----

----

| **UNITED                STATES****SECURITIES                AND EXCHANGE COMMISSION****Washington,                D.C. 20549** ** ****FORM                10-QSB** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

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

| Nevada                                                                                       | 33-0986282                                                         |
|----------------------------------------------------------------------------------------------|--------------------------------------------------------------------|
| (State                or other jurisdiction of incorporation                or organization) | (I.R.S.                Employer Identification                No.) |

|  4100                  Spring Valley, Suite 1002, Dallas, Texas 75244(Address                of principal executive offices) |
|-----------------------------------------------------------------------------------------------------------------------------------|

|  **972.361.1200**                                       |
|--------------------------------------------------------------|
| (Registrant’s                  telephone number)  |

----

**APPLICABLE      ONLY TO CORPORATE ISSUERS**

----

**PART      I - FINANCIAL INFORMATION**

**Item      1. Financial Statements**

**CIRRACOR,        INC.**

** (NOW        KNOWN AS PANDA ETHANOL, INC. AND FORMERLY KNOWN AS FULL CIRCLE PROMOTIONS,        INC.)**

**(A        DEVELOPMENT STAGE COMPANY)**

| **BALANCE                  SHEET - DECEMBER 31, 2005** |
|--------------------------------------------------------|
| (unaudited)                                            |

| **ASSETS**                                                                          |
|-------------------------------------------------------------------------------------|
|                                                                                |   |   |
| **Current                  assets:**                                                |   |   |
| Cash                                                                                | $ | 8,876 |   |
|                                                                                |   |  |   |
| **Property                  and equipment,**                  net of                |   |  |   |
| accumulated                  depreciation and amortization                          |   | 2,718 |   |
|                                                                                |   |  |   |
|                                                                                | $ | 11,594 |   |
|                                                                                |   |  |   |
| **LIABILITIES                  AND STOCKHOLDERS' DEFICIT**                          |
|                                                                                |   |  |   |
| **Current                  liabilities:**                                           |   |  |   |
| Accounts                  payable and accrued expenses                              | $ | 4,812 |   |
| Deferred                  revenue                                                   |   | 5,500 |   |
| Advances                  from officer                                              |   | 6,434 |   |
| Advances                  from shareholder                                          |   | 25,000 |   |
|                                                                                |   |  |   |
|  Total                  current liabilities                                    |   | 41,746 |   |
|                                                                                |   |  |   |
| **Stockholders'                  deficit:**                                         |   |  |   |
| Preferred                  stock, $0.001 par value; 50,000,000 shares authorized:   |   |  |   |
| no                  shares issued or outstanding                                    |   | - |   |
| Common                  stock, $0.001 par value; 500,000,000 shares authorized:     |   |  |   |
| 1,200,000                  issued and outstanding, restated for reverse stock split |   |   |   |
| of                  0.340885 to 1 on November 6, 2006                               |   | 3,521 |   |
| Additional                  paid-in capital                                         |   | 163,322 |   |
| Deficit                  accumulated during development stage                       |   | (196,995 | ) |
|                                                                                |   |  |   |
| Total                  stockholders' deficit                                   |   | (30,152 | ) |
|                                                                                |   |  |   |
|                                                                                | $ | 11,594 |   |

**The      accompanying notes form an integral part of these financial      statements.**

----

**CIRRACOR,          INC.**

** (NOW          KNOWN AS PANDA ETHANOL, INC. AND FORMERLY KNOWN AS FULL CIRCLE PROMOTIONS,          INC.)**

**(A          DEVELOPMENT STAGE COMPANY)**

| **STATEMENTS                    OF OPERATIONS** |
|-------------------------------------------------|
| (unaudited)                                     |

