UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10Q
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2021
| ☐ | ||
| TRANSITION REPORT | ||
Commission File Number: 333-179280
EARTH SCIENCE TECH, INC.
(Exact Namename of Registrantregistrant as Specifiedspecified in its Charter)
| Nevada | 80-0931484 | |
(State or of | (I.R.S. Employer Identification No.) |
10650 NW 29th Terrace Doral, FL33172 (Address of principal executive offices) (zip code) (786)375-7281 ( |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| N/A | N/A | N/A |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X ☒ No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files. files). Yes X ☒ No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |
| Non-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 X
As of November 19, 2021, there were shares outstanding of each of the issuer’s classes ofregistrant’s common stock as of the latest practicable date:outstanding.
| | ||
TABLE OF CONTENTS
| 2 |
Company Letterhead
November 17, 2021
BF Borgers CPA PC
5400 W. Cedar Avenue
Lakewood, CO 80226
We are providing this letter in connection with your review of the Interim Financial Information of Earth Science Tech, Inc. as of September 30, 2021, for the purpose of determining whether any material modifications should be made to the interim financial information for it to conform to accounting principles generally accepted in the United States of America. We confirm that we are responsible for the fair presentation of the interim financial information in conformity with generally accepted accounting principles. We are also responsible for establishing and maintaining effective internal control over financial reporting.
Certain representations in this letter are described as being limited to matters that are material. Items are considered material, regardless of size, if they involve an omission or misstatement of accounting information that, in light of surrounding circumstances, makes it probable that the judgment of a reasonable person relying on the information would be changed or influenced by the omission or misstatement.
We confirm, to the best of our knowledge and belief, as of November 17, 2021, the following representations made to you during your review.
| 1) | The interim financial information referred to above has been prepared and presented in conformity with generally accepted accounting principles applicable to interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The interim financial information has been prepared on a basis consistent with prior interim periods and years and includes all disclosures necessary and required to be included by the laws and regulations to which the Company is subject. |
| 2) | We have designed our internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of interim financial information for external purposes in accordance with generally accepted accounting principles. |
| 3) | We have disclosed to you all deficiencies in the design or operation of internal control over financial reporting identified as part of our evaluation, including separately disclosing to you all such deficiencies that we believe to be significant deficiencies or material weaknesses in internal control over financial reporting. |
| 4) | Management’s certification regarding internal control over financial reporting as of January 31, 2021 discloses any changes in the Company’s internal control over financial reporting that occurred during the most recent quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. |
| 5) | We have made available to you all— |
| a) | Financial records and related data. |
| b) | Minutes of the meetings of stockholders, directors, and committees of directors, or summaries of actions of recent meetings for which minutes have not yet been prepared. All significant board and committee actions are included in the summaries. |
| 6) | There have been no communications from the SEC or other regulatory agencies regarding noncompliance with, or deficiencies, in financial reporting practices. |
| 7) | There are no material transactions that have not been properly recorded in the accounting records underlying the interim financial information. |
| 8) | We are not aware of any uncorrected financial statement misstatements. |
| 9) | We acknowledge our responsibility for the design and implementation of programs and controls to prevent and detect fraud. |
| 10) | We have no knowledge of any fraud or suspected fraud affecting the Company involving: |
| a) | Management; |
| b) | Employees who have significant roles in internal control over financial reporting; or |
| c) | Others where the fraud could have a material effect on the interim financial information. |
| 11) | We have no knowledge of any allegations of fraud or suspected fraud affecting the Company received in communications from employees, former employees, analysts, regulators, short sellers, or others. |
| 12) | The Company has no plans or intentions that may materially affect the carrying value or classification of assets and liabilities. |
| 13) | The following have been properly recorded or disclosed in the interim financial information: |
| a) | Related-party transactions, including sales, purchases, loans, transfers, leasing arrangements, and guarantees, and amounts receivable from or payable to related parties. |
| b) | Guarantees, whether written or oral, under which the Company is contingently liable. |
| c) | Significant estimates and material concentrations known to management that are required to be disclosed in accordance with the AICPA Statement of Position 94-6, Disclosure of Certain Significant Risks and Uncertainties. |
| 14) | There are no: |
| a) | Violations or possible violations of laws or regulations whose effects should be considered for disclosure in the interim financial information or as a basis for recording a loss contingency. |
| b) | Unasserted claims or assessments that are probable of assertion and must be disclosed in accordance with FASB ASC 450 (formerly FASB Statement No. 5, Accounting for Contingencies). |
| c) | Other liabilities or gain or loss contingencies that are required to be accrued or disclosed by FASB ASC 450 (formerly FASB Statement No. 5). |
| 15) | The Company has appropriately reconciled its general ledger accounts to their related supporting information. All reconciling items considered to be material were identified and included on the reconciliations and were appropriately adjusted in the interim financial information. All intracompany (and intercompany) accounts have been eliminated or appropriately measured and considered for disclosure in the interim financial information. |
| 16) | The Company has satisfactory title to all owned assets, and there are no liens or encumbrances on such assets, nor has any asset been pledged as collateral. j |
| 17) | The company has complied with all aspects of contractual agreements that would have a material effect on the interim financial information in the event of noncompliance. |
| 18) | The company is not aware of any violation of the Foreign Corrupt Practices act. |
| 19) | Our plans with respect to alleviating the adverse financial conditions that caused you to express substantial doubt about the Company’s ability to continue as a going concern are as follows: |
| a) | Continued loans and advances from shareholders and those associated with the company. |
To the best of our knowledge and belief, no events have occurred subsequent to the balance sheet date and through the date of this letter that would require adjustment to or disclosure in the interim financial information referred to above.
Earth Science Tech, Inc
Name, Title
| 3 |
PART ITEM EARTH SCIENCE TECH, INC.1 —I – FINANCIAL INFORMATIONI.1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
| September 30, | March 31, | |||||||
| 2021 | 2021 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ | 25,217 | $ | 16,161 | ||||
| Accounts Receivable(net allowance of $101,404 and $101,404 respectively ) | $ | 5,456 | $ | 6,108 | ||||
| Prepaid expenses and other current assets | — | — | ||||||
| Inventory | 16,661 | 21,739 | ||||||
| Total current assets | 47,334 | 44,008 | ||||||
| Property and equipment, net | — | 1,712 | ||||||
| Other Assets: | ||||||||
| Patent, net | — | — | ||||||
| Rou Asset | — | 12,653 | ||||||
| Deposits | 6,191 | 6,191 | ||||||
| Total other assets | 6,191 | 18,844 | ||||||
| Total Assets | $ | 53,525 | $ | 64,564 | ||||
| LIABILITIES AND STOCKHOLDERS’S EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | 172,328 | $ | 173,994 | ||||
| PPP Loan | 31,750 | 31,750 | ||||||
| PPP Loan 2 | 31,215 | 31,215 | ||||||
| Issa Loan Advance | 50,000 | 49,980 | ||||||
| SBA EDIL Loan | 106,237 | 106,800 | ||||||
| Accrued expenses | $ | 250,605 | $ | 234,319 | ||||
| Accrued settlement | 585,886 | 3,994,523 | ||||||
| Interest Payable | ||||||||
| Interest Payable-SBA EDIL Loan | 1,563 | 0 | ||||||
| Interest Payable-ConvNotes-GHS | 38,829 | 29,107 | ||||||
| Int Payable-Promissory Note-GHS | 11,737 | 9,029 | ||||||
| Convertible Note | ||||||||
| Convertible Note 2-GHS | 42,072 | 62,055 | ||||||
| Convertible Note 3-GHS | 88,825 | 88,825 | ||||||
| Convertible Note 4-GHS | 88,894 | 88,894 | ||||||
| Convertible Note 5-GHS | 88,710 | 88,710 | ||||||
