Earth Science Tech, Inc 10-Q for FY2025 Q2
Earth Science Tech, Inc. (ETST)
About this 10-Q
Earth Science Tech, Inc filed this 10-Q on November 14, 2024, covering the quarter ended September 30, 2024 (FY2025 Q2).
Headline figures
Quarter ended September 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $8.52M
- up 341.9% from $1.93M a year earlier
- Net income
- $798.37K
- up 79.6% from net income of $444.58K a year earlier
- Diluted EPS
- $0.00
- up 200.0% from $0.00 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission
file number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices) (zip code)
(Registrant’s telephone number, including area code)
8950 SW 74th CT
Suite 101
Miami, FL 33156, USA
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Over the Counter Bulletin Board |
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.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large, accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large, accelerated filer | ☐ | Accelerated filer | ☐ | |
| ☒ | Smaller reporting company | |||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of September 30, 2024, there were Common and 1,000,000 Preferred shares of the registrant’s stock outstanding.
TABLE OF CONTENTS
| Page | ||
| PART I. FINANCIAL INFORMATION | ||
| ITEM 1. | Financial Statements (Unaudited) | F-1 |
| Consolidated Balance Sheets | F-1 | |
| Consolidated Statements of Operations | F-2 | |
| Consolidated Statements of Changes in Shareholders’ Equity | F-3 | |
| Consolidated Statements of Cash Flows | F-4 | |
| Notes to Consolidated Financial Statements | F-5- F-16 | |
| ITEM 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 3 |
| ITEM 3. | Quantitative and Qualitative Disclosures about Market Risk | 8 |
| ITEM 4. | Controls and Procedures | 8 |
| PART II. OTHER INFORMATION | ||
| ITEM 1. | Legal Proceedings | 9 |
| ITEM 1A. | Risk Factors | 9 |
| ITEM 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 9 |
| ITEM 3. | Defaults Upon Senior Securities | 9 |
| ITEM 4. | Mine Safety Disclosures | 9 |
| ITEM 5. | Other Information | 9 |
| ITEM 6. | Exhibits | 9 |
| SIGNATURES | 10 | |
| 2 |
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EARTH SCIENCE TECH, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| As
of September 30, 2024 | As
of March 31, 2024 | |||||||
| (Unaudited) | (Audited) | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts Receivable | ||||||||
| Deposits | ||||||||
| Inventory | ||||||||
| Prepaid | ||||||||
| Total current assets | ||||||||
| Non-Current Assets: | ||||||||
| Property and Equipment, net | ||||||||
| Right of use asset, net | ||||||||
| Goodwill | ||||||||
| Intangible Assets, net | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND EQUITY | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses and other payable | ||||||||
| Current portion of operating lease obligations | ||||||||
| Current portion of loans and obligations | ||||||||
| Total Current Liabilities | ||||||||
| Long-Term Liabilities: | ||||||||
| Lease liability less current maturities | ||||||||
| Equipment loans and obligations non-current | ||||||||
| Total Liabilities | ||||||||
| Commitment and Contingencies ( Note 12) | ||||||||
| Stockholders’ Equity: | ||||||||
| Preferred stock, par value $ per share, shares authorized; and shares issued and outstanding as of September 30, 2024, and March 31, 2024, respectively | ||||||||
| Common stock, par value $ per share, shares authorized; and shares issued and outstanding as of September 30, 2024, and March 31, 2024 respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ Equity | ||||||||
| Total Liabilities and Equity | $ | $ | ||||||
The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.
| F-1 |
EARTH SCIENCE TECH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2024, AND 2023.
(UNAUDITED)
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| For the Three Months Ended September 30, | For the Six Months Ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| (As restated) | (As restated) | |||||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of Goods Sold (exclusive of depreciation shown separately below) | ||||||||||||||||
| Gross Profit | ||||||||||||||||
| Expenses: | ||||||||||||||||
| Salaries Expense | ||||||||||||||||
| General and Administrative Expense | ||||||||||||||||
| Bank Charges | ||||||||||||||||
| Marketing | ||||||||||||||||
| Legal and Professional Fees | ||||||||||||||||
| Insurance Expense | ||||||||||||||||
| Depreciation and Amortization | ||||||||||||||||
| Utilities | ||||||||||||||||
| Total Expenses | ||||||||||||||||
| Net Operating Income | ||||||||||||||||
| Other Income/Expenses | ||||||||||||||||
| Other Income | ( | ) | ( | ) | ||||||||||||
| Interest expense | ( | ) | $ | ( | ) | ( | ) | $ | ( | ) | ||||||
| Net Income before taxes | ||||||||||||||||
| Income Taxes | ||||||||||||||||
| Net Income | $ | $ | $ | $ | ||||||||||||
| Profit/(Loss) per common share-Basic and Diluted | $ | $ | $ | $ | ||||||||||||
| Weighted average number of common shares outstanding | ||||||||||||||||
The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.
| F-2 |
EARTH SCIENCE TECH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
For the six months ended September 30, 2024
| Common Stock | Preferred Stock | Additional
Paid-in | Accumulated | |||||||||||||||||||||||||
| Description | Shares | Amount | Shares | Amount | Capital | Deficit | Total | |||||||||||||||||||||
| Balance at March 31, 2024 | ( | ) | $ | |||||||||||||||||||||||||
| Common stock buyback | ( | ) | ( | ) | — | ( | ) | $ | ( | ) | ||||||||||||||||||
| Net Income | $ | |||||||||||||||||||||||||||
| Balance at September 30, 2024 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
For the three months ended September 30, 2024
| Common Stock | Preferred Stock | Additional
Paid-in | Accumulated | |||||||||||||||||||||||||
| Description | Shares | Amount | Shares | Amount | Capital | Deficit | Total | |||||||||||||||||||||
| Balance at June 30, 2024 | ( | ) | $ | |||||||||||||||||||||||||
| Common stock buyback | ( | ) | ( | ) | — | ( | ) | $ | ( | ) | ||||||||||||||||||
| Net Income | $ | |||||||||||||||||||||||||||
| Balance at September 30, 2024 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
For the six months ended September 30, 2023
| Common Stock | Preferred Stock | Additional Paid-in | Accumulated | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
| Balance at March 31, 2023 (As restated) | ( | ) | ||||||||||||||||||||||||||
| Common stock issued for cash | ||||||||||||||||||||||||||||
| Common stock issued for conversion of note payable | ||||||||||||||||||||||||||||
| Net Profit/(Loss) | — | — | ||||||||||||||||||||||||||
| Balance at September 30, 2023 (As restated) Note 3 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
For the three months ended September 30, 2023
| Common Stock | Preferred Stock | Additional Paid-in | Accumulated | |||||||||||||||||||||||||
| Description | Shares | Amount | Shares | Amount | Capital | Deficit | Total | |||||||||||||||||||||
| Balance at June 30, 2023 (As restated) Note 3 | ( | ) | $ | |||||||||||||||||||||||||
| Net Income (Loss) | — | — | $ | |||||||||||||||||||||||||
| Balance at September 30, 2023 (As restated) Note 3 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Balance | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.
