**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**




**FORM
      10-KSB**





**o** **ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934**




**For
      the Fiscal Year Ended December 31, 2006**




**Commission
      File Number:   000-26673**






**ETHOS
      ENVIRONMENTAL, INC.**


(Name
      of
      Small Business Issuer in Its Charter)




**Nevada**
            
            **88-0467241**(State
                or Other Jurisdiction
            
            IRS
                Employerof
                Incorporation or Organization)
            
            Identification
                Number




**6800
      Gateway Park**


**San
      Diego, CA 92154**


**(619)
      575-6800**


(Address
      and Telephone Number of Principal Executive Offices)




Securities
                registered under Section 12(b) of the Exchange Act:Title
                of each class registered:
            Name
                of each exchange on which registered:**None**
            **Over-the-Counter
                Bulletin Board**Securities
                registered under Section 12(g) of the Exchange Act:**Common
                Stock, par value $0.001**
              (Title
                of class)






Indicate
      by check mark whether the registrant is a well-known seasoned issuer, as defined
      in Rule 405 of the Securities
      Act.    Yes  ̈ No x





Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or Section 15(d) of the Exchange
      Act.   ̈





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or 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 o




Indicate
      by check mark whether the registrant is a shell company as defined in Rule
      12b-2
      of the Exchange Act. Yes o  No x




*Table
            of Contents*
 *1*




Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B not contained in this form, and no disclosure will be contained,
      to the best of the 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. Yes o  No x




Revenues
      for year ended December 31, 2006: $4,768,013.




The
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates was approximately $85,254,407 as of April 16, 2007 based upon
      the
      average bid and asked price of the registrant’s common stock on the Over the
      Counter Bulletin Board.




Number
      of
      shares of the registrant’s common stock outstanding as of April 16, 2007 was:
      23,681,687.




Transitional
      Small Business Disclosure Format: Yes o  No x





**DOCUMENTS
      INCORPORATED BY REFERENCE**




Portions
      of the Company’s definitive proxy statement for its 2006 Annual Meeting of
      Shareholders are incorporated by reference in Part I and III of
      this
      Form 10-KSB .




*Table
          of Contents*
 *2*





**Ethos
      Environmental, Inc.**


**ANNUAL
      REPORT ON FORM 10-KSB**




**FOR
      THE YEAR ENDED DECEMBER 31, 2006**









**INDEX**




PART
                IItem
                1.
            Description
                of Business
            5The
                CompanyProductsTrademarksSignificant
                EventsItem
                2.
            Properties
            11Item
                3.
            Legal
                Proceedings
            11Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            11PART
                IIItem
                5.
            Market
                for Common Equity and Related Stockholder Matters
            12Item
                6.
            Management’s
                Discussion and Analysis or Plan of Operation
            13Item
                7.
            Financial
                Statements
            21-30Item
                8.
            Changes
                In and Disagreements With Accountants on Accounting and Financial
                Disclosure
            31Item
                8A.
            Controls
                and Procedures
            31Item
                8B.
            Other
                Information
            32PART
                IIIItem
                9.
            Directors,
                Executive Officers and Corporate Governance
            32Item
                10.
            Executive
                Compensation
            33Item
                11.
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            35Item
                12.
            Certain
                Relationships and Related Transactions
            36Item
                13.
            Exhibits
            36Item
                14.
            Principal
                Accountant Fees and Services
            37







*Table
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 *3*




**FORWARD-LOOKING
      STATEMENTS**




This
      Annual Report on Form 10-KSB contains forward-looking statements within the
      meaning of Section 27A of the Securities Act of 1933, as amended (the
“Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as
      amended (the “Exchange Act”). These forward-looking statements are not
      historical facts but rather are based on current expectations, estimates and
      projections. We use words such as “anticipate,” “expect,” “intend,” “plan,”
“believe,” “foresee,” “estimate” and variations of these words and similar
      expressions to identify forward-looking statements. These statements are not
      guarantees of future performance and are subject to certain risks, uncertainties
      and other factors, some of which are beyond our control, are difficult to
      predict and could cause actual results to differ materially from those expressed
      or forecasted. These risks and uncertainties include the following *:*




·
            The
                availability and adequacy of our cash flow to meet our
                requirements;




·
            Economic,
                competitive, demographic, business and other conditions in our local
                and
                regional markets;




·
            Changes
                or developments in laws, regulations or taxes in our
                industry;




·
            Actions
                taken or omitted to be taken by third parties including our suppliers
                and
                competitors, as well as legislative, regulatory, judicial and other
                governmental authorities;




·
            Competition
                in our industry;




·
            The
                loss of or failure to obtain any license or permit necessary or desirable
                in the operation of our business;




·
            Changes
                in our business strategy, capital improvements or development
                plans;




·
            The
                availability of additional capital to support capital improvements
                and
                development; and




·
            Other
                risks identified in this report and in our other filings with the
                Securities and Exchange Commission or the
                SEC.




You
      should read this report completely and with the understanding that actual future
      results may be materially different from what we expect. The forward looking
      statements included in this report are made as of the date of this report and
      should be evaluated with consideration of any changes occurring after the date
      of this Report. We will not update forward-looking statements even though our
      situation may change in the future and we assume no obligation to update any
      forward-looking statements, whether as a result of new information, future
      events or otherwise.




**Use
      of Term**




Except
      as
      otherwise indicated by the context, references in this report to “Company,”
“ETEV,” “we,” “us” and “our” are references to the pre-merger business of Victor
      Industries, Inc. and post-merger business of Ethos Environmental, Inc.  All
      references to “USD” or “$” refer to the legal currency of the United States of
      America.





*Table
          of Contents*
 *4*


**PART
      I**





**Item
      1.    Description of
      Business**




***The
      Company***




Ethos
      Environmental manufactures and distributes an array of fuel reformulating
      products under the name *Ethos
      FR®* ,
      Ethos
      Fuel Reformulators. *Ethos
      FR®* is
      a
      unique line of fuel reformulators based on a blend of high quality, non-toxic,
      non-petroleum based esters. When added to any fuel, these specially designed
      esters add cleaning and lubricating properties. They make engines run more
      efficiently-smoother, cooler and cleaner. *Ethos
      FR®* improves
      the formula of commonly used fuels such as gasoline, diesel, methanol, ethanol,
      CNG or bio-diesel. Only the elements of carbon, hydrogen and oxygen are used
      in *Ethos
      FR®* products
      and are 99.9% clean upon ignition, ashless upon combustion and free of
      carcinogenic compounds.





Ethos
      seeks both a cleaner environment and economic success. As the name Ethos
      suggests, we are committed to the highest ethical standards - in the product
      that we sell, in the relationship with our clients, and in the conduct of our
      business. The Company’s approach is to sell *Ethos
      FR®* “one
      gallon at a time”, earning the trust and loyalty of each customer by providing
      products that perform as promised and make a positive difference in the
      world.




***Background***




Ethos
      Environmental, Inc. was originally incorporated under the laws of the State
      of
      Idaho on January 19, 1926 under the name of Omo Mining and Leasing Corporation.
      The Company was renamed Omo Mines Corporation on January 19, 1929. The name
      was
      changed again on November 14, 1936 to Kaslo Mines Corporation and finally Victor
      Industries, Inc. on December 24, 1977.





As
      Victor
      Industries, Inc., the Company developed, manufactured, and marketed products
      related to the use of the mineral known as zeolite. Zeolites have the unique
      distinction of being nature's only negatively charged mineral. Zeolites are
      useful for metal and toxic chemical absorbents, water softeners, gas absorbents,
      radiation absorbents and soil and fertilizer amendments.





On
      November 2, 2006, the Company completed a reverse acquisition transaction of
      Ethos Environmental, Inc., as described herein.





***Our
      Reverse Acquisition of Ethos***





On
      November 2, 2006, as part of a two-step reverse merger, the Company merged
      with
      and into Victor Nevada, Inc. a newly incorporated entity for the purpose of
      redomiciling under the laws of the State of Nevada. Concurrently therewith,
      we
      completed the merger transaction with Ethos Environmental, Inc., a privately
      held Nevada corporation “Ethos”). The Company was the surviving entity. To more
      adequately reflect the new direction of the Company the Company changed its
      name
      to Ethos Environmental, Inc. and adopted the business plan of Ethos.




**Acquisition**





On
      April
      20, 2006, Victor Industries, Inc., with the approval of its Board of Directors,
      executed an Agreement and Plan of Merger with San Diego, CA based Ethos
      Environmental, Inc., a Nevada corporation.





At
      a
      meeting of shareholders of the Company held on October 30, 2006, a majority
      of
      shareholders voted in favor of the merger. On November 2, 2006, the merger
      was
      consummated. As part of the merger, the Company redomiciled to Nevada, and
      changed its name to Ethos Environmental, Inc. In addition thereto, and as part
      of the merger, the Company set a record date of November 16, 2006 for a reverse
      stock split of 1 for 1,200.





The
      merger provides for a business combination transaction by means of a merger
      of
      Ethos with and into the Company, with the Company as the corporation surviving
      the merger. Under the terms of the merger, the Company acquired all issued
      and
      outstanding shares of Ethos in exchange for 17,718,187 shares of common stock
      of
      the Company. Shares of Company common stock, representing an estimated 97%
      of
      the total issued and outstanding shares of Company common stock, was issued
      to
      the Ethos stockholders. Ethos shareholders were able to exchange their shares
      beginning on or after November 16, 2006, the record date set for the reverse
      stock split.




*Table
          of Contents*
 *5*


The
      transaction between the Registrant and Ethos Environmental, Inc. is accounted
      for as a purchase transaction; that is, the transaction is equivalent to the
      issuance of shares by the Registrant for the net assets of Ethos
      Environmental, Inc. The shares issued by the Registrant were valued at $0.25
      per
      share, a value determined by management’s estimate of the dilution effect
      expected to occur from the issuance of such a large block of shares, i.e.
      17,718,187 shares of common stock. The net value recorded equals management’s
      estimate of the value of the acquired assets.


The
        merger was intended to qualify as a reorganization within the meaning of
        Section 368(a) of the Internal Revenue Code and no gain or loss will be
        recognized by the Company as a result of the merger.





The
      merger is accounted for under the purchase method of accounting as a reverse
      acquisition in accordance with U.S. generally accepted accounting principles
      for
      accounting and financial reporting purposes. Under this method of accounting,
      Ethos is treated as the “accounting acquirer” for financial reporting purposes.
      In accordance with guidance applicable to these circumstances, the merger was
      considered to be a capital transaction in substance. Accordingly, for accounting
      purposes, the merger was treated as the equivalent of Ethos issuing stock for
      the net monetary assets of the Company. The net monetary assets of the Company
      have been stated at their fair value.





In
      connection with the merger, Lana Pope and Dave Boulter voluntarily resigned
      from
      the board of directors of the Company on November 3, 2006.





Following
      such resignations, as a result of the merger, three persons became the Company’s
      board of directors: Enrique de Vilmorin, President, Chief Executive Officer,
      and
      Director, Jose Manuel Escobedo, Director and Secretary, and Luis Willars,
      Director and Treasurer.




A
      summary
      of the merger follows:





·
            The
                Company was the surviving legal
                corporation,


·
            The
                Company acquired all issued and outstanding shares of Ethos in exchange
                for 17,718,187 shares of common stock of the Company. Shares of Company
                common stock, representing an estimated 97% of the total issued and
                outstanding shares of Company common stock, was issued to the Ethos
                stockholders,


·
            The
                shareholders of the Company received pro rata for their shares of
                common
                stock of Ethos, 17,718,187 shares of common stock of the Company
                in the
                merger, and all shares of capital stock of Ethos were
                cancelled,


·
            The
                officers and directors of Ethos became the officers and directors
                of the
                Company,


·
            The
                name of Victor Industries, Inc. was changed to “Ethos Environmental,
                Inc.”, and


·
            Ethos
                requested a new symbol for trading on the Over the Counter Bulletin
                Board
                (“OTCBB”), which also reflects the reverse stock split of 1 for 1,200, the
                new symbol of the Company is
“ETEV.”





