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

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

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

                                    FORM 10-K

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


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


     FOR THE FISCAL YEAR ENDED JULY 31, 2003 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]

     Indicate by check mark whether Registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).     YES [_]    NO  [X]

     As of November 6, 2003: (a) 10,130,000 shares of Common Stock, $.001 par
value, of the registrant (the "Common Stock") were outstanding; (b) 1,592,576
shares of Common Stock were held by non-affiliates ; and (c) the aggregate
market value of the Common Stock held by non-affiliates was $637,030 based on
the closing sale price of $ .40 per share on November 6, 2003.

     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 four
years, the Company has concentrated on consolidating or closing certain of 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 12.1 percent of the outstanding
shares of the Company as of July 31, 2003.

     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 existing stores, ending
fiscal year 1997 with 23 stores.

     In fiscal 1998, the Company acquired four additional facilities located in
California and Alaska. The previous Alaska facility was discontinued as it was
combined with the new Alaska facility. 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 certain larger stores in each region. One branch office in Washington
was sold during the third quarter of fiscal 2000 while two temporary locations
were

                                       I-2
<PAGE>
established in Southern California. The closures were 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 resulting in 15
branches at the end of fiscal 2002. There were no store closures and no new
stores opened in fiscal 2003.

BUSINESS STRATEGY

     The Company's strategy is to streamline the Company's operations and close
or consolidate stores and to increase efficiency and profitability. The Company
is concentrating its efforts on reducing costs and increasing sales and margins
so that all of its operations can be profitable. 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.

     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 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

                                       I-3
<PAGE>
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 47% and 51% of the Company's net sales for
fiscal year 2003 and fiscal 2002, 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.

     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 5% of revenue in fiscal year 2003 from 6% of revenue in fiscal year
2002. 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 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.

                                       I-4
<PAGE>
     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, 2003.

For fiscal years 2003, 2002, and 2001, the revenue breakdown by source for the
business operated by the Company were approximately as follows:

                                       FY 2003  FY 2002  FY 2001
                                       -------------------------
                  Equipment Sales         70%      68%      60%
                  Equipment Rental         5%       6%      15%
                  Product Support         25%      26%      25%
                                       -------------------------
                                         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 2003 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 44 equipment salespersons on July 31,
2003. 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, 2003, the Company employed 1 product support salesperson who
sells Company 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 2003. 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, 2003, the Company employed 245 full-time employees. Of that
number, 16 are in corporate administration, 21 are involved in administration at
the branch locations, 62 are employed in equipment sales and rental, and 146 are
employed in product support. At July 31, 2003, 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,
2003.
<TABLE><CAPTION>
                                                          Expiration                       Size/Square         Purchase
Location and Use                      Lessor              Date            Annual Rental    Feet                Options
-----------------                     ------              ----            -------------    ----                -------
<C>                                   <C>                 <C>             <C>              <C>                    <C>
1745 N.E. Columbia Blvd.              Carlton O.          12/31/2010      $84,0001 plus    Approx. 4 acres;       No
Portland, Oregon 97211                Fisher, CNJ                         CPI adjustments  building 17,622
                                      Enterprises                                          sq. ft.

1665 Silverton Road, N.E.             LaNoel Elston       07/10/2004      $37,2001         Approx. 1 acre;        No
Salem, Oregon 97303                   Myers Living Trust                                   building 14,860
                                                                                           sq. ft.

West 7916 Sunset Hwy.                 U.S. Bank           09/30/20034     $69,6001         Approx. 5 acres;       No
Spokane, Washington 99204                                                                  building 19,200
                                                                                           sq. ft.

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

6407-B  NE 117th Ave                  McLain-Rubin        03/31/2006      $69,600          Building 8,627         No
Vancouver, Washington 98662           Realty Company,                                      sq. ft.
(Executive Offices)                   LLC 3

2702 W. Valley Hwy No.                Avalon Island LLC   11/30/2015      $204,0001        Approx. 8 acres;       No
Auburn, Washington 98001                                                                   building 33,000
                                                                                           sq. ft.

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

1455 Glendale Ave.                    McLain-Rubin        09/30/2007      $276,0002        Approx. 5 acres;       No
Sparks, Nevada 89431                  Realty Company,                                      building 22,475
                                      LLC 3                                                sq. ft.

25886 Clawiter Road                   Clawiter Asso.,     11/30/2004      $108,9001        Approx. 2.8            No
Hayward, California 94545             LLC                                                  acres; building
                                                                                           21,580 sq. ft.

3540 D Regional Parkway               Soiland             02/28/2005      $57,6001 plus    Approx. 1.25           No
Santa Rosa, California  95403                                             annual CPI       acres; building
                                                                          adjustments      5,140 sq. ft.

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

8271 Commonwealth Avenue              M.E. Robinson &       03/31/2005    $93,960                 N/A             No
Buena Park, CA 90621-2537             Lois Robinson


2535 Ellis Street                     Hart Enterprises    04/30/2005      $33,600          Approx. 2 acres;       Yes
Redding, California 96001                                                                  building 6,200
                                                                                           sq. ft.
</TABLE>

                                       I-8
<PAGE>
<TABLE><CAPTION>
                                                          Expiration                       Size/Square         Purchase
Location and Use                      Lessor              Date            Annual Rental    Feet                Options
-----------------                     ------              ----            -------------    ----                -------
<C>                                   <C>                 <C>             <C>              <C>                    <C>
1041 S Pershing Ave                   Raymond             03/14/2006      $48,492          Approx. .5 acres;      Yes
Stockton, CA   95206                  Investment Corp                                      building 1,794
                                                                                           sq. ft.

723 15th Street                       Mark Flerchinger    Month to Month  $20,400          Approx. 1.2            Yes
Clarkston, Washington 99403                                                                acres; 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             Wingless            11/30/2009      $78,000          Approx. 1.5            No
Fairbanks, Alaska 99701               Properties                                           acres; 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.
4    Renewal in process.
--------------------------------------------------------------------------------


     The Company's operating facilities at July 31, 2003 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.

     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.

                                       I-9
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
        ----------------------------------------------------

     There were no matters submitted during the fourth quarter of the fiscal
year covered by this report to a vote of security holders, through the
solicitation of proxies or otherwise.
































                                      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, 2003 and July 31, 2002 were as follows:

                                                                  High      Low
                                                                  ----      ---
     Fiscal 2003
     -----------

     1ST QUARTER - August 1, 2002 through October 31, 2002       $ 0.26   $ 0.11

     2ND QUARTER - November 1, 2002 through January 31, 2003     $ 0.24   $ 0.12

     3RD QUARTER - February 1, 2003 through April 30, 2003       $ 0.17   $ 0.10

     4TH QUARTER - May 1, 2003 through July 31, 2003             $ 0.20   $ 0.12


     Fiscal 2002
     -----------

     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


     The number of shareholders of record of the Company's Common Stock on July
31, 2003 was 507 and the number of beneficial holders of the Company's Common
Stock is estimated by management to be approximately 1,000 holders.

     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
development of its business.
<TABLE><CAPTION>

     Equity Compensation Plan Information
     ------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
Plan category                    Number of Securities to be issued upon   Weighted -average exercise   Number of securities
                                 exercise of outstanding options,         price of outstanding         remaining available for
                                 warrants and rights                      options, warrants and        future issuance under equity
                                                                          rights                       compensation plans (excluding
                                                                                                       securities reflected in
                                                                                                       column (a))
-------------------------------- ---------------------------------------- ---------------------------- -----------------------------
<S>                                            <C>                                  <C>                          <C>
Equity compensation plans
approved by security holders                    1,210,000                            $.56                         540,000
-------------------------------- ---------------------------------------- ---------------------------- -----------------------------
Equity compensation plans not
approved by security holders                       --                                 --                             --
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      II-1
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
        -----------------------

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

(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE><CAPTION>
                                                                         Fiscal Year Ended July 31,
                                                      2003           2002           2001           2000           1999
-------------------------------------------------------------------------------------------------------------------------
<S>                                               <C>            <C>            <C>            <C>            <C>
Net sales                                         $  102,396     $  107,988     $  139,902     $  155,637     $  163,650
Gross profit                                      $   13,526     $    7,763     $    9,820     $   11,538     $   14,594
    (% of sales)                                        13.2            7.2            7.0            7.4            8.9
Selling, general and administrative               $    9,955     $   10,199     $   12,840     $   13,534     $   12,586
    (% of sales)                                         9.7            9.4            9.2            8.7            7.7
(Loss) income before income taxes                 $      460     $   (9,971)    $   (7,537)    $   (6,419)    $   (2,916)
    (% of sales)                                          .4           (9.2)          (5.4)          (4.1)          (1.8)
Tax rate (%)                                              10            0.5                             4             12
(38)
Net (loss) income                                 $      412     $  (10,019)    $   (7,842)    $   (7,198)    $   (1,815)

Net (loss) income per common share                $      .08     $    (2.50)    $    (2.30)    $    (2.18)    $    (0.55)
Shares used in basic and diluted
    earnings per share calculations                    5,336          4,003          3,403          3,306          3,303


Working capital deficit                           $  (17,590)    $  (24,390)    $  (20,102)    $ ( 15,910)    $  (16,117)
Long-term debt (including capital leases
   and deferred lease income)                     $      880     $      928     $    3,469     $   10,796     $   11,124
Stockholders' (deficit) equity                    $   (1,811)    $   (3,136)    $    6,751     $   14,381     $   21,322
Total assets                                      $   54,466     $   60,116     $   93,092     $  122,710     $  136,594
</TABLE>









                                      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 and 2003, the Company had 15 stores in
operation.

     For the last four 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>
  2001             21                   0                3                 0                 18
-------- ----------------------- ---------------- ----------------- ---------------- --------------------
  2002             18                   0                3                 0                 15
-------- ----------------------- ---------------- ----------------- ---------------- --------------------
  2003             15                   0                0                 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 2003, AS COMPARED WITH FISCAL YEAR 2002

     The Company reported net revenues for fiscal 2003 of $102,396,000 compared
with net revenues of $107,988,000 for fiscal 2002. Stores opened longer than 12
months showed an overall revenue decrease of 5.2 percent from prior year revenue
reflecting a general softening in economic conditions along with increased
competitive pressures. During 2003, there were no new stores opened or
additional store closures.

     For fiscal 2003, the Company reported net income of $412,000 or $ .08 per
share compared with a net loss of $10,019,000 or $2.50 per share in fiscal 2002.
Included in the net loss for fiscal year 2002 were significant non-cash charges
of $3,796,000 for increases of inventory reserves and allowances, a $2,525,000
write-off of all goodwill, a $1,983,000 write-off of disputed vendor financing
discounts (receivables), and a $953,000 write-off of fixed assets.

