SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2003
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from__________to__________.
Commission File No. 0-27929
ETERNAL TECHNOLOGIES GROUP, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 62-1655508
- ---------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
Suite 04-06, 28/F, Block A, Innotec Tower, 235 Nanjing Road,
Heping District, Tianjin, 300100
-------------------------------------------------------------
(Address of principal executive offices)
011-86-22-2750-1802
-------------------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
YES __ NO X
----
As of November 14, 2003, 29,177,396 shares of Common Stock of the
issuer were outstanding.
Eternal Technologies Group, Inc.
INDEX
Page
Number PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets - September 30, 2003 (unaudited) and
December 31, 2002 3
Unaudited Consolidated Statements of Income - For the
three months and nine months ended September 30, 2003 and 2002 4
Unaudited Consolidated Statements of Cash Flows- For the three months
and nine months ended September 30,
2003 and 2002 5
Notes to Consolidated Financial Statements 6
Item 2. Management Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II - OTHER INFORMATION
Signatures 12
Certifications 13
2
ETERNAL TECHNOLOGIES GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2003 AND DECEMBER 31, 2002
(UNITED STATES DOLLARS)
ASSETS
September 30 December 31
2003 2002
--------------- ---------------
(Unaudited) (Audited)
CURRENT ASSETS
Cash and bank balances $ 8,197,367 $ 7,135,559
Inventories 232,401 232,401
Deferred costs 5,500,000 -
Accounts receivable - 4,483,855
Common stock subscribed 36,118 -
Receivable due from related company 518,212 518,212
Prepayments and deposits 152,010 146,715
--------------- ---------------
TOTAL CURRENT ASSETS 14,636,108 12,516,742
FIXED ASSETS
(net of accumulated depreciation of $1,775,062 in 2003
and $1,320,907 in 2002 3,772,448 4,226,603
CONSTRUCTION IN PROGRESS 4,658,697 4,658,697
ESTIMATED FUTURE CONSTRUCTION COST UNDER CONTRACT 1,000,000 1,000,000
LAND USE RIGHTS
(net of accumulated amortization of $744,873 in 2003
and $558,620 in 2002) 5,255,128 5,441,380
--------------- ---------------
TOTAL ASSETS $ 29,322,381 $127,843,422
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable for construction $ 402,771 $ 348,193
Notes payable 503,857 782,733
Estimated payable for construction contracts not invoiced 1,000,000 1,000,000
Accounts payable and accrued expenses 613,202 711,572
Prepayments 1,060,241 -
Payable to related company 119,363 156,265
Amounts due to related parties 317,896 291,193
--------------- ---------------
TOTAL CURRENT LIABILITIES 4,017,330 3,289,956
--------------- ---------------
SHAREHOLDERS' EQUITY
Preferred shares - 5,000,000 authorized $.001 par -
none issued - -
Common shares - 95,000,000 shares authorized, at
$.001 par, 28,474,475 and 25,531,316 shares issued and
outstanding at September 30, 2003 and December 31, 2002, respectively 28,474 25,531
Paid - in capital 7,492,549 5,825,735
Retained earnings 17,784,028 18,702,200
--------------- ---------------
TOTAL SHAREHOLDERS' EQUITY 25,305,051 24,553,466
--------------- ---------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 29,322,381 $27,843,422
=============== ===============
3
ETERNAL TECHNOLOGIES GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNTIED STATES DOLLARS)
Three Months Ended Nine Months Ended
September 30 September 30
------------------------------ ------------------------------
2003 2002 2003 2002
---------- ----------- ---------- ------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
SALES $ - $ - $ 119,460 $ 843,373
COST OF SALES - - - 436,467
-------------- -------------- -------------- --------------
GROSS PROFIT - - 119,460 # 406,906
DEPRECIATION AND AMORTIZATION 213,469 250,432 640,407 687,039
RESEARCH AND DEVELOPMENT COSTS - - - 1,000,000
SELLING AND ADMINISTRATIVE EXPENSES 102,068 80,645 397,226 509,618
-------------- -------------- -------------- --------------
NET LOSS BEFORE INCOME TAXES (315,537) (331,077) (918,173)# (1,789,751)
INCOME TAXES - - - -
-------------- -------------- -------------- --------------
NET LOSS $ (315,537) $ (331,077) $ (918,173) $ (1,789,751)
============== ============== ============== ==============
EARNINGS PER SHARE
Basic and diluted
Net loss ($0.01) $ (0.01) ($0.03) $ (0.07)
======= ======== ======= ========
Weighted average number of common
shares outstanding
Basic and diluted 26,917,661 25,531,316 * 26,238,287 25,531,316 *
============== ============== ============== ==============
Note
*Number of shares outstanding the date of the merger for comparison only.
