U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                  FORM 10-KSB/A
                                (Amendment No. 2)


     Annual Report under Section 13 or 15(d) of the Securities Exchange Act
                of 1934 for the Fiscal Year Ended June 30, 2002


                        Commission File Number 2-85602-D


                          MID-POWER SERVICE CORPORATION
                  --------------------------------------------
                 (Name of small business issuer in its charter)

            Nevada                                              87-0398403
--------------------------------                            -------------------
(State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                             Identification No.)

        3800 Howard Hughes Parkway
                Suite 860A
             Las Vegas, Nevada                                    89109
 ----------------------------------------                       ----------
 (Address of principal executive offices)                       (Zip Code)

                                 (702) 214-3615
                 ----------------------------------------------
                (Issuer's telephone number, including area code)

Securities registered under Section 12(b) of the Exchange Act:

   Title of each class               Name of each exchange on which registered
   -------------------               -----------------------------------------
          None                                          None

Securities registered under Section 12(g) of the Exchange Act:

                                      None
                                (Title of Class)

Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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[ ]

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

State issuer's revenues for its most recent fiscal year:  $100,148

State the aggregate market value of the voting and nonvoting common equity held
by nonaffiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days. As of October 18, 2002, the aggregate
market value of the voting and nonvoting common equity held by nonaffiliates of
the issuer was $3,686,019.90.

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date. As of October 18, 2002, the issuer
had 27,972,276 shares of issued and outstanding common stock, par value $0.001.

DOCUMENTS INCORPORATED BY REFERENCE:  None.

Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]

<PAGE>

                   SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS

         This report contains statements about the future, sometimes referred to
as "forward-looking" statements. Forward-looking statements are typically
identified by the use of the words "believe," "may," "will," "should," "expect,"
"anticipate," "estimate," "project," "propose," "plan," "intend" and similar
words and expressions. Statements that describe our future strategic plans,
goals or objectives are also forward-looking statements. We intend that the
forward-looking statements will be covered by the safe harbor provisions for
forward-looking statements contained in Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934.

         Readers of this document are cautioned that any forward-looking
statements, including those regarding us or our management's current beliefs,
expectations, anticipations, estimations, projections, proposals, plans or
intentions, are not guarantees of future performance or results of events and
involve risks and uncertainties, such as:

         o        the future results of drilling individual wells and other
                  exploration and development activities;

         o        the relatively small share of revenues that we have retained
                  in our principal prospect areas as compared to the share of
                  exploration and other costs that we must bear;

         o        our dependence on the ability of our lender, an affiliate,
                  under our credit facility to fund our draws of up to $20.0
                  million to be used to pay $10.0 million in December 2002 for
                  the purchase of the Clear Creek property and to fund planned
                  exploration and other activities;

         o        the encumbrance on our Clear Creek property to secure
                  repayment of up to $20.0 million that we may borrow from an
                  affiliate to pay the balance of the purchase price due and
                  planned exploration and the possibility that we could lose the
                  Clear Creek property through foreclosure if we are unable to
                  generate adequate revenue from future discoveries or obtain
                  capital from other sources sufficient to repay such loan;

         o        contractual limitations on the number of shares we may issue
                  for equity capital;

         o        our future ability to attract industry or financial partners
                  to share the costs of exploration, exploitation, development
                  and acquisition activities;

         o        our ability to raise additional capital we may require may be
                  limited by restrictions imposed on our ability to issue stock
                  under our agreement with our principal stockholder;

         o        the degree of market acceptance of distributed
                  power-generation services;

         o        the prices at which we may be able to sell gas, oil or
                  electrical power; and

         o        fluctuations in prevailing prices for gas, oil and electrical
                  power.

         The forward-looking information is based on present circumstances and
on our predictions respecting events that have not occurred, that may not occur,
or that may occur with different consequences from those now assumed or
anticipated. Actual events or results may differ materially from those discussed
in the forward-looking statements as a result of various factors, including the
risk factors detailed in this document. The forward-looking statements included
in this document are made only as of the date of this document.

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

         Effective April 10, 2001, Mid-Power Service Corporation effected a
one-for-two reverse split of its common stock. Unless otherwise noted, all
references to our common stock and prices per share of our common stock give
effect to the reverse split.

                                       1
<PAGE>

                                     PART II

        ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

General

         We are currently implementing a plan to acquire gas and oil properties
for exploration and development, to acquire fuel sources for power generation,
to develop energy-related technologies, and to generate and trade electrical
power. We initiated this plan following the acquisition of a controlling
interest by a new group of stockholders, the infusion of more than $5.5 million
of equity, and the appointment of new directors during the year ended June 30,
2001, during which we had no other activities. We are currently focusing
principally on the exploration and development of gas and oil by initiating
exploration of acquired property interests and by participating in exploration
projects sponsored by others.

         In order to implement our plan, we:

         o        completed, on June 14, 2002, our acquisition of gas and oil
                  leases on approximately 17,197 gross acres comprising the
                  Clear Creek Unit in Carbon and Emery Counties, Utah, for $5.5
                  million in cash, a promissory note requiring payment of $10.0
                  million into escrow in December 2002, and 17.1 million shares
                  of common stock issued to Edward Mike Davis, who as a result
                  now owns approximately 61.2% of our issued and outstanding
                  stock;

         o        established a $25.5 million secured credit facility with SCRS
                  Investors, LLC, an affiliate, to obtain funds to complete the
                  acquisition and to engage in initial exploration and
                  development activities on the Clear Creek field;

         o        acquired, in two transactions completed in August and December
                  2001 with unrelated parties, gas and oil leases on
                  approximately 1,010 gross acres in the field in Kern County,
                  California, with more than 50 wells at depths between 550 to
                  6,300 feet, up to approximately five of which may warrant
                  recompletion in another zone, depending on initial results;

         o        entered into an agreement in May 2002 with Edward Mike Davis,
                  to earn a 50% working interest (40% net revenue interest) in
                  up to 10 wells by funding the costs to drill and, if
                  warranted, complete, at depths of approximately 6,800 feet,
                  each well and construct gas delivery pipelines during the next
                  two and one-half years in the Arbuckle Prospect located in
                  Colusa County, California;

         o        agreed in August 2002 to fund approximately $1.0 million for
                  an initial 16,300 foot test to earn a retained 16.125% working
                  interest (approximately 11.77% net revenue interest) and an
                  8.875% working interest (6.48% net revenue interest) to be
                  conveyed to Edward Mike Davis in the 606 gross acre Lakeside
                  Prospect in Cameron Parish, Louisiana. This agreement was
                  subsequently amended to reflect our decision to assume 100% of
                  the costs of completing the initial well in consideration of
                  the opportunity to earn a larger net revenue interest in the
                  Lakeside Prospect; and

         o        purchased in June 2001 for $1.0 million a minority interest in
                  a specialized synthetic fuel research and development project,
                  which we subsequently sold.

         We have not earned revenues under our license to trade and generate
electric power throughout the United States. We continue to review opportunities
to participate in distributed power-generation projects, which consist of
placing relatively small generating units at or near consumer sites to meet
specific consumer power needs.

                                       2
<PAGE>

         As of June 30, 2002, we had an accumulated deficit of approximately
$5.8 million, substantial recurring losses, and only nominal revenues.
Accordingly, the report of our auditors on our financial statements as of June
30, 2002, and for the year then ended contains an explanatory paragraph
respecting our ability to continue as a going concern.

Results of Operations


         During the year ended June 30, 2002, we had revenues of approximately
$100,000 from the sale of oil from our California producing properties, while
during the preceding fiscal year, we had no revenues. We incurred total costs
and expenses of approximately $4.5 million during the year ended June 30, 2002,
including $2.3 million in general and administrative expenses, $814,000 in
exploration expenses, $791,000 in impairment of investment in equipment and gas
and oil properties, $577,000 in research and development expenses, and $73,000
in production expenses, for a loss from operations of approximately $4.4
million. The impairments consisted of $527,000, equivalent to the amount by
which the capitalized cost of our Kern County, California property exceeds the
estimated net present value of undeveloped future reserves as of June 30, 2002,
and $264,000 related to two turbine engines held for sale. The substantial
increase in costs and expenses and resulting loss from operations are
attributable to the activation of our business during the year ended June 30,
2002. During the preceding fiscal year, when we were inactive, total costs and
expenses of $38,000 consisted of general and administrative expenses.


         We recognized net other income of $90,000 in the year ended June 30,
2002, as compared to net other income of $1,000 in the preceding fiscal year
from interest earned on net proceeds received from the sale of equity
securities.

Liquidity and Capital Resources

         During the year ended June 30, 2002, we relied on cash provided by our
financing activities to fund our operations and investments. Operating
activities used cash of approximately $2.9 million, principally to fund our $4.3
million net loss and $314,000 in reduction in receivables and prepaids and other
assets. Our operating activities included noncash expenses of $791,000 for
impairment of gas and oil properties and investment in equipment, $553,000 for
the issuance of common stock for financing fee and services, and $313,000 for
increases in accounts payable and accrued liabilities. Investing activities
required cash of $7.6 million, principally for the purchase of gas and oil
property and equipment. Cash from financing activities was provided by $6.7
million in proceeds from long-term debt borrowed from SCRS Investors, an
affiliate, less $1.0 million in debt payments. At June 30, 2002, we had cash and
cash equivalents of $640,000.

         As of June 30, 2002, we had current assets of $1.2 million and current
liabilities of $10.5 million, including $10.0 million due on our note payable to
Edward Mike Davis to be paid into escrow in December 2002 for the acquisition of
our Clear Creek property, for a working capital deficit of approximately $9.3
million. We require capital to fund the $10.0 million payment into escrow in
December 2002 due Edward Mike Davis, our operating activities, and planned
exploration and related activities on our various gas and oil properties. We
currently estimate that our operating activities, excluding exploration
expenses, require approximately $750,000 in cash per quarter. In addition, for
the year ending June 30, 2003, we are budgeting approximately $10.0 to $12.0
million for exploration activities on our existing properties and in order to
earn interests or participate in additional exploration opportunities.
Accordingly, in addition to the $10.0 million to be drawn under our credit
facility, we estimate that we will require $5.0 million prior to June 30, 2003,
to fund our requirements.

         We have not established any source of funding except for our credit
facility with SCRS Investors. Under this credit facility, we can draw up to
$20.0 million to pay the $10.0 million due Edward Mike Davis into escrow in
December 2002 and to provide $10.0 million for exploration of the Clear Creek
property and other activities.