| F-3 |
EARTH SCIENCE TECH, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
FOR SIX MONTHS ENDED SEPTEMBER 30, 2024, AND 2023.
(UNAUDITED)
| 2024 | 2023
(As restated) | |||||||
| Cash flows from operating activities: | ||||||||
| Net Income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts Receivable | ( | ) | ||||||
| Deposits | ( | ) | ||||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Inventory | ( | ) | ( | ) | ||||
| Other current liabilities | ||||||||
| Lease Liability, net | ( | ) | ( | ) | ||||
| Accrued settlement | ( | ) | ||||||
| Accounts payable and accrued expenses | ||||||||
| Net cash provided in operating activities | ||||||||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment and intangibles | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of common stock | ||||||||
| Payments on debt obligations | ( | ) | ( | ) | ||||
| Repurchase of common stock | ( | ) | ||||||
| Net Cash provided by (used) in financing activities | ( | ) | ||||||
| Net increase in cash and cash equivalents | ||||||||
| Cash and cash equivalents at beginning of the period | ||||||||
| Cash and cash equivalents at end of the period | $ | $ | ||||||
| Supplemental Disclosure of Cash Flow Information: | ||||||||
| Cash paid for interest | $ | |||||||
Cash paid for income taxes | $ | |||||||
| Non-Cash Transactions | ||||||||
| Initial recognition of right of use asset | $ | $ | ||||||
| Common stock issued on conversion of notes payable | $ | $ | ||||||
The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.
| F-4 |
EARTH SCIENCE TECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
(UNAUDITED)
Note 1 — Organization and Nature of Operations
Earth Science Tech, Inc. (“ETST” or the “Company”) was incorporated under the laws of the State of Nevada on April 23, 2010. The Company subsequently changed its domicile to the State of Florida on June 27, 2022. As of November 8, 2022, the Company is a holding entity set to acquire companies with its current focus in the health and wellness industry. The Company is presently in compounding pharmaceuticals and telemedicine through its wholly owned subsidiaries RxCompoundStore.com, LLC. (“RxCompound”), Peaks Curative, LLC. (“Peaks”), and Earth Science Foundation, Inc. (“ESF”).
RxCompound is a complete compounding pharmacy. RxCompound is currently licensed to fulfill prescriptions in 22 states: Delaware, Florida, Pennsylvania, New York, Arizona, New Jersey, Wisconsin, Minnesota, Rhode Island, Utah, Georgia, Nevada, Massachusetts, Missouri, Iowa, Maryland, Ohio, Colorado, North Carolina, Maine, Indiana and Illinois. RxCompound is in the application process to obtain licenses in the remaining states in which it is not yet licensed to fulfill prescriptions.
Peaks is a telemedicine referral site focused on overall health and wellness for men and women. Peaks’ orders are exclusively fulfilled by RxCompound. Patients who order Peaks via monthly subscription receive their refills automatically. The company intends to expand offerings to include over the counter (“OTC”) (non-prescription) products such as supplements and topicals.
ESF is a favored entity of ETST, effectively being a non-profit organization that was incorporated on February 11, 2019, and is structured to accept grants and donations to help those in need of assistance in paying for prescriptions.
These financial statements should be read in conjunction with audited consolidated financial statements and notes.
Note 2 — Summary of Significant Accounting Policies
Basis of presentation
The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).
These financial statements must be read in conjunction with audited consolidated financial statements and notes thereto which are included in the Company’s Annual Report on Form 10-K for the year ended March 31, 2024 for a broader discussion of the Company’s business and risks inherent in such business. In the opinion of management, all adjustments considered for a fair presentation, consisting solely of normal and recurring adjustments have been made. The results of operations for the three and six months ended September 30, 2024, are not necessarily indicative of results to be expected for any other interim period or the fiscal year ending March 31, 2025.
Principles of consolidation
The accompanying consolidated financial statements include all the accounts of the Company and its wholly owned subsidiaries RxCompound, Peaks and ESF. All intercompany transactions have been eliminated during consolidation.
| F-5 |
Use of estimates and assumptions
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The areas requiring significant estimates are impairment of goodwill, provision for taxation, accrued liabilities, liabilities for legal matters, the determination of useful lives of depreciable and intangible assets, contingencies, and going concern assessment. The estimates and underlying assumptions are reviewed on an ongoing basis. Actual results could differ from those estimates.
Carrying value, recoverability, and impairment of long-lived assets
The Company tests long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value. As of September 30, 2024, and 2023 no such impairment was needed.
Cash and cash equivalents
Cash
and cash equivalents include all highly liquid debt instruments with original maturities of three months or less which are not
securing any corporate obligations. As of September 30, 2024, and March 31,2024, the Company held a cash balance of $
Accounts Receivable.
The Company has adopted the new standard ASC-326- CECL to account for current credit losses. The Company has analyzed its accounts receivable, based on historical and customer experience, economic trends, and future estimates. Accounts receivable are recorded for pharmaceuticals picked up or shipped as of September 30, 2024, and March 31, 2024. Accounts receivables are expected to be collected within twelve months in its entirety, therefore no reserve was necessary.
