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 September 30, 2005

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

                          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 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 |_|

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

                                  Yes  |_|                            No |X|

      As of  September  30,  2005,  the issuer had  46,710,821  shares of common
stock, no par value per share, issued and outstanding.

Transitional Small Business Disclosure Format: Yes |_|  No |X|

<PAGE>

                               eTOTALSOURCE, INC.

                                   FORM 10-QSB

                                TABLE OF CONTENTS
                                -----------------
<TABLE>
<CAPTION>

PART I. - FINANCIAL INFORMATION
<S>       <C>                                                                                             <C>
     ITEM 1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS..................................................3
      Balance Sheets - September 30, 2005 and December 31, 2004............................................4
      Statements of Operations - Three and Nine Months Ended September 30, 2005 and 2004...................5
      Statements of Cash Flows - Nine Months Ended September 30, 2005 and 2004.............................6
      Notes to Financial Statements........................................................................7
     ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION....................................9
     ITEM 3.  CONTROLS AND PROCEDURES.....................................................................23

PART II. - OTHER INFORMATION
     ITEM 1.  LEGAL PROCEEDINGS...........................................................................24
     ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS...................................................24
     ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.............................................................24
     ITEM 4.  SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS..........................................24
     ITEM 5.  OTHER INFORMATION...........................................................................24
     ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K............................................................25

SIGNATURE PAGE............................................................................................27
</TABLE>

                                       2
<PAGE>


                                     PART I

                              FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS.

                               eTOTALSOURCE, INC.
                   CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                   -------------------------------------------
                            As of September 30, 2005

                          INDEX TO FINANCIAL STATEMENTS
                          -----------------------------
<TABLE>
<CAPTION>

                                                                                                     PAGE
                                                                                                     ----

<S>                                                                                                   <C>
CONDENSED  CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2005 AND DECEMBER 31, 2004                  4

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER          5
30, 2005 AND 2004

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005           6
AND 2004

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2005                          7
</TABLE>

                                       3
<PAGE>


                                eTotalSource, Inc.
                       Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>

ASSETS                                                                             September 30, 2005         December 31, 2004
                                                                                 ----------------------    ----------------------
Current Assets
<S>                                                                                         <C>                       <C>
Cash                                                                                        $   12,661                $   37,849
Other                                                                                            1,242                     1,296
                                                                                 ----------------------    ----------------------

Total Current Assets                                                                            13,903                    39,145
                                                                                 ----------------------    ----------------------

Property and Equipment
Furniture and equipment                                                                         86,450                    88,122
   Less accumulated depreciation                                                              (64,809)                  (56,786)
                                                                                 ----------------------   ----------------------

                                                                                                21,641                    31,336
                                                                                 ----------------------    ----------------------

Other Assets
Patent applications and trademarks, less $18,456 and $15,431 accumulated
amortization, respectively                                                                      21,882                    24,907
Deposits                                                                                           721                     1,162
                                                                                 ----------------------    ----------------------

                                                                                                22,603                    26,069
                                                                                 ----------------------    ----------------------

Total Assets                                                                                $   58,147                $   96,550
                                                                                 ======================    ======================

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities

Convertible notes payable less $89,856 discount                                             $  260,143               $   417,569
Other notes payable                                                                            757,000                   632,000
Judgments payable                                                                              204,788                   204,788
Accounts payable                                                                               370,269                   183,461
Accrued compensation payable                                                                 1,081,983                   845,880
Accrued interest payable                                                                       263,692                   185,475
Deferred revenue                                                                                33,750                    67,500
                                                                                 ----------------------    ----------------------
Total Current Liabilities                                                                    2,971,625                 2,536,673

Convertible Notes Payable, less current maturities and $170,526 discount                       179,474                   117,900
                                                                                 ----------------------    ----------------------

Total Liabilities                                                                            3,151,099                 2,654,573
                                                                                 ----------------------    ----------------------

Commitments and Contingencies

Stockholders' Equity (Deficit)
Common stock; no par value; 300 million shares authorized,
  46,710,821 shares issued and outstanding                                                   6,121,817                 5,784,300

Accumulated (deficit)                                                                      (9,214,769)               (8,342,323)
                                                                                 ----------------------    ----------------------

Total Stockholders' Equity (Deficit)                                                       (3,092,952)               (2,558,023)
                                                                                 ----------------------    ----------------------

Total Liabilities and Stockholders' Equity (Deficit)                                        $   58,147                $   96,550
                                                                                 ======================    ======================
</TABLE>

                            See accompanying notes.