                                       3
<PAGE>

         SCRS Investors does not have the cash or cash items available at this
time and has provided us with no assurances that it will have funds available to
us if, as we plan, we attempt to draw $10.0 million in December 2002 for a
payment into escrow for Edward Mike Davis for the purchase of the Clear Creek
property, or the balance in 2003 for exploration and other activities.
Accordingly, we cannot assure that SCRS Investors will be able to meet its
commitment to provide funds under the credit facility. If SCRS Investors is
unable to provide the committed funds, we will be forced to attempt to secure
alternate financing, and we cannot assure that we will be able to do so on terms
favorable to us, or at all, particularly in view of the restrictions in our
agreement with Edward Mike Davis on our ability to issue additional shares to
obtain equity.

         Even if we are able to draw the entire $20.0 million remaining
commitment under our credit facility with SCRS Investors, we estimate that we
will require approximately $5.0 million additional cash prior to the end of our
fiscal year on June 30, 2003. We may seek to obtain some or all of the required
additional funds through additional borrowing from SCRS Investors, other
borrowings from other parties, the sale of equity securities, or other sources.
SCRS Investors has no obligation to provide us with funds in excess of the
remaining $20.0 million commitment under our credit facility. Our ability to
obtain alternative borrowings will likely be impaired by the encumbrance on our
Clear Creek property in favor of SCRS Investors securing repayment of any
amounts that we may draw under our credit facility. We have not arranged any
sources of possible additional or alternative financing.

         Our ability to obtain additional capital is restricted by the terms of
our agreement to acquire the Clear Creek property from Edward Mike Davis, in
which we agreed not to issue additional shares to reduce Edward Mike Davis's
17.1 million share ownership below 60% on a fully-diluted basis until we pay
$10.0 million into escrow in December 2002 and payable in January 2003.
Thereafter, we have agreed not to issue shares that would dilute Edward Mike
Davis's 17.1 million shares below 51% before July 20, 2003, or below 36% before
June 20, 2007. These provisions significantly limit our ability to sell equity
securities to obtain additional capital that we anticipate we will need to
advance our exploration and development and possible other projects before these
restrictions expire in 2007. Further, these restrictions may sufficiently limit
our financial flexibility and viability because they may impair our ability to
obtain debt or other capital.

         The amounts drawn under our credit facility with SCRS Investors are
convertible into common stock at $1.50 per share, subject to the limitations
imposed by the agreement not to reduce the percentage of Edward Mike Davis's
ownership. The existence of such conversion rights may impair or restrict our
ability to obtain future financing because the conversion of such indebtedness
could dilute the interests of investors providing new capital and could
adversely affect the prevailing market price of the common stock.

         We may also obtain funds for existing or new gas and oil projects from
strategic alliances with other energy or financial partners, including SCRS
Investors or other affiliates, which may dilute the interest of our existing
stockholders or our interest in the specific project financed. There can be no
assurance that additional funds could be obtained or, if obtained, would be on
terms favorable to us.


Deferred Tax Liability

         As a result of our acquisition of the Clear Creek property, we have
determined that it is necessary to record a deferred tax liability of
approximately $9.3 million. This deferred tax liability results from the tax
treatment of the difference between the value of the assets recorded upon their
acquisition and the value of the assets used for tax purposes. See Note 22 in
the Notes to our restated Consolidated Financial Statements included in this
Amendment.


Commitments and Contingencies

         We are responsible for costs associated with compliance with
comprehensive federal, state and local laws and regulations governing the
storage, use and discharge of materials into the environment, the remediation of
environmental impacts, and other matters relating to environmental protection.
Our subsidiary owning and operating our Clear Creek property has assumed
liability for well plugging and abandonment and well-site restoration costs for
any of seven nonproducing gas wells in the field that are not returned to
production within five years. We have posted with the state of Utah a cash bond
of $184,000 as security for this plugging, abandonment and restoration
obligation. We cannot assure that the amount of this bond will be sufficient to
complete the work required.

                                       4
<PAGE>

New Accounting Pronouncements

         In August 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 144, "Accounting for the
Impairment of Long-Lived Assets." This statement addresses financial accounting
and reporting for the impairment of long-lived assets and for long-lived assets
to be disposed of. This statement supersedes FASB Statement 121 and APB Opinion
No. 30. However, this statement retains certain fundamental provisions of FASB
Statement 121, namely; recognition and measurement of the impairment of
long-lived assets to be held and used, and measurement of long-lived assets to
be disposed of by sale. The statement also retains the requirement of Opinion 30
to report discontinued operations separately from continuing operations. This
statement also amends ARB No. 51 to eliminate the exception of consolidation for
a temporarily controlled subsidiary. The provisions of this statement are
effective for financial statements issued for fiscal years beginning after
December 15, 2001. We are currently assessing the impact of this statement.

         In June 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 143, "Accounting for Asset Retirement
Obligations." This statement addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. This statement is effective for financial
statements issued for fiscal years beginning after June 15, 2002. We do not
expect the adoption of SFAS No. 143 to have a significant impact on our
financial position or results of operations. We are currently assessing the
impact of this statement.


                          ITEM 7. FINANCIAL STATEMENTS


         Our restated consolidated financial statements, including the
accountants' report, are included beginning at page F-1 immediately following
the signature page of this document.

                                       5
<PAGE>

                                    PART III


             ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The following transactions between related parties were not the result
of arm's-length negotiations, but are on terms that, in the opinion of the board
of directors, are fair to us from a financial point of view. However, we have
not obtained any independent evaluation of the terms of the following
transactions to determine whether they were fair to us from a financial point of
view.

Transactions with Edward Mike Davis

         Acquisition of Arbuckle Field Property

         On May 10, 2002, which was the same day our president and chief
executive officer James W. Scott entered into the option agreement that led to
our acquisition of the Clear Creek property in June 2002 as discussed below, we
agreed with Edward Mike Davis to fund 100% of the costs, through drilling,
completion and pipeline connection as warranted, of up to 10 wells, at a depth
of approximately 6,800 feet, and construct gas delivery pipelines during the
next two and one-half years in acreage located in the Arbuckle gas field, Colusa
County, California, to earn a 50% working interest, equivalent to a 40% net
revenue interest. We deposited $600,000 into an escrow account to be applied
toward costs for the first well. Additional prospects may be included in the
venture. We are also funding lease extension costs on up to seven additional
prospects on 2,111 gross acres in order to earn a 50% working interest,
equivalent to a 40% net revenue interest, in that additional acreage.

         By our bearing 100% of the costs of agreed activities as noted above,
Edward Mike Davis will receive, at no cost to him, a 50% working interest,
equivalent to a 40% net revenue interest. At the time of this transaction,
Edward Mike Davis had no relationship with our Company, so this transaction was
the result of arm's-length negotiations.

         Acquisition of Clear Creek Property

         On May 10, 2002, James W. Scott, our president, chief executive officer
and a director, acting on our behalf and in anticipation of our assumption of
the agreement upon the completion of formal documentation, entered into an
option agreement with Edward Mike Davis to acquire the Clear Creek property.
Under the terms of the option agreement, Mr. Scott paid a $5.5 million deposit
forfeitable if the transaction were not closed by June 14, 2002, or extended by
mutual agreement. Mr. Scott paid the $5.5 million option consideration with
funds borrowed from SCRS Investors, LLC. See Credit Facility below. On June 13,
2002, Mr. Scott assigned the option to us and we assumed the obligations under
the option and released Mr. Scott, allowing us to acquire the Clear Creek
property. We were credited with the initial $5.5 million deposit paid by Mr.
Scott with funds borrowed from SCRS Investors and assumed his obligation to
repay that amount to SCRS Investors, as part of our credit facility with SCRS
Investors discussed below.

         On June 14, 2002, we completed the acquisition under the above option
of gas and oil rights located on approximately 17,197 gross acres comprising the
Clear Creek Unit in Carbon and Emery Counties, Utah. This acquisition was
effected by merging our wholly-owned subsidiary into Red Star, Inc., which owns
the Clear Creek property.


         In the acquisition, we paid $5.5 million in cash as detailed above,
agreed to pay $10.0 million into escrow in December 2002 to be paid in January
2003, and issued 17,125,365 million shares of our common stock to the sole
stockholder of Red Star, Edward Mike Davis, who, as a result, now owns
approximately 61.2% of our common stock after giving effect to the exercise of
outstanding options and the conversion of outstanding indebtedness to common
stock. Under the terms of the acquisition agreement, we are precluded from
issuing additional shares to reduce Edward Mike Davis's 17.1 million shares
below 60% on a fully-diluted basis until the $10.0 million note is paid.
Thereafter, we cannot issue shares that would dilute Edward Mike Davis's 17.1
million shares below 51% before July 20, 2003, or below 36% before June 20,
2007.


         The amount of consideration paid and the other terms of the acquisition
were determined by arm's-length negotiations. Our board of directors considered
engineering, geological and geophysical data provided by Red Star and other
publicly available data as well as technical overviews by consultants engaged by
us. We did not obtain any independent evaluation of the terms of the transaction
to determine whether they were fair to us from a financial point of view.

                                       6
<PAGE>

         As part of the acquisition, we have agreed to file a registration
statement under the Securities Act of 1933 covering the resale of Edward Mike
Davis's 17.1 million shares of our common stock. We intend to file that
registration statement immediately following the filing of this report.

         To our knowledge, Edward Mike Davis has not entered into any agreements
with any other stockholders, including those who formerly held control, with
respect to the election of directors or other matters. Edward Mike Davis has not
entered into any agreement with any other person, such as a pledge agreement or
an option, that may result in a change of control at a later date.

         Acquisition of Lakeside, Louisiana Prospect

         On August 1, 2002, we agreed to pay approximately $1.0 million for a
25% working interest in the Lakeside Prospect, of which a 16.125% working
interest (11.77% net revenue interest) will be retained by us and an 8.875%
working interest (6.48% net revenue interest) will be conveyed to Edward Mike
Davis, who brought the prospect to us, with future drilling and completion costs
attributable to Edward Mike Davis's working interest to be paid by us. Our
agreement with Edward Mike Davis is unchanged by the changes to our agreement
with Petrogulf Corporation. See Items 1 and 2. Description of Business and
Property: Gas and Oil Activities: Lakeside Prospect, Cameron Parish, Louisiana.

