10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.20549

FORM 10 – Q

[mark one]

x QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: June 30, 2008

o TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ______________

Commission File Number:   000-26673

ETHOS ENVIRONMENTAL, INC.

(Name of Small Business Issuer in Its Charter)

Nevada	88-0467241
(State or Other Jurisdiction	IRS Employer
of Incorporation or Organization)	Identification Number

6800 Gateway Park

San Diego, CA 92154

(619) 575-6800

(Address and Telephone Number of Principal Executive Offices)

Securities registered under Section 12(b) of the Exchange Act:
Title of each class registered:	Name of each exchange on which registered:
None	Over-the-Counter Bulletin Board
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $0.0001 (Title of class)

with a copy to:

SteadyLaw Group, LLP

501 W. Broadway, Suite 800

San Diego, CA92101

Telephone (619) 399-3090

Telecopier (619) 330-1888

1

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

2

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o	Smaller reporting company x
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).YES o NO x

The registrant has 39,520,174 shares of common stock outstanding as of August 14, 2008.

3

Quarterly Report on FORM 10-Q

For The Period Ended

June 30, 2008

Table of Contents

Ethos Environmental, Inc.

PART I - FINANCIAL INFORMATION		Page No.
ITEM 1.	FINANCIAL STATEMENTS	5
	CONSOLIDATED BALANCE SHEETS
	CONSOLIDATED STATEMENTS OF OPERATIONS
	CONSOLIDATED STATEMENTS OF CASH FLOWS
	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	14
ITEM 4T.	CONTROLS AND PROCEDURES	35
PART II - OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	36
ITEM 1A.	RISK FACTORS	36
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	36
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	37
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	37
ITEM 5.	OTHER INFORMATION	37
ITEM 6.	EXHIBITS	37
SIGNATURES		38

4

PART I.

Item 1.  FINANCIAL STATEMENTS

ETHOS ENVIRONMENTAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

			June 30,	December 31,
			2008	2007
Assets
Current Assets:
	Cash and cash equivalents		$              133,971	$                74,176
	Accounts receivable-trade, net		7,147,495	5,951,275
	Inventory, net		1,128,335	1,376,030
	Other current assets		5,000	-
		Total Current Assets	8,414,801	7,401,481
Property and Equipment, net			217,354	228,452
Other Assets			705,419	699,419
		Total Assets	$           9,337,574	$           8,329,352
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
	Accounts payable		$              141,727	$              223,891
	Accrued liabilities		309,221	109,300
	Notes payable		1,300,000	350,000
	Notes payable-related party		195,997	246,521
		Total Current Liabilities	1,946,945	929,712
Commitments:			-	-
Stockholders' Equity (Deficit):
	Common stock, $.0001 par value 100,000,000 authorized
		39,450,243 issued and outstanding	3,945	3,687
	Additional Paid in Capital		37,496,371	35,615,040
	Accumulated deficit		(30,109,687)	(28,219,087)
		Total Stockholders' Equity (Deficit)	7,390,629	7,399,640
		Total Liabilities and Stockholders' Equity (Deficit)	$           9,337,574	$           8,329,352

See notes to consolidated financial statements.

5

ETHOS ENVIRONMENTAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

			Three Months Ended June 30,		Six Months Ended June 30,
			2008	2007	2008	2007
Revenues			$  1,286,884	$     2,599,962	$  2,391,352	$  5,297,095
Cost of Goods Sold			404,424	785,297	751,613	1,709,941
Gross Profit			882,460	1,814,665	1,639,739	3,587,154
Operating Expenses
	Depreciation (Other than Cost of Goods Sold)		2,134	5,280	4,273	10,273
	Selling Expenses		85,420	200,226	173,430	328,929
	General and Administrative		2,061,269	2,053,897	3,236,696	4,570,510
	Debt Extinguishment			6,646,171	-	6,646,171
		Total Operating Expenses	2,148,823	8,905,574	3,414,399	11,555,883
Loss from operations			(1,266,363)	(7,090,909)	(1,774,660)	(7,968,729)
Other Income (Expense)
	Other income (loss)		-	35	2,500	35
	Gain on Sale of Assets		-	47,929	-	179,003
	Interest expense		(38,000)	(200,632)	(118,440)	(378,292)
			(38,000)	(152,668)	(115,940)	(199,254)
Income (loss) before provision for income taxes			(1,304,363)	(7,243,577)	(1,890,600)	(8,167,983)
Provision for income taxes			-	-	-
Net Income (Loss)			$ (1,304,363)	$   (7,243,577)	$ (1,890,600)	$ (8,167,983)
Basic and Diluted (Loss) per Common Share			$          (0.03)	$            (0.30)	$          (0.05)	$          (0.35)
Basic and Diluted Weighted Average
	Shares Outstanding		38,747,181	23,763,000	37,925,961	23,570,744

See notes to consolidated financial statements

6

ETHOS ENVIRONMENTAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

					Total
	Common Stock		Paid in	Accumulated	Stockholders'
	Shares	Amount	Capital	Deficit	Equity
Balance, December 31, 2006	23,107,687	$       2,311	$      11,560,535	$      (9,866,577)	$      1,696,269
Common stock issued for cash	2,500,000	250	2,049,750	-	2,050,000
Common stock cancelled	(50,000)	(5)	5	-	-
Warrants issued for extinguishment of debt			6,646,171	-	6,646,171
Common stock issued for services	11,314,000	1,131	15,358,579	-	15,359,710
Net loss	-	-	-	(18,352,510)	(18,352,510)
Balance, December 31, 2007	36,871,687	3,687	35,615,040	(28,219,087)	7,399,640
Common stock issued for services and expense	2,578,556	258	1,881,331	-	1,881,589
Net Loss	-	-	-	(1,890,600)	(1,890,600)
Balance, June 30, 2008	39,450,243	$       3,945	$      37,496,371	$    (30,109,687)	$      7,390,629

See notes to consolidated financial statements

7

ETHOS ENVIRONMENTAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the Six Months Ended
	June 30,
	2007			2006
Operating Activities:
Net income (loss)	$	(1,890,600	)	$	(8,167,983	)
Adjustments to reconcile net income (loss) to net cash
Provided (used) by operating activities:		-			-
Gain on sale of assets		-			(179,003	)
Depreciation		42,734			126,987
Common stock issued for services and expenses		1,881,589			3,875,710
Loss on Debt Extinguishment		-			6,646,171
Changes in Assets and Liabilities:
Accounts receivable		(1,196,220	)		(3,627,776	)
Inventory		247,695			87,506
Other current assets		(5,000	)		(394,419	)
Other assets		(6,000	)		-
Accounts payable		(82,164	)		286,454
Accrued liabilities		199,921			-
Net Cash Provided (Used) by Operating Activities		(808,045	)		(1,346,353	)
Investing Activities
Purchase of Property and Equipment		(31,636	)		(190,983	)
Net Cash Used by Investing Activities		(31,636	)		(190,983	)
Financing Activities:
Proceeds from Sale/Leaseback		-			737,968
Proceeds from Note Receivable		-			(23,100	)
Proceeds from Note Payable		1,300,000			705,334
Repayment of Notes Payable		(350,000	)		-
Repayment of Notes Payable-Related Party		(50,524	)		65,124
Net Cash Provided by Financing Activities		899,476			1,485,326
		-			-
Net Increase in Cash		59,795			(52,010	)
Cash at Beginning of Year		74,176			64,867
Cash at End of Year	$	133,971		$	12,857
Supplemental Disclosures:
Cash paid for income taxes	$	-		$	-
Cash paid for interest	$	-		$	-
Non Cash Transactions:	$	-		$	-

8

ETHOS ENVIRONMENTAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Organization and Significant Accounting Policies

Organization

Ethos Environmental, Inc. ("the Company") manufactures and distributes fuel reformulating products that increase fuel mileage, reduce emissions, and maintain lower fuel costs. The Company is based in Southern California and sells its product, primarily in the United States, Latin America, Europe, Africa, Australia and Asia.

Acquisition

On April 20, 2006, Victor Industries, Inc. (“Victor”), with the approval of its Board of Directors, executed an Agreement and Plan of Merger with San Diego, CA based Ethos Environmental, Inc., a Nevada corporation.

At a meeting of shareholders of the Company held on October 30, 2006, a majority of shareholders voted in favor of the merger. On November 2, 2006, the merger was consummated. As part of the merger, Victor redomiciled to Nevada, and changed its name to Ethos Environmental, Inc. In addition thereto, and as part of the merger, Victor set a record date of November 16, 2006 for a reverse stock split of 1 for 1,200 of the issued and outstanding shares of Victor. Prior to the reverse stock split and subsequent merger, Victor issued 47,685,805 shares to reduce its liabilities by $257,503 based on the pre-merger stock price of $0.0054 per share. All of the per share data in these consolidated financial statements are presented on a post-split basis.

The merger provides for a business combination transaction by means of a merger of Ethos with and into Victor, with Victor as the corporation surviving the merger. Under the terms of the merger, Victor acquired all issued and outstanding shares of Ethos in exchange for 17,718,187 shares of common stock of Victor. Shares of Victor common stock, representing an estimated 97% of the total issued and outstanding shares of Victor common stock, were issued to the Ethos stockholders. Ethos shareholders were able to exchange their shares beginning on or after November 16, 2006, the record date set for the reverse stock split.

The merger was intended to qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code and no gain or loss was recognized by Victor as a result of the merger.

The merger is accounted for under the purchase method of accounting as a reverse acquisition in accordance with U.S.generally accepted accounting principles for accounting and financial reporting purposes. Under this method of accounting, Ethos is treated as the “accounting acquirer” for financial reporting purposes. Accordingly the operations of the company are included in these financial statements as of November 2, 2006. In accordance with guidance applicable to these circumstances, the merger was considered to be a capital transaction in substance. Accordingly, for accounting purposes, the merger was treated as a recapitalization of Victor.  The assets and liabilities of Victor have been included in these consolidated financial statements at their net book value.

The assets acquired and liabilities assumed of Victor were as follows:

Assets	66,062
Liabilities	62,931
Net Recapitalization	3,131

9

The accounting effect of the reverse acquisition is reflected in the consolidated statements of stockholders’ equity.

The historical financial statements prior to the reverse merger transaction have been restated to be those of the accounting acquirer and historical stockholders' equity prior to the reverse merger has been retroactively restated for the equivalent number of shares received in the merger after giving effect to the difference in par value of the issuer's and acquirer's stock with an offset to additional paid-in capital.

As part of the reverse acquisition, the prior activities of the Company were discontinued. No discontinued operations are presented in these financial statements since there were no expenses or revenues incurred after November 2, 2006 related to these operations.

The Company agreed to acquire Ethos Environmental, Inc. because of its anticipated future growth in a marketplace that is in strong demand for its product, and it was believed that the acquisition would benefit the existing shareholders of both companies.

Of the 4,910,000 shares issued in 2006, 3,600,000 shares represented a pre-merger commitment by the entity then known as Ethos Environmental, Inc. The entity then known as Ethos Environmental, Inc. committed to issue the shares on October 15, 2006, and the shares were to be issued regardless of the outcome of the then pending merger as such shares were not for services in any way associated with the then pending merger. As such, the shares were valued at fair value as determined by the pre-merger Ethos Board of Directors.

On the date that the pre-merger Ethos Environmental, Inc. committed to issue the shares, there was not a public market for Ethos’ common stock, and the most readily determinable value of the stock was fair value. Of the 3,600,000 shares, 100,000 were issued for services rendered by an outside consultant prior to, and unrelated to, the merger. As this was the number of shares that said consultant was willing to accept as payment for services rendered valued at $25,000, we believe that the value of $0.25 approximated the fair value of the shares on the date of the commitment and therefore was the appropriate value to be used.

The remaining 3,500,000 shares (the “Bonus Shares”) were issued to our Chief Executive Officer as a one-time bonus by the pre-merger entity known as Ethos Environmental, Inc.  The Bonus Shares were not subject to any performance and/or service conditions, and there was no pre-existing arrangement or agreement regarding the Bonus Shares.

Since the 3,600,000 shares were due and payable in the 4th quarter of 2006 by the pre merger Ethos, these shares have been recorded on the year end financial statements of the post-merger entity.  All 3,600,000 shares were deemed fully paid and non-assessable as of the date authorized by the pre-merger Ethos Board of Directors, October 15, 2006.

The 3,600,000 shares were accounted for at the fair value of $0.25 and charged against general and administrative expenses in accordance with Generally Accepted Accounting Principles (GAAP).  The remaining 1,310,000 shares were issued in compliance with prior consulting agreements and valued at the market price at the date of issue, $5.10.  The value of these shares was charged against selling expenses and general and administrative expenses. There was no cash involved in these transactions.

Going Concern

The Company has incurred significant losses from operations in the last two years. The Company's ability to continue as a going concern is in substantial doubt and is dependent upon obtaining additional financing and/or achieving a sustainable profitable level of operations.

10

Management of the Company has undertaken steps as part of a plan with the goal of sustaining the Company operations for the next twelve months and beyond. These steps include: (a) attempting to raise additional capital and/or other forms of financing; (b) controlling overhead and operating expenses; and (c) continuing to increase the sales of its fuel reformulating product. There can be no assurance that any of these efforts will be successful.

Principles of Consolidation

These consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All material inter-company accounts have been eliminated in consolidation.

Interim Disclosure

The interim period consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the "SEC"). Certain information and footnote disclosure normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such SECrules and regulations. The interim period consolidated financial statements should be read together with the audited consolidated financial statements and accompanying notes for the year ended December 31, 2007, included in the Company's annual report on Form 10-KSB. In the opinion of the Company, the unaudited consolidated financial statements contained herein contain all adjustments necessary (consisting of a normal recurring nature) to present a fair statement of the results of the interim periods presented.

The results of operations for the three months ended June 30, 2008, are not necessarily indicative of the results to be expected for the entire year ending December 31, 2008.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from the estimated amounts.

Cash

Cash includes a payroll account and an operating checking account held at a financial institution. The Company's cash balances exceed federally insured limits from time to time.

Accounts Receivable

Accounts receivable are stated at their principal balances, do not bear interest and are generally unsecured. Management considers all balances over 30 days old to be past due. However, if credit is extended management conducts a periodic review of the collectability of its accounts receivable. If an account is determined to beuncollectible based on historical experience and the current economic climate, an allowance is established and the account is written off against the allowance. The Company determined that an allowance of $111,362 at June 30, 2008 was necessary. At June 30, 2008, 71% of accounts receivable is due from one Latin American customer, and 19% are due from one U.S. customer.

Inventory

Inventory consists primarily of the Company's fuel reformulating product and is stated at the lower of cost or market.  At June 30, 2008, inventory consisted of $56,368 in finished goods and $1,071,967 in raw materials.

11

Property and Equipment

Property and equipment are recorded at cost. Depreciation is calculated on the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of the anticipated lease term or the estimated useful life. The Company's policy is to capitalize items with a cost greater than $4,000 and an estimated useful life greater than one year. The Company reviews all property and equipment for impairment at least annually.

Fair Value of Financial Instruments

The carrying value of the Company's accounts receivable, accounts payable, accrued expenses, note payable, and note payable related party approximate their estimated fair value due to the relatively short maturities of those instruments.

Revenue Recognition

Revenue from the sale of fuel reformulating products is recorded when the product is shipped, the price is fixed and determinable, collection is reasonably assured, and no further obligations of the Company remain.

Stock Based Compensation

The Company accounts for stock based awards in accordance with SFAS No. 123(R) “share-based payment”, which requires measurement of compensation cost for all stock-based awards at fair value on the date of grant and recognition of compensation over the service period for awards expected to vest. The fair value of stock options is determined using the Black-Scholes valuation model, which is consistent with the Company’s valuation techniques previously utilized for options in footnote disclosures required under SFAS No. 123, “Accounting for Stock Based Compensation”, as amended by SFAS No. 148, “Accounting for Stock Based Compensation Transition and Disclosure”.

Since the Company did not issue stock options to employees during the year ended December 31, 2007 or 2006, nor during the six months ended June 30, 2008, there is no effect on net loss or earnings per share had the Company applied the fair value recognition provisions of SFAS No. 123(R) to stock-based employee compensation. When the Company issues shares of common stock to employees and others, the shares of common stock are valued based on the market price at the date the shares of common stock areapproved for issuance.

Earnings Per Share

Basic earnings per share is computed by dividing the net income available to common shareholders by the weighted average number of common shares outstanding in the period. Diluted earnings per share takes into consideration common shares outstanding (computed under basic earnings per share) and potentially dilutive common shares. There were 2,900,000 dilutive securities outstanding at June 30, 2008 and at June 30, 2007. The convertible feature of the Notes Payable is not included in the calculation of diluted earnings per share since it would not have an appreciable effect on the earnings per share.

Common Stock

During the three month period ended June 30, 2008, the Company issued 1,896,106 shares of stock for the payment of expenses valued at $1,175,201, and 206,578 shares of stock for services, valued at $87,515.

12

Note 2. New Accounting Pronouncements

In May 2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee Insurance Contracts—an interpretation of FASB Statement No. 60”.  This statement refers to insurance enterprises and it is not anticipated that this statement will have an effect on the current method of reporting for the Company.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles”.  This Statement identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States (the GAAP hierarchy).  It is not anticipated that this statement will have an effect on the current method of reporting for the Company.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No.133”.  The Statement requires that objectives for using derivative instruments be disclosed in terms of underlying risk and accounting designation.  The statement is effective for interim periods beginning after November 15, 2008 although early adoption is encouraged. The Company has not determined the impact this standard will have on its consolidated operating results or financial position upon adoption.

In December 2007, the FASB issued SFAS No. 141R, “Business Combinations”.  This statement is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008.  The Company has not determined the impact this standard will have on its consolidated operating results or financial position upon adoption.

In December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements—an amendment of ARB No. 51”.  This statement addresses the ownership interests in subsidiaries held by parties other than the parent be clearly identified, labeled, and presented in the consolidated statement of financial position within equity, but separate from the parent’s equity. The statement is effective as of the beginning of an entity’s first fiscal year that begins after December 15, 2008.  The Company has not determined the impact this standard will have on its consolidated operating results or financial position upon adoption.

Note 3. Subsequent Events

On March 26, 2008, the Company issued a Secured Promissory Note in exchange for an aggregate amount of $1,000,000 cash investment received on January 1, 2008. The note matured and became due on July 30, 2008, as of the date of this report the Company has repaid and satisfied the Note in full. In order to do so, the Company received a Nonrecourse Loan in the amount of $500,000 from its Chief Executive Officer in order to satisfy the amount due and owing under the note.

