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

                                   FORM 10-KSB

     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 17, 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 17, 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>

                                TABLE OF CONTENTS


Part/Item                      Description                                  Page

           Special Note on Forward-Looking Statements........................  1

Part I
Item 1     Description of Business...........................................  3
Item 2     Description of Property...........................................  3
Item 3     Legal Proceedings................................................. 27
Item 4     Submission of Matters to a Vote of Security Holders............... 27

Part II
Item 5     Market for Common Equity and Related
             Stockholder Matters............................................. 28
Item 6     Management's Discussion and Analysis or Plan of Operation......... 30
Item 7     Financial Statements.............................................. 34
Item 8     Changes in and Disagreements with Accountants on
             Accounting and Financial Disclosure............................. 34

Part III
Item 9     Directors, Executive Officers, Promoters and Control Persons;
             Compliance with Section 16(a) of the Exchange Act............... 35
Item 10    Executive Compensation............................................ 36
Item 11    Security Ownership of Certain Beneficial Owners and Management.... 38
Item 12    Certain Relationships and Related Transactions.................... 39
Item 13    Exhibits and Reports on Form 8-K.................................. 42

           Signatures........................................................ 45
           Certification of Principal Executive Officer...................... 45
           Certification of Principal Financial Officer                       46

                                       i
<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.

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

                                       1
<PAGE>

         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.

                                       2
<PAGE>

                                     PART I

               ITEMS 1 AND 2. DESCRIPTION OF BUSINESS AND PROPERTY

Introduction and History

         Mid-Power Service Corporation 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. 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. 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.

         On June 14, 2002, we completed our acquisition under a May 10, 2002,
option agreement of gas and oil leases on approximately 17,197 gross acres
comprising the Clear Creek Unit in Carbon and Emery Counties, Utah. The Clear
Creek field was originally discovered and developed during the mid-1950s, and
approximately 136 billion cubic feet of gas had been produced from the field by
the mid 1970s. The leases in the unit are currently held by nominal production
from one of the 17 wells initially completed. Based on ongoing evaluation of the
extensive engineering, geological and geophysical data available, we are
undertaking exploration of this property, including attempting to recomplete
existing wells in additional potentially productive zones and drilling new
wells. The first attempted recompletion, the Oman No. 2-20, is currently being
tested. Additional drilling is planned for the 2003 field season. To acquire
these properties, we paid $5.5 million in cash, agreed to pay $10.0 million into
escrow in December 2002, and issued 17.1 million shares to Edward Mike Davis,
who as a result now owns approximately 61.2% of our issued and outstanding
stock.

         In order to fund this acquisition, we entered into a loan agreement
with SCRS Investors, LLC, under which we may borrow up to $25.5 million to
complete the acquisition and to engage in initial exploration and development
activities on the Clear Creek field. The loan is secured by encumbrances on the
assets acquired. The loan is repayable over 10 years, commencing on December 31,
2003, and is convertible into common stock at $1.50 per share, subject to
certain limitations. 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. Accordingly, this
transaction was not the result of arm's-length negotiations.

         In order to implement our plan, we also:

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

         o        entered into an agreement in May 2002 with Edward Mike Davis,
                  to earn a 50% working 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;

                                       3
<PAGE>

         o        entered into an agreement in August 2002 with an unrelated
                  party, 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 a 606 gross acre prospect in Cameron
                  Parish, Louisiana; 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 also continue to investigate possible opportunities to develop
on-site power generation, also known as distributed-power generation, to provide
power to commercial or industrial users to supplement or replace electrical
power they currently purchase from the electric utility grid. We hold a Federal
Energy Regulatory Commission license to trade and generate electric power
throughout the United States.

         Mid-Power Service Corporation was incorporated as Caplan Corporation
under the laws of the state of Delaware on July 5, 1983. The corporation changed
its name from Caplan Corporation to Mid-Power Service Corporation in March 2001,
and changed its corporate domicile to Nevada through a merger with a corporate
subsidiary in December 2001. In 1999 and 2000, our activities were limited to
maintaining an interest in 3,825 acres of leased and permitted lands in Texas
for the exploration and possible mining, production and sale of bentonite,
zeolite and other nonferrous minerals. In March 2000, we discontinued operations
in this business segment and thereafter were inactive with no material assets
until the change in management and control and infusion of additional equity
during the year ended June 30, 2001, as discussed above.

         When used in this document, the terms "we," "our" and "the Company"
refer to Mid-Power Service Corporation as well as its wholly owned subsidiaries:
Mid-Power Resource Corporation, a Nevada corporation, which holds our Clear
Creek, Utah, and Lakeside, Louisiana, properties, and Sunray Petroleum, Inc.
(formerly known as MaxCo Oil Co., Inc.), a Nevada corporation, which owns our
Kern County, California property. We also own 100% of 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, and a 50% interest in S-C Engines, LLC, a Nevada limited liability
company, none of which has conducted activities.

         Our executive offices are located at 3800 Howard Hughes Parkway, Suite
860A, Las Vegas, Nevada 84109. Our telephone number is (702) 214-3615, facsimile
number (702) 214-3865.

         We use various terms in this document that are common in the gas and
oil and energy industries but that may not be familiar to all investors. This
document contains a glossary of certain of these industry terms beginning on
page 26.

Gas and Oil Activities

         Since June 30, 2001, we have acquired minimal proved reserves and
undeveloped and unproved gas and oil interests, including some interests with
only nominal, noncommercial production. We have undertaken evaluation of these
acquired gas and oil interests and are drilling or conducting other exploration
or are reworking existing wells. We have no commercial production and only
minimal proved reserves.

         Acquisition of Clear Creek, Utah Property

         On June 14, 2002, we acquired gas and oil rights on approximately
17,197 gross acres comprising the Clear Creek Unit in Carbon and Emery Counties,

                                       4
<PAGE>

Utah, in consideration of paying $5.5 million in cash, delivering a $10.0
million note requiring payment into escrow in December 2002, and issuing 17.1
million shares of common stock. See Item 12. Certain Relationships and Related
Transactions.

         The Clear Creek field was discovered in 1951 and developed during the
mid-1950s. A total of 20 wells were drilled, 17 of which were completed for
production and three of which were dry holes. By the mid-1970s, all but one well
in the field had been abandoned as noncommercial, apparently because of
collapsed holes, excessive water production, or low gas volume. One of the
wells, the Utah Fuels No. 8, produces noncommercial quantities in order to
maintain the leases in the approved unit. The Clear Creek field has no proved
reserves. To date, approximately 136 billion cubic feet of gas have been
produced from the field. The gas gathering and transmission system used to
transport and market previous production remains in place.

         We believe that data from wells drilled to date suggests that the field
contains a low permeability, fractured reservoir with seven distinct sand
sections, six of which are not continuous in the drilled area. Previous
bottom-hole pressure tests available from previous owners indicate poor pressure
communication among wells in the field, which suggests to us that the reservoir
may not have been adequately drained and that additional test wells may be
warranted. In our opinion, the initial open-hole completion practices prevent
identification of which of the seven sands in the field may be the source of
water that impeded production in several of the wells. Because of the lack of
correlation across the entire field, there is a possibility that water-free
completions can be made in the upper zones in abandoned wells and in additional
infield well locations. Initial wells in the Clear Creek field were drilled on
640-acre spacing. We believe that this large spacing pattern may have been
inadequate to drain the field because of the geological characteristics of the
productive formations. We estimate that there may be in excess of 20 infield
locations with 160-acre spacing. We intend to drill on additional locations and
to test each of the seven sands, to the extent present in individual wells, to
determine if gas in commercial quantities remains in the field. Gas discovered
would be delivered to the pipeline on the property for sale to an unrelated
purchaser.

         Since acquiring these properties in June 2002, we have initiated a
program to rework, log and test up to three previously drilled wells and, if
warranted, complete them for production. Our program included an engineering,
geological and geophysical evaluation of several of the previously productive
wells in the field to determine whether to reenter and attempt to recomplete the
wells in additional potentially productive zones, implement enhanced recovery
measures and drill new wells. In addition, we began evaluation of the coalbeds
at depths from 800 to 3,000 feet to determine their potential for coalbed
methane gas. Our first attempted recompletion in the Clear Creek field, the Oman
No. 2-20, is currently being tested.

         We have a 100% working interest on approximately 17,197 gross acres in
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%
landowners' and overriding royalties to unrelated parties and an approximately
7.14% overriding royalty due to Edward Mike Davis, our principal stockholder. In
addition, Edward Mike Davis has a 14.3% working interest, equivalent to a 10%
net revenue interest, in the 1,280 gross acre drilling spacing unit on which the
Oman No. 2-20 and the Utah Fuel No. 8 wells are located. The leases are also
subject to a $200,000 production payment due an unaffiliated
predecessor-in-interest, payable out of 5% of the net revenue interest,
excluding production from the Oman No. 2-20, Utah Fuels No. 8 and one other
specified well.

         Lakeside Prospect, Cameron Parish, Louisiana

         On August 1, 2002, we agreed to provide approximately $1.0 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.

                                       5
<PAGE>

The Claude Boudreaux No. 1 well will test the Marg. Howei Sand formation at a
target depth of approximately 16,300 feet. The Lakeside Prospect may contain an
extension of a series of fault blocks productive from the same formation outside
the prospect.

         We agreed to pay approximately $1.0 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
us and an 8.875% working interest (6.48% net revenue interest) received by
Edward Mike Davis, a principal stockholder of the Company, who brought the
prospect to us. We have agreed to carry Edward Mike Davis's costs in the above
working interest percentage through the tanks or pipelines for any additional
wells drilled, worked over or recompleted.

         As of 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. To avoid shutdown of all operations, we
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. We have 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 us, with the exception of a 10% working interest held by Petrogulf
and a 40% working interest retained by Petrogulf in a 180-acre parcel within the
Lakeside Prospect referred to as the Western Lease. We have now taken over as
the operator and are commencing our efforts to test and complete the well.

         Arbuckle Gas Field

         On May 10, 2002, we agreed to fund 100% of the costs, through drilling,
completion and pipeline connection 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 (1,055 net acres).

         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. Thereafter, as a result of the issuance
of stock to Edward Mike Davis as partial consideration for our acquisition of
our Clear Creek property, he became a principal stockholder. See Item 11.
Security Ownership of Certain Beneficial Owners and Management and Item 12.
Certain Relationships and Related Transactions.

         The initial well, the Lohman No. 2-14, reached total depth of
approximately 5,400 feet in early September 2002 and is producing at
approximately 800 to 900 thousand cubic feet of gas per day.

         Kern County, California

         In an effort to obtain a source of fuel for possible future distributed
power-generation facilities, in August and December 2001, we purchased in two
transactions a total of 100% of the issued and outstanding stock of MaxCo Oil
Company, Inc. (changed to Sunray Petroleum, Inc. in March 2002), Bakersfield,
California, with properties in Kern County, California.

