SECURITIES EXCHANGE COMMISSION
                             Washington, D.C. 20549




                                   FORM 10-KSB


                            Annual Report Pursuant to
                       the Securities Exchange Act of 1934



                   For the fiscal year ended December 31, 2003

                        Commission file number: 33-49797

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

   Colorado                                        84-1066959
------------------------                          --------------------
(State of incorporation)                          (I.R.S. Employer
                                                  Identification No.)

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


Registrant's telephone number: (530) 751-9615

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

                            Title of each class: None

                 Name of each exchange on which registered: N/A

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

                            Title of each class: None

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to the filing
requirements for at least the past 90 days.

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

<PAGE>

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

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

Transitional Small Business Disclosure Format:

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

Aggregate market value of the authorized voting stock held by non-affiliates of
the registrant as of December 31, 2003: $0.14 based on the last sale price at
year end of $0.14 as reported on the OTC Bulletin Board.

Number of authorized outstanding  shares of the  registrant's no par value
common stock, as of December 31, 2003: 29,549,207.



<PAGE>





                                TABLE OF CONTENTS

PART I

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


PART II

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

PART III

     Item 9.   Directors, Executive Officers, Promoters and Control Persons;
               Compliance with Section 16(a) of the Exchange Act
     Item 10.  Executive Compensation
     Item 11.  Security Ownership of Certain Beneficial Owners and Management
     Item 12.  Certain Relationships and Related Transactions

PART IV

     Item 13.  Exhibits and Reports on Form 8-K
     Item 14.  Principal Accountant Fees and Services

SIGNATURES



<PAGE>



                                     PART I


ITEM 1.            DESCRIPTION OF BUSINESS.
------------------------------------------

The Company was incorporated in Colorado on September 16, 1987 as Premium
Enterprises, Inc. On December 20, 2002 Premium Enterprises, Inc. ("Premium")
entered into a Plan and Agreement of Reorganization with eTotalSource, Inc. and
its shareholders whereby Premium acquired 91% of the issued and outstanding
common stock of eTotalSource, Inc. 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. ("eTS" hereafter).


HISTORY

For a period of time in 1988-94 the Company  operated three fast lube locations,
at various  times in Arizona and  Colorado as "Grease  Monkey"  franchises.  The
locations were  unprofitable,  two were sold,  and the last franchise  closed in
1994.

Premium Enterprises then attempted to enter the automobile and truck tire
recycling business in 1994. It formed a limited partnership of which it owned
62.5% and commenced limited tire recycling operations. The equipment proved to
be inadequate and the Company ran out of capital to continue operations and
ceased all operations in 1996. The Company has been dormant since 1996. The
Company wrote off all of its investment in equipment and licenses for tire
recycling in 1996.

BUSINESS

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

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

General

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

<PAGE>

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

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

Presenta Pro(TM) features include:

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

eTS BUSINESS MODEL

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

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

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

eTS shares in the revenue derived from the program sales. The Company carefully
chooses its content, identifying unique subjects and "niches" offering more
probable sales. These topics/markets are generally underserved and in need of
the program packages that are produced by eTS. Examples of finished products
currently being marketed include:

        o   Anger Management Facilitator Training and Certification
        o   Domestic Violence Facilitator Training and Certification
        o   School Maintenance, Cleaning Training and Certification
        o   Emergency Disaster Preparedness - Terrorist Awareness
        o   Mandated School Internet Acceptable Use Policy (AUP)

<PAGE>

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

INTELLECTUAL PROPERTY DIFFERENTIATION:

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

TECHNOLOGY:

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


                   RISK FACTORS RELATING TO eTS AND BUSINESS

Any person or entity contemplating an investment in the securities offered
hereby should be aware of the high risks involved and the hazards inherent
therein. Specifically, the investor should consider, among others, the following
risks:

Working Capital. The capital needs of eTS consist primarily of production staff
costs and marketing of its services and could total over $1,000,000 in the next
twelve months. Such funds are not currently committed. eTS has insufficient
cash for operations as of the date of this private placement memorandum.

Revenues.  eTS currently has revenues but to date expenses of operations have
exceeded revenues and the Company has not had profitable operations.  Investors
are subject to the risk that the Company may never be profitable.

<PAGE>

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

Need for Additional  Financing.  eTS has very limited funds,  and such funds may
not be adequate to carryout the business plan.  The ultimate  success of eTS may
depend upon its ability to raise  additional  capital.  eTS has investigated the
availability,  source,  or terms that might govern the acquisition of additional
capital  and is  seeking  capital  but has no  defined  terms as of date of this
report financing.  If additional  capital is needed,  there is no assurance that
funds  will be  available  from any source  or, if  available,  that they can be
obtained on terms acceptable to ETLS. If not available,  ETLS's  operations will
be limited to those that can be financed with its modest capital.

Regulation of Penny Stocks. ETLS's securities trade on the OTC Bulletin Board
under the symbol "ETLS" and are subject to a Securities and Exchange Commission
rule that imposes special sales practice requirements upon broker-dealers who
sell such securities to persons other than established customers or accredited
investors. For purposes of the rule, the phrase "accredited investors" means, in
general terms, institutions with assets in excess of $5,000,000, or individuals
having a net worth in excess of $1,000,000 or having an annual income that
exceeds $200,000 (or that, when combined with a spouse's income, exceeds
$300,000). For transactions covered by the rule, the broker-dealer must make a
special suitability determination for the purchaser and receive the purchaser's
written agreement to the transaction prior to the sale. Consequently, the rule
may affect the ability of broker-dealers to sell ETLS's securities and also may
affect the ability of purchasers in this offering to sell their securities in
any market that might develop therefore.

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

Shareholders should be aware that, according to Securities and Exchange
Commission, the market for penny stocks has suffered in recent years from
patterns of fraud and abuse. Such patterns include (i) control of the market for
the security by one or a few broker-dealers that are often related to the
promoter or issuer; (ii) manipulation of prices through prearranged matching of
purchases and sales and false and misleading press releases; (iii) "boiler room"
practices involving high-pressure sales tactics and unrealistic price
projections by inexperienced sales persons; (iv) excessive and undisclosed
bid-ask differentials and markups by selling broker-dealers; and (v) the
wholesale dumping of the same securities by promoters and broker-dealers after
prices have been manipulated to a desired consequent investor losses. ETLS's
management is aware of the abuses that have occurred historically in the penny
stock market. Although eTS 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's securities.

Limited  Operating  History.  eTS  has  had  revenues  during  the  period  from
inception,  but eTS is not profitable and the business  effort is in development
stage.  eTS must be regarded  as a new or  development  venture  with all of the
unforeseen costs,  expenses,  problems,  and difficulties to which such ventures
are subject. The venture must be considered highly speculative.

<PAGE>

No Assurance of Success or Profitability. There is no assurance that eTS will
ever operate profitably. There is no assurance that it will generate revenues or
profits, or that the market price of ETLS's Common Stock will be increased
thereby.

