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

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2004

                          Commission File No. 33-49797

                               eTOTALSOURCE, INC.
        (Exact name of small business issuer as specified in its charter)

                  COLORADO                             84-1066959
      ---------------------------------   --------------------------------------
       (State or Other Jurisdiction of     (I.R.S. Employer Identification No.)
       Incorporation or Organization)


                    1510 POOLE BOULEVARD, YUBA CITY, CA 95993
                    -----------------------------------------
                     Address of principal executive offices)

                                 (530) 751-9615
              (Registrant's Telephone Number, Including Area Code)

Check  whether  the  registrant  (1) filed all  reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act of 1934  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 [ ]

State the number of shares outstanding of each of the issuer's classes of common
equities as of the latest practicable date: AS OF SEPTEMBER 30, 2004, THERE WERE
41,046,316 OUTSTANDING SHARES OF THE ISSUER'S COMMON STOCK, NO PAR VALUE.

Transitional Small Business Disclosure Format: Yes [_]  No [X]

<PAGE>

                               eTOTALSOURCE, INC.

                                   FORM 10-QSB

                                TABLE OF CONTENTS
                                -----------------

PART I. - FINANCIAL INFORMATION
    ITEM 1.  CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.......................3
      Balance Sheets - September 30, 2004 and December 31, 2003................4
      Statements of Operations - Three and Nine Months Ended
       September 30, 2004 and 2003.............................................5
      Statements of Cash Flows - Three and Nine Months ended
       September 30, 2004 and 2003.............................................6
      Notes to Financial Statements............................................7
    ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.........9
    ITEM 3.  CONTROLS AND PROCEDURES..........................................13

PART II. - OTHER INFORMATION
    ITEM 1.  LEGAL PROCEEDINGS................................................14
    ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS........................14
    ITEM 3.  DEFAULTS UPON SENIOR SECURITIES..................................14
    ITEM 4.  SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS...............14
    ITEM 5.  OTHER INFORMATION................................................14
    ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.................................14

SIGNATURE PAGE

                                       2
<PAGE>

                                     PART I

                              FINANCIAL INFORMATION


ITEM 1.  FINANCIAL STATEMENTS

                               eTOTALSOURCE, INC.

                   CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                   -------------------------------------------

                            AS OF SEPTEMBER 30, 2004


                          INDEX TO FINANCIAL STATEMENTS
                          -----------------------------

PAGE       4      CONSOLIDATED CONDENSED BALANCE SHEETS AS OF SEPTEMBER 30, 2004
                  (UNAUDITED) AND DECEMBER 31, 2003

PAGE       5      CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS  FOR THE THREE
                  AND NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003 (UNAUDITED)

PAGE       6      CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS  FOR THE THREE
                  AND NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003 (UNAUDITED)

PAGES    7 - 8    NOTES  TO  CONSOLIDATED  CONDENSED  FINANCIAL STATEMENTS AS OF
                  SEPTEMBER 30, 2004 (UNAUDITED)

                                       3
<PAGE>

                               eTOTALSOURCE, INC.

                      CONSOLIDATED CONDENSED BALANCE SHEETS
                      -------------------------------------
                                   (UNAUDITED)

                                                     Sept 30, 04    Dec 31, 03
                                                    -------------  -------------
ASSETS                                               (Unaudited)
CURRENT ASSETS
Cash                                                      $ 1,964     $ 313,084
Accounts receivable                                         2,922           414
Other                                                       1,323             -
                                                    -------------  -------------
Total Current Assets                                        6,209       313,498
                                                    -------------  -------------

PROPERTY & EQUIPMENT
Equipment                                                  93,779        95,019
   Less accumulated depreciation                          (57,492)      (52,580)
                                                    -------------  -------------
                                                           36,287        42,439
                                                    -------------  -------------
OTHER ASSETS
Patent applications and trademarks, less
  $14,422 and $11,397 accumulated amortization             25,916        28,941
Deposits                                                    1,162         1,358
                                                    -------------  -------------
                                                           27,078        30,299
                                                    -------------  -------------

TOTAL ASSETS                                             $ 69,574     $ 386,236
                                                    =============  =============

