SECURITIES EXCHANGE COMMISSION
                             Washington, D.C. 20549



                                  FORM 10-KT/A


                                  AMENDMENT #2


                            Annual Report Pursuant to
                       the Securities Exchange Act of 1934


       For the transitional period from July 1, 2002 to December 31, 2002
                        Commission file number 000-49797



                               eTOTALSOURCE, INC.
                         -----------------------------
             (Exact name of registrant as specified in its charter)



                           Premium Enterprises, Inc.
                         -----------------------------
             (Former name of registrant as specified in its charter)

   Colorado                                        84-10669559
------------------------                          --------------------
(State of incorporation)                          (I.R.S. Employer
                                                  Identification No.)

                    1510 Poole Boulevard, Yuba City, CA 95993
            --------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

        Registrant's telephone number, including area code: 530-751-9615

           Securities registered pursuant to Section 12(b) of the Act:

                            Title of each class: None

                 Name of each exchange on which registered: N/A

           Securities registered pursuant to Section 12(g) of the Act:

                            Title of each class: None

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 the filing
requirements for at least the past 90 days.

                      Yes  X      No
                         -----           ------

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

State issuer's revenues for its most recent fiscal year. $0


                                       1
<PAGE>


Transitional Small Business Disclosure Format:

                             Yes [_]       No [X]


Aggregate  market  value  of the  voting  stock  held by  non-affiliates  of the
registrant as of December 31, 2002: $20,250.

Number of outstanding  shares of the  registrant's common stock, as of December
31, 2002: 17,565,151.


                                       2
<PAGE>

                                TABLE OF CONTENTS

PART I                                                                     PAGE

     Item 1.   Description of Business                                         4
     Item 2.   Description of Property                                        10
     Item 3.   Legal Proceedings                                              10
     Item 4.   Submission of Matters to a Vote of Security Holders            10


PART II

     Item 5.   Market for Common Equity and Related Stockholder Matters       11
     Item 6.   Management's Discussion and Analysis or Plan of Operation      11
     Item 7.   Financial Statements                                           13
     Item 8.   Changes in and Disagreements With Accountants on Accounting    13
               and Financial Disclosure


PART III

     Item 9.   Directors, Executive Officers, Promoters and Control Persons;  13
               Compliance with Section 16(a) of the Exchange Act
     Item 10.  Executive Compensation                                         15
     Item 11.  Security Ownership of Certain Beneficial Owners and Management 17
     Item 12.  Certain Relationships and Related Transactions                 19
     Item 13.  Exhibits and Reports on Form 8-K                               20
     Item 14   Procedures and Controls                                        20

SIGNATURES

"Supplemental  Information  to be  Furnished  With  Reports  Filed  Pursuant
to Section 15(d) of the Exchange Act by Non-Reporting Issuers"


                                       3
<PAGE>

                                     PART I


Item 1.  Description of Business.
         ------------------------
Premium  Enterprises was incorporated under the laws of the State of Colorado on
September  16,  1987.  To date the  Company's  activities  have  been to own and
operate fast service  automative  lubrication  centers.  For a period of time in
1988-94 the Company  operated  three fast lube  locations,  at various  times in
Arizona and Colorado as "Grease Monkey" franchises. The locations were unprofit-
able, two were sold, and the last franchise closed in 1994.

Premium  Enterprises  then  attempted  to enter the  automobile  and truck  tire
recycling  business in 1994. It formed a limited  partnership  of which it owned
62.5% and commenced limited tire recycling  operations.  The equipment proved to
be  inadequate  and the Company ran out of capital to  continue  operations  and
ceased all  operations  in 1996.  The Company has been dormant  since 1996.  The
Company  wrote off all of its  investment  in  equipment  and  licenses for tire
recycling  in 1996.  The Company  has no  full-time  employees  and owns no real
estate.

On  December  20,  2002  the  Company  entered  into a  Plan  and  Agreement  of
Reorganization  with  eTotal  Source,  Inc.,  and its  shareholders  whereby the
Company  is  acquiring  91%  of the  issued  and  outstanding  common  stock  of
eTotalSource,  Inc. (eTS) in exchange for  15,540,001  shares of common stock of
the company.

The contract was completd  December 31, 2002.  eTotalSource,  Inc., a California
corporation, is a subsidiary of the company. The sole business of the Company is
that of its subsidiary, eTotalSource, Inc.

General
-------

The  Company  and its  business  eTotalSource,  Inc.  (eTS) is a  developer  and
supplier of  proprietary  multimedia  software  technology,  and a publisher  of
multimedia  training  content.  Some of the current  client list  include:  U.S.
Department of Defense,  Boeing,  Steven  Spielberg  Online Film School,  Pacific
Bell/SBC,  Grant  School  District,   California  State  University,   Logistics
Management Institute, First American Title Company and other corporate entities.
The company's clients work with eTS to develop,  produce, market, and distribute
multimedia  development  software.  eTS is also marketing  educational  training
programs it has produced utilizing its proprietary software. Additionally, Grant
McClellan Technical Institute


                                       4
<PAGE>

Foundation  GMTI, a high tech marketing  organization,  has entered into a joint
venture with eTS to provide a 100 person call center to facilitate  the sales of
all eTS products.  eTS and GMTI are building a sales and marketing team which is
participating with content creators to market and distribute custom products.

eTotal  Source,  Inc.  was  founded in February  2000 with the  express  goal of
designing a better interface for information and education  multimedia delivery.
Approximately  one year after inception,  the beta Presenta Pro(TM) platform was
completed.  Presenta Pro(TM) features  back-end  development of multi-panel time
synchronized  presentations  and course work,  as well as testing,  feedback and
performance monitoring. Clients are utilizing Presenta Pro(TM) as a platform for
distance learning and computer-based training. Presenta Pro(TM) is delivered via
the Internet, intranet, or CD/DVD Rom.

The Software and IP The Company has developed a software  application,  Presenta
Pro(TM) that simplifies the production and delivery of multimedia  presentations
and content while at the same time  improving the quality and  effectiveness  of
the  presentations.  Presenta Pro is designed  with cost saving  features and it
offers post-production opportunities.

Presenta Pro features include:

o        Multi-panel time synchronized presentation
o        Quick content and program development
o        Rich video and content experience
o        Still images
o        Graphics
o        Flash
o        Links to Website
o        Live Cams
o        Test and quizzes to tract performance
o        Users progress can be tracked
o        Diagrams
o        Simple server requirements
o        Reduces training and learning curve time
o        Easy to implement and use

eTS BUSINESS MODEL

STRATEGY:  The  Company  employs a dual  strategy  to meet  market  demands  and
opportunities that includes both software licensing and publishing.

SOFTWARE LICENSING:  eTS is licensing Presenta Pro(TM) software via distribution
partners and an internal  sales and marketing  team.  The marketing team will be
directing its sales effort in targeting the education,  corporate and government
markets.  The cost of the product ranges from $5,500 to $15,000, and the Company
is aggressively  positioning the software package for a volume intensive market.
The nearest competitor (in quality or functionality), Virage, prices its product
at  substantially  higher  prices.  The  Aggressive  pricing  policy  appeals to
governments, schools and corporate clients.

PUBLISHING:   The  Company   publishes   and  produces   original   content  and
postproduction  services,  and participates in the sales and distribution of the
final published product.

eTS shares in the revenue derived from the program sales. The Company  carefully
chooses its content,  identifying  unique  subjects and "niches"  offering  more
probable sales. These  topics/markets  are generally  underserved and in need of
the program  packages  that are produced by eTS.  Examples of finished  products
currently being marketed include:
o        Anger Management Facilitator Training and Certification
o        Domestic Violence Facilitator Training and Certification
o        School Maintenance, Cleaning Training and Certification
o        Emergency Disaster Preparedness - Terrorist Awareness
o        Mandated School Internet Acceptable Use Policy (AUP)


                                       5
<PAGE>

The  production,  postproduction  and publishing also create an avenue for added
revenues and potential profits. For example, the U.S. Department of Defense will
provide for their  employees over 100,000  finished  packages of one topic area,
produced and  distributed  by eTS.  The  resulting  gross profit  margin for the
Company is over 84%.

MARKETING/DISTRIBUTION CHANNELS
The  Company  has  formed a Joint  Venture  with the Grant  McClellan  Technical
Institute  Foundation  (GMTI) in  Sacramento,  California.  The joint venture is
developing a 100-seat Call/Marketing Center, that will be completely staffed and
fully operational by December 31, 2002. This high-tech marketing will handle the
sales  and  service  of eTS  products,  exclusively.  The  Company  and GMTI are
building a sales and marketing team that  participates  with content creators to
market and distribute software and programming  content.  eTS targets high level
contacts, large organizations,  school districts and government agencies. On the
software  side,  the Company is building a sales team to work with the JV in the
direct  marketing of the software.  School  districts,  government  entities and
corporations will be targeted.


Intellectual Property Differentiation

eTS currently has on file,  four patents  pending.  The company's  technological
differentiation is based on high quality and low cost software. Presenta Pro(TM)
is easier to use and  considerably  more  flexible  than the  company's  closest
competitor.  Management believes that competitors have chosen, via their pricing
policies, to alienate most of the business community. Presenta Pro(TM) is priced
to be affordable and cost/training effective. Presenta Pro's ease of implementa-
tion and quality it a viable choice for authoring software and distance learning
tools.

TECHNOLOGY:
The Presenta Pro,  Production and Delivery System is modular and was designed to
allow rapid  addition of  functionality.  The  platform  provides  high  quality
streaming of video and audio,  and was designed for delivery  over the Internet,
intranet,  CD or DVD. The Presenta Pro system has been created  using the Delphi
development  system. The server portion of Presenta Pro is a custom control that
connects  to a  Microsoft  SQL server.  The data is  distributed  to the viewing
client via a custom  control that connects to the server via  Extensible  Markup
Language (XML). The backend is scalable and transportable. The production client
uses all custom code written in Delphi  connecting to the SQL server via TCP/IP.
The  end-user  client can be run on any Windows  based PC and  requires  minimum
system  resources.  There are several  modules to the end-user client that allow
the producer to export video to either a CD/DVD format or stand-alone  web site.
The Company's  technology and user interface are advanced in their simplicity of
use and ability to deliver multiple platforms and media simultaneously.


Administrative Offices
----------------------

     The Company  currently  maintains  1,885 square feet at its  administrative
offices at 1510 Poole  Boulevard,  Yuba City,  CA 95993.  The  Company  owns the
building at this address and, therefore, pays no rent.



                                       6
<PAGE>


Employees
---------

     The Company is currently has 9 employees.

Risk Factors
------------

1.  Conflicts of Interest.  Certain  conflicts of interest may exist between the
Company and its officers and directors.  They have other  business  interests to
which they  devote  their  attention,  and may be  expected to continue to do so
although  management time should be devoted to the business of the Company. As a
result,  conflicts  of  interest  may arise that can be  resolved  only  through
exercise of such judgment as is consistent with fiduciary duties to the Company.
See "Management," and "Conflicts of Interest."

2. Need For Additional  Financing.  The Company has very limited funds, and such
funds  may  not  be  adequate  to  take  advantage  of  any  available  business
opportunities.  Even if the Company's funds prove to be sufficient to acquire an
interest in, or complete a transaction with, a business opportunity, the Company
may not have enough capital to exploit the opportunity.  The ultimate success of
the  Company  may  depend  upon its  ability  to raise  additional  capital.  If
additional  capital is needed,  there is no assurance  that funds will be avail-
able from any source or, if available, that they can be obtained on terms accept
-able to the Company. If not available, the Company's operations will be limited
to those that can be financed with its modest capital and income.