Credit Facility

         In order to finance the costs of acquiring our Clear Creek property and
obtain access to capital needed for initial exploration activities, we
established a credit facility with SCRS Investors, LLC, under which we could
borrow up to $25.5 million. As consideration for entering into the agreement for
the credit facility, we issued 340,000 shares of our common stock to SCRS
Investors. Repayment of the loan is secured by encumbrances on the Clear Creek
property. The outstanding principal balance of the loan is repayable over 10
years, commencing on December 31, 2003, and is convertible into our common stock
at $1.50 per share, subject to the limitations on issuing additional shares that
would reduce Edward Mike Davis's ownership percentage below agreed amounts as
noted above. James W. Scott, our president, chief executive officer and a
director, is approximately an 86% equity owner of SCRS Investors, and Mark T.
Davis, our general counsel, is a member of SCRS Investors. The $5.5 million
payment by Mr. Scott to Edward Mike Davis that we assumed as part of our
assumption of the option to acquire the Clear Creek property was treated as an
initial draw on this credit facility. Thereafter, on June 28, 2002, this $5.5
million of indebtedness was converted to 3,666,667 shares of our common stock.
As of June 30, 2002, we had $20.0 million available to be drawn under this
credit facility. We intend to borrow that amount for the $10.0 million payment
to Edward Mike Davis into escrow in December 2002 and to fund further
exploration of the Clear Creek and other properties; however, SCRS Investors
does not have the cash or cash items available at this time and has provided us
with no assurances that it will have funds available to us to draw upon in the
future.

Additional Loans from SCRS Investors

         In addition to our $25.5 million credit facility with SCRS Investors,
we have obtained funds from SCRS Investors on several other occasions.

         o        On June 13, 2002, SCRS Investors advanced $184,000 on our
                  behalf for the payment of a bond related to our Clear Creek
                  property.

         o        On May 22, 2002, we borrowed $200,000 from SCRS Investors to
                  be used for operating expenses. The loan is at 9% interest per
                  annum, and is due and payable on May 22, 2004.

         o        On May 17, 2002, we borrowed $1,000,000 from SCRS Investors to
                  be used in connection with our acquisition of two Pratt and
                  Whitney engines. The loan is at 9% interest per annum and is
                  due and payable on May 17, 2004.

                                       7
<PAGE>

Lease

         We rent our office facilities on a month-to-month basis from an entity
controlled by James W. Scott, our president, chief executive officer and a
director. In the fiscal year ended June 30, 2002, we paid $70,000 under this
arrangement, and we currently pay the amount of $7,494 per month.

Possible Future Transactions

         We anticipate that in the future we may enter into additional
agreements with Edward Mike Davis, SCRS Investors, their respective affiliates,
or other related parties in transactions that will not be the result of
arm's-length negotiations. We have not established any procedures for resolving
conflicts of interest between us and our officers, directors and principal
stockholders or their respective affiliates. We do not have an audit or other
committee composed of independent directors to review transactions with
affiliates to determine whether they are fair to our stockholders.

                                       8
<PAGE>

                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this amendment no. 2 to
report to be signed on its behalf by the undersigned thereunto duly authorized.

                                               MID-POWER SERVICE CORPORATION



Dated:  November 14, 2002                      By  /s/ James W. Scott
                                                  ------------------------------
                                                   James W. Scott, President



                                       9
<PAGE>

                  CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

         I, James W. Scott, certify that:

         1. I have reviewed this annual report on Form 10-KSB of Mid-Power
Service Corporation.

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

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

Date: November 14, 2002


/s/ James W. Scott
-------------------------------
James W. Scott
Principal Executive Officer

                                       10
<PAGE>

                  CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER


         I, Kenneth M. Emter, certify that:

         1. I have reviewed this annual report on Form 10-KSB of Mid-Power
Service Corporation.

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

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

Date: November 14, 2002


/s/ Kenneth M. Emter
------------------------------
Kenneth M. Emter
Principal Financial Officer

                                       11
<PAGE>

                                                   MID-POWER SERVICE CORPORATION
                                                   Index to Financial Statements

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


                                                                        Page

Independent Auditor's report of Tanner + Co.                            F-2

Balance sheet                                                           F-3

Statement of operations                                                 F-4

Statement of stockholders' equity                                       F-5

Statement of cash flows                                                 F-6

Notes to financial statements                                           F-7

Schedules of supplementary information on
  oil and gas operations                                               F-29

                                      F-1
<PAGE>

                                                    INDEPENDENT AUDITORS' REPORT


To the Board of Directors and
Stockholders of Mid-Power Service Corporation


We have audited the accompanying consolidated balance sheet of Mid-Power Service
Corporation and  subsidiaries as of June 30, 2002, and the related  consolidated
statements of  operations,  stockholders'  equity,  and cash flows for the years
ended June 30, 2002 and 2001. These financial  statements are the responsibility
of the  Company's  management.  Our  responsibility  is to express an opinion on
these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain reasonable  assurance about whether the consolidated
financial  statements  are free of  material  misstatement.  An  audit  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  financial  statements.  An audit also  includes  assessing  the  accounting
principles  used  and  significant  estimates  made  by  management,  as well as
evaluating the overall consolidated financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial  position of Mid-Power Service
Corporation and  Subsidiaries as of June 30, 2002 and the related  statements of
operations,  stockholders'  equity,  and cash flows for the years ended June 30,
2002 and 2001 in conformity with accounting principles generally accepted in the
United States of America.

The accompanying  consolidated  financial statements have been prepared assuming
the Company  will  continue as a going  concern.  As  discussed in note 2 to the
financial  statements,  the Company  has a working  capital  deficiency  and has
incurred substantial losses from operations.  These conditions raise substantial
doubt  about  the  ability  of the  Company  to  continue  as a  going  concern.
Management's  plans in regard to these matters are also described in note 2. The
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.

As explained in Note 22, the financial statements have been restated.


                               TANNER + CO.

Salt Lake City, Utah
August 22, 2002, except for Notes 1, 5, 12, 16, and 22,
which are dated November 8, 2002.

                                       F-2
<PAGE>
<TABLE>
<CAPTION>
                                                                              MID-POWER SERVICE CORPORATION
                                                                      Consolidated Balance Sheet (Restated)

                                                                                              June 30, 2002
-----------------------------------------------------------------------------------------------------------

                        Assets
<S>                                                                                         <C>
Current assets:
  Cash and cash equivalents                                                                 $        639,540
  Other receivables                                                                                   52,077
  Prepaids and other assets                                                                           13,481
  Current portion of notes receivable                                                                450,000
                                                                                            ----------------

        Total current assets                                                                       1,155,098

Notes receivable                                                                                     200,000
Property and equipment, net                                                                          564,323
Oil and gas property, undeveloped                                                                 41,018,204
Investment in equipment                                                                              900,000
                                                                                            ----------------

                                                                                            $     43,837,625
                                                                                            ================

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

                Liabilities and Stockholders' Equity

Current Liabilities:
  Accounts payable                                                                          $        192,110
  Accrued liabilities                                                                                259,799
  Related party note payable                                                                      10,000,000
  Current portion of long-term debt                                                                   33,703
                                                                                            ----------------

        Total current liabilities                                                                 10,485,612

Long-term debt                                                                                     1,259,357
Deferred tax liability                                                                             9,262,000
                                                                                            ----------------

        Total liabilities                                                                         21,006,969

Commitments and contingencies                                                                              -

Stockholders' equity:
  Preferred stock, $.001 par value, 10,000,000 shares authorized,
    none issued and outstanding                                                                            -
  Common stock, $.001 par value, 100,000,000 shares authorized,
    27,972,276 issued and outstanding                                                                 27,972
  Additional paid-in capital                                                                      28,627,215
  Accumulated deficit                                                                             (5,824,531)
                                                                                            ----------------

        Total stockholders' equity                                                                22,830,656
                                                                                            ----------------

        Total liabilities and stockholders' equity                                          $     43,837,625
                                                                                            ================

-----------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.                                                         F-3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                                                   MID-POWER SERVICE CORPORATION
                                                                            Consolidated Statement of Operations

                                                                                            Years Ended June 30,
----------------------------------------------------------------------------------------------------------------

                                                                                   2002               2001
                                                                              -------------      -------------
<S>                                                                           <C>                <C>
Revenues                                                                      $     100,148      $           -
                                                                              -------------      -------------

Costs and expenses
  Production expenses                                                                72,690                  -
  Exploration costs                                                                 814,255
  General and administrative                                                      2,260,439             38,274
  Research and development                                                          577,095                  -
  Impairment of investment in equipment                                             264,000
  Impairment of oil and gas properties                                              526,907                  -
                                                                              -------------      -------------

        Total costs and expenses                                                  4,515,386             38,274
                                                                              -------------      -------------

  Loss from operations                                                           (4,415,238)           (38,274)
                                                                              -------------      -------------

Other income (expense):
  Interest income                                                                   139,408              8,815
  Interest expense                                                                  (48,986)            (7,397)
                                                                              -------------      -------------

        Total other income                                                           90,422              1,418
                                                                              -------------      -------------

Net loss before income taxes                                                     (4,324,816)           (36,856)

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

Net loss                                                                      $  (4,324,816)     $     (36,856)
                                                                              =============      =============

Net loss per share - basic and diluted                                        $       (0.55)     $       (0.02)
                                                                              =============      =============

Weighted average shares outstanding -
  basic and diluted                                                               7,820,000          2,392,000
                                                                              =============      =============


------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.                                                                F-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                                                                       MID-POWER SERVICE CORPORATION
                                                                           Consolidated Statement of Stockholders' Equity (Restated)

                                                                                                  Years Ended June 30, 2002 and 2001
------------------------------------------------------------------------------------------------------------------------------------


                                              Preferred Stock         Common Stock         Additional
                                           --------------------- ----------------------     Paid-in     Accumulated
                                             Shares      Amount    Shares      Amount       Capital        Deficit        Total
                                           -----------------------------------------------------------------------------------------
<S>                                          <C>        <C>      <C>          <C>         <C>           <C>            <C>
Balance, July 1, 2000                             -     $    -   1,800,244    $  1,800    $ 1,481,649   $ (1,462,859)  $     20,590

Sale of common stock, net of
  offering costs                                  -          -   3,000,000       3,000        738,050              -        741,050
                                                                                                                                  -
Sale of common stock to a director
  net of offering costs                           -          -   2,000,000       2,000      4,989,655              -      4,991,655

Excess of purchase price over net
  assets acquired of business                                                                                                     -
  operations under common control                 -          -           -           -       (204,086)             -       (204,086)
                                                                                                                                  -
Net loss                                                     -           -           -              -        (36,856)       (36,856)
                                           -----------------------------------------------------------------------------------------

