**UNITED
      STATES**




**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      DC 20549**







**FORM
      10-KSB**




( mark
      one )




x
            Annual
                Report Pursuant to Section 13 or 15(d) of Securities Exchange Act
                of 1934.
              
              For
                the fiscal year ended**December
                31, 2007**




o
            Transition
                report under Section 13 or 15(d) of the Securities Exchange Act of
                1934
              
              For
                the transition period from _______ to
                _______




**Commission
      File No. 33-49797**




**ETOTALSOURCE,
      INC.**


(Name
      of
      Small Business Issuer in Its Charter)




**Colorado**
            
            **84-1066959**(State
                or Other Jurisdiction of
              Incorporation
                or Organization)
            
            (I.R.S.
                Employer
              Identification
                No.)**1818
                N. Farwell Ave - Milwauke, WI**
            
            **53202**(Address
                of Principal Executive Offices)
            
            (Zip
                Code)**(414)
                727-2695**(Issuer’s
                Telephone Number, Including Area
                Code)





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




Common
                Stock
            
            Name
                of each exchange on which registered**No
                par value**
            
            **N/A**





Securities
      registered pursuant to Section 12(g) of the Act: **None**





Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act. o





Note:  Checking
      the box above will not relieve any registrant required to file reports pursuant
      to section 13 or 15(d) of the Exchange Act from their obligations under those
      Sections.





Indicate
      by check mark whether the registrant: (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding
      12
      months, (or for such shorter period that the registrant was required to file
      such reports), and (2) has been subject to such filing requirements for the
      past
      90 days. Yes x No
o





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B not contained in this form, and no disclosure will be contained,
      to the best of the registrant’s knowledge, in the definitive proxy or
      information statement incorporated by reference in Part III of this Form 10-KSB
      or amendment to Form 10-KSB. Yes o No
o





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes xNo
o




Issuer’s
      revenues for fiscal year ended December 31, 2007: **$0**





Aggregate
      market value of the voting and non-voting common equity held by non-affiliates
      computed by reference to the price at which the common equity was sold, or
      the
      average bid and asked price of such common equity of the registrant as of
      December 31, 2007 **** was
      $
      60,000. The aggregate market value was based upon the closing price of the
      Company’s common stock on December 31, 2007 as quoted by the Over-the-Counter
      Bulletin Board (“OTC-BB”) under the symbol (“ETLS.OB”), which was
      $0.0002.





(ISSURERS
      INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)





Check
      whether the issuer has filed all documents and reports required to be filed
      by
      Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities
      under a plan confirmed by a court. Yes oNo
o





State
      the
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of the latest practicable date: as of December 31, 2007 299,998,972 shares
      of
      common stock.




DOCUMENTS
      INCORPORATED BY REFERENCE





If
      the
      following documents are incorporated by reference, briefly, describe them and
      identify the part of the Form 10-KSB (e.g., Part 1, Part II, etc.) into which
      the document is incorporated: (1) any annual report to security-holders; (2)
      any
      proxy or information statement; and (3) any prospectus filed pursuant to Rule
      424(b) or (c) of the Securities Act of 1933 ("Securities Act"). The listed
      documents should be clearly described for identification purposes (e.g., annual
      report to security holders for fiscal year ended December 24, 1990).
      None.





Transitional
      Small Business Disclosure Format: **** No. ****









**ETOTALSOURCE,
      INC.**


**FISCAL
      YEAR 2007 FORM 10-KSB**





**TABLE
      OF CONTENTS**





PART
                IItem
                1.
            
            Description
                of Business
            
            2Item
                2.
            
            Description
                of Property
            
            3Item
                3.
            
            Legal
                Proceedings
            
            3Item
                4.
            
            Submission
                of Matters to a Vote of Security Holders
            
            3PART
                IIItem
                5.
            
            Market
                for Common Equity and Related Stockholder Matters
            
            4Item
                6.
            
            Management’s
                Discussion and Analysis or Plan of Operations
            
            6Item
                7.
            
            Financial
                Statements
            
            15Item
                8.
            
            Changes
                In and Disagreements with Accountants on Accounting and Financial
                Disclosure
            
            17Item
                8A.
            
            Controls
                and Procedures
            
            17Item
                8B.
            
            Other
                Information
            
            18PART
                IIIItem
                9.
            
            Directors
                and Executive Officers
            
            19Item
                10.
            
            Executive
                Compensation
            
            20Item
                11.
            
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            
            21Item
                12.
            
            Certain
                Relationships and Related Transactions, and Director
                Independence
            
            22Item
                13.
            
            Exhibits
            
            23Item
                14.
            
            Principal
                Accountant Fees and Services
            
            25SIGNATURES
            
            26




i


**FORWARD-LOOKING
      STATEMENTS**





Certain
      statements made in this report on Form 10-KSB are "forward-looking statements"
      regarding the plans and objectives of management for future operations. Such
      statements involve known and unknown risks, uncertainties and other factors
      that
      may cause actual results, performance or achievements of eTotalSource, Inc.
      (the
      "Company") to be materially different from any future results, performance
      or
      achievements expressed or implied by such forward-looking statements. The
      forward-looking statements included herein are based on current expectations
      that involve numerous risks and uncertainties. The Company's plans and
      objectives are based, in part, on assumptions involving judgments with respect
      to, among other things, future economic, competitive and market conditions
      and
      future business decisions, all of which are difficult or impossible to predict
      accurately and many of which are beyond the control of the Company. Although
      the
      Company believes its assumptions underlying the forward-looking statements
      are
      reasonable, any of the assumptions could prove inaccurate and, therefore, there
      can be no assurance the forward-looking statements included in this report
      will
      prove to be accurate. In light of the significant uncertainties inherent in
      the
      forward-looking statements included herein, the inclusion of such information
      should not be regarded as a representation by the Company or any other person
      that the objectives and plans of the Company will be achieved.




**PART
      I**




**Item
                1.**
            **Description
                o****f
                Business.**




The
      Company or “ ETLS ”
was
      incorporated in Colorado on September 16, 1987 as Premium Enterprises, Inc.
      (“ Premium ”).
      On
      December 20, 2002, Premium entered into a Plan and Agreement of Reorganization
      with eTotalSource, Inc., a California corporation (“ eTotalSource ”)
      and
      its shareholders whereby Premium acquired 91% of the issued and outstanding
      common stock of eTotalSource in exchange for 15,540,001 shares of common stock
      of Premium. The contract was completed December 31, 2002. On June 17, 2003,
      shareholders voted to amend the Articles to change the name of Premium
      Enterprises, Inc. to eTotalSource, Inc.




**History.**




For
      a
      period of time in 1988-1994, Premium operated three fast lube locations, at
      various times in Arizona and Colorado as “Grease Monkey” franchises. The
      locations were unprofitable, two were sold, and the last franchise closed in
      1994.




Premium
      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
      Premium ran out of capital and ceased all operations in 1996. Premium wrote-off
      all of its investment in equipment and licenses for tire recycling in 1996
      and
      became dormant.




**Business.**




The
      sole
      business of the Company is that of eTotalSource. The Company ceased the majority
      of operations in the fourth quarter of 2006 due to lack of capital.




**Recent
      Developments.**




**Management
      Transition** .
      On
      March 27, 2007, the Company’s Board of Directors accepted the resignations of
      Terry Eilers and A. Richard Barber as members of the Board. The Company did
      not
      have a disagreement with any of the resigning directors. Neither Mr. Eilers
      nor
      Mr. Barber served on any committees of the Board. On March 27, 2007, the
      Company’s Board of Directors also accepted the resignations of the following
      officers: Terry Eilers, President and Chief Executive Officer, and Michael
      Sullinger, Chief Operating Officer and Secretary. The Company did not have
      a
      disagreement with any of the resigning officers.




In
      addition, on March 27, 2007, the Board of Directors of the Company appointed
      David Marks as a member of the Board and appointed Frank Orlando as Chief
      Restructuring Officer, Chief Financial Officer and Secretary of the Company.
      Mr.
      Orlando and Mr. Marks are not our employees, and as of the date of this report
      we do not have employment contracts with either of them nor agreements regarding
      compensation and related matters. Mr. Orlando and Mr. Marks are each an officer
      of Crivello Group, LLC and other entities. We expect that Crivello Group, LLC
      will enter into a management services agreement with us.




The
      Company currently has no active operations, but, is actively pursuing operating
      business acquisition opportunities. The Company expects to incur additional
      losses until it acquires an operating business.   There can be no
      assurance that Company will ever achieve any revenues or profitable
      operations.  The new management team will be undertaking an analysis and
      evaluation of the Company’s assets and liabilities, our financial condition, and
      overall prospects in order to determine whether to continue the Company’s
      current operations or to develop and implement a new business strategy that
      could result in a substantial change in the Company’s business model, a
      liquidation of the Company’s existing assets, and other changes. During this
      evaluation phase, we have operations and reduced our personnel to no full-time
      employees and no part-time employees in order to minimize operating costs
      pending the outcome of the analysis noted above. In addition, during this
      evaluation phase, we anticipate that our operating revenues will be negligible,
      that the Company will generate a significant loss from operations, and that
      the
      Company will need to obtain debt and/or equity financing for working capital
      purposes. No assurance can be given that such financing will be available on
      terms acceptable to the Company.




2




**Debenture
      Financings** .
      We have
      entered into a series of debenture financings with YA Global Investments, L.P,
      f/k/a Cornell Capital Partners, L.P. (“YA Global”) as described in greater
      detail below in this report. Most recently, we issued and sold a $7,642
      debenture to Cornell in December 2006, a $72,000 debenture to YA Global in
      April
      2007 and a $17,620 debenture to YA Global in December 2007. The proceeds from
      these three debt financings were used to pay professional fees associated with
      securities law compliance, audit fees, transaction costs, and related
      fees.




**Employees.**




As
      of
      December 31, 2007, we have no full-time employees. No employees are presently,
      nor as of the end of the 2007 fiscal year, represented by any labor unions.
      As
      of the date of this report, we have no full-time employees. As noted above,
      we
      have recently implemented a management transition and the new management team
      is
      currently evaluating our personnel requirements for the next twelve months
      in
      conjunction with determining the Company’s business model. These decisions might
      or might not require the hiring of additional employees in the next twelve
      months.




**Item
      2.**  **Description
      Of Property.**




None




**Item
                3.**
            **Legal
                Proceedings.**




On
      December 6, 2006, a
      creditor, Gary Miller, filed an action against ETLS and Terry Eilers, former
      President, CEO and Director, for breach of contract in the Superior Court of
      California, Sutter County claiming damages of $175,000. On March 27, 2008,
      Gary
      Miller received a judgment against the Company in the amount of $266,940.78.




ETLS
      has
      defended an action and has reached a settlement for $50,000 with Alchemy
      Communications in connection with a breach of contract claim involving
      co-location of ETLS' servers with Alchemy. $83,000 has been accrued as a
      judgment payable as of December 31, 2002. ETLS intends to pay $50,000 as soon
      as
      sufficient funds are available to do so, and in March of 2003, ETLS issued
      30,000 shares of its common stock in partial satisfaction of the settlement.
      No
      action has been taken by Alchemy to enforce the terms of the settlement and
      ETLS
      does not anticipate any action will be taken by Alchemy to enforce the
      settlement, provided that the balance of funds owed is paid within a reasonable
      period of time.




In
      1997,
      Premium Enterprises, Inc. was sued by Tusco, Inc. for an alleged breach of
      the
      company’s lease with Tusco. Tusco prevailed in its suit and obtained a judgment
      against Premium for $75,000. No action has been taken by Tusco to enforce the
      judgment against Premium or ETLS, its successor, and ETLS does not anticipate
      any action will be taken by Tusco to enforce the judgment. Nonetheless, ETLS
      has
      recorded a liability for the full amount of the judgment.




In
      1996,
      Premium Enterprises, Inc. was sued by Ally Capital Corporation for an alleged
      breach of contract claim. Ally prevailed in its suit and obtained a judgment
      against Premium for $47,000. No action has been taken by Ally to enforce the
      judgment against Premium or ETLS, its successor, and ETLS does not anticipate
      any action will be taken by Ally to enforce the judgment as Ally is no longer
      in
      business according to Colorado Secretary of State’s office. Nonetheless, ETLS
      has recorded a liability for the full amount of the judgment.




**Item
                4.**
            **Submission
                Of Matters To A Vote Of Security
                Holders.**




None.




3


**PART
      II**




**Item
              5.**
            **Market
                For Common Equity, Related Stockholder Matters****and Small Business Issuer Purchases of Equity
                Securities**




Our
      common stock is currently traded on the OTC-BB under the symbol “ETLS.OB”. The
      table below sets forth, for each of the quarterly periods indicated, the highest
      and lowest closing bid prices for our common stock as reported on the OTC-BB
      and
      the over-the-counter market in the Pink Sheets as maintained by Pink Sheets
      LLC.
      The closing bid price for our common stock on December 31, 2007 was $0.0002.
      Such quotations reflect inter-dealer prices, without retail mark-up, mark-down
      or commission and may not represent actual transactions




**Fiscal
                2007**
            
            **High**
            
            **Low**First
                (ended March 31, 2007)
            
            $
            0.0025
            
            $
            0.0009Second
                (ended June 30, 2007)
            
            $
            0.0025
            
            $
            0.0006Third
                (ended September 30, 2007)
            
            $
            0.0016
            
            $
            0.0004Fourth
                (ended December 31, 2007)
            
            $
            0.0008
            
            $
            0.0002**Fiscal
                2006**
            
            
            **High**
            
            
            **Low**First
                (ended March 31, 2006)
            
            $
            0.020
            
            $
            0.006Second
                (ended June 30, 2006)
            
            $
            0.015
            
            $
            0.002Third
                (ended September 30, 2006)
            
            $
            0.006
            
            $
            0.002Fourth
                (ended December 31, 2006
            
            $
            0.003
            
            $
            0.001




***Dividends.***




We
      have
      not paid any dividends on our common stock and do not anticipate paying any
      cash
      dividends in the foreseeable future. We intend to retain any earnings to finance
      the growth of the business. We cannot assure you that we will ever pay cash
      dividends. Whether we pay any cash dividends in the future will depend on the
      financial condition, results of operations and other factors that the Board
      of
      Directors will consider.