Lack of Diversification. Because of the very limited financial resources that
eTS has, it is unlikely that eTS will be able to diversify its operations.
ETLS's probable inability to diversify its activities into more that one area
will subject eTS to economic fluctuations within a particular business or
industry and therefore increase the risks associated with ETLS's operations.

Dependence upon Management. Limited Participation of Management. eTS currently
has five individuals who are serving as its officers and directors. Terry Eilers
and Virgil Baker devote full time to the Company. Other directors will devote
part time to the operations of the Company. eTS will be heavily dependent upon
their skills, talents, and abilities, as well as several consultants to ETLS, to
implement its business plan, and may, from time to time, find that the inability
of the officers, directors and consultants to devote their full time attention
to the business of eTS results in a delay in progress toward implementing its
business plan. Once eTS receives the proceeds from this offering, the officers
and several consultants will be employed on a full-time basis. See "Management."
Because investors will not be able to manage ETLS, they should critically assess
the information concerning ETLS's officers and directors.

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

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

Dependence upon Outside Advisors. To supplement the business experience of its
officers and directors, eTS may be required to employ accountants, technical
experts, appraisers, attorneys, or other consultants or advisors. ETLS's Board
without any input from stockholders will make the selection of any such
advisors. Furthermore, it is anticipated that such persons may be engaged on an
"as needed" basis without a continuing fiduciary or other obligation to ETLS. In
the event eTS considers it necessary to hire outside advisors, it may elect to

<PAGE>

hire persons who are affiliates, if they are able to provide the required
services.

Competition. eTS will be in competition with other services and products
developed and marketed by much larger corporations, which are better capitalized
and have far greater marketing capabilities than ETLS. eTS expects to be at a
disadvantage when competing with many firms that have substantially greater
financial and management resources and capabilities than ETLS.

No Foreseeable Dividends.  eTS has not paid dividends on its Common Stock and
does not ever anticipate paying such dividends in the foreseeable future.

Loss of Control by Present Management and Stockholders. eTS may issue further
shares as consideration for the cash or assets or services out of ETLS's
authorized but unissued Common Stock that would, upon issuance, represent a
majority of the voting power and equity of ETLS. The result of such an issuance
would be those new stockholders and management would control ETLS, and persons
unknown could replace ETLS's management at this time. Such an occurrence would
result in a greatly reduced percentage of ownership of eTS by its current
shareholders.

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

Rule 144 Sales. All of the outstanding shares of Common Stock held by present
officers, directors, and affiliate stockholders are "restricted securities"
within the meaning of Rule 144 under the Securities Act of 1933, as amended. As
restricted shares, these shares may be resold only pursuant to an effective
registration statement or under the requirements of Rule 144 or other applicable
exemptions from registration under the Act and as required under applicable
state securities laws. Rule 144 provides in essence that a person who has held
restricted securities for one year may, under certain conditions, sell every
three months, in brokerage transactions, a number of shares that does not exceed
the greater of 1.0% of a Company's outstanding common stock or the average
weekly trading volume during the four calendar weeks prior to the sale. There is
no limit on the amount of restricted securities that may be sold by a
nonaffiliate after the owner has held the restricted securities for a period of
two years. A sale under Rule 144 or under any other exemption from the Act, if
available, or pursuant to subsequent registration of shares of Common Stock of
present stockholders, may have a depressive effect upon the price of the Common
Stock in any market that may develop. There are over 10,000,000 shares owned by
officers/directors and affiliates.

<PAGE>


ITEM 2.  DESCRIPTION OF PROPERTY
------------------------------

On June 9, 2003, the Company sold its building and land to a non-affiliate  note
holder for $1,050,000.  Effective with the sale of its building and land on June
9,  2003,  the  Company  began  leasing  its  corporate  offices  in Yuba  City,
California on a month to month basis with no expiration  date.  Monthly payments
under the lease are  approximately  $3,010.  Such premises are adequate to serve
its current staffing level.  The offices consist of  approximately  1,900 square
feet.


ITEM 3.  LEGAL PROCEEDINGS
-----------------------------------

The Company is a party to current pending legal proceedings, arising in the
ordinary course of business, at December 31, 2003. The Company has defended an
action and has reached a settlement for $50,000. The Company intends to pay the
$50,000 and issue the 30,000 shares by the due date; however, due to the nature
of the matter, $83,000 has been accrued as a judgment payable as of December 31,
2002.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------------------------

On November 21, 2003, at a Special  Meeting of  Shareholders,  the  shareholders
approved an amendment to the Company's Articles of Incorporation to increase the
number of Common  Shares  authorized  from twenty  million  (20,000,000)  to one
hundred  million (100,000,000).  The measure  was passed  with 10,111,354 shares
voting in favor and no shares voting against,  which was sufficient to carry out
the proposal.

                                     PART II


ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
------------------------------------------------------------------------------

     The Company's common stock trades on the OTC Bulletin Board under the
symbol "ETLS.OB." The range of high, low and close trade quotations for the
Company's common stock by fiscal quarter within the last two fiscal years, as
reported by the National Quotation Bureau Incorporated, was as follows:


Year Ended December 31, 2002              HIGH         LOW
-----------------------------

First Quarter ended March 31, 2002        0             0
Second Quarter ended June 30, 2002        0             0
Third Quarter ended September 30, 2002    0             0
Fourth Quarter ended December 31, 2002    0             0


Year Ended December 31, 2003

First Quarter ended March 31, 2003        *             *
Second Quarter ended June 30, 2003        $.37          $.06
Third Quarter ended September 30, 2003    $.05          $.31
Fourth Quarter ended December 31, 2003    $.07          $.17

<PAGE>

* Due to no reliable information available from the Pink Sheets, the Company is
unable to specify quotes.

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


NUMBER OF HOLDERS

         As of December 31, 2003, there were 310 record holders of the Company's
common Stock.

DIVIDENDS

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



ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
------------------------------------------------------------------

FINANCIAL CONDITION AND CHANGES IN FINANCIAL CONDITION

Changes in Financial Condition

     On December 30, 2002, PMN acquired 91% of the preferred and common stock of
eTotalSource, Inc. ("eTS" - incorporated in California on February 7, 2000),
pursuant to an Agreement and Plan of Reorganization effective December 30, 2002,
by issuing 15,540,011 shares of PMN common stock to eTS shareholders.

     Immediately after the transaction, the eTS shareholders owned approximately
88.5% of the Company's common stock. Coincident with the transaction, the
Company changed its fiscal year from June 30 to December 31.

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

     On June 9, 2003, the Company sold its office building for $1,050,000,
received net cash proceeds of $142,596 after retiring mortgage debt, and
recognized a $205,705 net capital gain.

     In November 2003, the shareholders approved an increase of authorized
shares from 20 million shares to 100 millions shares.


Results of Operations for the fiscal year ended December 31, 2003, compared to
fiscal year ended December 31, 2002
-----------------------------------------------------------------------

     The Company had revenues from operations of $281,919 and $213,823 in the
years ended December 31, 2003 and 2002 respectively. The Company incurred
expenses incident to operations in the amount of $1,860,146 in 2003 and
$1,167,468.