***Product***





Ethos
      manufactures a unique line of fuel reformulators that contain a blend of low
      and
      high molecular weight esters. *Ethos
      FR®* products
      add cleaning and lubricating qualities to any type of fuel or motor oil,
      allowing engines to perform cooler, smoother and with more vigor. The overall
      benefits are increased fuel mileage, reduced emissions, and reduced maintenance
      costs.





Ethos
      fuel reformulating products increase fuel mileage and reduce emissions by
      burning fuel more completely. Exhaust is essentially unburned fuel - wasted
      fuel
      - so when that fuel is used more completely, the engine delivers better mileage
      from every tank. Efficient fuel use also improves engine performance, because
      a
      more complete combustion process obtains increased power from every engine
      revolution.




*Table
          of Contents*
 *6*




*Ethos
      FR®* products
      reduce fuel emissions, benefiting the environment in two notable ways:





1.
            The
                use of*Ethos
                FR®*products reduce engine exhaust emissions by 30% or more, including
                measurable reductions in the emission of hydrocarbons (HC), nitrogen
                oxides (Nox), and carbon monoxide (CO). All of these emissions are
                highly
                toxic and detrimental to the
                environment.





2.
            *Ethos
                FR®*products reduce emissions of particulate matter, especially in
                diesel-powered engines. Diesel fuel is commonly dirty and maintaining
                a
                diesel engine in the prime condition necessary to reduce emissions
                is both
                expensive and time-consuming. As a result, diesel engines are a constant
                source of air contaminants. In most industrialized countries, including
                the U.S., diesel engines are one of the largest sources of air pollution.
                When*Ethos
                FR®*products are added to diesel fuel, the engine runs cleaner, smoother
                and
                cooler - significantly reducing sooty exhaust. Engines treated with*Ethos
                FR®*run with less friction, heat and noise. Fuel and lubricating systems,
                filters, tanks, and injectors last longer, reducing maintenance
                costs.





*Ethos
      FR®* products
      provide risk-free benefits with an economic gain to the client. Customers
      realize a monetary gain on fuel savings alone, with an average improvement
      in
      mileage between 7% and 19%, depending on the fuel (gasoline or diesel) and
      the
      vehicle used. Even greater savings are achieved with the significant increase
      in
      oil prices.




***T*** ***rademarks***





We
      own
      the following trademark(s) used in this document: Ethos FR®. Trademark rights
      are perpetual provided that we continue to keep the mark in use. We consider
      these marks, and the associated name recognition, to be valuable to our
      business.





***Air
      Quality Standards***





Ethos
      Environmental began the manufacturing and marketing of Ethos FR® products after
      ten years of successful product testing. During the early years, widespread
      public environmental concerns were only beginning to surface. Air quality
      standards were non-existent and fuel costs were low, making penetration of
      the
      market an uphill battle.





In
      recent
      years most of the improvements in air quality have come through advancements
      in
      engine technologies. Through catalytic converters and computer controlled air
      and fuel injection systems, engineers have designed cars that use fuel much
      more
      efficiently and pollute far less than ever before. But as new engine
      technologies have reached their limits, the government has turned its attention
      to the oil companies to produce cleaner-burning fuels.





The
      approach of Ethos Environmental is to sell Ethos FR® “one gallon at a time”,
      earning the respect and trust of each user. Over the past decade, the Ethos
      FR®
product has gone though millions of miles in road tests, and test after test
      has
      demonstrated the ability of Ethos FR® to significantly reduce emissions while
      improving gas mileage. Now, at a time of skyrocketing fuel costs, the value
      of
      Ethos FR® is paying off for a long list of domestic customers and a growing
      contingent of international clients.





***Market
      Research***





Air
      pollution caused by cars, trucks and other vehicles burning petroleum-based
      fuels is one of the most harmful and ubiquitous environmental problems.
      Furthermore, local accumulation in heavy traffic is the greatest source of
      community ambient exposure, largely because carbon monoxide is formed by
      incomplete combustion of carbon containing fuels.





Diesel
      exhaust is a major contributor of particulate matter concentrations.
      Representing only 2 percent of the vehicles on the road, diesel powered vehicles
      generate more than half of the particulates and nearly a third of the nitrogen
      oxides in the air, according to a study by the California Air Resources Board.
      Air pollution monitoring efforts by the American Lung Association indicate
      that
      diesel accounts for 70% of the cancer risk. Furthermore, pioneers in the study
      of global warming factors have come to believe that particulate matter, such
      as
      that emitted by diesel engines, plays a far more critical role in the
      development of the “greenhouse effect” than previously suspected.





*Table
          of Contents*
 *7*




To
      combat
      this problem the U.S. Environmental Protection Agency developed a two-step
      plan
      to significantly reduce pollution from new diesel engines. (New Emission
      Standards for Heavy-Duty Diesel Engines Used In Trucks and Buses) (October
      1997,
      EPA 420-F-97-016). The first step set new emissions standards for diesel engines
      beginning in 2000. The second step sets even more stringent emission standards
      that will take effect in 2007, combined with mandated reductions in the sulfur
      levels of all diesel fuel.





When
      blended with fuels, Ethos FR® products reduce the emissions of hydrocarbons
      (HC), nitrogen oxides (NOx) carbon monoxide (CO), particulate matter (PM) and
      other harmful compounds of combustion. Given these conditions, the commercial
      fuels consumer market represents an important target for Ethos Environmental.




**Competition**





The
      primary task for the Company is to distinguish itself as an industry leader
      in
      the reduction of fuel costs and emission problems at a profit gain to the
      commercial user. Part of the challenge before us is to differentiate Ethos
      FR®
from two types of products in this industry, additives - that are purported
      to
      increase fuel mileage and oxygenates - which are mandated to lower emissions.
      Both provide short-term benefits at the price of long-term engine or
      environmental problems.





Additives
      contain highly refined petrochemicals or compressed hydrocarbons that promise
      better fuel mileage and sometimes lower emissions, by “cleaning” the engine.
      Used mainly by individual consumers, they are expensive and commonly sold at
      the
      auto parts and retail stores. More than five thousand EPA-registered fuel
      additives compete in the retail market and although the EPA requires that such
      products be registered, that registration constitutes neither endorsement nor
      validation of the product’s claims.





Oxygenates,
      such as methyl tertiary butyl ether (MTBE) and Ethanol, are intended to lower
      emissions by adding oxygen to the fuel. Ethos FR® products actually complement
      federally mandated oxygenates by lowering emissions, but as mentioned earlier,
      Ethos FR® is not an oxygenate and cannot be used for the purpose of complying
      with current language federal legislation.





In
      contrast, Ethos FR® products have cleaning properties that contribute to the
      lubrication of the engine instead of destroying it. The ester-based formula
      dissolves the gums and residues and adds important lubrication that an engine
      needs. The engine stays clean and lubricated, allowing it to run smoothly and
      efficiently.





**Marketing
      Strategy**





Ethos
      FR®
products are ideally positioned to capitalize on increasing fuel prices and
      regulatory pressure to tighten emissions standards. Fuel is a significant
      operating cost for companies that use cars, trucks or vessel fleets in their
      daily business, especially where competitive markets make it difficult to pass
      along fuel increases. Every hike in the price of fuel hurts the profitability
      of
      that company. For these businesses, obtaining better mileage offers a crucial
      competitive edge, and the goal of Ethos Environmental is to help them maximize
      their fuel use and maintain profitability.





From
      its
      earliest days, Ethos has focused on the product demonstration as the most
      effective means of introducing Ethos FR® to potential users. During this
      demonstration phase, Ethos supplies product to treat a sample of the fleet
      at no
      cost to the client. It is vital that the customer understand and prove the
      effectiveness of Ethos FR® in their fleets. This demonstration phase will last
      as long as necessary to quantify the value and projected savings possible once
      the entire fleet is treated.




Through
      this demonstration process, we prove to each customer that they can realize
      the
      benefits of reduced emissions, smoother-running vehicles and lower maintenance
      costs at virtually no risk, because the reduction in fuel usage will more than
      cover the expense of using Ethos FR®. In fact, the addition of Ethos FR® will
      result in fuel savings beyond the cost of treatment, resulting in monetary
      gain
      to the user.





*Table
          of Contents*
 *8*




Commercial
      fleets vary in size from a few to thousands of vehicles. Such fleets generally
      produce immediate sales results because administrative requirements are minimal
      and the product demonstration phase is brief. Typically, a sample of the fleet
      is treated and the potential customer is quickly able to quantify the value
      and
      project the savings that the use of Ethos FR® will produce. Usually a fleet’s
      oldest and dirtiest vehicles, or vehicles out of warranty, are included in
      the
      demonstration. Such vehicles amplify the effectiveness of the products and
      help
      to ease any initial client objections regarding manufacturer warranties. Once
      the demonstration is underway, Ethos FR® products sell themselves, increasing
      fuel mileage between 7% and 19% and reducing emissions by more than 30%. Once
      the effectiveness of the product has been established, a conscientious
      customer-service program ensures continued use.





The
      Ethos
      Environmental strategy has been to approach each market from the perspective
      of
      the customer’s strongest motivation, whether to reduce fuel costs or reduce
      engine emissions. From a marketing standpoint, it is most cost-effective for
      Ethos Environmental to focus on commercial fuel users that keep track of
      maintenance and operating expenses. These consumers are more sensitive to
      pressures from rising fuel costs and more concerned about meeting emissions
      standards.





Rising
      fuel costs will always be a marketing advantage for Ethos. Higher fuel prices
      decrease the cost to treat each gallon of fuel; resulting in even greater
      savings to Ethos clients. The Company’s marketing strategy strengthens as the
      price of fuel increases. Even where cost savings are a client’s primary
      motivator, the use of Ethos FR® identifies the user as an environmentally
      conscientious business. It also creates goodwill within the community through
      the reduction of unhealthful and unsightly exhaust emissions.





**Target
      Markets**





***Domestic***





According
      to the American Petroleum Institute, the United States fuels consumer market
      is
      comprised of the following segments: retail consumer 27%, government agencies
      16%, ground fleets 14%, industrial users 10%, aircraft 9%, maritime 6%,
      miscellaneous 4%.





The
      Company’s typical customers use cars, trucks or vessels in their day-to-day
      operations. Fuel is a significant operating cost, and consequently these fleets
      are particularly sensitive to fuel price fluctuations and strict emissions
      standards. The ideal clients are those with fleet managers and are conscientious
      about keeping track of operating expenses. They understand that every hike
      in
      fuel price hurts their profitability, this being a critical factor wherever
      competitive markets make it difficult to pass on the price increases to their
      clients. Making it critical for businesses to obtain better mileage as a
      competitive advantage.





Maritime
      and government agencies are desirable for their large fuel volume use and
      industry credibility. They offer the Company medium to long-term sales, since
      the process requires a longer lead-time to close. The product demonstration
      phase and administrative requirements are generally more complex, particularly
      with large government institutions. At the same time, they offer large volume
      sales and a continual source of staged orders that promote production
      stability.




Marine
      vessels run on bunker fuel that is less refined than diesel. A mid-size ship
      will use more than half a ton per hour of operation, or 125 gallons of fuel
      per
      hour. For example, a mid-size vessel running on bunker on a typical trip to
      Japan from Los Angeles will require a half a ton per hour, or 180 tons. This
      represents a total of 45,000 gallons of fuel that requires 4,500 oz. (35
      gallons) of Ethos FR®. This vessel would use approximately one drum (55gals.) of
      Ethos FR® per month. Accordingly, maritime customers represent a large and solid
      client base.





Like
      the
      United States, countries all around the world are endeavoring to deal with
      the
      high costs of petroleum products and the detrimental effects of those products
      on the environment. The Company has found broad and enthusiastic acceptance
      of
      its Ethos FR® products globally. During the past three years, the Company has
      opened markets in Asia, Latin America, Canada and Europe, often dealing directly
      with government entities that possess the power to implement widespread use
      of
      Ethos FR® - whether in citywide public transportation systems or countrywide
      fuel distribution structures.





