10QSB 1 fm10qsb_33105.txt 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 March 31, 2005 [ ] 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) Sect D, 5/F, Block A, Innotec Tower, 235 Nanjing Road Heping District, Tianjin, 300052 ----------------------------------------------------------------- (Address of principal executive offices) 011-86-22-2721-7020 ------------------------- (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 X NO As of May 15, 2005, 30,679,630 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 - March 31, 2005 (unaudited)and December 31, 2004 3 Unaudited Consolidated Statements of Income - For the three months ended March 31, 2005 and 2004 4 Unaudited Consolidated Statements of Cash Flows- For the three months ended March 31, 2005 and 2004 5 Notes to Unaudited Consolidated Financial Statements 6 Item 2. Management Discussion and Analysis or Plan of Operations 9 Item 3. Controls and Procedures 10 PART II - OTHER INFORMATION Item 1. Legal Proceedings 10 Item 2. Changes in Securities and Small Business Issuers 10 Purchaser of Equity Securities 10 Item 3. Defaults Upon Senior Securities 10 Item 4. Submission of Matters to a Vote of Security Holders 10 Item 5. Other Information 10 Item 6. Exhibits and Reports on Form 8-K 10 Signatures 10 Certifications 12 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements ETERNAL TECHNOLOGIES GROUP INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS MARCH 31, 2005 (UNITED STATES DOLLARS) ASSETS March 31 December 31 2005 2004 --------------- --------------- --------------- --------------- (Unaudited) (Audited) CURRENT ASSETS Cash and Cash equivalents $26,987,302 $27,473,354 Accounts receivable 2,577,783 1,538,313 Inventories 621,307 621,307 Prepayments and deposits 602 602 ------------ ----------- 30,186,994 29,633,576 TOTAL CURRENT ASSETS FIXED ASSETS (net of accumulated depreciation of $2,584,189 in 2005 5,775,983 5,904,050 and $2,456,122 in 2004 LAND USE RIGHTS (net of accumulated amortization of $1,117,461 in 2005 and $1,055,361 in 2004 4,882,539 4,944,639 ------------ ------------ TOTAL ASSETS $40,845,516 $40,482,265 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Notes payable $ 443,366 $ 443,366 Accounts payable and accrued expenses 1,679,712 1,526,595 Amounts due to related parties 290,465 272,465 ------------ ------------ TOTAL CURRENT LIABILITIES 2,413,543 2,242,426 SHAREHOLDERS' EQUITY Preferred shares - 5,000,000 authorized $.001 par - none issued Common shares - 95,000,000 shares authorized, at $.001 par, 30,679,630 and 30,679,630 shares issued and outstanding at March 31, 2005 and December 31, 2004, respectively 30,679 30,679 Paid - in capital 9,965,208 9,740,830 Stock subscription receivable (10,176) (10,176) Retained earnings 28,446,262 28,478,506 ------------- -------------- TOTAL SHAREHOLDERS' EQUITY 38,431,973 38,239,839 ------------- --------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $40,845,516 $40,482,265 ============= =============== See Notes to Consolidated Financial Statements
3 ETERNAL TECHNOLOGIES GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004 (UNITED STATES DOLLARS) March 31 ------------------------------- ------------------------------- 2005 2004 ------------- ------------- ------------- ------------- (Unaudited) (Unaudited) SALES $2,108,747 $2,044,578 COST OF SALES 1,566,434 1,449,937 ------------ ------------- GROSS PROFIT 542,313 594,641 DEPRECIATION AND AMORTIZATION 190,167 190,188 SELLING AND ADMINISTRATIVE EXPENSES 433,232 368,154 OTHER INCOME (EXPENSE) Interest Income 48,842 26,380 Impairment Loss - (53,517) ------------ ------------- NET INCOME BEFORE INCOME TAXES (32,244) 9,162 INCOME TAXES - - ------------ ------------- NET INCOME (LOSS) ($32,244) $ 9,162 ============ ============= EARNINGS PER SHARE Basic and diluted Net income (loss) ($0.00) $ 0.00 ============ ============ Weighted average number of common shares outstanding Basic 30,679,630 29,337,381 ============= =========== Diluted 30,785,938 29,337,381 ============= =========== 4 See Notes to Consolidated Financial Statements ETERNAL TECHNOLOGIES GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004 (UNITED STATES DOLLARS) March 31 ---------------------------- ---------------------------- 2005 2004 ----------- ----------- (Unaudited) (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES Net income (Loss) $(32,244) $ 9,162 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 190,168 190,190 Stock issued for services - 45,000 Non-cash expenses for services 42,000 - Impairment loss - 53,517 (Increase) decrease in assets: Inventories - 5,600 Accounts receivable (1,039,470) (215,783) Increase (decrease) in liabilities: Accounts payable and accrued expenses 153,117 183,679 Amounts advanced by related parties 18,000 4,337 Account payable to related company - (107,161) ----------- ------------- Net cash provided (used in) by operating activities (668,429) 168,541 ----------- ------------- CASH FLOWS FROM FINANCING ACTIVIES Capital Contributed 182,377 - ------------ ------------- Net cash provided by financing activities 182,377 - ------------ ------------- NET INCREASE (DECREASE) IN CASH AND Cash Equivalents (486,052) 168,541 Cash and cash equivalents, beginning of period 27,473,354 16,302,464 ------------- ------------- Cash and cash equivalents, at end of period $26,987,302 $16,471,005 ============= ============= SUPPLEMENTARY CASH FLOWS DISCLOSURES 1. Interest paid - - Taxes paid - - 2. During the quarter ended March 31, 2004, 109,984 shares were issued for the payment of notes payable of $60,491. 100,000 shares were issued related to services and prepaid services totaling $90,000. 5 See Notes to Consolidated Financial Statements ETERNAL TECHNOLOGIES GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) MARCH 31, 2005 -------------------------------------------------------------------------------- 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 owns 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. 6 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, 2004 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 March 31, 2005, the results of operations for the three months ended March 31, 2005 and 2004, respectively. Interim results are not necessarily indicative of full year performance because of the impact of seasonal and short-term variations. 3. Cash At March 31, 2005, approximately $26,984,574 of cash is to be exclusively used for operations in the PRC. 4. Public relations agreement On February 1, 2005, the Company entered into a six-month public relations agreement with Empire Relations Group, Inc. (ERG). As consideration for public relations services, the Company must compensate ERG with 150,000 shares subject to Rule 144. For the three months ended March 31, 2005, the Company expensed $37,500 associated with this agreement. 7 5. Notes payable The Company's promissory notes payable are in default at March 31, 2005 and the holder of the notes has filed suit for payment of the notes. The Company believes it has meritorious defenses to the lawsuit related to the notes. 6. Contingencies In conjunction with certain subscription agreements entered into during 2003, the Company has agreed to register the shares issued under a Form SB-2 registration statement. There are penalties for not timely meeting filing and effectiveness deadlines, and the Company has received claims related to these penalties. For the three months ended March 31, 2005, the Company has additional accrued expenses for penalties of $30,441. 8 Item 2. Management Discussion and Analysis or Plan of Operation The Company's business is highly seasonal, with most of the Company's revenue and income being earned during the second half of the calendar year. Accordingly, the results of operations for the calendar quarter ended March 31, 2005 are not indicative of the results for any other quarter or for the fiscal year. Three Months Ended March 31, 2005 compared to the Three Months Ended March 31, 2005 Revenues Revenues for the three months ended March 31, 2005 increased by $64,169 or 3.1% to $2,108,747 from $2,044,578 for the corresponding period of the prior year. All of the revenue came from the processing and sale of lamb meat. Cost of Sales Cost of sales for the three months ended March 31, 2005 increased by $116,497 or 8.0% to $1,566,434 from $1,449,937 from the corresponding period of the prior year. Our gross margin declined by 340 basis points from 29.1% to 25.7% principally because of the higher price for sheep. Depreciation and Amortization Depreciation and amortization expense for the three months ended March 31, 2005 totalled $190,167, virtually unchanged from the $190,188 for the corresponding period of the prior year. Selling and Administrative Expenses Selling and administrative expenses for the three months ended March 31, 2005 increased by $65,078 or 17.7% to $433,232 from $368,154 for the corresponding period of the prior year. The increase in the selling and administrative expenses is principally attributable to an increase in salaries of $58,678 and an increase in professional fees of $69,309 which was partially offset by a decrease in the penalty for the delay in the registration of $21,920 and a decreases in marketing expense of $34,650. Other Income (Expense) Other income, all interest income, increased by $22,462 to $48,842 for the