Eternity Healthcare (ETAH) 10-Q 2014 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

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

For the quarterly period endedJuly 31, 2014

or

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

For the transition period from _______ to ________

Commission File Number000-53376

ETERNITYHEALTHCARE INC.

(Exactname 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 ☐  NO

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 ☐ NO

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	☐	Smaller reporting company	☒
(Do not check if a 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  S NO

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£ NO

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 September 9, 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	14
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21
	Item 4.	Controls and Procedures	21
PART II – OTHER INFORMATION			21
	Item 1.	Legal Proceedings	21
	Item 1A.	Risk Factors	21
	Item 2.	Unregistered Sales of Equity Securities	22
	Item 3.	Defaults Upon Senior Securities	22
	Item 4.	Mining Safety Disclosures	22
	Item 5.	Other Information	22
	Item 6.	Exhibits	22
SIGNATURES			24

2

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

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

3

Eternity Healthcare Inc.

Consolidated Financial Statements

For the three months ended July 31, 2014 and 2013

(Expressed in U.S. Dollars)

4

Eternity Healthcare Inc.

Consolidated Balance Sheets

(Expressed in U.S. Dollars)

(Unaudited) 

	July 31,			April 30,
	2014			2014
	$			$
Assets
Current assets
Cash and cash equivalents		818,549			403,603
Accounts receivable		293			38
Prepaid expenses		29,007			3,000
GST/HST receivable		966			891
Inventory (Note 5)		16,474			22,688
		865,289			430,220
Total assets		865,289			430,220
Liabilities
Current liabilities
Accounts payable and accrued liabilities		129,328			89,935
Customer deposits and prepayments		468			-
Due to related parties (Note 6)		514,061			6,217
		643,857			96,152
Shareholders’ equity (deficiency)
Capital stock (Note 7)
Authorized
300,000,000 common shares, par value $ 0.001
Issued and outstanding
July 31, 2014 - 66,299,868 common shares
April 30, 2014 – 66,299,868 common shares		66,300			66,300
Additional paid-in capital		1,511,316			1,500,679
Accumulated other comprehensive gain (loss)		(18,166	)		(18,203	)
Deficit, accumulated during the development stage		(1,338,018	)		(1,214,708	)
Total stockholders’ equity (deficit)		221,432			334,068
Total liabilities and stockholders’ equity (deficit)		865,289			430,220

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

5

Eternity Healthcare Inc.

Consolidated Statements of Loss and Comprehensive Loss

(Expressed in U.S. Dollars)

(Unaudited)

	For the three		For the three
	months ended		months ended
	July 31, 2014		July 31, 2013
	$		$
Sales
Product sales	17,359		19,091
Cost of goods sold	5,648		4,992
	11,711		14,099
Expenses
Depreciation	-		61
General and administrative	34,763		29,971
Professional fees	16,813		35,278
Research and development	-		-
Salaries	83,445		30,872
	135,021		96,182
Net loss for the period	(123,310	)	(82,083	)
Comprehensive loss
Net loss for the period	(123,310	)	(82,083	)
Foreign currency translation adjustments	37		9,255
Comprehensive loss for the period	(123,273	)	(72,828	)
Comprehensive loss per share - basic and diluted	(0.002	)	(0.001	)
Net loss per share - basic and diluted	(0.002	)	(0.001	)
Weighted average number of common shares
Outstanding – basic and diluted	66,299,868		63,575,000

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

6

Eternity Healthcare Inc.

Consolidated Statements of Cash Flows

(Expressed in U.S. Dollars)

(Unaudited) 

	For the three months ended July 31, 2014 $			For the three months ended July 31, 2013 $
Operating activities
Net (loss) income for the period		(123,310	)		(82,083	)
Items not affecting cash
Depreciation		-			61
Expenses paid on behalf of the Company by  related parties		156			-
Stock options issued for services		10,637			10,636
Changes in operating assets and liabilities
Inventory		5,882			(29,453	)
Prepaid expenses		(26,212	)		16,038
Accounts payable and accrued liabilities		39,720			(4,445	)
Accounts receivable		(256	)		(3,843	)
GST/HST receivable		(70	)		(1,451	)
Net cash used in operating activities		(93,453	)		(94,540	)
Financing activities
Subscription payments received		-			461,620
Proceeds from related party payables		517,532			97,350
Repayments on related party payables		(5,777	)		-
Net cash provided by financing activities		511,755			558,970
Effect of exchange rate changes on cash		(3,356	)		(5,316	)
Increase (decrease) in cash		414,946			459,114
Cash, beginning of period		403,603			156,554
Cash, end of period		818,549			615,668

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

7

Eternity Healthcare Inc.