Schedule of Accounts Receivable
| As of | ||||||||
| September 30, 2024 | March 31, 2024 | |||||||
| Accounts Receivable | $ | $ | ||||||
| F-6 |
Revenue recognition
The Company has implemented ASC 606, Revenue from Contracts with Customers for revenue recognition by incorporating the necessary changes in systems and processes. These changes included the development of new policies based on the five-step model provided in the new revenue standard, ongoing contract review requirements, and gathering of information provided for disclosures. Revenue is recognized at this point in time.
The Company recognizes revenue from product sales or services rendered when control of the promised goods is transferred to our customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods and services. To achieve this core principle, we apply the following five steps: identify the contract with the client, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to performance obligations in the contract and recognize revenue when or as the Company satisfies a performance obligation.
Disaggregated Revenue
The Company disaggregates revenue from contracts with customers by category — core and non-core, as it believes it best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.
The Company’s disaggregated revenue by category is as follows:
Schedule of Disaggregated Revenue
For the six months ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Core: | ||||||||
| Sale of Pharmaceutical products – RxCompound and Peaks | $ | $ | ||||||
| Total core revenue, net | $ | $ | ||||||
| Non-Core: | ||||||||
| Shipping Income | $ | $ | ||||||
| Total revenue, net | $ | $ | ||||||
The
Company currently has three large customers, each representing
Inventory
The
Company has its inventories stated at a lower cost (on first in, first out (FIFO) method) or market value basis. A reserve is established
if necessary to reduce excess or obsolete inventories to their realizable value. The stated cost consists of finished products. Reserves,
if necessary, are recorded to reduce inventory to market value based on assumptions about consumer demand, current inventory levels and
product life cycles for the various inventory items. These assumptions are evaluated annually and are based on the Company’s business
plan and on feedback from customers and the product development team. As of September 30, 2024, and March 31, 2024, the inventory
reserves were not material. The Company has three main suppliers, that account for
Cost of Goods Sold
Components of cost of goods sold include product costs, consumables, shipping costs to customers and any inventory adjustments.
| F-7 |
Shipping and Handling Costs
Costs incurred by the Company for shipping and handling are included in costs of revenues.
Related parties
The Company pays the employee compensation for Giorgio R. Saumat and Mario Tabraue to their respective, solely owned LLCs, Point96 Consulting, LLC and Tabraue Consulting, LLC.
The Company follows ASC 850-10, Related Parties, for the identification of related parties and disclosure of related party transactions. Pursuant to Section 850-10-20, the related parties include: (a) affiliates of the Company (“Affiliate” means, with respect to any specified person, any other person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with such person, as such terms are used in and construed under Rule 405 under the Securities Act); (b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825-10-15, to be accounted for by the equity method by the investing entity; (c) trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; (d) principal owners of the Company; (e) management of the Company; (f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and (g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
Income taxes
The Company accounts for income taxes under ASC 740, Income Taxes. Under ASC 740, deferred tax assets and liabilities 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. 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 effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period, which includes the enactment date. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of or all the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
| F-8 |
The Company follows ASC 260 to account for earnings per share. Basic earnings per common share calculations are determined by dividing net results from operations by the weighted average number of shares of common stock outstanding during the year. Diluted loss per common share calculation is determined by dividing net results from operations by the weighted average number of common shares and diluted common share equivalents outstanding. During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation, for the three and six months ended September 30, 2024 and 2023, the Company did not have any antidilutive equity instruments.
Cash flows reporting
The Company follows ASC 230 to report cash flows. This standard classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by this standard to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments. The Company reports separately information about investing and financing activities not resulting in cash receipts or payments in the period pursuant to this standard.
Goodwill
Goodwill represents the excess of the aggregate purchase price over the fair value of the net assets acquired in a purchase business combination. Goodwill is reviewed for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the carrying amount of goodwill may be impaired. In conducting its annual impairment test, the Company first reviews qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If factors indicate that the fair value of the reporting unit is less than its carrying amount, the Company performs a quantitative assessment, and the fair value of the reporting unit is determined by analyzing the expected present value of future cash flows. If the carrying value of the reporting unit continues to exceed its fair value, the fair value of the reporting unit’s goodwill is calculated and an impairment loss equal to the excess is recorded.
The Company applies the fair value method of ASC 718, Compensation-Stock Compensation, in accounting for its stock-based compensation. These standards state that compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period, if any. The Company uses the Black-Scholes option pricing model to determine the fair value of its stock, stock option and warrant issuance. The determination of the fair value of stock-based payment awards on the date of grant using an option-pricing model is affected by the Company’s stock price, as well as assumptions regarding a few complex and subjective variables. These variables include the Company’s expected stock price, volatility over the term of the awards, actual employee exercise behaviors, risk-free interest rate and expected dividends. The company has no stock-based commitments outstanding as of September 30, 2024, and March 31, 2024.
Fair Value
FASB ASC 820, Fair Value Measurements and Disclosures (“ASC 820”) establishes a framework for all fair value measurements and expands disclosures related to fair value measurement and developments. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 requires that assets and liabilities measured at fair value are classified and disclosed in one of the following three categories:
Level 1 — Quoted market prices for identical assets or liabilities in active markets or observable inputs; and
| F-9 |
Level 2 — Significant other observable inputs that can be corroborated by observable market data; and
Level 3 — Significant unobservable inputs that cannot be corroborated by observable market data.
The carrying amounts of cash, accounts payable and other liabilities, accrued expenses and settlement payable approximate fair value because of the short-term nature of these items.
The fair value of the Company’s debt approximated the carrying value of the Company’s debt as of September 30, 2024, and September 30, 2023. Factors that the Company considered when estimating the fair value of its debt included market conditions, liquidity levels in the private placement market, variability in pricing from multiple lenders and terms of debt.
