<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                          -----------------------------
                               Amendment No. 2 to
                                  FORM 10-QSB/A
                          -----------------------------

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


For Quarter Ended September 30, 2001
Commission File Number 001-15071


                          -----------------------------

                             PowerSource Corporation

                 (Name of Small Business Issuer in its charter)

                          -----------------------------


         Nevada                                         61-1180504
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)


3660 Wilshire Blvd, Suite 1104
Los Angeles, CA  90010
(Address of principal executive office)

                                 (213) 383-4443
                         (Registrant's Telephone Number)

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 of 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  (   )                          No  ( * )

The number of shares outstanding of each of the issuer's classes of common
stock, as of 9/30/01

6,817,008 shares of common stock, $.001 par value

--------------------------------------------------------------------------------
                                       1
<PAGE>

                             PowerSource Corporation

                    INDEX TO QUARTERLY REPORT ON FORM 10-QSB
                        QUARTER ENDED SEPTEMBER 30, 2001


                              ITEMS IN FORM 10-QSB


Facing Page


PART I          FINANCIAL INFORMATION

Item 1.         Consolidated Financial Statements.

                Condensed consolidated balance sheets.
                September 30, 2001 (unaudited) and December 31, 2000

                Condensed consolidated statements of operations.
                for the three and nine months ended September 30, 2001
                and 2000 (unaudited)

                Condensed consolidated statements of cash flows.
                for the three and nine months ended September 30, 2001 and
                2000 (unaudited)

                Condensed consolidated statements of changes in stockholders'
                (deficit).
                for the nine months ended September 30, 2001 (unaudited)

                Notes to condensed consolidated financial statements.

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


PART II         OTHER INFORMATION

Item 1.         Legal Proceedings.

Item 2.         Changes in Securities and Use of Proceeds.

Item 3.         Defaults Upon Senior Securities.

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

Item 5.         Other Information.

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

--------------------------------------------------------------------------------

                                       2
<PAGE>

PART I.           FINANCIAL INFORMATION

Item 1.  FINANCIAL STATEMENTS


<TABLE>
                                POWERSOURCE CORPORATION

                         CONDENSED CONSOLIDATED BALANCE SHEETS
                        September 30, 2001 and December 31, 2000


<CAPTION>
                                               ASSETS
                                                                     09/30/01       12/31/00
                                                                   (unaudited)
                                                                   ------------   ------------
<S>                                                                <C>            <C>
Current assets
      Cash                                                         $   160,350    $   143,651
      Accounts receivable, net                                              --        348,028
      Prepaid expenses                                                  28,009         12,411
                                                                   ------------   ------------
                Total current assets                                   188,359        504,090
                                                                   ------------   ------------

Property and equipment, net                                            161,258         41,792
                                                                   ------------   ------------

Other assets
      Notes receivable - officers                                       30,000         30,000
      Interest receivable - officers                                     2,125             --
      Investment in EHG technology, LLC                                 25,000         25,000
      Investment in oil and gas properties                              13,375         13,375
      Deposits                                                           3,013          1,774
                                                                   ------------   ------------
                Total other assets                                      73,513         70,149
                                                                   ------------   ------------

                Total assets                                       $   423,130    $   616,031
                                                                   ============   ============

                               LIABILITIES AND STOCKHOLDERS' (DEFICIT)

 Current liabilities
      Accounts payable and accrued expenses                        $   334,222    $   804,616
      Accrued wages                                                    801,508         97,453
      Income taxes payable                                                 800            800
      Interest payable                                                  50,387         24,411
      Loan payable - in default at 09/30/01 and 12/31/00               210,000        210,000
      Notes payable - computer equipment                                18,012         15,788
                                                                   ------------   ------------
                Total current liabilities                            1,414,929      1,153,068
                                                                   ------------   ------------

 Long-term liabilities
      Notes payable - computer equipment                                 8,491         22,292
      Senior convertible notes payable                                  47,000             --
      Deferred revenue                                                 139,860        510,860
      Long term wages and salaries payable                                  --        704,055
                                                                   ------------   ------------
                Total long-term liabilities                            195,351      1,237,207
                                                                   ------------   ------------

