**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON
      D.C. 20549**





**FORM
      10-QSB**





QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE


SECURITIES
      EXCHANGE ACT OF 1934, AS AMENDED:





**For
      the Quarterly Period Ended June 30, 2006**










**Commission
      File No. 33-49797**










**ETOTALSOURCE,
      INC.**


(Name
      of
      Small Business Issuer in Its Charter)




**Colorado**
            **84-1066959**(State
                or Other Jurisdiction of Incorporation
              or
                Organization)
            (I.R.S.
                Employer Identification No.)**1510
                Poole Boulevard, Yuba City, CA**
            **95993**(Address
                of Principal Executive Offices)
            (Zip
                Code)**(****530)
                751-9615**(Issuer’s
                Telephone Number, Including Area
                Code)





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





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





As
      of
      June 30, 2006, the issuer had **64,267,283** shares
      of common stock, no par value, issued and outstanding.





Transitional
      Small Business Disclosure Format. Yes oNo
x










**ETOTALSOURCE,
      INC.**





**FORM
      10-QSB**





**TABLE
      OF CONTENTS**





PART
                I. -FINANCIAL
                INFORMATIONITEM
                1.
            CONSOLIDATED
                CONDENSED FINANCIAL STATEMENTS
            
            3Balance
                Sheets - June 30, 2006 and December 31, 2005
            
            4Statements
                of Operations - Three and Six Months Ended June 30, 2006 and
                2005
            
            5Statements
                of Cash Flows - Six Months ended June 30, 2006 and 2005
            
            6Notes
                to Financial Statements
            
            7ITEM
                2.
            MANAGEMENT'S
                DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
            
            9ITEM
                3.
            CONTROLS
                AND PROCEDURES
            
            18PART
                II. -OTHER
                INFORMATIONITEM
                1.
            LEGAL
                PROCEEDINGS
            
            20ITEM
                2.
            CHANGES
                IN SECURITIES AND USE OF PROCEEDS
            
            20ITEM
                3.
            DEFAULTS
                UPON SENIOR SECURITIES
            
            20ITEM
                4.
            SUBMISSION
                OF MATTER TO A VOTE OF SECURITY HOLDERS
            
            20ITEM
                5.
            OTHER
                INFORMATION
            
            20ITEM
                6.
            EXHIBITS
                AND REPORTS ON FORM 8-K
            
            21SIGNATURE
              PAGE
            
            24





Exhibit
                31.1
            Section
                302 Certification by Chief Executive Officer and Interim Chief Financial
                Officer (one person)Exhibit
                32.1
            Section
                906 Certification by Chief Executive Officer and Interim Chief Financial
                Officer (one person)




2




**PART
      I**




**FINANCIAL
      INFORMATION**




**Item
      1.** **Financial
      Statements** **.**




**ETOTALSOURCE,
      INC.**


**CONSOLIDATED
      FINANCIAL STATEMENTS**


**As
      of June 30, 2006**





**INDEX
      TO FINANCIAL STATEMENTS**








**PAGE**CONSOLIDATED
                BALANCE SHEETS AS OF JUNE 30, 2006 AND DECEMBER 31, 2005
            
            4CONSOLIDATED
                STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE
                30, 2006
                AND 2005
            
            5CONSOLIDATED
                STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2006 AND
                2005
            
            6NOTES
                TO CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2006
            
            7




3





**eTotalSource,
        Inc.** **Consolidated
          Balance Sheet**





**ASSETS**
            
            **June
                30, 2006**
            
            **December
                31, 2005*****Current
                Assets***Cash
            
            $
            435
            
            $
            118,958Other
            
            
            5,478
            
            
            1,223*Total
                Current Assets*
            
            
            5,913
            
            
            120,181***Property
                and Equipment***Furniture
                and equipment
            
            
            83,922
            
            
            86,451Less
                accumulated depreciation
            
            
            (71,562
            )
            
            (67,641
            )12,360
            
            
            18,810***Other
                Assets***Deposits
            
            
            801
            
            
            721801
            
            
            721***Total
                Assets***
            
            $
            19,074
            
            $
            139,712**LIABILITIES
                AND STOCKHOLDERS' EQUITY (DEFICIT)*****Current
                Liabilities***Convertible
                notes payable
            
            $
            250,000
            
            $
            250,000Other
                notes payable
            
            
            797,114
            
            
            772,114Judgments
                payable
            
            
            204,788
            
            
            204,788Accounts
                payable and other accrued liabilities
            
            
            327,727
            
            
            291,785Accrued
                compensation payable
            
            
            1,073,809
            
            
            1,036,104Accrued
                interest payable
            
            
            373,345
            
            
            265,952Deferred
                revenue
            
            
            —
            
            
            22,500*Total
                Current Liabilities*
            
            
            3,026,782
            
            
            2,843,242**Convertible
                Notes Payable, less current maturities and $219,194 and $303,452
                discount,
                respectively**
            
            
            732,766
            
            
            696,548**Total
                Liabilities**
            
            
            3,759,488
            
            
            3,539,790**Commitments
                and Contingencies*****Stockholders'
                Equity (Deficit)***Common
                stock; no par value; 300 million shares authorized,48,794,154
                shares issued and outstanding
            
            
            6,327,405
            
            
            6,226,906Accumulated
                (deficit)
            
            
            (10,067,819
            )
            
            (9,626,984
            )*Total
                Stockholders' Equity*
            
            
            (3,740,414
            )
            
            (3,400,078
            )***Total
                Liabilities and Stockholders' Equity
                (Deficit)***
            
            $
            19,074
            
            $
            139,712


See
        accompanying notes.




