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

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                  FORM 10-K/A1

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

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


  For the fiscal year ended July 31, 2002     Commission File Number 0-26230




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

                DELAWARE                                   91-1688446
                --------                                   ----------
    (State or other jurisdiction of                     (I.R.S. Employer
     incorporation or organization)                  Identification Number)

  6407-B N.E. 117TH AVE, VANCOUVER, WA                             98662
--------------------------------------------------------------------------------
(Address of principal executive offices)                         (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)

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

            Indicate by check mark 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 November 22, 2002: (a) 4,003,162 shares of Common Stock, $.001
par value, of the registrant (the "Common Stock") were outstanding; (b)
2,180,578 shares of Common Stock were held by non-affiliates ; and (c) the
aggregate market value of the Common Stock held by non-affiliates was
$501,532.94 based on the closing sale price of $0.23 per share on November 22,
2002.

            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.

================================================================================
<PAGE>

                                     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 30.5 percent of the
outstanding shares of the Company as of July 31, 2002.

            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.

            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

                                      I-2
<PAGE>

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.

            During fiscal 2002, the Company closed/sold 3 branches. There were
15 branches as of the end of fiscal year 2002.

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 2002 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 as
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 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

                                      I-3
<PAGE>

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 51% and 50% of the Company's
net sales for fiscal year 2002 and fiscal 2001, 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 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 6% of revenue in fiscal year 2002 from 15% of revenue in
fiscal year 2001. 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 80

                                      I-4
<PAGE>

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, 2002.

For fiscal years 2002, 2001, and 2000, the revenue breakdown by source for the
business operated by the Company were approximately as follows:

                                         FY 2002    FY 2001    FY 2000
                                         -------------------------------
              Equipment Sales              68%        60%        59%
              Equipment Rental              6%        15%        17%
              Product Support              26%        25%        24%
                                         -------------------------------
                                          100%       100%       100%
                                         ===============================

            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 2002 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 42 equipment salespersons on July
31, 2002. 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, 2002, the Company employed 3 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 its equipment and parts inventory from Case
and other manufacturers. No supplier other than Case accounted for more than 10%
of such inventory purchases during fiscal 2002. 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.

                                      I-5
<PAGE>

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 several 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.

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 resulting 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, 2002, the Company employed 242 full-time employees. Of
that number, 15 are in corporate administration, 21 are involved in
administration at the branch locations, 63 are employed in equipment sales and
rental, and 143 are employed in product support. At July 31, 2002, approximately
14 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, 2005. 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.

                                      I-6
<PAGE>

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.































                                      I-7
<PAGE>

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, 2002.

<TABLE><CAPTION>
                                                         Expiration      Annual             Size/Square                   Purchase
Location and Use                Lessor                   Date            Rental             Feet                           Options
----------------                ------                   ----            ------             ----                           -------
<S>                             <C>                      <C>             <C>                <C>                              <C>
1745 N.E. Columbia Blvd.        Carlton O. Fisher, CNJ   12/31/2010      $84,0001 plus      Approx. 4 acres;                  No
Portland, Oregon 97211          Enterprises                              CPI adjustments    building 17,622 sq. ft.

1665 Silverton Road, N.E.       LaNoel Elston            07/10/2004      $36,0001           Approx. 1 acre; building          No
Salem, Oregon 97303             Myers Living Trust                                                       14,860 sq. ft.

West 7916 Sunset Hwy.           U.S. Bank                09/30/2003      $69,6001           Approx. 5 acres;                  No
Spokane, Washington 99204                                                                   building 19,200 sq. ft.

12406 Mukilteo Speedway         Phil & Jana Pickering    10/31/2008      $120,9601          Approx. 2.1 acres;                No
Mukilteo, Washington 98275                                                                  building 13,600 sq. ft.

6407-B  NE 117th Ave            McLain-Rubin Realty      03/31/2006      $98,400            Building 8,627 sq. ft.            No
Vancouver, Washington 98662     Company, LLC 3
(Executive Offices)
2702 W. Valley Hwy No.          Avalon Island LLC        11/30/2015      $228,0001          Approx. 8 acres;                  No
Auburn, Washington 98001                                                                    building 33,000 sq. ft.

500 Prospect Lane               Owned                    N/A             N/A                Approx. 1.5 acres;                N/A
Moxee, Washington 98936                                                                     building 4,320 sq. ft.
(Subleased to 3rd Party)


1455 Glendale Ave.              McLain-Rubin Realty      01/31/2007      $276,0002          Approx. 5 acres;                  No
Sparks, Nevada 89431            Company, LLC 3                                              building 22,475 sq. ft.

25886 Clawiter Road             Fred Kewel II, Agency    11/30/2004      $108,9031          Approx. 2.8 acres;                No
Hayward, California 94545                                                                   building 21,580 sq. ft.


3540 D Regional Parkway         Soiland                  02/28/05        $50,2501 plus      Approx. 1.25 acres;               No
Santa Rosa, California  95403                                            annual CPI         building 5,140 sq. ft.
                                                                         adjustments

1751 Bell Avenue                McLain-Rubin Realty      09/30/2007      $228,0002          Approx. 8 acres;                  No
Sacramento, California 95838    Company, LLC 3                                              building 35,940 sq. ft.


8271 Commonwealth Avenue        M.E. Robinson &          N/A             $90,960                       N/A                    No
Buena Park, CA 90621-2537       Lois Robinson


2535 Ellis Street               Hart Enterprises         Month to        $8,400             Approx. 2 acres;                  Yes
Redding, California 96001                                Month                              building 6,200 sq. ft.

</TABLE>

                                      I-8
<PAGE>

<TABLE><CAPTION>
                                                         Expiration      Annual             Size/Square                   Purchase
Location and Use                Lessor                   Date            Rental             Feet                           Options
----------------                ------                   ----            ------             ----                           -------
<S>                             <C>                      <C>             <C>                <C>                              <C>
1041 S Pershing Ave             Stockton Further         03/14/2006      $48,845            Approx. .5 acres;                 Yes
Stockton, CA   95206            Processing                                                  building 1,794 sq. ft.

723 15th Street                 Mark Flerchinger         11/02/2002      $20,400            Approx. 1.2 acres;                Yes
Clarkston, Washington 99403                                                                 building 3,750 sq. ft.


2020 E. Third Avenue            Owned                    N/A             N/A                Approx. 4 acres;                  N/A
Anchorage, Alaska 99501                                                                     building 15,650 sq. ft.


3511 International Street       Airport Rentals          11/30/2009      $74,400            Approx. 1.5 acres;                No
Fairbanks, Alaska 99701                                                                     building 8,500 sq. ft.
</TABLE>

1    Net lease with payment of insurance, property taxes, and maintenance costs
     paid by the Company.
2    Net lease with payment of insurance, property taxes and maintenance costs,
     including structural repairs, paid by the Company.
3    Related party lease.

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

            The Company's operating facilities at July 31, 2002 were separated
into eight "hub" outlets and seven "sub-stores". In addition, the Company
maintains its headquarter operations in Vancouver, Washington. The hub stores
are the main distribution centers located in Auburn and Spokane, Washington;
Portland, Oregon; Sparks, Nevada; Hayward, Buena Park, and Sacramento,
California; and Anchorage, Alaska; and the sub-stores are the smaller facilities
located in Mukilteo and Clarkston, Washington; Salem, Oregon; Santa Rosa,
Stockton, and Redding, California; and Fairbanks, Alaska.

            The stores in Springfield, OR, Pasco, WA, and Yuba City, CA were
closed during fiscal year 2002 and the operations were combined with the
operations in Salem, OR, Auburn, WA and Sacramento, CA respectively.

            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.


