<PAGE>


                                    FORM 10-Q


                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C.  20549


                   Quarterly Report Under Section 13 or 15 (d)
                     of the Securities Exchange Act of 1934

                     For the Quarter Ended October 31, 1996
                         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 I.D.
     incorporation or organization)                     number)

4601 NE 77TH AVENUE, SUITE 200, VANCOUVER, WA               98662
---------------------------------------------               -----
(Address of principal executive offices)                  (Zip Code)


                   Registrant's telephone no.:    360-253-2346
                                                  ------------

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 and 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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report.

          Title of Class                               Number of shares
           Common Stock                                  Outstanding
     (par value $.001 per share)                          3,533,462

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                         WESTERN POWER & EQUIPMENT CORP.
                                      INDEX


PART I.   FINANCIAL INFORMATION                             PAGE NUMBER

     Item 1. Financial Statements

      Consolidated Balance Sheet
        October 31, 1996 (Unaudited) and July 31, 1996 . . . . . . 1

      Consolidated Statement of Operations
        Three months ended October 31, 1996 (Unaudited)
        and October 31, 1995 (Unaudited) . . . . . . . . . . . . . 2

      Consolidated Statement of Cash Flows
        Three months ended October 31, 1996 (Unaudited)
        and October 31, 1995 (Unaudited) . . . . . . . . . . . . . 3

      Notes to Consolidated Financial Statements . . . . . . . . . 4

     Item 2.  Management's Discussion and Analysis of
              Financial Condition and Operating Results. . . . . . 5 - 8


PART II.  OTHER INFORMATION

     Item 1.  Legal Proceedings. . . . . . . . . . . . . . . . . N/A

     Item 2.  Changes in Securities. . . . . . . . . . . . . . . N/A

     Item 3.  Defaults Upon Senior Securities. . . . . . . . . . N/A

     Item 4.  Submission of Matters to a Vote of Security
              Holders. . . . . . . . . . . . . . . . . . . . . . N/A

     Item 5.  Other Information. . . . . . . . . . . . . . . . . N/A

     Item 6.  Exhibits and Reports on Form 8-K . . . . . . . . . N/A


<PAGE>

ITEM I.


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

                                                       October 31,    July 31,
                                                         1996           1996
                                                       ---------      --------
                                                      (Unaudited)
                ASSETS
                ------
Current assets:
     Cash and cash equivalents . . . . . . . . .          $ 1,852      $ 2,721
     Accounts receivable, less allowance for
       doubtful accounts of $651 and $519. . . .           10,332        6,506
     Inventories . . . . . . . . . . . . . . . .           64,375       65,689
     Prepaid expenses. . . . . . . . . . . . . .               59           43
     Deferred income taxes . . . . . . . . . . .              556          556
                                                          -------      --------
          Total current assets . . . . . . . . .           77,174       75,515

     Property, plant and equipment, net. . . . .            7,204        7,031
     Intangibles and other assets. . . . . . . .            2,761        2,744
                                                          -------      -------

          Total assets . . . . . . . . . . . . .          $87,139      $85,290
                                                          -------      -------
                                                          -------      -------

                       LIABILITIES & STOCKHOLDERS' EQUITY

Current liabilities:
     Borrowings under floor plan financing . . .          $55,138      $54,364
     Short-term borrowings . . . . . . . . . . .              489          963
     Accounts payable. . . . . . . . . . . . . .            3,018        2,414
     Accrued payroll and vacation. . . . . . . .              534          793
     Other accrued liabilities . . . . . . . . .            1,603        1,384
     Income taxes payable. . . . . . . . . . . .              241           37
     Capital lease obligation. . . . . . . . . .              146           46
     Payable to parent . . . . . . . . . . . . .              188          188
                                                          -------      -------
          Total current liabilities. . . . . . .           61,357       60,189

Deferred income taxes. . . . . . . . . . . . . .              384          383
Capital lease obligation . . . . . . . . . . . .            1,819        1,656
Long-term borrowings . . . . . . . . . . . . . .            1,268        1,268
                                                          -------      -------
          Total liabilities. . . . . . . . . . .           64,828       63,496
                                                          -------      -------
Commitments and contingencies