4





**eTotalSource,
      Inc.**


**Consolidated
      Statements of Operations**





**Three
                months Ended June 30,**
            
            **Six
                months Ended June 30,****2006**
            
            **2005**
            
            **2006**
            
            **2005****Revenues**
            
            $
            12,829
            
            $
            13,998
            
            $
            25,647
            
            $
            28,984**General
                and Administrative Expenses**
            
            
            114,196
            
            
            267,146
            
            
            330,396
            
            
            519,671**Operating
                Income (Loss)**
            
            
            (101,367
            )
            
            (253,148
            )
            
            (304,749
            )
            
            (490,686
            )**Other
                Income (Expense)**Gain
                (loss) on sale or retirement of assets
            
            
            594
            
            
            —
            
            
            594
            
            
            —Interest
                expense
            
            
            (127,395
            )
            
            (64,778
            )
            
            (221,800
            )
            
            (112,539
            )Bad
                debt write-off
            
            
            85,121
            
            
            —
            
            
            85,121
            
            
            —Other
                income (expense), net
            
            
            —
            
            
            (67
            )
            
            —
            
            
            1,275**Total
                Other Income (Expense)**
            
            
            (41,680
            )
            
            (64,846
            )
            
            (136,085
            )
            
            (111,264
            )**Net
                (Loss)**
            
            $
            (143,047
            )
            $
            (317,994
            )
            $
            (440,834
            )
            $
            (601,951
            )**Basic
                and Diluted (Loss) per Share**
            
            $
            (0.01
            )
            $
            (0.01
            )
            $
            (0.01
            )
            $
            (0.01
            )**Weighted
                Average Common Shares Outstanding**
            
            
            54,411,199
            
            
            46,710,821
            
            
            51,280,520
            
            
            46,710,821




See
        accompanying notes.





5





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





**Six
                Months Ended June 30,****2006**
            
            **2005****Cash
                Flows From (Used in) Operating Activities:**Net
                (loss)
            
            $
            (440,834
            )
            $
            (601,951
            )Depreciation
                and amortization
            
            
            89,813
            
            
            40,594Gain
                (loss) on sale or retirement of assets
            
            
            43
            
            
            67Stock
                options and warrant expense
            
            
            53,039
            
            
            52,648Changes
                in assets and liabilities:Decrease
                (increase) in accounts receivable
            
            
            —
            
            
            (1,121
            )Decrease
                (increase) in other current assets
            
            
            (4,255
            )
            
            53Decrease
                (increase) in deposits
            
            
            (80
            )
            
            441Increase
                (decrease) in payables, credit cards and accrued
                liabilities
            
            
            181,891
            
            
            377,778Increase
                (decrease) in deferred revenue
            
            
            (22,500
            )
            
            (22,500
            )Net
                Cash (Used in) Operating Activities
            
            
            (145,523
            )
            
            (153,991
            )**Cash
                Flows From (Used in) Investing Activities:**Purchase
                of equipment
            
            
            —
            
            
            —Net
                Cash (Used in) Investing Activities
            
            
            —
            
            
            —**Cash
                Flows From (Used in) Financing Activities:**Proceeds
                from the conversion of warrants
            
            
            2,000
            
            
            —Proceeds
                from the issuance of note payables
            
            
            25,000
            
            
            125,000Net
                Cash From Financing Activities
            
            
            27,000
            
            
            125,000Increase
                (decrease) in Cash and Cash Equivalents
            
            
            (118,523
            )
            
            (28,991
            )Cash
                and Cash Equivalents - Beginning of Period
            
            
            118,958
            
            
            37,849Cash
                and Cash Equivalents - End of Period
            
            $
            435
            
            $
            8,858**Supplemental
                Disclosures:**Interest
                paid
            
            $
            24,377
            
            $
            34,608Income
                taxes paid
            
            
            800
            
            
            1,600Non-cash
                investing and financing transactions:Conversion
                of debt to equity
            
            
            48,100
            
            
            —


See
        accompanying notes.


6




**ETOTALSOURCE,
      INC.**





**NOTES
      TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS**


**AS
      OF JUNE 30, 2006**





**Note
      A - Basis of Presentation**





The
      accompanying unaudited financial statements of eTotalSource, Inc. (the
“ Company ”)
      were
      prepared in accordance with generally accepted accounting principles for interim
      financial information and Article 10 of Regulation S-X. Accordingly, they do
      not
      include all of the information and footnotes required by generally accepted
      accounting principles for complete financial statements.