| Convertible Note 6-GHS | 55,000 | — | ||||||
| Promissory Note-GHS | 30,000 | 30,000 | ||||||
| Lease Liability Current | — | 12,653 | ||||||
| Notes payable - related party | 59,558 | 59,558 | ||||||
| Total current liabilities | 1,733,209 | 5,091,412 | ||||||
| Long Term Liabilities | ||||||||
| Total liabilities | 1,733,209 | 5,091,412 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ (Deficit) Equity: | ||||||||
| Common stock, par value $ per share, shares authorized; and shares issued and outstanding as of September 30, 2021 and March 31, 2021 respectively | 52,853 | 50,553 | ||||||
| Additional paid-in capital | 28,245,452 | 28,219,577 | ||||||
| Accumulated deficit | (29,977,989 | ) | (33,296,978 | ) | ||||
| Total stockholders’ (Deficit)Equity | (1,679,684 | ) | (5,026,848 | ) | ||||
| Total Liabilities and Stockholders’ (Deficit) Equity | $ | 53,525 | $ | 64,564 | ||||
EARTH SCIENCE TECH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
| For the three | For the three | For the six | For the six | |||||||||||||
| Months Ended | Months Ended | Months Ended | Months Ended | |||||||||||||
| September 30, 2021 | September 30, 2020 | September 30, 2021 | September 30, 2020 | |||||||||||||
| Revenue | $ | 2,455 | $ | 26,551 | $ | 9,945 | $ | 98,631 | ||||||||
| Cost of revenues | 1,332 | 13,116 | 5,077 | 61,241 | ||||||||||||
| Gross Profit | 1,123 | 13,435 | 4,868 | 37,390 | ||||||||||||
| Operating Expenses: | ||||||||||||||||
| Compensation - officers | 9,500 | 120,375 | 15,212 | 120,375 | ||||||||||||
| Officer Compensation Stock | — | — | — | — | ||||||||||||
| Employee Compensation Stock | — | — | — | — | ||||||||||||
| Marketing | — | 5,455 | — | 5,455 | ||||||||||||
| General and administrative | 30,313 | 148,417 | 37,509 | 148,417 | ||||||||||||
| Professional fees | — | 8,055 | 900 | 8,055 | ||||||||||||
| Loss on disposal of assets | — | — | 1,712 | — | ||||||||||||
| Cost of legal proceedings | — | 13,275 | 7,267 | 13,275 | ||||||||||||
| Litigation Expense | — | 3,763,200 | — | 3,763,200 | ||||||||||||
| Research and development | — | 9,000 | — | 9,000 | ||||||||||||
| Total operating expenses | 47,313 | 4,067,777 | 62,600 | 4,067,777 | ||||||||||||
| Loss from operations | (46,190 | ) | (4,030,387 | ) | (57,732 | ) | (4,030,387 | ) | ||||||||
| Other Income (Expenses) | ||||||||||||||||
| Other Income | 3,408,636 | — | 3,408,930 | — | ||||||||||||
| Interest expense | (4,397 | ) | (2,382 | ) | (5,588 | ) | (2,382 | ) | ||||||||
| Int Exp-Convertible Note 1-GHS | — | (3,677 | ) | — | (3,677 | ) | ||||||||||
| Int Exp-Convertible Note 2-GHS | (1,075 | ) | (4,504 | ) | (2,966 | ) | (4,504 | ) | ||||||||
| Int Exp-Convertible Note 3-GHS | (2,270 | ) | (4,515 | ) | (4,515 | ) | (4,515 | ) | ||||||||
| Int Exp-Convertible Note 4-GHS | (2,271 | ) | (4,518 | ) | (4,518 | ) | (4,518 | ) | ||||||||
| Int Exp Promissory Note 5-GHS | (2,267 | ) | (2,796 | ) | (4,509 | ) | (2,796 | ) | ||||||||
| Int Exp Promissory Note 6-GHS | (6,406 | ) | — | (6,406 | ) | — | ||||||||||
| Interest Expense-Promissory Note-GHS | (1,361 | ) | (2,707 | ) | (2,707 | ) | (2,707 | ) | ||||||||
| Interest Expense-SBA Loan | (1,000 | ) | — | (1,000 | ) | — | ||||||||||
| Interest income | — | — | — | — | ||||||||||||
| Total other income (expenses) | 3,387,589 | (12,495 | ) | 3,376,721 | (25,099 | ) | ||||||||||
| Net loss before income taxes | 3,341,399 | (167,988 | ) | 3,318,989 | (4,055,486 | ) | ||||||||||
| Income taxes | — | — | — | — | ||||||||||||
| Net loss | $ | 3,341,399 | $ | (1,67,988 | ) | $ | 3,318,989 | $ | (4,055,486 | ) | ||||||
| F-2 |
EARTH SCIENCE TECH. INC, AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETSSTATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY
FOR THREE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
| Description | Shares | Amount | Shares | Amount | Capital | Deficit | Total | |||||||||||||||||||||
| Common Stock | Preferred Stock | Additional Paid-in | Accumalated | |||||||||||||||||||||||||
| Description | Shares | Amount | Shares | Amount | Capital | Deficit | Total | |||||||||||||||||||||
| Balance June 30, 2020 | 39,786,879 | $ | 39,788 | $ | — | — | $ | 28,088,810 | $ | (32,801,303 | ) | (4,672,705 | ) | |||||||||||||||
| Common stock issued for cash | 863,512 | 864 | — | — | 19,068 | — | 19,932 | |||||||||||||||||||||
| Common stock issued for services | — | — | — | — | — | |||||||||||||||||||||||
| Common stock issued for officer compensation | — | — | - | - | — | — | — | |||||||||||||||||||||
| Common stock issued for employee compensation | — | — | - | - | — | — | ||||||||||||||||||||||
| Common stock issued for Conversion on Note | 1500,000 | 1,500 | - | - | 30,000 | 31,500 | ||||||||||||||||||||||
| Net Loss | (167,988 | ) | (167,988 | ) | ||||||||||||||||||||||||
| Balance September 30, 2020 | 42,150,391 | $ | 42,152 | $ | — | — | $ | 28,137,878 | $ | (32,969,291 | ) | (4,789,261 | ) | |||||||||||||||
| Common stock issued for cash | — | — | — | — | — | — | — | |||||||||||||||||||||
| Common stock issued for services | ||||||||||||||||||||||||||||
| Common stock issued for officer compensation | — | — | - | - | — | — | ||||||||||||||||||||||
| Common stock issued for employee compensation | — | — | — | — | ||||||||||||||||||||||||
| Common stock issued for Conversion on Note | 3,500,000 | 3,500 | 39,611 | 43,111 | ||||||||||||||||||||||||
| Net Loss | (110,793 | ) | (110793 | ) | ||||||||||||||||||||||||
| Balance December 31, 2020 | 45,650,391 | $ | 45,652 | $ | — | — | $ | 28,177,489 | $ | (33,080,084 | ) | (4,856,943 | ) | |||||||||||||||
| Common stock issued for cash | — | — | — | — | — | — | — | |||||||||||||||||||||
| Common stock issued for services | ||||||||||||||||||||||||||||
| Common stock issued for officer compensation | — | — | — | — | ||||||||||||||||||||||||
| Common stock issued for employee compensation | — | — | — | — | ||||||||||||||||||||||||
| Common stock issued for Conversion on Note | 4,901,575 | 4,901 | 42,088 | 46,989 | ||||||||||||||||||||||||
| Net Loss | (216,894 | ) | (216,894 | ) | ||||||||||||||||||||||||
| Balance March 31, 2021 | 50,551,966 | $ | 50,553 | $ | — | — | $ | 28,219,577 | $ | (33,296,978 | ) | (5,026,848 | ) | |||||||||||||||
| Common stock issued for cash | — | — | — | — | — | — | — | |||||||||||||||||||||
| Common stock issued for services | ||||||||||||||||||||||||||||
| Common stock issued for officer compensation | — | — | — | — | ||||||||||||||||||||||||
| Common stock issued for employee compensation | — | — | — | — | ||||||||||||||||||||||||
| Common stock issued for Conversion on Note | 2,300,000 | 2,300 | 25,875 | 28,175 | ||||||||||||||||||||||||
| Net Loss | (22,410 | ) | (22,410 | ) | ||||||||||||||||||||||||
| Balance June 30, 2021 | 52,851,966 | $ | 52,853 | $ | — | — | $ | 28,245,452 | $ | (33,319,388 | ) | (5,021,083 | ) | |||||||||||||||
| Beginning balance, value | 52,851,966 | $ | 52,853 | $ | — | — | $ | 28,245,452 | $ | (33,319,388 | ) | (5,021,083 | ) | |||||||||||||||
| Common stock issued for cash | — | — | — | — | — | — | — | |||||||||||||||||||||
| Common stock issued for services | ||||||||||||||||||||||||||||
| Common stock issued for officer compensation | — | — | — | — | ||||||||||||||||||||||||
| Common stock issued for employee compensation | — | — | — | — | ||||||||||||||||||||||||
| Common stock issued for Conversion on Note | — | — | — | — | ||||||||||||||||||||||||
| Net Loss | 3,341,399 | 3,341,399 | ||||||||||||||||||||||||||
| Balance September 30, 2021 | 52,851,966 | $ | 52,853 | $ | — | — | $ | 28,245,452 | $ | (29,977,989 | ) | (1,679,684 | ) | |||||||||||||||
| Ending balance, value | 52,851,966 | $ | 52,853 | $ | — | — | $ | 28,245,452 | $ | (29,977,989 | ) | (1,679,684 | ) | |||||||||||||||
| F-3 |
December 31 2015 | March 31, 2015 | |||||||
| Current Assets: | (Unaudited) | |||||||
| Cash | $ | 123,811 | $ | 324,378 | ||||
| Prepaid expenses | ‐ | 101,619 | ||||||
| Inventory | 165,770 | 235,588 | ||||||
| Total current assets | 289,581 | 661,585 | ||||||
| Property and equipment , net | 71,290 | 65,854 | ||||||
| Other Assets: | ||||||||
| Patent, net | 27,556 | 29,078 | ||||||
| Deposits | 21,698 | 17,211 | ||||||
| Total other assets | 49,254 | 46,289 | ||||||
| Total Assets | $ | 410,125 | $ | 773,728 | ||||
LIABILITIES AND STOCKHOLDERS’ (DEFICIT)/EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | 208,817 | $ | 88,655 | ||||
| Notes payable ‐ related parties | 59,558 | 59,558 | ||||||
| Accrued settlement | 236,250 | ‐ | ||||||
| Total liabilities | 504,625 | 148,213 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ (Deficit)/Equity: | ||||||||
| Convertible preferred stock with liquidation preferencce, par value of $0.001 per share, 10,000,000 shares authorized; 5,200,000 shares issued and outstanding | 5,200 | 5,200 | ||||||
| Common stock, par value $0.001 per share, 75,000,000 shares authorized; 39,570,662 and 38,229,829 shares issued and outstanding as of December 31, 2015 and March 31, 2015 respectively | 39,571 | 38,230 | ||||||
| Additional paid‐in capital | 22,388,272 | 21,998,214 | ||||||
| Accumulated deficit | (22,527,543 | ) | (21,416,129 | ) | ||||
| Total stockholders’ (Deficit)/Equity | (94,500 | ) | 625,515 | |||||
| Total Liabilities and Stockholders'(Deficit)/Equity | $ | 410,125 | $ | 773,728 | ||||
EARTH SCIENCE TECH, INC.