Stockholders' equity:
     Preferred stock-10,000,000 shares authorized;
       none issued and outstanding . . . . . . .                -            -
     Common stock-$.001 par value; 20,000,000
       shares authorized; 3,533,462 issued and
       outstanding . . . . . . . . . . . . . . .                4            4
     Additional paid-in capital. . . . . . . . .           16,047       16,047
     Retained earnings . . . . . . . . . . . . .            6,260        5,743
                                                          -------      -------
          Total stockholders' equity . . . . . .           22,311       21,794
                                                          -------      -------
          Total liabilities and stockholders'
            equity . . . . . . . . . . . . . . .          $87,139      $85,290
                                                          -------      -------
                                                          -------      -------

                 See accompanying notes to financial statements.


                                      - 1 -

<PAGE>

                         WESTERN POWER & EQUIPMENT CORP.
                      CONSOLIDATED STATEMENT OF OPERATIONS
                                   (UNAUDITED)
                (Dollars in thousands, except per share amounts)



                                                   Three Months Ended
                                                       October 31,
                                                    1996         1995
                                                    ----         ----

Net sales. . . . . . . . . . . . . . . . . . .    $31,213      $23,153

Cost of goods sold . . . . . . . . . . . . . .     27,448       20,449
                                                  -------      -------
Gross profit . . . . . . . . . . . . . . . . .      3,765        2,704

Selling, general and administrative expenses .      2,251        1,719

Other (income) expense:
     Interest expense. . . . . . . . . . . . .        853          240
     Other income. . . . . . . . . . . . . . .       (180)         (98)
                                                  -------      -------

Income before taxes. . . . . . . . . . . . . .        841          843

Income tax provision . . . . . . . . . . . . .        324          320
                                                  -------      -------

Net income . . . . . . . . . . . . . . . . . .    $   517      $   523
                                                  -------      -------
                                                  -------      -------

Earnings per common share. . . . . . . . . . .    $  0.14      $  0.15
                                                  -------      -------
                                                  -------      -------

Weighted average common shares . . . . . . . .      3,619        3,533
                                                  -------      -------
                                                  -------      -------


                 See accompanying notes to financial statements.


                                      - 2 -

<PAGE>


                         WESTERN POWER & EQUIPMENT CORP.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (UNAUDITED)
                             (Dollars in thousands)

                                                          Three Months Ended
                                                              October 31,
                                                            1996      1995
                                                            ----      ----

Cash flows from operating activities:
   Net income. . . . . . . . . . . . . . . . . . . .       $  517    $  523
   Adjustments to reconcile net income to net cash
     provided by operating activities:
        Depreciation . . . . . . . . . . . . . . . .          244       184
        Amortization . . . . . . . . . . . . . . . .           25        16
        Changes in assets and liabilities (excluding
          effects of acquisition):
            Accounts receivable. . . . . . . . . . .       (3,826)      658
            Receivable from underwriter. . . . . . .            -     1,102
            Inventories. . . . . . . . . . . . . . .        1,314    (4,158)
            Floor plan financing . . . . . . . . . .          774     3,615
            Prepaid expenses . . . . . . . . . . . .          (16)      (38)
            Accounts payable . . . . . . . . . . . .          604       175
            Accrued payroll and vacation . . . . . .         (259)     (256)
            Other accrued liabilities. . . . . . . .          219      (174)
            Income taxes payable . . . . . . . . . .          204        98
            Other assets . . . . . . . . . . . . . .          (40)        5
                                                           ------    ------

   Net cash provided by (used in) operating
     activities. . . . . . . . . . . . . . . . . . .         (240)    1,750
                                                           ------    ------

Cash flow from investing activities:
   Purchase of fixed assets. . . . . . . . . . . . .         (124)      (86)
                                                           ------    ------
   Net cash (used in) investing activities . . . . .         (124)      (86)
                                                           ------    ------