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES

Convertible notes payable                               $ 250,000     $ 300,000
Other notes payable                                       632,000       662,000
Judgments payable                                         204,788       204,788
Accounts payable                                          193,645       224,471
Accrued compensation payable                              849,843       716,395
Accrued interest payable                                  175,199       149,070
Other accrued liabilities                                 300,182       329,776
Deferred revenue                                           78,750       112,500
                                                    -------------  -------------
Total Current Liabilities                               2,684,407     2,699,000

Commitments and Contingencies                                   -             -

Stockholders' Equity (Deficit)
Common stock; no par value; 100 million shares
  authorized, 41,046,316 shares issued and
  outstanding                                           5,112,753     3,656,884
Accumulated (deficit)                                  (7,727,586)   (5,969,648)
                                                    -------------  -------------
Total Stockholders' Equity                             (2,614,833)   (2,312,764)
                                                    -------------  -------------

Total Liabilities and Stockholders' Equity
  (Deficit)                                              $ 69,574     $ 386,236
                                                    =============  =============

                            See accompanying notes.


                                       4
<PAGE>

<TABLE>
<CAPTION>
                               eTOTALSOURCE, INC.

                 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

                                                    THREE MONTHS ENDED SEPT 30,    NINE MONTHS ENDED SEPT 30,
                                                    ----------------------------   ---------------------------
                                                            2004           2003            2004         2003
                                                    -------------  -------------   -------------   -----------
<S>                                                 <C>             <C>             <C>            <C>
REVENUES                                            $    70,598     $    34,757     $   185,865    $  180,957

GENERAL AND ADMINISTRATIVE EXPENSES                     598,309         178,797       1,803,447       909,008
                                                    -------------  -------------    -------------  -----------
OPERATING INCOME (LOSS)                                (527,711)       (144,040)     (1,617,582)     (728,051)

OTHER INCOME (EXPENSE)
Gain on sale of building                                      -              -                -       205,705
Gain on sale of asset                                         -              -               47             -
Interest expense                                        (36,313)        (91,504)       (140,193)     (406,975)
Rental income (loss)                                          -            (108)              -           352
Other                                                      (295)          1,335            (209)       (1,271)
                                                    -------------  -------------   -------------   -----------
TOTAL OTHER INCOME (EXPENSE)                            (36,608)        (90,277)       (140,355)     (202,189)
                                                    -------------  -------------   -------------   -----------

NET (LOSS)                                          $  (564,319)    $  (234,317)    $(1,757,937)   $ (930,240)
                                                    =============  =============   =============   ===========

BASIC AND DILUTED (LOSS) PER SHARE                  $     (0.02)    $     (0.01)    $     (0.05)   $    (0.05)
                                                    =============  =============   =============   ===========

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING           35,800,117      18,301,090      36,197,851    17,935,153
                                                    =============  =============   =============   ===========

                                            See accompanying notes.
</TABLE>


                                       5
<PAGE>

<TABLE>
<CAPTION>
                               eTOTALSOURCE, INC.

                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                 -----------------------------------------------
                                   (UNAUDITED)


                                                      Three Months Ended Sept 30,    Nine Months Ended Sept 30,
                                                    ------------------------------  -----------------------------
                                                             2004           2003             2004            2003
                                                    -------------  -------------    -------------     -----------
Cash Flows From (Used in) Operating Activities:
<S>                                                     <C>             <C>            <C>            <C>
Net (loss)                                              $   (564,319)   $  (234,317)   $(1,757,937)   $ (930,240)
Depreciation and amortization                                  5,280          5,154         16,419        25,491
Gain on sale of building                                           -              -              -      (205,705)
Gain on sale of asset                                              -              -            (47)            -
Loss of retirement of assets                                     295              -          1,482         2,891
Stock issued for services                                    391,000              -        981,300       375,300
Stock issued in lieu of interest                                   -              -         52,400        10,670
Stock options and warrants issued for services                25,617         15,151         76,293        44,959
Stock warrants issued in lieu of interest                      1,125         60,329          3,375       263,106
Changes in assets and liabilities:
Decrease (increase) in accounts receivable                       947         39,043         (2,108)        7,764
Decrease (increase) in other current assets                    6,301              -         (1,323)       40,358
Increase (decrease) in payables, credit cards
 and accrued liabilities                                     139,206           (477)       361,659        13,544
Increase (decrease) in deferred revenue                      (11,250)       (11,250)       (33,750)      (33,750)
                                                        -------------  -------------  -------------   -----------