For the Three Months Ended December 31, | For the Nine Months Ended December 31, | |||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| Revenue | $ | 173,995 | $ | 14,251 | $ | 371,046 | $ | 20,851 | ||||||||
| Cost of revenues | 96,453 | 15,416 | 288,372 | 19,998 | ||||||||||||
| Gross Profit (loss) | 77,542 | (1,165 | ) | 82,674 | 853 | |||||||||||
| Operating Expenses: | ||||||||||||||||
| Marketing | (17,045 | ) | 115,402 | 48,975 | 293,157 | |||||||||||
| Compensation ‐ officers | 67,000 | 231,000 | 112,542 | 356,000 | ||||||||||||
| General and administrative | 145,407 | (26,165 | ) | 415,777 | 78,456 | |||||||||||
| Professional fees | 11,350 | 198,971 | 221,027 | 241,348 | ||||||||||||
| Consulting Fees‐related party | ‐ | 7,072,000 | ‐ | 7,072,000 | ||||||||||||
| Cost of legal proceedings | 137,227 | ‐ | 392,227 | ‐ | ||||||||||||
| Research and development | ‐ | 2,681 | ‐ | 14,833 | ||||||||||||
| Total operating expenses | 343,939 | 7,593,889 | 1,190,548 | 8,055,794 | ||||||||||||
| Loss from Operations | (266,397 | ) | (7,595,054 | ) | (1,107,874 | ) | (8,054,941 | ) | ||||||||
| Other Income (Expenses) | ||||||||||||||||
| Interest expense | (1,190 | ) | (3,443 | ) | (3,572 | ) | (3,443 | ) | ||||||||
| Interest income | ‐ | 45 | 32 | 110 | ||||||||||||
| Total other income (expenses) | (1,190 | ) | (3,398 | ) | (3,540 | ) | (3,333 | ) | ||||||||
| Net loss before income taxes | (267,587 | ) | (7,598,452 | ) | (1,111,414 | ) | (8,058,274 | ) | ||||||||
| Income taxes | ‐ | ‐ | ‐ | ‐ | ||||||||||||
| Net loss | $ | (267,587 | ) | $ | (7,598,452 | ) | $ | (1,111,414 | ) | $ | (8,058,274 | ) | ||||
| Loss per common share: | ||||||||||||||||
| Loss per common share ‐ Basic and Diluted | $ | (0.01 | ) | $ | (0.20 | ) | $ | (0.03 | ) | $ | (0.22 | ) | ||||
| Weighted Average Common Shares Outstanding: | ||||||||||||||||
| Basic and Diluted | 38,924,418 | 37,625,461 | 38,548,246 | 37,351,215 | ||||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the Six | For the Six | |||||||
| Months Ended | Months Ended | |||||||
| September 30, 2021 | September 30, 2020 | |||||||
| Cash Flow From Operating Activities: | ||||||||
| Net loss | 3,318,989 | (4,055,486 | ) | |||||
| Adjustments to reconcile net loss to net cash from operating activities: | ||||||||
| Stock-based compensation | — | — | ||||||
| Stock issued for services | — | — | ||||||
| Intrinsic value of Conv Notes-Addtl Paid-in-Capital | — | — | ||||||
| Depreciation and amortization | — | 1,539 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Increase/Decrease in deposits | — | — | ||||||
| Increase/Decrease in prepaid expenses and other current assets | 13,305 | 2,989 | ||||||
| Decrease/Increase in inventory | 5,077 | 27,257 | ||||||
| Increase in other assets | — | — | ||||||
| Increase in accrued settlement | (3,408,637 | ) | 3,763,200 | |||||
| Increase in accounts payable | 50,435 | 168,814 | ||||||
| Net Cash Used in Operating Activities | (20,831 | ) | (91,687 | ) | ||||
| Investing Activities: | ||||||||
| Purchases of property and equipment | 1,712 | — | ||||||
| Patent expenditures | — | — | ||||||
| Net Cash Used in Investing Activities | 1,712 | — | ||||||
| Financing Activities: | ||||||||
| Proceeds from issuance of common stock | 28,175 | 60,524 | ||||||
| Proceeds from notes payable- related party | — | — | ||||||
| Proceeds from Convertible Notes | — | 31,500 | ||||||
| Intrinsic value of Conv Notes-Addtl Paid-in-Capital | - | - | ||||||
| Officer Compensation Stock | ||||||||
| Repayment of advances from related party | — | — | ||||||
| Net Cash Provided by Financing Activities | 28,175 | 92,024 | ||||||
| Net Decrease in Cash | 9,056 | 337 | ||||||
| Cash - Beginning of year | 16,161 | 30,723 | ||||||
| Cash - End of year | 25,217 | 31,060 | ||||||
| F-4 |
For the Nine Months Ended December 31, | ||||||||
| 2015 | 2014 | |||||||
| Cash Flow From Operating Activities: | ||||||||
| Net loss | $ | (1,111,414 | ) | $ | (8,058,274 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock‐based compensation | 161,650 | 7,860,051 | ||||||
| Depreciation and amortization | 9,225 | ‐ | ||||||
| Inventory impairment | 78,146 | ‐ | ||||||
| Changes in operating assets and liabilities: | ||||||||
| (Increase) Decrease in deposits | (4,487 | ) | 111,589 | |||||
| Decrease in prepaid expenses | 58,494 | ‐ | ||||||
| Increase in inventory | (8,328 | ) | (197,828 | ) | ||||
| Increase in accounts payable and accrued liabilities | 120,163 | 25,616 | ||||||
| Increase in accrued settlement | 236,250 | ‐ | ||||||
| Net Cash Used in Operating Activities | (460,301 | ) | (258,846 | ) | ||||
| Investing Activities: | ||||||||
| Purchases of property and equipment | (13,140 | ) | (53,783 | ) | ||||
| Intangible asset purchases | ‐ | (25,000 | ) | |||||
| Net Cash Used in Investing Activities | (13,140 | ) | (78,783 | ) | ||||
| Financing Activities: | ||||||||
| Proceeds from issuance of common stock | 272,874 | 299,000 | ||||||
| Proceeds from notes payable‐related party | ‐ | 20,953 | ||||||
| Repayments of advances from related party | ‐ | (166,511 | ) | |||||
| Net Cash Provided by Financing Activities | 272,874 | 153,442 | ||||||
| Net Decrease in Cash | (200,567 | ) | (184,187 | ) | ||||
| Cash ‐ Beginning of Period | 324,378 | 376,704 | ||||||
| Cash ‐ End of Period | $ | 123,811 | $ | 192,517 | ||||
| Supplement Disclosure of Non Cash Investing and Financing Activities: | ||||||||
| Reversal of prepaid expenses and additional paid in capital due to re-measurement of shares issued for web marketing services | $ | 43,125 | $ | - | ||||
EARTH SCIENCE TECH INCNotes to Condensed Consolidated Financial Statements
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
(UNAUDITED)
Note 1 — Organization and Nature of Operations
Earth Science Tech, Inc. ("ETST"(“ETST” or the “Company”) was incorporated under the laws of the State of Nevada on April 23, 2010. ETST has changed its immediate focus from researching and developing innovative hemp extracts and making them accessible worldwide; with plans to be a supplier of high quality hemp oil enriched with high-grade CBD. Its primary goal had been to advance different high quality hemp extracts with a broad profile of cannabinoids and additional natural molecules found in industrial hemp and to identify their distinct properties. Initially our missions were to educate the public on the many and varied nutritional and health benefits of CBD-rich hemp oil, to optimize purity in formulation, and to find new product delivery systems. With the decline in CBD sales due to the number of factors described in the Registrant’s periodic report filed with the SEC on Form 10-K for the period ending March 31, 2021, we determined that the most efficient means to increase shareholder value would be the acquisition of a complimentary business that would bring revenues sufficient to support its own operations but that would allow the business to expand and for the Company to rebuild its CBD business. The opportunity that the Company is currently pursuing is the acquisition of JBC Medical Equipment, Inc. together with RxCompoundStore.com, LLC and Peaks Curative, LLC. The acquisition of all three businesses would give the Company the ability to cross-sell among the businesses as well as our current customers. There are also some areas that have been identified in these companies that are at the point where the revenue levels are at a point where allocating minimal incremental expenses in certain product offerings should result in more significant increases in revenue and earnings. The corporate strategy currently is to develop the acquisition plan, structure and terms while the Company’s receivership is wound down so that when it emerges from receivership, it is in a position to execute on the planned acquisitions. As the Company assimilates the new businesses into its operations, it plans to work to raise additional capital necessary to expand on the existing operations and to capitalize on their synergistic opportunities that provide the greatest immediate return on investment (i.e. pick the low hanging fruit), then to continue capitalizing on the opportunities among the companies and to rebuild its CBD sales. Finally it plans to license its Hygee product to a third party, if it is able to negotiate terms that are acceptable.
To design and produce CBD enhanced nutraceutical products for sale to the general public. We intend to create high-grade CBD-rich hemp oil and other CBD containing products unique biotechnology company focused on cutting edgeto the current market in the nutraceuticals industry. We believe that our formulations will set us apart from competing products for promoting health. We have formulated and bioceuticals designedproduced our initial CBD products, intended for, subject to excel in industries such as health, wellness, nutrition, supplement, cosmeticperformance, treating various symptoms of diseases and alternative medicine to improve illnesses and the quality of lifeailments or for consumers worldwide.overall health. The Company sells itsplans to expand manufacturing and marketing of these CBD products with expansion of products over the next five years.
To offer a wide selection of health and nutrition products through itsonline, clinics, pharmacies, and in-store retail. Through our wholly owned subsidiary, we plan to continue expanding retail store located in Coral Gables Floridasales of nutritional supplements through online, clinics, pharmacies, and throughin-store sales. Then with the internet. ETST is currently focusedacquisition of the compounding pharmacy, we will focus on delivering nutritionalmen’s health as well as other areas. In particular, the Company plans to continue with plans to build a sterile facility so that injectable products may be compounded and dietary supplements that help with treating symptoms such as: chronic pain, joint pain, inflammation, seizures, high blood pressure, memory loss, depression, weight management, nauseasold. Our current product selection includes many high-quality supplement brands, and aging. This may include products such as vitamins, minerals, herbs, botanicals, personal care products, homeopathies, functional foods, and other products. These products will be in various formulations and delivery forms including capsules, tablets, soft gels, chewables, liquids, creams, sprays, powders, and whole herbs.
