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FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

For the Quarter Ended October 31, 2003
Commission File Number 0-26230

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

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

6407-B N.E. 117th Avenue, Vancouver, WA 98662
- --------------------------------------- -----
(Address of principal executive offices) (Zip Code)

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

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports); and (2) has been subject to such filing
requirements for the past 90 days.

YES X NO
----- -----

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

Title of Class Number of shares
Common Stock Outstanding
(par value $.001 per share) 10,130,000

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WESTERN POWER & EQUIPMENT CORP.
INDEX

PART I. FINANCIAL INFORMATION Page Number

Item 1. Financial Statements

Condensed Consolidated Balance Sheets
October 31, 2003 (Unaudited) and July 31, 2003............... 2

Condensed Consolidated Statements of Operations
Three months ended October 31, 2003 (Unaudited)
and October 31, 2002 (Unaudited)............................. 3

Condensed Consolidated Statements of Cash Flows
Three months ended October 31, 2003 (Unaudited)
and October 31, 2002 (Unaudited)............................. 4

Notes to Consolidated Financial Statements..................... 5-8

Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations......... 9-12

Item 3. Quantitative and Qualitative Disclosures about
Market Risk........................................... 12

Item 4. Controls and Procedures............................... 12-13

PART II. OTHER INFORMATION

Item 1. Legal Proceedings...............................

Item 2. Changes in Securities...........................

Item 3. Defaults Upon Senior Securities................. 14

Item 4. Submission of Matters to a Vote of Security
Holders............................. 14

Item 5. Other Information............................... 14

Item 6. Exhibits and Reports on Form 8-K................ 14

SIGNATURES ............................................... 15

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

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

October 31, July 31,
2003 2003
------------ ------------

(Unaudited)
ASSETS (PLEDGED)
----------------
Current assets:
Cash and cash equivalents ........................... $ 9 $ 8
Restricted Cash ..................................... 478 400
Accounts receivable, less allowance for doubtful
accounts of $748 and $555, respectively ........... 7,715 9,779
Inventories ......................................... 24,281 27,494
Prepaid expenses .................................... 141 126
------------ ------------
Total current assets ......................... 32,624 37,807

Fixed assets:
Property, plant and equipment (net) ................. 2,733 2,843
Rental equipment fleet (net) ........................ 12,681 13,663
------------ ------------
Total fixed assets ........................... 15,414 16,506

Other assets ............................................. 131 153
------------ ------------
Total assets ............................................. $ 48,169 $ 54,466
============ ============

LIABILITIES & STOCKHOLDERS' DEFICIT
-----------------------------------
Current liabilities:
Borrowings under floor plan financing ............... $ 8,339 $ 10,959
Short-term borrowings ............................... 31,396 34,566
Convertible debt .................................... 50 63
Accounts payable and accrued expenses ............... 7,181 8,214
Accrued payroll and vacation ........................ 562 572
Other accrued liabilities ........................... 958 984
Capital lease obligation ............................ 30 39
------------ ------------
Total current liabilities ....................... 48,516 55,397

Capital lease obligation ................................. 880 880
------------ ------------
Total long-term liabilities ........................ 880 880
------------ ------------
Total liabilities ........................................ 49,396 56,277
------------ ------------

Stockholders' deficit:
Preferred stock-10,000,000 shares authorized;
none issued and outstanding ....................... -- --
Common stock-$.001 par value; 20,000,000 shares
authorized; 10,260,300 issued and 10,130,000
outstanding ....................................... 10 10
Additional paid-in capital .......................... 16,933 16,933
Accumulated deficit ................................. (17,326) (17,910)
Less common stock in treasury, at cost
(130,300 shares) .................................. (844) (844)
------------ ------------
Total stockholders' deficit ..................... (1,227) (1,811)
------------ ------------
Total liabilities and stockholders' deficit .............. $ 48,169 $ 54,466
============ ============

The accompanying notes are an integral part of
these condensed consolidated financial statements.

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

Three Months Ended
October 31,
2003 2002
------------ ------------

Net revenue ..................................... $ 27,732 $ 24,094

Cost of revenues (includes depreciation of
$1,549 and $1,066, respectively) ............. 24,163 20,633
------------ ------------

Gross profit .................................... 3,569 3,461

Selling, general and administrative expenses .... 2,323 2,290
------------ ------------

Operating income ................................ 1,246 1,171

Other income (expense):
Interest expense ........................... (722) (945)
Other income ............................... 72 66
------------ ------------

Income before income tax provision .............. 596 292

Income tax provision ............................ 12 13
------------ ------------

Net income ...................................... $ 584 $ 279
============ ============

Average outstanding common shares for
basic and diluted earnings per share .......... 10,130 4,003
============ ============

Basic and diluted earnings per common share ..... $ 0.06 $ 0.07
============ ============

The accompanying notes are an integral part of
these condensed consolidated financial statements.