                                       4
<PAGE>


                               eTotalSource, Inc.
                 Condensed Consolidated Statements of Operations
<TABLE>
<CAPTION>

                                               Three Months Ended September 30,      Nine Months Ended September 30,
                                              -----------------------------------   --------------------------------
                                                    2005              2004              2005              2004
                                                ------------      ------------      ------------      ------------

<S>                                             <C>               <C>               <C>               <C>
Revenues                                        $     12,852      $     70,598      $     41,836      $    185,865

General and Administrative Expenses                  207,584           598,309           727,254         1,803,447
                                                ------------      ------------      ------------      ------------

Operating Income (Loss)                             (194,732)         (527,711)         (685,418)       (1,617,582)

Other Income (Expense)
Gain (loss) on sale or retirement of assets             (178)               --              (245)               47

Interest expense                                     (75,585)          (36,313)         (188,125)         (140,193)

Other income (expense), net                               --              (295)            1,342              (209)
                                                ------------      ------------      ------------      ------------
Total Other Income (Expense)                         (75,763)          (36,608)         (187,028)
                                                                                                          (140,355)
                                                ------------      ------------      ------------      ------------

Net (Loss)                                      $   (270,495)     $   (564,319)     $   (872,446)     $ (1,757,937)
                                                ============      ============      ============      ============

Basic and Diluted (Loss) per Share              $      (0.01)     $      (0.02)     $      (0.02)     $      (0.05)
                                                ============      ============      ============      ============

Weighted Average Common Shares Outstanding        46,710,821        35,800,117        46,710,821        36,197,851
                                                ============      ============      ============      ============
</TABLE>



                             See accompanying notes.

                                       5
<PAGE>


                           eTotalSource, Inc.
             Condensed Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>

                                                                                    Nine months Ended September 30,
                                                                              --------------------------------------------
                                                                                     2005                    2004
                                                                              --------------------    --------------------
Cash Flows From (Used in) Operating Activities:
<S>                                                                                   <C>                   <C>
Net (loss)                                                                            $ (872,446)           $ (1,757,937)

Depreciation and amortization                                                              82,071                  16,419
Gain (loss) on sale or retirement of assets                                                   245                   1,435

Stock issued for services and in lieu of interest                                               -               1,033,700

Stock options and warrant expense                                                          72,068                  79,668
Changes in assets and liabilities:

Decrease (increase) in accounts receivable                                                      -                 (2,108)
Decrease (increase) in other current assets                                                    54                 (1,323)
Decrease (increase) in deposits                                                               441                     196
Increase (decrease) in payables, credit cards and accrued liabilities                     501,129                 361,659

Increase (decrease) in deferred revenue                                                  (33,750)                (33,750)
                                                                              --------------------    --------------------

Net Cash (Used in) Operating Activities                                                 (250,188)               (302,041)
                                                                              --------------------    --------------------

Cash Flows From (Used in) Investing Activities:

Purchase of equipment                                                                           -                 (9,077)
                                                                              --------------------    --------------------

Net Cash (Used in) Investing Activities                                                         -                 (9,077)
                                                                              --------------------    --------------------

Cash Flows From (Used in) Financing Activities:
Proceeds from issuance of convertible debenture                                           100,000                       -
Proceeds from issuance of notes payable                                                   125,000                       -
                                                                              --------------------    --------------------

Net Cash From Financing Activities                                                        225,000                       -
                                                                              --------------------    --------------------

Increase (decrease) in Cash and Cash Equivalents                                         (25,188)               (311,118)

Cash and Cash Equivalents - Beginning of Period                                            37,849                 313,082
                                                                              --------------------    --------------------

Cash and Cash Equivalents - End of Period                                              $   12,661               $   1,964

                                                                              ====================    ====================
</TABLE>
                            See accompanying notes.


                                       6
<PAGE>

                               eTOTALSOURCE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2005

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  periods ended
September 30, 2005 are not  necessarily  indicative of the results of operations
that can be expected for the fiscal year ending  December 31, 2005.  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 25,
2005.

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 - Going Concern Contingency

As  reported in the  December  31, 2004  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 2005.  The  accompanying
condensed  consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.

Note C - Convertible Debentures

On April 20, 2005, the Company and Cornell Capital Partners, LP ("Cornell"), the
holder of two  $175,000  convertible  debentures  issued by the Company in 2004,
agreed to modify the 20% floating  conversion  rate of the debentures to a fixed
rate equal to $0.0112 per share.  In addition,  the term of the  debentures  was
reset for a new 24-month period beginning April 20, 2005, when the principal and
accrued  interest  shall be, at the Company's  option,  either paid or converted
into shares of common stock at a conversion price equal to $0.0112 per share.

