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FORM 10-Q

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SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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

For the Quarter Ended January 31, 2001

Commission File Number 0-26230

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

Delaware(State or other jurisdiction of
incorporation or organization)

91-1688446(I.R.S. Employer I.D. number)4601 NE 77th Avenue, Suite 200, Vancouver, WA(Address of principal executive offices)

98662(Zip Code)


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

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Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities 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
Common Stock
(par value $.001 per share)

Number of shares
Outstanding
3,353,162


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WESTERN POWER & EQUIPMENT CORP.
INDEX

|PART I.    FINANCIAL INFORMATION                                                                                      |  | Page Number |  | 
|--------------------------------------------------------------------------------------------------------------------- |  | ----------- |  | 
|Item 1.    Financial Statements                                                                                       |  |             |  | 
|Consolidated Balance Sheet
January 31, 2001 (Unaudited) and July 31, 2000                                             |  | 1           |  | 
|Consolidated Statement of Operations
Three months ended January 31, 2001 (Unaudited) and January 31, 2000 (Unaudited) |  | 2           |  | 
|Consolidated Statement of Operations
Six months ended January 31, 2001 (Unaudited) and January 31, 2000 (Unaudited)   |  | 3           |  | 
|Consolidated Statement of Cash Flows
Six months ended January 31, 2001 (Unaudited) and January 31, 2000 (Unaudited)   |  | 4           |  | 
|Notes to Consolidated Financial Statements                                                                            |  | 5-7         |  | 
|Item 2.    Management's Discussion and Analysis of Financial Condition and Operating Results                          |  | 8-11        |  | 
|Item 3.    Defaults Upon Senior Securities                                                                            |  | 11          |  | 
|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                                                                                          |  | 12          |  | 
|Item 6.    Exhibits and Reports on Form 8-K                                                                           |  | 12          |  | 

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ITEM 1.

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

|                                                                                             |  | January 31,
2001 |         | July 31,
2000 |  
|-------------------------------------------------------------------------------------------- |  | ---------------- | ------- | ------------- | -
|
|ASSETS                                                                                       |  |                  |         |               |  
|Current assets:                                                                              |  |                  |         |               |  
|Cash and cash equivalents                                                                    |  | $                | 1,565   |               | $
|Accounts receivable, less allowance for doubtful accounts of $823 and $563                   |  |                  | 11,472  |               |  
|Inventories                                                                                  |  |                  | 47,512  |               |  
|Prepaid expenses                                                                             |  |                  | 234     |               |  
|Income taxes receivable                                                                      |  |                  | 615     |               |  
|Deferred income taxes                                                                        |  |                  | 4,826   |               |  
|                                                                                             |  |                  |         |               |  
|Total current assets                                                                         |  |                  | 66,224  |               |  
|Fixed Assets:                                                                                |  |                  |         |               |  
|Property, plant and equipment (net)                                                          |  |                  | 5,894   |               |  
|Rental equipment fleet (net)                                                                 |  |                  | 22,414  |               |  
|Leased equipment fleet (net)                                                                 |  |                  | 4,868   |               |  
|                                                                                             |  |                  |         |               |  
|Total fixed assets                                                                           |  |                  | 33,176  |               |  
|Intangibles and other assets, net of accumulated amortization of $601 and $683               |  |                  | 2,802   |               |  
|                                                                                             |  |                  |         |               |  
|Total assets                                                                                 |  | $                | 102,202 |               | $
|                                                                                             |  |                  |         |               |  
|LIABILITIES & STOCKHOLDERS' EQUITY                                                           |  |                  |         |               |  
|Current liabilities:                                                                         |  |                  |         |               |  
|Borrowings under floor plan financing                                                        |  | $                | 11,105  |               | $
|Short-term borrowings                                                                        |  |                  | 55,157  |               |  
|Accounts payable                                                                             |  |                  | 8,730   |               |  
|Accrued payroll and vacation                                                                 |  |                  | 712     |               |  
|Other accrued liabilities                                                                    |  |                  | 856     |               |  
|Capital lease obligation                                                                     |  |                  | 8       |               |  
|                                                                                             |  |                  |         |               |  
|Total current liabilities                                                                    |  |                  | 76,568  |               |  
|Deferred income taxes                                                                        |  |                  | 2,273   |               |  
|Capital lease obligation                                                                     |  |                  | 938     |               |  
|Long-term borrowings                                                                         |  |                  | 28      |               |  
|Deferred lease income                                                                        |  |                  | 5,858   |               |  
|                                                                                             |  |                  |         |               |  
|Total long-term liabilities                                                                  |  |                  | 9,097   |               |  
|                                                                                             |  |                  |         |               |  
|Total liabilities                                                                            |  |                  | 85,665  |               |  
|                                                                                             |  |                  |         |               |  
|Stockholders' equity:                                                                        |  |                  |         |               |  
|Preferred stock-10,000,000 shares authorized; none issued and outstanding                    |  |                  |        |               |  
|Common stock-$.001 par value; 20,000,000 shares authorized; 3,353,162 issued and outstanding |  |                  | 4       |               |  
|Additional paid-in capital                                                                   |  |                  | 16,005  |               |  
|Retained earnings                                                                            |  |                  | 1,696   |               |  
|Less common stock in treasury, at cost (180,300 shares)                                      |  |                  | (1,168  | )             |  
|                                                                                             |  |                  |         |               |  
|Total stockholders' equity                                                                   |  |                  | 16,537  |               |  
|                                                                                             |  |                  |         |               |  
|Total liabilities and stockholders' equity                                                   |  | $                | 102,202 |               | $
|                                                                                             |  |                  |         |               |  