Note 2 — Summary of Significant Accounting Policies
Basis of presentation
The Company’s accounting policies used in the presentation of the accompanying unaudited condensed consolidated interim financial statements include the accounts of the Company, Nutrition Empire Inc. and Earth Science Tech Vapor One, Inc. (the "Company") as of December 31, 2015.
| F-5 |
Principles of consolidation
The accompanying consolidated financial statements should be read in conjunction withinclude all of the Company's audited financial statements foraccounts of the year ended March 31, 2015 containedCompany and its wholly-owned subsidiaries. The subsidiaries include Nutrition Empire, Inc., Cannabis Therapeutics, Inc. and Earth Science Pharmaceutical Inc. Earth Science Foundation, Inc. is a non-profit favored entity of the Company focused on developing its role as a world leader in the Company's Annual Report. on Form 10-K/A filed with the SEC on May 10, 2016. The results of operations for the nine months ended December 31, 2015, are not necessarily indicative of results to be expected for any other interim period or the fiscal year ended March 31, 2016.
Earth Science Pharmaceutical (“ESP”) is a wholly-owned subsidiary of ETST was committed to the Independent Registered Public Accounting Firm regarding substantial doubt aboutdevelopment of low cost, non-invasive diagnostic tools, medical devices, testing processes and vaccines for sexually transmitted infections and/or diseases. ESP’s operations have been suspended while the Company's abilityCompany restructures to continuemaximize all efforts in the best interest to its shareholders.
Cannabis Therapeutics (“CTI”) is a wholly-owned subsidiary of ETST poised to take a leadership role in the development of new, leading-edge cannabinoid-based pharmaceutical and nutraceutical products. CTI is invested in research and development to explore and harness the medicinal power of cannabidiol. The company is focused on developing treatments for breast and ovarian cancers, as a going concern.
Nutrition Empire Inc. (“NE”) was openedestablished in 2014 as a brick and mortarsupplement retail store that provides health, wellness,offering products such as; sports nutrition, and dietary supplement products at competitive prices. In March 2015, the Company createdtime Earth Science Tech, Vapor One, Inc.,’s High Grade CBD Oil and nutraceutical/bioceutical line. In early 2017 the Company decided to relinquish the retail store to allocate its capital and time to further pursue its successful industrial hemp CBD products through its growing wholesale accounts. Since the closing of Nutrition Empire in 2017, the wholly owned subsidiary has been dormant and kept for potential acquisitions or projects.
Earth Science Foundation (“ESF”) is a licensefavored entity of ETST, effectively being a non-profit organization on February 11, 2019 and distribution company allowing us entryis structured to accept grants and donations to conduct further studies and help donate ETST’s effective CBD products to those in the maturing marketplace of the vaping industry. Our licensing relationship gives us the market mobility, allowing us to capture the emerging market offering our Cannabidiol oil to our retail partners as demand emerges.
All intercompany balances and transactions have been eliminated on consolidation.
Use of estimates and assumptions
The preparation of the condensed 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 periods.
The Company'sCompany’s significant estimates and assumptions include the fair value of financial instruments; the accrual of the legal settlement, the carrying value recoverability and impairment, if any, of long-lived assets, including the estimated useful lives of fixed assets; the valuation allowance of deferred tax assets; stock based compensation, the valuation of the inventory reserves and the assumption that the Company will continue as a going concern. Those significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to those estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.
Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
Management regularly reviews its estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such reviews, and if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates.
Carrying value, recoverability and impairment of long-lived assets
The Company follows Financial Accounting Standards Board ("FASB"(“FASB”) Accounting Standards Codification (“ASC’) 360 to evaluate its long-lived assets. The Company'sCompany’s long-lived assets, which include property and equipment and a patent are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
| F-6 |
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'sasset’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'sCompany’s overall strategy with respect to the manner or use of the acquired assets or changes in the Company'sCompany’s overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; (v) a significant decline in the Company'sCompany’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.
On June 4, 2019 the Company has not experienced impairment lossesdiscontinued its patents based upon the advice of IP counsel. IP counsel indicated that only one patent application had a reasonable chance of being granted and based upon this advice the Company determined that it would discontinue this approach of using the patent process to protect product formulations in general and rather, revert to proprietary formulae and trade secrets to protect its intellectual property (unless it was clear from the beginning of the process that the formula was patentable. As a result, on June 4, 2019, the company wrote down or otherwise impaired approximately $27,000 in legal fees that had previously been attributed to its long-lived assets.
Cash and cash equivalents
The Company considers all highly liquid investments with a maturity of three months or less to be cash and cash equivalents.
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.
| F-7 |
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'sCompany’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'sCompany’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'sCompany’s business, financial position, and results of operations or cash flows.
Revenue recognition
The Company follows and implemented ASC 605606, Revenue from Contracts with Customers for revenue recognition. Although the new revenue standard is expected to have an immaterial effect, if any, on our ongoing net income, we did implement changes to our processes related to revenue recognition and the control activities within them. These 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.
The Company recognizes revenue from product sales or services rendered when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when allcontrol of the promised goods are transferred to our clients 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 criteria are met: (i) persuasive evidence of an arrangement exists, (ii)five steps: identify the product has been shipped orcontract with the services have been rendered toclient, identify the customer, (iii)performance obligations in the salescontract, determine the transaction price, is fixed or determinable, and (iv) collectability is reasonably assured.
The Company recognizes its retail store revenue at point of sale, net of sales tax.
Inventories
Inventories consist of various types of nutraceuticals and bioceuticals at the Company'sCompany’s retail store and main office. Inventories are stated at the lower of cost or market using the first in, first out (FIFO) method. A reserve is established if necessary to reduce excess or obsolete inventories to their net realizable value.
Cost of Sales
Components of costs of sales include product costs, shipping costs to customers and any inventory adjustments.
Shipping and Handling Costs
The Company includes shipping and handling fees billed to customers as revenues and shipping and handling costs for shipments to customers as cost of revenues.
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.
| F-8 |
Income taxes
The Company follows ASC 740 in accounting for income taxes. Deferred tax assets and liabilities are determined based on the estimated future tax effects of net operating loss carryforwardscarry forwards and temporary differences between the tax bases of assets and liabilities and their respective financial reporting amounts measured at the current enacted tax rates. The Company records a valuation allowance for its deferred tax assets when management concludes that it is not0t more likely than not that suchthose assets will be recognized.
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, 2015 and March 31, 2015,2019, the Company has not recorded any unrecognized tax benefits.
Interest and penalties related to liabilities for uncertain tax positions will be charged to interest and operating expenses, respectively.
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 subsequent to 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 are 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.
As of December 31, 2015 and March 31, 2015,September 30, 2021 the Company has 333,332 warrants that are anti-dilutive and not included in the calculation of diluted loss per share.
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"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.
The Company follows ASC 718 in accounting for its stock basedstock-based compensation to employees. This standard states that compensation cost is measured at the grant date based on the fair value of the award and is recognized over the service period, which is usually the vesting period. The Company values stock basedstock-based compensation at the market price of the Company’s common stock as of the date in which the obligation for payment of service is incurred.
The Company accounts for transactions in which service are received from non-employees in exchange for equity instruments based on the fair value of the equity instrument exchanged in accordance with ASC 505-50.
| F-9 |
Property and equipment
Property and equipment is recorded at cost net of accumulated depreciation. Depreciation is computed using the straight-line method based upon the estimated useful lives of the respective assets as follows:
Schedule of Property and Equipment Estimated Useful Lives
| Leasehold improvements | Shorter of useful life or term of lease |
| Signage | 5 years |
| Furniture and equipment | 5 years |
| Computer equipment | 5 years |
The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation are removed from accounts and any resulting gains or losses are included in operations.
Recently issued accounting pronouncements
In June 2014, FASBAugust 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU"(“ASU”) No. 2014-09, "Revenue from Contracts with Customers". The update gives entities a single comprehensive model to use in reporting information about the amount2016-15, Classification of Certain Cash Receipts and timing of revenue resulting from contracts to provide goods or services to customers. The proposed ASU, which would apply to any entity that enters into contracts to provide goods or services, would supersede the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance throughout the Industry Topics of the Codification. Additionally, the update would supersede some cost guidance included in Subtopic 605-35, Revenue Recognition — Construction-Type and Production-Type Contracts. The update removes inconsistencies and weaknesses in revenue requirements and provides a more robust framework for addressing revenue issues and more useful information to users of financial statements through improved disclosure requirements. In addition, the update improves comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets and simplifies the preparation of financial statements by reducing the number of requirements to which an entity must refer. The update was originally effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. In August 2015, FASB issued ASU No.2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date” which deferred the effective date ASU No. 2014-09 by one year to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.
In February 2016, includingthe FASB issued Accounting Standards Update No. 2016-02, Leases. This ASU requires lessees to recognize most leases on their balance sheets related to the rights and obligations created by those leases. The ASU also requires additional qualitative and quantitative disclosures related to the nature, timing and uncertainty of cash flows arising from leases. The guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact the adoption of this new standard will have on its consolidated financial statements.
In March 2016, the FASB issued Accounting Standards Update No. 2016-09, Compensation – Stock Compensation. The new standard modified several aspects of the accounting and reporting for employee share- based payments and related tax accounting impacts, including the presentation in the statements of operations and cash flows of certain tax benefits or deficiencies and employee tax withholdings, as well as the accounting for award forfeitures over the vesting period. The new standard was effective for the Company on April 1, 2017. The Company does not believe that the adoption of this new standard will have a material effect on its consolidated financial statements.
| F-10 |
In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers. This guidance will supersede Topic 605, Revenue Recognition, in addition to other industry-specific guidance, once effective. The new standard requires a company to recognize revenue in a manner that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods and services. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers: Deferral of the Effective Date, as a revision to ASU 2014-09, which revised the effective date to fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted but not prior to periods beginning after December 15, 2016 (i.e., the original adoption date per ASU 2014-09). In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers: Principal versus Agent Considerations, which clarifies certain aspects of the principal- versus-agent guidance, including how an entity should identify the unit of accounting for the principal versus agent evaluation and how it should apply the control principle to certain types of arrangements, such as service transactions. The amendments also reframe the indicators to focus on evidence that an entity is acting as a principal rather than as an agent. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing, which clarifies how an entity should evaluate the nature of its promise in this ASU should be applied prospectively with earlier application permitted asgranting a license of intellectual property, which will determine whether it recognizes revenue over time or at a point in time. The amendments also clarify when a promised good or service is separately identifiable (i.e., distinct within the context of the contract) and allow entities to disregard items that are immaterial in the context of a contract. The Company continues to assess the impact this new standard may have on its ongoing financial reporting. The Company has identified its revenue streams both by contract and product type and is assessing each for potential impacts. For the revenue streams assessed, the Company does not anticipate a material impact in the timing or amount of revenue recognized.
