FY02  10-K  11/12/02
                                                   UNITED STATES
                                        SECURITIES AND EXCHANGE COMMISSION
                                              WASHINGTON, D.C. 20549

                                           ____________________________

                                                     FORM 10-K
                                           ____________________________


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


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

     For the fiscal year ended July 31, 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)                        Identification No.)


  6407-B N.E. 117TH AVE, VANCOUVER, WA                     98662
(Address of principal executive offices)                (Zip Code)


       Registrant's telephone number, including area code: (360) 253-2346


          Securities registered pursuant to Section 12(b) of the Act:
                                      None

          Securities registered pursuant to Section 12(g) of the Act:

                          Common Stock, $.001 par value
                                (Title of Class)

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. YES X NO

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulations S-K is not contained  herein,  and will not be contained,  to
the  best  of  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to the Form 10-K. [ X ]

     As of November 12, 2002:  (a) 3,403,162  shares of Common Stock,  $.001 par
value, of the registrant (the "Common  Stock") were  outstanding;  (b) 2,180,578
shares  of Common  Stock  were held by  non-affiliates  ; and (c) the  aggregate
market value of the Common Stock held by non-affiliates was $261,669.36 based on
the closing sale price of $0.21 per share on October 1, 2002.

     Portions of the Registrant's Proxy Statement to be filed in connection with
its Annual Meeting of Shareholders are incorporated by reference in Part III.

<PAGE>

PART I



ITEM 1.           BUSINESS

General

     Western Power & Equipment Corp., a Delaware corporation (the "Company"), is
engaged in the sale,  rental,  and servicing of light,  medium-sized,  and heavy
construction,   agricultural,  and  industrial  equipment,  parts,  and  related
products which are manufactured by Case  Corporation  ("Case") and certain other
manufacturers.  The Company  believes,  based upon the number of locations owned
and  operated,  that  it is one of  the  largest  independent  dealers  of  Case
construction equipment in the United States. Products sold, rented, and serviced
by the Company include backhoes, excavators, crawler dozers, skid steer loaders,
forklifts,  compactors, log loaders,  trenchers, street sweepers, sewer vacuums,
and mobile highway signs.

     The Company operates out of facilities located in the states of Washington,
Oregon, Nevada, California, and Alaska. The equipment distributed by the Company
is  furnished  to  contractors,  governmental  agencies,  and  other  customers,
primarily for use in the  construction of residential and commercial  buildings,
roads, levees, dams,  underground power projects,  forestry projects,  municipal
construction, and other projects.

     The  Company's  strategy  had  focused  on  acquiring  additional  existing
distributorships  and  rental  operations,   opening  new  locations  as  market
conditions  warrant,  and increasing  sales at its existing  locations.  In such
connection,  it had sought to operate  additional Case or other equipment retail
distributorships,  and sell, lease, and service additional lines of construction
equipment  and related  products not  manufactured  by Case.  For the past three
years,  the Company has  concentrated on  consolidating or closing its stores to
improve operating efficiency and profitability. See "Business Strategy."

History and Acquisitions

     The Company  commenced  business in November 1992 with the acquisition from
Case of seven retail  distribution  facilities located in Oregon and Washington.
The Company  became a  subsidiary  of American  United  Global,  Inc.  ("AUGI"),
simultaneous  with such  acquisition.  AUGI holds 36 percent of the  outstanding
shares of the Company as of July 31, 2001.

     In September  1994 and February  1996, in two different  transactions,  the
Company acquired from Case four retail construction  equipment stores located in
California and Nevada.  In addition,  in June 1996 and January 1997, the Company
made  two  additional   acquisitions  of   distributorships   of   predominantly
non-competing  lines  of  equipment,  with  locations  in  California,   Oregon,
Washington,  and Alaska.  From fiscal 1993 through fiscal 1997, the Company also
opened  nine new  stores in the states  served by the  acquired  stores,  ending
fiscal year 1997 with 23 stores.

     In fiscal 1998, the Company  acquired four  additional  facilities  through
acquisition,  located in California and Alaska. The pre-existing Alaska facility
was  discontinued  as it was combined  with the  acquired  Alaska  facility.  In
addition,  in fiscal 1998 the  Company  opened one new store in  Washington.  On
December 11,  1997,  the Company  acquired  substantially  all of the  operating
assets  used  by  Case  in  connection   with  its  business  of  servicing  and
distributing  Case  agricultural  equipment at a facility  located in Yuba City,
California.

     On April 30, 1998, the Company acquired  substantially all of the operating
assets of Yukon  Equipment,  Inc. (Yukon) in connection with Yukon's business of
servicing and distributing construction,  industrial, and agricultural equipment
in Alaska. Yukon has facilities in Anchorage, Fairbanks, and Juneau, Alaska.

     In fiscal  1999,  the Company  closed three of its smaller  facilities  and
began  servicing  the  territories  served  by  these  small  stores  by  larger
facilities in the region.

     The Company  consolidated  four  facilities  in the first quarter of fiscal
2000 into larger stores in each region. One branch office in Washington was sold
during the third quarter  while two  temporary  locations  were  established  in
Southern  California.  The closures are  intended to increase  efficiencies  and
reduce costs.  The two branches in California  were  established in an effort to
assist Case Corporation in a dealership transition for Southern California.  The
Company consolidated one branch in Washington during the first quarter of fiscal
2001 and sold the two branches in Southern  California  in the third  quarter of
fiscal 2001.

     During  fiscal  2002,  the Company  closed/sold  3 branches.  There were 15
branches as of the end of fiscal year 2002.



                                       2
<PAGE>

Business Strategy

     The Company's  strategy is to streamline the Company's  structure and close
or consolidate  stores and operations to increase  efficiency and profitability.
The Company is concentrating its efforts on making all of its ongoing operations
profitable and in capitalizing on its existing operations'  strengths to restore
profitability.  The Company has selectively  pared down its product offerings to
reduce inventory carrying costs and to improve turnover in the remaining product
lines that it offers.

     The Company's  business  strategy  includes  efforts to expand sales at its
existing  locations.  The Company  will  continue to seek to improve its product
line and generate  incremental  sales  increases by adding  equipment  and parts
produced by manufacturers  other than Case, where appropriate.  The Company will
also  seek  to  increase  sales  of  parts  and   service--both  of  which  have
considerably  higher  margins  than  equipment  sales.  This  increase  will  be
accomplished  through targeted sales efforts to parts and service  customers and
the  continued  diversification  of our parts product lines and the servicing of
equipment  produced by  manufacturers  other than Case, where  appropriate.  The
Company plans to continue emphasis of its fleet of rental equipment. As the cost
of  purchasing  equipment  escalates,  short and  long-term  rental  will become
increasingly attractive to the Company's customers.

     The  Company's  business  strategy  had  previously  focused  on  acquiring
additional  existing   distributorships  and  rental  operations,   opening  new
locations,  and increasing sales at its existing locations.  The Company reduced
its  acquisition  activity  in  fiscal  years  1999  through  2002 due to market
conditions.  When market conditions improve and opportunities arise, the Company
intends to make strategic  acquisitions of other  authorized  Case  construction
equipment retail dealers located in established or growing  markets,  as well as
dealers or distributors of construction,  industrial, or agricultural equipment,
and related  parts,  manufactured  by companies  other than Case. In addition to
acquisitions,  in the  future  the  Company  may open  new  retail  outlets  and
opportunities and conditions  permit.  The strategy in opening additional retail
outlets  has been to test  market  areas by placing  sales,  parts,  and service
personnel in the target market. If the results are favorable, a retail outlet is
opened with its own  inventory  of  equipment.  This  approach  reduces both the
business risk and the cost of market development.

Products

Case Construction Equipment.

     The construction  equipment (the "Equipment") sold, rented, and serviced by
the Company  generally  consists of: backhoes (used to dig large,  wide and deep
trenches);  excavators  (used to dig deeply for the construction of foundations,
basements,  and other  projects);  log  loaders  (used to cut,  process and load
logs); crawler dozers (bulldozers used for earth moving,  leveling and shallower
digging  than  excavators);  wheel  loaders  (used for loading  trucks and other
carriers with  excavated  dirt,  gravel and rock);  roller  compactors  (used to
compact  roads and other  surfaces);  trenchers  (a  smaller  machine  that digs
trenches for sewer lines,  electrical  power and other utility pipes and wires);
forklifts (used to load and unload pallets of materials); and skid steer loaders
(smaller version of a wheel loader,  used to load and transport small quantities
of material--e.g., dirt and rocks-- around a job site). Selling prices for these
units range from $15,000 to $350,000 per piece of Equipment.

     Under the terms of  standard  Case  dealer  agreements,  the  Company is an
authorized  Case dealer for sales of Equipment and related parts and services at
locations in Oregon,  Washington,  Nevada, northern California,  and Alaska (the
"Territory").  The dealer  agreements have no defined term or duration,  but are
reviewed on an annual basis by both parties, and can be terminated without cause
at any time  either  by the  Company  on 30 days'  notice or by Case on 90 days'
notice.  Although the dealer  agreements  do not prevent  Case from  arbitrarily
exercising its right of termination,  based upon Case's  established  history of
dealer  relationships and industry  practice,  the Company does not believe that
Case would terminate its dealer agreements without good cause.

     The dealer  agreements  do not contain  requirements  for specific  minimum
purchases  from Case. In  consideration  for the  Company's  agreement to act as
dealer,  Case  supplies to the Company  items of  Equipment  for sale and lease,
parts,  cooperative  advertising  benefits,  marketing brochures related to Case
products,  access to Case product specialists for field support,  the ability to
use the Case  name  and logo in  connection  with  the  Company's  sales of Case
products, and access to Case floor plan financing for Equipment purchases.  Such
floor  planning  arrangement  currently  provides the Company with interest free
credit  terms  on new  equipment  purchases  ranging  from  one  to six  months,
depending upon the type of equipment floored,  after which interest commences to
accrue  monthly at an annual  rate equal to 2% over the prime rate of  interest.
The  invoice  price of each item of  Equipment  is payable at the earlier of the
time of its sale by the Company or six months  after the date of shipment to the
Company by Case.


                                       3
<PAGE>


Other Products.

     Although the principal  products sold,  rented, and serviced by the Company
are manufactured by Case, the Company also sells,  rents, and services equipment
and sells  related  parts (e.g.,  tires,  trailers,  and  compaction  equipment)
manufactured by others. Approximately 51% and 50% of the Company's net sales for
fiscal year 2002 and fiscal 2001, respectively, resulted from sales, rental, and
servicing of products  manufactured by companies other than Case.  Manufacturers
other than Case  represented by the Company offer various levels of supplies and
marketing  support along with purchase  terms which vary from cash upon delivery
to interest-free, 12-month flooring.

     The  Company's   distribution   business  is  divided  into  three  general
categories of activity:  (i) Equipment sales, (ii) Equipment rentals,  and (iii)
Product Support.

Equipment Sales.

     At each of its  distribution  outlets,  the  Company  maintains  a fleet of
various new and used Equipment for sale. The Equipment purchased for each outlet
is selected by the Company's  marketing  staff based upon the types of customers
in the geographical areas surrounding each outlet,  historical purchases as well
as  anticipated  trends.  Subject to  applicable  limitations  in the  Company's
manufacturers'  dealer  contracts,  each  distribution  outlet has access to the
Company's full inventory of Equipment.

     The Company provides only the standard  manufacturer's limited warranty for
new Equipment, generally a one-year parts and service repair warranty. Customers
can purchase extended warranty contracts.

     The Company sells used  Equipment  that has been  reconditioned  in its own
service shops.  It generally  obtains such used  Equipment as  "trade-ins"  from
customers  who  purchase new items of Equipment  and from  Equipment  previously
rented and not purchased.  Unlike new Equipment, the Company's used Equipment is
generally sold "as is" and without a warranty.

Equipment Rental.

     The Company  maintains a separate  fleet of Equipment  that it holds solely
for rental.  Such  Equipment is generally  held in the rental fleet for 12 to 36
months and then sold as used Equipment  with  appropriate  discounts  reflecting
prior rental usage.  As rental  Equipment is taken out of the rental fleet,  the
Company adds new  Equipment to its rental  fleet as needed.  The rental  charges
vary, with different rates for different types of Equipment  rented.  In October
1998, the Company opened its first  rental-only  store,  located in the Seattle,
Washington area, under the name Western Power Rents. This store was consolidated
with the  Company's  Auburn,  Washington  store in  August  2000.  Rentals  have
decreased  to 6% of  revenue  in fiscal  year 2002 from 15% of revenue in fiscal
year 2001. See Sales and Marketing below.




Product Support.

     The Company operates a service center and yard at each retail  distribution
outlet for the repair and storage of Equipment.  Both warranty and  non-warranty
service work is performed,  with the cost of warranty  work being  reimbursed by
the manufacturer following the receipt of invoices from the Company. The Company
employs  approximately 80  manufacturer-trained  service technicians who perform
Equipment  repair,   preparation  for  sale,  and  other  servicing  activities.
Equipment  servicing is one of the higher profit margin  businesses  operated by
the  Company.  The  Company has  expanded  this  business  by hiring  additional
personnel  and  developing  extended  warranty  contracts  to  be  purchased  by
customers  for  Equipment  sold and serviced by the Company,  and  independently
marketing such contracts to its customers.  The Company services items and types
of  Equipment  that  include  those that are  neither  sold by the  Company  nor
manufactured by Case.

     The Company purchases parts for use in its Equipment  service business,  as
well as for  sale to  other  customers  who are  independent  servicers  of Case
Equipment. Generally, parts purchases are made on standard net 30-day terms. The
Company  employs one or more  persons who take orders from  customers  for parts
purchases at each retail  distribution  outlet.  The Company  provides  only the
standard  manufacturer's warranty on the parts that it sells, which is generally
a 90-day replacement guaranty.



                                       4
<PAGE>

Sales and Marketing

     The Company's  customers are typically  residential and commercial building
general contractors, road and bridge contractors,  sewer and septic contractors,
underground  utility  contractors,  persons  engaged in the  forestry  industry,
equipment  rental  companies  and state and municipal  authorities.  The Company
estimates  that it has  approximately  19,000  customers,  with most being small
business owners,  none of which accounted for more than 3% of its total sales in
the fiscal year ended July 31, 2002.

