SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

(Mark One)

[X]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934

                   For the Fiscal Year Ended December 31, 2002

[ ]  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.
                ------------------------------------------------
                 (Name of small business issuer in its charter)

           Nevada                                         62-1655508
--------------------------------         ---------------------------------------
(State or other jurisdiction of          (I.R.S. Employer Identification Number)
 incorporation or organization)

      Suite 1801-02 Jinwan Mansion, 358 Nanjing Road, Tianjin P.R.C. 300100
      ----------------------------------------------------------------------
               (Address of Principal Executive Offices) (Zip Code

        c/o Vanderkam & Associates, 1301 Travis, #1200, Houston, TX 77002
                                 (U.S. Address)

Registrant's Telephone Number, Include Area Code: 011-86-22-2750-1802

Securities Registered Pursuant to Section 12(b) of the Act:

      Title of Each Class              Name of Each Exchange on Which Registered
           None                                          None


Securities Registered Pursuant to Section 12(g) of the Act:

                            Common Stock, $ par value
                           ----------------------------
                                (Title of Class)

         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 twelve (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 ninety (90)
days. Yes X No

         Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]

         The issuer's revenues for its most recent fiscal year were $12,640,964.

         As of April 15, 2002, 25,531,316 shares of common stock of the
Registrant were outstanding. As of such date, the aggregate market value of the
common stock held by non-affiliates, based on the closing bid price on the NASD
Bulletin Board, was approximately $5,444,683.

                       DOCUMENTS INCORPORATED BY REFERENCE

Transitional Small Business Disclosure Format:    Yes      No   X
                                                     -----    ------
<PAGE>
                                TABLE OF CONTENTS

                                                                        Page

PART I

         Item 1.  Description of Business..............................   3
         Item 2.  Description of Properties............................   5
         Item 3.  Legal Proceedings....................................   5
         Item 4.  Submission of Matters to a Vote
                  of Security Holders..................................   5

PART II

         Item 5.  Market for Common Equity and
                  Related Stockholder Matters..........................   5
         Item 6.  Management's Discussion and Analysis.................   7
         Item 7.  Financial Statements.................................   8
         Item 8.  Changes in and Disagreements with Accountants
                  on Accounting and Financial Disclosure...............   8

PART III

         Item 9.  Directors, Executive Officers, Promoters
                  and Control Persons; Compliance with
                  Section 16(a) of the Exchange Act....................   8
         Item 10. Executive Compensation...............................  10
         Item 11. Security Ownership of Certain Beneficial
                  Owners and Management................................  11
         Item 12. Certain Relationships and Related Transactions.......  11
         Item 13. Exhibits and Reports of Form 8-k.....................  12
         Item 14. Controls and Procedures..............................  12
         Item 16. Principal Accountant Fees and Services...............  12


                  Signatures...........................................  12
                  Certificates........................................14-15

                  Financial Statements................................. F-1


<PAGE>


                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

Corporate History

     Over the past several  years,  the Company has changed its name on multiple
ocassions.  On  December  12,  2002,  the  Company  changed  its name to Eternal
Technology Group, Inc. fromWaterford  Sterling Corporation.  The Company changed
its  name  to  Eternal   Technologies   Group,  Inc.  from  Waterford   Sterling
Corporation.  The Company  changed its name to Waterford  Sterling  Corporation,
from  Skreem.com  Corporation on January 25, 2001.  Skreem.com  Corporation  was
formerly Commerce Centers  Corporation,  a corporation  formed in May 1989 which
did not have any operations until it acquired Skreem.com  Corporation,  a Nevada
corporation  ("Skreem")  in March  1999.  Upon the  acquisition  of Skreem,  the
Company  changed  its name from  Commerce  Centers  Corporation  to  "Skreem.com
Corporation".

     On  December  12,  2002,  Waterford  Sterling  Corporation   completed  its
acquisition of Eternal  Technologies  Group Ltd. and  Subsidiaries  ("Eternal").
Eternal was incorporated in the British Virgin Islands with limited liability on
March 3, 2000 under the name Eternal  Phoenix  Company  Limited.  By  resolution
adopted on June 17,  2000,  the Company  changed its name to Eternal  Technology
Group Ltd.

     On May 16,  2000,  Eternal  acquired a 100%  equity  interest  in  Willsley
Company  Limited  ("Willsley"),  a company  incorporated  in the British  Virgin
Island with limited liability.

     Willsley's  principal  activity  is a  holding  company  which  owns a 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.  Its principal  activities  are operating a
breeding center to propagate  quality sheep and other livestock  breeds in Inner
Mongolia.

     We acquired all of the issued and outstanding shares of Eternal in exchange
for  22,050,000  post  reverse  split  shares.   Following   completion  of  the
acquisition there are 25,941,176 shares of the Company outstanding.

     Eternal  Technology  Group  Limited  is a major  agriculture  genetics  and
bio-pharmaceutical  R&D firm  operating in China with the support of the Chinese
Government.  Based on animal  genetics  and gene  engineering,  the company will
develop   three   principal   businesses,   i.e.   meat,   dairy   products  and
bio-pharmaceuticals.

     Three years ago, the Company launched a project to commercialize technology
in sheep embryo production and transfer in China.  After the Company carried out
"The World's First  Transfer  Project of Thousands of Sheep Embryos" in China, a
system of breeding  better  quality is taking  shape.  The Company has now moved
into the lamb meat production thus completing the business cycle.

     The Company has also entered the dairy  industry by applying its technology
of embryo  transfer to the  breeding of  higher-yielding  and  pure-breed  dairy
cattle.

     The Company has also made  significant  progress  in its  research  work in
bio-pharmaceuticals.  The  company  hopes to  launch  gene  engineered  drugs in
several years.

The Farm


     The  farm is  located  in  Wulagai  Development  Area in the  northeast  of
Xilingol  League,  Inner  Mongolia.  The  area  is in one of the  few  naturally
preserved grassland areas in China. The United Nations Educational,  Scientific,
and  Cultural  Organization  admitted  this  area  as a  member  of the  Man and
Biosphere  Program (MAB) in 1987.  In 1997, it was  designated as a State Nature
Protection Zone.

     The farm is equipped with a  60-kilovolt-electricity  transmission  line to
ensure  an  adequate  energy  supply.  Existing  telephones  and  transportation
facilities are also adequate.  A railway station is located 80 kilometers to the
south,  which will facilitate the  distribution of products to various places in
China.  The  road  system  inside  the  farm  consisting  of  approximately  200
kilometers, connects all sub-pastures.

                                       3
<PAGE>

Embryo Transfer Center

     The center comprises nearly 35,000 square feet and consists of buildings
containing operating rooms, equipment rooms, offices, conference rooms, lecture
halls and guest rooms for the scientists.

Reception Center

     The reception center comprises nearly 30,000 square feet. It is used to
host scientists, customers, and guests.

Breeding Grassland

     Utilizing scientific grassland management, the grassland is organized into
various breeding sub-pastures. Each sub-pasture is composed of haciendas and
sheep stables, and equipment such as wells, mowing machines and tractors. A
supply of forage grass is reserved for winter and for snowstorms. Part of the
breeding pastureland has been sown and developed. It will be expanded as the
amount of livestock increases.

