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Sunday, September 25, 2005

Eternal Technologies (ETLT) proxy

Definitive proxy statement
Meeting held in Arlington, Virginia on August 26.

Inconsistent information in the proxy:
At the Annual Meeting, the shareholders will vote upon three proposals, the election of directors, and the ratification of the appointment of Ham Langston Brezenia LLP. as independent certifying accountants, as described further in this Proxy Statement.
Later on they describe
PROPOSAL 1 - ELECTION OF DIRECTORS (7 are up for election while there were 10 total at the end of last year)
and that's it.

During the first half of 2005:
Shang Jiaji's ownership dropped by about 1.1 million shares from 14.67% to 11.03% of the company.

Jijun Wu's ownership dropped by about 800K shares from 7.84% to 5.49% of the company.

Xingjian Ma's ownership dropped to 100 shares from 125K shares.

Tielian Liu disappeared off the radar from having 2.28% of the company.

Executives and directors dropped from owning 31.9% to 21.57% of the company.

Not up for election are:
Garfield W. Hu
Tielian Liu
Xingfa Xu
The Company has an employment contract with Zhai Rui. This contract runs from February 20, 2005 to February 19, 2006 and pays annual compensation of $60,000.
There is no audit committee and not audit financial expert, no compensation committee, or any others. But I've seen this before with Chinese companies after reverse mergers. They intend to add directors as they grow.

10 board meetings during 2004. All directors attended at least 8.

Audit fees were $111K during 2004 with only $44K additional fees ($39K were audit related, the rest taxes).

In US companies, the related party loans are usually from the company to the executives. In Chinese companies, it's usually the executives loaning money to the company (despite their far lower wages). This case is no different. The 10-K showed them, they were minor.

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