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

Show all filings for ETERNITY HEALTHCARE INC.

Form 10-Q for ETERNITY HEALTHCARE INC.


10-Dec-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, 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 has 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. Our company will issue to GMEA, and all of the shareholders of GMEA, approximately 40,000,000 of its shares in exchange for all of the shares of GMEA and all of their shareholders. These new shares will be issued by our company at the time of the transaction. The share exchange agreement is expected to complete in the first quarter of 2014. As part of the transaction, our company's head office shall be moved from Vancouver, Canada to Phoenix, Arizona where it will become sequestered under the existing management of GMEA. The current president and chief executive officer of GMEA, Mr. Harold Halman, shall take the position as the president and chief executive officer of our company and Dr. Hassan Salari will serve as executive chairman.


Results of Operations for the Three Months Ended October 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 October 31, 2013 which are included herein.

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

                                                                                        Change
                                                                                        Between
                                                                                      Three Month
                                                                                        Periods
                                                     Three Month                         Ended
                                                       Period        Three Month      October 31,
                                                        Ended        Period Ended        2012
                                                     October 31,     October 31,      and October
                                                        2013             2012          31, 2013
Sales                                                $     7,493     $        Nil     $     7,493

Cost of goods sold                                   $     6,796     $        Nil     $     6,796
Operating expenses                                   $   137,358     $     57,987     $    79,371
Total other expenses                                 $   172,487     $        Nil     $   172,487
Net loss                                             $  (309,148 )   $    (57,987 )   $   251,161

Our expenses increased during the three month period ended October 31, 2013 compared to the same period in 2012 primarily as a result of increases in cost of goods sold, general and administrative expenses, professional fees, salaries and loss on settlement of debt.

                                                                                         Change
                                                                                        Between
                                                                                       Six Month
                                                                                        Periods
                                                      Six Month                          Ended
                                                       Period         Six Month       October 31,
                                                        Ended        Period Ended         2012
                                                     October 31,     October 31,      and October
                                                        2013             2012           31, 2013
Sales                                                $    26,584     $        Nil     $     26,584

Cost of goods sold                                   $    11,788     $        Nil     $     11,788
Operating expenses                                   $   233,540     $     87,617     $    145,923
Total other expenses                                 $   172,487     $        Nil     $    172,487
Net loss                                             $  (391,231 )   $    (87,617 )   $   (303,614 )

Our expenses increased during the six month period ended October 31, 2013 compared to the same period in 2012 primarily as a result of increases in cost of goods sold, general and administrative expenses, professional fees, salaries and loss on settlement of debt.

Revenues

We have earned net revenues of $25,338 from December 10, 2009 (date of inception) through October 31, 2013. We have incurred $811,757 in operating expenses from December 10, 2009 (date of inception) through October 31, 2013.


Expenses

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

                                                                                                 For the Period
                                                                                                      from
                                                                                                  December 10,
                                                                     Six             Six              2009
                                  Three Month     Three Month       Month           Month         (Inception)
                                    Period          Period          Period         Period           through
                                     Ended           Ended          Ended           Ended         October 31,
                                  October 31,     October 31,      October       October 31,          2013
                                     2013            2012          31, 2013         2012              ($)
Depreciation                      $        60     $        61     $      121     $       122     $          683
General and administrative        $    75,860     $    30,258     $  105,831     $    44,487     $      237,112
Professional fees                 $    31,559     $    27,668     $   66,837     $    43,008     $      360,048
Research and development          $       Nil     $       Nil     $      Nil     $       Nil     $      109,360
Salaries                          $    29,879     $       Nil     $   60,751     $       Nil     $      104,554

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             April 31,
                            October 31, 2013         2013
                                   ($)               ($)
Current Assets              $         614,143     $  189,440
Current Liabilities         $           9,082     $  767,211
Working Capital (Deficit)   $         605,061     $ (577,771 )


Cash Flows

                                                                                        For the Period
                                                                       Six Month      from December 10,
                                                      Six Month         Period         2009 (Inception)
                                                     Period Ended        Ended             through
                                                     October 31,      October 31,        October 31,
                                                         2013            2012                2013
                                                         ($)              ($)                ($)
Cash Flows used in Operating Activities                  (263,599 )       (84,232 )             (837,273 )
Cash Flows used in Investing Activities                       Nil             Nil                   (727 )
Cash Flows provided by Financing Activities               595,900         171,321              1,348,466
Effect of Exchange Rate Changes on Cash                    27,749          (2,798 )               (7,051 )
Net Increase in Cash During Period                        360,963          84,291                517,517

As of October 31, 2013, our total assets were $614,187 and our total liabilities were $9,082 and we had a working capital of $605,061. Our unaudited financial statements report a net loss of $391,231 for the six months ended October 31, 2013 compared to a net loss of $87,617 for the same period in 2012 and a net loss of $958,906 for the period from December 10, 2009 (inception) to October 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 November 2013)
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.

                                     Estimated    Estimated
                                     Completion    Expenses
           Description                  Date         ($)
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 October 31, 2013, our company has accumulated losses of $958,906 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

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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