     The Company had a net loss on operations of $1,966,575 in 2003 compared to
a loss of $1,214,305 in 2002. The loss per share was approximately ($.10) in
2003 and ($.07) in 2002.

<PAGE>

         The Company recorded adjustments having the aggregate effect of
increasing the net loss for the fourth quarter of 2003 by approximately
$(693,000). The adjustments consisted primarily of issuances of common stock for
services or settlement of debt, accrual of services to be settled in stock, and
the recognition of stock option and warrant expenses for services and in lieu of
interest.

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

     The Company had $313,084 in cash at year end and no other capital
resources. The Company will be dependent on its shareholders for loans for
expenses, and has no capital availability except through private placement of
stock, none of which has been arranged for 2004 at this time.

<TABLE>
<CAPTION>

Contractual Obligations and Commercial Commitments
--------------------------------------------------

As of December 31, 2003, the following contractual obligations were outstanding:

                                                      Payments Due by Period

Contractual             Less than               2-3             4-5             After
Obligations             1 year                  years           years           5 years         Total
----------------------------------------------------------------------------------------------------------
<S>                     <C>                     <C>             <C>             <C>             <C>
Judgments                 $205,000                $.00            $.00            $.00            $205,000
----------------------------------------------------------------------------------------------------------
Short Term Debt           $962,000                $.00            $.00            $.00            $962,000
----------------------------------------------------------------------------------------------------------
Total contractual
cash obligations        $1,167,000                $.00            $.00            $.00          $1,167,000
==========================================================================================================
</TABLE>

Effective with the sale of its building and land on June 9, 2003, the Company
began leasing its corporate offices in Yuba City, California on a month to month
basis with no expiration date.  Monthly payments under the lease are approximate
-ly $3,010.

Critical Accounting Policies and Estimates
------------------------------------------

        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 not 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 cover-
ing 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 carryforwards and valuation of non-monetary transactions in
connection with issuances of common stock and common stock warrants and options.

Need for Additional Funding
--------------------------

     The  Company is unable to carry out any plan of business  without  funding.
The Company  cannot  predict to what extent its current  lack of  liquidity  and
capital resources will impair the continuation of business whether it will incur
further operating losses. There is no assurance that the Company can continue as
a going concern without substantial funding, for which there is no source.

     The Company does not have capital  sufficient to meet the Company's current
cash needs.  The Company will have to seek loans or equity  placements  to cover
such cash needs. Lack of its existing capital may be a sufficient  impediment to
prevent it from  accomplishing  the goal of successfully  executing its business
plan.  The Company will need to raise  additional  funds to conduct its business
activities in the next twelve months.

     No commitments to provide  additional funds have been made by management or
other stockholders.  Accordingly,  there can be no assurance that any additional
funds will be available to the Company to allow it to cover its expenses as they
may be incurred.

<PAGE>

     Irrespective of whether the Company's cash assets prove to be inadequate to
meet the  Company's  operational  needs,  the Company  might seek to  compensate
providers of services by issuances of stock in lieu of cash.

     The  Company  has no plans for any  research  and  development  in the next
twelve  months.  The Company has no plans at this time for purchases or sales of
fixed assets which would occur in the next twelve months.

     The Company has no expectation or  anticipation  of significant  changes in
number of  employees  in the next  twelve  months.  It may add full or part time
employees  of an  unknown  number  in the next  twelve  months  if its  business
expands.

     Going concern  qualification:  The Company has incurred  significant losses
from  operations  for the year ended  December  31,  2003,  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.  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 consolidated  financial statements do
not  include  any  adjustments  that  might  result  from  the  outcome  of this
uncertainty.

RECENT SALE OF SECURITIES

In furtherance  of these  financing  efforts the Company  entered into a private
placement agreement on December 19, 2003 for the sale of up to 12,000,000 shares
of common stock pursuant to Regulation S of the Act, commencing in January 2004.
The purchaser will have to and until April 30, 2004 (or until  12,00,000  shares
are sold) to deliver one or more purchase notices to the Company.  The agreement
provided for a variable  purchase  price based on a  percentage  of the five-day
average closing price on the date of a purchase with a floor price of $.08 cents
net to the Company.  The Company may terminate this agreement upon 3 days notice
to the purchaser.  The Company hopes the entire  12,000,000 shares be placed the
approximate  net  proceeds  to the  Company may total  $960,000.  The  purchaser
represented  that it intends to acquire the shares for its own  account  with no
then present  intention  of dividing  its  interest  with others or reselling or
otherwise disposing of all or any portion of the shares. The shares were offered
in a private transaction, not part of a distribution of shares.


NET OPERATING LOSS

     For federal income tax purposes, we have net operating loss carry forwards
of approximately $6 million as of December 31, 2003.  These carry forwards will
expire at various dates through the year and 2023. 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.

<PAGE>

ITEM 7.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------------------------

              Please refer to pages F-1 through F-17.


ITEM 8.  CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL
                  DISCLOSURE
-----------------------------------------------------------------------------

       In 2003, the Company engaged Gordon, Hughes and Banks, LLP, CPA's of
Denver, Colorado as its new principal independent accountants to audit the
Company's financial statements for 2003 fiscal years.  The prior accountant was
Michael Johnson & Co., LLC. whose last audit was for fiscal year June 30, 2002.
There has been no disagreement between accountants regarding the application of
accounting principals to any specific completed or contemplated transaction, or
as to policies as to accounting.

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

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


ITEM 8A. CONTROLS AND PROCEEDURES
-----------------------------------------------------------------------------

EVALUATION OF INTERNAL DISCLOSURE CONTROLS

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

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

<PAGE>

                                    PART III


ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
----------------------------------------------------------------------
COMPLIANCE WITH SECTION 16(a)
-----------------------------

         The following table lists the executive offices and directors of the
Company as of December 31, 2003:

NAME                             POSITION HELD                TENURE
------------------------------------------------------------------------------
Terry Eilers             President, CEO, Director       Since 2002

Virgil Baker             CFO, Director                  Since 2002

Michael Sullinger        Secretary, COO, Director       Since 2002

A. Richard Barber        Director                       Since 2002

J. Cody Morrow           Director                       Since 2002

        The directors named above will serve until the next annual meeting of
the Company's stockholders. Thereafter, directors will be elected for one-year
terms at the annual stockholders' meeting. Officers will hold their positions at
the pleasure of the board of directors, absent any employment agreement, of
which none currently exists or is contemplated. There is no arrangement or
understanding between the directors and officers of the Company and any other
person pursuant to which any director or officer was or is to be selected as a
director or officer.

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

TERRY EILERS - CEO, Chairman, and Director eTotalSource, Inc. since 2002. From
1994-Present he was founder, CEO, Director of eTotalSource, Inc., a California
corporation. Former VP, Regional Manager and Regional Training Director for
Lawyers Title Company, 1984-1987. He was involved in the creation, operation and
sale of Sydney Cambric Publishing 1983-1985, where he was in charge of
implementing marketing and management systems, developing and supervising
management training and conducting live seminars to nearly 1 million people
worldwide for many Fortune 500 companies such as, Bank of America, Coldwell
Banker, IBM, Xerox, and First American Financial. Over the past 30 years, his
management and computer sales programs have been utilized by major real estate
entities, banks, savings and loans, insurance companies, sales and research
organizations and publishing companies worldwide such as Norwest Mortgage,

<PAGE>

Century 21, Sun Trust, Stewart Title Company, and Lawyers Title. 1980-1994. He
was appointed President, CEO, and Director of Premium Enterprises, Inc. (now
eTotalSource, Inc.) on December 31, 2002.