Animal Genetics Technologies

     The Company possesses technologies for industrialized embryo production and
transfer, and has patents on the of relevant technologies that guarantee the
smooth implementation of animal genetics projects. These technologies include
the following:

Peritoneal Endoscope Technique

         This is a technique of collecting sheep embryos by means of peritoneal
endoscopes without surgical operations, before transferring.

         Embryo collecting and transfer has traditionally been conducted through
surgical procedures. Unfortunately, under this method, a provider is usually
rendered useless after four operations, because of adhesions. The peritoneal
endoscope technique adopted by the Company may enable a provider to undergo more
than 10 embryo procedures, thus increasing the utility of providers. It can also
raise the conception rate from 20% to over 80% by deep semen deposition and
frozen semen mating, using a frozen semen consumption volume two-thirds less
than that of conventional techniques.

Vitrification Freezing Technique

         Vitrification refers to the process by which concentrated antifreeze
solution is transformed into transparent colloidal solid through rapid freezing.

         After experiments and selection, the Company has produced a new
anti-freezing protectant, which enables the freezing process to be operated at
room temperatures of between 20 and 25 celcius without a cooling system, which
produces increased efficiency. Internal and external fertilization blastulae (an
early embryonic form produced by cleavage of a fertilized ovum and consisting of
a spherical layer of cells surrounding a fluid-filled cavity) in cattle has a
growth rate of 95% and 83% respectively after freezing and a transfer pregnancy
rate of 58% and 36%, respectively with the pregnancy rate and farrowing rate
(the rate of the offspring that the pregnant animal gives birth to) raised by 5
to 10%, or comparable to international standards.

                                       4
<PAGE>

The Techniques Of Embryo Splitting And Cleavage Ball

         These are techniques for splitting embryos by microsurgery or of
separating the embryo cleavage balls in early cultivation before the
half-embryos or separated cleavage balls develop into individuals.

         Currently, the average transfer rate of half-embryos in the world is
about 35 to 40%, while that of newly split half-embryos (of cattle and sheep) is
above 50%. This is the equivalent of a 100% embryo transfer pregnancy rate, thus
improving the embryo availability. By combining the techniques of half-embryo
transfer and embryo sex identification, we can objectively produce male or
female animals, which will exert a positive impact on the breeding of dairy and
beef cattle.

The External Fertilization Technique

         In this technique, ova from the ovariums of cattle and sheep are
collected (that is, ova is collected from living animals) before being
cultivated externally. They are then cultivated with semen obtained either
internally or externally so as to complete the fertilization process before
being further cultivated to the transferable stage.

         Presently, the transfer pregnancy rate of externally fertilized embryos
worldwide is 40 to 45%, while that in China is only approximately 20%. However,
our fertilized embryo transfer pregnancy rate is above 40%, or world standard.

         The cost of embryos fertilized externally is only 10% of that produced
internally. When mass-produced and applied commercially to cattle and sheep,
there is significant reverse potential.

Employees

         The Company currently employs 17 people on a full-time basis as well as
a number of seasonal and part-time personnel on the farm. Of the seventeen
people, fourteen are employeed in an administrative capacity and three are
employeed on the farm.

ITEM 2.  DESCRIPTION OF PROPERTIES

         The Company operates from two separate facilities, its administrative
offices in Tinjain, PRC and its farm in Inner Mongolia, PRC. The administrative
offices occupy approximately 218 square meters (approximately 2,146 square feet)
in a commercial building in Tinjain, PRC. The Company rents these facilities
under a 3 year lease at $60,240 per year.

         The farm consists of 106 square kilometers (approximately 66 square
miles) and is located in Inner Mongolia, PRC. The Company purchased the land use
rights to this farm in April, 2000. The land use rights run until 2025.

ITEM 3.  LEGAL PROCEEDINGS

         Management is not aware of any pending or threatened litigation against
the Company.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         On December 12, 2002, the shareholders of the Company approved an
amendment to the Articles of Incorporation to reverse split the shares of the
Company on a 1:6 basis, reauthorize the par value at $.001 and increase the
number of shares authorized from 25,000,000 common shares to 95,000,000 common
shares and authorized 5,000,000 preferred shares. In addition, the shareholders
approved the name change in the Company's name to Eternal Technologies Group,
Inc. from Waterford Sterling Corporation and ratified the acquisition of Eternal
Technologies Group Limited and its subsidiaries.

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information

                                       5
<PAGE>

           The Company's common stock trades on the over-the-counter market on
the National Association of Securities Dealers OTC Bulletin Board under the
symbol "ETLT." The following table sets forth the high and low bid and asked
sales priced for the periods indicated.

                                       Bid Price
Calendar Year 2002                    High      Low
                                      ---------------------

         Fourth Quarter               $.08    1.40*
         Third Quarter                 .07     .20
         Second Quarter                .08     .35
         First Quarter                 .09     .12

         * represents high following the one for six reverse share split.

Calendar Year 2001

         Fourth Quarter                .13     .05
         Third Quarter                .309     .16
         Second Quarter                .31     .13
         First Quarter                .531     .25

     The quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not represent actual transactions. At April 15,
2003 the bid price of the Common Stock was $1.03.

Record Holders

     As of April 15, 2003, there were approximately 233 record holders of the
Company's common stock.

Dividends

     The Company has never declared or paid any cash dividend on its Common
Stock and does not expect to declare or pay any such dividend in the foreseeable
future.

                                       6
<PAGE>

ITEM 6. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

Revenues. Revenues increased by $1,194,603 or 10.4% from $11,446,361 or the year
ended December 31, 2001 to $12,640,964 for the year ended December 31, 2002. The
increase in revenues is attributable to an increase in the sale of embryos which
was partially offset by a decline in the sale of forage grasses.

Cost of Sales. Cost of sales decreased by $1,099,575 or 39.9% to $2,752,811 for
the year ended December 31, 2002 from $3,852,386 for the year ended December 31,
2001. Gross profit as a percent of sales increased to 78.2% for the year ended
December 31, 2002 from 66.3% for the year ended December 31, 2001. The decrease
in the cost of sales and the increase in the gross profit margins are
attributable to an increased percentage of embryo sales which have a higher
profit margin and a decrease in the sale of folage grasses which have a lower
profit margin.

Depreciation and Amortization. Depreciation and amortization expense increased
by $16,336 or 1.9% from $845,716 for the year ended December 31, 2001 to
$862,052 for the year ended December 31, 2002. This increase resulted from the
depreciation of additional assets which were placed in services during the
current year.

Selling and Administrative Expenses. Selling and administrative expenses
increased by $275,646 or 29.4% from $937,971 for the year ended December 31,
2001 to $1,213,617 for the year ended December 31, 2002. The increase in selling
and administrative expenses resulted from increase in consulting fees, legal and
accounting expenses, office expenditures, rent, public relations and expenses
which was partially offset by reduced travel expenses. For the year ended
December 31, 2002 approximately $304,000 was expended on financial advisors and
$209,000 on public relations.

