ETERNITY HEALTHCARE INC. - FORM 10-Q

Attached files

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EX-32.1 - CERTIFICATION - ETERNITY HEALTHCARE INC.	f10q0114ex32i_eternity.htm
EX-31.1 - CERTIFICATION - ETERNITY HEALTHCARE INC.	f10q0114ex31i_eternity.htm
EXCEL - IDEA: XBRL DOCUMENT - ETERNITY HEALTHCARE INC.	Financial_Report.xls

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January 31, 2014
	or

o	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 000-53376

ETERNITY HEALTHCARE INC.

(Exact name of registrant as specified in its charter)

Nevada		75-3268426
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

8755 Ash Street, Suite 1, Vancouver, British Columbia, Canada		V6P 6T3
(Address of principal executive offices)		(Zip Code)

(855) 324-1110

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

(Do not check if a smaller reporting company)

Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

YES

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.

YES

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

66,299,868 common shares issued and outstanding as of February 27, 2014.

TABLE OF CONTENTS

	PART I – FINANCIAL INFORMATION	3

Item 1.	Financial Statements	3

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	10

Item 4.	Controls and Procedures	11

	PART II – OTHER INFORMATION	11

Item 1.	Legal Proceedings	11

Item 1A.	Risk Factors	11

Item 2.	Unregistered Sales of Equity Securities	11

Item 3.	Defaults Upon Senior Securities	11

Item 4.	Mining Safety Disclosures	11

Item 5.	Other Information	12

Item 6.	Exhibits	12

SIGNATURES		13

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

The following unaudited interim condensed consolidated financial statements of Eternity Healthcare Inc. for the three and nine month periods ended January 31, 2014 are included with this Quarterly Report on Form 10-Q.

Eternity Healthcare Inc.

(A Development Stage Company)

CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

For the nine months ended January 31, 2014

(Expressed in U.S. Dollars)

(Unaudited)

Eternity Healthcare Inc.

(A Development Stage Company)

CONDENSED CONSOLIDATED BALANCE SHEET

(Expressed in U.S. Dollars)

	As at January 31, 2014 (unaudited)			As at April 30, 2013

ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	439,512		$	156,554
Accounts receivable		5,754			297
Inventory (Note 5)		33,646			12,822
Note receivable		60,000			—
Prepaid expenses		—			16,038
GST/HST receivable		1,099			3,729
		540,011			189,440

PROPERTY AND EQUIPMENT, net (Note 6)		—			165

TOTAL ASSETS	$	540,011		$	189,605

LIABILITIES

CURRENT LIABILITIES
Accounts payable and accrued liabilities	$	120		$	4,532
Due to related parties (Note 7)		5,889			762,679
Total Liabilities		6,009			767,211

STOCKHOLDERS’ EQUITY (DEFICIT)

CAPITAL STOCK (Note 8)

Authorized
300,000,000 common shares, par value $0.001
Issued and outstanding
January 31, 2014 – 66,299,860 common shares		66,300
April 30, 2013 – 63,575,000 common shares		—			63,575
Additional paid-in capital		1,490,389			(73,816	)
Accumulated other comprehensive gain		59,801			310
Deficit, accumulated during the development stage		(1,082,488	)		(567,675	)
Total Stockholders’ Equity (Deficit)		534,002			(577,606	)

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	540,011		$	189,605

The accompanying notes are an integral part of these interim consolidated financial statements.

F-1

Eternity Healthcare Inc.