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

Three Months Ended
October 31,
2003 2002
------------ ------------

Cash flows from operating activities:
Net income .................................... $ 584 $ 279
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation .................................. 1,676 2,131
Amortization .................................. -- --
Bad Debts ..................................... 114 113
Gain on sale of fixed assets and
rental equipment ....................... (461) (157)
Changes in assets and liabilities:
Accounts receivable ....................... 1,950 3,226
Restricted Cash ........................... (78) (26)
Inventories ............................... 2,368 (293)
Prepaid expenses .......................... (15) (78)
Accounts payable .......................... (1,033) (1,629)
Accrued payroll and vacation .............. (10) (46)
Other accrued liabilities ................. (26) 1,462
Sale of other assets ...................... 23 --
Income taxes receivable/payable ........... -- 2
------------ ------------
Net cash provided by operating activities .......... 5,092 4,984
------------ ------------

Cash flows from investing activities:
Purchase of fixed assets ...................... (18) (26)
Purchases of rental equipment ................. (979) --
Proceeds on sale of fixed assets .............. -- 5
Proceeds on sale of rental equipment .......... 1,718 1,338
------------ ------------
Net cash provided by (used in)
investing activities ............................. 721 1,317
------------ ------------

Cash flows from financing activities:
Principal payments on capital leases .......... (9) (10)
Payments on floor-plan financing .............. (2,620) (2,208)
Payments on short-term borrowings ............. (3,170) (4,044)
Payments on convertible debt .................. (13) (39)
------------ ------------
Net cash used in financing activities .............. (5,812) (6,301)
------------ ------------

Decrease in cash and cash equivalents .............. 1 --
Cash and cash equivalents at beginning of
period ............................................ 8 5
------------ ------------

Cash and cash equivalents at end of period ......... $ 9 $ 5
============ ============

The accompanying notes are an integral part of
these condensed consolidated financial statements.

Western Power & Equipment Corp.

Notes to Consolidated Financial Statements
(Dollars in thousands)

1. BASIS OF PRESENTATION

The accompanying consolidated financial statements are unaudited and in the
opinion of management contain all the adjustments (consisting of those of a
normal recurring nature) considered necessary to present fairly the consolidated
financial position and the consolidated results of operations and cash flows for
the periods presented in conformity with accounting principles generally
accepted in the United States applicable to interim periods. The results of
operations for the quarterly periods ended October 31, 2003 are not necessarily
indicative of results that may be expected for any other interim periods or for
the full year. This report should be read in conjunction with the Company's
consolidated financial statements included in the Annual Report on Form 10-K for
the fiscal year ended July 31, 2003 filed with the Securities and Exchange
Commission. The accounting policies used in preparing these unaudited condensed
consolidated financial statements are consistent with those described in the
July 31, 2003 consolidated financial statements.

The accompanying consolidated 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.

The Company has recurring losses and is currently in default on its short-term
borrowing facility as discussed in Note 6 of these consolidated financial
statements, both of which create substantial doubt about the Company's ability
to continue as a going concern. The accompanying unaudited consolidated
financial statements do not include any adjustments that might be necessary
should the Company be unable to continue as a going concern.

2. ACCOUNTING POLICIES

The accounting policies followed by the Company are set forth in Note 1 to the
Company's consolidated financial statements as filed in its Form 10-K for the
year ended July 31, 2003.

During the current quarter the company adopted Statement of Financial Accounting
Standards ("SFAS") No. 150, "Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity." SFAS No. 150 addresses certain
financial instruments that, under previous guidance, could be accounted for as
equity, but now must be classified as liabilities in statements of financial
position. These financial instruments include: (1) mandatorily redeemable
financial instruments. (2) obligations to repurchase the issuer's equity shares
by transferring assets, and (3) obligations to issue a variable number of
shares. SFAS No. 150 is effective for all financial instruments entered into or
modified after May 31, 2003, and otherwise effective at the beginning of the
first interim period beginning after June 15, 2003. There was no effect on the
condensed consolidated financial statements from the adoption of this
pronouncement.