Stockholders' (deficit)
      Common stock,  par value $ .001,  50,000,000 authorized,
       6,817,008 and 6,147,008 shares issued and outstanding             6,817          6,147
      Paid-in capital in excess of par value                         1,058,570        925,240
      Preferred stock,  par value $ 100,  10,000,000 authorized,
       5,350 shares issued and outstanding                              13,375         13,375
      Accumulated deficit                                           (2,265,912)    (2,719,006)
                                                                   ------------   ------------
                Total stockholders' (deficit)                       (1,187,150)    (1,774,244)
                                                                   ------------   ------------

                Total liabilities and stockholders' (deficit)      $   423,130    $   616,031
                                                                   ============   ============

               See accompanying notes to condensed consolidated financial statements.
</TABLE>

                                                  3
<PAGE>
<TABLE>
                                       POWERSOURCE CORPORATION

                           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                Three and Nine Months Ended September 30, 2001 and September 30, 2000
                                             (Unaudited)


<CAPTION>
                                                   3 Months Ended  9 Months Ended  3 Months Ended 9 Months Ended
                                                      09/30/01        09/30/01        09/30/00       09/30/00
                                                    ------------    ------------    ------------   ------------
<S>                                                 <C>             <C>             <C>            <C>
Revenue
          Electricity sales                         $    20,880     $ 2,186,505     $   726,814    $   838,661
          Cost of sales                                (131,129)        819,618         532,617        603,330
                                                    ------------    ------------    ------------   ------------
                Gross margin on electricity sales       152,009       1,366,887         194,197        235,331
                                                    ------------    ------------    ------------   ------------

          Sales of marketing territory                  210,000         420,000         210,000        210,000
                                                    ------------    ------------    ------------   ------------
                                                        362,009       1,786,887         404,197        445,331
                                                    ------------    ------------    ------------   ------------

Expenses
          Selling expenses                               (2,957)         26,870             785         51,603
          General and administrative expenses           327,518       1,286,869         297,429        871,434
                                                    ------------    ------------    ------------   ------------
               Total expenses                           324,561       1,313,739         298,214        923,037
                                                    ------------    ------------    ------------   ------------

Income (loss) from operations                            37,448         473,148         105,983       (477,706)
                                                    ------------    ------------    ------------   ------------

Other expense (income)
           Interest income                               (3,046)        (10,358)             --             --
           Interest expense                               9,808          30,413           7,977         19,147
                                                    ------------    ------------    ------------   ------------
                Total other expenses                      6,762          20,055           7,977         19,147
                                                    ------------    ------------    ------------   ------------

Income (loss) before provision for income taxes          30,686         453,093          98,006       (496,853)

Provision for income taxes                                   --              --              --             --
                                                    ------------    ------------    ------------   ------------

Net income (loss)                                   $    30,686     $   453,093     $    98,006    $  (496,853)
                                                    ------------    ------------    ------------   ------------

Net income (loss) per common share                  $      0.00     $      0.07     $      0.02    $     (0.08)
                                                    ------------    ------------    ------------   ------------

Weighted average
Shares outstanding                                    6,817,008       6,703,883       6,006,825      6,006,825
                                                    ------------    ------------    ------------   ------------

                    See accompanying notes to condensed consolidated financial statements.
</TABLE>

                                                      4
<PAGE>

<TABLE>
                                                 POWERSOURCE CORPORATION

                             CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Three and Nine
                                 Months Ended September 30, 2001 and September 30, 2000
                                                       (Unaudited)

<CAPTION>
                                                                           3 Months     9 Months     3 Months     9 Months
                                                                            Ended        Ended        Ended        Ended
                                                                           09/30/01     09/30/01     09/30/00     09/30/00
                                                                          ----------   ----------   ----------   ----------
<S>                                                                       <C>          <C>          <C>          <C>
Cash flows from operating activities
    Net income (loss)                                                     $  30,686    $ 453,093    $  98,006    $(496,853)
    Adjustment to reconcile net income (loss) to net cash
      Provided by operating activities
              Depreciation                                                   20,167       33,014        3,536       10,609
              Shares issued for payment of consulting services                   --      134,000
              Changes in operating assets and liabilities
                  Accounts receivable                                        54,960      348,028     (109,531)    (118,154)
                  Note receivable - officers                                     --           --           --      (30,000)
                  Interest receivable - officers                               (375)      (2,125)          --           --
                  Prepaid expenses                                           17,446      (15,598)       9,263      (21,674)
                  Deposits                                                       --       (1,239)          --           --
                  Accounts payable and accrued expenses(139,996)           (470,394)     457,804      684,853
                  Accrued wages                                                  --           --           --         (625)
                  Interest payable                                            9,141       25,977        7,939       16,471
                  Deferred revenue                                         (203,000)    (371,000)     (63,040)     119,685
                                                                          ----------   ----------   ----------   ----------
                       Net cash provided (used) by operating activities    (210,971)     133,756      403,977      164,311
                                                                          ----------   ----------   ----------   ----------