(A Development Stage Company)

CONDENSED CONSOLIDATED STATEMENT OF LOSS AND COMPREHENSIVE LOSS

(Expressed in U.S. Dollars)

(Unaudited)

	For the three month period ended January 31, 2014			For the three month period ended January 31, 2013			For the nine month period ended January 31, 2014			For the nine month period ended January 31, 2013			From inception on December 10, 2009 through January 31, 2014
SALES
Product Sales	$	—		$	3,039		$	26,201		$	3,039		$	42,376
Cost of goods sold		1,051			1,096			12,456			1,096			18,089
		(1,051	)		1,943			13,745			1,943			24,287

EXPENSES
Depreciation		44			61			165			183			727
General and administrative		90,837			20,438			196,668			64,925			327,949
Professional fees		3,881			27,579			70,718			70,587			363,929
Research and development		—			—			—			—			109,360
Salaries		27,769			11,072			88,520			11,072			132,323
		122,531			59,150			356,071			146,767			934,288

OTHER EXPENSES
Loss on settlement of debt		—			—			172,487			—		$	172,487
		—			—			172,487			—			172,487
NET LOSS FOR THE PERIOD	$	(123,582	)	$	(57,207	)		(514,813	)	$	(144,824	)	$	(1,082,488	)

COMPREHENSIVE LOSS
Net (loss) for the period	$	(123,582	)	$	(57,207	)		(514,813	)	$	(144,824	)	$	(1,082,488	)
Foreign currency translation adjustments		41,843			(797	)		59,491			6,611			59,801

COMPREHENSIVE LOSS FOR THE PERIOD	$	(81,739	)	$	(58,004	)		(455,322	)	$	(138,213	)	$	(1,022,687	)

NET LOSS PER SHARE – BASIC AND DILUTED	$	(0.001	)	$	(0.001	)		(0.007	)	$	(0.002	)

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING		66,299,868			63,575,000			65,144,761			63,575,000

The accompanying notes are an integral part of these interim consolidated financial statements.

F-2

Eternity Healthcare Inc.

(A Development Stage Company)

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Expressed in U.S. Dollars)

(Unaudited)

	For the nine month period ended January 31, 2014			For the nine month period ended January 31, 2013			From inception on December 10, 2009 to January 31, 2014

OPERATING ACTIVITIES

Net loss for the period	$	(514,813	)	$	(144,824	)	$	(1,082,488	)
Adjustments to reconcile net cash provided by operating activities:
Depreciation		165			183			727
Expenses paid on behalf of the Company by related parties		—			—			7,308
Stock options issued for services		32,009			1,551			44,266
Loss on settlement of debt		172,487						172,487
Changes in operating assets and liabilities:
Inventory		(19,351	)		(17,028	)		(32,173	)
Prepaid expenses		14,507						(1,531	)
Accounts receivable		(5,486	)		—			(5,783	)
Note receivable		(60,000	)		—			(60,000	)
Accounts payable and accrued liability		(3,977	)		(3,666	)		2,169
GST/HST receivable		2,274			6,873			(1,754	)

Net cash used in operating activities		(382,185	)		(156,911	)		(956,772	)

INVESTING ACTIVITIES
Purchase of equipment		—			—			(727	)

FINANCING ACTIVITIES
Common shares issued for cash (Note 8)		500,000			—			500,380
Proceeds from related party payables		95,900			197,682			879,759
Repayments on related party payables		—			—			(31,673	)

Net cash provided by financing activities		595,900			197,682			1,348,466

EFFECT OF EXCHANGE RATE CHANGES ON CASH		69,243			(2,648	)		48,545

INCREASE IN CASH		282,958			38,123			439,512

CASH, beginning of period		156,554			226,372			—

CASH, end of period	$	439,512			264,495		$	439,512

NON CASH INVESTING AND FINANCING ACTIVITIES
Net assets acquired in share agreement		—			—			22,879
Common stock issued for debt		—			—			862,434

The accompanying notes are an integral part of these interim consolidated financial statements.

F-3

Eternity Healthcare Inc.

(A Development Stage Company)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2014

(Expressed in U.S. Dollars)

(Unaudited)

1. NATURE AND CONTINUANCE OF OPERATIONS

Eternity Healthcare Inc. (the “Company”) was incorporated under the laws of the State of Nevada on October 24, 2007 under the name Kid’s Book Writer, Inc. On September 23, 2010, the Company changed its name to Eternity Healthcare Inc., and affected a reverse stock split of the issued and outstanding common stock at a factor of 10 old shares for 1 new share. The Company is focused on offering an extensive range of diagnostic kits, general lifestyle supplements and many other management products and resources.

