ETST 10-Q/A
Earth Science Tech, Inc. (ETST)
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 February 1, 2025, there were Common and 1,000,000 Preferred shares of the registrant’s stock outstanding.
EXPLANATORY NOTE
| ● | This Amendment corrects the number of common shares outstanding as reported in the original filing. The adjustment reflects an accurate alignment with the reported figures for the specified date. | |
| ● | Part I, Item 2. The comment section in the results of operations was amended to show the correct gross profit for the three months ended December 31, 2023, of $2,376,698. |
Except for the corrections noted above, no other changes have been made to the original Form 10-Q. This Amendment speaks as of the original filing date, February 14, 2025, and does not incorporate any subsequent events or modify any other disclosures made in the original filing.
| 2 |
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-5 | |
| Notes to Consolidated Financial Statements | F-6- F-18 | |
| ITEM 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 4 |
| ITEM 3. | Quantitative and Qualitative Disclosures about Market Risk | 9 |
| ITEM 4. | Controls and Procedures | 9 |
| PART II. OTHER INFORMATION | ||
| ITEM 1. | Legal Proceedings | 10 |
| ITEM 1A. | Risk Factors | 10 |
| ITEM 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 10 |
| ITEM 3. | Defaults Upon Senior Securities | 10 |
| ITEM 4. | Mine Safety Disclosures | 10 |
| ITEM 5. | Other Information | 10 |
| ITEM 6. | Exhibits | 11 |
| SIGNATURES | 12 | |
| 3 |
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EARTH SCIENCE TECH, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
As of December 31, | As
of March 31, | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts Receivable | ||||||||
| Equity Investments at fair value | ||||||||
| Inventory | ||||||||
| Deposits | ||||||||
| 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 December 31, 2024, and March 31, 2024, respectively | ||||||||
| Common stock, par value $ per share, shares authorized; and shares issued and outstanding as of December 31, 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 NINE MONTHS ENDED DECEMBER 31, 2024, AND 2023.
(UNAUDITED)
| For the Three Months Ended December 31, | For the Nine Months Ended December 31, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| (As restated) | (As restated) | |||||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of goods sold | ||||||||||||||||
| Gross Profit | ||||||||||||||||
| Expenses: | ||||||||||||||||
| Salaries expenses | ||||||||||||||||
| General and administrative expense | ||||||||||||||||
| Marketing | ||||||||||||||||
| Bank charges | ||||||||||||||||
| Insurance expense | ||||||||||||||||
| Legal and professional fees | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Utilities | ||||||||||||||||
| Total Expenses | ||||||||||||||||
| Other Income/Expenses | ||||||||||||||||
| Net realized gain on sale of investments | ||||||||||||||||
| Dividend income | ||||||||||||||||
| Unrealized loss of fair value changes of investments | ( | ) | ( | ) | ||||||||||||
| 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 basic and diluted | ||||||||||||||||
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 nine months ended December 31, 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 December 31, 2024 | $ | 1,000,000 | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||
For the three months ended December 31, 2024
| Common Stock | Preferred Stock | Additional Paid-in | Accumulated | |||||||||||||||||||||||||
| Description | Shares | Amount | Shares | Amount | Capital | Deficit | Total | |||||||||||||||||||||
| Balance at September 30, 2024 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Common stock buyback | ( | ) | ( | ) | - | ( | ) | $ | ( | ) | ||||||||||||||||||
| Net Income | $ | |||||||||||||||||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| F-3 |
For the nine months ended December 31, 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 services | - | |||||||||||||||||||||||||||
| Common stock issued for conversion of note payable | - | |||||||||||||||||||||||||||
| Net Profit/(Loss) | - | - | ||||||||||||||||||||||||||
| Balance at December 31, 2023 (As restated) Note 3 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
For the three months ended December 31, 2023
| Common Stock | Preferred Stock | Additional Paid-in | Accumulated | |||||||||||||||||||||||||
| Description | Shares | Amount | Shares | Amount | Capital | Deficit | Total | |||||||||||||||||||||
| Balance at September 30, 2023 (As restated) Note 3 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Common stock issued for services | - | |||||||||||||||||||||||||||
| Net Income (Loss) | - | - | $ | |||||||||||||||||||||||||
| Balance at December 31, 2023 (As restated) Note 3 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.