The debentures are reported net of a $170,526  unamortized discount related to a
beneficial  conversion feature. This discount represents the quoted market price
of the  Company's  common  stock  on  April  20,  2005 in  excess  of  Cornell's
conversion  rate.  The discount is being  amortized over the revised term of the
debentures.

On  August  24,  2005,  the  Company  issued to  Cornell  a secured  convertible
debenture in the principal amount of $100,000.  Any part of the principal amount
of  the  Secured  Convertible  Debenture,  plus  accrued  interest  thereon,  is
convertible at any time up to maturity,  at Cornell's option, into shares of the
Company's  common  stock at a  conversion  price  equal to  $0.02.  The  Secured
Convertible  Debenture is secured by substantially  all of the Company's assets,
has a one-year  term and  accrues  interest  at 12% per annum.  In the event the
Secured  Convertible  Debenture is  redeemed,  then  eTotalSource  will issue to
Cornell a warrant to purchase  5,000,000 shares at an exercise price of $0.02 or
as subsequently adjusted under the terms of the warrant.

                                       7
<PAGE>

Note D - Notes Payable

On April 20, 2005,  the Company  borrowed  $100,000 from Cornell and issued it a
note payable with interest accruing at 12%. The note and accrued interest is due
on the earlier of (i) the effective  date a proposed  Registration  Statement on
Form SB-2 is filed with the United  States  Securities  and Exchange  Commission
(the "SEC"), or (ii) August 1, 2005 (currently in default).  The note is secured
by 8,117,946 shares of Company common stock  beneficially held by three officers
of the Company.

On June 27, 2005, the Company borrowed $25,000 from Cornell and issued it a note
payable with interest  accruing at 10%. The note and accrued  interest is due on
the earlier of (i) the effective date a proposed Registration  Statement on Form
SB-2 is filed with the SEC or (ii) August 1, 2005 (currently in default).

Note E - Subsequent Events

eTotalSource  sought to register  244,590,000  shares of common stock underlying
the  2005  SEDA  pursuant  to  a  Registration   Statement  on  Form  SB-2  that
eTotalSource  filed  with the SEC on April  21,  2005  (the  "2005  Registration
Statement").  We withdrew the 2005  Registration  Statement on October 21, 2005.
The reason for the withdrawal of the 2004 Registration Statement was based on us
entering into a new financing  arrangement with Cornell that we were negotiating
in  late-March  2005,  and  therefore,  we did not  register the shares of stock
underlying the 2004 SEDA.


      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
Debenture").  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 Debenture was issued to consolidate  these prior  debentures  plus
accrued and unpaid  interest  thereon as of November 2, 2005,  which amounted to
$17,404 the October  2004  Debenture  and the  December  2004  Debenture  and to
$2,465.75 for the August 2005 Debenture,  and to reflect  additional  funding to
the Company in the amount of $530,130.

      The  November  2005  Debenture  is  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.


                                       8
<PAGE>

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         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 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

      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 from
1988 to 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 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:  the 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.

                                       9
<PAGE>

         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 Intellectual Property

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

      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 directs
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  has
positioned  the  software  package for a volume  intensive  market.  The nearest
competitor  (in  quality  or  functionality),  Virage,  prices  its  product  at
substantially higher prices. The aggressive pricing policy is intended to appeal
to governments, schools and corporate clients.

      eTotalSource  publishes and produces original content and  post-production
services,  and participates in the sales and distribution of the final published
product.

                                       10
<PAGE>

      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
      o     Mandated School Internet Acceptable Use Policy ("AUP")

      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,   which  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.

      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,  compact  disk ("CD") or digital  video disk  ("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
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's
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.

                                       11
<PAGE>

      eTotalSource  has no plans at this  time for  purchases  or sales of fixed
assets which would occur in the next 12 months.

      Employees

      As of September 30, 2005, we had three full-time  employees,  all 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, 2004  financial
statements  filed by  eTotalSource  on Form  10-KSB  on March  25,  2005.  Those
conditions  continued  through the third quarter of 2005  resulting in operating
losses and liquidity  shortages,  including default  conditions on certain notes
payable and judgments  payable to creditors.  As of September 30, 2005,  current
liabilities exceed current assets by approximately $2.96 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.