3.  Regulation of Penny Stocks.  The Company's  securities,  when  available for
trading,  will be subject to a  Securities  and  Exchange  Commission  rule that
imposes special sales practice  requirements upon  broker-dealers  who sell such
securities to persons other than established  customers or accredited investors.
For purposes of the rule, the phrase  "accredited  investors"  means, in general
terms, institutions with assets in excess of $5,000,000, or individuals having a
net worth in excess of  $1,000,000  or  having  an annual  income  that  exceeds
$200,000 (or that, when combined with a spouse's income, exceeds $300,000).  For
transactions  covered  by the  rule,  the  broker-dealer  must  make  a  special
suitability  determination for the purchaser and receive the purchaser's written
agreement to the transaction prior to the sale. Consequently, the rule may


                                       7
<PAGE>

affect the ability of broker-dealers  to sell the Company's  securities and also
may affect the ability of purchasers  in this offering to sell their  securities
in any market that might develop therefore.

     In addition, the Securities and Exchange Commission has adopted a number of
rules to regulate "penny stocks." Such rules include Rules 3a51-1, 15g-1, 15g-2,
15g-3,  15g-4,  15g-5, 15g-6, 15g-7, and 15g-9 under the Securities Exchange Act
of 1934, as amended. Because the securities of the Company may constitute "penny
stocks"  within the  meaning of the rules,  the rules would apply to the Company
and to its  securities.  The rules may  further  affect the ability of owners of
Shares to sell the  securities  of the Company in any market that might  develop
for them.

     Shareholders  should be aware that,  according to  Securities  and Exchange
Commission,  the  market  for penny  stocks has  suffered  in recent  years from
patterns of fraud and abuse. Such patterns include (i) control of the market for
the  security  by one or a few  broker-dealers  that are  often  related  to the
promoter or issuer; (ii) manipulation of prices through prearranged  matching of
purchases and sales and false and misleading press releases; (iii) "boiler room"
practices   involving   high-pressure   sales  tactics  and  unrealistic   price
projections  by  inexperienced  sales persons;  (iv)  excessive and  undisclosed
bid-ask  differentials  and  markups  by  selling  broker-dealers;  and  (v) the
wholesale dumping of the same securities by promoters and  broker-dealers  after
prices  have been  manipulated  to a desired  level,  along  with the  resulting
inevitable  collapse of those prices and with consequent  investor  losses.  The
Company's  management is aware of the abuses that have occurred  historically in
the penny stock market. Although the Company does not expect to be in a position
to dictate the behavior of the market or of  broker-dealers  who  participate in
the market,  management will strive within the confines of practical limitations
to prevent the  described  patterns from being  established  with respect to the
Company's securities.

4. Limited of Operating History.  The Company of which eTotalsource has become a
subsidiary has not had a profitable  operating  history,  and after its business
failure in 1995-1996  was inactive  until a business  combination  was made with
eTotalsource which was formed in 2000 and has had a short operating history. The
Company must be regarded as a new or start-up venture with all of the unforeseen
costs, expenses, problems, and difficulties to which such ventures are subject.

5. No Assurance of Success or Profitability.  There is no assurance that it will
generate  revenues or profits,  or that the market price of the Company's Common
Stock will be increased.



                                       8
<PAGE>

6. Lack of Diversification.  Because of the limited financial resources that the
Company has, the Company may not be able to diversify or expand its  operations.
The Company's  probable inability to diversify its activities into more than one
area will  subject the Company to economic  fluctuations  within its business or
industry  and  therefore  increase  the  risks  associated  with  the  Company's
operations.

7. Dependence  upon  Management.  The Company  currently has individuals who are
serving as its officers and directors on a full time basis.  The Company will be
heavily  dependent  upon their skills,  talents,  and abilities to implement its
business  plan.  Loss of any one of them  could  be a  severe  detriment  to the
Company.

8. Indemnification of Officers and Directors.  The Colorado Business Corporation
Act provides for the indemnification of its directors,  officers, employees, and
agents, under certain circumstances,  against attorney's fees and other expenses
incurred by them in any  litigation  to which they become a party  arising  from
their association with or activities on behalf of the Company.  The Company will
also bear the expenses of such  litigation for any of its  directors,  officers,
employees,  or agents,  upon such person's promise to repay the Company therefor
if it is ultimately determined that any such person shall not have been entitled
to  indemnification.  This  indemnification  policy could result in  substantial
expenditures by the Company which it will be unable to recoup.

9. Director's  Liability Limited. The Colorado Business Corporation Act excludes
personal  liability  of its  directors to the Company and its  stockholders  for
monetary  damages  for breach of  fiduciary  duty  except in  certain  specified
circumstances.  Accordingly,  the Company will have a much more limited right of
action against its directors than  otherwise  would be the case.  This provision
does not affect the liability of any director under federal or applicable  state
securities laws.

10.  Competition.  The  business of the Company is  intensely  competitive.  The
Company expects to be at a disadvantage when competing with many firms that have
substantially  greater financial and management  resources and capabilities than
the Company.

11. No Foreseeable  Dividends.  The Company has not paid dividends on its common
stock and does not anticipate paying such dividends in the foreseeable future.



                                       9
<PAGE>

12.  Limited  Public  Market  Exists.  There is a limited  public market for the
Company's  common stock, in the "Pink Sheets" and no assurance can be given that
any  other  market  will  develop  or that a  shareholder  ever  will be able to
liquidate his  investment  without  considerable  delay,  if at all. If a market
should  develop,  the  price  may be  highly  volatile.  Factors  such as  those
discussed in this "Risk Factors" section may have a significant  impact upon the
market price of the  securities  offered  hereby.  Owing to the low price of the
securities,  many brokerage  firms may not be willing to effect  transactions in
the  securities.  Even if a  purchaser  finds  a  broker  willing  to  effect  a
transaction in these securities, the combination of brokerage commissions, state
transfer  taxes,  if any,  and any other  selling  costs may exceed the  selling
price.  Further,  many  lending  institutions  will not  permit  the use of such
securities as collateral for any loans.


Item 2.           Property
--------------------------

     The Company owns the building at 1510 Poole Boulevard,  Yuba City, CA 95993
(approximately 7000 square feet) where it maintains its executive offices.


Item 3.           Legal Proceedings
-----------------------------------

     The  Company is a party to several  currently  pending  legal  proceedings,
arising in the ordinary  course of business,  at December 31, 2002.  The Company
has defended the action and has reached a settlement for $50,000. If not paid by
April 20, 2003, the payment due will be $83,000.  The Company intends to pay the
$50,000 and issue the 30,000 shares by the due date; however,  due to the nature
of the matter, $83,000 has been accrued as a judgment payable as of December 31,
2002.

     Thomas E. Nelson v.  eTotalSource,  Inc.  d/b/a ETS  Marketing,  California
Labor  Commissioner  matter,  Docket  15-13980 MS, for unpaid wages. On March 6,
2003,  a decision  was  rendered  in favor of the  Plaintiff  for  $24,206.  The
obligation has been accrued as of December 31, 2002

     James   Barrickman,   Trustee  for  the  Jessie  M.  Barrickman   Trust  v.
eTotalSource,  Inc.,  Sutter County  Superior  Court Docket CVCS 02-1825,  filed
October 1, 2002, involves a claim of $100,000 owed on an outstanding convertible
note  payable.  The  obligation  is  recorded  as a  current  liability  in  the
accompanying  balance sheet;  settlement  communications are being held with the
debtor. No trial date has been set.

     The Company is subject to several outstanding judgments totalling in excess
of $200,000 and the Company will need to settle these matters at some point.


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

     No matters  were  submitted  during the period  covered by this report to a
vote of security holders of the Company,  through the solicitation of proxies or
otherwise.


                                       10

<PAGE>

Item 5.         Market for Registrant's Common Equity and Related  Stockholder
                Matters
------------------------------------------------------------------------------

     As of the date of this report,  there has been limited trading or quotation
of the Company's  common stock. It is quoted in the Pink Sheets under the symbol
"PMEN." The range of high and low trade quotations for each fiscal quarter since
the last report, as reported by the National Quotation Bureau Incorporated,  was
as follows:

                         2002                   High          Low
                   First quarter                 *             *
                   Second quarter                *             *
                   Third quarter                 .01           .01
                   Fourth quarter                .01           .01


                         2001                   High          Low
                   First quarter                 *             *
                   Second quarter                *             *
                   Third quarter                 *             *
                   Fourth quarter                *             *

                         2000                   High          Low
                   First quarter                 *             *
                   Second quarter                *             *
                   Third quarter                 *             *
                   Fourth quarter                *             *

* No quotations

     The above quotations reflect inter-dealer prices, without retail mark-up,
mark-down, or commission and may not necessarily represent actual transactions.


     As of December 31, 2002,  there were 280 record  holders of the Company's
common Stock.


     The Company has not declared or paid any cash dividends on its common stock
and does not anticipate paying dividends for the foreseeable future.


Item 6.          Management's Discussion and Analysis of Financial Condition and
                 Results of Operations

                 Financial Condition and Changes in Financial Condition
------------------------------------------------------------------------------

Changes in Financial Condition
------------------------------

     This Form 10KT is being filed due to a  transitional  period which resulted
from  the  acquisition  of  a  subsidiary,   eTotalSource,  Inc.,  a  California
corporation.  The Company prior to the eTotalSource  acquisition had no revenues
or operations. Its prior fiscal year end was June 30.



                                       11

<PAGE>

     On December 30, 2002, PMN acquired 91% of the preferred and common stock of
eTotalSource,  Inc.  ("eTS" -  incorporated  in California on February 7, 2000),
pursuant to an Agreement and Plan of Reorganization effective December 30, 2002,
by  issuing   15,540,011  shares  of  PMN  common  stock  to  eTS  shareholders.
Immediately  after the  transaction,  the eTS shareholders  owned  approximately
88.5% of the  Company's  common  stock.  Coincident  with the  transaction,  the
Company changed its fiscal year from June 30 to December 31.

     The reorganization is recorded as a recapitalization  effected by a reverse
merger  wherein PMN is treated as the acquiree  for  accounting  purposes,  even
though it is the legal  acquirer.  The  transaction  has been accounted for as a
purchase, and accordingly, since the transaction occurred December 31, 2002, the
results of operations for the periods  presented  represent  solely those of the
accounting  acquirer - eTS.  Since PMN was a  non-operating  shell with  limited
business activity, goodwill was not recorded.


Results of Operations for the fiscal year ended December 31, 2002, compared to
fiscal year ended December 31, 2001
------------------------------------------------------------------------------

     The Company had revenues  from  operations  of $213,823 and $332,526 in the
years ended  December  31,  2002 and 2001  respectively.  The  Company  incurred
expenses  incident  to  operations  in the  amount  of  $1,167,468  in 2002  and
$1,289,895.

     Premium  Enterprises,  Inc.  (the  "Company")  experienced  a loss  for the
twelve-month  period  ended  December  31, 2002 in the amount of  $1,214,305  as
compared with a loss of $1,114,247 for the  corresponding  period ended December
31, 2001.