| F-4 |
EARTH SCIENCE TECH, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
FOR NINE MONTHS ENDED DECEMBER 31, 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 | ||||||||
| Stock based compensation | ||||||||
| Unrealized loss on investments | ||||||||
| Realized gain on sale of investments | ( | ) | ||||||
| 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 by operating activities | ||||||||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment and intangibles | ( | ) | ||||||
| Purchase of investments | ( | ) | ||||||
| Sale of investments | ||||||||
Cash used for asset acquisitions loan unpaid balance | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of common stock | ||||||||
| Payments on loans and obligations | ( | ) | ( | ) | ||||
| Proceeds from loan payable | ||||||||
| Repurchase of common stock | ( | ) | ||||||
| Net Cash provided by (used) in 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 | $ | $ | ||||||
| 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 | $ | $ | ||||||
| Short term loan for asset acquisition | $ | $ | ||||||
The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.
| F-5 |
EARTH SCIENCE TECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 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 October 1, 2024, The Company operates as a strategic holding company, focused on value creation through the acquisition, operational optimization, and management of its operating businesses. The company executes this strategy via its wholly-owned subsidiaries: RxCompoundStore.com, LLC. (RxCompound”), MisterMeds, LLC. (“MisterMeds”), Peaks Curative, LLC. (“Peaks”), Avenvi, LLC. (“Avenvi”), and Earth Science Foundation, Inc. (“EST”).
RxCompound, based in Miami, Florida, is a fully licensed compounding pharmacy, currently authorized to fulfill prescriptions in 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, Illinois, and Puerto Rico. The company compounds both sterile and non-sterile medications. The company is actively pursuing licensure in the remaining states where it is not yet approved to ship prescriptions.
Mister Meds, acquired on October 1, 2024 from a related party, and located in Abilene, Texas, is in the process of obtaining full licensure as a compounding pharmacy. The company is projected to begin operations in the first quarter of 2025. The pharmacy will feature a state-of-the-art sterile room, equipped with both positive and negative pressure capabilities, as well as hazardous compounding facilities. It will operate from a 5,000 sq. ft. facility owned by Avenvi LLC, a related party. Additionally, Mister Meds plans to apply for state licenses in markets where RxCompoundStore.com is not yet licensed.
Peaks is a telemedicine referral platform that facilitates asynchronous consultations for Peaks-branded compounded medications prepared at RxCompoundStore.Com and Mister Meds. The platform is currently operational in states where RxCompoundStore.com and Mister Meds are licensed. Through the development of its own network of healthcare providers via MyOnlineConsultation.com, as well as the continued expansion of state licensure for RxCompoundStore.com and Mister Meds, Peaks plans to extend its services to all 50 states. The company also recently expanded into the Animal market with the acquisition of Zoolzy.Com.
Avenvi
acquired from a related party, a diversified company with expertise across various segments of the real estate industry. The company has developed a robust portfolio
of real estate assets, primed for development, and provides financing solutions to purchasers of properties developed by Avenvi. This
strategic positioning allows Avenvi to engage in the real estate market at every stage, from identifying development opportunities to
facilitating end-user property acquisitions. In addition, Avenvi manages investments for ETST and oversees the ongoing $
| F-6 |
EST. is a 501(c)(3) non-profit organization and a favored entity of ETST. Incorporated on February 11, 2019, the Foundation is established to receive grants and donations to support individuals in need of financial assistance for prescription costs at both RxCompoundStore.com and Mister Meds.
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 nine months ended December 31, 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 RxCompoundstore.com LLC, Peaks Curative, LLC ,ESF, Avenvi LLC, and Mister Meds, LLC. All intercompany transactions have been eliminated during consolidation.
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 December 31, 2024, and March 31, 2024, 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 December 31, 2024, and March 31,2024, the Company held a cash balance of $
Accounts Receivable.