|                                                                |                                          | ** ** | ** **                             | ** ** | **For                the period**    | ** ** |
|---------------------------------------------------------------------|-----------------------------------------------|------------|----------------------------------------|------------|--------------------------------------|------------|
| ** **                                                          | **For                the three months ended** | ** ** | **from                October 12,**    | ** ** |
| ** **                                                          | **December                31,**               | ** ** | **2001                (inception) to** | ** ** |
| ** **                                                          | **2005**                                      | ** ** | **2004**                               | ** ** | **December                31, 2005** |       |
| **Net                revenue**                                      | $                                             | 9,363      |                                   | $          | 5,020                                |       | $ | 89,499 |   |
|                                                                |                                          |       |                                   |       |                                 |       |   |   |   |
| **Cost                of revenue**                                  |                                          | 8,245      |                                   |       | 1,080                                |       |   | 73,472 |   |
|                                                                |                                          |       |                                   |       |                                 |       |   |   |   |
| **Gross                profit**                                     |                                          | 1,118      |                                   |       | 3,940                                |       |   | 16,027 |   |
|                                                                |                                          |       |                                   |       |                                 |       |   |   |   |
| **General                and administrative expenses**              |                                          | 15,641     |                                   |       | 19,102                               |       |   | 212,750 |   |
|                                                                |                                          |       |                                   |       |                                 |       |   |   |   |
| **Loss                from operations**                             |                                          | (14,523    | )                                      |       | (15,162                              | )          |   | (196,723 | ) |
|                                                                |                                          |       |                                   |       |                                 |       |   |   |   |
| **Interest                expense**                                 |                                          | 52         |                                   |       | -                                    |       |   | 272 |   |
|                                                                |                                          |       |                                   |       |                                 |       |   |   |   |
| **Loss                before provision for income taxes**           |                                          | (14,575    | )                                      |       | (15,162                              | )          |   | (196,995 | ) |
|                                                                |                                          |       |                                   |       |                                 |       |   |   |   |
| **Provision                for income taxes**                       |                                          | -          |                                   |       | -                                    |       |   | - |   |
|                                                                |                                          |       |                                   |       |                                 |       |   |   |   |
| **Net                loss**                                         | $                                             | (14,575    | )                                      | $          | (15,162                              | )          | $ | (196,995 | ) |
|                                                                |                                          |       |                                   |       |                                 |       |   |   |   |
| **Net                loss per common share -**                      |                                          |       |                                   |       |                                 |       |   |   |   |
| **basic                and dilutive:**                              |                                          |       |                                   |       |                                 |       |   |   |   |
|                                                                |                                          |       |                                   |       |                                 |       |   |   |   |
| Net                loss per common share,                           |                                          |       |                                   |       |                                 |       |   |   |   |
| restated                for reverse stock split of 0.340885 to 1    |                                          |       |                                   |       |                                 |       |   |   |   |
| on                  November 6, 2006                                | $                                             | (0.01      | )                                      | $          | (0.01                                | )          | $ | (0.17 | ) |
|                                                                |                                          |       |                                   |       |                                 |       |   |   |   |
| Weighted                average common shares outstanding -         |                                          |       |                                   |       |                                 |       |   |   |   |
| basic                and dilutive, restated for reverse stock split |                                          |       |                                   |       |                                 |       |   |   |   |
| of                    0.340885 to 1 on November 6, 2006             |                                          | 1,200,000  |                                   |       | 1,200,000                            |       |   | 1,136,542  |   |

**The      accompanying notes form an integral part of these financial      statements.**

----

**CIRRACOR,        INC.**

** (NOW        KNOWN AS PANDA ETHANOL, INC. AND FORMERLY KNOWN AS FULL CIRCLE PROMOTIONS,        INC.)**

**(A        DEVELOPMENT STAGE COMPANY)**

| **STATEMENT                  OF STOCKHOLDERS' EQUITY (DEFICIT)** |
|------------------------------------------------------------------|
| (unaudited)                                                 |