Net Cash (Used in) Operating Activities                       (5,798)      (126,367)      (302,237)     (385,612)
                                                        -------------  -------------  -------------   -----------

Cash Flows From (Used in) Investing Activities:
Net proceeds from sale of building                                 -              -              -       142,596
Purchase of equipment                                              -         (1,419)        (9,077)       (2,236)
Decrease (increase) in deposits                                    -              -            196            14
                                                        -------------  -------------  -------------   -----------

Net Cash (Used in) Investing Activities                            -         (1,419)        (8,881)      140,374
                                                        -------------  -------------  -------------   -----------

Cash Flows From (Used in) Financing Activities:
Payments on note payables                                          -       (102,500)             -      (102,500)
Proceeds from issuance of notes payable                            -        250,000              -       360,000
Proceeds (payments) on mortgage payables                           -              -              -        (4,642)
                                                        -------------  -------------  -------------   -----------
Net Cash From Financing Activities                                 -        147,500              -       252,858
                                                        -------------  -------------  -------------   -----------

Increase (decrease) in Cash and Cash Equivalents              (5,798)        19,714       (311,118)        7,620

Cash and Cash Equivalents - Beginning of Period                7,762         38,232        313,082        50,326
                                                        -------------  -------------  -------------   -----------

Cash and Cash Equivalents - End of Period               $      1,964    $    57,946    $     1,964    $   57,946
                                                        =============  =============  =============   ===========

                                               See accompanying notes.
</TABLE>

                                       6
<PAGE>

                               eTOTALSOURCE, INC.

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                            AS OF SEPTEMBER 30, 2004
                            ------------------------
                                   (UNAUDITED)

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 and  nine-month  period ended
September 30, 2004 are not  necessarily  indicative of the results of operations
that can be expected for the fiscal year ending  December 31, 2004.  For further
information,  refer to the Company's audited financial  statements and footnotes
thereto included in Item 7 of Form 10-KSB filed by  eTOTALSOURCE,  Inc. on April
15, 2004.

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 - COMMON STOCK

During the three and  nine-months  ended  September 30, 2004, the Company issued
5,320,000  and  9,205,000  shares of common  stock for  services,  respectively,
expensed at the fair value of the stock based on  contemporaneous  stock  market
quotes  at  $.05  -  $.17  per  share  (a  total  of  $526,000  and  $1,116,300,
respectively).

During the three months ended June 30, 2004,  notes payable and accrued interest
totaling  $87,500 were  converted to 469,318  shares of common stock ($17 - $.20
per share) and  850,000  shares  were  issued in  payment  of  accounts  payable
totaling $120,000.

During the three months ended June 30, 2004,  the Company  issued 275,000 shares
of common stock to note holders as  compensation  for additional  interest.  The
Company has expensed the fair value of the stock based on contemporaneous  stock
market quotes at $.09 - .53 per share (a total of $52,400).

During the second  quarter of 2004,  the Company issued 697,391 shares of common
stock   previously   reserved  in   connection   with  the   December  30,  2002
reorganization.

NOTE C - CONTINGENCY

As  reported in the  December  31, 2003  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 third  quarter of 2004.  The  accompanying
condensed  consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.

NOTE D - STATEMENT OF CASH FLOWS INFORMATION AND SUPPLEMENTAL NON-CASH FINANCING
ACTIVITIES

Cash and cash equivalents include cash and short-term  investments with original
maturities   of  three  months  or  less.   Non-cash   investing  and  financing
transactions during the periods consist of the following:

                                                Nine months ended
                                                  September 30,
                                            ---------------------------
                                               2004         2003
                                            ---------------------------
Conversion of accounts payable                 $255,000     $     --
Conversion of notes payable                      87,500      160,670

                                       7
<PAGE>

                               eTOTALSOURCE, INC.

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                      AS OF SEPTEMBER 30, 2004 (CONTINUED)
                      ------------------------------------
                                   (UNAUDITED)


NOTE E - EVENTS SUBSEQUENT TO SEPTEMBER 30, 2004

      On  October  6,  2004,  we  entered  into a  Standby  Equity  Distribution
Agreement with Cornell  Capital  Partners,  L.P.  Pursuant to the Standby Equity
Distribution Agreement, we may, at our discretion,  periodically sell to Cornell
Capital  Partners 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 Standby Equity
Distribution  Agreement,  Cornell Capital  Partners will pay eTOTALSOURCE 98% of
the  lowest  volume   weighted   average  price  of  our  common  stock  on  the
Over-the-Counter  Bulletin Board or other  principal  market on which our common
stock is traded for the five trading days immediately following the notice date.
Further,  Cornell Capital Partners will retain a fee of 5% of each advance under
the Standby Equity Distribution Agreement. In connection with the Standby Equity
Distribution Agreement,  Cornell Capital Partners received a one-time commitment
fee in the form of  3,833,334  restricted  shares of our common  stock issued on
October 8, 2004.