Risk Factors

eTotalSource Lost Money For The Years Ended December 31, 2004 and 2003, The Nine
months Ended September 30, 2005, And Losses May Continue In The Future

      For the 12 months ended December 31, 2004 and 2003, we incurred a net loss
of $2,372,675 and $1,966,575,  respectively. For the nine months ended September
30, 2005, we incurred a net loss of $872,446.  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 rely  on the  funds  in  connection  with  the
Convertible  Debentures,  as described in detail below under the section of this
Report  entitled  "Liquidity & Capital  Resources."  If we are not successful in
reaching and maintaining  profitable  operations,  we may not be able to attract
sufficient capital to continue our operations.  Our inability to obtain adequate
financing will result in the need to curtail business operations and will likely
result in a lower stock price.

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

                                       12
<PAGE>

      We had negative  working  capital of $2,497,528 and $2,385,502 at December
31, 2004 and  December  31,  2003,  respectively,  negative  working  capital of
$2,957,722  for the nine months ended  September 30, 2005,  and continue to need
cash for operations.  We have relied on significant  external  financing to fund
our operations.  As of September 30, 2005, we had $12,661 of cash on hand, total
current assets were $13,903,  and our total current liabilities were $2,971,625.
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,  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 September  30, 2005, we have issued an aggregate of 11,731,908
shares  of  common  stock to  finance  our  operations.  We will  issue up to an
additional 33,534,700 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.

All Of Our Assets Are Securing Our Obligations To Cornell

      Pursuant to the terms  contained  in that  certain  Amended  and  Restated
Security  Agreement  dated  November 2, 2005,  by and between  eTotalSource  and
Cornell,  all of our obligations under the Securities  Purchase  Agreement,  the
Secured Convertible Debenture,  the Investor Registration Rights Agreement,  the
Irrevocable Transfer Agent Instructions, and the Escrow Agreement are secured by
substantially  all of our assets as of such date or  thereafter  acquired by us.
Accordingly,  if we are  unable  to  satisfy  any of our  obligations  under the
foregoing agreements,  our assets may be foreclosed upon and our business may be
shut down.

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.

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

      Our success is dependent on the efforts,  experience and  relationships of
Terry Eilers, our Chief Executive Officer and Chairman,  Virgil Baker, our Chief
Financial  Officer and a Director,  and Michael  Sullinger,  our Chief Operating
Officer and a Director,  and other essential staff. If any 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.

                                       13
<PAGE>

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 shares,  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.  If the  selling  shareholders  all elect to sell their  shares of our
common stock at the same time,  the market price of our shares may decrease.  It
is possible that the selling shareholders will offer all of the shares for sale.
Further,  because it is possible  that a  significant  number of shares could be
sold at the  same  time,  the  sales,  or the  possibility  thereof,  may have a
depressive effect on the market price of our common stock.

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

      Our common  stock is  currently  traded on the  Over-the-Counter  Bulletin
Board and Pink Sheets.  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 3, 2005 through
September  30, 2005 was 57,682  shares.  The high and low  trading  price of our
common stock  during the same period has been $0.0525 and $0.015,  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.

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:

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

      o     that are not traded on a "recognized" national exchange;

      o     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

                                       14
<PAGE>

      o     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 SEC, 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.

eTotalSource's  Competition  is Better  Capitalized  and Has  Greater  Marketing
Capabilities Which Could Adversely Affect  eTotalSource's  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.

                                       15
<PAGE>

Critical Accounting Policies

      Revenue Recognition

      eTotalSource  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
("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.

      Other

      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 convertible  debentures,  common stock and common
stock warrants and options.

                                       16
<PAGE>

Results of Operations

      Results of Operations For The Three-Month  Period Ended September 30, 2005
      Compared To The Same Period Ended September 30, 2004

      Revenues.

      Revenues for the three-months ended September 30, 2005 were $12,852 versus
$70,598 for the  corresponding  2004  period,  a decrease of $57,746 or 82%. The
decrease was  attributable to fewer sales of the compact disk training  products
and decreased sales of software.

      Expenses.

      Operating  expenses for the  three-month  period ended  September 30, 2005
were  $207,584 as compared with  $598,309 for the  comparable  period in 2004, a
decrease of $390,725 or 65%.  The decrease  was  primarily  due to a decrease in
stock  compensation and payroll  expenses.  Payroll expenses for the three-month
period  ended  September  30, 2005 were  $79,081 as compared to $108,862 for the
comparable period in 2004, a decrease of $29,781 or 27%.