     Net  revenues  for the  twelve-month  period  ended  December 31, 2002 were
$287,255  versus $407,788 for the  corresponding  period ended December 31, 2001
representing a 29.5%  decrease.  This decrease was  attributable  to the lack of
funding to allow the company to accept  production and post production  projects
and the lack of funding to allow for branding, promotion,  advertising and sales
of multi media training products and software.

     Annual  revenues  from  the CD  Training  programs  were  $67,441  for  the
twelve-month  period ended December 31, 2002 versus $0.00 for the same period in
the previous year. The CD training programs were ready for the market in 2002.

     Post Production  annual revenues for the twelve month period ended December
31, 2002 were $29,075,  as compared to $100,000 for the corresponding  period in
the previous  year.  Revenue for this segment of the business will increase from
quarter to quarter, due to the timing of the completion of existing contracts

     Consulting  expenses for the  twelve-month  period ended  December 31, 2002
were $242,500 as compared with $184,610 for the comparable period ended December
31, 2001.

     Consulting  Expenses  (Warrants  and Options) for the  twelve-month  period
ended  December 31, 2002 were $45,558 as compared with $0.00 for the  comparable
period ended  December 31, 2001.  The warrants and options were given to outside
consultants.

                                       12

<PAGE>

     Contract labor expenses for the twelve-month period ended December 31, 2002
were $1,700 as compared with $76,142 for the  comparable  period ended  December
31, 2001.

     Interest  expense for the  twelve-month  period ended December 31, 2002 was
$188,312 as compared with $188,568 for the  corresponding  period ended December
31, 2001.

     Payroll  expenses,  including  payroll taxes, for the  twelve-month  period
ended  December  31,  2002 were  $371,876  as  compared  with  $570,819  for the
comparable  period ended  December 31, 2001. In 2002, the company scaled back in
several areas.

     Legal Fees  expenses for the  twelve-month  period ended  December 31, 2002
were $130,899 as compared with $11,896 for the comparable  period ended December
31, 2001. The increase in fees is due to additional need for legal  consultation
on Corporate  matters:  creation of needed documents and corrected  filings with
the Secretary of State. Also, this includes the part of the merger costs.

     Professional  Fees expenses for the twelve-month  period ended December 31,
2002 were  $75,000  as  compared  with  $0.00 for the  comparable  period  ended
December 31, 2001. This includes part of the merger costs.

     The Company had a net loss on  operations of $1,214,305 in 2002 compared to
a loss of $1,114,246  in 2001.  The loss per share was  approximately  ($.07) in
each year.


Liquidity & Capital Resources
-----------------------------

     The Company had $50,326 in cash at year end and no other capital resources.
the Company will be dependent on its  shareholders  for loans for expenses,  and
has no capital  availability  except through private placement of stock, none of
which has been arranged.

                             Financial Commitments

The Company has notes with non-current maturities in the amount of $419,545.

The Company expects to convert approximately $400,000 of these non-current items
to equity in the second quarter of 2003.

Future maturities of loans and notes payable are as follows:

                                Year ending December 31,
                                2003                               $ 1,633,244
                                2004                                    13,212
                                2005                                    14,451
                                2006                                    15,807
                                2007                                    17,290
                                2008 - 2012                            114,043
                                2013 - 2017                            178,556
                                2018 - 2019                             66,186
                                                                        ------

                                Total                              $ 2,052,789
                                                                   ===========

                                       13

<PAGE>


Item 7.           Financial Statements and Supplementary Data
-------------------------------------------------------------

     Please refer to pages F-1 through F-21.


Item 8.           Changes  in  and  Disagreements  on  Accounting and  Financial
                  Disclosure
------------------------------------------------------------------------------

     Michael B. Johnson & Company,  CPA's of Denver,  Colorado  were retained in
1998 as auditors for the Company for fiscal year 1998  through  fiscal year June
30, 2002.

     In April 2003,  Michael Johnson & Co., LLC.  resigned,  and Gordon Hughes &
Banks were appointed auditor.

     In  connection  with audits of two most recent fiscal years and any interim
period preceding resignation,  no disagreements exist with any former accountant
on any  matter  of  accounting  principles  or  practices,  financial  statement
disclosure, or auditing scope of procedure,  which disagreements if not resolved
to the  satisfaction  of the former  accountant  would  have  caused him to make
reference  in  connection   with  his  report  to  the  subject  matter  of  the
disagreement(s).

     The decision to change  accountants  was approved by the Board of Directors
as the registrant has no audit committee.

     The principal  accountants'  reports on the financial statements for any of
the past two years  contained no adverse  opinion or a disclaimer of opinion nor
was qualified as to uncertainty,  audit scope, or accounting  principles  except
for the "going concern" qualification.



                                    PART III

Item 9.           Directors  and  Executive  Officers   of  the  Registrant  and
                  Compliance with Section 16(a)
------------------------------------------------------------------------------

     The director and executive  officers  currently  serving the Company are as
follows:

NAME                      POSITION HELD                       TENURE
----                      -------------                       ------

Terry Eilers              President/CEO (Director)            Annual since 2003
Michael Sullinger         COO, Secretary                      Annual since 2003
Wesley F. Whiting         Assistant Secretary (Director)      Annual since 2003
Virgil Baker              CFO                                 Annual since 2003

     The directors  named above will serve until the next annual  meeting of the
Company's stockholders. Thereafter, directors will be elected for one-year terms
at the annual stockholders'  meeting.  Officers will hold their positions at the
pleasure of the board of directors,  absent any employment  agreement,  of which
none currently exists or is contemplated.

     Pursuant to the Plan and  Agreement of  Reorganization  with  eTotalSource,
Inc.,  the following  persons were appointed to the Board of Directors as of May
12, 2003: Cody Morrow, Michael Sullinger,  Virgil Baker, and Richard Barber. The
Company  complied  with  Section 14f of the  Securities  Exchange Act of 1934 by
mailing  of  Form  14f1 to  shareholders  ten  days  prior  to the  appointment.
Biographical information for all directors is included herein.




                                       13

<PAGE>


     The  directors who are officers of the Company will devote such time to the
Company's  affairs on an "as needed" basis, but less than 20 hours per month. As
a result,  the actual  amount of time which  they will  devote to the  Company's
affairs is unknown and is likely to vary substantially from month to month.

BIOGRAPHICAL INFORMATION

TERRY  EILERS - CEO  Chairman,  Director  and  Founder of  eTotalSource,  Inc. -
1994-Present - Former VP and Regional  Manager,  Regional  Training Director for
Lawyers Title Company, 1984-1987, Creation, operation and sale of Sydney Cambric
Publishing 1983-1985 , implemented  marketing and management systems,  developed
and  supervising  management  training and conducting  live seminars to nearly 1
million  people  worldwide  for many  Fortune  500  companies  such as,  Bank of
America,  Coldwell Banker,  IBM, Xerox, and First American  Financial.  Over the
past 30 years,  his management and computer sales programs have been utilized by
major real estate entities, banks, savings and loans, insurance companies, sales
and research  organizations and publishing  companies  worldwide such as Norwest
Mortgage,  Century 21, Sun Trust,  Stewart  Title  Company,  and Lawyers  Title.
1980-1994. He was appointed President,  CEO, and Director of Premium Enterprises
on December 31, 2002.

He  is a  frequent  author,  having  written,  and  published  through  Crescent
Publishing,  Sydney  Cambric  Publishing  and  the  Disney  Corporation-Hyperion
Publishing,  12 books concentrated in the real estate,  business  management and
personal  development fields. Some of the titles Mr. Eilers has written include:
How to Sell  Your  Home  Fast  (Disney/Hyperion),  How To Buy the  Home You Want
(Disney/Hyperion),  The Title and Document Handbook (Sydney  Cambric),  Mortgage
Lending Handbook (Sydney Cambric),  Mastering Peak Performance (EMR Publishing),
Real Estate Calculator Handbook (Sydney Cambric). He has an AA Administration of
Justice  -Sacramento  City College 1971 Extensive Course Work - California State
College/Sacramento, Yuba College, Lincoln School of Law 1970-1985

VIRGIL  BAKER - CFO  Director and founder of  eTotalSource,  Inc.  1996-Present.
Formerly the CFO for AGRICO, a large agriculture  corporation  1993-1996 - where
he designed and integrated the network  programs for the  accounting,  cash flow
and inventory systems on a nationwide basis. Mr. Baker had the added responsibil
-ity for all of the International commerce generation.  He has a BA Accounting -
California  State  University/Chico  - 1992.  He was  appointed  CFO of  Premium
Enterprises on December 31, 2002 and was appointed as Director in May 2003.

MICHAEL  SULLINGER - COO - Secretary -  (Director  of  eTotalSource)  - In-house
legal  counsel of  eTotalSource,  Inc.  Elected to Board of Directors  for 2003.
Extensive  background in development  and management of  partnerships  and joint
ventures.  Previous private legal practice involved business litigation,  forma-
tion of business entities and advising  principals and directors in the planning
and  operation  of  various  companies.  Has  served as a Board of  Director  on
numerous  government,  business  and  philanthropic  organizations.  He has a BA
Business - San Francisco State  University 1977 JD - California  Northern School
of Law 1993.  He was  appointed  Director in May 2003 and  Secretary  of Premium
Enterprises on December 31, 2002.

WESLEY WHITING - Assistant Secretary - Current Director of Premium  Enterprises,
Inc. Mr. Whiting was President,  director,  and secretary of Berge  Exploration,
Inc.  (1978-88)  and  President,  vice  president,  and  director of NELX,  Inc.
(1994-1998),  and was vice  president  and  director  of  Intermountain  Methane
Corporation (1988-91),  and President of Westwind Production,  Inc. (1997-1998).
He was a director of Kimbell deCar Corporation (1998 until 2000) and he has been
President and a director of Dynadapt System,  Inc. since 1998. He was a Director
of Colorado Gold & Silver, Inc. from 1999 to 2000. He was President and director
of Business Exchange Holding Corp. from 2000 to date and Aqusition Lending, Inc.
(2000 to date).  He was director and Vice  President of Utilitec,  Inc,  1999 to
2002.  He was  president of Premium  Enterprises,  Inc.  from  October,  2002 to
December 30, 2002 and has been a director  since  October 2002. He is a director
and  Secretary of BSA  Satellink,  Inc.  and is a director and  Secretary of SDE
Holdings 2, Inc. He has been  appointed as  President  and Director of Quickbyte
Software, Inc. as of Spring 2003.



                                       14

<PAGE>

CODY MORROW - Director of  eTotalSource,  Inc. - President  of Morrow  Marketing
International   1995-present,   $200  million+   annual  sales   nationally  and
internationally.  Current  direct  business  operations in Europe,  Thailand and
India.  Many  years  experience  in  opening  foreign  markets.  Prior to Morrow
Marketing,  Cody was President of Monarch  Development  Corporation  1989-1993 a
Southern  California  based Real Estate  Development  Company.  He was appointed
Director of Premium Enterprises in May 2003.

