Earth Science Tech, Inc 10-Q for FY2024 Q3
Earth Science Tech, Inc. (ETST)
About this 10-Q
Earth Science Tech, Inc filed this 10-Q on February 20, 2024, covering the quarter ended December 31, 2023 (FY2024 Q3).
Headline figures
Quarter ended December 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $3.79M
- up 149529.4% from $2533 a year earlier
- Net income
- $225.44K
- up 129.0% from net income of $98.46K 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)
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 ☐
As of December 31, 2023, 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-14 | |
| 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. & Subsidiaries
Consolidated Balance Sheets
| December 31, 2023 | March 31, 2023 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts Receivable (net allowance of $ | $ | $ | ||||||
| Inventory | $ | $ | ||||||
| Total current assets | ||||||||
| Other Assets: | ||||||||
| Property and Equipment, net | $ | $ | ||||||
| Right of use asset, net | $ | $ | ||||||
| Intangible assets, net | $ | $ | ||||||
| Goodwill | $ | $ | ||||||
| Total other assets | $ | |||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Current portion of loans and obligations | $ | $ | ||||||
| Other Payables - Equipment Leases | $ | $ | ||||||
| Interest Payable | $ | $ | ||||||
| Current portion of operating lease obligations | $ | $ | ||||||
| Total current liabilities | $ | |||||||
| Operating lease obligations; less current maturities | $ | $ | ||||||
| Loans and obligations; less current maturities | $ | $ | ||||||
| Total Liabilities | $ | $ | ||||||
| Stockholders’ (Deficit) Equity: | ||||||||
| Preferred stock, par value $ per share, shares authorized; and shares issued and outstanding as of December 31, 2023, and March 31, 2023, respectively | $ | $ | ||||||
| Common stock, par value $per share, shares authorized; and shares issued and outstanding as of December 31, 2023, and March 31, 2023 respectively | $ | $ | ||||||
| Additional paid-in capital | $ | |||||||
| Accumulated deficit | ( | ) | $ | ( | ) | |||
| Total stockholders’ (Deficit)Equity | $ | $ | ||||||
| Total Liabilities and Stockholders’ (Deficit) Equity | $ | $ | ||||||
| F-1 |
Earth Science Tech, Inc. & Subsidiaries
Consolidated Statements of Operations
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
For the Three Months Ended December 31, | For the Nine Months Ended December 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of revenues | ||||||||||||||||
| Gross Profit | ||||||||||||||||
| Operating Expenses: | ||||||||||||||||
| Compensation - officers | ||||||||||||||||
| Officer compensation stock | ||||||||||||||||
| Compensation – staff | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Amortization & Depreciation | ||||||||||||||||
| Marketing | ||||||||||||||||
| Litigation Expense | ||||||||||||||||
| Cost of legal proceedings | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Income//(Loss) from operations | ( | ) | ( | ) | ||||||||||||
| Other Income (Expenses) | ||||||||||||||||
| Other Income | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Note Payable Interest | ( | ) | ||||||||||||||
| Interest SBA Loan | ( | ) | ( | ) | ||||||||||||
| Total other income (expenses) | ( | ) | ( | ) | ||||||||||||
| Net Profit/(Loss) before income taxes | ( | ) | ||||||||||||||
| Income taxes | ||||||||||||||||
| Net Profit/(Loss) | $ | $ | $ | $ | ( | ) | ||||||||||
| F-2 |
Earth Science Tech, Inc. & Subsidiaries
Consolidated Statements of Stockholders’ (Deficit) Equity
For Fiscal Quarter Ended December 31, 2023
| Description | Shares | Amount | Shares | Amount | Capital | Deficit | Total | |||||||||||||||||||||
| Common Stock | Preferred Stock | Additional Paid-in | Accumulated | |||||||||||||||||||||||||
| Description | Shares | Amount | Shares | Amount | Capital | Deficit | Total | |||||||||||||||||||||
| Balance at September 30, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Common stock issued for cash | ||||||||||||||||||||||||||||
| Common stock issued for services | ||||||||||||||||||||||||||||
| Common stock issued for Conversion on Note | ||||||||||||||||||||||||||||
| Net Profit/(Loss) | ||||||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
Earth Science Tech, Inc. & Subsidiaries
Consolidated Statements of Stockholders’ (Deficit) Equity
For Nine Months Ended December 31, 2023
| Common Stock | Preferred Stock | Additional Paid-in | Accumulated | |||||||||||||||||||||||||
| Description | Shares | Amount | Shares | Amount | Capital | Deficit | Total | |||||||||||||||||||||
| Balance at March 31, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Common stock issued for cash | ||||||||||||||||||||||||||||
| Common stock issued for services | ||||||||||||||||||||||||||||
| Common stock issued for Conversion on Note | ||||||||||||||||||||||||||||
| Net Profit/(Loss) | ||||||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| F-3 |
Earth Science Tech, Inc. & Subsidiaries
Consolidated Statements of Cash Flows
| 2023 | 2022 | |||||||
For the Nine Months Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities: | ||||||||