Cash flows from investing activities
    Acquisition of property and equipment                                   (10,761)    (152,480)          --           --
                                                                          ----------   ----------   ----------   ----------
                       Net cash used by investing activities                (10,761)    (152,480)          --           --
                                                                          ----------   ----------   ----------   ----------

Cash flows from financing activities
    Loan payable (computer lease)                                            (4,030)     (11,577)      (3,381)     (13,306)
    Loan payable (auto)                                                     (48,832)          --           --           --
    Senior notes payable                                                         --       47,000           --      210,000
    Common stock issued                                                          --           --           --       53,506
                                                                          ----------   ----------   ----------   ----------
                       Net cash provided (used) by financing activities     (52,862)      35,423       (3,381)     250,200
                                                                          ----------   ----------   ----------   ----------

Net increase (decrease) in cash                                           $(274,594)   $  16,699    $ 400,596    $ 414,511
                                                                          ----------   ----------   ----------   ----------

Cash - beginning of period                                                  434,944      143,651       15,323        1,408
                                                                          ----------   ----------   ----------   ----------

Cash - end of period                                                      $ 160,350    $ 160,350    $ 415,919    $ 415,919
                                                                          ----------   ----------   ----------   ----------


Supplemental disclosure of cash flow information

Cash paid during the period for:
Interest                                                                  $   9,808    $  30,413    $   7,977    $  19,147
                                                                          ----------   ----------   ----------   ----------
Income taxes                                                              $      --    $      --    $      --    $      --
                                                                          ----------   ----------   ----------   ----------

During the nine months ended September 30, 2001, the Company issued 670,000
shares of its common stock valued at $134,000 for consulting services.

                         See accompanying notes to condensed consolidated financial statements.

                                                           5
</TABLE>
<PAGE>

<TABLE>
                                            POWERSOURCE CORPORATION

                     CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
                                     Nine Months Ended September 30, 2001
                                                  (Unaudited)


<CAPTION>
                                                             Common Stock           Paid-in
                                         Preferred    --------------------------  Capital in    Accumulated
                                           Stock         Shares        Amount      Excess of      Deficit          Total
                                        ------------  ------------  ------------  ------------  ------------   ------------
<S>                                     <C>             <C>         <C>           <C>           <C>            <C>
Balance January 1, 2001                 $    13,375     6,147,008   $     6,147   $   925,240   $(2,719,006)   $(1,774,244)

Shares issued for consulting services            --       650,000           650       129,350            --        130,000

Net income                                       --            --            --            --       417,460        417,460

Balance March 31, 2001                       13,375     6,797,008         6,797     1,054,590    (2,301,546)    (1,226,784)

Shares issued for consulting services            --        20,000            20         3,980            --          4,000

Net income                                       --            --            --            --         4,947          4,947

Balance June 30, 2001                        13,375     6,817,008         6,817     1,058,570    (2,296,598)    (1,217,836)

Net income                                       --            --            --            --        30,686         30,686

                                        ------------  ------------  ------------  ------------  ------------   ------------
Balance September 30, 2001              $    13,375     6,817,008   $     6,817   $ 1,058,570   $(2,265,912)   $(1,187,150)
                                        ============  ============  ============  ============  ============   ============

                    See accompanying notes to condensed consolidated financial statements.

                                                      6
</TABLE>
<PAGE>

                             POWERSOURCE CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                    SEPTEMBER 30, 2001 AND SEPTEMBER 30, 2000
                                   (UNAUDITED)


Note 1. Basis of presentation
-----------------------------

The consolidated financial statements included herein have been prepared by
PowerSource Corporation (the "Company"), without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain information
and footnote disclosure normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States of
America have been condensed or omitted pursuant to such rules and regulations;
however, the Company believes that the disclosures are adequate to make the
information presented not misleading.

In the opinion of management, all adjustments necessary to present fairly the
financial position of the Company as of September 30, 2001 and December 31,
2000, and the results of operations and cash flows for the period ended
September 30, 2001 and September 30, 2000 have been included and are of a normal
recurring nature.