RICHARD BARBER - Director of eTotalSource,  Inc. - Founder and senior partner of
A. Richard Barber & Associates  1983- Present,  a literary agency and consultant
to numerous major publishing companies.  He was also the Director of Development
for Network  Enterprises,  Inc., 1969-1983 where he supervised the creations and
writing of television and film properties.  Former Director and Senior Editor of
Public Relations,  for Viking Penguin,  Inc. Lecturer in publishing at New York,
Harvard and Radcliff  Universities,  1971- 1989. Mr. Barber's Extensive Academic
Background  is as follows:  Phillips  Exeter  Academy,  Exeter Fellow in History
(1963-1965),   Columbia  University,  M.A,  Ph.D  (1962-1963).  Course  work  at
Dartmouth College, Special Dartmouth Fellow, A.B., and study programs with Corey
Ford at Harvard, William & Mary, University of Michigan,  British Museum, Oxford
University and Columbia  University  (1961-1962).  He was appointed  Director of
Premium Enterprises in May 2003.

     Officers devote full time to the operations of the Company.

Conflicts of Interest

     Members of the  Company's  management  jmaybe  associated  with other firms
involved in a range of business  activities.  Consequently,  there are potential
inherent  conflicts of interest in their acting as officers and directors of the
Company.  Insofar as the officers and  directors  are engaged in other  business
activities, management anticipates it will devote only a minor amount of time to
the Company's affairs.

     The officers and  directors  are, so long as they are officers or directors
of the Company,  subject to the restriction that all opportunities  contemplated
by the Company's plan of operation which come to their attention,  either in the
performance  of  their  duties  or in  any  other  manner,  will  be  considered
opportunities  of, and be made  available to the Company and the companies  that
they are affiliated with on an equal basis. A breach of this requirement will be
a breach of the fiduciary duties of the officer or director.  If the Company and
the companies with which the officers and directors are  affiliated  both desire
to take advantage of an opportunity, then the Board of Directors has agreed that
said opportunity  should be available to each such Company in the order in which
such  companies  registered  or became  current in the filing of annual  reports
under the Exchange Act  subsequent  to January 1, 1997.  All directors may still
individually take advantage of opportunities if the Company should decline to do
so. Except as set forth above, the Company has not adopted any other conflict of
interest policy with respect to such transactions.

     There can be no assurance that management will resolve all conflicts of
interest in favor of the Company.


                                       15

<PAGE>


     Section 16(a) of the Securities  Exchange Act of 1934 (the "Exchange  Act")
requires that the  Company's  officers and  directors,  and persons who own more
than ten percent of the  registered  class of the Company's  equity  securities,
file  reports of  ownership  and changes in ownership  with the  Securities  and
Exchange   Commission.   Officers,   directors  and  greater  than  ten  percent
stockholders  are required by regulation to furnish to the Company copies of all
Section 16(a) forms they file.


     The following  persons  failed to file Forms required under Section 16a for
year 2002 on a timely basis:


Ronald D. Morrow                        Form 3, Form 5
Terry Eilers                            Form 3, Form 5
Michael Sullinger                       Form 3, Form 5
Wesley F. Whiting                       Form 3, Form 5
Cody Morrow                             Form 3, Form 5
Clark Davenport                         Form 3, Form 5


Item 10.          Executive Compensation
---------------------------------------------

     The Company doesn't have any employee incentive stock option plans.



<TABLE>
<CAPTION>


                                     SUMMARY COMPENSATION TABLE OF EXECUTIVES
<S>                            <C>       <C>         <C>          <C>           <C>              <C>           <C>            <C>
                                          Annual Compensation                          Awards
Name & Principal               Year    Salary      Bonus      Other         Restricted       Securities                    ALL
Position                               ($)         ($)        Annual        Stock            Underlying      LONG TERM     OTHER
                                                              Comp-         Award(s)         Options/SARS   COMPENSATION   COMPENSA-
                                                              ensation      ($)              (#)              / OPTION     TION
                                                              ($)
------------------------------------------------------------------------------------------------------------------------------------
Ronald D. Morrow,
President (Resigned 2002)      2000    0           0          0             0                0                  0             0
                               2001    $50,000*    0          0             0                0                  0             0
                               2002    0           0          0             0                0                  0             0
------------------------------------------------------------------------------------------------------------------------------------
Terry Eilers, President,       2000    $50,000     0          0             0                0                  0             0
CEO                            2001    $111,000    0          0             0                200,000            0             0
                               2002    $37,000     0          0             0                100,000            0             0
------------------------------------------------------------------------------------------------------------------------------------
Michael Sullinger,             2000    0           0          0             0                0                  0             0
Secretary, COO, Legal Counsel  2001    0           0          0             0                0                  0
                               2002    0           0          0             0                200,000            0             0
------------------------------------------------------------------------------------------------------------------------------------
Wesley F. Whiting,             2002    0           0          10,000 shares 0                0                  0             0
Assistant Secretary
(Former Pres., resigned 2003)
------------------------------------------------------------------------------------------------------------------------------------
Virgil Baker, CFO              2000    $27,000     0          0             0                0                  0             0
                               2001    $72,000     0          0             0                200,000            0
                               2002    $18,000     0          0             0                100,000            0             0
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>


     Aggregated  Option/SAR  Exercises in Last Fiscal Year an FY-End  Option/SAR
value (None)


     Long Term Incentive Plans - Awards in Last Fiscal Year (None)



                                       16

<PAGE>
<TABLE>
<CAPTION>

                          Directors' Compensation for Last Fiscal Year
                                     -----------------------

Name                          Annual     Meeting  Consulting    Number     Number of                   ALL
                              Retainer   Fees     Fees/Other    of         Securities    LONG TERM     OTHER
                              Fee ($)    ($)      Fees ($)      Shares     Underlying   COMPENSATION   COMPENSA-
                                                                (#)        Options        / OPTION     TION
                                                                           SARs(#)
------------------------------------------------------------------------------------------------------------------
<S>                  <C>        <C>           <C>      <C>          <C>            <C>         <C>           <C>
A. Director          2002       0             0        0            0              0           0             0
   Ronald D. Morrow  2001       0             0        0            0              0           0             0
   (Resigned)

B. Director          2002       0             0        0            0              0           0             0
   Terry Eilers      2001       0             0        0            0              0           0             0

C. Director          2002       0             0        0            0              0           0             0
   Michael Sullinger 2001       0             0        0            0              0           0             0
   (Designee)

D. Director          2002       0             0        0            0              0           0             0
   Virgil Baker      2001       0             0        0            0              0           0             0
   (Designee)

E. Director          2002       0             0        0            0              0           0             0
   Cody Morrow       2001       0             0        0            0              0           0             0
   (Designee)

F. Director          2002       0             0        0            0              25,000      0             0
   Richard Barber    2001       0             0        0            0              0           0             0
   (Designee)


G. Wesley F. Whiting 2002       0             0        0            0              0           0             0
   (Resigned 2003)   2001       0             0        0            0              0           0             0
</TABLE>

     Aggregated  Option/SAR  Exercises in Last Fiscal Year an FY-End  Option/SAR
value (None)

     Long Term Incentive Plans - Awards in Last Fiscal Year (None)

Employment Contracts

Agreements were executed with the Chief Executive Officer, Terry Eilers, and the
Chief Financial Officer, Virgil Baker, at the inception of the Company (February
7, 2000) which expire December 31, 2003.  Annual salary is $150,000 and $96,000,
respectively, and each accrues an annual non-accountable automobile allowance of
$9,000. The agreements also provide for 10% royalties on license revenues of the
Company's PresentaPro(TM)software and an annual bonus of incentive stock options
(covering  200,000  shares  each).  In  addition,  the CEO is  entitled  to a 5%
referral  commission on certain sales. Unpaid salary and commissions can be paid
with  warrants to purchase  common stock at $1 per share.  During 2002 and 2001,
CEO compensation  expensed pursuant to these  arrangements  totaled $159,000 and
$204,962,  and CFO  compensation  totaled  $105,000 and  $105,000,  respectively
(exclusive of the fair value of incentive stock options).

An  agreement  was  executed  August 1, 2000 with the Chief  Operating  Officer,
Michael  Sullinger,  which expires December 31, 2007.  Annual salary is $120,000
and a  non-accountable  automobile  allowance  of  $9,000.  The  agreement  also
provides  for  a  10%  royalty  on  the  license   revenues  of  the   Company's
PresentaPro(TM)  software  and  an  annual  bonus  of  incentive  stock  options
(covering  200,000  shares).  Unpaid  salary  and  commissions  can be paid with
warrants to purchase common stock at $1 per share. During 2002, COO compensation
expensed pursuant to these arrangements totaled $43,538, respectively (exclusive
of the fair value of incentive stock options).


                                       17

<PAGE>


Item 11.        Security Ownership of Certain Beneficial Owners and Management
------------------------------------------------------------------------------

     The following  table sets forth, as of the date of this Annual Report , the
number of shares of Common Stock owned of record and  beneficially  by executive
officers,  directors and persons who hold 5.0% or more of the outstanding Common
Stock  of the  Company.  Also  included  are the  shares  held by all  executive
officers and directors as a group.


<TABLE>
<CAPTION>
<S>                                         <C>                                 <C>

SHAREHOLDER/                                NUMBER OF SHARES                    OWNERSHIP
BENEFICIAL OWNERS                                                               PERCENTAGE
--------------------------------------------------------------------------------------------
Terry Eilers                                8,399,457                             48%
1510 Poole Boulevard                        300,000 options (1)                   1.6%
Yuba City, CA  95993

Clark Davenport                             1,535,386                             7.7%
1510 Poole Boulevard
Yuba City, CA  95993

Morrow Revocable Trust                      1,645,056                             8.2%
(beneficially Cody Morrow & Family)         200,000 options (1)                   1%
12655 Rough & Ready
Grass Valley, CA  95945

Michael Sullinger                           68,544                                .3%
1510 Poole Boulevard                        200,000 options (1)                   1%
Yuba City, CA  95993

Virgil Baker                                987,033                               5.6%
1510 Poole Boulevard                        300,000 options (1)                   1.6%
Yuba City, CA  95993

Richard Barber                              584,352                               3%
1510 Poole Boulevard                        50,000 options (1)                    .2%
Yuba City, CA  95993

Wesley Whiting                              75,000                                .4%
10200 W. 44th Ave., Suite 210E
Wheat Ridge, CO  80033


All directors and executive                 11,759,442                             65.5%
officers as a group (6 persons)             12,809,442                             70.9%


Each principal shareholder has sole investment power and sole voting power over
the shares.

</TABLE>

(1)     Options exercisable within 60 days computed pursuant to Section 13.

(2)     Includes total options exercisable as mentioned in (1) above.