On August 11, 2008, the Company entered into a Stock Purchase Agreement and a Note and Warrant Purchase Agreement with MKM Opportunity Master Fund, Limited, a Cayman Islands corporation a non-affiliated investors pursuant to which, in exchange for an aggregate payment of $600,000 in cash (the “Financing Transaction”). Pursuant to the terms of the Stock Purchase Agreement the Company sold 909,091 shares of the Company’s Common Stock for an aggregate purchase price of $300,000. In connection with the sales of Common Stock pursuant to the Stock Purchase Agreement, the Company entered into a Securities Purchase Agreement with Buyer whereby the Company sold one Unit in the aggregate principal amount of $300,000. The Unit included a convertible promissory note and a warrants to purchase in the aggregate 1,000,000 shares of the Company’s common stock at an exercise price of $0.25 per share.

Subsequent to the quarter ended June 30, 2008, there were no shares issued for expenses and 69,931 shares were issued for services.

13

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

This discussion and analysis should be read in conjunction with the accompanying Financial Statements and related notes. Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires usto make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of any contingent liabilities at the financial statement date and reported amounts of revenue and expenses during the reporting period. On an on-goingbasis we review our estimates and assumptions. Our estimates are based on our historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual results are likely to differ from those estimates under different assumptions or conditions, but we do not believe such differences will materially affect our financial position or results of operations. Our critical accounting policies, the policies we believe are most important to the presentation of our financial statements and require the most difficult, subjective and complex judgments, are outlined below in ‘‘Critical Accounting Policies,’’ and have not changed significantly.

In addition, certain statements made in this report may constitute “forward-looking statements”. These forward-looking statements involve known or unknown risks, uncertainties and other factors that may cause the actual results, performance, or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Specifically, 1) our ability to obtain necessary regulatory approvals for our products; and 2) our ability to increase revenues and operating income, is dependent upon our ability to develop andsell our products, general economic conditions, and other factors. You can identify forward-looking statements by terminology such as "may," "will," "should," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "continues" or the negative of these terms or other comparable terminology. Although we believe that the expectations reflected-in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.

Overview

The mission of Ethos Environmental is to be recognized as the industry standard for high quality, non-toxic cleaning and lubricating products that increase fuel mileage and reduce these ecologically damaging emissions from vehicles, and at a price everyone can afford.  The goal of the company is to make the world a better place, “one gallon at a time”. According to the Environmental Protection Agency (EPA), “The burning of fuels releases carbon dioxide (CO2) into the atmosphere and contributes to climate change [Global Warming], but these emissions can be reduced by improving your car’s fuel efficiency.”  Air pollution caused by cars, trucks and other vehicles burning petroleum-based fuels is one of the most harmful and ubiquitous environmental problems. Furthermore, local accumulation in heavy traffic is the greatest source of community ambient exposure, largely because carbon monoxide is formed by incomplete combustion of carbon containing fuels.

Ethos Environmental manufactures and distributes a unique line of fuel reformulators that contain a blend of low and high molecular weight esters.  The product adds cleaning and lubrication qualities to any type of fuel or motor oil.  The overall benefits are increased fuel mileage, reduced emissions and reduced maintenance costs as the product allows engines to perform cooler, smoother and with more vigor.

Esters

In the simplest terms, esters can be defined as the reaction products of acids and alcohols. Thousands of different kinds of esters are commercially produced for a broad range of applications. Within the realm of synthetic lubrication, a relatively small substantial family of esters have been found to be very useful in severe environment applications.

Esters lubricants have already captured certain niches in the industrial market such as reciprocating air compressors and high temperature industrial oven chain lubricants. When one focuses on high temperature extremes and their telltale signs such as smoking, wear, and deposits, the potential applications for the problem solving ester lubricants are virtually endless.

In many ways esters are very similar to the more commonly known and used synthetic hydrocarbons or PAOs. Like PAOs, esters are synthesized form relatively pure and simple starting materials to produce predetermined molecular structures designed specifically for high performance lubrication. Both types of synthetic base stocks are primarily branched hydrocarbons which are thermally and oxidatively stable, have high viscosity indices, and lack the undesirable and unstable impurities found in conventional petroleum based oils. The primary structural difference between esters and PAOs is the presence of multiple ester linkages (COOR) in esters which impart polarity to the molecules. This polarity affects the way esters behave as lubricants in the following ways:

14

Volatility: The polarity of the ester molecules causes them to be attracted to one another and this intermolecular attraction requires more energy (heat) for the esters to transfer from a liquid to a gaseous state. Therefore, at a given molecular weight or viscosity, the esters will exhibit a lower vapor pressure which translates into a higher flash point and a lower rate of evaporation for the lubricant. Generally speaking, the more ester linkages in a specific ester the higher its flash point and the lower its volatility.

Lubricity: Polarity also causes the ester molecules to be attracted to positively charged metal surfaces. As a result, the molecules tend to line up on the metal surface creating a film which requires additional energy (load) to penetrate. The result is a stronger film which translates into higher lubricity and lower energy consumption on lubricant applications.

Detergency/Dispersency: The polar nature of esters also makes them good solvents and dispersants. This allows the esters to solubilize or disperse oil degradation by-products which might otherwise be deposited as varnish or sludge, and translates into cleaner operation and improved additive solubility in the final lubricant.

Biodegradability: While stable against oxidative and thermal breakdown, the ester linkage provides a vulnerable site for microbes to begin their work of biodegrading the ester molecule. This translates into very high biodegradability rates for ester lubricants and allows more environmentally friendly products to be formulated.

Ethos Environmental manufactures and distributes Ethos FR, a unique combination of high-quality, non-toxic, specially designed esters that uses only the elements of carbon, hydrogen and oxygen. It significantly reduces emissions, fuel consumption, and engine maintenance costs. Ethos FR provides an immediate, cost-effective strategy for fighting air pollution caused by fossil fuels and the internal combustion engine. This combination of low molecular cleaning esters and the high molecular lubricating esters, reformulates any fuel whether it’s gasoline, diesel, methanol, ethanol, LNG, compressed natural gas or bio-diesel. When blended with fuels, Ethos FR reduces the emissions of hydrocarbons (HC), nitrogen oxides (NOx), carbon monoxide (CO), particulate matter (PM) and other harmful products of combustion. Yet, the emission of O2 is significantly increased. An EPA registered laboratory, confirms that Ethos FR is 99.99976% clean upon ignition and cashless upon combustion. Ethos FR is free of carcinogens.

Ethos FR is a light colored, multi-functional fuel reformulator. It is designed for use in all fuels to increase power and mileage, dissolve gums and varnishes, lubricate upper cylinder components and keep the entire fuel system clean and highly lubricated. It is recommended for use at 1 part in 1280, which is equal to 1 fluid ounce of Ethos FR per 10 gallons of fuel.

Typical Specifications
Tests	Results
Viscosity @ 37.8º C,CS	10.39
Viscosity @ 100º F, SSU	60.2
Specific Gravity @ 15.6/15.6ºC	0.93
API Gravity, Degrees	26.6
Flash Point, COC, ºC (ºF)	149ºC (300ºF)
Color and Appearance	Light, bright and clear
Sediment	None

Ethos Environmental offers a cost-effective solution to relieve skyrocketing fuel prices and help lessen environmental regulatory pressures. Ethos products address one problem that has two side effects, wasted fuel and air pollution. Fuel burns inefficiently in an internal combustion engine and that inefficiency leads to wasted fuel transformed into toxic emissions. Ethos products make fuel burn more efficiently so it significantly improves both of the aforementioned adverse effects. Most important, the use of Ethos results in fuel cost savings to the customer.

Fuel and Maintenance Costs Savings:

•Increases Miles-Per-Gallon between 7% and 19% Fleet-Wide

•Enhances Engine Performance by Reducing Heat Produced by Friction

15

Fines and Downtime are Reduced Due To Air Pollution:

•Reduces Toxic Emissions By 30% or More

•Free Of Carcinogens

•Non-Toxic & Non-Hazardous

•Not a Petrochemical

•99.99976% cashless upon Combustion

Repairs:

•Improves Combustion

•Cleans Fuel System

•Lubricates Moving Components

•Extends Engine Life by Reducing Friction

How Do Ethos Products Work?

Ethos products reformulate any fuel, resulting in two important benefits. The first benefit is the added lubricity to the engine. The second is adding cleansing properties to the fuel. All of the internal components benefit from the cleansing and lubricating action including the fuel lines, filters, carburetors, spark plugs and injectors. Ethos also conditions the engine seals, keeping them tighter for a longer period of time. A cleaner, more lubricated engine runs smoother, requires less maintenance and reduces engine heat significantly, thereby returning horsepower closer to the manufacturer’s specifications. Ethos removes carbon deposits that cause fuel to combust incompletely, resulting in wasted fuel that createstoxic emissions. The combination of cleaning and lubricating esters in our products stabilize the fuel without changing its specifications.

In Ethos FR®, for example, a group of low molecular weight esters clean the dirty deposits formed by fuels and the combustion process. These deposits lower performance of an engine making it less fuel-efficient. Causing it to exhaust raw fuel, which is the primary contributor to pollution. A group of high molecular weight esters lubricate the engine surfaces as the fuel runs through it. Their molecular structure is small enough to penetrate the metal and form a lubricating layer between surfaces. This process allows the moving components of an engine to operate smoother and with less power-robbing friction and heat.

The primary task for the Company is to distinguish itself as an industry leader in the reduction of fuel costs and emission problems at a profit gain to the commercial user. Part of the challenge before us is to differentiate Ethos products from two types of products in this industry, additives - that are purported to increase fuel mileage and oxygenates - which are mandated to lower emissions. Both additives and oxygenates provide short-term benefits at the price of long-term engine or environmental problems.

Additives contain highly refined petrochemicals or compressed hydrocarbons that promise better fuel mileage and sometimes lower emissions, by “cleaning” the engine. Used mainly by individual consumers, they are expensive and commonly sold at the auto parts and retail stores. More than five thousand EPA-registered fuel additives compete in the retail market and although the EPA requires that such products be registered, that registration constitutes neither endorsement nor validation of the product’s claims.

Oxygenates, such as methyl tertiary butyl ether (MTBE) and Ethanol, are intended to lower emissions by adding oxygen to the fuel. Ethos FR® products actually complement federally mandated oxygenates by lowering emissions, but as mentioned earlier, Ethos FR® is not an oxygenate and cannot be used for the purpose of complying with current language federal legislation.

In contrast, Ethos products have cleaning properties that contribute to the lubrication of the engine instead of destroying it. The ester-based formula dissolves the gums and residues and adds important lubrication that an engine needs. The engine stays clean and lubricated, allowing it to run smoothly and efficiently.

16

Both E85 and biodiesel, such as B5, are alternative measures currently being considered for use by the federal government.  However, these alternative measures rely entirely on agricultural resources such as corn, barley, wheat and vegetable oils.  Realistically, the agricultural sector of the economy cannot hope to produce sufficient quantities of these products to cause an appreciable effect on global warming.  This is a problem not facing Ethos as the product is readily available and continuously produced at a lower price.

While the debate on emissions reduction solutions continues, Ethos Environmental is making a difference in cleaning the air today while reducing fuel costs to its customers.  Extensive road tests with Ethos FR® have proven that commercial fleets, on average, increase fuel mileage between 7% and 19% and reduce emissions by more than 30%.  Ethos FR® is non-toxic, non-hazardous and works with any fuel used in cars, trucks, buses, RV’s, ships, trains and generators.

The overall result is that Ethos FR® makes engines combust fuel more efficiently.  When an engine uses each measure of fuel to the maximum degree possible, it has two very important benefits.  It reduces fuel consumption and reduces non-combusted residues that an engine expels in the form of exhaust emissions such as hydrocarbons, nitrogen oxides,carbon monoxide, particulate matter and other harmful products of combustion.  Unused fuel is saved in the fuel tank, waiting to be used efficiently by the engine, instead of exhausted in the form of toxic emissions.  Ethos FR® reduces emissions without adding any of its own components to the exhaust since it is 99.99976% ash-less upon combustion, and free of carcinogenic compounds.

Ethos Environmental is also at the forefront in the development of new blending methods and is positioned to become an industry leader with new products currently under development.

Over the last decade, the unmatched value of Ethos FR® products has been proven through millions of miles of on-the-road testing. On average, customers have achieved a 7% to 19% increase in fuel mileage, and more than a 30% reduction in emissions.

Ethos seeks both a cleaner environment and economic success. As the name Ethos suggests, we are committed to the highest ethical standards - in the product that we sell, in the relationship with our clients, and in the conduct of our business. The Company’s approach is to sell Ethos FR® “one gallon at a time”, earning the trust and loyalty of each customer by providing products that perform as promised and make a positive difference in the world.

Our Corporate History

We were originally incorporated under the laws of the State of Idaho on January 19, 1926 under the name of Omo Mining and Leasing Corporation. The Company was renamed Omo Mines Corporation on January 19, 1929. The name was changed again on November 14, 1936 to Kaslo Mines Corporation and finally Victor Industries, Inc. on December 24, 1977.

As Victor Industries, Inc., the Company developed, manufactured, and marketed products related to the use of the mineral known as zeolite. Zeolites have the unique distinction of being nature's only negatively charged mineral. Zeolites are useful for metal and toxic chemical absorbents, water softeners, gas absorbents, radiation absorbents and soil and fertilizer amendments.

Reverse Acquisition of Ethos

On November 2, 2006, as part of a two-step reverse merger, the Company merged with and into Victor Nevada, Inc. a newly incorporated entity for the purpose of redomiciling under the laws of the State of Nevada. Concurrently therewith, we completed the merger transaction with Ethos Environmental, Inc., a privately held Nevada corporation “Ethos”. The Company was the surviving entity. To more adequately reflect the new direction of the Company, the name was changed to Ethos Environmental, Inc. and the Companyadopted the business plan of Ethos.

Products

Ethos manufactures a unique line of fuel reformulators that contain a blend of low and high molecular weight esters. Ethos products add cleaning and lubricating qualities to any type of fuel or motor oil, allowing engines to perform cooler, smoother and with more vigor. The overall benefits are increased fuel mileage, reduced emissions, and reduced maintenance costs.

17

Ethos fuel reformulating products increase fuel mileage and reduce emissions by burning fuel more completely. Exhaust is essentially unburned fuel, i.e. wasted fuel, so when that fuel is used more completely, the engine delivers better mileage from every tank. Efficient fuel use also improves engine performance due to the fact that a more complete combustion process obtains increased power from every engine revolution.

The management of Ethos Environmental firmly believes that the market for our product is aggressively expanding.  Worldwide fuel consumption is approximately 85 million barrels per day and projected by the Energy Information Administration to continue to grow to 97 million barrels per day by 2015, and 118 million barrels per day by 2030.  Much of the dramatic growth over the past decade has been fueled by the dramatic expansion of India, China and Brazil.  As additional undeveloped countries begin to expand, so too will fuel consumption and the Company’s market base.  In addition, consumers are becoming more sensitive to increased fuel economy as oil prices have increased eight timessince the late 1990s.

Ethos products reduce fuel emissions, benefiting the environment in two notable ways:

1.           The use of Ethos products reduce engine exhaust emissions by 30% or more, including measurable reductions in the emission of hydrocarbons (HC), nitrogen oxides (Nox), and carbon monoxide (CO).  All of these emissions are highly toxic and detrimental to the environment.

2.           Ethos products reduce emissions of particulate matter, especially in diesel-powered engines. Diesel fuel is commonly dirty and maintaining a diesel engine in the prime condition necessary to reduce emissions is both expensive and time-consuming.  As a result, diesel engines are a constant source of air contaminants. In most industrialized countries, including the U.S., diesel engines are one of the largest sources of air pollution. When Ethos products are added to diesel fuel, the engine runs cleaner, smoother and cooler - significantly reducing sooty exhaust. Engines treated with Ethos run with less friction, heat and noise. Fuel and lubricating systems, filters, tanks, and injectors last longer, reducing maintenance costs.

Ethos has two products, Ethos FR® and Ethos Bunker Fuel Conditioner (“Ethos BFC”). There are two esters used in each product, a light ester and a heavy ester.  For the Ethos FR®, we obtain the esters from major suppliers.  The mineral oil used in the Ethos FR® is obtained, primarily, from major suppliers.

Ethos FR® can be used in any fuel. Ethos BFC is used for Bunker Fuel, which is used in external combustion engines. 

Ethos products provide risk-free benefits with an economic gain to the client. To date, all customers have testified, either verbally or in writing, that they experienced a monetary gain on fuel savings, with all stating that they experienced an average improvement in mileage per gallon between 7% and 19%, depending on the fuel (gasoline or diesel), the vehicle used, and the individual driver’s practices and driving traits.

Trademarks

We own the following trademark(s) used in this document (which is registered with the United States Patent and Trademark Office under Registration Number 3,015,561): Ethos FR®. Trademark rights are perpetual provided that we continue to keep the mark in use. We consider these marks, and the associated name recognition, to be valuable to our business.

Air Quality Standards

It is believed that with the increased worldwide focus on the greenhouse effects of petroleum products, the ability of Ethos to reduce emissions by 30% can only increase the Company’s market presence. Political and media pressures are causing more people to become concerned about our environment and the effects of global warming.  For example, per the National Snow and IceDataCenter in Boulder, Colorado, the ice cover in the Arctic Ocean has shattered the all-time low record during the summer months of 2007.  Most researchers had anticipated the complete disappearance of the Arctic ice pack during the summer months would not happen until after the year 2070, but now believe it could happen as early as 2030.

Ethos Environmental began the manufacturing and marketing of Ethos products after ten years of successful product testing. During the early years, widespread public environmental concerns were only beginning to surface. Air quality standards were non-existent and fuel costs were low, making penetration of the market an uphill battle.

18

In recent years most of the improvements in air quality have come through advancements in engine technologies.  Through catalytic converters and computer controlled air and fuel injection systems, engineers have designed cars that use fuel much more efficiently and pollute far less than ever before.  But as new engine technologies have reached their limits, the government has turned its attention to the oil companies to produce cleaner-burning fuels.

The approach of Ethos Environmental is to sell our products “one gallon at a time”, earning the respect and trust of each user. Over the past decade, our products have gone though extensive miles of road tests, with all such testing verifying the ability of our products to significantly reduce emissions while improving gas mileage.  Now, at a time of skyrocketing fuel costs, the value of Ethos products is paying off for a long list of domestic customers and a growing contingent of international clients.