                                       6
<PAGE>

         When we acquired the initial 70% of MaxCo, we paid $400,000 in cash,
agreed to pay an additional $53,000 within 12 months, entered into employment
agreements with MaxCo's two remaining stockholders, and agreed to issue an
aggregate of 450,000 shares of our restricted common stock to those stockholders
if MaxCo were able to rework and return to commercial production an agreed
number of wells. When we acquired the remaining 30% of MaxCo's stock, the
employment agreement and the right to receive 225,000 shares of our common stock
of one of the two MaxCo stockholders were terminated in consideration of $25,000
in cash and certain equipment with a book value of $167,254. The other MaxCo
stockholder agreed to terminate his employment agreement and assume the $53,000
to be paid by us in consideration of $40,384 in cash and the right to receive
the 225,000 shares of our common stock if the conditions preceding are met. As
of the date of this report, no shares of our common stock have been issued under
this agreement.

         As a result of this acquisition, we now hold leases to the gas and oil
rights on 1,010 gross and net acres, equivalent to an 84% net revenue interest,
which include over 50 wells at depths between 550 to 6,300 feet, of which one
contains small reserves and the balance currently produce small, noncommercial
quantities. Based on the current level of oil prices, we believe that we may be
able to rework some of the shut-in wells for production. In addition, we believe
that some of these wells can be reworked to produce gas in sufficient amounts to
power gas turbine generators, producing electricity for sale in the area in
partial implementation of our strategic plan.

         Since acquiring the leases in Kern County, California, we have
completed reworking one well and are continuing to evaluate the results to
determine what further activities may be warranted.

         Other Opportunities

         We continue to review opportunities of which we become aware for
possible participation in additional gas and oil exploration, development or
production. In some instances, we may participate in opportunities introduced to
us by Edward Mike Davis, our principal stockholder, and may compensate Edward
Mike Davis in connection with such a transaction or enter into other
arrangements in which we may benefit. See Item 12. Certain Relationships and
Related Transactions.

         Limited Oil Production and Sales

         We had no gas or oil production prior to our acquisition of our Kern
County property in 2001 and the Clear Creek field in June 2002. With the
exception of one well in Kern County, California, our production is limited and
noncommercial, and each of our properties is in the exploration stage.

                                       7
<PAGE>

         The following table sets forth our average net daily oil production,
average sales price and average production costs associated with our oil
production attributable to our interest in the Kern County property, giving
effect to the acquisition of a 70% interest on August 30, 2001, and acquisition
of the remaining 30% interest on December 31, 2001, and excluding any nominal
production from the Clear Creek property acquired June 14, 2002:

                                                                Year Ended
                                                              June 30, 2002
                                                            -------------------
 Producing property data:
  Average daily net oil production (barrels)...............         16
  Average sales price per barrel...........................      $  17.00
  Average production costs per barrel(1)...................      $  12.33
--------------------
(1)      Production costs include production costs (water disposal, repairs,
         maintenance, pumper, transportation and similar items) and production
         taxes. Production costs do not include such items as general and
         administrative costs, depreciation, depletion, state income taxes or
         federal income taxes.

         We sell oil at posted field prices to one of several purchasers in the
Kern County area. For the year ended June 30, 2002, all of our oil sales were to
Kern Oil Refinery. Posted prices are generally competitive among gas purchasers.
We have no commitments for the delivery or sale of gas or oil.

         Wells and Acreage

         As of June 30, 2002, we had one gross and net producing gas well. As of
June 30, 2001, we did not have any developed wells or acreage.

         The following table sets forth our gross and net acres of undeveloped
gas and oil acreage as of June 30, 2002:
<TABLE>
<CAPTION>
                                                      Developed                  Undeveloped
                                              --------------------------  --------------------------
                                                 Gross          Net          Gross          Net
                                              ------------  ------------  ------------  ------------
<S>                                           <C>           <C>           <C>           <C>
  Clear Creek, Utah..........................         --            --        17,197       17,014
  Kern County, California....................         --            --         1,010          848
  Arbuckle Gas Field, California.............         --            --         2,111        1,055
                                              ------------  ------------  ------------  ------------
     Total...................................         --            --        20,318       18,917
                                              ============  ============  ============  ============
</TABLE>

The above excludes any interest we may earn in the Lakeside, Louisiana prospect
under an agreement entered into in August 2002 and amended in September 2002.

         Proved Reserves

         The following table sets forth estimated oil reserves, net to our
interest, of gas and oil properties as of April 12, 2002. The estimates of
future net revenues from our proved reserves are made using a sales price of
$20.00 per barrel, held constant throughout the life of the properties:
<TABLE>
<CAPTION>
                                                                           Present Value of Estimated
     Estimated Proved Reserves         Estimated Oil (Bbls)          Future Net Revenues, Discounted at 10%(1)
     -------------------------         -------------------           -----------------------------------------
<S>                                          <C>                                   <C>
Proved Developed Producing
  Kern County, CA................            30,270                                $100,000
                                             ------                                --------
---------------------
</TABLE>
(1)  The price used in the evaluation was $20.00 per barrel. Operating costs
     have not been escalated. The operating costs are computed by estimating
     expenditures to be incurred in developing and producing the proved oil
     reserves, based on year-end costs and assuming the continuation of existing
     economic conditions.

                                       8
<PAGE>

         The oil reserves assigned to the properties in the evaluation were
determined by analyzing current test data, extrapolating historical production
data, and comparing field data with the production history of similar wells in
the area. The current volatility of oil prices provides an element of
uncertainty to any estimates. If prices should vary significantly from those
projected in the appraisal, the resulting values would change substantially. The
reserve estimates contained in the engineering report are based on accepted
engineering and evaluation principles. The present value of estimated future net
revenues, discounted at 10%, does not necessarily represent an estimate of a
fair market value for the evaluated property.

         There are numerous uncertainties inherent in estimating quantities of
proved oil reserves. The estimates in the appraisal are based on various
assumptions relating to rates of future production, timing and amount of
development expenditures, oil prices, and the results of planned development
work. Actual future production rates and volumes, revenues, taxes, operating
expenses, development expenditures, and quantities of recoverable oil reserves
may vary substantially from those assumed in the estimates. Any significant
change in these assumptions, including changes that result from variances
between projected and actual results, could materially and adversely affect
future reserve estimates. In addition, such reserves may be subject to downward
or upward revision based upon production history, results of future development,
prevailing oil prices, and other factors

         The actual amount of our proved reserves is dependent on the prevailing
price for oil, which is beyond our control or influence. There can be no
assurance that oil prices will not decline in the future. Gas and oil prices
have been and are likely to continue to be volatile and subject to wide
fluctuations in response to any of the following factors: relatively minor
changes in the supply of and demand for gas and oil; market uncertainty;
political conditions in international oil producing regions; the extent of
domestic production and importation of oil; the level of consumer demand;
weather conditions; the competitive position of oil as a source of energy as
compared with gas, coal, nuclear energy, hydroelectric power, and other energy
sources; the refining capacity of prospective oil purchasers; the effect of
federal and state regulation on the production, transportation and sale of oil;
and other factors, all of which are beyond our control or influence.

         Drilling Activities

         We commenced our gas and oil activities in the fiscal year ended June
30, 2002, and had no previous drilling activities. During the fiscal year ended
June 30, 2002, we did not drill any new wells, but did work over and recomplete
one well in our Kern County property. We do not have sufficient geological or
engineering data to determine whether these efforts established reserves and/or
whether similar reworking or recompletion efforts are warranted on additional
wells.

         As of June 30, 2002, we were testing the Oman No. 2-20 well in our
Clear Creek project and had agreed to participate in drilling a test in the
Lakeside, Louisiana prospect. As of October 14, 2002, both of those test wells
had reached total depth and were being tested.

         Drilling Rig and Well Servicing Equipment

         As part of the acquisition of our Clear Creek property in August 2002,
we also acquired a well service rig, associated oilfield servicing equipment and
two field vehicles.

                                       9
<PAGE>

Distributed Power Generation

         Overview

         Distributed power generation consists of relatively small generating
units at or near consumer sites to meet specific consumer power needs, to
support economic operation of the existing power distribution grid, or both.
Distributed power-generation facilities may improve a user's power quality,
increase system reliability, and reduce energy costs. Distributed
power-generation systems allow the consumer to choose its energy provider,
method of delivery, and the attendant services. Distributed power-generation
systems may offer the following benefits:

         o        Distributed power-generation systems may improve a user's
                  power reliability by reducing the risk of utility grid power
                  cutbacks or suspensions, curtailments or surges. Standby power
                  can be used by consumers for which interruptions in electrical
                  service cause potential health and safety problems, such as
                  hospitals, or substantial costs and product losses, such as
                  grocery stores.

         o        In some areas with system-wide, high utility rates, generating
                  electrical power with on-site generators can be less expensive
                  than purchasing power from the local utility.

         o        Distributed power-generation systems allow consumers to reduce
                  their per unit cost of power when utility rates are highest
                  during periods of peak power consumption. By using power from
                  their own distributed power-generation systems during high
                  utility rate periods of peak consumption, consumers may be
                  able to reduce their overall power costs. This practice, known
                  as "peak shaving," also benefits other consumers by reducing
                  demand during those periods when demand is typically at its
                  height.

         o        Distributed power generated by on-site generators can be a
                  more stable source of power because the power does not have to
                  be delivered over hundreds of miles of lines through the
                  utility power grid.

         We believe that there currently is an opportunity for the development
and operation of small, modular power facilities that can be installed quickly
due to:

         o        recent concerns regarding the reliability and quality of power
                  from centralized electric power generators available from the
                  utility grid and their ability to produce and deliver
                  electricity in the amounts needed;

         o        increasing demand for electricity at the same time there has
                  been little development of additional centralized power
                  generators; and

         o        technological advances that improve the cost and performance
                  of small electrical power generators.

         Project Development and Marketing

         We are currently reviewing a number of distributed power-generation
opportunities, including projects that may be suitable for use for the fuel from
our gas and oil project in Kern County, California, acquired during this fiscal
year. In selecting a project, an important consideration is the availability of
a reliable supply of fuel at an economical, predictable price for the

                                       10
<PAGE>

anticipated life of the project. In addition, we also consider anticipated costs
and delays that may be encountered in meeting any applicable permitting
obstacles for the construction of any facilities, easements or permits required
for fuel delivery or power transmission, and other requirements.

         In reviewing a project opportunity, our executive officers, working
with industry consultants who may be engaged on a project-by-project basis,
review the above factors in an effort to estimate and evaluate the anticipated
capital requirements, possible sources of financing, possible customers, the
financial stability of possible purchasers based on publicly available data,
prevailing electrical power prices, and related risks. No single factor is given
predominant weight in this analysis, but a decision is made on a composite view
of the foregoing as well as any other relevant factors that appear as a result
of the analysis. In many instances, we may engage consultants to conduct a
formal feasibility analysis of an individual project prior to committing to its
development. The feasibility project serves as a management tool in the
decision-making process and may assist us in our efforts to seek third-party
financing.

         Based upon a preliminary decision to undertake a project, we, with the
advice of our consultants, will seek to negotiate required agreements to obtain
a reliable, long-term fuel source at a predictable and acceptable price, a
long-term contract for the sale of power to a financially stable purchaser at an
agreed price schedule, and project financing. We will seek to finance each
project through a combination of equity and debt financing secured by an
encumbrance on the power-generation facility being developed as well as the
related power-generation revenues.