*Table
          of Contents*
 *9*




As
      with
      our domestic client base, international customers of Ethos FR® appreciate the
      benefits of improved mileage and reduced emissions. And in countries that lack
      the regulatory structures necessary to control vehicle emissions and fuel
      efficiency, the benefits of Ethos FR® are even more pronounced.





***Customers***





We
      have a
      very diversified customer list. Although we have many customers utilizing
      products, the broadly diversified base means there is no significant
      concentration in any industry. We derive revenue from our customers as discussed
      in Note 1, "Organization and Significant Accounting Policies: Revenue
      Recognition" of the consolidated financial statements. Two customers accounted
      for 88% of our revenues for the fiscal year ended December 31, 2006. One
      customer accounted for 40% and the second customer accounted for 48%. One of
      these customers accounted for 62% of our accounts receivable at December 31,
      2006.




***Supply
      Arrangements***





We
      presently obtain our raw materials on an exclusive basis from five (5)
      suppliers. However, these arrangements are not governed by any formal written
      contract. Accordingly, either party can terminate the arrangement at any time,
      including the exclusivity aspect of the arrangement. If this supplier is not
      able to provide us with sufficient quantities of the product, or chooses not
      to
      provide the product at all (for any reason), or if exclusivity is lost, business
      and planned operations could be adversely affected. Although management has
      identified alternate suppliers of the products, no assurance can be given that
      the replacement products will be comparable in quality to the product presently
      supplied to us by these companies, or that, if comparable, that it can be
      acquired under acceptable terms and conditions.




***Revenue
      and Fixed Assets***





Most
      of
      our revenue is generated in the United States through our San Diego, California
      office, and all of our fixed assets are located in the San Diego, California
      office.





***Vendors***





We
      maintain strong relationships with all of our vendors. We are not dependent
      upon
      any one vendor for our business.





***Governmental
      Regulation***





In
      the
      United States, fuel and fuel additives are registered and regulated pursuant
      to
      Section 211 of the Clean Air Act. 40 CFR Part 79 and 80 specifically relates
      to
      the registration of fuels and fuel additives. Typically, there are registration
      and regulation requirements for fuel additives in each country in which they
      are
      sold. In accordance with the Clean Air Act regulations at 40 CFR 79,
      manufacturers (including importers) of gasoline, diesel fuel and additives
      for
      gasoline or diesel fuel, are required to have their products registered by
      the
      EPA prior to their introduction into commerce.





However,
      EPA registered additives are derived from petroleum while Ethos FR® is a
      reformulator. Even though you “add it” to the fuel, Ethos FR® is not derived
      from petroleum and is non-toxic and non-hazardous and therefore not subject
      to
      governmental regulations. There could be unforeseen future changes to the
      registration requirements under the Clean Air Act and Ethos FR® may have to seek
      registration under such new requirements. In addition, we currently sell our
      product outside of the United States and intend to further expand our sales
      efforts internationally. We may need to seek registration in other countries
      for
      the Ethos FR® product.





At
      this
      time the Company is not aware of any present or pending rules or regulations
      that would require the Company to seek registration of the Ethos FR® product
      either domestically or internationally.





*Table
          of Contents*
 *10*




***Research
      and Development Costs***





Research
      and development costs are charged to operations when incurred and are included
      in operating expenses. The amounts charged for the years ended December 31,
      2006
      and 2005 amounted to $112,051 and $132,404, respectively. All of these costs
      are
      borne by the Company.





***Employees***





As
      of
      March 29, 2007, we had 25 full-time and 10 part-time employees.





***Available
      Information***




We
      file
      electronically with the Securities and Exchange Commission our annual reports
      on
      Form 10-KSB, quarterly reports on Form 10-QSB, and current reports on Form
      8-K,
      pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. 
You may obtain a free copy of our reports and amendments to those reports on
      the
      day of filing with the SEC by going to http://www.sec.gov.




**Item
      2.   Properties**




We
      are
      located at 6800 Gateway Park Drive San Diego, CA 92154. We own, approximately
      70,000 square feet of industrial space and manufacturing space. We purchased
      our
      current facility in 2006. It is our belief that the space is more than adequate
      for our immediate and future needs. The company is also still obligated to
      a
      long-term lease at its prior facility. Please see Note 5. “Operating Leases” in
      the consolidated financial statements.





**Item
      3.  Legal Proceedings**





We
      are
      not currently involved in any legal proceedings





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




None.




*Table
          of Contents*
 *11*





**PART
      II**




**Item
      5** .  **Market
      for the Common Equity and Related Stockholder Matters**




***Price
      Range of Our Common Stock***




Our
      shares of common stock are currently trading on the OTC Bulletin Board (“OTCBB.
      Prior to November 16, 2006, our trading symbol was “VICI.” On November 16, 2006,
      to reflect our new name and the 1 for 1,200 stock split, our trading symbol
      was
      changed to “ETEV”. The OTCBB is a regulated quotation service that displays
      real-time quotes, last-sale prices, and volume information in over-the-counter
      equity securities. An OTCBB equity security generally is any equity that is
      not
      listed or traded on NASDAQ or a national securities exchange. The reported
      high
      and low bid and ask prices for the common stock are shown below for the period
      from January 1, 2005 through December 31, 2006.




**Bid*****Low**
            
            **High**2005
                Fiscal YearJan
                - March 2005
            
            $
            6.00
            
            $
            18.00Apr
                - June 2005
            
            $
            7.20
            
            $
            12.00July
                - Sept 2005
            
            $
            3.00
            
            $
            32.40Oct
                - Dec 2005
            
            $
            6.00
            
            $
            22.802006
                Fiscal YearJan
                - Mar 2006
            
            $
            6.60
            
            $
            13.20Apr
                - June 2006
            
            $
            6.00
            
            $
            11.76July
                - Sept 2006
            
            $
            3.00
            
            $
            7.68Oct
                - Dec 2006
            
            $
            2.00
            
            $
            11.15






*All
      of
      the prices indicated in the table above reflect the reverse stock split, which
      became effective November 16, 2006.




***Because
      our common stock is subject to the SEC's penny stock rules, broker-dealers
      may
      experience difficulty in completing customer transactions, and trading activity
      in our securities may be adversely affected.***





Transactions
      in our common stock are currently subject to the "penny stock" rules promulgated
      under the Securities Exchange Act of 1934. Under these rules, broker-dealers
      who
      recommend our securities to persons other than institutional accredited
      investors must:




·
            make
                a special written suitability determination for the
                purchaser;




·
            receive
                the purchaser's written agreement to a transaction prior to
                sale;




·
            provide
                the purchaser with risk disclosure documents which identify certain
                risks
                associated with investing in "penny stocks" and which describe the
                market
                for these "penny stocks" as well as a purchaser's legal remedies;
                and




·
            obtain
                a signed and dated acknowledgment from the purchaser demonstrating
                that
                the purchaser has actually received the required risk disclosure
                document
                before a transaction in a "penny stock" can be
                completed.




As
      a
      result of these rules, broker-dealers may find it difficult to effectuate
      customer transactions and trading activity in our securities may be adversely
      affected. As a result, the market price of our securities may be depressed,
      and
      you may find it more difficult to sell our securities.





*Table
          of Contents*
 *12*




***Holders***




As
      of
      December 31, 2006, there were approximately 855 holders of record of our common
      stock.




***Dividends***




We
      have
      not paid any cash dividends on our common stock or preferred stock since
      inception and presently anticipate that all earnings, if any, will be retained
      for development of our business and that no dividends on our common stock or
      preferred will be declared in the foreseeable future. Any future dividends
      will
      be subject to the discretion of our Board of Directors and will depend upon,
      among other things, future earnings, operating and financial condition, capital
      requirements, general business conditions and other pertinent facts. Therefore,
      there can be no assurance that any dividends on our common stock or preferred
      stock will be paid in the future.




***Securities
      Authorized for Issuance Under Equity Compensation
      Plans***




On
      November 20, 2006, the board of directors adopted the 2006 Stock Incentive
      Plan
      or the 2006 Plan. The 2006 Plan reserves 3,500,000 shares of our common stock
      for issuance in connection with stock options, stock awards and other
      equity-based awards to be granted under the 2006 Plan.




***Recent
      Sales of Unregistered Securities***




None
      (other than in connection with the merger described herein).





**Item
      6. Management's Discussion and Analysis or Plan of
      Operation.**





*The
      following discussion should be read in conjunction with our audited financial
      statements and notes thereto included herein. In connection with, and because
      we
      desire to take advantage of, the “safe harbor” provisions of the Private
      Securities Litigation Reform Act of 1995, we caution readers regarding certain
      forward looking statements in the following discussion and elsewhere in this
      report and in any other statement made by, or on our behalf, whether or not
      in
      future filings with the Securities and Exchange Commission. Forward-looking
      statements are statements not based on historical information and which relate
      to future operations, strategies, financial results or other developments.
      Forward looking statements are necessarily based upon estimates and assumptions
      that are inherently subject to significant business, economic and competitive
      uncertainties and contingencies, many of which are beyond our control and many
      of which, with respect to future business decisions, are subject to change.
      These uncertainties and contingencies can affect actual results and could cause
      actual results to differ materially from those expressed in any forward looking
      statements made by, or our behalf. We disclaim any obligation to update
      forward-looking statements.*




***Overview***




The
      mission of Ethos Environmental is to be recognized as the industry standard
      for
      high quality, non-toxic cleaning and lubricating products that increase fuel
      mileage and reduce emissions.





Ethos’
      customers exist everywhere that budgets are affected by the rising cost of
      fuel
      and where solutions are sought for the pervasive ills of air pollution. Our
      customers are motivated both by cost savings and environmental concerns, and
      it
      is our mission to provide products to meet their needs, risk free, and at an
      economic gain to every client.





It
      is our
      goal to build on our success in the domestic U.S. market and continue to grow
      internationally, offering the benefits of our products to companies and
      countries around the world.





*Table
          of Contents*
 *13*




***Our
      Corporate History***





We
      were
      originally incorporated under the laws of the State of Idaho on January 19,
      1926
      under the name of Omo Mining and Leasing Corporation. The Company was renamed
      Omo Mines Corporation on January 19, 1929. The name was changed again on
      November 14, 1936 to Kaslo Mines Corporation and finally Victor Industries,
      Inc.
      on December 24, 1977.





As
      Victor
      Industries, Inc., the Company developed, manufactured, and marketed products
      related to the use of the mineral known as zeolite. Zeolites have the unique
      distinction of being nature's only negatively charged mineral. Zeolites are
      useful for metal and toxic chemical absorbents, water softeners, gas absorbents,
      radiation absorbents and soil and fertilizer amendments.





In
      November of 2006, and as part of a two-step reverse merger, the Company merged
      with and into Victor Nevada, Inc. a newly incorporated entity for the purpose
      of
      redomiciling under the laws of the State of Nevada. Concurrently therewith,
      we
      completed the merger transaction with Ethos Environmental, Inc., a privately
      held Nevada corporation “Ethos”). The Company was the surviving entity. To more
      adequately reflect the new direction of the Company the Company changed its
      name
      to Ethos Environmental, Inc. and adopted the business plan of Ethos.





The
      proposed merger was submitted to the shareholders of Victor Industries, Inc.
      pursuant to a Proxy Statement first filed with the Commission on March 25,
      2006.
      As fully described in the Company’s Form 8-K filed on November 11, 2006 with the
      Commission, the shareholders of the Company and Ethos approved the merger,
      and
      the merger was legally effected on November 2, 2006.