Market Research

Air pollution caused by cars, trucks and other vehicles burning petroleum-based fuels is one of the most harmful and ubiquitous environmental problems. Furthermore, local accumulation in heavy traffic is the greatest source of community ambient exposure, largely because carbon monoxide is formed by incomplete combustion of carbon containing fuels.

Diesel exhaust is a major contributor of particulate matter concentrations. Representing only 2 percent of the vehicles on the road, diesel powered vehicles generate more than half of the particulates and nearly a third of the nitrogen oxides in the air, according to a study by the California Air Resources Board.  Air pollution monitoringefforts by the American Lung Association indicate that diesel accounts for 70% of the cancer risk. Furthermore, pioneers in the study of global warming factors have come to believe that particulate matter, such as that emitted by diesel engines, plays a far more critical role in the development of the “greenhouse effect” than previously suspected.

To combat this problem the U.S. Environmental Protection Agency developed a two-step plan to significantly reduce pollution from new diesel engines. (New Emission Standards for Heavy-Duty Diesel Engines Used In Trucks and Buses) (October 1997, EPA 420-F-97-016).  The first step set new emissions standards for diesel engines beginning in 2000. The second step sets even more stringent emission standards that will take effect in 2007, combined with mandated reductions in the sulfur levels of all diesel fuel.

As crude oil is heated, various components evaporate at increasingly higher temperatures. First to evaporate is butane, the lighter-than-air gas used in cigarette lighters, for instance. The last components of crude oil to evaporate, and the heaviest, include the road tars used to make asphalt paving. In between are gasoline, jet fuel, heating oil, lubricating oil, bunker fuel (used in ships), and of course diesel fuel. The fuel used in diesel engine applications such as trucks and locomotives is a mixture of different types of molecules of hydrogen and carbon and include aromatics and paraffin. Diesel fuel cannot burn in liquid form. It must vaporize into its gaseous state. This is accomplished by injecting the fuel through spray nozzles at high pressure. The smaller the nozzles and the higher the pressure, the finer the fuel spray and vaporization. When more fuel vaporizes, combustion is more complete, so less soot will form inside the cylinders and on the injector nozzles. Soot is the residue of carbon, partially burned and unburned fuel.

Sulfur is also found naturally in crude oil. Sulfur is a slippery substance and it helps lubricate fuel pumps and injectors. It also forms sulfuric acid when it burns and is a catalyst for the formation of particulate matter (one of the exhaust emissions being regulated). In an effort to reduce emissions, the sulfur content of diesel fuel is being reduced through the refinery process, however, the result is a loss of lubricity.

Diesel fuel has other properties that affect its performance and impact on the environment as well. The main problems associated with diesel fuel include:

·Difficulty getting it to start burning o Difficulty getting it to burn completely o Tendency to wax and gel

·With introduction of low sulfur fuel, reduced lubrication

·Soot clogging injector nozzles

·Particulate emissions

·Water in the fuel

·Bacterial growth

19

Today’s advanced diesel engines are far cleaner than the smoke-belching diesels of recent decades. Unfortunately, even smokeless diesel engines are not clean enough to meet current stricter air pollution regulations.

While diesel engines are the only existing cost-effective technology making significant inroads in reducing “global warming” emissions from motor vehicles, it is not sufficient to satisfy regulators and legislators. Diesel engines will soon be required to adhere to stringent regulatory/legislative guidelines that meet near “zero” tailpipe emissions, especially on smog-forming nitrogen oxides (NOx), particulate matter (PM) and “toxins”; the organic compounds of diesel exhaust.

The U.S. Department of Energy, Energy Information Administration (“EIA”) estimates that U.S. annual consumption of fuel will continue to escalate through the year 2030.

A breakdown of this estimate is summarized as follows:

Based on further EIA published data, the following table* depicts domestic distillate fuel oil consumption by energy use for 2006.

When blended with fuels, Ethos products reduce the emissions of hydrocarbons (HC), nitrogen oxides (Nox) carbon monoxide (CO), particulate matter (PM) and other harmful compounds of combustion.  Given these conditions, the commercial fuels consumer market represents an important target for Ethos Environmental.

Competition

The market for products and services that increase diesel fuel economy, reduce emissions and engine wear is rapidly evolving and intensely competitive and management expects it to increase due to the implementation of stricter environmental standards. Competition can come from other fuel additives, fuel and engine treatment products and from producers of engines that have been modified or adapted to achieve these results. In addition, we believe that new technologies, including additives, will further increase competition.

Alternative fuels, gasoline oxygenates and ethanol production methods are continually under development. A number of automotive, industrial and power generation manufacturers are developing more efficient engines, hybrid engines and alternative clean power systems using fuel cells or clean burning gaseous fuels. Vehicle manufacturers are working to develop vehicles that are more fuel efficient and have reduced emissions using conventional gasoline. Vehicle manufacturers have developed and continue to work to improve hybrid technology, which powers vehicles by engines that utilize both electric and conventional gasoline fuel sources. In the future, the emerging fuel cell industry offers a technological option to address increasing worldwide energy costs, the long-term availability of petroleum reserves and environmental concerns.

20

The diesel fuel additive business and related anti-pollutant businesses are subject to rapid technological change, especially due to environmental protection regulations, and subject to intense competition. We compete with both established companies and a significant number of startup enterprises. We face competition from producers and/or distributors of other diesel fuel additives (such as Lubrizol Corporation, Chevron Oronite Company, Octel Corp., Clean Diesel Technologies, Inc. and Ethyl Corporation), from producers of alternative mechanical technologies (such as Algae-X International, Dieselcraft, Emission Controls Corp. and JAMS Turbo, Inc.) and from alternative fuels (such as bio-diesel fuel and liquefied natural gas) all targeting the same markets and claiming increased fuel economy, and/or a decrease in toxic emissions and/or a reduction in engine wear.

Ethos FR® and Ethos BFC are unique, and comparative fuel reformulators do not exist.  The primary task for the Company is to distinguish itself as an industry leader in the reduction of fuel costs and emission problems at a profit gain to the commercial user.  Part of the challenge before us is to differentiate Ethos products from two types of products in this industry, additives - that are purported to increase fuel mileage and oxygenates - which are mandated to lower emissions. Both provide short-term benefits at the price of long-term engine or environmental problems.

Additives contain highly refined petrochemicals or compressed hydrocarbons that promise better fuel mileage and sometimes lower emissions, by “cleaning” the engine. Used mainly by individual consumers, they are expensive and commonly sold at the auto parts and retail stores. More than five thousand EPA-registered fuel additives compete in the retail market and although the EPA requires that such products be registered, that registration constitutes neither endorsement nor validation of the product’s claims.

Oxygenates, such as methyl tertiary butyl ether (MTBE) and Ethanol, are intended to lower emissions by adding oxygen to the fuel. Ethos FR® products actually complement federally mandated oxygenates by lowering emissions, but as mentioned earlier, Ethos FR® is not an oxygenate and cannot be used for the purpose of complying with current language federal legislation.

In contrast, Ethos FR® products have cleaning properties that contribute to the lubrication of the engine instead of destroying it. The ester-based formula dissolves the gums and residues and adds important lubrication that an engine needs.  The engine stays clean and lubricated, allowing it to run smoothly and efficiently.

Marketing Strategy

Ethos products are ideally positioned to capitalize on increasing fuel prices and regulatory pressure to tighten emissions standards.  Fuel is a significant operating cost for companies that use cars, trucks or vessel fleets in their daily business, especially where competitive markets make it difficult to pass along fuel increases. Every hike in the price of fuel hurts the profitability of that company.  For these businesses, obtaining better mileage offers a crucial competitive edge, and the goal of Ethos Environmental is to help them maximize their fuel use and maintain profitability.

From its earliest days, Ethos has focused on the product demonstration as the most effective means of introducing Ethos FR® to potential users. During this demonstration phase, Ethos supplies product to treat a sample of the fleet at no cost to the client. It is vital that the customer understand and prove the effectiveness of Ethos FR® in their fleets. This demonstration phase will last as long as necessary to quantify the value and projected savings possible once the entire fleet is treated.

Through this demonstration process, we prove to each customer that they can realize the benefits of reduced emissions, smoother-running vehicles and lower maintenance costs at virtually no risk, because the reduction in fuel usage will more than cover the expense of using Ethos FR®. In fact, the addition of Ethos FR® will result in fuel savings beyond the cost of treatment, resulting in monetary gain to the user.

Commercial fleets vary in size from a few to thousands of vehicles. Such fleets generally produce immediate sales results because administrative requirements are minimal and the product demonstration phase is brief.  Typically, a sample of the fleet is treated and the potential customer is quickly able to quantify the value and project the savings that the use of Ethos FR® will produce.Usually a fleet’s oldest and dirtiest vehicles, or vehicles out of warranty, are included in the demonstration. Such vehicles amplify the effectiveness of the products and help to ease any initial client objections regarding manufacturer warranties. Once the demonstration is underway, Ethos FR® products sell themselves, increasing fuel mileage between 7% and 19% and reducing emissions by more than 30%.  Once the effectiveness of the product has been established, a conscientious customer-service program ensures continued use.

21

The Ethos Environmental strategy has been to approach each market from the perspective of the customer’s strongest motivation, whether to reduce fuel costs or reduce engine emissions. From a marketing standpoint, it is most cost-effective for Ethos Environmental to focus on commercial fuel users that keep track of maintenance and operating expenses. These consumers are more sensitive to pressures from rising fuel costs and more concerned about meeting emissions standards.

Rising fuel costs will always be a marketing advantage for Ethos. Higher fuel prices decrease the cost to treat each gallon of fuel; resulting in even greater savings to Ethos clients.  The Company’s marketing strategy strengthens as the price of fuel increases.  Even where cost savings are a client’s primary motivator, the use of Ethos FR® identifies the user as an environmentally conscientious business. It also creates goodwill within the community through the reduction of unhealthy and unsightly exhaust emissions.

As the following table indicates, over the past ten years, the average monthly spot price per barrel of oil (FOB) has increased dramatically from $11.35 in December 1998 to $133.88 in June 2008, and continues to rise.

1998	16.72	16.06	15.12	15.35	14.91	13.72	14.17	13.47	15.03	14.46	13.00	11.35
1999	12.51	12.01	14.68	17.31	17.72	17.92	20.10	21.28	23.80	22.69	25.00	26.10
2000	27.26	29.37	29.84	25.72	28.79	31.82	29.70	31.26	33.88	33.11	34.42	28.44
2001	29.59	29.61	27.24	27.49	28.63	27.60	26.42	27.37	26.20	22.17	19.64	19.39
2002	19.71	20.72	24.53	26.18	27.04	25.52	26.97	28.39	29.66	28.84	26.35	29.46
2003	32.95	35.83	33.51	28.17	28.11	30.66	30.75	31.57	28.31	30.34	31.11	32.13
2004	34.31	34.68	36.74	36.75	40.28	38.03	40.78	44.90	45.94	53.28	48.47	43.15
2005	46.84	48.15	54.19	52.98	49.83	56.35	59.00	64.99	65.59	62.26	58.32	59.41
2006	65.49	61.63	62.69	69.44	70.84	70.95	74.41	73.04	63.80	58.89	59.08	61.96
2007	54.51	59.28	60.44	63.98	63.45	67.49	74.12	72.36	79.91	85.80	94.77	91.69
2008	92.97	95.39	105.45	112.58	125.40	133.88

Source: U.S. Energy Information Administration

Ethos FR – Proof of Performance

An integral part of our sales process is to conduct proof of performance demonstrations for potential customers wherein we accumulate historical data that documents the effects of the use of Ethos FR® (i.e. advantages in terms of increased fuel economy, a decrease in engine wear and reductions in toxic emissions) on that customer’s specific vehicles or vessels. In connection with the proof of performance demonstrations, we provide fleet monitoring services and forecasts of fuel consumption for purposes of the prospective customer’s own analysis.

The results below are test results of customer experiences using Ethos FR®.  The first results are for a fleet of trucks for Allied Waste.  The second results are for Ecuador for Ethos BFC used in external combustion engines.  On our website are results for other customers including:  US Department of Justice; LA Transport; Lucar Transport; Mission Linen Supply; Vista City; China City Bus Company; Oceanside School District; San Diego Port District; and the Shenzhen Public Transport Group.  In all tests the results have been consistent, with a 7% to 19% cost saving, and an over 30% reduction in emissions.

Following is a Management Report outlining the process and methodology of the testing of Ethos FR® for Allied Waste Services.

22

MANAGEMENT REPORT

Testing of Ethos Fuel Reformulator

Allied Waste Services, Southwestern Region

Overview

Ethos FR has been used, without interruption, at multiple Allied Waste locations in Southern California since the year 2001.

Based on the positive results realized at those locations (estimated at a 10 reduction in fuel consumption plus significant reductions in maintenance/repair costs and emissions) an initial test was conducted at one location in the Southwestern Region of Allied Waste during the months of July and August, 2006.  The results of this initial 4 week test showed an estimated reduction in fuel consumption of 10.35%, as measured by gallons per engine hour, compared to a baseline period of the previous 12 months (July 2005 through June 2006).

Based on these positive results, a second phase of testing was initiated in May 2007 encompassing 4 locations in the Southwestern Region.  The period of testing was generally the months of May, June and July 2007, however, one location continued Ethos use through August.  The detailed data obtained from this testing period is content of this report.

Testing Procedures and Data Compilation & Reporting Methodology

Upon initiation of the testing period, fuel consumption and engine hour data was obtained from each location for a baseline period in order to establish a point of comparison for the test.  The baseline period for each location was generally the period of January through March, 2007.

The standard CFA report obtained from each location was the “Fuel Transaction Detail by Equipment #” report.  This report provides the most comprehensive daily listing of fuel dispensed and engine hours recorded for each vehicle during each time period.  It is important to note that detailed reports were used throughout the compilation of the data contained in this analysis because every report from every location contains several “anomalies” which could distort the accuracy of any data from any report.

Most common among these “anomalies” are:

1.Vehicles showing fuel consumed but few or no engine hours recorded (which would result in a higher fuel per hour calculation than is actually the case),

2.Vehicles showing no fuel consumed yet have engine hours recorded (which would result in a lower fuel per hour calculation than is actually the case), or

3.Vehicles that do not have recorded data for both comparative periods.  This would include:

·new vehicles that have been added to the fleet (and therefore have no baseline data)

·vehicles that have been retired from the fleet or are out of service for repairs or maintenance (these vehicles will have baseline data but no data in one or more of the test periods).

Raw Data vs. Comparable Data

Due to the frequency and significance of the anomalies outlined above, a detailed process was implemented to ensure that any such reporting inaccuracies did not undermine the validity of the comparative data obtained during this test.

The procedures utilized by Green Fleet Associates were as follows:

1.Every CFA report that was obtained from every location for every time period as reviewed line-by-line, vehicle-by-vehicle to assure the validity of the data.  Any obvious anomalies were highlighted on the raw CFA report.

2.This raw data from the CFA report was transferred to a spreadsheet in order to facilitate ongoing side-by-side, vehicle-by-vehicle comparisons of baseline to test period data.  Any anomalies or missing data for any vehicle was highlighted on the spreadsheet for reach comparative period.

3.A true “apples-to-apples” comparison was obtained for each time period by removing all highlighted items.

23

Verification of Ethos Use

Equally important in assuring the validity of the data collected was making best efforts to verify that all of the fuel being consumed by each location during the testing period was being treated with Ethos.  The method utilized to check this compliance was a detailed tracking of fuel deliveries compared the Ethos inventory at each location during the testing period.  While almost all locations maintained a consistent treatment schedule throughout the three month testing period, there were some minor exceptions.

The spreadsheets detailing the baseline & test period data, for each month at each location are as follows:

24

Following is a summary of the test results for Ethos Bunker Fuel Conditioner, tested at Esmeraldas, Ecuador.

1.)O2 levels increased by 41.53 % after the application of the Ethos Bunker Fuel Conditioner.

2.)CO2 levels decreased by 7.79% after the application of the Ethos BFC.

3.)CO levels decreased by 91.75 % after the application of the Ethos Bunker Fuel Conditioner.

4.)SO2 levels decreased by 1.69% after the applications of the Ethos BFC.

5.)NO levels decreased by .82% after the application of the Ethos BFC.

6.)NO2 levels remained constant at 0.

7.)Nox levels decreased by .82% after the application of the Ethos BFC.

8.)tf levels decreased by 9.18% after the application of the Ethos BFC.

9.)ta levels decreased by 1.16% after the application of the Ethos BFC.

10.)CO2 max levels decreased by ..69% after the application of Ethos BFC.

11.)Excess air readings increased by 48.14% after the application of the Ethos BFC.

25

Ethos FR – Proof of Performance Demonstrations

Ethos Environmental’s fuel reformulating products reduce emissions by burning fuel more completely, which improves fuel mileage. Exhaust is essentially unburned fuel, wasted fuel, so when the fuel is used more completely the engine delivers better mileage from every tank. Efficient fuel use also means improved engine performance because a more complete combustion process obtains increased power from each engine revolution.

In the last decade hundreds of thousands of miles in road tests have been conducted. Test after test, Ethos products have proven to reduce engine exhaust emissions by 30% and more, including measurable reductions in the emissions of hydrocarbons (HC), nitrogen oxides (NOx), carbon monoxide (CO), and sooty exhaust or particulate matter (PM). All of these emissions are highly toxic and as a result, fuel mileage increases have been significant, ranging from 7% to 19% fleet wide.

Ethos Environmental uses an opacity meter, a detection device for diesel vehicles that measures the percentage of opacity (light obstructed from passage through an exhaust smoke plume), to demonstrate dramatic reductions in emissions. In more that 1,000 heavy-duty diesel vehicles treated (a motor vehicle having a manufacturer’s maximum gross vehicle weight rating (GVWR) greater than 6,000 pounds), emissions were lowered by as much as 90%. The Society of Automotive Engineers (SAE) recommended practice SAE J1667 “Snap Acceleration Smoke Test Procedure” to be used for heavy-duty diesel powered vehicles. Attached are samples of opacity test sheets, taken from diesel-powered engines, demonstrating the positive results after using Ethos FR®.

26

Target Markets

According to the American Petroleum Institute, the United States fuels consumer market is comprised of the following segments: retail consumer 27%, government agencies 16%, ground fleets 14%, industrial users 10%, aircraft 9%, maritime 6%, miscellaneous 18%.