      Also on October  6, 2004,  we issued a secured  Convertible  Debenture  to
Cornell  Capital  Partners,  L.P.  in  the  principal  amount  of  $175,000.  At
eTOTALSOURCE's  option, the entire principal amount and all accrued interest can
be either: (i) paid to the holder of the Convertible Debenture on the third-year
anniversary  of the  Convertible  Debenture  or (ii)  converted  into  shares of
eTOTALSOURCE common stock. The Convertible  Debenture is convertible into shares
of our common  stock as a price per share that is equal to the lesser of: (x) an
amount  equal to 120% of the closing bid price as listed on a principal  market,
as quoted by Bloomberg,  L.P., on October 6, 2004, or (y) an amount equal to 80%
of the lowest  closing bid price of our common  stock,  as quoted by  Bloomberg,
L.P., for the five trading days  immediately  preceding the conversion date. The
Convertible  Debenture  accrues  interest  at a  rate  of 5%  per  year  and  is
convertible at the holder's option. The Convertible  Debenture has a term of two
years and is secured by all of our non-cash assets.  At  eTOTALSOURCE's  option,
the  Convertible  Debenture may be paid in cash or converted  into shares of our
common stock unless  converted  earlier by the holder.  Except after an event of
default,  as set forth in the secured Convertible  Debenture,  the holder is not
entitled to convert such debenture for a number of shares of our common stock in
excess of that number of shares which,  upon giving  effect to such  conversion,
would cause the aggregate number of shares of common stock  beneficially held by
such holder and its  affiliated  to exceed  4.99% of our  outstanding  shares of
common  stock.  After we file a  registration  statement  with the United States
Securities  and  Exchange  Commission  registering  the  shares of common  stock
underlying the Convertible Debenture, we will issue a second secured Convertible
Debenture to Cornell Capital  Partners in the principal  amount of $175,000 upon
the same terms and conditions as the first secured Convertible Debenture above.

      Also on October 6, 2004, we engaged Newbridge Securities  Corporation,  an
unaffiliated registered  broker-deal,  to advise eTOTALSOURCE in connection with
the Standby Equity Distribution Agreement.  Newbridge Securities Corporation was
paid a one-time fee of $10,000 by the issuance of 166,666  restricted  shares of
eTOTALSOURCE's common stock on October 8, 2004.

                                       8
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

FORWARD-LOOKING   STATEMENTS  AND  ASSOCIATED   RISKS.   THIS  FILING   CONTAINS
FORWARD-LOOKING  STATEMENTS.  SUCH FORWARD-LOOKING STATEMENTS INCLUDE STATEMENTS
REGARDING,   AMONG  OTHER  THINGS,   (a)  THE  COMPANY'S   PROJECTED  SALES  AND
PROFITABILITY,  (b) THE COMPANY'S GROWTH  STRATEGIES,  (c) ANTICIPATED TRENDS IN
THE  COMPANY'S  INDUSTRY,  (d) THE COMPANY'S  FUTURE  FINANCING  PLANS,  (e) THE
COMPANY'S  ANTICIPATED  NEEDS FOR WORKING  CAPITAL,  (f) THE  COMPANY'S  LACK OF
OPERATIONAL  EXPERIENCE,  AND (g)  THE  BENEFITS  RELATED  TO  OWNERSHIP  OF THE
COMPANY'S COMMON STOCK.  FORWARD-LOOKING  STATEMENTS,  WHICH INVOLVE ASSUMPTIONS
AND DESCRIBE THE  COMPANY'S  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  THE  COMPANY'S   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 OR PLAN OF
OPERATIONS"  AS WELL AS IN THIS FILING  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 MATTERS DESCRIBED IN THIS
FILING  GENERALLY.  IN LIGHT OF THESE RISKS AND  UNCERTAINTIES,  THERE CAN BE NO
ASSURANCE THAT THE FORWARD-LOOKING  STATEMENTS  CONTAINED IN THIS FILING WILL IN
FACT OCCUR AS PROJECTED.