In January 2017, the FASB issued Accounting Standards Update No. 2017-04, Intangibles-Goodwill and Other, which simplifies the accounting for goodwill impairments by eliminating step 2 from the goodwill impairment test. Instead, if “the carrying amount of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.” The guidance is effective for fiscal years beginning of an interim or annual reporting period. We areafter December 15, 2019. Early adoption is permitted. The Company is currently reviewingevaluating the provisionsimpact the adoption of this ASU to determine if therenew standard will be any impacthave on our results of operations, cash flows or financial condition.
All other newly issued accounting pronouncements not yet effective have been deemed either immaterial or not applicable.
Intangible Assets
In October 2014, the Company acquired a patent that is being amortized over its useful life of fifteen years in accordance with ASC 350, "Intangibles“Intangibles - Goodwill and Other"Other”. The Company purchased the patent through a cash payment of $25,000.$25,000. Additionally, the Company capitalized patent fees of $5,430.$26,528. The Company'sCompany’s balance of intangible assets on the condensed consolidated balance sheet net of accumulated amortization is $27,556amortizations $0 and $29,078 at December$38,740.00 as of March 31, 20152019 and March 31, 2015,2018, respectively. Amortization expense related to the intangible assets was $1,522$4,406.00 and $0,$4,406.00, respectively for the nine monthsyears ended DecemberMarch 31, 20152019 and 2014.
Reclassification
Certain amounts from the prior period have been reclassified to conform to the current period presentation.
Note 3 — Going Concern
The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. At December 31, 2015,September 30, 2021, the Company had negative working capital, an accumulated deficit of $22,527,543 $29,977,989 and was in negotiations to extend the maturity date on notes payable that are in default. This raises aThese factors raise substantial doubt about the Company’s ability to continue as a going concern.
While the Company is attempting to generate sufficient revenues, the Company'sCompany’s cash position may not be sufficient to pay its obligations and support the Company'sCompany’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 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'sCompany’s ability to further implement its business plan and generate sufficient revenues.
| F-11 |
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
Kannabidioid, Inc. is currently in development stage and has had 0related party revenue from Earth Science Tech, Inc. for the three months ended September 30, 2021.
On January 11, 2019, Robert Stevens was appointed by the Nevada District Court as Receiver for the Company in Case No. A-18-784952-C. As approved by the Nevada District Court, Strongbow Advisors, Inc., an entity controlled by Robert Stevens (“Strongbow”), is compensated at a rate of $400 per hour for his services as the Company’s Receiver. During 2014, a former stockholder provided fundsthe three months ended September 30, 2021, $0 has been paid to Strongbow as compensation for Mr. Stevens’ services as the Company’s Receiver, this is due to the judge ordering the Receiver not being allowed to compensate Strongbow Advisors, Inc. throughout the intervenor litigation that subsequently led to Robert Steves being discharged an ordered out of the Company evidenced by 8% uncollateralized notes payable dueon August 27, 2021 (See Note 6 Commitments and Contingencies, Legal Proceedings).
Note 5 – Stockholders’ Equity
During the three months ended September 30, 2014. As of December 31, 20152021 and March 31, 2015,2020, the Company issued and common shares for an aggregate of $0 and $19,932.62 respectively.
Note 6 — Commitments and Contingencies
Legal Proceedings
On January 11, 2019, the Company received notice that Strongbow Advisors, Inc. and Robert Stevens (“Stevens”, and together with Strongbow, the “Receiver”) had $59,558been appointed by the Nevada District Court, as Receiver for the Registrant in Case No. A-18-784952-C (the “Order).
The Company sought the appointment of these notes payable whichthe Receiver after it found itself in an imminent danger of insolvency following the issuance by an arbitration panel of an award (the “Award”) in the sum of $3,994,522 in favor of Cromogen Biotechnology Corporation (“Cromogen”) in the matter entitled Cromogen Biotechnology Corporation vs. Earth Science Tech, Inc. (the “Cromogen Litigation”). The Nevada District Court found that the Company was in fact insolvent and ordered the appointment of the Receiver.
The Award consisted of a sum for breach of contract against the Company in the amount of $120,265, a sum for costs and fees against the Company in the amount of $111,057 and a sum for the claim of tortuous interference and conversion against the Company in the amount of $3,763,200. The District Court in Florida had confirmed the Award granted by the arbitration panel, denying however, the award of fees that the arbitration panel had granted Cromogen.
The Cromogen Litigation has been settled under an agreement that provides for monthly payments beginning after the first of the year in January 2022. The settlement agreement contains a significant increase in the amount due from $450,000 if the Company should default on its payment obligations thereunder.
| F-12 |
As part of the impact of the receivership, the Court issued a Writ of Injunction or “Blanket Stay” covering the Company and its assets during the time that the Company is in receivership. As a result of the “Blanket Stay” the Company’s estate is protected from creditors and interference with its administration is prevented while the Company’s financial issues are being fully analyzed and resolved. As part of this process, creditors will be notified and required to provide claims in default. writing under oath on or before the deadline stated in the notice provided by the Receiver or those claims will be barred under NRS §78.675. The Blanket Stay will remain in place unless otherwise waived by the Receiver, or it is vacated by the Court or alternatively, lifted by the Court, upon a “motion to lift stay” duly made and approved by the Nevada District Court.
On November 7, 2019 the Receiver for Earth Science Tech, Inc., a Nevada corporation (the “Company”) filed a motion for preliminary injunction against Majorca Group Ltd. in the 8th Judicial District in Clark County, Nevada. The filing requests a show cause hearing whereby the Company will request the Court grants it motion to cancel certain shares and class of stock and to nullify certain amendments of the Articles of Incorporation. Specifically, the Company is asking that Majorca Group Ltd. be restricted from selling, transferring, converting, encumbering, hypothecating, obtaining loans against or in any fashion or in any way transferring their shares of common and preferred stock in the Company. Additionally the motion seeks a Freezing Injunction over any broker, bank, any financial institution, attorney, or agent holding shares of the Company as well as any proceeds from shares of the Company.
On January 27, 2020 Earth Science Tech, Inc., a Nevada corporation (the “Company”) reached a confidential settlement with Majorca Group, Ltd (“Majorca”). The Receiver will withdraw its motion for injunction over the Majorca common and preferred shares. The Settlement Agreement provides that Majorca Group, Ltd. and all relevant parties will, within 10 days of execution of the settlement agreement, return 18,000,000 common shares and 5,200,000 Series A Preferred Stock held by Majorca for cancellation. The Series A Preferred Stock class will be cancelled completely. The remaining 6,520,000 common shares held by Majorca is subject to lockup agreement and thereafter, sales will be made only pursuant to a limited strict bleed-out agreement administered by a third party.
On January 19, 2021, one of the Company’s largest shareholders served and filed a notice of motion and motion to intervene against Robert L. Stevens and Strongbow Advisors, Inc. (individually or collectively referred to as “Receiver”) this action was later joined by additional shareholders representing approximately 33% of the issued and outstanding shares of the Company at that time. This motion to intervene, at its heart, was based upon and resulted from, what the interveners saw as, a lack of transparency by the Receiver. What was filed was initially based upon concerns of Mr. Stevens’ lack of transparency. However as the matter progressed in court, additional concerns have arisen and on August 27, 2021, Stevens and Strongbow were discharged and removed and William Leonard was appointed to replace them as Receiver, by the Nevada District Court. Mr. Leonard is currently reviewing various matters, including past invoices presented by Stevens, as well as his conduct during the time he acted as Receiver for the Company as well as others that the prior Receiver had a prior relationship with that have derived benefits from working with the prior Receiver. The outcome of this review is uncertain at this time and a wide number of outcomes is possible.
The Company is now optimistic that it will be able to emerge from receivership under the new receiver, in current negotiationsa reorganized position that will allow it to extendproceed with the maturityacquisitions of the three entities. Combined, these entities present a larger opportunity to realize the synergies that they have among themselves and in so doing, the Company believes it will be possible for shareholder value to increase at a faster rate than would otherwise be possible with only its CBD business and licensing of its medical device, Hygee, The Company has executed a joint letter of intent with three entities involved in the durable medical equipment, retail sales and compounding pharmacy businesses with the objective of negotiating the final terms of a transaction that will result in the Company’s acquisition of these notesentities.
On August 30, 2021, the Company reached a settlement with Cromogen for an additional 2 years. Interest expense$585,885 in a month to month payment plan starting January 1, 2022, having the initial payment of $45,000 and $10,000 each month followed with the final payment set on December 1, 2026. If the Company is able to and decides to pay the settlement entirely prior to January 1, 2022 commencement, a $85,885 reduction will take place having the settlement be $500,000. If the Company defaults on Cromogen’s settlement, a confession of judgement will be executed for the nine months ended December 31, 2015 and 2014 was $3,572 and $3,443, respectively.
Following the discharge and removal of Robert L. Stevens and Strongbow Advisors, Inc., the successor Receiver, William A Leonard, Jr., of Crisis Management, Inc., undertook the investigation of the former receiver’s actions, practices , and alleged fees. The successor receiver then issued his report evaluating Mr. Stevens alleged fees and found that no outstanding fees are due. The court has set to an evidentiary hearing scheduled for mid January 2022 to consider the successor receivers conclusions as well as the former receiver’s potential liabilities to the Company.