Property and equipment
Property
and equipment are stated at cost. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and
betterments are capitalized. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation
are removed from the respective accounts, and any gain or loss is included in operations. During the three months ended September 30,
2024, RxCompound added various equipment for its operations. Depreciation on equipment is charged using a straight-line method over the
estimated useful life of
Recently issued accounting pronouncements
We have considered the impact of the following pronouncements:
The FASB recently issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470- 20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, to reduce complexity in applying GAAP to certain financial instruments with characteristics of liabilities and equity. The guidance in ASU 2020-06 simplifies the accounting for convertible debt instruments and convertible preferred stock by removing the existing guidance in ASC 470-20, Debt: Debt with Conversion and Other Options, which requires entities to account for beneficial conversion features and cash conversion features in equity, separately from the host convertible debt or preferred stock. The guidance in ASC 470-20 applies to convertible instruments for which the embedded conversion features are not required to be bifurcated from the host contract and accounted for as derivatives. In addition, the amendments revise the scope exception from derivative accounting in ASC 815-40 for freestanding financial instruments and embedded features that are both indexed to the issuer’s own stock and classified in stockholders’ equity, by removing certain criteria required for equity classification. These amendments are expected to result in more freestanding financial instruments qualifying for equity classification (and, therefore, not accounted for as derivatives), as well as fewer embedded features requiring separate accounting from the host contract. The amendments in ASU 2020-06 further revise the guidance in ASC 260, Earnings Per Share, to require entities to calculate diluted earnings per share (EPS) for convertible instruments by using the if-converted method. In addition, entities must presume share settlement for purposes of calculating diluted EPS when an instrument may be settled in cash or shares. The amendments in ASU 2020-06 are effective for public entities for fiscal years beginning after December 15, 2021, with early adoption permitted (for an “emerging growth company,” beginning after December 15, 2023). The Company has assessed the impact this standard will have on the Company’s consolidated financial statements. No material adjustments were required.
| F-10 |
Intangible Assets
Intangible
assets consist of Peaks telemedicine platform, and the Holding Company’s web domains. Intangible assets with finite lives are amortized
over the estimated useful life of
Note 3 – Restatement
As
of September 30, 2023, the Company’s subsidiary RXCompound carried a goodwill in the amount of $
Schedule of Effect of Restatement
Adjustments to Consolidated Balance Sheet as of September 30, 2023
Consolidated Balance Sheet
| As of September 30, 2023 | ||||||||||||
| September 30, 2023, before restatement | Restatement | September 30,2023 after restatement | ||||||||||
| Total Assets | $ | $ | $ | |||||||||
| Total stockholders’ Equity | ||||||||||||
Adjustments to Consolidated Statement of Stockholders’ Equity for the six months ended September 30, 2023
Consolidated Statement of Stockholders’ Equity
| For the six months ended September 30, 2023 | ||||||||||||
| September 30, 2023, before restatement | Restatement | September 30, 2023, after restatement | ||||||||||
| Accumulated deficit | $ | ( | ) | $ | $ | ( | ) | |||||
| Stockholders’ Equity | ||||||||||||
| F-11 |
Adjustments to Consolidated Statement of Operations for the six months ended September 30, 2023
Consolidated Statement of Operations
| For the six months ended September 30, 2023 | ||||||||||||
| September 30, 2023, before restatement | Restatement | September 30, 2023, after restatement | ||||||||||
| Net Income | $ | $ | ( | ) | $ | |||||||
Note 4 - Inventory
The
Company has its inventories stated at a lower cost (on first in, first out (FIFO) method) or market value basis. A reserve is established
if necessary to reduce excess or obsolete inventories to their realizable value. The stated cost consists of finished products. Reserves,
if necessary, are recorded to reduce inventory to market value based on assumptions about consumer demand, current inventory levels and
product life cycles for the various inventory items. These assumptions are evaluated annually and are based on the Company’s business
plan and on feedback from customers and the product development team. As of September 30, 2024, and March 31, 2024, the inventory
reserves were not material. The Company has three main suppliers, that account for
Schedule of Inventory
| As of | ||||||||
| September 30, 2024 | March 31, 2024 | |||||||
| Raw materials | $ | |||||||
| Finished goods | ||||||||
| Inventory | $ | $ | ||||||
Note 5 — Property and Equipment
Schedule of Property and Equipment
| As of | ||||||||
| September 30, 2024 | March 31, 2024 | |||||||
| Equipment – cost | $ | $ | ||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| Property and Equipment, Net | $ | $ | ||||||
Depreciation
expense for the six months ended September 30, 2024, and September 30, 2023, was $
Note 6 — Leases
The
Company signed a new
The Company treats a contract as a lease when the contract conveys the right to use a physically distinct asset for a period in exchange for consideration, or the Company directs the use of the asset and obtains substantially all the economic benefits of the asset. These leases are recorded as right-of-use (“ROU”) assets and lease obligation liabilities for leases with terms greater than 12 months. ROU assets represent the Company’s right to use an underlying asset for the entirety of the lease term. Lease liabilities represent the Company’s obligation to make payments over the life of the lease. A ROU asset and a lease liability are recognized at commencement of the lease based on the present value of the lease payments over the life of the lease. Initial direct costs are included as part of the ROU asset upon commencement of the lease. Since the interest rate implicit in a lease is generally not readily determinable for the operating leases, the Company uses an incremental borrowing rate to determine the present value of the lease payments. The incremental borrowing rate represents the rate of interest the Company would have to pay to borrow on a collateralized basis over a similar lease term to obtain an asset of similar value.
| F-12 |
The Company reviews the impairment of ROU assets consistent with the approach applied for the Company’s other long-lived assets. The Company reviews the recoverability of long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on the Company’s ability to recover the carrying value of the asset from the expected undiscounted future pre-tax cash flows of the related operations. The Company elected the practical expedient to exclude short-term leases (leases with original terms of 12 months or less) from ROU asset and lease liability accounts.