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

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

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

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

<PAGE>

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


COMPLIANCE WITH SECTION 16(A) OF EXCHANGE ACT

         Section 16(a) of the Exchange Act requires the Company's officers and
directors, and certain persons who own more than 10% of a registered class of
the Company's equity securities (collectively, "Reporting Persons"), to file
reports of ownership and changes in ownership ("Section 16 Reports") with the
Securities and Exchange Commission (the "SEC"). Reporting Persons are required
by the SEC to furnish the Company with copies of all Section 16 Reports they
file.

         Based solely on its review of the copies of such Section 16 Reports
received by it, or written representations received from certain Reporting
Persons, the following persons were required to file forms pursuant to Section
16(a):

Name                             Form                      Filed
----------------------------------------------------------------
Terry Eilers                     Form 3                    August 25, 2003
                                 Form 4                    November 14, 2003
Virgil Baker                     Form 3                    August 25, 2003
Michael Sullinger                Form 3                    August 25, 2003
Morrow Revocable Living Trust    Form 3                    August 27, 2003
  (John Morrow Trustee)
Cody J. Morrow                   Form 3                    August 27, 2003
Wesley F. Whiting                Form 3                    August 25, 2003
A. Richard Barber                Form 3                    August 25, 2003


<PAGE>

ITEM 10. EXECUTIVE COMPENSATION
---------------------------------------------

EXCUTIVE OFFICER 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 2003
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,
2003.

<TABLE>
<CAPTION>
                                     SUMMARY COMPENSATION TABLE OF EXECUTIVES
<S>                            <C>       <C>         <C>          <C>           <C>              <C>           <C>            <C>
                                          Annual Compensation                          Awards
Name & Principal               Year    Salary      Bonus      Other         Restricted       Securities                    ALL
Position                               ($)         ($)        Annual        Stock            Underlying      LONG TERM     OTHER
                                                              Comp-         Award(s)         Options/SARS   COMPENSATION   COMPENSA-
                                                              ensation      ($)              (#)              / OPTION     TION
                                                              ($)
------------------------------------------------------------------------------------------------------------------------------------
Terry Eilers, President,       2000    $50,000     0          0             0                0                  0             0
CEO                            2001    $111,000    0          0             0                200,000            0             0
                               2002    $37,000     0          0             0                100,000            0             0
                               2003    $79,000     0          0             0                0                  0            200,000
------------------------------------------------------------------------------------------------------------------------------------
Michael Sullinger,             2000    0           0          0             0                0                  0             0
Secretary, COO, Legal Counsel  2001    0           0          0             0                0                  0
                               2002    0           0          0             0                200,000            0             0
                               2003    0           0          0             0                0                  0            200,000
------------------------------------------------------------------------------------------------------------------------------------
Virgil Baker, CFO              2000    $27,000     0          0             0                0                  0             0
                               2001    $72,000     0          0             0                200,000            0
                               2002    $18,000     0          0             0                100,000            0             0
                               2003    $76,900     0          0             0                0                  0             0
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>


        There are no compensatory plans or arrangements, with respect to any
executive office of the Company, which result or will result from the resigna-
tion, 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.


<PAGE>


DIRECTOR COMPENSATION

         Directors received no cash compensation for their service to the
Company as directors, but can be reimbursed for expenses actually incurred in
connection with attending meetings of the Board of Directors.
<TABLE>
<CAPTION>
                          Directors' Compensation for Last Fiscal Year
                                     -----------------------

Name                          Annual     Meeting  Consulting    Number     Number of                   All
                              Retainer   Fees     Fees/Other    of         Securities    Long Term     Other
                              Fee ($)    ($)      Fees ($)      Shares     Underlying   Compensation   Compensa-
                                                                (#)        Options        / Option     tion
                                                                           SARs(#)
------------------------------------------------------------------------------------------------------------------
<S>                  <C>        <C>           <C>      <C>          <C>            <C>         <C>           <C>
A. Director          2002       0             0        0            0              0           0             0
   Terry Eilers      2001       0             0        0            0              0           0             0

B. Director          2002       0             0        0            0              0           0             0
   Michael Sullinger 2001       0             0        0            0              0           0             0

C. Director          2002       0             0        0            0              0           0             0
   Virgil Baker      2001       0             0        0            0              0           0             0

D. Director          2002       0             0        0            0              0           0             0
   J. Cody Morrow    2001       0             0        0            0              0           0             0

E. Director          2002       0             0        0            0              25,000      0             0
   A. Richard Barber 2001       0             0        0            0              0           0             0
</TABLE>

Employment Contracts

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

     An agreement was executed August 1, 2002 with the Chief Operating  Officer,
Michael  Sullinger,  which expires December 31, 2007.  Annual salary is $120,000
and a  non-accountable  automobile  allowance  of  $9,000.  The  agreement  also
provides  for  a  10%  royalty  on  the  license   revenues  of  the   Company's
PresentaPro(TM)  software  and  an  annual  bonus  of  incentive  stock  options
(covering  200,000  shares).  Unpaid  salary  and  commissions  can be paid with
warrants to purchase  common  stock at $1 per share.  During 2003 and 2002,  COO
compensation  expensed  pursuant  to  these  arrangements  totaled  $60,000  and
$43,538, respectively (exclusive of the fair value of incentive stock options).


<PAGE>

<TABLE>
<CAPTION>

Name                    Number of       Percent of total        Exercise or     Expiration date
                        securities      options/SARs            base price
                        underlying      granted to              ($/Sh)
                        options/SARs    employees in
                        granted (#)     fiscal year
-----------------------------------------------------------------------------------------------
<S>                     <C>             <C>                     <C>             <C>
Terry Eilers            200,000  *                                $.50             12/15/2011
Terry Eilers            100,000  *                                $.50             12/12/2012
Virgil Baker            200,000  *                                $.50             12/15/2011
Virgil Baker            100,000  *                                $.50             12/12/2012
Michael Sullinger       200,000  *                                $.50             12/12/2012
Richard Barber           25,000  *                                $.50             12/15/2011
Richard Barber           25,000  *                                $.50             12/15/2012
Morrow Revocable Trust
(beneficially           200,000  *                                $.50             12/15/2011
 J. Cody Morrow & Family)
</TABLE>


* Were assumed by the Company as part of reorganization.