The Company follows ASC-326- CECL, Financial Instruments-Credit Losses 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 receivables are recorded for pharmaceuticals picked up or shipped as of December 31, 2024, and March 31, 2024. Accounts receivables are expected to be collected within twelve months in its entirety, therefore no reserve was necessary.
| F-7 |
| As of | ||||||||
| December 31, 2024 | March 31, 2024 | |||||||
| Accounts Receivable | $ | $ | ||||||
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.
Equity investments at fair value
The Company accounted for equity securities using the trading method under ASU 2016-01, Recognition and Measurement of Financial assets and Financial Liabilities, securities are reported at fair value, and valuation changes directly recorded in current period earnings, impacting net income.
As of December 31, 2024 |
||||
| Cost Basis | $ | |||
| Unrealized gain/(loss) | ( |
) | ||
| Equity securities - Fair value | $ | |||
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.
| F-8 |
The Company’s disaggregated revenue by category is as follows:
For the nine months ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Core: | ||||||||
| Sale of Pharmaceutical products – RxCompound and Peaks | $ | $ | ||||||
| Total core revenue, net | $ | $ | ||||||
| Non-Core: | ||||||||
| Shipping income | 524,059 | - | ||||||
Total revenue, net | $ | $ | ||||||
During the three and nine months ended December 31, 2024 the
Company had a net realized gain on sales of investments of $
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 December 31, 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.
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-9 |
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 nine months ended December 31, 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 December 31, 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
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, 2024, and March 31, 2024. 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.
| F-10 |
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 and nine
months ended December 31, 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.
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 December 31, 2023, the Company’s subsidiary RXCompound carried a goodwill in the amount of $
| F-11 |
Adjustments to Consolidated Balance Sheet as of December 31, 2023
Consolidated Balance Sheet
| As of December 31, 2023 | ||||||||||||
| December 31, 2023, before restatement | Restatement | December 31, 2023, after restatement | ||||||||||
| Total Assets | $ | $ | $ | |||||||||
| Total stockholders’ Equity | ||||||||||||
Adjustments to Consolidated Statement of Stockholders’ Equity for the six months ended December 31, 2023
Consolidated Statement of Stockholders’ Equity
| For the nine months ended December 31, 2023 | ||||||||||||
| December 31, 2023, before restatement | Restatement | December 31, 2023, after restatement | ||||||||||
| Accumulated deficit | $ | ( | ) | $ | $ | ( | ) | |||||
| Stockholders’ Equity | ||||||||||||
Adjustments to Consolidated Statement of Operations for the nine months ended December 31, 2023
Consolidated Statement of Operations
| For the nine months ended December 31, 2023 | ||||||||||||
| December 31, 2023, before restatement | Restatement | December 31, 2023, after restatement | ||||||||||
| Net Income | $ | $ | $ | |||||||||
| F-12 |
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 December 31, 2024, and March 31, 2024, the inventory reserves
were not material. The Company has three main suppliers, that account for
| As of | ||||||||
| December 31, 2024 | March 31, 2024 | |||||||
| Raw materials | $ | |||||||
| Finished goods | ||||||||
| Inventory | $ | $ | ||||||
Note 5 — Property and Equipment
| As of | ||||||||
| December 31, 2024 | March 31, 2024 | |||||||
| Land | $ | $ | ||||||
| Building | ||||||||
| Equipment – cost | $ | $ | ||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| Property and Equipment, Net | $ | $ | ||||||
Depreciation
expense for the nine months ended December 31, 2024, and December 31, 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.