                                       18
<PAGE>


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

     No officer,  director,  or affiliate of the Company has or proposes to have
any direct or indirect material interest in any asset proposed to be acquired by
the Company through security holdings,  contracts, options, or otherwise, except
that pursuant to the Plan and  Agreement of  Reorganization  with  eTotalsource,
Inc. certain persons received shares:


        Terry Eilers                                8,399,457 shares
                                                      300,000 options

        Clark Davenport                             1,535,386 shares

        Morrow Revocable Trust                      1,645,056 shares
        (beneficially Cody Morrow & Family)           200,000 options

        Michael Sullinger                              68,544 shares
                                                      200,000 options

        Virgil Baker                                  987,033 shares
                                                      300,000 options

        Richard Barber                                584,352 shares
                                                       50,000 options

        Wesley Whiting                                 75,000 shares

        The following persons have options to purchase shares:

<TABLE>
<CAPTION>

                                                Option Grant
                                Shares          Date            Vesting Date    Option Price     Expiry Date
                                ------          -----------     -----------     ------------     -----------
<S>                             <C>             <C>             <C>             <C>              <C>
        Terry Eilers            200,000  *      12/17/2001      3/1/02          $.50             12/15/2011
        Terry Eilers            100,000  *      12/15/2002      2/15/03         $.50             12/12/2012
        Virgil Baker            200,000  *      12/17/2001      3/1/02          $.50             12/15/2011
        Virgil Baker            100,000  *      12/15/2002      2/15/03         $.50             12/12/2012
        Michael Sullinger       200,000  *      12/15/2002      2/15/03         $.50             12/12/2012
        Richard Barber           25,000  *      12/17/2001      2/17/02         $.50             12/15/2011
        Richard Barber           25,000  *      12/15/2002      2/17/03         $.50             12/15/2012
        Morrow Revocable Trust
        (beneficially           200,000  *      12/17/2001      3/1/02          $.50             12/15/2011
         Cody Morrow & Family)
</TABLE>

* Were assumed by Premium Enterprises, Inc. as part of reorganization.



                                       19
<PAGE>

                                     PART IV


Item 13.       Exhibits and Reports on Form 8-K
------------------------------------------------

     The following documents are filed as part of this report:

     1.   Reports on Form 8-K:

          8-K filed 10-28-02
          8-K filed 12-31-02

     2.   Exhibits:
          None


Item 14 - Procedures and Controls
---------------------------------

The  management of the Company has evaluated the  effectiveness  of the issuer's
disclosure  controls  and  procedures  as of a date  within 90 days prior to the
filing  date of the  report  (evaluation  date)  and  have  concluded  that  the
disclosure  controls and procedures are adequate and effective  based upon their
evaluation as of the evaluation date.

There were no significant  changes in internal controls or in other factors that
could significantly  affect internal controls subsequent to the date of the most
recent  evaluation  of such,  including  any  corrective  actions with regard to
significant deficiencies and material weaknesses.



                                       20
<PAGE>

                                      INDEX

                                                      Form 10-K
Regulation                                            Consecutive
S-K Number                 Exhibit                    Page Number

3.1               Articles of Incorporation           *Incorporated by reference
                                                      to Registration Statement
                                                      on Form S-18 #33-17449D


3.2               Bylaws                              Incorporated by Reference
                                                      to Registration Statement
                                                      Form S-18 #33-17449D



31.1 & 31.2       Certifications

32.1 & 31.2       Sarbanes Oxley Certifications



                                       21
<PAGE>

                                   SIGNATURES:
                                   -----------

Pursuant to the  requirements  of Section 12 of the  Securities  Exchange Act of
1934,  the  registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.



DATED:  August 15, 2003



                                             eTOTALSOURCE, INC.
                                             f/k/a Premium Enterprises, Inc.


                                              /s/Terry Eilers
                                              ------------------------
                                              Terry Eilers
                                              President and CEO


                                              Directors:


                                              /s/Terry Eilers
                                              ------------------------
                                              Terry Eilers

                                              /s/Virgil Baker
                                              ------------------------
                                              Virgil Baker

                                              /s/Michael Sullinger
                                              ------------------------
                                              Michael Sullinger

                                              /s/Cody Morrow
                                              ------------------------
                                              Cody Morrow

                                              /s/Richard Barber
                                              ------------------------
                                              Richard Barber




                                       22


<PAGE>

                            Premium Enterprises, Inc.
                        Consolidated Financial Statements
                                Table of Contents

                                                                          PAGE

Consolidated Financial Statements

    Report of Independent Auditors                                         F-1

    Balance Sheet                                                          F-2

    Statement of Operations                                                F-3

    Statement of Cash Flows                                                F-4

    Statement of Changes in Stockholders' Equity (Deficit)                 F-5

    Notes to Financial Statements                                          F-6



<PAGE>


                            Gordon, Hughes, & Banks
                             215 Union Blvd., #215
                               Lakewood, CO 80228
                              Phone: 303-986-2454
                               Fax: 303-980-5029




REPORT OF INDEPENDENT AUDITORS


To the Board of Directors
Premium Enterprises, Inc.
Yuba City, California

We have audited the accompanying consolidated balance sheet of Premium
Enterprises, Inc. (the "Company") as of December 31, 2002, and the related
consolidated statements of operations, stockholders' equity (deficit) and cash
flows for the years ended December 31, 2002 and 2001. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
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 Premium Enterprises,
Inc. at December 31, 2002, and the results of its consolidated operations and
its cash flows for the years ended December 31, 2002 and 2001, in conformity
with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been presented assuming that the
Company will continue as a going concern, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business. As
discussed in Note 1 to the financial statements, the Company has incurred
significant recurring losses, and as of December 31, 2002 has a substantial
liquidity shortage, including default conditions on certain notes payable and
judgments payable to creditors. As a consequence, the Company requires
significant additional financing to satisfy outstanding obligations and continue
operations. Unless the Company successfully obtains suitable significant
additional financing, there is substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these matters are
also discussed in Note 1. The financial statements do not include any
adjustments to reflect the possible future effect on the recoverability and
classification of assets or the amounts and classification of liabilities that
may result from the outcome of this uncertainty.




/S/ Gordon, Hughes & Banks, LLP
GORDON, HUGHES & BANKS, LLP
Lakewood, Colorado
March 5, 2003


                                      F-1

<PAGE>
<TABLE>
<CAPTION>


                            Premium Enterprises, Inc.
                           Consolidated Balance Sheet
                                December 31, 2002

<S>                                                                                         <C>
ASSETS
Current Assets
Cash                                                                                            $ 50,326
Other current assets                                                                              48,122
                                                                                                 -------
Total Current Assets                                                                              98,448
                                                                                                 -------
Property and Equipment
Building and land                                                                                900,000
Equipment                                                                                         98,821
                                                                                                 -------
                                                                                                 998,821
  Less accumulated depreciation                                                                  (91,540)
                                                                                                 --------
                                                                                                 907,281

Other Assets
Patents applications and trademarks, less $7,363 accumulated amortization                         32,975
Deposits                                                                                           3,976
                                                                                                  ------
                                                                                                  36,951

Total Assets                                                                                 $ 1,042,680
                                                                                            ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current Liabilities
Current maturities of mortgages payable                                                        $ 814,501
Convertible notes payable                                                                        575,000
Other notes payable                                                                              243,743
Judgments payable                                                                                209,787
Accounts payable                                                                                 315,586
Accrued compensation payable                                                                     625,937
Accrued interest payable                                                                         290,550
Other accrued liabilities                                                                         12,293
Deferred revenue                                                                                 157,500
                                                                                                --------
Total Current Liabilities                                                                      3,244,897

Mortgages Payable, less current maturities                                                       419,545
                                                                                                --------

Commitments and Contingencies                                                                          -

Total Liabilities                                                                              3,664,442
                                                                                              ----------
Stockholders' Equity (Deficit)
Common stock; no par value; 20 million shares authorized,
  17,565,151 shares issued and outstanding                                                     1,381,311
Accumulated (deficit)                                                                         (4,003,073)
                                                                                              -----------
Total Stockholders' Equity (Deficit)                                                          (2,621,762)
                                                                                              -----------

Total Liabilities and Stockholders' Equity (Deficit)                                         $ 1,042,680
                                                                                             ============
</TABLE>


                            See accompanying notes.

                                      F-2

<PAGE>
<TABLE>
<CAPTION>

                            Premium Enterprises, Inc.
                      Consolidated Statement of Operations

                                                                              December 31,
                                                                         2002             2001
                                                                 -------------    -------------
<S>                                                              <C>              <C>

Revenues                                                            $ 213,823        $ 332,526

General and Administrative Expenses                                 1,167,468        1,289,895
                                                                 -------------    -------------

Operating Income (Loss)                                              (953,645)        (957,369)

Other Income (Expense)
Rental Income                                                          10,721           30,442
Interest Expense                                                     (283,237)        (190,289)
Other                                                                  11,856            2,970
                                                                 -------------    -------------
                                                                     (260,660)        (156,877)

Net Income (Loss)                                                $ (1,214,305)    $ (1,114,246)
                                                                 =============    =============

Basic and Diluted Income (Loss) Per Share                             $ (0.07)         $ (0.07)
                                                                 =============    =============

Weighted Average Common Shares Outstanding                         17,059,167       15,647,584
                                                                 =============    =============
</TABLE>


                             See accompanying notes

                                      F-3

<PAGE>
<TABLE>
<CAPTION>

                                    Premium Enterprises, Inc.
                    Consolidated Statement of Stockholders' Equity (Deficit)

                                                      Preferred Stock            Common Stock           Accumulated
                                                     -----------------           -------------
                                                   Shares        Amount       Shares        Amount       (Deficit)          Total
                                                   -------       -------      -------       -------      ----------         ------
<S>                                               <C>         <C>         <C>             <C>         <C>              <C>
December 31, 2000                                        -           $ -    2,730,000      $ 273,000  $ (1,674,522)    $ (1,401,522)

    Stock issued for services ($.75 per share)           -             -       50,000         37,500             -           37,500

    Series A Preferred Stock ($4.00 per share) -
       Cash                                        123,500       494,000            -              -             -          494,000
       Conversion of promissory notes              106,250       425,000            -              -             -          425,000
       Services                                     10,000        40,000            -              -             -           40,000
       Equipment                                     3,000        12,000            -              -             -           12,000

    Series B Preferred Stock ($1.81 per share) -
       Cash                                         13,812        25,000            -              -             -           25,000

    Redemption ($.75 per share)                          -             -       (1,000)          (750)            -             (750)

     Net (loss)                                          -             -            -              -    (1,114,246)      (1,114,246)
                                                  ---------   ----------- -----------     ----------  -------------    -------------

December 31, 2001                                  256,562       996,000    2,779,000        309,750    (2,788,768)      (1,483,018)

    Series B Preferred Stock ($1.81 per share) -
       Cash                                         55,248       100,000            -              -             -          100,000
       Conversion of promissory notes               52,624       150,000            -              -             -          150,000

    Options and warrants issued to
        consultants and lenders                          -             -            -        134,934             -          134,934

     Net (loss)                                          -             -            -              -    (1,214,305)      (1,214,305)

    Reorganization December 30, 2002:
        Premium Enterprises, Inc. reverse merger         -             -    2,025,140       (309,373)            -         (309,373)
        Shares issued eTS shareholders            (364,434)   (1,246,000)  12,761,011      1,246,000             -                -
                                                  ---------   ----------- -----------     ----------  -------------    -------------

December 31, 2002                                        -           $ -   17,565,151    $ 1,381,311   $ (4,003,073)   $ (2,621,762)
                                                  =========   =========== ===========   ============  =============    =============
</TABLE>


                            See accompanying notes.