3. EARNING PER SHARE

Basic net income per share of common stock is computed based on the
weighted average number of common shares outstanding during the period.

Diluted net income per share of common stock is computed based on the
weighted average number of common shares outstanding during the period

plus any dilutive securities outstanding (stock options). There were no dilutive
securities for the three month period ended October 31, 2003. Total outstanding
options as October 31, 2003 totaled 1,210,000.

4. INVENTORIES

Inventories consist of the following:

October 31, July 31,
2003 2003
-------- --------

Equipment (net of reserve allowances of
$4,350 and $4,493, respectively):
New $ 12,621 $ 15,460
Used 4,898 5,370

Parts (net of reserve allowance of $412
and $378, respectively) 6,762 6,664
-------- --------
$ 24,281 $ 27,494
======== ========

5. FIXED ASSETS

Fixed assets consist of the following:

October 31, July 31,
2003 2003
-------- --------

Operating property, plant and equipment:
Land $ 522 $ 522
Buildings 1,749 1,749
Machinery and equipment 3,092 3,092
Office furniture and fixtures 2,213 2,213
Computer hardware and software 1,530 1,525
Vehicles 1,239 1,226
Leasehold improvements 966 967
-------- --------
11,311 11,294
Less: accumulated depreciation (8,578) (8,451)
-------- --------
Property, plant, and equipment (net) $ 2,733 $ 2,843
======== ========

Rental equipment fleet $ 20,469 $ 21,046
Less: accumulated depreciation (7,788) (7,383)
-------- --------
Rental equipment (net) $ 12,681 $ 13,663
======== ========

6. SHORT-TERM 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 twelve-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 an inventory floor plan and operating line of credit through GE
Commercial Distribution Finance ("GE"), fka Deutsche Financial Services. The
credit facility matured December 31, 2001 and had provided terms with a floating
interest 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. Amounts may
be advanced to the Company based on its assets, including accounts receivable,
parts inventory, new and used equipment inventory, rental fleet, 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 GE
under the terms of which GE raised the interest rate to prime plus 4% while the

Company was in technical default and required the Company to pay a $45 fee to GE
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 October 31, 2003, the Company continued to be in
technical default of the GE Loan Agreement. The Company has requested but did
not receive a waiver from GE. Although GE has not called the debt due to such
defaults, there is no guarantee that GE will not require the Company to repay
the debt at any time.

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.

7. RECENT ACCOUNTING PRONOUNCEMENTS

The following pronouncements have been issued by the Financial Accounting
Standards Board ("FASB").

In January 2003, the FASB issued Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51."
FIN 46 requires certain variable interest entities to be consolidated by the
primary beneficiary of the entity if the entity investors in the equity do not
have the characteristics of a controlling financial interest or do not have a
sufficient equity risk for the entity to finance its activities without
additional financial support from other parties. FIN 46 is effective for all new
variable interest entities created or acquired after January 31, 2003. For
variable interest entities created or acquired prior to February 1, 2003, the
provisions of FIN 46 must be applied for the first interim or annual period
beginning after December 15, 2003.

In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." This Statement amends and
clarifies SFAS No. 133 "Accounting for Derivative Instruments and Hedging
Activities." This statement clarifies the accounting guidance on (1) derivative
instruments (including certain derivative instruments embedded in other
contracts) and (2) hedging activities that fall within the scope of the SFAS No.
133. SFAS No. 149 also amends certain other existing pronouncements, which will
result in more consistent reporting of contracts that are derivatives in their
entirety or that contain embedded derivatives that warrant separate accounting.
SFAS No. 149 is effective (1) for contracts entered into or modified after
September 30, 2003, with certain exceptions, and (2) for hedging relationships
designated after September 30, 2003. The guidance is applied prospectively.

Management does believe that the adoption of any of these pronouncements will
have a material effect on the Company's condensed consolidated financial
statements.

