<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                          -----------------------------
                                   FORM 10-QSB
                          -----------------------------

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


For Quarter Ended March 31, 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 3/31/01

6,797,008 shares of common stock, $.001 par value



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

<PAGE>

                             PowerSource Corporation

                    INDEX TO QUARTERLY REPORT ON FORM 10-QSB
                          QUARTER ENDED MARCH 31, 2001


                              ITEMS IN FORM 10-QSB


Facing Page


PART I   FINANCIAL INFORMATION

Item 1.  Consolidated Financial Statements.

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

         Condensed consolidated statements of operations.
         for the three months ended March 31, 2001 and 2000 (unaudited)

         Condensed consolidated statements of cash flows.
         for the three months ended March 31, 2001 and 2000 (unaudited)

         Condensed consolidated statements of changes in stockholders' (deficit)
         for the three months ended March 31, 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.


<PAGE>



PART I.           FINANCIAL INFORMATION

Item 1.  CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>

                             POWERSOURCE CORPORATION

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                      March 31, 2001 and December 31, 2000
<CAPTION>

                                     ASSETS
                                                                  03/31/01       12/31/00
                                                                (unaudited)
                                                                ------------   ------------
<S>                                                             <C>            <C>
Current assets
      Cash                                                      $   905,812    $   143,651
      Accounts receivable, net                                      564,796        348,028
      Prepaid expenses                                                3,349         12,411
                                                                ------------   ------------
                Total current assets                              1,473,957        504,090
                                                                ------------   ------------

Property and equipment, net                                          51,002         41,792
                                                                ------------   ------------

Other assets
      Notes receivable - officers                                    30,000         30,000
      Interest receivable - officers                                  1,375
      Investment in EHG technology, LLC                              25,000         25,000
      Investment in oil and gas properties                           13,375         13,375
      Deposits                                                        1,774          1,774
                                                                ------------   ------------
                Total other assets                                   71,524         70,149
                                                                ------------   ------------

                Total assets                                    $ 1,596,483    $   616,031
                                                                ============   ============

                     LIABILITIES AND STOCKHOLDERS' (DEFICIT)

 Current liabilities
      Accounts payable and accrued expenses                     $ 1,182,032    $   804,616
      Accrued wages                                                 801,508         97,453
      Income taxes payable                                              800            800
      Interest payable                                               32,178         24,411
      Loan payable - in default at 03/31/01                         210,000        210,000
      Notes payable - computer system (current portion)              16,497         15,788
                                                                ------------   ------------
                Total current liabilities                         2,243,015      1,153,068
                                                                ------------   ------------

 Long-term liabilities
      Notes payable - computer system                                17,892         22,292
      Senior notes payable                                           20,000              -
      Deferred revenue                                              542,360        510,860
      Long term wages and salaries payable                                -        704,055
                                                                ------------   ------------
                Total long-term liabilities                         580,252      1,237,207
                                                                ------------   ------------

Stockholders' (deficit)
      Common stock, par value $.001, 40,000,000 authorized,
       6,797,008 and 6,147,008 shares issued and outstanding          6,797          6,147
      Paid-in capital in excess of par value                      1,054,590        925,240
      Preferred stock, par value $100, 10,000,000 authorized,
       5,350 shares issued and outstanding                           13,375         13,375
      Accumulated deficit                                        (2,301,546)    (2,719,006)
                                                                ------------   ------------
                Total stockholders' (deficit)                    (1,226,784)    (1,774,244)
                                                                ------------   ------------

                Total liabilities and stockholders' (deficit)   $ 1,596,483    $   616,031
                                                                ============   ============


</TABLE>

See accompanying notes to condensed consolidated financial statements.

<PAGE>

                             POWERSOURCE CORPORATION

                 CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
              Three Months Ended March 31, 2001 and March 31, 2000
                                   (Unaudited)


                                                          3 Months Ended
                                                      03/31/01        03/31/00
                                                     ------------   ------------
Revenue
          Electricity sales                          $ 1,787,993    $    36,562
          Cost of sales                                  784,117         22,464
                                                     ------------   ------------
                Gross margin on electricity sales      1,003,876         14,098
                                                     ------------   ------------

Expenses
          Selling expenses                                17,932          5,528
          General and administrative expenses            561,229        232,612
                                                     ------------   ------------
               Total expenses                            579,161        238,140
                                                     ------------   ------------

Income (loss) from operations                            424,715       (224,042)
                                                     ------------   ------------

Other expense (income)
           Interest revenue                               (2,109)             -
           Interest expense                                9,364          2,151
                                                     ------------   ------------
                Total other expense (income)               7,255          2,151
                                                     ------------   ------------

Income (loss) before provision for income taxes          417,460       (226,193)
                                                     ------------   ------------

Provision for income taxes                                    --             --

Net income (loss)                                    $   417,460    $  (226,193)
                                                     ============   ============

Net income (loss) per common share                   $      0.06    $     (0.04)
                                                     ============   ============

Weighted average
shares outstanding                                     6,475,897      5,868,042
                                                     ============   ============


See accompanying notes to condensed financial statements.