                                      F-4

<PAGE>
<TABLE>
<CAPTION>


                                 Premium Enterprises, Inc.
                           Consolidated Statement of Cash Flows

                                                                                                  December 31,
                                                                                              2002             2001
                                                                                           --------         --------
<S>                                                                                   <C>              <C>
Cash Flows From (Used in) Operating Activities:
Net (loss)                                                                            $ (1,214,305)    $ (1,114,246)
Depreciation and amortization                                                               46,287           40,843
Stock options and warrants issued for services                                              45,558                -
Stock warrants issued in lieu of interest                                                   89,376                -
Stock issued for services                                                                        -           77,500
Note payable issued for services                                                                 -           24,582
Loss from retirement of equipment                                                            4,191                -
Changes in assets and liabilities:
Decrease (increase) in other current assets                                                (46,092)           2,136
Decrease (increase) in deposits                                                              3,909           (3,380)
Increase (decrease) in payables, credit cards and accrued liabilities                      531,336          277,401
Increase (decrease) in deferred revenue                                                    (45,000)         202,500
                                                                                           --------        --------
Net Cash (Used in) Operating Activities                                                   (584,740)        (492,664)
                                                                                          ---------        ---------
Cash Flows From (Used in) Investing Activities:
Purchase equipment                                                                            (321)          (6,839)
Patent and trademark costs                                                                 (10,479)          (6,257)
                                                                                           --------          -------

Net Cash (Used in) Investing Activities                                                    (10,800)         (13,096)
                                                                                           --------         --------
Cash Flows From (Used in) Financing Activities:
Proceeds from notes payable                                                                554,369          100,000
Proceeds from sale of preferred stock                                                      100,000          519,000
Payments on notes payable                                                                   (8,844)        (112,853)
Redemption of common stock                                                                      -              (750)
                                                                                           --------         --------

Net Cash From Financing Activities                                                         645,525          505,397
                                                                                           --------         --------

Increase (decrease) in Cash and Cash Equivalents                                            49,985             (363)

Cash and Cash Equivalents - Beginning of Year                                                 341              704
                                                                                           --------         --------

Cash and Cash Equivalents - End of Year                                                  $ 50,326            $ 341
                                                                                         =========           ======
Supplemental Disclosures:
   Interest paid                                                                         $ 166,723         $ 94,505
   Income taxes paid                                                                           800              800
   Non-cash investing and financing transactions:
      Issue 17 million shares to refinance Company                                         309,373                -
      Issue stock for equipment                                                                  -           12,000
      Conversion of debt to equity                                                         150,000          425,000

</TABLE>

                            See accompanying notes.

                                      F-5

<PAGE>

Premium Enterprises, Inc.
Notes to Consolidated Financial Statements

NOTE 1.  BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Premium Enterprises, Inc. (the "Company" or "PMN"), was incorporated in Colorado
on September 16, 1987.  The principal  activities of the Company are  developing
and publishing  proprietary  multimedia  software technology and training media.
The Company's primary customers are corporations, governmental organizations and
agencies.  The Company also owns and partially occupies facilities in Yuba City,
California;  office space in excess of the Company's  current needs is leased to
others.

Reorganization. On December 30, 2002,  PMN  acquired  91% of the  preferred  and
common stock of  eTotalSource,  Inc.  ("eTS" -  incorporated  in  California  on
February 7, 2000), pursuant to an Agreement and Plan of Reorganization effective
December  30,  2002,  by issuing  15,540,011  shares of PMN common  stock to eTS
shareholders.  Immediately  after the transaction,  the eTS  shareholders  owned
approximately  88.5%  of  the  Company's  common  stock.   Coincident  with  the
transaction, PMN changed its fiscal year from June 30 to December 31.

The  reorganization  is  recorded  as a  recapitalization  effected by a reverse
merger  wherein PMN is treated as the acquiree  for  accounting  purposes,  even
though it is the legal  acquirer.  The  transaction  has been accounted for as a
purchase, and accordingly, since the transaction occurred December 31, 2002, the
results of operations for the periods  presented  represent  solely those of the
accounting  acquirer - eTS.  Since PMN was a  non-operating  shell with  limited
business  activity,  goodwill was not recorded.  A summary of net liabilities on
December 30, 2002 are set forth below:

<TABLE>
<CAPTION>

                                                             eTS              PMN        Consolidated
                                                             ---              ---        ------------
<S>                                                  <C>                <C>               <C>
Cash and equivalents                                    $  50,326              $ -           $  50,326
Other current assets                                       48,122                -              48,122
Property and equipment, net of depreciation               907,281                -             907,281
Other assets, net of amortization                          36,951                -              36,951
Notes payable and current liabilities                  (3,355,068)        (309,374)         (3,664,442)
                                                       -----------        -----------       -----------
Net liabilities                                      $ (2,312,388)      $ (309,374)       $ (2,621,762)
                                                     =============      ===========       =============
</TABLE>


                                      F-6

<PAGE>

Premium Enterprises, Inc.
Notes to Consolidated Financial Statements

The following  unaudited pro forma  consolidated  results of operations  for the
years  ended  December  31, 2002 and 2001 assume the  business  combination  had
occurred as of January 1, 2001:

                                                        Year Ended December 31,
                                                        2002               2001
                                                        ----               ----
       Revenues                                    $ 214,000         $  333,000
       Net income (loss)                          (1,243,000)        (1,229,000)
       Net income (loss) per share                     $(.07)             $(.07)
                                                   =========          =========

In management's  opinion,  the unaudited pro forma results of operations are not
indicative of the actual results that would have occurred if the acquisition had
taken place at the beginning of the periods presented and are not intended to be
a projection of future results.

As part of the Agreement and Plan of  Reorganization,  both parties agreed to an
irrevocable  "poison  pill" which shall  survive  the  Agreement  for a two year
period to preclude any reverse splits, consolidations, reorganizations, mergers,
or reduction of the number of outstanding  shares of stock except for a proposed
one-for  four  reverse  split of shares  immediately  after the  closing  of the
Agreement.  In the event the  provision  is  breached  it  triggers a grant of a
mandatory dividend to each shareholder of PMN as of Sept 30, 2002.

Shares Reserved for Minority eTS Shareholders
The 9%  remaining  un-tendered  balance  of  eTS  shares  in the  reorganization
discussed  above  (20,250  shares of eTS Series A  Preferred  Stock and  249,888
shares of eTS Common  Stock)  resulted in the board of  directors  reserving  an
additional  1,459,989 shares of PMN common stock for later issuance (for a grand
total of 17  million  PMN common  shares  issued for all of the eTS stock in the
exchange). The capital stock of these un-tendered interests is exceeded by their
related pro rata net losses; consequently,  minority interest attributes are not
reflected in the  accompanying  balance sheet or statement of operations and the
related  shares  are not  reflected  as being  outstanding,  pending  subsequent
issuance.  These shares are excluded from the  calculation  of weighted  average
shares outstanding in the determination of the net loss per share.

                                      F-7

<PAGE>

Premium Enterprises, Inc.
Notes to Consolidated Financial Statements

Shares Reserved for PMN Shareholders
In connection with the  reorganization  discussed  above, the board of directors
reserved a total of 400,000  common shares to retire PMN debt totaling  $107,322
and 400,000  common shares for services.  Issuance of these shares is contingent
upon  successful  completion of the  reorganization  discussed above (see Shares
Reserved for Minority eTS  Shareholders)  and filing of a Form 8-K 12g3 with the
Securities  and  Exchange  Commission.   These  shares  are  excluded  from  the
calculation of weighted average shares  outstanding in the  determination of the
net loss per share.

Going Concern Considerations
The  accompanying  financial  statements  have been presented  assuming that the
Company will continue as a going concern,  which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business. The
Company has incurred significant  recurring losses since its inception and as of
December  31,  2002  had  a  net  working  capital   deficit  of   $(3,146,449),
stockholders'  deficit  of  $(2,621,762),  notes  payable  of  $495,000  were in
default,  related  accrued  interest in arrearages  of $47,810,  and courts have
entered judgments payable to creditors totaling $209,787.  Management's plans to
address these matters include funding from issuance of debt,  private placements
of stock and increasing  revenue from governmental  sources and other customers.
Unless  the  Company  successfully   obtains  suitable  significant   additional
financing and attains  profitable  operations,  there is substantial doubt about
the Company's ability to continue as a going concern.  The financial  statements
do not include any  adjustments  to reflect the  possible  future  effect on the
recoverability and classification of assets or the amounts and classification of
liabilities that may result from the outcome of this uncertainty.

Use of Estimates
The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect certain  reported amounts and  disclosures.  Accordingly,  actual results
could differ from those estimates.

Principles of Consolidation
The consolidated  financial  statements  include the accounts of the Company and
its wholly-owned subsidiary after the elimination of intercompany transactions.

                                      F-8

<PAGE>

Premium Enterprises, Inc.
Notes to Consolidated Financial Statements

Revenue Recognition
The Company recognizes revenue in accordance with Statement of Position No. 97-2
"Software  Revenue  Recognition"  issued by the Accounting  Standards  Executive
Committee of the AICPA.  Revenues are recorded net of an allowance for estimated
returns and collectibility at the time of billing.

Product  revenue is derived  primarily from the sale of  self-produced  training
multimedia and related off-the-shelf  software products.  The Company recognizes
revenue  from sales of these  products  at the time of  shipment  to  customers.
Service revenue is primarily derived from production of videos for others and is
recognized upon customer acceptance.

Deferred revenue includes payments received for product licenses covering future
periods and advances on service contracts that have not yet been fulfilled.

Software and Development Costs
The  Company  capitalizes  purchased  software  that is ready  for  service  and
development costs of marketable software incurred from the time of technological
feasibility  until the software is ready for use. Research and development costs
and other computer software  maintenance  costs are expensed as incurred.  As of
December 31, 2002, the Company has not capitalized any software costs.

Property and Equipment
Building and equipment  represents the cost of the Yuba City,  California office
building,  furniture  and  equipment.  Maintenance  and  repairs  are charged to
operations  when  incurred.  When  property and  equipment are sold or otherwise
disposed of, the asset account and related accumulated  depreciation account are
relieved,  and any gain or loss is included in operations.  The cost of property
is depreciated  using the  straight-line  method over estimated  useful lives as
follows:

                                  Years
                                  -----
            Buildings             31
            Equipment             5 - 7

Depreciation charged to operations was $39,409 in 2002 and $37,377 in 2001.

                                      F-9

<PAGE>

Premium Enterprises, Inc.
Notes to Consolidated Financial Statements

Patents and Trademarks
Patents and trademarks  represent the legal and application  costs of multimedia
technology used in operations and are amortized using the  straight-line  method
over an estimated useful life of ten years.

Comprehensive Income
For the periods presented,  the Company had no items of comprehensive  income or
loss, and accordingly, comprehensive income is the same as net loss reported.

Income Taxes
Income taxes are  accounted for using the  liability  method.  Under this method
deferred  tax assets and  liabilities  are  determined  based on the  difference
between the  financial  statement  carrying  amounts and tax basis of assets and
liabilities  using  enacted  tax  rates in  effect  in the  years  in which  the
differences  are  expected  to  reverse.  Deferred  tax assets are  reduced by a
valuation allowance to the extent realization is uncertain.

Cash Equivalents
For  the  purpose  of  reporting  cash  flows,  the  Company  considers  as cash
equivalents  all highly  liquid  investments  with a maturity of three months or
less at the time of purchase.

Long-Lived Assets
Long-lived  assets,  such as property and  equipment and  intangible  assets are
evaluated for impairment when events or changes in  circumstances  indicate that
the carrying  amount of the assets may not be recoverable  through the estimated
undiscounted  future  cash  flows  from the use of these  assets.  When any such
impairment  exists,  the related  assets will be written down to fair value.  No
impairment expense was recognized in 2002 or 2001.