The Company is currently a going concern and fully expects to be so for at least
the next twelve months. The current cash balance of approximately $160,000 and
payments from outside entities that owe the Company refunds are anticipated to
cover overhead expenses and provide a sufficient level of working capital to
allow our diversification efforts to be successful. These refunds come from
three sources. First, overpayments from the California Independent System
Operator ("ISO") that previously overcharged all market participants are now
being returned to the proper entities, including our Company. The Automated
Power Exchange will receive these funds on behalf of PowerSource and has
determined through their accounting records that the amount owed to the Company
is $94,154.81. These payments from the ISO were requested to be paid to
recipients such as the Company, prior to the end of 1st Quarter 2002, by the
Federal Regulatory Commission in their December 19, 2001 decision. Second, all
three utilities in the state under-calculated the value of its power due
Electric Service Providers such as our Company. These underpayments should be
refunded within the next six to nine months. Although, it is impossible to
predict the exact amount, based on our experience, we anticipate a refund
between $100,000 and $200,000. Finally, it is likely that the Federal Energy
Regulatory Commission will confirm its previous assessments that certain groups
of power generators overcharged sufficiently for electric power to require a
refund to those entities that purchased this power. Our Company would receive
its proportionate share of any refund of this type. Based upon information
reported in the press, this amount could approach $200,000 - $500,000. However,
it should be noted that as this is a highly political issue, one cannot place
too much reliance on these figures. The Company recognizes that there is
uncertainty associated with both the timing and the amounts associated with
these payments. Therefore, they may not be available to the Company when it
needs these funds for either expansion or operations.

The Company anticipates reporting a loss for both the 4th Quarter of 2001 and
for the Year Ended December 31, 2001.

The Company's diversification efforts are already generating interest and the
Company expects significant revenue from these activities within the next twelve
months. However, the revenue from these diversification efforts is not expected
to occur quickly enough to offset the deferred tax benefit during the current
fiscal year (See Note 9.)



Note 2. Accounts Receivable
---------------------------

The Company has generated no new receivables, and has been collecting on
existing receivables, as of May 31, 2000, when it turned over its customers to
Southern California Edison. As such, the overall accounts receivable balance is,
and will continue to be, reduced.


Note 3. Property and equipment
------------------------------

Property and equipment consist of the following:
                                                         9/30/01       12/31/00
                                                        ----------    ----------

                  Stabilux Equipment                    $  41,118     $      --
                  Automobiles                              97,360            --
                  Furniture and fixtures                    5,088         1,906
                  Office Equipment                         82,143        71,323
                                                        ----------    ----------
                                                          225,709        73,229
                  Less: Accumulated depreciation          (64,451)      (31,437)
                                                        ----------    ----------

                                                        $ 161,258     $  41,792
                                                        ----------    ----------

                                       7
<PAGE>

Note 4. Loan payable
--------------------

As of September 30, 2001, the Company had a loan that was due August, 2000, from
Earth Co, in the amount of $210,000 at a simple interest rate of 15%. The
Company is currently in default, but the note is convertible into common stock.
In addition, the Company had loans on two automobiles payable over 36 months
commencing May, 2001, at an interest rate of 8.2% each. As of September 30,
2001, both automobile loans had been paid in full.


Note 5. Accrued Salaries and Wages
----------------------------------

Accrued salaries were classified as long-term at December 31, 2000 because the
officers agreed, in writing, to waive payment demand until after December 31,
2001. Since then, the accrued salaries have been classified as current
liabilities being that the officers have not extended their demand waiver beyond
December 31, 2001. Accordingly, since the demand waiver is less than twelve
months, they become current liabilities for any period after December 31, 2000.

Compensation related to the issuance of stock options in the year 2000 comprises
$761,508 of the $801,508 total balance. As of September 30, 2001, no stock
options had been exercised.


Note 6. Notes payable
---------------------

Notes payable consist of:
                                                             9/30/01    12/31/00
                                                             --------   --------
            Capital lease obligation due in 48 monthly
            installments of $1,774 per month including
            principal and interest at 13.7%

            Total                                            $26,503    $38,080
            Less amount current portion                       18,012     15,788
                                                             --------   --------
                                                             $ 8,491    $22,292
                                                             --------   --------



            Senior Convertible Note                          $20,000    $    --
            to Herbert Dornbush
            due February 28, 2003
            interest at 10%

            Senior Convertible Note                           20,000         --
            to Daniel S. Allen
            due April 5, 2003
            interest at 10%

            Senior Convertible Note                            2,000         --
            to Gordon Livingston
            due May 14, 2003
            interest at 10%

            Senior Convertible Note                            5,000         --
            to Matossian Family
            due June 6, 2003
            interest at 10%
                                                             --------   --------
                     Senior Convertible Note Total           $47,000    $    --

                                       8
<PAGE>

Note 7. Litigation
------------------

The Company has no current, threatened, or pending litigation.