<PAGE>
<TABLE>

                             POWERSOURCE CORPORATION

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
              Three Months Ended March 31, 2001 and March 31, 2000
                                   (Unaudited)
<CAPTION>

                                                                       3 Months Ended
                                                                    03/31/01     03/31/00
                                                                   ----------   ----------
<S>                                                                <C>          <C>
Cash flows from operating activities:
 Net income (loss)                                                 $ 417,460    $(226,193)
  Adjustments to reconcile net income (loss) to net cash
   provided (used) by operating activities
      Depreciation                                                     3,620        3,536
      Shares issued for payment of consulting services               130,000
      Changes in operating assets and liabilities
          Accounts receivable                                       (216,768)      (2,878)
          Interest receivable - officers                              (1,375)           -
          Prepaid expenses                                             9,062            -
          Accounts payable and accrued expenses                    $ 377,416       28,411
          Accrued wages                                                    -         (625)
          Interest payable                                             7,767        1,603
          Deferred revenue                                            31,500       87,340
                                                                   ----------   ----------
                Net cash provided (used) by operating activities     758,681     (108,806)
                                                                   ----------   ----------

Cash flows from investing activities:
  Acquisition of assets                                              (12,830)           -
                                                                   ----------   ----------
                Net cash used by investing activities                (12,830)           -
                                                                   ----------   ----------

Cash flows from financing activities:
  Notes payable, net                                                  20,000      120,000
  Loan payable (computer lease)                                       (3,691)      (6,691)
  Common stock issued                                                      -       53,488
                                                                   ----------   ----------
                Net cash provided by financing activities             16,309      166,797
                                                                   ----------   ----------

Net increase in cash                                                 762,161       57,991
                                                                   ----------   ----------

Cash - beginning of period                                           143,651        1,408
                                                                   ----------   ----------

Cash - end of period                                               $ 905,812    $  59,399
                                                                   ==========   ==========

</TABLE>

See accompanying notes to condensed financial statements.

<PAGE>
<TABLE>

                             POWERSOURCE CORPORATION

     CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
                       Three Months Ended March 31, 2001
                                   (Unaudited)

<CAPTION>

                                                 Common Stock
                               Preferred   -----------------------  Paid-in Capital in    Accumulated
                                 Stock        Shares       Amount   Excess of Par Value     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)
                               ==========  ============  =========  ===================  =============  =============

</TABLE>


See accompanying notes to condensed financial statements.
<PAGE>


                             POWERSOURCE CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                        MARCH 31, 2001 AND MARCH 31, 2000
                                   (UNAUDITED)


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

The condensed 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 generally accepted accounting principles 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 March 31, 2001 and December 31, 2000,
and the results of operations and cash flows for the period ended March 31, 2001
and March 31, 2000 have been included and are of a normal recurring nature.


Note 2 - Property and equipment
-------------------------------

Property and equipment consist of the following:

                                                       3/31/01      12/31/00
                                                      ---------     --------

           Stabilux Equipment                         $ 10,750      $      -
           Furniture and fixtures                        1,906         1,906
           Office equipment                             73,403        71,323
                                                      ---------     ---------
                                                        86,059        73,229
           Less: Accumulated depreciation              (35,057)      (31,437)
                                                      ---------     ---------

                                                      $ 51,002      $ 41,792
                                                      =========     =========

Note 3 - Loan payable
---------------------

As of March 31, 2001, loan payable consists of a loan that was due August, 2000,
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 300,000 shares of the
Company's common stock.

Note 4 - Notes payable
---------------------

Notes payable consist of:
                                                   3/31/01        12/31/00
                                                  ---------       ---------

        Capital lease obligation
        due in 48 monthly installments
        of $1,774 per month including
        principal and interest at 13.7%

        Total                                     $ 34,389        $ 38,080
        Less amount current portion                 16,497          15,788
                                                  ---------       ---------
                                                  $ 17,892        $ 22,292
                                                  =========       =========



<PAGE>

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


Note 5 - Litigation
------------------

The Company was a defendant in a lawsuit filed on February 25, 2000 based upon
claims that the Company benefited from the use of certain proprietary or
confidential information obtained or developed by the current president of the
Company during the time he was employed by the plaintiff. This complaint was
settled on March 27, 2001 without any monetary effect. (See PART II., Item 1.).


Note 6 - 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.





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



                 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.

================================================================================
<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.