|                                                                                                                     |                              |      |        |   |            |   | **Deficit**     |    |              |   |
|--------------------------------------------------------------------------------------------------------------------------|-----------------------------------|-----------|-------------|--------|-----------------|--------|-----------------|---------|-------------------|--------|
|                                                                                                                     |                              |      |        |   |            |   | **accumulated** |    | **Total**         |   |
|                                                                                                                     |                              |      |        |   | **Additional**  |   | **during**      |    | **stockholders'** |   |
|                                                                                                                     | **Common                  stock** |      | **paid-in** |   | **development** |   | **equity**      |    |
|                                                                                                                     | **Shares**                        |      | **Amount**  |   | **capital**     |   | **stage**       |    | **(deficit)**     |   |
| **Balance                    at October 12, 2001, date of incorporation**                                                |                              | -         |        | $      | -               |   | $               | -       |              | $      | - |   | $ | - |   |
|                                                                                                                     |                              |      |        |   |            |   |            |    |              |   |   |   |   |   |   |
| Issuance                    of Founder Shares for services at $0.0001 per share (October                    2001),  |                              |      |        |   |            |   |            |    |              |   |   |   |   |   |   |
| restated                  for reverse stock split of 0.340885 to 1 on November 6,                  2006                  |                              | 859,030   |        |   | 2,520           |   |            | -       |              |   | - |   |   | 2,520 |   |
|                                                                                                                     |                              |      |        |   |            |   |            |    |              |   |   |   |   |   |   |
| Issuance                    of common stock for cash at $0.02 per share (January                    2002)                |                              | 236,489   |        |   | 694             |   |            | 13,181  |              |   | - |   |   | 13,875 |   |
|                                                                                                                     |                              |      |        |   |                 |   |            |    |              |   |  |   |   |  |   |
| Additional                  paid-in capital in exchange for office expenses                                              |                              | -         |        |   | -               |   |            | 5,500   |              |   | - |   |   | 5,500 |   |
|                                                                                                                     |                              |      |        |   |            |   |            |    |              |   |   |   |   |   |   |
| Net                  loss from inception to September 30, 2002                                                           |                              | -         |        |   | -               |   |            | -       |              |   | (29,543 | ) |   | (29,543 | ) |
|                                                                                                                     |                              |      |        |   |            |   |            |    |              |   |   |   |   |   |   |
| **Balance                  at September 30, 2002**                                                                       |                              | 1,095,519 |        |   | 3,214           |   |            | 18,681  |              |   | (29,543 | ) |   | (7,648 | ) |
|                                                                                                                     |                              |      |        |   |            |   |            |    |              |   |   |   |   |   |   |
| Additional                  paid-in capital in exchange for office expenses                                              |                              | -         |        |   | -               |   |            | 6,000   |              |   | - |   |   | 6,000 |   |
|                                                                                                                     |                              |      |        |   |            |   |            |    |              |   |   |   |   |   |   |
| Additional                  paid-in capital in exchange for services from officers                                       |                              | -         |        |   | -               |   |            | 22,301  |              |   | - |   |   | 22,301 |   |
|                                                                                                                     |                              |      |        |   |            |   |            |    |              |   |   |   |   |   |   |
| Issuance                  of common stock for cash at $0.20 per share (August 2003)                                      |                              | 12,442    |        |   | 37              |   |            | 7,263   |              |   | - |   |   | 7,300 |   |
|                                                                                                                     |                              |      |        |   |            |   |            |    |              |   |   |   |   |   |   |
| Net                  loss for the year ended September 30, 2003                                                          |                              | -         |        |   | -               |   |            | -       |              |   | (10,917 | ) |   | (10,917 | ) |
|                                                                                                                     |                              |      |        |   |            |   |            |    |              |   |   |   |   |   |   |