     Gross margin was 13.2 percent during fiscal 2003 which is higher than the
7.2 percent gross margin during fiscal 2002. The increase in 2003, is due in
part to managements successful efforts in reducing inventory levels,
particularly of older inventory which were sold at higher prices than their
marked down values. Such benefits may not occur in fiscal 2004. Aloso
contributing to higher margins in 2003, are favorable changes in sales mix,
which reflect a greater number of sales/service transactions with higher margins
for repairs/servicing, parts and rental equipment, and the partial recovery of a
weakening economy. Inventory reserves and allowances are lower in 2003 ($4.5
million) than 2002 ($7.8 million) due to the sell off of such older equipment as
described above. The Company continues to focus its sales efforts on specialty
and niche lines.
                                      II-3
<PAGE>
     Selling, general, and administrative expenses were $ 9,955,000 or 9.7
percent of revenues for fiscal 2003 compared to $10,199,000 or 9.4 percent of
sales for fiscal 2002. The decrease in selling, general, and administrative
expenses resulted in part from the concentrated effort by management to reduce
expenses primarily in the area of payroll and payroll related costs.

     Interest expense for fiscal 2003 was $3,363,000, down from $4,114,000 in
fiscal 2002 due to a combination of a decrease in interest rates and lower
inventory levels. The Company has a inventory floor plan and operating line of
credit facility through GE Commercial Distribution Finance ("GE"), fka Deutsche
Financial Services. The agreement provided for a floating interest 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 GE, under the terms of which GE raised
the interest rate to prime plus 4% while the Company is in default and required
the Company to pay $45,000 fee to GE 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. As of July 31,
2003 the Company was not in compliance with these covenants. The Company
requested but did not receive a waiver of such non-compliance. The line of
credit with GE which expired on December 31, 2001 has not been renewed and the
Company is operating under the agreement on a month to month basis. Although GE
has not called the debt due to non-compliance, there is no guarantee that GE
will not require the Company to repay the debt at any time in full. See
LIQUIDITY AND CAPITAL RESOURCES below for a description of the status of the GE
facility. Management has used this facility to allow the Company to take greater
discounts and to lower overall interest expense and to provide operating capital
liquidity.

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.

     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 floor plan and
operating line of credit facility through GE Commercial Distribution Finance
("GE"), fka Deutsche Financial Services. 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. See LIQUIDITY AND CAPITAL RESOURCES below for a description of the
status of the GE facility.
                                      II-4
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

     The Company's primary needs for liquidity and capital resources are related
to its acquisition of inventory for sale and its rental fleet. The Company's
primary source of internal liquidity has been from its operations. As more fully
described below, the Company's primary sources of external liquidity are
equipment inventory floor plan financing arrangements provided to the Company by
the manufacturers of the products the Company sells as well as the credit
facility with GE more fully described below.

     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, 2003, the Company was indebted under manufacturer
provided floor planning arrangements in the aggregate amount of $10,959,000.

     The Company has an inventory floor plan and operating line of credit with
GE which expired on December 31, 2001. The line of credit agreement has not been
renewed and the Company is operating under the agreement on a month to month
basis. Amounts are advanced against the Company's assets, including accounts
receivable, parts, new equipment, rental fleet, and used equipment. The
agreement provided for a floating interest 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. The Company uses 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. Borrowings are collateralized by the Company's
assets, including accounts receivable, parts inventory, new and used equipment
inventory and rental equipment. As of July 31, 2003, approximately $34,566,000
was outstanding under the GE credit facility.

     On June 21, 2002, the Company entered into a Forbearance Agreement with GE
under the terms of which GE 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 GE 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, 2003, the Company was in technical default of
the GE Loan Agreement. The Company has requested, but has not obtained a waiver.
Although GE has not called the debt due to such defaults, there is no guarantee
that GE will not require the Company to repay the debt at any time in full.

     During the year ended July 31, 2003, cash and cash equivalents increased by
$ 3,155. The Company had positive cash flow from operating activities during the
year of $ 4,285,000. The Company's cash flow from operating activities consisted
primarily of a a reduction of accounts receivable of $524,000, depreciation of
$6,023,000, offset by an increase in inventories of $3,335,000. 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
$6,764,000 during the year.

     The Company's cash and cash equivalents was approximately $8,155 as of July
31, 2003. The Company cannot fund current levels of operations without the
continued availability of borrowing from its current lender GE. Under the
existing credit facility, GE is entitled to all cash collections from the
Company's accounts receivable, which are applied as they are received by GE
against the total amount due GE from the Company under the credit facility. To
fund operations, the Company must request advances from GE under its credit
facility. Since the Company has essentially no cash flow other than from
accounts receivable (which are remitted to GE), the Company cannot fund
operations without borrowing from GE. If GE decided to stop making borrowing
available to the Company, the Company would immediately be unable to continue
its operations.

Although the Company and GE are in negotiations to extend or renew the credit
facility, there can be no assurance that the Company will be able to
successfully negotiate an acceptable extension or renewal of the expired GE
credit facility or that GE will continue to make borrowing available to the
Company. The Company continues to investigate alternative sources of financing
and/or capital infusion in an effort to meet its operational needs.

                                      II-5
<PAGE>
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.

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.

                                      II-6
<PAGE>
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.

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 53% of our products.
Case dealer contracts are non-exclusive and terminable by either party upon
minimum notice. There can be no assurances that Case will continue to supply the
Company with products or continue its relationship with the Company. If we are
unable to obtain Case products or to continue our relationship with Case, we
will likely experience reductions in product and service sales and increased
expenses. Our operations will be negatively affected if we experience inadequate
supplies of any key products.

RECENT ACCOUNTING STANDARDS

The following pronouncements have been issued by the FASB.

In January 2003, the FASB issued FIN 46, "Consolidation of Variable Interest
Entities." In general, a variable interest entity is a corporation, partnership,
trust or other legal structure used for business purposes that either (a) does
not have equity investors with voting rights or, (b) has equity investors that
do not provide sufficient financial resources for the entity to support its
activities. FIN 46 requires a variable interest entity to be consolidated by a
company if that company is subject to a majority of the risk of loss from the
variable interest entities activities or entitled to receive a majority of the
entity's residual returns or both. The consolidated requirements of FIN 46 apply
immediately to variable interest entities created after January 31, 2003. For
variable interest entities created or acquired prior to February 1, 2003, the
provisions of FIN 46 must be applied for the first interim or annual period
beginning after December 15, 2003.

In April 2003, FASB issued SFAS No. 149, `Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." The Statement amends and
clarifies accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities under
Statement 133. This Statement is effective for contracts entered into or
modified after June 30, 2003, except as stated below and for hedging
relationships designated after June 30, 2003. The guidance should be applied
prospectively. The provisions of this Statement that relate to Statement 133
Implementation Issues that have been effective for fiscal quarters that began
prior to June 15, 2003 should continue to be applied in accordance with their
effective dates. In addition, certain provision relating to forward purchases or
sales of when-issued securities or other securities that do not yet exist,
should be applied to existing contracts as well as new contracts entered into
after June 30, 2003.
                                      II-7
<PAGE>
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity." SFAS No. 150
establishes standards for classification and measurement in the statement of
financial position of certain financial instruments with characteristics of both
liabilities and equity. It requires classification of financial instruments that
are within its scope to be a liability (or an asset in some circumstances). SFAS
No. 150 is effective for financial instruments entered into or modified after
May 31, 2003 and, otherwise, is effective at the beginning of the first interim
period beginning after June 15, 2003.

Management does not believe that the adoption of any of these pronouncements
will have a material effect on the Company's financial statements.

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. Our
financial statements and accompanying notes are prepared in accordance with U.S.
GAAP. Preparing financial statements requires management to make certain
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenue and expenses. These estimates and assumptions are affected
by management's application of accounting policies.

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. 142, "Accounting for Goodwill
and other Intangibles." The Company continually reviews goodwill and other
intangibles to evaluate whether events or changes have occurred that would
suggest an impairment.

Also in accordance with Statement of Financial Accounting Standards No. 144,
"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.

Some amount of judgement is required to assess the ultimate realization of
receivables, including assessing the probability of collection and the current
credit worthiness of our clients. Probability of collection is based upon the
assessment of the client's financial condition through review of its current
financial statements and/or credit reports. The 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.

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

                                      II-8
<PAGE>
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, 2003, the Company
had variable rate floor plan payables, notes payable, and long-term debt of
approximately $45.6 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 $0.46 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 following Part IV, Item 14:

     Consolidated Statements of Operations for
       the years ended July 31, 2003, 2002, and 2001            F-1
     Consolidated Balance Sheets as of July 31, 2003 and 2002   F-2
     Consolidated Statements of Stockholders' Equity/(Deficit)
       for the years ended July 31, 2003, 2002, and 2001        F-3
     Consolidated Statements of Cash Flows for
       the years ended July 31, 2003, 2002, and 2001            F-4
     Notes to Consolidated Financial Statements                 F-5
     Report of Independent Auditors'                            F-16, F-17, F-18

Financial Statement Schedule:

     Report of Independent Auditors' - Financial
       Statement Schedule                                       F-19, F-20, 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 Marcum & Kliegman LLP as its
          new independent accountants as of May 1, 2003. During the two fiscal
          years and the subsequent interim period prior to the engagement of
          Marcum & Kliegman LLP on May 1, 2003, Western Power & Equipment Corp.
          did not consult with Marcum & Kliegman 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.


ITEM 9A.  CONTROLS AND PROCEDURES
          -----------------------

          We maintain disclosure controls and procedures that are designed to
          ensure that information required to be disclosed in our Exchange Act
          reports is recorded, processed, summarized and reported within the
          time periods specified in the Securities and Exchange Commission's
          rules and forms and that such information is accumulated and
          communicated to our management, including our CEO and CFO, as
          appropriate, to allow for timely decisions regarding required
          disclosure. In designing and evaluating the disclosure controls and
          procedures, management recognizes that any controls and procedures, no
          matter how well designed and operated, can provide only reasonable
          assurance of achieving the desired control objectives, and management
          is required to apply its judgment in evaluating the cost-benefit
          relationship of possible controls and procedures.

          As required bt SEC Rule 13a-15(b), we carried out an evaluation, under
          the supervision and with the participation of our management,
          including our CEO and CFO, of the effectiveness of the design and
          operation of our disclosure controls and procedures as of the end of
          the period covered by this report. Based on the foregoing, the CEO and
          CFO concluded that our disclosure controls and procedures were
          effective at the reasonable assurance level.

                                      II-11
<PAGE>

          There has been no change in our internal controls over financial
          reporting during the most recent fiscal quarter that has materially
          affected, or is reasonably likely to materially affect, our internal
          controls over financial reporting.






