Supplemental balance sheet information related to leases were as follows:
Schedule of Supplemental Balance Sheet Related To Leases
| As of | ||||||||
| September 30, 2024 | March 31, 2024 | |||||||
| Assets | ||||||||
| Right of use asset, net | $ | $ | ||||||
| Operating lease liabilities | ||||||||
| Current | ||||||||
| Non-current | ||||||||
| Total Lease Liabilities | $ | $ | ||||||
The components of lease cost were as follows:
Schedule of Lease Cost
| For six months ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Depreciation | $ | $ | ||||||
| Interest on lease obligation | ||||||||
| Total lease cost | $ | $ | ||||||
Lease term and discount rate were as follows:
Schedule Lease Term and Discount Rate
| For the six months ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Weighted average remaining lease term - Operating leases | ||||||||
| Weighted average discount rate - Operating leases | % | % | ||||||
| F-13 |
Note 7 - Intangible Assets
Intangible assets, consisted of the following:
Schedule of Intangible Assets
| As of | ||||||||
| September 30, 2024 | March 31, 2024 | |||||||
| Telemedicine Property | $ | $ | ||||||
| Web Properties | ||||||||
| Domain | ||||||||
| Software | ||||||||
| Intangible assets, gross | ||||||||
| Accumulated Amortization | ( | ) | ( | ) | ||||
| Net Balance | $ | $ | ||||||
Amortization
expense for the six months ended September 30, 2024 was $
Note 8 - Goodwill
Goodwill
represents the excess of the aggregate purchase price over the fair value of the net assets acquired in the business combinations. On
November 08, 2022, the Company acquired
Schedule of Goodwill
| As of | ||||||||
September 30, 2024 | March 31, 2024 | |||||||
| RxCompound and Peaks | $ | $ | ||||||
| Total | $ | $ | ||||||
The Company conducted an impairment test as of September 30, 2024, and March 31, 2024, and no indication of impairment was identified
| F-14 |
Note 9 - Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consisted of the following:
Schedule of Accounts Payable and Accrued Expenses
| As of | ||||||||
| September 30, 2024 | March 31, 2024 | |||||||
| Accounts Payable | $ | $ | ||||||
| Accrued Expenses and other payable (A) | $ | $ | ||||||
| (A) |
As
of September 30, 2024, accrued expenses included
approximately; officer compensation of $
Note 10 – Debt
Loans and Notes Payable consisted of the following
Schedule of Notes and Loans Payable
| Name | Total | Current | Non-Current | |||||||||
| As of September 30, 2024 | ||||||||||||
| Equipment Finance | $ | $ | $ | |||||||||
| As of March 31, 2024 | ||||||||||||
| Equipment Finance | $ | $ | $ | |||||||||
No additional debt was incurred during the period.
Note 11 - Related Party Balances and Transactions
Parties
are considered to be related if one party has the ability to control or exercise significant influence over the other party in
making financial and operating decisions. Transactions with related parties have been disclosed officer’s compensation notes.
Additionally, for the six months ended September 30, 2024 the Company reimbursed Point 96 Consulting LLC for consulting services,
marketing, and SG&A in the amount of $
Officer
compensation for the three months ended September 30, 2024 was $
During the three months ended September 30, 2024, the Company paid Avenvi LLC $
| F-15 |
Note 12 – Commitment and Contingencies
On August 15, 2024, the Board of Directors of Earth Science Tech, Inc., a Florida corporation (the “Company”), approved a new twelve-month Employment Agreement for its officers Giorgio R. Saumat, the Company’s CEO and Chairman of the Board, and Mario G. Tabraue, the Company’s COO and Director of the Board, entered on August 16, 2024. Under the new agreement, the CEO shall receive eighteen percent of the Company’s monthly cash receipts while the COO shall receive twelve percent. Payments will commence on October 1, 2024, and will be based on the preceding month’s cash receipts, provided the Company’s net profit increases quarter over quarter. If the Company fails to increase its net profit, the arrangement must be renegotiated, with no payments made at the beginning of the new quarter. Additionally, the COO has agreed to relinquish all current roles held in the Company’s wholly owned subsidiaries, along with the associated compensation, in order to focus exclusively on his duties as COO. This adjustment reflects the COO’s commitment to the new role and revised scope of responsibilities.
The Company follows ASC 450 to account for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. This may result in contingent liabilities that are required to be accrued or disclosed in the financial statements. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time, that these matters will have a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.
Legal Matters:
From time to time and in the course of business, we may become involved in various legal proceedings seeking monetary damages and other relief. The amount of the ultimate liability, if any, from such claims cannot be determined. As of the date hereof, there are no legal claims currently pending or, to our knowledge, threatened against us or any of our officers or directors in their capacity as such or against any of our properties that, in the opinion of our management, would be likely to have a material adverse effect on our financial position, results of operations or cash flows.
Note 13 – Stockholders’ Equity
During the six months ended September 30, 2024, and 2023, the Company did t issue any shares of restricted common stock.
During the six months ended September 30, 2024, and 2023, the Company did t issue any shares of common stock at fair value.
During
the six months ended September 30, 2024, and 2023, the Company repurchased shares and shares of common stock at fair value
of $
As of September 30, 2024, the Company has repurchased a total of shares of its common stock out of its five million dollar common stock repurchase program initiated on January 29, 2024. Repurchases have been made at management’s discretion from time to time through privately negotiated transactions. The repurchase program expires December 31, 2025, but may be suspended for periods or discontinued at any time, and does not obligate the Company to acquire any particular number of shares.
Note 14 – Subsequent Events
Related Party Transaction
Giorgio R. Saumat, who currently serves as the Company’s Chief Executive Officer (CEO) and the Chairman of Board, is the seller in this transaction. The transaction was reviewed and approved by the Board of Directors to ensure that the terms were no less favorable to the Company than those that could be obtained from unaffiliated third parties.
Related Party Transaction
Mario G. Tabraue, who currently serves as the Company’s Chief Operations Officer (COO) and is a Director of the Board, is the seller in this transaction. The transaction was reviewed and approved by the Board of Directors to ensure that the terms were no less favorable to the Company than those that could be obtained from unaffiliated third parties.