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

            On May 30, 2002, the Company held its 2002 Annual meeting of
Stockholders (the "Annual Meeting"). The directors holding office prior to the
date of the Annual Meeting, Messrs. C. Dean McLain, Robert M. Rubin, Seymour
Kessler, Allen Perres, and Irwin Pearl were nominated for election at the Annual
Meeting, and all of such persons were reelected at the Annual Meeting for
another one-year term as director. The votes recorded for election of each
nominee for director were the following:

            Name                        For          Against       Abstention
            ----                        ---          -------       ----------
            C. Dean McLain           2,855,987        6,762          94,038

                                      I-9
<PAGE>

            Robert M. Rubin          2,855,090        7,659          94,038
            Seymour Kessler          2,855,987        6,762          94,038
            Allen Perres             2,855,805        6,944          94,038
            Irwin Pearl              2,855,987        6,762          94,038

           Votes were also cast, and proposals approved, at the Annual Meeting
for: i) issuance of 600,000 shares of the Company's Common Stock to the Rubin
Family Irrevocable Trust, and ii) ratification of the appointment of Moss Adams
LLP as the Company's independent auditors for the 2002 fiscal year.

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

                                                     Position Held With the
           Name               Officer Since   Age    Registrant
           ----------------   -------------   ---    ---------------------------
           C. Dean McLain          1993        49    Chairman, President, and
                                                     Chief Executive Officer (2)

           Mark J. Wright          1997        46    Vice President of Finance,
                                                     Chief Financial Officer,
                                                     Treasurer, and Secretary

(1)  The officers serve for a term of one year and until their successors are
     elected.

(2)  Elected Chairman in 1998, Chief Executive Officer and President in 1993.

















                                      I-10
<PAGE>

                                     PART II

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

            The Company's stock is traded on the OTC Bulletin Board under the
symbol WPEC. The high and low closing prices for the Company's common stock for
the years ended July 31, 2002 and July 31, 2001 were as follows:

<TABLE><CAPTION>
                                                                        High       Low
                                                                        ----       ---
            Fiscal 2002
            -----------
            <S>                                                         <C>        <C>
            1st Quarter - August 1, 2001 through October 31, 2001       $0.56      $0.17

            2nd Quarter - November 1, 2001 through January 31, 2002     $0.31      $0.10

            3rd Quarter - February 1, 2002 through April 30, 2002       $0.35      $0.16

            4th Quarter - May 1, 2002 through July 31, 2002             $0.32      $0.22

            Fiscal 2001
            -----------
            1st Quarter - August 1, 2000 through October 31, 2000       $6.440     $2.000

            2nd Quarter - November 1, 2000 through January 31, 2001     $4.594     $0.281

            3rd Quarter - February 1, 2001 through April 30, 2001       $2.063     $0.550

            4th Quarter - May 1, 2001 through July 31, 2001             $1.500     $0.370
</TABLE>

            The number of shareholders of record of the Company's Common Stock
on October 1, 2002 was 512 and the number of beneficial holders of the Company's
Common Stock is estimated by management to be approximately 1,200 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
<PAGE>

ITEM 6.     SELECTED FINANCIAL DATA
            -----------------------

            The following selected financial data have been derived from the
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.

(Amounts in thousands, except per share data)

<TABLE><CAPTION>
                                                                   Fiscal Year Ended July 31,
                                               2002(a)         2001           2000           1999           1998
------------------------------------------------------------------------------------------------------------------
<S>                                          <C>            <C>            <C>            <C>            <C>
Net sales                                    $ 107,988      $ 139,902      $ 155,637      $ 163,650      $ 163,478
Gross profit                                 $   7,763      $   9,820      $  11,538      $  14,594      $  19,176
     (% of sales)                                  7.2            7.0            7.4            8.9           11.7
Selling, general and administrative          $  10,199      $  12,840      $  13,534      $  12,586      $  12,092
     (% of sales)                                  9.4            9.2            8.7            7.7            7.4
(Loss) income before income taxes               (9,971)     $  (7,537)     $  (6,419)     $  (2,916)     $   3,193
     (% of sales)                                 (9.2)          (5.4)          (4.1)          (1.8)           2.0
Tax rate (%)                                       0.8            0.2             12            (38)            42
Net (loss) income                            $ (10,019)     $  (7,842)     $  (7,198)     $  (1,815)     $   1,839

Net (loss) income per common share           $   (2.50)     $   (2.30)     $   (2.18)     $   (0.55)     $    0.53
Shares used in basic earnings
     per share calculations                      4,003          3,403          3,306          3,303          3,473

Net (loss) income per
    diluted common share                     $   (2.50)     $   (2.30)     $   (2.18)     $   (0.55)     $    0.49
Shares used in diluted earnings
     per share calculations                      4,003          3,403          3,306          3,303          3,772



Working capital deficit                      $ (24,390)     $ (20,102)     $ (15,910)     $ (16,117)     $  (6,339)
Long-term debt (including capital leases
   and deferred lease income)                $     928      $   3,469      $  10,796      $  11,124      $   7,457
Stockholders' (deficit) equity               $  (3,136)     $   6,751      $  14,381      $  21,322      $  23,138
Total assets                                 $  59,576      $  93,092      $ 122,710      $ 136,594      $ 138,766
</TABLE>

(a) Unaudited


                                      II-2
<PAGE>

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 3 stores. At the end of fiscal 2002, the Company had 15 stores in
operation.

            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:

<TABLE><CAPTION>
-------- ------------------- --------------- --------------- --------------- ------------------
 Fiscal    No. of Stores at   No. of Stores   No. of Stores   No. of Stores   No. of Stores at
  Year    Beginning of Year       Opened       Closed/Sold       Acquired       End of Year
-------- ------------------- --------------- --------------- --------------- ------------------
<S>               <C>               <C>             <C>             <C>              <C>
 2000             24                2               5               0                21
-------- ------------------- --------------- --------------- --------------- ------------------
 2001             21                0               3               0                18
-------- ------------------- --------------- --------------- --------------- ------------------
 2002             18                0               3               0                15
-------- ------------------- --------------- --------------- --------------- ------------------
</TABLE>

              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 2002, AS COMPARED WITH FISCAL YEAR 2001

            The Company reported net revenue for fiscal 2002 of $107,988,000
compared with net revenue of $139,902,000 for fiscal 2001. Stores opened longer
than 12 months showed an overall revenue decrease of 7.7 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 three of its facilities during fiscal 2002 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 2002 of $10,019,000 or $2.50
per share compared with a net loss of $7,842,000 or $2.30 per share in fiscal
2001. Included in the net loss for fiscal year 2002 are fourth quarter non-cash
charges of $3,796,000 for inventory allowances in light of decreasing market
prices for aged equipment, a $2,525,000 write-off of all goodwill, a $1,983,000
write-off of disputed receivables from vendors, and a $953,000 write-off of
fixed assets. In addition, the Company increased the valuation allowance related
to the deferred tax asset by $4,637,000 due to the uncertainty in the Company's
ability to utilize its net operating loss carryforwards.

            Gross margin was 7.2 percent during fiscal 2002 which is higher than
the 7.0 percent gross margin during fiscal 2001. Margins increased in fiscal
2002 due mainly to management placing a high priority on improving overall gross
margins. 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
<PAGE>

            Selling, general, and administrative expenses were $ 10,199,000 or
9.4 percent of revenues for fiscal 2002 compared to $12,840,000 or 9.2 percent
of sales for fiscal 2001. The increase in selling, general, and administrative
expenses as a percent of revenues resulted in part from the decrease in revenue
volume and due to the costs of store closures during the year.

            Interest expense for fiscal 2002 was $4,114,000, down from
$5,982,000 in fiscal 2001 due to a combination of a 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 and to provide operating capital liquidity. As of June 21,
2002, the Company entered into a Forbearance Agreement with DFS, under the terms
of which DFS raised the interest rate to prime plus 4% while the Company is in
default and required the Company to pay $45,000 fee to DFS for the forbearance.
In addition, under the terms of the Forbearance Agreement, the Company is
required to meet certain financial covenants and meet certain debt reduction
schedules. See Liquidity and Capital Resources below for a description of the
status of the DFS facility.

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
along with increased competitive pressures. The Company consolidated three 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 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 7.0 percent during fiscal 2001 which is lower than
the 7.4 percent gross margin during fiscal 2000. Margins decreased in fiscal
2001 due primarily to continued competitive pressures and the fourth quarter
equipment reserve as discussed above. 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 $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 lower than expected
revenue levels and the costs of closing stores during the year.