Cash flows from financing activities:
   Principal payments on capital leases. . . . . . .          (31)      (14)
   Short-term borrowings (repayments). . . . . . . .         (474)   (2,466)
   Borrowings from (repayments to) parent. . . . . .            -        22
                                                           ------    ------
   Net cash provided by financing activities . . . .         (505)   (2,458)
                                                           ------    ------

Decrease in cash and cash equivalents. . . . . . . .         (869)     (794)
Cash and cash equivalents at beginning of
  period     . . . . . . . . . . . . . . . . . . . .        2,721     4,065
                                                           ------    ------
Cash and cash equivalents at end of period . . . . .       $1,852    $3,271
                                                           ------    ------
                                                           ------    ------

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
   Interest  . . . . . . . . . . . . . . . . . . . .         $853      $240
   Income taxes. . . . . . . . . . . . . . . . . . .          120       320



SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:

A capital lease obligation of $294 was incurred during the quarter ended October
31, 1996 when the Company entered into a lease for computer equipment and
software.


                 See accompanying notes to financial statements.


                                      - 3 -

<PAGE>


                         Western Power & Equipment Corp.

                   Notes to Consolidated Financial Statements


1.   BASIS OF PRESENTATION

The financial information included in this report has been prepared in
conformity with the accounting principles and practices reflected in the
financial statements for the preceding year included in the annual report on
Form 10-K for the year ended July 31, 1996 filed with the Securities and
Exchange Commission.  All adjustments are of a normal recurring nature and are,
in the opinion of management, necessary for a fair statement of the results for
the interim periods.  This report should be read in conjunction with the
Company's financial statements included in the annual report on Form 10-K for
the year ended July 31, 1996 filed with the Securities and Exchange Commission.


2.   INVENTORIES

Inventories consist of the following:

                                           October 31,      July 31,
                                              1996            1996
                                              ----            ----

     Equipment:
       New equipment                         $51,036        $53,279
       Used equipment                          6,578          6,090
     Parts                                     6,761          6,320
                                             -------        -------


                                             $64,375        $65,689
                                             -------        -------
                                             -------        -------


                                      - 4 -

<PAGE>


ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
          LIQUIDITY AND CAPITAL RESOURCES

The following discussion and analysis should be read in conjunction with the
Financial Statements and Notes thereto appearing elsewhere in this Form 10-Q.

GENERAL

Effective November 1, 1992, the Company completed the acquisition of seven
stores located in Washington and Oregon which sell and service equipment used in
the construction industry.  The Company's strategic plan was, and continues to
be, that of expanding the operations and improving profitability at each of its
existing retail outlets.  In furtherance of such strategic plan, subsequent to
1992 the Company opened three additional outlets in Washington and Oregon.
Effective September 10, 1994, the Company also purchased from Case Corporation
(Case) two additional retail construction equipment distribution outlets located
in Sparks, Nevada and Fremont, California.  The Fremont operation was relocated
to neighboring Hayward, California in December 1994.  In March and August 1995
the Company opened distribution outlets in Santa Rosa and Salinas, California,
respectively.  In February 1996, the Company announced the opening of a
distribution outlet in Elko, Nevada.  Also in February 1996, the Company
completed the acquisition of the Sacramento, California outlet from Case.  The
opening of a Stockton, California outlet was completed in March 1996.  In June
1996 the Company completed the acquisition of GCS, Inc. bringing the total
number of distribution outlets owned and operated by the Company to 18.  The
Company plans to open and acquire additional distribution outlets for Case
products, as well as for products which may be manufactured by other companies.

RESULTS OF OPERATIONS

THE THREE MONTHS ENDED OCTOBER 31, 1996 COMPARED TO THE THREE MONTHS ENDED
OCTOBER 31, 1995.

Revenues for the three month period ended October 31, 1996 increased $8,060,000
or approximately 35% over the three month period ended October 31, 1995, due
mainly to the contribution of the Sacramento and Stockton, California and Elko,
Nevada stores which accounted for $6,008,000 of this increase in sales.  Same
store revenues increased $2,052,000 or 8.9% for the three month period ended
October 31, 1996, as compared to the prior year period.  The increase in same
store revenues resulted from higher sales across all departments.