Balance, June 30, 2001                            -          -   6,800,244       6,800      7,005,268     (1,499,715)     5,512,353
                                           -----------------------------------------------------------------------------------------

Issuance of common stock
  to related party as financing fee               -          -     340,000         340        492,660              -        493,000

Conversion of debt to common stock                -          -   3,666,667       3,667      5,496,333              -      5,500,000

Issuance of stock options for compensation        -          -           -           -         20,340              -         20,340

Issuance of stock for services                    -          -      40,000          40         59,960              -         60,000

Issance of stock related to the
  purchase of Red Star, Inc.                      -          -  17,125,365      17,125     15,552,654              -     15,569,779

Net loss                                          -          -           -           -              -     (4,324,816)    (4,324,816)
                                           -----------------------------------------------------------------------------------------

Balance, June 30, 2002                            -     $    -  27,972,276    $ 27,972    $28,627,215   $ (5,824,531)  $ 22,830,656
                                           =========================================================================================

------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.                                                                                  F-5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                                                        MID-POWER SERVICE CORPORATION
                                                                                 Consolidated Statement of Cash Flows

                                                                                                   Year Ended June 30,
----------------------------------------------------------------------------------------------------------------------
                                                                                       2002                2001
                                                                                   -------------      -------------
<S>                                                                                <C>                <C>
Cash flows from operating activities:
  Net loss                                                                         $  (4,324,816)     $     (36,856)
  Adjustments to reconcile net loss to net cash
    used in operating activities:
      Depreciation and depletion                                                          43,648                 -
      Issuance of common stock for financing fee and services                            553,000                 -
      Issuance of stock options for compensation                                          20,340
      Impairment of oil and gas properties and investment
        in equipment                                                                     790,907
      Changes in operating assets and liabilities
        Receivables                                                                     (302,077)                -
        Prepaids and other assets                                                        (12,256)           (50,000)
        Accounts payable                                                                 141,902           (104,692)
        Accrued liabilities                                                              170,925
                                                                                   -------------      -------------

            Net cash used in operating activities                                     (2,918,427)          (191,548)
                                                                                   -------------      -------------

Cash flows from investing activities:
  Cash received from capital contribution made by directors                                   -              45,224
  Advances for notes receivable                                                         (177,526)
  Sale of (purchase of) investment                                                       650,000         (1,000,000)
  Purchase of  investment in equipment                                                (1,164,000)
  Purchase of property and equipment                                                    (533,379)                -
  Purchase of oil and gas property                                                    (6,375,434)                -
                                                                                   -------------      -------------

            Net cash used in investing activities                                     (7,600,339)          (954,776)
                                                                                   -------------      -------------

Cash flows from financing activities:
  Proceeds from sale of common stock                                                          -           5,732,705
  Proceeds from long-term debt                                                         6,700,000          1,000,000
  Principal payments on long-term debt                                                (1,023,465)          (125,200)
                                                                                   -------------      -------------

            Net cash provided by financing activities                                  5,676,535          6,607,505
                                                                                   -------------      -------------

            Net (decrease) increase in cash and cash equivalents                      (4,842,231)         5,461,181

Cash and cash equivalents at beginning of year                                         5,481,771             20,590
                                                                                   -------------      -------------

Cash and cash equivalents at end of year                                           $     639,540      $   5,481,771
                                                                                   =============      =============

---------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.                                                                   F-6
</TABLE>
<PAGE>

                                                   MID-POWER SERVICE CORPORATION
                                                   Notes to Financial Statements

                                                                   June 30, 2002
--------------------------------------------------------------------------------

1.       Organization and Summary of Significant Accounting Policies

         Organization and Business

         Mid-Power   Service   Corporation   and  affiliates  (the  Company)  is
         incorporated  under the laws of the state of  Nevada  and is  currently
         implementing a plan to acquire gas and oil  properties for  exploration
         and  development,  to acquire  fuel  sources for power  generation,  to
         develop  energy-related   technologies,   and  to  generate  and  trade
         electrical  power.  The  Company  initiated  this  plan  following  the
         acquisition of a controlling  interest by a new group of  stockholders,
         the infusion of more than $5.5 million of equity,  and the  appointment
         of new  directors  during the year ended June 30, 2001.  The Company is
         currently  focusing  principally on the  exploration and development of
         gas and oil by initiating  exploration of acquired  property  interests
         and by participating in exploration projects sponsored by others.

         On  March  12,  2001,  eight  individuals  purchased  an  aggregate  of
         1,500,000   shares  of  restricted   common  stock  from  six  existing
         stockholders of the Company.  Additionally,  one investor  purchased an
         irrevocable  proxy to vote 500,000 shares of  outstanding  common stock
         and an option,  which was  exercised in May 2001,  to purchase  100,000
         outstanding  shares  of  restricted  common  stock.  As a result of the
         foregoing  transactions,  the eight purchasers  obtained voting control
         over approximately 55% of the Company's common stock.

         Also on March 12, 2001, the  stockholders  of the Company,  by majority
         written  consent,  elected  a new  board  of  directors,  which in turn
         elected new officers.  The Company then effected a one-for-two  reverse
         split  of the  common  stock of the  Company  and  changed  its name to
         "Mid-Power  Service  Corporation."  All share and per share  amounts in
         these   financial   statements   have  been  restated  to  reflect  the
         retroactive effect of the stock split.

--------------------------------------------------------------------------------
                                                                             F-7
<PAGE>

                                                   MID-POWER SERVICE CORPORATION
                                                   Notes to Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------

1.       Organization and Summary of Significant Accounting Policies Continued

         Organization and Business - Continued

         In August  2001,  the  Company,  through its wholly  owned  subsidiary,
         completed a merger  between  Mid-Power  Service  Corporation,  a Nevada
         corporation  and  Mid-Power  Service  Corporation  (Formerly  Caplan) a
         Delaware  corporation  wherein all of the issued and outstanding shares
         in the  Nevada  corporation  were  exchanged  for  all the  issued  and
         outstanding  shares of the  Delaware  corporation  effecting a domicile
         change of Mid-Power  Service  Corporation  (formerly Caplan, a Delaware
         Corporation) to a Nevada corporation.

         As discussed in Note 4, on June 14, 2002,  the Company  acquired all of
         the  outstanding  stock of Red Star,  Inc. in exchange  for  17,125,365
         shares of common stock, $5,500,000 in cash, a deferred tax liability of
         $9,262,000, and a promissory note payable of $10,000,000.  The issuance
         of 17,125,365  shares of common stock resulted in the recipient of such
         shares obtaining voting control over approximately  61.2% of the issued
         and outstanding shares of common stock.

         Principles of Consolidation

         The consolidated financial statements include the accounts of Mid-Power
         Service  Corporation  and  its  wholly  owned  subsidiaries:  Mid-Power
         Resource Corporation,  a Nevada corporation,  Sunray Petroleum, Inc., a
         Nevada  corporation  (formerly MaxCo Inc.),  Wind  Associates,  Inc., a
         North  Dakota  corporation,  Mid-Power  Energy  Trading  LLC,  a Nevada
         limited liability company,  and Emergency Power Systems,  LLC, a Nevada
         limited   liability   company   (collectively,   "the  Company").   All
         significant   inter-company   transactions   have  been  eliminated  in
         consolidation.

         Cash and Cash Equivalents

         The Company considers all highly liquid  investments with a maturity of
         three months or less to be cash equivalents.

         Concentration of Credit Risk

         Financial   instruments  which  potentially   subject  the  Company  to
         concentration   of  credit  risk  consist   primarily  of  receivables.
         Accordingly,  the Company  performs  ongoing credit  evaluations of its
         customers  and maintains  allowances  for possible  losses which,  when
         realized, have been within the range of management's expectations.

--------------------------------------------------------------------------------
                                                                             F-8
<PAGE>

                                                   MID-POWER SERVICE CORPORATION
                                                   Notes to Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------

1.       Organization and Summary of Significant Accounting Policies Continued

         Concentration of Credit Risk - Continued

         The Company  maintains  its cash in bank  deposit  accounts  which,  at
         times,  may  exceed  federally  insured  limits.  The  Company  has not
         experienced any losses in such account.  The Company believes it is not
         exposed to any significant credit risk on cash and cash equivalents.

         Oil and Gas Producing Activities

         The Company  utilizes the  successful  efforts method of accounting for
         its oil and gas  producing  activities.  Under this  method,  all costs
         associated  with  productive   exploratory   wells  and  productive  or
         nonproductive  development  wells  are  capitalized  while the costs of
         nonproductive  exploratory  wells are expensed.  If an exploratory well
         finds oil and gas reserves,  but a determination that such reserves can
         be classified as proved is not made after one year following completion
         of drilling, the costs of drilling are charged to operations.  Indirect
         exploratory expenditures,  including geophysical costs and annual lease
         rentals, are expensed as incurred.

         Unproved undeveloped oil and gas property costs are capitalized and are
         not  amortized  pending an evaluation of the  exploration  results.  If
         unproved  properties  are determined to be productive the related costs
         are  transferred  to  proved  oil  and  gas  properties.  Oil  and  gas
         properties that are individually  significant are periodically assessed
         for  impairment  of  value,  and a loss is  recognized  at the  time of
         impairment by providing an impairment  allowance.  Capitalized costs of
         producing  oil  and  gas  properties,   after   considering   estimated
         dismantlement and abandonment  costs and estimated salvage values,  are
         depreciated  and  depleted by the  unit-of-production  method.  Support
         equipment and other property and equipment are  depreciated  over their
         estimated useful lives.

         On the sale or retirement of a complete unit of a proved property,  the
         cost and related accumulated depreciation,  depletion, and amortization
         are eliminated  from the property  accounts,  and the resulting gain or
         loss is  recognized.  On the  retirement  or sale of a partial  unit of
         proved  property,  the cost is  charged  to  accumulated  depreciation,
         depletion, and amortization with a resulting gain or loss recognized in
         income.

--------------------------------------------------------------------------------
                                                                             F-9
<PAGE>

                                                   MID-POWER SERVICE CORPORATION
                                                   Notes to Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------

1.       Organization and Summary of Significant Accounting Policies Continued

         Oil and Gas Producing Activities - Continued

         On the sale of an entire  interest in an unproved  property for cash or
         cash  equivalent,  gain or loss on the sale is recognized,  taking into
         consideration the amount of any recorded impairment if the property had
         been  assessed  individually.  If a  partial  interest  in an  unproved
         property is sold, the amount  received is treated as a reduction of the
         cost of the interest retained.