***Recent
      Sales Of Unregistered Shares.***




During
      the last three years, ETLS issued the following unregistered securities pursuant
      to Section 4(2) and Rule 506 under Regulation D of the Securities Act of 1933,
      as amended, unless otherwise noted:




On
      December 4, 2007 YA Global and the Company entered into an agreement providing
      for the Company’s issuance of a secured convertible debenture to YA Global in
      the face amount of $17,620 for a purchase price of $17,620 (the “December 2007
      Debenture”). The conversion price per share, subject to adjustment, is the
      lesser of (i) $.002 price per share of common stock or (ii) 95% of the lowest
      volume weighted average price (as defined in the debenture) of the Company’s
      common stock for the thirty trading days immediately preceding the conversion
      date (as defined in the debenture).




On
      November 19, 2007, YA Global converted $250 of convertible debentures into
      2,500,000 shares of common stock.




On
      November 12, 2007, YA Global converted $2,000 of convertible debentures into
      13,333,333 shares of common stock.




On
      November 7, 2007, YA Global converted $1,900 of convertible debentures into
      12,666,667 shares of common stock.




On
      November 1, 2007, YA Global converted $3,100 of convertible debentures into
      12,400,000 shares of common stock.




On
      October 29, 2007, YA Global converted $1,800 of convertible debentures into
      12,000,000 shares of common stock.




On
      October 24, 2007, YA Global converted $1,700 of convertible debentures into
      11,333,333 shares of common stock.




On
      October 18, 2007, YA Global converted $1,600 of convertible debentures into
      10,666,667 shares of common stock.




4




On
      October 15, 2007, YA Global converted $2,100 of convertible debentures into
      10,500,000 shares of common stock.




On
      October 8, 2007, YA Global converted $3,000 of convertible debentures into
      10,000,000 shares of common stock.




On
      October 3, 2007, YA Global converted $2,800 of convertible debentures into
      9,333,333 shares of common stock.




On
      September 26, 2007, YA Global converted $2,700 of convertible debentures into
      9,000,000 shares of common stock.




On
      September 17, 2007, YA Global converted $2,500 of convertible debentures into
      8,333,333 shares of common stock.




On
      September 11, 2007, YA Global converted $3,300 of convertible debentures into
      8,250,000 shares of common stock.




On
      September 5, 2007, YA Global converted $2,300 of convertible debentures into
      7,666,667 shares of common stock.




On
      August
      21, 2007, YA Global converted $3,000 of convertible debentures into 7,500,000
      shares of common stock.




On
      August
      9, 2007, YA Global converted $2,700 of convertible debentures into 6,750,000
      shares of common stock.




On
      August
      6, 2007, YA Global converted $2,500 of convertible debentures into 6,250,000
      shares of common stock.




On
      August
      2, 2007, YA Global converted $3,000 of convertible debentures into 6,000,000
      shares of common stock.




On
      July
      30, 2007, YA Global converted $3,500 of convertible debentures into 5,833,333
      shares of common stock.




On
      July
      26, 2007, YA Global converted $3,500 of convertible debentures into 5,833,333
      shares of common stock.




On
      July
      24, 2007, YA Global converted $2,500 of convertible debentures into 4,166,667
      shares of common stock.




On
      July
      20, 2007, YA Global converted $2,500 of convertible debentures into 4,166,667
      shares of common stock.




On
      June
      21, 2007, YA Global converted $1,800 of convertible debentures into 3,600,000
      shares of common stock.




On
      June
      14, 2007, YA Global converted $1,800 of convertible debentures into 3,600,000
      shares of common stock.




On
      June
      13, 2007, YA Global converted $1,800 of convertible debentures into 3,600,000
      shares of common stock.




On
      June
      4, 2007, YA Global converted $2,000 of convertible debentures into 3,333,333
      shares of common stock.




On
      May
      25, 2007, YA Global converted $2,500 of convertible debentures into 3,571,429
      shares of common stock.




On
      May
      17, 2007, YA Global converted $2,800 of convertible debentures into 3,500,000
      shares of common stock.




On
      May 9,
      2007, YA Global converted $2,500 of convertible debentures into 3,571,429 shares
      of common stock.




On
      April
      13, 2007 YA Global and the Company entered into an agreement providing for
      the
      Company’s issuance of a secured convertible debenture to YA Global in the face
      amount of $72,000 for a purchase price of $72,000 (the “April 2007 Debenture”).
      The conversion price per share, subject to adjustment, is the less of (i) $.0018
      price per share of common stock or (ii) 80% of the lowest closing bid (as
      defined in the debenture) of the Company’s common stock for the five trading
      days immediately preceding the conversion date (as defined in the
      debenture).





On
      April
      6, 2007, YA Global converted $2,800 of convertible debentures into 3,500,000
      shares of common stock.




On
      March
      28, 2007, YA Global converted $2,500 of convertible debentures into 3,571,429
      shares of common stock.




On
      January 4, 2007, YA Global converted $3,500 of convertible debentures into
      3,500,000 shares of common stock.




On
      December 21, 2006, the Company issued and sold a $7,642 convertible debenture
      to
      YA Global.




5




On
      November 3, 2006, YA Global converted $2,500 of convertible debentures into
      3,125,000 shares of common stock.





On
      October 11, 2006, YA Global converted $5,000 of convertible debentures into
      3,125,000 shares of common stock.





On
      September 24, 2006, YA Global converted $5,000 of convertible debentures into
      2,500,000 shares of common stock.





On
      August
      23, 2006, YA Global converted $4,100 of convertible debentures into 2,562,500
      shares of common stock.





On
      August
      4, 2006, YA Global converted $4,300 of convertible debentures into 2,529,412
      shares of common stock.





On
      July
      12, 2006, YA Global converted $3,500 of convertible debentures into 2,058,824
      shares of common stock.





On
      June
      28, 2006, YA Global converted $4,600 of convertible debentures into 2,300,000
      shares of common stock.





On
      June
      12, 2006, YA Global converted $5,500 of convertible debentures into 2,291,667
      shares of common stock.





On
      May
      24, 2006, YA Global converted $6,000 of convertible debentures into 2,500,000
      shares of common stock.





On
      May
      10, 2006, YA Global converted $9,000 of convertible debentures into 2,500,000
      shares of common stock.





On
      April
      27, 2006, YA Global exercised its warrant to purchase 2,000,000 shares of common
      stock for a payment to the Company of $2,000.





On
      April
      19, 2006, YA Global converted $6,500 of convertible debentures into 1,911,765
      shares of common stock.





On
      April
      4, 2006, YA Global converted $6,500 of convertible debentures into 1,969,697
      shares of common stock.





On
      February 28, 2006, YA Global converted $10,000 of convertible debentures into
      2,083,333 shares of common stock.





On
      November 2, 2005, the Company issued to YA Global secured convertible debentures
      in the principal amount of $1,000,000 (“ November
      2005 Debentures ”).
      The
      November 2005 Debentures were issued to consolidate the 2004 Debentures, in
      the
      original principal amount of $350,000, and the August 2005 Debenture, in the
      original principal amount of $100,000, plus accrued and unpaid interest on
      the
      2004 Debentures and the August 2005 Debenture, and to reflect additional funding
      in the amount of $530,130. The November 2005 Debentures are secured by
      substantially all of the Company’s assets, have a three-year term and accrue
      interest at 12% per annum. **** YA
      Global
      is entitled, at its option, to convert, and sell all or any part of the
      principal amount of the November 2005 Debentures, plus accrued interest thereon,
      into shares of the Company’s common stock at the price per share equal to the
      lesser of (a) $0.024 or (b) an amount equal to 80% of the lowest
      closing bid price of the Company’s common stock for the five trading days
      immediately preceding the conversion date (which price may be adjusted pursuant
      to certain other terms of the November 2005 Debentures). The November 2005
      Debentures have been fully subscribed.




Except
      as
      otherwise indicated above, ETLS believes that all of the above transactions
      were
      transactions not involving any public offering within the meaning of Section
      4(2) of the 1933 Act, since (a) each of the transactions involved the offering
      of such securities to a substantially limited number of persons; (b) each person
      took the securities as an investment for his/her/its own account and not with
      a
      view to distribution; (c) each person had access to information equivalent
      to
      that which would be included in a registration statement on the applicable
      form
      under the 1933 Act; (d) each person had knowledge and experience in business
      and
      financial matters to understand the merits and risk of the
      investment.





**Item
              6.**
            **Management's
                Discussion An****d
                Analysis Or Plan Of
                Operation.**




***Forward-Looking
      Statements and Associated Risks.*** *This
      report contains forward-looking statements. Such forward-looking statements
      may
      include statements regarding or be based upon, among other things, (a) our
      projected sales and profitability, (b) our growth strategies, (c) anticipated
      trends in our industry, (d) our future financing plans, (e) our anticipated
      needs for working capital, (f) our lack of operational experience, and (g)
      the
      benefits related to ownership of our common stock. Forward-looking statements,
      which involve assumptions and describe our future plans, strategies, and
      expectations, are generally identifiable by use of the words* *“* *may,* *”* ** *“* *will,* *”* ** *“* *should,* *”* ** *“* *expect,* *”* ** *“* *anticipate,* *”* ** *“* *estimate,* *”* ** *“* *believe,* *”* ** *“* *intend,* *”* *or* *“* *project* *”* *or
      the negative of these words or other variations on these words or comparable
      terminology. This information may involve known and unknown risks,
      uncertainties, and other factors that may cause our actual results, performance,
      or achievements to be materially different from the future results, performance,
      or achievements expressed or implied by any forward-looking statements. These
      statements may be found under* *“* *Management* *’* *s
      Discussion and Analysis of Financial Condition and Results of
      Operations* *”* *and* *“* *Business,* *”* *as
      well as in this report generally. Actual events or results may differ materially
      from those discussed in forward-looking statements as a result of various
      factors, including, without limitation, the risks outlined under* *“* *Risk
      Factors* *”* *and
      matters described in this Report generally. In light of these risks and
      uncertainties, there can be no assurance that the forward-looking statements
      contained in this report will in fact occur as projected.*




6




***Financial
      Condition and Changes In Financial Condition.***




**Background.**




On
      December 30, 2002, Premium acquired 91% of the preferred and common stock of
      eTotalSource pursuant to an Agreement and Plan of Reorganization effective
      December 30, 2002, by issuing 15,540,011 shares of Premium common stock to
      eTotalSource shareholders.




Immediately
      after the transaction, the eTotalSource shareholders owned approximately 88.5%
      of Premium’s common stock. Coincident with the transaction, Premium changed its
      fiscal year from June 30 to December 31. The reorganization was recorded as
      a
      recapitalization effected by a reverse merger wherein Premium was 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,
      eTotalSource. Since Premium was a non-operating shell with limited business
      activity, goodwill was not recorded.




**Results
      Of Operations For The Fiscal Year Ended December 31, 200** **7,
      Compared To Fiscal Year Ended December 31, 20** **06.**




***Revenues.***




Revenues
      for the twelve months ended December 31, 2007 were $0 verses $25,980 for the
      corresponding 2006 period, a decrease of $25,980 or 100%. This decrease was
      attributed to the cease in operations of eTotalSource.





***Other
      General & Administrative Expenses.***




Operating
      expenses for the twelve month period ended December 31, 2007 were $77,554 as
      compared to $533,478 for the comparable 2006 period, or a decrease of $455,924
      or 85%. This decrease was primarily due to the cease in operations of
      eTotalSource.





***Warrants
      and Options for Consulting Expense***




Operating
      expenses for the twelve month period ended December 31, 2007 were $167,463
      as
      compared to $101,632 for the comparable 2006 period, or an increase of $65,831
      or 65%. This increase was primarily due to the cease in operations of
      eTotalSource in March 2007. The Company expensed the remaining balance of
      warrants issued for consulting fees.





***(Loss)
      From Operations.***




eTotalSource
      recognized a loss for the twelve month period ended December 31, 2007in the
      amount of ($245,017), as compared with a loss of ($609,130) for the
      corresponding period ended December 31, 2006. The decrease of $364,113 or 60%
      was attributable to the cease in operations of eTotalSource.





***Interest
      Expense***




Interest
      expense for the twelve month period ended December 31, 2007 was $357,608 as
      compared to $409,332 for the comparable 2006 period, an decrease of $51,724
      or
      12%. This decrease was attributed to the reduction in related imputed
      interest.





***Settlement
      Debt Write Off***




Settlement
      debt write off for the twelve month period ended December 31, 2007 was $187,728
      as compared to $85,121 for the comparable 2006 period, an increase of $102,607
      or 120%. This increase was attributed to the accrued officer compensation
      expenses and other expenses from previous periods reversed due to
      settlement.





***Net
      Income/(Loss)***




Net
      loss
      for the twelve month period ended December 31, 2007 was ($415,194) as compared
      to a net loss of ($945,092) for the comparable 2006 period, a decrease of
      $529,898 or 56%. This decrease was attributed to the cease in operations of
      eTotalSource.




7




**Liquidity
      & Capital Resources** ***.***




At
      December 31, 2007, eTotalSource had $969 in cash with which to conduct
      operations, and no other capital resources. The company needs equity or debt
      financing for working capital but has no commitments for new capital
      availability. **** There
      can
      be no assurance that ETLS will be able to pursue its business plan or fully
      exploit business opportunities that management may identify. Accordingly, ETLS
      will need to seek additional financing through loans, the sale and issuance
      of
      additional debt and/or equity securities, or other financing arrangements,
      including loans from our shareholders to cover expenses. ETLS presently has
      no
      sources of capital. ETLS is unable to carry out any plan of business without
      funding. Because of the re-evaluation of our business model currently in
      process, we are unable to quality and estimate our working capital requirements
      for the 12 months ending December 31, 2007. We cannot predict to what extent
      our
      current lack of liquidity and capital resources will impair the continuation
      of
      business or whether it will incur further operating losses. There is no
      assurance that we can continue as a going concern without substantial funding,
      for which there is no source.