            Interest expense for fiscal 2001 was $5,982,000, down from
$6,069,000 in fiscal 2000 due in part to a decrease in interest rates and lower
inventory levels. 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

                                      II-4
<PAGE>

equipment inventory floor plan financing arrangements provided to the Company by
the manufacturers of the products the Company sells.

            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 upon sale of the
equipment. At July 31, 2002, the Company was indebted under manufacturer
provided floor planning arrangements in the aggregate amount of $10,974,000.

            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, 2002, approximately $41,322,000 was outstanding under the DFS credit
facility.

            The DFS 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. As of June 21, 2002, the Company entered
into a Forbearance Agreement with DFS under the terms of which DFS raised the
interest rate to prime plus 4% while the Company is in default and required the
Company to pay a $45,000 fee to DFS for the forbearance. In addition, under the
terms of the Forbearance Agreement, the Company is required to meet certain
financial covenants and meet certain debt reduction schedules. At July 31, 2002,
the Company was in technical default of the DFS Loan Agreement. The Company has
requested, but has not obtained a waiver letter for the period July 31, 2002 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, 2002.

            During the year ended July 31, 2002, cash and cash equivalents
decreased by $765,000. The Company had positive cash flow from operating
activities during the year of $ 14,079,000. The Company's cash flow from
operating activities consisted primarily of an inventory reduction of
$17,952,000, accounts receivable reduction of $3,991,000, and depreciation of
$7,950,000 offset by a decrease in accounts payable of $3,990,000. 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
$12,075,000 during the year.

            The Company's cash and cash equivalents was approximately $5,000 as
of July 31, 2002. The Company cannot fund current levels of operations without
the continued availability of borrowing from its current lender DFS. Although
the Company and DFS are in negotiations to extend or renew the credit facility
beyond its expiration on December 31, 2001, there can be no assurance that the
Company will be able to successfully negotiate an acceptable extension or
renewal of the expired DFS credit facility or that DFS will continue to make
borrowing available to the Company.

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

                                      II-5
<PAGE>

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.

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 is recognized to the
extent the carrying amount of assets exceeds their fair values. Based on this
review, a $2,525,000 write-down for impairment loss on goodwill has been
recorded during the fourth quarter of the year ended July 31, 2002.

COMPETITION

                Many of the Company's existing and potential competitors have
substantially greater marketing, financial, and service resources than the
Company has. 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.

                                      II-6
<PAGE>

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 51% 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.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company's significant accounting policies are described in Note 1 to the
financial statements included in Item 14 of the Annual Report on Form 10-K.

The estimates for inventory obsolescence reserves are developed to provide for
allowances in recognition of decreasing market prices for aged equipment
inventory using inventory aging reports for new and used equipment, combined
with available market prices for comparable equipment, historical and forecasted
sales information. As trends in these variables change, the percentages applied
to the inventory aging categories are updated.

The estimates for impairments of goodwill are derived in accordance with
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets to be Disposed Of." The Company continually
reviews goodwill to evaluate whether events or changes have occurred that would
suggest an impairment of carrying value based on an estimate of future cash
flows from related operations.

Also in accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets to be Disposed Of" estimates
related to the impairment in the value of the long-lived assets are reviewed at
each balance sheet date. 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 operating results, trends and prospects, as
well as the effects of obsolescence, demand, competition, and other economic
factors.

The $646,000 estimate of allowance for doubtful accounts is comprised of two
parts, a specific account analysis and a general reserve. Accounts where
specific information indicates a potential loss may exist are reviewed and a
specific reserve against amounts due is recorded. As additional information
becomes available such specific account reserves are updated. Additionally, a
general reserve is applied to the aging categories based on historical
collection and write-off experience. As trends in historical collection and
write-offs change, the percentages applied against the accounts receivable aging
categories are updated.

                                      II-7
<PAGE>

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 Other Intangible 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:

                - It requires use of the purchase method of accounting for all
                business combinations, thereby eliminating use of the
                pooling-of-interests method.

                - It provides new criteria for determining whether intangible
                assets acquired in a business combination should be recognized
                separately from goodwill.

                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:

                - Goodwill and indefinite lived intangible assets will no longer
                be amortized and will be tested for impairment at least
                annually.

                - Goodwill will be tested at least annually at the reporting
                unit level.

                - The amortization period of intangible assets with finite lives
                is no longer limited to forty years

                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 previously been issued. 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.

            In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB
Statement No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections." SFAS No. 145 generally requires that any gains or losses on
extinguishment of debt in current or prior periods be classified as other income
(expense). The Company expects to adopt the provisions of SFAS No. 145 in its
fiscal year ending July 31, 2003. The Company is currently evaluating the impact
of adopting the provisions of SFAS No. 145 in its financial statements.

            In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." SFAS No. 146 requires companies to
recognize costs associated with exit or disposal activities when they are
incurred rather than at the date of a commitment to an exit or disposal plan.
SFAS 146 will be applied prospectively to any exit or disposal activities
initiated after December 31, 2002. The Company expects there will be no effect
on its financial results relating to the adoption of SFAS No. 146.

                                      II-8
<PAGE>

            In October 2002, the FASB issued SFAS No. 147, "Acquisitions of
Certain Financial Institutions - an amendment of FASB Statements No. 72 and 144
and FASB Interpretation No. 9. SFAS 147 is effective for related transactions
which occur on n or after October 1, 2002. It is not anticipated that SFAS 147
will have an impact on the Company's 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.

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. Any forward-looking statements
should be considered in light of these factors.






                                      II-9
<PAGE>

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, 2002, the
Company had variable rate floor plan payables, notes payable, and long-term debt
of approximately $52.5 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 $0.5 million. The
Company's policy is not to enter into derivatives or other financial instruments
for trading or speculative purposes.























                                     II-10
<PAGE>

ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
            -------------------------------------------

            The following financial statements and financial schedules are
attached to this Report on Form 10-K/A1 following Part IV, Item 14:

            Consolidated Statements of Operations for
                the year ended July 31, 2002   (unaudited)                 F-1

            Consolidated Statements of Operations for
                the years ended July 31, 2001 and 2000                     F-2

            Consolidated Balance Sheet as of July 31, 2002  (unaudited)    F-3

            Consolidated Balance Sheet as of July 31, 2001                 F-4

            Consolidated Statements of Stockholders' Equity/(Deficit)
                for the years ended July 31, 2002 (unaudited), 2001,
                and 2000                                                   F-5

            Consolidated Statements of Cash Flows for
                the year ended July 31, 2002   (unaudited)                 F-6

            Consolidated Statements of Cash Flows for
                the years ended July 31, 2001 and 2000                     F-7

            Notes to Consolidated Financial Statements                     F-8

            Report of Independent Accountants for years ended July
                31, 2001 and 2000                                         F-20


Financial Statement Schedule:

            Report of Independent Accountants - Financial Statement
                Schedule for years ended July 31, 2001 and 2000           F-21
            Schedule II - Valuation and Qualifying Accounts               F-22


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

            Western Power & Equipment Corp. engaged Moss Adams LLP as its new
independent accountants as of December 5, 2001. During the two fiscal years and
the subsequent interim period prior to the engagement of Moss Adams LLP on
December 5, 2001, Western Power & Equipment Corp. did not consult with Moss
Adams LLP regarding the application of accounting principles to any specific
transaction, whether completed or proposed; on the type of audit opinion that
might be rendered on Western Power & Equipment Corp.'s financial statements; or
on any matter that was either the subject of a disagreement or a reportable
event.

            Moss Adams LLP did not audit the financial statements contained in
this Form 10-K/A1 for the year ended July 31, 2002 or the financial statements
contained in the Form 10-K for the year ended July 31, 2002 filed November 13,
2002 and did not issue a report with respect to the aforementioned financial
statements or consent to the incorporating by reference of these financial
statements on the Form S-8.


                                     II-11
<PAGE>

                                    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/A1. 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/A1.

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/A1.

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/A1.



                                     III-1
<PAGE>

                                     PART IV

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

(a)    1.   Financial Statements.