| Net Profit/(Loss) | ( | ) | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Stock-based compensation | ||||||||
| Gain on payable settlement | ||||||||
| Depreciation and amortization | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Deposits | ||||||||
| Increase in Accounts receivable | ( | ) | ( | ) | ||||
| Prepaid expenses and other current assets | ||||||||
| Inventory | ( | ) | ||||||
| Stock issued for debt settlement | ||||||||
| Other current liabilities | ||||||||
| Accrued settlement | ( | ) | ( | ) | ||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Net cash provided in operating activities | ( | ) | ||||||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment | ||||||||
| Net cash used in investing activities | ||||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of common stock | ||||||||
| Proceeds from Additional Paid In Capital | ||||||||
| Increase/(Decrease) in Loans | ( | ) | ||||||
| Increase/(Decrease) in Other Payables | ( | ) | ||||||
| Increase/(Decrease) in Lease Liability | ( | ) | ||||||
| Proceeds from loans and notes | ||||||||
| Net Cash Provided/Used by Financing Activities | ( | ) | ||||||
| Net increase (decrease) in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents at beginning of the period | ||||||||
| Cash and cash equivalents at end of the period | ||||||||
| Non-Cash Transactions | ||||||||
| Common stock issued on conversion of notes payable | ||||||||
| F-4 |
EARTH SCIENCE TECH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
(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, subsequently changed 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. Rx Compound Currently licensed to fulfill prescriptions in the states of Arizona, Colorado, Delaware, Florida, Georgia, Iowa, Maryland, Minnesota, Missouri, New York, New Jersey, Nevada, North Carolina, Ohio, Pennsylvania, Rhode Island, Utah, Washington, and Wisconsin. 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 men’s health. Peaks’ orders are exclusively fulfilled by RxCompound. Patients who order Peaks via monthly subscription receive their refills automatically. Currently, Peaks is focused on Men’s health, and, more specifically, ED. The company intends to expand offerings to include over the counter (“OTC”) (non-prescription) products such as supplements and topicals. The OTC products will be custom manufactured or fulfilled through partnered companies under the Peaks brand and offered worldwide.
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.
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”).
Principles of consolidation
The accompanying consolidated financial statements include all the accounts of the Company and its wholly owned subsidiaries RxCompound, Peaks Curative, and ESF.
The Company’s acquisition of RxCompound was consummated on November 8, 2022, along with Peaks Curative; however, RxCompound completed its PCAOB audit on February 3, 2023 (“Acquisition Date”). Operating results of subsidiaries have been consolidated according to their acquisition dates. No intercompany transactions and balances were identified.
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.
| F-5 |
Carrying value, recoverability, and impairment of long-lived assets
Company follows Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC’) 360 to evaluate its long-lived assets. The Company’s long-lived assets, which include property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
The Company assesses the recoverability of its long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group of long-lived assets over their remaining estimated useful lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives.
The Company considers the following to be some examples of important indicators that may trigger an impairment review: (i) significant under-performance or losses of assets relative to expected historical or projected future operating results; (ii) significant changes in the manner or use of assets or in the Company’s overall strategy with respect to the manner or use of the acquired assets or changes in the Company’s overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; (v) a significant decline in the Company’s stock price for a sustained period of time; and (vi) regulatory changes. The Company evaluates assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events. Impairment of assets, if any, are included in operating expenses.
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 December 31, 2023, and March 31, 2023, the Company held a cash balance of $
Related parties
The Company follows ASC 850 for the identification of related parties and disclosure of related party transactions.
Pursuant to this ASC related parties include a) affiliates of the Company; 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.
Commitments and contingencies
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.
| F-6 |
Revenue recognition
Revenue is recognized when the Company transfers control of its products to the customer, which typically occurs at a point-in-time, either upon shipment or delivery. Substantially all of the Company’s net revenues relate to products which are transferred to the customer at a point-in-time.