Note 8. Deferred Revenues
-------------------------

Revenue from sales of marketing territories is deferred until such time as the
specified purchase price is received and any options to exchange interests in
the related limited liability partnerships for equity interests in the Company
have expired or have been waived by the option holder. As of September 30, 2001
and December 31, 2000, revenue recognized from sales of marketing territories
were $420,000 and $210,000, respectively.

Note 9. Provision for Income taxes
----------------------------------

In accordance with APB 128, Interim Financial Reporting, the company does not
expect to have Earnings Before Income Taxes for the year ended December 31,
2001. Accordingly no provision for income taxes is being provided in the
financial statements for the three months and nine months ended September 30,
2001.

Under SFAS 109 "Accounting for Income Taxes", the company utilizes the liability
method of accounting for income taxes. Accordingly, the Company has recorded a
deferred tax benefit of approximately $800,000 as of December 31, 2000, and does
not expect a material change in this asset at December 31, 2001. The Company
recorded a valuation account to fully offset the deferred tax benefit due to
uncertainty of the realization of this benefit.



--------------------------------------------------------------------------------
                 DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995 Statements in this filing which are not
historical facts may be considered "forward-looking statements" within the
meaning of Section 21E of the Securities Act of 1934, as amended, including
projected sales based on orders, estimated cost savings and savings that may be
generated from restructuring. The words "believe", "expect", "anticipate",
"estimate", and similar expressions identify forward-looking statements. Any
forward-looking statement involves risk and uncertainties that could cause
actual events or results to differ, perhaps materially, from the events
described in the forward-looking statements. Readers are cautioned not to place
undue reliance on these forward-looking statements. The Company undertakes no
obligation to publicly update or revise any forward-looking statement, whether
as a result of new information, future events or otherwise. The risks associated
with the Company's forward-looking statements include, but are not limited to,
risks associated with the Company's history of losses and uncertain
profitability, reliance on a large customer, risks associated with competition,
general economic conditions, reliance on key management and production people,
future capital needs, dilution, effects of outstanding notes and convertible
debentures, limited public market, low stock price, and lack of liquidity.
--------------------------------------------------------------------------------

                                       9
<PAGE>


Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

         The following discussion and analysis should be read in conjunction
with the Company's financial statements, related notes, and other information
included in this quarterly report of Form 10-QSB.


CORPORATE AND INDUSTRY UPDATE

         A major decision was handed down from the California Public Utilities
Commission (CPUC) on September 20, 2001. This decision was to suspend the right
of customers to choose electric service providers other than their host utility.
This suspension of direct access prohibits the Company from signing new
customers for the services offered by PowerSource. This ruling adversely impacts
the entire industry and the suspension will likely be in effect for at least the
next ten years in California.

         The Company has taken the following steps to mitigate the impact of
this change in the Electric Service Provider business in California. First, the
Company is seeking avenues to diversify its business activities outside of the
Electric Service Provider business in related areas such as energy efficiency,
power procurement, and power development. Second, the Company is attempting to
sell its existing customer base, which was temporarily returned to the service
of their host utility during 2nd quarter 2001, with other firms that are better
positioned to outlast the suspension period. Third, the Company is reviewing its
legal options for possible indemnification of shareholders for the problems
brought to this industry by a group of out-of-state power marketers that
illegally used their market power to set prices above those allowed by the
Federal Energy Regulatory Commission.


RESULTS OF OPERATIONS

         For the three months and nine months ended September 30, 2001, revenues
totaled approximately $21,000 and $2,187,000, respectively. This compares to
revenue of approximately $727,000 and $839,000, respectively, for the same two
periods in 2000. The increase in revenue was due to the higher number of
customers being served by the Company during the first five months of 2001. The
revenue for the three months ended September 30, 2001, was significantly lower
than the preceding quarter due to the Company temporarily returning customers to
their host utilities. This transfer was deemed necessary due to the high,
unregulated wholesale prices that exceeded the regulated retail prices the
Company was obligated to provide. This lower level of revenue will continue for
future quarters given that the CPUC has suspended direct access and the Company
intends to sell off its customer base to a larger company. The revenues expected
from the sale of this customer base will be determined through negotiation with
the purchasing company and cannot be specified at this time.