The Company's gross profit margin of 12.1% for the three month period ended
October 31, 1996 was up from the prior year comparative period margin of 11.7%.
The increase in gross profit margins was a result of the Company's ability to
capitalize on the cash discounts offered by Case on the purchase of new
equipment.  Also, while sales were up across all departments for the quarter
ended October 31, 1996, higher-margin parts and service sales made up a higher
percentage of sales than in the prior year bringing the consolidated margin up.
These gross margin improvements offset the impact of a gross margin sharing
provision of the purchase agreement with GCS, Inc., which


                                      - 5 -

<PAGE>

called for the split of gross margin between GCS and the Company for backlogged
sales made prior to the closing of this acquisition in June 1996.  Now that
nearly all of the backlogged GCS sales have been delivered, the Company will
retain the full gross margin on future sales of GCS-related equipment.

Selling, general and administrative ("SG&A") expenses, as a percentage of sales,
were down slightly although above management's goal of 7% of sales.  While
executive management is still fine-tuning the Company's organizational model,
they are confident it will prove to be the most efficient and cost-effective
means of management in this era of consolidation in the equipment distribution
industry.

Interest expense for the three months ended October 31, 1996 of $853,000 was up
significantly from the $240,000 in the prior year comparative period.  This
increase is the result of a build up in inventory levels to support the
Company's higher equipment sales level including a significant investment in
equipment dedicated to the rental fleet.  In addition, the Company was also
caught with an imbalance in its equipment inventory mix when the paper pulp
market in the Pacific Northwest, which utilizes the Company's log loaders,
experienced a tightening this past year.  The Company is currently working
several deals which will bring the inventory of log loaders down to an
acceptable level.

The effective tax rate for the three months ended October 31, 1996 was
consistent with the prior year at 38%.  The Company anticipates the effective
tax rate to remain at statutory rates for the foreseeable future.

Although sales were ahead, the increase in operating and interest expenses
offset the sales increase such that net income for the quarter ended October 31,
1996 was virtually the same as the prior year.  The dilutive effect of
outstanding stock options resulted in an increase in average common shares and
equivalents outstanding resulting in earnings per share of $.14 compared to the
prior year results of $.15.

LIQUIDITY AND CAPITAL RESOURCES

The Company's primary source of internal liquidity has been its profitable
operations since its inception in November 1992.  As more fully described below,
the Company's primary sources of external liquidity were contributions to the
Company by its parent, American United Global, Inc. ("AUGI"), and equipment
inventory floor plan financing arrangements provided to the Company by the
manufacturers of the products the Company sells and Seattle-First National Bank
("Seafirst Bank").  In addition, in fiscal 1995, the Company completed an
initial public offering of 1,495,000 shares of common stock at $6.50 per share,
generating net proceeds of $7,801,000.  The net proceeds of the offering have
been utilized to repay amounts due to AUGI and to Case, the acquisition and
opening of additional outlets, as well as to reduce floor plan debt.

Under inventory floor planning arrangements the manufacturers of products sold
by the Company provide interest free credit terms on new equipment purchases


                                      - 6 -

<PAGE>

for periods ranging from four to twelve months after which interest commences to
accrue monthly at rates ranging from 2% to 3% over the prime rate of interest.
Principal payments are typically made under these agreements at scheduled
intervals and/or as the equipment is rented with the balance due at the earlier
of a specified date or sale of the equipment.  At October 31, 1996, the Company
was indebted under manufacturer provided floor planning arrangements in the
aggregate amount of $38,934,000.

In order to take advantage of the 4% cash discount offered by Case, to provide
financing beyond the term of applicable manufacturer provided floor plan
financing or as alternatives to manufacturer provided floor plan financing
arrangements, the Company has entered into a separate secured floor planning
line of credit with Seafirst Bank.  The Seafirst line of credit was entered into
in June 1994 and provides a $17,500,000 line of credit which can be used to
finance new and used equipment or equipment to be held for rental purposes.  On
October 31, 1996, approximately $16,204,000 was outstanding under such line of
credit, the principal of which bears interest at .125 percent over the bank's
prime rate and is subject to annual review and renewal on June 1, 1997.