                                      II-12
<PAGE>
                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
         ----------------------------------------------

         Directors

The following table sets forth the name and age of each of the Company's
directors, as well as the length of time which each director has served.

         Name                     Age         Director Since
         ------------------      -----        --------------
         Robert M. Rubin          62               1992
         C. Dean McLain           49               1993
         Michael Metter           52               2003
         Steven Moskowitz         39               2003

ROBERT M. RUBIN. Mr. Rubin has been the Chief Executive Officer of American
United Global, Inc. ("AUGI"), an approximately 12% stockholder of the Company,
since October 1990, and also served as Chairman of AUGI from October 1990 to
present. Mr. Rubin served as the Chairman of the Board of Directors of the
Company from November 20, 1992 to August 1, 1998. Mr. Rubin is also a director
of Medimerge, Inc. Mr. Rubin was Chairman of the Board of ERD Waste Technology,
Inc., a diversified waste management public company specializing in the
management and disposal of municipal solid waste, industrial, and commercial
non-hazardous waste and hazardous waste. ERD Waste Technology filed for Chapter
11 bankruptcy reorganization in the year 2000. Mr. Rubin also served for
approximately five years as an Officer and Director of Style Site Inc., which
filed for bankruptcy in January 2001.

C. DEAN MCLAIN. Mr. McLain has served as President, Chief Executive Officer, and
a director of the Company since March 7, 1993. Mr. McLain was elected Chairman
of the Board of Directors effective August 1, 1998. From March 1, 1993 through
June 13, 1995, Mr. McLain served as Executive Vice President of AUGI. Mr. McLain
has served on the Board of Directors of AUGI since March 7, 1994. From January
1990 through 1993 Mr. McLain served as Manager of Privatization of Case
Corporation.

MICHAEL METTER. Mr. Metter has served as director since February 11, 2003. Since
April 2001, Mr. Metter has been the President of RME International, Ltd. (RME).
Mr. Metter also currently consults to a broad range of businesses, including IT
communications and media businesses, on mergers, acquisitions, restructuring,
financing and other matters. From October 1998 to February 2001, Mr. Metter was
a principal of Security Capital Trading, Inc., and was a principal at Madison
Capital from September 1997 to October 1998. Prior thereto, Mr. Metter was
President of First Cambridge Securities from October 1994 to August 1997.
Effective with a merger of a division of R.M. Enterprises International, Ltd
into Azurel, Ltd., in October 2002, Mr. Metter became President and COO of
Azurel. He resigned as President in February 2003 and subsequently resigned the
position of COO which he held from February 2003 until June 28, 2003. Mr. Metter
is also President and CEO of BusinessTalkRadio.net (a private company). BTR is a
syndicated radio network based in Greenwich, Connecticut. He has held this
position since June 2002. He is also chairman of Tiburon Capital Group, a
privately held holding corporation.

STEVEN MOSKOWITZ. Mr. Moskowitz has served as director since February 11, 2003.
Since 1997, Mr. Moskowitz has been the Vice-President of Business Development
for H.W. Carter and Sons. Prior thereto, Mr. Moskowitz was Division President of
Evolutions. Mr. Moskowitz is currently a director and secretary for Spongetech.
He previously served as the CEO and a director of Azurel, Ltd from October 2002
through September 2003. Mr. Moskowitz also is currently an independent director
for R.M. Enterprises International, Ltd. He is also Executive Vice President of
Tiburon Capital Group, a privately held holding corporation.

     Audit Committee Financial Expert
     --------------------------------

The Company's board of directors has determined that at least one audit
committee financial expert is serving on its audit committee. Mr. Metter, is a
financial expert and is independent as that term is used in Item 7(d)(3)(iv) of
Schedule 14A under the Exchange Act.

                                      III-1
<PAGE>
     Code of Ethics
     --------------

The Company has adopted a code of ethics that applies to its chief executive
officer and chief financial officer and other key financial personnel. The code
of ethics can be viewed at the Company's website, www.westernpower.com. The
Company intends to satisfy the disclosure requirements under item 10 of Form 8-K
regarding an amendment to, or a waiver from, a provision of its code of ethics
by putting such information on its Internet website.

ITEM 11. EXECUTIVE COMPENSATION
         ----------------------

     The Compensation Committee of the Board of Directors (the "Committee") is
currently composed of two non-employee directors. The Committee reviews the
compensation of the Company's officers and key employees and the granting of
stock options under the Company's stock option plans and makes recommendations
to the Board of Directors for action on these matters. During the fiscal year
ended July 31, 2003, the Company's Board of Directors decided all compensation
matters relating to the Company's executive officers.

     The key objectives of the Company's executive compensation policies are to
attract and retain key executives who are important to the long-term success of
the Company and to provide incentives for these executives to achieve high
levels of job performance and enhancement of shareholder value. The Company
seeks to achieve these objectives by paying its executives a competitive level
of base compensation for companies of similar size and industry and by providing
its executives an opportunity for further reward for outstanding performance in
both the short term and the long term. The Company has entered into an
employment agreement with Mr. McLain that covers a multiple year term (see
"Chief Executive Officer Compensation," below). The compensation of Mr. Wright
is based on an employment agreement dated August 1, 2000. Mr. Rubin, previously
compensated under an employment contract (see "Employment, Consulting and
Incentive Compensation Agreements," below), entered into a consulting agreement
with the Company on August 1, 1998 after he ceased to be an executive officer of
the Company on July 31, 1998 and entered into another consulting agreement on
August 1, 2000 when the original consulting agreement expired.

     Executive Officer Compensation. The Company's executive officer
compensation program is comprised of three elements: base salary, annual cash
bonus and long-term incentive compensation in the form of stock option grants.

     Salary. The Committee and the Board of Directors established base salaries
for the Company's executive officers, including the salary established in Mr.
McLain's employment agreement, after taking into account individual experience,
job responsibility and individual performance during the prior year. These
factors are not assigned a specific weight in establishing individual base
salaries. The Committee also considered the Company's executive officers'
salaries relative to salary information for executives in similar industries and
similarly sized companies.

     Cash Bonuses. The purpose of the cash bonus component of the compensation
program is to provide a direct financial incentive in the form of cash bonuses
to executives. Mr. McLain's bonus is derived under the performance formula set
forth in his employment contract described under "Employment and Incentive
Compensation Agreements" below.

     Stock Options. Stock options are the primary vehicle for rewarding
long-term achievement of Company goals. The objectives of the program are to
align employee and shareholder long-term interests by creating a strong and
direct link between compensation and increases in share value. Under the
Company's 1995 Employee Stock Option Plan, the Board of Directors or the
Compensation Committee may grant options to purchase Common Stock of the Company
to key employees of the Company. Messrs. McLain and Wright currently participate
in the 1995 Employee Stock Option Plan. The number of options granted to Mr.
McLain are determined under the terms of his employment agreement. The number of
options granted to Mr. Wright are determined by the Compensation Committee on a
discretionary basis. The options generally vest in increments over a period of
years established at the time of grant.

     Chief Executive Officer Compensation. In August 2000 the Company entered
into an new employment agreement with its chief executive officer, Mr. McLain,
to ensure the retention of his services and to encourage him to perform at
increasing levels of effectiveness and to use his best efforts to promote the
growth and profitability of the Company. This approach enabled the Board to
concentrate on the negotiation of a particular employment contract with salary,
incentive bonus and stock option components that reflect a longer term view of
the Company's prospects and goals. See "Employment, Consulting and Incentive
Compensation Agreements" for a complete description of the employment agreements
and the compensation and benefits provided thereunder.

                                      III-2
<PAGE>
     Summary Compensation Table

     The following table sets forth the amount of all compensation paid during
each of the last three fiscal years to the Chief Executive Officer and to each
of the Company's other executive officers for services in all capacities to the
Company.
<TABLE><CAPTION>
                                              Long-Term
                                         Annual Compensation
                                         -------------------                            Compensation
                                                                                           Awards
                                                                                        ------------
                                                                       Other Annual       Number of          All Other
Name and Principal Position         Year        Salary       Bonus     Compensation        Options          Compensation
---------------------------         ----        ------       -----     ------------        -------          ------------
<S>                                 <C>          <C>          <C>          <C>               <C>              <C>
Robert M. Rubin                     2003          --           --           --                --               $615,413
Consultant; former                  2002          --           --           --                --               $332,000
Chairman(1)                         2001          --           --           --             500,000             $200,000


C. Dean McLain                      2003       $399,633    $ 15,000         --                --               $415,413
President, CEO,                     2002       $393,300    $135,000      $  967               --               $ 31,199
Chairman of the Board(2)            2001       $387,474        --        $1,369            500,000             $ 31,199

Mark J. Wright                      2003       $208,255    $ 75,000         --                --                   --
Vice President of Finance           2002       $176,481    $ 75,000      $9,000               --               $  7,718
and CFO                             2001       $173,265        --        $9,000            100,000             $  7,718
</TABLE>


(1)  The Company entered into a seven (7) year consulting agreement with Mr.
     Rubin effective August 1, 2000 which pays Mr. Rubin a base salary of
     $200,000 plus all authorized business expenses in the first year, followed
     by a 3% raise in each successive year of the contract. See "Employment,
     Consulting and Incentive Compensation Agreements," below. In addition,
     pursuant to shareholder approval at the 2002 Annual Meeting of the
     Stockholders, 600,000 shares of the Company's common stock were issued to
     the Rubin Family Irrevocable Stock Trust in lieu of compensation to Mr.
     Rubin. The fair market value of the shares at the date of issuance was
     $0.22 per share, resulting in a compensation charge to the Company in the
     amount of $132,000. On May 1, 2003 Mr. Rubin agreed to convert the
     principal amount of a loan made to the Company in the amount of $73,500
     into shares of the Company's common stock. In connection therewith The
     Rubin Family Irrevocable Stock Trust received 2,769,419 shares of the
     Company's common stock resulting in a compensation charge to the Company in
     the amount of $415,413.