<TABLE>
<CAPTION>

                                Aggregated Option/SAR Exercises in Last Fiscal Year
                                            and FY-End Option/SAR value

<S>                         <C>               <C>             <C>                           <C>
Name                        Shares            Value           Number of Securities          Value of Unexercised
                            Acquired          Realized        Underlying                    In the Money
                            on                ($)             Unexercised                   Options/SARs at FY-
                            Exercise                          Options/SARs at FY-           End ($) Exercisable/
                            (#)                               End (#) Exercisable/          Unexercisable
                                                              Unexercisable
---------------------------------------------------------------------------------------------------------------------
None                        0                 0               0                             0
for any officer or
director

</TABLE>


<PAGE>

             LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR

Name        Number of       Performance     Estimated future payouts under
            shares,         or other        non-stock price-based plans
            units or        period until    ------------------------------
            other rights    maturation or   Threshold       Target     Maximum
            (#)             payout          ($ or #)        ($ or #)   ($ or #)
-------------------------------------------------------------------------------
None for any officer or director.



ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
------------------------------------------------------------------------------

     The Company has 29,549,207 shares of common stock issued and outstanding as
of  December 31,  2003.  There are no  shares  of  preferred  stock  issued  and
outstanding  as of  December 31,  2003.  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.


OFFICERS, DIRECTORS AND BENEFICIAL OWNERS, AS OF DECEMBER 31, 2003

--------------------------------------------------------------------------------
Name and Address of             Amount and Nature
Beneficial Owner                of Beneficial Ownership (1)  Percentage of Class
--------------------------------------------------------------------------------
Terry Eilers                       6,372,039                           30%
1510 Poole Boulevard                 300,000 options (1)                1.3%
Yuba City, CA  95993

Clark Davenport                    1,535,386                            7%
1510 Poole Boulevard
Yuba City, CA  95993

Morrow Revocable Trust             1,645,056                            7.8%
(beneficially J. Cody Morrow         200,000 options (1)                 .9%
 & Family)
12655 Rough & Ready
Grass Valley, CA  95945

Michael Sullinger                     68,544                             .3%
1510 Poole Boulevard                 200,000 options (1)                 .19
Yuba City, CA  95993

Virgil Baker                         877,363                            4%
1510 Poole Boulevard                 300,000 options (1)                1.3%
Yuba City, CA  95993

A. Richard Barber                    548,352                            3%
1510 Poole Boulevard                  50,000 options (1)                 .2%
Yuba City, CA  95993

All directors and executive
officers as a group (5 persons)    9,511,354                           45%
                                  10,561,354 with options              47%

<PAGE>

Notes to the table:

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

(2) Unless otherwise indicated,  the persons named in the table have sole voting
and  investment  power  with  respect  to all  shares of common  stock  shown as
beneficially owned by them.

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


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
---------------------------------------------------------------

     On December 30, 2002, PMN acquired 91% of the preferred and common stock of
eTotalSource, Inc. ("eTS" - incorporated in California on February 7, 2000),
pursuant to an Agreement and Plan of Reorganization effective December 30, 2002,
by issuing 15,540,011 shares of PMN common stock to eTS shareholders.

     Immediately after the transaction, the eTS shareholders owned approximately
88.5% of the Company's common stock. Coincident with the transaction, the
Company changed its fiscal year from June 30 to December 31.

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

         No officer,  director,  or  affiliate of the Company has or proposes to
have any  direct or  indirect  material  interest  in any asset  proposed  to be
acquired  by the Company  through  security  holdings,  contracts,  options,  or
otherwise.


                                     PART IV


ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
------------------------------------------------

     The following documents are filed as part of this report:

     1.   Reports on Form 8-K:
          8-K filed 2/7/03
          8-K12g3 filed 3/17/03
          8K filed 7/17/03
          8-K filed 12/2/03

     2.   Exhibits:

          32    Sarbanes-Oxley Certification
          33    Sarbanes-Oxley Certification


<PAGE>

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
-------------------------------------------------------
General.  Gordon, Hughes and Banks, LLP, CPAs ("GHB") is the Company's principal
auditing accountant firm. The Company's Board of Directors has considered
whether the provisions of audit services is compatible with maintaining GHB's
independence.

         Audit Fees. GHB billed the Company $23,800 for the following
professional services: audit of the annual financial statement of the Company
for the fiscal year ended December 31, 2003, and review of the interim financial
statements included in quarterly reports on Form 10-QSB for the periods ended
March 31, 2003, June 30, 2003, and September 30, 2003. GHB billed
the Company $19,000 for the 2002 audit.

         There were no audit related fees in 2002 or 2003. There were no tax
fees or other fees in 2002 or 2003.  GHB billed the Company $5,275 for preparing
the 2002 tax returns.

         The Company's Board acts as the audit committee and had no "pre-
approval policies and procedures" in effect for the auditors' engagement for the
audit year 2002 and 2003.

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

<PAGE>


                                      INDEX

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

3.1             Articles of Incorporation             Incorporated by reference
                                                      to Registration Statement
                                                      Form 10SB12G #000-49797


3.2             Bylaws                                Incorporated by Reference
                                                      to Registration Statement
                                                      Form 10SB12G #000-49797

3.3             Amendments to Articles of             Incorporated by Reference
                of Incorporation                      to Registration Statement
                                                      Form 10SB 12G #000-49797
                                                      in 8-K dated 3/17/03


<PAGE>

                                   SIGNATURES

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


Dated: April 15, 2004



                                          eTOTALSOURCE, INC.


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


                                          DIRECTORS:

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


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


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


                                          /s/ J. Cody Morrow
                                          ---------------------------------
                                          J. Cody Morrow


                                          /s/ A. Richard Barber
                                          ---------------------------------
                                          A. Richard Barber

<PAGE>

                               eTotalSource, Inc.
                      (Formerly Premium Enterprises, Inc.)
                        Consolidated Financial Statements
                                Table of Contents

                                                                          PAGE

Consolidated Financial Statements

             Independent Auditors' Report                                  F-1

             Balance Sheet                                                 F-2

             Statement of Operations                                       F-3

             Statement of Cash Flows                                       F-4

             Statement of Stockholders' Equity (Deficit)                   F-5

             Notes to Financial Statements                                 F-6


<PAGE>

REPORT OF INDEPENDENT AUDITORS


To the Board of Directors
eTotalSource, Inc.
Yuba City, California

We have audited the acCompanying consolidated balance sheet of eTotalSource,
Inc. (formerly Premium Enterprises, Inc. - the "Company") as of December 31,
2003 and the related consolidated statements of operations, cash flows and
stockholders' equity (deficit) for the years ended December 31, 2003 and 2002.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of eTotalSource, Inc.
at December 31, 2003, and the results of its consolidated operations and its
cash flows for the years ended December 31, 2003 and 2002, in conformity with
accounting principles generally accepted in the United States of America.

The acCompanying financial statements have been presented assuming that the
Company will continue as a going concern, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business. As
discussed in Note 1 to the financial statements, the Company has incurred
significant recurring losses, and as of December 31, 2003 has a substantial
liquidity shortage, including default conditions on certain notes payable and
judgments payable to creditors. As a consequence, the Company requires
significant additional financing to satisfy outstanding obligations and continue
operations. Unless the Company successfully obtains suitable significant
additional financing, there is substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these matters are
also discussed in Note 1. The financial statements do not include any
adjustments to reflect the possible future effect on the recoverability and
classification of assets or the amounts and classification of liabilities that
may result from the outcome of this uncertainty.