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.
| F-13 |
Supplemental balance sheet information related to leases were as follows:
| As of | ||||||||
| December 31, 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:
| For nine months ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Depreciation | $ | $ | ||||||
| Interest on lease obligation | ||||||||
| Total lease cost | $ | $ | ||||||
Lease term and discount rate were as follows:
| For the nine months ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Weighted average remaining lease term - Operating leases | ||||||||
| Weighted average discount rate - Operating leases | % | % | ||||||
| F-14 |
Note 7 - Intangible Assets
Intangible assets, consisted of the following:
| As of | ||||||||
| December 31, 2024 | March 31, 2024 | |||||||
| Telemedicine Property | $ | $ | ||||||
| Web Properties | ||||||||
| Domain | ||||||||
| Software | ||||||||
| Accumulated Amortization | ( | ) | ( | ) | ||||
| Net Balance | $ | $ | ||||||
Amortization
expense for the nine months ended December 31, 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
| As of | ||||||||
December 31, 2024 | March 31, 2024 | |||||||
| RxCompound and Peaks | $ | $ | ||||||
| Total | $ | $ | ||||||
The Company conducted an impairment test as of December 31, 2024, and March 31, 2024, and no indication of impairment was identified.
| F-15 |
Note 9 - Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consisted of the following:
| As of | ||||||||
| December 31, 2024 | March 31, 2024 | |||||||
| Accounts Payable | $ | $ | ||||||
| Accrued Expenses and other payable (A) | $ | $ | ||||||
| (A) |
As
of December 31, 2024, accrued expenses included approximately;
officer compensation of $
Note 10 – Debt
Loans and Notes Payable consisted of the following
| Name | Total | Current | Non-Current | |||||||||
| As of December 31, 2024 | ||||||||||||
| Equipment Finance | $ | $ | $ | |||||||||
| Short term loan | ||||||||||||
| As of March 31, 2024 | ||||||||||||
| Equipment Finance | $ | $ | $ | |||||||||
The
Company entered into an agreement on October 1st, 2024, to acquire Avenvi, LLC, owned by Giorgio R. Saumat. The Company
agreed to make a down payment, and
The
Company obtained a $
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.
Officer
compensation of approximately $
The Company purchased other entities from related parties. See Note 14.
| F-16 |
Note 12 – Commitment and Contingencies
The Company follows ASC 450, Contingencies, 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 nine months ended December 31, 2024, and 2023, the Company did t issue any shares of restricted common stock.
During the nine months ended December 31, 2024, and 2023, the Company issued and shares respectively of common stock at fair value.
During the three months ended December 31, 2024, and 2023, the Company issued and shares respectively of common stock at par value for services.
During
the nine months ended December 31, 2024, and 2023, the Company repurchased shares and shares of common stock at fair value
of $
Note 14 – Acquisitions
Mister
Meds was acquired for a total of $
Mister Meds is in the process of obtaining full licensure as a compounding pharmacy. The company is projected to begin operations in the first quarter of 2025. The pharmacy will feature a state-of-the-art sterile room, equipped with both positive and negative pressure capabilities, as well as hazardous compounding facilities. It will operate from a 5,000 sq. ft. facility owned by Avenvi LLC, a related party. Additionally, Mister Meds plans to apply for state licenses in markets where RxCompoundStore.com is not yet licensed.
Avenvi is a diversified company with expertise across
various segments of the real estate industry. The company has developed a robust portfolio of real estate assets, primed for development,
and provides financing solutions to purchasers of properties developed by Avenvi. This strategic positioning allows Avenvi to engage in
the real estate market at every stage, from identifying development opportunities to facilitating end-user property acquisitions. In addition,
Avenvi manages investments for ETST and oversees the ongoing $
Assets acquired from Avenvi LLC and Mister Meds.
| Cash | $ | |||
| Investments | ||||
| Property and equipment | ||||
| Intangibles assets | ||||
| Total assets acquired | $ | |||
| Purchase price | $ |
| F-17 |
Note 15 – Subsequent Events
On
January 30, 2025, Company” entered into an acquisition agreement with Las Villas Healthcare, LLC. and Doconsultations.com, LLC.,
both Florida limited liability companies (together, the “Targets”).
On
January 30, 2025, the Company, entered into an acquisition agreement with Magnefuse, LLC and Alicat, LLC, both Florida limited liability
companies (together, the “Targets”).
| F-18 |
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 December 31, 2024.