Research and Development Costs. For the year ended December 31, 2002, the
Company incurred $1,000,000 of costs in its research and development program.
This compares with $0 for the year ended December 31, 2001. The Company does not
conduct research itself, but rather has two contacts with outside parties who
perform research on behalf of the Company. The first contract is with Towering
International Trade Corp., an entity controlled by JiaJi Shang, the principal
shareholders of the Company and the second contract is with the Chinese Science
Bureau Shen-Yang Ecology Research Center. The research is being conducted in
genetic cloning and recombinant protein production of thrombin like enzyme from
snake venom and targeting antiturnover drug and other gene engineering medicine.
During 2002, $400,000 was paid to Towering International for their research ,
and $600,000 was paid to the Chinese Science Bureau. The contracts with each of
these parties is for twenty-four months.

Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

Revenues. Revenues increased by $2,492,894 or 27.8% from $8,953,467 or the year
ended December 31, 2000 to $11,446,361 for the year ended December 31, 2001. The
increase in revenues is attributable to an increase in the sale of embryos and
the sale of forage grasses in 2001.

Cost of Sales. Cost of sales increased by $1,557,054 or 67.8% to $3,852,386 for
the year ended December 31, 2001 from $2,295,332 for the year ended December 31,
2000. Gross profit as a percent of sales decreased to 66.3% for the year ended
December 31, 2001 from 74.4% for the year ended December 31, 2000. The increase
in the cost of sales and the decrease in the gross profit margins are
attributable to forage grass sales which have a lower profit margin.

Depreciation and Amortization. Depreciation and amortization expense increased
by $696,124 or 465.3% from $149,592 for the year ended December 31, 2000 to
$845,716 for the year ended December 31, 2001. This increase resulted from the
depreciation of additional assets which were placed in services during the
current year.

Selling and Administrative Expenses. Selling and administrative expenses
increased by $508,857 or 118.6% from $429,114 for the year ended December 31,
2000 to $939,971 for the year ended December 31, 2000. The increase in selling
and administrative expenses resulted from an increase in consulting fees,
business travel, office expense and staff salaries and allowances.


                                       7
<PAGE>

Liquidity and Capital Resources

     Since inception, the Company has funded its operations and met its capital
requirements through the sale of its shares stock and loans from both related
parties and third parties. At December 31, 2002, the Company had working capital
of $9,266,786 and a cash balance of $7,135,559. This compares to working capital
of $4,253,708 and a cash balance of $7,753,452 at December 31, 2001.

     Cash provided by operating activities was $1,275,472 for the year ended
December 31, 2002 compared to $8,956,212 for the year ended December 31, 2001.
Although earnings were higher for the year ended December 31, 2002 then in 2001,
this was more than offset by large charge in the current accounts, principally
in the reduction of payables.

     Cash used in investing activities, totaled $1,893,365 for the year ended
December 31, 2001 compared to $1,330,659 used in investing activities for the
year ended December 31, 2001. This use of cash was expended in both years for
the purchase of fixed assets and expenditure on construction in process.

     There were no financing activities during either the year ended December
31, 2002 or 2001.

     Although the Company had cash of $7,135,559 as of December 31, 2002, the
use of such cash has been restricted by the Company's principal shareholders. As
a result, the Company has been unable to pay certain liabilities when they
become due or to expand its business as planned. Accordingly, unless the Company
is able to obtain lines of credit, or sell its shares, it will have insufficient
working capital to carry out its business plan for the next twelve months.

ITEM 7. FINANCIAL STATEMENTS

     The consolidated financial statements of the Company, together with the
independent auditors' report thereon of Thomas Leger & Co., appears on pages F-2
through F-18 of this report. See Index to Financial Statements on page F-1 of
this report.

ITEM 8.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
         FINANCIAL DISCLOSURE

     On January 10, 2003, Andersen Andersen & Strong, LC advised the Company
that it would be unable to act as the Company's independent accountant.

     On January 10, 2003 the Company engaged Thomas Leger & Co. as its new
independent accountants.

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16(a) OF THE EXCHANGE ACT

     Information Regarding Present Directors and Executive Officers

     The names of the Company's executive officers and directors and the
positions held by them are set forth below:

 Name                    Age       Title
-------                 -----     --------
JiJun Wu                 66       Chairman of the Board of Directors, President
                                  and Chief Executive Officer
Jiansheng Wei            50       Chief Operating Officer and Director
Dr. Thomas E. Wagner     62       Director
Shien Zhu                47       Director
James Q. Wang            33       Director
Garfield W. Hu           29       Secretary
Wenli Yu                 38       Chief Technical Officer
Xingjian Ma              56       Chief Financial Officer

         The term of office of each director is one year and until his successor
is elected at the Company's annual shareholders' meeting and is qualified,
subject to removal by the shareholders. The term of office for each officer is
for one year and until a successor is elected at the annual meeting of the board
of directors and is qualified, subject to removal by the board of directors.

                                       8
<PAGE>

Biographical Information

         Set forth below is certain biographical information with respect to
each of the Company's officers and directors.

         Mr. Jijun Wu, Chairman
         Mr. Wu graduated from China Central Finance & Economics University. Mr.
Wu became one of the first CPAs in the People's Republic of China. He has
significant experience in finance and investments and has held the position of
Accountant-General in a state-owned electronics company with revenues of over
$1.5 billion and over 200 subsidiaries. Mr. Wu maintains business relationships
with more than twenty major banks, consortiums and funds worldwide. Mr. Wu took
a lead in planning for mainland enterprises to list on overseas stock markets.
He was the consultant to Motorola, NEC, Epson, Yamaha, AT&T, and Panasonic when
they initiated investments in the PRC in the early 1980s. He was made an
honorary citizen of Houston, TX.

         Mr. Jiansheng Wei, Director
         Mr. Wei graduated with an MBA from Tianjin Finance & Economics College.
He has been engaged in animal husbandry practices and management for over thirty
years and has been in charge of several large farms in Inner Mongolia and Hebei
Province. He is familiar with advanced husbandry techniques and has significant
experience in management, breeding and the introduction of superior agricultural
genetics. Mr. Wei maintains close commercial relationships within animal
husbandry and business circles throughout Southeast Asia, Australia, New Zealand
and South Africa.

         Dr. Thomas E. Wagner, Director
         Dr. Wagner is currently the Director of the Oncology Research Institute
at the Greenville Hospital System and Distinguished Professor of Molecular &
Cellular Biology at Clemson University. He was trained in both the physical
biochemistry of DNA and microbiology at Princeton and Northwestern University,
where he received his PhD. He carried out research on the conformational changes
in DNA associated with gene expression since the early 1970s.

         His research laboratory performs studies of early development including
embryonic microsurgery and contemporary molecular biology including complex
RT/PCR cloning. This has led to contributions including the development of the
means of producing transgenic animals in 1979, the isolation and maintenance in
culture of embryo-derived stem cell populations useful in transplantation
biology and medicine, as well as vehicles for cell-based gene therapy in 1987
and the development of a highly efficient cytoplasmic T7 gene therapy vector in
1993. Since 1998 he has focused his efforts as Director of the Oncology Research
Institute on the application of modern molecular and cellular biology to the
development of new therapies for the treatment of cancer.