HISTORY AND OVERVIEW

      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  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 of Incorporation to change the name of
Premium Enterprises, Inc. to eTotalSource, Inc. For a period of time in 1988-94,
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
to continue  operations and ceased all operations in 1996. Premium wrote-off all
of its investment in equipment and licenses for tire recycling in 1996.  Premium
was dormant from 1996 until 2002, when it effectuated the  above-described  Plan
and Agreement of Reorganization with eTotalSource and its shareholders.

      eTotalSource,  Inc., a California corporation,  was founded on February 7,
2000. eTotalSource is a subsidiary of Premium and the sole business of Premium.

      eTOTALSOURCE  is  a  developer  and  supplier  of  proprietary  multimedia
software technology, and a publisher of multimedia training content. Our 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.  eTotalSource's  clients work with  eTotalSource to develop,  produce,
market,  and  distribute  multimedia  development  software.  eTotalSource  also
markets educational  training programs it has produced utilizing its proprietary
software.

      eTotalSource  was  founded  with the  express  goal of  designing a better
interface for information and education multimedia  delivery.  Approximately one
year after inception,  the beta Presenta ProTM platform was completed.  Presenta
ProTM  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  ProTM as a platform  for distance
learning  and  computer-based  training.  Presenta  ProTM is  delivered  via the
Internet, intranet, or CD/DVD.

OUR SOFTWARE AND IP

      eTotalSource  has developed a software  application,  Presenta  ProTM 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  ProTM is  designed  with cost saving  features  and it
offers post-production opportunities.

      Presenta ProTM features include:

      o    Multi-panel time synchronized presentation;

                                       9
<PAGE>

      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; and
      o    Easy to implement and use.

OUR BUSINESS MODEL

      eTotalSource   employs  a  dual  strategy  to  meet  market   demands  and
opportunities that includes both software licensing and publishing.

      eTotalSource  is  licensing   Presenta  ProTM  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 eTotalSource
is positioning the software package for a volume intensive  market.  The nearest
competitor  (in quality or  functionality)  prices its product at  substantially
higher  prices.   Our  aggressive  pricing  policy  is  intended  to  appeal  to
governments, schools and corporate clients.

      eTotalSource  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  the  program  sales.
eTotalSource  carefully  chooses its content,  identifying  unique  subjects and
niches offering more probable sales. We believe that these markets are generally
underserved  and  in  need  of  the  program   packages  that  are  produced  by
eTotalSource. 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; and
      o    Mandated School Internet Acceptable Use Policy.

INTELLECTUAL PROPERTY DIFFERENTIATION

      eTotalSource currently has five patents pending:

      o    Multiple  screen  operating  environment,  framework  and  tools  for
           transacting e-commerce;

      o    System  and  method  for   pre-loading   still  imagery  data  in  an
           interactive  multimedia  presentation;  provides an image pre-loading
           system that maximizes available network bandwidth;

      o    System  and method  for  dynamically  managing  web  content  using a
           browser independent  framework,  which provides an interactive system
           for enabling dynamic updating of web content to "live" websites;

      o    System  and   method  for   providing   an   interactive   multimedia
           presentation  environment with low bandwidth capable sessions,  which
           provides  an  integrated   presentation   environment  consisting  of
           multi-screen  clinic logically defined within a browser  application;
           and

      o    Presenta  Pro(TM)  production and delivery  system,  which provides a
           multi-screen environment for presenting multimedia presentations with
           video, images, flash images and text all integrating with the video.

                                       10
<PAGE>

      eTotalSource's technological  differentiation is based on high quality and
low  cost  software.  We  believe  that  Presenta  ProTM  is  easier  to use and
considerably more flexible than eTotalSource's  closest  competitor.  We believe
that  Presenta   ProTM  is  priced  to  be   affordable,   cost-effective,   and
training-efficient.  Presenta  Pro'sTM ease of  implementation  and quality it a
viable choice for authoring software and distance learning tools.

TECHNOLOGY

      The Presenta  ProTM,  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 ProTM system has been created using
the Delphi development  system. The server portion of Presenta ProTM 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  back-end 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 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 web site. We believe that  eTotalSource's  technology  and
user  interface  are advanced in their  simplicity of use and ability to deliver
multiple platforms and media simultaneously.