      Interest  expense for the three-month  period ended September 30, 2005 was
$75,585 as compared with $36,313 for the corresponding  2004 period, an increase
of  $39,272  or 108%.  The  increase  in  interest  expense is the result of the
amortization  expense in 2005 of the fair value of warrants issued as incentives
to lenders of a secured convertible debenture in 2005.

      Gain (Loss) From Operations.

      The  Company  recognized  a net  loss  for the  three-month  period  ended
September  30, 2005 in the amount of  $270,495  or $0.01 per share,  as compared
with a loss of  $564,319,  $0.02 per share for the  corresponding  period  ended
September 30, 2004. The decrease of $293,824 or $0.01 per share was attributable
to the decrease in stock issued as compensation and in lieu of interest.

      Results of Operations For The Nine-Month  Period Ended  September 30, 2005
      Compared To The Same Period Ended September 30, 2004

      Revenues.

      Revenues for the nine-month  period ended  September 30, 2005 were $41,836
versus  $185,865 for the  corresponding  2004 period,  a decrease of $144,029 or
77%. The decrease was attributable to fewer sales of  eTotalSource's CD training
products and decreased sales of software.

      Expenses.

      Operating expenses for the nine-month period ended September 30, 2005 were
$727,254 as compared to $1,803,447 for the comparable 2004 period, a decrease of
$1,076,193  or 60%.  The  decrease  was  primarily  due to a  decrease  in stock
compensation and payroll  expenses.  Payroll expenses for the nine-month  period
ended  September  30,  2005  were  $276,323  as  compared  to  $327,698  for the
comparable period in 2004, a decrease of $51,375 or 16%.

      Interest  expense for the nine-month  period ended  September 30, 2005 was
$188,125 as compared to $140,193 for the corresponding  2004 period, an increase
of  $47,932  or 34%.  The  increase  in  interest  expense  is the result of the
amortization  expense in 2005 of the fair value of warrants issued as incentives
to lenders of a secured convertible debenture in 2005.

                                       17
<PAGE>

         Gain (Loss) From Operations.

      The  Company  recognized  a net  loss  for  the  nine-month  period  ended
September  30, 2005 in the amount of  $872,446  or $0.02 per share,  as compared
with a loss of $1,757,937 or $0.05 per share for the corresponding  period ended
September 30, 2004. The decrease of $885,491 or $0.03 per share was attributable
to the decrease in stock compensation and payroll expenses.

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  $2,500.  Such premises are adequate to serve  eTotalSource's
current staffing level. The offices consist of approximately 1,700 square feet.

Dividends

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

Liquidity and Capital Resources

      At  September  30,  2005,  eTotalSource  had $12,661 in cash with which to
conduct operations, a decline of $25,188 during the preceding nine months. 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 except contingently available through the
Convertible Debentures described below.

      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.

                                       18
<PAGE>

      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 existing capital may be a sufficient  impediment to prevent eTotalSource
from  accomplishing  the  goal of  successfully  executing  its  business  plan.
eTotalSource will need to raise  approximately $2 million in additional funds to
conduct its business  activities  over the next 12 months.  At the present,  our
current cash will last approximately a month.

      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 SEDAs
      ---------

      The 2004 SEDA

      On  October  6,  2004,  we  entered  into a  Standby  Equity  Distribution
Agreement  (the "2004  SEDA") with Cornell  Capital  Partners,  LP  ("Cornell").
Pursuant to the 2004 SEDA, we were able to periodically sell to Cornell,  at our
discretion,  shares of our common stock for a total  purchase price of up to $10
million.  For each share of common stock purchased under the 2004 SEDA,  Cornell
was obligated to pay us 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  consecutive  trading  days
immediately  following  the advance  notice date.  Under the 2004 SEDA, we could
periodically  have sold shares of common stock to Cornell,  known as an advance,
to raise capital to fund our working  capital needs.  We could have requested an
advance  every seven  trading  days with a maximum of $200,000  per  advance.  A
closing  could have been held five  trading  days after such  written  notice at
which time we were  obligated to deliver shares of common stock and Cornell will
pay the  advance  amount.  Cornell  was  entitled  to retain a fee of 5% of each
advance  under the 2004 SEDA.  In  connection  with the 2004 SEDA, on October 6,
2004, we paid Cornell a one-time  commitment fee in the form of 3,833,334 shares
of our common stock.