/s/ Gordon, Hughes and Banks LLP
Greenwood Village, Colorado
February 26, 2004


                                      F-1

<PAGE>

<TABLE>
<CAPTION>

                                                       eTotalSource, Inc.
                                              (Formerly Premium Enterprises, Inc.)
                                                   Consolidated Balance Sheet
                                                        December 31, 2003
<S>                                                                                                <C>
ASSETS
Current Assets
     Cash                                                                                            $ 313,084
     Accounts receivable                                                                                   414
                                                                                                    -----------
     Total Current Assets                                                                              313,498
                                                                                                    -----------
Furniture and Equipment                                                                                 95,019
        Less accumulated depreciation                                                                  (52,580)
                                                                                                    -----------
         Total Furniture and Equipment, less accumulated depreciation                                   42,439
                                                                                                    -----------
Other Assets
     Patents applications and trademarks, less $11,397 accumulated amortization                         28,941
     Deposits                                                                                            1,358
                                                                                                    -----------
      Total Other Assets                                                                                30,299
                                                                                                    -----------
     Total Assets                                                                                    $ 386,236
                                                                                                    ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
     Convertible notes payable                                                                       $ 300,000
     Other notes payable                                                                               662,000
     Judgments payable                                                                                 204,788
     Accounts payable                                                                                  224,471
     Accrued compensation payable                                                                      716,395
     Accrued interest payable                                                                          149,070
     Other accrued liabilities                                                                         329,776
     Deferred revenue                                                                                  112,500
       Total Current Liabilities                                                                     2,699,000
                                                                                                    -----------
Commitments and Contingencies                                                                                -

Stockholders' Equity (Deficit)
     Common stock; no par value; 100 million shares authorized,
      29,549,207 shares issued and outstanding                                                       3,656,884
     Accumulated (deficit)                                                                          (5,969,648)
                                                                                                    -----------
       Total Stockholders' Equity (Deficit)                                                         (2,312,764)
                                                                                                    -----------
     Total Liabilities and Stockholders' Equity (Deficit)                                            $ 386,236
                                                                                                    ===========
</TABLE>

                                      F-2

<PAGE>

<TABLE>
<CAPTION>


                                       eTotalSource, Inc.
                              (Formerly Premium Enterprises, Inc.)
                              Consolidated Statement of Operations

                                                                            December 31,
                                                                       2003             2002
                                                                  ---------------  ---------------
<S>                                                               <C>              <C>

Revenues                                                               $ 281,919        $ 213,823

General and Administrative Expenses                                    1,860,146        1,167,468
                                                                  ---------------  ---------------
Operating Income (Loss)                                               (1,578,227)        (953,645)

Other Income (Expense)
     Gain on sale of office building                                     205,705                -
     Interest expense                                                   (602,045)        (283,237)
     Rental income                                                           352           10,721
     Other income (expense), net                                           7,640           11,856
                                                                  ---------------  ---------------
     Total Other Income (Expense)                                       (388,348)        (260,660)
                                                                  ---------------  ---------------
Net (Loss)                                                           $(1,966,575)    $ (1,214,305)
                                                                  ===============  ===============
Basic and Diluted (Loss) per Share                                       $ (0.10)         $ (0.07)
                                                                  ===============  ===============

Weighted Average Common Shares Outstanding                            19,830,586       17,059,167
                                                                  ===============  ===============
</TABLE>


                                      F-3

<PAGE>

<TABLE>
<CAPTION>


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

                                                              Preferred Stock                Common Stock            Accumulated
                                                              ----------------
                                                         Shares       Amount       Shares     Amount     (Deficit)       Total
                                                        ----------  ----------- ------------ ----------- ------------- -------------
<S>                                                     <C>         <C>         <C>          <C>         <C>           <C>

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

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

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

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

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

 December 31, 2002                                              -            -   17,565,151   1,381,311    (4,003,073)   (2,621,762)

      Issued for services or in lieu of interest
           ($.08 to $.525 per share)                            -            -    4,050,000     751,350             -       751,350

      Conversion of notes payable -
           Convertible notes ($.35 per share)                                       459,056     160,670             -       160,670
           Other notes payable ($.08 and $.24 per share)                          2,500,000     361,950             -       361,950

      Issuance for cash in private placement                    -            -
          ($.08 per share)                                                        6,625,000     530,000             -       530,000

      Exercise of warrants ($.09 per share)                     -            -      350,000      31,500             -        31,500

      Options and warrants -
          Interest                                              -            -            -     364,721             -       364,721
          Services                                              -            -            -      75,382             -        75,382

      Shares rescinded by officer                               -            -   (2,000,000)          -             -             -

       Net (loss)                                               -            -            -           -    (1,966,575)   (1,966,575)
                                                        ----------  ----------- ------------ ----------- ------------- -------------
December 31, 2003                                               -          $ -   29,549,207  $3,656,884  $ (5,969,648) $ (2,312,764)
                                                        ==========  =========== ============ =========== ============= =============
</TABLE>


                                      F-4

<PAGE>

<TABLE>
<CAPTION>


                                               eTotalSource, Inc.
                                      (Formerly Premium Enterprises, Inc.)
                                      Consolidated Statement of Cash Flows

                                                                                                    December 31,
                                                                                               2003             2002
                                                                                          ---------------  ---------------
<S>                                                                                       <C>              <C>
Cash Flows From (Used in) Operating Activities:
Net (loss)                                                                                   $(1,966,575)    $ (1,214,305)
Adjustments to reconcile net (loss) to net cash (used in) operations -
     Stock issued for services and in lieu of interest                                           751,350                -
     Stock issued for accrued interest upon debt conversion                                      182,620                -
     Stock option and warrant expense                                                            440,103          134,934
     Depreciation and amortization                                                                30,383           46,287
     Loss on retirement of assets                                                                  4,460            4,191
     Gain on sale of office building                                                            (205,705)               -
Changes in assets and liabilities -
     Decrease (increase) in other current assets                                                  47,708          (46,092)
     Decrease (increase) in deposits                                                               2,618            3,909
     Increase (decrease) in payables, credit cards and accrued liabilities                       170,347          531,336
     Increase (decrease) in deferred revenue                                                     (45,000)         (45,000)
                                                                                          ---------------  ---------------
     Net Cash (Used in) Operating Activities                                                    (587,691)        (584,740)
                                                                                          ---------------  ---------------
Cash Flows From (Used in) Investing Activities:
     Net proceeds from sale of office building                                                   142,596                -
     Purchase of equipment                                                                        (9,005)            (321)
     Patents applications and trademarks                                                               -          (10,479)
                                                                                          ---------------  ---------------
     Net Cash From (Used in) Investing Activities                                                133,591          (10,800)
                                                                                          ---------------  ---------------
Cash Flows From (Used in) Financing Actives:
     Proceeds from issuance of notes payable                                                     360,000          554,369
     Payments on mortgages and notes payable                                                    (204,642)          (8,844)
     Proceeds from sale of stock                                                                 561,500          100,000
                                                                                          ---------------  ---------------
     Net Cash From Financing Activities                                                          716,858          645,525
                                                                                          ---------------  ---------------
Increase in Cash and Cash Equivalents                                                            262,758           49,985