The Company’s typical customers use cars, trucks or vessels in their day-to-day operations. Fuel is a significant operating cost, and consequently these fleets are particularly sensitive to fuel price fluctuations and strict emissions standards. The ideal clients are those with fleet managers and are conscientious about keeping track of operating expenses. They understand that every hike in fuel price hurts their profitability, this being a critical factor wherever competitive markets make it difficult to pass on the price increases to their clients; thereby making it critical for businesses to obtain better mileage as a competitive advantage.

Maritime and government agencies are desirable for their large fuel volume use and industry credibility.  They offer the Company medium to long-term sales, since the process requires a longer lead-time to close. The product demonstration phase and administrative requirements are generally more complex, particularly with large government institutions. At the same time, they offer large volume sales and a continual source of staged orders that promote production stability.

Marine vessels run on bunker fuel that is less refined than diesel.  A mid-size ship will use more than half a ton per hour of operation, or 125 gallons of fuel per hour. For example, a mid-size vessel running on bunker on a typical trip to Japan from Los Angeles will require a half ton per hour, or 180 tons.  This represents a total of 45,000 gallons of fuel that requires 4,500 oz. (35 gallons) of Ethos BFC. This vessel would use approximately one drum (55gals.) of Ethos BFC per month. Accordingly, maritime customers represent a large and solid client base.

Countries all around the world are endeavoring to deal with the high costs of petroleum products and the detrimental effects of those products on the environment, much like the United States.  The Company has found broad and enthusiastic acceptance of its Ethos products globally.  During the past three years, the Company has opened markets in Asia, Latin America, Canada, Australia, Africa and Europe, often dealing directly with government entities that possess the power to implement widespread use of Ethos products – whether in citywide public transportation systems or countrywide fuel distribution structures.

As with our domestic client base, international customers of Ethos appreciate the benefits of improved mileage and reduced emissions.  In countries that lack the regulatory structures necessary to control vehicle emissions and fuel efficiency, the benefits of Ethos are even morepronounced.

27

Customers

We have a very diversified customer list. Although we have many customers utilizing products, the broadly diversified base means there is no significant concentration in any industry. We derive revenue from our customers as discussed in Note 1, "Organization and Significant Accounting Policies: Revenue Recognition" of the consolidated financial statements. Two U. S. customers accounted for approximately 90% of our revenues for the three andsix months ended June 30, 2008.

Supply Arrangements

We presently obtain our raw materials on an exclusive basis from five (5) suppliers. However, these arrangements are not governed by any formal written contract. Accordingly, either party may terminate the arrangement at any time, including the exclusivity aspect of the arrangement. If a supplier is not able to provide us with sufficient quantities of the product, or chooses not to provide the product at all (for any reason), or if exclusivity is lost, business and planned operations couldbe adversely affected. Although management has identified alternate suppliers of the products, no assurance can be given that the replacement products will be comparable in quality to the product presently supplied to us by current suppliers, or that, if comparable, products can be acquired under acceptable terms and conditions.

Revenue and Fixed Assets

The Company’s revenue is generated in the United States and abroad through our San Diego, California office, which at present is our only operating office.  All of the fixed assets are located in the San Diego, California office.  In February, 2007, the Company entered into a sale and leaseback arrangement as outlined below under Loan Facilities. In October 2007, the Company completed the Commercial Property Purchase Agreement executed in August 2007, and reported on Form 8-K on August 13, 2007.

Vendors

The Company maintains strong relationships with all vendors. We are not dependent upon any one vendor for our business.

Governmental Regulation

In the United States, fuel and fuel additives are registered and regulated pursuant to Section 211 of the Clean Air Act. 40 CFR Part 79 and 80 specifically relates to the registration of fuels and fuel additives. Typically, there are registration and regulation requirements for fuel additives in each country in which they are sold. In accordance with the Clean Air Act regulations at 40 CFR 79, manufacturers (including importers) of gasoline, diesel fuel and additives for gasoline or diesel fuel, are required to have their products registered by the EPA prior to their introduction into commerce.

However, EPA registered additives are derived from petroleum while Ethos FR® is a reformulator. Even though you “add it” to the fuel, Ethos FR® is not derived from petroleum and is non-toxic and non-hazardous and therefore not subject to governmental regulations.  There could be unforeseen future changes to the registration requirements under the Clean Air Act and Ethos FR® may have to seek registration under such new requirements.  In addition, we currently sell our product outside of the United States and intend to further expand our sales efforts internationally.  We may need to seek registration in other countries for the Ethos FR® product.

At this time the Company is not aware of any present or pending rules or regulations that would require the Company to seek registration of the Ethos FR® product either domestically or internationally.

Research and Development Costs

Research and development costs are charged to operations when incurred and are included in operating expenses.

Following is the Ethos FR® Material Safety Data Sheet (MSDS)

28

29

Following is the Ethos FR® Material Safety Data Sheet (MSD

30

Available Information

We file electronically with the Securities and Exchange Commission our annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934.  You may obtain a free copy of our reports and amendments to those reports on the day of filing with the SEC by going to http://www.sec.gov.

Critical Accounting Policies and Estimates

We believe that there are several accounting policies that are critical to understanding our historical and future performance, as these policies affect the reported amounts of revenue and the more significant areas involving management’s judgments and estimates. These significant accounting policies relate to revenue recognition, research anddevelopment costs, valuation of inventory, valuation of long-lived assets and income taxes. For a summary of our significant accounting policies (which have not changed from December 31, 2007), see our annual report on Form 10-KSB for the period ended December 31, 2007.

RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2008 AS COMPARED WITH THE THREE AND SIX MONTHS ENDED JUNE 30, 2007

The following analysis of historical financial condition and results of operations are not necessarily reflective of the on-going operations of the Company.

Revenues

We recognized revenues of $1,286,884 for the three months ended June 30, 2008 compared to revenues of $2,599,962 for the same period in the prior year, a decrease of $ 1,313,078 or 51%.  The primary source of revenue for the period ended June 30, 2008 was from the sale of Ethos FR®.  During 2007, the Company had a large order of Ethos Bunker Fuel to Ecuador which was not repeated in the first quarter of 2008.

We recognized revenues of $ 2,391,352 for the six months ended June 30, 2008 compared to revenues of $ 5,297,095 for the same period in the prior year, a decrease of $ 2,905,743 or 55%.  The primary source of revenue for the period ended June 30, 2008 was from the sale of Ethos FR®.  During2007, the Company had large orders of Ethos Bunker Fuel to Ecuador, totaling $4,450,205, which were not repeated in the first six months of 2008.

We expect our growth to continue as sales increase and the sales and marketing strategies are implemented into the targeted markets and we create an understanding and awareness of our technology through proof of performance demonstrations with potential customers.

Our future growth is significantly dependent upon our ability to generate sales. Our main priorities relating to revenue are: (1) increase market awareness of Ethos FR® product through our sales and marketing plan, (2) growth in the number of customers and vehicles per customer, and (3) providing extensive customer service and support.

Gross Profit

Gross profit, defined as revenues less cost of goods sold, was $882,460 or 69% of sales for the three months ended June 30, 2008, compared to $1,814,665 or 70% of sales for the same period ended June 30, 2007. In terms of absolute dollars, gross profit decreased 51% for the three months ended June 30, 2008 compared to same period in the prior year due primarily to the reduction in gross revenue.

For the six month period ending June 30, 2008 gross profit was $1,639,739 or 69% of sales, compared to $3,587,154 or 68% of sales for the same period ended June 30, 2007. In terms of absolute dollars, gross profit decreased 54% for the six months ended June 30, 2008 compared to same period in the prior year due primarily to the reduction in gross revenue.

Cost of goods sold was $404,424 for the three months ended June 30, 2008, which represented 31% of revenues compared to $785,297 for the comparable period in the prior year, which represented 30% of revenues.

Cost of goods sold was $751,613 for the six months ended June 30, 2008, which represented 31% of revenues compared to $1,709,941 for the comparable period in the prior year, which represented 32% of revenues.

31

Operating Expenses

Our current operating expenses are comprised of costs associated with administrative, salary, marketing, legal and business development. We will have additional operating expenses for additional staff members as they are hired. We have allocated funds in our capital structure for our current expenses.

General and Administrative expenses incurred during the three months ended June 30, 2008 totaled $2,061,269. These expenses were incurred as follows:

Accounting, audit, bookkeeping and director fees	$	55,688
Legal fees	$	17,752
Business consulting fees	$	15,000
Outside Services	$	9,309
Office expenses	$	131,865
Depreciation	$	2,134
Stock Issued for expenses	$	1,175,201
Stock Issued for services	$	87,515
Salaries and Wage expense	$	243,729
Taxes	$	5,681
Rent	$	206,072
Equipment Rental	$	91,323
Research & Development	$	20,000

                         &# 160;                                                

Similar expenses incurred for the three months ended June 30, 2007 were $2,053,897 and were incurred primarily for expenses of a similar nature.

Also, for comparison purposes, there were 1,896,106 newly issued shares for the payment of expenses, and 206,578 shares newly issued for services during the three months ended June 30, 2008, compared to 483,500 shares issued for services during the three months ended June 30, 2007.  For the six months ended June 30, 2008, the shares issued were 2,265,428 and 313,128, respectively.

Research and Development Costs

Research and development costs are charged to operations when incurred and are included in general and administrative expenses. The amounts expensed for the three months ended June 30, 2008 and 2007 amounted to $20,000 and $7,500, respectively.

The company continues to strive to improve its products, packaging, etc., and to develop new products for the future.

Net Loss

We realized a net loss for the three months ended June 30, 2008 of $1,273,683 as compared to a net loss of $7,243,577 for the comparable prior year period.  For the six months ended June 30, 2008 and 2007, the Company realized net losses of $1,859,520 and $8,167,983, respectively.

NON-OPERATING INCOME AND EXPENSES  

Non-operating income, net of expenses, decreased in the quarter ended June 30, 2008 to $0 versus $35 in 2007. Interest expense decreased to $38,400 during the 3 months ended June 30, 2008 from $200,632 the comparable period in 2007. The interest difference was directly associated with promissory notes issued during the quarter ended March 31, 2008 versus an interest only note in the amount of $4,750,000 during 2007.  The latter note was paid in October 2007.

32

Liquidity and Capital Resources

During the three months ended June 30, 2008, we had a working capital of $6,498,935 and stockholders’ equity of $7,421,707 compared to a working capital of $2,504,247 and stockholders’ equity of $4,050,165 during the comparable period in the prior year.

On June 30, 2008, the Company had $133,970 in cash, total assets of $9,337,573 and total liabilities of $1,915,865, compared to $12,857 in cash and $300,000 in restricted cash, total assets of $10,930,284 and total liabilities of $6,880,119 on June 30, 2007.

We anticipate, based on currently proposed plans and assumptions relating to our operations, that our current cash and cash equivalents together with projected cash flows from operations and projected revenues will be sufficient to satisfy our contemplated cash requirements for the next 12 months. Our contemplated cash requirements for 2008 and beyond will depend primarily upon the level of sales of our products, inventory levels, product development, sales and marketing expenditures and capital expenditures.

Management of the Company has undertaken steps as part of a plan with the goal of sustaining the Company operations for the next twelve months and beyond. These steps include: (a) attempting to raise additional capital and/or other forms of financing; (b) controlling overhead and operating expenses; and (c) continuing to increase the sales of its fuel reformulating product. There can be no assurance that any of these efforts will be successful.

Loan Facilities

In exchange for an aggregate amount of $1,000,000 cash investment received on January 30, 2008, on March 26, 2008, the Company issued a Secured Promissory Note (the “Note”). The Note of $1,000,000 bears interest at 12% per annum. The note matured and became due on July 30, 2008, as of the date of this report the Company has repaid and satisfied the Note in full. In order to do so, the Company received a Nonrecourse Loan in the amount of $500,000 from its Chief Executive Officer in order to satisfy the amount due and owing under the Note.

Additionally, in exchange for an aggregate amount of $300,000 cash investment received on March 31, 2008, the Company issued a promissory note. The promissory note is in the original principal amount of $300,000 and bears interest at 12% per annum, which is payable monthly in arrears. The promissory note is due on March 31, 2009. 

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our investors.

PLAN OF OPERATIONS FOR THE NEXT TWELVE MONTHS

Since inception in 2000, Ethos Environmental has grown its customer base to thousands of diverse clients in over 21 countries worldwide In addition to an effective and desirable product, the company’s success also derives from the careful development and tenacious implementation of a structured “proof-of-concept” marketing strategy.

Throughout this “proof-of-concept” sales and marketing phase, gross sales for Ethos Environmental have consistently exceeded forecasts, reaching more than $1.78 million by the end of 2005, $4.77 million by the end of 2006 and $10.38 million in 2007. Even more significant growth is anticipated for 2008, with sales in established markets in the U.S., Asia, Latin America, Europe, Africa andAustralia expected to top current forecasts. Furthermore, market implementation plans anticipate gross multi million sales in 2008 and beyond. These projections are based on the product’s proven ability to improve fuel efficiency while reducing emissions, the Company’s proven ability to penetrate new markets and build a solid base of loyal customers, and the world’s increasing costs in the petro-economic markets.

Looking forward, marketing will constitute a significant portion of company expenditures as Ethos Environmental continues to develop sales of new ester-based fuel and engine enhancing products. We are in the process of developing new products covering areas of synthetic oils, sulfur substitutes, and varied formulations of the original Ethos FR®and its enhancements.

33

The management of Ethos Environmental is excited by the enthusiastic acceptance that Ethos FR®products have received - domestically and all around the world. We are proud to provide a product that is part of the solution to the high cost of fuel and the health costs of environmental pollutants. Since inception management has been focused on the development of a solid infrastructure, building relationships and establishing the foundation of a business that will continue to grow - non-stop - into the future.

Critical Accounting Policies

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make a wide variety of estimates and assumptions that affect (i) the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, and (ii) the reported amounts of revenues and expenses during the reporting periods covered by the financial statements. Our management routinely makes judgments and estimates about the effect of matters that are inherently uncertain. As the number of variables and assumptions affecting the future resolution of the uncertainties increases, these judgments become even more subjective and complex. The most significant accounting policies that are most important to the portrayal of our current financial condition and results of operations are as follows:

Revenue Recognition

The Company recognizes revenue in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 104 (“SAB 104”), “Revenue Recognition in Financial Statements”. Revenue consists of the sale of products and is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the product is shipped, and collectability is reasonably assured.

34

ITEM 4(T). CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures:

Our President and Chief Financial Officer, after evaluating the effectiveness of our “disclosure controls and procedures” (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), have concluded that, as of March 31, 2008 due to the material weaknesses in our internal control over financial reporting identified in our2007 Form 10-KSB, our disclosure controls and procedures were not effective in providing reasonable assurance that information we are required to disclose in reports we file is recorded, processed, summarized and reported within the periods specified.

(b)           Management’s Annual Report on Internal Control Over Financial Reporting:

While we have continued our efforts to address each of the material weaknesses identified in our 2007 Form 10-KSB, there were no material changes in our internal control over financial reporting during the most recently completed quarter.  We have not identified any additional material weaknesses during this quarter.  We are not planning to report on whether there has been full remediation of the identified material weaknesses until our 2008 report on internal control over financial reporting is complete.

(c)           Changes in Internal Control Over Financial Reporting:

There were no changes in our internal control over financial reporting during the three months ended June 30, 2008 that have materially affected, or are reasonably likely to materially affect our internal controls over financial reporting.

During 2008, the company will be directing concerted focus to full compliance with Sarbanes-Oxley requirements, as revised in Audit Standard No. 5 for small businesses, in implementing Section 404(a) of the Act.

35

PART II.

ITEM 1.  LEGAL PROCEEDINGS

From time to time, we are involved in routine legal matters incidental to our business. In the opinion of management, the ultimate resolution of such matters will not have a material adverse effect on our financial position, results of operations or liquidity. 

The Company became a defendant in a lawsuit filed by Accutek, Inc. of Vista, CA for an outstanding balance on equipment purchased in the amount of $43,000.  The Company has filed a cross-complaint asserting that the contractual obligations of the supplier, Accutek were not fulfilled.  The proceeding is pending as of the date of this report.

TheCompany became a defendant in a lawsuit filed by Groovie Like A Movie in the amount of $19,950.  The Company has filed a cross-complaint claiming non-delivery of goods and services. The proceeding is pending as of the date of this report.

The Company also became a defendant in a lawsuit filed by the Bedrock Group in Arizona in May 2008.  Settlement negotiations are underway, and the Company expects to be able to settle this matter shortly.

ITEM 1(A). RISK FACTORS

Not required.

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

On August 11, 2008, Ethos Environmental, Inc. (the “Company”) entered into a Stock Purchase Agreement and a Note and Warrant Purchase Agreement (the ‘Purchase Agreements”) with MKM Opportunity Master Fund, Limited, a Cayman Islands corporation (the “Buyer”) a non-affiliated investors pursuant to which, in exchange for an aggregate payment of $600,000 in cash (the “Financing Transaction”).

Pursuant to the terms of the Stock Purchase Agreement the Company sold to Buyer 909,091 shares of the Company’s Common Stock for an aggregate purchase price of $300,000. In connection with the sales of Common Stock pursuant to the Stock Purchase Agreement, the Company entered into a Securities Purchase Agreement with Buyer whereby the Company sold to Buyer one Unit in the aggregate principal amount of $300,000. The Unit included (i) a convertible promissory notes (the “Note”) and (ii) a warrants to purchase in the aggregate 1,000,000 shares of the Company’s common stock (the “Common Stock”) at an exercise price of $0.25 per share (the “Warrants”) (collectively the shares underlying the Stock Purchase, Note and Warrant are referred to herein as the “Securities”). Both Purchase Agreements contain standard representations, and warranties and affirmative and negative covenants. The Notes and the Warrants are described in greater detail below.  

The Note carries a six month maturity date and the Buyer holds the right to convert thereafter at a rate of $0.25 per share, upon maturity the Note is equal to 120% of the face value, or $360,000. Thereafter if the Note is not satisfied or converted the Note shall carry 10% interest. The Notes also contain customary events of default.  The Warrants are exercisable for an aggregate of 1,000,000 shares of Common Stock at an exercise price of $0.75 per share prior. The Warrants may be exercised by the Investors by making payment in full of the exercise price either in cash or by written instruction directing the Company to cancel or surrender a portion of the Warrants to satisfy payment of the exercise price.  Payment by such cancellation or surrender is deemed a “cashless exercise.”