Earnings (Loss) Per Share
Basic  earnings per share are  computed  using the  weighted  average  number of
shares outstanding during each period. Diluted earnings per share is computed on
the basis of the average  number of common shares  outstanding  and the dilutive
effect of  convertible  notes  payable,  stock  options and  warrants  using the
"treasury  stock"  method.  Basic and  diluted  earnings  per share are the same
during the periods presented since the Company had a net losses and the

                                      F-10

<PAGE>

Premium Enterprises, Inc.
Notes to Consolidated Financial Statements

inclusion of stock options and warrants would be antidilutive. All share and per
share amounts  reflect the  retroactive  effect of the  conversion of eTS shares
into PMN shares.

Stock-Based Compensation

The  Company  accounts  for  its  stock-based   compensation   using  Accounting
Principles Board's Opinion No. 25 ("APB 25"). Under APB 25, compensation expense
is  recognized  for stock  options with an exercise  price that is less than the
market price on the grant date of the option.  For stock  options with  exercise
prices at or above the market value of the stock on the grant date,  the Company
adopted  the  Financial  Accounting  Standards  Board  ("FASB")  disclosure-only
provisions of Statement of Financial Accounting Standards No. 123 Accounting for
Stock-Based   Compensation   ("SFAS   123").   The   Company   has  adopted  the
disclosure-only  provisions  of  SFAS  123  for  stock  options  granted  to the
employees and directors.  Accordingly,  no compensation cost has been recognized
for these  options.  Had  compensation  expense  for the  options  granted  been
determined based on the fair value at the grant date for the options, consistent
with the  provisions  of SFAS 123, the Company's net loss and net loss per share
would have been increased to the pro forma amounts indicated below:

                                                     2002                  2001
                                                     ----                  ----
         Net loss
            Reported                         $(1,214,305)          $(1,114,246)
            Pro forma                        $(1,636,573)          $(1,559,257)

         Net loss per share
            Reported                               $(.07)                $(.07)
            Pro forma                              $(.10)                $(.10)


The fair value of the common stock  options  granted  during 2002 and 2001,  for
disclosure  purposes was  estimated  on the grant dates using the  Black-Scholes
Pricing Model and the following assumptions.

                                      F-11

<PAGE>

Premium Enterprises, Inc.
Notes to Consolidated Financial Statements

                                                    2002                  2001
                                                    ----                  ----
     Risk free interest rate                        4.11%                 4.05%
     Expected life - years                           7.9                  10.0
     Expected volatility                             406%                  406%
     Expected dividend yield                          - %                   - %

Recent Accounting Pronouncements
In June  2001  the  FASB  issued  SFAS  143,  Accounting  for  Asset  Retirement
Obligations,  which  requires  that the fair value of a  liability  for an asset
retirement  obligation  be recognized in the period in which it is incurred if a
reasonable  estimate of fair value can be made. The associated  asset retirement
costs are  capitalized as part of the carrying  amount of the long-lived  asset.
The asset retirement liability will be allocated to operating expense by using a
systematic  and rational  method.  The  Statement is effective  for fiscal years
beginning  June 15, 2002.  The Company  adopted SFAS 143 on January 1, 2003. The
Company  does not  anticipate  that the adoption of this  Statement  will have a
material effect on its financial position or results of operations.

In April 2002 the FASB issued SFAS 145, Rescission of FASB Statements No. 4, 44,
and 64,  Amendment of FASB Statement No. 13, and Technical  Corrections.  FASB 4
required all gains or losses from  extinguishment  of debt to be  classified  as
extraordinary items net of income taxes. SFAS 145 requires that gains and losses
from  extinguishment of debt be evaluated under the provisions of APB 30, and be
classified  as ordinary  items unless they are unusual or infrequent or meet the
specific  criteria for treatment as an  extraordinary  item.  This  Statement is
effective  January 1, 2003. The Company does not anticipate that the adoption of
this Statement will have a material effect on its financial  position or results
of operations.

In July 2002,  the FASB issued SFAS 146,  Accounting for Costs  Associated  with
Exit or Disposal  Activities.  This Statement addresses financial accounting and
reporting for costs  associated  with exit or disposal  activities and nullifies
EITF Issue 94-3, Liability Recognition for Certain Employee Termination Benefits
and Other  Costs to Exit an  Activity  (including  Certain  Costs  Incurred in a
Restructuring).  This Statement  requires  recognition of a liability for a cost
associated with an exit or disposal activity when the liability is incurred,  as
opposed  to when the  entity  commits  to an exit plan  under  EITF  94-3.  This
Statement  is to  be  applied  prospectively  to  exit  or  disposal  activities
initiated after December 31, 2002. The Company does not anticipate that the

                                      F-12

<PAGE>

Premium Enterprises, Inc.
Notes to Consolidated Financial Statements

adoption of this Statement will have a material effect on its financial position
or results of operations.

In October 2002,  the FASB issued SFAS 147,  Acquisitions  of Certain  Financial
Institutions.  The  provisions  of SFAS 147 are generally  effective  October 1,
2002. The Company does not anticipate that this pronouncement will result in any
impact on its financial statements.

In  December  2002,  the FASB  approved  SFAS 148,  Accounting  for  Stock-Based
Compensation  - Transition  and  Disclosure - an amendment of FASB Statement No.
123.  SFAS 148 amends  SFAS 123,  Accounting  for  Stock-Based  Compensation  to
provide  alternative  methods of transition  for a voluntary  change to the fair
value based method of  accounting  for  stock-based  employee  compensation.  In
addition,  SFAS 148 amends the  disclosure  requirements  of SFAS 123 to require
prominent  disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect of the
method used on reported results.  SFAS 148 is effective for financial statements
for fiscal years ending after  December 15, 2002.  Since the Company has elected
to follow the  unaffected  provisions of SFAS 123, it does not  anticipate  that
this pronouncement will result in any impact on these financial statements.

<TABLE>
<CAPTION>

NOTE 2.  NOTES PAYABLE

<S>                                                                               <C>
Mortgage note payable to a bank; principle and interest at 9% in payable
monthly payments of $4,203 through November 2004, when the interest rate
is adjusted and every five years thereafter to 3% above the U.S. Treasury
bill rate until  November  10,  2019 when unpaid principal and interest
are due.  Secured by real estate.                                                 $ 433,792

Mortgage note payable to a bank; interest at 10% payable monthly, principal
and unpaid interest due January 5, 2001, extended to May 15, 2003.  Secured
by real estate.  As of December 31, 2002, payment of $20,810 in accrued
interest is in arrears.                                                             243,885

Mortgage note payable to a trust; interest at 17% payable monthly through
December 18, 2003 when principal and unpaid interest are due.  Secured
by real estate.                                                                     234,369

Mortgage note payable to a trust; interest at 15% payable monthly through
December 18, 2003 when principal and unpaid interest are due.  Secured
by real estate.                                                                     172,000

Mortgage note payable to a trust; interest at 10% and principal due
January 17, 2003, extended to December 17, 2003 (with interest increased
to 18% and due monthly beginning February 17, 2003).  Secured by real
estate and a security interest in a specific subcontract with the U.S.
Department of Defense.                                                              110,000

Mortgage note payable to a trust; interest at 14% payable monthly through
December 18, 2003 when principal and unpaid interest are due.  Secured
by real estate.                                                                      40,000

                                      F-13

<PAGE>

Premium Enterprises, Inc.
Notes to Consolidated Financial Statements

Promissory notes payable; interest at 6% payable monthly, due in
2001, $375,000 in default, $75,000 extended due date May 15, 2003,
unsecured.  Principal and accrued interest ($24,000 at December 31,
2001) convertible to common stock at $.50 per share.  Warrants also
issued to the two extended note holders to purchase 37,500 shares of
common stock for five years at $.50 per share.  As of December 31,
2002, payment of $21,500 in accrued  interest is in arrears.                         450,000

Promissory notes payable; principle and accrued interest at 8%
payable in 2002, extended to May 15, 2003, unsecured.  Principal and
accrued interest ($10,638 at December 31, 2001) convertible to Company
common stock at $.50 per share.  Warrants  also issued to the note
holders to purchase 60,248 shares of common stock for five years at
$.50 per share.                                                                      125,000

Promissory note payable to an individual for services performed in 2000;
interest at 28%; due July 15, 2000, extended to August 31, 2003; secured by
substantially all assets of the Company and personally guaranteed by its
president and a former officer.                                                      70,000

Note payable to a corporation; principal and interest at 10% due March 17,
2003, in default, unsecured. As additional consideration the lender was
granted warrants to purchase 13,000 shares of common stock at $.50 per share.        70,000

Note payable to an individual; non-interest bearing and imputed at 10%; due
in 2001, extended to December 31, 2003, unsecured.                                   28,743

Note payable to an individual; principal and interest at 10% due March 17,
2003, in default, unsecured.  As additional consideration the lender was
granted warrants to purchase 126,000 shares of common stock at $.50 per
share.  As of December 31, 2002, payment of $5,500 in accrued interest
is in arrears.                                                                       25,000

Note payable to an individual; principal and interest at 10% due March 17,
2003, in default, unsecured.                                                         25,000

Note payable to an individual; principal and interest at 9.2% due December
4, 2002, extended to May 1, 2003, unsecured.                                         20,000

Other; unsecured; due in 2003.                                                       5,000
                                                                                     ------
Total                                                                                2,052,789

Current maturities                                                                   1,633,244
                                                                                     ---------
Non-current maturities                                                               $419,545
                                                                                     ========
</TABLE>

                                      F-14

<PAGE>

Premium Enterprises, Inc.
Notes to Consolidated Financial Statements

Future maturities of loans and notes payable are as follows:

                Year ending December 31,
                2003                                      $ 1,633,244
                2004                                           13,212
                2005                                           14,451
                2006                                           15,807
                2007                                           17,290
                2008 - 2012                                   114,043
                2013 - 2017                                   178,556
                2018 - 2019                                    66,186
                                                             --------
                Total                                     $ 2,052,789
                                                          ===========

NOTE 3.  INCOME TAXES

The components of the provision (benefit) for income taxes are as follows:

                                                    2002                  2001
                                                    ----                  ----
    Current:
       Federal                                       $ -                   $ -
       State                                           -                     -
                                                    -----                 -----
         Total                                         -                     -
                                                    -----                 -----
    Deferred
       Federal                                         -                     -
       State                                           -                     -
                                                    -----                 -----
         Total                                         -                     -
                                                    -----                 -----
    Total provision (benefit) for income taxes       $ -                   $ -
                                                     ===                   ===

The provision (benefit) for income taxes reconciles to the amount computed by
applying the federal statutory rate to income before the provision (benefit) for
income taxes as follows:

                                                           2002            2001
                                                           ----            ----
     Federal statutory rate
                                                          (25)%           (25)%
     State franchise taxes, net of federal benefits
                                                           (4)             (4)
     Valuation allowance                                   29              29
                                                          -----          -----
          Total                                            -- %           --%
                                                          =====          =====

                                      F-15

<PAGE>

Premium Enterprises, Inc.
Notes to Consolidated Financial Statements

Significant components of deferred income taxes as of December 31, 2002 are as
follows:

                  Net operating loss carryforward                  $1,155,000
                  Vacation accrual                                    (16,000)
                  Stock option compensation                           (39,000)
                  Depreciation and amortization                        (2,000)
                                                                       -------

                  Total deferred tax asset                          1,098,000
                  Total deferred tax liability                              -
                  Less valuation allowance                         (1,098,000)
                                                                   -----------

                  Net deferred tax asset                              $     -
                                                                   ===========

The  Company  has  assessed  its past  earnings  history  and  trends,  budgeted
revenues,  and expiration dates of  carryforwards  and has determined that it is
more likely than not that no deferred tax assets will be realized. The valuation
allowance of  $1,155,000  is maintained on deferred tax assets which the Company
has  determined  to be more likely  than not  realizable  at this time.  The net
change in the  valuation  allowance  for  deferred tax assets was an increase of
$351,000  during 2002.  The Company will continue to review this  valuation on a
quarterly basis and make adjustments as appropriate.