**The
      Standby Equity Distribution Agreements.**




On
      November 2, 2005, we terminated the 2005 SEDA, the 2005 Secured Convertible
      Debentures, the 2005 Securities Purchase Agreement, and all other financing
      agreements that we entered into with YA Global on April 20, 2005 by execution
      of
      the November Termination Agreement. The 2004 SEDA, along with the related
      Investor Registration Rights Agreement, related Placement Agent Agreement,
      related Irrevocable Transfer Agent Instructions, and related Escrow Agreement,
      each dated October 6, 2004, were mutually terminated by the Company and YA
      Global on April 20, 2005 pursuant to the April Termination Agreement. We have
      recently entered into a December 2006 Debenture and an April 2007 Debenture.
      All
      of the foregoing documents are defined and described in detail in this report.





**The
      November 2005 Debentures.**




On
      November 2, 2005, the Company entered into a Securities Purchase Agreement
      with
      YA Global, pursuant to which we issued to YA Global secured convertible
      debentures in the principal amount of $1,000,000 (i.e., the November 2005
      Debentures). Of this amount, $175,000 was previously funded on October 7, 2004,
      $175,000 was previously funded on December 2, 2004, $100,000 was previously
      funded on August 19, 2005, and $530,130 was funded on November 4, 2005. The
      November 2005 Debentures were issued to consolidate these prior debentures
      and
      to Debentures were issued to consolidate these prior debentures and to reflect
      additional funding to the Company in the amount of $530,130.





The
      November 2005 Debentures are secured by substantially all of the Company’s
      assets, has a three-year term and accrues interest at 12% per annum. **** YA
      Global is entitled, at its option, to convert, and sell all or any part of
      the
      principal amount of the November 2005 Debenture, plus accrued interest thereon,
      into shares of the Company’s common stock, at a price per share equal to the
      lesser of (a) an amount equal to an amount equal to 120% of the closing bid
      price of the common stock as listed on a principal market as quoted by Bloomberg
      L.P., on the November 2, 2005 closing date or (b) an amount equal to
      80% of the lowest closing bid price of the common stock for the five trading
      days immediately preceding the conversion date which may be adjusted pursuant
      to
      the other terms of the November 2005 Debenture. In the event the November 2005
      Debentures are redeemed, then we will issue to YA Global a warrant to purchase
      2,000,000 shares at an exercise price of $0.001 or as subsequently adjusted
      under the terms of the warrant.





During
      the period ending December 31, 2007, the holder converted $83,461 to 219,830,953
      shares of common stock.





**The
      December 2006 Debenture.**





On
      December 21, 2006 YA Global and the Company entered into an agreement providing
      for the Company’s issuance of a secured convertible debenture to YA Global in
      the face amount of $7,642 for a purchase price of $7,642 (the “December 2006
      Debenture”). The conversion price per share, subject to adjustment, is the
      lesser of (a) $0.0018 or (b) 80% of the lowest Closing Bid Price (as defined
      in
      the debenture) of the Company’s common stock for the five trading days
      immediately preceding the Conversion Date (as defined in the
      debenture).





**The
      April 2007 Debenture.**





On
      April
      13, 2007 YA Global and the Company entered into an agreement providing for
      the
      Company’s issuance of a secured convertible debenture to YA Global in the face
      amount of $72,000 for a purchase price of $72,000 (the “April 2007 Debenture”).
      The conversion price per share, subject to adjustment, is the lesser of (a)
      $0.0018 or (b) 80% of the lowest Closing Bid Price (as defined in the debenture)
      of the Company’s common stock for the five trading days immediately preceding
      the Conversion Date (as defined in the debenture).





**August
      2007 Promissory Note**





On
      August
      13, 2007, the Company signed a promissory note in the amount of $7,640 with
      YA
      Global Investments, L.P. at an interest rate of 14%.. This promissory note
      is
      due on or before October 1, 2007, now in default as of December 31, 2007. The
      proceeds of this note are to be distributed as follows: $3,933 to the auditor,
      $2,000 to Vintage Filings, and $1,707 to the Chief Restructuring Officers for
      expenses incurred.




8





**The
      December 2007 Debenture.**





On
      December 4, 2007 YA Global and the Company entered into an agreement providing
      for the Company’s issuance of a secured convertible debenture to YA Global in
      the face amount of $17,620 for a purchase price of $17,620 (the “December 2007
      Debenture”). The conversion price per share, subject to adjustment, is the less
      of (i) $.002 price per share of common stock or (ii) 95% of the lowest volume
      weighted average price (as defined in the debenture) of the Company’s common
      stock for the thirty trading days immediately preceding the conversion date
      (as
      defined in the debenture).





In
      the
      year ended December 31, 2007, $76,350 worth of debentures was converted to
      207,830,593 worth of stock. In the year ended December 31, 2006, $62,500 worth
      of debentures was converted to 29,373,865 worth of stock and YA Global exercised
      its warrant to purchase 2,000,000 shares of stock for $2,000.




***Contractual
      Obligations and Commercial Commitments.***




As
      of
      December 31, 2007, the following obligations were outstanding:





Payments
      Due Period




**Contractual
                Obligations**
            
            **Less
                than 1 year**
            
            **1-3
                years**
            
            **4-5
                years**
            
            **After
                5 years**
            
            **Total**Judgments
                payable
            
            $
            204,788
            
            $
            .00
            
            $
            .00
            
            $
            .00
            
            $
            204,788Short
                Term note payables
            
            
            1,064,754
            
            
            .00
            
            
            .00
            
            
            .00
            
            
            1,064,754Convertible
                debentures
            
            
            848,071
            
            
            .00
            
            
            .00
            
            
            .00
            
            
            848,071Other
                current liabilities
            
            
            2,145,641
            
            
            .00
            
            
            .00
            
            
            .00
            
            
            2,145,641Total
                contractual cash obligations
            
            $
            4,263,254
            
            $
            .00
            
            $
            .00
            
            $
            .00
            
            $
            4,263,254




***Critical
      Accounting Policies And Estimates***




ETLS
      recognizes revenue in accordance with Statement of Position No. 97-2 “Software
      Revenue Recognition” issued by the Accounting Standards Executive Committee of
      the American Institute of Certified Public Accountants. 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 not related off-the-shelf software products. ETLS 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 be fulfilled.




Significant
      estimates include evaluation of the company’s income tax net operating loss
      carry-forwards and valuation of non-monetary transactions in connection with
      issuances of common stock and common stock warrants and options.




None
      of
      these policies had any material or substantial effect upon ETLS’
operations.




***Financial
      Condition***




There
      is
      substantial doubt about the ability of ETLS to continue as a going concern
      as
      disclosed in the notes to the December 31, 2006 financial statements filed
      by
      ETLS in this Report. Those conditions continued through the end of fiscal year
      2007 resulting in operating losses and liquidity shortages, including default
      conditions on certain notes payable and judgments payable to creditors. As
      of
      December 31, 2007, current liabilities exceed current assets by approximately
      $4,259,335.




Management
      continued to meet operating deficits primarily through short-term borrowings
      and
      may attempt to utilize debt and equity financing alternatives to sustain
      operations. Whether such financing will be available as needed and the ultimate
      form of such financing is uncertain and the effects of this uncertainty could
      ultimately lead to bankruptcy.




***Going
      Concern Uncertainty***




The
      Company has incurred significant losses from operations for the year ended
      December 31, 2007, and such losses are expected to continue. In addition, the
      Company has no working capital. The foregoing raises substantial doubt about
      the
      Company's ability to continue as a going concern. Management's plans include
      seeking additional capital and/or debt financing, and re-evaluation of the
      Company’s business strategy as discussed above in this report. There is no
      guarantee that additional capital and/or debt financing will be available when
      and to the extent required, or that if available, it will be on terms acceptable
      to the Company. The financial statements do not include any adjustments that
      might result from the outcome of this uncertainty.




9




The
      Company currently has no active operations, but, is actively pursuing operating
      business acquisition opportunities, and the organic development of opportunities
      in real estate, investment, and financing.  The Company expects to incur
      additional losses until it acquires an operating business, or until its organic
      business opportunities reach a critical mass.   The Company expects to
      change its name to reflect the definitive direction of the Company, as it is
      expanding the pursuit of businesses outside of the beverage sector.  There
      can be no assurance that Company will ever achieve any revenues or profitable
      operations.




***Net
      Operating Loss.***




For
      federal income tax purposes, the Company has net operating loss carry forwards
      of approximately $6,156,000 as of December 31, 2007. These carry forwards will
      expire at various dates starting in 2021. The use of such net operating loss
      carry forwards to be offset against future taxable income, if achieved, may
      be
      subject to specified annual limitations.




***Off-Balance
      Sheet Arrangements.***




None.




**Risk
      Factors Related to the Company.**




*If
      any of the risks discussed in this report actually occur, our business,
      financial condition and results of operations could be materially and adversely
      affected. If this were to happen, the price of our stock could decline
      significantly and you may lose all or part of your investment. The risk factors
      described below are not the only ones that may affect us. Our actual results
      could differ materially from those anticipated by our forward-looking statements
      as a result of the risk factors below.*




***ETLS*** ***Lost Money For The Year Ended December 31, 2007 And Losses May Continue In
      The
      Future. We Had Negligible Operating Revenue in Fiscal 2007 and Anticipate the
      Same in Fiscal 2008***




For
      the
      12 months ended December 31, 2007 and 2006, we incurred a net loss of
      $415,194 **** and
      $945,092 respectively. We anticipate that we will in all likelihood have to
      rely
      on external financing for all of our capital requirements. Future losses are
      likely to continue unless we successfully implement our business plan, which
      we
      are currently re-evaluating. We had negligible operating revenue in fiscal
      2007
      and anticipate the same in fiscal 2008. Our ability to continue as a going
      concern will be dependent upon our ability to raise additional debt and/or
      equity capital from third party sources, but no such negotiations are currently
      taking place. If we incur any problems in raising such additional capital,
      we
      will experience significant liquidity and cash flow problems. If we are not
      successful in reaching and maintaining profitable operations, we may not be
      able
      to attract sufficient capital to continue our operations. Our inability to
      obtain adequate financing will result in the need to curtail business
      operations, could result in our bankruptcy, and will likely result in a lower
      stock price.






***There
      Is Substantial Doubt About Our Ability To Continue As A Going Concern Due To
      Insufficient Revenues To Cover Our Operating Costs, Which Means That We May
      Not
      Be Able To Continue Operations Unless We Obtain Additional
      Funding***




Our
      financial statements for the year ended December 31, 2007 have been presented
      assuming that ETLS 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 operating losses since
      inception and as of December 31, 2007 had a net working capital deficit of
      approximately $4,259,335, a stockholders’ deficit of $4,256,112, notes payable
      totaling $1,064,754, debentures totaling $848,071 with related accrued interest
      in arrears of $770,204.




Management
      anticipates that ETLS will incur net losses for the immediate future, and expect
      ETLS' operating expenses to increase significantly, and, as a result, ETLS
      will
      need to generate monthly revenue if it is to continue as a going concern. To
      the
      extent that we do not generate revenue at anticipated rates ,
      that we
      do not obtain additional funding, that our stock price does not increase, that
      we are unable to adjust operating expense levels accordingly, we may not have
      the ability to continue on as a going concern. Our financial statements which
      accompany this report do not include any adjustments that might result from
      the
      outcome of this uncertainty.




***We
      Have Negative Working Capital***




We
      had
      negative working capital of approximately $4,259,335 and **** $3,344,000
      at December 31, 2007 and December 31, 2006, respectively, and continue to need
      cash for operations. We have relied on significant external financing to fund
      our operations. As of December 31, 2007, we had $969 of cash on hand and total
      current assets were $3,919, and our total current liabilities were $4,263,254.
      We will need to raise additional capital to fund our anticipated operating
      expenses and future expansion. Among other things, external financing will
      be
      required to cover our operating costs. Unless we obtain profitable operations,
      it is unlikely that we will be able to secure additional financing from external
      sources. If we are unable to secure additional financing, we believe that we
      have sufficient funds to continue operations for approximately one
      month. **** We
      are
      unable to presently estimate the working capital that we will require to fund
      our anticipated operating expenses for the next 12 months because of the
      business model re-evaluation this is currently in process. The sale of our
      common stock to raise capital may cause dilution to our existing shareholders.
      Our inability to obtain adequate financing will result in the need to curtail
      business operations. Any of these events would be materially harmful to our
      business and may result in a lower stock price. Our inability to obtain adequate
      financing will result in the need to curtail business operations and you could
      lose your entire investment. Our financial statements do not include any
      adjustments that might result from the outcome of this uncertainty.




10




***We*** ***Will
      Need Additional Capital To Be Successful, Which We May Be Unable To Obtain
      On
      Terms Acceptable To Us, If At All, And Which Will Potentially Dilute The Value
      Of Our Shareholders’ Shares. Significant Dilution Is Possible to Existing
      Shareholders.***




We
      anticipate we will need substantial capital to execute our business plan once
      our management’s re-evaluation of our business model is completed. To finance
      our operations to date, we have relied on private offerings, exercises of
      warrants, and loans. As of December 31, 2007, we have issued a total of
      299,998,972 shares of common stock, of which an aggregate of 11,731,908 shares
      were issued in exchange for cash to finance our operations and the remainder
      were issued in exchange for services rendered to ETLS. We could be required
      to
      issue a substantial number of additional shares if all of the outstanding
      debentures are converted and all options and warrants exercised. The terms
      on
      which we obtain additional financing, including the exercise of outstanding
      warrants, may dilute the existing shareholders’ investment, or otherwise
      adversely affect their position. It is also possible that we will be unable
      to
      obtain the additional funding we need as and when we need it. If we are unable
      to obtain additional funding as and when needed, we will be forced to curtail
      or
      cease our operations.