     For fiscal years 2002, 2001, and 2000, the revenue  breakdown by source for
the business operated by the Company were approximately as follows:

                                          FY 2002   FY 2001   FY 2000
                  Equipment Sales           68%       60%       59%
                  Equipment Rental           6%       15%       17%
                  Product Support           26%       25%       24%
                                            --        --        --
                                           100%      100%      100%
                                           ===       ===       ===


     The Company  advertises its products in trade  publications  and appears at
trade shows  throughout its Territory.  It also  encourages its  salespersons to
visit customer sites and offer Equipment demonstrations when requested.

     The  Company's  sales  and  marketing  activities  do  not  result  in  any
significant  backlog  of  orders.  Although  the  Company  accepts  orders  from
customers  for  future   delivery   following   manufacture  by  Case  or  other
manufacturers, during fiscal 2002 a majority of its sales revenues resulted from
products  sold  directly out of  inventory,  or the  providing of services  upon
customer request.

     The Company employed  approximately  42 equipment  salespersons on July 31,
2002. All of the Company's sales personnel are employees of the Company, and all
are under the  general  supervision  of C. Dean  McLain,  the  President  of the
Company.  Each Equipment salesperson is assigned a separate exclusive territory,
the size of which  varies  based  upon the  number of  potential  customers  and
anticipated volume of sales, as well as the geographical characteristics of each
area.

     On July 31, 2002, the Company  employed 3 product support  salespersons who
sell  the  Company's   parts  and  repair  services  to  customers  in  assigned
territories.  The Company has no independent  distributors or non-employee sales
representatives.




Suppliers

     The Company purchases of its inventory of equipment and parts from Case and
other manufacturers.  No supplier other than Case accounted for more than 10% of
such inventory purchases during fiscal 2002. While maintaining its commitment to
Case to  primarily  purchase  Case  Equipment  and parts as an  authorized  Case
dealer,  the Company  plans to expand the number of products  and  increase  the
aggregate  dollar  value of those  products  which the  Company  purchases  from
manufacturers other than Case in the future.

Competition

     The Company competes with distributors of construction,  agricultural,  and
industrial  equipment and parts manufactured by companies other than Case on the
basis of price,  the  product  support  (including  technical  service)  that it
provides  to its  customers,  brand  name  recognition  for  its  products,  the
accessibility and number of its distribution outlets, and the overall quality of
the products that it sells. The Company's management believes that it is able to
effectively  compete with  distributors of products  produced and distributed by
such other  manufacturers  primarily on the basis of overall product quality and
the  superior  product  support  and other  customer  services  provided  by the
Company.

     Case's  two  major   competitors  in  the  manufacture  of  full  lines  of
construction   equipment  of  comparable   sizes  and  quality  are  Caterpillar
Corporation  and Deere &  Company.  In  addition,  other  manufacturers  produce
specific  types of  equipment  which  compete  with  Case  Equipment  and  other
Equipment  distributed  by the  Company.  These  competitors  and their  product
specialties include, but are not limited to, JCB Corporation--backhoes,  Kobelco
Corporation -- excavators,  Dresser  Industries -- light and medium duty dozers,
Komatsu  Corporation -- wheel loaders and crawler  dozers,  and Bobcat,  Inc. --
skid steer loaders.



                                       5
<PAGE>

     The Company is currently the only Case dealer for construction equipment in
Alaska,  northern  Nevada,  and in the  northern  California  area  (other  than
Case-owned  distribution  outlets), and is one of several Case dealers in Oregon
and Washington.  However,  Case has the right to establish other  dealerships in
the future in the same  territories in which the Company  operates.  In order to
maintain and improve its competitive position,  revenues and profit margins, the
Company plans to increase its sales of products produced by companies other than
Case.

Environmental Standards and Government Regulation

     The Company's  operations are subject to numerous rules and  regulations at
the  federal,  state,  and  local  levels  which are  designed  to  protect  the
environment  and to regulate the  discharge of materials  into the  environment.
Based upon current laws and regulations, the Company believes that its policies,
practices,  and procedures are properly designed to prevent unreasonable risk of
environmental  damage and the resultant  financial  liability to the Company. No
assurance  can be given  that  future  changes  in such  laws,  regulations,  or
interpretations thereof,  changes in the nature of the Company's operations,  or
the effects of former  occupants'  past activities at the various sites at which
the  Company  operates,  will  not  have  an  adverse  impact  on the  Company's
operations.

     The  Company  is  subject to  federal  environmental  standards  because in
connection  with its operations it handles and disposes of hazardous  materials,
and discharges sewer water in its equipment rental and servicing operations. The
Company's internal staff is trained to keep appropriate  records with respect to
its  handling of  hazardous  waste,  to establish  appropriate  on-site  storage
locations for hazardous waste, and to select regulated carriers to transport and
dispose of hazardous waste. Local rules and regulations also exist to govern the
discharge of waste water into sewer systems.

Employees

     At July 31, 2002,  the Company  employed 242 full-time  employees.  Of that
number, 15 are in corporate administration, 21 are involved in administration at
the branch locations, 63 are employed in Equipment sales and rental, and 143 are
employed in product support. At July 31, 2002, approximately 14 of the Company's
service technicians and parts employees at the Sacramento,  California operation
were  being  represented  by  Operating  Engineers  Local  Union  No.  3 of  the
International  Union  of  Operating  Engineers,  AFL-CIO  under  the  terms of a
five-year  contract  expiring  August 31, 2005.  The Company  believes  that its
relations with its employees are generally satisfactory.

Insurance

     The  Company  currently  has  general,   product  liability,  and  umbrella
insurance policies covering the Company with limits, terms, and conditions which
the  Company  believes  to be  consistent  with  reasonable  business  practice,
although  there is no assurance  that such coverage will prove to be adequate in
the future.  An  uninsured  or  partially  insured  claim,  or a claim for which
indemnification is not available,  could have a material adverse effect upon the
Company's business, results of operations, and financial condition.

Forward-Looking Statements

     Information  included above relating to projected growth and future results
and events  constitutes  forward-looking  statements.  Actual  results in future
periods  may differ  materially  from the  forward-looking  statements  due to a
number of risks and uncertainties,  including but not limited to fluctuations in
the  construction,  agricultural,  and  industrial  sectors;  the success of the
Company's entry into new markets;  the success of the Company's expansion of its
equipment   rental  business;   rental  industry   conditions  and  competitors;
competitive  pricing; the Company's  relationship with its suppliers;  relations
with the  Company's  employees;  the  Company's  ability to manage its operating
costs;  the continued  availability of financing;  governmental  regulations and
environmental  matters;  risks  associated  with regional,  national,  and world
economies. Any forward-looking statements should be considered in light of these
factors.


                                       6
<PAGE>

ITEM 2.           PROPERTIES

     The following  table sets forth  information  as to each of the  properties
which  the  Company  owns or  leases  (all of which are  retail  sales,  rental,
service,  storage,  and repair facilities except as otherwise noted) at July 31,
2002.

<TABLE>
<CAPTION>
                                                          Expiration      Annual           Size/Square         Purchase
Location and Use                      Lessor              Date            Rental           Feet                Options
----------------                      ------              ----           ---------         ----                -------

<S>                                  <C>                <C>             <C>              <C>                    <C>

1745 N.E. Columbia Blvd.              Carlton O.          12/31/2010      $84,0001 plus    Approx. 4 acres;         No
Portland, Oregon 97211                Fisher, CNJ                         CPI adjustments  building 17,622
                                      Enterprises                                          sq. ft.
1665 Silverton Road, N.E.             LaNoel Elston       07/10/2004      $36,0001         Approx. 1 acre;          No
Salem, Oregon 97303                   Myers Living Trust                                   buildings 14,860
                                                                                           sq. ft.
West 7916 Sunset Hwy.                 U.S. Bank           09/30/2003      $69,6001         Approx. 5 acres;         No
Spokane, Washington 99204                                                                  building 19,200
                                                                                           sq. ft.
12406 Mukilteo Speedway               Phil & Jana         10/31/2008      $120,9601        Approx. 2.1              No
Mukilteo, Washington 98275            Pickering                                            acres; building
                                                                                           13,600 sq. ft.
6407-B  NE 117th Ave                  McLain-Rubin        03/31/2006      $98,400          Building 8,627           No
Vancouver, Washington 98662           Realty Company,                                      sq. ft.
(Executive Offices)                   LLC 3
2702 W. Valley Hwy No.                Avalon Island LLC   11/30/2015      $228,0001        Approx. 8 acres;         No
Auburn, Washington 98001                                                                   building 33,000
                                                                                           sq. ft.
500 Prospect Lane                     Owned               N/A             N/A              Approx. 1.5             N/A
Moxee, Washington 98936  (Subleased                                                        acres; building
to 3rd Party)                                                                              4,320 sq. ft.

1455 Glendale Ave.                    McLain-Rubin        01/31/2007      $276,0002        Approx. 5 acres;         No
Sparks, Nevada 89431                  Realty Company,                                      building 22,475
                                      LLC 3                                                sq. ft.
25886 Clawiter Road                   Fred Kewel II,      11/30/2004      $108,9031        Approx. 2.8              No
Hayward, California 94545             Agency                                               acres; building
                                                                                           21,580 sq. ft.

3540 D Regional Parkway               Soiland             02/28/05        $50,2501 plus    Approx. 1.25             No
Santa Rosa, California  95403                                             annual CPI       acres; building
                                                                          adjustments      5,140 sq. ft.

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

8271 Commonwealth Avenue              M.E. Robinson &                     $90,960                                   No
Buena Park, CA 90621-2537             Lois Robinson


2535 Ellis Street                     Hart Enterprises    Month to        $8,400           Approx. 2 acres;        Yes
Redding, Oregon 96001                                     Month                            building 6,200
                                                                                           sq. ft.
1041 S Pershing Ave                   Stockton Further    03/14/2006      $48,845          Approx. .5 acres;       Yes
Stockton, CA   95206                  Processing                                           building 1,794
                                                                                           sq. ft.

723 15th Street                       Mark Flerchinger    11/02/2002      $20,400          Approx. 1.2             Yes
Clarkston, Washington 99403                                                                acres; building
                                                                                           3,750 sq. ft.

2020 E. Third Avenue                  Owned               N/A             N/A              Approx. 4 acres;        N/A
Anchorage, Alaska 99501                                                                    building 15,650
                                                                                           sq. ft.

3511 International Street             Airport Rentals     11/30/2009      $74,400          Approx. 1.5              No
Fairbanks, Alaska 99701                                                                    acres; building
                                                                                           8,500 sq. ft.


</TABLE>

                                       7
<PAGE>


     1. Net lease with payment of insurance,  property  taxes,  and  maintenance
costs paid by the  Company.

     2. Net lease with  payment of  insurance,  property  taxes and  maintenance
costs, including structural repairs, paid by the Company.

     3. Related party lease.


     The Company's  operating  facilities at July 31, 2002 were  separated  into
eight "hub" outlets and seven "sub-stores".  In addition,  the Company maintains
its  headquarters  operations in Vancouver,  Washington.  The hub stores are the
main distribution centers located in Auburn and Spokane,  Washington;  Portland,
Oregon; Sparks, Nevada;  Hayward,  Buena Park, and Sacramento,  California;  and
Anchorage,  Alaska;  and the  sub-stores are the smaller  facilities  located in
Mukilteo  and  Clarkston,  Washington;  Salem,  Oregon;  Santa  Rosa,  Stockton,
Redding, California; and Fairbanks, Alaska.

     The stores in  Springfield,  OR,  Pasco,  WA, and Yuba City, CA were closed
during  fiscal year 2002 and the  operations  combined  with the  operations  in
Salem, OR, Auburn, WA and Sacramento, CA respectively.

     All of the leased and owned  facilities used by the Company are believed to
be adequate in all material  respects for the needs of the Company's current and
anticipated business operations.



                                       8
<PAGE>


ITEM 3.           LEGAL PROCEEDINGS

     The Company is involved in various legal  proceedings  which are incidental
to the industry and for which certain matters are covered in whole or in part by
insurance  or,  otherwise,  the  Company has  recorded  accruals  for  estimated
settlements.  Management believes that any liability which may result from these
proceedings will not have a material  adverse effect on the Company's  business,
results of operations, and financial condition.


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

     On May 30,  2002,  the  Company  held its 2002 and 2001  Annual  meeting of
Stockholders (the "Annual  Meeting").  The directors holding office prior to the
date of the Annual Meeting,  Messrs.  C. Dean McLain,  Robert M. Rubin,  Syemour
Kessler, Allen Perres, and Irwin Pearl were nominated for election at the Annual
Meeting,  and all of such  persons  were  reelected  at the Annual  Meeting  for
another  one-year  term as  director.  The votes  recorded  for election of each
nominee for director were the following:

         Name                   For               Against           Abstention
         C. Dean McLain         2,855,987             6,762           94,038
         Robert M. Rubin        2,855,090             7,659           94,038
         Seymour Kessler        2,855,987             6,762           94,038
         Allen Perres           2,855,805             6,944           94,038
         Irwin Pearl            2,855,987             6,762           94,038

     Votes were also cast, and proposals approved, at the Annual Meeting for: i)
issuance of 600,000  shares of the  Company's  Common  Stock to the Rubin Family
Irrevocable  Trust, and ii) ratification of the appointment of Moss Adams LLP as
the Company's independent auditors for the 2002 fiscal year.


ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT (1)

<TABLE>
<CAPTION>


                  Name                    Officer Since      Age       Position Held With the Registrant
                  ----                    -------------      ---       ---------------------------------
<S>                                         <C>            <C>       <C>



                  C. Dean McLain              1993            49       Chairman, President, and
                                                                       Chief Executive Officer (2)

                  Mark J. Wright             1997             46       Vice President of Finance, Chief Financial
                                                                       Officer, Treasurer, and Secretary
</TABLE>

     (1) The  officers  serve for a term of one year and until their  successors
are elected.

     (2) Elected  Chairman in 1998,  Chief  Executive  Officer and  President in
1993.



                                       9
<PAGE>





                                                      PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     The  Company's  stock is traded on the  NASDAQ  SmallCap  Market  under the
symbol WPEC. The high and low closing prices for the Company's  common stock for
the years ended July 31, 2001 and July 31, 2002 were as follows:
<TABLE>
<CAPTION>

         Fiscal 2001                                                                      High             Low
         -----------                                                                      ----             ---
<S>                                                                                    <C>           <C>

         1st Quarter - August 1, 2000 through October 31, 2000                           $ 6.440       $ 2.000

         2nd Quarter - November 1, 2000 through January 31, 2001                         $ 4.594       $ 0.281

         3rd Quarter - February 1, 2001 through April 30, 2001                           $ 2.063       $ 0.550

         4th Quarter - May 1, 2001 through July 31, 2001                                 $ 1.500       $ 0.370

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

         1st Quarter - August 1, 2001 through October 31, 2001                          $  0.56        $ 0.17

         2nd Quarter - November 1, 2001 through January 31, 2002                        $  0.31        $ 0.10

         3rd Quarter - February 1, 2002 through April 30, 2002                          $  0.35        $ 0.16

         4th Quarter - May 1, 2002 through July 31, 2002                                $  0.32        $ 0.22

</TABLE>

     The  number of  shareholders  of record of the  Company's  Common  Stock on
October 1, 2002 was 512 and the number of  beneficial  holders of the  Company's
Common Stock is estimated by management to be approximately 1,200 holders.