On December 13, 2010, pursuant to the terms of a share exchange agreement, the Company acquired 100% of the issued and outstanding common stock of Eternity Healthcare Inc., a company incorporated under the laws of the Province of British Columbia on December 10, 2009 (“Eternity BC”), for 60,000,000 shares of its own common stock, which were distributed to the shareholders of Eternity BC (the “Share Exchange Agreement”) (Note 7).

The Share Exchange Agreement, which represents a majority of the then issued and outstanding shares of the Company, constituted a change in control of the Company. The acquisition of Eternity BC was accounted for as a reverse acquisition in accordance with Accounting Standards Codification (“ASC”) 805-40, “Business Combinations”. The Company determined for accounting and reporting purposes that Eternity BC is the acquirer because of the significant holdings and influence of the control group of the Company before and after the acquisition. As a result of the transaction, Eternity BC shareholders own approximately 94.4% of issued and outstanding common stock of the Company on a diluted basis.

Accordingly, the assets and liabilities of Eternity BC are reported as historical costs and the historical results of operations of Eternity BC are reflected in this and future filings as a change in reporting entity. The assets and liabilities of the Company are reported at their carrying values, which approximate fair value, on the date of the acquisition and results of operations are reported from the date of acquisition of December 13, 2010. The transaction was accounted for as a recapitalization of Eternity BC and the issuance of stock by Eternity BC for the assets and liabilities of the Company.

The Company is a development stage enterprise, as defined in ASC 915-10 “Development Stage Entities”. The Company is devoting all of its present efforts in securing and establishing a new business, and its planned principle operations have not commenced, and, accordingly, a small amount of revenue has been derived during the organization period.

On June 25, 2012, the Company entered into a marketing agreement with Mika Medical Company of Korea, to be the sole marketer of a new line of needle-free injection product for North America. Furthermore, the marketing agreement was extended to some European countries (Germany, France and Spain) in December 2012. Additionally, the Company obtained the rights to market the products throughout the world with an Amendment dated December 20, 2012.

Since signing the Distribution Agreement with Mika Medicals, the Company has emerged in organizational and start-up activities, including developing a new business plan, making arrangements for office space and raising additional capital. The Company has generated a small amount of revenue from product sales.

F-4

Eternity Healthcare Inc.

(A Development Stage Company)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2014

(Expressed in U.S. Dollars)

(Unaudited)

1. NATURE AND CONTINUANCE OF OPERATIONS - continued

On October 25, 2013 the Company entered into a Binding Letter of Intent for Acquisition through Share Exchange with Global Medical Equipment of America (GMEA) to issue 40,000,000 shares to the shareholders of GMEA in exchange for all of the shares of GMEA. As a confirmation of intent to merge, the Company advanced funds in the amount of $60,000 to GMEA. The Company was unable to reach a final agreement with GMEA and on January 31, 2014 the Company provided notice demanding repayment of the note receivable.

The Company’s consolidated financial statements as at January 31, 2014 have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities and commitments in the normal course of business. The Company has net loss of $ 514,813 for the nine months ended January 31, 2014 (January 31, 2013 - $ 144,824) and has a working capital surplus of $ 534,002 as at January 31, 2014 (January 31, 2013 - $ 484,531 deficit).

2. CONDENSED FINANCIAL STATEMENTS

The accompanying financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, result of operations, and cash flows at January 31, 2014, and for all periods presented herein, have been made.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s April 30, 2013 audited financial statements. The results of operations for the period ended January 31, 2014 are not necessarily indicative of the operating results for the full year.

3. GOING CONCERN

The Company’s financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.

F-5

Eternity Healthcare Inc.

(A Development Stage Company)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2014

(Expressed in U.S. Dollars)

(Unaudited)

4. SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies used in the preparation of these consolidated financial statements.