***All
      Of Our Assets Are Securing Our Obligations To*** ***YA
      Global***




Pursuant
      to the terms contained in that certain Amended and Restated Security Agreement,
      dated November 2, 2005, by and between ETLS and Yorkville Advisors, all of
      our
      obligations under said Agreement, the November 2005 Debentures and subsequent
      debentures described in other parts of this report, the related Investor
      Registration Rights Agreement, the related Irrevocable Transfer Agent
      Instructions, and the related Escrow Agreement are secured by substantially
      all
      of our assets as of such date or thereafter acquired by us. Accordingly, if
      we
      are unable to satisfy any of our obligations under the foregoing agreements,
      our
      assets may be foreclosed upon and our business may be shut down.




***YA
      Global Could Acquire A Significant Amount Of Our Common Stock And, If It Does
      So, Could Exercise Significant Influence Over Us By Means Of Its Stockholdings
      As Well As Through Its Rights As A Secured Debentureholder. The Interests Of
      YA
      Global May Differ From Those of Other Stockholders***





As
      of the
      date of this report, YA Global currently owns 223,402,382 shares of ETLS common
      stock and a warrant to purchase 7,000,00 shares of ETLS common stock at $0.02
      per share. Based upon those warrants and the conversion rights under the
      convertible debentures as described in this report, YA Global could acquire
      a
      substantially greater position in our common stock, subject to the terms and
      conditions of the applicable agreements limiting exercise or conversion of
      the
      overlying securities, in addition to the rights that YA Global holds as a
      secured debentureholder. Thus, YA Global could exercise significant influence
      over the election of directors, determination of policies, appointment of the
      persons constituting management, and determining the outcome of corporate
      actions requiring stockholder approval, including mergers, consolidations,
      and
      the sale of all or substantially all of our assets. The interests of YA Global
      may differ from the interests of other stockholders.




***We
      Rely On Our Senior Management And Will Be Harmed If Any Or All Of Them
      Leave***




Our
      success is dependent on the efforts, experience and relationships of our senior
      management: David Marks and Frank Orlando. If any of these individuals become
      unable to continue in their role, our business or prospects could be adversely
      affected. We do not have employment agreements with Messrs. Marks and Orlando.
      The new director and officer will be evaluating our assets and business model.
      Such evaluation could result in a substantial change in our business model,
      a
      liquidation of the Company’s existing assets, or other significant changes in
      the business.




***Fluctuations
      In Our Operating Results May Adversely Affect Our Stock Price And Purchasers
      Of
      Our Shares Of Common Stock May Lose All Or A Portion Of Their
      Investment***




Historically,
      there has been volatility in the market price for our common stock. Our
      quarterly operating results, the number of shareholders desiring to sell their
      share, changes in general conditions in the economy, the financial markets
      or
      our industry, or other developments affecting us or our competitors, could
      cause
      the market price of our common stock to fluctuate substantially. We expect
      to
      experience significant fluctuations in our future quarterly operating results
      due to a variety of factors.




11




Accordingly,
      in one or more future quarters, our operating results may fall below the
      expectations of securities analysts and investors. In this event, the market
      price of our common stock would likely be materially adversely affected.




***Our
      Common Stock May Be Affected By Limited Trading Volume And May Fluctuate
      Significantly***




Our
      common stock is currently traded on the Over-the-Counter Bulletin Board and
      Pink
      Sheets. Historically, there has been a limited public market for our common
      stock and there can be no assurance that an active trading market for our common
      stock will develop. This could adversely affect our shareholders’ ability to
      sell our common stock in short time periods, or possibly at all. Our common
      stock is thinly traded compared to larger, more widely known companies in our
      industry. Thinly traded common stock can be more volatile than common stock
      traded in an active public market. Our common stock has experienced, and is
      likely to experience in the future, significant price and volume fluctuations,
      which could adversely affect the market price of our common stock without regard
      to our operating performance. In addition, we believe that factors such as
      quarterly fluctuations in our financial results and changes in the overall
      economy or the condition of the financial markets, could cause the price of
      our
      common stock to fluctuate substantially.




***Our
      Common Stock Is Deemed To Be*** ***“Penny
      Stock,” Which May Make It More Difficult For Investors To Sell Their Shares Due
      To Suitability Requirements***




Our
      common stock is deemed to be “penny stock” as that term is defined in Rule
      3a51-1 promulgated under the Securities Exchange Act of 1934, as amended. Penny
      stocks are stock:




·
            with
                a price of less than $5.00 per
                share;




·
            that
                are not traded on a “recognized” national
                exchange;




·
            whose
                prices are not quoted on the NASDAQ automated quotation system
                (NASDAQ-listed stock must still have a price of not less than $5.00
                per
                share); or




·
            stock
                in issuers with net tangible assets less than $2,000,000 (if the
                issuer
                has been in continuous operation for at least three years) or $5,000,000
                (if in continuous operation for less than three years), or with average
                revenues of less than $6,000,000 for the last three
                years.




Broker-dealers
      dealing in penny stocks are required to provide potential investors with a
      document disclosing the risks of penny stocks. Moreover, broker-dealers are
      required to determine whether an investment in a penny stock is a suitable
      investment for a prospective investor. These requirements may reduce the
      potential market for our common stock by reducing the number of potential
      investors. This may make it more difficult for investors in our common stock
      to
      sell shares to third parties or to otherwise dispose of them. This could cause
      our stock price to decline.




Shareholders
      should be aware that, according to United States Securities and Exchange
      Commission (the “ SEC ”
or
      the
“ 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
      consequent investor losses. ETLS' management is aware of the abuses that have
      occurred historically in the penny stock market. Although ETLS 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 ETLS' securities.





***Existing
      Shareholders Will Experience Significant Dilution From The Conversion Of
      Debentures***





YA
      Global
      may convert the November 2005 Debenture, the December 2006 Debenture, April
      2007
      and December 2007 Debenture into shares of ETLS’ common stock, at a conversion
      price which is the lesser of a contractually established price per share or
      a
      20% discount to the market price. The subsequent sale of such shares by YA
      Global could cause significant downward pressure on the price of ETLS’ common
      stock. This is especially the case if the shares being placed into the market
      exceed the market’s demand for the shares of ETLS’ common stock. As the stock
      price of ETLS’ common stock declines, YA Global will be entitled to receive an
      increasing number of shares under the convertible debentures. The sale of such
      increasing number of shares by YA Global could cause further downward pressure
      on the stock price to the detriment and dilution of other existing
      stockholders.




12




Further,
      there is no maximum number of shares ETLS might be required to issue under
      securities with market-price based conversion or exercise prices, such as
      securities issued in connection with the YA Global Debentures, except for the
      4.99% limitation on YA Global’s ownership interest in ETLS at any one time. This
      limitation may be waived by YA Global upon not less than 65 days prior notice
      to
      the Company.




As
      a
      result, our net income per share could decrease in future periods, and the
      market price of our common stock could decline. In addition, the lower our
      stock
      price, the more shares of common stock we will have to issue upon conversion
      of
      the YA Global Debentures. If our stock price is lower, then our existing
      stockholders would experience greater dilution.




***The
      Sale Of Material Amounts Of Common Stock Under The Company’s Registration
      Statement Could Encourage Short Sales By Third
      Parties***





In
      many
      circumstances the provisions contained in convertible debentures for companies
      that are traded on the Over-the-Counter Bulletin Board have the potential to
      cause a significant downward pressure on the price of common stock. This is
      especially the case if the shares being placed into the market exceed the
      market’s ability to take up the increased stock or if ETLS has not performed in
      such a manner to show that the debt raised will be used to grow the Company.
      Such an event could place further downward pressure on the price of common
      stock.




The
      outstanding Debentures are convertible at a 20% discount to the market price
      of
      our common stock. As a result, the opportunity exists for short sellers and
      others to contribute to the future decline of ETLS’ stock price. Persons
      engaging in short sales first sell shares that they do not own, and thereafter,
      purchase shares to cover their previous sales. To the extent the stock price
      declines between the time the person sells the shares and subsequently purchases
      the shares, the person engaging in short-sales will profit from the transaction,
      and the greater the decline in the stock, the greater the profit to the person
      engaging in such short-sales. Because the Debentures are convertible at a
      discount to market, it is possible that the debentures could be converted if
      the
      market price of our common stock declines, thus, supplying any short sellers
      with the opportunity to cover their short positions. By contrast, a person
      owning a long position in a stock, first purchases the shares at the then market
      price, if the stock price declines while the person owns the shares, then upon
      the sale of such shares the person maintaining the long position will incur
      a
      loss, and the greater the decline in the stock price, the greater the loss
      which
      is incurred by the person owning a long position in the stock.




If
      there
      are significant short-sales of our stock, the price decline that would result
      from this activity will cause our share price to decline more so which in-turn
      may cause long holders of our stock to sell their shares thereby contributing
      to
      sales of stock in the market. If there is an imbalance on the sell side of
      the
      market for our stock the price will decline. It is not possible to predict
      if
      the circumstances whereby short-sales could materialize or to what our share
      price could drop. In some companies that have been subjected to short-sales,
      their stock price has dropped to near zero. We cannot provide any assurances
      that this situation will not happen to us.




***Our
      substantial indebtedness could adversely affect our cash flow and our ability
      to
      fulfill our obligations.***





Our
      substantial level of indebtedness increases the possibility that we may be
      unable to generate cash sufficient to pay, when due, the principal of, interest
      on or other amounts due in respect of our indebtedness or other costs and
      expenses. Our substantial leverage could have significant consequences
      including:





·
            making
                it more difficult for us to satisfy our obligations with respect
                to the
                secured convertible debentures;





·
            increasing
                our vulnerability to general adverse economic and industry
                conditions;





·
            limiting
                our ability to obtain additional
                financing;





·
            requiring
                us to dedicate a substantial portion of our cash flow from operations
                to
                payments on our indebtedness, which will reduce the amount of our
                cash
                flow available for other purposes, including capital expenditures
                and
                other general corporate purposes;





·
            requiring
                us to sell debt securities or to sell some of our core assets, possibly
                on
                terms unfavorable to us;





·
            restricting
                us from making strategic acquisitions or exploiting business
                opportunities;





·
            limiting
                our flexibility in planning for, or reacting to, changes in our business
                and our industry; and




13




·
            placing
                us at a possible competitive disadvantage compared to our competitors
                that
                have less debt.





***Restrictive
      covenants in our convertible debentures and related agreements could adversely
      affect our business by limiting our operating and strategic
      flexibility.***





The
      convertible debentures and related agreements governing certain of our
      outstanding indebtedness contain restrictive covenants that limit our ability
      to, among other things:





·
            issue
                or sell our common stock or preferred
                stock;





·
            issue
                or sell any warrant, option (except pursuant to an employee stock
                option
                plan), right, contract, call or other security convertible into shares
                of
                our common stock;





·
            file
                a registration statement on Form
                S-8;





·
            enter
                into certain transactions with
                affiliates;





These
      covenants could have an adverse effect on our business by limiting our ability
      to take advantage of a financing, merger and acquisition or other corporate
      opportunities. **** Upon
      the
      occurrence of an event of default under our convertible debentures, the holder
      of such indebtedness could elect to declare all amounts outstanding under such
      indebtedness, together with accrued interest, to be immediately due and payable
      in cash or shares of our common stock. If the holder accelerates the payment
      of
      that indebtedness, our assets currently would be insufficient to repay in full
      that indebtedness and any other debt.





***To
      service our indebtedness, make capital expenditures and fund our operations,
      we
      will require a significant amount of cash. Our ability to generate cash depends
      on many factors beyond our control.***





Our
      ability to make payments on our indebtedness and to fund potential capital
      expenditures will depend on our ability to generate and have excess cash in
      the
      future, which is dependent on various factors. These factors include our ability
      to market our products as well as general economic, financial, competitive,
      legislative, regulatory and other factors that are beyond our control. We may
      not be able to generate sufficient cash flow from operations, we may not realize
      currently anticipated cost savings and operating improvements on schedule or
      at
      all, and future borrowings and/or equity financing may not be available to
      us in
      amounts sufficient to enable us to pay our indebtedness or to fund our other
      liquidity needs. We may need to refinance all or a portion of our indebtedness
      before maturity. We may not be able to refinance any of our indebtedness on
      commercially reasonable terms or at all.





***Our
      Chief Restructuring Officer and Director are not our employees; we do not have
      definitive contracts with them.***





Mr.
      Orlando and Mr. Marks were appointed to their ETLS positions on March 27, 2007,
      are not our employees, and as of the date of this report we do not have
      employment contracts with either of them nor agreements regarding compensation
      and related matters. Mr. Orlando and Mr. Marks are each an officer of Crivello
      Group, LLC and other entities. We expect that Crivello Group, LLC will enter
      into a management services agreement with us. Mr. Orlando and Mr. Marks do
      not
      devote 100% of their working time to us. If Mr. Orlando or Mr. Marks were unable
      or unwilling to provide services to us for whatever reason, our business
      operations would be adversely affected.




14




**Item
                7.**
            **Financial
                Statements And Supplementary
                Data.**




**ETOTAL
      SOURCE, INC.**




**Consolidated
      Financial Statements**




15


**ETOTALSOURCE,
      INC.**





**Consolidated
      Financial Statements**





**T****able
      of Contents**




Report
                of Independent Registered Public Accounting Firm
            
            
            F-1Report
                of Independent Registered Public Accounting Firm
            
            
            F-2Balance
                Sheet as of December 31, 2007
            
            
            F-3Statements
                of Operations - Twelve Months Ended December 31, 2007 and
                2006
            
            
            F-4Statement
                of Stockholder’s Equity as of December 31, 2007
            
            
            F-5Statements
                of Cash Flows Twelve Months Ended December 31, 2007 and
                2006
            
            
            F-6Notes
                  to Financial Statements
            
            
            F-7





16


**Report
        of Independent Registered Public Accounting Firm**
 
 **To
        The Board of Directors and**
 **Shareholders
        of EtotalSource, Inc.**
 
 We
        have
        audited the accompanying consolidated balance sheet of EtotalSource, Inc
        as of
        December 31, 2007 and the related statements of operation, stockholders'
        (deficit), and cash flows for the year then ended. These consolidated financial
        statements are the responsibility of the Company's management. Our
        responsibility is to express an opinion on these consolidated financial
        statements based on our audit.
 