three months ended March 31, 2005 from $26,380 for the corresponding period of the prior year. The increase in interest income resulted from increased amounts on deposit and higher rates paid. Impairment Loss The Company recorded no impairment loss for the three months ended March 31, 2005. For the corresponding period of the prior year it had an impairment loss of $53,517 from the write down of property for sale at the Company's farm. Net Income (Loss) As a result of the foregoing, the Company reported a loss of $32,244 for the three months ended March 31, 2005 compared to income of $9,162 for the three months ended March 31, 2004. There were no income taxes recorded for either three month period. Liquidity and Capital Resources As of March 31, 2005, the Company had cash of $26,987,302 and working capital of $27,773,450. This compares with cash of $27,473,354 and working capital of $27,391,150 at December 31, 2004. Cash used in operating activities totaled $668,429 for the three months ended March 31, 2005. This compares with cash flows from operating activities of $168,541 for the three months ended March 31, 2004. The decrease in cash flows resulted from changes in the current accounts, particularly an increase in accounts receivable of $1,039,470 which was partially offset by non-cash expenses of $42,000 and an increase in payables of $153,117 and depreciation and amortization of $190,168. There were no investing activities by the Company during either the three months ended March 31, 2005 or 2004. There were no financing activities for the three months ended March 31, 2004. Cash flows from financing activities for the three months ended March 31, 2005 totaled $182,377 all of which was from capital contributed. 9 Although the Company has a cash and bank balance of $26,987,302, substantially all of it is to be exclusively used for operations within the People's Republic of China. Therefore, if the Company is to expand outside 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. Item 3. Controls and Procedures We strive to maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designated and operated, can provide only reasonable assurance of achieving the desired control objectives and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls. Our independent accountants, Thomas Leger & Co. LLP conducted audits of our financial statements for 2002, 2003 and 2004. In connection with the issuance of its report of the independent registered public accounting firm, Thomas Leger & Co. LLP reported to our Board of Directors two material weaknesses under standards established by the Public Company Accounting Oversight Board regarding some elements of our system of internal controls. They noted the following material deficiencies: (i) The Company lacked certain procedures and required expertise needed to properly account for non-rountine transactions (such as acquisitions of other businesses) and preparation of its required financial statement disclosure in accordance with U.S. G.A.A.P. and SEC rules and regulations. (ii) The Company has restated its consolidated financial statements for the year ended December 31, 2002 to reflect merger costs of $867,411 as post-acquisition activity. This restatement adjustment is considered a material weakness over financial reporting as defined by the PCAOB. We have conducted a review of the errors requiring restatement, including a separate review by our board of directors to determine what remedial measures were necessary. We believe our management has taken or is in the process of taking the steps necessary to correct the errors and avoid similar errors in the future. As required by SEC rule 13a-15(b) we conducted an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer, Chief Financial Officer concluded that our disclosure controls and procedures are effectively in timely alerting them to material information relating to us (including our subsidiaries) required to be included in our periodic SEC filings. Other than the foregoing initatives, there were no significant changes in our internal controls or to our knowledge, in other factors that could significantly affect such internal controls subsequent to the date of their evaluation. While we have taken or are in the process of taking the foregoing steps in order to address the adequacy of our disclosure controls and procedures, and, in addition, to develop and implement a formal set of internal controls and procedures for financial reporting in accordance with SEC's proposed rules to adopt the internal control report requirements included in Section 404 of the Sarbanes-Oxley Act of 2002, the effiency of the steps we have taken to date and