         Property and Equipment

         Property   and   equipment   are   stated  at  cost  less   accumulated
         depreciation.  Depreciation is provided using the straight-line  method
         over  the  estimated  useful  lives  of the  assets.  Expenditures  for
         maintenance  and repairs are expensed when incurred and betterments are
         capitalized.  When assets are sold,  retired or otherwise  disposed of,
         the  applicable  costs and  accumulated  depreciation,  depletion,  and
         amortization  are removed from the accounts,  and the resulting gain or
         loss is reflected in operations.

         Income Taxes

         Deferred income taxes arise from temporary  differences  resulting from
         income and expense  items  reported for  financial  accounting  and tax
         purposes in different periods. Deferred taxes are classified as current
         or  non-current,  depending  on the  classification  of the  assets and
         liabilities to which they relate. Deferred taxes arising from temporary
         differences  that  are  not  related  to  an  asset  or  liability  are
         classified as current or non-current  depending on the periods in which
         the temporary differences are expected to reverse.

         Revenue Recognition

         Revenue  is  recognized  from  oil  sales  at  such  time as the oil is
         delivered to the buyer.  Revenue is recognized  from gas sales when the
         gas passes through the pipeline at the well head. Oil and gas sales are
         reported net of royalty  fees,  which were $10,037 and $0 for the years
         ended June 30,  2002 and 2001,  respectively.  Revenues  from  services
         provided to other well operators are recognized  when the services have
         been   performed.   The  Company  does  not  have  any  gas   balancing
         arrangements.

--------------------------------------------------------------------------------
                                                                            F-10
<PAGE>

                                                   MID-POWER SERVICE CORPORATION
                                                   Notes to Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------

1.       Organization and Summary of Significant Accounting Policies Continued

         Use of Estimates in the Preparation of Financial Statements

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

         Earnings Per Share

         The  computation  of basic  earnings  per common  share is based on the
         weighted average number of shares outstanding during the period.

         The  computation  of diluted  earnings per common share is based on the
         weighted  average number of shares  outstanding  during the period plus
         the common stock  equivalents  which would arise from the conversion of
         convertible  debt to common stock and the exercise of stock options and
         warrants  outstanding  using the treasury  stock method and the average
         market price per share during the period.  Options to purchase  130,000
         shares of common  stock at a price of $1.50 per share were  outstanding
         at June 30, 2002 but were not  included  in the diluted  loss per share
         calculation  because  the  effect  would  have been  anti-dilutive.  No
         options or warrants were outstanding at June 30, 2001.

         Reclassification

         Certain amounts in the 2001 consolidated financial statements have been
         reclassified  to conform  with  classifications  adopted in the current
         year.

--------------------------------------------------------------------------------
                                                                            F-11
<PAGE>

                                                   MID-POWER SERVICE CORPORATION
                                                   Notes to Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------

2.       Going Concern

         The accompanying  consolidated  financial statements have been prepared
         assuming that the Company will continue as a going concern.  As of June
         30, 2002, the Company had a working capital deficiency,  an accumulated
         deficit and has had  substantial  recurring  losses.  The  consolidated
         operations of the Company have not had sustained  profitability and the
         Company  has relied  upon debt and  equity  financing  to  satisfy  its
         obligations. These conditions raise substantial doubt about the ability
         of the  Company  to  continue  as a  going  concern.  The  consolidated
         financial  statements do not include any adjustments  that might result
         from the outcome of these uncertainties.

         The Company's  ability to continue as a going concern is subject to the
         attainment of profitable  production  operations of its undeveloped oil
         and gas properties or obtaining necessary funding from outside sources.
         Management's  plan with respect to this uncertainty  include  obtaining
         debt financing from the convertible loan discussed in Note 9, exploring
         its oil and gas properties to obtain proved reserves and evaluating new
         products and markets, and minimizing overhead costs. However, there can
         be no assurance that management will be successful in these efforts.


3.       Notes Receivable

         Notes receivable are comprised of the following at June 30, 2002:

            Note receivable from an entity for the sale of the
            Company's 22.2% ownership interest in First Step
            Investors LLC, the full balance was paid subsequent to
            year-end                                                  $  350,000

            Note receivable from an entity with interest at 10%,
            due in three equal annual installments on or before
            September 30 of each year                                    300,000
                                                                      ----------

            Total                                                        650,000

            Less current portion                                         450,000
                                                                      ----------

            Total long-term portion of notes receivable               $  200,000
                                                                      ==========


         $100,000 of the  long-term  portion is due on or before  September  30,
         2003 and $100,000 is due on or before September 30, 2004.

--------------------------------------------------------------------------------
                                                                            F-12
<PAGE>

                                                   MID-POWER SERVICE CORPORATION
                                                   Notes to Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------

4.       Property and Equipment

         Property and equipment consists of the following:

            Gas and oil equipment                                    $  347,067
            Vehicles other equipment                                    141,948
            Vehicles                                                     96,812
            Office furniture and equipment                                5,317
                                                                     ----------
                                                                        591,144

            Less accumulated depreciation and amortization              (26,821)
                                                                     ----------
                                                                     $  564,323
                                                                     ==========

5.       Acquisitions

         Acquisition of Red Star, Inc.

         On June  14,  2002  the  Company  completed  an  acquisition  under  an
         Acquisition Agreement and Plan of Merger Agreement with Red Star, Inc.,
         a Nevada Corporation,  wherein a wholly-owned subsidiary of the Company
         merged  into Red Star,  Inc.,  in  exchange  for  17,125,365  shares of
         Mid-Power  common  stock  valued  at  approximately   $.91  per  share,
         $5,500,000  in cash a  deferred  tax  liability  of  $9,262,000,  and a
         promissory note for $10,000,000 payable,  together with interest at the
         greater of 6% or one  percentage  point over Bank of America  reference
         rate.  The note is due in  December  2002.  The  assets  acquired  were
         recorded at their  estimated fair values at the date of the acquisition
         and  the  results  of  operations  are  included  in  the  accompanying
         consolidated  statement of operations from the date of the acquisition.
         The purchase price was allocated entirely to assets acquired.

         The primary assets  acquired,  and  liabilities  assumed in conjunction
         with the acquisition of Red Star Inc., were as follows:

            Undeveloped gas properties                         $     40,260,809
            Gas and oil equipment and vehicles                          234,611
            Accrued abandonment costs                                   (87,500)
            Long-term debt                                              (76,141)
                                                               ----------------
            Total acquisition cost                             $     40,331,779
                                                               ================

--------------------------------------------------------------------------------
                                                                            F-13
<PAGE>

                                                   MID-POWER SERVICE CORPORATION
                                                   Notes to Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------

5.       Acquisitions Continued

         Acquisition of Red Star, Inc. - Continued

         The properties  acquired are unproved and  undeveloped  and as such are
         subject   to  future   impairment.   If  proved   reserves   cannot  be
         substantiated  or the fair  value of the  properties  falls  below  the
         recorded book value, the Company will be required to record  impairment
         charges against such properties. The Company has commenced some limited
         exploration  of the properties  and plans to continue  exploration  and
         commence  development over the next 12 months.  Impairment  charges may
         result  if  such  exploration  and  development  indicate  that  proved
         reserves  do not  exist  or  that  production  of any  reserves  is not
         commercially viable.

         No assurance  can be given that the Company will be  successful  in its
         efforts to obtain proved reserves.

         Through the acquisition of Red Star Inc., the Company  acquired oil and
         gas  leasehold  interests  in the Clear  Creek Unit in Carbon and Emery
         Counties in Utah,  which is  comprised  of  approximately  17,197 gross
         acres of land.

         The Company  maintains a 100% working  interest in the Leasehold of the
         Clear Creek Unit,  equivalent to a 72.1% net revenue  interest,  except
         for two well  locations  as noted  below.  The  leases  are  subject to
         approximately   20.75%  revenue  interest  landowners'  and  overriding
         royalties and approximately  7.14% due to the former owner of Red Star,
         Inc.  In  addition,  the  former  owner has a 14.3%  working  interest,
         equivalent to a 10% net revenue interest in the Oman #2-20 and the Utah
         fuel #8 Wells.  The Company is obligated to pay an unaffiliated  former
         leasehold owner $200,000 solely out of 5% from the net revenue interest
         received by the Company from oil and gas production  from certain wells
         on the Clear Creek unit.

--------------------------------------------------------------------------------
                                                                            F-14
<PAGE>

                                                   MID-POWER SERVICE CORPORATION
                                                   Notes to Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------

5.       Acquisitions Continued

         Acquisition of Red Star, Inc. - Continued

         The following  unaudited pro forma  consolidated  results of operations
         have been prepared as if the  acquisition had occurred at the beginning
         of each respective period:

                                                   Year Ended June 30,
                                                2002                   2001
                                             --------------------------------
             Total revenue                   $    346,256         $       672
                                             ============         ===========
             Net loss                          (4,327,508)            (80,972)
                                             ============         ===========
             Net loss per share              $       (.17)        $         -
                                             ============         ===========


         The pro forma  consolidated  results do not purport to be indicative of
         results that would have  occurred had the  acquisitions  been in effect
         for the periods presented,  nor do they purport to be indicative of the
         results that will be obtained in the future.

         Acquisition of Sunray Petroleum, Inc. (Formerly MaxCo, Inc.)

         The Company purchased  through its wholly owned  subsidiary,  Mid-Power
         Resource,  Inc., 100% of the issued and outstanding  stock of MaxCo Oil
         Co.,  Inc.   ("MaxCo"),   a   privately-owned   oil  company  based  in
         Bakersfield,  California,  with  producing oil wells and additional oil
         holdings in Kern County, California. The acquisition occurred under two
         separate  agreements  dated  August 22,  2001 on which 70% of MaxCo was
         purchased  and on December 31, 2001 on which the remaining 30% of MaxCo
         was purchased.  MaxCo has been engaged in oil and gas  exploration  and
         production in Kern County since June 2000.