 We
        conducted our audit in accordance with the standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audits to obtain reasonable assurance about whether the
        financial statements are free of material misstatement. Our audit included
        consideration of internal control over financial reporting as a basis for
        designing audit procedures that are appropriate in the circumstances, but
        not
        for the purpose of expressing an opinion on the effectiveness of the Company’s
        internal control over financial reporting. Accordingly, we express no such
        opinion. An audit also includes examining, on a test basis, evidence supporting
        the amounts and disclosures in the financial statements also assessing  
the accounting principles used and significant estimates made by management,
        as
        well as evaluating the overall financial statement presentation. We believe
        that
        our audit provides 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 EtotalSource, Inc. as
        of
        December 31, 2007, and the results of their operations and their cash flows
        for
        the year then ended in conformity with accounting principles generally accepted
        in the United States of America.
 
 The
        accompanying consolidated financial statements have been prepared assuming
        that
        EtotalSource, Inc. will continue as a going concern. As discussed in Note1
        to
        the financial statements, the Company requires additional working capital
        to
        meet its current liabilities. This condition raises substantial doubt about
        its
        ability to continue as a going concern. Management’s plans in regard to this
        matter are more fully described in Note 1. The financial statements do not
        include any adjustments that might result from the outcome of this
        uncertainty.
 
 
 /s/
        Demetrius & Company, L.L.C.
 
 Demetrius
        & Company, L.L.C.
 Wayne,
        New Jersey 07470
 April
        15,
        2008


F-1




**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**




To
      the
      Board of Directors of


*e* TotalSource,
      Inc.


1510
      Poole Blvd.


Yuba
      City, CA 95993





We
      have
      audited the accompanying balance sheet of eTotalSource, Inc. as of December
      31,
      2006, and the related statements of operations, changes in stockholders' equity
      and cash flows for the years ended December 31, 2006. 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 audit in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the balance
      sheets are free of material misstatement. The Company is not required to have,
      nor were we engaged to perform, an audit of its internal control over financial
      reporting. Our audit included consideration of internal control over financial
      reporting as a basis for designing audit procedures that are appropriate in
      the
      circumstances, but not for the purpose of expressing an opinion on the
      effectiveness of the Company’s internal control over financial reporting.
      Accordingly, we express no such opinion. An audit includes examining, on a
      test
      basis, evidence supporting the amounts and disclosures in the balance sheets.
      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 audit provides a reasonable basis
      for our opinion.





In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the financial position of the Company as of December 31,
      2006, and the results of its operations and its cash flows for the year ended
      December 31, 2006, in conformity with U.S. generally accepted accounting
      principles.





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, 2006 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/
      Beadle, McBride, Evans & Reeves, LLP*




Las
      Vegas, Nevada


April
      12,
      2007




F-2


**eTotalSource,
      Inc**


**Balance
      Sheet**


**December
      31, 2007**





***Current
                Assets***Cash
            
            $
            969Prepaid
                Expense
            
            
            2,950*Total
                Current Assets*
            
            
            3,919***Other
                Assets***Prepaid
                finance cost
            
            
            3,223***Total
                Assets***
            
            $
            7,142**LIABILITIES
                AND STOCKHOLDERS' EQUITY (DEFICIT)*****Current
                Liabilities***Convertible
                notes payable
            
            $
            225,000Notes
                payable
            
            
            839,754Judgments
                payable
            
            
            204,788Accounts
                payable and other accrued liabilities
            
            
            283,234Accrued
                compensation payable
            
            
            1,092,203Accrued
                interest payable
            
            
            770,204Convertible
                Debentures, less current maturities and net of amortized discount
                of
                $98,441
            
            
            848,071**Total
                Current Liabilities**
            
            
            4,263,254**Commitments
                and Contingencies*****Stockholders'
                Equity (Deficit)***Common
                stock; no par value; 300 million shares authorized,299,998,972
                shares issued and outstanding, respectively
            
            
            6,731,148Accumulated
                (deficit)
            
            
            (10,987,270
            )*Total
                Stockh4olders' Equity (Deficit)*
            
            
            (4,256,112
            )***Total
                Liabilities and Stockholders' Equity
                (Deficit)***
            
            $
            7,142





See
      accompanying notes.





F-3


**eTotalSource,
      Inc**


**Statement
      of Operations**





**December
                31,****2007**
            
            **2006****Revenues**
            
            $
            -
            
            $
            25,980**General
                and Administrative Expenses**Other
            
            
            77,554
            
            
            533,478Options
                and Warrants for Consulting
            
            
            167,463
            
            
            101,632Total
                General and Administrative Expenses
            
            
            245,017
            
            
            635,110**Operating
                Income (Loss)**
            
            
            (245,017
            )
            
            (609,130
            )**Other
                Income (Expense)**Interest
                expense
            
            
            (357,608
            )
            
            (409,332
            )Gain
                (loss) on sale or retirement of assets
            
            
            -
            
            
            594Settlement
                debt write-off
            
            
            187,728
            
            
            85,121Loss
                on Impaired Assets
            
            
            -
            
            
            (13,444
            )Other
                income (expense), net
            
            
            (297
            )
            
            1,099**Total
                Other Income (Expense)**
            
            
            (170,177
            )
            
            (335,962
            )**Net
                (Loss)**
            
            $
            (415,194
            )
            $
            (945,092
            )**Basic
                and Diluted (Loss) per Share**
            
            $
            (0.002
            )
            $
            (0.015
            )**Weighted
                Average Common Shares Outstanding**
            
            
            151,079,879
            
            
            62,954,670




See
      accompanying notes.





F-4


**eTotalSource,
      Inc.**


**Statement
      of Stockholder’s Equity (Deficit)**




**Common
                Stock**
            
            **Accumulated****Shares**
            
            **Amount**
            
            **(Deficit)**
            
            **Total****December
                31, 2005**
            
            
            **46,710,821**
            
            **$**
            **6,226,906**
            
            **$**
            **(9,626,984**
            **)**
            **$**
            **(3,400,078**
            **)**Common
                Stock -Conversion
                of debentures($.0016-.0048
                per share)
            
            
            31,457,198
            
            
            72,500
            
            
            
            
            
            72.500Conversion
                of warrants($.001
                per share)
            
            
            2,000,000
            
            
            2,000
            
            
            
            
            
            2,000Options
                and warrants-Services
                and interest
            
            
            
            
            
            101,632
            
            
            
            
            
            101,632Additional
                paid-in-capital -Discounts-convertibledebenture
                bonds
            
            
            
            
            
            1,528
            
            
            
            
            
            1,528Vested
                FV of stockCompensation
                costs
            
            
            
            
            
            62,955
            
            
            
            
            
            62,955Net
                (loss)
            
            
            
            
            
            
            
            
            (945,092
            )
            
            (945,092
            )**December
                31, 2006**
            
            
            **80,168,019**
            
            
            **6,467,511**
            
            
            **(10,572,076**
            **)**
            
            **(4,104,555**
            **)**Common
                Stock -Conversion
                of debentures($.0003-.001
                per share)
            
            
            219,830,953
            
            
            78,250
            
            
            
            
            
            78,250Options
                and warrants-Services
                and interest
            
            
            
            
            
            167,463
            
            
            
            
            
            167,463Additional
                paid-in-capital -Discounts-convertibledebenture
                bonds
            
            
            
            
            
            17,924
            
            
            
            
            
            17,924Net
                (loss)
            
            
            
            
            
            
            
            
            (415,194
            )
            
            (415,194
            )**December
                31, 2007**
            
            
            **299,998,972**
            
            **$**
            **6,731,148**
            
            **$**
            **(10,987,270**
            **)**
            **$**
            **(4,256,112**
            **)**




See
      accompanying notes .





F-5


**eTotalSource,
                Inc.****Statements
                of Cash Flows**




**December
                31,****2007**
            
            **2006****Cash
                Flows From (Used in) Operating Activities:**Net
                (loss)
            
            $
            (415,194
            )
            $
            (945,092
            )Depreciation
                and amortization
            
            
            277
            
            
            141,450Amortization
                of discounted convertible debentures
            
            
            92,980
            
            
            -Gain
                (loss) on sale or retirement of assets
            
            
            -
            
            
            43Stock
                options and warrant expense
            
            
            167,463
            
            
            101,632Vested
                stock compensation expense
            
            
            
            
            
            62,955Impairment
                of assets
            
            
            
            
            
            13,444Changes
                in assets and liabilities:Decrease
                (increase) in other current assets
            
            
            801
            
            
            (4,252
            )Decrease
                (increase) in deposits
            
            
            -
            
            
            (80
            )Decrease
                (increase) in prepaid expense
            
            
            (2,950
            )
            
            -Increase
                (decrease) in payables, and accrued liabilities
            
            
            (205,145
            )
            
            499,363Increase
                (decrease) in accrued interest payable
            
            
            268,415
            
            
            -Increase
                (decrease) in deferred revenue
            
            
            -
            
            
            (22,500
            )Net
                Cash (Used in) Operating Activities
            
            
            93,353
            
            
            (153,037
            )**Cash
                Flows From (Used in) Financing Activities:**Proceeds
                from exercise of warrants
            
            
            -
            
            
            2,000Proceeds
                from issuance of convertible debt (net)
            
            
            86,120
            
            
            7,642Proceeds
                from notes payable
            
            
            7,640
            
            
            25,000Net
                Cash From Financing Activities
            
            
            93,760
            
            
            36,642Increase
                (Decrease) in Cash
            
            
            407
            
            
            (118,395
            )Cash
                - Beginning of Period
            
            
            563
            
            
            118,958Cash
                - End of Period
            
            $
            969
            
            $
            563**Supplemental
                Disclosures of Cash flow Information:**Interest
                paid
            
            $
            -
            
            $
            24,567Income
                taxes paid
            
            
            -
            
            
            -Non-cash
                investing and financing transactions:
            
            
            -
            
            
            72,500Conversion
                of convertible debenture
            
            
            78,250
            
            
            -Discount
                on convertible debentures
            
            
            17,924
            
            
            1,528


See
      accompanying notes.




F-6


**eTotalSource,
      Inc.**




**Notes
      to Condensed Financial Statements as of December 31,
      2007**




**NOTE
      1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**




**Description
      of Our Business**




The
      Company was incorporated in Colorado on September 16, 1987 as Premium
      Enterprises, Inc. (“Premium”) On December 20, 2002, Premium entered into a Plan
      and Agreement of Reorganization with eTotalSource, Inc., a California
      corporation (the “Company” or “eTotalSource”) and its shareholders whereby
      Premium acquired 91% of the issued and outstanding common stock of eTotalSource
      in exchange for 15,540,001 shares of common stock of Premium. The contract
      was
      completed December 31, 2002. On June 17, 2003, shareholders voted to amend
      the
      Articles to change the name of Premium Enterprises, Inc. to eTotalSource,
      Inc.




**History.**




For
      a
      period of time in 1988-1994, Premium operated three fast lube locations, at
      various times in Arizona and Colorado as “Grease Monkey” franchises. The
      locations were unprofitable, two were sold, and the last franchise closed in
      1994.




Premium
      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
      Premium ran out of capital and ceased all operations in 1996. Premium wrote-off
      all of its investment in equipment and licenses for tire recycling in 1996
      and
      became dormant.




**Business.**




The
      sole
      business of the Company is that of eTotalSource. The Company ceased the majority
      of operations in the fourth quarter of 2006 due to lack of
      capital.





**Recent
      Developments**





**Debenture
      Financing.** We have
      entered into a series of debenture financings with YA Global Investments, L.P.
      f/k/a Cornell Capital Partners, L.P. (“YA Global”) as described in greater
      detail below in this report. Most recently, we issued and sold a $7,642
      debenture to YA Global in December 2006, a $72,000 debenture to YA Global in
      April 2007, and a $17,620 debenture to YA Global in December 2007. The proceeds
      from these three debt financing were used to pay professional fees associated
      with securities law compliance, audit fees, transaction costs, and related
      fees.





*Going
      Concern Uncertainty*





The
      Company’s financial statements are prepared based on the going concern
      principle. That principal anticipates the realization of assets and payments
      of
      liabilities through the ordinary course of business. No adjustments have been
      made to reduce the value of any assets or record additional liabilities, if
      any,
      if the Company were to cease to exist. The Company has incurred significant
      operating losses since inception. These operating losses have been funded by
      the
      issuance of capital, loans and advances. There are not guarantees that the
      Company will continue to be able to raise the funds necessary. Additionally,
      the
      lack of capital may limit the Company’s ability to establish a viable
      business.





*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 inter-company balances and
      transactions.





F-7




**eTotalSource,
      Inc.**




**Notes
      to Condensed Financial Statements as of December 31,
      2007**




*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 use 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,
      2007, the Company has not capitalized any software development
      costs.





*Furniture
      and Equipment*




Furniture
      and equipment are recorded at cost. 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
      ranging from five to seven years. Depreciation charged to operations was $0
      in
      2007 and $9,946 in 2006.





*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. A loss on impairment in the amount
      of $20,873 was recognized in 2005 as the Company fully impaired the unamortized
      cost of its patent applications and trademarks.





*Comprehensive
      Income*




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





*Segment
      Reporting*




In
      June
      1997, Statement of Financial Accounting Standards (“SFAS”) 131, "Disclosure
      about Segments of an Enterprise and Related Information," was issued. Operating
      segments, as defined in the pronouncement, are components of an enterprise
      about
      which separate financial information is available and that are evaluated
      regularly by management in deciding how to allocate resources and assess
      performance. As of December 31, 2007 and 2006, the Company had one operating
      segment, publishing proprietary multimedia software technology and training
      media.