     The Company has never paid cash  dividends  on its Common Stock and it does
not anticipate  that it will pay cash dividends or alter its dividend  policy in
the  foreseeable  future.  The payment of dividends by the Company on its Common
Stock  will  depend on its  earnings  and  financial  condition,  and such other
factors as the Board of  Directors  of the Company may  consider  relevant.  The
Company  currently  intends to retain its  earnings to assist in  financing  the
development of its business.



                                       10
<PAGE>


ITEM 6.           SELECTED FINANCIAL DATA

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

(Amounts in thousands, except per share data)

                                                                       Fiscal Year Ended July 31,
                                                      2002           2001           2000            1999           1998
                                                      ----           ----           ----            ----           ----
<S>                                           <C>            <C>            <C>             <C>            <C>
Net sales                                         $107,988       $139,902       $155,637        $163,650      $ 163,478
Gross profit                                    $    9,746       $  9,820      $  11,538       $  14,594      $  19,176
    (% of sales)                                      9.0             7.0            7.4            8.9            11.7
Selling, general and administrative             $   10,431       $ 12,840      $  13,534       $  12,586      $  12,092
    (% of sales)                                      9.7             9.2            8.7            7.7             7.4
(Loss) income before income taxes                   (9,839)    $   (7,537)     $  (6,419)      $  (2,916)     $   3,193
    (% of sales)                                     (9.1)           (5.4)          (4.1)          (1.8)            2.0
Tax rate (%)                                          0.8             0.2           12.0          (38.0)           42.0
Net (loss) income                                $  (9,887)    $   (7,842)     $  (7,198)      $  (1,815)     $   1,839

Net (loss) income per common share             $     (2.47)    $    (2.30)     $   (2.18)      $   (0.55)     $    0.53
Shares used in basic earnings
    per share calculations                           4,003          3,403          3,306           3,303          3,473

Net (loss) income per
    diluted common share                       $    (2.47)    $     (2.30)    $    (2.18)      $  (0.55)      $    0.49
Shares used in diluted earnings
    per share calculations                           4,003          3,403          3,306           3,303          3,772



Working capital deficit                        $   (21,850)    $  (20,102)     $ (15,910)      $ (16,117)     $  (6,339)
Long-term debt (including capital leases
   and deferred lease income)                  $     3,469     $    3,469      $  10,796       $  11,124      $   7,457
Stockholders' (deficit) equity                 $    (3,136)    $    6,751      $  14,381       $  21,322      $  23,138
Total assets                                   $    62,117     $   93,092      $ 122,710       $ 136,594      $ 138,766

</TABLE>



                                       11
<PAGE>



     ITEM 7.  MANAGEMENT'S  DISCUSSION  AND ANALYSIS OF FINANCIAL  CONDITION AND
RESULTS OF OPERATIONS

     The following  discussion and analysis  should be read in conjunction  with
the Consolidated  Financial  Statements and Notes thereto appearing elsewhere in
this annual report.  Certain matters  discussed  herein contain  forward-looking
statements that are subject to risks and  uncertainties  that could cause actual
results to differ  materially from those projected,  including,  but not limited
to, projected sales levels,  expense reductions,  reduced interest expense,  and
increased inventory turnover, one or more of which may not be realized.

General

     The Company acquired its first seven retail distribution stores in November
1992.  The  Company  expanded  to 18 stores in four  states by the end of fiscal
1996, to 23 stores in five states by the end of fiscal 1997, and to 27 stores in
five states by the end of fiscal  1998.  In fiscal  1999,  the Company  closed 3
stores. At the end of fiscal 2002, the Company had 15 stores in operation.

     For the last three years,  the Company has concentrated on consolidating or
closing stores to improve operating efficiency and profitability. Store activity
for the last three years is summarized as follows:
<TABLE>
<CAPTION>

------------ ----------------------- ---------------- ----------------- ---------------- --------------------
  Fiscal        No. of Stores at      No. of Stores    No. of Stores     No. of Stores    No. of Stores at
   Year        Beginning of Year         Opened         Closed/Sold        Acquired          End of Year
------------ ----------------------- ---------------- ----------------- ---------------- --------------------
<S>        <C>                     <C>              <C>               <C>              <C>
2000                   24                   2                5                 0                 21
------------ ----------------------- ---------------- ----------------- ---------------- --------------------
2001                   21                   0                3                 0                 18
------------ ----------------------- ---------------- ----------------- ---------------- --------------------
------------ ----------------------- ---------------- ----------------- ---------------- --------------------
2002                   18                   0                3                 0                 15
------------ ----------------------- ---------------- ----------------- ---------------- --------------------

</TABLE>


     The Company is evaluating  additional store closures or sales. In addition,
in the future the Company may open and acquire additional  distribution  outlets
for Case products,  as well as for products which may be  manufactured  by other
companies as circumstances  permit. The Company's results can be impacted by the
timing of,  and costs  incurred  in  connection  with,  new store  openings  and
acquisitions as well as the costs of closing existing stores.

Results of Operations

Fiscal Year 2002, as Compared with Fiscal Year 2001

     The Company  reported net revenue for fiscal 2002 of $107,988,000  compared
with net revenue of $139,902,000  for fiscal 2001.  Stores opened longer than 12
months showed an overall revenue decrease of 7.7 percent from prior year revenue
reflecting  a  general  softening  in  economic   conditions  in  the  northwest
(resulting  in lower sales volume) along with  increased  competitive  pressures
(which negatively  affected average sales prices of equipment the Company sold).
The Company  consolidated three of its facilities during fiscal 2002 into larger
facilities in the region in order to reduce costs and leverage existing,  larger
facilities  in the  region to cover  the  territories  previously  served by the
closed facilities.

     The Company had a net loss for fiscal 2002 of  $9,887,000,000  or $2.47 per
share  compared with a net loss of $7,842,000 or $2.30 per share in fiscal 2001.
Included  in the net loss for  fiscal  year  2002 are  fourth  quarter  non-cash
charges of  $3,796,000  for inventory  allowances in light of decreasing  market
prices for aged equipment,  a $2,525,000 write-off of all goodwill, a $1,983,000
write-off of disputed  receivables  from  vendors,  and a $953,000  write-off of
fixed assets.  In the fourth quarter of fiscal 2001,  the Company  recognized an
inventory   charge  of  approximately   $4,106,000  to  provide   allowances  in
recognition  of  decreasing  market prices for aged  equipment  inventory in the
fourth quarter.

     Gross  margin was 9.0 percent  during  fiscal 2002 which is higher than the
7.0 percent gross margin during  fiscal 2001.  Margins  increased in fiscal 2002
due mainly to  management  placing a high  priority on improving  overall  gross
margins.  Management  continues to place a high  priority on  improving  overall
gross margins by working to increase  higher margin service,  parts,  and rental
revenues,  focusing more sales efforts on specialty and niche product lines, and
by obtaining higher prices for new and used equipment.



                                       12
<PAGE>

     Selling,  general,  and  administrative  expenses  were $ 10,431,000 or 9.7
percent of revenues for fiscal 2002  compared to  $12,840,000  or 9.2 percent of
sales for fiscal 2001.  The  increase in selling,  general,  and  administrative
expenses as a percent of revenues  resulted in part from the decrease in revenue
volume and due to the costs of store closures during the year.

     Interest  expense for fiscal 2002 was  $4,114,000,  down from $5,982,000 in
fiscal  2001 due to a  combination  of a decrease  in  interest  rates and lower
inventory levels. The Company has a $50 million inventory flooring and operating
line of  credit  facility  through  Deutsche  Financial  Services  ("DFS").  The
agreement  was amended in the first  quarter of fiscal 2001 with terms  maturing
December  31,  2001 and with a floating  rate based on prime with rates  between
0.75%  under  prime to 2.25%  over prime  depending  on the amount of total debt
leverage of the Company.  Management has used this facility to allow the Company
to take  advantage of more  purchase  discounts  and to lower  overall  interest
expense and to provide  operating  capital  liquidity.  As of June 21, 2002, the
Company  entered into a Forbearance  Agreement with DFS under the terms of which
DFS raised the  interest  rate to prime plus 4% while the  Company is in default
and  required  the  Company to pay $45,000  fee to DFS for the  forbearance.  In
addition,  under the terms of the Forbearance Agreement, the Company is required
to meet certain financial  covenants and meet certain debt reduction  schedules.
See Liquidity and Capital Resources below for a description of the status of the
DFS facility.

Fiscal Year 2001, as Compared with Fiscal Year 2000

     The Company  reported net revenue for fiscal 2001 of $139,902,000  compared
with net revenue of $155,637,000  for fiscal 2000.  Stores opened longer than 12
months showed an overall revenue decrease of 7.4 percent from prior year revenue
reflecting a general  softening in economic  conditions in the  northwest  along
with increased  competitive  pressures.  The Company  consolidated  three of its
facilities  during fiscal 2000 into larger  facilities in the region in order to
reduce costs and leverage existing, larger facilities in the region to cover the
territories previously served by the closed facilities.

     The Company had a net loss for fiscal 2001 of $7,842,000 or $2.30 per share
compared with a net loss of $7,198,000 or $2.18 per share in fiscal 2000. In the
fourth  quarter of fiscal 2001,  the Company  recognized an inventory  charge of
approximately  $4,106,000  to provide  allowances in  recognition  of decreasing
market  prices for aged  equipment  inventory in the fourth  quarter.  In fiscal
2000, the Company  recognized a fourth quarter inventory charge of approximately
$2,547,000 to provide  allowances to recognize  decreasing market prices on aged
equipment  inventory in the last half of fiscal 2000.  In addition,  the Company
recorded a valuation allowance of $2,956,000 related to its deferred tax asset.

     Gross margin was 7.0 percent during fiscal 2001 which is lower than the 7.4
percent gross margin during  fiscal 2000.  Margins  decreased in fiscal 2001 due
primarily to continued  competitive  pressures and the fourth quarter  equipment
reserve.  Management  continues to place a high  priority on  improving  overall
gross margins by working to increase  higher margin service,  parts,  and rental
revenues,  focusing more sales efforts on specialty and niche product lines, and
by obtaining higher prices for new equipment.

     Selling,  general,  and  administrative  expenses were  $12,840,000  or 9.2
percent of revenues for fiscal 2001  compared to  $13,534,000  or 8.7 percent of
sales for fiscal 2000.  The  increase in selling,  general,  and  administrative
expenses  as a percent of  revenues  resulted  in part from lower than  expected
revenue levels and the costs of closing stores during the year.

     Interest  expense for fiscal 2001 was  $5,982,000,  down from $6,069,000 in
fiscal  2000 due in part to a decrease  in  interest  rates and lower  inventory
levels.  The Company has a $50 million inventory  flooring and operating line of
credit  facility  through DFS. The facility is a floating rate facility at rates
as low as 50 basis  points  under the prime  rate.  Prime  interest  rates  have
increased from those in fiscal 1999.  Management has used this facility to allow
the Company to take  advantage of more  purchase  discounts and to lower overall
interest expense.


                                       13
<PAGE>

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 fleets,  store openings,  and
acquisitions  of additional  stores.  The Company's  primary  source of internal
liquidity  has been from its  operations.  As more fully  described  below,  the
Company's  primary sources of external  liquidity are equipment  inventory floor
plan financing  arrangements provided to the Company by the manufacturers of the
products the Company sells, and DFS and, with respect to  acquisitions,  secured
loans from Case.

     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
July 31,  2002,  the Company was  indebted  under  manufacturer  provided  floor
planning arrangements in the aggregate amount of $10,966,000.

     The Company has a $50 million  inventory  flooring  and  operating  line of
credit through DFS. Amounts are advanced against the Company's assets, including
accounts receivable, parts, new equipment, rental fleet, and used equipment. The
agreement  was amended as of October 31, 2000 with terms  maturing  December 31,
2001 and with a floating  rate based on prime with  rates  between  0.75%  under
prime to 2.25% over prime  depending on the amount of total debt leverage of the
Company.  This  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  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,  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. Borrowings are collateralized
by the Company's assets, including accounts receivable, parts inventory, new and
used  equipment  inventory  and rental  fleet  equipment.  As of July 31,  2002,
approximately $41,322,000 was outstanding under the DFS credit facility.

     The  agreement  was amended in the first  quarter of fiscal 2001 with terms
maturing  December  31, 2001 and with a floating  rate based on prime with rates
between  0.75% under prime to 2.25% over prime  depending on the amount of total
debt leverage of the Company.  As of June 21, 2002,  the Company  entered into a
Forbearance  Agreement with DFS under the terms of which DFS raised the interest
rate to prime plus 4% while the Company is in default and  required  the Company
to pay a $45,000 fee to DFS for the forbearance. In addition, under the terms of
the  Forbearance  Agreement,  the Company is required to meet certain  financial
covenants  and meet  certain debt  reduction  schedules.  At July 31, 2002,  the
Company  was in  technical  default of the DFS Loan  Agreement.  The Company has
requested  but has not obtained a waiver  letter for the period July 31, 2002 or
thereafter.  Although DFS has not called the debt due to such defaults, there is
no guarantee that DFS will not call this debt at any time after July 31, 2002.

     During the year ended July 31, 2002, cash and cash equivalents decreased by
$765,000.  The Company had positive cash flow from operating  activities  during
the year of $ 13,479,000.  The  Company's  cash flow from  operating  activities
consisted  primarily  of  an  inventory   reduction  of  $14,715,000,   accounts
receivable  reduction of $3,991,000,  and depreciation of $8,315,000 offset by a
decrease in accounts payable of $3,990,000. Purchases of fixed assets during the
period were related mainly to the ongoing  replacement of aged operating assets.
The Company paid down its short-term financing by $12,075,000 during the year.

     The Company's cash and cash equivalents was approximately $5,000 as of July
31, 2002.  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.