Pursuant
      to the agreement of merger between the Company and Ethos,





·
            The
                Company was the surviving
                corporation,


·
            The
                Company acquired all issued and outstanding shares of Ethos in exchange
                for 17,718,187 shares of common stock of the Company. Shares of Company
                common stock, representing an estimated 97% of the total issued and
                outstanding shares of Company common stock, shall be issued to the
                Ethos
                stockholders,


·
            The
                shareholders of Concierge received pro rata for their shares of common
                stock of Ethos, 17,718,187 shares of common stock of the Company
                in the
                merger, and all shares of capital stock of Ethos were
                cancelled,


·
            The
                officers and directors of Ethos became the officers and directors
                of the
                Company,


·
            The
                name of Victor Industries, Inc. was changed to “Ethos Environmental,
                Inc.”, and


·
            Ethos
                requested a new symbol for trading on the Over the Counter Bulletin
                Board
                (“OTCBB”), which also reflects the reverse stock split of 1 for 1,200, the
                new symbol of the Company is
“ETEV.”




***Business
      Description***





Ethos
      Environmental manufactures and distributes an array of fuel reformulating
      products under the name *Ethos
      FR®* ,
      Ethos
      Fuel Reformulators. *Ethos
      FR®* is
      a
      unique line of fuel reformulators based on a blend of high quality, non-toxic,
      non-petroleum based esters. When added to any fuel, these specially designed
      esters add cleaning and lubricating properties. They make engines run more
      efficiently smoother, cooler and cleaner. *Ethos
      FR®* improves
      the formula of commonly used fuels such as gasoline, diesel, methanol, ethanol,
      CNG or bio-diesel. Only the elements of carbon, hydrogen and oxygen are used
      in *Ethos
      FR®* products
      and are 99.9% clean upon ignition, ashless upon combustion and free of
      carcinogenic compounds.





Over
      the
      last decade, the unmatched value of *Ethos
      FR®* products
      has been proven through millions of miles of on-the-road testing. On average,
      customers have achieved a 7% to 19% increase in fuel mileage, and more than
      a
      30% reduction in emissions.





Ethos
      seeks both a cleaner environment and economic success. As the name Ethos
      suggests, we are committed to the highest ethical standards - in the product
      that we sell, in the relationship with our clients, and in the conduct of our
      business. The Company’s approach is to sell *Ethos
      FR®* “one
      gallon at a time”, earning the trust and loyalty of each customer by providing
      products that perform as promised and make a positive difference in the
      world.





*Table
          of Contents*
 *14*
 
  ***PLAN
        OF OPERATIONS FOR THE NEXT TWELVE MONTHS***





Since
      inception in 2000, Ethos Environmental has grown its customer base to thousands
      of diverse clients in over 15 countries worldwide, using the most effective
      sales tool possible - a product that works! In addition to an effective and
      desirable product, the company’s success also derives from the careful
      development and tenacious implementation of a structured “proof-of-concept”
marketing strategy.





Throughout
      this “proof-of-concept” sales and marketing phase, gross sales for Ethos
      Environmental have consistently exceeded forecasts, reaching more than $1.78
      million by the end of 2005, and $4.77 million by the end of 2006. Even more
      significant growth is anticipated for 2007, with sales in established markets
      in
      the U.S., China, Ecuador and Europe expected to top current forecasts.
      Furthermore, market implementation plans anticipate growth in 2007 and beyond,
      leading to gross multi million sales in 2008. These projections are based on
      the
      product’s proven ability to improve fuel efficiency while reducing emissions,
      the Company’s proven ability to penetrate new markets and build a solid base of
      loyal customers, and the world’s increasing costs in the petro-economic markets.





Looking
      forward, marketing will constitute a significant portion of company expenditures
      as Ethos Environmental continues to develop sales of new ester-based fuel and
      engine enhancing products. We are in the process of developing new products
      covering areas of synthetic oils, sulfur substitutes, and varied formulations
      of
      the original *Ethos
      FR®* and its
      enhancements.





In
      addition, we will continue to initiate patents to cover ongoing development
      of a
      new engine design that combines past, present and state-of-the-art technologies.
      This new system generates rotary shaft power using only a fraction of the fuel
      consumed by today’s internal combustion engines, and testing has yielded power
      output that rivals current technologies with just a fraction of the emissions.
      We have great hope that this project will revolutionize power generation as
      we
      know it, significantly easing pollution from the usage of fossil
      fuels.





The
      management of Ethos Environmental is excited by the enthusiastic acceptance
      that *Ethos
      FR®* products
      have received - domestically and all around the world. We are proud to provide
      a
      product that is part of the solution to the high cost of fuel and the health
      costs of environmental pollutants. Since inception management has been focused
      on the development of a solid infrastructure, building relationships and
      establishing the foundation of a business that will continue to grow - non-stop
      - into the future.




***Results
      of Operations***





The
      following financial data compares the balances as relates to Ethos
      Environmental, Inc. for the fiscal years ended December 2006 and 2005.




***Revenues***





We
      recognized revenues of $4,768,013 for the year ended December 31, 2006 compared
      to revenues of $1,780,825 for the year ended December 31, 2005, an increase
      of
      $2,987,188 or 168%. The primary source of revenue for the years ended December
      31, 2006 is from the sale of Ethos FR®.





We
      expect
      our tremendous growth to continue as sales increase and the sales and marketing
      strategies are implemented into the targeted markets and we create an
      understanding and awareness of our technology through proof of performance
      demonstrations with potential customers.





Our
      future growth is significantly dependent upon our ability to generate sales.
      Our
      main priorities relating to revenue are: (1) increase market awareness of Ethos
      FR® product through our sales and marketing plan, (2) growth in the number of
      customers and vehicles per customer, and (3) providing extensive customer
      service and support.





*Table
          of Contents*
 *15*




***Gross
      Profit***





Gross
      profit, defined as revenues less cost of goods sold, was $3,427,878 or 72%
      of
      sales for the year ended December 31, 2006, compared to $1,254,366 or 70% of
      sales for the year ended December 31, 2005. In terms of absolute dollars, gross
      profit increased 173% for the 2006 calendar year compared to the 2005 calendar
      year due primarily to the sales of the Ethos FR® product.





Cost
      of
      goods sold was $1,340,135 for the 2006 calendar year, which represented 28%
      of
      revenues compared to $526,459 for the 2005 calendar year, which represented
      30%
      of revenues.




***Operating
      Expenses***




Our
      current operating expenses are comprised of costs associated with
      administrative, salary, marketing, legal and business development. We will
      have
      additional operating expenses for additional staff members as they are hired.
      We
      have allocated funds in our capital structure for our current expenses.





General
      & Administrative expenses incurred during the year ended December 31, 2006
      totaled $5,346,409. These expenses were incurred primarily for the following
      reasons:





Legal
      fees of approximately $ 136,598


Accounting,
      audit, bookkeeping and director fees totaling $ 57,676


Business
      consulting fees of $ 4,862,976


Outside
      Services of $159,749


Office
      expenses of $ 129,410





Similar
      expenses incurred for the year ended December 31, 2005 were $1,821,160 and
      were
      incurred primarily for consulting services of a similar nature.




Also,
      for
      comparison purposes, there were 4,910,000 newly issued shares for the payment
      of
      services during the year ended December 31, 2006, compared to 5,108,190 shares
      issued for cash during the year ended December 31, 2005.





***Research
      and Development Costs***





Research
      and development costs are charged to operations when incurred and are included
      in general and administrative expenses. The amounts expensed for the years
      ended
      December 31, 2006 and 2005 amounted to $112,051 and $132,404,
      respectively.





***Net
      Loss***





We
      incurred a net loss for the year ended December 31, 2006 of $6,490,113 as
      compared to a net loss of $1,051,637 for the comparable prior year period.





***NON-OPERATING
      INCOME AND EXPENSES*** ******





Non-operating
      income, net of expenses, increased in the year ended December 31, 2006 versus
      2005, due to the settlement of a substantial amount due to one of our vendors.
      Interest expense increased to $620,244 during the 12 months ended December
      31,
      2006 from $0 in 2005. The interest was directly associated with the
      interest-only loan for $4,750,000, related to the purchase of our new building.
      Other expenses increased to $58,931 in 2006 versus none in
      2005.





*Table
          of Contents*
 *16*




***Liquidity
      and Capital Resources***





On
      December 31, 2006, we had a working capital of $49,801 and stockholders’ equity
      of $6,096,938 compared to a working capital deficit of $405,752 and
      stockholders’ equity of $610,392 on December 31, 2005.





On
      December 31, 2006, the Company had $64,867 in cash and $300,000 in restricted
      cash, total assets of $11,920,143 and total liabilities of $5,823,205, compared
      to $198,498 in cash and $300,000 in restricted cash, total assets of $-1,446,212
      and total liabilities of $793,395 on December 31, 2005.





We
      anticipate, based on currently proposed plans and assumptions relating to our
      operations, that our current cash and cash equivalents together with projected
      cash flows from operations and projected revenues will be sufficient to satisfy
      our contemplated cash requirements for the next 12 months. Our contemplated
      cash
      requirements for 2007 and beyond will depend primarily upon the level of sales
      of our products, inventory levels, product development, sales and marketing
      expenditures and capital expenditures.





Management
      of the Company has undertaken steps as part of a plan with the goal of
      sustaining the Company operations for the next twelve months and beyond. These
      steps include: (a) attempting to raise additional capital and/or other forms
      of
      financing; (b) controlling overhead and operating expenses; and (c) continuing
      to increase the sales of its fuel reformulating product. There can be no
      assurance that any of these efforts will be successful.





**Loan
      Facilities**




On
      February 7, 2007, we entered into an equipment lease agreement with Mazuma
      Capital Corp. wherein the Company agreed to a 24-month sale and leaseback
      arrangement for up to $800,000 of its manufacturing equipment. The lease calls
      for a monthly payment based on a factor of .04125 times the average outstanding
      loan balance during the month. Through March 29, 2007, the company has placed
      property valued at $737,968 under this lease arrangement with Mazuma Capital
      Corp.




Inflation
      has not significantly impacted the Company’s operations.





***Off-Balance
      Sheet Arrangements***




We
      do not
      have any off-balance sheet arrangements that have or are reasonably likely
      to
      have a current or future effect on our financial condition, changes in financial
      condition, revenues or expenses, results of operations, liquidity, capital
      expenditures or capital resources that are material to our investors.




***Critical
      Accounting Policies***





The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make a wide variety of estimates
      and assumptions that affect (i) the reported amounts of assets and liabilities
      and disclosure of contingent assets and liabilities as of the date of the
      financial statements, and (ii) the reported amounts of revenues and expenses
      during the reporting periods covered by the financial statements. Our management
      routinely makes judgments and estimates about the effect of matters that are
      inherently uncertain. As the number of variables and assumptions affecting
      the
      future resolution of the uncertainties increases, these judgments become even
      more subjective and complex. The most significant accounting policies that
      are
      most important to the portrayal of our current financial condition and results
      of operations are as follows:




***Revenue
      Recognition***




The
      Company recognizes revenue in accordance with Securities and Exchange Commission
      Staff Accounting Bulletin No. 104 (“SAB 104”), “Revenue Recognition in Financial
      Statements”. Revenue consists of the sale of products and is recognized only
      when the price is fixed or determinable, persuasive evidence of an arrangement
      exists, the product is shipped, and collectability is reasonably assured.




***Acquired
      Goodwill***




Goodwill
      represents the excess of the purchase price of acquired assets over the fair
      values of the identifiable assets acquired and liabilities assumed. Pursuant
      to
      SFAS No. 141, “Business Combinations” the Company does not amortize goodwill,
      but tests for impairment of goodwill on an annual basis and at any other time
      if
      events occur or circumstances indicate that the carrying amount of goodwill
      may
      not be recoverable. Circumstances that could trigger an impairment test include
      but are not limited to: a significant adverse change in the business climate
      or
      legal factors; an adverse action or assessment by a regulator; unanticipated
      competition and loss of key personnel. Goodwill is tested for impairment using
      present value techniques of estimated future cash flows; or using valuation
      techniques based on multiples of earnings. If the carrying amount of goodwill
      exceeds the implied fair value of that goodwill, an impairment loss is charged
      to operations.




***Customer
      Relationships***




The
      Company used the replacement cost approach for accounting for customer
      relationships. This approach uses an estimate of what a notional purchaser
      would
      likely pay for the intangible asset in order to be in the same position of
      the
      Company at the date of the closing of the Asset Purchase Agreement described
      above in “Acquired Goodwill”.