The respective descriptions of (i) Stock Purchase Agreement (ii) the Notes, (ii) the Warrants and (iii) the Securities Purchase Agreements are brief summaries only and are qualified in their entirety by their respective terms set forth in each document, forms of which are filed as exhibits hereto.

The Securities offered in the Financing Transaction, have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), and may not be offered or sold in the United States absent the registration or an applicable exemption from the registration requirements of the Securities Act. The transactions contemplated by the Purchase Agreements are exempt from the registration requirements of the Securities Act, pursuant to Section 4(2) and/or Regulation D thereunder. Pursuant to the Purchase Agreements, the Buyer made representations to the Company regarding their respective suitability to invest in the Private Placement, including, without limitation, that each Investor qualifies as an “accredited investor” as that term is defined under Rule 501(a) of the Securities Act. The Company did not engage in general solicitation in connection with the sale of the Securities.

36

This Current Report shall not constitute an offer to sell, the solicitation of an offer to buy, nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state.

The Securities of Company common stock issued to the Buyer pursuant to the terms of the Financing Transaction were issued in reliance on Section 4(2) under the Securities Act and Regulation D promulgated thereunder in a transaction not involving a public offering.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.

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

None.

ITEM 5.  OTHER INFORMATION

On March 26, 2008, the Company issued a 12% Secured Promissory Note (the “Applegate Note”) in favor of Patricia Applegate in the amount of $1,000,000. The note matured and became due on July 30, 2008, as of the date of this report the Company has repaid and satisfied the Applegate Note in full. The Company received a Nonrecourse Loan in the amount of $500,000 from its Chief Executive Officer in order to satisfy the amount due and owing under the Applegate Note.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits.

EXHIBIT NUMBER	DESCRIPTION	LOCATION
3.1 - 3.2	Articles of Incorporation and Bylaws	Previously Filed.
10.1	Note and Warrant Purchase Agreement	Filed herewith
10.2	Convertible Note	Filed herewith
10.3	Securities Purchase Agreement	Filed herewith
10.4	Common Stock Purchase Warrant	Filed herewith
31.1	Rule 13a-14(a)/15d-14(a) Certification (CEO)	Filed herewith
31.2	Rule 13a-14(a)/15d-14(a) Certification (CFO)	Filed herewith
32.1	Section 1350 Certification (CEO)	Filed herewith
32.2	Section 1350 Certification (CFO)	Filed herewith

(b)           Reports on Form 8-K.

During the six months ended June 30, 2008, we filed the reports on Form 8-K on the following dates:

(1)           January 24, 2008

(2)           January 24, 2008

(3)           January 24, 2008

(4)           March 27, 2008

(5)           April 4, 2008

37

SIGNATURES

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

	ETHOS ENVIRONMENTAL, INC. (Registrant)
Date: August 14, 2008	By:	/s/ Enrique de Vilmorin
		Enrique de Vilmorin
		President and CEO

38

EX-10.1

ETHOS ENVIRONMENTAL, INC.

SECURITIES PURCHASE AGREEMENT

This Securities Purchase Agreement (the “Agreement”) is made as of August 1, 2008, by and between Ethos Environmental, Inc., a Nevada corporation (the “Company”) and MKM Opportunity Master Fund Limited, a Cayman Island corporation (“Purchaser”).

RECITALS

Subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”) and Rule 506 promulgated thereunder, the Company desires to issue and sell to Purchaser, and Purchaser desires to purchase from the Company, securities of the Company as more fully described in this Agreement.

AGREEMENT

In consideration of the mutual promises contained herein and other good and valuable consideration, receipt of which is hereby acknowledged, the parties to this Agreement agree as follows:

1.           Purchase and Sale of Securities.

(a)           Sale and Issuance of Securities. Subject to the terms and conditions of this Agreement and the exhibits attached hereto, Purchaser agrees to purchase at the Closing (as defined below), and upon payment of the Purchase Price (as defined below) the Company agrees to sell and issue to Purchaser, the following securities (the “Securities”):

(i)           a convertible promissory note in the amount of $300,000.00, in the form attached to this Agreement as Exhibit A (the “Note”); and,

(ii)           a common stock purchase warrant for 1,000,000 shares of the Company’s Common Stock, in the form attached to this Agreement as  Exhibit B (the “Warrant”).

(b)           Payment of Purchase Price.  Payment of the Purchase Price must be transmitted via bank wire to the Company as follows to:

Bank of America

7680 Girard Avenue

La Jolla, CA 92037

Tel. (858) 452-8400

Routing Number: 0260-0959-3

SWIFT NUMBER:  BOFAUS6S

ACCOUNT INFORMATION:

SteadyLaw Group, LLP

501 W. Broadway, Suite 800

San Diego, CA 92101

Tel. (619) 399-3102

Fax. (619) 330-1888

ATTORNEY CLIENT TRUST ACCOUNT

Account No. 16648-41027

1

 (c)           Closing; Delivery.

(i)           Thepurchase and sale of the Securities shall take place at the offices of the Company at such time and place as the Company and the Purchaser mutually agree upon in writing (which time and place are designated as the “Closing”).

(ii)           At the Closing, the Company shall deliver to the Purchaser the Note and Warrant to be purchased by such Purchaser against (1) payment of the Purchase Price therefor by wire transfer to the Company set forth above, and (2) delivery of counterpart signature pages to this Agreement.

2.           [This Section 2 is intentionally left blank]

3.           Representations and Warranties of the Company.  The Company hereby represents and warrants to Purchaser that:

(a)           Organization, Good Standing and Qualification.  The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada and has all requisite corporate power and authority to carry on its business as now conducted and as proposed to be conducted. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure so to qualify would have a material adverse effect on its business or properties.

(b)           Authorization.  All corporate action on the part of the Company, its officers and directors necessary for the authorization, execution and delivery of this Agreement and the authorization, sale, issuance and delivery of the Securities, the shares of the Company’s capital stock issuable on conversion and/or exercise thereof, and the performance of all obligations of the Company hereunder and thereunder has been taken or will be taken prior to the Closing.The Agreement and the Note and Warrant, when executed and delivered by the Company, shall constitute valid and legally binding obligations of the Company, enforceable against the Company in accordance with their respective terms except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and other laws of general application affecting enforcement of creditors’ rights generally, and as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies.

(c)           Capitalization.  The authorized capital of the Company consists of:

(i)           100,000,000 shares of Common Stock, $0.0001 par value of which (excluding the Securities sold hereunder or pursuant to the Stock Purchase Agreement of even date herewith by and between the Company and the Purchaser (hereinafter, the “Stock Purchase Agreement”)) 39,520,174 shares of common stock are issued and outstanding and no shares of preferred stock are issued and outstanding. All of the outstanding shares of Common Stock have been duly authorized, are fully paid and nonassessable and were issued in compliance with all applicable federal and state securities laws.

(ii)The shares of common stock to be issued by the Company upon conversion of the Notes, shall be issued from the shares currently being reserved by the Company for delivery to the Company’s executives officers as earn out shares.

(iii)All shares of the Company’s common stock issuable upon the exercise of the Warrant or conversion of the Note shall, upon issuance, be duly duly and validly authorized and issued, fully paid and nonassessable.

(d)Enforceability.  The execution and delivery by Company of this Agreement, the issuance of the Securities and the shares of common stock issuable upon the exercise and/or conversion of the Securities, will result in legally binding obligations that are enforceable against the Company in accordance with the respective terms and provisions of the Agreement, the Note and the Warrant.

2

(e)Additional Representations and Warranties. The Company hereby adopts and incorporates by reference the representations and warranties of the Company set forth in Article III of the Stock Purchase Agreement as though such representations and warranties are expressly set forth at full herein.

4.           Representations and Warranties of the Purchaser.  Purchaser hereby represents and warrants to the Company that:

(a)           Authorization. Purchaser has full power and authority to enter into this Agreement.  This Agreement when executed and delivered by the Purchaser, will constitute valid and legally binding obligations of the Purchaser, enforceable in accordance with its terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and any other laws of general application affecting enforcement of creditors’ rights generally, and as limited by laws relating to the availability of a specific performance, injunctive relief, or other equitable remedies.

(b)           Purchase Entirely for Own Account.  This Agreement is made with the Purchaser in reliance upon the Purchaser’s representation to the Company, which by the Purchaser’s execution of this Agreement, the Purchaser hereby confirms, that the Securities to be acquired by the Purchaser will be acquired for investment for the Purchaser’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Purchaser has no present intention of selling, granting any participation in, or otherwise distributing the same.  By executing this Agreement, the Purchaser further represents that the Purchaser does not presently have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to the Securities. The Purchaser has not been formed for the specific purpose of acquiring any of the Securities.

(c)           Knowledge. Purchaser acknowledges that he has had access to the Company’s filings with the Securities and Exchange Commission and has reviewed in particular the risk factors for investors contained in those filings. Purchaser further acknowledges that the Company has continued to sustain operating losses since the last financial statements filed. The Purchaser is aware of the Company’s business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Securities.

(d)           Restricted Securities.  The Purchaser understands that the Securities (and the shares of common stock issuable upon the exercise and/or conversion thereof) have not been registered under the Securities Act. Unless registered, the Purchaser may only sell or transfer the Securities (and the shares of common stock issuable upon the exercise and/or conversion thereof) pursuant to a specific exemption from the registration provisions of the Securities Act.  The Purchaser understands that the Securities are “restricted securities” under applicable U.S. federal and state securities laws and that, pursuant to these laws, the Purchaser must hold the Securities indefinitely unless they are registered with the Securities and Exchange Commission and qualified by state authorities, or an exemption from such registration and qualification requirements is available. The Purchaser further acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Securities, and on requirements relating to the Company which are outside of the Purchaser’s control, and which the Company is under no obligation and may not be able to satisfy.

(e)           [This Section 4(e) is intentionally left blank]

(f)           Legends.  The Purchaser understands that the Securities, and any shares of common stock issuable upon the exercise and/or conversion thereof may bear one or all of the following legends:

(i)   A legend substantially similar to the following form:

 “THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.  NO SUCH SALE OR DISTRIBUTION MAY BE AFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.”

3

(ii)           Any legend required by the Blue Sky laws of any state to the extent such laws are applicable to the shares represented by the certificate so legended.

(g)           Accredited Investor. The Purchaser is an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Securities Act.

5.           Conditions of the Purchasers’ Obligations at Closing.  The obligations of Purchaser to the Company under this Agreement are subject to the fulfillment, on or before the Closing, of each of the following conditions, unless otherwise waived:

(a)             Representations and Warranties.  The representations and warranties of the Company contained and incorporated by reference in Section 3 shall be true on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the date of the Closing.

(b)             Qualifications.  All authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Securities pursuant to this Agreement shall be obtained and effective as of the Closing.

6.           Conditions of the Company’s Obligations at Closing.  The obligations of the Company to Purchaser under this Agreement are subject to the fulfillment, on or before the Closing, of each of the following conditions, unless otherwise waived:

(a)           Representations and Warranties. The representations and warranties of Purchaser contained in Section 4 shall be true on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the Closing.

(b)           Qualifications.  All authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Securities pursuant to this Agreement shall be obtained and effective as of the Closing.

7.           Miscellaneous.

(a)           Successors and Assigns.  The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties.  Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

(b)           Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to conflicts of laws principles that would result in the application of the substantive laws of another jurisdiction. Any action brought by any party against the others concerning the transactions contemplated by this Agreement shall be brought only in the state or federal courts located in the County of New York, State of New York. All parties agree to submit to the jurisdiction of such courts. The prevailing party or parties shall be entitled to recover from the losing party or parties its reasonable attorney’s fees and costs. In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law.  Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of this Agreement.  Nothing contained herein shall be deemed or operate to preclude either party hereto from bringing suit or taking other legal action against the other in any other jurisdiction to enforce a judgment of any court located in New York County, City and State of New York, in favor of the prevailing party.

4

(c)           Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.

(d)           Titles and Subtitles.  The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

(e)Notices.   All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice.  Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.  The addresses for such communications shall be: (i) if to the Company: 6800 Gateway Park Drive, San Diego, Ca 92154, Fax: 619.575.9300, with a copy to Luis Carrillo, Esq., SteadyLaw Group, LLP, 501 W. Broadway Suite 800, San Diego, CA 92101 (ii) if to the Purchaser:  MKM Opportunity Master Fund, Limited, 644 Broadway, Fourth Floor, New York, New York 10012, facsimile , with a copy to Charles J. Hecht, Esq., Hecht & Associates, P.C., 275 Madison Avenue, 28th Floor, New York, New York 10016, facsimile: (212) 490-3263, e-mail: ..

(f)           Amendments and Waivers.  No provision of this Agreement or the Note or Warrant may be waived or amended except in a written instrument signed, in the case of an amendment, by the Company and the Purchaser, or in the case of a waiver, by the party against whom enforcement of any such waiver is sought.  No waiver of any provision shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right.

(g)           Severability.  If one or more provisions of this Agreement are held to beunenforceable under applicable law, the parties agree to renegotiate such provision in good faith, in order to maintain the economic position enjoyed by each party as close as possible to that under the provision rendered unenforceable.  In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of the Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of the Agreement shall be enforceable in accordance with its terms.

(h)           Entire Agreement.  This Agreement, the documents referred to herein, the provisions incorporated herein by reference and the documents annexed as exhibits hereto constitute the entire agreement between the parties hereto pertaining to the subject matter hereof, and any and all other written or oral agreements existing between the parties hereto are expressly canceled.

(i)           Corporate Securities Law.  THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF THE SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS CODE.  THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON THE QUALIFICATION BEING OBTAINED UNLESS THE SALE IS SO EXEMPT.

IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

5

COMPANY:                                                                                  PURCHASER:

ETHOS ENVIRONMENTAL, INC. MKM OPPORTUNITY MASTER FUND, LIMITED

By:		By:
	Enrique de Vilmorin, President	Its

6

EX-10.2

Exhibit A to Securities Purchase Agreement

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION OF THIS NOTE OR OF THE COMMON STOCK ISSUABLE UPON THE CONVERSION HEREOF MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT.

CONVERTIBLE PROMISSORY NOTE

ETHOS ENVIRONMENTAL, INC.

$300,000	August 1, 2008
	San Diego, CA

For value received, Ethos Environmental, Inc., a Nevada corporation (the “Company”), promises to pay to MKM Opportunity Master Fund, Limited, a Cayman Islands corporation (the “Holder”), the principal sum of Three Hundred Thousand Dollars ($300,000), together with interest as set forth herein. This Note is being issued pursuant to that certain Securities Purchase Agreement dated concurrently herewith (the “Purchase Agreement”). All capitalized terms used but not defined herein shall have the meanings given to them in the Purchase Agreement. This Note is subject to the following terms and conditions.

1.Maturity; Payment due upon Maturity; Default.Unless converted as provided in Section 3, this Note will automatically mature and be due and payable on the six month anniversary of the date hereof (the “Maturity Date”).   The amount payable upon the maturity of this Note shall be equal to one hundred twenty percent (120%) of the face value hereof, or three hundred sixty thousand dollars ($360,000), in addition to any accrued and unpaid interest as set forth in Section 2.  Notwithstanding anything in the foregoing, the entire unpaid principal sum of this Note, together with accrued and unpaid interest thereon, shall become immediately due and payable upon an “Event of Default”, which is: the insolvency of the Company, the failure of the Company to pay interest as set forth in Section 2 hereof, the commission of any act of bankruptcy by the Company, the execution by the Company of a general assignment for the benefit of creditors, the filing by or against the Company of a petition in bankruptcy or any petition for relief under the federal bankruptcy act or the continuation of such petition without dismissal for a period of ninety (90) days or more, or the appointment of a receiver or trustee to take possession of the property or assets of the Company.

2.Interest.  Interest upon this Note shall be payable in cash monthly, in arrears, at a rate of ten percent (10%) per annum, equivalent to one eighth and one-third percent (0.81/3%) or two thousand five hundred dollars ($2,500) monthly.  Interest shall be paid upon the first day of each month, commencing with September 1, 2008.

3.Conversion.

(a)           Conversion.

(i)           Conversion on Maturity.  Should the Company not repay the Note in full prior to the Maturity Date, the entire principal amount and accrued interest shall at the option of the Holder be converted into shares of the Company’s common stock as of the Maturity Date at a conversion rate of $0.25 per share or such other amount as determined in accordance with Section 3(d) (such conversion rate, as adjusted, being the “Conversion Price”).

(ii)           Conversion upon Event of Default.  Should there occur an Event of Default as defined in Section 2, the Holder may in its sole discretion elect to convert any portion of the principal amount and accrued and unpaid interest into shares of the Company’s common stock at Conversion Price.

1

(b)           Prepayment.The Company shall have the right to prepay the principal and interest due under this Note, in full, upon 10 days written notice to the Holder. During the 10 day notice period, the Holder shall have the right to convert the entire principal amount of the Note together with accrued interest into shares of the Company’s common stock. Should the Holder elect to convert the entire principal and interest due under this Note such conversion shall be at the Conversion Price.

(c)Mechanics and Effect of Conversion.Upon conversion of this Note pursuant to this Section 3, the Holder shall surrender this Note at the principal offices of the Company or any transfer agent of the Company. At its expense, the Company will, as soon as practicable thereafter, issue and deliver to such Holder a certificate or certificates for the number of shares to which such Holder is entitled upon such conversion, together with any other securities and property to which the Holder is entitled upon such conversion under the terms of this Note, including a check payable to the Holder for any accrued interest due. Upon conversion of this Note, the Company will be forever released from all of its obligations and liabilities under this Note with regard to that portion of the principal amount being converted including without limitation the obligation to pay such portion of the principal amount and accrued interest.

(d)           Weighted-Average Anti-Dilution Protection.