         His work has been presented in 203 publications. Dr. Wagner has filed
over thirty patents and, to date, received eight patents on his work. He is also
currently: Senior Examiner and Consultant, Research Grants Council, Hong Kong;
Advisor and Honorary Professor of Molecular Biology, Tsing Hua University,
Beijing; and Honorary Professor of Biology, National Hydrobiology Institute,
Chinese Academy of Sciences, Wuhan, China.

         Mr. Shien Zhu, Director
         Mr. Zhu holds post-doctoral, Associate Professor and Master Director
positions with several leading Chinese universities. As a doctor from Kochi
University and Ehime University in Japan, he majored in the area of early embryo
vitrification freezing and transfer and of mammal adoscuolation in embryo
biotechnology. He invented a system of freezing dn preservation, unaided by a
cooling frigorimeter, which is characterized by low cost, simple operation and a
high embryonic survival rate. In recent years, he has written more than forty
articles that were published in international and domestic periodicals.
Currently, he is undertaking vital "863" projects for the PRC and scientific
research projects under the "Ninth Five-Year Plan" period.

         Mr. James Q. Wang, Director
         Mr. Wang, a Canadian citizen, received a Master of Applied Science
degree from the University of Ottawa. He has gained exceptional expertise in
enterprise management, marketing and engineering due to his leadership roles in
the telecommunications, electronics and Internet industries.

         Before joining Eternal, Mr. Wang founded DNS Technologies Group, Inc.
(Canada) and served as its President. DNS specialized in Internet technologies
and outsourcing between North America and Asia. Mr. Wang started his career
first as an engineer in NEC, where he published his technical innovation
proposal and was honored with an Award of Excellence at NEC's headquarters in
Tokyo. Later, he moved to the NEC Marketing department in charge of
sales/marketing for the entire Eastern region of mainland China.

                                       9
<PAGE>

         Garfield W. Hu, Secretary
         Mr. Hu graduated from the Foreign Languages Department, Tianjin Normal
University. He taught at Nankai University and worked as a translator and
adviser for the largest professional IT web site - yesky.com. He joined Eternal
Technology Group in 2000 and was appointed Corporate Secretary in 2001 with
responsibility for the coordination of internal affairs and external contacts.

         Dr. Wenli Yu, Chief Technological Officer
         Dr. Yu received her Ph.D from China Agriculture University, Biology
Department, and is a Research Fellow. She has presided over the following key
projects in the China including: "Development and Application of Bovine/Ovine
Embryo Transfer Technology", "Setting up Breeding and Production System of
Purebred Beef by Embryo Biotechnology," "Establishing a State Center for Beef
Breeding," "Research on Ovine Artificial Insemination and Embryo Transfer with
the Application of Endoscope." Dr. Yu has published over 20 papers in renowned
professional journals, such as China Animal Husbandry, China Veterinarian
Journal, and Animal Husbandry Veterinarian Journal. She maintains good
relationships with experts in biology both at home an abroad. She has
established a reputation in academic circles for her extensive experience. She
has met with President Jiang Zemin to discuss current activities in embryo
research.

         Xingjian Ma, Chief Financial Officer
         Mr. Ma joined the Company in 2002. Prior to joining the Company, he was
the Chief Financial Officer of a state owned enterprise in the PRC. His
background includes finance, accounting, taxation, banking and securities
reporting.

ITEM 10. EXECUTIVE COMPENSATION

         The following tables set forth certain summary information concerning
the compensation paid or accrued for each of the Company's last completed fiscal
years to the Company's or its principal subsidiaries chief executive officer and
each of its other executive officers that received compensation in excess of
$100,000 during such period (as determined at December 31, 2001, the end of the
Company's last completed fiscal year):

Summary Compensation Table
<TABLE>


                            Annual Compensation                           Long Term Compensation

                                                          Awards           Restricted                     Payouts
                                                          ------                                          -------
 Name and Principal      Year    Salary    Bonus($)    Other Annual    Stock      Options   LTIP         All other
     Position                                          Compensation    Awards     / SARS   Payout      compensation
--------------------     ----    ------    --------    -------------  --------    -------  -------     ------------
<S>                      <C>     <C>       <C>         <C>            <C>         <C>      <C>         <C>

Jijun Wu, Chairman       2002    7,229          -           -              -          -         -           -
and Chief Executive      2001        -          -           -              -          -         -           -
Officer
</TABLE>


Options /SAR Grants in Last Fiscal Year

         The Company has never granted options or stock appreciation rights.

Bonuses and Deferred Compensation

         None

Compensation Pursuant to Plans

         The Company does not have any compensation or option plans.

                                       10
<PAGE>

Pension Plans

         The Company does not have any pension or other deferred savings plans.

Other Compensation

         None

         Directors receive no compensation except for reimbursement for expenses
associated with attending director meetings.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth the number of shares of the Company's
Common Stock, par value $0.001, held by each person who is believed to be the
beneficial owner of 5% or more of the shares of the Company's common stock
outstanding at April 15, 2003, based on the Company's transfer agent's list,
representations and affidavits from shareholders and beneficial shareholder
lists provided by the Depository Trust and securities broker dealers, and the
names and number of shares held by each of the Company's officers and directors
and by all officers and directors as a group.


Title of        Name and Address of   Amount and Nature of      Percent of Class
Class            Beneficial Owner     Beneficial Ownership

Common             Thomas L. Tedrow          2,393,166                 9.4%

Common             Jiaji Shang              10,154,350                39.8%

Common             JiJun Wu                  2,205,000                 8.6%

Common             Jiansheng We              1,102,500                 4.3%

Common             James Q. Wang             2,182,950                 8.6%

Common             Shien Lu                      9,000                    *

Common             Xingjian Ma                     100                    *

Common             Wenli Yu                     15,000                    *

Common             Yuquo Chong                     100                    *

Common             Garfield W. Hu                  100                    0

All officers and Directors,
and as a Group (8 Persons)                   5,514,750                21.6%

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

ADDITIONAL RELATED PARTY BALANCES AND TRANSACTIONS

The Company's amounts due from/(to) directors, related parties, and related
company are unsecured, interest-free and are repayable on demand. China
Continental, Inc. ("CCI") is a related company. One of the Company's officers,
directors and major shareholder (Shang Jia Ji) owns more than 10% of CCI and
Towering International Trade (US) Corp.

CCI acquired 2,000 goat embryos and services from Eternal for US$425,000 in
December, 2000. CCI's 2,000 goats with implanted embryos were sold in March,
2001 for approximately US$1,687,000.

CCI had sales of forage grass to Eternal for approximately US$1,735,000 during
2001. These purchases were at the same price as to third parties. The forage
grass was sold to a third party for $1,855,000.

Eternal sold 3,000 goat embryos and services to a subsidiary of CCI for
approximately US$600,000 during 2002.

Eternal acquired 100% interest in Aershan in a transaction valued at $6,000,000
from Shang Jia Ji. The $6,000,000 represents Shang Jia Ji's cost. Eternal
entered into various construction contracts with companies controlled by Shang
Jai Ji. The contracts totaled approximately $985,530. This amount was paid in
full by December 31, 2002.

                                       11
<PAGE>

The Company entered into a contract with Towering International Trade (US) Corp
during 2001 for a research and development project totaling $1,400,000. No
payments were made in 2001. During 2002, $400,000 was paid on this contract.