OVERVIEW
The Company operates as a strategic holding company, focused on value creation through the acquisition, operational optimization, and management of its operating businesses. The company executes this strategy via its wholly-owned subsidiaries: RxCompoundStore.com, LLC. (RxCompound”), MisterMeds, LLC. (“MisterMeds”), Peaks Curative, LLC. (“Peaks”), Avenvi, LLC. (“Avenvi”), and Earth Science Foundation, Inc. (“EST”).
RxCompound, based in Miami, Florida, is a fully licensed compounding pharmacy, currently authorized to fulfill prescriptions in 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, Illinois, and Puerto Rico. The company compounds both sterile and non-sterile medications. The company is actively pursuing licensure in the remaining states where it is not yet approved to ship prescriptions.
| 4 |
Mister Meds, acquired on October 1, 2024, and located in Abilene, Texas, is in the process of obtaining full licensure as a compounding pharmacy. The company is projected to begin operations in the first quarter of 2025. The pharmacy will feature a state-of-the-art sterile room, equipped with both positive and negative pressure capabilities, as well as hazardous compounding facilities. It will operate from a 5,000 sq. ft. facility owned by Avenvi. Additionally, Mister Meds plans to apply for state licenses in markets where RxCompoundStore.com is not yet licensed.
Peaks is a telemedicine referral platform that facilitates asynchronous consultations for Peaks-branded compounded medications prepared at RxCompoundStore.Com and Mister Meds. The platform is currently operational in states where RxCompoundStore.com and Mister Meds are licensed. Through the development of its own network of healthcare providers via MyOnlineConsultation.com, as well as the continued expansion of state licensure for RxCompoundStore.com and Mister Meds, Peaks plans to extend its services to all 50 states. The company also recently expanded into the Animal market with the acquisition of Zoolzy.Com.
Avenvi is a diversified company with expertise across various segments of the real estate industry. The company has developed a robust portfolio of real estate assets, primed for development, and provides financing solutions to purchasers of properties developed by Avenvi. This strategic positioning allows Avenvi to engage in the real estate market at every stage, from identifying development opportunities to facilitating end-user property acquisitions. In addition, Avenvi manages investments for ETST and oversees the ongoing $5 million share repurchase program.
EST. is a 501(c)(3) non-profit organization and a favored entity of ETST. Incorporated on February 11, 2019, the Foundation is established to receive grants and donations to support individuals in need of financial assistance for prescription costs at both RxCompoundStore.com and Mister Meds.
Results of Operations
The following tables set forth summarized cost of revenue information for the three months ended December 31, 2024, and 2023:
| For the Three Months Ended December 31, | For the Nine Months Ended December 31, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenue | $ | 7,352,635 | $ | 3,790,112 | $ | 24,440,600 | $ | 5,937,766 | ||||||||
| Cost of Goods Sold | 2,265,762 | 1,413,414 | 6,676,612 | 2,230,805 | ||||||||||||
| Gross Profit | $ | 5,086,873 | $ | 2,376,698 | $ | 17,763,988 | $ | 3,706,961 | ||||||||
We had product sales of $7,352,635 and a gross profit of $5,086,873 representing a gross margin of 69% in the three months ended December 31, 2024, compared with product sales of $3,790,112 and a gross profit of $2,376,698 representing a gross margin of 63% during the three months ended December 31, 2023. The revenue increase during the three months ended December 31, 2024, compared with the three months ended December 31, 2023, is primarily due to an increase marketing campaigns and addition of sales personnel.