*Table
          of Contents*
 *17*





**REPORT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
 
 
 To
        the
        Board of Directors
 Ethos
        Environmental, Inc.
 San
        Diego, CA
 
 We
        have
        audited the accompanying consolidated balance sheet of Ethos Environmental,
        Inc., ("the Company") as of December 31, 2006, and the related consolidated
        statements of operations, stockholders' equity, and cash flows for the years
        ended December 31, 2006 and 2005. These consolidated financial statements
        are the responsibility of the Company's management. Our responsibility is
        to
        express an opinion on these consolidated financial statements based on our
        audits.
 
 We
        conducted our audits in accordance with the standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audit to obtain reasonable assurance about whether the financial
        statements are free of material misstatement. The Company has determined
        that it
        is not required to have, nor were we engaged to perform, an audit of its
        internal control over financial reporting. Our audit included consideration
        of
        internal control over financial reporting as a basis for designing audit
        procedures that are appropriate in the circumstances, but not for the purpose
        of
        expressing an opinion on the effectiveness of the Company's internal control
        over financial reporting. Accordingly, we express no such opinion. An audit
        includes examining, on a test basis, evidence supporting the amounts and
        disclosures in the financial statements. An audit also includes assessing
        the
        accounting principles used and significant estimates made by management,
        as well
        as evaluating the overall financial statement presentation. We believe that
        our
        audits provide a reasonable basis for our opinion.
 
 In
        our
        opinion, the consolidated financial statements referred to above present
        fairly,
        in all material respects, the financial position of Ethos Environmental,
        Inc.,
        as of December 31, 2006, and the results of its operations and its cash
        flows for the years ended December 31, 2006 and 2005, in conformity with
        accounting principles generally accepted in the United States.
 
 The
        accompanying consolidated financial statements have been prepared assuming
        the
        Company will continue as a going concern. As discussed in Note 1 to the
        consolidated financial statements, the Company has experienced recurring
        losses
        from operations. This raises substantial doubt about the Company's ability
        to
        continue as a going concern. Management's plans regarding this matter are
        also
        described in Note 1. The financial statements do not include any
        adjustments that might result from the outcome of this uncertainty.
 
 /S/
        PETERSON SULLIVAN PLLC
 
 Seattle,
        Washington
 April 15,
        2007





*Table
          of Contents*
 *18*




**Item
      7.    Financial
      Statements**





**ETHOS
      ENVIRONMENTAL, INC.**


**CONSOLIDATED
      BALANCE SHEET**





ASSETS
            
            December
                31,
              2006
              -------------------CURRENT
                ASSETS:Cash
            
            $
                64,867Restricted
                Cash
            
            300,000Accounts
                Receivable (Net )
            
            327,324Inventory
            
            410,915Other
                Current Assets
            
            19,900
              ----------------Total
                Current Assets
            
            $
                1,123,006Property
                and Equipment, Net
            
            6,380,308Goodwill
            
            2,411,103Customer
                List, Net
            
            1,934,036Other
                Assets
            
            5,000--------------Total
                Assets
            
            $
                11,853,453
              ========





LIABILITIES
      AND SHAREHOLDERS’ EQUITY





LIABILITIES:





CURRENT
                LIABILITIES:Accounts
                Payable
            
            $
                503,898Accrued
                Expenses
            
            101,488Notes
                Payable
            
            5,167,819Note
                Payable Related Party
            
            50,000
              ----------------Total
                Current Liabilities
            
            5,823,205---------------SHAREHOLDERS’
                EQUITY:Common
                Stock, $.001 par value; 100,000,000
              shares
                authorized; 23,107,687 issued and
              outstanding
            
            2,311Additional
                Paid-in Capital
            
            15,961,204Accumulated
                Deficit
            
            (9,933,267)
              ------------------Total
                Shareholders’ Equity
            
            6,030,248
              ----------------Total
                Liabilities and Shareholders’ Equity
            
            $
                11,853,453
              ==========





See
      notes
      to consolidated financial statements.




*Table
          of Contents*
 *19*




**ETHOS
      ENVIRONMENTAL, INC.**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**For
      the Years Ended December 31, 2006 and 2005**


2006
              
              2005Revenues
              $
                  4,768,013
              $
                  1,780,825Cost
                  of Sales
              1,340,135
                --------------
              526,459
                ---------------Gross
                  Profit
              3,427,878
              1,254,366Operating
                  Expenses:Selling
                  Expenses
                General
                  and Administrative
                
                Total
                  Operating Expenses
              4,689,910
                5,346,409
                -------------
                10,036,319
                -------------
              483,953
                1,821,160
                -------------
                2,305,113
                ------------Operating
                  Loss
              (6,608,441)
              (1,050,747)Other
                  Income
                Interest
                  Expense
                Other
                  Expense
              730,813
                (620,244)
                (58,931)
                --------------
              0
                (890)
                0
                -------------Net
                  Loss
              $
                  (6,556,803)
                ========
              $
                  (1,051,637)
                ========Net
                  Loss per Common Share
              $
                  (6.83)
              $
                  (5.38)Weighted
                  average shares used in per share calculation (basic and fully
                  diluted)
              960,685
              195,504


See
      notes
      to consolidated financial statements.





*Table
          of Contents*
 *20*








**ETHOS
                ENVIRONMENTAL, INC.**CONSOLIDATED
                STATEMENTS OF STOCKHOLDERS' EQUITYFor
                the Years Ended December 31, 2006 and 2005Common
                Stock
            
            Additional
                Paid-in CapitalNumber
                of Shares
            
            Amount
            
            
            Accumulated
                Deficit
            
            TotalBalance
                at December 31, 2004 as restated
            17,609,287
            
            $
                17,610
            
            $
                3,793,046
            
            $(2,324,827)
            
            $1,485,829Common
                stock issued for cash
            5,108,190
            
            5,108
            
            171,092
            
            
            
            176,200Net
                loss
            
            
            
            
            
            
            (1,051,637)
            
            (1,051,637)Balance
                at December 31, 2005 as restated
            22,717,477
            
            22,718
            
            3,964,138
            
            (3,376,464)
            
            610,392Common
                stock repurchased
            
            (5,000,000)
            
            (5,000)
            
            (45,000)
            
            
            
            (50,000)Capital
                contribution
            
            
            
            
            
            45,000
            
            
            
            45,000Shares
                cancelled as part of reverse acquisition
            
            (17,717,477)
            
            (17,718)
            
            
            
            
            
            (17,718)Common
                Stock issued to effect reverse acquisition
            
            17,718,187
            
            1,772
            
            4,427,775
            
            
            
            4,429,547Effects
                of Reverse acquisition
            
            479,500
            
            48
            
            (11,208)
            
            
            
            (11,160)Common
                stock issued for services
            4,910,000
            
            491
            
            7,580,499
            
            
            
            7,580,990Net
                Loss
            
            
            
            
            
            
            
            (6,556,803)
            
            (6,556,803)Balance
                at December 31, 2006
            
            23,107,687
            
            $2,311
            
            $15,961,204
            
            ($9,933,267)
            
            $6,030,248








See
      notes
      to consolidated financial statements.


*Table
          of Contents*
 *21*





**ETHOS
      ENVIRONMENTAL, INC.**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**For
      the Years Ended December 31, 2006 and 2005**


2006
              -----------
            2005
              ------------Cash
                Flows from Operating ActivitiesNet
                Loss
            $
                (6,556,803)
            $
                (1,051,637)Adjustments
                to Reconcile net Loss to net Cash provided by (used in) operating
                activitiesCommon
                Stock Issued for Expenses
            7,580,990
            0Depreciation
            292,096
            83,209Amortization
            66,690
            0Changes
                in allowance for bad debts
              Changes
                in Operating Assets and Liabilities
            (450,297)
            527,847Accounts
                Receivable
            413,030
            (451,030)Inventory
            (151,351)
            (200,816)Other
                assets
            67,209
            (10,000)Accounts
                Payable
            (246,658)
            567,575Accrued
                Expenses
            10,929
            90,559-------------
            --------------Net
                Cash Provided by (used in) Operating Activities
            1,025,835
              -------------
            (444,293)
              --------------Cash
                Flows from Investing ActivitiesBuilding
                Deposit
            0
            (200,000)Purchase
                of Property and Equipment
            (6,359,874)
            (101,549)Cash
                Received from Acquisition
            589
            0------------
            -----------Net
                Cash Used in Investing Activities
            (6,359,285)
              -----------
            (301,549)
              -----------Cash
                Flows from Financing ActivitiesProceeds
                from Note Payable
              Proceeds
                from Related Party Note Payable
            5,167,819
              50,000
            11,003
              0Repayment
                of Note Payable
              Repurchase
                of Common Stock
              Proceeds
                from Common Stock sales
            (13,000)
              (50,000)
              0
            0
              0
              176,200Proceeds
                from Capital Contributions
            45,000
              -----------
            0
              -----------Net
                Cash Provided by Financing Activities
            5,199,819
              ----------
            187,203
              ----------Net
                Change in Cash and Cash Equivalents
            (133,631)
            (558,639)Cash
                at Beginning of Period
            498,498
              -------------
            1,057,137
              --------------Cash
                at End of Period
            $
                364,867
              ========
            $
                498,498
              ========Reconciliation
                to Balance Sheet Presentation:Cash
            $
                64,867
            $
                198,498Restricted
                Cash
            300,000
              --------------
            300,000
              --------------$
                364,867
              ========
            $
                498,498
              ========








See
      notes
      to consolidated financial statements.




*Table
          of Contents*
 *22*








**Supplemental
                Disclosure of Non-Cash Investing Activities:****2006**Acquisition
                of Ethos Environmental, Inc.:Accounts
                Receivable acquired
            $
            48,972Accounts
                Payable assumed
            
            (60,720)Goodwill
                acquired
            
            2,411,103Customer
                List acquired
            
            2,000,726Common
                stock issued for acquisition net of shares cancelled and effects
                of
              Reverse
                acquisition, net of cash acquired
            
            (4,400,669)





*Table
          of Contents*
 *23*




**NOTES
      TO FINANCIAL STATEMENTS**




**Note
      1. Organization and Significant Accounting Policies**





**Organization**





Ethos
      Environmental, Inc. ("the Company") manufactures and distributes fuel
      reformulating products that increase fuel mileage, reduce emissions, and
      maintain lower fuel costs. The Company is based in Southern California and
      sells
      its product, primarily in the United States, Latin America and Asia.





**Acquisition**





On
      April
      20, 2006, Victor Industries, Inc., with the approval of its Board of Directors,
      executed an Agreement and Plan of Merger with San Diego, CA based Ethos
      Environmental, Inc., a Nevada corporation.





At
      a
      meeting of shareholders of the Company held on October 30, 2006, a majority
      of
      shareholders voted in favor of the merger. On November 2, 2006, the merger
      was
      consummated. As part of the merger, the Company redomiciled to Nevada, and
      changed its name to Ethos Environmental, Inc. In addition thereto, and as part
      of the merger, the Company set a record date of November 16, 2006 for a reverse
      stock split of 1 for 1,200. All of the per share data in these consolidated
      financial statements are presented on a post-split basis.





The
      merger provides for a business combination transaction by means of a merger
      of
      Ethos with and into the Company, with the Company as the corporation surviving
      the merger. Under the terms of the merger, the Company acquired all issued
      and
      outstanding shares of Ethos in exchange for 17,718,187 shares of common stock
      of
      the Company. Shares of Company common stock, representing an estimated 97%
      of
      the total issued and outstanding shares of Company common stock, was issued
      to
      the Ethos stockholders. Ethos shareholders were able to exchange their shares
      beginning on or after November 16, 2006, the record date set for the reverse
      stock split.