EMPLOYEES

      As of September  30, 2004, we had 12 full-time  employees,  of which three
were executive.  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.

GOING CONCERN

      There is substantial doubt about the ability of the Company to continue as
a going  concern as disclosed  in the notes to the  December 31, 2003  financial
statements  filed by the  Company on Form  10-KSB.  Those  conditions  continued
through the third quarter of 2004 as operating  losses and liquidity  shortages,
including  default  conditions on certain notes payable and judgments payable to
creditors,  remain. As of September 30, 2004, current liabilities exceed current
assets by approximately $2.7 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.

CRITICAL ACCOUNTING POLICIES

      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 American Institute of Certified Public  Accountants.
Revenues  are  recorded  net  of  an  allowance   for   estimated   returns  and
collectibility at the time of billing.

      Product  revenue  is  derived  primarily  from the  sale of  self-produced
training  multimedia and 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.

                                       11
<PAGE>

RESULTS OF OPERATIONS

      RESULTS OF OPERATIONS FOR THE THREE MONTH PERIOD ENDED  SEPTEMBER 30, 2004
      COMPARED TO THE SAME PERIOD ENDED SEPTEMBER 30, 2003

      REVENUES.

      Revenues for eTotalSource, Inc. (the "Company") for the three-months ended
September  30,  2004 were  $70,598  versus  $34,757 for the  corresponding  2003
period,  representing a 103% increase.  The increase was  attributable  to fewer
sales of the compact disk training products and increased sales of software.

      EXPENSES.

      Operating  expenses for the  three-month  period ended  September 30, 2004
were  $598,309 as compared  with  $178,797 for the  comparable  2003 period,  an
increase of $419,512.  The increase  was  primarily  due to an increase in stock
compensation and payroll expenses.  Payroll expenses for the three-month  period
ended  September  30, 2004 were $5,534  ,more than the  comparable  2003 period.
Interest expense for the three-month period ended September 30, 2004 was $36,313
as compared  with $91,504 for the  corresponding  2003  period.  The decrease in
interest  expense  is the  result of the June of 2003  retirement  of  mortgages
payable upon the sale of the Company's  business office building,  conversion of
debt to equity in the  fourth  quarter of 2003 and a  decrease  in  amortization
expense in 2004 of the fair value of warrants issued as incentives to lenders.

      GAIN (LOSS) FROM OPERATIONS.

      The Company  recognized a loss for the three-month  period ended September
30, 2004 in the amount of $564,319 or $(0.02) per share, as compared with a loss
of $234,317 or $(0.01) per share for the  corresponding  period ended  September
30, 2003.

      RESULTS OF OPERATIONS  FOR THE NINE MONTH PERIOD ENDED  SEPTEMBER 30, 2004
      COMPARED TO THE SAME PERIOD ENDED SEPTEMBER 30, 2003

      REVENUES.

      Revenues for the first nine months of the fiscal year ended  September 30,
2004  were  $185,865  versus  $180,957  for  the   corresponding   2003  period,
representing a 3% increase.  The decrease was attributable to fewer sales of the
CD training  products,  no  post-production  projects,  and  increased  sales of
software.

      EXPENSES.

      Operating expenses for the first nine months ended September 30, 2004 were
$1,803,447 as compared with $909,008 for the comparable 2003 period, an increase
of $894,439. The increase was primarily due to an increase in stock compensation
and payroll  expenses.  Interest expense for the first nine months of the fiscal
year ended  September  30, 2004  decreased to $140,193 as compared with $406,975
for 2003.

      GAIN (LOSS) FROM OPERATIONS.

      In the first nine months of the fiscal year, the Company recognized a loss
in the amount of  $1,757,937  or $(0.05) per share,  as compared  with a loss of
$930,240 or $(0.05) per share,  for the  corresponding  nine month  period ended
September 30, 2003.