                                       14
<PAGE>


Risk Factors

Inventory

     Controlling  inventory is a key  ingredient  to the success of an equipment
distributor  because  the  equipment  industry  is  characterized  by long order
cycles, high ticket prices, and the related exposure to "flooring" interest. The
Company's  interest  expense may  increase if  inventory is too high or interest
rates rise. The Company manages its inventory through  company-wide  information
and inventory sharing systems wherein all locations have access to the Company's
entire inventory.  In addition,  the Company closely monitors inventory turnover
by product  categories  and places  equipment  orders based upon  targeted  turn
ratios.

Inflation

     All of the products and services provided by the Company are either capital
equipment or included in capital equipment,  which are used in the construction,
agricultural,  and  industrial  sectors.  Accordingly,  the Company's  sales are
affected by inflation or  increased  interest  rates which tend to hold down new
construction,  and consequently adversely affect demand for the construction and
industrial  equipment  sold and rented by the  Company.  In  addition,  although
agricultural  equipment  sales are less than 2% of the Company's total revenues,
factors adversely affecting the farming and commodity markets also can adversely
affect the Company's agricultural equipment related business.

Economic Conditions

     The Company's business can also be affected by general economic  conditions
in its  geographic  markets as well as  general  national  and  global  economic
conditions that affect the construction,  agricultural,  and industrial sectors.
An erosion in North American and/or other  countries'  economies could adversely
affect the Company's  business.  Market  specific  factors could also  adversely
affect one or more of the Company's target markets and/or products.

Seasonality; Fluctuations in Results

     Historically,  sales of our products have varied substantially from quarter
to quarter due to the seasonality of the  construction  business.  We attempt to
accurately forecast orders for our products and commence purchasing prior to the
receipt of such orders. However, it is highly unlikely that we will consistently
accurately  forecast the timing and rate of orders.  This aspect of our business
makes  our  planning  inexact  and,  in  turn,  affects  our  shipments,  costs,
inventories, operating results and cash flow for any given quarter. In addition,
our  quarterly   operating   results  are  affected  by   competitive   pricing,
announcements  regarding new product developments and cyclical conditions in the
industry.  Accordingly,  we may experience  wide quarterly  fluctuations  in our
operating  performance and  profitability,  which may adversely affect our stock
price even if our year-to-year performance is more stable, which it also may not
be.  In  addition,  many  of  our  products  require  significant  manufacturing
lead-time,  making it difficult  to order  products on short  notice.  If we are
unable  to  satisfy  unexpected  customer  orders,  our  business  and  customer
relationships could suffer and result in the loss of future business.

Inventory Lead-Times; Potential Write-Downs

     To be  competitive  in certain of its  markets,  particularly  markets  for
products  with  long  lead  time,  the  Company  will be  required  to  build up
inventories of certain  products in anticipation of future orders.  There can be
no assurance that the Company will not experience problems of obsolete,  excess,
or  slow-moving  inventory  if it is not able to  properly  balance  inventories
against  the  prospect  of future  orders,  and the  Company's  operations  may,
therefore,  be adversely affected by inventory write-downs from time to time. In
periods of general economic slowdown or slowdowns in the construction  sector we
could be especially affected by such problems.

Potential Write-downs of Goodwill and Intangibles

     Goodwill and other intangible  assets are reviewed for impairment  whenever
an event or change in  circumstances  indicates that the carrying amount may not
be recoverable. If the carrying value of the Company's intangible assets exceeds
the expected  undiscounted  future cash flows, a loss would be recognized to the
extent the carrying  amount of assets  exceeds their fair values.  This loss may
negatively impact the Company's results of operation.



                                       15
<PAGE>

Competition

     Many of the Company's existing and potential competitors have substantially
greater marketing,  financial,  and service resources than we have. In addition,
some of the Company's  competitors have broader product  offerings,  placing the
Company at a disadvantage to some of its competitors.  In addition,  the Company
believes that some of its competitors have obtained and maintained business that
loses money - "loss leading" - in order to maintain a competitive advantage with
regard to specific customers or products.  If the Company's  competitors were to
use such  tactics in the  future,  the Company  would be unable to maintain  its
market position without incurring a negative impact on its profitability.

Cyclicality of Industry

     The construction equipment industry is always very competitive. Advances in
technology  may reduce the cost for  current or  potential  competitors  to gain
market share,  particularly for lower priced products.  We cannot guarantee that
sales of our products will  continue at current  volumes or prices in any event,
but especially if our current  competitors or new market entrants  introduce new
products with better  features,  better  performance,  or lower prices or having
other  characteristics  that are  more  attractive  than  our  own.  Competitive
pressures or other factors also may result in significant price competition that
could have a material adverse effect on our results of operations.

Dependence Upon Third-Party Manufacturers

     All of our products are supplied by third  parties.  From time to time,  we
experience delays and disruptions in our supply chain. To date, these delays and
disruptions have not materially adversely affected our business,  but they could
do so in the future.  Wherever possible,  we try to assure ourselves of adequate
inventory supply, but we do not always succeed. To the extent that we experience
significant supply or quality control problems with our vendors,  these problems
can have a  significant  adverse  effect on our ability to meet future  delivery
commitments to our customers.

     Currently,  Case Corporation  provides  approximately  51% of our products.
Case dealer  contracts  are  non-exclusive  and  terminable by either party upon
minimum notice. There can be no assurances that Case will continue to supply the
Company with products or continue its relationship  with the Company.  If we are
unable to obtain Case  products or to continue our  relationship  with Case,  we
will likely  experience  reductions  in product and service  sales and increased
expenses. Our operations will be negatively affected if we experience inadequate
supplies of any key products.

Recent Accounting Pronouncements

     On June 29, 2001,  the Financial  Accounting  Standards  Board (FASB or the
"Board") unanimously voted in favor of issuing two Statements: Statement No. 141
(FAS141),  Business Combinations,  and Statement No. 142 (FAS 142), Goodwill and
OtherIntangible  Assets. FAS 141 primarily addresses the accounting for the cost
of an acquired  business (i.e.,  the purchase price  allocation),  including any
subsequent  adjustments  to its  cost.  FAS  141  supercedes  APB  16,  Business
Combinations. The most significant changes made by FAS 141 are:

          - It  requires  use of the  purchase  method  of  accounting  for  all
     business combinations,  thereby eliminating use of the pooling-of-interests
     method.

          - It provides new criteria for determining  whether  intangible assets
     acquired in a business  combination  should be recognized  separately  from
     goodwill.

     FAS 141 is  effective  for all  business  combinations  (as  defined in the
Statement)  initiated  after  June 30,  2001 and for all  business  combinations
accounted  for by the  purchase  method that are  completed  after June 30, 2001
(that is, the date of acquisition is July 1, 2001, or later).

     FAS 142 primarily  addresses  the  accounting  for goodwill and  intangible
assets subsequent to their acquisition (i.e., the post-acquisition  accounting).
FAS 142 supercedes APB 17, Intangible Assets. The most significant  changes made
by FAS 142 are:

          - Goodwill and indefinite  lived  intangible  assets will no longer be
     amortized and will be tested for impairment at least  annually.

          - Goodwill  will be tested at least  annually  at the  reporting  unit
     level.

          - The amortization period of intangible assets with finite lives is no
     longer limited to forty years


                                       16
<PAGE>


     FAS 142 is effective for fiscal years  beginning after December 15, 2001 to
all goodwill and other intangible assets recognized in an entity's  statement of
financial position at that date,  regardless of when those assets were initially
recognized.  Early  application  is  permitted  for  entities  with fiscal years
beginning after March 15, 2001 provided that the first interim period  financial
statements have not been issued previously.  In all cases, the provisions of FAS
142 should be applied at the beginning of a fiscal year. Retroactive application
is not permitted.

     On October 3, 2001,  the FASB  issued  Statement  of  Financial  Accounting
Standards  No. 144  "Accounting  for the  Impairment  or Disposal of  Long-Lived
Assets"  ("SFAS  144").  SFAS  144  supersedes  SFAS  121  "Accounting  for  the
Impairment of Long-Lived  Assets and for  Long-Lived  Assets to Be Disposed Of."
SFAS 144 applies to all long-lived  assets (including  discontinued  operations)
and  consequently  amends  Accounting  Principles Board Opinion No. 30 (APB 30),
"Reporting  Results of  Operations  -  Reporting  the  Effects of  Disposal of a
Segment of a Business,  and  Extraordinary,  Unusual and Infrequently  Occurring
Events and  Transaction."  SFAS 144 develops one accounting model for long-lived
assets that are to be disposed of by sale.  SFAS 144  requires  that  long-lived
assets that are to be disposed of by sale be measured at the lower of book value
or fair value less cost to sell.  Additionally,  SFAS 144  expands  the scope of
discontinued  operations to include all components of an entity with  operations
that  (1) can be  distinguished  from  the  rest of the  entity  and (2) will be
eliminated from the ongoing operations of the entity in a disposal  transaction.
The provisions of this Statement are effective for financial  statements  issued
for fiscal years  beginning  after December 15, 2001, and interim periods within
those fiscal years, with early application encouraged.

Dividend Policy

     The Company has never paid cash  dividends  on its Common Stock and it does
not anticipate  that it will pay cash dividends or alter its dividend  policy in
the  foreseeable  future.  The payment of dividends by the Company on its Common
Stock  will  depend on its  earnings  and  financial  condition,  and such other
factors as the Board of  Directors  of the Company may  consider  relevant.  The
Company  currently  intends to retain its  earnings to assist in  financing  the
growth of its business.

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 believe 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. The Company believes that EMAC has since ceased its business
operations  and is  unable  to meet the  conditions  for  closing  the  proposed
transaction and that, therefore, this transaction will not be consummated.

Forward Looking Statements

     Information included within this section relating to growth projections and
future results and events constitutes forward-looking statements. Actual results
in future  periods may differ  materially  from the  forward-looking  statements
because of a number of risks and  uncertainties,  including  but not  limited to
fluctuations in the  construction,  agricultural,  and industrial  sectors;  the
success of the  Company's  entry into new markets;  the success of the Company's
expansion of its equipment  rental  business;  rental industry  conditions,  and
competitors; competitive pricing; the Company's relationship with its suppliers;
relations  with the Company's  employees;  the  Company's  ability to manage its
operating   costs;  the  continued   availability  of  financing;   governmental
regulations and environmental matters; risks associated with regional, national,
and  world  economies;   and  implementation  and  consummation  of  the  merger
transaction  (see  Letter  of  Intent  to  Merge  above).  Any   forward-looking
statements should be considered in light of these factors.


                                       17
<PAGE>




ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


     The  Company is  exposed to market  risk from  changes in  interest  rates.
Market risk is the potential  loss arising from adverse  changes in market rates
and prices such as interest  rates.  For fixed rate debt,  interest rate changes
affect the fair value of  financial  instruments  but do not impact  earnings or
cash flows.  Conversely for floating rate debt,  interest rate changes generally
do not affect  the fair  market  value but do impact  future  earnings  and cash
flows,  assuming other factors are held constant.  At July 31, 2002, the Company
had variable rate floor plan  payables,  notes  payable,  and long-term  debt of
approximately  $50.6  million.  Holding other  variables  constant,  the pre-tax
earnings and cash flow impact for the next year  resulting from a one percentage
point  increase  in interest  rates would be  approximately  $0.5  million.  The
Company's policy is not to enter into derivatives or other financial instruments
for trading or speculative purposes.


                                       18
<PAGE>


ITEM 8.        FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>

     The following  financial  statements and financial schedule are attached to
this Report on Form 10-K following Part IV, Item 14:
<S>                                                                          <C>

         Consolidated Statements of Operations for
             the years ended July 31, 2002, 2001, and 2000............          F-1
         Consolidated Balance Sheets as of July 31, 2002 and 2001.....          F-2
         Consolidated Statements of Stockholders' Equity
             for the years ended July 31, 2002, 2001, and 2000........          F-3
         Consolidated Statements of Cash Flows for
             the years ended July 31, 2002, 2001, and 2000............          F-4
         Notes to Consolidated Financial Statements...................          F-5
         Report of Independent Accountants............................          F-17, F-18

Financial Statement Schedule:

         Report of Independent Accountants
            - Financial Statement Schedule............................          F-18, F-19
         Schedule II - Valuation and Qualifying Accounts..............          F-19
</TABLE>




     ITEM 9. CHANGES IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON ACCOUNTING AND
FINANCIAL DISCLOSURE

                  None.




                                       19
<PAGE>



PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

     Information with respect to Directors of the Company is incorporated herein
by reference to "Proposal 1: Election of Directors"  continuing  through "Report
of the Compensation Committee on Executive  Compensation" in the Company's Proxy
Statement  for the  Annual  Meeting  of  Shareholders  to be filed  pursuant  to
Regulation  14A not later than 120 days after the end of the fiscal year covered
by this Form 10-K.  The  information  required by this Item with  respect to the
Company's Executive Officers follows Part I, Item 4A of this document.

ITEM  11.         EXECUTIVE COMPENSATION

     Information with respect to Executive  Compensation is incorporated  herein
by reference to  "Compensation  of Executive  Officers" in the  Company's  Proxy
Statement  for the  Annual  Meeting  of  Shareholders  to be filed  pursuant  to
Regulation  14A not later than 120 days after the end of the fiscal year covered
by this Form 10-K.

ITEM 12. PRINCIPAL STOCKHOLDERS

     Information with respect to Security Ownership of Certain Beneficial Owners
and  Management is  incorporated  herein by reference to "Security  Ownership of
Certain  Beneficial  Owners" and "Security  Ownership of Directors and Executive
Officers"  in  the  Company's   Proxy   Statement  for  the  Annual  Meeting  of
Shareholders  to be filed  pursuant  to  Regulation  14A not later than 120 days
after the end of the fiscal year covered by this Form 10-K.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Information with respect to Certain  Relationships and Related Transactions
is  incorporated  herein by reference  to "Board  Compensation,  Attendance  and
Committees,  Certain  Transactions"  in the  Company's  Proxy  Statement for the
Annual Meeting of  Shareholders to be filed pursuant to Regulation 14A not later
than 120 days after the end of the fiscal year covered by this Form 10-K.


                                       20
<PAGE>


PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
<S>    <C>      <C>                                                                  <C>
(a)      1.       Financial Statements.