4
ETERNAL TECHNOLOGIES GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
(UNITED STATES DOLLARS)
SEPTEMBER 30
---------------------------
2003 2002
---------- ---------
(Unaudited)
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ (918,172) $(1,458,674)
Adjustments to reconcile net income to -
net cash provided by operating activities: -
Depreciation and amortization 640,407 436,607
(Increase) decrease in assets: -
Inventories - (190,038)
Deferred costs (5,500,000) -
Accounts receivable 4,483,855 1,975,904
Receivable due from related parties - 68,218
Prepayments and deposits (5,295) 18,192
Increase (decrease) in liabilities:
Accounts payable for construction work 54,578 (2,557,615)
Notes payable (278,876) -
Accounts payable and accrued expenses (98,370) 94,843
Amounts advanced by related parties 26,703 64,500
Account payable to related company (36,902) (1,715,663)
Prepayments 1,060,241 -
-------------- -------------
Net cash provided by operating activities (571,831) (3,263,726)
-------------- -------------
-
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (905,665)
Construction in progress - (639,510)
-------------- -------------
Net cash used by investing activities - (1,545,175)
-------------- -------------
CASH FLOWS FROM FINANCING ACTIVITGEACTIVITIES
Issuance of capital shares 1,633,639 9,000
-------------- -------------
NET INCREASE IN CASH AND
BANK BALANCES 1,061,808 (4,799,901)
Cash and bank balances, beginning of period 7,135,559 7,753,452
-------------- -------------
SUPPLEMENTARY CASH FLOWS DISCLOSURES
1. Interest paid - -
Taxes paid - -
2. During the nine months ended September 30, 2003,
2,943,159 shares were issued. Cost associated with
the issues were $330,000
5
NOTES
1. Reporting entity
Pursuant to an exchange agreement, Eternal Technologies Group, Inc., ("Company")
formerly known as Waterford Sterling Corporation, completed its acquisition of
100% interest of Eternal Group Limited and Subsidiaries on December 12, 2002.
The Company has treated the transaction as a reverse merger for accounting
purposes. Following the acquisition, the former shareholders of Eternal
Technology Group Limited, a British Virgin Islands limited liability company,
now own approximately 85% of the issued and outstanding common shares of Eternal
Technologies Group Inc.
Eternal Phoenix Company Limited was incorporated in the British Virgin Islands
with limited liability on March 3, 2000. Pursuant to a resolution passed on June
17, 2000 Eternal Phoenix Company Limited changed its name to ETERNAL TECHNOLOGY
GROUP LTD., ("Eternal"). Eternal is a holding company for investments in
operating companies.
Eternal acquired a 100% equity interest in Willsley Company Limited
("Willsley"), a company incorporated in the British Virgin Island with limited
liability on May 16, 2000.
Willsley's principal activity is investments and owns 100% interest in Inner
Mongolia Aershan Agriculture & Husbandry Technology Co., Ltd ("Aershan").
Aershan was incorporated in the People's Republic of China ("the PRC") with
limited liability on July 11, 2000 and its principal activities are to run a
breeding center, transplant embryos, and to propagate quality meat sheep and
other livestock breeds in Inner Mongolia.
2. Condensed financial statements and footnotes
The interim consolidated financial statements presented herein have been
prepared by the Company and include the unaudited accounts of the Company and
its subsidiaries. All significant inter-company accounts and transactions have
been eliminated in the consolidation.