| **Balance                  at September 30, 2003**                                                                       |                              | 1,107,961 |        |   | 3,251           |   |            | 54,245  |              |   | (40,460 | ) |   | 17,036 |   |
|                                                                                                                     |                              |      |        |   |            |   |            |    |              |   |   |   |   |   |   |
| Additional                  paid-in capital in exchange for office expenses                                              |                              | -         |        |   | -               |   |            | 6,000   |              |   | - |   |   | 6,000 |   |
|                                                                                                                     |                              |      |        |   |            |   |            |    |              |   |   |   |   |   |   |
| Additional                  paid-in capital in exchange for services from officers                                       |                              | -         |        |   | -               |   |            | 27,500  |              |   | - |   |   | 27,500 |   |
|                                                                                                                     |                              |      |        |   |            |   |            |    |              |   |   |   |   |   |   |
| Issuance                  of common stock for cash at                  $0.20 per share (December 2003)                   |                              | 92,039    |        |   | 270             |   |            | 53,730  |              |   | - |   |   | 54,000 |   |
|                                                                                                                     |                              |      |        |   |            |   |            |    |              |   |   |   |   |   |   |
| Net                  loss for the year ended September 30, 2004                                                          |                              | -         |        |   | -               |   |            | -       |              |   | (64,516 | ) |   | (64,516 | ) |
|                                                                                                                     |                              |      |        |   |            |   |            |    |              |   |   |   |   |   |   |
| **Balance                  at September 30, 2004**                                                                       |                              | 1,200,000 |        |   | 3,521           |   |            | 141,475 |              |   | (104,976 | ) |   | 40,020 |   |
|                                                                                                                     |                              |      |        |   |            |   |            |    |              |   |   |   |   |   |   |
| Additional                  paid-in capital in exchange for office expenses                                              |                              | -         |        |   | -               |   |            | 6,000   |              |   | - |   |   | 6,000 |   |
|                                                                                                                     |                              |      |        |   |            |   |            |    |              |   |   |   |   |   |   |
| Additional                  paid-in capital in exchange for services from officers                                       |                              | -         |        |   | -               |   |            | 6,867   |              |   | - |   |   | 6,867 |   |
|                                                                                                                     |                              |      |        |   |            |   |            |    |              |   |   |   |   |   |   |
| Net                  loss for the year ended September 30, 2005                                                          |                              | -         |        |   | -               |   |            |    |              |   | (77,444 | ) |   | (77,444 | ) |
|                                                                                                                     |                              |      |        |   |            |   |            |    |              |   |   |   |   |   |   |
| **Balance                  at September 30, 2005**                                                                       |                              | 1,200,000 |        |   | 3,521           |   |            | 154,342 |              |   | (182,420 | ) |   | (24,557 | ) |
|                                                                                                                     |                              |      |        |   |            |   |            |    |              |   |   |   |   |   |   |
| Additional                  paid-in capital in exchange for office expenses                  (unaudited)                 |                              | -         |        |   | -               |   |            | 1,500   |              |   | - |   |   | 1,500 |   |
|                                                                                                                     |                              |      |        |   |            |   |            |    |              |   |   |   |   |   |   |
| Additional                  paid-in capital in exchange for services from officers                  (unaudited)          |                              | -         |        |   | -               |   |            | 7,480   |              |   | - |   |   | 7,480 |   |
|                                                                                                                     |                              |      |        |   |            |   |            |    |              |   |   |   |   |   |   |
| Net                  loss for the transition period ended December 31, 2005                  (unaudited)                 |                              | -         |        |   | -               |   |            |    |              |   | (14,575 | ) |   | (14,575 | ) |
|                                                                                                                     |                              |      |        |   |            |   |            |    |              |   |   |   |   |   |   |
| **Balance                  at December 31, 2005**                                                                        |                              | 1,200,000 |        | $      | 3,521           |   | $               | 163,322 |              | $      | (196,995 | ) | $ | (30,152 | ) |