RESULTS OF OPERATIONS

For the three months ended March 31, 2001, revenues totaled approximately $1.8
million. This compares to revenue of approximately $37,000 for the same three
months in 1999. Expenses totaled approximately $579,000, compared with expenses
of approximately $238,000 for the same three months of 1999. The increase was
due to the fact that the Company had just started selling energy in 2000, and
the revenue in 2001 is the result of a full year of selling.

General and administrative expenses for the first three months of 2001 were
approximately $561,000 compared with approximately $233,000 for the first three
months of 2000. This increase was attributable primarily to higher payroll and
consulting fees resulting from the increased business.

Net Income for the three months ended March 31, 2001 was approximately $417,000
compared with a loss of approximately $226,000 for the same three months in
2000. This is attributable to the Company evolving from a start-up to a going
concern and attracting over 7,000 customers.

Liquidity and Capital Resources
-------------------------------
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.
These bonds remain in effect at this time.

Cash balance as of 3/31/01 was approximately $906,000.

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. The
primary cost component in energy sold to customers subject to inflationary
pressures, is electrical power. The Company has a contract with its customers
whereby it automatically passes along these costs to the end-use customers, as
the Company incurs them.

Risk Factors
------------
California is one of the first states to deregulate the electric industry to
create competition in that industry. Management believes that the Company has a
window of opportunity to develop a network dedicated to providing electricity at
competitive rates. There is no assurance, however, that the Company will be
successful in developing a network of electricity suppliers and purchasers.

The Company recently commenced its business operations with respect to the
marketing of electricity. 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. The Company believes that its success
will depend in large part on its ability to pool individuals and businesses
together into a common buying group to make larger, more economical purchases of
energy. The Company must implement sophisticated purchasing and billing hardware
systems to conduct its business. There is no assurance that a malfunction of or
failure to properly develop or operate one or more of its computer systems will
not have a material adverse affect on the Company.


<PAGE>

Because of the Company's limited resources, it is unlikely that the Company will
conduct an exhaustive investigation and analysis of a power marketing
opportunity before the Company commits its capital or other resources.
Management decisions may be made without detailed feasibility studies,
independent analysis, 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 Company also expects to earn revenues by selling power to the distributors'
customers at a profit. The deferred revenue on the financial statements
represents the one time initial payment of the distributors to the Company. The
Company also intends to earn revenues from the sale of its Stabilux(TM) product.
There is no assurance that the Company will earn significant revenues or that
investors will not lose their entire investment.

Since the passage of recent utility deregulation laws by the California
legislature, the market for electrical power in the State of California is
intensely competitive. The market is also intensely competitive throughout the
United States. The Company's principal competitors include large utility
companies and a myriad of other independent licensed purchasers and sellers of
electrical power. These competitors have longer operating histories, greater
name recognition, larger installed customer bases, and substantially greater
financial, technical, and marketing resources than the Company. The Company
believes that the principal factors affecting competition in its market include
name recognition, the ability to aggregate customers and purchase and sell power
at a profit, the ability to attract and service customers, and the ability to
find low cost, reliable suppliers. Other than licensing requirements and the
time necessary to enter the market, there are no significant proprietary or
other barriers of entry that could keep potential competitors from providing
competing services in the Company's market. There can be no assurance that the
Company will be able to compete successfully in the future, or that future
competition will not have a material adverse effect on the business, operating
results, and financial condition of the Company.

To manage growth effectively, the Company will need to continue to improve its
operational, financial and management information systems and to hire, train,
motivate and manage a growing number of employees. Competition is intense for
qualified technical, marketing and management personnel. There can be no
assurance that the Company will be able to effectively achieve or management any
future growth, and its failure to do so could have a material adverse effect on
the Company's financial condition and results of operations.

As of the date of this filing, (August, 2001), the State of California has been
in the midst of an energy crisis; with the result being that wholesale prices
increased dramatically. Due to the "regulations" surrounding the deregulation of
the energy market, a situation was created whereby the retail (consumer) prices
were fixed, but wholesale prices fluctuated with the market. With the prospects
of "guaranteed" losses, the Company exercised its right to move the customer
base back to the respective utilities until such time that the market stabilizes
at a level where the providers of energy can make a profit. We expect this to
occur during the second half of 2001, but the Company will hold off until there
is assurance that this regulatory situation has been rectified.

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


PART II.  OTHER INFORMATION

Item 1.   LEGAL PROCEEDINGS

On February 25, 2000, a complaint was filed in the Superior Court of Los Angeles
County by Keystone Energy Services against Edward Douglas Mitchell, the
Company's president, and the Company, alleging fraud, conversion negligence,
misappropriation of trade secrets and unfair business practices. An answer to
the complaint was filed on April 10, 2000. This complaint was settled on March
27, 2001 without any monetary effect to the Company.

There is no other 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....................................  None




                                   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



Dated:  August 15, 2001
Los Angeles, California