--------------------------------------------------------------------------------
                                                                            F-15
<PAGE>

                                                   MID-POWER SERVICE CORPORATION
                                                   Notes to Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------

5.       Acquisitions Continued

         Acquisition of Sunray Petroleum, Inc. (Formerly MaxCo, Inc.)
         - Continued

         In the  acquisition,  the  Company  paid  $425,000  in  cash,  assigned
         $167,236 of  equipment  and  vehicles  (net of $64,388  related  debt),
         assumed  $177,526 of cash advances due to the Company from MaxCo.,  and
         assumed payables and other liabilities of $64,106. The Company had also
         originally  issued issue 450,000 shares of its restricted  common stock
         in which the actual delivery of the shares was conditional upon MaxCo's
         obtaining an agreed number of commercially productive wells in addition
         to those  currently  producing.  On  December  31,  2001 as part of the
         Company's  acquisition  of the remaining 30% purchase of the issued and
         outstanding  Stock of MaxCo, the 450,000 of the Company's common shares
         which were originally  issued as part of the purchase were  effectively
         cancelled as  commercial  productivity  had not been attained on agreed
         upon wells.

         The primary  assets  acquired by the  Company in  conjunction  with the
         acquisition of all the issued and  outstanding  stock of MaxCo included
         the following:

            Oil properties                                     $        626,907
            Gas and oil equipment and vehicles                          166,958
            Accounts receivable                                           7,586
            Cash                                                         32,417
                                                               ----------------
            Total acquisition costs                            $        833,868
                                                               ================

         The purchase price which exceeded the net assets as recorded on MaxCo's
         books  at the  dates  of  acquisition  was  allocated  to oil  and  gas
         properties.  Subsequent  to the purchase a  substantial  portion of the
         capitalized  costs  of the  oil  and  gas  properties  related  to this
         acquisition  were  determined to be impaired at June 30, 2002 (see note
         10). Pro forma  information as if the  acquisition  occurred on July 1,
         2001 have not been  presented  because such results were not materially
         different than the historical  results of operations for the year ended
         June 30, 2002.

--------------------------------------------------------------------------------
                                                                            F-16
<PAGE>

                                                   MID-POWER SERVICE CORPORATION
                                                   Notes to Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------

6.       Oil and Gas Properties

         Clear Creek Unit

         The  Company  has gas  leasehold  interests  in the Clear Creek Unit in
         Carbon and Emery Counties in Utah,  which is comprised of approximately
         17,197 gross acres of land.  Non-productive  wells have been located on
         the  property,  and  substantial   expenditures  will  be  required  to
         re-complete these wells,  therefore,  the Company has accounted for the
         properties  as  undeveloped.  The  Company  maintains  a  100%  working
         interest in the  Leasehold  of the Clear  Creek  Unit,  and a 72.1% net
         revenue interest.

         The  leases  are  subject  to  approximately  20.75%  revenue  interest
         landowners and overriding  royalties and approximately 7.14% due to the
         former owner of Red Star,  Inc..  In  addition,  the former owner has a
         14.3% working interest, equivalent to a 10% net revenue interest in the
         Oman #2-20 and the Utah fuel #8 Wells.  The Company is obligated to pay
         a former leasehold owner $200,000 solely out of 5% from the net revenue
         interest  received  by the  Company  from oil and gas  production  from
         certain  wells  on the  Clear  Creek  unit.  At June  30,  2002 the gas
         properties are being carried at a cost of $40,260,809.  The capitalized
         cost is subject to future  impairment if future proved  reserves cannot
         be  substantiated  or the fair value of the  properties  fall below the
         capitalized  costs.  No assurance can be given that the Company will be
         successful in its efforts to obtain proved reserves.

         Mountain View Field

         The Company has oil  leaseholds in the Mountain View Field of the Arvin
         Area located in Kern County  California.  The Company  maintains a 100%
         working  interest  in the  leaseholds,  which are  subject  to a 16.97%
         royalty interest to former lease holders on all production. At June 30,
         2002, the leasehold,  which had a carrying value of $626,907 was deemed
         to be substantially impaired by $526,907 (see note 10).

         Arbuckle Gas Field

         The Company  entered into a joint venture  agreement with the Company's
         majority  shareholder  to drill and  explore a gas well  located in the
         Arbuckle Gas Field in Colusa County California. The Company maintains a
         50% working interest equivalent to a 40% net revenue interest only upon
         such well becoming commercially  productive.  At June 30, 2002 the well
         with a carrying value of $657,395 had reached total depth and was being
         tested.

--------------------------------------------------------------------------------
                                                                            F-18
<PAGE>

                                                   MID-POWER SERVICE CORPORATION
                                                   Notes to Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------

7.       Investment in Equipment

         The Company  purchased two GG4A-7  non-flight Pratt and Whitney turbine
         engines  for  $1,164,000,  which are held for  sale.  The  engines  can
         provide increased power capacity to certain power generating facilities
         at peak usage times.  The Company has recorded  this  investment at the
         lower of cost or market.  At June 30, 2002 the Company  determined that
         an impairment of $264,000  should be  recognized.  The  impairment  was
         based on available  information  on the estimated  fair market value of
         the engines.  The balance of investment in the engines at June 30, 2002
         is $900,000.

8.       Related Party Note Payable

         The  Company  has a note  payable to the  majority  shareholder  of the
         Company which accrues interest at 1% above Bank of America's  reference
         rate or 6% minimum (6% at June 30, 2002).  The note matures in December
         2002 and is  unsecured.  The  balance of the note at June 30,  2002 was
         $10,000,000.

9.       Long-Term Debt

         Long-term debt consists of the following at June 30, 2002:

         Note payable to SCRS Investors, LLC, an 86% controlled
         entity of an officer of the Company, with interest at
         9%, maturing on May 17, 2004 and unsecured.               $  1,000,000

         Note payable to SCRS Investors, LLC, an 86% controlled
         entity of an officer of the Company, with interest at
         9%, maturing on May 22, 2004 and unsecured.                    200,000

         Note payable to a financial institution payable in
         monthly payments of $1,561 including interest at 2.9%,
         matures in September 2006, secured by vehicles.                 76,141

--------------------------------------------------------------------------------
                                                                            F-18
<PAGE>

                                                   MID-POWER SERVICE CORPORATION
                                                   Notes to Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------

9.       Long-Term Debt Continued

         Note payable to an individual with monthly payments of
         $4,167 including interest at 10%, due October 2002              16,919
                                                                   ------------

         Total                                                        1,293,060

         Less current portion                                            33,703
                                                                   ------------

         Total long-term debt                                      $  1,259,357
                                                                   ============


         Future maturities of long-term debt are as follows:

              Year Ending June 30:                                    Amounts
              --------------------                                 ------------
                     2003                                          $     33,703
                     2004                                             1,217,000
                     2005                                                18,000
                     2006                                                18,000
                     2007                                                 6,357
                                                                   ------------
                                                                   $  1,293,060
                                                                   ============

10.      Related Party Convertible Loan

         The Company has entered into a  convertible  loan  agreement  with SCRS
         Investors  LLC ("SCRS") an 86%  controlled  entity of an Officer of the
         Company.  The  Company  may  borrow up to  $25,500,000,  payable  in 20
         consecutive  equal quarterly  payments of principal and interest at 10%
         per annum  commencing on December 31, 2007. The balance on the loan and
         accrued  interest  related  thereto is  convertible  into the Company's
         common stock any time at the option of SCRS at $1.50 per share  subject
         to the  following  restrictions:  The  note  payable  to  the  majority
         shareholder as disclosed in note 6 must be paid in full; the conversion
         would not result in the majority  shareholder  becoming less than a 51%
         beneficial  or legal owner of the Company  through  June 13,  2003;  at
         anytime  after June 13,  2003 and before  June 14, 2007 would cause the
         majority  shareholder's  ownership  of the Company to be less than 36%.
         The loan is secured by the  Company's  interest in the Clear Creek Unit
         properties. At June 30, 2002, $5,500,000 had been borrowed against this
         note and  converted  into  3,666,667  shares of common stock  leaving a
         balance of $0 related to this loan.

--------------------------------------------------------------------------------
                                                                            F-19
<PAGE>

                                                   MID-POWER SERVICE CORPORATION
                                                   Notes to Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------

11.      Impairment On Oil and Gas Properties

         As of June 30, 2002,  based on available  reserve  information  certain
         capitalized  oil  properties  related to the  purchase  of Sunray  Inc.
         (formerly  Maxco  Oil,  Inc.),  were  determined  to be  impaired.  The
         principal  reason for the  impairment  was due to a lack of evidence of
         proved  reserves  of  developed  wells or adequate  proved  reserves on
         Sunray's  undeveloped  wells,  accompanied by the high production costs
         and low production  volume since the Company purchased Maxco Oil, Inc.,
         in August 2001. The impairment was calculated as the difference between
         the capitalized costs and proved undeveloped future reserves at current
         prices discounted at 10%. The total amount of impairment recorded as of
         June 30, 2002 was $526,907.

12.      Income Taxes

         The  provision  for income taxes  differs  from the amount  computed at
         federal statutory rates as follows at June 30:

                                                        2002           2001
                                                   ----------------------------
           Income tax benefit at statutory rate    $ (1,613,000)   $   (151,000)
           Stock based compensation                     214,000               -
           Oil property impairment                      197,000               -
           Net operating loss limitation                187,000               -
           Change in estimated tax rate                  76,000               -
           Other                                          2,000               -
           Change in valuation allowance                937,000         151,000
                                                   ------------    ------------
                                                   $          -    $          -
                                                   ============    ============

         Deferred tax assets  (liabilities)  are  comprised of the  following at
         June 30:

                                                        2002           2001
                                                   ----------------------------
           Net operating loss carry forward        $  1,171,000    $    266,000
           Book basis in excess of tax basis
             on gas and oil                           9,262,000               -
           Depreciation and depletion                   (23,000)              -
           Impairment on oil properties                  98,000               -
           Accrued wages                                 11,000               -
           Depletion carry forward                        6,000               -
           Research and development credit              (55,000)              -
           Investment tax credit                         (6,000)              -
           Other                                          1,000               -
           Valuation allowance                       (1,203,000)       (266,000)
                                                   ------------    ------------
                                                   $ (9,262,000)   $          -
                                                   ============    ============

--------------------------------------------------------------------------------
                                                                            F-20
<PAGE>

                                                   MID-POWER SERVICE CORPORATION
                                                   Notes to Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------

12.      Income Taxes Continued

         A  valuation  allowance  has been  recorded  for the full amount of the
         deferred tax asset because it is more likely than not that the deferred
         tax asset will not be realized.

         As of June 30, 2002, the Company had a net operating loss carry forward
         of  approximately  $3,142,171.  This carry forward  begins to expire in
         2003. If substantial  changes in the Company's  ownership should occur,
         there would be an annual  limitation of the amount of NOL carry forward
         which could be utilized. The ultimate realization of this carry forward
         is due, in part, on the tax law in effect at the time and future events
         which cannot be determined.