In
      the
      opinion of management, all adjustments considered necessary for a fair
      presentation of the results of operations and financial condition for the
      periods presented have been included. Such adjustments are of a normal recurring
      nature. The results of operations for the three-month period ended June 30,
      2006
      are not necessarily indicative of the results of operations that can be expected
      for the fiscal year ending December 31, 2006. For further information, refer
      to
      the Company's audited financial statements and footnotes thereto included in
      Item 7 of Form 10-KSB filed by the Company on March 28, 2006.





Certain
      reclassifications have been made to prior year expenses to conform to the
      current year presentation and have no effect on the reported net loss for either
      period.





**Note
      B - Contingency**




As
      reported in the December 31, 2005 financial statements, the Company has incurred
      significant recurring losses from operations and has a substantial liquidity
      shortage, including default conditions on certain notes payable and judgments
      payable to creditors. The foregoing raises substantial doubt about the Company's
      ability to continue as a going concern. These conditions are substantially
      unchanged through the first quarter of 2006. The accompanying condensed
      consolidated financial statements do not include any adjustments that might
      result from the outcome of this uncertainty.





**Note
      C - Management Changes**




On
      April
      3, 2006, Virgil Baker, the Chief Financial Officer, submitted his resignation
      as
      Chief Financial Officer and Director, such resignation to be effective on May
      15, 2006.





On
      May 1,
      2006, John (Cody) Morrow submitted his resignation as Director, such resignation
      to be effective on May 1, 2006.





**Note
      D - Note Payables**




On
      April
      15, 2006, a note payable was issued to an unrelated Trust Pao Lan Jarjabka
      Trust  in
      the
      amount of $25,000 bearing interest at 12% interest per annum, and a maturity
      date of October 15, 2006. The note was issued to complete the post-production
      of
      the DVD entitled “Beginning Golf for Women” and for marketing of the DVDs
      entitled “Family Disaster Preparedness” and “Beginning Golf for
      Women.”





**Note
      E - Stock Conversions**




On
      April
      4, 2006, Cornell Capital Partners, L.P. (“Cornell”) converted $6,500 of
      convertible debentures into 1,969,697 shares of common stock.





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





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





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





7





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





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





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





**Note
      F - Events Subsequent to June 30, 2006**




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





8




**Item
      2. Management's Discussion And Analysis Or Plan Of
      Operations.**





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




**Description
      of Our Business**




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




**History.**




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




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




**Business.**




The
      sole
      business of the Company is that of eTotalSource.




**General.**




The
      Company is a developer and supplier of proprietary multimedia software
      technology, and a publisher of multimedia training content. Its past  clients
      have included: 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 works with  clients
      to develop, produce, market, and distribute multimedia instructional and
      training programming. eTotalSource is also marketing educational training
      programs it has produced utilizing its proprietary software.





9




eTotalSource
        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. Presenta Pro TM 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:




Multi-panel
      time synchronized presentation;


Quick
      content and program development;


Rich
      video and content experience;


Still
      images;


Graphics;


Flash;


Links
      to
      Website;


Live
      Cams;


Test
      and
      quizzes to tract performance;


Users
      progress can be tracked;


Diagrams;


Simple
      server requirements;


Reduces
      training and learning curve time; and


Easy
      to
      implement and use.




**Business
      Model.**




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




**SOFTWARE
      LICENSING:** The
      Company 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 Company believes
      that its aggressive pricing policy appeals to governments, schools and corporate
      clients.




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




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




Anger
      Management Facilitator Training and Certification;


Domestic
      Violence Facilitator Training and Certification;


School
      Maintenance, Cleaning Training and Certification;


Emergency
      Disaster Preparedness - Terrorist Awareness; and


Mandated
      School Internet Acceptable Use Policy.




Management
      believes that the production, postproduction and publishing also create an
      avenue for added revenues and potential profits. For example, if a
      client  provides
      each of its employees finished packages of one topic area, produced and
      distributed by eTotalSource, then the Company would realize an additional profit
      over and above the production and post production profits as each individual
      package could be sold at $20.00 per unit and costs approximately $5.00 per
      unit
      to reproduce and ship .





10




**Intellectual
      Property Differentiation.**




eTotalSource’
      technological differentiation is based on high quality and low cost software.
      We
      believe that Presenta Pro TM is
      easier to use and considerably more flexible than eTotalSource’s closest
      competitor. We believe that Presenta Pro TM is
      priced to be affordable, cost-effective, and training-efficient. 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, compact
      disk (“ CD ”)
      or
      digital video disk (“ 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 Transmission Control
      Protocol/Internet Protocol (“ TCP/IP ”).
      The
      end-user client can be run on any Windows based personal computer 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
      website. We believe that eTotalSource’ technology and user interface are
      advanced in their simplicity of use and ability to deliver multiple platforms
      and media simultaneously.




eTotalSource
      has no plans for any research and development in the next 12 months.




**Employees.**




As
      of
      June 30, 2006, we had two full-time employees, both of which were executive
      personnel. No employees are presently represented by any labor unions. We
      believe our relations with our employees to be good, however additional
      employees will need to be recruited to meet our growth projections. eTotalSource
      has no expectation or anticipation of significant changes in number of employees
      in the next 12 months. It may add full-or part-time employees of an unknown
      number in the next 12 months if its business expands.





