Room 4561
January 26, 2006
Mr. Terry L. Eilers
Chief Executive Officer
eTotalSource, Inc.
1510 Pool Boulevard
Yuba City, California 95993
Re: eTotalSource, Inc.
Registration Statement on Form SB-2 filed December 30, 2005
File No. 333-130800
Dear Mr. Eilers:
This is to advise you that we have limited our review of the
above filings to the matters addressed in the comments below.
Where
indicated, we think you should revise your document in response to
these comments. If you disagree, we will consider your
explanation
as to why our comment is inapplicable or a revision is
unnecessary.
Please be as detailed as necessary in your explanation. In some
of
our comments, we may ask you to provide us with supplemental
information so we may better understand your disclosure. After
reviewing this information, we may or may not raise additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
Registration Statement on Form SB-2
1. We note your discussion of the November 2, 2005 secured
convertible debenture financing transaction throughout your
registration statement. In such discussion, you have indicated
that
one option for the conversion price of the debenture is "an amount
equal to an amount equal to 120% of the closing bid price of
[your]
common stock as listed on a principal market as quoted by
Bloomberg
LP, on the date hereof." The terms of your secured convertible
debenture appear to indicate that "the date hereof" is in
reference
to the date of the debenture as opposed to the date of your
prospectus. If so, it would also appear that this option for a
conversion price is determinable and, for purposes of clarity,
should
be disclosed in lieu of the formula.
2. Please advise us whether the escrow arrangement in your secured
convertible debenture financing transaction has since been
terminated
and, if so, when the proceeds from the financing transaction were
released from escrow and funded to you.
3. Exhibit 99.5 to your Form 8-K filed November 8, 2005 is a
warrant
for 2,000,000 shares of your common stock issued to Cornell
Capital
on November 2, 2005. The warrant was issued as part of the
secured
convertible debenture financing transaction. Your disclosure in
the
Form 8-K and in your registration statement, however, do not
discuss
this warrant. Please revise your disclosure regarding the secured
convertible debenture financing transaction to discuss this
warrant.
In addition, please advise us whether any shares being registered
in
your registration statement underlie the shares of common stock
issuable upon exercise of this warrant.
Selling Stockholders, page 12
4. Your tabular presentation of information with respect to your
selling stockholders appears to indicate that Cornell Capital
plans
to sells shares of your common stock acquired under the standby
equity distribution agreement. It appears that such agreement and
financing arrangement has been terminated. Please confirm the
termination of such financing arrangement and revise, as
appropriate.
Please review your disclosure throughout in light of this comment.
Shares Acquired in Financing Transactions with Cornell, page 13
5. Your bulleted discussion of the 2005 transactions appears to
suggest that Cornell Capital may still purchase from you up to
$1,000,000 of secured convertible debentures. Disclosure
elsewhere,
however, suggests that the secured convertible debenture financing
transaction has been fully subscribed. Please revise as
appropriate.
Further, please advise us of the material terms and conditions of
any
arrangements whereby securities may be sold to Cornell Capital in
the
future.
Facing Page
6. The registration number you have inserted on the facing page is
incorrect. Please revise.
Item 27. Exhibits
7. We will review counsel`s opinion with respect to the shares
being
registered when that document is submitted, and may have comments
at
that time. We will review a "form of" opinion included with a
pre-
effective amendment if you elect to provide such a document;
however,
the final amendment should include a currently dated legality
opinion.
Item 28. Undertakings
8. The undertaking set forth in Item 512(a) of Regulation S-B has
recently been revised. Please revise accordingly.
* * * *
As appropriate, please amend your filings in response to
this
comment. You may wish to provide us with marked copies of the
amendment to expedite our review. Please furnish a cover letter
with
your amendment that keys your responses to our comment and
provides
any requested supplemental information. Detailed cover letters
greatly facilitate our review. Please understand that we may have
additional comments after reviewing your amendment and responses
to
our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings to be certain that the
filings include all information required under the Securities Act
and
Exchange Act and that they have provided all information investors
require for an informed investment decision. Since the company
and
its management are in possession of all facts relating to a
company`s
disclosure, they are responsible for the accuracy and adequacy of
the
disclosures they have made.
Notwithstanding our comment, in the event the company
requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that:
* should the Commission or the staff, acting pursuant to delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
* the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
* the company may not assert the staff comments and the
declaration
of effectiveness as a defense in any proceeding initiated by the
Commission or any person under the federal securities laws of the
United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in connection with our review of
your
filing or in response to our comments on your filing.
We will consider a written request for acceleration of the
effective date of your registration statement as a confirmation of
the fact that those requesting acceleration are aware of their
respective responsibilities under the Securities Act and the
Exchange
Act as they relate to the proposed public offering of the
securities
specified in the above registration statement. We will act on the
request and, pursuant to delegated authority, grant acceleration
of
the effective date.
We direct your attention to Rule 461 regarding requesting
acceleration of a registration statement. Please allow adequate
time
after the filing of any amendment for further review before
submitting a request for acceleration. Please provide this
request
at least two business days in advance of the requested effective
date.
You may contact Daniel Lee at (202) 551-3477 with any
questions. If you need further assistance, you may contact me at
(202) 551-3730.
Sincerely,
Barbara C. Jacobs
Assistant Director
cc: Via Facsimile
Mr. Clayton E. Parker, Esq.
Kirkpatrick & Lockhart LLP
201 S. Biscayne Boulevard, Suite 2000
Miami, Florida 33131
Telephone: (305) 539-3300
Facsimile: (305) 358-7095