13.      Sales to Major Customer

         The Company's had sales to an entity which  represent more than 10% for
         the  year  ended  June  30,  2002.  All  oil   production   revenue  of
         approximately $100,000 was sold to the same company.

14.      Related Party Transactions Not Otherwise Disclosed

         The Company had accrued  liabilities due to SCRS Investor's LLC, an 86%
         controlled  entity  by an  Officer  of the  Company,  of  approximately
         $187,000  due to well  abandonment  bond  costs paid by SCRS for and on
         behalf of the Company

         The  Company  has a month to month  operating  lease for its  corporate
         facility with an entity controlled by an officer of the Company.  Total
         rent paid during the years  ended June 30,  2002 and 2001 were  $73,000
         and $4,000, respectively.

         On June  18,  2001,  the  Company  completed  a  private  placement  of
         2,000,000  shares of  restricted  common stock at $2.50 per share for a
         net  proceeds  of  approximately  $4.9  million to one  investor,  SCRS
         Investors, LLC.

--------------------------------------------------------------------------------
                                                                            F-21
<PAGE>

                                                   MID-POWER SERVICE CORPORATION
                                                   Notes to Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------

14.      Related Party Transactions Not Otherwise Disclosed Continued

         In June 2001, certain  stockholders of the Company, who held all of the
         issued and outstanding  shares of Mid-Power Nevada and Wind Associates,
         Inc., determined that it was in their best interest to contribute their
         ownership   interests  to  the   Company.   As  part  of  this  capital
         contribution,   the  Company   assumed   certain   liabilities  of  the
         subsidiaries  including notes payable to one of the  shareholders  with
         principal  and fair market  value of $125,200  and accrued  interest of
         $4,516.  The principal and accrued interest was paid to the shareholder
         on June 30, 2001. The company received assets of approximately  $54,000
         and  assumed   accounts   payable  of   approximately   $128,000  which
         represented  the  cost  basis of such  assets  and  liabilities  to the
         predecessor.

15.      Commitments And Contingencies

         The Company has assumed substantially all abandonment and environmental
         liability  for the  Clear  Creek  Unit.  In June 2002 the  Company  was
         required  to post a bond  with  the  State  of Utah  for  approximately
         $184,000 to secure certain abandoned well violations and provide a five
         year compliance period to either bring certain wells into production or
         properly plug and abandon the wells in accordance with state law.


16.      Supplemental Disclosures of Cash Flow Information


         Operations reflect actual amounts paid for interest and income taxes as
         follows:

                                                        2002           2001
                                                   -----------------------------
            Interest                                $   6,944       $     4,516
                                                    =========       ===========
            Income taxes                            $       -       $         -
                                                    =========       ===========

--------------------------------------------------------------------------------
                                                                            F-22
<PAGE>

                                                   MID-POWER SERVICE CORPORATION
                                                   Notes to Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------

16.      Supplemental Disclosures of Cash Flow Information Continued

         During the year ended June 30, 2002:

             o    The Company,  through a wholly-owned  subsidiary,  merged into
                  Red Star, Inc. In connection with the acquisition, the Company
                  recorded the following:

                    Common Stock (17,125,365 shares)             $  (15,569,779)
                    Deferred tax liability                           (9,262,000)
                    Note Payable                                    (10,000,000)
                    Undeveloped gas properties                       40,260,809
                    Gas and oil equipment and vehicles                  234,611
                    Accrued abandonment costs                           (87,500)
                    Long-term debt                                      (76,141)
                                                                 --------------
                    Net cash paid                                $    5,500,000
                                                                 ==============


             o    The Company purchased all of the issued and outstanding common
                  stock of MaxCo,  Inc. In connection with the acquisition,  the
                  Company recorded the following:

                    Long-term debt assigned                      $       64,388
                    Advances due by MaxCo to the Company               (177,526)
                    Equipment and vehicles assigned, net               (231,624)
                    Accounts payable and liabilities assumed            (64,106)
                    Accounts receivable                                   7,586
                    Equipment                                           221,958
                    Oil and gas properties                              571,907
                                                                 --------------
                    Net cash paid (net of cash received
                      of $32,417)                                $      392,583
                                                                 ==============

             o    The  Company  converted  a  $5,500,000  note  payable  to SCRS
                  investors into 3,666,667 of the Company's common stock.

             o    The Company  purchased  equipment  in exchange  for $64,388 of
                  long-term debt.

             o    The Company  sold its 22.2%  ownership  interest in First Step
                  Investors,  LLC of $1,000,000  for cash of $650,000 and a note
                  receivable of $350,000.

--------------------------------------------------------------------------------
                                                                            F-23
<PAGE>

                                                   MID-POWER SERVICE CORPORATION
                                                   Notes to Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------

16.      Supplemental Disclosures of Cash Flow Information Continued

         During the year ended June 30, 2001:

             o    The  Company  assumed  liabilities  of  $249,310  in excess of
                  assets, less cash, contributed to the Company by stockholders.


17.      Stock Options and Warrants

         A summary of the stock option and warrant activity is as follows:

                                                                  Weighted
                                                     Number        Average
                                                    of Shares   Exercise Price
                                                  ------------------------------
           Outstanding at July 1, 2001                 -              -
           Granted                                  130,000       $  1.50
           Exercised                                   -              -
                                                  ------------------------------
           Outstanding at June 30, 2002             130,000       $  1.50
                                                  ==============================

         When  accounting  for  the  issuance  of  stock  options  and  warrants
         financial  accounting  standards  allows  entities  the choice  between
         adopting  fair value method or an intrinsic  value method with footnote
         disclosures  of the pro forma effects if the fair value method had been
         adopted.  The  Company  has  opted  for the  latter  approach.  Had the
         Company's  options and warrants been determined based on the fair value
         method,  the results of  operations  would have been reduced to the pro
         forma amounts indicated below:

                                                      2002           2001
                                                  -----------------------------
           Net loss applicable to common
            shares - as reported                  $ (4,324,816)    $    (36,856)
           Net loss applicable to common
            shares - pro forma                    $ (4,348,581)    $    (36,856)
           Loss per common share - as reported    $       (.55)    $       (.02)
           Loss per common share - pro forma      $       (.55)    $       (.02)
                                                  =============================

--------------------------------------------------------------------------------
                                                                            F-24
<PAGE>

                                                   MID-POWER SERVICE CORPORATION
                                                   Notes to Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------

17.      Stock Options and Warrants Continued

         The fair value of each option  grant is  estimated on the date of grant
         using  the  Black-Scholes  option  pricing  model  with  the  following
         assumptions in:

                                                            2002         2001
                                                      --------------------------
            Expected dividend yield                    $     -        $      -
            Expected stock price volatility                116%              -
            Risk-free interest rate                        4.75              -
            Expected option life                         1 year              -



         The  weighted  average  fair value of options  granted  during the year
         ended June 30, 2002 was $1.50, respectively.

         The  following  table  summarizes  information  about stock options and
         warrants outstanding at June 30, 2002:
<TABLE>
<CAPTION>
                                      Outstanding                     Exercisable
                        -----------------------------------------------------------------
                                        Weighted
                                        Average      Weighted                 Weighted
            Range of                   Remaining     Average                   Average
            Exercise       Number     Contractual    Exercise      Number     Exercise
             Prices      Outstanding  Life (Years)    Price     Exercisable     Price
         --------------------------------------------------------------------------------
           <S>             <C>             <C>        <C>          <C>         <C>
           $  1.50         130,000         1          $  1.50      65,000      $  1.50
         ================================================================================
</TABLE>

18.      Fair Value of Financial Instruments

         The Company's financial instruments consist of cash, receivables, notes
         receivable,  payables,  and notes payable. The carrying amount of cash,
         receivables  and  payables  approximates  fair  value  because  of  the
         short-term  nature of these items.  The  aggregate  carrying  amount of
         notes  receivable  and notes  payable  approximates  fair  value as the
         individual borrowings bear interest at market interest rates.

--------------------------------------------------------------------------------
                                                                            F-25
<PAGE>

                                                   MID-POWER SERVICE CORPORATION
                                                   Notes to Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------

19.      Environmental Regulation

         Various  federal,   state  and  local  laws  and  regulations  covering
         discharge of materials into the environment,  or otherwise  relating to
         the protection of the environment,  may affect the Company's operations
         and the costs of its oil and natural gas  exploration,  development and
         production operations.  The Company does not anticipate that it will be
         required in the near future to expend  amounts  material in relation to
         the financial  statements  taken as a whole by reason of  environmental
         laws and regulations.

         Because these laws and  regulations are constantly  being changed,  the
         Company is unable to predict the  conditions  and other  factors,  over
         which it does not exercise  control,  that may give rise to environment
         liabilities affecting the Company.


20.      Recent Accounting Pronouncements

         In  August  2001,  the  Financial  Accounting  Standards  Board  issued
         Statement of Financial Accounting Standards No. 144 "Accounting for the
         Impairment of Long-Lived  Assets".  This Statement  addresses financial
         accounting  and reporting for the  impairment of long-lived  assets and
         for long-lived assets to be disposed of. This Statement supercedes FASB
         Statement 121 and APB Opinion No. 30. However,  this Statement  retains
         certain  fundamental  provisions of Statement 121, namely;  recognition
         and  measurement of the impairment of long-lived  assets to be held and
         used, and  measurement of long-lived  assets to be disposed of by sale.
         The  Statement  also  retains the  requirement  of Opinion 30 to report
         discontinued  operations  separately from continuing  operations.  This
         Statement  also  Amends  ARB  No.  51 to  eliminate  the  exception  of
         consolidation for a temporarily controlled  subsidiary.  The provisions
         of this  statement are effective  for financial  statements  issued for
         fiscal  years  beginning  after  December  15,  2001.  The  Company  is
         currently assessing the impact of this statement.

--------------------------------------------------------------------------------
                                                                            F-26
<PAGE>

                                                   MID-POWER SERVICE CORPORATION
                                                   Notes to Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------

20.      Recent Accounting Pronouncements Continued

         In June 2001, the Financial Accounting Standards Board issued Statement
         of  Financial  Accounting  Standards  No.  143,  "Accounting  for Asset
         Retirement Obligations".  This Statement addresses financial accounting
         and  reporting  for  obligations  associated  with  the  retirement  of
         tangible  long-lived  assets and the associated asset retirement costs.
         This Statement is effective for financial  statement  issued for fiscal
         years beginning after June 15, 2002. This Statement addresses financial
         accounting  and  reporting  for  the  disposal  of  long-lived  assets.
         Management  does not  expect  the  adoption  of SFAS No.  143 to have a
         significant  impact on the financial  position or results of operations
         of the Company.  The Company is currently  assessing the impact of this
         statement.