                  Consolidated Statements of Operations for
                       the years ended July 31, 2002, 2001, and 2000............           F-1
                  Consolidated Balance Sheets as of   July 31, 2002 and 2001....           F-2
                  Consolidated Statements of Stockholders' Equity
                       for the years ended July 31, 2002, 2001, and 2000........           F-3
                  Consolidated Statements of Cash Flows for
                       the years ended July 31, 2002, 2001, and 2000............           F-4
                  Notes to Consolidated Financial Statements....................           F-5
                  Report of Independent Accountants.............................           F-16, F-17

         2.       Financial Statement Schedule.

                  Report of Independent Accountants
                        - Financial Statement Schedule..........................           F-18
                  Schedule II - Valuation and Qualifying Accounts...............           F-19

         3.       Exhibits.

</TABLE>

<PAGE>

   Exhibit
   Number   Description

     3.1 Certificate of Incorporation of Registrant. (2)

     3.2 By-laws of Registrant. (2)

     10.1 1995 Employee Stock Option Plan. (3)

     10.2  Second  Amended  and  Restated  Stock  Option  Plan for  Non-Employee
Directors. (3)

     10.3 Case New Dealer Agreement Package. (1)

     10.4 Lease Agreement--Hayward, California. (2)

     10.5 Lease Agreement--Auburn, Washington. (7)

     10.6 Loan Agreement,  dated January 17, 1997,  between  Registrant and Case
Credit Corp. including related promissory notes. (5)

     10.7  Security  Agreement,  dated  January 17, 1997,  made by Registrant in
favor of Case Credit Corporation to secure payment for and collateralized by all
assets acquired by Registrant from Sahlberg Equipment, Inc. (5)

     10.8  Loan  and  Security  Agreement  dated  as of  June  5,  1997  between
Registrant and Deutsche Financial Services Corporation. (6)

     10.9  Asset  Purchase  Agreement,  dated  April  30,  1998,  between  Yukon
Equipment, Inc. and Registrant. (8)

     10.10 Employment  Agreement dated May 1, 1998 between Maurice Hollowell and
Registrant. (8)

     10.11 Employment  Agreement dated August 1, 2000 between C. Dean McLain and
Registrant.

     10.12 Consulting  Agreement dated August 1, 2000 by and between  Registrant
and Robert M. Rubin.

     10.13  Commercial Lease dated October 1, 2000 between  McLain-Rubin  Realty
Company III, LLC and Registrant for Yuba City, California facility.

     10.14  Commercial Lease dated October 1, 2000 between  McLain-Rubin  Realty
Company III, LLC and Registrant for Sacramento, California facility.

     10.15 Commercial  Lease,  dated as of October 1, 2000 between  McLain-Rubin
Realty Company, LLC and Registrant for the Sparks, Nevada facility.

     10.16  Commercial  Lease,  dated as of April 1, 2001  between  McLain-Rubin
Realty Company II, LLC and Registrant  for the Vancouver,  Washington  corporate
office.

     21. Subsidiaries of the Company.

     23. Consent of Independent Accountants.

          (1) Filed as an Exhibit  to the AUGI  Annual  Report on Form 10-K,  as
     filed on October 29, 1993 and incorporated herein by reference thereto.

          (2)  Filed  as an  Exhibit  to  Amendment  No.  1 to the  Registrant's
     Registration  Statement on Form S-1, filed on May 16, 1995 and incorporated
     herein by reference thereto. (Registration No. 33-89762).

          (3) Filed as an Exhibit to the Registrant's  Registration Statement on
     Form S-8, filed on September 18, 1998 and incorporated  herein by reference
     thereto. (Registration No. 33-63775).
<PAGE>
          (4) Filed as an  Exhibit to the  Quarterly  Report on Form 10-Q of the
     Registrant,  as filed on June 11, 1997 and incorporated herein by reference
     thereto.

          (5)  Filed as an  Exhibit  to the  Annual  Report  on Form 10-K of the
     Registrant,  as filed  on  October  28,  1996 and  incorporated  herein  by
     reference thereto.

          (6)  Filed as an  Exhibit  to the  Annual  Report  on Form 10-K of the
     Registrant,  as filed  on  October  29,  1998 and  incorporated  herein  by
     reference thereto.

          (7) Filed as an  Exhibit to the  Quarterly  Report on Form 10-Q of the
     Registrant,  as filed on June 14, 1999 and incorporated herein by reference
     thereto.

          (8) Filed as an Exhibit to Form 8-K of the Registrant, as filed on May
     11, 1998 and incorporated herein by reference thereto.

     (b) Reports on Form 8-K.

     The Company  field a current  report on Form 8-K on May 14, 2001  regarding
the  Company's  conditional  closing of its merger with Supply  Point,  Inc. The
Company filed a current  report on Form 8-K on September 24, 2001  regarding the
Company  signing  an  agreement  to  sell  substantially  all of its  assets  to
e-machinery.net, Inc.

     (c) Exhibits

          See (a)(3) above.

     (d) Additional Financial Statement Schedules

          See (a)(2) above.

<PAGE>

<TABLE>
<CAPTION>



                                                  WESTERN POWER & EQUIPMENT CORP.
                                               CONSOLIDATED STATEMENTS OF OPERATIONS
                                               (in thousands, except per share data)



                                                                                  Year Ended July 31,
                                                                         2002              2001             2000
                                                                         ----              ----             ----
<S>                                                               <C>                <C>             <C>

Net revenue                                                          $107,988          $139,902         $155,637

Cost of goods sold                                                     98,242           130,082          144,099
                                                                       ------           -------          -------

Gross profit                                                            9,746             9,820           11,538

Selling, general and administrative expenses                           10,431            12,840           13,534
                                                                       ------            ------           ------

                                                                         (685)            (3020)          (1,996)
Other income (expense):
    Interest expense                                                   (4,114)           (5,982)          (6,069)
    Other income (expense)                                             (5,040)            1,465            1,646
                                                                       ------             -----            -----

Loss before income taxes                                               (9,839)           (7,537)          (6,419)

Provision (benefit) for income taxes                                       48               305              779
                                                                           --               ---              ---
Net loss                                                              $(9,887)         $ (7,842)        $  (7,198)
                                                                      =======          ========         =========

Basic loss per common share                                         $   (2.47)        $   (2.30)      $    (2.18)
                                                                    =========         =========       ==========

Average Outstanding Common Shares
     for Basic EPS                                                      4,003             3,403            3,306
                                                                        =====             =====            =====


Diluted loss per common share                                       $   (2.47)        $   (2.30)      $    (2.18)
                                                                    =========         =========       ==========

Average Outstanding Common Shares
     And Equivalents for Diluted  EPS                                   4,003             3,403            3,306
                                                                        =====             =====            =====


</TABLE>




          See accompanying notes to consolidated financial statements.


                                      F-1
<PAGE>

<TABLE>
<CAPTION>





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

                                                                                July 31,              July 31,
                                                                                    2002              2001
                                                                                    ----              ----
<S>                                                                       <C>                  <C>

ASSETS
Current assets:
    Cash and cash equivalents                                               $          5          $    770
    Accounts receivable, less allowance for
      doubtful accounts of $646 and $948                                          10,304            14,295
    Inventories                                                                   26,915            44,867
    Prepaid expenses                                                                  48               298
    Note Receivable Current                                                          122                -0-
    Deferred income taxes                                                          2,541             2,541
                                                                                   -----             -----
        Total current assets                                                      39,935            62,771

Fixed assets (net):
    Property, plant and equipment                                                  3,434             5,584
    Rental equipment fleet                                                        18,696            22,027
                                                                                  ------            ------
       Total fixed assets                                                         22,130            27,611

Intangibles and other assets, net of accumulated
         amortization of $2,650 and $808                                              52             2,720
                                                                                      --             -----
        Total assets                                                             $62,117           $93,102
                                                                                 =======           =======

LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
    Borrowings under floor plan financing                                        $10,974           $14,237
    Short-term borrowings                                                         41,322            53,384
    Convertible Debt                                                                 218               182
    Accounts payable                                                               7,600            11,591
    Accrued payroll and vacation                                                     659             1,754
    Other accrued liabilities                                                        985             1,716
    Capital lease obligations                                                         26                18
                                                                                  ------            ------
        Total current liabilities                                                 61,784            82,882

Deferred income taxes                                                              2,541             2,541
Capital lease obligations                                                            928               920
Long-term borrowings                                                                  -0-                8
                                                                                 -------          --------
        Total liabilities                                                         65,253           108,329

Commitments and contingencies

Stockholders' equity:
    Preferred stock-10,000,000 shares authorized; none outstanding   -0-              -0-
    Common stock, $.001 par value - Authorized, 20,000,000 shares
        Outstanding, 4,003,162 shares and 3,403,162 shares, respectively               4                 4
    Additional paid-in capital                                                    15,894            15,894
    Accumulated deficit                                                          (18,190)           (8,303)
    Less common stock in treasury, at cost (130,300 shares)                         (844)             (844)
        Total stockholders' (deficit) equity                                      (3,136)            6,751
                                                                                  ------             -----
        Total liabilities and stockholders' equity                             $  62,117           $93,102
                                                                               =========           =======

</TABLE>

          See accompanying notes to consolidated financial statements.



                                      F-2
<PAGE>


                         WESTERN POWER & EQUIPMENT CORP.
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                             (Dollars in thousands)


<TABLE>
<CAPTION>

                                 Common Stock         Additional                                          Total
                                Number                  Paid-in        Accumulated     Treasury        Stockholders'
                             of Shares      Amount      Capital        Deficit            Stock     Equity (Deficit)
                             ---------      ------      -------        -------            -----     ----------------
<S>                        <C>          <C>           <C>            <C>          <C>                   <C>

Balance at
    July 31, 1999            3,303,162    $     4       $ 16,072        $  6,738     $    (1,491)             $ 23,138

Issuance of Treasury
Stock                           50,000                                       (67)            323                   256

Net loss                          -             -           -             (7 198)           -                   (7,198)
                            -----------      -----      --------        ---------        ---------            ---------
Balance at
    July 31, 2000            3,353,162          4         16,005            (460)         (1,168)               14,381

Issuance of Treasury
Stock                           50,000                      (111)                            324                   213


Net loss                         -              -            -            (7,842)           -                   (7,842)
                            -----------      -----      --------        ---------        ---------            ---------
Balance at
    July 31, 2001            3,403,162          4         15,894          (8,303)           (844)                6,751

Issuance of Stock               600,00

Net loss                                                                  (9,887)                               (9,887)
                            -----------      -----      --------        ---------        ---------            ---------
Balance at
    July 31, 2002            4,003,162   $      4       $ 15,894     $   (18,190)      $     (844)          $   (3,136)
                            ===========      =====      ========        =========       ==========            =========


</TABLE>


          See accompanying notes to consolidated financial statements.



                                      F-3
<PAGE>


                         WESTERN POWER & EQUIPMENT CORP.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)

<TABLE>
<CAPTION>

                                                                                  Year Ended July 31,
                                                                         2002              2001             2000
                                                                         ----              ----             ----
<S>                                                                <C>               <C>              <C>
 Cash flows from operating activities:
    Net loss                                                          ($9,887)          ($7,842)        ($ 7,198)
    Adjustments to reconcile net loss to
      net cash provided by operating activities:
             Depreciation                                               8,315             9,835           11,599
             Amortization                                               2,650               125              113
             Gain (Loss) on fixed assets                                 (618)           (2,016)             (59)
                   Changes in assets and liabilities
             (excluding effects of acquisitions):
               Accounts receivable                                      3,991             3,052           (1,847)
               Inventories                                             14,716             8,545            2,903
               Prepaid expenses                                           249               (88)              23
               Deferred income taxes                                       -0-               -0-             574
               Notes Receivable Current                                  (122)               -0-              -0-
               Accounts payable                                        (3,990)              861           (1,972)
               Accrued payroll and vacation                            (1,095)            1,003              (74)
               Other accrued liabilities                                 (723)              393             (433)
               Income taxes receivable/payable                             (7)              400              (46)
               Deferred lease income                                       -0-           (1,007)            (333)
               Other assets/liabilities                                    -0-               -0-              -0-
                                                                       -------          -------           -------
Net cash provided by operating activities                              13,479            13,261            3,250

Cash flow from investing activities:
    Purchase of fixed assets                                             (308)             (964)          (1,254)
    Purchase of rental equipment                                       (4,541)           (6,500)          (9,531)
    Sale of rental equipment                                            5,548             8,512           10,574
    Proceeds on sale of fixed assets                                      321               283              189
    Sale (purchase) of leased equipment fleet                              -0-               -0-             289
    Purchase of other assets                                               18                12               -0-
                                                                       ------            -------            -----
         Net cash provided by (used in) investing activities            1,038             1,343              249

Cash flows from financing activities:
    Principal payments on capital leases                                   16                (2)              32
    Treasury stock sales                                                   -0-               -0-             256
    Inventory floor plan financing                                     (3,251)             (531)          (2,380)
    Short-term financing                                              (12,075)          (14,287)          (3,192)
    Convertible debt issuance                                              36               182               -0-
    Long-term debt repayments                                              (8)              (20)             (20)
                                                                      -------           -------           ------
         Net cash used in financing activities                        (15,282)          (14,658)          (5,304)


(Decrease) increase in cash and cash equivalents                         (765)              (54)          (1,805)
Cash and cash equivalents at beginning of year                            770               849            2,629
                                                                    ---------           -------          -------
Cash and cash equivalents at end of year                          $         5          $    770          $   824
                                                                  ===========          ========          =======




</TABLE>


          See accompanying notes to consolidated financial statements.


                                      F-4
<PAGE>
Western Power & Equipment Corp.

     Notes to Consolidated  Financial  Statements (Dollars in thousands,  except
per share and options data)

1.   Summary of Significant Accounting Policies

     Basis of Presentation

     The Company is engaged in the sale, rental, and servicing of light, medium,
and heavy  construction and industrial,  and agricultural  equipment and related
parts in Washington,  Oregon, California, Nevada, and Alaska. Case serves as the
manufacturer of the single largest portion of the Company's products.

     The consolidated  financial  statements include the accounts of the Company
and its Oregon  subsidiary after  elimination of all  intercompany  accounts and
transactions.

     The accompanying financial statements have been prepared on a going concern
basis,  which  contemplates  the  realization of assets and the  satisfaction of
liabilities in the normal course of business.  As discussed in note 5 below, the
Company has significant borrowings that require, among other things,  compliance
with  certain  financial  ratios  on a  quarterly  basis.  As s result of losses
incurred  during the last  year,  the  Company  was not in  compliance  with the
financial  ratio  covenants  under its credit  facility  with Deutsch  Financial
Services  (DFS).  The  Company  requested,  but did not receive a waiver of such
non-compliance.  There can be no assurance that the Company will be able to meet
the financial ratio  covenants in the future,  which could result in DFS calling
the debt at any time and requiring the Company to discontinue operations.