These condensed financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
the instructions to Form 10-QSB and Item 310 (b) Regulation S-B. Certain
information and footnote disclosures normally included in financial statements
presented in accordance with generally accepted accounting principles have been
condensed or omitted. The Company believes the disclosures made are adequate to
make the information presented not misleading. The condensed consolidated
financial statements should be read in conjunction with the Company's
consolidated financial statements for the year ended December 31, 2002 and notes
thereto included in the Company's Form 10-KSB.
In the opinion of management, the unaudited condensed consolidated financial
statements reflect all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position of the Company
as of June 30, 2003, the results of operations for the three months ended June
30, 2003 and 2002 and the six months ended June 30, 2003 and 2003, respectively.
Interim results are not necessarily indicative of full year performance because
of the impact of seasonal and short-term variations.
3. Segment reporting
The Company currently is engaged in only one business segment.
4. Cash
Approximately $7,300,000 of cash is reserved by the company for use in
operations in the PRC.
6
5. The deferred costs of $5,500,000 are for the purchase of 2,000 cows at a cost
of $2,700 each. These cattle were purchased under an agreement to sell them back
to the original owner during 2004. The cattle are being used to harvest embryos.
7
Item 2. Management discussion and Analysis of Financial Condition and Result of
Operations
Our operations are conducted through our wholly-owned subsidiary, Eternal
Technologies Group Ltd. ("Eternal Technologies - BVI"), a British Virgin Islands
company, and its subsidiaries.
Eternal Technologies - BVI was incorporated in the British Virgin Islands in
March 2000. In May 2000, Eternal Technologies - BVI acquired 100% of Willsley
Company Limited. Willsley is a holding company that owns 100% of Inner Mongolia
Aershan Agriculture & Husbandry Technology Co., Ltd. ("Aershan Agriculture").
Aershan Agriculture operates a farm and breeding center focused on the
propagation of superior breeds of sheep and livestock in the Inner Mongolia
region of China.
In January, 2003, we supplemented our research and development embryo transfer
capabilities by establishing a relationship with Beijing AnBo Embryo Biotech
Center ("AnBo Biotech Center"), a biotech research and development and embryo
transfer center located in Beijing.
Our operations are focused on developing superior livestock breeds in order to
improve the quality and yield of livestock in China and the profitability of
livestock operations. We initially imported embryos from Australia and the
United States. We are utilizing our facilities and expertise to develop a herd
of "carrier animals" in order to produce a domestic supply of embryos,
eliminating our dependence on third party foreign embryo suppliers and reducing
our cost of embryos. Under that program, we (1) breed, own and manage a herd of
sheep on our farm and (2) purchase dairy cattle, inject our bio-engineered
embryo into the "host animals", and, after birth, retain the offspring to serve
as breeder stock and sell the "host animal" back to the original owner.
We utilize our genetically engineered livestock embryos and our breeding and
biotech expertise to offer a range of livestock breeding services and products,
including sale of embryos, artificial insemination and embryo transplant
services, both at our facilities and on-site, and related products and services
designed to improve production, quality and profitability of Chinese livestock
operators.
Our initial operations focused on the production and sale of bio-engineered
embryo and services targeted to sheep growers. In 2003, we expanded our
operations to include the dairy cattle market.
In late 2003, we began implementation of a mutton production and sale program
focused on the processing and sale of mutton from our higher yielding, higher
quality genetically-engineered stock. In implementing our mutton production and
sales strategy, we utilize our farm in Inner Mongolia to raise a heard of sheep
for ultimate processing and sale. Because of changes in government policy
relating to plowing in Inner Mongolia, we have determined that we may have
impediments to the ongoing economic use of our farm for grazing. Pending a final
determination with respect to the economic viability of using our farm for
grazing, we continue to carry out our mutton production and sale strategy
supplemented through purchases from our clients of sheep raised from our
genetically-engineered embryo, with meat processing contracted to slaughter
houses and sale of processed meat to wholesale purchasers in and around Beijing.
Depending on the outcome of our evaluation of the economic viability of our
farm, we may attempt to sell the farm and rely on purchases of sheep from
clients to support mutton production or evaluate other best-economic uses of the
farm.
The company's business is highly seasonal with all of its revenues and earnings
occurring during the fourth quarter of the company's fiscal year (October-
December). The results for both the three months and nine months ended September
30, are not indicative of the anticipated results for the full fiscal year.