Inventories
The Company has its inventories stated at the lower of 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 bulk ingredients used to compound finished products as well as 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 from feedback from customers and the product development team.
Cost of Revenues
Components of costs of sales include product and shipping costs to customers and any inventory adjustments.
Shipping and Handling Costs
The Company accounts shipping and handling costs to customers as cost of revenue.
Research and development
Research and development costs are expensed as incurred. The Company’s research and development expenses relate to its engineering activities, which consist of the design and development of new products for specific customers, as well as the design and engineering of new or redesigned products for the industry in general.
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.
ASC 740 contains a two-step approach to recognizing and measuring uncertain tax positions. This first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement. The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may require periodic adjustments, and which may not accurately anticipate actual outcomes.
The
Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained
on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated
financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized
upon ultimate settlement. As of December 31, 2023, the Company has
| F-7 |
Interest
and penalties related to liabilities for uncertain tax positions will be charged to interest and operating expenses, respectively. The
Company has net operating loss carryforwards (NOL) for income tax purposes of approximately $
Internal Revenue Code Section 382 (“Section 382”) imposes limitations on the availability of a company’s net operating losses after certain ownership changes occur. The Section 382 limitation is based upon certain conclusions pertaining to the dates of ownership changes and the value of the Company on the dates of the ownership changes. It was determined that an ownership change occurred in October 2013 and March 2014. The amount of the Company’s net operating losses incurred prior to the ownership changes are limited based on the value of the Company on the date of the ownership change. Management has not determined the amount of net operating losses generated prior to the ownership change available to offset taxable income after the ownership change.
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 calculations is determined by dividing net results from operations by the weighted average number of common shares and dilutive common share equivalents outstanding. During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation.
For the nine months ended December 31, 2023, shares issuable upon conversion of convertible notes were anti-dilutive. As such, their effect has not been included in the calculation of diluted net loss per share. No dilutive common shares in the comparative year.
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 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. As of December 31, 2023, the Company recognized goodwill on the acquisition of its wholly owned subsidiaries; RxCompound and Peaks.
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 December 31, 2023, and 2022.
| F-8 |
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;
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 December 31, 2023, and December 31, 2022. 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 net of accumulated depreciation. 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. Depreciation on equipment is charged using a straight-line method over the estimated useful life of 5 years.
Recently issued accounting pronouncements
We have considered the impact of the following pronouncements:
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”), which requires entities to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, Revenue from Contracts with Customers (“ASC 606”). The update will generally result in an entity recognizing contract assets and contract liabilities at amounts consistent with those recorded by the acquiree immediately before the acquisition date rather than at fair value. ASU 2021-08 was effective on a prospective basis for fiscal years beginning after December 15, 2022, with early adoption permitted. The Company adopted ASU 2021-08 effective January 1, 2023, and will apply the guidance to subsequent acquisitions. The adoption of ASU 2021-08 did not have an impact on the Company’s consolidated financial statements because the Company did not acquire a business during the three and nine months ended December 31, 2023.
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 “emerging growth companies” 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-9 |
Intangible Assets
Intangible assets consist of Peaks telemedicine property, the Company’s web properties and goodwill recognized by RxCompound which is presented on the historical basis at date of acquisition by the Company. Prior to the acquisition, RxCompound, elected to amortize goodwill as an intangible asset on a straight-line basis over 10 years. All other Intangible assets with finite lives are amortized over the estimated useful life of five years. These assets are evaluated for impairment at least on an annual basis and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. We assess recoverability by determining whether the carrying value of such assets will be recovered through the undiscounted expected future cash flows. If the future undiscounted cash flows are less than the carrying amount of these assets, we recognize an impairment loss based on the excess of the carrying amount over the fair value of the assets.
Reclassification
No restatement was made in comparative Consolidated Financial Statements. However, certain amounts from the prior year have been reclassified to conform to the current year presentation.
Note 3 — Going Concern
The
accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern.
On December 31, 2023, the Company had negative working capital, an accumulated deficit of $
The Company as of November 8, 2022, became a holding entity set to acquire companies with its recent two acquisitions, RxCompound and Peaks both operating in the health and wellness industry. The Company’s cash position may not be sufficient to pay its obligations and support the Company’s daily operations. Management intends to raise additional funds by way of a public or private offering. Management believes that the actions presently being taken to further implement its business plan and generate sufficient revenues may provide the opportunity for the Company to continue as a going concern. While the Company believes in the viability of its strategy to generate sufficient revenues by acquiring companies and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenues.
The condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Note 4 - 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 in debt, acquisition, and officer’s compensation notes. As of December 31, 2023, the Company had no related party balances.
Note 5 – Stockholders’ Equity
During
the three months ended December 31, 2023, and 2022, the Company issued shares and shares of restricted common stock
for cash of $
During
the three months ended December 31, 2023, and 2022, the Company issued shares and shares of restricted common stock for
debt settlements at a fair value of $
On November 28, 2023, the Company” amended its Articles Incorporation (the “Amendment’) in the State of Florida to reduce its Authorized Shares of Common Stock from shares to shares. The Amendment was through a voting majority Shareholder Written Consent and a Corporate Resolution. The Amendment was stamped and uploaded by the State of Florida on January 8, 2024
| F-10 |
Note 6 — Commitments and Contingencies
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.
Employment and Consulting Agreements
The
Company has entered into amended employment agreements with the current CEO, Giorgio R. Saumat, and President, Mario G. Tabraue. The
amended term of the employment agreements commenced on October 1, 2023, for a term of twelve months. The Executive compensation is
On August 1, 2023, Company’s subsidiary, RX Compound, entered into an agreement with its chief pharmacist, Shibu John. Under the terms of the employment agreement Mr. John was issued shares of Company’s restricted common stock as additional compensation.
Note 7 — Property and Equipment
Schedule of Property And Equipment
| December 31, 2023 | December 31, 2022 | |||||||
For the Fiscal Quarter Ended December 31, | ||||||||
| December 31, 2023 | December 31, 2022 | |||||||
| Equipment – cost | $ | $ | ||||||
| Less: Accumulated depreciation | ( | ) | ||||||
| Property and Equipment, Net | $ | $ | ||||||
Depreciation
expense for the fiscal quarters ended December 31, 2023, and December 31, 2022, was $
During the fiscal quarter ended December 31, 2023, there were no additions to the Property and Equipment.
Note 8 — Leases
The Company treats a contract as a lease when the contract conveys the right to use a physically distinct asset for a period of time 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-11 |
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.
RxCompoundStore.com,
LLC entered into a lease arrangement on May 26, 2022, whereby the subsidiary obtained the possession of the property located at 8950
SW 74th Court Suite 101, Miami, FL, 33156. The lease requires monthly payments of $
Supplemental balance sheet information related to leases were as follows:
Schedule of Supplemental Balance Sheet Related to Leases
| 2023 | 2022 | |||||||
For the Fiscal Quarter Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| 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
| 2023 | 2022 | |||||||
For the Fiscal Quarter Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Depreciation | $ | $ | ||||||
| Interest on lease obligation | ||||||||
| Total lease cost | $ | $ | ||||||
Note 9 — Intangible Assets
Intangible assets, consisted of the following:
Schedule of Intangible Assets
| 2023 | 2022 | |||||||
For the Fiscal Quarter Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Telemedicine Property | $ | $ | ||||||
| Web Properties | ||||||||
| Goodwill – historical basis | ||||||||
| Accumulated Amortization | ( | ) | ||||||
| Net Balance | $ | $ | ||||||
| F-12 |
NOTE 10- 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
For the Fiscal Quarter Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| RxCompound and Peaks | $ | $ | ||||||
| Total | $ | $ | ||||||
The Company has evaluated all relevant events and circumstances as of December 31, 2023, which could have a negative effect on the future expected earnings or cashflow that could affect significant inputs used to determine the fair value of the indefinite-lived intangible asset. There are no indicators of a change in legal or regulatory factors or business climate which would require Goodwill to be tested for impairment between annual testing dates.
