Saturday, March 25, 2006
Eternal Technologies (ETLT) Sept 05, 2005 10-Q/A
Comparing the 10-Q to the 10-Q/A, the diff output is here.
They're Unaudited Consolidated Condensed Statements of Operations. Ya got that?
It would make sense to add "the" to a sentence because the Chinese language doesn't have such a thing and thus Chinese speakers tend to forget to add it. But to remove "the" is odd:
- Notes to the Unaudited Consolidated Financial Statements 7But here's where it starts to get interesting:
+ Notes to Unaudited Consolidated Financial Statements 7
- Total current assets 33,685,080 29,633,578Two dollars disappeared from the current assets. In reality, the original filing was incorrect. The error did not propagate through the numbers, so it was a typo and not a math error.
+ Total current assets 33,685,080 29,633,576
They used a minus sign instead of parentheses:
- Subscription receivable -10,176 (10,176)And another error in the numbers:
+ Subscription receivable (10,176) (10,176)
- Total liabilities and stockholders' equity $ 45,476,025 $ 40,482,265Since it's the last number in the list, we don't know if it was a typo or a math error. It would be very easy to see that it was wrong since it's the sum of two numbers, both of which are odd (odd + odd = even).
- ================== ==================
+ Total liabilities and stockholders' equity $ 45,476,026 $ 40,482,265
+ ============== ==================
Here we have another number error of 1 dollar:
-SALES $ 5,026,968 $ 9,074,651 $ 17,292,310 $ 15,215,483Two more errors, worse this time:
+SALES $ 5,026,968 $ 9,074,651 $ 17,292,310 $ 15,215,482
WEIGHTED AVERAGE NUMBER OFAnd they added an "Other" category for cash flows from operations:
COMMON SHARES OUTSTANDING
-Basic and diluted 30,733,058 29,337,381 30,696,630 29,362,380
+Basic and diluted 30,733,058 29,387,380 30,696,630 29,370,774
+ Other - 27,200...which increased the cash flow from operations for the first 9 months of 2004 by that much.
And this is a large error:
At September 30, 2005, the Company maintains bank accounts in the PRC ofHowever, this is a cut-and-paste error. The amount matches exactly the same item in Q2 shown here.
-approximately $21,329,840, and substantially the entire amount is to be
+approximately $24,115,753, and substantially the entire amount is to be
exclusively used for operations in the PRC.
More number changes in the discussion, but these don't seem to be cut-and-paste errors:
Selling and administrative expenses decreased by $120,216 or 28.9% to $294,917and here
from $415,133 for the corresponding period of the prior year. This decrease
-resulted from a decrease in penalty expense of $93,878 and a decrease in
-management expenses of $23,329 which was offset by small decreases in other
+resulted from a decrease in penalty expense of $68,673 and a decrease in
+management expenses of $22,371 which was offset by small decreases in other
Cost of sales for the nine months ended September 30, 2005 increased byand here
-$2,862,070 or 29.5% to $12,576,696 from $9,714,594 for the corresponding period
+$2,862,102 or 29.5% to $12,576,696 from $9,714,594 for the corresponding period
of the prior year. This increase resulted from an increase in the costs of
As of September 30, 2005, the Company had cash and cash equivalents ofand this next change is due to the addition of $27,200 "Other" cash flow from operations.
-$24,164,917 and working capital of $30,948,076. This compares with cash and cash
-equivalents of $27,473,354 and working capital of $27,436,168 as of December 31,
+$24,164,917 and working capital of $30,986,115. This compares with cash and cash
+equivalents of $27,473,354 and working capital of $27,391,150 as of December 31,
September 30, 2005. This compares with cash provided from operating activitiesand here they had the wrong amount for cash used in investing in the liquidity discussion. I can't figure out where that number came from.
-of $1,289,673 for the corresponding period of the prior year. This decrease
+of $1,316,873 for the corresponding period of the prior year. This decrease
resulted from a decrease in net income of $737,376 and non-cash expenses of
-Cash used in investing activities totaled $1,272,108 during the nine monthsand here (cut-and-paste error)
+Cash used in investing activities totaled $1,516,830 during the nine months
-Although the Company has a cash and bank balance of $21,329,840, it has all beenI'll bet the auditors from Thomas Leger are having so much fun with this stuff. Probably lots of forehead-smacking going on.
+Although the Company has a cash and bank balance of $24,115,753, it has all been
This is a common problem with Chinese reverse mergers that I've looked at. In my opinion there are some things you really want to watch out for: anything that results in a significant change in the amount of cash held by the company, a change in earnings, or a significant change in the number of shares. ETLT did have a very small change in the weighted average share count for 2004.