SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
Amendment No. 1
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 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
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(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 July 31, 2003, 26,684,275 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 - June 30, 2003 and
December 31, 2002
3
Unaudited Consolidated Statements of Income - For the
three months and Six Months ended June 30, 2003 and 2002 4
Unaudited Consolidated Statements of Cash Flows-
For the three months and Six Months ended June 30,
2003 and 2002 5
Notes to Consolidated Financial Statements 6
Item 2. Management Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II - OTHER INFORMATION
Signatures 10
Certifications 11
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ETERNAL TECHNOLOGIES GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
FOR THE SIX MONTHS ENDED JUNE 30, 2003
(UNITED STATES DOLLARS)
ASSETS
JUNE 30 December 31
2003 2002
----------- -----------
(Unaudited) (Audited)
CURRENT ASSETS
Cash and bank balances $ 11,727,651 $ 7,135,559
Inventories 232,401 232,401
Accounts receivable - 4,483,855
Receivable due from related company 522,212 518,212
Prepayments and deposits 149,607 146,715
------------ -----------
TOTAL CURRENT ASSETS 12,631,871 12,516,742
FIXED ASSETS
(net of accumulated depreciation of
$1,623,677 in 2003 and $1,320,907 in 2002 3,923,833 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
$682,788 in 2003 and $558,620 in 2002) 5,317,212 5,441,380
------------- ------------
TOTAL ASSETS $ 27,531,613 $27,843,422
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable for construction $ 348,193 $ 348,193
Notes payable 782,733 782,733
Estimated payable for construction
contracts not invoiced 1,000,000 1,000,000
Accounts payable and accrued expenses 789,658 711,572
Payable to related company 151,379 156,265
Deferred Revenue 91,084 -
Amounts due to related parties 321,583 291,193
------------ -----------
TOTAL CURRENT LIABILITIES 3,484,630 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, 26,177,046 and 25,531,316 shares
issued and outstanding at June 30, 2003 and
December 31, 2002, respectively 26,177 25,531
Paid - in capital 6,012,325 5,825,735
Retained earnings 18,008,481 18,702,200
-------------- ----------
TOTAL SHAREHOLDERS' EQUITY 24,046,983 24,553,466
-------------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 27,531,613 $27,843,422
============== ===========
ETERNAL TECHNOLOGIES GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNITED STATES DOLLARS)
Three Months Ended Six Months Ended
June 30 June 30
-------------------- ---------------------
2003 2002 2003 2002
------- ------ ------ ------
(Unaudited) (Unaudited)(Unaudited) (Unaudited)
SALES $ - $ 240,963 $ 28,376 $ 843,373
COST OF SALES - 120,481 - 436,467
--------- --------- --------- ---------
GROSS PROFIT - 120,482 28,376 406,906
DEPRECIATION AND AMORTIZATION 213,469 288,267 426,938 436,607
RESEARCH AND DEVELOPMENT COSTS - - - 1,000,000
SELLING AND ADMINISTRATIVE
EXPENSES 161,147 361,526 295,157 428,973
--------- ---------- --------- ---------
NET LOSS BEFORE INCOME TAXES (374,616) (529,311) (693,719) (1,458,674)
INCOME TAXES - - - -
--------- ---------- --------- ----------
NET LOSS $ (374,616) $ (529,311) $(693,719) $(1,458,674)
========= ========== ========= ==========
EARNINGS PER SHARE
Basic and diluted
Net loss $ (0.01) $ (0.02) $ (0.03) $ (0.06)
Weighted average number of common
shares outstanding
Basic and diluted 26,119,233 25,531,316 * 25,892,971 25,531,316
=========== =========== ========== ===========
Note
*Number of shares outstanding the date of the merger for comparison only.
ETERNAL TECHNOLOGIES GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND 2002
(UNITED STATES DOLLARS)
June 30
---------------------------
2003 2002
---------- --------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ (693,719) $(1,458,674)
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortizatio 426,938 436,607
(Increase) decrease in assets:
Inventories - (190,038)
Accounts receivable 4,483,855 1,975,904
Receivable due from related parties (4,000) 68,218
Prepayments and deposits (2,892) 18,192
Increase (decrease) in liabilities:
Accounts payable for construction work - (2,557,615)
Accounts payable and accrued expenses 78,086 94,843
Amounts advanced by related parties 30,390 64,500
Account payable to related company (4,886) (1,715,663)
Deferred Revenue 91,084 -
---------- ------------
Net cash provided by operating
activities 4,404,856 (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 ACTIVIES
Issuance of capital shares 187,236 9,000
---------- -----------
NET INCREASE IN CASH AND
BANK BALANCES 4,592,092 (4,799,901)
Cash and bank balances, beginning
of period 7,135,559 7,753,452
----------- -----------
Cash and bank balances, at end
of period $11,727,651 $ 2,953,551
============= ===========
SUPPLEMENTARY CASH FLOWS DISCLOSURES
1. Interest paid
- -
Taxes paid
- -
2. During the six months ended June 30, 2003, 645,730 shares were issued. Cost
associated with the issues were $94,153.