**Going
      Concern**





There
      is
      substantial doubt about the ability of eTotalSource to continue as a going
      concern as disclosed in the notes to the December 31, 2005 financial statements
      filed by eTotalSource on Form 10-KSB. Those conditions continued through the
      first quarter of 2006 resulting in operating losses and liquidity shortages,
      including default conditions on certain notes payable and judgments payable
      to
      creditors. As of June 30, 2006, the Company had a working capital deficit of
      approximately $3 million, which means that our current liabilities exceed our
      current assets by approximately $3 million.




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





11




**Risk
      Factors**




***eTotalSource*** ***Lost Money For The Years Ended December 31, 2005 and 2004, The Six Months Ended
      June 30, 2006, And Losses May Continue In The Future***




For
      the
      12 months ended December 31, 2005 and 2004, we incurred a net loss of $1,284,661
      and $2,372,675, respectively. For the six months ended June 30, 2006, we
      incurred a net loss of $440,834, and for the three months ended June 30, 2006,
      we incurred a net loss of $143,047. We anticipate that we will in all likelihood
      have to rely on external financing for all of our capital requirements. Future
      losses are likely to continue unless we successfully implement our business
      plan. Our ability to continue as a going concern will be dependent upon our
      ability to issue other debentures as described in detail below under the section
      of this report entitled “Liquidity & Capital Resources” or borrow from other
      unrelated parties. If we incur any problems in any of these scenarios, we may
      experience significant liquidity and cash flow problems. If we are not
      successful in reaching and maintaining profitable operations, we may not be
      able
      to attract sufficient capital to continue our operations. Our inability to
      obtain adequate financing will result in the need to curtail or discontinue
      entirely our business operations, which in-turn would likely result in a lower
      stock price.




***We
      May Not Be Able To Access Sufficient Funds When Needed***




Currently,
      we are dependent upon external financing to fund our operations. Our financing
      needs are expected to be provided, in large part, by additional debentures,
      although we have no assurance that any third party would accept such debentures
      given our current financial condition. If such debentures are not accepted
      by
      third parties, we would likely curtail or discontinue entirely our operations.




***We
      Have Negative Working Capital Which May Affect our Ability to Continue As A
      Going Concern***




We
      had
      negative working capital of $2,723,061 and $2,497,528 at December 31, 2005
      and
      December 31, 2004, respectively, negative working capital of $3,020,869 for
      the
      six months ended June 30, 2006, and continue to need cash for operations. We
      have relied on significant external financing to fund our operations. As of
      June
      30, 2006, we had $435 of cash on hand, total current assets were $5,913, and
      our
      total current liabilities were $3,026,782. We will need to raise additional
      capital to fund our anticipated operating expenses and future expansion. Among
      other things, external financing may be required to cover our operating costs.
      Unless we obtain profitable operations, it is unlikely that we will be able
      to
      secure additional financing from external sources. If we are unable to secure
      additional financing or we cannot issue additional debentures, we believe that
      we have sufficient funds to continue operations for approximately one month.
      We
      estimate that we will require $2,000,000 to fund our anticipated operating
      expenses for the next 12 months. The sale of our common stock to raise capital
      may cause dilution to our existing shareholders. Our inability to obtain
      adequate financing will result in the need to curtail business operations.
      Any
      of these events would be materially harmful to our business and may result
      in a
      lower stock price. Our inability to obtain adequate financing will result in
      the
      need to curtail business operations and you could lose your entire investment.
      Our financial statements do not include any adjustments that might result from
      the outcome of this uncertainty.




***We
      Need Additional Capital To Be Successful, Which Will Potentially Dilute The
      Value Of Our Shareholders’ Shares***




We
      need
      substantial capital to execute our business plan. To finance our operations
      to
      date, we have relied on private offerings, exercises of warrants, and loans.
      As
      of June 30, 2006, we have issued an aggregate of 11,731,908 shares of common
      stock to finance our operations. We will issue up to an additional 234,088,500
      shares if all of the outstanding debentures are converted and all options and
      warrants exercised. The terms on which we obtain additional financing, including
      the exercise of outstanding warrants, may dilute the existing shareholders’
investment, or otherwise adversely affect their position. It is also possible
      that we will be unable to obtain the additional funding we need as and when
      we
      need it. If we are unable to obtain additional funding as and when needed,
      we
      could be forced to curtail or cease our operations.





12




***All
      Of Our Assets Are Securing Our Obligations To Cornell***




Pursuant
      to the terms contained in that certain Security Agreement dated October 6,
      2004,
      by and between eTotalSource and Cornell Capital Partner, LP (“ Cornell ”),
      all
      of our obligations under the related Securities Purchase Agreement, the related
      Secured Convertible Debenture, the related Investor Registration Rights
      Agreement, the related Irrevocable Transfer Agent Instructions, and the related
      Escrow Agreement are secured by all of our non-cash assets as of such date
      or
      thereafter acquired by us. Accordingly, if we are unable to satisfy any of
      our
      obligations under the foregoing agreements, our assets may be foreclosed upon
      and our business may be shut down.