     The Company is in  discussions  with DFS regarding  renewal or extension of
the current credit facility.  In addition,  the Company is exploring alternative
financing  arrangements with other potential lenders. The Company's continuation
as a going  concern is  dependent,  in part,  upon its  ability to  successfully
establish  the  necessary  financing  arrangements  and to comply with the terms
thereof.

     Subsequent  breaches of any of the terms and  conditions of the current DFS
credit  facility  or  any  renewal  or  replacement   thereof  could  result  in
acceleration of the Company's indebtedness,  in which case the debt would become
immediately due and payable.  Based upon the Company's current  projections,  it
does not  believe  that it will  comply with the  existing  financial  covenants
unless they are modified or waived.  If there is no modification or waiver,  the
Company  may  not be able to  repay  its  debt or  borrow  sufficient  funds  to
refinance it. Even if new  financing is  available,  it may not be on terms that
are acceptable to the Company.

     The  Company is  concentrating  its  efforts  on making all of its  ongoing
operations  profitable and in capitalizing on its existing operations' strengths
to restore  profitability.  The Company has selectively pared down the number of
stores it operates  and its product  offerings  to reduce  overall  costs and to
improve turnover in the remaining product lines that it offers.

     Cash Equivalents

     For financial reporting  purposes,  the Company considers all highly liquid
investments  purchased  with an original  maturity of three months or less to be
cash  equivalents,  which balances may, at times,  exceed the federally  insured
limits.

     Restricted Cash

     In accordance with the borrowing agreement with Deutsche Financial Services
(DFS),  the  Company  has a cash  account  restricted  by DFS for the purpose of
paying down the line of credit.  Restricted  cash  included in the cash balances
totaled $590 and $242 at July 31, 2002 and 2001, respectively.

     Inventories

     Inventories  are stated at the lower of cost or market.  Cost is determined
using the  first-in,  first-out  (FIFO)  method  for parts  inventories  and the
specific identification method for equipment inventories.

     Intangible Assets

     The Company's  acquisition strategy has been focused on existing businesses
with  established  market share in a contiguous  geographic  area. Items with an
indeterminate useful life, such as name recognition,  geographical  location and
presence  represent  value to the  Company.  The Company  uses  estimates of the
useful life of these intangible assets ranging from twenty to forty years. These
lives are based on the  factors  influencing  the  acquisition  decision  and on
industry practice.  The Company reviews for asset impairment on a periodic basis
and  whenever  events or changes in  circumstances  indicate  that the  carrying
amount of the intangible  asset may not be recoverable.  Based on this review, a
$2,525  write-down for impairment  loss on goodwill has been recorded during the
year ended July 31, 2002.


                                      F-5
<PAGE>

     Property, Plant, and Equipment

     Property,  plant,  and  equipment  are  stated  at  cost  less  accumulated
depreciation. Depreciation and amortization are computed using the straight-line
method  over the  estimated  useful  lives of the assets,  ranging  from 5 to 40
years.  Expenditures for  replacements  and major  improvements are capitalized.
Expenditures for repairs,  maintenance,  and routine replacements are charged to
expenses as incurred.  The cost of assets  retired or otherwise  disposed of and
the related  accumulated  depreciation  are  eliminated  from the accounts;  any
resulting gain or loss is included in the results of operations.

     At each balance  sheet date,  management  assesses  whether  there has been
permanent  impairment in the value of the long-lives  assets.  The amount of any
such impairment is determined by comparing anticipated  undiscounted future cash
flows from operating  activities with the associated carrying value. The factors
considered  by  management  in  performing  this  assessment  include  operating
results, trends and prospects,  as well as the effects of obsolescence,  demand,
competition, and other economic factors.

     Revenue Recognition

     Revenue  on  equipment  and parts  sales is  recognized  upon  shipment  of
products  and  passage  of  title.  Rental  and  service  revenue  is  generally
recognized at the time such services are provided.

     The Company has entered into sales  contracts  under which the customer may
require the Company to  repurchase  equipment at specified  dates and  specified
prices.  The Company  records the proceeds from such sales contracts as deferred
lease income. The difference between the sale contract amount and the repurchase
obligation  is  recognized  as  revenue  over  the  period  of  the   repurchase
obligation.  The  remaining  repurchase  obligation is recorded as a sale if and
when the customer does not exercise the repurchase  option. At July 31, 2002, no
repurchase obligations were in existence.

     Advertising Expense

     The Company expenses all advertising  costs as incurred.  Total advertising
expense for the years ended July 31,  2002,  2001 and 2000 was $176,  $221,  and
$320 respectively.

     Income Taxes

     The  Company  recognizes  deferred  tax assets and  liabilities  based upon
differences  between  the  financial  reporting  and tax bases of the assets and
liabilities  using the  enacted  tax rates and laws that are  expected  to be in
effect when the differences are expected to be recovered. The Company provides a
valuation  allowance  for  deferred  tax assets  for which it does not  consider
realization of such assets to be more likely than not.

     Treasury Stock

     In April 1998,  the Board of Directors  authorized  the repurchase of up to
350,000  shares of the  Company's  common stock in the open  market,  subject to
normal trading  restrictions.  Under this program, the Company purchased a total
of 230,300  shares of common  stock at a cost of $1.49  million  in fiscal  year
1998. Currently,  the Company uses shares of treasury stock to issue shares upon
exercise of outstanding  stock options  and/or for private  placements of common
stock.

     Reclassifications

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

     Financial Instruments

     The recorded  amounts of cash and cash  equivalents,  accounts  receivable,
short-term borrowings,  accounts payable and accrued liabilities as presented in
the financial statements approximate fair value because of the short-term nature
of these  instruments.  The recorded  amount of short and  long-term  borrowings
approximates  fair  value  as the  actual  interest  rates  approximate  current
competitive rates.



                                      F-6
<PAGE>

     Net Income (loss) Per Common Share

     Basic net income  (loss) per common  share is  computed  using the  average
number of common shares outstanding during the period. Diluted net income (loss)
per share is computed using the average number of common shares and common share
equivalents  outstanding  during the period,  unless  inclusion  of common share
equivalents would be antidilutive.

     Supplemental disclosures of cash flow information

     A capital lease obligation of $1,942 was incurred in February 1999 when the
Company  entered into a 20-year lease for the Sparks,  Nevada  facility.  In the
first quarter of fiscal 2001 certain  capital leases were converted to operating
leases resulting in a gain of $720.


<TABLE>
<CAPTION>

                                                                   Year ended July 31,
                                                          2002              2001             2000
                                                          ----              ----             ----
<S>                                                  <C>                <C>              <C>
     Cash paid (received) during the year for:
         Interest                                       $4,114            $5,887           $5,922
         Income taxes, net of refunds                      (12)              (12)             219

</TABLE>


     During fiscal year 2001, the Company's obligations under various guaranteed
buyback obligations were terminated resulting in elimination of leased equipment
assets of $4,975 and deferred  income of $5,982 from the prior  fiscal year.  In
fiscal year 2001, in lieu of payment for certain professional  services provided
to the Company, the Company issued 50 shares of its common stock for $213 to the
provider of such professional services.

     Use of Estimates

     The  preparation  of financial  statements  in conformity  with  accounting
principles   generally  accepted  in  the  United  States  of  America  requires
management to make estimates and assumptions that affect the reported amounts of
assets and  liabilities  and disclosure of contingent  assets and liabilities at
the date of the financial  statements  and the reported  amounts of revenues and
expenses during the fiscal periods  presented.  Actual results could differ from
those estimates.

     Recent Accounting Pronouncements

     Business Combinations and Goodwill and Other Intangible Assets

     The Financial  Accounting  Standards  Board (FASB)  recently  announced the
issuance of No. 141,  "Business  Combinations" and No. 142,  "Goodwill and Other
Intangible  Assets." The Company has goodwill  for which  amortization  has been
recorded against in prior periods.  The impact of the future adoption of FAS 142
has  yet  to be  determined.  Amortization  of  goodwill  per  quarter  is  $31;
amortization  of goodwill  for the year would be $125.  The Company will need to
review the potential  impairment of carrying  values of goodwill to determine if
there will be a write-down. Currently, goodwill is valued at $2,525.

     On October 3, 2001,  the FASB  issued  Statement  of  Financial  Accounting
Standards  No. 144  "Accounting  for the  Impairment  or Disposal of  Long-Lived
Assets" ("SFAS 144). SFAS 144 supersedes SFAS 121 "Accounting for the Impairment
of  Long-Lived  Assets and for  Long-Lived  Assets to Be Disposed  Of." SFAS 144
applies  to  all  long-lived  assets  (including  discontinued  operations)  and
consequently  amends  Accounting  Principles  Board  Opinion  No.  30 (APB  30),
"Reporting  Results of  Operations  -  Reporting  the  Effects of  Disposal of a
Segment of a Business,  and  Extraordinary,  Unusual and Infrequently  Occurring
Events and  Transaction."  SFAS 144 develops one accounting model for long-lived
assets that are to be disposed of by sale.  SFAS 144  requires  that  long-lived
assets that are to be disposed of by sale be measured at the lower of book value
or fair value less cost to sell.  Additionally,  SFAS 144  expands  the scope of
discontinued  operations to include all components of an entity with  operations
that  (1) can be  distinguished  from  the  rest of the  entity  and (2) will be
eliminated from the ongoing operations of the entity in a disposal  transaction.
The provisions of this Statement are effective for financial  statements  issued
for fiscal years  beginning  after December 15, 2001, and interim periods within
those fiscal years,  with early  application  encouraged.  The Company is in the
process of evaluating the effect of SFAS 144 on its financial statements.



                                      F-7
<PAGE>

2.   Related Party Transactions

     The real property and  improvements  used in connection with the Sacramento
Operations,  and upon which the  Sacramento  Operation is located,  were sold by
Case for $1,500 to the  McLain-Rubin  Realty  Company,  LLC ("MRR"),  a Delaware
limited liability  company the owners of which are Messrs.  C. Dean McLain,  the
President and a director of the Company, and Robert M. Rubin, the Chairman and a
director of the Company.  Simultaneous  with its  acquisition  of the Sacramento
Operation  real  property and  improvements,  MRR leased such real  property and
improvements  to the  Company  under  the terms of a  20-year  commercial  lease
agreement  dated March 1, 1996 with the Company paying an initial annual rate of
$168.  As of October 1, 2000,  the Company  entered into a  renegotiated  7-year
lease with an initial annual rate of $228. In addition to base rent, the Company
is  responsible  for the  payment of all  related  taxes and other  assessments,
utilities,  insurance and repairs (both structural and regular maintenance) with
respect to the leased real property during the term of the lease.  The new lease
qualifies for treatment as an operating lease.

     On December 11, 1997, the real property and improvements used in connection
with Case's Yuba City,  California  operation,  was  purchased  by  McLain-Rubin
Realty Company III, LLC ("MRR III"), 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 Yuba City, California real property and
improvements,  MRR III leased such real property and improvements to the Company
under the terms of a 20-year commercial lease agreement dated effective December
11, 1997 with the Company paying an initial annual rate of $54. As of October 1,
2000,  the Company  entered  into a  renegotiated  7-year  lease with an initial
annual rate of $66. In addition to base rent, the Company is responsible for the
payment of all related taxes and other assessments,  utilities,  insurance,  and
repairs (both  structural  and regular  maintenance)  with respect to the leased
real  property  during  the  term of the  lease.  The new  lease  qualifies  for
treatment as an operating lease.

     In February  1999,  the real property and  improvements  used in connection
with the Company's  Sparks,  Nevada  operation and upon which such  operation is
located,  were sold to McLain-Rubin  Realty,  L.L.C.  (MRR) under the terms of a
real property  purchase and sale agreement.  MRR is a Delaware limited liability
company  the owners of which are  Messrs.  C. Dean  McLain,  the  President  and
Chairman of the Company,  and Robert M. Rubin,  a director of the  Company.  The
sale price was $2,210 in cash at closing. Subsequent to the closing of the sale,
the Company entered into a 20-year  commercial  lease agreement with MRR for the
Sparks, Nevada facility at an initial rental rate of $252 per year. The lease is
a net lease with payment of insurance, property taxes and maintenance costs paid
by the  Company.  The sale  resulted in a deferred  gain which will be amortized
over the life of the lease pursuant to generally accepted accounting principles.
As of October 1, 2000, the Company entered into a renegotiated 7-year lease with
an initial  annual rate of $276.  The new lease  qualifies  for  treatment as an
operating  lease and the  remainder  of the deferred  gain which was  previously
being  amortized over the life of the cancelled  lease was all recognized in the
first quarter of fiscal year 2001.

     On April 1, 2001, the Company entered into a lease with McLain-Rubin Realty
Company II, LLC ("MRR II"), a Delaware limited liability company,  the owners of
which are Messrs.  C. Dean McLain,  the President and a director of the Company,
and Robert M. Rubin,  the Chairman  and a director of the Company,  for a 5-year
lease on its Vancouver,  Washington corporate office with an annual rate of $98.
In addition  to base rent,  the  Company is  responsible  for the payment of all
related taxes and other  assessments,  utilities,  insurance,  and repairs (both
structural  and regular  maintenance)  with respect to the leased real  property
during the term of the lease.  The lease qualifies for treatment as an operating
lease.


                                      F-8
<PAGE>


3.   Inventories

     Inventories consist of the following:
<TABLE>
<CAPTION>

                                                                              July 31,          July 31,
                                                                                  2002              2001

                                                                                  ----              ----
<S>                                                                         <C>             <C>
              Equipment (net of reserve allowances of
                $7,770 and $7,489 respectively):
                  New equipment                                               $ 13,834         $  28,163
                  Used equipment                                                 5,915             7,425

              Parts (net of reserve allowance of $286
                and $282 respectively)                                           7,166             9,279
                                                                                 -----             -----
                                                                              $ 26,915          $ 44,867

                                                                              ========          ========
</TABLE>
4.   Fixed Assets

Fixed assets consist of the following:
<TABLE>
<CAPTION>

                                                                              July 31,            July 31,
                                                                                  2002              2001
                                                                                  ----              ----
<S>                                                                      <C>               <C>
                 Property, plant, and equipment:
                 Land                                                      $       522        $      500
                 Buildings                                                       1,749             1,717
                 Machinery and equipment                                         3,137             3,997
                 Office furniture and fixtures                                   2,220             2,377
                 Computer hardware and software                                  1,501             1,453
                 Vehicles                                                        1,406             1,964
                 Leasehold improvements                                            960               958
                                                                                ------            ------
                                                                                11,495            12,966

                 Less: accumulated depreciation                                 (8,060)           (7,382)
                                                                                ------            ------
                 Property, plant, and equipment (net)                         $  3,434          $  5,584
                                                                              ========          ========


                 Rental equipment fleet                                       $ 25,833          $ 28,889
                 Less: accumulated depreciation                                 (7,137)           (7,193)
                                                                                ------            ------
                 Rental equipment (net)                                       $ 18,696          $ 21,696
                                                                              ========          ========

</TABLE>



                                      F-9
<PAGE>

5.   Borrowings

     The Company  has  inventory  floor plan  financing  arrangements  with Case
Credit  Corporation,  an affiliate of Case,  for Case  inventory  and with other
finance companies  affiliated with other equipment  manufacturers.  The terms of
these agreements  generally include a one-month to six-month  interest free term
followed by a term during  which  interest is charged.  Principal  payments  are
generally due at the earlier of sale of the  equipment or twelve to  forty-eight
months from the invoice date.