See
accompanying notes to financial statements.

1

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

|                                                                                        |  | Three Months Ended January 31, |       
|--------------------------------------------------------------------------------------- |  | ------------------------------ | ------
|
|Net revenue                                                                             |  | $                              | 34,299
|Cost of revenues                                                                        |  |                                | 31,341
|                                                                                        |  |                                |       
|Gross profit                                                                            |  |                                | 2,958 
|Selling, general and administrative expenses                                            |  |                                | 3,077 
|                                                                                        |  |                                |       
|Operating (loss) income                                                                 |  |                                | (119  
|Other income (expense):                                                                 |  |                                |       
|Interest expense                                                                        |  |                                | (1,549
|Other income                                                                            |  |                                | 318   
|                                                                                        |  |                                |       
|Loss before taxes                                                                       |  |                                | (1,350
|Income tax benefit                                                                      |  |                                | (3,045
|                                                                                        |  |                                |       
|Net income (loss)                                                                       |  | $                              | 1,695 
|                                                                                        |  |                                |       
|Basic earnings (loss) per common share                                                  |  | $                              | 0.51  
|                                                                                        |  |                                |       
|Average outstanding common shares for basic earnings (loss) per share                   |  |                                | 3,353 
|                                                                                        |  |                                |       
|Average outstanding common shares and equivalents for diluted earnings (loss) per share |  |                                | 3,353 
|                                                                                        |  |                                |       
|Diluted earnings (loss) per share                                                       |  | $                              | 0.51  
|                                                                                        |  |                                |       

All
common stock equivalents are anti-dilutive as such basic and diluted earnings per share are the same.

See
accompanying notes to financial statements.