***Our
      Success Is Based On Increasing Demand For Our
      Products***




We
      depend
      on the continued demand for our products and on favorable general economic
      conditions. We cannot assure you that our business strategy will be successful
      or that we will successfully address these risks or difficulties. If we should
      fail to adequately address any of these risks or difficulties, we could be
      forced to curtail or cease our business operations. Currently, the Company
      has
      entered the market place with the DVD entitled “Family Disaster Preparedness”
and by September 15, 2006, should have the DVD entitled “Beginning Womens’ Golf”
in the marketplace. The Company is relying on these two programs to fund
      near-term ongoing expenses as well a provide a financial foundation to allow
      production and delivery on spin-off productions. Should these items not fare
      well in the marketplace, the Company would not have revenues to continue
      operations nor produce the spin-off productions without relying on further
      borrowing or investment.




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




Our
      success is dependent on the efforts, experience and relationships of Terry
      Eilers, our Chief Executive Officer and Chairman, and Michael Sullinger, our
      Chief Operating Officer and a director. If either of these individuals become
      unable to continue in their role, our business or prospects could be adversely
      affected. Although we have entered into employment agreements with each of
      our
      executive officers, we cannot assure you that such individuals will continue
      in
      their present capacity for any particular period of time.




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




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




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




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




Our
      common stock is currently traded on the Over-the-Counter Bulletin Board (the
      “ OTCBB ”)
      and
      Pink Sheets. Prior to this offering, there has been a limited public market
      for
      our common stock and there can be no assurance that an active trading market
      for
      our common stock will develop. This could adversely affect our shareholders’
ability to sell our common stock in short time periods, or possibly at all.
      Our
      common stock is thinly traded compared to larger, more widely known companies
      in
      our industry. Thinly traded common stock can be more volatile than common stock
      traded in an active public market. The average daily trading volume of our
      common stock from approximately January 1, 2006 through June 30, 2006 was
      404,299 shares. The high and low trading price of our common stock during 2006
      has been $0.0209 and $0.0021, respectively. Our common stock has experienced,
      and is likely to experience in the future, significant price and volume
      fluctuations, which could adversely affect the market price of our common stock
      without regard to our operating performance. In addition, we believe that
      factors such as quarterly fluctuations in our financial results and changes
      in
      the overall economy or the condition of the financial markets, could cause
      the
      price of our common stock to fluctuate substantially.





13




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




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




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




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




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




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




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




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




***Sale
      Of Shares Eligible For Future Sale Could Adversely Affect The Market
      Price***




All
      of
      the approximate 8,117,946 shares of common stock which are currently held,
      directly or indirectly, by management have been issued in reliance on private
      placement exemptions under the Securities Act of 1933, as amended (the
“ Securities
      Act ”).
      Such
      shares will not be available for sale in the open market without separate
      registration except in reliance upon Rule 144 under the Securities Act. In
      general, under Rule 144 a person (or persons whose shares are aggregated),
      who
      has beneficially owned shares acquired in a non-public transaction, for at
      least
      one year, including persons who may be deemed affiliates of eTotalSource, as
      defined, would be entitled to sell within any 3-month period a number of shares
      that does not exceed the greater of 1% of the then outstanding shares of common
      stock, or the average weekly reported trading volume during the four calendar
      weeks preceding such sale, provided that current public information is then
      available. If a substantial number of the shares owned by these stockholders
      were sold under Rule 144 or a registered offering, the market price of the
      common stock could be adversely affected.





14




***eTotalSource'
      Competition is Better Capitalized and Has Greater Marketing Capabilities Which
      Could Adversely Affect eTotalSource' Ability to Compete in the Marketplace***





eTotalSource
      is 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 eTotalSource. eTotalSource expects to be at a
      disadvantage when competing with many firms that have substantially greater
      financial and management resources and capabilities than eTotalSource. As a
      result of these disadvantages, eTotalSource may not be able to effectively
      complete in the markets in which its products and services are sold, which
      would, in turn, affect its ability to continue to operate.





**Critical
      Accounting Policies**





***Revenue
      Recognition***




eTotalSource
      recognizes revenue in accordance with Statement
      of Position N o.
      97-2
“Software Revenue Recognition” issued by the Accounting Standards Executive
      Committee of the American Institute of Certified Public Accountants (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. eTotalSource 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.





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




**Results
      of Operations**




*Results
      of Operations For The Three Month Period Ended June 30, 2006 Compared To The
      Same Period Ended June 30, 2005*




***Revenues.***





Revenues
      for the three months ended June 30, 2006 were $12,829 versus $13,998 for the
      corresponding 2005 period, a decrease of $1,169 or 8%. The decrease was
      attributable to fewer sales of eTotalSource’s CD training products.





***Expenses.***





Operating
      expenses for the three month period ended June 30, 2006 were $114,196 as
      compared to $267,146 for the comparable 2005 period, a decrease of $152,950
      or
      57%. The decrease was primarily due to a decrease in decrease in consulting
      expense, professional services and payroll expenses. Payroll expenses for the
      three month period ended June 30, 2006 were $45,986 as compared to $90,065
      for
      the comparable period in 2005, a decrease of $44,079 or 49%.





