Eternal Technologies (ETLT) 8-K Results of Operations and Financial Condition

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

Date of Report: (Date of earliest event reported: August 15, 2008

ETERNAL TECHNOLOGIES GROUP, INC. (Exact name of Registrant as specified in its charter)
0-27929 (Commission file number)
Nevada   (State or other jurisdiction of incorporation)	62-1655508     (I.R.S. Employer Identification Number)
Suite 2007, Golden Central Tower, No. 3037, Jintian Rd., Futian District, Shenzhen, Guangdong, Province, P.R. China
011-86-22-2721-7020 (Registrant’s telephone number, including area code)
__________________________________________  (Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions. (see General Instruction A.2. below).

□        Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

□        Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

□        Pre-commencement communications pursuant to Rule 14d-2(b) uner the Exchange Act (17 CFR 240.14d-2(b)).

Item 2.02                      Results of Operations and Financial Conditions

Reference is made to the Eternal Technologies Group, Inc. (the “Company”) press release on August15, 2008 attached hereto as Exhibit 99.1 and incorporated by reference herein (including without limiting the information set out in the cautionary statement contained in the press release) relating to the Company’s financial results for the quarter ended June 30, 2008.

Item. 9.01                                Financial Statements and Exhibits

(d)           Exhibits

Exhibit No.                                Description

99.1           Press Release issued August 15, 2008

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 hereunto duly authorized.

	ETERNAL TECHNOLOGIES GROUP, INC.
Date: August 15, 2008	By:	/s/ Jiansheng Wei
		Jiansheng Wei
		President and Chief Executive Officer

PRESS RELEASE

Eternal Technologies Group, Inc. (ETLT:OB) today reported earnings for the three months and six months ended June 30, 2008.

For the three months ended June 30, 2008 the company reported revenues of $14,041,480 a 26.7% increase compared to the revenues of $11,084,009 for the corresponding period of prior year.  Gross profit for the three months ended June 30, 2008 totalled $4,088,264 an 18.8% increase compared to the $3,440,339 for the prior period.  Net income for the three months ended June 30, 2008 totaled $2,613,560 a 36.2% increase  or $.05 per share compared to the net income of $1,919,341 or $.04 per share for the corresponding period of the prior year.

For the six months ended June 30, 2008 the company reported revenue of $23,738,014 a 27.7% increase compared to the revenue of $18,588,494 for the six months ended June 30, 2007.  Gross profit for the six months June 30, 2007 totalled $6,105,386 an 11.2% increase compared to the gross profit of $5,491,148 for the corresponding period of the prior year.  Net income for the six months ended June 30, 2008 totalled $4,608,466 or $.09 per share a 47.1% increase compared to the net income of $3,132,082 or $.07 per share for the six months ended June 30, 2007.

Sales for E-Sea totaled $5,124,005 for the six months ended June 30, 2008 compared with revenue of $3,216,075 an increase of $1,907,930 or 59.3%. E-Sea’s gross margin was $63.5% for the six months ended  June 30, 2008.

As of June 30, 2008 the company had cash and cash equivalents of $27,976,450 and working capital of $45,825,953.  This compares with cash and cash equivalents of $12,692,479 and working capital of $36,898,802 as of December 31, 2007.  In addition to the foregoing, the company also had short-term investments of $14,717,153. As of June 30, 2008 shareholders equity had increased to $83,841,542.

ETERNAL TECHNOLOGIES GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
June 30, 2008 and December 31, 2007
(Amounts in United States Dollars)
		(Unaudited) June 30,			(See Note) December 31,
		2008			2007
ASSETS
Current assets:
Cash and cash equivalents		$	27,976,450		$	12,692,479
Short-term investments			14,717,153			13,827,174
Accounts receivable			7,086,207			6,274,866
Inventories			-			6,312,236
Prepayments and deposits			14,989			14,082
Total current assets			49,794,799			39,120,837
Property and equipment, net of accumulated depreciation
of $5,033,889 and $4,296,083 at June 30, 2008 and
December 31, 2007, respectively			7,158,822			7,161,773
Land use rights, net of accumulated amortization
of $2,324,793 and $2,043,266 at June 30, 2008 and
December 31, 2007, respectively			4,922,217			4,765,501
Intangible assets			1,381,734			6,571,098
Long term Accounts Receivable			3,201,490			-
Patent held for lease, net of accumulated amortization
of $302,201 at June 30, 2008			2,288,095			-
Other Assets			19,063,231			17,433,088
	Total assets	$	87,810,388		$	75,052,297
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable		$	443,366		$	443,366
Accounts payable and accrued liabilities			1,378,620			1,294,310
Amounts due to related parties			215,672			215,295
Income taxes  payable			193,992			167,764
Deferred Income			1,699,813
Derivative financial instrument liability			37,383			109,300
Total current liabilities			3,968,846			2,230,035
Stockholders' equity:
Preferred shares - $0.001 par value, 5,000,000
Authorized, none issued or outstanding			-			-
Common shares - $0.001 par value; 95,000,000
Authorized; 55,689,634 shares issued and
Outstanding			55,689			52,137
Additional paid - in capital			23,075,753			21,303,505
Retained earnings			49,457,232			44,848,766
Treasury shares at cost 1,509,703 shares			(882,090	)		(882,090	)
Accumulated other comprehensive income			12,134,958			7,499,944
Total stockholders' equity			83,841,542			72,822,262
	Total liabilities and stockholders' equity	$	87,810,388		$	75,052,297
Note: The balance sheet at December 31, 2007 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principals for complete financial statements. The accompanying notes are an integral part of these unaudited consolidated condensed financial statements