            Consolidated Statements of Operations for
                 the year ended July 31, 2002   (unaudited)                F-1

            Consolidated Statements of Operations for
                 the years ended July 31, 2001 and 2000                    F-2

            Consolidated Balance Sheet as of July 31, 2002  (unaudited)    F-3

            Consolidated Balance Sheet as of July 31, 2001                 F-4

            Consolidated Statements of Stockholders' Equity/(Deficit)
                 for the years ended July 31, 2002 (unaudited), 2001,
                 and 2000                                                  F-5

            Consolidated Statements of Cash Flows for
                 the year ended July 31, 2002   (unaudited)                F-6

            Consolidated Statements of Cash Flows for
                 the years ended July 31, 2001 and 2000                    F-7

            Notes to Consolidated Financial Statements                     F-8

            Report of Independent Accountants for the years ended
                 July 31, 2001 and 2000                                   F-20

       2.   Financial Statement Schedule.

            Report of Independent Accountants - Financial Statement
                 Schedule for the years ended July 31, 2001 and 2000      F-21

            Schedule II - Valuation and Qualifying Accounts               F-22

       3.   Exhibits.

            Exhibit
            Number      Description
            ------      -----------

            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)

                                      IV-1
<PAGE>

            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.

            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.

       (1)  Filed as an Exhibit to the American United Global, Inc. Annual
            Report on Form 10-K, as filed on October 29, 1993 and incorporated
            herein by reference thereto.

       (2)  Filed as an Exhibit to Amendment No. 1 to the Registrant's
            Registration Statement on Form S-1, filed on May 16, 1995 and
            incorporated herein by reference thereto. (Registration No.
            33-89762).

       (3)  Filed as an Exhibit to the Registrant's Registration Statement on
            Form S-8, filed on September 18, 1998 and incorporated herein by
            reference thereto. (Registration No. 33-63775).

       (4)  Filed as an Exhibit to the Quarterly Report on Form 10-Q of the
            Registrant, as filed on June 11, 1997 and incorporated herein by
            reference thereto.

       (5)  Filed as an Exhibit to the Annual Report on Form 10-K of the
            Registrant, as filed on October 28, 1996 and incorporated herein by
            reference thereto.

       (6)  Filed as an Exhibit to the Annual Report on Form 10-K of the
            Registrant, as filed on October 29, 1998 and incorporated herein by
            reference thereto.

       (7)  Filed as an Exhibit to the Quarterly Report on Form 10-Q of the
            Registrant, as filed on June 14, 1999 and incorporated herein by
            reference thereto.

       (8)  Filed as an Exhibit to Form 8-K of the Registrant, as filed on May
            11, 1998 and incorporated herein by reference thereto.

(b)    Reports on Form 8-K.
       --------------------

       During the quarter ended January 31, 2002, the Company filed a report on
       Form 8-K to report a change in the Company's Certifying Accountant.

(c)    Exhibits
       --------

       See (a)(3) above.

(d)    Additional Financial Statement Schedules
       ----------------------------------------

       See (a)(2) above.


                                      IV-2
<PAGE>

Note Regarding the Financial Statements for the year ended July 31, 2002:

The financial statements for the year ended July 31, 2002 are unaudited.
Accordingly, this Form 10-K/A1 filing is deficient under the Securities and
Exchange Commission's rules and regulations. Audited financial statements for
the year ended July 31, 2002 are being filed immediately following this filing.

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

                                                  Year Ended July 31,
                                                         2002
                                                      ---------
Net revenue                                           $ 107,988

Cost of goods sold                                      100,225
                                                      ---------

Gross profit                                              7,763

Selling, general and administrative expenses             10,199
Impairment of goodwill and write-down of
      property, plant and equipment                       3,478
                                                      ---------

                                                         (5,914)

Other income (expense):
     Interest expense                                    (4,114)
     Other income (expense)                                  57
                                                      ---------

Loss before income taxes                                 (9,971)

Provision for income taxes                                   48
                                                      ---------
Net loss                                              $ (10,019)
                                                      =========

Basic loss per common share                           $   (2.50)
                                                      =========

Average Outstanding Common Shares
     for Basic EPS                                        4,003
                                                      =========


Diluted loss per common share                         $   (2.50)
                                                      =========

Average Outstanding Common Shares
     And Equivalents for Diluted  EPS                     4,003
                                                      =========

          See accompanying notes to consolidated financial statements.

                                      F-1
<PAGE>

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

                                                       Year Ended July 31,
                                                    2001                 2000
                                                  ---------           ---------

Net revenue                                       $ 139,902           $ 155,637

Cost of goods sold                                  130,082             144,099
                                                  ---------           ---------

Gross profit                                          9,820              11,538

Selling, general and administrative expenses         12,840              13,534
Impairment of goodwill and write-down of
      property, plant and equipment                     -0-                 -0-
                                                  ---------           ---------

                                                     (3,020)             (1,996)

Other income (expense):
     Interest expense                                (5,982)             (6,069)
     Other income                                     1,465               1,646
                                                  ---------           ---------

Loss before income taxes                             (7,537)             (6,419)

Provision for income taxes                              305                 779
                                                  ---------           ---------
Net loss                                          $  (7,842)          $  (7,198)
                                                  =========           =========

Basic loss per common share                       $   (2.30)          $   (2.18)
                                                  =========           =========

Average Outstanding Common Shares
     for Basic EPS                                    3,403               3,306
                                                  =========           =========


Diluted loss per common share                     $   (2.30)          $   (2.18)
                                                  =========           =========

Average Outstanding Common Shares
     And Equivalents for Diluted  EPS                 3,403               3,306
                                                  =========           =========

          See accompanying notes to consolidated financial statements.


                                      F-2
<PAGE>

Note Regarding the Financial Statements for the year ended July 31, 2002:

The financial statements for the year ended July 31, 2002 are unaudited.
Accordingly, this Form 10-K/A1 filing is deficient under the Securities and
Exchange Commission's rules and regulations. Audited financial statements for
the year ended July 31, 2002 are being filed immediately following this filing.

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

                                                                       July 31,
                                                                         2002
                                                                       --------
ASSETS
------
Current assets:
     Cash and cash equivalents                                         $      5
     Accounts receivable, less allowance for
       doubtful accounts of $646                                         10,304
     Inventories                                                         26,915
     Prepaid expenses                                                        48
     Note Receivable Current                                                122
     Deferred income taxes                                                  -0-
                                                                       --------
         Total current assets                                            37,394
                                                                       --------

Fixed assets (net):
     Property, plant and equipment                                        3,434
     Rental equipment fleet                                              18,696
                                                                       --------
         Total fixed assets                                              22,130
                                                                       --------

Intangibles and other assets, net of accumulated
          amortization of $2,650                                             52
                                                                       --------
         Total assets                                                  $ 59,576
                                                                       ========
LIABILITIES & STOCKHOLDERS' EQUITY
----------------------------------
Current liabilities:
     Borrowings under floor plan financing                             $ 10,974
     Short-term borrowings                                               41,322
     Convertible Debt                                                       218
     Accounts payable                                                     7,600
     Accrued payroll and vacation                                           659
     Other accrued liabilities                                              985
     Capital lease obligations                                               26
                                                                       --------
         Total current liabilities                                       61,784
                                                                       --------

Capital lease obligations                                                   928
                                                                       --------
         Total liabilities                                               62,712
                                                                       --------
Commitments and contingencies

Stockholders' equity:
     Preferred stock-10,000,000 shares authorized; none outstanding         -0-
     Common stock, $.001 par value - Authorized, 20,000,000 shares
         Outstanding, 4,003,162 shares                                        5
     Additional paid-in capital                                          16,025
     Accumulated deficit                                                (18,322)
     Less common stock in treasury, at cost (130,300 shares)               (844)
                                                                       --------
         Total stockholders' deficit                                     (3,136)
                                                                       --------
         Total liabilities and stockholders' equity                    $ 59,576
                                                                       ========

          See accompanying notes to consolidated financial statements.