2

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

|                                                                                        |  | Six Months Ended January 31, |       
|--------------------------------------------------------------------------------------- |  | ---------------------------- | ------
|
|Net revenue                                                                             |  | $                            | 72,082
|Cost of revenues                                                                        |  |                              | 64,267
|                                                                                        |  |                              |       
|Gross profit                                                                            |  |                              | 7,815 
|Selling, general and administrative expenses                                            |  |                              | 6,356 
|                                                                                        |  |                              |       
|Operating income                                                                        |  |                              | 1,459 
|Other income (expense):                                                                 |  |                              |       
|Interest expense                                                                        |  |                              | (3,229
|Other income                                                                            |  |                              | 1,175 
|                                                                                        |  |                              |       
|Loss before taxes                                                                       |  |                              | (595  
|Income tax benefit                                                                      |  |                              | (2,751
|                                                                                        |  |                              |       
|Net income (loss)                                                                       |  | $                            | 2,156 
|                                                                                        |  |                              |       
|Basic earnings (loss) per common share                                                  |  | $                            | 0.64  
|                                                                                        |  |                              |       
|Average outstanding common shares for basic earnings (loss) per share                   |  |                              | 3,353 
|                                                                                        |  |                              |       
|Average outstanding common shares and equivalents for diluted earnings (loss) per share |  |                              | 3,353 
|                                                                                        |  |                              |       
|Diluted earnings (loss) per share                                                       |  | $                            | 0.64  
|                                                                                        |  |                              |       

All
common stock equivalents are anti-dilutive as such basic and diluted earnings per share are the same.

See
accompanying notes to financial statements.

3

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

|                                                                                            |  | Six Months Ended January 31, |        
|------------------------------------------------------------------------------------------- |  | ---------------------------- | -------
|
|Cash flows from operating activities:                                                       |  |                              |        
|Net income (loss)                                                                           |  | $                            | 2,156  
|Adjustments to reconcile net income to net cash provided by (used in) operating activities: |  |                              |        
|Depreciation                                                                                |  |                              | 5,456  
|Amortization                                                                                |  |                              | 52     
|Gain on Sale of Fixed Assets                                                                |  |                              | (710   
|Changes in assets and liabilities:                                                          |  |                              |        
|Accounts receivable                                                                         |  |                              | 5,875  
|Inventories                                                                                 |  |                              | 7,991  
|Leased equipment, net                                                                       |  |                              | 107    
|Inventory floor-plan financing                                                              |  |                              | (3,663 
|Short-term financing                                                                        |  |                              | (12,514
|Deferred income tax asset                                                                   |  |                              | (2,553 
|Prepaid expenses                                                                            |  |                              | (24    
|Accounts payable                                                                            |  |                              | (2,000 
|Accrued payroll and vacation                                                                |  |                              | (39    
|Other accrued liabilities                                                                   |  |                              | (467   
|Deferred lease income                                                                       |  |                              | (124   
|Income taxes receivable/payable                                                             |  |                              | (215   
|                                                                                            |  |                              |        
|Net cash used in operating activities                                                       |  |                              | (672   
|                                                                                            |  |                              |        
|Cash flow from investing activities:                                                        |  |                              |        
|Purchase of fixed assets                                                                    |  |                              | (468   
|Purchase/sales of rental equipment, net                                                     |  |                              | 1,696  
|Proceeds on sale of fixed assets                                                            |  |                              | 173    
|Purchase of other assets                                                                    |  |                              | 4      
|                                                                                            |  |                              |        
|Net cash provided by (used in) investing activities                                         |  |                              | 1,405  
|                                                                                            |  |                              |        
|Cash flows from financing activities:                                                       |  |                              |        
|Principal payments on capital leases                                                        |  |                              | 8      
|Long-term repayments                                                                        |  |                              | -0-    
|                                                                                            |  |                              |        
|Net cash provided by (used in) financing activities                                         |  |                              | 8      
|                                                                                            |  |                              |        
|Increase (decrease) in cash and cash equivalents                                            |  |                              | 741    
|Cash and cash equivalents at beginning of period                                            |  |                              | 824    
|                                                                                            |  |                              |        
|Cash and cash equivalents at end of period                                                  |  | $                            | 1,565  
|                                                                                            |  |                              |        
|Supplemental disclosures of cash flow information:                                          |  |                              |        
|Cash paid during the period for:                                                            |  |                              |        
|Interest                                                                                    |  | $                            | 3,810  
|Income taxes                                                                                |  |                              | 2      
|Supplemental schedule of non-cash investing and financing activities:                       |  |                              |        
|Capital leases reclassified to operating leases                                             |  |                              | 3,865  

See accompanying notes to financial statements.