Notes to the Consolidated Financial Statements

July 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 a range of medical devices and diagnostics.

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 Health Care Inc., a federal company incorporated under the laws of Canada and extra-provincially registered in 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 8).

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.

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 is generating revenue from product sales.

8

Eternity Healthcare Inc.

Notes to the Consolidated Financial Statements

July 31, 2014

(Expressed in U.S. Dollars)

(Unaudited)

1.         Nature and continuance of operations - continued

On June 5, 2014 the Company incorporated a wholly owned subsidiary within the state of Arizona, also named Eternity Healthcare, Inc. The Arizona operating Company will be take over operations within the United States from the BC Company.

The Company’s consolidated financial statements as at July 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 $ 123,310 for the three months ended July 31, 2014 (July 31, 2013 - $ 82,083) and has a working capital surplus of $ 221,432 as at July 31, 2014 (July 31, 2013 - $ 178,282 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 July 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, 2014 audited financial statements. The results of operations for the period ended July 31, 2014 and 2013 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.

4.        Significant accounting policies

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.

9

Eternity Healthcare Inc.

Notes to the Consolidated Financial Statements

July 31, 2014

(Expressed in U.S. Dollars)

(Unaudited)

4.        Significant accounting policies - continued

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:

i) 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.

Financial instruments

Fair value

The carrying value of cash and cash equivalents, accounts receivable, accounts payable and due to related parties approximate their fair values because of the short-term maturity of these financial instruments.

Interest rate risk

The Company is not exposed to significant interest rate risk due to the short-term maturity of its monetary assets and liabilities.

Credit risk

Credit risk is the risk of loss associated with counterparty’s inability to fulfill its payment obligations. The Company’s credit risk is primarily attributable to cash and accounting receivable. Management believes that the credit risk concentration with respect to financial instruments included in cash and accounts receivable is remote.

Currency risk

The Company’s operating expenses are primarily incurred in Canadian dollars, and fluctuation of the Canadian dollar in relation to the United States dollar will have an impact upon the profitability of the Company and may also have an effect of the value of the Company’s. The Company has not entered into any agreements or purchased any instruments to hedge possible currency risk. At July 31, 2014 1 United States dollar was equal to 1.0904 Canadian dollars.

10

Eternity Healthcare Inc.

Notes to the Consolidated Financial Statements

July 31, 2014

(Expressed in U.S. Dollars)

(Unaudited)

4.         Significant accounting policies - continued

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. At July 31, 2014, the Company has no potentially dilutive shares outstanding.

Income taxes

Deferred income taxes are reported for timing differences between items of income or expense reported in the financial statements and those reported for income tax purposes in accordance with ASC 740, “Income Taxes”, which requires the use of the asset/liability method of accounting for income taxes. Deferred income taxes and tax benefits are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and for tax losses and credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company provides for deferred taxes for the estimated future tax effects attributable to temporary differences and carry-forwards when realization is more likely than not.

Comprehensive loss

ASC 22, “Comprehensive Income”, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at July 31 2014, the Company has items that represent a comprehensive income (loss) and, therefore, has included a schedule of comprehensive income (loss) in the financial statements.

Equipment and depreciation

Equipment has been recorded at cost, net of accumulated depreciation. Improvements are capitalized, and maintenance, repairs and minor replacements are expensed as incurred. Depreciation is determined using a straight-line method over the estimated useful life of the computer equipment.

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.

11

Eternity Healthcare Inc.

Notes to the Consolidated Financial Statements

July 31, 2014

(Expressed in U.S. Dollars)

(Unaudited)

4.        Significant accounting policies - continued

Segments of an enterprise and related information

ASC 280, “Segment Reporting” establishes guidance for the way that public companies report information about operating segments in annual financial statements and requires reporting of selected information about operating segments in interim financial statements issued to the public. It also establishes standards for disclosures regarding products and services, geographic areas and major customers. ASC 280 defines operating segments as components of a company about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company has evaluated this Codification and does not believe it is applicable at this time.

