56
%


Adjustments
for forfeitures are made as they occur. For the years ended July 31, 2001, 2000, and 1999, the total value of the options granted, for which no previous expense has been
recognized, was computed as approximately $0, $0, and $72 respectively, which would be amortized over the vesting period of the options. The weighted average fair value per share of the options
granted in fiscal years 2001, 2000, and 1999 are $0.53, $0, and $5.07, respectively.

F13

---

If the Company had accounted for these stock options issued to employees in accordance with SFAS 123, the Company's net loss and pro forma net loss and net loss per share and pro
forma net loss per share would have been reported as follows.

Year Ended July 31, 2001Net Loss

Basic
E.P.S.

Diluted
E.P.S.As Reported

$
(7,841
)
$
(2.30
)
$
(2.30
)Pro Forma

$
(8,162
)
$
(2.40
)
$
(2.40
)


Year Ended July 31, 2000Net Loss

Basic
E.P.S.

Diluted
E.P.S.As Reported

$
(7,198
)
$
(2.18
)
$
(2.18
)Pro Forma

$
(7,206
)
$
(2.18
)
$
(2.18
)


Year Ended July 31, 1999Net Loss

Basic
E.P.S.

Diluted
E.P.S.As Reported

$
(1,815
)
$
(0.55
)
$
(0.55
)Pro Forma

$
(2,174
)
$
(0.66
)
$
(0.66
)


The
effects of applying SFAS 123 for providing pro forma disclosure for fiscal years 2001, 2000 and 1999 are not likely to be representative of the effects on reported net income and
earnings per share for future years since options vest over several years and additional awards are made each year.

The
following summarizes the stock option transactions under the Company's stock option plans:

Shares
(000)

Weighted Average
Option PriceOptions outstanding July 31, 1998:

1508

4.56Exercised



Surrendered

(12
)
4.53Granted

17

5.07Options outstanding July 31, 1999:

1,513

4.56Exercised

(50
)
5.13Surrendered

(1,453
)
4.64Granted



Options outstanding July 31, 2000:

10

4.56Exercised



Surrendered



Granted

1,200

0.53Options outstanding July 31, 2001

1,210

0.56


F14

---

In
January 2001, the Company issued a total of 1,200,000 options to management, employees, and directors as follows:

|Name            |  | Position           |  | # of Shares
in Option |  | Exercise Price
per Share |       | Term of Option
(Years)
|--------------- |  | ------------------ |  | --------------------- |  | ------------------------ | ----- | ----------------------
|Dean McLain     |  | President/CEO      |  | 500,000               |  | $                        | 0.531 |                       
|Robert Rubin    |  | Board of Directors |  | 500,000               |  | $                        | 0.531 |                       
|Allen Perres    |  | Board of Directors |  | 25,000                |  | $                        | 0.531 |                       
|Seymour Kessler |  | Board of Directors |  | 25,000                |  | $                        | 0.531 |                       
|Mark J. Wright  |  | VP Finance/CFO     |  | 100,000               |  | $                        | 0.531 |                       
|employees       |  |                    |  | 50,000                |  | $                        | 0.531 |                       

The
options issued to Robert Rubin, Allen Perres, and Seymour Kessler are subject to shareholder ratification which will be sought at the next annual meeting of shareholders.

The
following table sets forth the exercise prices, the number of options outstanding and exercisable, and the remaining contractual lives of the Company's stock options at July 31,
2001:

|Exercise
Price |       | Number of
Options
Outstanding |           | Weighted
Average
Exercise
Price |   | Weighted
Average
Contractual
Life Remaining |  | Number of
Options
Exercisable |  | Weighted
Average
Exercise
Price
|-------------- | ----- | ----------------------------- | --------- | ------------------------------- | - | ------------------------------------------- |  | ----------------------------- |  | -------------------------------
|$              | 4.375 |                               | 10,000    |                                 | $ | 4.375                                       |  | 6.00                          |  | 10,000                         
|$              | 0.531 |                               | 1,200,000 |                                 | $ | 0.531                                       |  | 9.50                          |  | 1,200,000                      