(2)  Mr. McLain joined the Company in March 1993, when he became its Chief
     Executive Officer. On July 31, 1995, Mr. McLain was permitted to and did
     purchase from AUGI 6,000 shares of AUGI's common stock at a price of $.01
     per share. On August 1, 1995, the closing price for a share of AUGI's
     common stock as reported by NASDAQ was $4.875. Effective as of August 1,
     1995, Mr. McLain's employment agreement with the Company was terminated and
     he entered into an amended employment agreement expiring July 31, 2005. The
     base salary under this employment agreement commenced at $250,000 for
     fiscal 1996, and increased to $300,000 for fiscal 2000. His employment
     agreement also calls for Incentive Bonuses under certain circumstances.
     Effective as of August 1, 2000 Mr. McLain's employment agreement with the
     Company was terminated and he entered into a new employment agreement
     expiring July 31, 2007. The base salary under this employment agreement
     commences at $390,000 and increases yearly based upon the average
     percentage increase in salary for all employees of Employer for the current
     fiscal year over the previous fiscal year. His employment agreement also
     calls for Incentive Bonuses under certain circumstances. See "Employment,
     Consulting and Incentive Compensation Agreements" below. Mr. McLain became
     Chairman effective August 1, 1998. On May 1, 2003 Mr. McLain agreed to
     convert the principal amount of a loan made to the Company in the amount of
     $73,500 into shares of the Company's common stock. In connection therewith
     Mr. McLain received 2,769,419 shares of the Company's common stock
     resulting in a compensation charge to the Company in the amount of
     $415,413.

                                      III-3
<PAGE>
     Option Grants in Last Fiscal Year

     The following table provides information regarding individual grants of
stock options to each executive officer in fiscal 2003.
<TABLE><CAPTION>

                                                                             Potential Realizable Value
                             Individual Grants                               at Assumed Annual
                             % of Total Options                              Rates of Stock Price
                  Options    Granted to Employees    Exercise   Expiration   Appreciation for term
   Name           Granted    in Fiscal Year           Price        Date           5%       10%
---------         -------    --------------------    --------   ----------      ------   -------
<S>                 <C>             <C>               <C>          <C>           <C>      <C>
C. Dean McLain       --              N/A               N/A          N/A           N/A      N/A

Robert M. Rubin      --              N/A               N/A          N/A           N/A      N/A

Mark J. Wright       --              N/A               N/A          N/A           N/A      N/A
</TABLE>


     Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values

     The following table provides information concerning the exercise of stock
options during the fiscal 2003 by each executive officer and the fiscal year-end
value of unexercised options held by that officer.
<TABLE><CAPTION>
                                                                      Value of
                                          Number of Unexercised       Unexercised In-
                    Shares                Options at                  the-money options
                  Acquired on   Value     Fiscal Year-End             at Fiscal Year-End
    Name           Exercise    Realized   Exercisable/Unexercisable   Exercisable/Unexercisable
-------------      --------    --------   -------------------------   -------------------------
<S>                  <C>         <C>             <C>                         <C>
C. Dean McLain        --          --              500,000                     N/A

Robert M. Rubin       --          --              500,000                     N/A

Mark J. Wright        --          --              100,000                     N/A
</TABLE>

Employment, Consulting and Incentive Compensation Agreements

     Upon completion of the Company's 1995 initial public offering, the Company
entered into an employment agreement with Mr. Rubin, effective as of June 13,
1995, that expired July 31, 1998. Pursuant to this agreement, Mr. Rubin served
as Chairman of the Board of the Company and received an annual base salary of
$150,000 plus bonuses if certain conditions were met. Effective August 1, 1998,
the Company entered into a new two-year agreement with Mr. Rubin. Under the
terms of this agreement, Mr. Rubin no longer served as Chairman, but provided
consulting services to the Company. He received an annual fee of $200,000 plus
all authorized business expenses. The Company then entered into a new seven (7)
year consulting agreement with Mr. Rubin effective August 1, 2000 paying him
$200,000 plus all authorized business expenses in the first year, followed by a
3% raise in each successive year of the contract.

     Effective as of August 1, 2000 Mr. McLain entered into an employment
agreement expiring July 31, 2007. The base salary under this employment
agreement commences at $390,000 and increases yearly based upon the average
percentage increase in salary for all employees of Employer for the current
fiscal year over the previous fiscal year. His employment agreement also calls
for Incentive bonuses under certain circumstances. Mr. McLain received a $30,000
bonus during the Company's 2003 fiscal year. In addition, Mr. McLain receives
the use of vehicles at Company expense and certain other fringe benefits not
exceeding $50,000 per year.

                                      III-4
<PAGE>

Compensation Committee Interlocks and Insider Participation

     The Compensation Committee consists of Mr. Moskowitz and Mr. Metter. There
are no interlocking relationships, as described by the Securities and Exchange
Commission, between the Compensation Committee members. Mr. McLain, the Chairman
of the Board of Directors since August 1998, as well as its President and CEO,
and Mr. Rubin, the Chairman of the Board of Directors before Mr. McLain, and
currently a director and consultant for the Company, participated in all
discussions and decisions regarding salaries and incentive compensation for all
employees and consultants to the Company, except that they were each excluded
from discussions regarding their own salary.

Directors' Compensation

     Each director, not otherwise a full time employee of the Company, is
eligible to receive $1,500 per quarter, together with reimbursement of their
reasonable expenses incurred on the Company's behalf.


ITEM 12. SECUTITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
         ------------------------------------------------------------------
         RELATED STOCKHOLDER MATTERS
         ---------------------------

Security Ownership of Certain Beneficial Owners

The following table sets forth certain information, as of the date hereof, with
respect to the beneficial ownership of our common stock by each: (i) holder of
more than five percent (5%) of the outstanding shares of our common stock; (ii)
our officers and directors; and (iii) all our officers and directors as a group.
The Company's outstanding voting securities at the close of business on October
25, 2003, consisted of 10,130,000 shares of common stock, $.001 par value (the
"Common Stock"), each of which is entitled to one vote on all matters to be
presented at the Annual Meeting. The Common Stock does not have cumulative
voting rights. Unless otherwise indicated, the address of each of the named
persons is care of Western Power & Equipment Corp., 6407-B North East 117th
Avenue, Vancouver, WA 98662.
<TABLE><CAPTION>
                                                                  Shares            Percentage
Name and Address                                    Beneficially Owned(1)   Beneficially Owned
----------------                                    ---------------------   ------------------
<S>                                                           <C>                       <C>
C. Dean McLain (2)(6)(7)                                       3,857,419                 32.6%

Robert M. Rubin(3)(4)(6)                                         500,000                  4.9%

The Rubin Family Irrevocable Stock Trust (4)                   3,369,419                 33.3%

Mark J. Wright (5)                                               100,000                     *

Steven Moskowitz                                                    --                    --

Michel Metter (9)                                                   --                    --

American United Global, Inc.
11108 NE 106th Place
Kirkland, WA 98033                                             1,222,586                 12.1%

JSC, LLC (7)
38207 NE Gerber Rd.
Yacolt, WA  98675                                                588,000                  5.8%

All officers and directors as a group (5 persons)(8)           4,457,419                 38.5%

* less than one percent
</TABLE>

                                      III-5
<PAGE>
(1) Unless otherwise indicated, we believe that all persons named in the table
have sole voting and investment power with respect to all shares of the
Company's common stock beneficially owned by them. A person is deemed to be the
beneficial owner of securities which may be acquired by such person within 60
days from the date on which beneficial ownership is to be determined, upon the
exercise of options, warrants or convertible securities. Each beneficial owner's
percentage ownership is determined by assuming that options, warrants and
convertible securities that are held by such person (but not those held by any
other person) and which are exercisable within such 60 day period, have been
exercised.

(2) Includes Mr. McLain's direct beneficial ownership of exercisable options to
acquire 500,000 shares of the Company's common stock. Excludes Mr. McLain's
indirect ownership in the Company through his beneficial ownership of options to
purchase 362,000 shares of AUGI common stock. Mr. McLain's beneficial ownership
of AUGI common stock represents 18.1 percent of AUGI voting stock as of October
27, 2003.

(3) Includes Mr. Rubin's direct beneficial ownership of exercisable options to
acquire 500,000 shares of the Company's common stock. Excludes the shares of the
Company's common stock held by the Rubin Family Irrevocable Stock Trust (the
"Trust"). Excludes Mr. Rubin's indirect ownership in the Company through his
beneficial ownership of 80 shares and options to purchase 33,600 shares of AUGI
common stock. Mr. Rubin's beneficial ownership of AUGI common stock represents
1.7 percent of AUGI voting stock as of October 27, 2003.

(4) Mr. Rubin, a grantor of the Trust, does not have sole or shared voting or
dispositive power over the shares of the Company's common stock held by the
Trust, and disclaims any beneficial ownership of the shares of the Company's
common stock held by the Trust.

(5) Includes options to purchase 100,000 shares of the Company's common stock.

(6) On May 1, 2003, Mr. McLain and the Rubin Family Irrevocable Stock Trust
agreed to convert the principal amount of a loan made to the Company in the
amount of $147,000 into an aggregate of 5,538,838 shares of the Company's common
stock, as a result of which Mr. McLain and the Rubin Family Irrevocable Stock
Trust each received 2,769,419 shares of the Company's common stock.

(7) Includes 588,000 shares beneficially owned by JSC. Through JSC LLC Mr.
McLain has sole or shared voting or dispositive power over the shares of the
Company's common stock beneficially owned by JSC LLC.

(8) Includes the shares of the Company's common stock held by American United
Global, Inc. ("AUGI"), a company of which Mr Rubin is the chief executive
officer and chairman of the board of directors and of which Mr. Mc Lain is a
director.

(9) Excludes Mr. Metter's indirect ownership in the Company through his
ownership of exercisable options to acquire 150,000 shares of AUGI, the
Company's principal stockholder. Mr. Metter's beneficial ownership of AUGI
voting stock represents 7.5 percent of AUGI voting stock as of October 27, 2003.

Security Ownership of Management

     The following table, which was prepared on the basis of information
furnished by the persons described, shows ownership of the Common Stock as of
October 27, 2003 by the Chief Executive Officer, by each of the other executive
officers, by each of the directors, and by the executive officers and directors
as a group.

Shares Held By Directors and Named Executive Officers

     Set forth in the table below is information concerning the ownership, as of
the close of business on October 27, 2003, of the Common Stock by the Company's
directors and Named Executive Officers and all directors and present executive
officers as a group.

                                      III-6
<PAGE>
================================================================================
Name and Address                         Amount and Nature of        Percent(1)
                                         Beneficial Ownership(1)
---------------------------------------- ------------------------- -------------
C. Dean McLain (2)                             3,857,419               32.6%

Mark J. Wright (3)                               100,000                1.0%

Robert M. Rubin (4)                              500,000                4.9%
---------------------------------------- ------------------------- -------------
All directors and executive officers
as a group (3 persons)                         4,457,419               38.5%
================================================================================

     (1)  Unless otherwise indicated, the Company believes that all persons
          named in the table have sole voting and investment power with respect
          to all shares of Common Stock beneficially owned by them. A person is
          deemed to be the beneficial owner of securities which may be acquired
          by such person within 60 days from the date on which beneficial
          ownership is to be determined, upon the exercise of options, warrants
          or convertible securities. Each beneficial owner's percentage
          ownership is determined by assuming that options, warrants and
          convertible securities that are held by such person (but not those
          held by any other person) and which are exercisable within such 60 day
          period, have been exercised.