The Company entered into an investor relations agreement with Stoneside
Development Limited ("Stoneside"). Stoneside is controlled by Thomas L. Tedrow.
The agreement is for $10,000 per month for twenty four months commencing June,
2002. Thomas L. Tedrow also received a $90,000 fee from the Company.

                                     PART IV

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

     10.1   Research Contract with Shen Yang Institute of Applied Ecology of the
            Chinese Academy of Science.
     10.2   Research Contract with Tower International Trade Corp.
     10.3   Purchase Agreement wtih Shang Jai Ji dated July 15, 2000 for the
            purchase of the Shares of Willsley Company Limited
     10.4   Amendment to the Purchase Agreement with Shang Jai Ji dated July 15,
            2000 for the Purchase of the Shares of Willsley Company Limited

(b)  Reports on Form 8-K

         On December 12, 2002 the Company filed an 8-K reporting the acquisition
of Eternal Technologies Group, Ltd., the change of the Company's name to Eternal
Technologies Group, Inc., a one for six reverse stock split and an increase in
authorized shares to 95,000,000 common shares and 5,000,000 preferred shares.

ITEM 14.  CONTROLS AND PROCEDURES

(a) The Company's Chief Executive Officer and Chief Financial Officer have
concluded that the Company's disclosure controls and procedures are effective,
based on their evaluation of these controls and procedures within 90 days of the
date of this report.

(b) There have been no significant changes in the Company's internal controls or
in other factors that could significantly affect these controls subsequent to
the date of their evaluation.

ITEM 16.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

         The Company's independent auditors only provided audit services to the
Company. Of the $41,200 paid in 2001, 12,500 was for a conversion of the
Company's 2000 financials from International Accounting Standards to GAAP, and
$28,700 was for the audit of the financial statements for 2001. It is estimated
that the 2002 total will be approximately $45,000 all for audit related
services.

                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
                                              ETERNAL TECHNOLOGIES GROUP, INC.

                                     By: /s/ JiJun Wu
                                         -------------------------------------
Dated: May 7, 2003                    JiJun Wu
                                      Chief Executive Officer


Dated: May 7, 2003                  By:/s/ Xingjian Ma
                                        --------------------------------------
                                     Xingjian Ma
                                     Chief Financial Officer

                                       12
<PAGE>

         In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the Registrant and in the capacities and
on the dates indicated.


   Name                         Title                                   Date
------------                 -----------                             -----------

/s/ JiJun Wu                Chairman of the Board and Chief        May 7, 2003
----------------------      Executive Officer
JiJun Wu


/s/ Jiansheng Wei           Chief Operating Officer and Director   May 7, 2003
----------------------
Jiansheng Wei

/s/ Dr. Thomas Wagner       Director                               May 7, 2003
----------------------
Dr. Thomas Wagner

/s/ Shien Zhu               Director                               May 7, 2003
----------------------
Shien Zhu

/s/ James Q. Wang           Director                               May 7, 2003
----------------------
James Q. Wang


                                       13
<PAGE>

                                 CERTIFICATIONS

I, JiJun Wu, certify that:

1. I have reviewed this annual report on Form 10-KSB of Eternal Technologies
Group, Inc.;

2. Based on my knowledge, this annual 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 annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual 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 annual 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
annual report (the "Evaluation Date"); and

         c) presented in this annual 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
annual 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 7, 2003

By:/s/ JiJun Wu
   ---------------------
JiJun Wu
Chief Executive Officer
<PAGE>

I, Xingjian Ma, certify that:

1. I have reviewed this annual report on Form 10-KSB of Eternal Technologies
Group, Inc.;

2. Based on my knowledge, this annual 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 annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual 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 annual 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
annual report (the "Evaluation Date"); and

         c) presented in this annual 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
annual 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 7, 2003

By: /s/ Xingjian Ma
   ---------------------
Xingjian Ma
Chief Financial Officer

<PAGE>



                        ETERNAL TECHNOLOGIES GROUP, INC.
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS





                                                                       Pages

Report of Independent Auditors                                          F-2

Consolidated Balance Sheet                                              F-3

Consolidated Statements of Income                                       F-4

Consolidated Statements of Changes in Shareholders' Equity              F-5

Consolidated Statements of Cash Flows                                   F-6

 Notes to Consolidated Financial Statements                     F-7 to F-18

<PAGE>



                          INDEPENDENT AUDITOR'S REPORT



To the Board of Directors and Stockholders
of Eternal Technologies Group, Inc.

We  have  audited  the  accompanying  consolidated  balance  sheets  of  Eternal
Technologies Group Inc. (a British Virgin Islands  corporation) and subsidiaries
as of December 31, 2002 and 2001,  and the related  consolidated  statements  of
income,  changes in  shareholders'  equity,  and cash flows for the years  ended
December 31, 2002 and 2001.  These  consolidated  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United  States of  America.  Those  standards  required  that we plan and
perform the audit to obtain reasonable  assurance about whether the consolidated
financial  statements  are free of  material  misstatement.  An  audit  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  consolidated  financial  statements.  An audit also includes  assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.  We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly in all material  respects,  the financial  position of Eternal Technology
Group,  LTD. and  subsidiaries as of December 31, 2002 and 2001, and the results
of their  operations  and their cash flows for the years ended December 31, 2002
and 2001 in conformity  with  accounting  principles  generally  accepted in the
United States of American.

/s/ Thomas Leger and Co., LLP

Thomas Leger and Co., LLP
Houston, Texas

April 24, 2003

                                      F-2
<PAGE>

                ETERNAL TECHNOLOGIES GROUP INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                           DECEMBER 31, 2002 AND 2001
                             (UNITED STATES DOLLARS)

                                     ASSETS
<TABLE>

                                                                 2002                 2001
                                                             -------------        -------------
<S>                                                           <C>                 <C>

CURRENT ASSETS
  Cash and bank balances                                      $ 7,135,559         $ 7,753,452
  Inventories                                                     232,401             285,576
  Accounts receivable                                           4,483,855           2,712,506
  Receivable due from related company                             518,212                   -
  Receivable due from
    related parties                                                     -             456,052
  Prepayments and deposits                                        146,715             164,841
                                                            --------------      --------------

TOTAL CURRENT ASSETS                                           12,516,742          11,372,427


FIXED ASSETS (net of accumulated depreciation)                  4,226,603           3,971,773
CONSTRUCTION IN PROGRESS                                        4,658,697           3,619,652
ESTIMATED FUTURE CONSTRUCTION COST UNDER CONTRACT               1,000,000           1,000,000
LAND USE RIGHTS
   (net of accumulated amortization of $558,620
   in 2002 and $310,345 in 2001)                                5,441,380           5,689,655
                                                            --------------      --------------

TOTAL ASSETS                                                $  27,843,423        $ 25,653,507
                                                            ==============      ==============
        LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
   Accounts payable for construction                          $  348,193         $ 2,557,616
   Notes payable                                                 782,733                   -
   Estimated payable for construction contracts
   not invoiced                                                1,000,000           1,000,000
   Accounts payable and accrued expenses                         711,572             273,695
   Payable to related company                                    156,265           1,715,663
   Amounts due to related parties                                291,193           1,571,745
                                                          --------------      --------------