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Western Power & Equipment Corp.        Notes to Consolidated Financial Statements        (Dollars in thousands)

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, 2000 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, 2000 filed with the Securities and Exchange Commission.

2.  Inventories

Inventories consist of the following:

|                                                                       |  | January 31, 2001 |        | July 31, 2000
|---------------------------------------------------------------------- |  | ---------------- | ------ | -------------
|Equipment (net of reserve allowances of 3,835 and 4,770 respectively): |  |                  |        |              
|New equipment                                                          |  | $                | 30,186 |              
|Used equipment                                                         |  |                  | 6,609  |              
|Parts (net of reserve allowances of 561 and 522 respectively)          |  |                  | 10,717 |              
|                                                                       |  |                  |        |              
|                                                                       |  | $                | 47,512 |              
|                                                                       |  |                  |        |              

5

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3.  Fixed Assets

Fixed Assets consist of the following:

|                                         |  | January 31, 2001 |        | July 31, 2000 |  
|---------------------------------------- |  | ---------------- | ------ | ------------- | -
|Operating property, plant and equipment: |  |                  |        |               |  
|Land                                     |  | $                | 500    |               | $
|Buildings                                |  |                  | 1,706  |               |  
|Machinery and equipment                  |  |                  | 4,016  |               |  
|Office furniture and fixtures            |  |                  | 2,378  |               |  
|Computer hardware and software           |  |                  | 1,448  |               |  
|Vehicles                                 |  |                  | 1,895  |               |  
|Leasehold improvements                   |  |                  | 728    |               |  
|                                         |  |                  |        |               |  
|                                         |  |                  | 12,671 |               |  
|Less: accumulated depreciation           |  |                  | (6,777 | )             |  
|                                         |  |                  |        |               |  
|Property, plant, and equipment (net)     |  | $                | 5,894  |               | $
|                                         |  |                  |        |               |  
|Rental equipment fleet                   |  | $                | 29,270 |               | $
|Less: accumulated depreciation           |  |                  | (6,856 | )             |  
|                                         |  |                  |        |               |  
|Rental equipment (net)                   |  | $                | 22,414 |               | $
|                                         |  |                  |        |               |  
|Leased equipment fleet                   |  | $                | 5,481  |               | $
|Less: accumulated amortization           |  |                  | (613   | )             |  
|                                         |  |                  |        |               |  
|Leased equipment fleet (net)             |  | $                | 4,868  |               | $
|                                         |  |                  |        |               |  

4.  Segment Information

In fiscal 1999, the Company adopted Statement of Financial Accounting Standards No. 131 (SFAS 131), "Disclosures about Segments of an Enterprise
and Related Information," which requires the reporting of certain financial information by business segment. For the purpose of providing segment information, management believes that all of the
Company's operations consist of one

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segment. However, the Company evaluates performance based on revenue and gross margin of three distinct business components. Revenue and gross margin by component are summarized as follows:

Business Component
Net Revenues

3 Months
Ended
January 31,
2001

3 Months
Ended
January 31,
2000

6 Months
Ended
January 31,
2001

6 Months
Ended
January 31,
2000Equipment Sales

$
20,175

$
19,508

$
41,026

$
43,765Equipment Rental


5,405


6,261


12,388


13,616Product Support


8,719


8,219


18,668


18,671Totals

$
34,299

$
33.988

$
72,082

$
76,052


Business Component
Gross Margins

3 Months
Ended
January 31,
2001

3 Months
Ended
January 31,
2000

6 Months
Ended
January 31,
2001

6 Months
Ended
January 31,
2000Equipment Sales

$
436

$
1,447

$
1,074

$
1,894Equipment Rental


1,138


1,268


3,030


3,758Product Support


1,384


1,150


3,711


3,133Totals

$
2,958

$
3,865

$
7,815

$
8,785


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

5.  Subsequent Events

Subsequent to January 31, 2001 and in accordance with a temporary operating agreement with Case Corporation, the Company entered into a contract to sell
its Escondido and Fontana branches. Finalization of this sale has not yet occurred.