While the company has began to carry out measures which will reduce the
seasonality of its operations, for the near future, the business of the company
will be highly seasonal.
8
Results of Operation -
Three Months Ended September 30, 2003 compared to Three months Ended September
30, 2002
Revenues -
There were no revenues for either the three months ended September 30, 2003 or
2002.
Cost of Sales -
Because there were no revenues, there were no identifiable costs of sales for
either the three months ended September 30, 2003 or 2002.
Depreciation and Amortization -
Depreciation and amortization expense decreased by $36,963 or 14.76% to $213,469
for the three months ended September 30, 2003 from $250,432 for the three months
ended September 30, 2002. Depreciation expense was higher for the same quarter
in 2002 primarily because certain assets placed into service at the end of 2001
were not depreciated properly in the first quarter of 2002.
Research and Development Costs -
There were no identifiable research and development costs for either the three
months ended September 30, 2003 or 2002.
Selling and Administrative Expenses -
Selling and administrative expenses for the three months ended September 30,
2003 increased by $21,423 or 26.56% to $102,068 from $80,645 for the same period
in 2002, principally because of increased public relations and professional
expenses.
Net Income (Loss)
As a result of the foregoing, the Company incurred a net operating loss of
$315,537 for the three months ended September 30, 2003 compared to a net loss of
$331,077 for the three months ended September 30, 2002.
Nine Months Ended September 30, 2003 Compared To Nine Months Ended September 30,
2002.
Revenues -
Revenues decreased by $723,913 or 86% to $119,460 for the nine months ended
September 30, 2003 from $843,373 for the nine months ended September 30, 2002.
The decrease was primarily due to sales made in 2001, but delivery of which did
not take place until 2002. Without this aberration, revenues for 2003 would have
been slightly higher than those of 2002.
Cost of Sales -
There were no identifiable costs of sales for the nine months ended September
30, 2003. Cost of sales totaled $436,467 for the nine months ended September 30,
2002 representing costs directly associated with the delivery of embryos and
transplants during the period.
9
Depreciation and Amortization -
Depreciation and amortization decreased by $46,632 or 6.79% to $640,407 for the
nine months ended September 30, 2003 from $687,039 during the nine months ended
September 30, 2002.
Research and Development Costs -
Research and development costs decreased by $1,000,000 or 100% to $0 at
September 30, 2003. Although research is on going, no identifiable additional
costs have been incurred during 2003.
Selling and Administrative Expenses -
Selling and administrative expenses decreased by $112,392 or 22.05% to $397,226
for the nine months ended September 30, 2003 as compared to the same period in
2002. The decrease is primarily attributable to lower public relations and
professional expenses incurred which although higher for the three months ended
September 30, 2003 were lower for the year to date.
Net Income (Loss) -
As a result of the foregoing, the net loss decreased by $871,578 or 48.70% to
$918,173 for the nine months ended September 30, 2003 from a loss of $1,789,751
at September 30, 2002. This reduction is the result of decreased expenditures
for research and development.
Liquidity and Capital Resources -
The Company had $8,197,367 in cash at September 30, 2003 compared to $3,104,761
at September 30, 2002. The Company's working capital was $10,618,778 at
September 30, 2003 compared to $9,226,786 at December 31, 2002.
Cash used in operating activities totaled $571,831 for the nine months ended
September 30, 2003. This compares with cash used in operating activities of
$3,263,726 for the nine months ended September 30, 2002. The reduction is the
use of cash resulted from a decrease in the net operating loss by $540,502, the
collection of all trade receivables outstanding at December 31, 2002 of
$4,483,855, an increase in deferred costs of $5,500,000, an increase in
prepayments of $1,054,946 a decrease in liabilities of $332,867.
There were no investing activities by the Company during the nine months ended
September 30, 2003. During the corresponding period of the prior year the
Company used $1,545,173 in investing activities for the purchase of fixed assets
and for construction costs.