Amounts owing under these floor plan financing agreements are secured by
inventory purchases financed by these lenders, as well as all proceeds from
their sale or rental, including accounts receivable thereto.

On October 19, 1995, the Company entered into a purchase and sale agreement with
an unrelated party for the Auburn, Washington facility subject to the execution
of a lease.  Under the terms of this agreement, which closed on December 1,
1995, the Company sold the property and is leasing it back from the purchaser.
In accordance with Statement of Financial Accounting Standards No 13 (SFAS 13),
the building portion of the lease is being accounted for as a capital lease
while the land portion of the lease qualifies for treatment as an operating
lease.

Effective February 17, 1996, the Company acquired substantially all of the
operating assets used by Case in connection with its business of servicing and
distributing Case construction equipment at a facility located in Sacramento,
California (the "Sacramento Operation").  The acquisition was consummated for
approximately $630,000 in cash, $3,090,000 in installment notes payable to Case
and the assumption of $3,965,000 in inventory floor plan debt with Case and its
affiliates.  The acquisition has been accounted for as a purchase.

The real property and improvements used in connection with the Sacramento
Operation, 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 as of March 1, 1996.  In accordance with SFAS 13, the building
portion of the lease is being accounted for as a capital lease while the land
portion of the lease qualifies for treatment as an operating lease.


                                      - 7 -

<PAGE>

On October 10, 1995, using proceeds from the Company's initial public offering,
the Company retired the $2,175,000 real estate note given to Case for the
purchase of the Sparks, Nevada real estate in September 1994.  In March 1996,
the Company consummated an agreement with an institutional lender for a
conventional mortgage on the property in the amount of $1,330,000, secured by
the Sparks, Nevada real estate.  The agreement calls for principal and interest
payments over a seven year term using a fifteen year amortization period.  The
note cannot be prepaid during the first two years of its term.

On June 11, 1996, the Company acquired the operating assets of GCS, Inc.
("GCS"), a California-based, closely-held distributor of heavy equipment
primarily marketed to municipal and state government agencies responsible for
street and highway maintenance.  The Company will operate the GCS business from
an existing location in Fullerton, California and from the Company's existing
facility in Sacramento, California.  The purchase price for the GCS assets was
$1,655,000.  This transaction was accounted for as a purchase.

During the quarter ended October 31, 1996, cash and cash equivalents decreased
by $869,000 primarily due an increase in accounts receivable due to increased
sales partially offset by a decrease in inventories.  The Company had negative
cash flow from operating activities during the quarter of $240,000 reflecting
this increase in receivables. Purchases of fixed assets during the period were
related mainly to the opening of new distribution outlets.

The Company has signed a letter of intent to acquire Sahlberg Equipment, Inc., a
Pacific Northwest distributor of non-competing lines of equipment including
asphalt pavers, snow blowers, street sweepers, compactors and several other
lines.  The Sahlberg Equipment acquisition is structured as an asset purchase
for cash and completion is subject to normal closing conditions.  Closing of
this deal is expected on or about January 1, 1997.

The Company's cash and cash equivalents of $1,852,000 as of October 31, 1996 and
available credit facilities are considered sufficient to support current or
higher levels of operations for at least the next twelve months.  In addition,
the Company is currently in negotiations with several financing institutions to
expand the credit available to the Company to accommodate the Sahlberg
acquisition.

                                      - 8 -

<PAGE>

PART II.  OTHER INFORMATION

     ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

          A.   EXHIBITS.                                    NONE

          B.   REPORTS ON FORM 8-K.                         NONE


                                      - 9 -

<PAGE>


                                    SIGNATURE


Pursuant to the requirements of the Securities and 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.

December 13, 1996

                    By:  /s/Thomas D. Berkompas
                         ------------------------------------------
                         Thomas D. Berkompas
                         Vice President, Chief Accounting and Chief
                         Financial Officer


                                     - 10 -