*Income
      Taxes*




Deferred
      income taxes are based on temporary differences between the financial statement
      and tax basis of assets and liabilities existing at each balance sheet date
      using enacted tax rates for years during which taxes are expected to be paid
      or
      recovered.





F-8




**eTotalSource,
      Inc.**




**Notes
      to Condensed Financial Statements as of December 31,
      2007**




*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.





*Asset
      Impairment*




If
      facts
      and circumstances suggest that a long-lived asset may be impaired, the carrying
      value is reviewed. If this review indicates that the value of the asset will
      not
      be recoverable, as determined based on projected undiscounted cash flows related
      to the asset over its remaining life, then the carrying value of the asset
      is
      reduced to its estimated fair value.





*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 net losses and the inclusion of stock
      options and warrants would be anti-dilutive.




*Stock-Based
      Compensation*




Prior
      to
      January 1, 2006, the Company accounted for stock-based compensation using the
      intrinsic value method prescribed in APB Opinion No. 25, "Accounting for Stock
      Issued to Employees," and related interpretations. On January 1, 2006 the
      Company adopted SFAS No.123 (Revised 2004), "Share Based Payment," ("SFAS
      123R"), using the modified prospective method. There were no options granted
      in
      2007 or 2006.




*Beneficial
      Conversion Feature of Debt*




In
      accordance with Emerging Issues Task Force No. 98-5, Accounting for Convertible
      Securities with Beneficial Conversion Features or Contingently Adjustable
      Conversion Ratios, and No. 00-27, to Certain Convertible Instruments, the
      Company recognizes the value of conversion rights attached to convertible debt.
      These rights give the debt holder the ability to convert his debt into common
      stock at a price per share that is less than the trading price to the public
      on
      the day the loan is made to the Company. The beneficial value is calculated
      based on the market price of the stock at the commitment date in excess of
      the
      conversion rate of the debt and related accruing interest and is recorded as
      a
      discount to the related debt and an addition to additional paid in capital.
      The
      discount is expensed as interest expense immediately.





*Recent
      Accounting Pronouncements*




On
      February 15, 2007, the FASB issued FASB Statement No. 159, *The
      Fair Value Option for Financial Assets and Financial Liabilities - Including
      an
      Amendment of FASB Statement No. 115.* The
      fair
      value option established by Statement 159 permits all entities to choose to
      measure eligible items at fair value at specified election dates. A business
      entity will report unrealized gains and losses on items for which the fair
      value
      option has been elected in earnings (or another performance indicator if the
      business entity does not report earnings) at each subsequent reporting date.
      Statement 159 is effective as of the beginning of


an
      entity’s first fiscal year that begins after November 15, 2007.  The
      Company does not expect that adoption of SFAS No. 159 will have a material
      effect on its financial position, results of operations, or liquidity and does
      not currently believe it will have a material impact on our financial
      statements **.**





On
      September 29, 2006, the FASB issued FASB Statement No. 158, *Employers'
      Accounting for Defined Benefit Pension and Other Postretirement Plans — An
      Amendment of FASB Statements No. 87, 88, 106, and 132R.* This new
      standard requires an employer to: ( *a* ) 
recognize in its statement of financial position an asset for a plan’s
      overfunded status or a liability for a plan’s underfunded status; ( *b* )
      measure
      a plan’s assets and its obligations that determine its funded status as of the
      end of the employer’s fiscal year (with limited exceptions); and ( *c* )
      recognize changes in the funded status of a defined benefit postretirement
      plan
      in the year in which the changes occur. The requirement to recognize the funded
      status of a benefit plan and the disclosure requirements are effective as of
      the
      end of the fiscal year ending after December 15, 2006, for entities with
      publicly traded equity securities, and at the end of the fiscal year ending
      after June 15, 2007, for all other entities. The requirement to measure plan
      assets and benefit obligations as of the date of the employer’s fiscal year-end
      statement of financial position is effective for fiscal years ending after
      December 15, 2008. The Company does not expect that adoption of SFAS
      No. 158 will have a material effect on its financial position, results of
      operations, or liquidity and does not currently believe it will have a material
      impact on our financial statements **.**




F-9




**eTotalSource,
      Inc.**




**Notes
      to Condensed Financial Statements as of December 31,
      2007**




In
      September 2006, the FASB issued Statement No. 157, *Fair
      Value Measurements* .
      This
      new standard provides guidance for using fair value to measure assets and
      liabilities. Statement 157 applies whenever other standards require (or permit)
      assets or liabilities to be measured at fair value but does not expand the
      use
      of fair value in any new circumstances. Under Statement 157, fair value refers
      to the price that would be received to sell an asset or paid to transfer a
      liability in an orderly transaction between market participants in the market
      in
      which the reporting entity transacts. In this standard, the FASB clarifies
      the
      principle that fair value should be based on the assumptions market participants
      would use when pricing the asset or liability. The provisions of Statement
      157
      are effective for financial statements issued for fiscal years beginning after
      November 15, 2007, and interim periods within those fiscal years. The Company
      does not expect that adoption of SFAS No. 157 will have a material effect
      on its financial position, results of operations, or liquidity and does not
      currently believe it will have a material impact on our financial
      statements **.**




On
      July
      13, 2006, FASB Interpretation (FIN) No. 48, *Accounting
      for Uncertainty in Income Taxes - An Interpretation of FASB Statement No.
      109,* was
      issued. FIN 48 clarifies the accounting for uncertainty in income taxes
      recognized in an enterprise’s financial statements in accordance with FASB
      Statement No. 109, *Accounting
      for Income Taxes.* FIN 48
      also prescribes a recognition threshold and measurement attribute for the
      financial statement recognition and measurement of a tax position taken or
      expected to be taken in a tax return. The new FASB standard also provides
      guidance on de-recognition, classification, interest and penalties, accounting
      in interim periods, disclosure, and transition. The provisions of FIN 48 are
      effective for fiscal years beginning after December 15, 2006. The Company does
      not expect that adoption of (FIN)No. 48 will have a material effect on its
      financial position, results of operations, or liquidity and does not currently
      believe it will have a material impact on our financial statements **.**





**NOTE
      2. CONVERTIBLE NOTES PAYABLE AT DECEMBER 31, 2007**





The
      Company has a Convertible
      notes payable with interest at 6% payable monthly, due in 2001, unsecured.
      Principal ($50,000 at December 31, 2007) and accrued interest ($18,500 at
      December 31, 2007) are convertible to common stock at $.50 per share. The note
      and interest are in default.





The
      Company has a Convertible
      notes payable with interest at 6% payable monthly, due in 2001, unsecured.
      Principal ($75,000 at December 31, 2007) and accrued interest ($26,951 at
      December 31, 2007) are convertible to common stock at $.50 per share. Warrants
      also issued to note holders to purchase 18,500 shares of common stock for five
      years at $.50 per share. The note and interest are in default.





The
      Company has a Convertible note payable; principal and accrued interest at 8%
      payable in 2002, extended to May 15, 2003, unsecured. Principal ($100,000 at
      December 31, 2007) and accrued interest ($30,782 at December 31, 2007) are
      convertible to Company common stock at $.50 per share. Warrants also issued
      to
      the note holder to purchase 55,248 shares of common stock for five years at
      $.50
      per share. The note and interest are in default.





**NOTE
      3.**  **NOTES
      PAYABLE AT DECEMBER 31, 2007**





The
      Company has a Note
      payable with interest at 6% payable monthly, due in 2001, unsecured. Principal
      ($25,000 at December 31, 2007) and accrued interest ($9,250 at December 31,
      2007) are due. Warrants also issued to note holder to purchase 18,750 shares
      of
      common stock for five years at $.50 per share. The note and interest are in
      default.





The
      Company has a Note payable to an unrelated individual; principal and interest
      at
      12%, due October 15, 2006. Principal ($25,000 at December 31, 2007) and unpaid
      interest ($4,250 at December 31, 2007) are due. The note and interest are
      default.





The
      Company has a Note payable; interest at 15% payable monthly through December
      18,
      2003. Principal ($172,000 at December 31, 2007) and unpaid interest ($54,825
      at
      December 31, 2007) are due. The note and interest are in default.





The
      Company has a note payable; interest at 10% and principal due January 17, 2003,
      extended to December 17, 2003. Principal ($110,000 at December 31, 2007) and
      unpaid interest ($38,386 at June 30 ,2007) (with interest increased to 18%
      and
      due monthly beginning February 17, 2003) are due. The note and interest are
      in
      default.





The
      Company has a note payable; interest at 15% payable monthly through December
      18,
      2003. Principal ($40,000 at December 31, 2007) and unpaid interest ($12,750
      at
      December 31, 2007) are due. The note and interest are in default.




F-10





**eTotalSource,
      Inc.**




**Notes
      to Condensed Financial Statements as of December 31,
      2007**




The
      Company has a note payable ;
      stated
      interest rate of 10% due June 2003, extended to June 2004. As consideration
      for
      forbearance, the note holder received 50,000 shares of common stock in 2004,
      valued at $.525 per share ($26,250). In October 2004, the note was extended
      to
      April 2005. In December 2005, the note was extended to June 2006. Principal
      ($52,483 at December 31, 2007) and unpaid interest ($9,203 at December 31,
      2007)
      are due. This note and interest are in default.





The
      Company has a note payable; principal and interest at 10% due monthly. This
      note
      is a revolving credit obligation and the Company can repay and borrow up to
      the
      amount of the note. In October 2004, the note was extended to April 2005. In
      December 2005, the note was extended to June 2006. Principal ($262,631 at
      December 31, 2007) and unpaid interest ($46,050 at December 31, 2007) are due.
      This note and interest are in default.





The
      Company has a note payable;
      principal and interest at 9.2%, due December 4, 2002, extended to May 1, 2003.
      Principal ($20,000 at December 31, 2007) and unpaid interest ($11,218 at
      December 31, 2007) are due, unsecured. The note and interest are in
      default .





The
      Company has a note payable
      to YA Global; principal and interest at 10%, due August 1, 2005. Principal
      ($25,000 at December 31, 2007) and unpaid interest ($6,281 at December 31,
      2007)
      are due. The note and interest are in default.





The
      Company has a note payable to YA Global Investors; principal and interest at
      14%, due October 1, 2007. Principal ($7,640 at December 31, 2007) and unpaid
      interest ($414 at December 31, 2007) are due.





The
      Company has a note payable to YA Global; principal and interest at 12%, due
      August 1, 2005. Principal ( $100,000 at December 31, 2007) and unpaid interest
      ($32,384 at December 31, 2007) are due. The note and interest are in
      default.





**NOTE
      4. CONVERTIBLE DEBENTURES AT DECEMBER 31, 2007**





The
      Company has a Convertible debentures payable to a YA Global, principal and
      interest at 12%, payable November 1, 2008, secured by 225,000,000 shares of
      common stock and 7 million warrants. Principal and accrued interest convertible
      to common stock at a
      conversion price equal to the lower of (i) $.024 price per share of common
      stock
      or (ii) 80% of the lowest closing bid price of our common stock, as quoted
      by
      Bloomberg, L.P., for the five trading days immediately preceding the conversion
      date. At the due date the Company has the option to repay the debt or issue
      common stock. The principal balance as of December 31, 2007 was
      $849,250.





The
      Company has a Convertible
      debentures payable to a YA Global,, principal and interest at 12%, payable
      December 21, 2008. Principal and accrued interest ($942 at December 31, 2007)
      convertible to common stock at a conversion price equal to the lower of (i)
      $.0018 price per share of common stock or (ii) 80% of the lowest closing bid
      price of our common stock, as quoted by Bloomberg, L.P., for the five trading
      days immediately preceding the conversion date. At the due date the Company
      has
      the option to repay the debt or issue common stock. The principal balance as
      of
      December 31, 2007 was $7,642.





On
      April
      13, 2007, the Company issued a convertible debenture to YA Global, in the
      principal amount of $72,000(principal and interest at 12% payable April 13,
      2009). Principal and accrued interest convertible to common stock at a
      conversion price equal to the lower of (i) $.0018 price per share of common
      stock or (ii) 80% of the lowest closing bid price of our common stock, as quoted
      by Bloomberg, L.P., for the five trading days immediately preceding the
      conversion date. The principal balance as of December 31, 2007 was
      $72,000.





On
      December 4, 2007, the Company issued a convertible debenture to YA Global,
      in
      the principal amount of $17,620(principal and interest at 15% payable November
      9, 2008). Principal and accrued interest convertible to common stock at a
      conversion price equal to the lower of (i) $.002 price per share of common
      stock
      or (ii) 95% of the lowest volume weighted average price of our common stock,
      as
      quoted by Bloomberg, L.P., for the thirty trading days immediately preceding
      the
      conversion date. The principal balance as of December 31, 2007 was
      $17,620.





F-11




**eTotalSource,
      Inc.**




**Notes
      to Condensed Financial Statements as of December 31,
      2007**






**NOTE
      5. STOCKHOLDER EQUITY**




During
      the year ended December 31, 2007, YA Global converted $83,461 of convertible
      debentures into 219,830,953 shares of common stock.





On
      December 4, 2007 YA Global and the Company entered into an agreement providing
      for the Company’s issuance of a secured convertible debenture to YA Global in
      the face amount of $17,620 for a purchase price of $17,620 (the “December 2007
      Debenture”). The conversion price per share, subject to adjustment, is the less
      of (i) $.002 price per share of common stock or (ii) 95% of the lowest volume
      weighted average price (as defined in the debenture) of the Company’s common
      stock for the thirty trading days immediately preceding the conversion date
      (as
      defined in the debenture).





On
      August
      13, 2007, the Company signed a promissory note in the amount of $7,640 with
      YA
      Global Investments, L.P. at an interest rate of 14%.. This promissory note
      is
      due on or before October 1, 2007, now in default as of December 31, 2007. The
      proceeds of this note are to be distributed as follows: $3,933 to the auditor,
      $2,000 to Vintage Filings, and $1,707 to the Chief Restructuring Officers for
      expenses incurred.