Basis of presentation

These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and are expressed in U.S. dollars.

Principles of consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Eternity BC. All significant intercompany balances and transactions have been eliminated in consolidation.

Cash and cash equivalents

Cash and cash equivalents include highly liquid investments with original maturities of three months or less.

Inventory

Inventory is stated at the lower of cost or market with cost determined under the weighted average cost method

Foreign currency translation

The Company’s functional currency is the Canadian dollar and reporting currency is the U.S. dollar. All transactions initiated in other currencies are translated into the reporting currency in accordance with ASC 830, “Foreign Currency Matters” as follows:

Assets and liabilities at the rate of exchange in effect at the balance sheet date; and

ii)

Revenue and expense items at rate of exchange at the dates on which those elements are recognized.

Gains and losses on translation are included in other comprehensive income (loss) in stockholders’ deficiency for the period.

Basic and diluted net income (loss) per share

The Company computes net income (loss) per share in accordance with ASC 260, “Earnings per Share”. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common stockholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.

F-6

Eternity Healthcare Inc.

(A Development Stage Company)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

October 31, 2013

(Expressed in U.S. Dollars)

(Unaudited)

4. SIGNIFICANT ACCOUNTING POLICIES – continued

Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures during the reporting period. Actual results could differ from these estimates

Recent accounting pronouncements

The Company has evaluated recent accounting pronouncements and their adoption has not had or is not expected to have material impact on the Company’s financial position or statements.

5. INVENTORY

Inventory consists of needle free injection products that are held for resale. Inventory is stated at the lower of cost or market with cost determined under the weighted average cost method. As of January 31, 2014 and April 30, 2013 inventory consisted of the following:

	January 31,		April 30,
	2014		2013

Raw materials	$	—	$	—
Work in progress		—		—
Finished goods		33,646		12,822
Reserve for obsolescence		—		—

	$	33,646	$	12,822

6. EQUIPMENT

			Accumulated		January 31,		April 30
	Cost		depreciation		2014		2013

Computer equipment	$	728	$	728	$	—	$	165

7. DUE TO RELATED PARTIES AND RELATED PARTY TRANSACTIONS

During the period ended January 31, 2014, the Company received $95,900 additional cash loans from related parties of the Company. On August 26, 2013 the Company exchanged $ 862,434 in related party notes payable held by Eternity BC for 1,724,868 common shares of the Company. Total related party notes payable as of January 31, 2014 were $ 5,899. This balance is non-interest bearing, unsecured and has no fixed terms of repayment.

See also Note 8

F-7

Eternity Healthcare Inc.

(A Development Stage Company)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

October 31, 2013

(Expressed in U.S. Dollars)

(Unaudited)

8. CAPITAL STOCK

Authorized

The total authorized capital is 300,000,000 common shares with a par value of $ 0.001 per common share.

Issued and outstanding

Effective on November 1, 2010, the Board of Directors approved a 1:10 reverse stock split and decreased the issued and outstanding share capital from 35,750,000 to 3,575,000 with the same par value of $ 0.001 per share. Unless otherwise noted, all references herein to the number of common shares, price per common share or weighted average number of common shares outstanding have been adjusted to reflect this reverse stock split on a retroactive basis.

On December 13, 2010, the Company issued 60,000,000 common shares of the Company with a value of $ 60,000 related to the Share Exchange Agreement (Note 1).

On August 26, 2013 the Company completed an agreement with existing shareholders to exchange outstanding loans to related parties for common shares at a rate of 1 common share per $0.50 of debt. The total number of shares issued under this agreement was 1,724,868 to settle amounts due to related parties of $862,434, causing a loss on settlement of debt of $172,487. Additionally, the Company completed a non-brokered private placement for 1,000,000 common shares at a price of $500,000.