Interest
      expense for the three month period ended June 30, 2006 was $127,395 as compared
      to $64,778 for the corresponding 2005 period, an increase of $62,617 or 97%.
      The
      increase in interest expense is the result of the amortization expense in 2006
      of the fair value of warrants issued as incentives to lenders and the
      amortization of secured convertible debenture in 2006.





15




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





eTotalSource
      recognized a loss for the three month period ended June 30, 2006 in the amount
      of $143,047 or $0.01 per share, as compared with a loss of $317,993 or $0.01
      per
      share for the corresponding period ended June 30, 2005. The decrease of
      $ 174,946 or
      $0.003 per share was attributable to the increase of interest, decrease of
      operating expenses, decrease of payroll expenses and write-off of services
      and
      accrued payroll forfeited by an officer at the time of his resignation.





*Results
      of Operations For The Six Month Period Ended June 30, 2006 Compared To The
      Same
      Period Ended June 30, 2005*




***Revenues.***





Revenues
      for the six months ended June 30, 2006 were $25,647 versus $28,984 for the
      corresponding 2005 period, a decrease of $3,327 or 12%. The decrease was
      attributable to fewer sales of eTotalSource’s CD training products.





***Expenses.***





Operating
      expenses for the six month period ended June 30, 2006 were $330,396 as compared
      to $519,671 for the comparable 2005 period, a decrease of $189,275 or 36%.
      The
      decrease was primarily due to a decrease in decrease in consulting expense,
      professional services and payroll expenses. Payroll expenses for the six month
      period ended June 30, 2006 were $119,189 as compared to $197,242 for the
      comparable period in 2005, a decrease of $78,053 or 40%.





Interest
      expense for the six month period ended June 30, 2006 was $221,800 as compared
      to
      $112,539 for the corresponding 2005 period, an increase of $108,561 or 96%.
      The
      increase in interest expense is the result of the amortization expense in 2006
      of the fair value of warrants issued as incentives to lenders and the
      amortization of secured convertible debenture in 2006.





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





eTotalSource
      recognized a loss for the six month period ended June 30, 2006 in the amount
      of
      $440,834 or $0.01 per share, as compared with a loss of $601,951 or $0.01 per
      share for the corresponding period ended June 30, 2005. The decrease of $161,117
      or $0.003 per share was attributable to the increase of interest, decrease
      of
      operating expenses, decrease of payroll expenses and write-off of services
      and
      accrued payroll forfeited by an officer at the time of his resignation.





16




**Contractual
        Obligations and Commercial Commitments**
 
 As
        of
        June 30, 2006, the following obligations were outstanding:


Payments
      Due Period




**Contractual
                Obligations**
            
            **Less
                than 1 year**
            
            **2-3
                years**
            
            **4-5
                years**
            
            **After
                5 years**
            
            **Total**Judgments
                payable
            
            $
            204,788
            
            $
            .00
            
            $
            .00
            
            $
            .00
            
            $
            204,788Short
                Term note payables
            
            
            1,047,114
            
            
            .00
            
            
            .00
            
            
            .00
            
            
            1,047,114Convertible
                debentures (net discounts - $218,114)
            
            
            .00
            
            
            732,706
            
            
            .00
            
            
            .00
            
            
            732,706Other
                current liabilities
            
            
            1,774,880
            
            
            .00
            
            
            .00
            
            
            .00
            
            
            1,774,880Total
                contractual cash obligations
            
            $
            3,026,782
            
            $
            732,706
            
            $
            .00
            
            $
            .00
            
            $
            3,026,782




**Facilities
      and Leases**




eTotalSource
      leases its corporate offices in Yuba City, California on a month-to-month basis
      with no expiration date. Monthly rentals under the lease are approximately
      $1,900. Such premises are adequate to serve eTotalSource’s current staffing
      level. The offices consist of approximately 1,300 square feet.




**Dividends**




eTotalSource
      does not intend to pay dividends in the foreseeable future.





**Liquidity
      and Capital Resources**





At
      June
      30, 2006, eTotalSource had $435 in cash with which to conduct operations, a
      decline of $5,841 during the quarter. There can be no assurance that
      eTotalSource will be able to complete its business plan or fully exploit
      business opportunities that management may identify. Accordingly, eTotalSource
      will need to seek additional financing through loans, the sale and issuance
      of
      additional debt and/or equity securities, or other financing arrangements,
      including loans from our shareholders to cover expenses. eTotalSource presently
      has no capital availability except through the 2005 SEDA described below. All
      of
      the funds available under the 2005 SEDA have been delivered to the Company.
      The
      2005 SEDA is completed on behalf of Cornell and they continue to convert under
      the November 2005 Debentures and related warrants.




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




eTotalSource
      does not have capital sufficient to meet its current cash needs. We 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. eTotalSource will need to
      approximately $2 million to fund its operations over the next 12 months. At
      the
      present, our current cash will last approximately 30 days.




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 eTotalSource to allow it to cover its expenses as they
      may
      be incurred.