the steps we are still in the process of completing is subject to continued management review supported by confirmation and testing by our external auditors. As a result, it is likely that additional changes will be made to our internal controls. PART II. OTHER INFORMATION Item 1. Legal Proceedings. As of March 1, 2005, we were a party to two legal proceedings. The first is a lawsuit brought by Western Securities Corporation. This cause of action seeks payment of $500,942 on two outstanding promissory notes, one to Market Management, Inc. and one to Thomas L. Tedrow plus accrued interest since July 11, 2004, attorney's fees, cost of collection and other court costs. This cause of action was filed in Federal Court in the Eastern District of Louisiana. The Company has filed a Motion to Dismiss for lack of personal jurisdiction or alternatively a Motion to Dismiss for lack of venue. Both motions are currently pending before the court. The second cause of action was filed in State Court in New York City by Bristol Investments Limited against the company and is seeking the payment of the penalty due under their original investment for failure to have a registration effective within a stated period of time. Bristol is currently seeking $53,000 in damages. A settlement is pending in this cause of action and documents are being drafted to reflect this settlement agreement. Under this settlement agreement a Convertible Debenture Note will be issued in lieu of a cash payment. This Debenture is convertible into shares of the company's common stock at a 20% discount to the five trading day closing price prior to the date of settlement. Debentures have a maturity of two years from the date of closing and any unconverted non-redeemed debentures outstanding on the second anniversary of the closing date will be paid in cash to the investor. As of May 10, 2005 we are not a party to any other pending litigation and were not aware of any threatened litigation. Item 2. Changes in Securities During the quarter ended March 31, 2004, 109,984 shares were issued for the payment of notes payable of $60,491. 100,000 shares were also issued related to services and prepaid services totaling $90,000. There were no securities issued during the three months ended March 31, 2005. Item. 3. Defaults Upon Senior Securities None Item 4. Submissions of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K a) Exhibits 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. 10 ETERNAL TECHNOLOGIES GROUP, INC. /s/ Jiansheng Wei ------------------------------------- May 20, 2005 Jiansheng Wei, Chief Executive Officer /s/ Xingjian Ma May 20, 2005 ------------------------------------- Xingjian Ma, Chief Financial Officer 11 CERTIFICATIONS I, Jiansheng Wei, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Eternal Technologies Group, Inc.; 2. Based on my knowledge, this quarterly 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 quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Dated: May 20, 2005 By: /s/ Jiansheng Wei --------------------- Jiansheng Wei Chief Executive Officer 12 I, Xingjian Ma, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Eternal Technologies Group, Inc. 2. Based on my knowledge, this quarterly 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 quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Dated: May 20, 2005 By: /s/ Xingjian Ma -------------------- Xingjian Ma Chief Financial Officer 13 CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF TEHE SARBANES-OXLEY ACT OF 2002 -------------------------------------------------------------------------------- I, Jiansheng Wei, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Eternal Technologies Group, Inc. on Form 10-QSB for the quarterly period ended March 31, 2005 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-QSB fairly presents in all material respects the financial condition and results of operations of Eternal Technologies Group, Inc. By: /s/ Jiansheng Wei -------------------------- Name: JiJun Wu Title: Chief Financial Officer May 20, 2005 14 CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF TEHE SARBANES-OXLEY ACT OF 2002 -------------------------------------------------------------------------------- I, Xingjian Ma, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Eternal Technologies Group, Inc. on Form 10-QSB for the quarterly period ended March 31, 2005 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-QSB fairly presents in all material respects the financial condition and results of operations of Eternal Technologies Group, Inc. By: /s/ Xingjian Ma -------------------------- Name: Xingjian Ma Title: Chief Financial Officer May 20, 2005 15