9. STOCK OPTIONS

During the fiscal year ended April 30, 2013, the Company granted 200,000 stock options for services. The fair value of the stock options granted were estimated on the date granted using the Black-Scholes pricing model, with the following assumptions used for the valuation: exercise price of $0.80 per share, average risk-free interest rate of 0.79%, expected dividend yield of zero, expected lives of five years and an average expected volatility of 2.99%. During the months ended January 31, 2014 and 2013 the Company recognized expense of $10,636 and $ 1,551 related to options that vested, respectively.

During the period ended January 31, 2014, the Company issued no new stock options.

10. SUBSEQUENT EVENTS

In accordance with ASC 855, the Company’s management has evaluated the subsequent events through the date the financial statements were issued and has found no subsequent events to report.

F-8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This quarterly report on Form 10-Q and other reports filed by our company from time to time with the United States Securities and Exchange Commission (the “SEC”) contain or may contain forward-looking statements (collectively the “Filings”) and information that are based upon beliefs of, and information currently available to, our company’s management as well as estimates and assumptions made our company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the filings, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions as they relate to our company or our company’s management identify forward-looking statements. Such statements reflect the current view of our company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors, including the risks contained in the “Risk Factors” section of our company’s Annual Report on Form 10-K for the fiscal year ended April 30, 2013, filed with the SEC, relating to our company’s industry, our company’s operations and plan of operations, and any businesses that our company may acquire. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, our company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, our company does not intend to update any of the forward-looking statements to conform these statements to actual results.

Our interim condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the interim condensed consolidated financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our interim condensed consolidated financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. The following discussion should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this report.

In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars unless otherwise state. All references to “common stock” refer to the common shares in our capital stock.

As used in this quarterly report, the terms, “we”, “us”, “our” and “our company” refer to Eternity Healthcare Inc. and our wholly owned subsidiary Eternity Healthcare Inc., a British Columbia corporation, unless the context clearly requires or states otherwise.

General Overview

We were incorporated in the State of Nevada on October 24, 2007 as an online services company under the name Kid’s Book Writer, Inc. On September 23, 2010, we changed our name to Eternity Healthcare Inc., and we effected a reverse split of our issued and outstanding common stock on a 10 old shares for 1 new share basis. Our business offices are located at 8755 Ash Street, Suite 1, Vancouver, British Columbia, Canada V6P 6T3. Our telephone number is (855) 324-1110.

From inception to December 13, 2010, we planned to develop a website for children to create their own books. We intended to offer a pure online service designed to offer children and parents an ability to create their own book. Customers were to be able to log on to the service, pick a theme (i.e. birthday, family outing, vacation, special occasion such as Christmas / Easter, sporting event, summer camp, etc.), and the software would offer several options, including various book templates, backgrounds, page sizes, the ability to write your own story or have some guidance, etc. We were unable to find sufficient financing for this business model.

On December 10, 2010, we entered into and completed a share exchange agreement with Eternity Healthcare Inc., a British Columbia corporation, wherein we acquired Eternity BC as our wholly owned subsidiary and abandoned our former business to focus on the operations of Eternity BC.

Our Current Business

We are a medical device company that, subject to government approval, plans to manufacture and market medical devices. Our first product to be marketed is a needle-free injection system throughout the world. The products which we hope to distribute differ from other current offerings by allowing ordinary people to perform injection of medication without the need for professionals.

On June 25, 2012, we entered into a marketing agreement to sell a device which does not require a needle for injection of medicine to the body from Mika Medical Company and its affiliate MK Global both of South Korea. We have the exclusive marketing rights for this device throughout North America, Germany, France and Spain and non-exclusive rights for the world market. Currently we are the sole marketer of the product.

The product has received regulatory approval for Europe, Canada and many other countries and US regulatory approval is underway. We plan to enter distribution agreements with several companies worldwide and enter into distribution agreements with various retailers. We plan to expand our website to include the option to purchase our products online. We anticipate producing promotional materials and advertising in medical journals as well as consumer magazines. In order to carry out these plans, we anticipate hiring a marketing manager, a quality control manager and three people for packaging and shipping. We will require approximately $500,000 in order to achieve these objectives and there can be no assurance that we will be able to raise the required funds.