On October 1, 2024, the company expanded into the pet and wildlife industry by launching Zoolzy, a brand under Peaks Curative, LLC. Zoolzy specializes in providing compounded medications tailored by RxCompoundstore.com, LLC., to the unique health needs of pets and wildlife. Visit: Zoolzy.com
On October 1, 2024, the Company relocated its principal office to 8950 SW 74th CT Suite 1401, Miami, FL 33156. The new office spans approximately one thousand one hundred twenty-five square feet, adding to the existing two thousand five hundred square feet of administrative space. This brings the Company’s total space to around seven thousand one hundred twenty-five total square feet, which includes approximately three thousand one hundred twenty-five square feet of administrative space, about two thousand square feet dedicated to pharmacy operations, and around one thousand five hundred square feet for off-site storage.
| F-16 |
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
The following section, Management’s Discussion and Analysis, should be read in conjunction with Earth Science Tech, Inc.’s financial statements and the related notes thereto and contains forward-looking statements that involve risks and uncertainties, such as statements of the Company’s plans, objectives, expectations, and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect,” and the like, and/or future-tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements in this Report on Form 10-Q. The Company’s actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of many factors. The Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Report filed on Form 10-Q.
The following discussion should be read in conjunction with the company’s unaudited consolidated financial statements and related notes and other financial data included elsewhere in this report. See also the notes to the Company’s consolidated financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in the Company’s Registration Statement filed on Form 10-12g and the Company’s Annual Report filed on Form 10-K for the fiscal year ended March 31, 2024, as well as the Company’s Quarterly report filed on Form 10-Q for the fiscal quarter ended June 30, 2024.
OVERVIEW
The Company is a holding entity set to acquire companies with its current focus in the health and wellness industry. The Company is presently in compounding pharmaceuticals and telemedicine through its wholly owned subsidiaries RxCompound, Peaks, and ESF.
RxCompound is a complete compounding pharmacy. RxCompound is currently licensed to fulfill prescriptions in 22 states: Delaware, Florida, Pennsylvania, New York, Arizona, New Jersey, Wisconsin, Minnesota, Rhode Island, Utah, Georgia, Nevada, Massachusetts, Missouri, Iowa, Maryland, Ohio, Colorado, North Carolina, Maine, Indiana and Illinois. RxCompound is in the application process to obtain licenses in the remaining states in which it is not yet licensed to fulfill prescriptions. Furthermore, RxCompound recently had its sterile compounding room approved to operate in late May 2023, to provide sterile products for injection.
Peaks is the telemedicine referral site facilitating asynchronous consultations for branded compound medications prepared at RxCompound. Peaks is currently positioned to prescribe to all 50 states utilizing third-party consultation services, but only able to fulfill prescriptions within RxCompound’s licensed states. Peaks will be able to fulfill more states as RxCompound becomes licensed in additional states.
ESF is a favored entity of ETST, effectively being a non-profit organization that was incorporated on February 11, 2019, and is structured to accept grants and donations to help those in need of assistance in paying for prescriptions.
Results of Operations
The following tables set forth summarized cost of revenue information for the three months ended September 30, 2024, and 2023:
| For the Three Months Ended September 30, | For the Six Months Ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenue | $ | 8,519,047 | $ | 1,927,720 | $ | 17,087,965 | $ | 2,147,654 | ||||||||
| Cost of Goods Sold | 2,252,366 | 746,226 | 4,410,850 | 817,391 | ||||||||||||
| Gross Profit | $ | 6,266,681 | $ | 1,181,494 | $ | 12,677,115 | $ | 1,330,263 | ||||||||
We had product sales of $8,519,047 and a gross profit of $6,266,681 representing a gross margin of 73% in the fiscal quarter ended September 30, 2024, compared with product sales of $1,927,720 and a gross profit of $1,181,494 representing a gross margin of 61% in the fiscal quarter ended September 30, 2023. The revenue increase during the three months ended September 30, 2024, compared with the three months ended September 30, 2023, is primarily due to an increase of sales through new accounts.
| 3 |
Operating Expenses
| For the three months ended September 30, | For the six months ended September 30, | |||||||||||||||||||||||||||||||
| 2024 | 2023 | change | % change | 2024 | 2023 | change | % change | |||||||||||||||||||||||||
| Salaries Expense | 3,605,954 | 193,917 | 3,412,037 | 95 | % | 6,941,084 | 258,305 | 6,682,779 | 96 | % | ||||||||||||||||||||||
| General and Administrative Expenses | 1,259,422 | 93,962 | 1,165,460 | 93 | % | 2,580,405 | 161,462 | 2,418,943 | 94 | % | ||||||||||||||||||||||
| Bank Charges | 271,452 | 271,452 | 100 | % | 560,297 | - | 560,297 | 100 | % | |||||||||||||||||||||||
| Marketing | 152,520 | 5,148 | 147,372 | 97 | % | 363,966 | 16,524 | 347,442 | 95 | % | ||||||||||||||||||||||
| Legal and Professional fees | 63,259 | 407,626 | (344,367 | ) | -544 | % | 181,706 | 424,546 | (242,840 | ) | -134 | % | ||||||||||||||||||||
| Insurance Expense | 45,021 | 45,021 | 100 | % | 80,826 | - | 80,826 | 100 | % | |||||||||||||||||||||||
| Depreciation and Amortization | 33,191 | 1,097 | 32,094 | 97 | % | 63,423 | 64,093 | (670 | ) | -1 | % | |||||||||||||||||||||
| Utilities | 6,302 | 6,302 | 100 | % | 10,830 | - | 10,830 | 100 | % | |||||||||||||||||||||||
| Total Expenses | 5,437,121 | 701,750 | 4,735,371 | 87 | % | 10,782,537 | 924,930 | 9,857,607 | 91 | % | ||||||||||||||||||||||
| Net Operating Income | 829,560 | 479,944 | 349,616 | 42 | % | 1,894,578 | 405,333 | 1,489,245 | 79 | % | ||||||||||||||||||||||
| Other Income/Expenses | ||||||||||||||||||||||||||||||||
| Other Income | (452 | ) | 452 | -100 | % | 13,200 | (452 | ) | 13,652 | 103 | % | |||||||||||||||||||||
| Interest Expense | (2,843 | ) | (34,911 | ) | 32,068 | -1128 | % | (4,807 | ) | (47,509 | ) | 42,702 | -888 | % | ||||||||||||||||||
| Net Income before taxes | 826,717 | 444,581 | 382,136 | 46 | % | 1,902,971 | 357,372 | 1,545,599 | 81 | % | ||||||||||||||||||||||
| Income Taxes | 28,349 | 100 | % | 28,349 | - | 28,349 | 100 | % | ||||||||||||||||||||||||
| Net Income | $ | 798,368 | $ | 444,581 | 353,787 | 44 | % | $ | 1,874,622 | $ | 357,372 | 1,517,250 | 81 | % | ||||||||||||||||||
For the three months ended September 30, 2024, Salaries expense increased to $3,605,954, this is attributable to the rapid growth the Company has experienced, hence the necessity to hire new employees, and the executive team’s new compensation agreement has been put in place.