     (2)  Excludes Mr. McLain's indirect ownership in the Company through his
          beneficial ownership of options to purchase 362,000 shares of AUGI
          common stock. Includes Mr. McLain's direct beneficial ownership
          exercisable options to acquire 500,000 shares of the Company's common
          stockand 588,000 shares of the Company's common stock held by the JSC
          LLC. Mr. McLain's beneficial ownership of AUGI common stock represents
          2.4 percent of AUGI voting stock as at October 27, 2003.

     (3)  Includes exercisable stock options to purchase 100,000 shares of
          common stock of the Company issued to Mr. Wright for services rendered
          to the Company.

     (4)  Includes Mr. Rubin's direct beneficial ownership of exercisable
          options to acquire 500,000 shares of the Company's common stock.
          Excludes the shares of the Company's common stock held by the Rubin
          Family Irrevocable Stock Trust (the "Trust"). Excludes Mr. Rubin's
          indirect ownership in the Company through his beneficial ownership of
          80 shares and options to purchase 33,600 shares of AUGI common stock.
          Mr. Rubin's beneficial ownership of AUGI common stock represents 1.7
          percent of AUGI voting stock as of October 27, 2003.

Shares Held by Certain Other Stockholders

The following table sets forth, as of the close of business on October 27, 2003,
certain information with respect to each person who is known to the Company to
be the beneficial owner of more than five (5%) percent of the Common Stock,
other than the directors set forth in the Directors and Named Executive Officers
Ownership Table above.

================================================================================
                                           Amount and Nature of
Name and Address                           Beneficial Ownership(1)   Percent(1)
------------------------------------------ ----------------------- -------------
American United Global, Inc. ("AUGI")
2489 152nd Avenue NE
Richmond, WA, 98052 (2)                          1,222,586             12.1%
================================================================================

     (1)  Unless otherwise indicated, the Company believes that all persons
          named in the table have sole voting and investment power with respect
          to all shares of Common Stock beneficially owned by them. A person is
          deemed

                                      III-7
<PAGE>

          to be the beneficial owner of securities which may be acquired by such
          person within 60 days from the date on which beneficial ownership is
          to be determined, upon the exercise of options, warrants or
          convertible securities. Each beneficial owner's percentage ownership
          is determined by assuming that options, warrants and convertible
          securities that are held by such person (but not those held by any
          other person) and which are exercisable within such 60 day period,
          have been exercised.

     (2)  Mr. Rubin has been the Chief Executive Officer of American United
          Global, Inc. ("AUGI"), the Company's majority shareholder, since
          October 1990, and also served as Chairman of AUGI from October 1990
          until January 1996. From March 1, 1993 through June 13, 1995, Mr.
          McLain served as Executive Vice President of AUGI. Mr. McLain has
          served on the Board of Directors of AUGI since March 7, 1994.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED 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 $1,500,000 to the McLain-Rubin Realty Company, LLC ("MRR"), a
     Delaware limited liability company the owners of which are Messrs. C. Dean
     McLain, the President and a director of the Company, and Robert M. Rubin,
     the Chairman and a director of the Company. Simultaneous with its
     acquisition of the Sacramento Operation real property and improvements, MRR
     leased such real property and improvements to the Company under the terms
     of a 20-year commercial lease agreement dated March 1, 1996 with the
     Company paying an initial annual rate of $168,000. As of October 1, 2000,
     the Company entered into a renegotiated 7-year lease with an initial annual
     rate of $228,000. 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 by the Company to McLain-Rubin Realty, L.L.C. (MRR)
     under the terms of a real property purchase and sale agreement. MRR is a
     Delaware limited liability company the owners of which are Messrs. C. Dean
     McLain, the President and Chairman of the Company, and Robert M. Rubin, a
     director of the Company. The sale price was $2,210,000 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 $252,000 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 $276,000. 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 President and a director of
     the Company, and Robert M. Rubin, the Chairman and a director of the
     Company, for a 5-year lease on its Vancouver, Washington corporate office
     with an annual rate of $98,000. 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 July 30, 2002, pursuant to shareholder approval at the 2002 Annual
     Meeting of the Stockholders, 600,000 shares of the Company's common stock
     were issued to the Rubin Family Irrevocable Stock Trust in lieu of
     compensation to Mr. Rubin. The fair market value of the shares at the date
     of issuance was $0.22 per share, resulting in a compensation charge to the
     Company in the amount of $132,000.

     On March 24 2003, Mr. McLain agreed to convert the accrued and unpaid
     interest on a loan made to the Company in the amount of $147,000 into
     shares of the Company's common stock. In connection therewith Mr. McLain
     received 588,000 shares of the Company's common stock with a value of $
     82,000.

                                      III-8
<PAGE>

     On May 1, 2003, Mr. McLain and The Rubin Family Irrevocable Stock Trust
     agreed to convert the principal amount of a loan made to the Company in the
     amount of $147,000 into an aggregate of 5,538,838 shares of the Company's
     common stock. In connection therewith The Rubin Family Irrevocable Stock
     Trust received 2,769,419 shares of the Company's common stock and Mr.
     McLain received 2,769,419 shares of the Company's common stock resulting in
     a compensation charge to the Company of $831,000.































                                      III-9
<PAGE>
                                     PART IV

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

(a)   1.   FINANCIAL STATEMENTS.

           A list of financial statements filed as part of this report is
identified in Part II, item 8.

           Report of Independent Auditors' - Financial Statement Schedule
Schedule II - Valuation and Qualifying Accounts

      2.   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)

           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.

                                      IV-1
<PAGE>

           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.

           10.17      Western Power & Eqyuipment Corp.'s Code of Ethics adopted
                      on November 6, 2003.

           21.        Subsidiaries of the Company.

           23.        Consent of Independent Accountants.

           31.1       Rule 13a-14(a)/15d-14(a) Certifications

           31.2       Rule 13a-14(a)/15d-14(a) Certifications

           32.1       Certification by the Chief Executive Officer Relating to
                      Periodic Report Containing Financial Statements. *

           32.2       Certification by the Chief Financial Officer Relating to a
                      Periodic Report Containing Financial Statements. *

                      * The Exhibit attached to this Form 10-K shall not be
                      deemed "filed" for the purposes of Section 18 of the
                      Securities Exchange Act of 1934 (the "Exchange Act") or
                      otherwise subject to liability under that section,
                      amended, or the Exchange Act, except as expressly set
                      forth by specific reference in such filing.

     (1)  Filed as an Exhibit to the AUGI 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 July 31, 2003, the Company filed a report on Form
     8-K on May 8, 2003 pursuant to Item 4 and Item 7. and on May 9, 2003
     pursuant to Item 4 and Item 7. Subsequent to the quarter ended July 31,
     2003, the Company filed a report on Form 8-K on August 7, 2003 pursuant to
     Item 5 and Item 7.

(c)  EXHIBITS

     See (a)(3) above.


(d)  ADDITIONAL FINANCIAL STATEMENT SCHEDULES

     See (a)(2) above.

                                      IV-2
<PAGE>
                         WESTERN POWER & EQUIPMENT CORP.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)


<TABLE><CAPTION>
                                                               YEAR ENDED JULY 31,
                                                ----------------------------------------------
                                                    2003             2002             2001
                                                ------------     ------------     ------------
<S>                                             <C>              <C>              <C>
Net revenues
    Product sales                               $     92,461     $     96,723     $    112,502
    Service revenue                                    4,978            5,517            6,584
    Rental revenue                                     4,957            5,748           20,816
                                                ------------     ------------     ------------
  Total net revenues                                 102,396          107,988          139,902

Cost of goods sold
    Product sales                                     80,256           90,261          107,447
    Service revenue                                    4,289            4,945            6,087
    Rental revenue                                     4,325            5,019           16,548
                                                ------------     ------------     ------------
  Total cost of goods sold                            88,870          100,225          130,082
                                                ------------     ------------     ------------



Gross profit                                          13,526            7,763            9,820

Selling, general and administrative expenses           9,955           10,199           12,840
Impairment of goodwill and write-down of
  property, plant and equipment                           --            3,478               --
                                                ------------     ------------     ------------

Income (loss) from operations                          3,571           (5,914)          (3,020)

Other income (expense):
    Interest expense                                  (3,363)          (4,114)          (5,982)
    Other income                                         252               57            1,465
                                                ------------     ------------     ------------
  Total other income (expense)                        (3,111)          (4,057)          (4,517)
                                                ------------     ------------     ------------

Income (loss) before income taxes                        460           (9,971)          (7,537)

Provision for income taxes                                48               48              305
                                                ------------     ------------     ------------
Net income (loss)                               $        412     $    (10,019)    $     (7,842)
                                                ============     ============     ============

Income (loss) per common share -
  basic and dilutive                            $        .08     $      (2.50)    $      (2.30)
                                                ============     ============     ============

Weighted Average Outstanding Common Shares
  for Basic and Dilutive EPS                           5,336            4,003            3,403
                                                ============     ============     ============
</TABLE>


          See accompanying notes to consolidated financial statements.