| 5 |
Operating Expenses
For the three months ended | For the nine months ended December 31, | |||||||||||||||||||||||||||||||
| 2024 | 2023 | change | % change | 2024 | 2023 | change | % change | |||||||||||||||||||||||||
| Labor Expense | $ | 3,297,826 | $ | 570,798 | $ | 2,727,028 | 83 | % | $ | 10,372,308 | $ | 829,103 | $ | 9,543,205 | 92 | % | ||||||||||||||||
| General and Administrative Expenses | 809,850 | 1,496,708 | (686,858 | ) | 85 | % | 3,455,474 | 2,012,669 | 1,442,805 | 42 | % | |||||||||||||||||||||
| Marketing | 346,109 | 3,062 | 343,047 | 99 | % | 511,455 | 19,586 | 491,869 | 96 | % | ||||||||||||||||||||||
| Bank charges | 210,549 | - | 210,549 | 100 | % | 770,849 | - | 770,849 | 100 | % | ||||||||||||||||||||||
| Insurance expense | 79,569 | - | 79,569 | 100 | % | 160,395 | - | 160,395 | 100 | % | ||||||||||||||||||||||
| Legal and professional fees | 61,540 | 27,135 | 34,405 | 56 | % | 243,245 | 97,181 | 146,064 | 60 | % | ||||||||||||||||||||||
| Depreciation and amortization | 44,778 | 47,964 | (3,186 | ) | -7 | % | 108,201 | 112,058 | (3,857 | ) | -4 | % | ||||||||||||||||||||
| Utilities | 10,426 | - | 10,426 | 100 | % | 21,257 | - | 21,257 | 100 | % | ||||||||||||||||||||||
| Total Expenses | 4,860,647 | 2,145,667 | 2,714,980 | 56 | % | 15,643,184 | 3,070,597 | 12,572,587 | 80 | % | ||||||||||||||||||||||
| Other Income/Expenses | ||||||||||||||||||||||||||||||||
| Net realized gain on sale of investments | 174,613 | - | 174,613 | 100 | % | 174,613 | - | 174,613 | 100 | % | ||||||||||||||||||||||
| Dividend Income | 9,123 | - | 9,123 | 100 | % | 9,123 | - | 9,123 | 100 | % | ||||||||||||||||||||||
| Unrealized loss of fair value changes in investments | (197,277 | ) | - | (197,277 | ) | 100 | % | (197,277 | ) | - | (197,277 | ) | 100 | % | ||||||||||||||||||
| Other Income | 16 | 8,250 | (8,234 | ) | -5185 | % | 13,216 | 7,798 | 5,418 | 41 | % | |||||||||||||||||||||
| Interest Expense | (6,290 | ) | (13,838 | ) | 7,548 | -120 | % | (11,097 | ) | (61,347 | ) | 50,250 | -453 | % | ||||||||||||||||||
| Net Income before taxes | 206,411 | 225,443 | (19,032 | ) | -9 | % | 2,109,382 | 582,815 | 1,526,567 | 72 | % | |||||||||||||||||||||
| Income Taxes | - | - | - | - | % | 28,349 | - | 28,349 | 100 | % | ||||||||||||||||||||||
| Net Income | $ | 206,411 | $ | 225,443 | (19,032 | ) | -9 | % | $ | 2,081,033 | $ | 582,815 | 1,498,218 | 72 | % | |||||||||||||||||
| 6 |
For the three months ended December 31, 2024, Labor expense increased to $3,297,826, this is attributable to the rapid growth the Company has experienced, hence the necessity to hire new employees.
General and administrative expenses decreased from $1,496,708 for the three months ended December 31, 2023, to $809,850 for the three months ended December 31, 2024, this 85% decrease is mainly attributable to the outsourcing of area managers.
Marketing expenses totaled $346,109 for the three months ended December 31, 2024, and $3,062 for three months ended on December 31, 2023, this increase had been contemplated by management as part of the strategic plan to increase sales.
Bank charges for the three months ended December 31, 2024, totaled $210,549, this is directly related to credit card processing fees.
Legal and professional fees totaled $61,540 for the three months ended December 31, 2024, and $27,135 for the three months ended December 31, 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 December 31, 2024, was $6,290 vs $13,838 in the three months ended December 31, 2023. This 120% 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.