Cash flows from financing activities totaled $1,633,639 for the nine months
ended September 30, 2003 compared to $9,000 for the corresponding period in
2002. All cash flows from financing activities for 2003 and 2002 were from the
sale of the Company's common stock. A total of 647,146 warrants for the purchase
of common stock were issued during the third quarter of 2003. The exercise price
on these warrants is $1.54 per share. The warrants are exercisable for a period
of five years with the expiration dates ranging from September 4, 2008 to
October 8, 2008. The warrants include certain registration rights and have a
cashless exercise provision.
Although the Company has a cash and bank balance of $8,197,367, all but $897,367
is restricted for certain uses within the People's Republic of China. Therefore,
if the Company is to expand in the PRC, as it anticipates doing, or pay its
non-PRC obligation, it will have to sell additional shares of its stock or
borrow funds from third parties. Unless it is able to either borrow funds or
sell additional shares, it will have insufficient resources to carry out its
business objectives for the next twelve (12) months.
10
Deferred Costs -
The deferred costs of $5,500,000 are for the purchase of 2,000 cows at a cost of
$2,700 each. These cattle were purchased under an agreement to sell them back to
the original owner during 2004. The cattle are being used to harvest embryos.
Prepayments Liability -
The prepayment liability of $1,060,241 is for an advance payment from the sale
of a sheep embryo transfer contract. According to the sales contract, No.
03-EX-015, the total amount is $1,518,072 and the prepayment is 70% of the total
amount. The contract should be concluded during the fourth quarter of the
current fiscal year.
Item 3. Controls and Procedures
(a) Evaluation of disclosure controls and procedures. Our chief executive
officer and our chief financial officer, after evaluating the effectiveness of
the Company's "disclosure controls and procedures" (as defined in the Securities
Exchange Act of 1934 Rules 13a-14(c) and 15-d-14(c)) as of a date (the
"Evaluation Date") within 90 days before the filing date of this quarterly
report, have concluded that as of the Evaluation Date, our disclosure controls
and procedures were adequate and designed to ensure that material information
relating to us and our consolidated subsidiaries would be made known to them by
others within those entities.
(b) Changes in internal controls. There were no significant changes in our
internal controls or to our knowledge, in other factors that could significantly
affect our disclosure controls and procedures subsequent to the Evaluation Date.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities
None
Item. 3. Defaults Upon Senior Securities
None
Item 4. Submissions of Matters to a Vote of Security Holders
None
Item 5. Other Information
During the three months ended September 30, 2003, the Company issued 2,297,429
shares of its common stock for cash. Stock warrants totaling 657,146 were issued
to purchasers of the companies stock. The warrants are exercisable at $1.54 per
share.
11
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
None
b) Reports on Form 8-K None
None
Signatures
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto authorized.
ETERNAL TECHNOLOGIES GROUP, INC.
/s/ JiJun Wu
-------------------------------------
November 14, 2003 JiJun Wu, Chief Executive Officer
/s/ Xingjian Ma
November 14, 2003 -------------------------------------
Xingjian Ma, Chief Financial Officer
12
CERTIFICATIONS
I, JiJun Wu, certify that:
1. I have reviewed this Form 10-QSB of Eternal Technologies Group, 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 small business
issuer as of, and for, the periods presented in this report;
4. The small business issuer's other certifying officer(s) and I are 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:
(a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the small business issuer, including its
consolidated subsidiaries, 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 (the small business issuer's fourth fiscal
quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the small business issuer's internal
control over financial reporting; and
5. The small business issuer's other certifying officer(s) and I have disclosed,
based on our 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: November 14, 2003 /s/ JiJun Wu
-----------------------
JiJun Wu
Chief Executive Officer
13
I, Xingjian Ma, certify that:
1. I have reviewed this Form 10-QSB of Eternal Technologies Group, Inc.;
4. 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;
5. 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 small business
issuer as of, and for, the periods presented in this report;
4. The small business issuer's other certifying officer(s) and I are 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:
(a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the small business issuer, including its
consolidated subsidiaries, 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 (the small business issuer's fourth fiscal
quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the small business issuer's internal
control over financial reporting; and
5. The small business issuer's other certifying officer(s) and I have disclosed,
based on our 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: November 14, 2003 /s/ Xingjian Ma
-----------------------
Xingjian Ma
Chief Financial Officer