                                      F-3
<PAGE>

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

                                                                      July 31,
                                                                        2001
                                                                      --------
ASSETS
------
Current assets:
     Cash and cash equivalents                                        $    770
     Accounts receivable, less allowance for
       doubtful accounts of $948                                        14,295
     Inventories                                                        44,867
     Prepaid expenses                                                      298
     Note Receivable Current                                               -0-
     Deferred income taxes                                               2,541
                                                                      --------
         Total current assets                                           62,771
                                                                      --------
Fixed assets (net):
     Property, plant and equipment                                       5,584
     Rental equipment fleet                                             22,027
                                                                      --------
         Total fixed assets                                             27,611
                                                                      --------
Intangibles and other assets, net of accumulated
          amortization of $808                                           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
                                                                      --------
         Total liabilities                                              86,351
                                                                      --------

Commitments and contingencies

Stockholders' equity:
     Preferred stock-10,000,000 shares authorized; none outstanding        -0-
     Common stock, $.001 par value - Authorized, 20,000,000 shares
         Outstanding, 4,003,162 shares and 3,403,162 shares,
         respectively                                                        4
     Additional paid-in capital                                         15,894
     Accumulated deficit                                                (8,303)
     Less common stock in treasury, at cost (130,300 shares)              (844)
                                                                      --------
         Total stockholders' (deficit) equity                            6,751
                                                                      --------
         Total liabilities and stockholders' equity                   $ 93,102
                                                                      ========

          See accompanying notes to consolidated financial statements.


                                      F-4
<PAGE>

Note Regarding the Financial Statements for the year ended July 31, 2002:

The financial statements for the year ended July 31, 2002 are unaudited.
Accordingly, this Form 10-K/A1 filing is deficient under the Securities and
Exchange Commission's rules and regulations. Audited financial statements for
the year ended July 31, 2002 are being filed immediately following this filing.


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

<TABLE><CAPTION>
                                 Common Stock
                            -----------------------     Additional                                     Total
                              Number                     Paid-in      Accumulated     Treasury     Stockholders'
                            of Shares       Amount       Capital        Deficit         Stock     Equity (Deficit)
                            ---------     ---------     ---------      ---------      ---------      ---------
<S>                         <C>           <C>           <C>            <C>            <C>            <C>
Balance at
     July 31, 1999          3,303,162     $       4     $  16,072      $   6,738      $  (1,491)     $  21,323

Issuance of Treasury
Stock                          50,000          --             (67)          --              323            256

Net loss                         --            --            --           (7,198)          --           (7,198)
                            ----------------------------------------------------------------------------------

Balance at
     July 31, 2000          3,353,162             4        16,005           (460)        (1,168)        14,381

Issuance of Treasury
Stock                          50,000          --            (111)          --              324            213


Net loss                         --            --            --           (7,842)          --           (7,842)
                            ----------------------------------------------------------------------------------

Balance at
     July 31, 2001          3,403,162             4        15,894         (8,303)          (844)         6,751

Issuance of Stock             600,000             1           131           --             --              132
(UNAUDITED)

Net loss                         --            --            --          (10,019)          --          (10,019)
                            ----------------------------------------------------------------------------------
(UNAUDITED)

Balance at July 31,
     2002 (UNAUDITED)       4,003,162     $       5     $  16,025      $ (18,322)     $    (844)     $  (3,136)
                            =========     =========     =========      =========      =========      =========
</TABLE>

       See accompanying notes to consolidated financial statements.


                                      F-5
<PAGE>

Note Regarding the Financial Statements for the year ended July 31, 2002:

The financial statements for the year ended July 31, 2002 are unaudited.
Accordingly, this Form 10-K/A1 filing is deficient under the Securities and
Exchange Commission's rules and regulations. Audited financial statements for
the year ended July 31, 2002 are being filed immediately following this filing.


                         WESTERN POWER & EQUIPMENT CORP.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                    UNAUDITED
                                 (In thousands)
                                                                    Year Ended
                                                                     July 31,
                                                                       2002
                                                                     --------
 Cash flows from operating activities:
     Net loss                                                        $(10,019)
     Adjustments to reconcile net loss to
       net cash provided by operating activities:
                Depreciation                                            7,950
                Amortization                                              125
                 Impairment of goodwill and write-down of
                        property, plant and equipment                   3,478
     Write-off of disputed financing receivables                        1,983
      Gain on sale of fixed assets                                       (606)
               Non-cash stock compensation expense                        132
        Changes in assets and liabilities
                    Accounts receivable                                 2,008
                    Inventories                                        14,716
                    Prepaid expenses                                      249
                    Notes receivable current                             (122)
                    Accounts payable                                   (3,990)
                    Accrued payroll and vacation                       (1,095)
                    Other accrued liabilities                            (723)
                    Income taxes receivable/payable                        (7)
                    Other assets/liabilities                              -0-
                                                                     --------
Net cash provided by operating activities                              14,079
                                                                     --------

Cash flow from investing activities:
     Purchase of fixed assets                                            (308)
     Purchase of rental equipment                                      (5,129)
     Proceeds on sale of rental equipment                               5,548
     Proceeds on sale of fixed assets                                     309
     Purchase of other assets                                              18
                                                                     --------
            Net cash provided by (used in) investing activities           438
                                                                     --------

Cash flows from financing activities:
     Principal payments on capital leases                                  16
     Inventory floor plan financing                                    (3,251)
     Short-term financing                                             (12,075)
     Convertible debt issuance                                            100
     Payments on convertible debt                                         (64)
     Long-term debt repayments                                             (8)
                                                                     --------
            Net cash used in financing activities                     (15,282)
                                                                     --------

(Decrease) increase in cash and cash equivalents                         (765)
Cash and cash equivalents at beginning of year                            770
                                                                     --------
Cash and cash equivalents at end of year                             $      5
                                                                     ========

          See accompanying notes to consolidated financial statements.

                                      F-6
<PAGE>

                         WESTERN POWER & EQUIPMENT CORP.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
<TABLE><CAPTION>
                                                                      Year Ended July 31,
                                                                      2001          2000
                                                                    --------      --------
<S>                                                                 <C>           <C>
 Cash flows from operating activities:
     Net loss                                                       $ (7,842)     $ (7,198)
     Adjustments to reconcile net loss to
       net cash provided by operating activities:
                Depreciation                                           9,835        11,599
                Amortization                                             125           113
      Gain on sale of fixed assets                                    (2,016)          (59)
      Changes in assets and liabilities
                    Accounts receivable                                3,052        (1,847)
                    Inventories                                        8,545         2,903
                    Prepaid expenses                                     (88)           23
                    Deferred income taxes                                -0-           574
                    Accounts payable                                     861        (1,972)
                    Accrued payroll and vacation                       1,003           (74)
                    Other accrued liabilities                            393          (433)
                    Income taxes receivable/payable                      400           (46)
                    Deferred lease income                             (1,007)         (333)
                    Other assets/liabilities                             -0-           -0-
                                                                    --------      --------
Net cash provided by operating activities                             13,261         3,250
                                                                    --------      --------

Cash flow from investing activities:
     Purchase of fixed assets                                           (964)       (1,254)
     Purchase of rental equipment                                     (6,500)       (9,531)
     Proceeds on sale of rental equipment                              8,512        10,574
     Proceeds on sale of fixed assets                                    283           189
     Sale (purchase) of leased equipment fleet                           -0-           289
     Purchase of other assets                                             12           (18)
                                                                    --------      --------
            Net cash provided by (used in) investing activities        1,343           249
                                                                    --------      --------

Cash flows from financing activities:
     Principal payments on capital leases                                 (2)           32
     Treasury stock sales                                                -0-           256
     Inventory floor plan financing                                     (531)       (2,380)
     Short-term financing                                            (14,287)       (3,192)
     Convertible debt issuance                                           182           -0-
     Long-term debt repayments                                           (20)          (20)
                                                                    --------      --------
            Net cash used in financing activities                    (14,658)       (5,304)
                                                                    --------      --------

(Decrease) increase in cash and cash equivalents                         (54)       (1,805)
Cash and cash equivalents at beginning of year                           824         2,629
                                                                    --------      --------
Cash and cash equivalents at end of year                            $    770      $    824
                                                                    ========      ========
</TABLE>
          See accompanying notes to consolidated financial statements.

                                      F-7
<PAGE>

                         Western Power & Equipment Corp.

Notes to Consolidated Financial Statements (Dollars in thousands, except per
share and options data). The financial statements and other data for the year
ended July 31, 2002 are unaudited. Accordingly, this Form 10-K/A1 filing is
deficient under the Securities and Exchange Commission's rules and regulations.
Audited financial statements and data for the year ended July 31, 2002 are being
filed immediately following this filing.