General and administrative expenses increase from $93,962 for the three months ended September 30, 2023, to $1,259,422, this is due to the area managers fees to support clients out of state , for the six months ended September 30, 2024 increased from $161,462 to $2,580,405.
| 4 |
Bank charges for the three months ended September 30, 2024, totalled $271,452, this is directly related to credit card processing fees.
Marketing expenses totaled $152,520 for the three months ended September 30, 2024, and $5,148 for three months ended on September 30, 2023, this increase had been contemplated by management as part of the strategic plan to increase sales, for the six months ended September 30, 2024 marketing expense was $363,966 versus $16,524 in 2023.
Legal and professional fees totaled $63,259 for the three months ended September 30, 2024, and $407,626 for the three months ended September 30, 2023.
We are a smaller reporting company, as defined by 17 CFR § 229.10(f)(1). We do not consider the impact of inflation and changing prices as having a material effect on our net sales and revenues and on income from our operations for the previous two years or from continuing operations going forward.
Interest Expense
Interest expense for the three months ended September 30, 2024, was $2,843 vs $34,911 in the three months ended September 30, 2023. This 92% reduction of interest expense is attributable to the Company paying off a large portion of its long-term debt.
We use Adjusted EBITDA internally to evaluate our performance and make financial and operational decisions that are presented in a manner that adjusts from their equivalent GAAP measures or that supplements the information provided by our GAAP measures. Adjusted EBITDA is defined by us as EBITDA (net income (loss) plus depreciation expense, amortization expense, interest and income tax expense, minus income tax benefit), further adjusted to exclude certain non-cash expenses and other adjustments as set forth below. We use Adjusted EBITDA because we believe it more clearly highlights trends in our business that may not otherwise be apparent when relying solely on GAAP financial measures, since Adjusted EBITDA eliminates from our results specific financial items that have less bearing on our core operating performance.
We use Adjusted EBITDA in communicating certain aspects of our results and performance, including in this Quarterly Report, and believe that Adjusted EBITDA, when viewed in conjunction with our GAAP results and the accompanying reconciliation, can provide investors with greater transparency and a greater understanding of factors affecting our financial condition and results of operations than GAAP measures alone. In addition, we believe the presentation of Adjusted EBITDA is useful to investors in making period-to-period comparison of results because the adjustments to GAAP are not reflective of our core business performance.
Adjusted EBITDA is not presented in accordance with, or as an alternative to, GAAP financial measures and may be different from non-GAAP measures used by other companies. We encourage investors to review the GAAP financial measures included in this Annual Report, including our consolidated financial statements, to aid in their analysis and understanding of our performance and in making comparisons.
| 5 |
Assets and Cash Flows
| As of September 30, 2024 | As of March 31, 2024 | |||||||
(Unaudited) | Audited | |||||||
| ASSETS | ||||||||
| Current Assets | 2,281,088 | 1,258,234 | ||||||
| Total Assets | $ | 5,049,628 | $ | 3,881,336 | ||||
| Total Liabilities | 1,848,496 | 1,632,031 | ||||||
| 6 |
For the six months ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Net cash provided by operating activities | $ | 1,877,917 | $ | 127,910 | ||||
| Net cash used in investing activities | (108,595 | ) | — | |||||
| Net cash used/provided by financing activities | (934,832 | ) | 23,984 | |||||
| Net increase in cash and cash equivalents | 834,490 | 151,894 | ||||||
| Cash and cash equivalents at beginning of the period | 697,721 | 35,756 | ||||||
| Cash and cash equivalents at end of the period | $ | 1,532,211 | $ | 187,650 | ||||
The Company had $1,532,211 cash as of September 30, 2024, compared to $187,650 as of September 30, 2023.
Accounts receivable as of September 30, 2024, were $203,942, and 100% is expected to be collected within term.
The Company has made a $22,608 lease security deposit, which is fully refundable at the end of the lease period.
The Company has prepaid its liability insurance for the year totaling $90,110.
The Company’s subsidiaries, RxCompound and Peaks Curative have made additional capital expenditures as of September 30, 2024, and have a total net balance of $216,346 in property and equipment, versus $135,352 as of March 31, 2024.
As of September 30, 2024, the Company had $482,217 in inventory vs $315,738 as of March 31, 2024.
The Company had a balance of $392,227 in Accounts Payable as of September 30, 2024, compared to $530,724 as of March 31, 2024.
Accrued expenses totaled $1,158,238 as of September 30, 2024, and $854,719 as of March 31, 2024. Most accrued expenses as of September 30, 2024, are attributable to officer compensation.
The Stockholders’ Equity as of September 30, 2024, was $3,201,132, compared to $2,249,305 of Stockholders Equity as of March 31, 2024. This improvement is primarily attributable to the results of operations.
Cash Flow from Operating Activities
Net cash provided by operating activities for the six months ended September 30, 2024, was $1,877,917, compared to $127,909 provided by operating activities for the prior year period. The increase in cash flows from the prior year period is primarily driven by the results of operations.
Net cash from investing activities during the six months ended September 30, 2024, was $108,595.
