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ETAH > SEC Filings for ETAH > Form 10-Q on 16-Sep-2013All Recent SEC Filings

Show all filings for ETERNITY HEALTHCARE INC. | Request a Trial to NEW EDGAR Online Pro

Form 10-Q for ETERNITY HEALTHCARE INC.


16-Sep-2013

Quarterly Report


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, 2012, 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 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 consolidated financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our interim 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, BC 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 $1,000,000 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, we entered into debt settlement subscription agreements pursuant to which we settled demand notes of $853,634 and $8,800 previously payable to our president and a family member, respectively. Pursuant to the agreements, we issued 1,707,268 common shares to the debt holders, in full settlement of all debt and accrued interest payable to them by our company. The debt conversion price was $0.50 per share.

Concurrently with the above described issuances, we closed a private placement pursuant to which we issued 1,000,000 common shares to two investors at the price of $0.50 per share, raising aggregate proceeds of $500,000.

In respect of the above described transactions, we issued an aggregate of 2,724,868 common shares to four (4) non-US persons (as that term is defined in Regulation S of the Securities Act of 1933 ("Regulation S"), in offshore transactions relying on Regulation S.

Results of Operations for the Three Months Ended July 31, 2013 and 2012

The following summary of our results of operations should be read in conjunction with our unaudited interim consolidated financial statements for the quarter ended July 31, 2013 which are included herein.


Our operating results for the three month periods ended July 31, 2013 and 2012 and the changes between those periods for the respective items are summarized as follows:

                                                              Change Between
                                                               Three Month
                                                              Periods Ended
                       Three Month         Three Month        July 31, 2012
                      Period Ended        Period Ended             and
                      July 31, 2013       July 31, 2012       July 31, 2013
Sales                $        19,091     $           Nil     $         19,091

Cost of goods sold   $         4,992     $           Nil     $          4,992
Operating expenses   $        96,182     $        29,630     $         66,552
Net loss             $       (82,083 )   $       (29,630 )   $        (52,453 )

Our expenses increased during the three month period ended July 31, 2013 compared to the same period in 2012 primarily as a result of increases in general and administrative expenses, professional fees and salaries.

Revenues

We have earned revenues of $35,266 from December 10, 2009 (date of inception) through July 31, 2013. We have incurred $674,399 in expenses from December 10, 2009 (date of inception) through July 31, 2013.

Expenses

Our expenses for the three months ended July 31, 2013 and 2012 and for the
period from December 10, 2009 (inception) through July 31, 2013 are outlined in
the table below:

                                                                                                For the
                                                                                              Period from
                                                                                             December 10,
                                                                                                 2009
                                                       Three Month         Three Month        (Inception)
                                                      Period Ended        Period Ended          through
                                                      July 31, 2013       July 31, 2012      July 31, 2013
                                                           ($)                 ($)                ($)
Depreciation                                         $            61     $            61     $         623
General and administrative                           $        29,971     $        14,229     $     161,252
Professional fees                                    $        35,278     $        15,340     $     328,489
Research and development                             $           Nil     $           Nil     $     109,360
Salaries                                             $        30,872     $           Nil     $      74,675

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                   At
                           July 31, 2013       April 31, 2013
                                ($)                 ($)
Current Assets            $       667,185     $        189,440
Current Liabilities       $       845,467     $        767,211
Working Capital Deficit   $      (178,282 )   $       (577,771 )



Cash Flows

                                                                                      For the Period
                                                     Three Month     Three Month      from December
                                                       Period          Period            10, 2009
                                                        Ended           Ended          (Inception)
                                                        July            July             through
                                                      31, 2013        31, 2012        July 31, 2013
                                                         ($)             ($)               ($)
Cash Flows used in Operating Activities                  (94,540 )       (35,486 )           (669,137 )
Cash Flows used in Investing Activities                      Nil             Nil                 (727 )
Cash Flows provided by Financing Activities              558,970          36,109            1,311,536
Effect of Exchange Rate Changes on Cash                   (5,316 )        (5,125 )            (26,014 )
Net Increase (Decrease) in Cash During Period            459,144          (4,502 )            615,658

As of July 31, 2013, our total assets were $667,289 and our total liabilities were $845,467 and we had a working capital deficit of $178,282. Our unaudited financial statements report a net loss of $82,083 for the three months ended July 31, 2013 compared to a net loss of $29,630 for the same period in 2012 and a net loss of $649,758 for the period from December 10, 2009 (inception) to July 31, 2013.

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 August 2013) will be approximately $1,000,000 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.


                                     Estimated     Estimated
                                     Completion    Expenses
           Description                  Date          ($)
Legal and accounting fees            12 months        100,000
Marketing and advertising            12 months        500,000
Employees                            12 months       2,30,000
Consulting fees                      12 months         70,000
Regulatory approval                  12 months         20,000
Travel and administrative expenses   12 months         80,000
Total                                               1,000,000

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 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 July 31, 2013, our company has accumulated losses of $649,758 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 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 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 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 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

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.

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