Cash Flow & Assets
| As of December 31, 2024 | As of March 31, 2024 | |||||||
| (Unaudited) | Audited | |||||||
| ASSETS | ||||||||
| Current Assets: | $ | 2,005,365 | $ | 1,258,234 | ||||
| Total Assets | 5,708,014 | 3,881,336 | ||||||
| Total Current Liabilities | 2,314,592 | 1,486,522 | ||||||
| 7 |
For the nine months ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Net cash provided by operating activities | $ | 2,378,347 | $ | 307,280 | ||||
| Net cash used in investing activities | (1,810,891 | ) | - | |||||
| Net cash used/provided by financing activities | (742,938 | ) | (137,318 | ) | ||||
| Net increase(decrease) in cash and cash equivalents | (175,482 | ) | 169,962 | |||||
| Cash and cash equivalents at beginning of the period | 697,721 | 35,756 | ||||||
| Cash and cash equivalents at end of the period | $ | 522,239 | $ | 205,718 | ||||
The Company had $522,239 cash as of December 31, 2024, compared to $205,718 as of December 31, 2023.
Accounts receivable as of December 31, 2024, were $164,221, and 100% is expected to be collected within term.
The Company has made a $32,608 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 $47,967.
The Company’s subsidiaries have made additional capital expenditures as of December 31, 2024, and have a total net balance of $1,123,243 in property and equipment, versus $135,352 as of March 31, 2024.
As of December 31, 2024, the Company had $137,557 in inventory vs $315,738 as of March 31, 2024.
The Company had a balance of $46,292 in Accounts Payable as of December 31, 2024, compared to $530,724 as of March 31, 2024.
Accrued expenses totaled $1,394,754 as of December 31, 2024, and $854,719 as of March 31, 2024. Most accrued expenses as of December 31, 2024.
The Company financed a portion of Avenvi’s acquisition, and $400,000 was outstanding as of the end of December 31, 2024.
The Stockholders’ Equity as of December 31, 2024, was $3,280,447, 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 nine months ended December 31, 2024, was $2,378,347, compared to $307,280 provided by operating activities for the prior year period.
Cash Flow from Investing Activities
Net cash used in investing activities during the nine months ended December 31, 2024, was $1,810,891.
Cash Flows from Financing Activities
Net cash used in financing activities during the nine months ended December 31, 2024, was $742,938, of which $1,049,891 was repurchased of shares.
| 8 |
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 December 31, 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.
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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 December 31, 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 December 31, 2024.
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 December 31, 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 nine months ended December 31, 2024, the Company repurchased 7,317,248 shares of its common stock for $1,049,891 in private transactions through Stock Purchase Agreements with certain shareholders. On June 26, 2024, the Company repurchased 914,108 shares from an investor at $0.1734 per share in cash. On August 14, 2024, the Company repurchased 725,727 shares from an investor at $0.2346 per share. On July 10,2024, the Company repurchased 17,000 shares from an investor at $0.28 per share. On July 30 ,2024, the Company repurchased 70,000 shares from an investor at $0.13 per share. On August 2, 2024, the Company repurchased 1,500,000 shares from an investor at $0.13 per share. On August 26 ,2024, the Company repurchased 2,500,000 shares from an investor at $0.105 per share. On August 26, 2024, the Company repurchased 70,000 shares from an investor at $0.105 per share. On September 18, 2024, the Company repurchased 549,061 shares from an investor at $0.21 per share. On October 3, 2024, the Company repurchased 500,000 shares from an investor at $0.11 per share. On October 28, 2024, the Company repurchased 115,385 shares from an investor at $0.105 per share. On November 15, 2024, the Company repurchased 355,967 shares at $0.1685 per share.
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During the three months ended December 31, 2024, the Company repurchased 971,352 shares of its common stock for $127,096, in private transactions through Stock Purchase Agreements with certain shareholders. On October 3, 2024, the Company repurchased 500,000 shares from an investor at $0.11 per share. On October 28 ,2024, the Company repurchased 115,385 shares from an investor at $0.105 per share. On November 15, 2024, the Company repurchased 355,967 shares from an investor at $0.1685 per share.
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 18, 2025 | By: | /s/ Giorgio R. Saumat |
| Giorgio R. Saumat | ||
| Its: | CEO and Chairman of the Board | |
| Dated: February 18, 2025 | By: | /s/ Ernesto Flores |
| Ernesto Flores, | ||
| Its: | Chief Financial Officer | |
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