ETERNAL TECHNOLOGIES GROUP, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
For  the Three Months and Six Months ended June 30, 2008 and 2007
(Amounts in United States Dollars)
			Three Months Ended June 30,								Six Months Ended June 30,
			2008			2007			2008			2007
Revenue:			$			$			$			$
	Agricultural and genetics sales			10,445,408			9,214,703			18,160,147			14,923,370
	Medical device sales and services			3,301,219			1,719,093			5,124,005			3,216,075
	Leasing			294,853			150,213			453,862			449,049
		Total revenue		14,041,480			11,084,009			23,738,014			18,588,494
Cost of sales and services
	Agricultural and genetics sales			8,376,413			7,002,928			15,332,910			12,186,174
	Medical device sales and services			1,295,390			501,611			1,870,931			1,033,985
	Leasing			281,413			139,331			428,787			277,187
		Total cost of sales and services		9,953,216			7,643,870			17,632,628			13,497,346
Gross profit				4,088,264			3,440,139			6,105,386			5,091,148
Depreciation and amortization expenses					265,521		138,458	596,826     275,340
Selling, general and administrative expenses				1,729,081			1,287,108			2,508,867			1,956,574
Research and development expense				286,962			130,055			282,780			129,366
Income from operations				1,806,700			1,884,518			2,716,913			2,729,868
Other income (expense)
	Interest income			60,352			53,662			106,341			103,530
	Gain on Sale of Assets			-			-			269,649			(849)
	Investment Income			885,994			97,541			1,746,168			543,338
	Change in value of derivative
		financial instruments		15,797			769			71,917			(38,111)
	Other income (expense), net			962,143			151,972			2,194,075			607,908
Income before provision for
	income taxes			2,768,843			2,036,490			4,910,988			3,337,776
Provision for income taxes				155,283			117,149			302,522			205,694
Net income				2,613,560			1,919,341			4,608,466			3,132,082
Net income per common share
	Basic and diluted		$	0.05		$	0.04		$	0.09		$	0.07
Weighted average number of
	Common shares outstanding,
	Basic and diluted			53,400,825			47,073,579			52,765,941			47,073,579
The accompanying notes are an integral part of these unaudited consolidated condensed financial statements

ETERNAL TECHNOLOGIES GROUP, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2008 and 2007
(Amounts in United States Dollars)
	2008				2007
Cash flows from operating activities
Net income	$	4,608,466			$	3,132,082
Adjustments to reconcile net income to net cash
Provided by operating activities:
Depreciation and amortization		1,025,614				552,527
Gain on sale of assets		(269,649	)
Investment income		(1,746,168	)
Change in value of derivative financial instruments		(71,917	)			(98,693	)
Compensatory stock issuances		710,320				-
Changes in operating assets and liabilities:
Inventories		6,718,520				5,430,445
Accounts receivable		(184,481	)			1,752,930
Short-term investments		494,775				-
Long-term investments		436,567				-
Prepayments and deposits		600,755				199,560
Accounts payable and accrued expenses		16,431				539,447
Net cash provided by operating activities		12,339,233				11,508,298
Cash flows from investing activities:
Proceeds from sales of Intangible Assets		1,062,313
Purchase of fixed assets		-				(10,212	)
Purchase of long-term investment		-				(4,018,919	)
Net cash provided by /(used in) investing activities		1,062,313				(4,029,131	)
Cash flows from financing activities:
Capital contributed		-				2,304,615
Common Stock Receivable		-				10,176
Proceeds from sales of common stocks		1,065,480				-
Net cash provided by financing activities		1,065,480				2,314,791
Effect of exchange rate changes on cash		816,945				404,974
				��
Net increase (decrease) in cash and cash equivalents		15,283,971				10,198,932
Cash and cash equivalents, beginning of period		12,692,479				16,024,123
Cash and cash equivalents, end of period	$	27,976,450			$	26,223,055
Supplemental disclosure of cash flow information:
Interest paid	$	-			$	-
Income taxes paid	$	159,610				205,694
Non-cash investing and financing activities
Receivable from sale of intangible assets	$	3,201,490			$	-
Deferred gain from sale of intangible assets	$	1,099,059			$	-
The accompanying notes are an integral part of these unaudited consolidated condensed financial statements

About Eternal Technologies

Eternal is a major agricultural genetics and biopharmaceutical R&D firm operating in China with the support of the Chinese Government.  Eternal's animal breeding division has a strong assets base, cash position and net  income ..  Eternal  has become one of China's leading  institutions for biopharmaceutical and biotech research , pure breed cultivation and breed stock production.  The Company has secured a key market niche by  commercializing gene engineering technologies and providing superior  breeding  stock, allowing China's citizens the ability to improve their living standards.  With the world's largest population, a double-digit national growth  rate and entry into the WTO, Eternal Technologies has a playing field set for tremendous opportunity.  As a prominent player in the agricultural genetics industry, cash in the bank and an untapped market, Eternal has the potential to become a major player in China's national growth.

For more information please visit website: http://www.eternaltechs.com