On
January 31, 2001, the Company and eMobile, Inc. (eMobile) agreed to amend the Termination Agreement related to their previously announced merger agreement. In accordance
with the amended termination agreement, the Company is to receive 2.8 million (2,800,000) shares of eMobile's common stock. The Company has received a stock certificate for 1.4 million
(1,400,000) shares of eMobile's stock and expects to receive the balance shortly.

On
January 29, 2001 the Company announced that it had signed a non-binding Letter of Intent to acquire SupplyPoint, Inc., based in San Jose, California for 650,000 shares of
common stock and 2,235,000 shares of preferred stock, which are convertible upon shareholder approval of the transaction into 22,350,000 shares of common stock. The acquisition is subject to a
fairness opinion, negotiation and execution of definitive acquisition documentation, and other customary conditions. In connection with the acquisition, it is anticipated that new additional directors
will be appointed to the Company's Board from SupplyPoint's Board and/or management.

7

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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. Information included herein 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 because of a number of risks and uncertainties, including but not limited to fluctuations in the construction, agricultural and industrial sectors and general
economic cycles; the success of the Company's entry into new markets through store openings or acquisitions; 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 and to
integrate acquired businesses in an effective manner; the continued availability of financing; governmental regulations and environmental matters; risks associated with regional, and national and
world economies. Any forward-looking statements should be considered in light of these factors.

Results of Operations

The Three Months and Six Months ended January 31, 2001 compared to the Three Months and Six Months ended January 31, 2000.

Revenues for the three-month period ended January 31, 2001 increased 0.9% to $34.3 million compared with $34.0 million for the three-month
period ended January 31, 2000. Revenues were up from the prior year's second quarter in the rental, parts and service departments. The increase in sales was primarily due to milder than normal
weather conditions in the Pacific Northwest during the quarter.

Revenues
for the six-month period ended January 31, 2001 decreased $3,970,000 or approximately 5.2% over the six-month period ended January 31, 2000. The decrease was
due primarily to the consolidation of stores during the past year. For the six-month period ended January 31, 2000, revenues in all departments were down from the same period in the prior year.

The
Company's gross profit margin of 8.6% for the three-month period ended January 31, 2001 was down from the prior year comparative period margin of 11.4%. The decrease in
gross profit margins was partly the result of increased pressure from an economic downturn in the equipment industry. For the six-month period ended January 31, 2001, the Company's gross margin
was 10.8%, down from the 11.6% gross margin for the six-month period ended January 31, 2000.

For
the three-month period ended January 31, 2001, selling, general, and administrative ("SG&A") expenses, as a percentage of sales, were 9.0%, down from 9.5% for the prior
year's second quarter. This decrease in SG&A expenses is attributable to a reduction in costs associated with the consolidation of several branches during the first quarter of the prior year. SG&A
expenses for the six-month period ended January 31, 2001 and 2000 were 8.8% of revenue.

Interest
expense for the three months ended January 31, 2001 of $1,549,000 was up from the $1,253,000 in the prior year comparative period. This increase is the result of
higher average interest rates on the Deutsche Financial Services facility. Interest expense for the six-month period ended January 31, 2001 was $3,229,000 compared to $2,745,000 for the
six-month period ended January 31, 2000, due to the factors just mentioned.

The
provision for taxes in the second quarter of this year included a reversal of a $2,553,000 reserve related to the tax provision as of July 31, 2000. The effective tax rate
without this reversal would have been 33.3% for the six months ended January 31, 2001 which more closely approximates prior year levels.