8. PRODUCT INFORMATION

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 categories. Revenue and gross margin by product categories are
summarized as follows:

Business product category Three Months Ended
Net Revenues October 31,
2003 2002
---------------- -------- --------

Equipment Sales $ 18,772 $ 15,117

Equipment Rental 1,479 1,820

Product Support 7,481 7,157
-------- --------

Total $ 27,732 $ 24,094
======== ========

Business Component Three Months Ended
Gross Margins October 31,
2003 2002
------------------ -------- --------

Equipment Sales $ 1,709 $ 1,456

Equipment Rental 416 605

Product Support 1,444 1,400
-------- --------

Total $ 3,569 $ 3,461
======== ========

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

The following discussion and analysis should be read in conjunction with the
Consolidated Financial Statements and Notes thereto appearing elsewhere in this
Form 10-Q. Information included herein relating to projected growth and future
results and events constitutes forward-looking statements. Actual results in
future periods may differ materially from the forward-looking statements due to
a number of risks and uncertainties, including but not limited to fluctuations
in the construction, agricultural, and industrial sectors; the success of the
Company's restructuring and cost reduction plans; the success of the Company's
equipment rental business; rental industry conditions and competitors;
competitive pricing; the Company's relationship with its suppliers; relations
with the Company's employees; the Company's ability to manage its operating
costs; the continued availability of financing; the Company's ability to
refinance/restructure its existing debt; governmental regulations and
environmental matters; risks associated with regional, national, and world
economies; and consummation of the merger and asset purchase transactions. Any
forward-looking statements should be considered in light of these factors.

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

The Three Months ended October 31, 2003 compared to the Three Months ended
- --------------------------------------------------------------------------
October 31, 2002.
- -----------------

Revenues for the three-month period ended October 31, 2003 increased 15.1% to
$27.7 million compared with $24.1 million for the three-month period ended
October 31, 2002. Revenues were up from the prior year's first quarter primarily
in the equipment sales department as a result of improved economy conditions,
especially in the Pacific Northwest.

The Company's gross profit margin of 12.9% for the three-month period ended
October 31, 2003 was slightly lower than the prior year's comparative period
margin of 14.4%. The slight decrease in margins is associated with changes in
the sales and rental mix of products.

For the three-month period ended October 31, 2003, selling, general, and
administrative ("SG&A") expenses as a percentage of sales were 8.4%, down from
9.5% for the prior year's quarter reflecting the Company's continued efforts to
reduce operating expenses.

Interest expense for the three months ended October 31, 2003 of $722,000 was
down from $945,000 in the prior year comparative period. This decrease is the
result of reduced overall inventory levels as well as lower average interest
rates and a lower balance on the GE facility.

The Company had net income for the quarter ended October 31, 2003 of $584,000 or
$.06 per share (basic and diluted) compared with a net income of $279,000 or
$0.07 per share (basic and diluted) for the prior year's first quarter.

Liquidity and Capital Resources
- -------------------------------

The Company's primary needs for liquidity and capital resources are related to
its acquisition of inventory for sale and its rental fleet. 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 as well as the credit
facility with GE more fully described below.

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 upon sale of the equipment. At October 31,
2003, the Company was indebted under manufacturer provided floor planning
arrangements in the aggregate amount of $8,339,000.

The Company has an inventory floor plan and operating line of credit with GE
which expired on December 31, 2001. The line of credit agreement has not been
renewed and the Company is operating under the agreement on a month to month
basis. Amounts are advanced against the Company's assets, including accounts
receivable, parts, new equipment, rental fleet, and used equipment. The
agreement provided for a floating interest 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. The Company uses this borrowing facility to lower
flooring related interest expense by using advances under such line to finance
inventory purchases in lieu of financing provided by suppliers, to take
advantage of cash purchase discounts from its suppliers, to provide operating
capital for further growth. Borrowings are collateralized by the Company's
assets, including accounts receivable, parts inventory, new and used equipment
inventory and rental equipment. As of October 31, 2003, approximately
$31,396,000 was outstanding under the GE credit facility.

On June 21, 2002, the Company entered into a Forbearance Agreement with GE under
the terms of which GE 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 GE 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 October 31, 2003, the Company was in technical default
of the GE Loan Agreement. The Company has requested, but has not obtained a
waiver. Although GE has not called the debt due to such defaults, there is no
guarantee that GE will not require the Company to repay the debt at any time in
full.

During the quarter ended October 31, 2003 the Company had positive cash flow
from operating activities during the year of $ 5,092,000. The Company's cash
flow from operating activities consisted primarily of a reduction of accounts
receivable of $1,950,000, depreciation of $1,676,000, and a decrease in
inventories of $2,368,000. 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 $3,170,000 during the quarter.

