<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 April 30, 1997
                            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

<PAGE>

                           WESTERN POWER & EQUIPMENT CORP.
                                        INDEX


PART I.  FINANCIAL INFORMATION                                  Page Number

    Item 1.   Financial Statements


     Consolidated Balance Sheet
       April 30, 1997 (Unaudited) and July 31, 1996........          1

     Consolidated Statement of Operations
       Three months ended April 30, 1997 (Unaudited)
       and April 30, 1996 (Unaudited)......................          2

     Consolidated Statement of Operations
       Nine months ended April 30, 1997 (Unaudited)
       and April 30, 1996 (Unaudited)......................          3

     Consolidated Statement of Cash Flows
       Nine months ended April 30, 1997 (Unaudited)
       and April 30, 1996 (Unaudited)......................          4

     Notes to Consolidated Financial Statements............          5 - 6

    Item 2.   Management's Discussion and Analysis of
              Financial Condition and Operating Results....          6 - 10


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.............          11

<PAGE>

ITEM 1.
                           WESTERN POWER & EQUIPMENT CORP.
                              CONSOLIDATED BALANCE SHEET
                                (Dollars in thousands)


                                                             April 30, July 31,

                                                               1997      1996
                                                           ----------   --------
                                                            (Unaudited)
                                        ASSETS
Current assets:
    Cash and cash equivalents..........................       $ 358     $ 2,721
    Accounts receivable, less allowance for
      doubtful accounts of $656 and $519...............      11,736       6,506
    Inventories........................................      72,891      65,689
    Prepaid expenses...................................         120          43
    Deferred income taxes..............................         556         556
                                                            -------     -------
        Total current assets...........................      85,661      75,515

    Property, plant and equipment, net.................       7,598       7,031
    Intangibles and other assets.......................       2,910       2,744
                                                            -------     -------

        Total assets...................................     $96,169     $85,290
                                                            -------     -------
                                                            -------     -------

                          LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
    Borrowings under floor plan financing..............     $51,217     $54,364
    Short-term borrowings..............................       4,612         963
    Accounts payable...................................      11,085       2,414
    Accrued payroll and vacation.......................         678         793
    Other accrued liabilities..........................       2,150       1,384
    Income taxes payable...............................        (482)         37
    Capital lease obligations..........................         105          46
    Covenant Not to Compete............................          96           -
    Payable to parent..................................          94         188
                                                            -------     -------
        Total current liabilities......................      69,555      60,189

Covenant Not to Compete.................................         75           -
Deferred income taxes...................................        384         383
Capital lease obligations...............................      1,784       1,656
Long-term borrowings....................................      1,268       1,268
                                                            -------     -------
        Total liabilities..............................      73,066      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..................................       7,052       5,743
                                                            -------     -------
        Total stockholders' equity.....................      23,103      21,794
                                                            -------     -------

        Total liabilities and stockholders'
          equity.......................................     $96,169     $85,290
                                                            -------     -------
                                                            -------     -------

               See accompanying notes to financial statements.


                                         -1-

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                   See accompanying notes to financial statements.
                           WESTERN POWER & EQUIPMENT CORP.
                         CONSOLIDATED STATEMENT OF OPERATIONS
                                     (UNAUDITED)
                   (Dollars in thousands, except per share amounts)




                                                            Three Months Ended
                                                                 April 30,
                                                             1997       1996
                                                            -------   --------

Net sales..............................................     $42,043    $26,136

Cost of goods sold.....................................      37,444     22,854
                                                            -------    -------

Gross profit...........................................       4,599      3,282

Selling, general and administrative expenses...........       2,974      2,099

Other (income) expense:
    Interest expense...................................         894        440
    Other (income) expense.............................         (41)      (103)

                                                            -------    -------
Income before taxes....................................         772        846

Income tax provision...................................         313        321
                                                            -------    -------

Net income.............................................     $   459    $   525
                                                            -------    -------
                                                            -------    -------

Earnings per common share..............................     $  0.13    $  0.15
                                                            -------    -------
                                                            -------    -------

Weighted average common shares.........................       3,638      3,533
                                                            -------    -------
                                                            -------    -------


                   See accompanying notes to financial statements.