1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      BASIS OF PRESENTATION

      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 a 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.

      CASH EQUIVALENTS

      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.

      RESTRICTED CASH

      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

                                      F-8
<PAGE>

      credit and accordingly has been recorded as a current asset. Restricted
      cash included in the cash balances totaled $540 and $242 at July 31, 2002
      and 2001, respectively.

      INTANGIBLE ASSETS

      Goodwill, which represents the excess of purchase price over fair value of
      net assets acquired is amortized on a straight-line basis over the
      expected period to be benefited. 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. In accordance with Statement of Financial Accounting
      Standards No. 121, "Accounting for the Impairment of Long-Lived Assets to
      be Disposed Of" the Company continually reviews goodwill to evaluate
      whether events or changes have occurred that would suggest an impairment
      of carrying value based on an estimate of future cash flows from related
      operations. Based on this review, a $2,525 write-down for impairment loss
      on goodwill has been recorded during the fourth quarter of the year ended
      July 31, 2002.

      PROPERTY, PLANT, AND EQUIPMENT

      Property, plant, and equipment are stated at cost less accumulated
      depreciation. Depreciation and amortization on the property, plant, and
      equipment are computed using the straight-line method over the estimated
      useful lives of the assets, ranging from 5 to 40 years. Depreciation on
      the rental fleet is calculated using the straight-line method over the
      estimated useful lives, considering salvage values. 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.

      In accordance with Statement of Financial Accounting Standards No. 121,
      "Accounting for the Impairment of Long-Lived Assets to be Disposed Of" at
      each balance sheet date, management assesses whether there has been
      permanent impairment in the value of the long-lived assets. The existence
      of any such impairment is determined by comparing anticipated undiscounted
      future cash flows from operating activities with the associated carrying
      value of the assets. The factors considered by management in performing
      this assessment include operating results, trends and prospects, as well
      as the effects of obsolescence, demand, competition, and other economic
      factors. The amount of any such impairment is determined by comparing the
      discounted future cash flows noted above with the associated carrying
      value of the assets. Based on a review of the Company's property, plant
      and equipment, a $953 reduction in the carrying value was recorded during
      the fourth quarter of the year ended July 31, 2002, which is, classified
      as a write-down of property, plant and equipment in the Consolidated
      Statement of Operations.

      REVENUE RECOGNITION

      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 obligation. The remaining repurchase
      obligation is recorded as a sale if and when the customer does not
      exercise the repurchase option. At July 31, 2002, no repurchase
      obligations were in existence.

      ADVERTISING EXPENSE

      The Company expenses all advertising costs as incurred. Total advertising
      expense for the years ended July 31, 2002, 2001 and 2000 was $176, $221,
      and $320 respectively.

                                      F-9
<PAGE>

      OTHER INCOME (EXPENSE)

      Other income and expense includes gains and losses on the sale of fixed
      assets, amortization of goodwill and miscellaneous income associated with
      contract financing activities.

      INCOME TAXES

      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.

      TREASURY STOCK

      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. As of July 31, 2002 and 2001 the Company held
      130,300 shares in treasury stock.

      RECLASSIFICATIONS

      Certain amounts in the 2001 financial statements have been reclassified to
      conform with the 2002 presentation. These reclassifications had no impact
      on net loss or cash flows as previously reported.

      FINANCIAL INSTRUMENTS

      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.

      NET INCOME (LOSS) PER COMMON SHARE

      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 anti-dilutive.

      SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

                                                     Year ended July 31,
                                                2002         2001         2000
                                              -------      -------      -------
Cash paid (received) during the year for:
      Interest                                $ 4,114      $ 5,887      $ 5,922
      Income taxes, net of refunds                (12)         (12)         219

      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.

                                      F-10
<PAGE>

      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.

      USE OF ESTIMATES

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

      RECENT ACCOUNTING PRONOUNCEMENTS

      Business Combinations and Goodwill and Other Intangible Assets

      During the first quarter of fiscal year-end 2003, the Company is required
      to adopt Financial Accounting Standard (FAS) No. 141, "Business
      Combinations" and FAS No. 142, "Goodwill and Other Intangible Assets." The
      Company has recorded the amortization of goodwill in prior periods. The
      impact of the future adoption of FAS 142 will result in the elimination of
      goodwill amortization of $31 per quarter and $125 on an annual basis. As
      noted above, the Company recorded an impairment loss of $2,525 during the
      fourth quarter of 2002 related to goodwill.

      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.

      In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statement
      No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
      Corrections." SFAS No. 145 generally requires that any gains or losses on
      extinguishment of debt in current or prior periods be classified as other
      income (expense). The Company expects to adopt the provisions of SFAS No.
      145 in its fiscal year ending July 31, 2003. The Company is currently
      evaluating the impact of adopting the provisions of SFAS No. 145 in its
      financial statements.

      In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
      Associated with Exit or Disposal Activities." SFAS No. 146 requires
      companies to recognize costs associated with exit or disposal activities
      when they are incurred rather than at the date of a commitment to an exit
      or disposal plan. SFAS 146 will be applied prospectively to any exit or
      disposal activities initiated after December 31, 2002. The Company expects
      there will be no effect on its financial results relating to the adoption
      of SFAS No. 146.

                                      F-11
<PAGE>

      In October 2002, the FASB issued SFAS No. 147, "Acquisitions of Certain
      Financial Institutions - an amendment of FASB Statements No. 72 and 144
      and FASB Interpretation No. 9. SFAS 147 is effective for related
      transactions which occur on n or after October 1, 2002. It is not
      anticipated that SFAS 147 will have an impact on the Company's 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 Chairman, President, and Chief Executive Officer of the
      Company, and Robert M. Rubin, 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 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
      Chairman, President, and Chief Executive Officer 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, 2001, 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 Chairman, President
      and Chief Executive Officer of the Company, and Robert M. Rubin, 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.

      On May 17, 2002, the shareholders authorized the issuance of 600,000
      shares of the Company's common stock to the Rubin Family Irrevocable Stock
      Trust with no monetary consideration received by the Company. Mr. Robert
      M. Rubin is an elected director of the Company and compensation expense
      for the fair market value of the stock on the date of issuance in the
      amount of $132 has been recognized in selling, general and administrative
      expenses.

                                      F-12
<PAGE>

3.    INVENTORIES

      Inventories are stated at market, which was lower than market. Cost is
      determined using the first-in, first-out (FIFO) method for parts
      inventories and the specific identification method for equipment
      inventories. Inventories consist of the following:

                                                  July 31,    July 31,
                                                    2002        2001
                                                  -------     -------
      Equipment (net of reserve allowances of
        $7,770 and $7,489 respectively):
            New equipment                         $13,834     $28,163
            Used equipment                          5,915       7,425

      Parts (net of reserve allowance of $286
        and $282 respectively)                      7,166       9,279
                                                  -------     -------
                                                  $26,915     $44,867
                                                  =======     =======

4.    FIXED ASSETS

      Fixed assets consist of the following:

                                               July 31,      July 31,
                                                 2002          2001
                                               --------      --------
      Property, plant, and equipment:
      Land                                     $    522      $    500
      Buildings                                   1,749         1,717
      Machinery and equipment                     3,137         3,997
      Office furniture and fixtures               2,220         2,377
      Computer hardware and software              1,501         1,453
      Vehicles                                    1,406         1,964
      Leasehold improvements                        960           958
                                               --------      --------
                                                 11,495        12,966
      Less: accumulated depreciation             (8,061)       (7,382)
                                               --------      --------
      Property, plant, and equipment (net)     $  3,434      $  5,584
                                               ========      ========

      Rental equipment fleet                   $ 25,833      $ 28,889
      Less: accumulated depreciation             (7,137)       (6,862)
                                               --------      --------
      Rental equipment (net)                   $ 18,696      $ 22,027
                                               ========      ========

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 twelve-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, used equipment, real property, and vehicles. Interest
      payments on the outstanding balance are due monthly.