8

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The Company had net income for the quarter ended January 31, 2001 of $1,695,000 or $.51 per (basic and diluted) share compared with a net loss of $284,000 or $(0.09) per (basic
and diluted) for the prior year's second quarter. The second quarter of FY01 included a non-recurring tax provision adjustment of $2,553,000 for the reversal of a reserve made in the year ending
July 31, 2000. For the six-month period ended January 31, 2001, the Company reported income of $0.64 per share (basic and diluted) compared with net loss of $0.05 per (basic and diluted)
share for the six-month period ended January 31, 2000.

Liquidity and Capital Resources

The Company's primary needs for liquidity and capital resources are related to its inventory for sale and its rental and lease fleet inventories. The Company's
primary source of internal liquidity has been its operations. 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 and Deutsche Financial Services ("DFS") credit facility and, with respect to acquisitions, secured loans from Case Corporation (now CNH Global).

Under
inventory floor planning arrangements the manufacturers of products sold by the Company provide interest-free credit terms on new equipment purchases for periods ranging from
one to twelve months, after which interest commences to accrue monthly at rates ranging from zero percent to two percent over the prime rate of interest. Principal payments are typically made under
these agreements at scheduled intervals and/or as the equipment is rented, with the balance due at the earlier of a specified date or sale of the equipment. At January 31, 2001, the Company was
indebted under manufacturer-provided floor planning arrangements in the aggregate amount of $11,105,000.

The
Company recently amended its inventory flooring and operating line of credit through DFS. The amended DFS credit facility matures December 28, 2001 and is a floating rate
facility 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. Borrowings are secured by the Company's assets,
including accounts receivable, parts, new equipment, rental fleet, and used equipment. 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, and to
refinance some its acquisition related debt at a lower interest rate. As of January 31, 2001, approximately $55,146,000 was outstanding under the DFS credit facility.

As
of October 31, 2000, the Company and DFS signed an amendment to the existing loan and security agreement. The amendment waived all prior defaults under the agreement and
established revised financial covenants to be measured at the Company's second and fourth quarters. In addition, the amendment included several, periodic mandatory reductions in the credit limit.

At
January 31, 2001, the Company was in technical default of several of its financial covenants in the Deutsche Financial Services Loan Agreement. The Company did obtain a
waiver of such defaults for the period ending January 31, 2001. Although DFS has not called the debt due to such default, there is no guarantee that DFS will not call this debt at any time
after January 31, 2001. In addition, by its terms, the DFS credit facility expires on December 31, 2001. Although the Company currently has no contingency plan in the event that DFS
calls the debt due to the default or does not renew the credit
facility, the Company would seek replacement credit facilities, although the availability, terms, and conditions of any such facility cannot be determined at this time. In the event that adequate
replacement credit facilities could not be obtained, DFS could exercise any of its rights under the Loan Agreement including, but not limited to, foreclosing its security interest in the Company's
assets.

During
the quarter ended January 31, 2001, cash and cash equivalents increased by $741,000. The Company had negative cash flow from operating activities for the first six
months reflecting an increase

9

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in short term financing. Purchases of fixed assets during the period were related mainly to the purchase of vehicles company wide and leasehold improvements to the Portland branch facility.

The
Company's cash and cash equivalents of $1,565,000 as of January 31, 2001 and available credit facilities are considered sufficient to support current levels of operations
for at least the next twelve months.

Inventory; Effects of Inflation and Interest Rates; General Economic Conditions

Controlling inventory is a key ingredient to the success of an equipment distributor because the equipment 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.

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, industrial, and
agricultural 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
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.

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, industrial, and agricultural 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.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

At January 31, 2001, the Company was in technical default of the Deutsche Financial Services ("DFS") Loan Agreement. As of January 31, 2001, the
outstanding balance owed to DFS was approximately $55.1 million. The Company received a waiver of the default for the period ending January 31, 2001. Although DFS has not called the debt
due to such default, there is no guarantee that DFS will not call this debt at any time after January 31, 2001. For a further explanation of the default and the potential effects thereof, see
Item 2, "Liquidity and Capital Resources."

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PART II. OTHER INFORMATION

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

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

A. EXHIBITS.            NONE

B.
REPORTS ON FORM 8-K.



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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.



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