During
      the year ended December 31, 2006, YA Global converted $62,500 of convertible
      debentures into 29,373,865 shares of common stock.





On
      April
      27, 2006, YA Global exercised its warrant to purchase 2,000,000 shares of common
      stock for a payment to the Company of $2,000.





**NOTE
      6. INCOME TAXES**




The
      provision (benefit) for income taxes consists of the following:





2007
            
            2006Current
                expense (benefit)
            
            $
            (194,562
            )
            $
            (255,144
            )Deferred
                expense
            
            
            -
            
            
            -Valuation
                allowance
            
            
            194,562
            
            
            255,144Income
                tax expense (benefit)
            
            $
            -
            
            $
            -





F-12




**eTotalSource,
      Inc.**




**Notes
      to Condensed Financial Statements as of December 31,
      2007**




A
      reconciliation of income tax computed at the U.S. statutory rate to the
      effective income tax rate is as follows:




2007
            
            2006Income
                tax (benefit) expense at statutory rate
            
            $
            (415,194
            )
            $
            (945,092
            )Prior
                period adjustments at statutory ratePermanent
                tax differences:
            
            
            (157,050
            )
            
            194,665Net
                Loss for tax
            
            $
            (572,244
            )
            $
            (750,427
            )Income
                tax (benefit) at statutory rate
            
            $
            (194,562
            )
            $
            (255,144
            )Valuation
                allowance
            
            
            194,562
            
            
            255,144Income
                tax expense
            
            
            -
            
            
            -$
            -
            
            $
            -





The
      components of deferred income taxes at December 31, 2007 are as
      follows:




Total
                deferred tax asset
            
            
            2,319,989Valuation
                allowance
            
            
            (2,319,989
            )Total
                net deferred tax
            
            $
            -




SFAS
      109
      requires that all deferred tax balances be determined using the tax rates and
      limitations expected to be in effect when the taxes will actually be paid or
      recovered. Consequently, the income tax provision will increase or decrease
      in
      the period in which a change in tax rate or limitation is enacted. As of
      December 31, 2007, the Company had total deferred tax assets of $2,319,989.
      The
      Company recorded a valuation allowance in the full amount of $2,319,989 at
      December 31, 2007, against the amount by which deferred tax assets exceed
      deferred tax liabilities. The valuation reserve at December 31, 2007 has been
      provided due to the uncertainty of the amount of future taxable income. The
      Company provides a valuation allowance in the full amount of its deferred tax
      assets because under the criteria of SFAS No. 109, the Company does not have
      a
      basis to conclude that it is more likely than not that it will realize the
      deferred tax assets.





The
      Company has accumulated net operating loss carry-forwards of approximately
      $11,000,000, expiring in varying amounts beginning in 2021. As of December
      31,
      2007, all identified deferred tax assets are reduced by a valuation allowance.
      Therefore, any additional operating loss carry-forwards not recognized would
      not
      result in a benefit in the provision for income taxes due to the uncertainty
      of
      future realization of those additional loss carry-forwards.




**NOTE
      7. STOCK OPTIONS AND WARRANTS**


.


*Stock
      Options and Warrants Issued to Others*





eTotalSource
      also has outstanding options and warrants that it has issued to consultants
      and
      lenders to purchase a total of 7,952,500 shares of common stock of eTotalSource
      at prices ranging from $.001 to $.50 per share: 827,500 expire in 2007,
      7,000,000 expire in 2010 and 125,000 expire in 2011. As of December 31, 2007,
      the weighted average expected life of all such compensatory options and warrants
      was 4.4 years.





For
      the
      twelve month ended December 31,2007, the Company recorded expenses for options
      and warrants to purchase common stock issued to consultants and lenders totaling
      $167,763. In 2007 the Company ceased operations, therefore it expensed the
      remaining balance on the warrants issued for consulting services.





F-13




**eTotalSource,
      Inc.**




**Notes
      to Condensed Financial Statements as of December 31,
      2007**





**NOTE
      8. 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 notes
      and
      judgments payable approximates fair value because of the market rate of interest
      on the debt.





**NOTE
      9. FINANCIAL INSTRUMENTS AND CONCENTRATIONS**




*Financial
      Instruments*




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





The
      Company maintains its cash deposits in one bank. Its bank accounts are
      guaranteed by the Federal Deposit Insurance Corporation (“FDIC”) up to $100,000.
      The amount on deposit in the financial institution did not exceed the $100,000
      FDIC insured limit at December 31, 2007. Management believes that the financial
      institution is financially sound.





**NOTE
      10. COMMITMENTS AND CONTINGENCIES**




ETLS
      and/or its predecessor are defendants in various legal actions for breach of
      contract. Judgments have been obtained against the company. The Company has
      recorded a liability for the full amounts of the judgments.





**NOTE
      11. EVENTS SUBSEQUENT TO DECEMBER 31, 2007**




On
      March
      27, 2008, Gary Miller received a default judgment against ETotalSource in the
      amount of $266,940.78. The breakdown of the judgment is as follows: principal
      was $175,000, costs were $835 and interest was $91,105.78.





F-14





**Item
                8.**
            **Changes
                In And Disagreements With Accountants On Accounting And Financial
                Disclosure.**




On
      November 30, 2007, Reeves, Evans, McBride & Zhang LLP (“REMZ”) resigned as
      independent registered public accounting firm of eTotalSource, Inc. (the
“Company”).




REMZ’s
      report on the Company’s financial statements for the fiscal year ended December
      31, 2006 contained an explanatory paragraph indicating that there was
      substantial doubt as to the Company’s ability to continue as a going
      concern.  Other than such statement, no report of REMZ on the
      financial statements of the Company for the past fiscal year contained an
      adverse opinion or disclaimer of opinion, or was qualified or modified as to
      uncertainty, audit scope or accounting principles. REMZ did not issue a report
      on the Company’s financial statements for the fiscal year ended December 31,
      2005.




In
      connection with the audits of the Company’s financial statements for the year
      ended December 31, 2006 and the subsequent interim period through the date
      of
      their resignation on November 26, 2007, there were no disagreements with REMZ
      on
      any matters of accounting principles or practices, financial statement
      disclosure, or auditing scope or procedures which, if not resolved to the
      satisfaction of REMZ would have caused REMZ to make reference to the matter
      in
      their report.  During the most recent fiscal year and the subsequent
      interim period through November 30, 2007, there were no reportable events,
      as defined in Item 304(a)(1)(v) of Regulation S-K.




On
      February 18, 2008, the Board of Directors approved the Company's engagement
      of
      Demetrius & Company, L. L.C. ("Demetrius") as independent auditors for the
      Company and its subsidiaries. The Company engaged Demetrius on February 18,
      2008.




**Item
                8a.**
            **Controls
                And Procedures.**




***a.***  ***Evaluation
      Of Disclosure Controls And Procedures***




ETLS’
      Principal Executive Officer and Principal Accounting Officer, after evaluating
      the effectiveness of eTotalSource’s disclosure controls and procedures (as
      defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act
      of
      1934, as amended (the “ Exchange
      Act ”))
      as of
      the end of the period covered by this Report, have concluded that as of such
      date, ETLS disclosure controls and procedures were adequate and effective to
      ensure that material information relating to ETLS that is required to be
      disclosed by ETLS in reports that it files or submits under the Exchange Act,
      is
      recorded, processed, summarized and reported within the time periods specified
      in SEC rules and accumulated and communicated to ETLS’ management, including its
      Principal Executive Officer and Principal Accounting and Financial Officer,
      to
      allow timely decisions regarding required disclosure **.**




***b.***  ***Changes
      In Internal Controls Over Financial Reporting***




In
      connection with the evaluation of ETLS’ internal controls during the Company’s
      last fiscal quarter, ETLS’ Principal Executive Officer and Principal Accounting
      Officer have determined that there are no changes to ETLS’ internal controls
      over financial reporting that have materially affected, or are reasonably likely
      to materially effect, the Company’s internal controls over financial reporting.




**Management’s
      Report on Internal Control Over Financial Reporting**




The
      management of eTotalSource, Inc. (the “Company”) is responsible for (1) the
      preparation of the accompanying financial statements; (2) establishing and
      maintaining internal controls over financial reporting; and (3) the assessment
      of the effectiveness of internal control over financial reporting. The
      Securities and Exchange Commission defines effective internal control over
      financial reporting as a process designed under the supervision of the company’s
      principal executive officer and principal financial officer, and implemented
      in
      conjunction with management and other personnel, to provide reasonable assurance
      regarding the reliability of financial reporting and the preparation of
      financial statements in accordance with generally accepted accounting
      principles.




All
      internal control systems, no matter how well designed, have inherent limitations
      and provide only reasonable assurance that the objectives of the control system
      are met. Therefore, no evaluation of controls can provide absolute assurance
      that all control issues and misstatements due to error or fraud, if any, within
      the company have been detected. Additionally, any system of controls is subject
      to the risk that controls may become inadequate due to changes in conditions
      or
      that compliance with policies or procedures may deteriorate. Also, projections
      of any evaluation of effectiveness to future periods are subject to the risk
      that controls may become inadequate because of changes in conditions or that
      compliance with the policies or procedures may deteriorate.




17




As
      of
      December 31, 2007, management of the company conducted an assessment of the
      effectiveness of the company’s internal control over financial reporting. Based
      on this assessment, management has concluded that the company’s internal control
      over financial reporting was effective as of December 31, 2007.




This
      annual report does not include an attestation report of the Company’s registered
      accounting firm regarding internal control over financial reporting.
      Management’s report was not subject to attestation by the Company’s registered
      public accounting firm pursuant to temporary rules of the Securities and
      Exchange Commission




**Item
      8b. Other Information.** ****




None




18




**PART
      III**




**Item
                9.**
            **Directors,
                Executive Officers, Promoters And Control
                Persons.**




The
      following persons were members of the Company’s Board of Directors (the
“ Board ”)
      and/or
      executive officers, in the capacities indicated, during the year ended December
      31, 2007:




**NAME**
            
            **AGE**
            
            **POSITION
                HELD**
            
            **TENURE**Terry
                Eilers(1)
            
            58
            
            President,
                CEO, Director
            
            2000
                - March 27, 2007Michael
                Sullinger(2)
            
            60
            
            Secretary,
                COO, Director
            
            2002
                - March 27, 2007A.
                Richard Barber(3)
            
            65
            
            Director
            
            2003
                - March 27, 2007





(1)
      On
      March 27, 2007, Terry Eilers resigned as President, Chief Executive Officer
      and
      Director. There was no disagreement between the Company and Mr. Eilers and
      Mr.
      Eilers did not serve on any committees of the Board.





(2)
      On
      March 27, 2007, Michael Sullinger resigned as Secretary, Chief Operating Officer
      and Director. There was no disagreement between the Company and Mr. Sullinger
      and Mr. Sullinger did not serve on any committees of the Board.





(3)
      On
      March 27, 2007, A. Richard Barber resigned as Director. There was no
      disagreement between the Company and Mr. Barber and Mr. Barber did not serve
      on
      any committees of the Board.




***New
      Director and Executive Officer***





**NAME**
            
            **AGE**
            
            **POSITION
                HELD**David
                Marks
            
            40
            
            DirectorFrank
                Orlando
            
            34
            
            Chief
                Restructuring Officer, CFO &
Secretary





Also
      on
      March 27, 2007, the Board appointed David Marks as a member of the Company’s
      Board of Directors and appointed Frank Orlando as Chief Restructuring Officer,
      Chief Financial Officer and Secretary of the Company.





Mr.
      Marks
      will serve as a Director until the next annual meeting of the Company’s
      stockholders, or until his successor is appointed. Officers will hold their
      positions at the pleasure of the Board, absent any employment agreement, of
      which none currently exists or is contemplated.





There
      is
      no arrangement or understanding between the directors and officers of ETLS
      and
      any other person pursuant to which any director or officer was or is to be
      selected as a director or officer.





The
      new
      director and executive officer of ETLS will devote such time to the Company’s
      affairs on an as needed basis. As a result, the actual amount of time which
      they
      will devote to ETLS’ affairs is unknown and is likely to vary substantially from
      month-to-month.





***Business
      Histories of New Director and Executive Officer***




**David
      Marks**




Mr.
      Marks
      has been the Chairman of Titan Global Holdings, Inc. (“Titan”), a diversified
      holding company, since May 2005 and previously served as the Chairman from
      September 2002 until May 2003. From May 2003 until May 2005, Mr. Marks served
      as
      one of the Directors of Titan. Mr. Marks has been a member of the Board of
      Directors of Tech Laboratories, Inc. since February 22, 2007. In addition,
      from
      November 2004 until November 2006, Mr. Marks served as the Chairman of the
      Board
      of Directors of Thomas Equipment, Inc., a manufacturer and distributor of skid
      steer loaders and pneumatic and hydraulic components and systems. Mr. Marks
      has
      served as Trustee of Irrevocable Children's Trust and Irrevocable Children's
      Trust No. 2 since 1994. Irrevocable Children's Trust and Irrevocable Children's
      Trust No. 2 currently have an ownership or investment interest in commercial
      properties, private residences, natural resources, telecommunications, and
      technology companies, and other business and investment ventures. Mr. Marks
      has
      the responsibility in overseeing all investments by Irrevocable Children's
      Trust
      and Irrevocable Children's Trust No. 2 with responsibilities beginning at
      acquisition and continuing through ownership. Mr. Marks generally acts in the
      capacity of officer or director for all of the operating companies that are
      vehicles for investments by the Trusts and is involved in strategic planning,
      and major decision-making. Mr. Marks is also a managing member of Farwell Equity
      Partners. Mr. Marks holds a BS in Economics from the University of Wisconsin.