         Cost of sales for the three months and nine months ended September 30,
2001 were approximately ($131,000) and $820,000, respectively, compared with
approximately $533,000 and $603,000 for the same period in 2000. The decrease in
cost of sales was due to the delay in receiving actual billings from the power
supplier. Accordingly, the cost of electricity in previous quarters was
estimated based on historical experience. The actual cost of electricity was
ultimately determined to be lower than the estimates, resulting in negative cost
of sales for the three months ended September 30, 2001.

                                       10
<PAGE>

         Expenses for the three months and nine months ended September 30, 2001
were approximately $325,000 and $1,314,000, respectively, compared with
approximately $298,000 and $923,000 for the same period in 2000. The increase
was as a result of higher salaries and consulting fees incurred in the three
months ended March 31, 2001, as the Company required additional personnel and
services to position the Company for growth. These expenditures will decline in
future reporting periods to match the lower personnel needs as the Company
transitions into other areas. Employees at the Company have been reduced from 10
full-time and 4 part-time to 6 full-time and one part-time. Also, the need for
outside consultants has been reduced by 30 percent. This smaller level of
personnel will likely continue for at least the next six months.

         Net Income for the three months and nine months ended September 30,
2001 was approximately $31,000 and $453,000, respectively, compared with
approximately $98,000 and a loss of ($497,000), respectively, for the same
period in 2000. This is directly attributable to the Company's increased
customer base in the first half of 2001. Although higher than last year, the net
income is lower than the preceding quarter due to the Company temporarily
returning customers to their host utilities as a result of the disparity between
wholesale and retail prices triggered by the energy crisis in California. This
lower level of profitability is expected to continue until other business
activities begin to produce results. These other activities are forecasted to
provide their own net income within the next quarterly reporting period.


COMPANY STATUS AS A GOING CONCERN


         The Company is currently a going concern and fully expects to be so for
at least the next twelve months. The current cash balance of approximately
$160,000 and payments from outside entities that owe the Company refunds are
anticipated to cover overhead expenses and provide a sufficient level of working
capital to allow our diversification efforts to be successful. These refunds
come from three sources. First, overpayments from the California Independent
System Operator ("ISO") that previously overcharged all market participants are
now being returned to the proper entities, including our Company. The Automated
Power Exchange will receive these funds on behalf of PowerSource and has
determined through their accounting records that the amount owed to the Company
is $94,154.81. These payments from the ISO were requested to be paid to
recipients such as the Company, prior to the end of 1st Quarter 2002, by the
Federal Regulatory Commission in their December 19, 2001 decision. Second, all
three utilities in the state under-calculated the value of its power due
Electric Service Providers such as our Company. These underpayments should be
refunded within the next six to nine months. Although, it is impossible to
predict the exact amount, based on our experience, we anticipate a refund
between $100,000 and $200,000. Finally, it is likely that the Federal Energy
Regulatory Commission will confirm its previous assessments that certain groups
of power generators overcharged sufficiently for electric power to require a
refund to those entities that purchased this power. Our Company would receive
its proportionate share of any refund of this type. Based upon information
reported in the press, this amount could approach $200,000 - $500,000. However,
it should be noted that as this is a highly political issue, one cannot place
too much reliance on these figures. The Company recognizes that there is
uncertainty associated with both the timing and the amounts associated with
these payments. Therefore, they may not be available to the Company when it
needs these funds for either expansion or operations.

         The Company anticipates reporting a loss for both the 4th Quarter of
2001 and for the Year Ended December 31, 2001.

         The Company's diversification efforts are already generating interest
and the Company expects significant revenue from these activities within the
next twelve months. However, the revenue from these diversification efforts is
not expected to occur quickly enough to offset the deferred tax benefit during
the current fiscal year (See Note 9.)



LIQUIDITY AND CAPITAL RESOURCES

         As of September 30, 2001, the Company had working capital of
approximately ($1,227,000) as compared with approximately ($582,000) for the
same period the previous year. This reduction was due to the temporary return of
customers to their host utility in the 2nd Quarter 2001.