The
      transaction between the Company and Ethos Environmental, Inc. is accounted
      for
      as a purchase transaction; that is, the transaction is equivalent to the
      issuance of shares by the Registrant for the net assets of Ethos
      Environmental, Inc. The shares issued by the Registrant were valued at $0.25
      per
      share, a value determined by management’s estimate of the dilution effect
      expected to occur from the issuance of such a large block of shares, i.e.
      17,718,187 shares of common stock. The net value recorded equals management’s
      estimate of the value of the acquired assets.





The
      merger was intended to qualify as a reorganization within the meaning of
      Section 368(a) of the Internal Revenue Code and no gain or loss will be
      recognized by the Company as a result of the merger.





The
      merger is accounted for under the purchase method of accounting as a reverse
      acquisition in accordance with U.S. generally accepted accounting principles
      for
      accounting and financial reporting purposes. Under this method of accounting,
      Ethos is treated as the “accounting acquirer” company for financial reporting
      purposes. Accordingly the operations of the company are included in these
      financial statements as of November 2, 2006. In accordance with guidance
      applicable to these circumstances, the merger was considered to be a capital
      transaction in substance. Accordingly, for accounting purposes, the merger
      was
      treated as the equivalent of Ethos issuing stock for the net monetary assets
      of
      the Company. The net monetary assets of the Company have been stated at their
      fair value.





The
      terms
      of the acquisition included the Company's issuance of 17,718,187 shares of
      common stock to the shareholders of Ethos. Upon the Company’s issuance of the
      17,718,187 shares, Ethos cancelled its 17,717,477 shares of common stock issued
      and outstanding. Since this was accounted for as a reverse acquisition, the
      Company is the legal acquirer while Ethos is the accounting acquirer.
      Accordingly, the financial statements present the activities of Ethos while
      the
      stock issued and outstanding is that of the Company. The effects of the reverse
      acquisition accounting is reflected in the consolidated statement of
      stockholders’ equity.





*Table
          of Contents*
 *24*




As
      part
      of the reverse acquisition, the prior activities of the Company were
      discontinued. No discontinued operations are presented in these financial
      statements since no expenses or revenue were incurred after November 2, 2006
      related to these operations.





The
      Company agreed to acquire Ethos Environmental, Inc. because of its anticipated
      future growth in a marketplace that is in strong demand for its product, and
      it
      was believed that the acquisition would benefit the existing shareholders of
      both companies. Valuation of the Ethos Environmental, Inc. working capital
      approximated $4,412,000, or $0.25 per share of issued common stock. The fair
      valuation of the purchase was determined to be $4,412,000 of which $2,000,700
      was attributable to the value of the Customer List and the remainder to
      Goodwill.





The
      following unaudited pro forma financial information presents the operations
      of
      Victor Industries, Inc. ("the Company") and Ethos Environmental, Inc. ("Ethos")
      as if the acquisition had occurred on January 1, 2006 and 2005, respectively.
      This pro forma data is presented for informational purposes only and is not
      necessarily indicative of what the results of operations would have been had
      the
      acquisition been completed the acquisition at the date indicated. In addition,
      the unaudited pro forma condensed combined statement of operations does not
      purport to project the future operating results of the combined company. The
      balance sheet information is not presented since the two companies are
      consolidated at December 31, 2006.








**Pro-forma
                Information (Unaudited)**2006
            
            2005Revenues
            
            
            
            $
                4,768,013
            
            $
                1,785,210Net
                Loss
            
            
            
            (7,175,207)
            
            (1,705,951)Loss
                per share, Basic and Diluted
            
            
            
            
            
            $
                (7.47)
            
            $
                (8.74)Weighted
                number of shares outstanding
            
            
            
            
            
            960,685
            
            195,204








**Going
      Concern**





The
      Company has incurred significant losses from operations in the last two years.
      The Company's ability to continue as a going concern is in substantial doubt
      and
      is dependent upon obtaining additional financing and/or achieving a sustainable
      profitable level of operations.





Management
      of the Company has undertaken steps as part of a plan with the goal of
      sustaining the Company operations for the next twelve months and beyond. These
      steps include: (a) attempting to raise additional capital and/or other forms
      of
      financing; (b) controlling overhead and operating expenses; and (c) continuing
      to increase the sales of its fuel reformulating product. There can be no
      assurance that any of these efforts will be successful.




**Principles
      of Consolidation**





These
      consolidated financial statements include the accounts of the Company and its
      wholly owned subsidiary. All material inter-company accounts have been
      eliminated in consolidation.





*Table
          of Contents*
 *25*




**Use
      of Estimates**





The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States requires management to make estimates
      and assumptions that affect certain reported amounts and disclosures. Actual
      results could differ from the estimated amounts.





**Cash**





Cash
      includes a payroll account and an operating checking account held at a financial
      institution. The Company's cash balances exceed federally insured limits from
      time to time.





Restricted
      cash consists of a deposit made in August 2005 that is being held in a bank
      in
      Beijing, China. This deposit is required by the government of China and must
      be
      held in the account a minimum of eighteen months in order for the Company to
      conduct business in China.





**Accounts
      Receivable**





Accounts
      receivable are stated at their principal balances, do not bear interest and
      are
      generally unsecured. Management considers all balances over 30 days old to
      be
      past due. However, if credit is extended management conducts a periodic review
      of the collectability of its accounts receivable. If an account is determined
      to
      be uncollectible based on historical experience and the current economic
      climate, an allowance is established and the account is written off against
      the
      allowance. The Company determined that an allowance of $126,485 and $576,782
      at
      December 31, 2006 and 2005, respectively, was necessary. At December 31,
      2006 62% of accounts receivable is due from one customer.





**Inventory**





Inventory
      consists primarily of the Company's fuel reformulating product and is stated
      at
      the lower of cost or market.





**Property
      and Equipment**





Property
      and equipment are recorded at cost. Depreciation is calculated on the
      straight-line method over the estimated useful lives of the assets. Leasehold
      improvements are amortized over the shorter of the anticipated lease term or
      the
      estimated useful life. The Company's policy is to capitalize items with a cost
      greater than $4,000 and an estimated useful life greater than one year. The
      Company reviews all property and equipment for impairment at least
      annually.





**Goodwill**





Goodwill
      represents the excess of the purchase price of the estimated fair value of
      the
      net identified tangible and intangible assets of the acquired business. Goodwill
      must be tested for impairment at least on an annual basis, or if an event occurs
      or circumstances change prior to the annual test of impairment, then the
      carrying value of goodwill must be tested on an interim basis. The Company
      has
      determined there is no impairment at December 31, 2006.





**Customer
      List**





As
      a
      result of the acquisition, the Company acquired a customer list which has an
      identifiable defined life. The customer lists is amortized on a straight-line
      basis over a five-year period. The Company will continue to amortize the
      identifiable intangible asset over the life of the asset unless an event occurs
      or circumstances change that indicate that the carrying value of this asset
      may
      not be recoverable. The following table reflects the cost of the customer list
      and the accumulated amortization related to this asset as of December 31,
      2006:





Customer
                list
            
            $2,000,726Accumulated
                Amortization
            
            (66,690)$1,934,036





For
      the
      year ending December 31, 2006, the Company recorded $66,690 as amortization
      expense. The Company expects to record annual amortization expense of
      approximately $400,000 in 2007, $400,000 in 2008, $400,000 in 2009, $400,000
      in
      2010 and 333,000 in 2011 related to the customer list.





*Table
          of Contents*
 *26*




**Notes
      Payable**





On
      December 26, 2006, the company entered into a Demand Loan Agreement for $500,000
      with an annual interest rate of 12%. At December 31, 2006, $417,819 had been
      funded. The remainder of the Demand Note was funded on January 2,
      2007.





On
      January 26, 2006 the Company secured a loan for its building in the amount
      of
      $4,750,000 with a convertible Promissory Note. The Note was convertible at
      $2.50
      per common share up to 1.9 million shares. The Note carried an annual
      interest rate of 17% with interest-only payments and a term of one year. On
      December 6, 2006, the Note was assigned to another third party.





Prior
      to
      maturity, the Company approached the current Note holders and requested that
      they extend the maturity of the Note to March 31, 2009. As part of its offer
      to
      induce the Note holder to extend the maturity date, the Company offered to
      rescind the conversion feature and issue 1.9 million detachable warrants. The
      Company is still currently negotiating the terms of a mutually acceptable
      extension.





**Note
      Payable - Related Party**





During
      2006, there was one Loan Payable to the President of the Company in the amount
      of $50,000. The loan has no stated repayment terms, is due on demand, is
      unsecured and does not bear interest. The Note was issued for a deposit to
      the
      Company account for short-term working capital needs.





**Fair
      Value of Financial Instruments**





The
      Carrying value of the Company's accounts receivable, accounts payable, accrued
      expenses, note payable, note payable related party and building loan approximate
      their estimated fair value due to the relatively short maturities of those
      instruments.





**Revenue
      Recognition**





Revenue
      from the sale of fuel reformulating products is recorded when the product is
      shipped, the price is fixed and determinable, collection is reasonably assured,
      and no further obligations of the Company remain.





Two
      customers accounted for 88% of our revenues for the fiscal year ended December
      31, 2006. One customer accounted for 40% and the second customer accounted
      for
      48%.





There
      was
      one U.S. customer that accounted for 40% of 2005 sales and one Hong Kong
      customer that accounted for 30% of 2005 sales.





**Stock
      Based Compensation**





Prior
      to
      January 1, 2006, the Company accounted for stock-based awards under the
      intrinsic value method, which followed the recognition and measurement
      principles of APB Opinion No. 25, “Accounting for Stock Issued to Employees”,
      and related Interpretations. The intrinsic value method of accounting resulted
      in compensation expense for stock options to the extent that the exercise prices
      were set below the fair market price of the Company’s stock at the date of
      grant.





As
      of
      January 1, 2006, the Company adopted SFAS No. 123(R) “share-based payment” using
      the modified prospective method, which requires measurement of compensation
      cost
      for all stock-based awards at fair value on the date of grant and recognition
      of
      compensation over the service period for awards expected to vest. The fair
      value
      of stock options is determined using the Black-Scholes valuation model, which
      is
      consistent with the Company’s valuation techniques previously utilized for
      options in footnote disclosures required under SFAS No. 123, “Accounting for
      Stock Based Compensation”, as amended by SFAS No. 148, “Accounting for Stock
      Based Compensation Transition and Disclosure”.





*Table
          of Contents*
 *27*




Since
      the
      Company did not issue stock options to employees during the year ended December
      31, 2006 or 2005, there is no effect on net loss or earnings per share had
      the
      Company applied the fair value recognition provisions of SFAS No. 123(R) to
      stock-based employee compensation. When the Company issues shares of common
      stock to employees and others, the shares of common stock are valued based
      on
      the market price at the date the shares of common stock are approved for
      issuance.





**Loss
      Per Share**





Basic
      loss per share is computed by dividing the net loss available to common
      shareholders by the weighted average number of common shares outstanding in
      the
      period. Diluted loss per share takes into consideration common shares
      outstanding (computed under basic earnings per share) and potentially dilutive
      common shares. There were no dilutive securities outstanding at December 31,
      2006 or 2005. The convertible feature of the Notes Payable is not included
      in
      the calculation of diluted earnings per share since the effect is anti-dilutive
      due to the Company’s net loss.





**Advertising
      Costs**





Advertising
      costs are expensed as incurred. Advertising expense for the years ended
      December 31, 2006 and 2005, was $132,955 and $231,380, respectively and are
      included in selling expenses in the consolidated financial
      statements.





**Shipping
      and Handling**





Expenses
      related to shipping and handling are expenses as incurred and are included
      in
      "cost of sales" in the statement of operations.





**Research
      and Development**





Research
      and development costs are expensed to operations when incurred and are included
      in general and administrative expenses in these consolidated financial
      statements. The amounts expensed for the years ended December 31, 2006 and
      2005
      amounted to $112,051 and $132,404, respectively.





**Concentrations**





The
      Company uses five vendors for most of its fuel reformulating products although
      there are other companies that can provide equivalent products. These vendors
      accounted for 90% of product purchases in 2006. During 2005, the company
      primarily used one vendor for most of its fuel reformulating products. That
      vendor accounted for 90% of products purchased in 2005.





