================================================================================
                                    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 January 31, 2002
                         Commission File Number 0-26230


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


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

6407-B N.E. 117th Avenue, 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)                   3,403,162

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



                         WESTERN POWER & EQUIPMENT CORP.
                                      INDEX


PART I.   FINANCIAL INFORMATION                                      Page Number

     Item 1.     Financial Statements

      Consolidated Balance Sheet
        January 31, 2002 (Unaudited) and July 31, 2001..............      1

      Consolidated Statement of Operations
        Three months ended January 31, 2002 (Unaudited)
        and January 31, 2001 (Unaudited)............................      2

      Consolidated Statement of Operations
         Six months ended January 31, 2002 (Unaudited)
         And January 31, 2001 (Unaudited)...........................      3

      Consolidated Statement of Cash Flows
        Six months ended January 31, 2002 (Unaudited)
        and January 31, 2001 (Unaudited)............................      4

      Notes to Consolidated Financial Statements....................      5 - 7

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

     Item 6.     Exhibits and Reports on Form 8-K...................      12
<PAGE>


ITEM 1.  FINANCIAL STATEMENTS
         --------------------

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

<TABLE><CAPTION>
                                                             January 31,         July 31,
                                                                2002               2001
                                                              --------           --------
                                                             (Unaudited)
<S>                                                           <C>                <C>
                ASSETS
Current assets:
     Cash and cash equivalents .....................          $    107           $    770
     Accounts receivable, less allowance for
       doubtful accounts of $765 and $948 ..........            10,625             14,295
     Inventories ...................................            37,850             44,867
     Prepaid expenses ..............................               201                298
       Deferred income taxes .......................             2,541              2,541
                                                              --------           --------
            Total current assets ...................            51,323             62,771

Fixed Assets:
     Property, plant and equipment (net) ...........             4,833              5,584
     Rental equipment fleet (net) ..................            20,191             22,027
                                                              --------           --------
            Total fixed assets .....................            25,024             27,611

Intangibles and other assets, net of accumulated
       amortization of $870 and $808 ...............             2,648              2,720
                                                              --------           --------
Total assets .......................................          $ 78,995           $ 93,102
                                                              ========           ========

               LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
     Borrowings under floor plan financing .........          $ 10,270           $ 14,237
     Short-term borrowings .........................            48,285             53,384
     Convertible debt ..............................               182                182
     Accounts payable ..............................             8,775             11,591
     Accrued payroll and vacation ..................               702              1,754
     Other accrued liabilities .....................               963              1,716
     Capital lease obligation ......................                 6                 18
                                                              --------           --------
         Total current liabilities .................            69,183             82,882

Deferred income taxes ..............................             2,541              2,541
Capital lease obligation ...........................               920                920
Long-term borrowings ...............................                 8                  8
                                                              --------           --------
      Total long-term liabilities ..................             3,469              3,469
                                                              --------           --------
Total liabilities ..................................            72,652             86,351
                                                              --------           --------

Stockholders' equity:
     Preferred stock-10,000,000 shares authorized;
       none issued and outstanding .................              --                 --
     Common stock-$.001 par value; 20,000,000 shares
       authorized; 3,403,162 issued and outstanding                  4                  4
     Additional paid-in capital ....................            15,894             15,894
     Retained deficit ..............................            (8,711)            (8,303)
     Less common stock in treasury, at cost
       (130,300 shares) ............................              (844)              (844)
                                                              --------           --------
         Total stockholders' equity ................             6,343              6,751
                                                              --------           --------
Total liabilities and stockholders' equity .........          $ 78,995           $ 93,102
                                                              ========           ========
</TABLE>

                 See accompanying notes to financial statements.