TOTAL CURRENT LIABILITIES                                      3,289,956           7,118,719
                                                          --------------      --------------


SHAREHOLDERS' EQUITY
   Preferred shares - 5,000,000 authorized $.001 par -
      none issued                                                     -                   -
   Common shares - 95,000,000 and 50,000 shares
   authorized at $.001 and $1.00 par - 25,531,316 and
   1,000 shares issued and outstanding at December
   31, 2002 and 2001 respectively                                25,531               1,000
   Paid - in capital                                          5,825,735           6,644,071
   Retained earnings                                         18,702,201          11,889,717
                                                          --------------      --------------
TOTAL SHAREHOLDERS' EQUITY                                   24,553,467          18,534,788
                                                          --------------      --------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                 $ 27,843,423         $25,653,507
                                                          ==============      ==============
</TABLE>
                                      F-3
<PAGE>
                ETERNAL TECHNOLOGIES GROUP INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
                             (UNITED STATES DOLLARS)


                                                 2002             2001
                                             ------------     -------------

SALES                                        $ 12,640,964     $ 11,446,361

COST OF SALES                                   2,752,811        3,852,386
                                             -------------    --------------

GROSS PROFIT                                    9,888,153        7,593,975


DEPRECIATION AND AMORTIZATION                     862,052          845,716

SELLING AND ADMINISTRATIVE EXPENSES             1,213,617          937,971

RESEARCH AND DEVELOPMENT COST                   1,000,000                -
                                             -------------    --------------

NET INCOME BEFORE INCOME TAXES                  6,812,484        5,810,288

INCOME TAXES                                            -                -

                                             -------------   ---------------

NET INCOME                                    $ 6,812,484      $ 5,810,288
                                             =============   ===============

EARNINGS PER SHARE
  Basic and diluted
  Net income                                      $ 0.27            $ 0.23
                                             =============   ===============

Weighted average number of common
  shares outstanding
  Basic and diluted                           25,289,600       25,531,316
                                             =============   ===============


Note
 * Number of shares outstanding the date of the merger for comparison only.

                                      F-4

<PAGE>
                ETERNAL TECHNOLOGIES GROUP INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
                             (UNITED STATES DOLLARS)

<TABLE>

                                   Common           Common
                                   Stock            Stock          Paid - in        Retained
                                   Share            Amount         Capital         Earnings           Total
                               --------------    -------------   -------------   --------------    -------------
<S>                            <C>               <C>             <C>              <C>               <C>

Balance, December 31, 2000        13,887,815       $ 138,878      $1,159,967        $ (745,762)       $ 553,083

Issuance of common stock
during 2001:
  Debts settled and expenses
  paid at $.04                     7,000,000           70,000         193,082                -          263,082
Non-temporary loss on
securities                                 -                -               -         (630,500)        (630,500)
Net change in unrealized
gain (loss) on securities                  -                -               -          200,000          200,000
Net loss year ended
December 31, 2001                          -                -               -         (784,070)        (784,070)
                               --------------    -------------   -------------   --------------    -------------
*Balance, December 31, 2001       20,887,815          208,878       1,353,049     $ (1,960,332)      $ (398,405)

Reverse split 1:6 par $.001
  December 12, 2002              (17,406,499)        (205,397)        205,397                                 -
Capitalization for merger
  December 12, 2002               22,050,000           22,050       4,267,289       13,850,049       18,139,388
Net income year ended
  December 12, 2002                        -                -               -        6,812,484        6,812,484
                               --------------    -------------   -------------   --------------    -------------
Balance December 31, 2002         25,531,316         $ 25,531      $5,825,735      $18,702,201      $24,553,467
                               ==============    =============   =============   ==============    =============
</TABLE>


*    See note 1. Organization and Principal Activities Waterford Sterling
     Corporation prior to merger.

                                      F-5
<PAGE>
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
                             (UNITED STATES DOLLARS)

<TABLE>


                                                           2002              2001
                                                       -------------   ---------------
<S>                                                    <C>              <C>

CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                $6,812,484       $ 5,810,288
Adjustments to reconcile net income to
   net cash provided by operating activities:
     Depreciation and amortization                           862,052           845,716
(Increase) decrease in assets:
     Inventories                                              53,175           630,087
     Accounts receivable                                  (1,771,349)       (2,043,136)
     Receivable due from related company                    (518,212)                -
     Receivable due from related parties                     456,052           231,987
     Prepayments and deposits                                 18,126          (137,251)
Increase (decrease) in liabilities:
     Accounts payable for construction work               (2,209,423)          197,760
     Accounts payable and accrued expenses                   412,517           122,875
     Deposit for future delivery                                   -          (385,542)
     Amounts advanced by related parties                  (1,280,552)          967,765
     Account payable to related company                   (1,559,398)        1,715,663
     Estimated payable for construction                            -         1,000,000
                                                        -------------   ---------------

     Net cash provided by operating activities            1,275,472         8,956,212
                                                        -------------   ---------------

CASH FLOWS FROM INVESTING ACTIVITIES
     Purchase of fixed assets                               (854,320)         (247,260)
     Construction in progress                             (1,039,045)          (83,399)
     Estimated future construction costs                           -        (1,000,000)
                                                        -------------   ---------------

   Notes payable                                          (1,893,365)       (1,330,659)
                                                        -------------   ---------------

NET INCREASE IN CASH AND
     BANK BALANCES                                          (617,893)        7,625,553

     Cash and bank balances, beginning of period           7,753,452           127,899
                                                        -------------   ---------------

     Cash and bank balances, at end of period             $7,135,559       $ 7,753,452
                                                        =============   ===============

SUPPLEMENTARY CASH FLOWS DISCLOSURES

1. Interest paid                                                   -                 -
   Taxes paid                                                      -                 -
</TABLE>
2. During 2002 stock was issued pursuant to an exchange agreement. The following
   amounts represent the non-cash portion of the transaction:

        Accrued expenses                                        $  (25,360)
        Notes payable                                             (782,733)
                                                           ----------------
                                                                $ (808,093)
                                                           ================
                                       F-6
<PAGE>

                ETERNAL TECHNOLOGIES GROUP INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2002
--------------------------------------------------------------------------------

NOTES

1. ORGANIZATION AND PRINCIPAL ACTIVITIES


              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.
                                      F-7
<PAGE>

2. BASIS OF PRESENTATION

              The consolidated financial statements are prepared in
              accordance with generally accepted accounting principles in the
              United States of America. This basis of accounting differs from
              that used in the statutory financial statements of the
              subsidiaries which are prepared in accordance with the accounting
              principles generally accepted in the relevant country. There were
              no material adjustments.

              Certain amounts in 2001 have been reclassified to permit
              comparison to 2002 amounts.

3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES

              Basis of consolidation
              The consolidated financial statements of the Company include the
              Company and its wholly owned subsidiaries. All material
              Intercompany balances and transactions have been eliminated.

              Economic and political risks
              The Company faces a number of risks and challenges since its main
              operations are in the PRC.

              Cash and cash equivalents
              The Company considers cash and cash equivalents to include cash on
              hand and demand deposits with banks with an original maturity of
              three months or less.