         This working capital deficiency consists primarily of "non-cash" items.
The accrued wages of $802,000 is attributable to the issuance of stock options,
and will accordingly be reversed upon exercise of the options. The current note
and interest payable for $260,000 are for a note to EarthCo which is in the
process of being converted to common stock. That leaves other current
liabilities of $353,000 of which most is for accrued power which was refunded in
the fourth quarter.

         Additional revenues from the Electric Service Provider portion of the
business will continue to accrue for likely the next six to nine months as the
electricity crisis in California unwinds. Market participants due refunds will
ultimately be paid their appropriate share of over-charges incurred during the
previous 18 month period of operations. Revenues from diversification efforts
are now anticipated to become the major source of new capital as these efforts
are being developed immediately on a national basis and are not solely dependent
on the California market.

         A major expense for the Company is the salaries associated with its
three top officers and directors. These individuals have demonstrated the
willingness to defer their compensation in order to maintain liquidity for the
continuing operations of the Company. This commitment provides immediate relief
in the case of timing differences between revenue and expenses.

                                       11
<PAGE>

         We believe that the cash flow from operations and cash from refunds
will be sufficient to meet our working capital and capital expenditure
requirements and provide us with adequate liquidity to meet our anticipated
operating needs for at least the next 12 months. Although operating activities
are expected to provide cash, to the extent the Company grows significantly in
the future, the Company's operating activities may use cash and consequently,
this growth may require the Company to obtain additional sources of financing.
There can be no assurance that any necessary additional financing will be
available to the Company on commercially reasonable terms, if at all.

         On March 8, 2000, PowerSource obtained a surety bond with Cascade
Surety and Bonding, Inc. in the amount of $1.5 million to satisfy Automated
Power Exchange requirements for purchasing power in California. On June 10, 2000
a bond for $100,000 was obtained from Cascade Surety and Bonding, Inc. to
satisfy the CPUC. The last payment for these bonds was made in June 2001 at the
regularly scheduled quarterly installment.

Cash balance as of 9/30/01 was approximately $160,000.


INFLATION

         The rate of inflation does not have a material impact on the Company's
results of operations and is not expected to have much of an impact in the
future.


RISK FACTORS

         There can be no assurance at this time that the Company will operate
profitably or that it will have adequate working capital to meet its obligations
as they become due.

         Management decisions may be made without detailed feasibility studies,
independent analyses, and market surveys which the Company would likely conduct
if the Company had sufficient resources. Management decisions will be
particularly dependent on information provided by the promoter, owner, sponsor
or others associated with a particular power marketing opportunity seeking the
Company's participation.

         The Company's business is speculative and dependent upon the acceptance
of the Company's products and the effectiveness of its marketing program. There
can be no assurance that the Company will be successful or that its business
will earn any revenues or profit.

         The Company reflects deferred revenue from affiliated distributors from
the sale of geographic territories in California to independent affiliated and
unaffiliated marketing companies in consideration for a single one-time payment.
The deferred revenue on the Company's financial statements represents the one
time initial payment of the distributors to the Company. There is no assurance
that the Company will earn significant revenues or that investors will not lose
their entire investment.




                                       12
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PART II. OTHER INFORMATION

Item 1.  LEGAL PROCEEDINGS

         There is no pending or threatened litigation against the Company.


Item 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS........................  None

Item 3.  DEFAULTS UPON SENIOR SECURITIES..................................  None

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


(1)      Exhibits

EXHIBIT
NUMBER       DESCRIPTION
--------     ---------------------
4.1          Distribution Agreement between EconoWatt Corp. and GreenView
             Energy, Inc.*
4.2          Selling Agreement between West Coast Energy, Inc. and Power Capital
             Funding Group, Inc.*
4.3.1        Automated Power Exchange Service and Participation Agreement*
4.3.2        Automated Power Exchange Monetary Reserve Account Agreement*
4.3.3        Automated Power Exchange Settlement Account Agreement*
--------------
*  Previously filed with Form 10QSB filed November 30, 2001.


 (2)     Reports on Form 8-K.

         There were no reports on Form 8-K filed during the three months ended
September 30, 2001.

                                   SIGNATURES

         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.


POWERSOURCE CORPORATION


/s/ Illya Bond
--------------------------------
Chief Executive Officer


/s/ E. Douglas Mitchell
--------------------------------
President


/s/ Thomas Ayer
--------------------------------
Acting Chief Financial Officer

Dated:  January 30, 2002
Los Angeles, California