                                       1
<PAGE>


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

<TABLE><CAPTION>
                                                                Three Months Ended
                                                                    January 31,
                                                             2002               2001
                                                           --------           --------
<S>                                                        <C>                <C>
Net revenue .....................................          $ 26,229           $ 34,299

Cost of revenues ................................            23,379             31,341
                                                           --------           --------

Gross profit ....................................             2,850              2,958

Selling, general and administrative expenses ....             2,551              3,077
                                                           --------           --------

Operating Income (Loss) .........................               299               (119)

Other income (expense):
     Interest expense ...........................            (1,026)            (1,549)
     Other income (expense) .....................               (27)               318
                                                           --------           --------

Loss before taxes ...............................              (754)            (1,350)

Income tax provision (Benefit) ..................                12             (3,045)
                                                           --------           --------

Net Income (Loss) ...............................          $   (766)          $  1,695
                                                           ========           ========

Basic earnings (loss) per common share ..........          $  (0.23)          $   0.51
                                                           ========           ========

Average outstanding common shares for
  basic earnings per share ......................             3,403              3,353
                                                           ========           ========

Average outstanding common shares and equivalents
  for diluted earnings per share ................             3,403              3,353
                                                           ========           ========

Diluted earnings (loss) per share ...............          $  (0.23)          $   0.51
                                                           ========           ========
</TABLE>

                 See accompanying notes to financial statements.

                                       2
<PAGE>


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


<TABLE><CAPTION>
                                                                Six Months Ended
                                                                   January 31,
                                                             2002               2001
                                                           --------           --------
<S>                                                        <C>                <C>
Net revenue .....................................          $ 54,729           $ 72,082

Cost of revenues ................................            47,762             64,267
                                                           --------           --------

Gross profit ....................................             6,967              7,815

Selling, general and administrative expenses ....             5,121              6,356
                                                           --------           --------

Operating Income ................................             1,846              1,459

Other income (expense):
     Interest expense ...........................            (2,284)            (3,229)
     Other income ...............................                54              1,175
                                                           --------           --------

Loss before taxes ...............................              (384)              (595)

Income tax provision (Benefit) ..................                24             (2,751)
                                                           --------           --------

Net Income (Loss) ...............................          $   (408)          $  2,156
                                                           ========           ========

Basic earnings per common share .................          $  (0.12)          $   0.64
                                                           ========           ========

Average outstanding common shares for
  basic earnings per share ......................             3,403              3,353
                                                           ========           ========

Average outstanding common shares and equivalents
  for diluted earnings per share ................             3,403              3,353
                                                           ========           ========

Diluted earnings per share ......................          $  (0.12)          $   0.64
                                                           ========           ========
</TABLE>
                 See accompanying notes to financial statements.

                                       3
<PAGE>

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

<TABLE><CAPTION>
                                                                  Six Months Ended
                                                                     January 31,
                                                                2002             2001
                                                              -------           -------
<S>                                                           <C>               <C>
Cash flows from operating activities:
     Net loss ......................................          $  (408)          $  (159)
     Adjustments to reconcile net loss to net cash
       provided by operating activities:
         Depreciation ..............................            4,272             5,193
         Amortization ..............................               63                50
         Gain on sale of fixed assets ..............             (493)                0
         Changes in assets and liabilities:
             Accounts receivable ...................            2,142             3,320
             Inventories ...........................            4,878             4,494
             Leased equipment, net .................              -0-               182
             Prepaid expenses ......................               74               (32)
             Accounts payable ......................           (2,400)           (6,736)
             Accrued payroll and vacation ..........              (77)             (267)
             Other accrued liabilities .............             (321)             (873)
             Deferred lease income .................             (213)
             Income taxes receivable/payable .......                3              (277)
             Other assets/liabilities ..............              -0-               -0-
                                                              -------           -------
     Net cash provided by operating activities .....            7,733             4,683
                                                              -------           -------
Cash flow from investing activities:
     Purchase of fixed assets ......................             (146)             (384)
     Purchase/sales of rental equipment, net .......           (1,992)             (576)
     Proceeds on sale of fixed assets ..............              271                 0
     Proceeds on sale of rental equipment ..........            2,814               -0-
     Purchase of intangibles .......................               10                 0
                                                              -------           -------
     Net cash provided by (used in) investing
      activities ...................................              957              (960)
                                                              -------           -------
Cash flows from financing activities:
     Principal payments on capital leases ..........              (12)                3
     Inventory floor-plan financing ................           (3,957)           (8,280)
     Short-term financing ..........................           (5,108)            2,958
     Long-term borrowings (repayments) .............              -0-               -0-
                                                              -------           -------
     Net cash used in financing activities .........           (9,077)           (5,319)
                                                              -------           -------