                                      F-13
<PAGE>

      As of June 21, 2002, the Company entered into a Forbearance Agreement with
      DFS under the terms of which DFS raised the interest rate to prime plus 4%
      while the Company is in default and required the Company to pay a $45 fee
      to DFS for the forbearance. In addition, under the terms of the
      Forbearance Agreement, the Company is required to meet certain financial
      covenants and meet certain debt reduction schedules. At July 31, 2002, the
      Company was in technical default of the DFS Loan Agreement. The Company
      has requested, but has not obtained a waiver letter for the period July
      31, 2002 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, 2002.

      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:

<TABLE><CAPTION>
                                                                               July 31,
                                                           Maturity     ---------------------
                                         Interest Rate      Date          2002          2001
                                         -------------      ----        -------       -------
<S>                                      <C>                <C>         <C>           <C>
      Case Credit Corporation            Prime + 2%         8 - 48      $10,974       $14,237
                                             (6.75%)        months

      Deutsche Financial Services        Prime + 4.00%      12 - 36      41,322        53,384
                                             (8.75%)        months      -------       -------

                                                                        $52,296       $67,621
                                                                        =======       =======
</TABLE>

      At July 31, 2002 and July 31, 2001, the Company was in technical default
      of 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, 2002. 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. In March 2001,
      the Company completed the sale of an additional $100 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 share. The Company could at its option,
      redeem the notes at the principal amount plus accrued interest any time
      prior to December 31, 2001. The Company elected to redeem the notes and is
      currently paying off the principal and accrued interest balances thereof.
      The balance of the unpaid principal and accrued interest on the
      convertible notes as of July 31, 2002 is $218.

6.    INCOME TAXES

      The provision for income taxes is comprised of the following:

                                                      Year Ended
                                            --------------------------------
                                            July 31,    July 31,    July 31,
                                              2002        2001        2000
                                              ----        ----        ----
      Current:
          Federal                             $-0-        $278        $180
          State                                 48          27          26
                                              ----        ----        ----
                                                48         305         206
                                              ----        ----        ----
      Deferred:
          Federal                              -0-           0         500
          State                                -0-           0          73
                                              ----        ----        ----
                                               -0-           0         573
                                              ----        ----        ----
      Total provision
          for income taxes                    $ 48        $305        $779
                                              ====        ====        ====

                                      F-14
<PAGE>

      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 Ended
                                            ------------------------------
                                            July 31,   July 31,   July 31,
                                              2002       2001       2000
                                              ----       ----       ----
      Statutory federal income tax rate      (34.0%)    (34.0%)    (34.0%)
      State income taxes, net of
           federal income tax benefit         (5.0%)     (4.3%)     (2.9%)
      Valuation allowance                     39.3%      38.3%      46.1%
      Other                                    0.2%       4.0%       2.9%
                                              ----       ----       ----
                                               0.5%       4.0%      12.1%
                                              ====       ====       ====

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

                                                               Year Ended
                                                          --------------------
                                                          July 31,     July 31,
                                                            2002         2001
                                                          -------      -------
      Net Current Deferred Tax Assets:
           Inventory                                      $ 2,804      $ 2,734
           Accounts receivable                                252          373
           Accrued vacation and bonuses                        75           83
           Other accruals                                      60           75
           NOL carryforward                                   -0-        5,997
                                                          -------      -------
           Current Deferred Tax Asset                       3,191        9,262
           Less-Valuation Allowance                        (3,191)      (6,721)
                                                          -------      -------
           Net Current Deferred Tax Asset                     -0-        2,541
                                                          -------      -------

      Net Long-Term Deferred Tax Assets (Liability):
           Fixed Assets                                    (2,542)      (2,385)
           Goodwill and intangibles                           774         (156)
           NOL carryforward                                 9,935          -0-
                                                          -------      -------
           Long-term Deferred Tax Asset (Liability)         8,167       (2,541)
           Less- Valuation Allowance                       (8,167)         -0-
                                                          -------      -------
           Net Long-term Deferred Tax Asset (Liability)   $     0      $(2,541)
                                                          =======      =======

      The valuation allowance primarily relates to the federal and state net
      operating losses for which utilization in future periods is uncertain. 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.

      As of July 31, 2002 the Company has approximately $29 million of federal
      net operating losses available to offset future taxable income, which if
      not utilized will expire in 2016 through 2021.

7.    STOCKHOLDERS' EQUITY

      STOCK OPTION PLANS

      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.

                                      F-15
<PAGE>

      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.

      The following summarizes the stock option transactions under the Company's
      stock option plans:
                                                                     Weighted
                                                         Shares       Average
                                                          (000)    Option Price
                                                         ------         ----
                  Options outstanding July 31, 1999:      1,513         4.56

                  Exercised                                 (50)        5.13
                  Surrendered                            (1,453)        4.64
                  Granted                                  --            --
                                                         ------         ----

                  Options outstanding July 31, 2000:         10         4.56

                  Exercised                                --            --
                  Surrendered -                            --
                  Granted                                 1,200         0.53
                                                         ------         ----

                  Options outstanding July 31, 2001       1,210         0.56

                  Exercised                                --            --
                  Surrendered                              --            --
                  Granted                                  --            --
                                                         ------         ----

      Options outstanding July 31, 2002                   1,210         0.56
                                                         ======         ====

      As allowed by SFAS 123, "Accounting for Stock-Based Compensation," the
      Company has elected to continue to follow Accounting Principles Board
      Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25), in
      accounting for its stock option plans. Under APB 25, the Company does not
      recognize compensation expense upon the issuance of its stock options
      because the option terms are fixed and the exercise price equals the
      market price of the underlying stock on the grant date. As required by
      SFAS, the Company has computed for pro-forma disclosure purposes the value
      of options granted using the Black-Scholes option pricing model. The
      weighted average assumptions used for stock option grants for fiscal years
      2002, 2001, and 2000 were:

                                    FY02        FY01            FY00
                                    ----        ----            ----
      Risk free interest rate       N/A          4.35%       4.85-5.45%

      Expected dividend yield       N/A             0%               0%

      Expected life                 N/A        4 years          4 years

      Expected volatility           N/A        116.21%            93.31

      Adjustments for forfeitures are made as they occur. The options granted in
      FY01 were fully vested and exercisable as of July 31, 2001. The weighted
      average fair value per share of the options granted in fiscal years 2002,
      2001, and 2000 are $-0-, $0.53, and $ -0-, respectively.

                                      F-16
<PAGE>

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, 2002:

<TABLE><CAPTION>
   ---------- ------------------- ------------------ ------------------ ------------------- ------------------
                                   Weighted Average   Weighted Average                       Weighted Average
    Exercise   Number of Options       Exercise         Contractual      Number of Options      Exercise
      Price       Outstanding           Price          Life Remaining       Exercisable           Price
   ---------- ------------------- ------------------ ------------------ ------------------- ------------------
<S>                 <C>                 <C>                <C>                  <C>               <C>
     $4.375         10,000              $4.375             5.00                 10,000            $4.375
   ---------- ------------------- ------------------ ------------------ ------------------- ------------------
     $0.531        1,200,000            $0.531             8.50              1,200,000            $0.531
   ---------- ------------------- ------------------ ------------------ ------------------- ------------------
</TABLE>

      If the Company had accounted for the compensation cost of 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, 2002
      ------------------------
                                                     Basic       Diluted
                                    Net Loss         E.P.S.       E.P.S.
                                    ---------        -----        ------

      As Reported                   $(10,019)       ($2.50)      ($2.50)
      Pro Forma                     $(10,019)       ($2.50)      ($2.50)

      Year Ended July 31, 2001
      ------------------------
                                                     Basic       Diluted
                                    Net Loss         E.P.S.       E.P.S.
                                    --------         -----        ------

      As Reported                   $ (7,842)       ($2.30)      ($2.30)
      Pro Forma                     $ (8,162)       ($2.30)      ($2.40)

      Year Ended July 31, 2000
      ------------------------
                                                     Basic       Diluted
                                    Net Loss         E.P.S.       E.P.S.
                                    ---------        -----        ------

      As Reported                   $  (7,198)      ($2.18)      ($2.18)
      Pro Forma                     $  (7,206)      ($2.18)      ($2.18)

      The effects of applying SFAS 123 for providing pro forma disclosure for
      fiscal years 2002, 2001 and 2000 are not likely to be representative of
      the effects on reported net income and earnings per share for future years
      since additional option awards may be made each year.