Note 11 — Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consisted of the following:
Schedule of Accounts Payable and Accrued Expenses
For the Fiscal Quarter Ended December 31, 2023 | ||||
| Accounts Payable (A) | $ | |||
| Accrued Expenses (B) | ||||
| Total | $ | |||
| (A) | Accounts Payable |
As
of December 31, 2023, accounts payable included inventory under net 60 terms of $
| (B) | Accrued Expenses |
As
of December 31, 2023, accrued expenses included accrued account management fee of $
| F-13 |
Note 12 — Debts
Notes payable and loans payable consisted of the following:
Schedule of Notes and Loans Payable
For the Nine Months Ended December 31, | ||||||||||
| Name | 2023 | 2022 | ||||||||
| SBA Loan Payable | (1) | $ | $ | |||||||
| Revolving Promissory Note Payable (Issa Note) | (2) | |||||||||
| Convertible Promissory Note - Strongbow | (3) | |||||||||
| Convertible Note Payable – Irrevocable Trust | ||||||||||
| Notes payable – related parties | ||||||||||
| Accrued Settlement | ||||||||||
| Equipment Finance | ||||||||||
| $ | $ | |||||||||
(1) SBA Loan
On
July 27, 2020, the Holding Company executed a secured loan with the U.S. Small Business Administration (SBA) under the Economic Injury
Disaster Loan program in the amount of $
On
April 01, 2021, RxCompound executed a secured loan with the U.S. Small Business Administration (SBA) under the Economic Injury Disaster
Loan program in the amount of $
Installment payments due within a year have been classified under current liabilities.
Both notes have been fully satisfied after December 31, 2023. Please refer to footnote,13 below, Subsequent Events, for additional information.
(2) Revolving Promissory Note –
On
August 31, 2021, the Company issued a revolving promissory note of $
(3) Convertible Promissory Note – Strongbow
Note 13 – Correction of Errors
During
2024, the Company discovered that the Goodwill recorded on the financial statements of RxCompound prior to being acquired by Earth Science
Tech, Inc. had been erroneously amortized and improperly reported in form 10-K for the year-ended March 31, 2023.
Note 14 — Subsequent Events
The
Company has evaluated subsequent events through February 20, 2024, which is the date the financial statements were issued, and has identified
two disclosable events or transactions that took place after December 31, 2023. On January 19, 2024, RX Compound satisfied its note with
the U.S. Small Business Administration (SBA) in the amount of $
| F-14 |
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, 2023, as well as the Company’s Quarterly report filed on Form 10-Q for the fiscal quarter ended December 31, 2022.
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 compounding pharmacy that has historically focused on men’s health, specifically medical products directed at ED such as Tadalafil, and Sildenafil Citrate (the generic names for Cialis and Viagra, respectively) and longevity. RxCompound is currently licensed to fulfill prescriptions in the states of Arizona, Colorado, Delaware, Florida, Georgia, Iowa, Maryland, Minnesota, Missouri, New York, New Jersey, Nevada, North Carolina, Ohio, Pennsylvania, Rhode Island, Utah, Washington, and Wisconsin. RxCompound is in the application process to obtain licenses in the remaining states in which it is not yet licensed to dispense 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.
| 3 |
Results of Operations
The following tables set forth summarized cost of revenue information for the fiscal quarters ended December 31, 2023, and December 31, 2022:
For the Fiscal Quarter Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Revenue | $ | 3,790,112 | $ | 2,533 | ||||
| Cost of revenues | 1,413,414 | 825 | ||||||
| Gross Profit/(Loss) | 2,376,698 | 1,708 | ||||||
We had product sales of $3,790,112 and a gross profit of $2,376,698 representing a gross margin of 62.7% in the fiscal quarter ended December 31, 2023, compared with product sales of $2,533 and a gross profit of $1,708 representing a gross margin of 67.4% in the fiscal quarter ended December 31, 2022. The revenue increase in the fiscal quarter ended December 31, 2023, compared with the fiscal quarter ended December 31, 2022, is primarily due to the acquisition of RxCompound and Peaks – see Item 2 Principal of Consolidation.
For the fiscal quarter ended December 31, 2023, the Company had a gain from continuing operations of approximately $225,443 compared to a gain from continuing operations of approximately $98,464 for the fiscal quarter ended December 31, 2022. This increase in net profit is primarily due to RxCompound’s increasing volume of business.