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




**The
      November 2005 Debentures.**




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





17




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





**The
      2005 SEDA.**




On
      April
      20, 2005, we entered into a Standby Equity Distribution Agreement with Cornell
      (the “ 2005
      SEDA ”).
      Pursuant to the 2005 SEDA, we could have, at our discretion, periodically sold
      to Cornell shares of our common stock for a total purchase price of up to
      $10,000,000. For each share of common stock purchased under the 2005 SEDA,
      Cornell would have paid eTotalSource 98% of the lowest volume weighted average
      price of our common stock on the OTCBB or other principal market on which our
      common stock is traded for the five trading days immediately following the
      notice date. Further, Cornell would have retained a fee of 5% of each advance
      under the 2005 SEDA. In connection with the 2005 SEDA, Cornell received a
      one-time commitment fee in the form of 3,833,334 restricted shares of our common
      stock.




The
      2005
      SEDA, along with the related Investor Registration Rights Agreement, related
      Placement Agent Agreement, related Irrevocable Transfer Agent Instructions,
      and
      related Escrow Agreement, all of which were dated as of April 20, 2005, were
      terminated by eTotalSource and Cornell pursuant to that certain Termination
      Agreement date November 2, 2005, by and between Cornell and the
      Company.




**2006
      SB-2 - Registration Statement**





On
      February 14, 2006, the Company’s registration statement on Form SB-2 was
      declared effective by the SEC. The Company registered the following shares
      in
      the SB-2: (i) 200,000,000 shares of common stock issued under the 2005 SEDA
      with
      Cornell; (ii) 31,250,000 shares of common stock underlying the 2005 Secured
      Convertible Debentures issued to Cornell; (iii) 3,833,334 shares of common
      stock
      issued to Cornell as a one-time commitment fee under the 2005 SEDA; (iv) 166,666
      shares of common stock issued to Newbridge Securities Corporation, an
      unaffiliated registered broker-dealer retained by eTotalSource in connection
      with the 2005 SEDA, as a one-time placement agent fee; and (v) an aggregate
      of
      9,340,000 shares of common stock previously issued in various financing
      transactions between eTotalSource and certain third-parties. The Company will
      receive no proceeds from any sale of its shares of common stock under the
      registration statement on Form SB-2.





**Item
      3. Controls and Procedures.**




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




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





18




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




In
      connection with the evaluation of eTotalSource’ internal controls during the
      Company’s last fiscal quarter, eTotalSource’ Chief Executive Officer and Interim
      Chief Financial Officer (one person) have determined that there are no changes
      to eTotalSource’ internal controls over financial reporting that have materially
      affected, or are reasonably likely to materially effect, the Company’s internal
      controls over financial reporting.





19




**PART
      II**




**OTHER
      INFORMATION**




**Item
      1. Legal Proceedings.**




None.




**Item
      2. Unregistered Sales of Equity Securities and use of
      Proceeds.**




None.




**Item
      3. Defaults Upon Senior Securities.**




Notes
      Payable issued on January 4, 2002 to an unrelated trust in the amount of $40,000
      (14% interest), $110,000 (18% interest), and $172,000 (15% interest), are all
      in
      default. As of June 30, 2006, $322,000 of principal and $32,250 of interest
      were
      outstanding on these notes.





Convertible
      Notes Payable issued on July 31, 2000 to unrelated parties in the total amount
      of $150,000 at 6% interest are in default. As of June 30, 2006, $150,000 of
      principal and $41,200 of interest was outstanding on this note.





Note
      Payable issued on December 3, 2001 to an unrelated party in the amount of
      $100,000 at 8% interest is in default. As of June 30, 2006, $100,000 of
      principal and $18,868 of interest was outstanding on this note.





Notes
      Payable issued on April 15, 2003 and August 3, 2003 to an unrelated trust in
      the
      amount of $52,483 and $262,631 at 10% interest are in default. As of June 30,
      2006, $315,114 of principal and $7,856 of interest was outstanding on this
      note.





A
      note
      payable issued on January 4, 2002 to a director in the amount of $10,000 at
      9.2%
      is in default. As of June 30, 2006, $10,000 of principal and $5,903 of interest
      was outstanding on this note.





Notes
      Payable issued on April 20, 2005 and June 27, 2005, respectively, to an
      unrelated party, due August 1, 2005, in the amount of $100,000 at 10%, and
      $25,000 at 12%, are in default. As of June 30, 2006, $125,000 of principal
      and
      $16,855 of interest were outstanding on these notes.




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




None.





**Item
      5. Other Information**





None.





20




**Item
      6. Exhibits and Reports on Form 8-K**




***a.***
            ***Exhibits
                pursuant to Regulation S-K:***




**DESIGNATION
                OF EXHIBIT AS SET FORTH IN ITEM 601 OF REGULATION
                S-B**
            
            **DESCRIPTION**
            
            **LOCATION**3.1
            
            Articles
                of Incorporation
            
            Incorporated
                by Reference to the Registration Statement of Form SB-2 filed onApril
                21, 2005.3.2
            
            Bylaws
            
            Incorporated
                by Reference to the Registration Statement of Form SB-2 filed on
                April 21,
                2005.3.3
            
            Certificate
                of Amendment of the Articles of Incorporation
            
            Incorporated
                by reference to the current report on Form 8-K dated July 14, 2003.
                (File
                no. 000-49797)3.4
            
            Articles
                of Amendment to the Articles of Incorporation
            
            Incorporated
                by reference to the current report on Form 8-K dated December 1,
                2003
                (File no. 000-49797)4.1
            
            2003
                Stock Plan
            
            Incorporated
                by reference to the current report on Form S-8 dated May 23, 2003.
                (File
                no. 333-105518)4.2
            
            2004
                Stock Plan
            
            Incorporated
                by reference to the current report on Form S-8 dated July 15, 2004.
                (File
                no. 333-111732)10.1
            
            Plan
                & Agreement of Reorganization dated December 18, 2002 by and between
                Premium Enterprises, Inc and eTotalSource, Inc.
            