      In  connection  with  the  2004  SEDA,  we  engaged  Newbridge  Securities
Corporation  ("Newbridge"),   a  registered  broker-dealer,   to  advise  us  in
connection  with the 2004 SEDA.  For its services,  Newbridge  received a fee of
$10,000 paid in 166,666 shares of our common stock on October 6, 2004.

      eTotalSource   sought  to  register  15,000,000  shares  of  common  stock
underlying the 2004 SEDA pursuant to a Registration  Statement on Form SB-2 that
eTotalSource  filed with the SEC on November  24,  2004 (the "2004  Registration
Statement").  We could  have  requested  advances  under  the 2004 SEDA once the
underlying  shares of stock became  registered with the SEC pursuant to the 2004
Registration Statement.  Thereafter, we could have continued to request advances
until Cornell  advanced $10 million or 24 months after the effective date of the
Registration   Statement,   whichever  occurred  first.  We  withdrew  the  2004
Registration  Statement on April 19, 2005.  The reason for the withdrawal of the
2004  Registration  Statement  was  based on us  entering  into a new  financing
arrangement  with Cornell  that we were  negotiating  in  late-March  2005,  and
therefore,  we did not register the shares of stock underlying the 2004 SEDA. On
November 2, 2005, we entered into a Termination  Agreement with Cornell  whereby
we terminated  the 2004 SEDA,  and the related  Registration  Rights  Agreement,
Placement Agent Agreement and Escrow Agreement.

                                       19
<PAGE>

      The 2005 SEDA

      On April 20,  2005,  we entered  into a new SEDA with  Cornell  (the "2005
SEDA"). Pursuant to the 2005 SEDA, we were able to periodically sell to Cornell,
at our  discretion,  shares of our common stock for a total purchase price of up
to $10 million.  For each share of common stock  purchased  under the 2005 SEDA,
Cornell would 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. Under the 2004 SEDA, we could  periodically have sold
shares of common stock to Cornell, known as an advance, to raise capital to fund
our  working  capital  needs.  We were able to request an  advance  every  seven
trading  days with a maximum of $200,000  per  advance.  Cornell was entitled to
retain a fee of 5% of each advance under the 2005 SEDA.

      We may have  requested  advances  under the 2005 SEDA once the  underlying
shares were registered with the SEC pursuant to the 2005 Registration  Statement
described  below.  Thereafter,  we may have continued to request  advances until
Cornell had advanced $10 million or 24 months  after the  effective  date of the
accompanying registration statement, whichever occurred first.

      The amount of each  advance was limited to a maximum draw down of $200,000
every seven trading days. At a recent stock price of $0.02, we would have had to
issue  10,204,081  shares of common  stock to Cornell  to draw down the  maximum
advance  amount of $200,000.  The amount  available  under the 2005 SEDA was not
dependent  on the price or volume of our common  stock.  Our  ability to request
advances was conditioned  upon our  registering  shares of common stock with the
SEC pursuant to the 2005 Registration  Statement.  In addition,  we may not have
requested  advances if the shares to be issued in connection  with such advances
would have resulted in Cornell owning more than 9.9% of our  outstanding  common
stock. We did not have any agreements with Cornell regarding the distribution of
such stock,  although  Cornell  indicated  that it intended to promptly sell any
stock received under the 2005 SEDA.

      We could not have  predicted  the actual  number of shares of common stock
that were to be issued pursuant to the 2005 SEDA, in part,  because the purchase
price of the shares would have fluctuated based on prevailing  market conditions
and we had not  determined  the total  amount of  advances  we intended to draw.
Nonetheless,  we estimated the number of shares of our common stock that were to
be issued using  certain  assumptions.  Based on our recent stock price of $0.02
and that we  registered  200 million  shares of our common  stock under the 2005
SEDA  pursuant to a  Registration  Statement on Form SB-2 that we filed with the
SEC on April 21, 2005 (the "2005 Registration  Statement"),  we could have drawn
down a maximum gross amount of $3,920,000 under the 2005 SEDA. These 200 million
shares would have represented  approximately 81% of our outstanding common stock
upon issuance.

      There was an inverse  relationship  between our stock price and the number
of shares  to be  issued  under  the 2005  SEDA.  That is,  as our  stock  price
declined,  we would be  required to issue a greater  number of shares  under the
2005 SEDA for a given  advance.  The issuance of a larger number of shares under
the 2005 SEDA may have  resulted in a change of  control.  That was, if all or a
significant block of such shares were held by one or more  shareholders  working
together,  then such shareholder or shareholders would have had enough shares to
assume control of eTotalSource by electing its or their own directors.