Cash Flows from Financing Activities
Net cash used in financing activities during the six months ended September 30, 2024, was 934,832, of which $922,795 was repurchased of shares.
| 7 |
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable to a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable assurance of achieving the desired control objectives. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
The Company’s management, including the Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the effectiveness of the Company’s design and operations of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that review and evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that as of the end of the period covered by this Quarterly Report, the Company’s disclosure controls and procedures were effective as of September 30, 2024.
Management’s Report on Internal Control Over Financial Reporting
Our disclosure controls and procedures contain components of our internal controls over financial reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, the Company’s principal executive and financial officer and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company.
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of the Evaluation Date. In making this assessment, the Company’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) Internal Control-Integrated Framework (2013). The COSO framework is based upon five integrated components of control: control environment, risk assessment, control activities, information and communications and ongoing monitoring.
Based on an evaluation under the supervision of and with the participation of, the Company’s management, including the Chief Executive Officer and Chief Financial Officer, Company management has concluded that the Company’s internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act was reasonably effective as of the Evaluation Date, and will continue to improve, to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms and (ii) accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control and Financial Reporting
During the quarter ended September 30, 2024, the company has continued to make process improvement changes in the internal control over financial reporting which are reasonably likely to significantly improve the internal control over financial reporting. The impact of these changes made is still under evaluation as of the quarter ended September 30, 2024.
| 8 |
PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time and in the course of business, we may become involved in various legal proceedings seeking monetary damages and other relief. The amount of the ultimate liability, if any, from such claims cannot be determined. As of the date hereof, there are no legal claims currently pending or, to our knowledge, threatened against us or any of our officers or directors in their capacity as such or against any of our properties that, in the opinion of our management, would be likely to have a material adverse effect on our financial position, results of operations or cash flows.
ITEM 1A. RISK FACTORS
The Company is a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and is not required to provide the information under this item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the three months ended September 30, 2024, the Company issued 0 shares of its common stock for $0, in transactions that were exempt from registration under the Securities Act of 1933, as amended pursuant to Section 4(2) and/or Rule 506 promulgate under Regulation D. No gain or loss was recognized on the issuances.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. MINE SAFETY DISCLOSURES
None
ITEM 5. OTHER INFORMATION
ISSUER REPURCHASES OF EQUITY SECURITIES
During the six months ended September 30, 2024, the Company repurchased 6,345,896 shares of its common stock for $922,795 in private transactions through Stock Purchase Agreements with certain shareholders. On June 4, 2024, the Company repurchased 914,108 shares from an investor at $0.1734 per share in cash. On July 1, 2024, the Company repurchased 725,727 shares from an investor at $0.2346 per share. On July 9,2024, the Company repurchased 17,000 shares from an investor at $0.28 per share. On July 11 ,2024, the Company repurchased 70,000 shares from an investor at $0.13 per share. On July 26, 2024, the Company repurchased 1,500,000 shares from an investor at $0.13 per share. On August 6, 2024, the Company repurchased 2,500,000 shares from an investor at $0.105 per share. On August 6, 2024, the Company repurchased 70,000 shares from an investor at $0.105 per share. On August 27, 2024, the Company repurchased 549,061 shares from an investor at $0.21 per share.
During the three months ended September 30, 2024, the Company repurchased 5,431,788 shares of its common stock for $764,315.60, in private transactions through Stock Purchase Agreements with certain shareholders. On July 1, 2024, the Company repurchased 725,727 shares from an investor at $0.2346 per share. On July 9, 2024, the Company repurchased 17,000 shares from an investor at $0.28 per share. On July 11, 2024, the Company repurchased 70,000 shares from an investor at $0.13 per share. On July 26, 2024, the Company repurchased 1,500,000 shares from an investor at $0.13 per share. On August 6, 2024, the Company repurchased 2,500,000 shares from an investor at $0.105 per share. On August 6, 2024, the Company repurchased 70,000 shares from an investor at $0.105 per share. On August 27, 2024, the Company repurchased 549,061 shares from an investor at $0.21 per share.
ITEM 6. EXHIBITS
| 9 |
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| EARTH SCIENCE TECH, INC. | ||
| Dated: November 14, 2024 | By: | /s/ Giorgio R. Saumat |
| Giorgio R. Saumat | ||
| Its: | CEO and Chairman of the Board | |
| Dated: November 14, 2024 | By: | /s/ Ernesto Flores |
| Ernesto Flores, | ||
| Its: | Chief Financial Officer | |
| 10 |
Exhibit 31.1
CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER PURSUANT TO RULE 13a-14
I, Giorgio R. Saumat, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Earth Science Tech, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under the Company’s supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report the Company’s conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on the Company’s most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| EARTH SCIENCE TECH, INC. | ||
| Dated: November 14, 2024 | By: | /s/ Giorgio R. Saumat |
| Giorgio R. Saumat | ||
| Its: | CEO and Chairman of the Board | |
Exhibit 31.2
CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER PURSUANT TO RULE 13a-14
I, Ernesto Flores, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Earth Science Tech, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under the Company’s supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report the company’s conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on the Company’s most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| EARTH SCIENCE TECH, INC. | ||
| Dated: November 14, 2024 | By: | /s/ Ernesto Flores |
| Ernesto Flores, | ||
| Its: | Chief Financial Officer | |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Earth Science Tech, Inc. (the “Company”) on Form 10-Q for the fiscal quarter ending September 30, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Giorgio R. Saumat, certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| EARTH SCIENCE TECH, INC. | ||
| Dated: November 14, 2024 | By: | /s/ Giorgio R. Saumat |
| Giorgio R. Saumat | ||
| Its: | CEO and Chairman of the Board | |
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Earth Science Tech, Inc. (the “Company”) on Form 10-Q for the fiscal quarter ending September 30, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ernesto Flores, certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| EARTH SCIENCE TECH, INC. | ||
| Dated: November 14, 2024 | By: | Ernesto Flores |
| Ernesto Flores | ||
| Its: | Chief Financial Officer | |
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.