On August 26, 2013 our company completed an agreement with existing shareholders to exchange outstanding loans to related parties for common shares at a rate of 1 common share per $0.60 of debt. The total number of shares issued under this agreement was 1,724,868 to settle amounts due to related parties of $862,434, causing a loss on settlement of debt of $172,487. Additionally, our company completed a non-brokered private placement for 1,000,000 common shares at a price of $500,000.

On October 30, 2013, we announced that our company had reached an agreement with Phoenix-based Global Medical Equipment of America (GMEA) pursuant to which our company will acquire 100% of our GMEA through a share exchange agreement. As a confirmation of intent to merge, our company advanced funds in the amount of $60,000 to GMEA. Our company was unable to reach a final agreement with GMEA and on January 31, 2014 we provided notice demanding repayment of the note receivable.

Results of Operations for the Three and Nine Months Ended January 31, 2014 and 2013

The following summary of our results of operations should be read in conjunction with our unaudited interim consolidated financial statements for the quarter ended January 31, 2014 which are included herein.

Our operating results for the three and nine month periods ended January 31, 2014 and 2013 and the changes between those periods for the respective items are summarized as follows:

	Three Month Period Ended January 31, 2014			Three Month Period Ended January 31, 2013			Change Between Three Month Periods Ended January 31, 2013 and January 31, 2014
Sales	$	Nil		$	3,039		$	(3,039	)

Cost of goods sold	$	1,051		$	1,096		$	(45	)
Operating expenses	$	122,531		$	59,150		$	63,381
Total other expenses	$	Nil		$	Nil		$	$Nil
Net loss	$	(123,582	)	$	(57,207	)	$	66,375

Our expenses increased during the three month period ended January 31, 2014 compared to the same period in 2013 primarily as a result of increases in general and administrative expenses and salaries.

	Nine Month Period Ended January 31, 2014			Nine Month Period Ended January 31, 2013			Change Between Nine Month Periods Ended January 31, 2013 and January 31, 2014
Sales	$	26,201		$	3,039		$	23,162

Cost of goods sold	$	12,456		$	1,096		$	11,360
Operating expenses	$	356,071		$	146,767		$	208,304
Total other expenses	$	172,487		$Nil			$	172,487
Net loss	$	(514,813	)	$	(144,824	)	$	(369,989	)

Our expenses increased during the nine month period ended January 31, 2014 compared to the same period in 2013 primarily as a result of increases in cost of goods sold, general and administrative expenses, professional fees and salaries.

Revenues

We have earned net revenues of $24,287 from December 10, 2009 (date of inception) through January 31, 2014. We have incurred $934,288 in operating expenses from December 10, 2009 (date of inception) through January 31, 2014.

Expenses

Our expenses for the three and nine months ended January 31, 2014 and 2013 and for the period from December 10, 2009 (inception) through January 31, 2014 are outlined in the table below:

	Three Month Period Ended January 31, 2014		Three Month Period Ended January 31, 2013		Nine Month Period Ended January 31, 2014		Nine Month Period Ended January 31, 2013		For the Period from December 10, 2009 (Inception) through January 31, 2014 ($)
Depreciation	$	44	$	61	$	165	$	183	$	727
General and administrative	$	90,837	$	20,438	$	196,668	$	64,925	$	327,949
Professional fees	$	3,881	$	27,579	$	70,718	$	70,587	$	363,929
Research and development	$	Nil	$	Nil	$	Nil	$	Nil	$	109,360
Salaries	$	27,769	$	11,072	$	88,520	$	11,072	$	132,323

Professional Fees

Professional fees include accounting and auditing expenses incurred in connection with the preparation and audit of our financial statements and professional fees that we pay to our legal counsel. Our accounting and auditing expenses were incurred in connection with the preparation of our audited financial statements and unaudited interim consolidated financial statements. Our legal expenses represent amounts paid to legal counsel in connection with our corporate organization.