         We cannot predict the nature or amount of financing that may be
required for the various kinds of distributed power-generation projects we may
develop. In general, we anticipate that the projects we develop may range in
size and will consist of distributed power-generation units ranging from 13
kilowatts to 1.5 megawatts per unit.

         We expect to finance the development of these generation facilities
through equity/debt, institutional financing with private investors.

         We may continue to own and operate the distributed power projects we
develop or may sell completed projects to the relevant power consumers or
others. When we determine to own and operate a project, we will be responsible
for day-to-day operation of the facility, either by Company personnel or through
operating agreements with third-parties. We have not identified any potential
operator that would provide these services.

         Projects

         Pure Power Technologies. On September 25, 2001, we entered into an
agreement with Pure Power Technologies, LLC, or Pure Power, a Nevada limited
liability company, to jointly develop electrical generation projects using Pure
Power's equipment and our financing and other resources.

         In anticipation of our joint development agreement with Pure Power, on
September 21, 2001, we agreed to loan Pure Power $300,000. The proceeds of the
note were to be used by Pure Power for the development and manufacture of
generator units that we were considering using in the production of wind energy
and extraction of gas and oil reserves. The loan is personally guaranteed by the
principal owners of Pure Power and is secured by an encumbrance on the assets of
Pure Power. The note receivable bears an interest rate of 10% per annum and
requires principal payments annually beginning September 30, 2002.

         We subsequently determined to terminate our agreements. Pure Power and
the personal guarantors remain obligated to repay the $300,000 note on the terms
described above.

                                       11
<PAGE>

         Turbine Engine Purchase. On May 24, 2002, we agreed to purchase from
unrelated parties two Model GG4A-7 nonflight, Pratt and Whitney turbine engines
for a total of $1,164,000, including the purchase price and commissions. The
engines have been kept on-site at the Alamitos and Huntington Beach, California
plants as spare engines that could be deployed within 24 hours for use in the
133 megawatt electric generating peaking plants owned by the sellers at those
locations. However, these engines have never been used. We are currently
evaluating possible uses of these engines, as well as the possibility of a
resale. With the purchase of each engine, we also received a right of first
refusal to purchase the electric generating peaking unit at which the engine was
located. The right of first refusal for the electric generating unit at the
Huntington Beach plant expired on September 21, 2002, while the right of refusal
for unit at the Alamitos plant expires on November 20, 2002.

         EcoSynfuel. In June 2001, we purchased for $1.0 million a 22.2%
interest in Gordon Brothers Group Capital LLC, which in turn owned a 70%
interest in First Step Capital LLC, which has a financial interest in results of
research and development of a specialized fuel known as EcoSynfuel. On June 6,
2002, we determined that the funds committed to this investment could better be
deployed to other opportunities and therefore, we sold our interest for $1.0
million.

Government Regulation

         The exploration for and production of oil in the United States are
subject to extensive regulation by both federal and state authorities. The
following discussion concerning regulation of the gas and oil industry is
necessarily brief and is not intended to constitute a complete discussion of the
various statutes, rules, regulations and governmental orders to which our
operations may be subject.

         Environmental Regulations

         Our operations are subject to 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, all of which may adversely affect our
operations and costs of doing business. It is probable that state and federal
environmental laws and regulations or their interpretations will become more
stringent in the future. There can be no assurance that measures to further
regulate the disposal of oil waste may not be adopted. Environmental laws and
regulations are frequently changed, so we are unable to predict the ultimate
cost of compliance. We do not believe that we will be required in the near
future to expend material amounts due to current environmental laws and
regulations.

         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.

         Present and future legislation and regulations could cause additional
expenditures, restrictions and delays in our business, the extent of which
cannot be predicted and which may require us to limit substantially, delay or
cease operations in some circumstances or subject us to various governmental
controls. From time to time, regulatory agencies have proposed or imposed price
controls and limitations on production by restricting the rate of flow of gas
and oil wells below actual production capacity in order to conserve supplies of
gas and oil. Because federal energy and taxation policies are subject to
constant revisions, no prediction can be made as to the ultimate effect of such
governmental policies and controls on our operations.

                                       12
<PAGE>

         State and Local Regulation of Drilling and Production

         State regulatory authorities have established rules and regulations
requiring permits for drilling, drilling bonds and reports concerning drilling
and producing activities. Such regulations also cover the location of wells, the
method of drilling and casing wells, the surface use and restoration of well
locations, the plugging and abandoning of wells, the density of well spacing
within a given area, and other matters. States in which we have properties also
have statutes and regulations governing a number of environmental and
conservation matters. We believe we are currently in full compliance with all
material provisions of such regulations.

         Federal Leases

         We conduct significant portions of our activities under federal gas and
oil leases. These operations must be conducted in accordance with detailed
federal regulations and orders that regulate, among other matters, drilling and
operations on these leases and calculation and disbursement of delay rentals and
royalty payments to the federal government.

         Power Generation

         The power-generation facilities that we develop and own will be
required to comply with applicable air quality environmental standards in the
local area, which are typically administered by the applicable state and a local
air quality management district. The nature and extent of these regulations will
depend on the size of the facility. We expect that the equipment we use for such
facilities will have emission specifications based on recognized tests that will
serve as the basis for applicable permit applications. Our power-generation
activities also will be subject to building codes, zoning regulations and
permitting requirements that will affect the location and construction of
facilities. Additionally, we will be required to install a protective device in
any power-generation facility that is connected to the electrical utility power
grid to protect both the grid from power generated by the on-site generator and
the on-site generator from the power grid.

         Safety and Health Regulations

         We must also conduct our operations in accordance with various laws and
regulations concerning occupational safety and health. Currently, we do not
foresee expending material amounts to comply with these occupational safety and
health laws and regulations. However, since such laws and regulations are
frequently changed, we are unable to predict the future effect of these laws and
regulations.

Employees and Consultants

         At June 30, 2002, we had four full-time employees. Our employees are
not represented by a collective bargaining organization. We consider our
relationship with our employees to be satisfactory. We also regularly engage
consultants to provide specific professional services, particularly to assist us
in our gas and oil exploration and related activities.

Offices and Facilities

         Our headquarters at 3800 Howard Hughes Parkway, Suite 860A, Las Vegas,
Nevada 89109, are rented on a month-to-month basis from an entity controlled by
James W. Scott, our president, chief executive officer and a director. See
Item 12. Certain Relationships and Related Transactions.

                                       13
<PAGE>

Competition

         All aspects of the energy industry, including gas and oil production
and power generation, are extremely competitive, and we compete in the search
for and acquisition of gas and oil leases and the exploration for gas and oil
with firms, including major gas and oil companies, that possess substantially
greater financial, technical and managerial resources than we do. In addition,
the sale of gas and oil programs is extremely competitive, and we are at a
significant disadvantage in competing with companies that have more extensive
operating histories than we do, that benefit from repeat investors, that have
their own internal sales forces, and/or that have long-established relationships
with brokerage firms.

         In the power-generation industry, we will be competing with established
electrical utilities that possess substantially greater financial, technical and
managerial resources than we do. In addition, those utilities have established
relationships with our potential customers, and we expect that we will be at a
disadvantage in persuading potential customers of the benefits of our
distributed power-generation systems. Generally, power purchased from the
electric utility grid is less costly than power produced by distributed
power-generation systems. Utilities may also charge fees to attach to their
power grid. However, we expect to compete with the power grid in instances in
which the costs of connecting to the grid from remote locations are high,
reliability and power quality are of critical importance, or in situations where
peak shaving could be economically advantageous due to highly variable
electricity prices.

         The production and marketing of gas and oil are affected by a number of
factors that are beyond our control or the control of any operator of properties
in which we have an interest, the effect of which cannot be accurately
predicted. These factors include actions by foreign oil producing nations, crude
oil imports, the availability of adequate gas for airlines and other
transportation facilities, availability and marketing of competitive fuels and
other matters affecting the ability of the market, such as fluctuating supply
and demand, the regulation of allowable production by governmental authorities,
and other regulations relating to the transportation and marketing of gas
transported or sold in interstate commerce. All of the factors are variable and
depend upon economical and political forces that cannot be predicted.

Risk Factors

     Factors Relating to the Gas and Oil Industry

         Our success will be dependent on the discovery of new reserves, which
         cannot be assured.

         We have only minimal proved reserves associated with one well. Our
success will be largely dependent on our ability to discover gas and oil
reserves through exploration and development, which involves substantial risks.
Although there has been substantial commercial production within our Clear Creek
property in the past, that production was terminated because the holders of the
property determined that further production was not economical. If hydrocarbons
are discovered on any present or future prospect, we believe several exploration
tests may be required to appraise the potential of any structure that is
identified in either of our project areas. There can be no assurance such tests
will be successful. Further, there can be no assurance that the porosity,
permeability or other characteristics of any reservoir formation will support
the production of gas or oil in commercial quantities.

         Our exploration efforts are subject to substantial risks and may not be
         successful.

         Our gas and oil exploration activities involve significant risks in
that:

         o        There can be no assurance that any well will encounter
                  hydrocarbons.

                                       14
<PAGE>

         o        There is no way to know in advance of drilling and testing
                  whether any prospect encountering hydrocarbons will yield gas
                  or oil in sufficient quantities to be economically viable or
                  cover drilling or completion costs.

         o        Several test wells are typically required to explore each
                  prospect or exploration area.

         o        We may continue to incur exploration costs in specific areas
                  even if initial test wells are plugged and abandoned or, if
                  completed for production, do not result in production of
                  commercial quantities.

         o        Drilling operations may be curtailed, delayed or canceled as a
                  result of numerous factors, including title problems, weather
                  conditions, compliance with governmental requirements, and
                  shortages or delays in the delivery of equipment.

There can be no assurance that our exploration efforts will be successful.
Although we have identified or expect that we will identify certain structures
within our interests that we believe contain gas or oil reservoirs, there can be
no assurance that hydrocarbons are present on such interests or that any such
hydrocarbons can be produced in commercial quantities. Many of the exploration
decisions on the project areas will be based on third-party scientific data,
some of which were gathered prior to recent significant technological advances.
There can be no assurance that such data are as reliable as data gathered either
using modern technology or under our supervision.

         Our net revenue interest share of revenue in the gas and oil projects
         that we acquired from or through Edward Mike Davis is substantially
         smaller than our working interest share of costs.

         We generally have a 100% working interest in our Clear Creek, Utah
property, equivalent to a 72.1% net revenue interest, which means that we must
bear 100% of the costs of exploration, development and production for which we
will receive only 72.1% of the revenues from production. In the Oman No. 2-20
and Utah Fuel No. 8 wells in the Clear Creek property, our principal stockholder
owns a 14.3% working interest, equivalent to a 10% net revenue interest, which
means that we hold an 85.7% working interest, equivalent to a 62.1% net revenue
interest. Similarly, we have agreed to bear 25% of the costs of each well
drilled, worked over or recompleted to earn a 16.125% working interest,
equivalent to an 11.77% net revenue interest, in the Lakeside Prospect in
Louisiana, which means that we must bear 25% of the costs of exploration,
development and production for which we will receive only an 11.77% interest in
the revenues from production. We have now agreed to assume 100% of all costs
incurred on the Claude Boudreaux No. 1 well in the Lakeside Prospect under an
agreement that will enable us to earn a larger interest in the Lakeside
Prospect. In the Arbuckle gas field in California, we have agreed to fund 100%
of the costs of up to 10 wells and construct gas delivery pipelines to earn a
50% working interest, equivalent to a 40% net revenue interest. As a result of
the small amount of our net revenue interest as compared to our working interest
share of costs in these projects, we will need to discover substantial reserves
and produce substantial quantities of gas or oil for our interests to be
financially successful. We cannot assure that production from any gas and oil
that we may discover on our existing properties or on property interests that we
may acquire in the future will be sufficient to pay for the costs of
acquisition, exploration and development.