Decrease in cash and cash equivalents ..............             (388)           (1,597)
Cash and cash equivalents at beginning of
 period ............................................              494             2,626
                                                              -------           -------

Cash and cash equivalents at end of period .........          $   107           $ 1,032
                                                              =======           =======
</TABLE>

                 See accompanying notes to financial statements.

                                       4
<PAGE>

                         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, 2001 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, 2001 filed with the
      Securities and Exchange Commission.

2.    INVENTORIES

      Inventories consist of the following:

<TABLE><CAPTION>
                                                     January 31,        July 31,
                                                         2002             2001
                                                       -------          -------
<S>                                                    <C>              <C>
      Equipment (net of reserve allowances of
       $5,816 and $7,489 respectively):
        New equipment                                  $21,836          $28,163
        Used equipment                                   7,492            7,425

      Parts (net of reserve allowance of $229
       and $282 respectively)                            8,522            9,279
                                                       -------          -------
                                                       $37,850          $44,867
                                                       =======          =======
</TABLE>

3.    FIXED ASSETS

      Fixed Assets consist of the following:

<TABLE><CAPTION>
                                                  January 31,          July 31,
                                                      2002               2001
                                                    --------           --------
<S>                                                 <C>                <C>
      Operating property, plant
        and equipment:
        Land                                        $    500           $    500
        Buildings                                      1,733              1,717
        Machinery and equipment                        3,777              3,997
        Office furniture and fixtures                  2,232              2,377
        Computer hardware and software                 1,454              1,453
        Vehicles                                       1,617              1,964
        Leasehold improvements                           983                958
                                                    --------           --------
                                                      12,296             12,966
        Less: accumulated depreciation                (7,464)            (7,382)
                                                    --------           --------
      Property, plant, and equipment (net)          $  4,833           $  5,584
                                                    ========           ========

      Rental equipment fleet                        $ 27,323           $ 28,889
        Less: accumulated depreciation                (7,132)            (6,862)
                                                    --------           --------
      Rental equipment (net)                        $ 20,191           $ 22,027
                                                    ========           ========
</TABLE>
                                       5
<PAGE>

4.    SHORT-TERM BORROWINGS

      As of October 31, 2000, the Company and Deutsche Financial Services (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. The amended DFS facility 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. As of January 31, 2002, the DFS credit facility had expired
      without extension or renewal and the Company was in technical default of
      the financial covenants in the DFS credit facility at the time of such
      expiration. The Company has not received an extension or renewal of the
      credit facility or a waiver of the defaults from DFS and although DFS has
      not called the loan, there is no guarantee that it will not do so at
      anytime in the future.

      The Company currently is in negotiations with DFS to extend or renew the
      credit facility beyond its expiration on December 28, 2001. The Company
      believes that it can reach agreement with DFS to extend or renew the
      agreement on reasonably acceptable terms prior to July 31, 2002. However,
      in the event that the Company cannot reach a reasonably acceptable
      agreement to extend or renew the expired DFS credit facility, DFS could
      demand repayment of the entire outstanding balance at anytime. In such
      case, the Company would be unable to repay the entire DFS outstanding
      balance. There can be no assurance that the Company will be able to
      successfully negotiate an acceptable extension or renewal of the expired
      DFS credit facility or that DFS will not call the balance due at anytime.