     The Company has a $50,000  inventory  flooring and operating line of credit
through  Deutsche  Financial  Services  (DFS).  The  agreement was amended as of
October 31, 2000 with terms maturing  December 31, 2001 and with a floating rate
based on prime  with  rates  between  0.75%  under  prime  to 4.00%  over  prime
depending on the amount of total debt  leverage of the Company.  This  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.  Amounts may be advanced against the Company's  assets,  including
accounts receivable,  parts, new equipment,  rental fleet, used equipment,  real
property,  and vehicles.  Interest  payments on the outstanding  balance are due
monthly.

     As of June 21, 2002, the Company entered into a Forbearance  Agreement with
DFS under the terms of which DFS raised the interest rate to prime plus 4% while
the Company is in default and  required  the Company to pay a $45,000 fee to DFS
for the forbearance.  In addition, under the terms of the Forbearance Agreement,
the Company is required to meet  certain  financial  covenants  and meet certain
debt reduction schedules. At July 31, 2002, the Company was in technical default
of the DFS Loan  Agreement.  The Company has  requested  but has not  obtained a
waiver letter for the period July 31, 2002 or  thereafter.  Although DFS has not
called the debt due to such  defaults,  there is no guarantee  that DFS will not
call this debt at any time after July 31, 2002.

     All floor plan debt is  classified  as current since the inventory to which
it relates is  generally  sold within  twelve  months of the invoice  date.  The
following table summarizes the inventory floor plan financing arrangements:

<TABLE>
<CAPTION>



                                                                 Maturity                 July 31,
                                          Interest Rate            Date             2002              2001
                                          -------------            ----             ----              ----
<S>                                      <C>                  <C>               <C>             <C>

         Case Credit Corporation            Prime + 2%           8 - 48           $9,285           $14,237
                                               (6.75%)            months

         Deutsche Financial Services       Prime + 4.00%        12 - 36           41,321            53,384
                                              (8.75%)             months
                                                                                 $50,606           $67,621

</TABLE>


     At July 31, 2002 and July 31, 2001, the Company was in technical default of
the Deutsche  Financial  Services  Loan  Agreement.  There is no guarantee  that
Deutsche  Financial  Services will not call this debt at any time after July 31,
2002. If DFS does call the debt, it will become  immediately  due and payable in
full and the Company would not be able to continue operations.  In addition,  if
the Company is unable to renew the DFS credit  facility  after December 31, 2001
or  replace  it with an  equivalent  or  better  credit  facility,  there are no
assurances that the Company will have adequate credit facilities to continue its
business.

     In December 2000, the Company  completed the sale of $182 principal  amount
of 10%  convertible  promissory  notes  due  December  31,  2001.  The notes are
convertible,  at the  option  of the  holders,  into  common  stock at a minimum
conversion price of $1.50 per share. The Company may, at its option,  redeem the
notes at the principal  amount plus accrued  interest any time prior to December
31, 2001.  The Company has elected to redeem the notes and is  currently  paying
off the principal and accrued interest balances thereof.


                                      F-10
<PAGE>


6.   Income Taxes

     The provision (benefit) for income taxes is comprised of the following:
<TABLE>
<CAPTION>

                                                                     Year Ended
                                                      July 31,          July 31,         July 31,
                                                          2002              2001             2000
                                                          ----              ----             ----
<S>                                             <C>                  <C>              <C>

                 Current:
                    Federal                       $                    $     278        $     180
                    State                                   48                27               26
                                                            --                --               --
                                                            48               305              206
                 Deferred:
                    Federal                                 -0-                0              500
                    State                                   -0-                0               73
                                                             -                 -               --
                                                            -0-                0              573
                                                             -                 -              ---
                 Total provision (benefit)
                       for income taxes             $       48          $    305           $  779
                                                    ==========          ========           ======

</TABLE>
     The  principal  reasons for the variation  from the customary  relationship
between  income  taxes at the  statutory  federal  rate  and  that  shown in the
statement of operations were as follows:

<TABLE>
<CAPTION>
                                                                     Year Ended
                                                      July 31,          July 31,       July 31,
                                                          2002              2001           2000
                                                          ----              ----           ----
<S>                                                     <C>             <C>              <C>
              Statutory federal income tax rate         (    )          (34.0%)          (34.0%)
              State income taxes, net of
                   federal income tax benefit           (    )           (4.3%)           (2.9%)
              Valuation allowance                                        38.3%            46.1%
              Other                                                       4.0%             2.9%

                                                                          4.0%            12.1%
</TABLE>

     Temporary  differences  and carry forwards which give rise to a significant
portion of deferred tax assets and liabilities were as follows:
<TABLE>
<CAPTION>
                                                                            Year Ended
                                                                     July 31,          July 31,
                                                                         2001              2000
                                                                         ----              ----
                 Deferred assets:
<S>                                                              <C>             <C>
                    Inventory                                      $    2,734      $      1,739
                    Accounts receivable                                   373               219
                    Accrued vacation and bonuses                           83               127
                    NOL Carryforward                                    5,997             3,069
                    Other accruals                                         75                75
                    Current Deferred Tax Asset                          9,262             5,229
                    Less-Valuation Allowance                           (6,721)           (2,956)
                                                                       ------            ------
                    Net Current Deferred Tax Asset                      2,541             2,273

                 Deferred liabilities:
                    Fixed Assets                                       (2,385)           (2,159)
                    Goodwill and intangibles                             (156)             (114)
                    Long-term Deferred Tax Liability                   (2,541)           (2,273)
                                                                       ------            ------

                    Net Deferred Tax Asset                       $          0      $          0
                                                                 ============      ============
</TABLE>



                                      F-11
<PAGE>

     The Company has  recorded a valuation  allowance  to reflect the  estimated
amount of deferred tax assets that may not be realized due to the  expiration of
net  operating  losses  and  tax  credit  carryovers.  The  valuation  allowance
primarily  related to federal and state net operating  losses,  which may not be
realized.  The ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which those  temporary
differences  become deductible.  The Company considers  projected future taxable
income and tax  planning  strategies  in making  this  assessment.  Based on the
historical  taxable  income and  projections  for future taxable income over the
periods that the deferred tax assets are deductible,  the Company believes it is
more  likely than not that the  Company  will not realize the  benefits of these
deductible differences in the near future.

7.   Stockholders' Equity

     Stock Option Plans

     Under the  Company's  1995  Employee  Stock  Option  Plan,  key  employees,
officers,  directors, and consultants of the Company can receive incentive stock
options  and  non-qualified  stock  options to purchase  up to an  aggregate  of
1,500,000  shares of the  Company's  common  stock.  The plan  provides that the
exercise  price of incentive  stock  options be at least equal to 100 percent of
the fair market value of the common stock on the date of grant.  With respect to
non-qualified  stock  options,  the plan requires that the exercise  price be at
least 85 percent of fair value on the date such option is  granted.  Outstanding
options expire no later than ten years after the date of grant.

     In December  1995,  the Board of Directors  adopted a stock option plan for
non-employee  directors  under which each  non-employee  director is entitled to
receive on August 1 of each year beginning  August 1, 1996,  options to purchase
2,500 shares of the Company's common stock at the fair market value of the stock
at the date of grant.  In January 1998, the Company's  shareholders  approved an
amendment  to this plan  increasing  the number of shares for which  options are
granted  yearly to  non-employee  directors  from  2,500 to  5,000.  Outstanding
options expire no later than ten years after the date of grant.

     During fiscal year 2002 no options were exercised.

     During 1995,  the  Financial  Accounting  Standards  Board issued SFAS 123,
"Accounting for Stock Based  Compensation," which defines a fair value method of
accounting  for an employee  stock  option or similar  equity  instrument.  That
pronouncement encourages all entities to adopt that method of accounting for all
compensation  costs related to stock options issued to all employees under these
plans,  but permits  companies to continue  using the intrinsic  value method of
accounting  prescribed by the Accounting  Principles  Board Opinion No. 25 ("APB
25"),  "Accounting for Stock Issued to Employees."  Entities  electing to remain
with the accounting in APB 25 must make pro forma  disclosures of net income and
earnings per share,  as if the fair value based method of accounting  defined in
this statement has been applied.

     The Company has elected to account for its stock based  compensation  under
APB 25; however, as required by SFAS 123, the Company has computed for pro forma
disclosure purposes the value of options granted during fiscal years 2001, 2000,
and 1999 using the  Black-Scholes  option  pricing model.  The weighted  average
assumptions  used for stock option grants for fiscal years 2001,  2000, and 1999
were:

                                 FY00              FY99             FY99
                                 ----              ----             ----
  Risk free interest rate       4.35%           4.85-5.45%        4.85-5.45%

  Expected dividend yield         0%               0%                0%

  Expected life               4 years           4 years           4 years

  Expected volatility          116.21%          93.31%             62.56%

     Adjustments  for  forfeitures  are made as they occur.  For the years ended
July 31, 2002, 2001, and 2000, the total value of the options granted, for which
no previous expense has been recognized, was computed as approximately $ -0- for
each year. The weighted  average fair value per share of the options  granted in
fiscal years 2002, 2001, and 2000 are $-0-, $ 0.53, and $5.07, respectively.



                                      F-12
<PAGE>

     If the Company had accounted for these stock options issued to employees in
accordance  with SFAS 123, the Company's net loss and pro forma net loss and net
loss per share and pro forma net loss per  share  would  have been  reported  as
follows.

              Year Ended July 31, 2002
                                                    Basic          Diluted
                                    Net Loss        E.P.S.         E.P.S.
                                    --------        ------         ------

              As Reported            $(9,887)        ($2.47)        ($2.47)
              Pro Forma             $ (9,887)        ($2.47)        ($2.47)

              Year Ended July 31, 2001
                                                    Basic          Diluted
                                    Net Loss        E.P.S.         E.P.S.
                                    --------        ------         ------

              As Reported           $ (7,841)       ($2.30)         ($2.30)
              Pro Forma             $ (8,162)       ($2.30)         ($2.40)

              Year Ended July 31, 2000
                                                    Basic          Diluted
                                    Net Income      E.P.S.         E.P.S.
                                    ----------      ------         ------

              As Reported  $          (7,198)       ($2.18)         ($2.18)
              Pro Forma          $    (7,206)       ($2.18)         ($2.18)

     The effects of applying  SFAS 123 for providing  pro forma  disclosure  for
fiscal  years  2002,  2001 and 2000 are not likely to be  representative  of the
effects on reported  net income and  earnings  per share for future  years since
options vest over several years and additional awards are made each year.

     The following  summarizes the stock option transactions under the Company's
stock option plans:
<TABLE>
<CAPTION>

                                                                 Shares    Weighted Average (000) Option Price
<S>                                                         <C>                    <C>

                  Options outstanding July 31, 1998:              1508                  4.56
                  Exercised                                          -                  -
                  Surrendered                                      (12)                 4.53
                  Granted                                           17                  5.07
                                                                  ----                  ----

                  Options outstanding July 31, 1999:             1,513                  4.56

                  Exercised                                        (50)                 5.13
                  Surrendered                                   (1,453)                 4.64
                  Granted       -                                    -
                                                                   ----                  ----
                  Options outstanding July 31, 2000:                10                  4.56

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

                  Exercised                                          -                    -
                  Surrendered                                        -                    -
                  Granted                                           -0-                  -0-
                                                                   ----                  ----
                  Options outstanding July 31, 2002               1,210                 0.56
                                                                  =====                 ====

</TABLE>


                                      F-13
<PAGE>


     The following table sets forth the exercise  prices,  the number of options
outstanding  and  exercisable,  and  the  remaining  contractual  lives  of  the
Company's stock options at July 31, 2001:
<TABLE>
<CAPTION>


                                        Weighted       Weighted Average                         Weighted
                     Number of          Average        Contractual Life       Number of         Average
     Exercise         Options        Exercise Price        Remaining           Options       Exercise Price
       Price        Outstanding                                              Exercisable
   -------------- ----------------- ----------------- -------------------- ----------------- ---------------
<S> <C>              <C>               <C>                 <C>                <C>              <C>
      $4.375           10,000            $4.375              5.00               10,000           $4.375
   -------------- ----------------- ----------------- -------------------- ----------------- ---------------
   -------------- ----------------- ----------------- -------------------- ----------------- ---------------
      $0.531         1,200,000           $0.531              8.50             1,200,000          $0.531
   -------------- ----------------- ----------------- -------------------- ----------------- ---------------

</TABLE>

8.   Commitments and Contingencies

     The Company leases certain facilities under noncancelable lease agreements.
As more fully described in Note 3, the building portion of some of the Company's
facility leases qualify under SFAS 13 as "capital  leases" (i.e., an acquisition
of an asset and the  incurrence of a liability).  The remaining  facility  lease
agreements  have  terms  ranging  from  month-to-month  to  nine  years  and are
accounted  for as operating  leases.  Certain of the facility  lease  agreements
provide for options to renew and  generally  require the Company to pay property
taxes, insurance, and maintenance and repair costs. Total rent expense under all
operating leases aggregated $1,535,  $2,280, and $2,129 for the years ended July
31, 2002, 2001, and 2000, respectively.

     The Company is involved in various legal  proceedings  which are incidental
to the industry and for which certain matters are covered in whole or in part by
insurance  or,  otherwise,  the  Company has  recorded  accruals  for  estimated
settlements.  Management believes that any liability which may result from these
proceedings   will  not  have  a  material   adverse  effect  on  the  Company's
consolidated financial statements.