                                       15
<PAGE>

         Even if we are successful in discovering gas reserves, we will be
         unable to exploit their economic potential unless we are able to obtain
         access to gas gathering and transmission systems.

         If our exploration efforts discover gas reserves, the production and
sale of such reserves will be dependent upon the availability, proximity and
capacity of gas gathering systems, pipelines and processing facilities. Although
a gas pipeline transverses our Clear Creek property, there can be no assurance
that we can obtain access to such pipeline. Further, we may have to incur
substantial capital costs for gas processing before any gas can be delivered to
the pipeline. It is likely that gathering, transmission and processing
facilities would have to be constructed before producing and marketing any gas
that may be discovered. Therefore, wells may be temporarily shut-in for lack of
a market or due to the unavailability of pipeline, gathering or processing
system capacity. This would correspondingly delay cash flow from our operations.
If substantial capital is required to complete necessary facilities, we may
determine it is not economically feasible to produce gas discovered even if
substantial reserves are identified.

         Adverse weather will limit our exploration and development activities.

         Our Clear Creek property, in particular, is located in steep
mountainous terrain in central Utah at elevations above approximately 10,000
feet where winter weather significantly shortens the field season. Extremely
cold temperatures, substantial snowfall, and precipitation may delay or
interrupt drilling, well servicing, infrastructure construction and production.
The foregoing may reduce production volumes or increase production costs and
could delay our planned exploration and development activities.

         Reserve estimates and estimates of our future net revenues are subject
         to numerous uncertainties and may not prove to be accurate.

         There are numerous uncertainties inherent in estimating quantities of
proved oil reserves. The estimates of reserves are based on various assumptions
relating to:

         o        rates of future production;

         o        timing and amount of development expenditures;

         o        oil prices;

         o        the results of planned development work;

         o        actual future production rates and volumes;

         o        revenues;

         o        taxes;

         o        operating expenses;

         o        development expenditures; and

         o        quantities of recoverable oil reserves.

                                       16
<PAGE>

The estimates of quantities and future net cash flows may vary substantially
from those assumed in the estimates. Any significant change in these
assumptions, including changes that result from variances between projected and
actual results, could materially and adversely affect future reserve estimates.
In addition, such reserves may be subject to downward or upward revision based
upon production history, results of future development, prevailing oil prices
and other factors.

         Gas and oil prices are volatile, and a decrease in prices could have a
         substantial adverse effect on us.

         Gas and oil prices have been and are likely to continue to be volatile
and subject to wide fluctuations in response to the following factors:

         o        relatively minor changes in the supply of and demand for gas
                  and oil;

         o        market uncertainty;

         o        political conditions in international gas and oil producing
                  regions;

         o        the extent of local production and importation of gas and oil;

         o        the level of consumer demand;

         o        weather conditions affecting production, transportation and
                  consumption;

         o        the competitive position of gas or oil as a source of energy
                  as compared with coal, nuclear energy, hydroelectric power and
                  other energy sources;

         o        the availability, proximity and capacity of gathering systems,
                  pipelines and processing facilities;

         o        the refining capacity of prospective oil purchasers;

         o        the effect of federal and state regulation on the production,
                  transportation and sale of gas and oil; and

         o        other factors.

We cannot control or influence the above factors. In addition to their direct
impact on the prices at which gas or oil may be sold, adverse changes in the
market or regulatory environment would likely have an adverse effect on our
ability to obtain funding from lending institutions, industry participants, the
sale of additional securities and other sources.

         Our industry is subject to numerous operating risks. Insurance may not
         be adequate to protect us against all these risks.

         Our gas and oil drilling and production operations are subject to
hazards incidental to the industry. These hazards include blowouts, cratering,
explosions, uncontrollable flows of oil, gas or well fluids, fires, pollution,
releases of toxic gas and other environmental hazards and risks. These hazards
can cause personal injury and loss of life, severe damage to and destruction of
property and equipment, pollution or environmental damage and suspension of

                                       17
<PAGE>

operations. To lessen the effects of these hazards, we maintain insurance of
various types to cover our properties. We cannot assure that the general
liability insurance of $5.0 million carried by us can continue to be obtained on
reasonable terms. The current level of insurance does not cover all of the risks
involved in gas and oil exploration, drilling and production. Where insurance
coverage does exist, the amount of coverage may not be sufficient to pay the
full amount of such liabilities. We may not be insured against all losses or
liabilities that may arise from all hazards because such insurance is
unavailable at economic rates, because of limitations on existing insurance
coverage or other factors. For example, we do not maintain insurance against
risks related to existing violations of environmental laws. We would be
adversely affected by a significant adverse event that is not fully covered by
insurance. Further, we cannot assure that we will be able to maintain adequate
insurance in the future at rates we consider reasonable.

         A market for distributed power-generation systems may never develop or
         may take longer to develop than we anticipate, which would adversely
         impact our revenues and profitability.

         Distributed power-generation systems are an emerging market, and we do
not know whether our targeted customers will accept our technology or will
purchase our products in sufficient quantities to grow our business. If a mass
market fails to develop or develops more slowly than we anticipate, we may be
unable to meet our operational expenses and we may be unable to achieve
profitability.

         The energy situation in California and the western United States may
         change and negatively impact our business.

         Problems associated with deregulation of the electric industry in
California have previously resulted in intermittent service interruptions and
significantly higher costs in some areas of California and the western United
States. To alleviate these problems, emergency procedures were implemented in
California to provide for expedited review and approval of the construction and
operation of new power plants in California on favorable terms. It is now
unclear to what extent the events in California and elsewhere were caused or
exacerbated by recently revealed activities by certain prominent members of the
energy-trading industry. Additional competition from possible new power plants
or other power sources that may take advantage of favorable legislation, as well
as unforeseen changes in the energy market in California and the western United
States and responses to recent events in the energy-trading industry, could
diminish the demand for our products.

         Utility companies could place barriers to our entry into the
         marketplace, and we may not be able to effectively implement our
         business plan.

         Utility companies commonly charge fees to industrial customers for
disconnecting from the grid, for using less electricity, or for having the
capacity to use power from the grid for backup purposes. These types of fees
could increase the cost of using our systems to our potential customers and
could make our systems less desirable, thereby harming our revenue and
profitability.

         There is intense competition in the gas and oil industry and we cannot
         assure that we will be able to compete effectively.

         The gas and oil industry is highly competitive. Most of our current and
potential competitors have greater financial resources and a greater number of
experienced and trained managerial and technical personnel than we do. There can
be no assurance that we will be able to compete effectively with such firms.

                                       18
<PAGE>

         We operate in a highly-regulated business environment and changes in
         regulation could impose costs on us or make our products less
         economical.

         Our products are subject to federal, state and local laws and
regulations governing, among other things, emissions to air, as well as laws
relating to occupational health and safety. Regulatory agencies may impose
special requirements for implementation and operation of our products (e.g.,
connection with the electric grid) or may significantly impact or even eliminate
some of our target markets. We may incur material costs or liabilities in
complying with government regulations. In addition, potentially significant
expenditures could be required in order to comply with the evolving
environmental and health and safety laws, regulations and requirements that may
be adopted or imposed in the future. The deregulation of the utility industry
may also create challenges for our marketing efforts. For example, as part of
electric utility deregulation, federal, state and local governmental authorities
may impose transitional charges or exit fees, which would make it less
economical for some potential customers to switch to our products.

         We are subject to United States governmental regulation and taxation.

         Gas and oil production and exploration are subject to comprehensive
federal, state and local laws and regulations controlling the exploration for
and production and sale of gas and oil and the possible effects of such
activities on the environment. Present and possible future legislation and
regulations could cause additional expenditures, restrictions and delays in our
business. The impact of these uncertainties on us cannot be predicted and may
require us to limit substantially, delay or cease operations in some
circumstances. We cannot predict the ultimate effect of such governmental energy
and taxation policies, which are frequently unclear and unpredictable.

     Risk Factors Related to our Company

         Our Clear Creek property is encumbered as security for repayment of up
         to $20.0 million that we may borrow from SCRS Investors, LLC, an
         affiliate, and if we are unable to repay the amounts borrowed, SCRS
         Investors may foreclose on our Clear Creek property.

         We have placed encumbrances on our Clear Creek property as security for
repayment of any funds we may draw under our credit facility with SCRS
Investors. We expect to draw the $20.0 million balance available under this
credit facility in order to pay $10.0 million into escrow in December 2002 on
the purchase of the Clear Creek property, and to fund exploration during 2003.
The terms of our credit facility with SCRS Investors were not the result of
arm's-length negotiations because 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. We are
obligated to repay the amounts drawn under the SCRS Investors credit facility
over 10 years, commencing on December 31, 2003, unless the loan is converted
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. See Item 12. Certain Relationships and Related
Transactions. If we are unable to repay the SCRS Investors loan as agreed and
default, SCRS Investors would have the right to exercise its remedies to
foreclose on the Clear Creek property, have the proceeds from foreclosure
applied against the obligation due, and seek to recover any deficiency from us.

         We have no assurance that SCRS Investors, LLC, has sufficient liquid
         resources to fund our draws under our credit facility, and if SCRS
         Investors fails to perform, we may be unable to secure alternate
         financing.

         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

                                       19
<PAGE>

payment into escrow to Edward Mike Davis for the purchase of the Clear Creek
property and/or an additional $10.0 million in 2003 for exploration and other
activities. Accordingly, we cannot assure that SCRS Investors will be able to
provide the funds committed under the credit facility. If SCRS Investors is
unable to provide such funds as agreed, 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 share to
obtain equity.

         If we fail to pay the $10.0 million into escrow as required in December
         2002, Edward Mike Davis may obtain a judgment and execute on our
         assets.

         If funds are not available to be drawn from SCRS Investors and if we
are unable to obtain required funds from alternative sources, we would be unable
to pay the $10.0 million into escrow in December 2002 as required. Edward Mike
Davis could then assert all available remedies, including obtaining a judgment
by confession for the balance due and executing on our assets, including the
Clear Creek property.

         Our ability to raise additional capital is significantly limited
         because of restrictive covenants on the issuance of common stock in our
         agreement with Edward Mike Davis.

         In the agreement to acquire the Clear Creek property from Edward Mike
Davis, we agreed not to issue additional shares to reduce Edward Mike Davis's
ownership below 60% on a fully-diluted basis until we pay the $10.0 million
payment into escrow in December 2002. Thereafter, we have agreed not to issue
shares that would dilute Edward Mike Davis's interests 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, development and to
participate in 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.