19




**Frank
      J. Orlando**




Mr.
      Orlando has served as Chief Restructuring Officer, Chief Financial Officer,
      Secretary and a Director of Headliners Entertainment Group, Inc since January
      2007. Since 2004, Mr. Orlando has served as the Executive Vice President and
      Director of Marine Growth Ventures, Inc. From September 1996 until April 2002,
      Mr. Orlando was vice president and director of corporate development for Phoenix
      Internet Technologies, Inc., a start up Internet service provider (ISP). In
      April 2002, Mr. Orlando was integral in procuring a buyer for Phoenix Internet
      Technologies and was responsible for seeing the transaction through to its
      closing, and remained with new owners in a similar capacity until September
      2003.  From September 2003 through September 2004, Mr. Orlando acted as a
      consultant to Phoenix Investors, LLC. Mr. Orlando’s areas of expertise include
      corporate development, operations, and management, management of strategic
      acquisitions, and asset liquidation.  Mr. Orlando received Bachelors
      Degrees in Marketing and Production & Operations Management from the
      University of Wisconsin - Oshkosh in 1995.





***Family
      Relationships.***




To
      our
      knowledge, there are no family relationships between or among the directors
      and
      executive officers.




***Legal
      Proceedings.*** ****




On
      December 6, 2006, a creditor, Gary Miller, filed an action against ETLS and
      Terry Eilers, former President, CEO and Director, for breach of contract in
      the
      Superior Court of California, Sutter County claiming damages of $175,000. ****




**Committees;
      Audit Committee Financial Expert.**




Currently,
      ETLS does not have an executive, audit or any standing committee of the Board.
      The Company does not have an audit committee, or an audit committee financial
      expert.




***Code
      o*** ***f
      Ethics***




On
      November 16, 2004, ETLS’ Board adopted a written Code of Ethics designed to
      deter wrongdoing and promote honest and ethical conduct, full, fair and accurate
      disclosure, compliance with laws, prompt internal reporting and accountability
      to adherence to the Code of Ethics. A copy of the codes is filed as an exhibit
      to this annual report.




***Section
      16(A) Beneficial Ownership Reporting Compliance.***




Section
      16(a) of the Exchange Act and the rules promulgated thereunder require ETLS’
officers and directors, and persons who beneficially own more than 10% of a
      registered class of ETLS’ equity securities, to file reports of ownership and
      changes in ownership with the Commission and to furnish the Company with copies
      thereof. Based on its reviews of the copies of the Section 16(a) forms received
      by it, or written representations from certain reporting persons, ETLS believes
      that, during the last fiscal year, all Section 16(a) filing requirements
      applicable to its officers, directors and greater than 10% beneficial owners
      were complied with and timely filed.




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




The
      Company accrued or paid compensation to the executive officers as a group for
      services rendered to the Company in all capacities during the 2006 fiscal year
      as shown in the following table. No cash bonuses were or are to be paid to
      such
      persons for services rendered in the fiscal year ended December 31, 2007.




20




**SUMMARY
      COMPENSATION TABLE**




**Name
                and Principal Position**
            
            **Year**
            
            **Salary**
              **($)**
            
            **Bonus**
              **($)**
            
            **Stock**
              **Awards**
              **($)**
            
            **Option
                Awards**
              **($)**
            
            **Non-Equity**
              **Incentive
                Plan**
              **Compensation**
              **($)**
            
            **Change
                in**
              **Pension**
              **Value
                and**
              **Nonqualified**
              **Deferred**
              **Compensation**
              **Earnings**
              **($)**
            
            **All
                Other**
              **Compensation**
              **($)**
            
            **Total**
              **($)**Terry
                Eilers,
            
            
            2006
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0President
              and CEO(1)
            
            
            2007
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0Michael
                Sullinger,
            
            
            2006
            
            
            11,500
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            11,500Sec.,COO,
                  Legal Counsel(2)
            
            
            2007
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0Virgil
                Baker,
            
            
            2006
            
            
            16,500
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            16,500CFO(3)
            
            
            2007
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0David
                M. Marks,
            
            
            2006
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0Director
            
            
            2007
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0Frank
                Orlando,
            
            
            2006
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0Chief
                Restructuring Officer,
              CFO
                & Secretary
            
            
            2007
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0





(1)
      On
      March 27, 2007, Terry Eilers resigned as President, Chief Executive Officer
      and
      Director.




(2)
      On
      March 27, 2007, Michael Sullinger resigned as Secretary, Chief Operating Officer
      and Director.





(3)
      On
      May 15, 2006, Virgil Baker resigned as Chief Financial Officer.





There
      are
      no compensatory plans or arrangements, with respect to any executive officer
      of
      the Company, which result or will result from the resignation, retirement or
      any
      other termination of such individual's employment with the Company or from
      a
      change in control of the Company or a change in the individual's
      responsibilities following a change in control.




***Director
      Compensation.***




Directors
      received no cash compensation for their service to the Company as directors
      for
      the fiscal year ended December 31, 2007, but can be reimbursed for expenses
      actually incurred in connection with attending meetings of the
      Board.




**Item
      11. Security Ownership of Certain Beneficial Owners a** **nd
      Management.**




The
      Company had 299,998,972 shares of common stock issued and outstanding as of
      December 31, 2007. There are no shares of preferred stock issued and outstanding
      as of December 31, 2007. The table below sets forth certain information with
      respect to the common stock beneficially owned by (i) each Director, nominee
      and
      executive officer of the Company; (i) each person who owns beneficially more
      than 5% of the common stock; and (iii) all Directors, nominees and executive
      officers as a group.




**Title
                of Class**
            
            **Name
                and Address of Beneficial Owner**
            
            **Amount
                of Beneficial Ownership**
            
            **Percentage
                of Class (1)**Common
                Stock
            
            Frank
                J. Orlando
            
            0
            
            0Common
                Stock
            
            David
                Marks
            
            0
            
            0




21




Mr.
      Marks
      and Mr. Orlando were appointed to their ETLS positions on March 27, 2007, and
      neither of them directly or indirectly owned any of the Company’s securities as
      of December 31, 2007 or as of the date of this report.




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




Director
      Independence




The
      Board
      of Directors has analyzed the independence of each director and has determined
      that the following directors are independent as defined under the National
      Association of Securities Dealers Automated Quotations System (“NASDAQ”) rules
      and has no direct or indirect material relationships with the Company:




David
      M.
      Marks




In
      particular, the Board of Directors has determined that each of the above-listed
      directors has no relationships that would cause him not to be independent under
      the criteria of the NASDAQ rules on corporate governance.





22


**Item
      13. Exhibits And Reports On Form 8-K**




The
      following documents are filed as part of this report:




***(a)***
            ***Exhibits.***




**DESIGNATION
                OF EXHIBIT AS SET FORTH IN ITEM 601 OF REGULATION
                S-B**
            
            **DESCRIPTION**
            
            **LOCATION**3.1
            
            Articles
                of Incorporation
            
            Incorporated
                by reference to Registration Statement on Form SB-2 filed on April
                21,
                2005(File No. 333-124220)3.2
            
            Bylaws
            
            Incorporated
                by reference to Registration Statement on Form SB-2 filed on April
                21,
                2005(File No. 333-124220)3.3
            
            Certificate
                of Amendment of Articles of Incorporation
            
            Incorporated
                by reference to the Current Report on Form 8-K dated July 14, 2003
                (File
                No. 000-49797).3.4
            
            Articles
                of Amendment to Articles of Incorporation
            
            Incorporated
                by reference to the Current Report on Form 8-K dated December 1,
                2003
                (File No. 000-49797).3.5
            
            Articles
                of Amendment to the Articles of Incorporation
            
            Incorporated
                by reference to Registration Statement on Form SB-2 filed on April
                21,
                2005(File No. 333-124220)10.1
            
            Securities
                Purchase Agreement, dated November 2, 2005 by and between eTotalSource,
                Inc. and Cornell Capital Partners, L.P.
            
            Incorporated
                by reference to the Current Report on Form 8-K dated November 8,
                2005
                (File No. 000-49797).10.2
            
            Investor
                Registration Rights Agreement, dated October 6, 2004, by and between
                eTotalSource, Inc. and Cornell Capital Partners, L.P.
            
            Incorporated
                by reference to the Current Report on Form 8-K dated November 8,
                2005
                (File No. 000-49797).10.3
            
            Secured
                Convertible Debenture
            
            Incorporated
                by reference to the Current Report on Form 8-K dated November 8,
                2005
                (File No. 000-49797).10.4
            
            Amended
                and Restated Security Agreement, dated November 2, 2005, by and between
                eTotalSource, Inc. and Cornell Capital Partners, L.P.
            
            Incorporated
                by reference to the Current Report on Form 8-K dated November 8,
                2005
                (File No. 000-49797).10.5
            
            Warrant
                issued to Cornell Capital Partners, L.P.
            
            Incorporated
                by reference to the Current Report on Form 8-K dated November 8,
                2005
                (File No. 000-49797).10.6
            
            Escrow
                Agreement (SEDA), dated November 2, 2005, by and among eTotalSource,
                Inc.,
                Cornell Capital Partners, L.P., and David Gonzalez, Esq.
            
            Incorporated
                by reference to the Current Report on Form 8-K dated November 8,
                2005
                (File No. 000-49797).10.7
            
            Irrevocable
                Transfer Agent Instructions, by and among eTotalSource, Inc., Cornell
                Capital Partners, L.P., and Executive Registrar & Transfer,
                Inc.
            
            Incorporated
                by reference to the Current Report on Form 8-K dated November 8,
                2005
                (File No. 000-49797).




23




10.8
            
            Termination
                Agreement, dated November 2, 2005, by and among eTotalSource, Inc.,
                and
                Cornell Capital Partners, L.P.
            
            Incorporated
                by reference to the Current Report on Form 8-K dated November 8,
                2005
                (File No. 000-49797).





10.9
            
            Agreement
                dated December 21, 2006 by and between eTotalSource, Inc. and Cornell
                Capital Partners, L.P.
            
            Incorporated
                by reference to the Quarterly Report of Form 10-QSB dated December
                21,
                200610.10
            
            Secured
                Convertible Debenture dated December 21, 2006 in the Principal Amount
                of
                $7,642 issued by eTotalSource, Inc. to Cornell Capital Partners,
                L.P.
            
            Incorporated
                by reference to the Quarterly Report of Form 10-QSB dated December
                21,
                200610.11
            
            Agreement
                dated April 13, 2007 by and between eTotalSource, Inc. and Cornell
                Capital
                Partners, L.P.
            
            Incorporated
                by reference to the Annual Report of Form 10-KSB dated April 17,
                200710.12
            
            Secured
                Convertible Debenture dated April 13, 2007 in the Principal Amount
                of
                $72,000 issued by eTotalSource, Inc. to Cornell Capital Partners,
                L.P.
            
            Incorporated
                by reference to the Annual Report of Form 10-KSB dated April 17,
                200710.13
            
            Promissory
                Note dated August 13, 2007 in the principal amount of $7,640 with
                YA
                Global Investments.
            
            Incorporated
                by reference to the Quarterly Report of Form 10-QSB dated November
                19,
                200710.14
            
            Agreement
                dated December 4, 2007 by and between eTotalSource, Inc. and Cornell
                Capital Partners, L.P.
            
            Filed
                Herewith10.15
            
            Secured
                Convertible Debenture dated December 4, 2007 in the Principal Amount
                of
                $17,620 issued by eTotalSource, Inc. to Cornell Capital Partners,
                L.P.
            
            Filed
                Herewith14.1
            
            Code
                of Ethics
            
            Filed
                Herewith31.1
            
            Certification
                of Principal Executive Officer pursuant to Section 302 of Sarbanes-Oxley
                Act of 2002
            
            Filed
                Herewith31.2
            
            Certification
                of Principal Financial Officer pursuant to Section 302 of Sarbanes-Oxley
                Act of 2002
            
            Filed
                Herewith32.1
            
            Certification
                of Principal Executive Officer pursuant to 18 U.S.C. Section 1350,
                as
                adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002
            
            Filed
                Herewith32.2
            
            Certification
                of Principal Financial Officer pursuant to 18 U.S.C. Section 1350,
                as
                adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002
            
            Filed
                Herewith





***(b)***  ***Reports
      on Form 8-K filed during the quarter ended December 31,
      2007*** :
      None.




24




**Item
      14. Principal Accountant Fees And Services**




Effective
      November 30, 2007, Reeves, Evans, McBride & Zhang LLP (“REMZ”) resigned as
      independent registered public accounting firm of eTotalSource, Inc. (the
“Company”).




REMZ
      billed the Company $53,573 for the following profession services: audit the
      year
      end financial statements included in the year end reports of Form 10-KSb for
      the
      period ended December 31, 2006, review of the interim financial statements
      included in the quarterly reports of Form 10-QSB for the periods ended March
      31,
      207, June 30, 2007, and September 30, 2007.





On
      February 18, 2008, the Board of Directors approved the Company's engagement
      of
      Demetrius & Company, L. L.C. ("Demetrius") as independent auditors for the
      Company and its subsidiaries. The Company engaged Demetrius on February 18,
      2008.





The
      aggregate fees billed by Demetrius & Company, LLC, for professional services
      rendered for the audit of the Company’s annual financial statements for the
      fiscal year ended December 31, 2007, was approximately $12,000.





The
      Board
      acts as the audit committee and had no pre-approval policies and procedures
      in
      effect for the auditors' engagement for the audit year 2006 and
      2007.





All
      audit
      work was performed by the auditors' full-time employees.




25




**SIGNATURES**




In
      accordance with the requirements of the Exchange Act, as amended, the Registrant
      has caused this report to be signed on its behalf by the undersigned, thereunto
      duly authorized.




**ETOTALSOURCE,
                INC.**April
                15, 2008
            By:
            */s/*Frank
              J. OrlandoFrank
                J. Orlando, Principal Executive Officer
              (Chief
                Restructuring Officer)




April
                15, 2008
            By:
            */s/*Frank
              J. OrlandoFrank
                J. Orlando, Principal Accounting and
              Financial
                Officer (Chief Financial Officer)




In
      accordance with the Exchange Act, this Report has been signed below by the
      following persons or on behalf of the Registrant and in the capacities on the
      dates indicated.




**April
                15, 200****8**
            **By:**
            **/s/David Marks****David
                M. Marks, Director**




26