              The Company maintains no accounts in the United States of America.
              All cash and cash equivalents, approximately $7,135,559, was
              restricted by the Company for operations in the PRC.
                                      F-8
<PAGE>

              Accounts receivable
              No allowance for doubtful accounts has been established, as
              management believes all amounts are collectible.

              Inventory
              Inventories are measured at lower of cost and net realizable value
              using the first-in first-out ("FIFO") or weighted average cost
              formulas.

              Fixed assets and depreciation
              Fixed assets are stated at cost less accumulated depreciation.
              Depreciation of fixed assets is calculated on the straight-line
              basis to write off the cost less estimated residual value of each
              asset over its estimated useful life. The principal annual rates
              used for this purpose are as follows:

                              Buildings                           2%-4%
                              Furniture and fixtures              20%
                              Office equipment                    20%
                              Motor vehicles                      20%

              In accordance with the Statement of Financial Accounting Standards
              ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived
              Assets and Long-Lived Assets to be Disposed Of ", the Company
              examines the possibility of decreases in the value of fixed assets
              when events or changes in circumstances reflect the fact that
              their recorded value may not be recoverable.

              Land lease rights and amortization
              Land lease rights in Mainland China were stated at cost less
              accumulated amortization. Amortization of land lease rights was
              calculated on the straight-line basis over the lesser of its
              estimated useful life or the lease term. The principal annual rate
              used for amortization is 2%.
                                      F-9
<PAGE>

              Income taxes
              Income taxes are determined under the liability method as required
              by Statement by Statement of Financial Accounting Standard No.109,
              "Accounting for Income Taxes". The Company's current operations
              are currently exempt from taxation.

              Foreign currency translation
              The Company maintains no accounts in currency of the United States
              of America.

              One of the subsidiaries maintains their books and accounts in
              Peoples Republic of China currency, which is called Renminbi
              ("RMB"). Translation of all assets and liabilities of amounts from
              RMB into US$ has been made at the single rate of exchange on
              December 31, 2002 and 2001 of US 1.00: RMB 8.30. No representation
              is made the RMB amounts could have been, or could be, converted
              into US$ at that rate on December 31, 2002 or 2001 or at any other
              date.

              On January 1, 1994, the PRC government introduced a single rate of
              exchange as quoted daily by the People's Bank of China (the
              "Unified Exchange Rate").

              The quotation of the exchange rates does not imply free
              convertibility of RMB to other foreign currencies. All foreign
              exchange transactions continue to take place either through the
              Bank of China or other banks authorized to buy and sell foreign
              currencies at the exchange rates quoted by the People's Bank of
              China. Approval of foreign currency payments by the Bank of China
              or other institutions requires submitting a payment application
              form together with invoices, shipping documents and signed
              contracts.
                                      F-10
<PAGE>

              Revenue recognition
              Revenue from the sale of livestock, embryos, forage grasses and
              raw materials is recognized when the merchandise is delivered to
              the customer and title passes.

              Research and development
              Research and development costs are charged to operations as
              incurred.

              Employees' benefits
              Mandatory contributions are made to the Government's health,
              retirement benefit and unemployment schemes at the statutory rates
              in force during the period, based on gross salary payments. The
              cost of these payments is charged to the statement of income in
              the same period as the related salary cost.

              Use of estimates
              The preparation of consolidated financial statements requires
              management to make estimates and assumptions that affect the
              amounts reported in the consolidated financial statements and
              accompanying notes. Actual results could differ from those
              estimates.

              Earnings per share
              The Company has adopted SFAS No. 128, "Earnings Per Share". Under
              SFAS 128, basic earnings per share is computed by dividing income
              available to common shareholders by the weighted-average number of
              common shares assumed to be outstanding during the period of
              computation. Diluted earnings per share is computed similar to
              basic earnings per share except that the denominator is increased
              to include the number of additional common shares that would have
              been outstanding if the potential common shares had been issued
              and if the additional common shares were dilutive.
                                      F-11

<PAGE>

              Per share amounts and shares have been adjusted for the 6 to 1
              reverse stock split on December 12, 2002.

              Recent pronouncements
              In July 2002, the Financial Accounting Standards Board ("FASB")
              issued SFAS No. 146, Accounting for Costs Associated with Exit or
              Disposal Activities. SFAS 146 addresses financial accounting and
              reporting for costs associated with exit or disposal activities
              and nullifies Emerging Issues Task Force ("EITF") Issue No. 94-3,
              Liability Recognition for Certain Employee Termination Benefits
              and Other Costs to Exit an Activity (including Certain costs
              Incurred in a Restructuring). SFAS 146 requires recognition of a
              liability for a cost associated with an exit or disposal activity
              when the liability is incurred, as opposed to when the entity
              commits to an exit plan under EITF No. 94-3. SFAS 146 is to be
              applied prospectively to exit or disposal activities initiated
              after December 31, 2002. The Company does not believe that the
              adoption of SFAS 146 will have a material effect on the Company's
              financial position, results of operations, or cash flows.

              In June 2001, the FASB issued SFAS No. 143 "Accounting for Asset
              Retirement Obligations". The statement addresses financial
              accounting and reporting for obligations associated with the
              retirement of tangible long-lived assets and the associated asset
              retirement costs. The statement is effective for the Company in
              fiscal 2003. The Company does not expect the adoption of SFAS 143
              to have a material impact on the Company's future results of
              operations or financial position.

              In August 2001, the FASB issued SFAS No. 144 "Accounting for the
              Impairment or Disposal of Long-Lived Assets". This statement
              supersedes SFAS No. 121, "Accounting for the Impairment of
              Long-Lived Assets and for Long-Lived Assets to be Disposed of",
              and the accounting and reporting provisions of APB Opinion 30,
              "Reporting the Results of Operations - Reporting the Effects of
              Disposal of a Segment of a Business, and Extraordinary, Unusual
              and infrequently Occurring Events and Transactions", for the
              disposal of a segment of a business. The statement is effective
              for the Company in fiscal 2003. The Company does not expect the
              adoption of SFAS 144 to have a material impact on the Company's
              future results of operations or financial position.
                                      F-12
<PAGE>

              In April, 2002, the FASB issued SFAS No. 145, Rescission of FASB
              Statements Nos. 4, 44, and 64, Amendment of FASB Statement No. 13,
              and Technical Corrections. SFAS 145 eliminates the requirement to
              classify gains and losses from extinguishments of indebtedness as
              extraordinary, requires certain lease modifications to be treated
              the same as a sale-leaseback transaction, and makes other
              non-substantive technical corrections to existing pronouncements.
              SFAS 145 is effective for fiscal years beginning after May 15,
              2002, with earlier adoption encouraged. The Company is required to
              adopt SFAS 145 effective January 2003. The Company does not
              believe that the adoption of SFAS 145 will have a material effect
              on the Company's financial position, results of operations, or
              cash flows.