         We will need additional capital in the future, and there is no
         assurance that we will be able to obtain it.

         We expect that we will need additional capital to continue with our
anticipated exploration and development programs and to participate in
additional prospects and projects. If exploration of any of our prospects is
successful in proving substantial gas or oil reserves, we will require
additional capital to fund a multi-well development program, install gas or oil
storage, handling and transportation facilities, or purchase other assets or
related investments required to support large-scale production. We have no
arrangement for any such additional financing, but may seek required funds from
the sale of debt and equity securities, project financing, strategic alliances
with other energy or financial partners, or other arrangements. Obtaining
additional financing may dilute the interest of our existing stockholders or our
interest in the specific project being financed. There can be no assurance that
additional funds could be obtained or, if obtained, would be on terms favorable
to us.

         As a result of our following the successful-efforts method of
         accounting, our results of operations for any particular period may not
         be indicative of the results that could be expected over longer
         periods.

         We follow the successful-efforts method of accounting for our gas and
oil properties. Under this method of accounting, all costs of acquiring
undeveloped and unproved properties are capitalized. Geological and geophysical
costs on exploratory prospects and the costs of carrying and retaining unproved
properties are expensed as incurred. An impairment allowance is provided to the

                                       20
<PAGE>

extent that capitalized costs of unproved properties, on a property-by-property
basis, are considered not to be realizable. Further, property acquisition costs
and costs of exploratory and development wells are capitalized when incurred,
pending determination of whether the well has found proved reserves. If an
exploratory well has not found proved reserves, these costs plus the costs of
drilling the well are expensed. The costs of development wells are capitalized,
whether productive or nonproductive. As of June 30, 2002, we reported unproved
gas properties of approximately $845,000, which comprised approximately 23.1% of
our total assets. An impairment loss is recorded if the net capitalized costs of
proved gas and oil properties exceed the aggregate undiscounted future net
revenues determined on a property-by-property basis. During the year ended June
30, 2002, we recorded an impairment of gas and oil properties of approximately
$527,000 related to our one well in Kern County, California. The impairment loss
recognized equals the excess of net capitalized costs over the expected
discounted future net revenues from the related property. Should future events
indicate that an impairment of recorded value has taken place, the impact on
results of operations for the relevant period could be significant. As a result
of the foregoing, our results of operations for any particular period may not be
indicative of the results that could be expected over longer periods. See Item
6. Management's Discussion and Analysis or Plan of Operation.

         We are aggressively pursuing our efforts to acquire, explore and
         develop gas and oil properties, and we will be adversely affected if we
         are unsuccessful in managing the rapid acquisition, exploration and
         development of those properties.

         To date, we have had limited operations. In the last few months, we
have acquired our interests in the Clear Creek, Lakeside, Arbuckle and Kern
County properties, and we are continuing to evaluate and pursue additional
property acquisitions. Our ability to manage these efforts will depend, in part,
upon our ability to attract and retain quality management and technical
personnel. No assurance can be given that we will be able to attract or retain
such employees or otherwise manage any potential expansion of our business. The
likelihood of our success must be considered in light of the expenses,
difficulties, complications and delays frequently encountered in connection with
the early stages of a gas and oil company.

         There are substantial conversion rights outstanding that, if exercised,
         would dilute the interests of our other stockholders and could
         adversely affect the price of our common stock.

         Under the terms of our agreement with SCRS Investors, an affiliated
entity, we may borrow up to an additional $20.0 million. That indebtedness could
then, under the agreement (and subject to the limitations imposed by the
agreement not to reduce the percentage of Edward Mike Davis's ownership), be
converted into common stock. The existence of such conversion rights may prove
to be a hindrance to future financing by us. If those conversion rights were
exercised, it would further dilute the interests of all other stockholders. The
possible future resale of common stock issuable on the exercise of such
conversion rights could adversely affect the prevailing market price of the
common stock. Further, the holders of the conversion rights may exercise them at
a time when we would otherwise be able to obtain additional equity capital on
terms more favorable to us.

         We currently do not have revenues or other sources of capital with
         which to repay our indebtedness to SCRS Investors, LLC.

         We have no revenue with which to repay our indebtedness to SCRS
Investors. The generation of revenue in the future to commence loan payments
that are to begin in December 2003 will depend on the commercial success of
future gas and oil exploration, and we cannot assure that any of our exploration
efforts will result in discoveries or establish production or reserves

                                       21
<PAGE>

sufficient to enable us to meet our obligations to SCRS Investors. In addition,
because of our agreement with Edward Mike Davis that restricts our ability to
issue common stock, we may be hampered to raise capital from other sources to
pay amounts due SCRS Investors. Since SCRS Investors has encumbrances on our
Clear Creek property to secure repayment of the draws under this credit
facility, any default by us in our obligation to SCRS Investors could result in
the loss of the Clear Creek property in foreclosure.

         We may be unable to remain eligible for listing on the Over-the-Counter
         Electronic Bulletin Board.

         The Sarbanes-Oxley Act of 2002 requires the Securities and Exchange
Commission, or SEC, to adopt rules requiring the Over-the-Counter Electronic
Bulletin Board, where our common stock is currently quoted, to impose listing
requirements that would require issuers to have audit committees that are
composed entirely of independent directors. We currently have only one
independent director on our board and will be required to restructure or expand
our board of directors in order to comply with such a requirement. If we are
unable to comply with this requirement, we would be unable to maintain our
listing on the Over-the-Counter Electronic Bulletin Board. If such a requirement
is deemed to apply to the proposed successor to the Over-the-Counter Electronic
Bulletin Board, the Bulletin Board Exchange, then we would have to restructure
our board of directors in order to be eligible for listing on the Bulletin Board
Exchange. If we are unable to maintain our listing on the Over-the-Counter
Electronic Bulletin Board or its successor, it would likely have a material
adverse effect on the trading market for our stock.

         Under the terms of a current proposal to replace the Over-the-Counter
         Electronic Bulletin Board with a new exchange, the Bulletin Board
         Exchange, our shares would not be eligible for listing on the new
         exchange.

         A current proposal would create the Bulletin Board Exchange, a new
exchange that, following a transition period, would supplant the
Over-the-Counter Electronic Bulletin Board. Under the currently proposed listing
standards, our common stock would be ineligible for listing on the Bulletin
Board Exchange because it is not registered under Section 12(b) of the
Securities Exchange Act of 1934. If the proposal is adopted as currently
constituted, we would be required to register our common stock under Section
12(b) of the Securities Exchange Act of 1934, which would then require us to
comply with the proxy rules and certain other requirements, all of which would
impose additional expenses on us and our executive officers, directors and
controlling stockholders. In addition, we would have to restructure or expand
our board of directors to establish an audit committee composed entirely of
independent directors.

         We may enter into additional significant agreements with related
         parties in the future.

         Since June 30, 2001, we have:

         o        acquired our Clear Creek property from Edward Mike Davis for
                  $15.5 million in cash and notes and 17.1 million shares of
                  common stock, which constitutes approximately 61.2% of our
                  outstanding common stock, thereby making Edward Mike Davis an
                  affiliate;

         o        issued 340,000 shares of common stock to SCRS Investors, an
                  affiliate, to establish a $25.5 million credit facility and
                  issued 3,666,667 shares of common stock to SCRS Investors on
                  conversion at $1.50 per share of the $5.5 million initial
                  draw; and

         o        agreed to pay approximately $1.0 million of costs in the
                  Lakeside Prospect for a 25% working interest, 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

                                       22
<PAGE>

                  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 for by us. Although the terms of our
                  agreement in the Lakeside Prospect have changed, our agreement
                  with Edward Mike Davis has not.

We did not obtain any independent evaluation of the terms of the foregoing
transactions to determine whether they were fair to us from a financial point of
view. We anticipate that in the future we may enter into additional agreements
with Edward Mike Davis, SCRS Investors 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 and us.

         The rights of holders of our common stock are limited by certain
         provisions, including those authorizing the issuance of preferred stock
         and those aimed at preventing a change in control.

         Our articles of incorporation authorize us to issue, without
stockholder approval, one or more classes or series of preferred stock, having
such preferences, powers and relative participating, optional or other rights
(including preferences over the common stock) as our board of directors may
determine. The terms of one or more classes or series of preferred stock could
be superior to the terms of the common stock, which may adversely impact the
rights of holders of common stock or could have anti-takeover effects.
Additionally, the provisions of our articles of incorporation, bylaws and the
Nevada Revised Statutes may delay, discourage, inhibit, prevent or render more
difficult an attempt to obtain control of us, whether by a tender offer,
business combination, proxy contest or otherwise. These other provisions include
the classification of the board of directors, a prohibition of stockholder
action by less than unanimous written consent, and Nevada Revised Statutes
restrictions on business combinations with certain interested parties.

         A substantial number of our shares are eligible for future sale, which
         may reduce the price at which our common stock trades.

         Approximately 6.8 million shares of the 28.0 million shares of common
stock currently issued and outstanding are eligible for resale in the trading
market or will be eligible for resale within the next six months. In addition,
pursuant to our agreement with Edward Mike Davis, immediately following the
filing of this report, we intend to file a registration statement with the
Securities and Exchange Commission relating to the resale of the 17.1 million
shares of common stock held by Edward Mike Davis. The resale of 6,490,417 shares
owned by our officers and directors is subject to certain volume and other
restrictions under Rule 144. The resale of the above-described shares or the
perception that such sales may occur may reduce the price at which the common
stock trades in the public trading market.

         Our majority stockholder holds sufficient shares of our common stock to
         impose substantial control over our activities.

         Edward Mike Davis currently holds 17.1 million shares, which
constitutes approximately 61.2% of our common stock. Under the terms of our
agreement with Edward Mike Davis, his 17.1 million share ownership cannot be
reduced below 60% on a fully-diluted basis until we pay $10.0 million into
escrow in December 2002. Thereafter, we have agreed not to issue shares that
would dilute Edward Mike Davis's 17.1 million share ownership interest below
51% before July 20, 2003, or below 36% before June 20, 2007. This means that
Edward Mike Davis has, and will maintain for some time, a substantial amount of

                                       23
<PAGE>

voting control over our future, including the election of directors. That
control is limited to some degree by certain provisions in our articles of
incorporation, including a classified board and a requirement that a two-thirds
majority be obtained to remove any director.

         We are dependent on certain officers, directors and key employees, and
         losing their services might have substantial adverse effects on us.

         We are dependent upon James W. Scott, our president and chief executive
officer, and other key personnel for our various activities. We have entered
into employment and consulting agreements with Mr. Scott, Kenneth Emter, Rod
Lighthipe and Mark Davis. We do not maintain key man insurance on any of our
employees or consultants. Additionally, our majority stockholder, Edward Mike
Davis, who has substantial experience in the gas and oil business, has been
actively involved in helping us identify and pursue opportunities. The loss of
the services of any of these individuals may materially and adversely affect us.

         Our stock price is subject to significant volatility.