Cash and Cash Equivalents - Beginning of Year                                                     50,326              341
                                                                                          ---------------  ---------------
Cash and Cash Equivalents - End of Year                                                        $ 313,084         $ 50,326
                                                                                          ===============  ===============

Supplemental Disclosures:
     Interest paid                                                                             $ 378,804        $ 166,723
     Income taxes paid                                                                               800              800
     Non-cash investing and financing transactions:
         Conversion of notes payable to stock                                                    340,000          150,000
         Issuance of shares in reorganization                                                          -          309,373
</TABLE>


                                      F-5

<PAGE>

eTotalSource, Inc.
Notes to Consolidated Financial Statements


NOTE 1.  BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business
eTotalSource, Inc., (the "Company" - formerly named Premium Enterprises, Inc.
("PMN")), was incorporated in Colorado on September 16, 1987. The principal
activities of the Company are developing and publishing proprietary multimedia
software technology and training media. The Company's primary customers are
corporations, governmental organizations and agencies. The Company is based in
Yuba City, California.

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

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

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

             Revenues                                               $ 214,000
             Net income (loss)                                    (1,243,000)
             Net income (loss) per share                               $(.07)

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

                                      F-6

<PAGE>

eTotalSource, Inc.
Notes to Consolidated Financial Statements


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

Going Concern Considerations
The acCompanying financial statements have been presented assuming that the
Company will continue as a going concern, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business. The
Company has incurred significant operating losses since inception and as of
December 31, 2003 had a net working capital deficit of approximately
$(2,386,000), a stockholders' deficit of $(2,313,000), notes payable totaling
$662,000 were in default with related accrued interest in arrears of $47,598,
and legal judgments against the Company $204,788 had been adjudicated.
Management's plans to address these matters include private placements of stock
and increasing revenue from government and others. Unless the Company
successfully obtains suitable significant additional financing and attains
profitable operations, there is substantial doubt about the Company's ability to
continue as a going concern. The financial statements do not include any
adjustments to reflect the possible future effect on the recoverability and
classification of assets or the amounts and classification of liabilities that
may result from the outcome of these uncertainties.

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

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

                                      F-7

<PAGE>

eTotalSource, Inc.
Notes to Consolidated Financial Statements


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

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

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

Software and Development Costs
The Company capitalizes purchased software that is ready for 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,
2003, the Company has not capitalized any software 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
$25,092 in 2003 and $21,209 in 2002.

On June 9, 2003, the Company sold its office building for $1,050,000, received
net cash proceeds of $142,596 after retiring mortgage debt, and recognized a
$205,705 net capital gain. After the sale, the Company began leasing the same
office space it previously owned on a month-to month basis.

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.

                                      F-8

<PAGE>

eTotalSource, Inc.
Notes to Consolidated Financial Statements


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, 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, 2003, 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.


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

                                      F-9

<PAGE>

eTotalSource, Inc.
Notes to Consolidated Financial Statements


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

Stock-Based Compensation
The Company accounts for its stock-based compensation using Accounting
Principles Board's Opinion No. 25 ("APB 25"). Under APB 25, compensation expense
is recognized for stock options with an exercise price that is less than the
market price on the grant date of the option. For stock options with exercise
prices at or above the market value of the stock on the grant date, the Company
adopted the Financial Accounting Standards Board ("FASB") disclosure-only
provisions of Statement of Accounting Standards No. 123 Accounting for
Stock-Based Compensation ("SFAS 123"). The Company has adopted the
disclosure-only provisions of SFAS 123 for stock options granted to the
employees and directors. Accordingly, no compensation cost has been recognized
for these options. Had compensation expense for the options granted been
determined based on the fair market value at the grant date for the options,
consistent with the provisions of SFAS 123, the Company's 2002 net loss and net
loss per share would have been increased to the pro forma amounts indicated
below (there were no options granted in 2003):



                                                                       2002
                                                                       ----
           Net loss
             Reported                                              $ (1,214,305)
             Pro forma                                             $ (1,636,573)

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

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

                                                                 2002
                                                                 ----
Risk free interest rate                                           4.11%
Expected life - years                                               5.0
Expected volatility                                                406%
Expected dividend yield                                             - %

                                      F-10

<PAGE>

eTotalSource, Inc.
Notes to Consolidated Financial Statements


Recent Accounting Pronouncements


SFAS No. 147, "Acquisitions of Certain Financial Institutions," was issued in
December 2002 and is not expected to apply to the Company's current or planned
activities.



In April 2003,  the FASB approved  SFAS No. 149,  "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities".  SFAS No. 149 is not expected to
apply to the Company's current or planned activities.



In June 2003, the FASB approved SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity". SFAS No. 150
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. This
Statement is effective for financial instruments entered into or modified after
May 31, 2003, and otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003. SFAS No. 150 is not expected to have an
effect on the Company's financial position.



In December 2003, the FASB issued a revised Interpretation No. 46,
"Consolidation of Variable Interest Entities". The interpretation clarifies the
application of Accounting Research Bulletin No. 51, "Consolidated Financial
Statements", to certain types of entities. The Company does not expect the
adoption of this interpretation to have any impact on its financial statements.

<TABLE>
<CAPTION>

NOTE 2.  NOTES PAYABLE
<S>                                                                                                           <C>

Note  payable to a trust;  interest at 15% payable  monthly  through  December 18, 2003 when                  $172,000
principal and unpaid interest are due.  The note is in default.

Note payable to a trust;  interest at 10% and  principal  due January 17, 2003,  extended to
December 17, 2003 (with  interest  increased to 18% and due monthly  beginning  February 17,
2003).  The note is in default.                                                                                110,000

Note  payable to a trust;  interest at 14% payable  monthly  through  December 18, 2003 when
principal and unpaid interest are due.  The note is in default.                                                 40,000

                                      F-11

<PAGE>

eTotalSource, Inc.
Notes to Consolidated Financial Statements


Promissory  notes  payable;  interest  at  6%  payable  monthly,  due  in  2001,  unsecured.
Principal  and accrued  interest  ($33,200 at December 31, 2003) are  convertible  to common
stock at $.50 per  share.  Warrants  also  issued to two note  holders  to  purchase  37,500
shares of common stock for five years at $.50 per share.  The notes are in default.                            200,000

Promissory note payable;  principal and accrued interest at 8% payable in 2002,  extended to
May 15,  2003,  unsecured.  Principal  and accrued  interest  ($16,644 at December 31, 2003)
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 is in default.                                                                                            100,000

Note payable to an individual; non-interest bearing and imputed at 10%; due in 2001,
extended to December 31, 2003, unsecured.  The note is in default.                                              30,000