(i)Stock Dividends and Splits. If the Company, at any time while this Note is outstanding: (A) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company pursuant to this Note or the other securities issued or to be issued in this transaction), (B) subdivides outstanding shares of Common Stock into a larger number of shares, (C) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (D) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event and the number of shares issuable upon conversion of this Note shall be proportionately and equitably adjusted.  Any adjustment made pursuant to this Section 3(d)(i) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

(ii)Subsequent Equity Sales. If at any time while this Note is outstanding the Company shall offer, sell, grant any option to purchase or offer, sell or grant any right to reprice its securities, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock or any securities of the Company or of any subsidiary of the Company which would entitle the holder thereof to acquire at any time Common Stock (hereinafter, “Common Stock Equivalents”), including without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exchangeable for or otherwise entitles the holder thereof to receive Common Stock, entitling any Person to acquire shares of Common Stock, at an effective price per share less than the Conversion Price then in effect (such issuances collectively, a “Dilutive Issuance”), as adjusted hereunder (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which is issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share which is less than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price in effect on such date of the Dilutive Issuance), then, the Conversion Price shall be adjusted pursuant to the following formula:

NP = OP x [OB + (AMT/OP)]

(OB+SI)

where

2

NP is the new Conversion Price;

OP is the Conversion Price in effect immediately prior to such adjustment;

OB is the number of shares of Common Stock outstanding prior to the Dilutive Issuance;

AMT is the dollar amount of the Dilutive Issuance, and

SI is the number of shares of Common Stock issuable in the Dilutive Issuance.

The Company shall notify the Holder in writing, no later than the business day following the issuance of any Common Stock or Common Stock Equivalents subject to this section, indicating therein the applicable information required by the formula above (such notice the “Dilutive Issuance Notice”).

(iii)           Pro Rata Distributions.  If the Company, at any time during the term of this Note, shall distribute to all holders of Common Stock evidences of its indebtedness or assets (including cash and cash dividends) or rights or warrants to subscribe for or purchase any security other than the Common Stock (which shall be subject to Section 3(d)(ii) above), then in each such case the Conversion Price shall be adjusted by multiplying the Conversion Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the Closing Price (defined below) determined as of the record date mentioned above, and of which the numerator shall be such Closing Price on such record date less the then per share fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of the Common Stock as determined by the Board of Directors in good faith, or at the option of the Holder, by an independent appraiser selected by the Holder. and reasonably acceptable to the Company.  In either case the adjustments shall be described in a statement provided by the Company to the Holder of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock.  Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.  At the time of such adjustment, the number of shares of common stock issuable following such adjustment shall be equitably and proportionally adjusted upward.

As used herein, “Closing Price”, shall mean the first of the following clauses that applies:  (A) if, at the time of any such calculation, the Common Stock is listed or quoted on the American Stock Exchange, or the New York Stock Exchange, or the NASDAQ Market, the NASDAQ Capital Market or the Archipelago Exchange, the Closing Price shall be the closing or last sale price reported for the last business day immediately preceding the date of any such calculation; (B) if, at the time of any such calculation, the Common Stock is quoted on the OTC Bulletin Board or listed in the “Pink Sheets” published by the National Quotation Bureau Inc. or a similar agency or organization succeeding to its function or reporting prices, the Closing Price shall be the average of the high closing bid and low ask prices reported for the last five (5) trading days immediately preceding the date of any such calculation, or (C) in all other cases, the Closing Price of a share of Common Stock shall be the price determined by an independent appraiser selected in good faith by the Holder and reasonably acceptable to the Company.

(iv)           Adjustment for Reorganization, Consolidation, Merger, etc.  In the event that the Company shall (A) effect a reorganization, (B) consolidate with or merge into any other entity or (C) transfer all or substantially all of its properties or assets to any other entity under any plan or arrangement contemplating the dissolution of the Company, then, in each such case, as a condition precedent to the consummation of such a transaction, proper and adequate provision shall be made whereby the Holder of this Note, on the conversion hereof as provided in this Section 3, at any time after the consummation of any such reorganization, consolidation or merger or the effective date of any such dissolution, shall receive in lieu of the shares of Common Stock issuable on such conversion immediately prior to any such consummation or effective date, the stock and other securities and property (including cash) to which such Holder would have been entitled to receive upon any such consummation or dissolution if the Holder had so converted this Note immediately prior to such consummation or dissolution.

(v)Certificate as to Adjustments.  The computation of any adjustments described in this Section shall be the sole responsibility of the Company, which shall expeditiously prepare and mail to the Holder a notice setting forth the nature of any necessary adjustment together with the basis thereof and the calculations therefor.  The Company shall immediately notify the Holder of any information which bears on any of the events referenced in this Section 3 and which may have an effect on the conversion of this Note.  If the Company issues a variable rate security, the Company shall be deemed to have issued Common Stock or Common Stock Equivalents at the lowest possible conversion or exercise price at which such securities may be converted or exercised in the case of a Variable Rate Transaction (as defined below).

3

As used herein, the term “Variable Rate Transaction” shall mean a transaction in which the Company issues or sells (i) any debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right to receive additional shares of Common Stock either (A) at a conversion, exercise or exchange rate or other price that is based upon and/or varies with the trading prices of or quotations for the shares of Common Stock at any time after the initial issuance of such debt or equity securities, or (B) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such debt or equity security or upon the occurrence of specified or contingent events directly or indirectly related to the business of the Company or the market for the Common Stock (other than pursuant to standard anti-dilution features) or (ii) enters into any agreement, including, but not limited to, an equity line of credit, whereby the Company may sell securities at a future determined price

(vi)           Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3 the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.

(vii)           Voluntary Adjustment By Company. The Company may at any time during the term of this Note reduce (but not increase) the then-current Conversion Price, as the case may be, to any amount and for any period of time deemed appropriate by the Board of Directors of the Company.

(viii)           Notice to Allow Conversion by Holder. If (A) the Company shall declare a dividend (or any other distribution) on the Common Stock; or (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock; or (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; or (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; or (E)the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company; then, in each case, the Company shall cause to be mailed to the Holder at its last address as it shall appear upon the books and records of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (y) the date on which a survey of the holders of record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (z) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided, that the unintentional failure to mail such notice or any unintentional defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice.  The Holder is entitled to convert this Note during the 20-day period commencing on the date of such notice to the effective date of the event triggering such notice.

(ix)  Excluded Events. Notwithstanding any other provision in this Section 3, the Conversion Price shall not be adjusted by virtue of (a) the issuance of capital stock to employees, consultants, officers or directors of the Company for services and/or pursuant to stock purchase or stock option plans or agreements approved by the Board (but not exceeding 20% of the Company's Common Stock outstanding as of the date hereof for all such issuances in the aggregate), (b) the issuance of securities to financial institutions, suppliers or lessors in connection with commercial credit arrangements, equipment financings or similar transactions in the ordinary course of business, or (c) the repurchase of Common Stock shares from the Company's employees, consultants, advisors, service providers, officers or Directors at such person's cost (or at such other price as may be agreed to by the Company's Board of Directors).

4.Payment.All payments shall be made in lawful money of the United States of America at such place as the Holder hereof may from time to time designate in writing to the Company. Payment shall be credited first to the accrued interest then due and payable and the remainder applied to principal.

4

5.Transfer; Successors and Assigns.The terms and conditions of this Note shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Notwithstanding the foregoing, the Holder may not assign, pledge, or otherwise transfer this Note without the prior written consent of the Company. Subject to the preceding sentence, this Note may be transferred only upon surrender of the original Note for registration of transfer, duly endorsed, or accompanied by a duly executed written instrument of transfer in form satisfactory to the Company. Thereupon, a new note for the same principal amount and interest will be issued to, and registered in the name of, the transferee. Interest and principal are payable only to the registered holder of this Note.

6.Governing Law. This Note shall be governed by, and construed in accordance with, the laws of the State of New York, without regard to the conflicts of laws provisions thereof.  The Company hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Note, or for recognition or enforcement of any judgment, and hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court.  The Company hereby agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.  The Company hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Note in any court referred to above, and hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

7. Notices. All notices and other communications in respect of this Note (including, without limitation, any modifications of, or requests, waivers or consents under, this Note) shall be given or made in writing (including, without limitation, by facsimile) (a) in the case of the Company, at the “Address for Notices” specified below its name on the signature page hereof and (b) in the case of the Holder, at the address for such purpose as shall have been most recently specified to the Company by the Holder; or, as to either the Company or the Holder, at such other address as shall be designated by such party in a notice to the other party.  Except as otherwise provided in this Note, all such communications shall be deemed to have been duly given when transmitted by facsimile or personally delivered or, in the case of a mailed notice, upon receipt, in each case given or addressed as aforesaid.

8. Amendments and Waivers.No provision of this Note may be waived or amended except in a written instrument signed, in the case of an amendment, by the Company and the Holder, or in the case of a waiver, by the party against whom enforcement of any such waiver is sought.  No waiver of any default with respect to any provision shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right.

9. Stockholders, Officers and Directors Not Liable.In no event shall any stockholder, officer or director of the Company be liable for any amounts due or payable pursuant to this Note.

10.[This Section 10 is intentionally left blank]

11.Rank; Subsequent Financing.  The Company expressly acknowledges that the indebtedness evidenced by this Note shall rank senior in right of payment to all other existing indebtedness of the Company.  The Company may not issue any debt or warrants senior to or pari passu with this Note without the prior consent of the Holder.

12.Action to Collect on Note.If action is instituted to collect on this Note, the Company promises to pay all costs and expenses, including reasonable attorney’s fees, incurred in connection with such action.

13.Successors and Assigns.  All agreements of the Company in this Note shall bind its successors and permitted assigns.  This Note shall inure to the benefit of the Holder and its permitted successors and assigns.  The Company shall not delegate any of its obligations hereunder without the prior written consent of Holder.

5

14.Loss of Note.Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Note or any Note exchanged for it, and indemnity reasonably satisfactory to the Company (in case of loss, theft or destruction) or surrender and cancellation of such Note (in the case of mutilation), the Company will make and deliver in lieu of such Note a new Note of like tenor, at the Company’s expense.

[SIGNATURE PAGE FOLLOWS]

6

COMPANY:
ETHOS ENVIRONMENTAL, INC.
By:
	Enrique de Vilmorin, CEO
Address & Fax for Notice: 6800 Gateway Park Drive San Diego, Ca 92154 Fax: 619.575.9300

7

EX-10.3

STOCK PURCHASE AGREEMENT

This Stock Purchase Agreement dated as of August 1, 2008, is by and between Ethos Environmental, Inc., a Nevada corporation (the “Company”), MKM Opportunity Master Fund, Limited, a Cayman Islands corporation (the "Purchaser").

RECITALS

A.           Whereas, the Company wishes to obtain equity financing through the issuance and sale of shares of the common stock of the Company, par value $0.0001 per share (the “Common Stock”); and

B.           Whereas, the Purchaser is willing on the terms and conditions set forth in this Agreement to purchase $300,000 worth of common stock at a purchase price of $0.33 per share (equivalent to 909,091 shares of Common Stock) .

AGREEMENT

NOW, THEREFORE, based upon the foregoing and the mutual covenants and agreements herein contained, and for other good and sufficient consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

ARTICLE I.

DEFINED TERMS

1.1            Certain Defined Terms. When used in this Agreement, the following terms shall have the following meanings:

“Affiliate” means, with respect to any specified Person, any other Person which, directly or indirectly, controls, is under common control with, or is owned or controlled by, such specified Person. For purposes of this definition, (i) “control” means, with respect to any specified Person, either (x) the beneficial ownership of 10% percent or more of any class of equity securities or (y) the power to direct the management and policies of the specified Person through the ownership of voting securities or other equity interests, by contract or otherwise, (ii) the terms “controlling”, “control with” and “controlled by”, etc. shall have meanings correlative to the foregoing, (iii) the officers, directors and shareholders of the Company shall be deemed to be Affiliates of the Company and (iv) with respect to any Purchaser, any investment manager (or similar Person) having voting or disposition power over the Common Stock of such Purchaser shall be deemed to be an Affiliate of such Purchaser.

“Agreement” shall mean this Stock Purchase Agreement, as it may be amended or otherwise modified from time to time.

“Material Adverse Effect” means, as to any Person, a material adverse effect on the business, condition (financial or otherwise), operations, performance, or properties or prospects of such Person and its Subsidiaries, taken as a whole.

“Person” means any individual, corporation, general or limited partnership, joint venture, association, limited liability company, joint stock company, trust, business trust, bank, trust company, estate (including any beneficiaries thereof), unincorporated organization, cooperative, association or government branch, agency or political subdivision thereof.

“Purchaser” has the meaning set forth in the preamble of this Agreement, and shall include any Person which becomes a “Purchaser” after the Closing Date pursuant to Section 2.2 and any partner of a Purchaser who receives shares of Common Stock pursuant to a distribution from or a liquidation of such Purchaser.

“Restricted Securities” means the Common Stock.  The Restricted Securities, shall cease to be Restricted Securities when they have (a) been effectively registered under the 33 Act and disposed of in accordance with the registration statement covering them, (b) become eligible for sale pursuant to Rule 144 (or any similar provision then in force) under the 33 Act or (c) been otherwise transferred and new certificates shall have been issued for them not bearing the 33 Act legend. Whenever the securities cease to be Restricted Securities, the holder thereof shall be entitled to receive from the Company, without expense, new securities of like tenor not bearing a restrictive legend.

1

“SEC” means the United States Securities and Exchange Commission.

“Subsidiary” or “Subsidiaries” of any Person means any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other Persons performing similar functions are at the time directly or indirectly owned or controlled by such Person or one or more Subsidiaries of such Person.

“Transfer Agent” means the transfer agent of the Company or such other person who is then serving as the transfer agent for the Company in respect of the Common Stock.

“33 Act” means the Securities Act of 1933, as amended, and the rules and regulations issued in respect thereto.

ARTICLE II.

PURCHASE AND SALE TERMS

2.1           Purchase and Sale.  Subject to the terms of this Agreement, the Company shall authorize, issue and sell to Purchaser, and Purchaser shall purchase from the Company at the Closing, the total number of shares of Common Stock for $0.33 per share, for the aggregate purchase price set forth opposite such Purchaser's name on Schedule 2.1 hereto.

2.2           The Closing. The closing of the purchase and sale of the Common Stock (the “Closing”) shall take place at the offices of the Company, on or before August 1, 2008, or at such other time as shall be agreed upon by the Company and the Purchaser (the “Closing Date”).  It is anticipated that this Agreement will be signed on the date of and immediately before the Closing.  All actions to be taken and all documents to be executed and delivered by the parties at the Closing shall be deemed to have been taken and executed simultaneously and no actions shall be deemed taken or any documents deemed executed or delivered until all have been taken and delivered.

2.3           Payment and Delivery. The amount of the purchase price to be paid by the Purchaser on the Closing Date shall be as set forth opposite such Purchaser's name on Schedule 2.1 hereto. At the time of the Closing, the Purchaser shall pay the purchase price of the Common Stock purchased by it in full, in cash, by wire transfer of immediately available funds to an account which the Company shall designate in writing not less than two days prior to Closing Date.  Within five business days of delivery of funds by Purchaser on the Closing Date, the Company shall deliver to Purchaser stock certificates evidencing the total amount of Common Stock to be purchased by it hereunder, registered in the name of such Purchaser or its nominee.  The stock certificate representing the Common Stock shall bear the restrictive legend(s) set forth in Section 5.1 hereof.

2.4           Restricted Securities. The shares of Common Stock sold pursuant to this Agreement shall be Restricted Securities and shall be issued pursuant an exemption from registration provided under Section 4(2) and 4(6) of the 33 Act, as amended.

2.5.           Use of Proceeds. The Company shall use the net cash proceeds of its sale of the Common Stock solely for (i) the payment of $30,000 (or such greater amount as consented to by the Company) to the Purchaser for the Purchaser’s legal fees and other out-of-pocket expenses incurred in connection with this transaction; and, (ii) the Company's ongoing working capital purpose, in its ordinary course of business.

2

ARTICLE III.

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

As an inducement to Purchaser to enter into this Agreement, the Company hereby represents and warrants that:

3.1           Organization and Corporate Power.  The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada and is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which its ownership of property or the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing does not or will not have a material adverse effect on the Company.  The Company has all requisite corporate power and authority to own and operate its properties, to carry on its businesses as they are now conducted and to consummate the transactions contemplated by this Agreement.

3.2           [This Section 3.2 is intentionally left blank]

3.3           Authorization; No Breach.  The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action of the Company.  This Agreement constitutes a valid and binding obligation of the Company enforceable in accordance with its terms. The execution and delivery of this Agreement by the Company  and the consummation of the transactions contemplated hereby and thereby do not and will not (i) conflict with or result in a breach of the terms, conditions or provisions of, (ii) constitute a default under, (iii) result in the creation of any lien, security interest, charge or encumbrance upon the Company's capital stock or assets pursuant to, (iv) give any third party the right to accelerate any obligation under, (v) result in a violation of, or (vi) require any authorization, consent, approval, exemption or other action by or notice to any court or administrative or governmental body pursuant to, the Company's Certificate of Incorporation or By-laws, each as amended, or any law, statute, rule or regulation to which the Company is subject, or any agreement, instrument, order, judgment or decree to which the Company  is subject.

3.4           SEC Reports.  To the best of the Company’s knowledge each of the financial statements (including the related notes) included in the Company’s annual, quarterly, periodic or other reports filed with the SEC present fairly, in all material respects, the consolidated financial position and consolidated results of operations and cash flows of the Company and its consolidated Subsidiaries as of the respective dates or for the respective periods set forth therein, all in conformity with United States generally accepted accounting principles (“GAAP”) consistently applied during the periods involved except as otherwise noted therein, and subject, in the case of the unaudited interim financial statements, to the absence of notes and normal year-end adjustments that have not been and are not expected to be material in amount.

3.5           No Adverse Changes.  As of the Closing, other than as described in this Agreement, there will not have occurred any one or more changes or events which in the aggregate would have a Material Adverse Effect upon the financial condition, operations or prospects of the Company and its subsidiaries taken as a whole, excluding for the purposes hereof, any economic or competitive conditions applicable to the United States economy as a whole.

3.6           Tax Matters.  The Company has filed all Federal, state and other tax returns and reports required to be filed by it and such returns are complete; no extensions of time to file any returns and reports are in effect, and the Company  has paid all taxes shown on such returns including all deficiency assessments, if any; to the extent tax liabilities have accrued but have not become payable, they have been adequately reflected as liabilities on the books of the Company. The Federal tax returns of the Company are not currently under examination by the Internal Revenue Service.  No issue has been raised in any prior examination which, by application of similar principles, can reasonably be expected to result in assertion of a deficiency for any year not examined nor is the Company aware of any fact which would constitute the grounds for the assessment of any further tax liability with respect to any such year.

3.7           Litigation.  To the best of the Company’s knowledge, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company or any of its Subsidiaries, threatened against or affecting the Company, the Common Stock or any of the Company's Subsidiaries or any of the Company's or the Company's Subsidiaries' officers or directors in their capacities as such, which could reasonably be expected to have a Material Adverse Effect.