         There is currently an extremely limited trading market for our common
stock, and there can be no assurance that any regular trading market for our
common stock will develop or, if developed, will be sustained. The trading
prices of our common stock could be subject to wide fluctuations in response to:

         o        material announcements of the results of specific exploration
                  drilling tests;

         o        quarter-to-quarter variations in our operating results;

         o        establishment of significant strategic partnerships by us or
                  our competitors or providers of alternative products or
                  services;

         o        terminations or other adverse changes in our strategic
                  relationships; and

         o        other events or factors, many of which are beyond our control.

In addition, the stock market as a whole and our stock in particular have
experienced and may continue to experience extreme price and volume
fluctuations. Such fluctuations are often unrelated to the performance of the
related corporations. Our operating results in future quarters may be below the
expectations of market makers, securities analysts and investors. In any such
event, the price of our common stock will likely decline, perhaps substantially.

         There are certain rules applicable to our common stock as a "penny
         stock," and those rules may limit the liquidity and the resale of our
         common stock.

         The Securities and Exchange Commission, or SEC, has promulgated rules
governing over-the-counter trading in penny stocks, defined generally as
securities trading below $5 per share that are not quoted on a securities
exchange or Nasdaq or which do not meet other substantive criteria. Under these
rules, our common stock is currently classified as a penny stock. As a penny
stock, our common stock is currently subject to rules promulgated by the SEC
that impose additional sales practice requirements on broker-dealers that sell
such securities to persons other than established customers and institutional
accredited investors. For transactions covered by the rule, the broker-dealer
must make a special suitability determination for the purchaser and receive the
purchaser's written consent to the transaction prior to sale. Further, if the
price of the stock is below $5 per share and the issuer does not have $2.0
million or more net tangible assets or is not listed on a registered national

                                       24
<PAGE>

securities exchange or Nasdaq, sales of such stock in the secondary trading
market are subject to certain additional rules promulgated by the SEC. These
rules generally require, among other things, that brokers engaged in secondary
trading of penny stocks provide customers with written disclosure documents,
monthly statements of the market value of penny stocks, disclosure of the bid
and asked prices, and disclosure of the compensation to the broker-dealer and
the salesperson working for the broker-dealer in connection with the
transaction. These rules and regulations may affect the ability of
broker-dealers to sell our common stock, thereby effectively limiting the
liquidity of our common stock. These rules may also adversely affect the ability
of persons who acquire our common stock to resell their securities in any
trading market that may exist at the time of such intended sale.

         We have never paid any dividends and do not expect to do so in the
         future.

         We have not paid dividends in the past, and we do not plan to pay
dividends on our stock in the future, even if we were to become profitable.
Earnings, if any, are expected to be used for the implementation of our business
plan and for general corporate purposes, rather than for distributions to
holders of common stock.

         We remain at an early stage of development and have no operating
         history, all of which makes it difficult for investors to determine
         whether we will accomplish our objectives.

         We have only recently initiated our proposed business strategy, and we
have no operating history on which investors can base an evaluation of our
business and prospects. Accordingly, potential investors must consider the risks
and difficulties we face with no operating history. Our business objectives must
be considered speculative, and there is no assurance that we will satisfy those
objectives. We cannot be certain that our business strategy will be successful.

                                       25
<PAGE>

Glossary

         The following terms have the indicated meaning when used in this
report:

         "Bbl" means barrel of oil.

         "Carried" or "Carry" refers to an agreement under which one party
         (carrying party) agrees to pay for all or a specified portion of costs
         of another party (carried party) on a property in which both parties
         own a portion of the working interest.

         "Development well" means a well drilled within the proved area of a gas
         or oil reservoir to the depth of a stratigraphic horizon known to be
         productive.

         "Exploratory well" means a well drilled to find and produce gas or oil
         in an unproved area, to find a new reservoir in a field previously
         found to be productive of gas or oil in another reservoir or to extend
         a known reservoir.

         "Field" means an area consisting of a single reservoir or multiple
         reservoirs all grouped on or related to the same individual geological
         structural feature and/or stratigraphic conditions.

         "Gross" means, when referring to wells or acres, the total number of
         acres or wells, as the case may be, in which an interest is owned,
         either directly or though a subsidiary or other enterprise in which we
         have an interest.

         "Horizon" or "Formation" means an underground geological formation that
         is the portion of the larger formation that has sufficient porosity and
         permeability to constitute a reservoir.

         "Net" means, when referring to wells or acres, the fractional ownership
         working interests held by us, either directly or through a subsidiary
         or other enterprise in which we have an interest, multiplied by the
         gross wells or acres.

         "Net revenue interest" means the percentage of revenue due an interest
         holder in a property, net of royalties and other burdens on the
         property.

         "Proved reserves" means the estimated quantities of crude oil, gas and
         gas liquids that geological and engineering data demonstrate with
         reasonable certainty to be recoverable in future years from known
         reservoirs under existing economic and operating conditions, i.e.,
         prices and costs as of the date the estimate is made. "Proved reserves"
         may be developed or undeveloped.

         "Reservoir" means a porous and permeable underground formation
         containing a natural accumulation of producible gas and/or oil that is
         confined by impermeable rock or water barriers and that is distinct and
         separate from other reservoirs.

         "Unit" refers to an agreement, established either voluntarily by
         various lease owners or at the insistence of regulatory authorities,
         uniting all leases in a field or other common geological or geophysical
         feature to operate under a cooperative or unit plan. Once the unit is
         approved, all operations within the unit area are administered as if
         there were a single lease.

         "Working interest" is the interest created by the execution of a gas
         and oil lease. The owner of 100% working interest has the exclusive
         right to explore for gas and oil and the obligation to pay 100% of the
         costs of drilling, completion, and producing any gas or oil discovered.

                                       26
<PAGE>

                            ITEM 3. LEGAL PROCEEDINGS

         None.


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

Amended Articles and Bylaws

         In June 2002, we adopted amended and restated articles of incorporation
and bylaws that provided for our directors to serve three-year terms, staggered
such that no more than one-third of our directors' terms shall expire in any one
year, as well as requiring a two-thirds majority for the removal of any
director. At the same time, our bylaws were amended to establish procedural
requirements for the nomination of directors and the consideration of matters at
meetings of stockholders.

         The amendments to the articles of incorporation and the bylaws were
adopted by majority written consent of our stockholders, with stockholders
representing 3,650,000, or approximately 52%, of the 7,025,244 then-issued and
outstanding shares approving the action.

2002 Stock Option and Purchase Rights Plan

         In June 2002, the stockholders adopted the 2002 Stock Option and
Purchase Plan by majority written consent, with stockholders representing
3,650,000 shares, or approximately 52%, of the 7,025,244 then-issued and
outstanding shares approving the action. Under the plan, options to purchase a
total of 500,000 shares may be granted to our employees, directors and
consultants.

                                       27
<PAGE>

                                     PART II

        ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         Since 1983, our common stock has been traded in the over-the-counter
market and is quoted on the Over-the-Counter Electronic Bulletin Board. The
trading volume of the common stock is limited. This limited trading volume
creates the potential for significant changes in the trading price of the common
stock as a result of relatively minor changes in the supply and demand. It is
likely that trading prices and volumes for the common stock will fluctuate in
the future, without regard to our business activities.

         The following table sets forth for the fiscal year periods indicated
the high and low closing prices for our common stock as quoted under the symbol
"MPSC" on the Over-the-Counter Electronic Bulletin Board:

                                                        Low          High
                                                     ----------    ----------
2003
  Second Quarter (through October 17, 2002)........    $0.52         $0.85
  First Quarter....................................     0.52          1.55

2002
  Fourth Quarter...................................    $1.45         $2.80
  Third Quarter....................................     1.40          1.70
  Second Quarter...................................     1.15          1.95
  First Quarter....................................     1.95          2.25

2001:
  Fourth Quarter...................................    $1.00         $2.48
  Third Quarter ...................................     0.75          1.00
  Second Quarter...................................     0.75          2.02
  First Quarter....................................     1.00          3.00

         On October 17, 2002, the closing price per share of our common stock on
the Over-the-Counter Electronic Bulletin Board was $0.85.

Penny Stock Regulations

         Our stock is presently regulated as a penny stock and broker-dealers
will be subject to such regulations that impose additional requirements on us
and on broker-dealers that want to publish quotations or make a market in our
common stock. See Items 1 and 2. Description of Business and Property: Risk
Factors: There are certain rules applicable to our common stock as a "penny
stock," and those rules may limit the liquidity and the resale of our common
stock.

Dividend Policy

         We have never paid cash dividends on our common stock and do not
anticipate that we will pay dividends in the foreseeable future. We intend to
reinvest any future earnings to further expand our business. We estimate that,
as of October 17, 2002, we had approximately 377 stockholders.

                                       28
<PAGE>

Transfer Agent

         Our stock transfer agent is U.S. Stock Transfer Corporation, 1745
Gardena, Second Floor, Glendale, California, 91204-2991, telephone number
818-502-1404.

Recent Sales of Unregistered Securities

         During the fiscal year ended June 30, 2002, we issued securities
without registration under the Securities Act of 1933 on the terms and
circumstances described in the following paragraphs.

         Unless otherwise indicated, all transactions were the result of
arm's-length negotiations with accredited investors who were provided with
business, technical and financial information, including copies of our periodic
reports as filed with the Securities and Exchange Commission, and who were
provided with the opportunity to ask questions directly of our executive
officers. Transactions involving the issuances of stock to persons who, at the
time of such transactions, were either executive officers, directors, principal
stockholders or other affiliates are noted. In each case of the issuance of
stock to affiliates, unless otherwise noted, such affiliates purchased stock on
the same terms at which stock was sold to unrelated parties in contemporaneous
transactions, and such transactions were approved unanimously by the
disinterested directors. In each instance, the securities purchased were
restricted securities taken for investment. Certificates for all shares issued
in the following transactions bore a restrictive legend conspicuously on their
face and stop-transfer instructions were noted respecting such certificates on
our stock transfer records. Each of the following transactions was effected in
reliance on the exemption from registration provided in Section 4(2) of the
Securities Act of 1933 as transactions not involving any public offering.

         Edward Mike Davis--17,125,365 Shares

         On June 14, 2002, we issued 17,125,365 shares of common stock to the
sole stockholder of Red Star, Inc., Edward Mike Davis, as partial consideration
for the acquisition of Red Star, which owned the Clear Creek property. On the
date of the transaction, the market price for our common stock was approximately
$1.45 per share.

         The amount of consideration paid and the other terms of the acquisition
were determined by arm's-length negotiations. Edward Mike Davis was represented
by independent legal counsel during those 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 an independent opinion that the transaction was
fair to our stockholders and us from a financial point of view.

         As part of the acquisition, we agreed to file a registration statement
under the Securities Act of 1933 covering the resale of Edward Mike Davis's
17,125,365 shares of common stock. We intend to file that registration statement
immediately following the filing of the report.

                                       29
<PAGE>

         SCRS Investors Credit Facility--4,006,667 shares

         On May 9, 2002, 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
common stock to SCRS Investors. Loans made under the credit facility are
convertible into 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. James W. Scott, our president, chief executive
officer and a director, is approximately an 86% owner of SCRS Investors, and
Mark T. Davis, our general counsel, is a member of SCRS Investors. On June 13,
2002, we drew $5.5 million under this credit facility, which was converted to
3,666,667 shares of common stock on June 28, 2002. The market price for our
common stock was approximately $1.75 per share on June 13, 2002, and $1.55 per
share on June 28, 2002.