Recent accounting pronouncements

In June 2014, the FASB issued ASU 2014-10, “Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation”. The guidance eliminates the definition of a development stage entity thereby removing the incremental financial reporting requirements from U.S. GAAP for development stage entities, primarily presentation of inception to date financial information. The provisions of the amendments are effective for annual reporting periods beginning after December 15, 2014, and the interim periods therein. However, early adoption is permitted. Accordingly, the Company has adopted this standard as of July 31, 2014.

The Company does not expect the adoption of any other recent accounting pronouncements to have a material impact on its financial 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 July 31, 2014 and April 30, 2014 inventory consisted of the following:

	July 31,		April 30,
	2014		2014
	$		$
Raw Material		-		-
Work in progress		-		-
Finished goods		16,474		22,688
Reserve for obsolescence		-		-
		16,474		22,688

6.         Due to related parties and related party transactions

During the three months ended July 31, 2014, the Company received an additional $ 513,576 in cash loans from related parties of the Company. Total related party notes payable as of July 31, 2014 were $ 514,061. This balance is non-interest bearing, unsecured and has no fixed terms of repayment.

12

Eternity Healthcare Inc.

Notes to the Consolidated Financial Statements

July 31, 2014

(Expressed in U.S. Dollars)

(Unaudited)

7.         Capital stock

Authorized

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

8.         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 $0.55 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 three months ended July 31, 2014 and 2013, the Company recognized expense of $ 10,637 and $ 10,636 related to options that vested, respectively

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

A summary of the status of the Company’s stock options and warrants as of July 31, 2014 is presented below:

	Number of Shares
Balance of stock options and warrants at April 30, 2014		200,000
Warrants and options granted		-
Exercised, forfeited or expired		-
Outstanding at July 31, 2014		200,000
Exercisable at July 31, 2014		154,247

The following table summarizes information about the stock options and warrants as of July 31, 2014:

		Options and Warrants Outstanding					Options and Warrants Exercisable
Exercise Prices		Number Outstanding	Weighted Average Remaining Contractual Life(in years)		Weighted Average Exercise Price		Number Exercisable	Weighted Average Exercise Price
$	0.80	200,000		3.46	$	0.80	154,247	$	0.80

9.        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.

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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, 2014, 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 Health Care Inc., a Canadian Federal corporation, extra-provincially registered in 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.

14

From inception to October 24, 2007, 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 Health Care Inc., a Canadian Federal corporation, extra-provincially registered in British Columbia (“Eternity BC”), 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 anticipate producing promotional materials and advertising in medical journals as well as consumer magazines. In order to carry out these plans we have hired a marketing manager and anticipate hiring a quality control manager and three people for packaging and shipment positions. We will require approximately $1,500,000 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 $0.50 of debt. The total number of shares issued under the 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. As of the date of this report, we have not received repayment of the note receivable.

Results of Operations for the Three Months Ended July 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 July 31, 2014 which are included herein.

15

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

	Three Month Period Ended July 31, 2014			Three Month Period Ended July 31, 2013			Change Between Three Month Periods Ended July 31, 2013 and July 31, 2014
Sales	$	17,359		$	19,091		$	(1,732	)
Cost of goods sold	$	5,648		$	4,992		$	656
Operating expenses	$	135,021		$	96,182		$	38,839
Net loss	$	(123,310	)	$	(82,083	)	$	41,227

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

Revenues

We have earned net revenues of $17,359 for the period ended July 31, 2014 compared with $19,091 for the period ended July 31, 2012. We have incurred $135,021 in operating expenses for the period ended July 31, 2014 compared with $96,182 for the period ended July 31, 2013.

Expenses

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

	Three Month Period Ended July 31, 2014		Three Month Period Ended July 31, 2013
Depreciation	$	Nil	$	61
General and administrative	$	34,763	$	29,971
Professional fees	$	16,813	$	35,278
Salaries	$	83,445	$	30,872

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.