3

3.8           No General Solicitation. Neither the Company, nor any of its officers or directors, nor any person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the 33 Act) in connection with the offer or sale of the securities as described herein.

3.9           Intellectual Property Rights. The Company and its Subsidiaries own or possess adequate rights or licenses to use all material trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and rights necessary to conduct their respective businesses as now conducted, none of the Company's material trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, government authorizations, trade secrets or other intellectual property rights have expired or terminated, or, by the terms and conditions thereof, could expire or terminate within two years from the date of this Agreement. The Company and its Subsidiaries do not have any knowledge of any infringement by the Company or its Subsidiaries of any material trademark, trade name rights, patents, patent rights, copyrights, inventions, licenses, service names, service marks, service mark registrations, trade secret or other similar rights of others, or of any such development of similar or identical trade secrets or technical information by others and, there is no claim, action or proceeding being made or brought against, or to the Company's knowledge, being threatened against, the Company or its Subsidiaries regarding trademark, trade name, patents, patent rights, invention, copyright, license, service names, service marks, service mark registrations, trade secret or other infringement, which could reasonably be expected to have a Material Adverse Effect.

3.10           Title. To the best of the Company’s knowledge it has good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them which are material to the business of the Company and its Subsidiaries, in each case free and clear of all liens, encumbrances and defects. Any real property and facilities held under lease by the Company and any of its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its Subsidiaries.

3.11           Transactions with Affiliates. To the best of the Company's knowledge, none of the officers, directors, or employees of the Company is presently a party to any transaction with the Company or any of its Subsidiaries (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any corporation, partnership, trust or other entity in which any officer, director, or any such employee has an interest or is an officer, director, trustee or partner.

3.12Disclosure.  The Company has fully provided Purchaser with all the information that such Purchaser has requested for deciding whether to purchase the Shares.  To the Company’s knowledge, no document, information or certificates made or delivered in connection with this Agreement contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements herein or therein not misleading.

3.13Securities Rights and Options.  Except for the securities deliverable upon the exercise and/or conversion of the warrant and note issued in accordance with the Securities Purchase Agreement of even date herewith by and between the parties hereto (the “Securities Purchase Agreement”), except as disclosed in Schedule 3.13, there are no outstanding rights or options to purchase shares of the Company’s Common Stock.

3.14Consents.  The execution, delivery and performance by Company of this Stock Purchase Agreement and the other agreements contemplated by this transaction and the issuance or delivery of shares of Common Stock or other securities hereunder or in connection therewith, does not and will not require the approval or consent of, or any filing with, any governmental authority or agency other than those required by Regulation D as promulgated under the Securities Act of 1933, as amended.

4

ARTICLE IV.

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

Purchaser represents and warrants to the Company, at and as of the Closing Date, as follows:

4.1            Power and Authority. Such Purchaser has full power and authority and has taken all required corporate (or trust or partnership, as the case may be) and other action necessary to permit it to execute and deliver this Agreement and each other document or instrument related hereto or contemplated by the transactions with the Purchaser, and to carry out the terms hereof and thereof. None of the foregoing actions will (i) violate any provision of such Purchaser's by-laws, charter or other similar organizational documents, if applicable, (ii) result in the breach of or constitute a default under any contract, agreement or instrument to which such Purchaser is a party or by which it is bound or (iii) violate any order, writ, judgment, injunction, decree, statute, rule or regulation of any court, tribunal or governmental entity or authority applicable to or bearing upon such Purchaser or any of its assets or business except, as to (iii) above, as would not have a Material Adverse Effect.

4.2            Enforceability, etc. This Agreement has been duly executed and delivered by the Purchaser and is within the power and authority of the Purchaser, and constitutes the legal, valid and binding obligation of the Purchaser enforceable against it in accordance with its respective terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, moratorium, reorganization or other similar laws affecting creditors' rights generally and subject to general principles of equity (regardless of whether considered in a proceeding in equity or at law).

4.3            Investment Representations.

(a)           Purchaser is an “Accredited Investor” as that term is defined in Rule 501(a) of Regulation D of the 33 Act, as amended, and is able to bear the economic risk of its purchase of the Common Stock for an indefinite period of time because the Common Stock is being issued and sold under exemptions from registration provisions of the 33 Act and under applicable state securities laws and, therefore, cannot be sold unless subsequently registered under the 33 Act or applicable state securities laws or an exemption from such registrations is available.

(b)           Purchaser acknowledges that the shares of Common Stock have not been registered under the 33 Act, or qualified under the laws of any state, or any other applicable blue-sky laws in reliance, in part, on the representations and warranties herein.  Purchaser understands that the Common Stock is being offered pursuant to the exemption from registration provided by Sections 4(2) and 4(6) of the 33 Act, as amended. Purchaser is acquiring such shares of Common Stock for investment purposes for Purchaser's own account, and not for resale or with a view to distribution of all or any of shares of the Common Stock.  No other person will have any direct or indirect beneficial interest in the Common Stock.

(c)           Purchaser understands that the Common Stock is, and will be, “Restricted Securities” under the federal securities laws in that such shares of Common Stock will be acquired from the Company in a transaction not involving a public offering, and that under such laws and applicable regulations such Common Stock may be resold without registration under the Act only in certain limited circumstances and that otherwise such Common Stock must be held indefinitely. In this connection, Purchaser represents that Purchaser understand the resale limitations imposed by the 33 Act and is familiar with Rule 144 of the 33 Act, as presently in effect, and the condition which must be meet in order for that rule to be available for resale of “Restricted Securities,” including the requirement that the Purchaser Shares must be held for at least one year after purchase thereof from the Company prior to resale (two years in the absence of publicly available information about the Company) and the condition that there be available to the public current information about the Company under certain circumstances.

4.4            Adequate Access to Personnel and Materials. During the negotiation of the transactions contemplated herein, the Purchaser and its representatives have been afforded access to the Company's corporate books, financial statements and records, have been afforded an opportunity to ask such questions of the Company's officers and directors concerning the Company's business, operations, financial condition, assets, liabilities and other relevant matters, and have been given all such information as has been requested, in order to evaluate the merits and risks of the prospective investment contemplated herein.

5

ARTICLE V.

COVENANTS AND OTHER AGREEMENTS OF THE PARTIES

5.1           Stock Certificate Legend.   Each certificate representing Common Stock will be imprinted with a legend in substantially the following form:

(a) “THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE ASSIGNED EXCEPT PURSUANT TO A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER SUCH ACT AND UNDER ANY APPLICABLE STATE SECURITIES LAWS UNLESS, IN THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND STATE SECURITIES LAWS IS AVAILABLE.”

(b)           Any legend required by applicable state securities laws.

5.2           Purchaser’s Right to Participate in Future Financing.  If the Company should issue any debt or equity during the period commencing the day after the Closing and for two years thereafter, the Purchaser shall have the right of first refusal to participate therein on the same terms.  Should the Company issue any Common Stock or securities convertible into Common Stock during such period, the Purchaser shall be entitled to purchase that amount of securities that would enable it to maintain the same percentage of Common Stock in the Company that it had immediately following the Closing.  Should the Company issue any debt securities, the Purchaser will be entitled to purchase up to 18.75% of the principal amount of the debt being offered.  The Company shall furnish to the Purchaser all of the information being furnished to prospective participants in any offering contemplated hereunder, and the Purchaser shall notify the Company of its intentions not less than five days before the initially-scheduled closing date for such offering.

ARTICLE VI.

CLOSING CONDITIONS

6.1            Closing Conditions. The obligation of Purchaser to purchase the Common Stock on the Closing Date shall be subject to satisfaction of the following conditions on or prior to such date:

(a)           The representations and warranties of the Company shall be true and correct in all material respects as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date) and the Company shall have performed, satisfied and complied with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date.

(b)           The Board of Directors of the Company shall have adopted resolutions authorizing the transactions contemplated by this Agreement which shall be in full force and effect without any amendment or supplement thereto as of the Closing Date.

(c)           As of the Closing Date, the Company shall have reserved out of its authorized and unissued Common Stock, shares of Common Stock solely for the purpose of and in an amount sufficient for consummating the sale of the Common Stock hereunder.

(d)           No Event of Default (as defined in Article VIII) has occurred, or any event which, after notice and/or lapse of time, would become an event of default has occurred.

(e)The Company shall have provided the Purchaser with the information requested by the Purchaser in connection with its due diligence requests made prior to the Closing.

(f)The Company shall have received additional capital of at least $500,000 for the purchase of its Common Stock from sources other than the Purchaser, or in the Purchaser’s sole discretion. a commitment to receive such additional capital of at least $500,000 satisfactory to the Purchaser.

6

ARTICLE VII.

INDEMNIFICATION

7.1           Indemnification. In consideration of the Purchaser's execution and delivery of this Agreement acquiring the securities hereunder and in addition to all of the Company's other obligations under this Agreement, the Company shall, to the fullest extent of the law, defend, protect, indemnify and hold harmless the Purchaser and all of its Affiliates, shareholders, officers, directors, employees and direct or indirect investors and any of the foregoing person's agents or other representatives (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the “Indemnitees”) from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses arising out of, related to or in connection therewith, and including reasonable attorneys' fees and disbursements (the “Indemnified Liabilities”), incurred by any Indemnitee as a result of, or arising out of, or relating to or incurred in connection with (a) any misrepresentation or breach of any representation or warranty made by the Company in this Agreement or any other certificate, instrument or document contemplated hereby or thereby, (b) any breach of any covenant, agreement or obligation of the Company contained in this Agreement or any other certificate, instrument or document contemplated hereby or thereby, or (c) any cause of action, suit or claim brought or made against such Indemnitee and arising out of or resulting from the execution, delivery, performance or enforcement of this Agreement or any other certificate, instrument or document contemplated hereby or thereby, other than with respect to Indemnified Liabilities which directly and primarily result from the gross negligence or willful misconduct of the Indemnitee. To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law.

ARTICLE VIII.

[This Article VIII has been intentionally left blank]

ARTICLE IX.

TERMINATION

9.1           Termination. This Agreement may be terminated at any time prior to the Closing:

(a)           by mutual consent of the Company and the Purchaser;

(b)           by either the Company if the Closing shall not have occurred by August 15, 2008; provided, however, that the failure to consummate the transactions contemplated hereby is not a result of the failure by the party so electing to terminate this Agreement to perform any of its obligations hereunder.

(c)           If, pursuant to or within the meaning of any applicable bankruptcy law, the Company commences a voluntary case or any Person commences a proceeding against the Company, a custodian is appointed for the Company or for all or substantially all of its property, or the Company makes a general assignment for the benefit of its creditors, (any of which would be an Event of Default as described in Sections 8 hereof) this Agreement shall automatically terminate without any liability or payment to the Company without further action or notice by any Person.

Any termination of this Agreement pursuant to this Section 9.1 shall be effected by written notice from the Company to the Purchaser, or the Purchaser to the Company, as the case may be, setting forth the basis for the termination hereof. The representations and warranties of the Company and the Purchaser contained in this Agreement, the indemnification provisions set forth in Section 7.1 hereof and the provisions set forth in Section 10, shall survive any termination of this Agreement.

7

ARTICLE X.

MISCELLANEOUS

10.1           Headings. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement.

10.2           Severability. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement.

10.3           Entire Agreement; Amendments and Waivers.  This Agreement represent the entire agreement between the parties hereto with respect to the subject matter hereof.  Neither this Agreement nor any term hereof may be changed, waived, discharged or terminated except by an instrument in writing signed by the party or parties against which enforcement of such change, waiver, discharge or termination is sought.

10.4           [This Section 10.4 is intentionally left blank]

10.5           Notices.  All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice.  Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.  The addresses for such communications shall be: (i) if to the Company: 6800 Gateway Park Drive, San Diego, Ca 92154, Fax: 619.575.9300, with a copy to Luis Carrillo, Esq., SteadyLaw Group, LLP, 501 W. Broadway Suite 800, San Diego, CA 92101 (ii) if to the Purchaser:  MKM Opportunity Master Fund, Limited, 644 Broadway, Fourth Floor, New York, New York 10012, facsimile ____________, with a copy to Charles J. Hecht, Esq., Hecht & Associates, P.C., 275 Madison Avenue, 28th Floor, New York, New York 10016, facsimile: (212) 490-3263, e-mail: ..

10.6           No Assignment.  No right or obligation of any party shall be assigned without the prior written of the other.

10.7           No Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person.

10.8           Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

10.9           [This Section 10.9 is intentionally left blank]

8

10.10           Remedies, Other Obligations, Breaches and Injunctive Relief. The Purchaser's remedies provided in this Agreement shall be cumulative and in addition to all other remedies available to the Purchaser under this Agreement, at law or in equity (including a decree of specific performance and/or other injunctive relief), no remedy of the Purchaser contained herein shall be deemed a waiver of compliance with the provisions giving rise to such remedy and nothing herein shall limit the Purchaser's right to pursue actual damages for any failure by the Company to comply with the terms of this Agreement. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Purchaser and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Purchaser shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required.

10.11           Attorneys' Fees and Costs.  If this Agreement gives rise to a lawsuit or other legal proceeding between any of the parties hereto, the prevailing party shall be entitled to recover court costs, necessary disbursements (including expert witnesses' fees) and reasonable attorneys' fees, in addition to any other relief such party may be entitled.

10.12           Failure or Indulgence not Waiver. No failure or delay in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege.

10.13           Governing Law; Jurisdiction.   This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to conflicts of laws principles that would result in the application of the substantive laws of another jurisdiction. Any action brought by any party against the others concerning the transactions contemplated by this Agreement shall be brought only in the state or federal courts located in the County of New York, State of New York. All parties agree to submit to the jurisdiction of such courts. The prevailing party or parties shall be entitled to recover from the losing party or parties its reasonable attorney’s fees and costs. In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law.  Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of this Agreement.  Nothing contained herein shall be deemed or operate to preclude either party hereto from bringing suit or taking other legal action against the other in any other jurisdiction to enforce a judgment of any court located in New York County, City and State of New York, in favor of the prevailing party.

10.15           Counterparts. This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party; provided that a facsimile signature shall be considered due execution and shall be binding upon the signatory thereto with the same force and effect as if the signature were an original, not a facsimile signature.

IN WITNESS WHEREOF, Purchaser has executed, or caused this Agreement to be executed by signing the attached Signature Page.

	Ethos Environmental, Inc.
Dated:
	By: Enrique de Vilmorin, CEO

9

STOCK PURCHASE AGREEMENT - SIGNATURE PAGE

This page constitutes the Signature Page to the Stock Purchase Agreement. The undersigned represents to the Company that the Undersigned has read and understands the terms and conditions as set forth in the Stock Purchase Agreement and agrees to be bound by such terms and conditions.  It is expressly agreed that the parties may execute this Signature Page to the Stock Purchase Agreement in counter parts and via facsimile signature and such facsimile signature pages shall be treated as originals for all purposes.

	MKM Opportunity Master Fund, Limited
Dated:
	By:

10

SCHEDULE 2.1

Purchaser’s Name and Address	Amount Purchased	Shares Purchased
MKM Opportunity Master Fund, Limited                                                                                                         644 Broadway Fourth Floor, New York, New York 10012	$300,000	909,091
TOTAL	$300,000	909,091

11

SCHEDULE 3.13

Securities Rights and Options

1. A warrant to purchase 1,900,000 shares of common stock at $2.50 per share has been issued to National Advisors, Inc. This Warrant expires March 31, 2010.

2. The Company is currently in negotiations with GreenBridge Capital Partners, LLC, (“GreenBridge”) to settle a pending matter by and between the Company and GreenBridge and it is anticipated that during the course of the negotiations the Company will issue to GreenBridge a Warrant as part of the settlement. The issuance of any such Warrant shall be deemed to have occurred prior to the execution of the Stock Purchase Agreement, for which this Schedule attached.

12

EX-10.4

Exhibit B to Securities Purchase Agreement

Warrant No. 2008-___________

ETHOS ENVIRONMENTAL, INC.

(a Nevada corporation)

Warrant for the Purchase of 1,000,000

Shares of Common Stock, Par Value $0.0001

[This Warrant Will Be Void

After 5:00 P.M. Mountain Time

On August 1, 2013]

These securities have not been registered with the U.S. Securities and Exchange Commission (the

“SEC”) under the Securities Act of 1933, as amended (the “Securities Act”), and are being

offered in reliance on exemptions from registration provided in Section 4(2) of the

Securities Act and Rule 506 of Regulation D promulgated thereunder and

preemption from the registration or qualification requirements (other

than notice filing and fee provisions) of applicable state laws under

the National Securities Markets Improvement Act of 1996.

THIS WARRANT (this “Warrant”) certifies that, for value received, MKM Opportunity Master Fund, Limited, a  Cayman Islands corporation, or its registered assigns (the “Holder” or “Holders”), is entitled, at any time on or before 5:00 p.m. Pacific Standard Time on August 1, 2013 (the “Termination Date”), to subscribe for, purchase, and receive One Million (1,000,000) shares (the “Warrant Shares”) of fully paid and nonassessable common stock, par value $0.001 (the “Common Stock”) of Ethos Environmental, Inc., a Nevada corporation (the “Company”). The purchase price of one share of Common Stock of the Exercise Price, as defined in Section 1(b) below. The number of Shares to be received on exercise of this Warrant and the Exercise Price may be adjusted on the occurrence of certain events as described herein. If the rights represented hereby are not exercised by 5:00 p.m. Pacific Standard Time on August 1, 2013, this Warrant shall automatically become void and of no further force or effect, and all rights represented hereby shall cease and expire.

Subject to the terms set forth herein, this Warrant may be assigned by the Holder in whole or in part by execution of the form of assignment attached hereto or may be exercised by the Holder in whole or in part by execution of the form of exercise attached hereto and payment of the Exercise Price in the manner described above, all subject to the terms hereof.

1.Exercise.

(a)Exercise of Warrants.  Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or before the Termination Date by delivering to the Company a duly executed  original or facsimile copy of the Notice of Exercise form annexed hereto.  The Holder shall have the rights of a stockholder only with respect to Shares fully paid for by the Holder under this Warrant. On the exercise of all or any portion of this Warrant in the manner provided herein, the Holder exercising the same shall be deemed to have become a Holder of record of the Shares as to which this Warrant is exercised for all purposes, and certificates for the securities so purchased shall be delivered to the Holder within a reasonable time, but in no event longer than 10 days after this Warrant shall have been exercised as set forth above.   Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within 10 days of the date the final Notice of Exercise is delivered to the Company.  Partial exercises of this Warrant resulting in purchases of a portion of the total number of Shares available hereunder shall have the effect of lowering the outstanding number of Shares purchasable hereunder in an amount equal to the applicable number of Shares purchased.