                                         -2-

<PAGE>

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




                                                             Nine Months Ended
                                                                 April 30,
                                                             1997      1996
                                                           --------   --------

Net sales..............................................    $108,244    $75,061

Cost of goods sold.....................................      96,279     66,347
                                                            -------    -------

Gross profit...........................................      11,965      8,714

Selling, general and administrative expenses...........       7,609      5,620

Other (income) expense:
    Interest expense...................................       2,572      1,182
    Other (income) expense.............................        (374)      (279)
                                                            -------    -------

Income before taxes....................................       2,158      2,191

Income tax provision...................................         848        825
                                                            -------    -------

Net income.............................................     $ 1,310    $ 1,366
                                                            -------    -------
                                                            -------    -------

Earnings per common share..............................     $  0.36    $  0.38
                                                            -------    -------
                                                            -------    -------

Weighted average common shares.........................       3,611      3,565
                                                            -------    -------
                                                            -------    -------


                   See accompanying notes to financial statements.


                                         -3-

<PAGE>

                           WESTERN POWER & EQUIPMENT CORP.
                         CONSOLIDATED STATEMENT OF CASH FLOWS
                                     (UNAUDITED)
                                (Dollars in thousands)
                                                            Nine Months Ended
                                                                  April 30,
                                                              1997       1996
                                                            -------    -------
Cash flows from operating activities:
    Net income........................................      $ 1,310    $ 1,366
    Adjustments to reconcile net income to net cash
      provided by (used in) operating activities:
        Depreciation..................................          803        591
        Amortization..................................            4         49
        (Gain) Loss on sale of fixed assets...........          (17)         -
        Changes in assets and liabilities:
            Accounts receivable.......................       (5,231)       810
            Inventories...............................       (7,203)   (10,450)
            Floor plan financing......................       (3,147)     8,050
            Prepaid expenses..........................          (76)       (79)
            Accounts payable..........................        8,667        442
            Accrued payroll and vacation..............         (115)       (23)
            Other accrued liabilities.................          766        535
            Income taxes payable......................         (519)      (135)
            Other assets..............................           14       (106)
                                                            -------    -------
Net cash provided by (used in) operating
     activities.......................................       (4,744)     1,050
                                                            -------    -------

Cash flow from investing activities:
    Purchase of fixed assets..........................       (1,081)      (538)
    Purchase of intangibles...........................           (8)     2,078
    Proceeds on sale of fixed assets..................           21       (603)
                                                            -------    -------
    Net cash provided by (used in)
      investing activities............................       (1,068)       937
                                                            -------    -------

Cash flows from financing activities:
    Principal payments on capital leases..............         (105)       (53)
    Short-term borrowings (repayments)................        3,648     (4,091)
    Borrowings from (repayments to) parent............          (94)        22
                                                            -------    -------
    Net cash provided by financing activities.........        3,449     (4,122)
                                                            -------    -------

Decrease in cash and cash equivalents..................      (2,363)    (2,135)
Cash & cash equivalents at beginning of period.........       2,721      4,065
                                                            -------    -------
Cash and cash equivalents at end of period.............      $  358     $1,930
                                                            -------    -------
                                                            -------    -------

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
    Interest..........................................       $2,572     $1,182
    Income taxes......................................          832        961

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:

During the quarter ended October 31, 1996, the Company incurred a capital lease
obligation of $293 for computer equipment and software. During the quarter ended
January 31, 1997, the Company incurred a total obligation of $200 for noncompete
agreements executed as part of the acquisition of the operating assets of
Sahlberg Equipment, Inc.

                   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, 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:
                                                          April 30,   July 31,
                                                            1997       1996
                                                            ----       ----
    Equipment:
      New equipment                                         $56,680    $53,279
      Used equipment                                          8,097      6,090
      Parts                                                   8,114      6,320
                                                            -------    -------

                                                            $72,891    $65,689
                                                            -------    -------
                                                            -------    -------

3.  FISCAL 1997 EVENTS

On January 17, 1997 the Company acquired the operating assets of Sahlberg
Equipment, Inc.("Sahlberg"), a four-store Northwest distributor of noncompeting
lines of equipment with facilities in Kent, Washington, Portland, Oregon,
Spokane, Washington and Anchorage, Alaska. The purchase price for the assets of
Sahlberg was an aggregate of approximately $5,290, consisting of $3,844 for
equipment inventory, $797 for parts inventories, $625 for fixed assets, and $24
for work-in-process.

The majority of the purchase price was financed through a loan agreement with
Case Credit Corporation ("Case Credit").  Under the loan agreement, the Company
obtained two term loans from Case Credit in the amounts of $3,844 for equipment
inventory (the "Equipment Note") and $1,422 for parts inventories and fixed
assets (the "Parts Note"), respectively.  Both term loans bear interest at 9.25%
which is payable monthly in arrears.  The Equipment Note is payable in a single
balloon payment on January 17, 1998, provided, however, that in the event the
Company sells any of the items of inventory securing the note prior to January
17, 1998, the principal portion of the note represented by such sold equipment
becomes due and payable at that time.  The Parts Note


                                         -5-

<PAGE>

is payable in twelve equal monthly installments of principal and interest
beginning February 21, 1997.  Both notes are cross-collateralized and secured by
all the assets acquired in the Sahlberg acquisition as well as certain accounts
receivable of the Company. Simultaneous with the closing of the Sahlberg
acquisition, the Company entered into sublease agreements for each of the four
facilities (all subleases are net leases with payment of insurance, property
taxes and maintenance costs by the Company).