16

Liquidity and Financial Condition

Working Capital

	At July 31, 2014 ($)		At April 30, 2014 ($)
Current Assets	$	865,289	$	430,220
Current Liabilities	$	643,857	$	96,152
Working Capital	$	221,432	$	334,068

Cash Flows

	Three Month Period Ended July 31, 2014 ($)			Three Month Period Ended July 31, 2013 ($)
Cash Flows used in Operating Activities	$	(93,453	)	$	(94,540	)
Cash Flows used in Investing Activities	$	Nil		$	Nil
Cash Flows provided by Financing Activities	$	511,755		$	558,970
Effect of Exchange Rate Changes on Cash	$	(3,356	)	$	(5,316	)
Net Increase (Decrease) in Cash During Period	$	414,946		$	459,114

As of July 31, 2014, our total assets were $865,289 and our total liabilities were $643,857 and we had a working capital of $221,432. Our unaudited financial statements report a net loss of $123,310 for the three months ended July 31, 2014 compared to a net loss of $82,083 for the same period in 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 2014) will be approximately $1,500,000 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		100,000
Marketing and advertising	12 months		800,000
Employees	12 months		200,000
Consulting fees	12 months		200,000
Travel and administrative expenses	12 months		200,000
Total			1,500,000

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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 July 31, 2014, our company has accumulated losses of $1,338,018 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.

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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:

i) 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.

Financial Instruments

Fair Value

The carrying value of cash and cash equivalents, accounts receivable, accounts payable and due to related parties approximate their fair values because of the short-term maturity of these financial instruments.

Interest Rate Risk

Our company is not exposed to significant interest rate risk due to the short-term maturity of its monetary assets and liabilities.

Credit Risk

Credit risk is the risk of loss associated with counterparty’s inability to fulfill its payment obligations. Our company’s credit risk is primarily attributable to cash and accounting receivable. Management believes that the credit risk concentration with respect to financial instruments included in cash and accounts receivable is remote.

Currency Risk

Our company’s operating expenses are primarily incurred in Canadian dollars, and fluctuation of the Canadian dollar in relation to the United States dollar will have an impact upon the profitability of our company and may also have an effect of the value of our company’s. Our company has not entered into any agreements or purchased any instruments to hedge possible currency risk. At July 31, 2014 1 United States dollar was equal to 1.0904 Canadian dollars.

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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.

Income Taxes

Deferred income taxes are reported for timing differences between items of income or expense reported in the financial statements and those reported for income tax purposes in accordance with ASC 740, “Income Taxes”, which requires the use of the asset/liability method of accounting for income taxes. Deferred income taxes and tax benefits are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and for tax losses and credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Our company provides for deferred taxes for the estimated future tax effects attributable to temporary differences and carry-forwards when realization is more likely than not.

Comprehensive Loss

ASC 22, “Comprehensive Income”, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at July 31 2014, our company has items that represent a comprehensive income (loss) and, therefore, has included a schedule of comprehensive income (loss) in the financial statements.

Equipment and Depreciation

Equipment has been recorded at cost, net of accumulated depreciation. Improvements are capitalized, and maintenance, repairs and minor replacements are expensed as incurred. Depreciation is determined using a straight-line method over the estimated useful life of the computer equipment.

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.

Segments of an Enterprise and Related Information

ASC 280, “Segment Reporting” establishes guidance for the way that public companies report information about operating segments in annual financial statements and requires reporting of selected information about operating segments in interim financial statements issued to the public. It also establishes standards for disclosures regarding products and services, geographic areas and major customers. ASC 280 defines operating segments as components of a company about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Our company has evaluated this Codification and does not believe it is applicable at this time.

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Recent Accounting Pronouncements

In June 2014, the FASB issued ASU 2014-10, “Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation”. The guidance eliminates the definition of a development stage entity thereby removing the incremental financial reporting requirements from U.S. GAAP for development stage entities, primarily presentation of inception to date financial information. The provisions of the amendments are effective for annual reporting periods beginning after December 15, 2014, and the interim periods therein. However, early adoption is permitted. Accordingly, our company has adopted this standard as of July 31, 2014.

Our company does not expect the adoption of any other recent accounting pronouncements to have a material impact on its financial statements.

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 theSecurities 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 July 28, 2014.

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.

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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

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Exhibit Number	Document Description
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.

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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: September 12, 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)

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