Note payable to an unrelated trust; principal and interest at 10% due monthly.  The
promissory note is due in June 2003, carries a stated interest rate of 10% and can be
extended for an additional 30 days. The note has been extended to June 16, 2004 and as
additional consideration, the note holder will receive 50,000 shares of common stock,
valued at $.525 per share ($26,250); the obligation is included in other accrued
liabilities.                                                                                                    50,000

Note payable to an unrelated  trust;  principal  and interest at 10% due monthly.  This note
is a revolving  credit  obligation and eTotalSource can repay and borrow up to the amount of
the note. As additional  consideration,  the note holder will  receive,  on the  anniversary
date,  100,000  shares of  eTotalSource  common  stock.  The  approximate  fair value of the
shares ($8,900) is being accrued ratably over the twelve month period.                                         250,000

Note  payable  to an  individual;  principal  and  interest  at 9.2% due  December  4, 2002,

extended to May 1, 2003, unsecured.  The note is in default.                                                    10,000
                                                                                                                ------
Total                                                                                                        $ 962,000
                                                                                                             =========
</TABLE>


NOTE 3.  INCOME TAXES

At December 31, 2003, the Company had a net operating loss carryforward of
approximately $6 million that may be offset against future taxable income
through from 2020 through 2023. These carryforwards are subject to review by the
Internal Revenue Service.

                                      F-12

<PAGE>

eTotalSource, Inc.
Notes to Consolidated Financial Statements


The Company has fully reserved the $2.3 million tax benefit of the operating
loss carryforward, by a valuation allowance of the same amount, because the
likelihood of realization of the tax benefit cannot be determined. The net
change in the valuation allowance for deferred tax assets was an increase of
$1.1 million during 2003.

Temporary differences between the time of reporting certain items for financial
statement and tax reporting purposes consists primarily of depreciation and
deferred revenue.

NOTE 4.  STOCKHOLDERS' EQUITY

Increase of Authorized Shares
In November 2003, the shareholders approved an increase in authorized shares of
common stock from 20 million to 100 million shares.

Convertible Notes Payable
During 2003, 459,056 shares of common stock were issued to convertible note
holders at $.35 per share and during 2002, 52,624 shares of preferred stock were
issued to convertible note holders at $1.81, which were later converted to
common stock in the merger. As of December 31, 2003, remaining outstanding
convertible notes payable and related accrued interest is convertible into
common stock as follows:

     Notes Payable      Accrued Interest            Total       Conversion Price
         $ 200,000              $ 25,201        $ 225,201                 $ 4.00
           100,000                16,644          116,644                   1.81

In addition, in 2003 other notes payable and accrued interest totaling $361,950
were converted into 2,500,000 shares of common stock at conversion prices of
$.08 to $.35 per share.

Stock Issued for Services and Interest
In 2003, 4,050,000 shares of common stock were issued to six individuals for
services or in lieu of interest at per share valuations ranging from $.08 to
$.525.

                                      F-13

<PAGE>

eTotalSource, Inc.
Notes to Consolidated Financial Statements


Private Placement Memorandum
In 2003, the Company sold 8,125,000 shares of common stock for $530,000 pursuant
to a private placement offering.

Stock Options and Warrants Issued for Services and in Lieu of Interest
In 2003 and 2002, the Company recorded expenses for options and warrants to
purchase common stock issued to consultants and lenders totaling $466,353 and
$134,934, respectively. Valuations of the transactions are based on the
estimated fair value of the options or warrants on the grant date using the
Black-Scholes pricing model. Consulting expense is recognized over the term of
the option or warrant period. Interest expense is recognized over the related
term of the related obligation on a straight-line basis.





NOTE 5.  STOCK OPTIONS AND WARRANTS

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


                                      F-14

<PAGE>

eTotalSource, Inc.
Notes to Consolidated Financial Statements


<TABLE>
<CAPTION>

A summary of stock options outstanding and excisable as of December 31, 2003
follows:

                                        Options Outstanding                        Options Exercisable
   Range of exercise         Number                    Weighted average           Number         Weighted average
   prices                    outstanding               remaining life        exercisable           exercise price
   ------                    -----------               --------------        -----------           --------------
<S>                          <C>                       <C>                   <C>                 <C>
   $.50                       1,512,500                  7.8 Years            1,359,219                $.50
</TABLE>


Information concerning all stock option activity is summarized as follows:

                                                   Option         Option Prices
                                                   Shares             Per Share
                                                  -------             ---------
   Outstanding, December 31, 2001                 912,700                 $ .50
     Granted                                      748,000                   .50
     Forfeiture                                  (100,000)                  .50
     Exercised                                          -                     -
                                               ------------        -------------
   Outstanding, December 31, 2002               1,560,700                   .50
     Granted                                            -                     -
     Forfeiture                                   (48,200)                  .50
     Exercised                                          -                     -
                                               ------------        -------------
   Outstanding, December 31, 2003               1,512,500                 $ .50
                                               ============        =============


The weighted fair value of options granted in 2002 was $.75 per share. No
options were granted in 2003.

Stock Options and Warrants Issued to Others
As of December 31, 2003, the Company has outstanding options and warrants that
it has issued to consultants and lenders to purchase a total of 982,500 shares
of common stock of the Company at $.75 per share; 40,000 expire in 2006, 817,500
expire in 2007, and 125,000 expire in 2011. The weighted average expected life
of all such compensatory options and warrants were 68 months.

NOTE 6.  FAIR VALUE OF FINANCIAL INSTRUMENTS


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

                                      F-15

<PAGE>

eTotalSource, Inc.
Notes to Consolidated Financial Statements


NOTE 7.  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 international 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 exceeded the
$100,000 FDIC insured limit at December 31, 2003 by $219,774. Management
believes that the financial institution is financially sound.

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

                  Customer                         2003                    2002
                  --------                         ----                    ----
                  A                                 47%                     - %
                  B                                 18%                     23%





NOTE 8.  COMMITMENTS AND CONTINGENCIES

Executive Employment Contracts

The Company has employment agreements with its three executive officers:

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


                                      F-16

<PAGE>

eTotalSource, Inc.
Notes to Consolidated Financial Statements


  2      An agreement was executed August 1, 2000 with the Chief Operating
         Officer which expires December 31, 2007. Annual salary is $120,000 and
         a non-accountable automobile allowance of $9,000. The agreement also
         provides for an annual bonus of incentive stock options (covering
         200,000 shares). Unpaid salary and commissions can be paid with
         warrants to purchase common stock at $1 per share. During 2003 and
         2002, COO compensation expensed pursuant to these arrangements was
         accrued on a "half-time" basis and totaled $64,500 and $43,538,
         respectively (exclusive of the fair value of incentive stock options).
         The officer has elected to forego the 2003 annual bonus of incentive
         stock options.

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

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

NOTE 9.  FOURTH QUARTER ADJUSTMENTS

The Company recorded adjustments having the aggregate effect of increasing the
net loss for the fourth quarter of 2003 by approximately $693,000. The
adjustments consisted primarily of issuances of common stock for services or
settlement of debt, accrual of services to be settled in stock, and the
recognition of stock option and warrant expenses for services and in lieu of
interest.



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