                                       6
<PAGE>

5.    SEGMENT INFORMATION.

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

<TABLE><CAPTION>
      Business Component           Three Months Ended                Six Months Ended
      Net Revenues                     January 31,                       January 31,
                                  2002             2001             2002             2001
      ------------------        -------          -------          -------          -------
<S>                             <C>              <C>              <C>              <C>
      Equipment Sales           $18,541          $20,175          $37,419          $41,026

      Equipment Rental              998            5,405            2,693           12,388

      Product Support             6,690            8,719           14,617           18,668
                                -------          -------          -------          -------

      Totals                    $26,229          $34,299          $54,729          $72,082
                                =======          =======          =======          =======


      Business Component           Three Months Ended                Six Months Ended
      Gross Margins                    January 31,                       January 31,
                                  2002             2001             2002             2001
      ------------------        -------          -------          -------          -------
      Equipment Sales           $ 1,942          $   436          $ 4,104          $ 1,074

      Equipment Rental               69            1,138              624            3,030

      Product Support               839            1,384            2,239            3,711
                                -------          -------          -------          -------

      Total                     $ 2,850          $ 2,958          $ 6,967          $ 7,815
                                =======          =======          =======          =======

</TABLE>
                                       7
<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.
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 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
restructuring and cost reduction plans; the success of the Company's equipment
rental business; rental industry conditions and competitors; competitive
pricing; the Company's relationship with its suppliers; relations with the
Company's employees; the Company's ability to manage its operating costs; the
continued availability of financing; governmental regulations and environmental
matters; risks associated with regional, national, and world economies; and
consummation of the merger and asset purchase transactions (see below). Any
forward-looking statements should be considered in light of these factors.

Results of Operations
---------------------

The Three Months and Six Months ended January 31, 2002 compared to the Three
----------------------------------------------------------------------------
Months and Six Months ended January 31, 2001.
---------------------------------------------

Revenues for the three-month period ended January 31, 2002 decreased 23.5% to
$26.2 million compared with $34.3 million for the three-month period ended
January 31, 2001. Revenues were down from the prior year's second quarter in
every department and in most store locations. The return of normal weather to
the Pacific Northwest compared with a mild quarter in 2000 contributed in part
to the revenue decrease, along with a generally sluggish economy in many areas.

Revenues for the six-month period ended January 31, 2002 decreased 24.1% to
$54.7 million compared with $72.1 million for the six-month period ended January
31, 2001. Revenues were down from the prior year in every department and in most
store locations for the same reasons stated above and the closing of two stores
in the first quarter contributed to the revenue decrease.

The Company's gross profit margin of 10.8% for the three-month period ended
January 31, 2002 was up from the prior year comparative period margin of 8.6%.
The Company's gross profit margin of 12.7% for the six-months ended January 31,
2002 was up from the comparative period margin of 10.8%. The increase in gross
profit margins was chiefly the result of higher gross margins on equipment
sales.

For the three-month period ended January 31, 2002, selling, general, and
administrative ("SG&A") expenses, as a percentage of sales, were 9.7%, up from
9.0% for the prior year's quarter. For the six-month period ended January 31,
2002, SG&A expenses were 9.3% of sales, up from 8.8% in the comparative period
ended January 31, 2001. Some of the increased SG&A expenses are attributable to
costs associated with the closing of two stores during the first quarter and
some ongoing expenses still being incurred for the vacated locations.

Interest expense for the three months ended January 31, 2002 of $1,026,000 was
down from the $1,549,000 in the prior year comparative period and for the six
months ended January 31, 2002 interest expense was $2,284,000 compared with
$3,229,000 for the prior year comparative period. This decrease is the result of
reduced overall inventory levels as well as lower average interest rates on the
DFS facility.

                                       8
<PAGE>

The Company had a net loss for the three months ended January 31, 2002 of
$766,000 or $0.23 per (basic and diluted) share compared with a net income of
$1,695,000 or $0.51 per (basic and diluted) for the prior year's comparable
quarter and a net loss of $408,000 or $0.12 per(basic and diluted)share for the
six months ended January 31, 2002 as compared to net income of $2,156,000 or
$0.64 per (basic and diluted) share for the six months ended January 31, 2001.
The first quarter of FY01 included a non-recurring pre-tax gain of $589,000 for
the conversion of capital leases to operating leases.