8.  Commitments and Contingencies

The Company leases certain facilities under noncancelable lease agreements. As more fully described in Note 3, the building portion of some of the Company's
facility leases qualify under SFAS 13 as "capital leases" (i.e., an acquisition of an asset and the incurrence of a liability). The remaining facility lease agreements have terms ranging from
month-to-month to nine years and are accounted for as operating leases. Certain of the facility lease agreements provide for options to renew and generally require the Company to pay property taxes,
insurance, and maintenance and repair costs. Total rent expense under all operating leases aggregated $2,280, $2,129, and $2,000 for the years ended July 31, 2001, 2000, and 1999, respectively.

The
Company is involved in various legal proceedings which are incidental to the industry and for which certain matters are covered in whole or in part by insurance or, otherwise, the
Company has recorded accruals for estimated settlements. Management believes that any liability which may result from these proceedings will not have a material adverse effect on the Company's
consolidated financial statements.

Assets
recorded under capital leases are recorded in fixed assets and are as follows:

July 31,
2001

July 31,
2000

July 31,
1999Capitalized asset value

$
937

$
4,553

$
4,978Less accumulated amortization


(262
)

(667
)

(550
)$
675

$
3,886

$
4,428


F15

---

Net capitalized assets values are included in Property, Plant and Equipment. Future minimum lease payments under all noncancelable leases as of July 31, 2001, are as follows:

Year ending July 31,

Capital
leases

Operating
leases2002

$
128

$
1,6922003


116


1,5342004


108


1,3562005


108


1,0902006


124


900Thereafter


1,204


1,921Total annual lease payments

$
1,788

$
8,493Less amount representing interest, with imputed interest rates ranging from 6% to 15%


850Present value of minimum lease payments


938Less current portion


18Long-term portion

$
920


The
Company issues purchase orders to Case Corporation for equipment purchases. Upon acceptance by Case, these purchases become noncancelable by the Company. As of July 31, 2001, such
purchase commitments totaled $7,116,979.

9.  Segment Information

In fiscal 1999, the Company adopted Statement of Financial Accounting Standards No. 131 (SFAS 131), "Disclosures about Segments of an Enterprise and Related
Information," which requires the reporting of certain financial information by business segment. For the purpose of providing segment information, management believes that all of the Company's
operations consist of one segment. However, the Company evaluates performance based on revenue and gross margin of three distinct business components. Revenue and gross margin by component are
summarized as follows:

Business Component
Net Revenues

Year Ended
July 31, 2001

Year Ended
July 31, 2000

Year Ended
July 31, 1999Equipment Sales

$
84,065

$
92,513

$
98,450Equipment Rental


20,817


26,334


25,771Product Support


35,020


36,790


39,429Totals

$
139,902

$
155,637

$
163,650Business Component
Gross Margins

Year Ended
July 31, 2001

Year Ended
July 31, 2000

Year Ended
July 31, 1999Equipment Sales

$
(641
)
$
(66
)
$
2,591Equipment Rental


4,566


5,556


5,017Product Support


5,895


6,048


6,986Totals

$
9,820

$
11,538

$
14,594


There
are no inter-segment revenues. Asset information by reportable segment is not reported, since the Company does not produce such information internally.

F16

---

10. Unaudited Quarterly Consolidated Financial Data

|             |                                 | Quarter |   |        | 
|------------ | ------------------------------- | ------- | - | ------ | 
|
|
|Fiscal 2001: |                                 |         |   |        | 
|             | Net sales                       |         | $ | 37,783 | 
|             | Gross Profit                    |         |   | 4,858  | 
|             | Net income (loss)               |         |   | 461    | 
|             | Basic income (loss) per share   |         |   | 0.14   | 
|             | Diluted income (loss) per share |         |   | 0.14   | 

|             |                            | Quarter |   |        | 
|------------ | -------------------------- | ------- | - | ------ | 
|
|
|Fiscal 2000: |                            |         |   |        | 
|             | Net sales                  |         | $ | 42,063 | 
|             | Gross Profit               |         |   | 4,920  | 
|             | Net income                 |         |   | 125    | 
|             | Basic earnings per share   |         |   | 0.04   | 
|             | Diluted earnings per share |         |   | 0.04   | 

F17

---

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and
Stockholders of Western Power & Equipment Corp.