Liquidity and Financial Condition

Working Capital

	At January 31, 2014 ($)		At April 31, 2013 ($)
Current Assets	$	540,011	$	189,440
Current Liabilities	$	6,009	$	767,211
Working Capital (Deficit)	$	533,992	$	(577,771	)

Cash Flows

	Nine Month Period Ended January 31, 2014 ($)			Nine Month Period Ended January 31, 2013 ($)			For the Period from December 10, 2009 (Inception) through Janaury 31, 2014 ($)
Cash Flows used in Operating Activities		(382,185	)		(156,911	)		(956,772	)
Cash Flows used in Investing Activities	Nil			Nil				(727	)
Cash Flows provided by Financing Activities		595,900			197,682			1,348,466
Effect of Exchange Rate Changes on Cash		69,243			(2,648	)		48,545
Net Increase (Decrease) in Cash During Period		282,958			38,123			439,512

As of January 31, 2014, our total assets were $540,011 and our total liabilities were $6,009 and we had a working capital of $533,992. Our unaudited financial statements report a net loss of $514,813for the nine months ended January 31, 2014 compared to a net loss of $144,824 for the same period in 2013 and a net loss of $1,082,488 for the period from December 10, 2009 (inception) to January 31, 2014.

Plan of Operation

The following discussion of our financial condition and results of operations should be read together with our unaudited financial statements and the notes thereto included elsewhere in this filing. Our unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States. This discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those anticipated in these forward-looking statements.

Anticipated Cash Requirements

We estimate that our expenses over the next 12 months (beginning February 2014) will be approximately $500,000 as described in the table below. These estimates may change significantly depending on the performance of our products in the marketplace and our ability to raise capital from shareholders or other sources.

Description	Estimated Completion Date	Estimated Expenses ($)
Legal and accounting fees	12 months		50,000
Marketing and advertising	12 months		200,000
Employees	12 months		150,000
Consulting fees	12 months		50,000
Travel and administrative expenses	12 months		50,000
Total			500,000

We intend to meet our cash requirements for the next 12 months through product sales and a combination of debt financing and equity financing by way of private placements. We currently do not have any arrangements in place to complete any private placement financings and there is no assurance that we will be successful in completing any private placement financings on terms that will be acceptable to us. We may not raise sufficient funds to fully carry out our business plan.

Going Concern

The interim condensed consolidated financial statements accompanying this report have been prepared on a going concern basis, which implies that our company will continue to realize its assets and discharge its liabilities and commitments in the normal course of business. Our company has not generated revenues since inception and has never paid any dividends and is unlikely to pay dividends or generate earnings in the immediate or foreseeable future. The continuation of our company as a going concern is dependent upon the continued financial support from our shareholders, the ability of our company to obtain necessary equity financing to achieve our operating objectives, and the attainment of profitable operations. As of January 31, 2014, our company has accumulated losses of $1,082,488 since inception. We do not have sufficient working capital to enable us to carry out our stated plan of operation for the next twelve months. These interim condensed consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should our company be unable to continue as a going concern.

Our interim condensed consolidated financial statements contain additional note disclosures describing the circumstances related to the uncertainty of our ability to continue as a going concern.

The continuation of our business is dependent upon us raising additional financial support. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.

Future Financings

We anticipate continuing to rely on equity sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to our existing stockholders. There is no assurance that we will achieve any additional sales of our equity securities rearrange for debt or other financing to fund our planned activities.

Off-Balance Sheet Arrangements

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.

Critical Accounting Policies

The interim condensed consolidated financial statements of our company have been prepared in accordance with generally accepted accounting principles in the United States. Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements for a period necessarily involves the use of estimates which have been made using careful judgment.

The following is a summary of significant accounting policies used in the preparation of these condensed consolidated financial statements.

Basis of Presentation

These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and are expressed in U.S. dollars.

Principles of Consolidation

The consolidated financial statements include the accounts of our company and our wholly-owned subsidiary, Eternity BC. All significant intercompany balances and transactions have been eliminated in consolidation.