1

(b)Exercise Price.  The exercise price of the Shares issuable under this Warrant shall be $.75 per share, subject to adjustment under Section 4 hereof (the “Exercise Price”). Within 5 business days of the date the Notice of Exercise is delivered to the Company, the Holder shall have surrendered this Warrant (if required) to the Company and the Company shall have received  payment of the aggregate Exercise Price of the shares thereby purchased by wire transfer or cashier’s check drawn on a United States bank.

(c)Cashless Exercise.  This Warrant may be exercised at any time otherwise permitted by means of a “cashless exercise” in which the Holder shall be entitled to receive a certificate for the number of Shares equal to the quotient obtained by the following formula:

(A-B)*X

A

Where:

(A) = the Closing Price on the Trading Day immediately preceding the date of  such election;

(B) = the Exercise Price of this Warrant, as adjusted; and

(X) = the number of Shares issuable upon exercise of this Warrant in accordance with the terms of this Warrant by means of a cash exercise rather than a cashless exercise.

As used herein, “Closing Price”, shall mean the first of the following clauses that applies:  (1) if, at the time of any such calculation, the Common Stock is listed or quoted on the American Stock Exchange, or the New York Stock Exchange, or the NASDAQ Market, the NASDAQ Capital Market or the Archipelago Exchange, the Closing Price shall be the closing or last sale price reported for the last business day immediately preceding the date of any such calculation; (2) if, at the time of any such calculation, the Common Stock is quoted on the OTC Bulletin Board or listed in the “Pink Sheets” published by the National Quotation Bureau Inc. or a similar agency or organization succeeding to its function or reporting prices, the Closing Price shall be the average of the high closing bid and low ask prices reported for the last five (5) Trading Days immediately preceding the date of any such calculation, or (3) in all other cases, the Closing Price of a share of Common Stock shall be the price determined by an independent appraiser selected in good faith by the Holder and reasonably acceptable to the Company. As used herein, the term “Trading Day” means any day in which any of the markets on which the Company’s Common Stock is listed or quoted for trading on the date in question shall be open for business, or, if the Common Stock is not listed or quoted on any markets, then a business day.

(d)           No Fractional Shares.  No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant.  As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall issue to the Holder one whole share.

2.Assignment of Warrants. In the event this Warrant is assigned in the manner provided herein, the Company, upon request and upon surrender of this Warrant by the Holder at the principal office of the Company accompanied by payment of all transfer taxes, if any, payable in connection therewith, shall transfer this Warrant on the books of the Company. If the assignment is in whole, the Company shall execute and deliver a new Warrant or Warrants of like tenor to this Warrant to the appropriate assignee expressly evidencing the right to purchase the aggregate number of Shares purchasable hereunder; and if the assignment is in part, the Company shall execute and

deliver to the appropriate assignee a new Warrant or Warrants of like tenor expressly evidencing the right to purchase the portion of the aggregate number of Shares as shall be contemplated by any such agreement, and shall concurrently execute and deliver to the Holder a new Warrant of like tenor to this Warrant evidencing the right to purchase the remaining portion of the Shares purchasable hereunder that have not been transferred to the assignee.

3.Fully Paid Shares. The Company covenants and agrees that the Shares issuable upon the exercise of this Warrant will, on issuance pursuant to the terms of this Warrant, be fully paid and nonassessable, free from all taxes, liens, and charges with respect to the issue thereof, and not issued in violation of the preemptive or similar right of any other person. The Company further covenants and agrees that during the period within which the rights represented by this Warrant may be exercised, the Company will have authorized and reserved a sufficient number of Shares of Common Stock to provide for the exercise of the rights represented by this Warrant.

2

4.Anti-Dilution Protection.

(a)Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (A) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company pursuant to this Warrant or the other securities issued or to be issued in this transaction), (B) subdivides outstanding shares of Common Stock into a larger number of shares, (C) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (D) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event and the number of shares issuable upon exercise of this Warrant shall be proportionately and equitably adjusted.  Any adjustment made pursuant to this Section 4(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

(b)Subsequent Equity Sales. If at any time while this Warrant is outstanding the Company shall offer, sell, grant any option to purchase or offer, sell or grant any right to reprice its securities, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock or any securities of the Company or of any subsidiary of the Company which would entitle the holder thereof to acquire at any time Common Stock (hereinafter, “Common Stock Equivalents”), including without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exchangeable for or otherwise entitles the holder thereof to receive Common Stock, entitling any Person to acquire shares of Common Stock, at an effective price per share less than the Exercise Price then in effect (such issuances collectively, a “Dilutive Issuance”), as adjusted hereunder (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which is issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share which is less than the Exercise Price, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the Dilutive Issuance), then, the Exercise Price shall be adjusted pursuant to the following formula:

NP = OP x [OB + (AMT/OP)]

(OB+SI)

where

NP is the new Exercise Price;

OP is the Exercise Price in effect immediately prior to such adjustment;

OB is the number of shares of Common Stock outstanding prior to the Dilutive Issuance;

AMT is the dollar amount of the Dilutive Issuance, and

SI is the number of shares of Common Stock issuable in the Dilutive Issuance.

The Company shall notify the Holder in writing, no later than the business day following the issuance of any Common Stock or Common Stock Equivalents subject to this section, indicating therein the applicable information required by the formula above (such notice the “Dilutive Issuance Notice”).

(c)Pro Rata Distributions.  If the Company, at any time during the term of this Warrant, shall distribute to all holders of Common Stock evidences of its indebtedness or assets (including cash and cash dividends) or rights or warrants to subscribe for or purchase any security other than the Common Stock (which shall be subject to Section 4(b) above), then in each such case the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the Closing Price (defined below) determined as of the record date mentioned above, and of which the numerator shall be such Closing Price on such record date less the then per share fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of the Common Stock as determined by the Board of Directors in good faith, or at the option of the Holder, by an independent appraiser selected by the Holder. and reasonably acceptable to the Company.  In either case the adjustments shall be described in a statement provided by the Company to the Holder of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock.  Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.  At the time of such adjustment, the number of shares of common stock issuable following such adjustment shall be equitably and proportionally adjusted upward.

3

As used herein, “Closing Price”, shall mean the first of the following clauses that applies:  (1) if, at the time of any such calculation, the Common Stock is listed or quoted on the American Stock Exchange, or the New York Stock Exchange, or the NASDAQ Market, the NASDAQ Capital Market or the Archipelago Exchange, the Closing Price shall be the closing or last sale price reported for the last business day immediately preceding the date of any such calculation; (2) if, at the time of any such calculation, the Common Stock is quoted on the OTC Bulletin Board or listed in the “Pink Sheets” published by the National Quotation Bureau Inc. or a similar agency or organization succeeding to its function or reporting prices, the Closing Price shall be the average of the high closing bid and low ask prices reported for the last five (5) trading days immediately preceding the date of any such calculation, or (3) in all other cases, the Closing Price of a share of Common Stock shall be the price determined by an independent appraiser selected in good faith by the Holder and reasonably acceptable to the Company.

(d)Adjustment for Reorganization, Consolidation, Merger, etc.  In the event that the Company shall 1) effect a reorganization, 2) consolidate with or merge into any other entity or 3) transfer all or substantially all of its properties or assets to any other entity under any plan or arrangement contemplating the dissolution of the Company, then, in each such case, as a condition precedent to the consummation of such a transaction, proper and adequate provision shall be made whereby the Holder of this Warrant, on the exercise hereof as provided in Section 1 above, at any time after the consummation of any such reorganization, consolidation or merger or the effective date of any such dissolution, shall receive in lieu of the shares of Common Stock issuable on such exercise immediately prior to any such consummation or effective date, the stock and other securities and property (including cash) to which such Holder would have been entitled to receive upon any such consummation or dissolution if the Holder had so exercised this Warrant immediately prior to such consummation or dissolution.

(e)Certificate as to Adjustments.  The computation of any adjustments described in this Section shall be the sole responsibility of the Company, which shall expeditiously prepare and mail to the Holder a notice setting forth the nature of any necessary adjustment together with the basis thereof and the calculations therefor.  The Company shall immediately notify the Holder of any information which bears on any of the events referenced in this Section 4 and which may have an effect on the exercise of this Warrant.  If the Company issues a variable rate security, the Company shall be deemed to have issued Common Stock or Common Stock Equivalents at the lowest possible conversion or exercise price at which such securities may be converted or exercised in the case of a Variable Rate Transaction (as defined below).

As used herein, the term “Variable Rate Transaction” shall mean a transaction in which the Company issues or sells (i) any debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right to receive additional shares of Common Stock either (A) at a conversion, exercise or exchange rate or other price that is based upon and/or varies with the trading prices of or quotations for the shares of Common Stock at any time after the initial issuance of such debt or equity securities, or (B) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such debt or equity security or upon the occurrence of specified or contingent events directly or indirectly related to the business of the Company or the market for the Common Stock (other than pursuant to standard anti-dilution features) or (ii) enters into any agreement, including, but not limited to, an equity line of credit, whereby the Company may sell securities at a future determined price

(f)Calculations. All calculations under this Section 4 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 4, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.

4

(g)Voluntary Adjustment By Company. The Company may at any time during the term of this Warrant reduce (but not increase) the then-current Exercise Price, as the case may be, to any amount and for any period of time deemed appropriate by the Board of Directors of the Company.

(h)Notice to Allow Exercise by Holder. If (1) the Company shall declare a dividend (or any other distribution) on the Common Stock; or (2) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock; or (3) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; or (4) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; or (5) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company; then, in each case, the Company shall cause to be mailed to the Holder at its last address as it shall appear upon the books and records of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (y) the date on which a survey of the holders of record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (z) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided, that the unintentional failure to mail such notice or any unintentional defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice.  The Holder is entitled to exercise this Warrant during the 20-day period commencing on the date of such notice to the effective date of the event triggering such notice.

(i)           Excluded Events. Notwithstanding any other provision in this Section 4, the Exercise Price shall not be adjusted by virtue of (a) the issuance of capital stock to employees, consultants, officers or directors of the Company for services and/or pursuant to stock purchase or stock option plans or agreements approved by the Board (but not exceeding 20% of the Company's Common Stock outstanding as of the date hereof for all such issuances in the aggregate during the life of this Warrant), (b) the issuance of securities to financial institutions, suppliers or lessors in connection with commercial credit arrangements, equipment financings or similar transactions in the ordinary course of business, or (c) the repurchase of Common Stock shares from the Company's employees, consultants, advisors, service providers, officers or Directors at such person's cost (or at such other price as may be agreed to by the Company's Board of Directors).

5.           Notice of Certain Events.  In the event of: (a) any taking by the Company of a record of the holders of any class of securities of the Company for the purpose of determining the holders thereof who are entitled to receive any dividends or other distribution, or any right to subscribe for, purchase, or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other rights; (b) any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company, or any transfer of all or substantially all of the assets of the Company to any other person, or any consolidation, share exchange, or merger involving the Company; or (c) any voluntary or involuntary dissolution, liquidation, or winding up of the Company, then, the Company will mail to the Holder(s) of this Warrant, at least 20 days prior to the earliest date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution, or right; the amount and character of such dividend, distribution, or right; or the date on which any such reorganization, reclassification, transfer, consolidation, share exchange, merger, dissolution, liquidation, or winding up of the Company will occur and the terms and conditions of such transaction or event.

 6.           Limitation of Transfer. Subject to the restrictions set forth in paragraph 7 hereof, this Warrant is transferable at the offices of the Company. On such transfer, every Holder hereof agrees that the Company may deem and treat the registered Holder(s) of this Warrant as the true and lawful owner(s) thereof for all purposes, and the Company shall not be affected by any notice to the contrary.

 7.           Disposition of Warrants or Shares. Each registered owner of this Warrant, by acceptance hereof, agrees for itself and any subsequent owner(s) that, before any disposition is made of any Warrants or Shares of Common Stock, the owner(s) shall give written notice to the Company describing briefly the manner of any such proposed disposition. No such disposition shall be made unless and until:

5

(a)           the Company has received written assurances from the proposed transferee confirming a factual basis for relying on exemptions from registration under applicable federal and state securities laws for such transfer or an opinion from counsel for the Holder(s) of the Warrants or Shares stating that no registration under the Securities Act or applicable state statute is required with respect to such disposition; or

(b)           a registration statement under the Securities Act has been filed by the Company and declared effective by the SEC covering such proposed disposition and the disposition has been registered or qualified, or is exempt therefrom, under the state having jurisdiction over such disposition.

8. Restricted Securities: Registration of Securities. The Holder acknowledges that this Warrant is, and that the Shares issuable on exercise hereof will be, “restricted securities” as that term is defined in Rule 144 promulgated under the Securities Act. Accordingly, this Warrant must be taken for investment and held indefinitely and may not be exercised or converted unless subsequently registered under the Securities Act and/or comparable state securities laws or unless an exemption from such registration is available. Likewise, any Shares issued on exercise of this Warrant must be taken for investment and held indefinitely and may not be resold unless such resale is registered under the Securities Act and/or comparable state securities laws or unless an exemption from such registration is available. A legend to the foregoing effect shall be placed conspicuously on the face of all certificates for Shares issuable on exercise of this Warrant.

9. Reports under Exchange Act.With a view to making available to the Holders the benefits of Rule 144 promulgated under the Securities Act and any other rule or regulation of the SEC that may at any time permit a Holder to sell the Shares issuable on exercise of this Warrant, the Company shall, until such Shares may be resold pursuant to the provisions of Rule 144(k) or any similar provision:

(a)make and keep public information available, as those terms are understood and defined in SEC Rule 144;

(b)file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Securities Exchange Act of 1934; and

(c)furnish to any Holder, forthwith upon request (i) a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144, the Securities Act and the Securities Exchange Act of 1934, or that it qualifies as a registrant whose securities may be resold pursuant to Form S-2 or Form S-3; (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company; and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC that permits the selling of any such securities without registration or pursuant to such form.

10.[This Section 10 is intentionally left blank]

11.Governing Law. All questions concerning the construction, validity, enforcement, governing law and interpretation of this Warrant shall be determined in accordance with the provisions of the Securities Purchase Agreement dated of even date herewith by and between the Company and the initial Holder (the “Purchase Agreement”).

12.Notices. Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Purchase Agreement.

13.Limitation of Liability.  No provision hereof, in the absence of any affirmative action by Holder to exercise this Warrant or purchase shares of Common Stock issuable upon the exercise of this Warrant, and no enumeration herein of the rights or privileges of Holder, shall give rise to any liability of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

6

14.Nonwaiver and Expenses.  No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice Holder’s rights, powers or remedies, notwithstanding the fact that all rights hereunder terminate on the Termination Date.  If the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.

15.Remedies.  Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant.  The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate.

16.Successors and Assigns.  Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and permitted assigns of Holder.  The provisions of this Warrant are intended to be for the benefit of all Holders of this Warrant from the Initial Exercise Date through the Termination Date, and shall be enforceable by any such Holder or holder of Warrant Shares.

17.Amendment.  This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

18.Severability.  Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

19.Headings.  The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

20.Loss, Theft, Destruction, or Mutilation. Upon receipt by the Company of reasonable evidence of the ownership of and the loss, theft, destruction, or mutilation of this Warrant, the Company will execute and deliver, in lieu thereof, a new Warrant of like tenor.

21.           Taxes. The Company will pay all taxes in respect of the issue of this Warrant or the Shares issuable upon exercise thereof.

DATED this____________ day of_______________, 2008.

ETHOS ENVIRONMENTAL, INC.

By: _________________________

Enrique de Vilmorin, CEO

7

Notice of Exercise

(to be signed only upon exercise of Warrant)

TO:          ETHOS ENVIRONMENTAL, INC.

The undersigned, the owner of the attached Warrant, hereby irrevocable elects to exercise the purchase

rights represented by the Warrant for, and to purchase thereunder,_____________shares of Common Stock of Ethos Environmental,

Inc., and herewith makes payment of $therefor. Please issue the shares of Common Stock as to which this

Warrant is exercised in accordance with the instructions set forth below and, if the Warrant is being exercised with respect to less than all of the Shares to which it pertains, prepare and deliver a new Warrant of like tenor for the balance of the Shares purchasable under the attached Warrant.

DATED this____day of ______, 20_______

 Signature:

Signature Guaranteed:

INSTRUCTIONS FOR REGISTRATION OF STOCK

Name:
	(Please Type or Print)
Address:

NOTICE: The signature to the form of purchase must correspond with the name as written upon the face of the attached Warrant in every particular without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank, other than a savings bank, or by a trust company or by a firm having membership on a registered national securities exchange.

8

EX-31.1

Exhibit 31.01

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO RULE 13a-14

I, Enrique de Vilmorin, certify that:

1.           I have reviewed this quarterly report on Form 10-Q of Ethos Environmental, Inc.;

2.           Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.           Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.           I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have, for the small business issuer and have:

 (a)         Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 (b)           Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 (c)         Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 (d)         Disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

5.           I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’s board of directors (or persons performing the equivalent functions):

 (a)         All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and

 (b)         Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

Date: August 14, 2008 _______________________________________

By: Enrique de Vilmorin

Its: Chief Executive Officer

EX-31.2

Exhibit 31.02

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO RULE 13a-14

I, Enrique de Vilmorin, certify that:

1.           I have reviewed this quarterly report on Form 10-Q of Ethos Environmental, Inc.;

2.           Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.           Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.           I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have, for the small business issuer and have:

 (a)         Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 (b)           Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 (c)         Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 (d)         Disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

5.           I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’s board of directors (or persons performing the equivalent functions):

 (a)         All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and

 (b)         Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

Date: August 14, 2008 ___________________________________

By: Enrique de Vilmorin

Its:  Chief Financial Officer

EX-32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Ethos Environmental, Inc. (the "Company") on Form 10-Q for the period ending June 30, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Enrique de Vilmorin, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)            The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)           The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/  Enrique de Vilmorin

Enrique de Vilmorin

Principal Executive Officer

August 14, 2008

EX-32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Ethos Environmental, Inc. (the "Company") on Form 10-Q for the period ending June 30, 2008 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Thomas W. Maher, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)           The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)            The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Thomas W. Maher

Thomas W. Maher

Principal Financial Officer

August 14, 2008