At December 31, 2002, the Company had federal net operating  loss  carryforwards
of approximately $4 million. Such carryforwards expire in the years 2020 through
2022.

NOTE 4.  STOCKHOLDERS' EQUITY

Convertible Notes Payable
During 2002 and 2001,  52,624 and 106,250 shares of preferred  stock were issued
to convertible  note holders at $1.81 and $4.00 per share,  respectively.  As of
December 31, 2002, remaining  outstanding  convertible notes payable and related
accrued interest is convertible into common stock as follows:

      Notes Payable      Accrued Interest           Total      Conversion Price
          $ 450,000              $ 24,000       $ 474,000                $ 4.00
            125,000                10,638          34,638                  1.81

Of the outstanding  notes,  $375,000 is in default and related accrued  interest
interest in  arrearage  of $21,500.  Certain note holders have also been granted
97,748  warrants  to purchase  common  stock at $.50 per share for five years in
consideration of the financing provided.

                                      F-16

<PAGE>

Premium Enterprises, Inc.
Notes to Consolidated Financial Statements

On January 29, 2003,  the Company's  board of directors  adopted a resolution to
assume and honor the issuance of common shares  pursuant to  conversions of debt
obligations  as an  addendum  and  supplement  to  the  Agreement  and  Plan  of
Reorganization.

Stock Issued for Services and Equipment
In 2001,  13,000 shares of preferred  stock were issued to two individuals and a
foundation for services and computer equipment valued at $4 per share.

Stock Options and Warrants  Issued for Services and in Lieu of Interest  Expense
recorded in 2002 for 1,305,248  stock  options and 125,000  warrants to purchase
common stock at $.50 per share,  issued  consultants for services and lenders in
lieu of interest,  a totaled $134,934.  Valuations of the transactions are based
on the  estimated  fair value of the options or warrants on the grant date using
the Black-Scholes pricing model.  Consulting expense is recognized over the term
of the  option  period  and  interest  expense  over  the  related  term  of the
obligation on a straight-line  basis.  The weighted average expected life of all
such compensatory options and warrants were 64 months.

NOTE 5.  STOCK OPTIONS AND WARRANTS

Stock Options
Effective  December 3, 2001,  the Company  adopted the  eTotalSource,  Inc. 2001
Stock Option Plan (the "Plan").  A total of 1.8 million shares of Company common
stock were  reserved for  exercise of stock  options  under the Plan.  The Plan,
administered  by the  Company's  board of  directors,  provides for the grant of
incentive  stock  options to  employees  and  directors at fair market value and
nonstatutory  stock options to  consultants  and others.  No option can be for a
term of more than ten years from the date of grant.  The option  price is at the
discretion of the board;  provided however, for incentive stock options it shall
not be less  than  fair  market  value on the date of grant  (110%  for  certain
options becoming  exercisable that exceed value $100,000),  and for nonstatutory
options not less than 85% of fair market value on the date of grant. All options
issued by the  Company  to date have  exercise  prices  which  were equal to the
estimated fair market value of the Company's common stock at the date of grant.


                                      F-17

<PAGE>

Premium Enterprises, Inc.
Notes to Consolidated Financial Statements

<TABLE>
<CAPTION>

A summary of stock options outstanding and excisable as of December 31, 2002
follows:

<S>                       <C>                       <C>                     <C>              <C>
                                   Options Outstanding                               Options Exercisable
   Range of exercise      Number                    Weighted average             Number      Weighted average
   prices                 outstanding                remaining life         exercisable        exercise price
   ------                 -----------               ----------------        -----------      ----------------

   $.50                     1,560,700                     8.8 Years          1,156,373                  $.50
</TABLE>

Information concerning all stock option activity is summarized as follows:

                                              Option               Option Prices
                                              Shares                  Per Share
                                              ------               -------------

   Outstanding, January 1, 2001                        -             $  -
     Granted                                     912,700              .50
     Exercised                                         -                -
                                             --------------          ------
   Outstanding, December 31, 2001                912,700              .50
     Granted                                     748,000              .50
     Forfeiture                                 (100,000)             .50
     Exercised                                        -                 -
                                             --------------          ------
   Outstanding, December 31, 2002              1,560,700             $.50
                                             ==============          ======

The weighted fair value price of options  granted in both 2002 and 2001 was $.75
per share.

On January 29, 2003,  the Company's  board of directors  adopted a resolution to
assume  and honor  the  issuance  of  common  shares  pursuant  to stock  option
agreements  as  an  addendum  and  supplement  to  the  Agreement  and  Plan  of
Reorganization.

Warrants
The Company issued  consultants and lenders  1,305,248  warrants to purchase one
share of common stock of the Company at $.50 per share;  55,248  warrants expire
in 2003, 40,000 expire in 2006, and 1,210,000 warrants expire in 2007.

On January 29, 2003,  the Company's  board of directors  adopted a resolution to
assume and honor the issuance of common shares  pursuant to warrant  obligations
agreements  as  an  addendum  and  supplement  to  the  Agreement  and  Plan  of
Reorganization.

                                      F-18

<PAGE>

Premium Enterprises, Inc.
Notes to Consolidated Financial Statements

NOTE 6.  FAIR VALUE OF FINANCIAL INSTRUMENTS

The  carrying  amounts  for  cash,  accounts  payable  and  accrued  liabilities
approximate fair value because of their short-term maturities. The fair value of
mortgages,  notes and judgments  payable  approximates fair value because of the
market rate of interest on the debt.

The  determinations  of fair value  discussed above are subjective in nature and
involve  uncertainties  and  significant  matters of judgment and do not include
income tax  considerations.  Therefore  the results  cannot be  determined  with
precision and cannot be substantiated by comparison to independent market values
and may not be realized in actual sale or settlement of the instruments.


NOTE 7.  CONCENTRATIONS

Financial Instruments
Financial  instruments,  which  potentially  subject the Company to  significant
concentrations of credit risk, consist principally of cash.

The Company transacts its business with one financial institution. The amount on
deposit in that  financial  institution  did not exceed the  $100,000  federally
insured  limit at December  31, 2002.  Management  believes  that the  financial
institution is financially sound.

Significant Customers
Revenue  from  customers  in  excess of  ten-percent  of total  Company  revenue
follows:

         Customer                          2002                    2001
         --------                          ----                    ----
         A                                  23%                     61%
         B                                  24%                       -
         C                                  14%                       -



                                      F-19

<PAGE>

Premium Enterprises, Inc.
Notes to Consolidated Financial Statements

NOTE 8.  COMMITMENTS AND CONTINGENCIES

Litigation

Alchemy Communications,  Inc. v. eTotalSource, Inc., Los Angeles County Superior
Court Docket BC269197, filed March 1, 2002. This matter is a lawsuit for payment
of  services  and was settled  for  $50,000  and 30,000  shares of common  stock
payable April 21, 2003.  Absent timely  payment,  a stipulated  judgment will be
entered in the amount of  $83,000.  The  Company  intends to pay the $50,000 and
issue  the  30,000  shares by the due date;  however,  due to the  nature of the
matter, $83,000 has been accrued as a judgment payable as of December 31, 2002.

Thomas E. Nelson v.  eTotalSource,  Inc. d.b.a. ETS Marketing,  California Labor
Commissioner  matter,  Docket  15-13980 MS, for unpaid wages. On March 6, 2003 a
decision was rendered in the favor of the plaintiff for $24,206.  The obligation
has been accrued as of December 31, 2002.

James  Barrickman,  Trustee for the Jessie M. Barrickman Trust v.  eTotalSource,
Inc.,  Sutter County Superior Court Docket CVCS 02-1825,  filed October 1, 2002,
involves a claim of $100,000 owed on an  outstanding  convertible  note payable.
The obligation is recorded as a current  liability in the  accompanying  balance
sheet; settlement  communications are being held with the debtor. No trial trail
date has been set.

Executive Employment Contracts

There are employment  agreements contracts with three of the Company's executive
officers:

        1.     Agreements were executed with the Chief Executive Officer and the
               Chief Financial Officer at the inception of the Company (February
               7,  2000)  which  expire  December  31,  2003.  Annual  salary is
               $150,000  and $96,000,  respectively,  and each accrues an annual
               non-accountable  automobile  allowance of $9,000.  The agreements
               also  provide  for  10%  royalties  on  license  revenues  of the
               Company's   PresentaPro(TM)software   and  an  annual   bonus  of
               incentive  stock  options  (covering  200,000  shares  each).  In
               addition,  the CEO is  entitled to a 5%  referral  commission  on
               certain  sales.  Unpaid salary and  commissions  can be paid with
               warrants to purchase  common  stock at $1 per share.  During 2002
               and  2001,   CEO   compensation   expensed   pursuant   to  these
               arrangements totaled $159,000 and $204,962,  and CFO compensation
               totaled  $105,000 and  $105,000,  respectively  (exclusive of the
               fair value of incentive stock options).


                                      F-20

<PAGE>

Premium Enterprises, Inc.
Notes to Consolidated Financial Statements

        2.     An agreement was executed August 1, 2000 with the Chief Operating
               Officer  which  expires  December  31,  2007.  Annual  salary  is
               $120,000 and a  non-accountable  automobile  allowance of $9,000.
               The  agreement  also  provides  for a 10%  royalty on the license
               revenues of the Company's  PresentaPro(TM) software and an annual
               bonus of  incentive  stock  options  (covering  200,000  shares).
               Unpaid  salary  and  commissions  can be paid  with  warrants  to
               purchase  common  stock  at  $1  per  share.   During  2002,  COO
               compensation  expensed  pursuant  to these  arrangements  totaled
               $43,538,  respectively  (exclusive of the fair value of incentive
               stock options).

Financial Advisor
On July 31, 2002,  the Company  entered into an  agreement  with Growth  Capital
Group,  Inc.  ("GCG") for six months  commencing  August 2, 2002,  for financial
services.  The agreement  requires monthly payments of $7,500,  of which $30,000
had yet to be paid at December  31,  2002.  The  agreement  also  provides for a
six-percent finders fee for defined financing transactions.

Contingent Common Shares Issuable
eTS shares not tendered in the reorganization  discussed in Note 1 above (20,250
shares of eTS Series A Preferred  Stock and 249,888  shares of eTS Common Stock)
resulted in the board of directors  reserving an additional  1,459,989 shares of
PMN common stock for later issuance.

In  connection  with  the  reorganization  discussed  in Note 1,  the  board  of
directors  reserved a total of 400,000 common shares to retire PMN debt totaling
$107,322 and 400,000  common  shares for  services.  Issuance of these shares is
contingent upon successful completion of the reorganization and filing of a Form
8-K 12g3 with the Securities and Exchange Commission.




                                      F-21