                                       20
<PAGE>

      In order for us to have utilized the full $10 million  available under the
2005  SEDA,  it may have been  necessary  for our  shareholders  to  approve  an
increase in our authorized common stock and for us to have registered additional
shares of common  stock.  That was the case based on our recent  stock  price of
$0.02.  eTotalSource was authorized in its Articles of Incorporation to issue up
to 300 million  shares of common stock.  As of September 30, 2005,  eTotalSource
had 46,710,821 shares of common stock outstanding.  eTotalSource  registered 200
million  shares of common  stock to be issued  under the 2005 SEDA by filing the
2005  Registration  Statement,  which as of the date of this  Report  was  being
reviewed by the SEC and had not been declared effective.

      In the event we desired to draw down any available amounts remaining under
the 2005 SEDA after we had issued the 200 million shares being registered in the
2005 Registration  Statement (and assuming we had obtained  shareholder approval
to  increase  our  authorized  common  stock),  we would  have had to file a new
registration  statement  to cover  such  additional  shares  which we would have
issued for additional draw downs under the 2005 SEDA.

      We did not pay any  commitment  fees to Cornell,  nor any placement  agent
fees to Newbridge,  in connection with the 2005 SEDA. The costs  associated with
the  2005  Registration   Statement,   estimated  to  be  approximately  $85,000
(consisting  primarily  of  professional  fees),  were borne by us. There was no
other significant closing conditions to draws under the 2005 SEDA.

      eTotalSource  sought  to  register  244,590,000  shares  of  common  stock
underlying the 2005 SEDA pursuant to a Registration  Statement on Form SB-2 that
eTotalSource  filed  with the SEC on April  21,  2005  (the  "2005  Registration
Statement").  We withdrew the 2005  Registration  Statement on October 21, 2005.
The reason for the withdrawal of the 2004 Registration Statement was based on us
entering into a new financing  arrangement with Cornell that we were negotiating
in  late-March  2005,  and  therefore,  we did not  register the shares of stock
underlying the 2004 SEDA.

      CONVERTIBLE DEBENTURES

      On August 19, 2005, we entered into a Securities  Purchase  Agreement with
Cornell,  pursuant to which we issued to Cornell convertible-  debentures in the
principal amount of $100,000 (the "August 2005 Debenture"). The debentures had a
12-month term,  accrue annual interest at 12%, were secured by substantially all
of our assets, and were convertible at the holder's option at a conversion price
equal to  $0.02,  or as  adjusted  pursuant  to the  terms  of the  2005  August
Debenture.  In connection with the 2005 August Debenture, we issued to Cornell a
warrant for 5,000,000  shares of our common stock, at an exercise price equal to
$0.02 or as adjusted under the terms of the warrant.

      On November 2, 2005, we entered into a Termination Agreement with Cornell,
whereby we terminated the Securities  Purchase  Agreement,  the related Investor
Registration  Rights  Agreement,  Escrow  Agreement,   Security  Agreement,  and
Irrevocable  Transfer Agent  Instructions,  all dated as of August 19, 2005, the
August  2005  Debenture  and an Amended  and  Restated  Escrow  Agreement  dated
September 1, 2005, were terminated.

      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
Debenture").  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 Debenture was issued to consolidate  these prior  debentures  plus
accrued and unpaid  interest  thereon as of November 2, 2005,  which amounted to
$17,404 for the October 2004  Debenture and the December  2004  Debenture and to
$2,465.75 for the August 2005 Debenture,  and to reflect  additional  funding to
the Company in the amount of $530,130.

                                       21
<PAGE>

      The  November  2005  Debenture  is  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  Debenture is 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.

                                       22
<PAGE>

Item 3.  Controls and Procedures

      a.    Evaluation Of Disclosure Controls And Procedures

      eTotalSource's   Principal  Executive  Officer  and  Principal  Accounting
Officer,  after  evaluating  the  effectiveness  of  eTotalSource's   disclosure
controls and procedures (as defined in Rules  13a-15(e) and 15d-15(e)  under the
Exchange Act) as of the end of the period covered by this Report, have concluded
that as of such date,  eTotalSource's  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's  management,  including its Principal  Executive
Officer  and  Principal  Accounting  and  Financial  Officer,  to  allow  timely
decisions regarding required disclosure.

      b.    Changes In Internal Controls Over Financial Reporting

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

                                       23
<PAGE>

                                     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 to an unrelated  Trust in the amount of $40,000
(14%  interest)  $110,000 (18%  interest),  and $172,000  (15%  interest) are in
default.