                                       F-1
<PAGE>
                         WESTERN POWER & EQUIPMENT CORP.
                           CONSOLIDATED BALANCE SHEETS
                             (DOLLARS IN THOUSANDS)
<TABLE><CAPTION>
                                                         JULY 31,         JULY 31,
                                                           2003             2002
                                                       ------------     ------------
<S>                                                    <C>              <C>
ASSETS
------
Current assets:
    Cash and cash equivalents                          $          8     $          5
    Restricted cash                                             400              540
    Accounts receivable, less allowance for
      doubtful accounts of $555 and $646                      9,779           10,304
    Inventories                                              27,494           26,915
    Prepaid expenses                                            126               48
    Note receivable current                                      --              122
                                                       ------------     ------------
        Total current assets                                 37,807           37,934
                                                       ------------     ------------

Fixed assets (net):
    Property, plant and equipment                             2,843            3,434
    Rental equipment fleet                                   13,663           18,696
                                                       ------------     ------------
        Total fixed assets                                   16,506           22,130
                                                       ------------     ------------

Intangibles and other assets, net of accumulated
  amortization of $2,650 and $2,650                             153               52
                                                       ------------     ------------
Total assets                                           $     54,466     $     60,116
                                                       ============     ============

LIABILITIES & STOCKHOLDERS' DEFICIENCY
--------------------------------------
Current liabilities:
    Borrowings under floor plan financing              $     10,959     $     10,974
    Short-term borrowings - GE line of credit                34,566           41,322
    Convertible debt                                             63              218
    Accounts payable                                          8,214            8,140
    Accrued payroll and vacation                                572              659
    Other accrued liabilities                                   984              985
    Capital lease obligations                                    39               26
                                                       ------------     ------------
        Total current liabilities                            55,397           62,324
                                                       ------------     ------------

Capital lease obligations                                       880              928
                                                       ------------     ------------
        Total liabilities                                    56,277           63,252
                                                       ------------     ------------

Commitments and contingencies

Stockholders' deficiency:
    Preferred stock-10,000,000 shares authorized;
       none outstanding                                          --               --
    Common stock, $.001 par value - 20,000,000
       shares authorized and 10,130,000 shares and
       4,003,162 shares outstanding, as of July 31,
       2003 and 2002 respectively                                10                5
    Additional paid-in capital                               16,933           16,025
    Accumulated deficit                                     (17,910)         (18,322)
    Less common stock in treasury, at cost
      (130,300 shares)                                         (844)            (844)
                                                       ------------     ------------
        Total stockholders' (deficiency) equity              (1,811)          (3,136)
                                                       ------------     ------------
Total liabilities and stockholders' deficiency         $     54,466     $     60,116
                                                       ============     ============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       F-2
<PAGE>
                         WESTERN POWER & EQUIPMENT CORP.
          CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
                             (DOLLARS IN THOUSANDS)




<TABLE><CAPTION>
                              COMMON STOCK
                       ------------------------     ADDITIONAL                                         TOTAL
                           NUMBER                    PAID-IN       ACCUMULATED      TREASURY      STOCKHOLDERS'
                         OF SHARES      AMOUNT       CAPITAL         DEFICIT          STOCK     EQUITY (DEFICIENCY)
                       ------------    --------    ------------    ------------    ------------    ------------
                       <S>               <C>             <C>             <C>             <C>             <C>
Balance at
July 31, 2000             3,353,162           4          16,005            (461)         (1,168)         14,380

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

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

Balance at
July 31, 2002             4,003,162    $      5    $     16,025    $    (18,322)   $       (844)   $     (3,136)

Issuance of Stock-
compensation              5,538,838           4             827              --              --             831

Issuance of Stock-
in lieu of interest         588,000           1              81              --              --              82

Net lncome                       --          --              --             412              --             412
                       ----------------------------------------------------------------------------------------
Balance at
July 31, 2003            10,130,000    $     10    $     16,933    $    (17,910)   $       (844)   $     (1,811)
                       ============    ========    ============    ============    ============    ============
</TABLE>



          See accompanying notes to consolidated financial statements.

                                       F-3
<PAGE>
                         WESTERN POWER & EQUIPMENT CORP.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)



<TABLE><CAPTION>
                                                                      YEAR ENDED JULY 31,
                                                        ----------------------------------------------
                                                            2003             2002             2001
                                                        ------------     ------------     ------------
<S>                                                     <C>              <C>              <C>
Cash flows from operating activities:
    Net Income (loss)                                            412     $    (10,019)    $     (7,842)
    Adjustments to reconcile net loss to Net
      cash provided by operating activities:
           Depreciation                                        6,021            7,950            9,835
           Amortization                                           --              125              125
           Bad debts                                             170               83              544
           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                                (421)            (606)          (2,016)
    Non-cash stock compensation expense                          831              132               --
    Non-cash stock interest expense                               82               --               --
    Changes in assets and liabilities
           Accounts receivable                                   355            1,925            2,508
           Restricted cash                                       140             (298)             301
           Inventories                                        (3,335)          14,716            8,545
           Prepaid expenses                                      (78)             249              (88)
           Notes receivable current                              122             (122)              --
           Accounts payable                                       74           (3,692)             560
           Accrued payroll and vacation                          (87)          (1,095)           1,003
           Other accrued liabilities                              (1)            (723)             393
           Income taxes receivable/payable                        --               (7)             400
           Deferred lease income                                  --               --           (1,007)
                                                        ------------     ------------     ------------
           Net cash provided by operating activities           4,285           14,079           13,261
                                                        ------------     ------------     ------------

Cash flow from investing activities:
    Purchase of fixed assets                                    (167)            (308)            (964)
    Purchase of rental equipment                              (2,119)          (5,129)          (6,500)
    Proceeds on sale of rental equipment                       4,910            5,548            8,512
    Proceeds on sale of fixed assets                             156              309              283
    (Purchase) sale of other assets                             (101)              18               12
                                                        ------------     ------------     ------------
           Net cash provided by investing activities           2,679              438            1,343
                                                        ------------     ------------     ------------

Cash flows from financing activities:
    Principal payments on capital leases                         (35)              16               (2)
    Inventory floor plan financing                               (15)          (3,251)            (531)
    Repayments of short-term financing -
      GE line of credit                                       (6,756)         (12,075)         (14,287)
    Convertible debt issuance                                     --              100              182
    Payments on convertible debt                                (155)             (64)              --
    Long-term debt repayments                                     --               (8)             (20)
                                                        ------------     ------------     ------------
           Net cash used in financing activities              (6,961)         (15,282)         (14,658)
                                                        ------------     ------------     ------------

Increase (decrease) in cash and cash equivalents                   3             (765)             (54)
Cash and cash equivalents at beginning of year                     5              770              824
                                                        ------------     ------------     ------------
Cash and cash equivalents at end of year                $          8     $          5     $        770
                                                        ============     ============     ============
</TABLE>


          See accompanying notes to consolidated financial statements.

                                       F-4
<PAGE>
WESTERN POWER & EQUIPMENT CORP.

Notes to Consolidated Financial Statements (DOLLARS IN THOUSANDS, EXCEPT PER
SHARE AND OPTIONS DATA)


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 for which the
     Company is currently not in compliance. As of July 31, 2003 the Company
     requested but did not receive a waiver of such non-compliance. The line of
     credit with GE which expired on December 31, 2001 has not been renewed and
     the Company is operating under the agreement on a month to month basis.
     Although GE has not called the debt due to non-compliance, there is no
     guarantee that GE will not require the Company to repay the debt at any
     time in full.

     The Company is in discussions with GE regarding renewal or extension of the
     current credit facility. There can be no assurance that this agreement will
     be renewed. 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 to fund the business.

     The Company is focusing its efforts on streamlining its operations. The
     Company in recent years has selectively reduced the number of stores it
     operates and its product offerings to reduce overall expenses and to
     improve product turnover.

     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 GE, the Company has a cash
     account restricted by GE for the purpose of paying down the line of credit
     and accordingly has been recorded as a current asset. Restricted cash
     totaled $400 and $540 at July 31, 2003 and 2002, respectively.

     ACCOUNTS RECEIVABLE

     Accounts receivable are reported net of an allowance for doubtful accounts,
     future returns, and markdowns and allowances. The allowance was determined
     by management to be adequate based on a periodic review of the status of
     the individual accounts receivable and the volume of returns.

                                       F-5
<PAGE>
     INVENTORIES

     Inventories (new and used) 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. The Company utilizes recent sales information, third party
     valuation guides and recent auction results as well as judgments of
     inventory managers within the Company to determine the net realizable value
     of inventory. For the year ended July 31, 2003, inventory reserves and
     allowances decreased due to the sale of older equipment inventory.

     INTANGIBLE ASSETS

     The Company evaluates the recoverability of it's goodwill and other
     intangibles in accordance with the Statement of Financial Accounting Board
     "SFASB" No. 142, Goodwill and Other Intangible Assets. As of July 31, 2003,
     the Company has not identified any impairment. As of July 31, 2002 the
     Company recorded an impairment loss of goodwill in the amount of $2,525
     million.

     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 20 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.

     LONG LIVED ASSETS

     In accordance with Statement of Financial Accounting Standards No. 144,
     "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. As of July 31, 2003 the Company has not identified any
     impairment.

     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. In addition to outright
     sales of new and used equipment, certain rentals include rent-to-purchase
     option agreements. Under such agreements, customers are given a period of
     several months to exercise the option to purchase the rented equipment and
     may be allowed to apply a portion of the rental payments to the purchase
     price. This rent-to-purchase equipment is included in the Company's
     inventory until the option is exercised and the equipment is purchased.

     ADVERTISING EXPENSE

     The Company expenses all advertising costs as incurred. Total advertising
     expense for the years ended July 31, 2003, 2002 and 2001 was $87, $176, and
     $221 respectively.

                                       F-6
<PAGE>
     OTHER INCOME

     Other income principally includes gains and losses on the sale of fixed
     assets and finance charges associated with accounts receivable 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, 2003 and 2002 the Company held
     130,300 shares in treasury stock.

     RECLASSIFICATIONS

     Certain amounts in the 2002 and 2001 financial statements have been
     reclassified to conform with the 2003 presentation. These reclassifications
     had no impact on net loss or cash flows as previously reported.

     FAIR VALUE OF 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 has been computed using the
     weighted average number of common shares outstanding during the periods
     presented.

     Diluted net income (loss) per share is computed using the weighted average
     number of common shares outstanding during the periods presented plus any
     dilutive securities outstanding. There were no common stock equivalents
     consisting of options which were required to be included in the calculation
     of diluted income (loss) per share for the periods presented. Total
     outstanding options as of July 31, 2003 totaled 1,210,000.

     STOCK BASED COMPENSATION

     The company accounts for employee stock transactions in accordance with APB
     Opinion No. 25, "Accounting for Stock Issued to Employees." The Company has
     adopted the pro-forma disclosure requirements of Statement of Financial
     Accounting Standards No. 123, " Accounting For Stock-Based Compensation."

     The FASB issued SFAS No. 148, " Accounting For Stock-Based
     Compensation-Transition and Disclosure- an amendment of FASB Statement No.
     123" that provides alternative methods of transition for a voluntary change
     to the fair value based method accounting for stock-based employee
     compensation. The provisions of this Statement are effective for fiscal
     years beginning December 15, 2002.

     During the year ended July 31, 2003, the Company adopted Statement of
     Financial Accounting Standard No. 148, " Accounting For Stock-Based
     Compensation-Transition and Disclosure." This statement amended Statement

                                       F-7
<PAGE>
     No. 123, Accounting for Stock-Based Compensation." As permitted under
     Statement No. 123, the Company continues to apply the Accounting Principles
     Board Opinion No. 25, "Accounting for Stock Issued to Employees." As
     required under Statement No. 148, the following table present pro-forma net
     income and basic and diluted earnings (loss) per share as if the fair
     value-based method had been applied to all awards.