On June 5, 1997, the Company obtained a $75 million inventory flooring and
operating line of credit through Deutsche Financial Services.  The Company
expects to use this borrowing facility to lower flooring related interest
expense by financing the purchase of equipment from Case and its other vendors
with amounts advanced under this line of credit, 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.

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.
Certain matters discussed herein contain forward-looking statements that are
subject to risks and uncertainties that could cause actual results to differ
materially from those projected, such as projected sales levels, expense
reductions, reduced interest expense, and increased inventory turnover, one or
more of which may not be realized.

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., a California
distributor of highway maintenance equipment with offices in Sacramento and
Fullerton.  In January 1997, the Company completed the acquisition of the
operating assets of Sahlberg Equipment Inc., a four-store Pacific Northwest
distributor of construction equipment, bringing the total number of distribution
outlets owned and operated by the Company to 23.

RESULTS OF OPERATIONS

THE THREE AND NINE MONTHS ENDED APRIL 30, 1997 COMPARED TO THE THREE AND NINE
MONTHS ENDED APRIL 30, 1996.

Revenues for the three month period ended April 30, 1997 increased $15,907,000
or approximately 61% over the three month period ended April 30, 1996, due


                                         -6-

<PAGE>

mainly to the contribution of the stores acquired or opened in the last year in
Sacramento, Fullerton, Stockton, and Redding, California, Elko, Nevada, Kent and
Spokane, Washington, Anchorage, Alaska, and Portland, Oregon, which accounted
for $10,786,000 (68%) of this increase in sales.  Same store revenues increased
$5,121,000 or 22% for the three month period ended April 30, 1997, as compared
to the prior year period.  The increase in same store revenues resulted from
higher sales across all departments.  In the three month period ended April 30,
1997, new equipment revenues increased $10,897,000, used equipment revenues
increased $1,084,000, parts revenues increased $2,991,000, rental revenues
increased $317,000, and service revenues increased $618,000 over the quarter
ended April 30, 1996.

Revenues for the nine month period ended April 30, 1997 increased $33,183,000 or
approximately 44% over the nine month period ended April 30, 1996.  The increase
was due primarily to the contribution of the stores acquired or opened in the
last year, accounting for $23,644,000 (71%) of the increase in sales.  Same
store revenues increased $9,205,000 or 12% for the nine month period ended April
30, 1997, as compared to the nine month period ended April 30, 1996. For the
nine month period ended April 30, 1997, sales in all departments were up
compared to the same period in the prior year.

The Company's gross profit margin of 10.9% for the three month period ended
April 30, 1997 was down from the prior year comparative period margin of 12.6%.
The decrease in gross profit margins was partly the result of a decrease in
higher margin rental revenue as a percentage of sales, and also lower margins on
new equipment sales. For the nine month period ended April 30, 1997, the
Company's gross margin was 11.1%, a slight decrease from the 11.6% for the nine
month period ended April 30, 1996 due to the same factors indicated above.

For the three month period ended April 30, 1997, selling, general, and
administrative ("SG&A") expenses, as a percentage of sales, were down from 8.0%
to 7.1% of sales.  SG&A expenses for the nine month period ended April 30, 1997
were 7.0% of sales compared to 7.5% of sales for the prior year nine month
period, reflecting management's recent efforts to streamline operations and
efficiently integrate newly opened and acquired operations. Executive management
is still fine-tuning the Company's organizational model and believes further
reduction in SG&A expenses as a percentage of sales can be achieved.

Interest expense for the three months ended April 30, 1997 of $894,000 was up
significantly (103%) from the $440,000 in the prior year comparative period.
This increase is the result of a build up in inventory levels to support the
increased number of facilities operated by the Company and the Company's higher
equipment sales level, including an increase in equipment dedicated to the
rental fleet of $3,178,000 in the three months ended April 30, 1997 compared
with the same period a year ago. Interest expense increased 118% for the nine
month period ended April 30, 1997 to $2,572,000 compared to $1,182,000 for the
nine month period ended April 30, 1996, due mainly to the increased inventory
carried by the Company. Management expects that interest expense will decrease
relative to sales as the company continues to rationalize its inventory levels
and realizes the benefits of its newly acquired financing facility through
Deutsche Financial Services.