Lease Agreements
On August 30, 2021, the Company entered into an agreement with JCR Medical Equipment, Inc., a Florida Corporation to lease a 1,000 square foot facility consisting of office and warehouse space out of its majority stockholder Majorca Group, Ltd., in connection with services provided pursuant to a founder’s agreement. These fees were paid through the issuance13,000/sq. ft. facility located at 10650 NW 29th Terrace Doral, FL 33172. JCR Medical Equipment, Inc. is part of the Company’s preferred stockfiled September 10, 2021 8-K dual acquisition LOI and partner of RxCompoundStore.com, LLC. acquisition filed on November 8, 2021 8-K.
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Note 7 — Balance Sheet and Income Statement Footnotes
Accounts receivable represent normal trade obligations from customers that are subject to normal trade collection terms, without discounts or rebates. If collection is expected in prior periods.
As of September 30, 2021, ROU Asset was $0 and Lease Liability-Current was $0.
Accounts payable are obligations to pay for goods and services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities
Accrued expenses of $250,605as of September 30, 2021 mainly represent, $135,000 of accrued payroll for Michele Aube, $74,000 in payroll and $8,000 in reimbursements for Nickolas S. Tabraue, and the remainder for of accrued interest on related Notes Payable..
General and administrative expenses were $30,313 and $74,020 for September 30, 2021 and 2020 respectively. For the three months ended September 30, 2021, the majority stockholder, pursuant to a consulting agreementcomprised was for web marketing servicesthe Company’s year end audit and for the period December 2014 through December 2015. The fair value of the shares issuedending quarter June 30, 2021 review.
Professional fees were recorded as prepaid marketing at March 31, 2015 and were re-measured until performance was completed in December 31, 2015, with the related expenses recorded over the service period. The final fair value of the 50,000 shares issued was $14,500 using the fair market value of the Company's stock in December 2015 when performance was complete. Marketing expense (income) $0for the three and nine month periodsmonths ended December 31, 2015 was ($16,625) and $125, respectively, pertaining to these services.
Legal expenses were performed as of March 31, 2015. The shares were valued at $261,250 and fully expensed as of March 31, 2015. No expense related to these shares was recorded $7,500for the three and nine months ended December 31, 2015.
Research and December 31, 2015: and 50,000 shares as a bonus pursuant to the employee’s promotion to the position of chief operations officer during the quarter ended December 31, 2015. Compensation expense of $67,000 for the time he was an officer has been presented as compensation-officers, while compensation of $85,500 for the time he was an employee has been presented as general and administrative expense in the accompanying Condensed Consolidated Statement of Operations for the nine months December 31, 2015. The expense for the three-month period ended December 31, 2015 is $67,000 and is presented as compensation-officer.
Interest expense was $(21,047)and $(12,495) for three months ended December 31, 2015, the Company issued 9,500 fully vested common shares with fair value of $9,025September 30, 2021 and 2020. Interest expense for marketing services by various parties.
| Warrants Outstanding | Exercise Price | Remaining Contractual Life (Years) | |
| Warrants outstanding—March 31, 2015 | 333,332 | $.75 | .9 |
| Warrants issued | - | - | - |
| Warrants expired | - | - | - |
| Warrants exercised | - | - | - |
| Balance, December 31, 2015 | 333,332 | $.75 | .4 |
| Number of Warrants Outstanding | Exercise Price | Remaining Contractual Life (Years) |
| 333,332 | $0.75 | .4 |
Note 7 - Commitments and contingencies
On November 9, 2015 the Company and the plaintiffs entered into a settlement agreement and the Company agreed to make a total payment of $31,000 to Dr. Katz and his administrative assistant. As part of the settlement agreement, 500,000 shares of the Company's common stock previously issued to the plaintiffs as compensation were returned to the Company and cancelled on February 4, 2016 (see note 8). The Company had an Employment Agreement with its former CEO which called for issuance of $50,000 worth of restricted common shares per quarter as compensation for his services which was terminated on May 10, 2015. As of December 31, 2015, accrued cost of legal proceeding includes $11,250 related to the remaining payment on this settlement.
About RxComponundStore.com, LLC and Peaks Curative, LLC.
RxCompound is a compounding pharmacy licensed in the States of new product linesNew York and Florida and registered with the Drug Enforcement Agency (“DEA”) to effect introductionssell Schedules II and III controlled medications. RxCompound has focused on men’s health, specifically medical products directed at treating erectile dysfunction (“ED”) such as Tadalafil, and Sildenafil Citrate (generic names for Cialis and Viagra, respectively) and others, compounded into capsules, tablets. Its flagship product(s) are a proprietary formulation for men’s ED medications in the form of business prospectsgummies. Currently RxCompound is not certified for and does not have sterile facilities that would allow it to the Company. This Agreement shall terminateoffer medications that can be injected such as testosterone, HCG, TriMix or peptides. However, it was planning on the 30th day of April, 2018becoming a sterile compounding pharmacy and is renewable for a second term of three years at the option of the Developer by 60-day notice to the Company prior to the expiration of the first term. There have been no commissions paid during the periods pursuant to this agreement.
Peaks was tenderedestablished as a marketing company that markets men’s ED products, however the Company plans to secureexpand the lease.
General Terms of the Acquisitions.
RxCompound and Peaks are both Florida limited liability companies that have their equity ownership structured as units or membership units. Although the acquisitions were negotiated at arms’ length and both the Company and the owner of the membership units of RxCompound and Peaks had separate counsel, since the owner, Mario Tabraue, is the brother of Nickolas Tabraue, our CEO and a member of our board of directors, Nickolas Tabraue abstained from his position as Chief Executive Officervoting on the resolution of the board of directors that approved these transactions. Upon closing RxCompound and DirectorPeaks will both be wholly owned subsidiaries of the Company. Mr. Pavlik was terminated as a result of his refusal to rescind certain matters related to a corporate opportunityThe agreement among the parties provides that he entered into with a competitor during January 2016.
On November 3, 2021, in accordance with the terms of the acquisition agreement referred to in Item 1.01 above, the Company’s Board of Directors appointed Mario G. Tabraue to fill a vacancy thereon. He will serve as a member of the board of directors until his earlier resignation, removal or incapacity. In addition, under the terms of the same agreement, Mario Tabraue was appointed to serve as the President of the Company, to serve until his earlier resignation or removal and will continue to serve as president of both RxCompoundstore.com, LLC. and Peaks Curative, LLC while the membership units of both are in escrow and following closing, when both are wholly owned subsidiaries. (Nickolas Tabraue will continue to serve as CEO of the Company).
Mario Tabraue – President and Director, 42 (age) Mr. Tabraue worked from 1997 until 2002 assisting with real estate transactions as well first and third party insurance claims at the law firm of MoisesKaba III. During this time, he also free-lanced creating web sites and working with businesses creating and implementing new processes, in accounting and with digital technologies. From 2002 until 2009, Mr. Tabraue worked for Eller-ITO Stevedoring Company at the Port of Miami where he served in operations and logistics, first with simple vessel operations and as he demonstrated his skills advanced to complex operations and finally management of full vessel planning and operations. From 2009 until 2013 Mr. Tabraue worked for Ceres Marine Terminals as an operations manager where he was given ever increasing responsibilities until among his duties were negotiating contract issues with union labor officials and contract negotiations with companies such as Royal Caribbean, Mediterranean Shipping Lines, Hapag-Lloyd and others. In 2013 through 2014 he began working with Zoological Wildlife Foundation, a business founded by his family in 2008. At the Foundation he restructured operations, tour packages, the accounting systems, and fully automated their booking system through the company’s website. Ultimately all internal procedures were automated and made paperless. In 2014 Mr. Tabraue was recruited back to Eller-ITO where he returned as Marine Manager and has advanced to the position of Special Projects Manager. In 2019, he began work for JCR Medical Equipment serving as the head of finance. In 2020 Mr. Tabraue purchased RxCompoundStore.com with the vision of starting a telemedicine platform to expand the company’s reach and to compete in the online market.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following section, Management’s Discussion and Associated Risks.
The following discussion should be read in conjunction with theour unaudited consolidated financial statements and therelated notes to those statementsand other financial data included elsewhere in this Quarterly Reportreport. See also the notes to our consolidated financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Registration Statement filed on Form 10-Q. This10-12g and our Annual Report filed on Form 10-K for the fiscal year ended March 31, 2021, as well as our Quarterly Reportreport filed on Form 10-Q contains certain statements that are forward-looking withinfor the meaning of the Private Securities Litigation Reform Act of 1995. Certain statements contained in the MD&A are forward-looking statements that involve risks and uncertainties. The forward-looking statements are not historical facts, but rather are based on current expectations, estimates, assumptions and projections about our industry, business and future financial results. Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors, including those discussed in other sections of this Quarterly Report on Form 10-Q.
OVERVIEW
The Company was incorporated under the laws of the State of Nevada on April 23, 2010. The Company is a biotechnology company focused on delivering unique nutraceuticals, bioceuticals and dietary supplements in the areas of health, wellness, sports and alternative medicine, Our products include cannabidiol ("CBD") hemp oil and other dietary supplements. ETST maintains a website at www.earthsciencetech.com.
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To design and produce CBD enhanced nutraceutical products for sale to the general public. The Company intend to create high-grade CBD-rich hemp oil and other CBD containing products unique to the current market in the nutraceuticals industry. The Company believe that our formulations will set us apart from competing products for promoting health. The Company has formulated and produced our initial CBD products, intended for, subject to performance, treating various symptoms of diseases and ailments or for overall health. The Company plans to expand manufacturing and marketing of these CBD products with expansion of products over the next five years.