                                       12
<PAGE>

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

      As of September 30, 2004, the following obligations were outstanding:

<TABLE>
<CAPTION>
                                                   Payments Due by Period
                             Less than                                   After
Contractual Obligations         1 year   2-3 years   4-5 years         5 years          Total
-----------------------     ----------  ----------   ---------    ------------   -------------
<S>                         <C>              <C>         <C>             <C>      <C>
Judgments payable           $  204,788       $ .00       $ .00           $ .00    $   204,788
Short Term note payables       882,000         .00         .00             .00        882,000
Other current liabilities    1,597,618         .00         .00             .00      1,597,618
                            ----------  ----------   ---------    ------------   -------------
Total contractual cash
obligations                 $2,684,406       $ .00       $ .00           $ .00    $ 2,684,406
                            ==========  ==========   =========    ============   =============
</TABLE>

      The Company  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 $3,000.

LIQUIDITY AND CAPITAL RESOURCES

      At  September  30,  2004,  the  Company  had  $1,964 in cash with which to
conduct  operations,  a decline of $5,798  during the  quarter.  There can be no
assurance  that the Company will be able to complete  its  business  plan and to
exploit fully any business  opportunity that management may be able to locate on
behalf of the Company.  Accordingly,  the Company  will need to seek  additional
financing  through loans, the sale and issuance of additional debt and/or equity
securities, or other financing arrangements.  The Company does not intend to pay
dividends in the foreseeable future.

ITEM 3.  CONTROLS AND PROCEDURES

      a.   EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

      Management  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
this 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.

      b.   CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING

      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.

                                       13
<PAGE>

                                     PART II

                                OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

      None.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

      On September 30, 2004,  each of the following  persons were issued 400,000
restricted  shares  of  common  stock  in  exchange  for  services  provided  to
eTotalSource:  Michael Sullinger, COO, Virgil Baker, CFO, and A. Richard Barber.
The Company did not receive any cash proceeds from the foregoing issuances.

      In July of 2004,  eTotalSource  issued 100,000 restricted shares of common
stock to an  unrelated  individual  for $9,000 of  services  accrued  for in the
second quarter. The Company did not receive any cash proceeds from the foregoing
issuance.

      Also in July of 2004,  eTotalSource  issued 1,400,000 shares of restricted
common stock to a former  contract  consultant in settlement of a contract.  The
fair value of the shares  were  accrued for in the second  quarter  based on the
quoted price of the stock on the date of  settlement,  a total of $126,000.  The
Company did not receive any cash proceeds from the foregoing issuance.

      Also in July of 2004,  eTotalSource  issued 2,000,000 shares of restricted
common stock to an unrelated company for sales and marketing  services completed
and  accepted  in the third  quarter.  The shares will be recorded at their fair
value,  $300,000,  based on the  quoted  price  of the  stock at the date of the
contract.  The  Company did not receive  any cash  proceeds  from the  foregoing
issuances.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

      None.

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

      None.

ITEM 5.  OTHER INFORMATION

      None.

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
--------------------  -------------------------------------   ------------------

                      Certification by Chief Executive         Provided herewith
                      Officer pursuant to 15 U.S.C. Section
31.1                  7241, as adopted pursuant to Section
                      302 of the Sarbanes-Oxley Act of 2002.

                                       14
<PAGE>

   DESIGNATION OF
EXHIBIT AS SET FORTH
   IN ITEM 601 OF
   REGULATION S-B                 DESCRIPTION                      LOCATION
--------------------  -------------------------------------   ------------------
                      Certification by Chief Financial         Provided herewith
31.2                  Officer pursuant to 15 U.S.C. Section
                      7241, as adopted pursuant to Section
                      302 of the Sarbanes-Oxley Act of 2002.

                      Certification by Chief Executive         Provided herewith
32.1                  Officer pursuant to 18 U.S.C. Section
                      1350, as adopted pursuant to Section
                      906 of the Sarbanes-Oxley Act of 2002

                      Certification by Chief Financial         Provided herewith
32.2                  Officer pursuant to 18 U.S.C. Section
                      1350, as adopted pursuant to Section
                      906 of the Sarbanes-Oxley Act of 2002

      b.   REPORTS ON FORM 8-K:

           None

                                       15
<PAGE>

                                   SIGNATURES

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

                                          eTOTALSOURCE, INC.



November 15, 2004                         By:  /s/ Terry L. Eilers
                                             ------------------------
                                              Terry L. Eilers, President, Chief
                                              Executive Officer, and Director



November 15, 2004                         By:  /s/ Virgil D. Baker
                                             ------------------------
                                              Virgil D. Baker, Chief Financial
                                              Officer, and Director

                                       16