**The      accompanying notes form an integral part of these financial      statements.**

----

**CIRRACOR,        INC.**

** (NOW        KNOWN AS PANDA ETHANOL, INC. AND FORMERLY KNOWN AS FULL CIRCLE PROMOTIONS,        INC.)**

**(A        DEVELOPMENT STAGE COMPANY)**

| **STATEMENTS                  OF CASH FLOWS** |
|-----------------------------------------------|
| (unaudited)                                   |

|                                                                                                                                           |                                            |    |                                     |   | **For                  the period**    |   |
|------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------|---------|------------------------------------------|--------|----------------------------------------|--------|
|                                                                                                                                           | **For                  the three months ended** |    | **from                  October 12,**    |   |
|                                                                                                                                           | **December                  31,**               |    | **2001                  (inception) to** |   |
|                                                                                                                                           | **2005**                                        |    | **2004**                                 |   | **December                  31, 2005** |   |
| **Cash                  flows provided by (used for) operating                  activities:**                                                  |                                            |    |                                     |   |                                   |   |
| Net                  loss                                                                                                                      | $                                               | (14,575 | )                                        | $      | (15,162                                | )      | $ | (196,995 | ) |
|                                                                                                                                           |                                            |    |                                     |   |                                   |   |   |   |   |
| **Adjustments                  to reconcile net loss to net cash used for**                                                                    |                                            |    |                                     |   |                                   |   |   |   |   |
| **operating                  activities -**                                                                                                    |                                            |    |                                     |   |                                   |   |   |   |   |
| Bad                  debt expense                                                                                                         |                                            | 1,000   |                                     |   | -                                      |   |   | 1,000 |   |
| Depreciation                                                                                                                              |                                            | 194     |                                     |   | 194                                    |   |   | 1,164 |   |
| Non-cash                  issuance of common stock for services                                                                           |                                            | -       |                                     |   | -                                      |   |   | 2,520 |   |
| Non-cash                  additional paid-in capital in exchange for                                                                      |                                            |    |                                     |   |                                   |   |   |   |   |
| office                  expenses                                                                                                          |                                            | 1,500   |                                     |   | 1,500                                  |   |   | 25,000 |   |
| Non-cash                  additional paid-in capital in exchange for                                                                      |                                            |    |                                     |   |                                   |   |   |   |   |
| for                  services from officers                                                                                               |                                            | 7,480   |                                     |   | 1,080                                  |   |   | 64,148 |   |
|                                                                                                                                           |                                            |    |                                     |   |                                   |   |   |   |   |
| **(Increase)                  decrease in assets -**                                                                                      |                                            |    |                                     |   |                                   |   |   |   |   |
|  Accounts                  receivable                                                                                                     |                                            | -       |                                     |   | (5,020                                 | )      |   | (1,000 | ) |
|                                                                                                                                           |                                            |    |                                     |   |                                   |   |   |   |   |
| **Increase                  (decrease) in liabilities -**                                                                                 |                                            |    |                                     |   |                                   |   |   |   |   |
| Accounts                  payable and accrued expenses                                                                                         |                                            | (5,357  | )                                        |   | 2,547                                  |   |   | 4,812 |   |
|  Deferred                  revenue                                                                                                        |                                            | (8,500  | )                                        |   | -                                      |   |   | 5,500 |   |
|                                                                                                                                           |                                            |    |                                     |   |                                   |   |   |   |   |
| Net                  cash used for operating activities                                                                                        |                                            | (18,258 | )                                        |   | (14,861                                | )      |   | (93,851 | ) |
|                                                                                                                                           |                                            |    |                                     |   |                                   |   |   |   |   |
| **Cash                  flows used for investing activities:**                                                                                 |                                            |    |                                     |   |                                   |   |   |   |   |
| Payments                  to acquire property and equipment                                                                                    |                                            | -       |                                     |   | -                                      |   |   | (3,882 | ) |
|                                                                                                                                           |                                            |    |                                     |   |                                   |   |   |   |   |
| **Cash                  flows provided by financing activities:**                                                                              |                                            |    |                                     |   |                                   |   |   |   |   |
| Proceeds                  from officer advances                                                                                                |                                            | 2,134   |                                     |   | -                                      |   |   | 6,434 |   |
| Proceeds                  from shareholder advances                                                                                            |                                            | 25,000  |                                     |   | -                                      |   |   | 25,000 |   |
| Proceeds                  from issuance of common stock                                                                                        |                                            | -       |                                     |   | -                                      |   |   | 75,175 |   |
|                                                                                                                                           |                                            |    |                                     |   |                                   |   |   |   |   |
|  Net                  cash provided by financing activities                                                                               |                                            | 27,134  |                                     |   | -                                      |   |   | 106,609 |   |
|                                                                                                                                           |                                            |    |                                     |   |                                   |   |   |   |   |
| **Net                  increase (decrease) in cash and cash equivalents**                                                                      |                                            | 8,876   |                                     |   | (14,861                                | )      |   | 8,876 |   |
|                                                                                                                                           |                                            |    |                                     |   |                                   |   |   |   |   |
| **Cash                  and cash equivalents**,                  beginning of period                                                           |                                            | -       |                                     |   | 40,360                                 |   |   | - |   |
|                                                                                                                                           |                                            |    |                                     |   |                                   |   |   |   |   |
| **Cash                  and cash equivalents**,                  end of period                                                                 | $                                               | 8,876   |                                     | $      | 25,499                                 |   | $ | 8,876 |   |
|                                                                                                                                           |                                            |    |                                     |   |                                   |   |   |   |   |
|                                                                                                                                           |                                            |    |                                     |   |                                   |   |   |   |   |
| **Supplemental                  disclosure of cash flow information:**                                                                         |                                            |    |                                     |   |                                   |   |   |   |   |
| Income                  taxes paid                                                                                                             | $                                               | -       |                                     | $      | -                                      |   | $ | - |   |
| Interest                  paid                                                                                                                 | $                                               | 52      |                                     | $      | -                                      |   | $ | 272 |   |
|                                                                                                                                           |                                            |    |                                     |   |                                   |   |   |   |   |
| **Supplemental                  disclosure of non-cash financing activities:**                                                                 |                                            |    |                                     |   |                                   |   |   |   |   |
| In                  October 2001, the Company issued 859,030 shares of its                  common stock in exchange for services to      |                                            |    |                                     |   |                                   |   |   |   |   |
| incorporate                  the Company, restated for reverse stock split of                  0.340885 to 1 on November 6, 2006. The          |                                            |    |                                     |   |                                   |   |   |   |   |
| Founder                  Shares were valued at the Company's par value of its common                  stock totaling $2,520, which             |                                            |    |                                     |   |                                   |   |   |   |   |
| represented                  its fair market value on the date of issuance.                                                                    |                                            |    |                                     |   |                                   |   |   |   |   |
|                                                                                                                                                |                                            |    |                                     |   |                                   |   |   |   |   |
| In                  December 2003, the Company issued 92,038                  shares at approximately $0.59 per share for $54,000. ,      |                                            |    |                                     |   |                                   |   |   |   |   |
| restated                  for reverse stock split of 0.340885 to 1 on November 6,                  2006. However, the Company only             |                                            |    |                                     |   |                                   |   |   |   |   |
| received                  $36,000. Subsequently, the Company received the remaining                  $18,000 in January                  2004. |                                            |    |                                     |   |                                   |   |   |   |   |
|                                                                                                                                                |                                            |    |                                     |   |                                   |   |   |   |   |
|                                                                                                                                                |                                            |    |                                     |   |                                   |   |   |   |   |