To offer a wide selection of health and nutrition products through online, clinics, pharmacies, and in-store retail. Through our wholly owned subsidiary, the Company plans to continue expanding retail sales of nutritional supplements through online, clinics, pharmacies, and in-store sales. Then with the acquisition of the compounding pharmacy, the Company will focus on men’s health as well as other areas. In particular, the Company plans to continue with plans to build a sterile facility so that injectable products may be compounded and sold. Our current product selection includes many high-quality supplement brands, and includes our proprietary CBD-rich hemp oil.
Critical Accounting Policies and Estimates
The discussion and analysis of the Company’s financial condition and results of operations are based upon the Company’s condensed financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States Foodof America. The preparation of these financial statements requires us to make estimates and Drug Administration (FDA) currently considers non-THC hempjudgments that affect the reported amounts of assets, liabilities, revenues and expenses. In consultation with the Company’s Board of Directors, management has identified the following accounting policies that it believes are key to an understanding of its financial statements. These are important accounting policies that require management’s most difficult, subjective judgments.
Basis of Presentation
The Company’s accounting policies used in the presentation of the accompanying consolidated financial statements conform to accounting principles generally accepted in the United States of America (“US GAAP”) and have been consistently applied.
Principles of Consolidation
The accompanying consolidated financial statements include all of the accounts of the Company and its wholly-owned subsidiaries. The subsidiaries include Nutrition Empire, Inc., Cannabis Therapeutics, Inc., Earth Science Pharmaceutical Inc., and a non-profit favored entity Earth Science Foundation. (all intercompany balances and transactions have been eliminated on consolidation.)
Use of Estimates and Assumptions
The preparation of the condensed 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 periods.
The Company’s significant estimates and assumptions include the fair value of financial instruments; the accrual of the legal settlement, the carrying value recoverability and impairment, if any, of long-lived assets, including the estimated useful lives of fixed assets; the valuation allowance of deferred tax assets; stock based cannabinoids, including CBD,compensation, the valuation of the inventory reserves and the assumption that the Company will continue as a going concern. Those significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to those estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.
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Management bases its estimates on historical experience and on various assumptions that are believed to be "food based"reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and therefore saleableliabilities that are not readily apparent from other sources.
Management regularly reviews its estimates utilizing currently available information, changes in all 50 statesfacts and circumstances, historical experience and reasonable assumptions. After such reviews, and if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates.
Carrying Value, Recoverability and Impairment of Long-Lived Assets
The 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 and a patent 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 than 40 countries. Cannabinoidsfrequently upon the occurrence of such events. Impairment of changes, if any, are natural constituentsincluded in operating expenses.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less to be cash and cash equivalents.
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 hemp plant and CBD is derived from hemp stalk and seed. Hemp oil is a dietary supplement that presents evidence of health and wellness benefits. According to research and ongoing studiesCompany; b) entities for which investments in collaboration with Dr. Wei R. Chen, Assistant Deantheir equity securities would be required, absent the election of the Collegefair value option under the Fair Value Option Subsection of MathematicsSection 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 Science atprofit-sharing trusts that are managed by or under the Universitytrusteeship of Central Oklahoma, CBDmanagement; 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.
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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 to help amaterial 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 conditionspossible losses, if determinable and disorders.
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.
Revenue Recognition
The Company follows and implemented ASC 606, Revenue from Contracts with Customers for revenue recognition. Although the new revenue standard is expected to have an immaterial effect, if any, on our ongoing net income, the Company did implement changes to our processes related to revenue recognition and the control activities within them. These 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.
The Company recognizes revenue from product sales or services rendered when control of the promised goods are transferred to our clients in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods and services. To achieve this core principle, the Company will 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 revenues when or as the Company satisfies a performance obligation.
The Company recognizes its retail store revenue at point of sale, net of sales tax.
Inventories
Inventories consist of various types of nutraceuticals and bioceuticals correctlyat the Company’s retail store and effectivelymain office. Inventories are stated at the lower of cost or market using the first in, first out (FIFO) method. A reserve is oneestablished if necessary to reduce excess or obsolete inventories to their net realizable value.
Cost of Sales
Components of costs of sales include product costs, shipping costs to customers and any inventory adjustments.
Shipping and Handling Costs
The Company includes shipping and handling fees billed to customers as revenues and shipping and handling costs for shipments to customers as cost of revenues.
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 most important ways to increase revenue and attract new clients. Our customer acquisition, however, revolves around our ability to provide unique products to the market in the form of capsules, tablets, soft gels, chewables, liquids, creams, sprays, powders, and whole herbs.
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Net Loss Per Common Share
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 Operationsshares of common stock outstanding during the year. Diluted loss per common share calculations are 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.
As of September 30, 2021 the Company had no warrants issued or outstanding.
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.
Stock Based Compensation
The Company follows ASC 718 in accounting for its stock based compensation to employees. This standard states that compensation cost is measured at the grant date based on the fair value of the award and is recognized over the service period, which is usually the vesting period. The Company values stock based compensation at the market price of the Company’s common stock as of the date in which the obligation for payment of service is incurred.
The Company accounts for transactions in which services are received from non-employees in exchange for equity instruments based on the fair value of the equity instrument exchanged in accordance with ASC 505-50.
Property and Equipment
Property and equipment is recorded at cost net of accumulated depreciation. Depreciation is computed using the straight-line method based upon the estimated useful lives of the respective assets as follows:
| Leasehold improvements | Shorter of useful life or term of lease |
| Signage | 5 years |
| Furniture and equipment | 5 years |
| Computer equipment | 5 years |
The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation are removed from accounts and any resulting gains or losses are included in operations.
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Liquidity and Capital Resources.
For the Three-Month Period Ended September 30, 2021 versus September 30, 2020
During the three months ended September 30, 2021, net cash used in the Company’s operating activities totaled $(20,831) compared to $(91,687) during the three months ended September 30, 2020. During the three months ended September 30, 2021, net cash used in investing activities totaled $1,172 compared to $0.00 provided by investing activities during the three months ended September 30, 2020. During the three months ended September 30, 2021, net cash provided by financing activities totaled $28,175 compared to $92,024 from financing activities during the three months ended September 30, 2020.
At September 30, 2021, the Company had cash of $25,217, accounts receivable of $5,456, inventories of $16,661 and prepaid expenses of $0 that comprised the Company’s total current assets totaling $47,334. The Company’s property and equipment at September 30, 2021 had a net book value of $0.
Convertible Note 2-GHS issued 4/2/19 for cash received $50,000, face amount $55,000 will accrue at a rate of 10% on a 360-day year. Maturity date is December 26, 2019. This note is at default and will continue accruing at the rate of 10%.
Convertible Note 3-GHS issued 5/15/19 for cash received $50,000, face amount $55,000 will accrue at a rate of 10% on a 360-day year. Maturity date is February 15, 2020. This note is at default and will continue accruing at the rate of 10%.
Convertible Note 4-GHS issued 6/07/19 for cash received $50,000, face amount $55,000 will accrue at a rate of 10% on a 360-day year. Maturity date is March 15, 2020. This note is at default and will continue accruing at the rate of 10%.
Convertible Note 5-GHS issued 9/09/19 for cash received $50,000, face amount $55,000 will accrue at a rate of 10% on a 360-day year. Maturity date is June 9, 2020. This note is at default and will continue accruing at the rate of 10%.
Convertible Note from a current share holder, issued 2/09/21 for cash received $50,000, free amount $50,000 will accrue at a rate of 10% on a 360-day year. Maturity date is February 9, 2022.
At September 30, 2021, the Company had total liabilities of $1,733,209 of which $585,886 was held as a reserved for the settlement of its lawsuit with Cromogen in a month to month payment plan starting January 1, 2022 (SeeNote 8 Subsequent Events).
At September 30, 2021, the Company had a stockholder’s equity totaling $(1,679,684) compared to an equity of $(5,026,848) for the period ending September 30, 2020.
RESULTS OF OPERATIONS
For the Three Months ended December 31, 2015 compared to the Three Months ended December 31, 2014
The Company’s gross revenue for the three months ended December 31, 2015,September 30, 2021 was $173,995$2,455 compared to $14,251 for the same periodSeptember 30, 2020 revenue totaling $26,551. The decrease in 2014 as a resultrevenue is primarily attributed to not having any of the openingonline orders fulfilled during the month of our retail store in Coral Gables, Florida in December 2014 coupled with an increased internet marketing initiative. CostJuly and August under the management of revenues for the three months ended December 31, 2015 was $96,453 comparedRobert L. Stevens leading to $15,416 for the same three-month period ended December 31, 2014 which resulted in a gross profit of $77,542 for the three months ended December 31, 2015 compared to a negative gross profit of $1,165 for the three months ended December 31, 2014. many upset customers and many refunds.
The increase in gross profit is due to the opening of the retail store and from the increased blend of products to include a concentration of hemp/cbd oil with higher margins along with our stores supplements and nutriceuticals.
Three Months Ended December 31, 2015 | Three Months Ended December 31, 2014 | |||||||
| Professional fees | $ | 11,350 | $ | 198,971 | ||||
| Consulting fees-related party | - | 7,072,000 | ||||||
| Marketing | (17,045 | ) | 115,402 | |||||
| Officer compensation | 67,000 | 231,000 | ||||||
| Cost of legal proceedings | 137,227 | - | ||||||
| Research and development | - | 2,681 | ||||||
| General and administrative | 145,407 | (26,165 | ) | |||||
| $ | 343,939 | $ | 7,593,889 | |||||
Officer compensation for the three months ended December 31, 2015 were much lowerSeptember 30, 2021 was $9,500 in comparisoncash and $0.00 in stock based compensation compared to the total operating costs of $521,889 for$82,048 in cash and $0 in stock based compensation during the three months ended December 31, 2014, excluding consulting fees. TheJune 30, 2020. This decrease in operating costsis due to both the CFO and COO resigning from the 2014 period asCompany and not being any executives prior to September 1, 2021.