The Company's cash and cash equivalents was approximately $9,000 as of October
31, 2003. The Company cannot fund current levels of operations without the
continued availability of borrowing from its current lender GE. Under the
existing credit facility, GE is entitled to all cash collections from the
Company's accounts receivable, which are applied as they are received by GE
against the total amount due GE from the Company under the credit facility. To
fund operations, the Company must request advances from GE under its credit
facility. Since the Company has essentially no cash flow other than from
accounts receivable (which are remitted to GE), the Company cannot fund
operations without borrowing from GE. If GE decided to stop making borrowing
available to the Company, the Company would immediately be unable to continue
its operations.

Although the Company and GE are in negotiations to extend or renew the credit
facility, there can be no assurance that the Company will be able to

successfully negotiate an acceptable extension or renewal of the expired GE
credit facility or that GE will continue to make borrowing available to the
Company. The Company continues to investigate alternative sources of financing
and/or capital infusion in an effort to meet its operational needs.

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

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

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

The Company's business can also be affected by general economic conditions in
its geographic markets as well as general national and global economic
conditions that affect the construction, industrial, and agricultural sectors. A
further erosion in North American and/or other countries' economies could
adversely affect the Company's business.

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 50% of the Company's net sales for the
three months ended October 31, 2003 resulted from sales, rental, and servicing
of products manufactured by companies other than Case. That compares with a
figure of 53% for the fiscal year ended July 31, 2003. 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 purchases its equipment and parts inventory from Case and other
manufacturers. No supplier other than Case accounted for more than 10% of such
inventory purchases during the quarter ended October 31, 2003. 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.

The generally soft economic conditions in the equipment market, particularly in
the northwest, have contributed to a decline in equipment sales in prior years.
A further softening in the industry could severely affect the Company's sales
and profitability. Market specific factors could also adversely affect one or
more of the Company's target markets and/or products. The Company expects the
construction equipment market in its store locations to remain flat or slightly
down over the next 6 to 12 months.

Recent Accounting Pronouncements

The following pronouncements have been issued by the Financial Accounting
Standards Board ("FASB").

Management does believe that the adoption of any of these pronouncements will
have a material effect on the Company's condensed consolidated financial
statements.

Item 3. 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 October 31, 2003, the Company had
variable rate floor plan payables, notes payable, and short-term debt of
approximately $39.7 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 $0.4 million. The
Company's policy is not to enter into derivatives or other financial instruments
for trading or speculative purposes.

Item 4. Controls and Procedures

Based on their evaluation as of the date of the end of the period covered by
this Form 10-Q, our management, with the participation of our Chief Executive
Office and Chief Financial Officer, conducted an evaluation of the effectiveness
of the design and operation of our disclosure controls and procedures, as
required by Exchange Act Rule 13a-15. Based on that

evaluation, the Chief Executive Officer and Chief Financial Officer have
concluded that our disclosure controls and procedures were effective to ensure
that information required to be disclosed by us in the reports that we file or
submit under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified by the SEC's rules and forms.

Changes in Internal Controls

There were no significant changes in our internal controls over financial
reporting that occurred during the quarter ended October 31, 2003 that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.

Limitations on the Effectiveness of Controls

We believe that a control system, no matter how well designed and operated,
cannot provide absolute assurance that the objectives of the control system are
met, and no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, within a company have been
detected.

PART II. OTHER INFORMATION

ITEM 1. 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 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
-----------------------------------------

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES
-------------------------------

As of October 31, 2003, the Company was in technical default of
the financial covenants in the GE Forbearance Agreement. The
Company has not received a waiver of such defaults from GE and
although GE has not called the loan, there is no guarantee that
it will not do so in the future.

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

None.

ITEM 5. OTHER INFORMATION
-----------------

None.

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

(a) Exhibits

Exhibit 31 Rule 13a-14(a)/15d-14(a) Certification
Exhibit 32.1 Certification by the Chief Executive
Officer Relating to a Periodic Repost
Containing Financial Statements. *
Exhibit 32.2 Certification by the Chief Financial
Officer Relating to a Periodic Report
Containing Financial Statements. *

(b) Reports on Form 8-K

None.

* The Exhibit attached to this Form 10-Q shall not be
deemed "filed" for purposes of Section 18 of the
Securities Exchange Act of 1934 (the "Exchange Act") or
otherwise subject to liability under that section, nor
shall it be deemed incorporated by reference in any
filing under the Securities Act of 1933, as amended, or
the Exchange Act, except as expressly set forth by
specific reference in such filing.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

WESTERN POWER & EQUIPMENT CORP.

December 9, 2003

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