Operating Expenses
Fiscal Quarter Ended December 31, | ||||||||||||||||
| 2023 | 2022 | $ Change | % Change | |||||||||||||
| Compensation – officers | 389,274 | 9,654 | 379,620 | 3932.26 | % | |||||||||||
| Officer Compensation – Stock | - | - | - | 0.00 | % | |||||||||||
| Compensation - Employees | 181,524 | 181,524 | 100.00 | % | ||||||||||||
| Employee Compensation – Stock | - | - | - | 0.00 | % | |||||||||||
| Marketing | 3,062 | 4,200 | (1,138 | ) | -27.08 | % | ||||||||||
| General and administrative | 1,496,708 | 5,599 | 1,491,109 | 26631.70 | % | |||||||||||
| Professional fees | 27,135 | 22,233 | 4,902 | 22.05 | % | |||||||||||
| Cost of legal proceedings | - | 8,297 | (8,297 | ) | -100.00 | % | ||||||||||
| Licenses and fees | - | - | - | 0.00 | % | |||||||||||
| Amortization expense | 9,587 | 9,587 | 0.00 | % | ||||||||||||
| Litigation Expense | - | - | - | 0.00 | % | |||||||||||
| Depreciation expense | 38,377 | - | 38,377 | 100.00 | % | |||||||||||
| Total operating expenses | 2,145,668 | 49,983 | 2,095,685 | 4192.79 | % | |||||||||||
| Income / (Loss) from operations | 231,030 | (48,275 | ) | 279,305 | -578.57 | % | ||||||||||
| Other Income (Expenses): | ||||||||||||||||
| Other income (expense) | 8,250 | 166,037 | (157,787 | ) | -95.03 | % | ||||||||||
| Interest Income / (Expense) | (13,838 | ) | (19,298 | ) | 5,460 | -75.53 | % | |||||||||
| Total other income (expenses) | (5,588 | ) | 146,739 | (152,327 | ) | -103.8 | % | |||||||||
| Net Profit/(Loss) before income taxes | 225,443 | 98,464 | 126,979 | 128.96 | % | |||||||||||
| Income taxes | - | - | - | 0.00 | % | |||||||||||
| Net Profit/(Loss) | 225,443 | 98,464 | 126,979 | 128.96 | % | |||||||||||
| 4 |
Marketing expenses totaled $3,062 for the fiscal quarter ended December 31, 2023, a decrease of $1,138 from $4,200 for the fiscal quarter ended December 31, 2022.
Legal fees totaled $9,825 for the fiscal quarter ended December 31, 2023, a decrease of $8,672 from $18,497 for the fiscal quarter ended December 31, 2022.This decrease is attributable to Company’s successful settlement of outstanding debts with various creditors as represented in the debt schedule detailed in Footnote 12 above.
Professional fees, exclusive of legal fees, totaled $27,135 for the fiscal quarter ended December 31, 2023, an increase of $4,902 from $22,233 for the fiscal quarter ended December 31, 2022. This increase is due to RxCompound’s hiring consultants to support marketing and order fulfillment functions as well as upgrading financial reporting capabilities.
Costs and Expenses - Costs of sales include the costs of manufacturing, packaging, warehousing, and shipping our products. As we develop and release additional products, we expect our costs of sales to increase.
General and administrative expenses, inclusive of research and development and account management fees, increased from $5,999 for the fiscal quarter ended December 31, 2022, to $1,492,651 for the fiscal quarter ended December 31, 2023. This increase is primarily attributable to the hiring of account management consultants to manage growing demand for Company’s products and corresponding increase in the number of customer accounts. Approximately 85% or 1,272,933 of the General and Administrative expenses are related to account management fees.
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 quarter ended December 31, 2023 was 13,838, a net decrease of 11,268 compared to the quarter ended December 31, 2022 that showed interest expense of 4,483. The reduction in interest is due to Company’s successful strategy of retiring a large portion of its outstanding debt and negotiating payment discounts in the process.
Non-GAAP Financial Measures
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 Quarterly Report, including our consolidated financial statements, to aid in their analysis and understanding of our performance and in making comparisons.