Stock Option and Bonus Grants

         We have granted to certain directors, executive officers and other key
employees options to purchase an aggregate of 130,000 shares at $1.50 per share
at any time on or before June 25, 2003. We also granted an aggregate of 40,000
shares as stock bonuses to three executives. On the date of these awards, the
market price for our common stock was approximately $1.50 per share.


        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;

                                       30
<PAGE>

         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.

         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 costs, $791,000 in impairment of investment in equipment and gas and
oil properties, 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

                                       31
<PAGE>

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.

         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

                                       32
<PAGE>

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.

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.

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

                                       33
<PAGE>

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


              ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
                     ON ACCOUNTING AND FINANCIAL DISCLOSURE

         We have not had any disagreements on accounting and financial
disclosure required to be reported. We have reported changes in our principal
accountant in reports on Form 8-K filed on June 6, 2002, and August 10, 2001.

                                       34
<PAGE>

                                    PART III

     ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
               COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

Executive Officers and Directors

         Our amended and restated articles of incorporation provide for the
election of one-third of our board of directors at each annual meeting of
stockholders, with each director to serve until the end of his or her three-year
terms and until such director's successor is elected and qualified. Officers are
elected and serve at the pleasure of the board of directors.

         The following table sets forth the name, age, position and term
expiration date of each of our current directors and executive officers:

           Name        Age                Title                    Term Expires*
--------------------- ------ ------------------------------------- -------------

James W. Scott          51   Director, Chief Executive Officer          2002
                             and President
Kenneth M. Emter        51   Director, Chief Financial Officer          2003
                             and Treasurer/Secretary
Michael T. Maloney      52   Director                                   2004
Rodney W. Lighthipe     55   Vice President Business Development         --
--------------------
* Term expires at the annual stockholders' meeting in the year indicated.

         The principal occupation, title and business experience of our
executive officers and directors during the past five years, including the names
and locations of employers, are indicated below.

         James W. Scott was appointed chief executive officer, president and
chairman of the board of Mid-Power Service Corporation in June 2001. From 1996
through early 2001, Mr. Scott served as president, chief executive officer and
director of EARTHCO, a Nevada corporation that owned and operated major
developmental and mining properties and synthetic fuel plants throughout the
United States. Mr. Scott played a major role in the identification of Section 29
tax credits for coal recovery and processing facilities, which allowed EARTHCO
to design and develop a process system. EARTHCO was one of the very few
companies that possessed a complete program for coal recovery, processing,
utilization, enhancement and marketing. Previously, Mr. Scott has been involved
as the owner and operator of a real estate development company, a nonhazardous
waste remediation company that operated in California, Nevada and Utah, and has
been an individual investor in several companies and projects.

         Kenneth M. Emter serves as chief financial officer, treasurer,
secretary and director. Mr. Emter holds accreditation as a Certified Public
Accountant and has more than 25 years of management, accounting and finance
experience. Prior to joining Mid-Power Service Corporation, Mr. Emter managed
his own accounting firm, Kenneth M. Emter Accounting Services, Las Vegas,
Nevada, which he founded in 1994.

         Michael T. Maloney is a Professor of Economics at Clemson University in
Clemson, South Carolina, a position he has held since 1984. For eight years,
from 1984 to 1992, he was Head of the Economics Department at Clemson. In
addition to his position at Clemson University, Mr. Maloney held a faculty
position at Emory University in 1981 and 1982. In 1990, Mr. Maloney served as a
senior financial economist at the U.S. Securities and Exchange Commission. At
present, he is an Associate Editor of the Journal of Corporate Finance and
Studies in Economics and Finance. Mr. Maloney received his B.A. degree from

                                       35
<PAGE>

Lewis College in 1970, his M.A. from Western Illinois University, and his Ph.D.
from Louisiana State University in 1978. Michael Maloney has been published in
numerous scholarly journals.

         Rodney W. Lighthipe joined us as Vice President of Business Development
in June 2001. Between August 2000 and June 2001, Mr. Lighthipe acted as
President of Conectisys Corporation, a Valencia, California, publicly traded
company with wireless automated meter reading technology. In 1996, Mr. Lighthipe
joined Bipolar Power Corporation of Whittier, California, an advanced lead-acid
battery company, with responsibilities in business development, including
negotiations with the government of China. From August 1992 through 1996, Mr.
Lighthipe was employed by San Diego Gas & Electric, where he was responsible for
the development and launching of new products and, at various times, the
management of a 100-megawatt coal gasification plant, the development and
acquisition of bulk power purchase contracts in the western United States, and
the joint venture with Edison to launch a company for the development,
construction and operation of distributed generation products. Mr. Lighthipe
graduated from the UCLA School of Engineering in 1970 and served as an officer
in the United States Navy Civil Engineering Corp as an advisor to the Vietnamese
Government for the development of electric distribution systems and
infrastructure.

         The board of directors has no standing audit or compensation
committees.

Compliance with Section 16(a) of the Securities Exchange Act

         We do not have a class of equity securities registered under Section Q
of the Securities Exchange Act. Accordingly, our executive officers, directors
and beneficial owners of more than 10% of stock are not subject to Section 16 of
the Securities Exchange Act.


                         ITEM 10. EXECUTIVE COMPENSATION

Summary Compensation

         The following table sets forth, for the last three fiscal years of the
Company, the annual compensation earned by, awarded to or paid to the person who
was chief executive officer of the Company and each of the other highest
compensated executive officers of the Company as of the end of the last fiscal
year:

      Name and Principal Position             Year Ended June 30   Salary ($)
------------------------------------------- --------------------- ------------
James W. Scott.............................         2002              $30,000
  President (CEO--since June 2001)                  2001                 --
                                                    2000                 --

         We employ James W. Scott under an employment agreement and related
confidentiality and noncompetition agreement dated May 8, 2002, at a salary at
the rate of $180,000 per annum for a term continuing through December 31, 2002,
automatically renewing annually for successive one-year terms unless terminated
by either party upon six month's prior notice, with an annual salary increase of
at least 10%. The terms of our employment agreement with Mr. Scott were not the
result of arm's-length negotiations. We are accruing Mr. Scott's salary as an
expense, but Mr. Scott has agreed orally to defer payment until funds are
available from cash flow from operations.

                                       36
<PAGE>

Director's Compensation

         We reimburse our director who is not an employee for the costs of
attending meetings of the board of directors, but do not otherwise compensate
our directors.

Options Granted to Officers, Directors, Employees and Consultants

         In June 2002, we granted options to purchase an aggregate of 130,000
shares to our officers, directors, employees and consultants. The options to
purchase 10,000 shares granted to Michael T. Maloney, a director, vested upon
grant. The balance of the options to purchase an aggregate of 120,000 shares
vested one half upon the date of grant and will vest the balance on January 1,
2003. These options are exercisable at a price of $1.50 and expire June 25,
2003. Options issued to executive officers and directors contain terms providing
that in the event of a change in control of the Company and at the election of
the optionee, the unexercised options will be canceled, and we will pay to the
optionee an amount equal to the number of unexercised options multiplied by the
amount by which the fair market value of the common stock as of the date
preceding the change of control event exceeds the option exercise price. The
grants of options to officers and directors were not the result of arm's-length
negotiations.

                                       37
<PAGE>

     ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         Set forth below is the name of each person who owns of record, or is
known by us to own beneficially, 5% or more of the 27,972,276 shares of our
issued and outstanding common stock as of June 30, 2002:
<TABLE>
<CAPTION>
                 Name of Person or Group                    Nature of Ownership        Amount        Percent(1)
                 -----------------------                    -------------------        ------        ----------
<S>                                                          <C>                     <C>              <C>
Principal Stockholders:
-----------------------
  Edward Mike Davis.....................................     Common Stock            17,125,365         61.2%
    200 Rancho Circle
    Las Vegas, Nevada  89107-4601

  James W. Scott(1).....................................     Common Stock             6,306,667         22.5
    3800 Howard Hughes Parkway, Suite 860A
    Las Vegas NV  89109

Directors:
----------
  James W. Scott........................................               ----------See above----------

  Kenneth M. Emter(2)...................................     Common Stock               143,750          0.5
                                                             Options                     40,000          --
                                                                                    -----------
                                                                                        183,750          0.7

  Michael T. Maloney....................................     Common Stock                    --          --
                                                             Options                     10,000          --
                                                                                    -----------
                                                                                         10,000          --

 All Executive Officers and Directors as a Group
      (3 persons):......................................     Common Stock             6,450,417         23.1
                                                             Options                     60,000          0.2
                                                                                    -----------
                                                                                      6,510,417         23.2
                                                                                    ===========
-----------------------------------
(1)  Mr. Scott is the beneficial owner of 6,006,667 shares owned by SCRS Investors, LLC, of which he owns
     approximately 86%, and 300,000 shares owned by Nimitz Development, Inc., an affiliated corporation.
(2)  Mr. Emter owns 93,750 shares in his own name and is the beneficial owner of
     50,000 shares owned by KME Associates, LLC, an affiliated limited liability
     company.
</TABLE>
                                       38
<PAGE>

Equity Compensation Plan Information

         As of the end of our most recent fiscal year on June 30, 2002, we had
authorized securities for issuance under equity compensation plans that had been
approved by the stockholders, but none under equity compensation plans that were
not approved by the stockholders. The following table shows the aggregate amount
of securities authorized for issuance under all equity compensation plans as of
June 30, 2002:
<TABLE>
<CAPTION>
                                                                                            Number of securities
                               Number of securities to be                                 remaining available for
                                issued upon exercise of     Weighted-average exercise      future issuance under
                                  outstanding options,         price of outstanding      equity compensation plans
                                      warrants and              options, warrants          (excluding securities
                                         rights                     and rights            reflected in column (a))
        Plan Category                     (a)                          (b)                          (c)
---------------------------------------------------------------------------------------------------------------------
<S>                                       <C>                          <C>                          <C>
Equity compensation
    plans approved by
    security holders.......               130,000                      $1.50                        370,000
Equity compensation
    plans not approved by
    security holders.......                    --                         --                             --
                                          -------                                                   -------
Total......................               130,000                                                   370,000
                                          =======                                                   =======
</TABLE>

         In June 2002, the stockholders adopted the 2002 Stock Option and
Purchase Plan by majority written consent, with stockholders representing 52% of
the 7,025,244 then-issued and outstanding shares approving the action. Under the
plan, we may grant options to purchase a total of 500,000 shares to our
employees, directors, consultants and others.


             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.

                                       39
<PAGE>

         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 below
51% before July 20, 2003, or below 36% before June 20, 2007. On June 14, 2002,
the market price for our common stock was approximately $1.45 per share.

         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.

         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.

                                       40
<PAGE>

         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. Decription of Business and
Properties: 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.

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.

                                       41
<PAGE>

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.