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 $11,725,000 of cash is restricted by the company for
use in operations in the PRC.
Item 2. Management discussion and Analysis of Financial Condition and Result of
Operations
Results of Operation -
The following is derived from, and should be read in conjunction with, our
unaudited condensed consolidated financial statements, and related notes, as of
and for the three and six months ended June 30, 2003 and 2002.
Three Months Ended June 30, 2003 As compared to Three months Ended June 30, 2002
Revenues -
Revenues decreased by $241,063 or by 100% to $0 for the three months ended June
30, 2003 from $240,963 for the three months ended June 30, 2002. As a general
rule, because of the seasonality of the company's business, it has little or no
revenue in the quarterly period ended June 30.
Cost of Sales -
There were no identifiable cost of sales for the three months ended June 30,
2003. Cost of sales was $120,481 for the three months ended June 30, 2002, which
were costs directly associated with the delivery of embryos and transplants
during the quarter.
Depreciation and Amortization -
Depreciation and amortization expense decreased by $74,798 or 26% to $213,469
for the three months ended June 30, 2003 from $288,267 for the three months
ended June 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.
Selling and Administrative Expenses -
Selling and administrative expenses for the three months ended June 30, 2003
decreased by $200,379 or 56% to $161,147 from $361,526 for the same period in
2002, and is primarily attributable to a lower public relations and professional
expenses incurred.
Net Income (Loss)
As a result of the foregoing, the Company incurred a net operating loss of
$374,616 for the three months ended June 30, 2003 compared to a net loss of
$529,311 for the three months ended March 31, 2002.
Six Months Ended June 30, 2003 As Compared to Six Months Ended June 30, 2002.
Revenues -
Revenues decreased by $814,997 or 97% to $28,376 for the six months ended June
30, 2003 from $843,373 for the six months ended June 30, 2002. The decrease was
primarily due to sales made in 2001, but delivery did not take place until 2002.
Without this aberration, revenues for 2003 would have been slightly lower than
2002.
Cost of Sales -
There were no identifiable cost of sales for the six months ended June 30, 2003.
Cost of sales was $436,467 for the six months ended June 30, 2002 which was
costs directly associated with the delivery of embryos and transplants during
the period.
Depreciation and Amortization -
Depreciation and amortization decreased by $9,669 or 2% to $426,938 for this six
months ended June 30, 2003 from $436,607 during this six months ended June 30,
2002.
Research and Development Costs -
Research and development costs decreased by $1,000,000 or 100% to none at June
30, 2003. Although research is on going no identifiable additional costs have
been incurred during 2003.
Selling and Administrative Expenses -
Selling and distractive decreased by $133,816 or 31% to $295,157 for the sic
months ended June 30, 2003 as compared to the same period in 2002. The decrease
is primarily attributable to lower public relations and professional expenses
incurred.
Net Income (Loss) -
Net loss decreased by $764,955 or 52% to $693,719 for the six months ended June
30, 2003 from a loss of $1,458,674 at June 30, 2002. This is primarily the
result of decreased expenditures for research and development.
Liquidity and Capital Resources -
The Company hade $11,727,651 in cash at June 30, 2003 compared to $7,135,559 at
June 30, 2002. The Company's working capital is $9,147,241 at June 30, 2003
compared to $9,226,786 at December 31, 2002.
Cash flows from operating activities totaled $4,404,856 for the six months ended
June 30, 2003. This compares with cash used in operating activities of
$3,263,726 for the six months ended June 30, 2002. This is the result of a
decrease in net loss by $764,955 and collection of all trade receivables
outstanding at December 31, 2002 of $4,483,855.
There were no investing activities by the Company during the six months ended
June 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 $187,236 for the six months ended
June 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.
Although the Company has a cash and bank balance of $11,727,651 all but
$4,000 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.
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 June 30, 2003, the Company issued 97,730
shares of its common stock for cash.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
None
b) Reports on Form 8-K None
Signature
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/
-------------------------------------
August 29, 2005 Jiansheng Wei, Chief Executive Officer
/s/
August 29, 2005 -------------------------------------
Xingjian Ma, Chief Financial Officer
CERTIFICATIONS
I, Jiansheng Wei, 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:
-----------------------
Jiansheng Wei
Chief Executive Officer
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:
-----------------------
Xingjian Ma
Chief Financial Officer