**Income
      Taxes**





The
      Company accounts for its income taxes under the provisions of Statements of
      Financial Accounting Standards No. 109 (SFAS No. 109). Income taxes are provided
      for the tax effects of transactions reported in the financial statements and
      consist of taxes currently due plus deferred taxes related primarily to
      differences between the bases of certain assets and liabilities for financial
      and tax reporting. The deferred taxes represent the future tax return
      consequences of those differences, which will either be taxable when the assets
      and liabilities are recovered or settled.





*Table
          of Contents*
 *28*




**Foreign
      Operations**





Transaction
      gains and losses that arise from exchange rate fluctuations on transactions
      denominated in a currency other than the local functional currency (the U.S.
      Dollar) are included in "general and administrative" expenses in the statements
      of operations, which amounts were not material for the years ended
      December 31, 2006 and 2005.





**Reclassification**





Certain
      items from the 2005 financial statements have been reclassified to conform
      to
      the 2006 presentation.





**Recent
      Accounting Pronouncements**





During
      October 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”
(“SFAS 157”). This statement does not require any new fair value measurements
      but provides guidance on how to measure fair value and clarifies the definition
      of fair value under accounting principles generally accepted in the United
      States of America. The statement also requires new disclosures about the extent
      to which fair value measurements in financial statements are based on quoted
      market prices, market-corroborated inputs, or unobservable inputs that are
      based
      on management’s judgments and estimates. The statement is effective for fiscal
      years beginning after November 15, 2007. The statement will be applied
      prospectively by the Company for any fair value measurements that arise after
      the date of adoption.





The
      FASB
      has also issued SFAS No. 158, “Employers’ Accounting for Defined Benefit
      Pension and Other Postretirement Plans—an amendment of FASB Statements
      No. 87, 88, 106, and 132(R)”. As the Company has no plans covered by this
      standard, it will have no effect on the consolidated financial
      statements.





The
      SEC
      has issued Staff Accounting Bulletin No. 108, “Considering the Effects of
      Prior Year Misstatements when Quantifying Misstatements in Current Year
      Financial Statements” (“SAB 108”), in September 2006. SAB 108 requires entities
      to quantify misstatements based on their impact on each of their financial
      statements and related disclosures. SAB 108 is effective as of December 31,
      2006. The adoption of this standard is not expected have an impact on the
      Company’s consolidated results of operations, cash flows or financial
      position.





In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities-Including an amendment of FASB
      Statement No. 115.”  This statement permits entities to choose to measure
      eligible items at fair value at specified election dates.  The statement is
      effective as of the beginning of an entity’s first fiscal year that begins after
      November 15, 2007 although early adoption is permitted provided that an entity
      also adopts SFAS 157. The Company has not determined the impact this standard
      will have on its consolidated operating results or financial position upon
      adoption.





**Note
      2. Prior Period Adjustments**





The
      December 31, 2004 balances have been restated to correct for an error related
      to
      vehicles that were incorrectly recorded as assets in 2003 and 2004. The value
      of
      the assets removed was $282,366, less $25,440 of accumulated depreciation.





In
      addition, the December 31, 2004 balances have been restated to reduce accrued
      expenses by $38,917 due to a settlement that was reached with a vendor in
      2004.





The
      net
      effect of the combined adjustments was to increase the accumulated deficit
      and
      decrease total stockholders’ equity by $218,009. There was no effect on earnings
      per share.





*Table
          of Contents*
 *29*




**Note
      3. Property and Equipment**





The
      Company’s property and equipment consisted of the following at
      December 31:





2006
            
            2005Building
            
            $
                5,845,417
            
            $0Equipment
            
            886,353
            
            167,591Furniture
                and fixtures
            
            14,727
            
            14,727Computers
            
            36,648
            
            35,7906,783,145
            
            218,108Less:
                accumulated depreciation
            
            (402,837)
            
            (63,153)$
                6,380,308
            
            $154,955











**Note
      4. Income Taxes**





The
      Company is liable for taxes in the United States. As of December 31, 2006,
      the Company does not expect to have any income for tax purposes and therefore,
      no tax liability or expense has been recorded in these financial
      statements.





The
      Company estimates that it has tax losses of approximately $12,300,000 which
      may
      be available to reduce future taxable income. Any tax loss carry forward
      available expires between the years 2022 and 2025.





The
      deferred tax asset associated with the estimated tax loss carry forward is
      approximately $4,182,000. The Company has provided a valuation allowance against
      the deferred tax asset. The valuation allowance increased by $2,370,000 and
      $358,000 for 2006 and 2005, respectively.





The
      use
      of any loss carry forwards may be limited under the Internal Revenue Code due
      to
      the change in control of the Company in 2006.








**Note
      5. Operating Leases**





The
      Company leases an office building under a lease agreement that expires in July
      2012. The rent expense for the year ended December 31, 2006 and 2005, totaled
      to
      $66,844 and $48,634, respectively.





The
      Company’s future annual minimum lease payments are as follows for years ending
      December 31:





2007
            
            $              
                52,6572008
            
            54,2362009
            
            55,8632010
            
            57,5392011
            
            59,265Thereafter
            
            35,170Total
            
            $314,730








**Note
      6. Stock Option Plan**





In
      2006,
      the Company adopted the 2006 Stock Incentive Plan which reserves a total of
      3,500,000 common shares to provide the Company with a means of compensating
      selected key employees (including officers), directors and consultants. No
      options were granted in 2006 under this Plan.








**Note
      7. Subsequent Events**





On
      February 7, 2007, the Company entered into an equipment lease agreement with
      Mazuma Capital Corp. wherein the Company agreed to a 24-month sale and
      lease-back arrangement for up to $800,000 of its manufacturing equipment. The
      lease calls for a monthly payment based on a factor of .04125 times the average
      outstanding loan balance during the month. Through March 29, 2007, the Company
      has placed property valued at $737,968 under this lease arrangement with Mazuma
      Capital Corp.





Between
      January 1, 2007 and April 14, 2007, the Company issued 574,000 shares of our
      common stock for services rendered by key consultants, officers, and
      directors.





On
      March
      9, 2007, the Company closed on a private placement of 50,000 shares of common
      stock for a total of $50,000.





On
      April
      4, 2007, the Company cancelled and returned to treasury 50,000 shares of our
      common stock.





*Table
          of Contents*
 *30*




**Item
      8.  Changes in and Disagreements with
      Accountants on Accounting and Financial Disclosure**




The
      Registrant’s Board of Directors approved the engagement of Peterson Sullivan,
      PLLC (“PS”) as the Registrant’s independent registered public accounting firm to
      audit the Company’s financial statements for the year ended December 31,
      2006.





The
      report issued by PS in connection with the audit for the year ended December
      31,
      2006 did not contain an adverse opinion or a disclaimer of opinion, nor was
      such
      report qualified or modified as to audit scope or accounting principles.






**Item
      8A.  Controls and Procedures**





*(a)*  *Evaluation
      of Disclosure Controls and Procedures:*





Our
      President, after evaluating the effectiveness of our “disclosure controls and
      procedures” (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), has
      concluded that, as of December 31, 2006 our disclosure controls and
      procedures contained significant internal control weaknesses that, in the
      aggregate, represent material weaknesses.





*(b)           Management’s
      Annual Report on Internal Control Over Financial Reporting:*





In
      connection with the preparation of our financial statements for the year ended
      December 31, 2006, certain significant internal control deficiencies became
      evident to management that, in the aggregate, represent material weaknesses,
      including,





(i)
            Lack
                of a control environment that sufficiently promotes effective internal
                control over financial reporting throughout the management
                structure;


(ii)
            Lack
                of independent directors for our audit committee;


(iii)
            Lack
                of training in public company reporting
                requirements;


(iv)
            Lack
                of control processes for recording and approving journal
                entries;


(v)
            Lack
                of controls over the sales transaction
                process;


(vi)
            Lack
                of controls over invoice posting
                process;


(vii)
            Insufficient
                policies and procedures over various financial statement
                areas;


(viii)
            Insufficient
                documentations for accounting or business
                transactions;


(ix)
            Lack
                of policies and procedures over records
                retention;


(x)
            Lack
                of an audit committee financial expert;


(xi)
            Insufficient
                personnel in our finance/accounting functions;


(xii)
            Insufficient
                segregation of duties; and


(xiii)
            Insufficient
                corporate governance policies.





As
      part
      of the communications by Peterson Sullivan, PLLC, or Peterson Sullivan, with
      our
      management with respect to Peterson Sullivan’s audit procedures for fiscal 2006,
      Peterson Sullivan informed management that these deficiencies constituted
      material weaknesses, as defined by Auditing Standard No. 2, “An Audit of
      Internal Control Over Financial Reporting Performed in Conjunction with an
      Audit
      of Financial Statements,” established by the Public Company Accounting Oversight
      Board, or PCAOB.





*Table
          of Contents*
 *31*




In
      accordance with Section 404 of the Sarbanes-Oxley Act of 2002, we intend to
      take appropriate and reasonable steps to make the necessary improvements to
      remediate these deficiencies during 2007. We intend to consider the results
      of
      our remediation efforts and related testing as part of our year-end 2007
      assessment of the effectiveness of our internal control over financial
      reporting.




*(c)           Changes
      in Internal Control Over Financial Reporting:*






There
      were no changes in our internal control over financial reporting during the
      quarter ended December 31, 2006 that have materially affected, or are reasonably
      likely to materially affect our internal controls over financial
      reporting.






**Item
      8B.  Other Information**






None.




**PART
      III**





**Item 9.
      Directors, Executive Officers, Promoters, Control
      Persons and Corporate Governance; Compliance With Section 16(a) of the
      Exchange Act**




The
      following sets forth the names and ages, as of March 31, 2007, of the
      members of the Board of Directors, their respective positions and offices with
      the Company, the period during which each has served as a director of the
      Company and their principal occupations or employment during the past five
      years.







***Directors***




**Name**
            
            **Age**
            
            **Position**
            
            **Director/Officer
                Since**Enrique
                de Vilmorin
            
            55
            
            Chief
                Executive Officer, President and Director
            
            2006Jose
                Manuel Escobedo
            
            66
            
            Director
            
            2006Luis
                Willars
            
            65
            
            Director
            
            2006




All
      directors serve until their successors have been duly elected and qualified,
      unless they earlier resign.




**Enrique
      de Vilmorin**





Mr.
      de
      Vilmorin has more than 25 years experience in multi-national corporations.
      His
      areas of expertise include finance, management and manufacturing. His hands-on
      approach makes him as comfortable with clients as he is in the warehouse or
      in
      the boardroom. His background includes work with Intel, IBM, First Union Bank,
      and the World Bank Group and a Masters Degree in Economics from the University
      of Southern California.





**Jose
      Manuel Escobedo**





Mr.
      Escobedo brings to the Company more than 30 years of entrepreneurial experience
      and an MBA from IPADE. Mr. Escobedo has owned and managed businesses within
      the
      oil and fuels industry. He is a director of the Company.





*Table
          of Contents*
 *32*




**Luis
      Willars**





Mr.
      Willars, an Economist with more than 30 years experience in government and
      private sector corporations, adds a strong knowledge in corporate finance and
      administration. Mr. Willars holds a Masters Degree in Economics from IETSM.
      He
      is responsible for Ethos Environmental’s worldwide Strategic Planning and
      Finance.





Executive
      officers of the company are as follows:





**Enrique
      de Vilmorin** -
      President and Chief Executive Officer (see above).





**Thomas
      W. Maher** - **** Chief
      Financial Officer





Mr.
      Maher
      brings to the company over 20 years of senior financial management experience.
      Over this period, he has served as Chief Financial Officer for both privately
      held and publicly reporting corporations. Over the past 10 years he has served
      as a Chief Financial Officer of a publicly traded international sign
      manufacturing company, Luminart Corp., and as a Chief Financial Officer of
      a
      commercial construction general contracting firm RC Vannatta Inc. Mr. Maher
      has
      a MBA degree in Finance and Economics from the University of Detroit.