      Convertible  Notes Payable issued to unrelated parties with a total amount
of $150,000 at 6% interest are in default.

      Note Payable issued to an unrelated  party in the amount of $100,000 at 8%
interest is in default.

      Notes Payable issued to an unrelated trust with a total amount of $300,000
at 10% interest are in default.

      Note  payable  issued to a director in the amount of $10,000 at 9.2% is in
default.

      Notes Payable to an unrelated  party, due August 1, 2005, in the amount of
$100,000 at 10% and $25,000 at 12% are in default.

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

      None.

Item 5. Other Information

      None.

                                       24
<PAGE>

ITEM 6. EXHIBITS

      a.    Exhibits pursuant to Regulation S-K:
<TABLE>
<CAPTION>

 DESIGNATION OF EXHIBIT
AS SET FORTH IN ITEM 601
    OF REGULATION S-B                   DESCRIPTION                                   LOCATION
-----------------------------------------------------------------------------------------------------------------
<S>                        <C>                                              <C>
99.1                       Securities Purchase Agreement, dated November    Incorporated by reference to the
                           2, 2005 by and between eTotalSource, Inc. and    Current Report on Form 8-K dated
                           Cornell Capital Partners, L.P.                   November 8, 2005 (File No. 000-49797)

99.2                       Investor Registration Rights Agreement, dated    Incorporated by reference to the
                           October 6, 2004, by and between eTotalSource,    Current Report on Form 8-K dated
                           Inc. and Cornell Capital Partners, L.P.          November 8, 2005 (File No. 000-49797)

99.3                       Secured Convertible Debenture                    Incorporated by reference to the
                                                                            Current Report on Form 8-K dated
                                                                            November 8, 2005 (File No. 000-49797)

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

99.5                       Warrant issued to Cornell Capital Partners,      Incorporated by reference to the
                           L.P.                                             Current Report on Form 8-K dated
                                                                            November 8, 2005 (File No. 000-49797)

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

99.7                       Irrevocable Transfer Agent Instructions, by      Incorporated by reference to the
                           and among eTotalSource, Inc., Cornell Capital    Current Report on Form 8-K dated
                           Partners, L.P., and Executive Registrar &        November 8, 2005 (File No. 000-49797)
                           Transfer, Inc.
</TABLE>

                                       25
<PAGE>
<TABLE>
<CAPTION>
 DESIGNATION OF EXHIBIT
AS SET FORTH IN ITEM 601
    OF REGULATION S-B                   DESCRIPTION                                   LOCATION
-----------------------------------------------------------------------------------------------------------------
<S>                        <C>                                              <C>
99.8                       Termination Agreement, dated November 2, 2005,   Incorporated by reference to the
                           by and among eTotalSource, Inc., and Cornell     Current Report on Form 8-K dated
                           Capital Partners, L.P.                           November 8, 2005 (File No. 000-49797)

31.1                       Section 302 Certification of Terry L. Eilers     Provided Herewith

31.2                       Section 302 Certification of Virgil D. Baker     Provided Herewith

32.1                       Section 906 Certification of Terry L. Eilers     Provided Herewith

32.2                       Section 906 Certification of Virgil D. Baker     Provided Herewith

-----------------------------------------------------------------------------------------------------------------
</TABLE>

      b.    Reports on Form 8-K:

      On September 2, 2005, we filed a Current Report on Form 8-K disclosing the
entry into a Securities Purchase  Agreement,  dated August 24, 2005, pursuant to
which we issued to  Cornell  secured  convertible  debentures  in the  principal
amount of $100,000.

      On November 4, 2005, we filed a Current  Report on Form 8-K disclosing the
entry into a Securities Purchase Agreement,  dated November 2, 2005, pursuant to
which we issued to  Cornell  secured  convertible  debentures  in the  principal
amount of $1,000,000,  and the termination of the Securities  Purchase Agreement
and related  documents,  dated  August 24,  2005,  and the  Securities  Purchase
Agreement and related documents, dated October 4, 2004.

                                       26
<PAGE>

                                   SIGNATURES

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

                            eTOTALSOURCE, INC.

November 21, 2005           By: /s/ Terry L. Eilers
                               -------------------------
                                Terry L. Eilers, President, Principal Executive
                                Officer, and Director

November 21, 2005           By: /s/ Virgil D. Baker
                               -------------------------
                                Virgil D. Baker, Chief Financial Officer,
                                Principal Accounting and Financial Officer, and
                                Director

                                       27