Cash and Cash Equivalents

Cash and cash equivalents include highly liquid investments with original maturities of three months or less.

Inventory

Inventory is stated at the lower of cost or market with cost determined under the weighted average cost method

Foreign Currency Translation

Our company’s functional currency is the Canadian dollar and reporting currency is the U.S. dollar. All transactions initiated in other currencies are translated into the reporting currency in accordance with ASC 830, “Foreign Currency Matters” as follows:

	iii)	Assets and liabilities at the rate of exchange in effect at the balance sheet date; and
	iv)	Revenue and expense items at rate of exchange at the dates on which those elements are recognized.

Gains and losses on translation are included in other comprehensive income (loss) in stockholders’ deficiency for the period.

Basic and Diluted Net Income (Loss) Per Share

Our company computes net income (loss) per share in accordance with ASC 260, “Earnings per Share”. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common stockholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.

Use of Estimates

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As a “small reporting company”, we are not required to provide the information required by this Item.

Item 4. Controls and Procedures

Management’s Report on Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer (our principal executive officer, principal financial officer and principle accounting officer) to allow for timely decisions regarding required disclosure.

As of the end of our quarter covered by this report, we carried out an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer (our principal executive officer, principal financial officer and principle accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our chief executive officer and chief financial officer (our principal executive officer, principal financial officer and principle accounting officer) concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this quarterly report due to the material weaknesses in our internal controls over financial reporting identified in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on August 8, 2013.

Changes in Internal Control over Financial Reporting

During the period covered by this report there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

Item 1A. Risk Factors

As a “small reporting company”, we are not required to provide the information required by this Item.

Item 2. Unregistered Sales of Equity Securities

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mining Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

Exhibit Number		Document Description
(2)		Plan of acquisition, reorganization, arrangement, liquidation or succession
2.1		Share Exchange Agreement with Eternity Healthcare Inc., dated December 13, 2010 (incorporated by reference to our Current Report on Form 8-K filed on December 17, 2010)
(3)		(i) Articles of Incorporation; (ii) By-laws
3.1		Articles of Incorporation (incorporated by reference to our C Registration Statement on Form S-1 filed on June 25, 2008)
3.2		By-laws (incorporated by reference to our Registration Statement on Form S-1 filed on June 25, 2008)
3.3		Certificate of Amendment filed with the Nevada Secretary of State on November 1, 2010 (incorporated by reference to our Current Report on Form 8-K filed on November 16, 2010)
(10)		Material Contracts
10.1		Revised Distribution Agreement dated June 25, 2012 between our company, our subsidiary, MK Global Co. and MIKA Medical Co. (incorporated by reference to our Annual Report on Form 10-K filed on July 19, 2012)
10.2		2013 Stock Option Plan (incorporated by reference to our Annual Report on Form 10-K filed on August 8, 2013)
10.3		Rental Agreement dated June 22, 2013 between our company and Kinexus Bioinformatic (incorporated by reference to our Annual Report on Form 10-K filed on August 8, 2013)
(14)		Code of Ethics
14.1		Code of Business Conduct and Ethics (incorporated by reference to our Annual Report on Form 10-K filed on August 8, 2013)
(31)		Rule 13a-14(a)/15d-14(a) Certifications
31.1*		Section 302 Certifications under Sarbanes-Oxley Act of 2002
(32)		Section 1350 Certifications
32.1*		Section 906 Certifications under Sarbanes-Oxley Act of 2002
101**		Interactive Data Files
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

*	Filed herewith.

**	Furnished herewith. Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of any registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, and otherwise are not subject to liability under those sections.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	ETERNITY HEALTHCARE INC.

Date: March 4, 2014	/s/ Hassan Salari
	Hassan Salari
	President, Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer and Director
	(Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)

ETERNITY HEALTHCARE INC. - FORM 10-Q - March 4, 2014

Attached files

ETERNITY HEALTHCARE INC. Reports