***Involvement
      in Certain Legal Proceedings***





We
      are
      not currently involved in any legal proceedings.





During
      the last five (5) years none of our directors or officers has:




(1)  any
      bankruptcy petition filed by or against any business of which such person was
      a
      general partner or executive officer either at the time of the bankruptcy or
      within two years prior to that time;




(2)  been
      convicted in a criminal proceeding or subject to a pending criminal
      proceeding;




(3)  been
      subject to any order, judgment, or decree, not subsequently reversed, suspended
      or vacated, of any court of competent jurisdiction, permanently or temporarily
      enjoining, barring,   suspendingor otherwise limiting his
      involvement
      in any type of business, securities or banking activities; or




(4)  been
      found by a court of competent jurisdiction in a civil action, the Commission
      or
      the Commodity Futures Trading Commission to have violated a federal or state
      securities or commodities law, and the judgment has not been reversed,
      suspended, or vacated.




***Section
      16(a) Beneficial Ownership Reporting Compliance***




Section
      16 of the Securities Exchange Act of 1934 requires the Company’s directors and
      certain executive officers and certain other beneficial owners of the Company’s
      common stock to periodically file notices of changes in beneficial ownership
      of
      common stock with the Securities and Exchange Commission.  To the best of
      the Company’s knowledge, based solely on copies of such reports received by it,
      and the written representations of its officers and directors, the Company
      believes that for 2006 all required filings were timely filed by each of its
      directors and executive officers.




***Code
      of Ethics***




We
      have
      adopted a Code of Ethics and Business Conduct for Officers, Directors and
      Employees that applies to all of our officers, directors and
      employees.





**Item
      10.** **** **Executive Compensation**




***Summary
      Compensation Table***




The
      following table sets forth the overall compensation earned over each of the
      past
      two fiscal years ending December 31, 2006 by (1) each person who served as
      the
      principal executive officer of the Company during fiscal year 2006; (2) the
      Company’s most highly compensated executive officers as of December 31, 2006
      with compensation during fiscal year 2006 of $100,000 or more; and (3) those
      individuals, if any, who would have otherwise been in included in section (2)
      above but for the fact that they were not serving as an executive of the Company
      as of December 31, 2006.




*Table
          of Contents*
 *33*




The
      following executive compensation was paid during 2005 or 2006, if
      any.


**Salary
                  Compensation****Name and**
                **Principal**
                **Position**
              
              **Fiscal**
                **Year**
              
              **Salary ($)**
              
              **Bonus**
                **($)**
              
              **Stock**
                **Awards
                  ($)**
              
              **Options**
                **Awards**
                **($)(1)**
              
              **Non-Equity**
                **Incentive Plan**
                **Compensation**
                **($)**
              
              **Nonqualified**
                **Deferred**
                **Compensation**
                **Earnings ($)**
              
              **All Other**
                **Compensation**
                **Compensation**
                **($) (2)(3)**
              
              **Total ($)**Enrique
                  de Vilmorin -
                CEO
                  & President
              
              2006
              
              $
              344,325
              
              $
              —
              
              875,000
              
              
              —
              
              —
              
              —
              
              —
              
              $
              1,219,3252005
              
              $
              --
              
              $
              —
              
              —
              
              —
              
              —
              
              —
              
              —
              
              $Thomas
                  W. Maher -
                CFO
              
              2006
              
              $
              --
              
              
              --
              
              --
              
              
              --
              
              --
              
              --
              
              --
              
              $


There
      were no stock options granted or exercised by the named executive directors
      in
      2006.





**GRANTS
        OF PLAN BASED AWARDS**
 ****
 Estimated Future Payouts Under
                Non-Equity
                  Incentive Plan Awards
              
              Estimated
                  Payouts Under
                Equity
                  Incentive Plan AwardsName
              
              Grant
                  Date
              
              Threshold
                ($)
              
              Target
                ($)
              
              Maximum
                ($)
              
              Threshold
                (#)
              
              Target
                (#)
              
              Maximum
                (#)
              
              All
                  Other Stock Awards; Number of Shares of Stock or Units
                (#)
              
              All
                  Other Option Awards; Number of Securities Underlying Options
                (#)
              
              Exercise
                  or Base Price of Option Awards
                ($/Sh)
              
              Grant
                  Date Fair Value of Stock and Option Awards-
              
              -
              
              -
              
              -
              
              -
              
              -
              
              -
              
              -
              
              --
              
              -
              
              -
              
              -




There
      were no other stock based awards under the Stock Incentive Plan in 2006 to
      the
      Named Executive Officers.





***Executive
      Officer Outstanding Equity Awards at Fiscal Year-End***





The
      following table provides certain information concerning any common share
      purchase options, stock awards or equity incentive plan awards held by each
      of
      our named executive officers that were outstanding as of December 31,
      2006.





*Table
          of Contents*
 *34*


**Option Awards**
            
            **Stock Awards****Name**
            
            **Number of**
              **Securities**
              **Underlying**
              **Unexercised**
              **Options(#)**
              **Exercisable**
            
            **Number of**
              **Securities**
              **Underlying**
              **Unexercised**
              **Options(#)**
              **Unexercisable**
            
            **Equity**
              **Incentive Plan**
              **Awards:**
              **Number of**
              **Securities**
              **Underlying**
              **Unexercised**
              **Unearned**
              **Options (#)**
            
            **Option**
              **Exercise**
              **Price ($)**
            
            **Option**
              **Expiration**
              **Date**
            
            **Number of**
              **Shares or**
              **Units of**
              **Stock That**
              **Have Not**
              **Vested (#)**
            
            **Market**
              **Value of**
              **Shares or**
              **Units of**
              **Stock That**
              **Have Not**
              **Vested**
            
            **Equity**
              **Incentive**
              **Plan**
              **Awards:**
              **Number**
              **of**
              **Unearned**
              **Shares,**
              **Units or**
              **Other**
              **Rights**
              **That Have**
              **Not**
              **Vested**
            
            **Equity**
              **Incentive Plan**
              **Awards:**
              **Market or**
              **Payout Value of**
              **Unearned**
              **Shares, Units or**
              **Other Rights**
              **That Have Not**
              **Vested**Enrique
                de Vilmorin
              CEO
                & President
            
            
            —
            
            
            —
            
            
            —
            
            $
            —
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Thomas
                Maher
              CFO
            
            
            —
            
            
            —
            
            
            —
            
            $
            —
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —




**OPTION
      EXERCISES AND STOCK VESTED**





There
      were no options exercised or stock vested during the year ended December 31,
      2006.





**PENSION
      BENEFITS AND NONQUALIFIED DEFERRED COMPENSATION**





The
      Company does not maintain any qualified retirement plans or non-nonqualified
      deferred compensation plans for its employees or directors.




**EMPLOYMENT
      AGREEMENTS**





On
      December 4, 2006, Ethos Environmental, Inc. (the “Company”) entered into an
      employment agreement (the “Maher Agreement”) with Thomas W. Maher defining the
      terms of his employment with the Company as Chief Financial Officer, effective
      December 1, 2006 (the “Effective Date”). The initial term of Mr. Maher’s
      employment under the Maher Agreement is through December 1, 2007 (unless earlier
      terminated in accordance with the terms of the Maher Agreement), with automatic
      one-year renewals for each of the successive two years following the Effective
      Date.





The
      Company has no other written employment agreements with any of its named
      executive officers or directors.







**DIRECTOR
      COMPENSATION**








***Stock
      Options***





The
      Company does not currently have a fixed stock option plan that provides for
      the
      issuance of incentive and non-qualified stock options to officers, directors,
      employees and non-employees.




***Cash
      Compensation***




Directors
      receive no cash compensation for services rendered.




**Item
      11.** **** **Security Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters**





The
      following table sets forth certain information regarding beneficial ownership
      of
      common stock as of December 31, 2006, by:





·
            Each
                person known to us to own beneficially more than 5%, in the aggregate,
                of
                the outstanding shares of our common
                stock;


·
            Each
                director;


·
            Each
                of our chief executive officer and our other two most highly compensated
                executive officers; and


·
            All
                executive officers and directors as a group.





*Table
          of Contents*
 *35*




The
      number of shares beneficially owned and the percent of shares outstanding are
      based on 23,107,669shares outstanding as of December 31, 2006. Beneficial
      ownership is determined in accordance with the rules of the SEC and generally
      includes voting or investment power with respect to securities.


**Beneficial
                Owner**
            
            **Shares of Common Stock Number**
            
            
            **Beneficially Owned Percent**Enrique
                de Vilmorin
            
            10,500,000
            
            
            45.44
            %Jose
                Manuel Escobedo
            
            250,000
            
            
            1.08
            %%%%%All such directorsand
                executiveOfficers as a group
            
            10,750,000
            
            
            46.52
            %Total
            
            10,750,000
            
            
            46.52
            %







***Changes
      in Control***





We
      know
      of no plans or arrangements that will result in a change of control at our
      company.





**Item
      12. Certain Relationships and Related
      Transactions**





During
      2006, there was one Loan Payable to the President of the Company in the amount
      of $50,000. The loan has no stated repayment terms, is due on demand, is
      unsecured and does not bear interest.





**Item
      13.   Exhibits**




EXHIBIT
                NUMBER
            DESCRIPTION
            LOCATION3.1
                - 3.2
            Articles
                of Incorporation and Bylaws
            Incorporated
                by reference as Exhibits to the Form 8-K filed on December 12, 2004
                as
                amended on February 3, 2005.10.1
            Agreement
                and Plan of Merger by and between the Company and Ethos Environmental,
                Inc.
            Incorporated
                by reference as an Exhibit to the Form 8-K filed on April 24, 2006.10.2
            2006
                Definitive Proxy Statement.
            As
                filed with the Commission on October 4, 2006.31.1
            Rule
                13a-14(a)/15d-14(a) Certification (CEO)
            Filed
                herewith31.2
            Rule
                13a-14(a)/15d-14(a) Certification (CFO)
            Filed
                herewith32.1
            Section
                1350 Certification (CEO)
            Filed
                herewith32.2
            Section
                1350 Certification (CFO)
            Filed
                herewith




*Table
          of Contents*
 *36*




**Item
      14.  Principal Accounting Fees and
      Services**






During
      the year ended December 31, 2006, we engaged Peterson Sullivan PLLC as our
      independent auditor.  For the year ended December 31, 2006, we incurred
      fees to Peterson Sullivan PLLC as discussed below.






·
            *Audit
                Fees:*Fees
                for audit and quarterly review services totaled $81,868 and $20,076
                for
                2006 and 2005, respectively, including fees associated with consents
                and
                the review of this report.






·
            *Tax
                Fees:*We did not engage PETERSON SULLIVAN PLLC, for any tax related services
                during 2006 or 2005.






·
            *All
                Other Fees:*Fees
                for other services not included in the above were $0in both 2006
                and
                2005.




*Table
          of Contents*
 *37*





**SIGNATURES**




In
      accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
      this report to be signed on its behalf by the undersigned, thereunto duly
      authorized on the 17 th day of
      April 2007.




**Ethos
                Environmental, Inc.**
              a
                Nevada CorporationBy:/s/
                Enrique de VilmorinEnrique
                de Vilmorin
              *Chief
                Executive Officer*




Pursuant
      to the requirements of the Securities Exchange Act of 1934, the following
      persons on behalf of the Registrant and in the capacities and on the dates
      indicated have signed this report below .







Signature
            
            Position
            
            Date/s/Enrique de Vilmorin
            
            Chief
                Executive Officer and Director
            
            April
                17, 2007Enrique
                de Vilmorin/s/
                Jose Manuel Escobedo
            
            Director
            
            April
                17, 2007Jose
                Manuel Escobedo/s/
                Luis Willars
            
            Director
            
            April
                17, 2007Luis
                Willars/s/  Thomas W. MaherThomas
                W. Maher
            
            Chief
                Financial Officer
            
            April
                17, 2007











*Table
          of Contents*
 *38*