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 $1,535, $2,280, and $2,129 for the years ended July 31,
      2002, 2001, and 2000, respectively.

                                      F-17
<PAGE>

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

                                        July 31,     July 31,     July 31,
                                          2002         2001         2000
                                        -------      -------      -------
      Capitalized asset value           $ 1,043      $   937      $ 4,553
      Less accumulated amortization        (369)        (262)        (667)
                                        -------      -------      -------
                                        $   674      $   675      $ 3,886
                                        =======      =======      =======

      Net capitalized asset values are included in Property, Plant and
      Equipment. Future minimum lease payments under all noncancelable leases as
      of July 31, 2002, are as follows:

                                                         Capital   Operating
     Year ending July 31,                                 leases     leases
                                                          ------     ------
      2003                                                   134      1,534
      2004                                                   126      1,356
      2005                                                   108      1,090
      2006                                                   124        900
      2007                                                   132        900
      Thereafter                                           1,100      1,021
                                                          ------     ------
      Total annual lease payments                         $1,724     $6,801
                                                                     ======
      Less amount representing interest, with imputed
           interest rates ranging from 6% to 15%             770
                                                          ------
      Present value of minimum lease payments                954
      Less current portion                                    26
                                                          ------
      Long-term portion                                   $  928
                                                          ======

      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, 2002, such purchase commitments totaled
      $4,100,951.

      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.

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      Year Ended      Year Ended      Year Ended
             Net Revenues       July 31, 2002   July 31, 2001   July 31, 2000
------------------------------ --------------- --------------- ---------------
Equipment Sales                   $ 73,909        $ 84,065        $ 92,513
------------------------------ --------------- --------------- ---------------
Equipment Rental                     5,747          20,817          26,334
------------------------------ --------------- --------------- ---------------
Product Support                     28,332          35,020          36,790
------------------------------ --------------- --------------- ---------------
    Totals                        $107,988        $139,902        $155,637
------------------------------ --------------- --------------- ---------------

------------------------------ --------------- --------------- ---------------
          Business Component      Year Ended      Year Ended      Year Ended
            Gross Margins       July 31, 2002   July 31, 2001   July 31, 2000
------------------------------ --------------- --------------- ---------------
Equipment Sales                   $  2,360        $   (641)       $    (66)
------------------------------ --------------- --------------- ---------------
Equipment Rental                       727           4,566           5,556
------------------------------ --------------- --------------- ---------------
Product Support                      4,676           5,895           6,048
------------------------------ --------------- --------------- ---------------
    Totals                        $  7,763        $  9,820        $ 11,538
------------------------------ --------------- --------------- ---------------

                                      F-18
<PAGE>

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

10.   UNAUDITED QUARTERLY CONSOLIDATED FINANCIAL DATA

<TABLE><CAPTION>
                                                               Quarter
                                          ----------------------------------------------------       Total
                                            First        Second        Third          Fourth          Year
                                          ---------     ---------     ---------      ---------      ---------
<S>                                       <C>           <C>            <C>            <C>            <C>
Fiscal 2002:

      Net sales                           $  28,499     $  26,229      $  25,568      $  27,692      $ 107,988
      Gross Profit                            4,117         2,850          2,538         (1,742)         7,763
      Net income (loss)                         357          (766)          (721)        (8,889)       (10,019)
      Basic income (loss) per share            0.10         (0.22)         (0.21)         (2.17)         (2.50)
      Diluted income (loss) per share          0.10         (0.22)         (0.21)         (2.17)         (2.50)


                                                               Quarter
                                          ----------------------------------------------------       Total
                                            First        Second        Third          Fourth          Year
                                          ---------     ---------     ---------      ---------      ---------
Fiscal 2001:

      Net sales                           $  37,783     $  34,299     $  33,641      $  34,179      $ 139,902
      Gross Profit                            4,858         2,957         2,358           (353)         9,820
      Net income (loss)                         461         1,695        (5,119)        (4,879)        (7,842)
      Basic income (loss) per share            0.14          0.51         (1.53)         (1.42)         (2.30)
      Diluted income (loss) per share          0.14          0.51         (1.53)         (1.42)         (2.30)
</TABLE>

      During the fourth quarter of fiscal 2002, the Company recorded four
      adjustments which in the aggregate reduced net income by $9.3 million and
      gross profit by $3.8 million in the quarter. Refer to Note 1 of the
      financial statements for additional disclosure of each individual
      adjustment. These adjustments included (1) a $3,796 adjustment to increase
      the inventory valuation allowance recorded at the end of the third quarter
      of 2002, (2) the impairment of goodwill aggregating $2,525, (3) the
      elimination of $1,983 of recorded financing discounts, and (4) the
      write-off of property, plant and equipment aggregating $953.


                                      F-19
<PAGE>

                        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 the results of
their operations and their cash flows for each of the two 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 at July 31, 2001. 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-20
<PAGE>

                        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 as of July 31, 2001 and for
each of the two years in the period ended July 31, 2001 referred to in our
report dated October 6, 2001 appearing on page F-20 of this Annual Report on
Form 10-K/A1 also included an audit of the financial statement schedule for the
year ended July 31, 2001 listed in Item 14(a)(2) of this Form 10-K/A1. In our
opinion, this financial statement schedule for the year ended July 31, 2001
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-21
<PAGE>


                                                                     SCHEDULE II

                         WESTERN POWER & EQUIPMENT CORP.

                       VALUATION AND QUALIFYING ACCOUNTS
                For the Fiscal Years Ended July 31, 2002 and 2001

                             (Dollars in Thousands)
<TABLE><CAPTION>
                                        Balance at    Charged to     Charged to                     Balance at
                                        Beginning     Costs and         Other                          End of
     Description                        of Period      Expenses       Accounts       Deductions        Period
     -----------                         -------        -------        -------         -------         -------
<S>                                      <C>            <C>            <C>             <C>             <C>
Accounts Receivable Reserve:

  Fiscal year ended July 31, 2002        $   948        $   119        $  --           $  (421)        $   646
  (UNAUDITED)
                                             563            544           --              (159)            948
  Fiscal year ended July 31, 2001

Inventory Reserve:
  Fiscal year ended July 31, 2002          7,771          6,616           --            (6,331)          8,056
  (UNAUDITED)
                                           5,052          4,106           --            (1,387)          7,771
  Fiscal year ended July 31, 2001
</TABLE>


The financial statements for the year ended July 31, 2002 are unaudited.
Accordingly, this Form 10-K/A1 filing is deficient under the Securities and
Exchange Commission's rules and regulations. Audited financial statements for
the year ended July 31, 2002 are being filed immediately following this filing.


                                      F-22
<PAGE>


                                   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:/S/ C. Dean McLain
                                          ------------------------------------
                                          C. Dean McLain, President and
                                          Chief Executive Officer

         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 McLain             President, Chief               November 27, 2002
-------------------------      Executive Officer,
 C. Dean McLain                and Chairman


/S/ Mark J. Wright             Vice President of Finance,     November 27, 2002
-------------------------      Chief Financial and Principal
 Mark J. Wright                Accounting Officer,
                               Treasurer and Secretary


/S/ Robert M. Rubin            Director                       November 27, 2002
-------------------------
 Robert M. Rubin


/S/ Dr. Seymour Kessler        Director                       November 27, 2002
-------------------------
Dr. Seymour Kessler


/S/ Allen Perres               Director                       November 27, 2002
-------------------------
Allen Perres



<PAGE>

I, C. Dean McLain, certify that:

      1. I have reviewed this annual report on Form 10-K/A1 of Western Power &
Equipment Corp.;

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

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


Date: November 27, 2002


/s/ C. Dean McLain
-------------------------------------
Chief Executive Officer and President
<PAGE>

I, Mark J. Wright, certify that:

      1. I have reviewed this annual report on Form 10-K/A1 of Western Power &
Equipment Corp.;

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

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


Date: November 27, 2002


/s/ Mark J. Wright
-------------------------------------
Chief Financial Officer and Vice President of Finance