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, the 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,
2002, the Company was indebted under manufacturer-provided floor planning
arrangements in the aggregate amount of $10,270,000.

As of October 31, 2000, the Company and Deutsche Financial Services (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. The amended DFS facility 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. As of January 31, 2002, the DFS
credit facility had expired without extension or renewal and the Company was in
technical default of the financial covenants in the DFS credit facility at the
time of such expiration. The Company has not received an extension or renewal of
the credit facility or a waiver of the defaults from DFS and although DFS has
not called the loan, there is no guarantee that it will not do so at anytime in
the future.

Borrowings under the DFS credit facility 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, 2002, approximately $48,285,000 was outstanding under
the DFS credit facility.

The Company currently is in negotiations with DFS to extend or renew the credit
facility beyond its expiration on December 28, 2001. The Company believes that
it can reach agreement with DFS to extend or renew the agreement on reasonably
acceptable terms prior to July 31, 2002. However, in the event that the Company
cannot reach a reasonably acceptable agreement to extend or

                                       9
<PAGE>

renew the expired DFS credit facility, DFS could demand repayment of the entire
outstanding balance at anytime. In such case, the Company would be unable to
repay the entire DFS outstanding balance. There can be no assurance that the
Company will be able to successfully negotiate an acceptable extension or
renewal of the expired DFS credit facility or that DFS will not call the balance
due at anytime.

During the six month period ended January 31, 2001, cash and cash equivalents
decreased by $387,000. The Company had positive cash flow from operating
activities in the first six months after adding depreciation and amortization
back to the net loss.

The Company's cash and cash equivalents as of January 31, 2002 was $107,000. The
Company cannot fund current levels of operations without the continued
availability of borrowing from its current lender DFS. Although the Company and
DFS are in negotiations to extend or renew the credit facility beyond its
expiration on December 28, 2001, there can be no assurance that the Company will
be able to successfully negotiate an acceptable extension or renewal of the
expired DFS credit facility or that DFS will continue to make borrowing
available to the Company.

MERGER AGREEMENT; ASSET SALE AGREEMENT

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

On September 18, 2001, the Company announced that it had entered into an
agreement to sell substantially all of assets and liabilities of the equipment
distribution business owned by Western Power & Equipment Corp. (Oregon), a
wholly owned subsidiary, to e*machinery.net, inc. (EMAC) for $500,000 in cash, a
seven-year, 7% promissory note for $700,000, and 1.2 million shares of EMAC
restricted common stock. Closing is subject to a number of conditions including,
but not limited to, due diligence, approval of Case Corporation, and Deutsche
Financial Services. On November 1, 2001 the Company and EMAC entered into an
agreement to extend the due diligence and escrowed funds deadlines in the Asset
Purchase Agreement until February 28, 2002. As of March 1, 2002, the Asset
Purchase Agreement expired due to EMAC's failure to meet the escrowed funds
deadline. The Company is continuing discussions with EMAC regarding potential
business relationships. However, there is no assurance that such discussions
will result in any business relationship or transactions with EMAC.

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

                                       10
<PAGE>

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. The Company
expects the construction equipment market in its store locations to remain flat
or slightly down over the next 6 to 12 months. A larger drop in the construction
equipment market could have a material adverse impact upon the Company's
operating results.




























                                       11
<PAGE>

PART II.  OTHER INFORMATION


ITEM 5.     OTHER INFORMATION
            -----------------
            None.


ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K
            --------------------------------

            A.   EXHIBITS.

                 None.

            B.   REPORTS ON FORM 8-K.

                 The Company filed a current report on Form 8-K on December 10,
                 2001 regarding the Company changing its external auditors. The
                 Company filed a current report on Form 8-K/A on December 11,
                 2001 to amend the current report on Form 8-K filed on December
                 10, 2001.
















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<PAGE>

                                    SIGNATURE


Pursuant to the requirements 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.


March 14, 2002

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

























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