     Year Ended July 31, 2003
                                                       BASIC     DILUTED
                                       NET INCOME      E.P.S.     E.P.S.
                                       ----------      -----      -----
     As Reported                       $      412        .08        .08
     Pro Forma                         $      412        .08        .08


     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)    ($2.40)    ($2.40)

       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 2003, 2001, and 2000 were:

                                          FY03           FY02           FY01
                                       ----------     ----------     ----------
     Risk free interest rate                  N/A            N/A          4.35%

     Expected dividend yield                  N/A            N/A             0%

     Expected life                            N/A            N/A        4 years

     Expected volatility                      N/A            N/A        116.21%

     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 2003,
     2002, and 2001 are $-0-, $-0-, and $ 0.53, respectively.

     SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION


                                                  YEAR ENDED JULY 31,
                                       ----------------------------------------
                                          2003          2002             2001
                                       ----------     ----------     ----------
     Cash paid (received) during
     the year for:
         Interest                      $    3,363     $    4,114     $    5,887
         Income taxes, net of refunds           1            (12)           (12)

     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-8
<PAGE>
     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

     The following pronouncements have been issued by the FASB.

     In January 2003, the FASB issued FIN 46, "Consolidation of Variable
     Interest Entities." In general, a variable interest entity is a
     corporation, partnership, trust or other legal structure used for business
     purposes that either (a) does not have equity investors with voting rights
     or, (b) has equity investors that do not provide sufficient financial
     resources for the entity to support its activities. FIN 46 requires a
     variable interest entity to be consolidated by a company if that company is
     subject to a majority of the risk of loss from the variable interest
     entities activities or entitled to receive a majority of the entity's
     residual returns or both. The consolidated requirements of FIN 46 apply
     immediately to variable interest entities created after January 31, 2003.
     For variable interest entities created or acquired prior to February 01,
     2003, the provisions of FIN 46 must be applied for the first interim or
     annual period beginning after December 15, 2003.

     In April 2003, FASB issued SFAS No. 149, `Amendment of Statement 133 on
     Derivative Instruments and Hedging Activities." The Statement amends and
     clarifies accounting for derivative instruments, including certain
     derivative instruments embedded in other contracts, and for hedging
     activities under Statement 133. This Statement is effective for contracts
     entered into or modified after June 30, 2003, except as stated below and
     for hedging relationships designated after June 30, 2003. The guidance
     should be applied prospectively. The provisions of this Statement that
     relate to Statement 133 Implementation Issues that have been effective for
     fiscal quarters that began prior to June 15, 2003 should continue to be
     applied in accordance with their effective dates. In addition, certain
     provision relating to forward purchases or sales of when-issued securities
     or other securities that do not yet exist, should be applied to existing
     contracts as well as new contracts entered into after June 30, 2003.

     In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
     Financial Instruments with Characteristics of Both Liabilities and Equity."
     SFAS No. 150 establishes standards for classification and measurement in
     the statement of financial position of certain financial instruments with
     characteristics of both liabilities and equity. It requires classification
     of financial instruments that are within its scope to be a liability (or an
     asset in some circumstances). SFAS No. 150 is effective for financial
     instruments entered into or modified after May 31, 2003 and, otherwise, is
     effective at the beginning of the first interim period beginning after June
     15, 2003.

     Management does not believe that the adoption of any of these
     pronouncements will have a material effect 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 President and a director of the Company, and Robert M. Rubin,
     the Chairman and a director of the Company. Simultaneous with its

                                       F-9
<PAGE>
     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
     President and Chairman of the Company, and Robert M. Rubin, a director of
     the Company. The sale price was $2,210 in cash at closing. Subsequent to
     the closing of the sale, the Company entered into a 20-year commercial
     lease agreement with MRR for the Sparks, Nevada facility at an initial
     rental rate of $252 per year. The lease is a net lease with payment of
     insurance, property taxes and maintenance costs paid by the Company. 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.

     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 President and a director of
     the Company, and Robert M. Rubin, the Chairman and a director of the
     Company, for a 5-year lease on its Vancouver, Washington corporate office
     with an annual rate of $98. In addition to base rent, the Company is
     responsible for the payment of all related taxes and other assessments,
     utilities, insurance, and repairs (both structural and regular maintenance)
     with respect to the leased real property during the term of the lease. The
     lease qualifies for treatment as an operating lease.

     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 recorded in selling, general and administrative expenses.

     On May 1, 2003, Mr. McLain and Mr. Rubin agreed to convert the principal
     amount of a loan made to the Company in the amount of $147 into an
     aggregate of 5,538,838 shares of the Company's common stock. In connection
     therewith Mr. Rubin received 2,769,419 shares of the Company's common stock
     and Mr. McLain received 2,769,419 shares of the Company's common stock
     resulting in a compensation charge to the Company of $831which has been
     recorded in selling, general and administrative expenses.

3.   INVENTORIES

     Inventories consist of the following:
                                                     JULY 31,        JULY 31,
                                                       2003            2002
                                                    ----------      ----------
     Equipment (net of reserve allowances of
       $4,493 and $7,770 respectively):
          New equipment                             $   15,460      $   13,834
          Used equipment                                 5,370           5,915

     Parts (net of reserve allowance of $378
       and $286 respectively)                            6,664           7,166
                                                    ----------      ----------
                                                    $   27,494      $   26,915
                                                    ==========      ==========

                                      F-10
<PAGE>
4.   FIXED ASSETS

     Fixed assets consist of the following:
                                                     JULY 31,        JULY 31,
                                                       2003            2002
                                                    ----------      ----------
     Property, plant, and equipment:
     Land                                           $      522      $      522
     Buildings                                           1,749           1,749
     Machinery and equipment                             3,092           3,137
     Office furniture and fixtures                       2,213           2,220
     Computer hardware and software                      1,525           1,501
     Vehicles                                            1,226           1,406
     Leasehold improvements                                967             960
                                                    ----------      ----------
                                                        11,294          11,495
     Less: accumulated depreciation                     (8,451)         (8,061)
                                                    ----------      ----------
     Property, plant, and equipment (net)           $    2,843      $    3,434
                                                    ==========      ==========

     Rental equipment fleet                         $   21,046      $   25,833
     Less: accumulated depreciation                     (7,383)         (7,137)
                                                    ----------      ----------
     Rental equipment (net)                         $   13,663      $   18,696
                                                    ==========      ==========


     Included in depreciation are charges related to certain inventory rentals
     under rent-to-purchase option agreements.

     As of July 31, 2003 and 2002 fixed assets (net) includes property under
     capital leases in the amount of $971 and $978 respectively.

5.   SHORT TERM 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 an inventory floor plan and operating line of credit
     through GE Commercial Distribution Finance ("GE"), fka Deutsche Financial
     Services. The credit facility matured December 31, 2001 and had provided
     terms with a floating interest 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. Amounts may be advanced to the Company based on
     its assets, including accounts receivable, parts inventory, new and used
     equipment inventory, rental fleet, real property, and vehicles. Interest
     payments on the outstanding balance are due monthly.

     As of June 21, 2002, the Company entered into a Forbearance Agreement with
     GE under the terms of which GE raised the interest rate to prime plus 4%
     while the Company was in technical default and required the Company to pay
     a $45 fee to GE 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, 2003, the
     Company continued to be in technical default of the GE Loan Agreement. The
     Company has requested but did not receive a waiver from GE. Although GE has
     not called the debt due to such defaults, there is no guarantee that GE
     will not require the Company to repay the debt at any time.

     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:

                                      F-11
<PAGE>
                                                              JULY 31,
                                                      ------------------------
                                  INTEREST RATE         2003            2002
                                  -------------       --------        --------
     Case Credit Corporation        Prime + 2%        $ 10,959        $ 10,974
                                      (6.75%)

     GE                            Prime + 4.00%        34,566          41,322
                                                      --------        --------
                                      (8.75%)
                                                      $ 45,525        $ 52,296
                                                      ========        ========

     If GE does call the debt, it will become immediately due and payable in
     full and the Company would not be able to operate if alternative financing
     is not obtained or the Company cannot renegotiate its line of credit with
     GE.

     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, 2003 is $63.

6.   INCOME TAXES

     The current year's federal and state income tax provision consists
     substantially of minimum taxes. The principal reasons for the variation
     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,
                                              2003         2002         2001
                                            --------     --------     --------
     Statutory federal income tax rate         34.0%       (34.0%)      (34.0%)
     State income taxes, net of federal
        income tax benefit                      5.0%        (5.0%)       (4.3%)
     Valuation allowance                         --         39.3%        38.3%
     Utilization of NOLs                      (29.0%)         --           --
     Other                                      0.2%         0.2%         4.0%
                                            --------     --------     --------
                                               10.2%         0.5%         4.0%
                                            ========     ========     ========

     Temporary differences between the financial statement and tax basis of
     assets and liabilities which give rise to a significant portion of deferred
     tax assets and deferred tax liabilities were as follows:

                                                               YEAR ENDED
                                                         ---------------------
                                                         JULY 31,     JULY 31,
                                                           2003         2002
                                                         --------     --------
     Net Current Deferred Tax Assets:
        Inventory                                        $  2,527     $  2,804
        Accounts receivable allowance                         216          252
        Accrued vacation and bonuses                          123           75
        Other accruals                                         75           60
                                                         --------     --------

        Current Deferred Tax Asset                          2,941        3,191
        Less-Valuation Allowance                           (2,941)      (3,191)
                                                         --------     --------
        Net Current Deferred Tax Asset                         --           --
                                                         --------     --------


     Net Long-Term Deferred Tax Assets (Liability):
        Fixed Assets                                       (1,401)      (2,542)
        Goodwill and intangibles                              470          774
        NOL carryforwards                                  10,327        9,935
                                                         --------     --------
        Long-term Deferred Tax Asset (Liability)            9,396        8,167
        Less- Valuation Allowance                          (9,396)      (8,167)
                                                         --------     --------
        Net Long-term Deferred Tax Asset (Liability)     $     --     $     --
                                                         ========     ========

                                      F-12
<PAGE>
     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 and therefore a full valuation allowance of $12,337 is
     provided.

     As of July 31, 2003 the Company has approximately $26 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

     On March 24 2003, Mr. McLain agreed to convert the accrued and unpaid
     interest on a loan made to the Company in the amount of $147,000 into
     shares of the Company's common stock. In connection therewith Mr. McLain
     received 588,000 shares of the Company's common stock with a value of
     $82,000.

     On May 1, 2003, Mr. McLain and Mr. Rubin agreed to convert the principal
     amount of a loan made to the Company in the amount of $147,000 into an
     aggregate of 5,538,838 shares of the Company's common stock. In connection
     therewith Mr. Rubin received 2,769,419 shares of the Company's common stock
     and Mr. McLain received 2,769,419 shares of the Company's common stock
     resulting in a compensation charge to the Company of $831,000.

     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.