21.      Subsequent Event

         On  August 1,  2002,  the  Company  entered  into a farmout  agreement,
         through  its  subsidiary  Mid-Power  Resource  Corporation,  to provide
         approximately  $1 million in funding for an initial  test to be drilled
         by  Petrogulf  Corporation,  Denver,  Colorado,  as  operator,  in  the
         Lakeside  Prospect in Cameron Parish,  Louisiana.  The Claude Boudreaux
         No.  1 well  will  test the  Marg.  Howei  Sands  at a target  depth of
         approximately 16,300 feet.

         The  Company  paid  approximately  $1  million  to  participate  in the
         prospect and the prospect  well for a 25% working  interest in the well
         and the approximately  606 gross acre prospect.  The earned 25% working
         interest will equate to a 16.125% working  interest (11.77% net revenue
         interest) retained by the Company and an 8.875% working interest (6.48%
         net  revenue  interest)  received  by a  principal  stockholder  of the
         Company who brought the prospect to it. The Company has agreed to carry
         the  other  owner's  costs in the  above  working  interest  percentage
         through the tanks or pipelines for any additional wells drilled, worked
         over or re-completed.

         On September 13, 2002,  the well had reached total depth of 16,275.  On
         that date,  Petrogulf tendered its resignation as operator of the well,
         as a result  of its  determination  that the  well was not  capable  of
         producing commercial quantities of hydrocarbons.

--------------------------------------------------------------------------------
                                                                            F-27
<PAGE>

                                                   MID-POWER SERVICE CORPORATION
                                                   Notes to Financial Statements
                                                                       Continued
--------------------------------------------------------------------------------

21.      Subsequent Event Continued

         To avoid  shutdown of all  operations,  the Company has elected to take
         over as operator of the well immediately following proper documentation
         with the State of Louisiana and assume the entire obligation to attempt
         to test and  complete  the well.  The Company has agreed to pay 100% of
         all  costs  incurred.   Subject  to  certain  conditions,   the  former
         participants  have agreed to assign all rights,  title and  interest to
         all oil and gas leases in the Lakeside  Prospect to the  Company,  with
         the exception of a 10% working interest held by Petrogulf.

22.      Restatement of Financial Statements

         Subsequent to the issuance of the Company's 2002 consolidated financial
         statements,  the Company  determined  that a deferred tax  liability of
         $9,262,000 had been obtained in the Red Star,  Inc.  transaction.  This
         resulted in the Company's  financial  statements  being  restated as of
         June 30, 2002, as follows:

                                                   As Reported    As Restated
                                                 -------------------------------
           Deferred tax liability                 $          -    $   9,262,000

           Total liabilities                      $ 11,744,969    $  21,006,969

           Additional paid-in capital             $ 37,889,215    $  28,627,215

           Total stockholders' equity             $ 32,092,656    $  22,830,656

--------------------------------------------------------------------------------
                                                                            F-28
<PAGE>

                                                   MID-POWER SERVICE CORPORATION
                 Schedule of Supplementary Information on Oil and Gas Operations

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

The  information  on the  Company's  oil and gas  operations  as  shown  in this
schedule  is  based  on the  successful  efforts  method  of  accounting  and is
presented  in  conformity  with the  disclosure  requirements  of  Statement  of
Financial  Accounting  Standards No. 69 "Disclosures about Oil and Gas Producing
Activities."

         Capitalized Costs Relating to Oil and Gas Producing Activities
<TABLE>
<CAPTION>
                                                                        June 30,
                                                            ----------------------------------
                                                                  2002             2001
                                                            -----------------------------------
<S>                                                         <C>               <C>
Proved oil and gas properties and related equipment         $         100,000 $              -
Unproved oil and gas properties                                    41,445,111                -
                                                            -----------------------------------
                  Subtotal                                         41,545,111                -

Accumulated depreciation, depletion and amortization
  and valuation allowances                                          (526,907)                -
                                                            -----------------------------------
                                                            $      40,018,204 $              -
                                                            ===================================

<CAPTION>
                   Costs Incurred in Oil and Gas Acquisition,
                     Exploration and Development Activities

                                                                   Year Ended June 30,
                                                            ----------------------------------
                                                                  2002             2001
                                                            ----------------------------------
<S>                                                         <C>                <C>
Acquisition of properties:
     Proved                                                 $         100,000  $            -
     Unproved                                               $      40,787,716  $            -
Exploration costs                                           $         814,255  $            -
Development costs                                           $         657,395  $            -

------------------------------------------------------------------------------------------------
                                                                                            F-29
<PAGE>

                                                   MID-POWER SERVICE CORPORATION

                 Schedule of Supplementary Information on Oil and Gas Operations
                                                                       Continued
--------------------------------------------------------------------------------


                 Results of Operations for Producing Activities

                                                                    Years Ended June 30,
                                                            -------------------------------------
                                                                  2002               2001
                                                            -------------------------------------
Oil and gas sales, net                                      $        100,148      $           -
Production costs                                                    (151,560)
Exploration costs                                                   (740,609)                 -
Impairment on properties and equipment                              (526,907)                 -
Depreciation, depletion and amortization provisions                  (20,506)                 -
                                                             -----------------------------------
Net loss before income taxes                                      (1,339,434)

Income tax provision                                                       -                  -
                                                             -----------------------------------
Results of operations from producing activities
  (excluding corporate overhead and interest costs)         $     (1,339,434)     $           -
                                                            ===================================

------------------------------------------------------------------------------------------------
                                                                                            F-30
</TABLE>
<PAGE>

                                                   MID-POWER SERVICE CORPORATION

                 Schedule of Supplementary Information on Oil and Gas Operations
                                                                       Continued
--------------------------------------------------------------------------------


                    Reserve Quantity Information (Unaudited)

The estimated  quantities of proved oil and gas reserves  disclosed in the table
below are based upon estimates by a consulting petroleum  engineering firm. Such
estimates are inherently imprecise and may be subject to substantial revisions.

Revisions may occur because  current  prices of oil and gas and current costs of
operating  are  subject  to  fluctuations,  past  performance  of wells does not
necessarily  guarantee future  performance and rates used to estimate decline of
reserves could vary from that which is projected.

All  quantities  shown in the  table are  proved  undeveloped  reserves  and are
attributable to one oil well location in the Arvin Area - Mountain View Field in
Kern County, California of the United States.
<TABLE>
<CAPTION>
                                                                  Years Ended June 30,
                                              -------------------------------------------------------------
                                                           2002                          2001
                                              -------------------------------------------------------------
                                                    Oil            Gas            Oil            Gas
                                                  (bbls)          (mcf)          (bbls)         (mcf)
                                              -------------------------------------------------------------
<S>                                              <C>             <C>             <C>           <C>
Proved developed and undeveloped
  reserves:
     Beginning of period                               -              -              -              -
     Revision in previous estimates                    -              -              -              -
     Discoveries and extension                         -              -              -              -
     Purchase in place                            30,270              -              -              -
     Production                                        -              -              -              -
     Sales in place                                    -              -              -              -
                                              -------------------------------------------------------------

     End of period                                30,270              -              -              -
                                              =============================================================
Proved developed reserves:
     Beginning of period                               -              -              -              -
     End of period                                30,270              -              -              -

-----------------------------------------------------------------------------------------------------------
                                                                                                       F-31
</TABLE>
<PAGE>

                                                   MID-POWER SERVICE CORPORATION

                 Schedule of Supplementary Information on Oil and Gas Operations
                                                                       Continued
--------------------------------------------------------------------------------


            Standardized Measure of Discounted Future Net Cash Flows
               Relating to Proved Oil and Gas Reserves (Unaudited)
<TABLE>
<CAPTION>
                                                                                  Years Ended
                                                                                    June 30,
                                                                       -----------------------------------
                                                                             2002              2001
                                                                       -----------------------------------
<S>                                                                    <C>                 <C>
Future cash inflows                                                    $       605,000     $            -
Future production costs                                                       (334,000)                 -
Development costs                                                              (50,000)                 -
                                                                       -----------------------------------
                                                                               221,000                  -

10% annual discount for estimated timing of cash flows                        (121,000)                 -
                                                                       -----------------------------------

Standardized measure of discounted future net cash flows               $       100,000     $            -
                                                                       ===================================
</TABLE>

The preceding  table sets forth the estimated  future net cash flows and related
present  value  discounted  at a 10%  annual  rate  from  the  Company's  proved
undeveloped  reserves  of oil,  condensate  and gas.  The  estimated  future net
revenue is  computed by  applying  approximate  period end prices of oil and gas
(including price changes that are fixed and  determinable)  and current costs of
development and production to estimated future production assuming  continuation
of existing  economic  conditions.  The values expressed are estimates only, and
may not  reflect  realizable  values  or fair  market  values of the oil and gas
ultimately  extracted and  recovered.  The ultimate year of  realization is also
subject to accessibility of petroleum reserves and the ability of the Company to
market the products.

--------------------------------------------------------------------------------
                                                                            F-32
<PAGE>

                                                   MID-POWER SERVICE CORPORATION

                 Schedule of Supplementary Information on Oil and Gas Operations
                                                                       Continued
--------------------------------------------------------------------------------

                     Changes in the Standardized Measure of
                  Discounted Future Net Cash Flows (Unaudited)
<TABLE>
<CAPTION>
                                                                           Year Ended
                                                                             June 30,
                                                             -------------------------------------
                                                                   2002               2001
                                                             -------------------------------------
<S>                                                          <C>                  <C>
Balance, beginning of period                                 $             -      $           -
Sales of oil and gas produced net of production costs                      -                  -
Net changes in prices and production costs                          (151,000)                 -
Extensions and discoveries, less related costs                       274,000                  -
Purchase and sales of minerals in place                                    -                  -
Revisions of estimated development costs                             (23,000)                 -
Revisions of previous quantity estimate                                    -                  -
Accretion of discount                                                      -                  -
Net changes in income taxes                                                -                  -
                                                             -------------------------------------

Balance, end of year                                         $       100,000      $           -
                                                             =====================================

---------------------------------------------------------------------------------------------------
                                                                                               F-33
</TABLE>
<PAGE>