                    ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>

(a)      Index to Exhibits:


                   SEC
   Exhibit      Reference
    Number        Number                            Title of Document                                Location
-------------- ------------ ------------------------------------------------------------------- -------------------
<S>             <C>         <C>                                                                 <C>
                            Plan of Acquisition, Reorganization,  Arrangement, Liquidation, or
   Item 2                   Succession
-------------- ------------ ------------------------------------------------------------------- -------------------
    2.01            2       Acquisition Agreement and Plan of Merger among Mid-Power Service    Incorporated by
                            Corporation, Red Star, Inc., and Mid-Power Resource Corporation,    reference(1)
                            dated June 13, 2002
   Item 3.                  Articles of Incorporation and Bylaws
-------------- ------------ ------------------------------------------------------------------- -------------------
    3.01            3       Amended and Restated Articles of Incorporation                      Incorporated by
                                                                                                reference(1)

    3.02            3       Bylaws                                                              Incorporated by
                                                                                                reference(1)
   Item 4.                  Instruments Defining the Rights of Security Holders, Including
                            Indentures
-------------- ------------ ------------------------------------------------------------------- -------------------
    4.01            4       Specimen stock certificate                                          Incorporated by
                                                                                                reference(2)
     Item 10.               Material Contracts
-------------- ------------ ------------------------------------------------------------------- -------------------
    10.01          10       Agreement of Stockholders To Sell Stock of MaxCo Oil Co., Inc.      Incorporated by
                            entered August 22, 2001                                             reference(3)

    10.02                   Venture Agreement of Mid-Power Service Corporation and Edward       Incorporated by
                            Mike Davis dated May 10, 2002                                       reference(4)

    10.03          10       Sales Agreement for 1(One) Pratt and Whitney GG4A-7 Gas Turbine     Incorporated by
                            between AES Huntington Beach L.L.C. and Mid-Power Service           reference(5)
                            Corporation dated April 26, 2002, signed
                            May 24, 2002

    10.04          10       Sales Agreement for 1(One) Pratt and Whitney GG4A-7 Gas Turbine     Incorporated by
                            between AES Alamitos L.L.C. and Mid-Power Service Corporation       reference(5)
                            dated April 26, 2002, signed May 24, 2002

                                       42
<PAGE>
<CAPTION>
                   SEC
   Exhibit      Reference
    Number        Number                            Title of Document                                Location
-------------- ------------ ------------------------------------------------------------------- -------------------
<S>             <C>         <C>                                                                 <C>
    10.05          10       Right of First Refusal among AES Huntington Beach, L.L.C., AES      Incorporated by
                            Alamitos, L.L.C. and Mid-Power Corporation entered May 24, 2002     reference(5)

    10.06          10       Promissory Note in the amount of $10,000,000 dated June 13, 2002    Incorporated by
                                                                                                reference(1)

    10.07          10       Registration Rights Agreement between Mid-Power Service             Incorporated by
                            Corporation and Edward Mike Davis dated June 13, 2002               reference(1)

    10.08          10       Loan Agreement by and among Mid-Power Service Corporation and       Incorporated by
                            Mid-Power Resource Corporation, borrowers, and SCRS Investors,      reference(1)
                            LLC, lender, dated as of May 9, 2002

    10.09          10       Promissory Note among Mid-Power Service Corporation and Mid-Power   Incorporated by
                            Resource Corporation, as makers, and SCRS Investors, LLC, as        reference(1)
                            holder, as of May 9, 2002

    10.10          10       Security Agreement between Mid-Power Resource Corporation and       Incorporated by
                            SCRS Investors, LLC as of May 9, 2002                               reference(1)

    10.11          10       Deed of Trust and Security Agreement as of May 9, 2002, between     Incorporated by
                            Mid-Power Resource Corporation, trustor, Bruce Lemons, trustee,     reference(1)
                            and SCRS Investors, LLC, beneficiary
    10.12          10       2002 Stock Option and Purchase Rights Plan adopted June 25, 2002    Incorporated by
                                                                                                reference(1)
    10.13          10       Notice of Grant (with related Stock Option Agreement and Notice     Incorporated by
                            of Exercise) and Stock and Option Grant Schedule                    reference(1)

    10.14          10       Letter Agreement dated August 1, 2002, between Petrogulf            Incorporated by
                            Corporation and Mid-Power Resource Corporation                      reference(6)

    10.15          10       Letter Agreement dated August 1, 2002, between Mid-Power Resource   Incorporated by
                            Corporation and Edward Mike Davis                                   reference(6)

    10.16          10       Promissory Note in the amount of $1,000,000 dated May 17, 2002      This filing

    10.17          10       Promissory Note in the amount of $200,000 dated May 22, 2002        This filing

    10.18          10       Letter Agreement between Mid-Power Resource Corporation and         This filing
                            Petrogulf III, L.L.C. dated September 11, 2002
     Item 16.               Letter re Change in Certifying Accountant
-------------- ------------ ------------------------------------------------------------------- -------------------
    16.01          16       Letter from Mann, Frankfort, Stein & Lipp to the Securities         Incorporated by
                            Exchange Commission regarding change in certifying accountant       reference(7)
                            dated August 9, 2001

    16.02          16       Letter from Hein + Associates LLP to Securities and Exchange        Incorporated by
                            Commission regarding change in certifying accountant dated June     reference(8)
                            5, 2002

                                       43
<PAGE>
<CAPTION>
                   SEC
   Exhibit      Reference
    Number        Number                            Title of Document                                Location
-------------- ------------ ------------------------------------------------------------------- -------------------
<S>             <C>         <C>                                                                 <C>
     Item 21.               Subsidiaries of the Registrant
-------------- ------------ ------------------------------------------------------------------- -------------------
    21.01          21       Schedule of subsidiaries                                            This filing

     Item 99                Miscellaneous
-------------- ------------ ------------------------------------------------------------------- -------------------
    99.01          99       Certification Pursuant to 18 U.S.C. Section 1350, as adopted        This filing
                            Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief
                            Executive Officer)
    99.02          99       Certification Pursuant to 18 U.S.C. Section 1350, as adopted        This filing
                            Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief
                            Financial Officer)
----------------------------
</TABLE>
(1) Incorporated by reference from Form 8-K filed July 1, 2002.
(2) Incorporated by reference from Form 10-K filed October 5, 2001.
(3) Incorporated by reference from Form 8-K filed September 14, 2001.
(4) Incorporated by reference from Form 10-QSB filed May 17, 2002.
(5) Incorporated by reference from Form 8-K filed May 24, 2002.
(6) Incorporated by reference from Form 8-K filed August 15, 2002.
(7) Incorporated by reference from Form 8-K filed August 10, 2001.
(8) Incorporated by reference from Form 8-K filed June 6, 2002.

(b)      Reports on Form 8-K. During the quarter ended June 30, 2002, we filed
the following reports on Form 8-K:

            Date of Event Reported                Item Reported
            ----------------------                -------------

                 June 20, 2002      Item 7. Exhibits
                                    Item 9. Regulation FD Disclosure
                 June 14, 2002      Items 1 and 2. Changes in Control of
                                     Registrant and Acquisition or Disposition
                                     of Assets
                                    Item 7. Financial Statements and Exhibits
                  June 4, 2002      Item 4. Change in Registrant's Certifying
                                     Accountant
                                    Item 7. Exhibits
                  May 24, 2002      Item 2. Acquisition or Disposition of Assets

                                       44
<PAGE>

                                   SIGNATURES

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

                                          MID-POWER SERVICE CORPORATION


Dated:  October 17, 2002                  By /s/ James W. Scott
                                             -----------------------------------
                                             James W. Scott, President


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

Dated:  October 17, 2002                  /s/ James W. Scott
                                         ---------------------------------------
                                         James W. Scott, Chairman and President
                                         (Chief Executive Officer)

                                          /s/ Kenneth M. Emter
                                         ---------------------------------------
                                          Kenneth M. Emter, Director and
                                          Secretary/Treasurer (Chief Financial
                                          Officer)

                                          /s/ Michael T. Maloney
                                         ---------------------------------------
                                          Michael T. Maloney, Director


                  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: October 17, 2002


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

                                       45
<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: October 17, 2002


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

                                       46
<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.

                /s/ Tanner + Co.

Salt Lake City, Utah
August 22, 2002

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

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

      Total liabilities                                                            11,744,969

Commitments and contingencies                                                               -

Stockholders' deficit:
  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                                                       37,889,215
  Accumulated deficit                                                              (5,824,531)
                                                                               --------------

Total stockholders' equity                                                         32,092,656
                                                                               --------------

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

                                                                                                  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>
Balances, 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     24,814,654              -    24,831,779

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

Balance, June 30, 2002                          -     $   -      27,972,276    $ 27,972   $ 37,889,215   $ (5,824,531) $ 32,092,656
                                            =====     =====      ==========    ========   ============   ============  ============

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

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

                                                                                  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,  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.


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

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

2.       Going Concern Continued

         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:
<TABLE>
<CAPTION>
                  <S>                                                                 <C>
                  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
                                                                                      =============
</TABLE>

         $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 $1.45 per share,  $5,500,000  in cash
         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-17
<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:
<TABLE>
<CAPTION>
                  <S>                                                                  <C>
                  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
<CAPTION>
                  <S>                                                                  <C>
                  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
                                                                                       ==============
</TABLE>

         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:
<TABLE>
<CAPTION>
                                                                      2002              2001
                                                                  ------------      ----------
                  <S>                                             <C>               <C>
                  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:
<CAPTION>
                                                                      2002              2001
                                                                  ------------      ----------
                  <S>                                             <C>               <C>
                  Net operating loss carry forward                $  1,171,000         266,000
                  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)
                                                                  ------------      ----------
                                                                  $          -      $        -
                                                                  ============      ==========
</TABLE>
--------------------------------------------------------------------------------
                                                                            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)            $ (24,831,779)
                  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:
<TABLE>
<CAPTION>
                                                                                  Weighted
                                                               Number             Average
                                                             of Shares         Exercise Price
                                                             ---------         --------------
         <S>                                                  <C>               <C>
         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:
<CAPTION>
                                                       2002                    2001
                                                  --------------        ---------------
         <S>                                      <C>                   <C>
         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)
                                                  --------------        ---------------
</TABLE>
--------------------------------------------------------------------------------
                                                                            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 environmental
         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.

--------------------------------------------------------------------------------
                                                                            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)               -
                                                                         -----------------  --------------
                                                                         $      41,018,204  $            -
                                                                         =================  ==============
<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  $            -
</TABLE>
--------------------------------------------------------------------------------
                                                                            F-29
<PAGE>
                                                   MID-POWER SERVICE CORPORATION
                 Schedule of Supplementary Information on Oil and Gas Operations
                                                                       Continued
--------------------------------------------------------------------------------

                 Results of Operations for Producing Activities
<TABLE>
<CAPTION>
                                                                                Years Ended June 30,
                                                                         ---------------------------------
                                                                               2002             2001
                                                                         -----------------  --------------
<S>                                                                      <C>                <C>
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) $           -
                                                                         =================  =============
</TABLE>
--------------------------------------------------------------------------------
                                                                            F-30
<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              -              -              -
</TABLE>
--------------------------------------------------------------------------------
                                                                            F-31
<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   $              -
                                                                     =================   ================
</TABLE>
--------------------------------------------------------------------------------
                                                                            F-33