| 5 |
Cash Flow & Assets
Earth Science Tech, Inc. & Subsidiaries
Consolidated Balance Sheets
| December 31, 2023 | December 31, 2022 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ | 205,718 | $ | 24,188 | ||||
| Accounts Receivable(net allowance of $0 and $0 respectively ) | $ | 112,826 | $ | 0 | ||||
| Prepaid expenses and other current assets | 0 | 0 | ||||||
| Inventory | $ | 395,483 | $ | 0 | ||||
| Total current assets | 714,027 | 24,188 | ||||||
| Other Assets: | ||||||||
| Property and Equipment | $ | 121,339 | $ | 0 | ||||
| Right of use asset, net | $ | 123,491 | $ | 0 | ||||
| Due from RX Compound | $ | 0 | $ | 397,382 | ||||
| Prepaid Acquisition Costs | $ | 0 | $ | 98,000 | ||||
| Intangible assets, net | $ | 108,222 | $ | 0.00 | ||||
| Goodwill | $ | 2,164,480 | $ | 0.00 | ||||
| Telemedicine Platform | $ | 14,096 | $ | 17,806 | ||||
| Total other assets | 2,531,628 | $ | 495,382 | |||||
| Total Assets | $ | 3,245,655 | $ | 537,376 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | 643,434 | $ | 235,419 | ||||
| Accrued Settlement – fox Rothchild | $ | 0 | $ | 158,846 | ||||
| Current portion of loans and obligations | $ | 30,492 | $ | 113,315 | ||||
| Issa Revolving Note | $ | 0 | $ | 250,000 | ||||
| Accrued Settlement – Strongbow Advisors | $ | 0 | $ | 220,000 | ||||
| Due to RXCompundStore.com., LLC | $ | 0 | $ | 110,363 | ||||
| Convertible Mote 1 VCAMJI Irrevocable Trust | $ | 0 | $ | 150,000 | ||||
| Convertible Mote 2 VCAMJI Irrevocable Trust | $ | 0 | $ | 250,000 | ||||
| Other Payables | $ | 98,542 | $ | 0.00 | ||||
| Current portion of operating lease obligations | $ | 0.00 | $ | 0.00 | ||||
| Total current liabilities | 957,476 | $ | 1,437,943 | |||||
| Operating lease obligations; less current maturities | $ | 113,790 | $ | 0.00 | ||||
| Loans and obligations; less current maturities | $ | 215,500 | $ | 0.00 | ||||
| Total Liabilities | $ | 1,079,489 | $ | 1,437,943 | ||||
| Stockholders’ (Deficit) Equity: | ||||||||
| Preferred stock, par value $0.001 per share, 1,000,000 shares authorized; 1,000,000 and 1,000,000 shares issued and outstanding as of December 31, 2023, and December 31, 2022, respectively | $ | 1,000 | $ | 1,000 | ||||
| Common stock, par value $0.001 per share, 750,000 shares authorized; 314,852,730 and 257,964,406 shares issued and outstanding as of December 31, 2023 and December 31, 2022 respectively | $ | 314,852 | $ | 257,966 | ||||
| Additional paid-in capital | 31,766,199 | $ | 29,106,164 | |||||
| Accumulated deficit | (29,922,668 | ) | $ | (30,265,697 | ) | |||
| Total stockholders’ (Deficit)Equity | $ | 2,159,382 | $ | (900,567 | ) | |||
| Total Liabilities and Stockholders’ (Deficit) Equity | $ | 3,245,655 | $ | 537,376 | ||||
| 6 |
A summary of our changes in cash flows & assets for the nine months ended December 31, 2023, and December, 2022, is provided below:
The Company had $205,718 in Cash for the nine months ended December 31, 2023, compared with $24,188 for the nine months ended December 31, 2022.
Assets’ position has been improved significantly with the purchase of inventory, recognition of goodwill, acquisition of equipment by RxCompound and addition of right of use assets for lease agreement of premises. Peaks also added its telemedicine platform in intangibles.
The Company had $112,826 in Accounts Receivable for the nine months ended December 31, 2023, compared with $0 for the nine months ended December 31, 2022. Accounts Receivable balance resulted from management’s decision to extend credit terms to certain of its larger customers.
The Company had $515,337 balance in Accounts Payable for the nine months ended December 31, 2023, compared with $149,236 for the nine months ended December 31, 2022. The accounts payable balance on December 31, 2023 was comprised of $506,855 in inventory under net 60 terms, and the remainder in miscellaneous payables.
Accrued expenses totaled $109,525 for the nine months ended December 31, 2023, an increase of $23,242 from $86,183 for the nine months ended December 31, 2022. The majority of the accrued expense balance on December 31, 2023 represents accrued account management fees of $76,000.
Long-term and short-term debt obligations have been reduced on settlement of outstanding claims against issue of shares.
The Company had a Stockholders Equity of $2,159,382 for the nine months ended December 31, 2023, compared with ($900,567) of Stockholders Equity for the nine months ended December 31, 2022. This improvement is primarily due to Rxcompound’s increase in total assets and revenue as well as a decrease in the Company’s total liabilities.
Cash Flow from Operating Activities
Net cash provided by operating activities for the nine months ended December 31, 2023, was $365,205 as compared to $699,254 used by the operating activities for the prior year period. The increase in cash flows from the prior year period is primarily driven by increased profitability and a decrease in cash payments related to litigation settlement agreements.