In
our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of stockholders' equity and of cash flows present fairly, in all
material respects, the financial position of Western Power & Equipment Corp. and its subsidiary at July 31, 2001 and 2000, and the results of their operations and their cash flows for each of the
three years in the period ended July 31, 2001, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above.

The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred losses from operations and has a working
capital deficit for the years ended July 31, 2001 and 2000. Further, as discussed in Note 5 to the financial statements, the Company is in technical default of its loan agreement and has not obtained
a waiver or revisions to the agreement from the financial institution. Accordingly, the financial institution at any time may call the outstanding borrowings, which aggregated $53.4 million at July
31, 2001. Such factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial
statements do not include any adjustment that might result from the outcome of this uncertainty.

PRICEWATERHOUSECOOPERS
LLP

Portland,
Oregon
October 6, 2001

F18

---

REPORT OF INDEPENDENT ACCOUNTANTS
FINANCIAL STATEMENT SCHEDULE

To the Board of Directors and
Stockholders of Western Power & Equipment Corp.

Our
audits of the consolidated financial statements referred to in our report dated October 6, 2001 appearing on page F-16 of this Annual Report on Form 10-K also included an audit of
the financial statement schedules listed in Item 14(a)(2) of this Form 10-K. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial statements.

PRICEWATERHOUSECOOPERS
LLP

Portland,
Oregon
October 6, 2001

F19

---



SCHEDULE II

WESTERN POWER & EQUIPMENT CORP.VALUATION AND QUALIFYING ACCOUNTS  For the Fiscal Years Ended July 31, 2001 and 2000        (Dollars in
Thousands)

|Description                  |                                 | Balance at
Beginning
of Period |   | Charged to
Costs and
Expenses |  | Charged to
Other
Accounts |       | Deductions |   | Balance at
End of
Period
|---------------------------- | ------------------------------- | ------------------------------ | - | ----------------------------- |  | ------------------------- | ----- | ---------- | - | ------------------------
|Accounts Receivable Reserve: |                                 |                                |   |                               |  |                           |       |            |   |                         
|                             | Fiscal year ended July 31, 2001 |                                | $ | 563                           |  | $                         | 544   |            | $ |                        
|                             | Fiscal year ended July 31, 2000 |                                |   | 724                           |  |                           | 690   |            |   |                        
|Inventory Reserve:           |                                 |                                |   |                               |  |                           |       |            |   |                         
|                             | Fiscal year ended July 31, 2001 |                                |   | 5,052                         |  |                           | 4,106 |            |   |                        
|                             | Fiscal year ended July 31, 2000 |                                |   | 2,513                         |  |                           | 2,547 |            |   |                        

F20

---



SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

| |  | WESTERN POWER & EQUIPMENT CORP.
| |  | -------------------------------
| |  | By:                            

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.

|Signature                                 |  | Title                                                                                                |  | Date             
|----------------------------------------- |  | ---------------------------------------------------------------------------------------------------- |  | -----------------
|                                          |  |                                                                                                      |  |                  
|/s/C. DEAN MCLAINC. Dean McLain           |  | President, Chief Executive Officer, and Chairman                                                     |  | November 13, 2001
|/s/MARK J. WRIGHTMark J. Wright           |  | Vice President of Finance, Chief Financial and Principal Accounting Officer, Treasurer and Secretary |  | November 13, 2001
|/s/ROBERT M. RUBINRobert M. Rubin         |  | Director                                                                                             |  | November 13, 2001
|/s/DR. SEYMOUR KESSLERDr. Seymour Kessler |  | Director                                                                                             |  | November 13, 2001
|/s/ALLEN PERRESAllen Perres               |  | Director                                                                                             |  | November 13, 2001
|/s/IRWIN PEARLIrwin Pearl                 |  | Director                                                                                             |  | November 13, 2001

F21

---

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