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


                                  FORM 10-KSB/A
                                (Amendment No. 1)



     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>

                   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.

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

                                       2
<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.

                                       3
<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;

                                        4
<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 27.

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.

                                       5
<PAGE>

         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,
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.

                                       6
<PAGE>

         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.
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.

                                       7
<PAGE>

         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.

         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.

                                       8
<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.

                                       9
<PAGE>

         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.

         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.

                                       10
<PAGE>

         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.

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.

                                       11
<PAGE>

         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
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.

                                       12
<PAGE>

         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.

         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.

                                       13
<PAGE>

         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.

         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

                                       14
<PAGE>

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.

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.

                                       15
<PAGE>

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.

         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.

                                       16
<PAGE>

         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.

         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.

                                       17
<PAGE>

         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.

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;

                                       18
<PAGE>

         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
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

                                       19
<PAGE>

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.

         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.

                                       20
<PAGE>

     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
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

                                       21
<PAGE>

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
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 $41.0 million, which comprised approximately
93.6% 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,

                                       22
<PAGE>

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
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.

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<PAGE>

         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
                  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

                                       24
<PAGE>

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
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;

                                       25
<PAGE>

         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
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.

                                       26
<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.

                                       27
<PAGE>

                                   SIGNATURES


         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this amendment no. 1 to
annual report to be signed on its behalf by the undersigned thereunto duly
authorized.


                                          MID-POWER SERVICE CORPORATION


Dated:  October 23, 2002                  By /s/ James W. Scott
                                             -----------------------------------
                                             James W. Scott, President



                                       28
<PAGE>

                  CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

         I, James W. Scott, certify that:

         1. I have reviewed this amendment no. 1 to annual report on Form 10-KSB
of Mid-Power Service Corporation.

         2. Based on my knowledge, this amendment no. 1 to 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 amendment no. 1 to annual report.

         3. Based on my knowledge, the financial statements, and other financial
information included in this amendment no. 1 to 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 amendment
no. 1 to annual report.

Date: October 23, 2002

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


                                       29
<PAGE>


                  CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

         I, Kenneth M. Emter, certify that:

         1. I have reviewed this amendment no. 1 to annual report on Form 10-KSB
of Mid-Power Service Corporation.

         2. Based on my knowledge, this amendment no. 1 to 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 amendment no. 1 to annual report.

         3. Based on my knowledge, the financial statements, and other financial
information included in this amendment no. 1 to 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 amendment
no. 1 to annual report.

Date: October 23, 2002

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

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