Cash Flows from Financing Activities
During the nine months ended December 31, 2023, the Company received $18,534 through the issue of common stock and $91,467 of additional paid-in-capital. During the same period, the Company used a net of $298,460 to reduce its outstanding debts.
Future Financing
As of December 31, 2023, the Company does not need any additional financing given the revenue being generated through the sales of RxCompound. If needed for expansion, the Company will seek financing with private investors through standard notes, discounted registered stock, and facilitated debt.
| 7 |
The Company’s Plan of Operation for the Next Twelve Months
The Company’s auditors have expressed doubt as to the Company’s ability to continue as a going concern in part, because on December 31, 2023, the Company had negative working capital and an accumulated deficit of $29,922,668.
The Company’s current liabilities have historically exceeded the Company’s Current Assets; and as of December 31, 2023,the Company’s total assets totaling $3,245,655 exceeding the Company’s liabilities of $1,086,272 by $2,159,383. In addition, the Company during the nine months ended December 31, 2023, had product sales of $5,937,766 and a gross profit of $3,706,961, representing a gross margin of 62.7%. The revenue increase is due to the acquisition of RxCompound and Peaks along with the increase in sales. This was primarily due to RxCompound’s completion of the integration of all product categories into its business, including hazardous hormonal creams and sterile injectable prescriptions. The Company recorded its highest revenue and profit generated month in December 2023. RxCompound plans to continue obtaining more accounts while expanding the states approved to fill with the capacity to compound injectables. Furthermore, the Company has been working on expanding its intellectual properties with unique platforms compared to Peaks and service providers that will further increase the Company’s assets and revenue. With this trend, the Company will have the ability to continue operating without having the need to raise capital unless needed for acquisitions or expansion.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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 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 the Company’s reports filed 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. Although the Company’s management has not formally carried out an evaluation under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”), because of the relatively thin management structure that the Company currently maintains, the Company believes that the Company’s Chief Executive Officer and Chief Financial Officer have sufficient timely information to allow them to make necessary disclosures in a timely manner.
Based on this informal evaluation, the Company’s chief executive and principal financial and accounting officer concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) were not effective as of December 31, 2023.
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f). The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting U.S. generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Changes in Internal Control and Financial Reporting
During the quarter ended December 31, 2023, 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 are still under evaluation as of the quarter ended December 31, 2023.
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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 nine months ended December 31, 2023, the Company issued 18,533,334 shares of its common stock for $110,000, 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. On April 5, 2023, the Company issued 5,000,000 shares to an investor at $0.005 per share for cash. On April 14, 2023, the Company issued 666,667 shares to an investor at $0.015 per share for cash. On April 27, 2023, the Company issued 5,000,000 shares to an investor at $0.005 per share for cash. On May 2, 2023, the Company issued 666,667 shares to an investor at $0.015 per share for cash. On May 4, 2023, the Company issued 2,000,000 shares to an investor at $0.005 per share for cash. On May 4, 2023, the Company issued 200,000 shares to an investor at $0.025 per share for cash. On May 24, 2023, the Company issued 5,000,000 shares to an investor at $0.005 per share for cash. On October 1, 2023, the Company issued 300,000 shares to an employee at $0.001 per share for services.
During the three months ended December 31, 2023, the Company issued 300,000 shares of its common stock. On October 1, 2023, the Company issued 300,000 shares to an employee at $0.001 per share for services.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. MINE SAFETY DISCLOSURES
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS
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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: February 20, 2024 | By: | /s/ Giorgio R. Saumat |
| Giorgio R. Saumat | ||
| Its: | CEO and Chairman of the Board | |
| Dated: February 20, 2024 | By: | /s/ Gabrielle Schuster |
| Gabrielle Schuster, | ||
| 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: February 20, 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, Gabrielle Schuster, 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: February 20, 2024 | By: | /s/ Gabrielle Schuster |
| Gabrielle Schuster, | ||
| 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 December 31, 2023, 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 result of operations of the Company.
| EARTH SCIENCE TECH, INC. | ||
| Dated: February 20, 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 December 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gabrielle Schuster, 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 result of operations of the Company.
| EARTH SCIENCE TECH, INC. | ||
| Dated: February 20, 2024 | By: | /s/ Gabrielle Schuster |
| Gabrielle Schuster | ||
| 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.