            Incorporated
                by reference to the Annual Report on Form 8-K dated December 30,
                2002.
                (File no. 000-49797)10.2
            
            Employment
                Agreement of Terry Eilers dated February 7, 2000
            
            Incorporated
                by reference to the pending Registration Statement on Form SB-2 dated
                November 24, 2004 (File no.
                333-120786)




21




**DESIGNATION
                OF EXHIBIT AS SET FORTH IN ITEM 601 OF REGULATION
                S-B**
            
            **DESCRIPTION**
            
            **LOCATION**10.3
            
            Employment
                Agreement of Michael Sullinger dated August 1, 2002
            
            Incorporated
                by reference to the pending Registration Statement on Form SB-2 dated
                November 24, 2004 (File no. 333-120786)10.4
            
            Securities
                Purchase Agreement, dated October 6, 2004 by and between eTotalSource,
                Inc. and Cornell Capital Partners, L.P.
            
            Incorporated
                by reference to the pending Registration Statement on Form SB-2 dated
                November 24, 2004 (File no. 333-120786)10.5
            
            Investor
                Registration Rights Agreement, dated October 6, 2004, by and between
                eTotalSource, Inc. and Cornell Capital Partners, L.P.
            
            Incorporated
                by reference to the pending Registration Statement on Form SB-2 dated
                November 24, 2004 (File no. 333-120786)10.6
            
            Security
                Agreement, dated October 6, 2004, by and between eTotalSource, Inc.
                and
                Cornell Capital Partners, L.P.
            
            Incorporated
                by reference to the pending Registration Statement on Form SB-2 dated
                November 24, 2004 (File no. 333-120786)10.7
            
            Irrevocable
                Transfer Agent Instructions, dated October 6, 2004, by and among
                eTotalSource, Inc., Cornell Capital Partners, L.P., and Executive
                Registrar & Transfer, Inc.
            
            Incorporated
                by reference to the pending Registration Statement on Form SB-2 dated
                November 24, 2004 (File no. 333-120786)10.8
            
            Escrow
                Agreement (SEDA), dated October 6, 2004, by and among eTotalSource,
                Inc.,
                Cornell Capital Partners, L.P., and David Gonzalez, Esq.
            
            Incorporated
                by reference to the pending Registration Statement on Form SB-2 dated
                November 24, 2004 (File no. 333-120786)10.9
            
            Escrow
                Agreement (CD), dated October 6, 2004, by and among eTotalSource,
                Inc.,
                Cornell Capital Partners, L.P., and David Gonzalez, Esq.
            
            Incorporated
                by reference to the pending Registration Statement on Form SB-2 dated
                November 24, 2004 (File no. 333-120786)14.1
            
            Code
                of Ethics
            
            Incorporated
                by reference to the pending Registration Statement on Form SB-2 dated
                November 24, 2004 (File no. 333-120786)15.1
            
            Letter
                on Change in Certifying Accountants
            
            Incorporated
                by reference to the Company’s Current Report on Form 8-K filed on August
                30, 2006




22




**DESIGNATION
                OF EXHIBIT AS SET FORTH IN ITEM 601 OF REGULATION
                S-B**
            
            **DESCRIPTION**
            
            **LOCATION**16.1
            
            Letter
                on Departure of Director -Virgil Baker
            
            Incorporated
                by reference to the Company’s Current Report on Form 8-K filed on August
                30, 200616.2
            
            Letter
                on Departure of Director - John (Cody) Morrow
            
            Incorporated
                by reference to the Company’s Current Report on Form 8-K filed on August
                30, 200631.1
            
            Certification
                of Chief Executive Officer and Interim Chief Financial Officer (one
                person) pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange
                Act
            
            Provided
                Herewith32.1
            
            Certification
                of Chief Executive Officer and Interim Chief Financial Officer (one
                person) pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
                Section
                906 of the Sarbanes-Oxley Act of 2002
            
            Provided
                Herewith




***b.***  ***Reports
      on Form 8-K:***





On
      August
      30, 2006, the Company filed a Current Report on Form 8-K to disclose: (i) a
      change in the Company’s certifying accountants, (ii) the resignation of Virgil
      Baker as Chief Financial Officer and a director of the Company, and (iii) the
      resignation of John (Cody) Morrow as a director of the Company. All of the
      foregoing events occurred on May 15, 2006.





23




**SIGNATURES**




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


**eTotalSource,
                INC.**August
                30, 2006
            By:
            */s/
              Terry L. Eilers*Terry
                L. Eilers, President,
              Chief
                Executive Officer, Interim Chief Financial Officer and
                Director




24