     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:

                                      F-13
<PAGE>
                                                              WEIGHTED AVERAGE
                                                     SHARES      OPTION PRICE
                                                   ----------     ---------
     Options outstanding July 31, 2000:                10,000          4.56

     Exercised                                             --            --
     Surrendered                                           --            --
     Granted                                        1,200,000          0.53
                                                   ----------     ---------
     Options outstanding July 31, 2001              1,210,000          0.56
                                                   ==========     =========

     Exercised                                             --            --
     Surrendered                                           --            --
     Granted                                               --            --
                                                   ----------     ---------
     Options outstanding July 31, 2002              1,210,000          0.56
                                                   ==========     =========

     Exercised                                             --            --
     Surrendered                                           --            --
     Granted                                               --            --
                                                   ----------     ---------
     Options outstanding July 31, 2003              1,210,000          0.56
                                                   ==========     =========


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, 2003:

================================================================================
                          WEIGHTED                       WEIGHTED
             NUMBER OF    AVERAGE    WEIGHTED AVERAGE    NUMBER OF     AVERAGE
EXERCISE      OPTIONS     EXERCISE      CONTRACTUAL       OPTIONS      EXERCISE
 PRICE      OUTSTANDING    PRICE      LIFE REMAINING    EXERCISABLE     PRICE
--------------------------------------------------------------------------------
 $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
================================================================================


8.   COMMITMENTS AND CONTINGENCIES

     LEASES

     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 $
     1,425 and $1,535 for the years ended July 31, 2003 and 2002, respectively.

     Assets recorded under capital leases are recorded in fixed assets and are
     as follows:
                                                 JULY 31,         JULY 31,
                                                   2003             2002
                                                ---------        ---------
     Capitalized asset value                    $     971        $   1,043
     Less accumulated amortization                   (384)            (369)
                                                ---------        ---------
                                                $     587        $     674
                                                =========        =========

     Net capitalized asset values are included in Property, Plant and Equipment.
     Future minimum lease payments under all noncancelable leases as of July 31,
     2003, are as follows:
                                                 CAPITAL         OPERATING
     Year ending July 31,                         LEASES           LEASES
                                                ---------        ---------
          2004                                        125            1,607
          2005                                        111            1,331
          2006                                        124            1,025
          2007                                        132              961
          2008                                        132              541
          Thereafter                                  968            1,141
                                                ---------        ---------
          Total annual lease payments           $   1,592        $   6,606
                                                =========        =========
          Less amount representing interest,
            with imputed interest rates
            ranging from 6% to 15%                    673
                                                ---------
          Present value of minimum lease
            payments                                  919
          Less current portion                         39
                                                ---------
          Long-term portion                     $     880
                                                =========

                                      F-14
<PAGE>
     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, 2003, such purchase commitments totaled $
     10,451.

     LITIGATION

     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.   CONCENTRATION OF CREDIT RISK

     Case Corporation provideed approximately 53%, 49% and 50% of our products
     for the years ending July 31, 2003, 2002 and 2001 respectively. 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.

10.  PRODUCT INFORMATION

     The Company's operations consist of one business segment. However, the
     Company evaluates performance based on revenue and gross margin of three
     distinct product categories. Revenue and gross margin by product categories
     are summarized as follows:

     ==========================================================================
     Business Component         Year Ended        Year Ended        Year Ended
        Net Revenues          July 31, 2003     July 31, 2002     July 31, 2001
     --------------------------------------------------------------------------
     Equipment Sales            $   71,215        $   73,909        $   84,065
     --------------------------------------------------------------------------
     Equipment Rental                4,957             5,747            20,817
     --------------------------------------------------------------------------
     Product Support                26,224            28,332            35,020
     --------------------------------------------------------------------------
         Totals                 $  102,396        $  107,988        $  139,902
     ==========================================================================

     ==========================================================================
     Business Component         Year Ended        Year Ended        Year Ended
       Gross Margins          July 31, 2003     July 31, 2002     July 31, 2001
     --------------------------------------------------------------------------
     Equipment Sales            $    8,225        $    2,360        $     (641)
     --------------------------------------------------------------------------
     Equipment Rental                  668               727             4,566
     --------------------------------------------------------------------------
     Product Support                 4,633             4,676             5,895
     --------------------------------------------------------------------------
         Totals                 $   13,526        $    7,763        $    9,820
     ==========================================================================

     Asset information by reportable product line is not reported, since the
     Company does not produce such information internally.

11.  UNAUDITED QUARTERLY CONSOLIDATED FINANCIAL DATA
<TABLE><CAPTION>
                                                                QUARTER                         TOTAL
                                           -----------------------------------------------     --------
                                             FIRST       SECOND        THIRD       FOURTH        YEAR
                                           --------     --------     --------     --------     --------
<S>                                        <C>          <C>          <C>          <C>          <C>
Fiscal 2003:

     Net sales                             $ 24,094     $ 24,663     $ 24,772     $ 28,867     $102,396
     Gross Profit                             3,461        3,430        2,784        3,851       13,526
     Net income (loss)                          279          223          110         (200)         412
     Income (loss) per share - basic           0.07         0.06         0.03        (0.02)        0.08
     Income (loss) per share - diluted         0.07         0.06         0.03        (0.02)        0.08
                                                                QUARTER                         TOTAL
                                           -----------------------------------------------     --------
                                             FIRST       SECOND        THIRD       FOURTH        YEAR
                                           --------     --------     --------     --------     --------
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)
     Income (loss) per share - basic           0.10        (0.22)       (0.21)       (2.17)       (2.50)
     Income (loss) per share - diluted         0.10        (0.22)       (0.21)       (2.17)       (2.50)
</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 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-15
<PAGE>


                         REPORT OF INDEPENDENT AUDITORS'


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

We have audited the accompanying consolidated balance sheet of Western Power &
Equipment Corp. (a Delaware Corporation) as of July 31, 2003, and the related
consolidated statements of operations, stockholders' deficiency and cash flows
for the year then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards 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. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Western Power &
Equipment Corp. as of July 31, 2003, and the consolidated results of their
operations and their cash flows for the year then ended, in conformity with
accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. In the past the Company has
incurred losses from operations and has a working capital deficit as of July 31,
2003. Further, as discussed in Note 5 to the consolidated 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 approximately $34.6 million at July 31, 2003. These
matters 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 consolidated financial statements do not include any adjustment
that might result from the outcome of this uncertainty.


                                                 /s/ Marcum & Kliegman LLP
                                                 -------------------------
                                                 MARCUM & KLIEGMAN LLP
New York, New York
September 26, 2003




                                      F-16
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS'


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

We have audited the accompanying consolidated balance sheet of Western Power &
Equipment Corp. (a Delaware Corporation) as of July 31, 2002, and the related
consolidated statements of operations, stockholders' deficiency and cash flows
for the year then ended. 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 audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards 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. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Western Power &
Equipment Corp. as of July 31, 2002, and the results of their operations and
their cash flows for the year then ended, in conformity with accounting
principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has incurred losses from
operations and has a working capital deficit for the year ended July 31, 2002.
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 $41.3 million at July 31, 2002. These matters 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.


                                                     /s/ Moss Adams LLP
                                                     ------------------
                                                     MOSS ADAMS LLP
Beaverton, Oregon
October 15, 2002




                                      F-17
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS'


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

In our opinion, the accompanying consolidated statement of operations and the
related consolidated statements of changes in stockholders' equity and of cash
flows present fairly, in all material respects, the results of operations of
Western Power & Equipment Corp. and its subsidiary and their cash flows for the
year 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 audit. We conducted our audit
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
audit provides 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. 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.



                                                 /s/ Price WaterhouseCoopers LLP
                                                 -------------------------------
                                                 PRICEWATERHOUSECOOPERS LLP

Portland, Oregon
October 6, 2001


                                      F-18
<PAGE>


                         REPORT OF INDEPENDENT AUDITORS'
                          FINANCIAL STATEMENT SCHEDULE




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

Our audit of the consolidated financial statements referred to in our report
dated September 26, 2003 appearing on page F-16 of this Annual Report on Form
10-K also included an audit of the financial statement schedules listed in Item
14(a)(2) of this Form 10-K. In our opinion, this financial statement schedule
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.


                                                 /s/ Marcum & Kliegman LLP
                                                 -------------------------
                                                 MARCUM & KLIEGMAN LLP


New York, New York
September 26, 2003

















                                      F-19
<PAGE>



                         REPORT OF INDEPENDENT AUDITORS'
                          FINANCIAL STATEMENT SCHEDULE


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

Our audit of the consolidated financial statements referred to in our report
dated October 15, 2002 appearing on page F-17 of this Annual Report on Form 10-K
also included an audit of the financial statement schedules listed in Item
14(a)(2) of this Form 10-K. In our opinion, this financial statement schedule
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.




                                                       /s/ Moss Adams LLP
                                                       ------------------
                                                       MOSS ADAMS LLP


Beaverton, Oregon
October 15, 2002


















                                      F-20
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS'
                          FINANCIAL STATEMENT SCHEDULE






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


Our audit of the consolidated financial statements for the year ended July 31,
2001 referred to in our report dated October 6, 2001 appearing on page F-18 of
this Annual Report on Form 10-K 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. 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.



                                                 /s/ Price WaterhouseCoopers LLP
                                                 -------------------------------
                                                 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, 2003 and 2002

                             (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, 2003     $      646     $      170     $       --     $     (261)    $      555

    Fiscal year ended July 31, 2002            948            119             --           (421)           646

    Fiscal year ended July 31, 2001            563            544             --           (159)           948

INVENTORY RESERVE:

    Fiscal year ended July 31, 2003          8,056            546             --         (3,731)         4,871

    Fiscal year ended July 31, 2002          7,771          6,616             --         (6,331)         8,056

    Fiscal year ended July 31, 2001          5,052          4,106             --         (1,387)         7.771
</TABLE>










                                      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 12, 2003
------------------------       EXECUTIVE OFFICER,
 C. DEAN MCLAIN                AND CHAIRMAN


/S/ MARK J. WRIGHT             VICE PRESIDENT OF FINANCE,      NOVEMBER 12, 2003
------------------------       CHIEF FINANCIAL AND PRINCIPAL
 MARK J. WRIGHT                ACCOUNTING OFFICER,
                               TREASURER AND SECRETARY


/S/ ROBERT M. RUBIN            DIRECTOR                        NOVEMBER 12, 2003
------------------------
 ROBERT M. RUBIN


/S/ MICHAEL METTER             DIRECTOR                        NOVEMBER 12, 2003
------------------------
MICHAEL METTER


/S/ STEVEN MOSKOWITZ           DIRECTOR                        NOVEMBER 12, 2003
------------------------
STEVEN MOSKOWITZ