             In December 2002, the FASB issued SFAS No. 148, "Accounting for
             Stock-Based Compensation - Transition and Disclosure". SFAS 148
             amends SFAS 123 "Accounting for Stock-Based Compensation," to
             provide alternative methods of transition for a voluntary change to
             the fair value based method of accounting for stock-based employee
             compensation. In addition, SFAS 148 amends the disclosure
             requirements of SFAS 123 to require prominent disclosures in both
             annual and interim financial statements about the method of
             accounting for stock-based employee compensation and the effect of
             the method used on reported results. SFAS 148 is effective for
             fiscal years beginning after December 15, 2002. The interim
             disclosure provisions are effective for financial reports
             containing financial statements for interim periods beginning after
             December 15, 2002. The Company does not expect the adoption of SFAS
             148 to have a material effect on our financial position, results of
             operations, or cash flows.
                                      F-13
<PAGE>


4. FIXED ASSETS
              Fixed assets are comprised of the following at December 31:

                                                     2002             2001
                                                    -----            -----
                  Infrastructure               $     226,506    $    81,928
                  Buildings                        3,428,537      2,519,277
                  Equipment                        1,265,961      1,225,200
                  Other                              626,506        826,024
                                                 ------------    ------------
                                                   5,547,510      4,652,429
                  Accumulated Depreciation        (1,320,907)      (680,656)
                                                 ------------    ------------
                                               $   4,226,603    $ 3,971,773
                                                 ============    ============

5. NOTES PAYABLE
      Balance at December 31, 2002:

      Promissory note to Market Management LLC, due December 11, 2005,
      interest payments are due semi-annually commencing 180 days after
      the date of the note (December 11, 2002) at 8% per annum.         $616,753

      Promissory note to Thomas I. Tedrow due December 11, 2005,
      interest payments are due semi- Annually commencing 180 days
      after the date of the
      note (December 11, 2002) at 8% per annum.                          165,980
                                                                         -------
                                                                        $782,733

             Each of the notes listed above are repayable from the first dollars
             received from any proceeds of any offering subsequent to the
             acquisition of Eternal Technologies Group Ltd. or at the option of
             the Lender, convertible into post reverse split common shares at a
             rate equal to the mean of the high and low share price as of the
             first date that the shares begin trading subsequent to the
             acquisition.
                                      F-14
<PAGE>

              The Company is performing additional detailed review of all
             expenditures prior to the merger. The balances of the notes are
             subject to change pending the outcome of the review of these
             expenditures.

6. INCOME TAXES

              The companies operate in several jurisdictions and may be subject
              to taxation in those jurisdictions.

              It is management's intention to reinvest all the income
              attributable to the Company earned by its operations outside of
              the United States of America. Accordingly, no United States
              corporate taxes have been provided in these financial statements.

              Under current law of the British Virgin Islands, any dividends and
              capital gains arising form the Company's investments are not
              subject to income tax in the British Virgin Islands.

              Companies with operations in the Peoples Republic of China may be
              subject to taxes for income therein. The Income Tax Law of the
              Peoples Republic of China for Enterprises with Foreign Investment
              and Foreign Enterprises provide certain exemptions from taxation.
              Aershan should be exempt from taxation. Accordingly, no PRC
              corporate taxes have been provided in these financial statements.

7. CONCENTRATION OF CREDIT RISKS

              Financial instruments which potentially subject the Group to a
              concentration of credit risk principally consist of cash deposits,
              trade receivables, long-term receivable and the amounts due from
              and to directors and related companies.

                  (i) Cash deposits
                  The Group places it cash deposits with an international bank.

                  (ii) Amounts due from related companies The Company does not
                  have a policy of requiring collateral.
                                      F-15
<PAGE>

                  (iii) Amounts due from and to directors (See "Additional
                  related party balances and transactions")

8. FAIR VALUE OF FINANCIAL INSTRUMENTS

              The fair values of financial instruments are set out as follows
              (i) Cash deposits The cash deposits are stated at cost, which
              approximates market value.
              (ii) Trade receivables, other receivables and amounts due from
              directors and related companies Trade receivables, other
              receivables and the amounts due from related companies and
              directors are stated at their book value less provision for
              doubtful debts, which approximates the fair value.
              (iii) Accounts payable and amounts due to related companies and
              directors are stated at their book value which approximates their
              fair value.


9. CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS

              The Company's operations are conducted in the PRC. Accordingly,
              the Company's business, financial condition and results of
              operations may be influenced by the political, economic and legal
              environments in the PRC, and by the general state of the PRC
              economy.

              The Company's operations in the PRC are subject to special
              considerations and significant risks not typically associated with
              companies in North America and Western Europe. These include risks
              associated with, among others, the political, economic and legal
              environments and foreign currency exchange. The Company's results
              may be adversely affected by changes in the political and social
              conditions in the PRC, and by changes in governmental policies
              with respect to laws and regulations, anti-inflationary measures,
              currency conversion and remittance abroad, and rates and methods
              of taxation, among other things.
                                      F-16
<PAGE>

10. ADDITIONAL RELATED PARTY BALANCES AND TRANSACTIONS

              The Company's amounts due from/(to) directors, related parties,
              and related company are unsecured, interest-free and are repayable
              on demand. China Continental, Inc. ("CCI") is a related company.
              One of the Company's officers, directors and major shareholder
              (Shang Jia Ji) owns more than 10% of CCI and Towering
              International Trade (US) Corp.

              CCI acquired 2,000 goat embryos and services from Eternal for
              US$425,000 in December, 2000. CCI's 2,000 goats with implanted
              embryos were sold in March, 2001 for approximately US$1,687,000.

              CCI had sales of forage grass to Eternal for approximately
              US$1,735,000 during 2001. These purchases were at the same price
              as to third parties. The forage grass was sold to a third party
              for $1,855,000.

              Eternal sold 3,000 goat embryos and services to a subsidiary of
              CCI for approximately US$600,000 during 2002.

              Eternal acquired 100% interest in Aershan in a transaction valued
              at $6,000,000 from Shang Jia Ji. The $6,000,000 represents Shang
              Jia Ji's cost.

              Eternal entered into various construction contracts with companies
              controlled by Shang Jai Ji. The contracts totaled approximately
              $985,530. This amount was paid in full by December 31, 2002.

              The Company entered into a contract with Towering International
              Trade (US) Corp during 2001 for a research and development project
              totaling $1,400,000. No payments were made in 2001. During 2002,
              $400,000 was paid on this contract.

              The Company entered into an ivestor relations agreement with
              Stoneside Development Limited ("Stoneside"). Stoneside is
              controlled by Thomas L. Tedrow.  The agreement is for $10,000 per
              month for twenty-four months commencing June 2002.  Thomas L.
              Tedrow also received a $90,000 fee from the Company.

                                      F-17
<PAGE>

11. MAJOR CUSTOMERS

              The Company purchases and sells livestock whose purchases and
sales exceed 10% of total purchases and sales.

                  Purchases:                          2002              2001
                                                      ----              ----
                                    Company A           -               16%
                                    Company B         40%               31%
                                    Company C           -               43%
                                    Company D         40%                 -
                  Sales:
                                    Company E         49%               84%
                                    Company F           -               16%
                                    Company G         44%                 -
12. CONTINGENCIES AND COMMITMENTS

              The Company is committed to various entities for certain research
              and development projects. These commitments totaled $1,600,000 and
              $2,600,000 at December 31, 2002 and 2001.


                                      F-18