     Assets  recorded  under capital leases are recorded in fixed assets and are
as follows:
<TABLE>
<CAPTION>

                                                        July 31,          July 31,         July 31,
                                                          2002              2001             2000
                                                          ----              ----             ----
<S>                                             <C>                <C>                 <C>
                 Capitalized asset value          $     1,043        $     937           $ 4,553
                 Less accumulated amortization           (369)            (262)             (667)
                                                         ----             ----              ----
                                                  $       674        $    675             $ 3,886
                                                  ===========        ========             =======
</TABLE>

     Net capitalized asset values are included in Property, Plant and Equipment.
Future  minimum lease  payments  under all  noncancelable  leases as of July 31,
2002, are as follows:
<TABLE>
<CAPTION>

                                                                                     Capital       Operating
                 Year ending July 31,                                                leases         leases
                 --------------------                                                ------         ------
<S>            <C>                                                                <C>         <C>
                      2003                                                               134         1,534
                      2004                                                               126         1,356
                      2005                                                               108         1,090
                      2006                                                               124           900
                      Thereafter                                                       1,204         1,921
                      Total annual lease payments                                   $  1,696       $ 6,801
                      Less amount representing interest, with imputed
                           interest rates ranging from 6% to 15%                         850
                      Present value of minimum lease payments                            938
                      Less current portion                                                 8
                      Long-term portion                                            $     930
</TABLE>

     The  Company  issues  purchase  orders to Case  Corporation  for  equipment
purchases.  Upon acceptance by Case, these purchases become noncancelable by the
Company. As of July 31, 2002, such purchase commitments totaled $4,100,951.


                                      F-14
<PAGE>


9.   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:

----------------------------- ---------------- ----------------- --------------
     Business Component         Year Ended        Year Ended       Year Ended
        Net Revenues           July 31, 2002    July 31, 2001     July 31, 2000
----------------------------- ---------------- ----------------- --------------
----------------------------- ---------------- ----------------- --------------
Equipment Sales               $   73,909       $     84,065      $    92,513
----------------------------- ---------------- ----------------- --------------
----------------------------- ---------------- ----------------- --------------
Equipment Rental                    5,747             20,817           26,334
----------------------------- ---------------- ----------------- --------------
----------------------------- ---------------- ----------------- --------------
Product Support                    28,332             35,020           36,790
----------------------------- ---------------- ----------------- --------------
----------------------------- ---------------- ----------------- --------------
    Totals                    $ 107,988        $   139,902       $  155,637
----------------------------- ---------------- ----------------- --------------

----------------------------- ---------------- ----------------- --------------
     Business Component         Year Ended        Year Ended       Year Ended
       Gross Margins           July 31, 2002    July 31, 2001     July 31, 2000
----------------------------- ---------------- ----------------- --------------
----------------------------- ---------------- ----------------- --------------
Equipment Sales               $      4,343     $       (  641)   $      (  66)
----------------------------- ---------------- ----------------- --------------
----------------------------- ---------------- ----------------- --------------
Equipment Rental                         727            4,566            5,556
----------------------------- ---------------- ----------------- --------------
----------------------------- ---------------- ----------------- --------------
Product Support                       4,676             5,895            6,048
----------------------------- ---------------- ----------------- --------------
----------------------------- ---------------- ----------------- --------------
    Totals                    $     9,746      $       9,820     $    11,538
----------------------------- ---------------- ----------------- --------------

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


10.  Unaudited Quarterly Consolidated Financial Data
<TABLE>
<CAPTION>

                                                                  Quarter                                Total
                                            First         Second           Third         Fourth           Year
                                            -----         ------           -----         ------           ----
Fiscal 2002:
<S>                                      <C>            <C>             <C>            <C>           <C>
     Net sales                            $28,499        $26,229         $25,568        $27,691       $107,988
     Gross Profit                           4,117          2,850           2,538            241          9,746
     Net income (loss)                        357           (766)           (721)        (8,757)        (9,887)
     Basic income (loss) per share          0.10           (0.22)         (0.21)          (2.14)         (2.47)
     Diluted income (loss) per share        0.10           (0.22)         (0.21)          (2.14)         (2.47)


                                                                  Quarter                                Total
                                            First         Second           Third         Fourth           Year
                                            -----         ------           -----         ------           ----
Fiscal 2001:

     Net sales                            $37,783        $34,299         $33,641        $34,179       $139,902
     Gross Profit                           4,858          2,957           2,358           (353)         9,820
     Net income (loss)                        461          1,695          (5,119)        (4,879)        (7,842)
     Basic income (loss) per share          0.14            0.51          (1.53)          (1.46)         (2.30)
     Diluted income (loss) per share        0.14            0.51          (1.53)          (1.46)         (2.30)



</TABLE>

                                      F-15
<PAGE>


                        REPORT OF INDEPENDENT ACCOUNTANTS


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

In our opinion,  the  accompanying  consolidated  balance sheets and the related
consolidated statements of operations, of stockholders' equity and of cash flows
present  fairly,  in all material  respects,  the financial  position of Western
Power & Equipment  Corp. and its subsidiary at July 31, 2002, and the results of
their  operations  and their cash flows for the year  ended  July 31,  2002,  in
conformity with accounting principles generally accepted in the United States of
America.  These  financial  statements are the  responsibility  of the Company's
management;  our  responsibility  is to express  an  opinion on these  financial
statements  based on our audits.  We conducted our audits of these statements in
accordance with auditing  standards  generally  accepted in the United States of
America,  which require that we plan and perform the audit to obtain  reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the  amounts  and  disclosures  in  the  financial  statements,   assessing  the
accounting  principles  used and significant  estimates made by management,  and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for the opinion expressed above.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company will continue as a going concern.  The Company has incurred  losses from
operations and has a working  capital  deficit for the year ended July 31, 2002.
Further, as discussed in Note 5 to the financial  statements,  the Company is in
technical  default  of its loan  agreement  and has not  obtained  a  waiver  or
revisions to the agreement  from the  financial  institution.  Accordingly,  the
financial  institution at any time may call the  outstanding  borrowings,  which
aggregated $41.3 million at July 31, 2002. Such factors raise  substantial doubt
about the Company's ability to continue as a going concern.  Management's  plans
in  regard  to  these  matters  are  also  described  in Note 1.  The  financial
statements do not include any  adjustment  that might result from the outcome of
this uncertainty.



MOSS ADAMS LLP
Beaverton, Oregon
October 15, 2002



                                      F-16
<PAGE>




                        REPORT OF INDEPENDENT ACCOUNTANTS


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

In our opinion,  the  accompanying  consolidated  balance sheets and the related
consolidated statements of operations, of stockholders' equity and of cash flows
present  fairly,  in all material  respects,  the financial  position of Western
Power & Equipment  Corp.  and its  subsidiary at July 31, 2001 and 2000, and the
results of their  operations and their cash flows for each of the three years in
the  period  ended July 31,  2001,  in  conformity  with  accounting  principles
generally accepted in the United States of America.  These financial  statements
are the  responsibility of the Company's  management;  our  responsibility is to
express  an  opinion  on these  financial  statements  based on our  audits.  We
conducted our audits of these  statements in accordance with auditing  standards
generally  accepted in the United States of America,  which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements,  assessing the accounting  principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion  expressed
above.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company will continue as a going concern.  The Company has incurred  losses from
operations and has a working  capital  deficit for the years ended July 31, 2001
and 2000.  Further,  as discussed  in Note 5 to the  financial  statements,  the
Company is in  technical  default of its loan  agreement  and has not obtained a
waiver  or  revisions  to  the  agreement   from  the   financial   institution.
Accordingly,  the  financial  institution  at any time may call the  outstanding
borrowings,  which aggregated $53.4 million at July 31, 2001. Such factors raise
substantial  doubt about the Company's  ability to continue as a going  concern.
Management's  plans in regard to these matters are also described in Note 1. The
financial  statements do not include any  adjustment  that might result from the
outcome of this uncertainty.



PRICEWATERHOUSECOOPERS LLP
Portland, Oregon
October 6, 2001



                                      F-17
<PAGE>




                        REPORT OF INDEPENDENT ACCOUNTANTS
                          FINANCIAL STATEMENT SCHEDULE


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

Our audits of the consolidated  financial  statements  referred to in our report
dated October 15, 2002 appearing on page F-16 of this Annual Report on Form 10-K
also  included  an audit of the  financial  statement  schedules  listed in Item
14(a)(2) of this Form 10-K. In our opinion,  this financial  statement  schedule
presents  fairly,  in all material  respects,  the information set forth therein
when read in conjunction with the related consolidated financial statements.




MOSS ADAMS LLP
Beaverton, Oregon
October 15, 2002





                                      F-18
<PAGE>




                                                                 SCHEDULE II

                         WESTERN POWER & EQUIPMENT CORP.

                       VALUATION AND QUALIFYING ACCOUNTS
                For the Fiscal Years Ended July 31, 2001 and 2000

                             (Dollars in Thousands)

<TABLE>
<CAPTION>


                                              Balance at      Charged to    Charged to                  Balance at
                                              Beginning       Costs and        Other                      End of
               Description                    of Period        Expenses      Accounts     Deductions      Period
               -----------                    ---------        --------      --------     ----------      ------

Accounts Receivable Reserve:
<S>                                            <C>             <C>           <C>          <C>            <C>
  Fiscal year ended July 31, 2002                $948            $119          $ ---        $(421)         $646

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

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

  Fiscal year ended July 31, 2001               5,052           4,106           ---        (1,387)        7,771

</TABLE>





                                      F-19
<PAGE>




                                   EXHIBIT 21

                           SUBSIDIARIES OF THE COMPANY



     1. Western Power & Equipment  Corp., an Oregon  corporation  (100% owned by
the Company).


<PAGE>



                                   EXHIBIT 23

                       CONSENT OF INDEPENDENT ACCOUNTANTS


     We hereby  consent to the  incorporation  by reference in the  Registration
Statement  on Form S-8 of Western  Power & Equipment  Corp.  of our report dated
October  15,  2002  relating  to the  financial  statements  and  the  financial
schedules which appear in this Form 10-K.



MOSS ADAMS LLP

Beaverton, Oregon
October 15, 2002

<PAGE>





                       CONSENT OF INDEPENDENT ACCOUNTANTS


     We hereby  consent to the  incorporation  by reference in the  Registration
Statement  on Form S-8 of Western  Power & Equipment  Corp.  of our report dated
October 6, 2001 relating to the financial statements and the financial schedules
which appear in this Form 10-K.



PRICEWATERHOUSECOOPERS LLP

Portland, Oregon
October 6, 2001



<PAGE>





                                   Exhibit 99
                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In  connection  with the  Annual  Report  on Form 10-K of  Western  Power &
Equipment  Corp.  (the  "Company")  for the period ending July 31, 2002 as filed
with the Securities and Exchange  Commission on the date hereof (the  "Report"),
I, C. Dean McLain, Chief Executive Officer of the Company,  certify, based on my
knowledge,  pursuant to 18 U.S.C.  Section 1350, as adopted  pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, that:

               (1) the Report fully  complies with the  requirements  of section
          13(a) or 15(d) of the Securities Exchange Act of 1934; and

               (2) the information  contained in the Report fairly presents,  in
          all  material  respects,   the  financial  condition  and  results  of
          operations of the Company.


/s/ C. Dean McLain
-------------------
C. Dean McLain
Chief Executive Officer
November 13, 2002





                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In  connection  with the  Annual  Report  on Form 10-K of  Western  Power &
Equipment  Corp.  (the  "Company")  for the period ending July 31, 2002 as filed
with the Securities and Exchange  Commission on the date hereof (the  "Report"),
I, Mark J. Wright, Chief Financial Officer of the Company,  certify, based on my
knowledge,  pursuant to 18 U.S.C.  Section 1350, as adopted  pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, that:

               (1) the Report fully  complies with the  requirements  of section
          13(a) or 15(d) of the Securities Exchange Act of 1934; and

               (2) the information  contained in the Report fairly presents,  in
          all  material  respects,   the  financial  condition  and  results  of
          operations of the Company.


Mark J. Wright
Chief Financial Officer
November 15, 2002


<PAGE>

                                   SIGNATURES


     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.

                                                 WESTERN POWER & EQUIPMENT CORP.


                                                  By:/S/ C. Dean McLain
                                                  ---------------------
                                                  C. Dean McLain, President and
                                                  Chief Executive Officer

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities and on the dates indicated.

Signature                                   Title                      Date
---------                                   -----                      ----


/S/ C. Dean McLain                 President, Chief            November 13, 2002
-------------------
 C. Dean McLain                    Executive Officer,
                                   and Chairman


/S/ Mark J. Wright                 Vice President of Finance,  November 13, 2002
-------------------
 Mark J. Wright                    Chief Financial and Principal
                                   Accounting Officer,
                                   Treasurer and Secretary


/S/ Robert M. Rubin                Director                    November 13, 2002
-------------------
 Robert M. Rubin


/S/ Dr. Seymour Kessler            Director                    November 13, 2002
-----------------------
Dr. Seymour Kessler


/S/ Allen Perres                   Director                    November 13, 2002
----------------
Allen Perres


/S/ Irwin Pearl                    Director                    November 13, 2002
---------------
Irwin Pearl


<PAGE>




I, C. Dean McLain, certify that:

               1. I have  reviewed  this  annual  report on Form 10-K of Western
          Power & Equipment Corp.;

               2. Based on my knowledge, this annual report does not contain any
          untrue  statement of a material  fact or omit to state a material fact
          necessary to make the statements  made, in light of the  circumstances
          under which such  statements were made, not misleading with respect to
          the period covered by this annual report;

               3.Based on my  knowledge,  the  financial  statements,  and other
          financial  information included in this annual report,  fairly present
          in  all  material  respects  the  financial   condition,   results  of
          operations  and  cash  flows of the  registrant  as of,  and for,  the
          periods presented in this annual report;


Date: November 13, 2002


/s/ C. Dean McLain
------------------
Chief Executive Officer and President








I, Mark J. Wright, certify that:

               1. I have  reviewed  this  annual  report on Form 10-K of Western
          Power & Equipment Corp.;

               2. Based on my knowledge, this annual report does not contain any
          untrue  statement of a material  fact or omit to state a material fact
          necessary to make the statements  made, in light of the  circumstances
          under which such  statements were made, not misleading with respect to
          the period covered by this annual report;

               3.Based on my  knowledge,  the  financial  statements,  and other
          financial  information included in this annual report,  fairly present
          in  all  material  respects  the  financial   condition,   results  of
          operations  and  cash  flows of the  registrant  as of,  and for,  the
          periods presented in this annual report;


Date: November 13, 2002


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