**The      accompanying notes form an integral part      of these financial statements.**

----

**CIRRACOR,          INC.**

** (NOW          KNOWN AS PANDA ETHANOL, INC. AND FORMERLY KNOWN AS FULL CIRCLE PROMOTIONS,          INC.)**

**(A          DEVELOPMENT STAGE COMPANY)**

**NOTES        TO FINANCIAL STATEMENTS (UNAUDITED)**

**THREE        MONTHS ENDED DECEMBER 31, 2005 AND 2004 AND THE **

**PERIOD        FROM OCTOBER 12, 2001 (INCEPTION) TO DECEMBER 31, 2005**

| **(1)** | **Nature                  of Business:** |
|---------|------------------------------------------|

| **(2)** | **Summary                  of Significant Accounting                  Policies:** |
|---------|-----------------------------------------------------------------------------------|

**Interim        Financial Statements:**

**Basis          of Presentation:**

----

**CIRRACOR,          INC.**

** (NOW          KNOWN AS PANDA ETHANOL, INC. AND FORMERLY KNOWN AS FULL CIRCLE PROMOTIONS,          INC.)**

**(A          DEVELOPMENT STAGE COMPANY)**

**NOTES        TO FINANCIAL STATEMENTS (UNAUDITED)**

**THREE        MONTHS ENDED DECEMBER 31, 2005 AND 2004 AND THE **

**PERIOD        FROM OCTOBER 12, 2001 (INCEPTION) TO DECEMBER 31, 2005**

| **(2)** | **Summary                  of Significant Accounting Policies,                  Continued:** |
|---------|----------------------------------------------------------------------------------------------|

**Revenue        Recognition:**

**Use        of Estimates:**

| **(3)** | **Related-Party                  Transactions:** |
|---------|--------------------------------------------------|

| **(4)** | **Deferred                  Revenues:** |
|---------|-----------------------------------------|

| **(5)** | **Agreement                  and Plan of Merger:** |
|---------|----------------------------------------------------|

| **(6)** | **Equity:** |
|---------|-------------|

----

**Item        2. Plan of Operation**

| ·   | our                  ability to complete construction of our ethanol plants; the projected                  growth or contraction in the ethanol market in which we will operate; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | fluctuations                  in the market price of ethanol; |
|--------------------|---------------------------------------------------------------|

| ·   | our                  business strategy for expanding, maintaining or contracting our                  presence                  in this market; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | our                  ability to obtain the necessary capital to finance our initiatives; |
|--------------------|------------------------------------------------------------------------------------------|

| ·   | anticipated                  trends in our financial condition and results of operations; |
|--------------------|-------------------------------------------------------------------------------------------|