The effective tax rate for the three months ended April 30, 1997 was
approximately 41%, which is slightly higher than the 38% effective tax rate for
the prior year comparative period due in part to higher Delaware franchise


                                         -7-

<PAGE>

taxes.  The Company anticipates the effective tax rate to remain at a similar
level for the foreseeable future.

Although sales were well ahead of the prior year comparative period, the
decrease in gross margins along with the increase in operating and interest
expenses offset the sales increase, resulting in net income for the quarter
ended April 30, 1997 of $0.13 per share as compared to $0.15 in the prior year
comparable quarter. For the nine month period ended April 30, 1997, earnings per
share were $0.36, a slight decrease from the $0.38 earnings per share for the
nine month period ended April 30, 1996 due to the previously mentioned expense
increases and reduced gross margins.  Management expects its efforts to
streamline expenses, increase inventory turns, and increase revenues to result
in more net income as a percentaage of sales in future periods.

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 were
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 for
periods ranging from one to twelve months, after which interest commences to
accrue monthly at rates ranging from two to three 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 April 30, 1997,
the Company was indebted under manufacturer provided floor planning arrangements
in the aggregate amount of $34,460,000.

In order to take advantage of the cash discounts offered by Case, and 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
April 30, 1997, approximately $16,757,000 was outstanding under such line of
credit, the principal of which bears interest at .125 percent over Seafirst
Bank's prime rate and is subject to annual review and renewal on June 1, 1997.
As of June 1, 1997, the Seafirst line of credit was extended for 30 days pending
ongoing renewal negotiations. On June 5, 1997, the Company obtained a $75
million inventory flooring and operating line on credit through Deutsche
Financial Services (DFS). The DFS credit facility is a three-year, floating rate
facility based on prime with rates between 0.50% under prime to 1.00% over prime
depending on the amount of total borrowing under the facility. Amounts are
advanced against the Company's assets, including accounts receivable (85%
advance rate), parts (advance rate of 50% of cost), new equipment (100% of book
value advance rate), rental fleet (advance rate of 100% of net book value), and
used equipment (advance rate of 93% of net book value). The Company expects to
use this borrowing facility to lower flooring related interest expense by using
advances under such line to finance inventory purchases in lieu of financing
provided by suppliers and/or Seafirst, to take advantage of cash purchase
discounts from its suppliers, to


                                         -8-

<PAGE>

provide operating capital for further growth, and to refinance some its
acquisition related debt at a lower interest rate.

Amounts owing under the floor plan financing agreements are generally secured by
inventory purchases financed by these lenders, as well as all proceeds from the
sale and rental of such inventory, including related accounts receivable.
Amounts owing under the DFS credit facility are secured by the Company's
accounts receivable and parts and equipment inventory.

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"). MRR is 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.

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 operates the GCS business from an
existing location in Fullerton, California and from the Company's existing


                                         -9-

<PAGE>

facility in Sacramento, California.  The purchase price for the GCS assets was
$1,655,000.  This transaction was accounted for as a purchase.

On January 17, 1997, the Company acquired the operating assets of Sahlberg
Equipment, Inc., a four-store Pacific Northwest distributor of construction
equipment, for $5,289,616.  The purchase price consisted of $3,844,152 in
equipment inventory, $796,914 in parts inventory. $625,326 in fixed assets, and
$23,224 in work-in-process. The majority of the purchase was financed by the
proceeds of two term loans from Case Credit Corporation carrying interest rates
of 9.25 percent.  The acquisition has been accounted for as a purchase.

During the nine months ended April 30, 1997, cash and cash equivalents decreased
by $2,363,000, primarily due to an increase in inventory.  The decrease was
partially offset by an increase in other short-term borrowing.  The Company had
positive cash flow from operating activities of $920,000 during the quarter
ended April 30, 1997, chiefly a result of the increase in other short-term
borrowing. Purchases of fixed assets during the quarter were related mainly to
the opening of new distribution outlets and the Sahlberg acquisition.

The Company's cash and cash equivalents of $358,000 as of April 30, 1997 along
with the new credit facility with DFS and the previously available credit
facilities are considered sufficient to support current or higher levels of
operations for at least the next twelve months.


                                         -10-
<PAGE>

PART II. OTHER INFORMATION

    ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

         A.   EXHIBITS.                   DFS Loan Agreement (Exhibits omitted)

         B.   REPORTS ON FORM 8-K.        NONE


                                         -11-

<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.

June 10, 1997

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


                                         -12-
<PAGE>


                                  INDEX OF EXHIBITS


            EXHIBIT 1        LOAN AND SECURITY
                             AGREEMENT




                                         -13-