| ·   | our                  ability to distinguish ourselves from our current and future                  competitors; |
|--------------------|-----------------------------------------------------------------------------------------------------------------|

| ·   | changes                  in or elimination of laws, tariffs, trade or other controls or                  enforcement                  practices such as: |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------|

| o   | national,                  state or local energy policy; |
|---------------|----------------------------------------------------------|

| o   | federal                  ethanol tax incentives; |
|---------------|--------------------------------------------------|

| o   | regulation                  currently under consideration pursuant to the passage of the Energy                  Policy                  Act of 2005, which contains a renewable fuel standard and other                  legislation mandating the usage of ethanol or other oxygenate additives;                  state and federal regulation restricting or banning the use of                  Methyl                  Tertiary Butyl Ether, or MTBE, a fuel derived from                  methanol; |
|---------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| o   | environmental                  laws and regulations applicable to our operations and the enforcement                  thereof; and |
|---------------|------------------------------------------------------------------------------------------------------------------------------------|

| o   | regulations                  related to homeland security; |
|---------------|------------------------------------------------------------|

| ·   | changes                  in weather and general economic conditions; |
|--------------------|----------------------------------------------------------------------|

| ·   | overcapacity                  within the ethanol and petroleum production and refining industries; |
|--------------------|----------------------------------------------------------------------------------------------------|

| ·   | total                  United States consumption of gasoline; |
|--------------------|---------------------------------------------------------------|

| ·   | availability                  and costs of products and raw materials, particularly corn, coal                  and                  natural gas; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | labor                  relations; fluctuations in petroleum prices; |
|--------------------|---------------------------------------------------------------------|

| ·   | our                  or our employees’ failure to comply with applicable laws and regulations; |
|--------------------|------------------------------------------------------------------------------------------------------|

| ·   | our                  ability to generate free cash flow to invest in our business and                  service                  our indebtedness; limitations and restrictions contained in the                  instruments and agreements governing our indebtedness; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | our                  ability to raise additional capital and secure additional financing; |
|--------------------|-------------------------------------------------------------------------------------------|

| ·   | changes                  in interest rates; |
|--------------------|---------------------------------------------|

| ·   | our                  ability to retain key employees; |
|--------------------|-------------------------------------------------------|

| ·   | liability                  resulting from actual or potential future litigation; competition; |
|--------------------|-----------------------------------------------------------------------------------------------|

| ·   | plant                  shutdowns or disruptions at our plant or plants whose products                  we will                  market; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------|

| ·   | availability                  of shuttle trains, rail cars and trucks; risks regarding a loss                  of or                  substantial decrease in purchases by our major customers; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | risks                  related to hedging decisions, including whether or not to enter                  into                  hedging arrangements and the possibility of financial losses related                  to                  hedging arrangements; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | risks                  related to diverting management’s attention from ongoing business                  operations; and |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------|

| ·   | other                  risks detailed in our current filings with the SEC, including our                  most                  recent filings on Form 10-KSB or Form 10-QSB, which discuss other                  important risk factors concerning our historical                  operations. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**Recent        Events. **

**Critical        Accounting Policy and Estimates. **

----

**Liquidity        and Capital Resources. **

**For        the three month period ending December 31, 2005.**

**Results        of Operations.**

**Revenues.**

**Operating        Expenses.**

**Our        Plan of Operation for the Next Twelve Months.**

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**Off-Balance        Sheet Arrangements. **

**Item        3. Controls and Procedures**

**PART        II — OTHER INFORMATION**

**Item        1. Legal Proceedings.**

**Item        2. Unregistered Sales of Securities and Use of        Proceeds.**

**Item        3. Defaults Upon Senior Securities**

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

**Item        5. Other Information**

**Item        6. Exhibits **

31.        Rule        13a-14(a)/15d-14(a) Certifications. 

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**SIGNATURES**

|                                          |                                                                                                                      |                                                      |
|-----------------------------------------------|---------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------|
|                                          | **Panda                      Ethanol, Inc.,**a                      Nevada corporation                                    |
|                                     |                                                                                                                 |                                                 |
| Date: November                  15, 2006 | By:                                                                                                             | /s/ Todd                  W.                  Carter |
|                                          | Todd                      W. CarterChief                      Executive Officer, President,                      Director |