The Company incurred marketing expenses of $0 during the three months ended September 30, 2021, compared to the 2015 period consisted of decreases in professional fees, marketing fees and officer compensation. The decrease in professional fees was the result of higher accounting fees, patent related legal fees and filing fees related to the December 2014 restatement of prior periods financial statements. Marketing expense decreased compared to that related to the 2014 period due to increased marketing/multi-media pertaining to the opening of our retail store in 2014 plus remeasurement of 50,000 Royal Palm shares created $38,920 marketing income$460 during the 2015 quarter. Officer compensation also decreased from the 2014 period due to stock compensation paid to the predecessor chief executive office in 2014 (none in 2015).three months ended September 30, 2020.
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The increase in cost of legal proceedings resulted from the accrual of additional legal expenses associated with the Company's litigation with a former supplier. The increase inCompany incurred general and administrative expenses of $30,313, during the 2015 period was primarily duethree months ended September 30, 2021, compared to a restatement of certain balances$74,020 during the 2014 period.
The Company paid professional fees of $0, during the Nine Monthsthree months ended December 31, 2015September 30, 2021, compared to $7,400 during the Nine Months ended December 31, 2014
The increase in gross profit is due to the opening of the retail store and the increased blend of products to include a concentration of hemp/cbd oil with higher margins along with our stores supplements and nutriceuticals.
Nine Months Ended December 31, 2015 | Nine Months Ended December 31, 2014 | |||||||
| Professional fees | $ | 221,027 | $ | 241,348 | ||||
| Marketing | 48,975 | 293,157 | ||||||
| Consulting fees-related party | - | 7,072,000 | ||||||
| Officer compensation | 112,542 | 356,000 | ||||||
| Cost of legal proceedings | 392,227 | - | ||||||
| Research and development | - | 14,833 | ||||||
| General and administrative | 415,777 | 78,456 | ||||||
| $ | 1,190,548 | $ | 8,055,794 | |||||
| Working Capital | December 31, 2015 | March 31, 2015 | ||||||
| Current Assets | $ | 289,581 | $ | 661,585 | ||||
| Current Liabilities | $ | (504,625 | ) | $ | (148,213 | ) | ||
| Working Capital | $ | (215,044 | ) | $ | 513,372 | |||
Nine Months Ended December 31, 2015 | Nine Months Ended December 31, 2014 | |||||||
| Cash used in operating activities | $ | (460,301 | ) | $ | (258,846 | ) | ||
| Cash used in investing activities | $ | (13,140 | ) | $ | (78,783 | ) | ||
| Cash provided by financing activities | $ | 272,874 | $ | 153,442 | ||||
| Net decrease in cash | $ | (200,567 | ) | $ | (184,187 | ) | ||
The Company incurred research and development expenses of incurring$0 during the three months ended September 30, 2021, compared to $0 during the three months ended September 30, 2020.
The Company generated a net loss of $1,111,414.
The Company’s Plan of Operation for the nine months ended December 31, 2015 was primarily the result of common stock issued.
The Company’s auditors have expressed doubt as to our common stock. However, we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock or through a loan from outside sources to meet our future obligations. We do not have any arrangements in place for any future equity financing. This raises a substantial doubt about the Company’s ability to continue as a going concern.
Regardless of the forgoing issues, the Company is attemptingwill require additional debt or equity financing for its operations as currently conducted. However the Company has changed its immediate focus from researching and developing innovative hemp extracts and making them accessible worldwide; with plans to generatebe a supplier of high quality hemp oil enriched with high-grade CBD. Its primary goal had been to advance different high quality hemp extracts with a broad profile of cannabinoids and additional natural molecules found in industrial hemp and to identify their distinct properties. Initially our missions were to educate the public on the many and varied nutritional and health benefits of CBD-rich hemp oil, to optimize purity in formulation, and to find new product delivery systems. With the decline in CBD sales due to the numbers of factors described in the Registrant’s periodic report filed with the SEC on Form 10-K for period ending March 31, 2021, the Company determined that the most efficient means to increase shareholder value would be the acquisition of a complimentary business that would bring revenues sufficient revenues, the Company's cash position may not be sufficient enough to support its own operations but that would allow the Company's daily operations. Management intendsbusiness 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 planexpand and generate sufficient revenues provide the opportunity for the Company to rebuild its CBD business. The opportunity that the Company is currently pursuing is the acquisition of JBC Medical Equipment, Inc. together with RxCompoundStore.com, LLC and Peaks Curative, LLC. The acquisition of all three businesses would give the Company the ability to cross-sell among the businesses as well as our current customers. There are also some areas that have been identified in these companies that are at the point where the revenue levels are at a point where allocating minimal incremental expenses in certain product offerings should result in more significant increases in revenue and earnings. The corporate strategy currently is to develop the acquisition plan, structure and terms while the Company’s receivership is wound down so that when it emerges from receivership, it is in a position to execute on the planned acquisitions. As the Company assimilates the new businesses into its operations, it plans to work to raise additional capital necessary to expand on the existing operations and to capitalize on their synergistic opportunities that provide the greatest immediate return on investment (i.e. pick the low hanging fruit), then to continue capitalizing on the opportunities among the companies and to rebuild its CBD sales. Finally it plans to license its Hygee product to a third party, if it is able to negotiate terms that are acceptable.
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To design and produce CBD enhanced nutraceutical products for sale to the general public. The Company intends to create high-grade CBD-rich hemp oil and other CBD containing products unique to the current market in the nutraceuticals industry. The believe that our formulations will set us apart from competing products for promoting health. The Company have formulated and produced our initial CBD products, intended for, subject to performance, treating various symptoms of diseases and ailments or for overall health. The Company plans to expand manufacturing and marketing of these CBD products with expansion of products over the next five years.
To offer a wide selection of health and nutrition products through online, clinics, pharmacies, and in-store retail. Through our wholly owned subsidiary, the Company plan to continue expanding retail sales of nutritional supplements through online, clinics, pharmacies, and in-store sales. Then with the acquisition of the compounding pharmacy, the Company will focus on men’s health as well as other areas. In particular, the Company plans to continue with plans to build a going concern. Whilesterile facility so that injectable products may be compounded and sold. Our current product selection includes many high-quality supplement brands, and includes our proprietary CBD-rich hemp oil.
Alternatively the Company could raise additional funds to meet the anticipated R&D and other expenses while the Company allow the sales from our existing products to become self sustaining. This last path is our currently intended path to additional revenue. In fact, our receiver intends to assist us in raising additional funds to meet our obligations and to fund expansion of our business and operations. The proceeds from any financing will be used to meet the expenses of the receiver’s ongoing fees and costs associated with the administration of the estate, meeting creditors allowed claims and working capital for the Company’s ongoing operations, expansion and pursuit of its business plan.
Historically the Company have been able to fully fund operations from a combination of operations and through additional sales of our common stock; and even though the Company are in receivership, the Company have no reason to believe that the Company will not be able to continue doing so since the Company have a strong base of existing shareholders who are committed to our vision for the Company, they have historically demonstrated a willingness to purchase shares of stock when they are offered and the receiver intends to offer and in fact, has an additional exemption available to it that may be more desirable to them. If these shareholders were to cease purchasing shares when offered, if the Company or our receiver were unable to secure other sources of debt or equity financing, or if the Company or our receiver were unable to secure any or sufficient financing and on terms that are acceptable to us collectively, the Company would not be able to continue operations as currently planned. However the Company do have sufficient resources over the short and long term with scaled back expenses and R&D so that after several turns of inventory the Company believes in the viabilitythe Company would then be able to meet the costs of administration and resume our R&D and operations as planned. Additional funding primarily allows us to meet the additional costs associated with the receiver’s administration of the estate and to expedite our business plan. During the periods ending September 30, 2021 and September 30, 2020 the Company has met its capital requirements through a combination of operating activities and through external financing through the sale of its strategyrestricted common stock and convertible notes. The Company intends to generate sufficient revenuescontinue the sales of our common stock and believe that by becoming a fully reporting company the Company has been able to attract additional investors, at smaller discounts to the current market price and from generally higher market prices, which is resulting in its abilityless dilution to raise additional funds, there can be no assurancesexisting investors than was the case while the Company was not a reporting company subject to that effect. The abilitythe reporting requirements of the Company to continueSecurities Exchange Act of 1934, as a going concern is dependent upon the Company's ability to further implement its business plan and generate sufficient revenues.
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 are not required to provide the information required under this item.
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ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in our 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 by our company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Although our management has not formally carried out an evaluation under the supervision and with the participation of our management, including chief executive officerPrincipal Executive Officer and chief operating officer, we have conducted an evaluationPrincipal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures aspursuant 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 our Principal Executive Officer and Principal Financial Officer have sufficient timely information to allow them to make necessary disclosures in a timely manner.
Based on this informal evaluation, our principal executive and principal financial and accounting officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934,1934) were effective as of June 30, 2018.
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 endreliability of financial reporting and the period covered by this report. Based on thispreparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation our chief executive officer and chief operating officer concluded as of the evaluation date that our disclosure controls and procedures were not effective dueeffectiveness to future periods are subject to the Company's:
Changes in Internal Control overand Financial Reporting
There have beenwere no other changes in ourthe Company’s internal control over financial reporting that occuredoccurred during the Company’s most recent fiscal quarter ended December 31, 2015 that hashave materially affected, or isare reasonably likely to materially affect, ourthe Company’s internal control over financial reporting, other than:
PART II –— OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On January 11, 2019, the Company received notice that Strongbow Advisors, Inc. and Robert Stevens (“Stevens”, and together with Strongbow, the “Receiver”) had been appointed by the Nevada District Court, as Receiver for the Registrant in Case No. A-18-784952-C (the “Order).
The Company is engagedsought the appointment of the Receiver after it found itself in a legal controversyan imminent danger of insolvency following the issuance by an arbitration panel of an award (the “Award”) in arbitration with a former supplier,the sum of $3,994,522.5 million in favor of Cromogen Biotechnology Corporation ("Cromogen"(“Cromogen”) in the matter entitled Cromogen Biotechnology Corporation vs. Earth Science Tech, Inc. (the “Cromogen Litigation”). Cromogen did not perform in accordance with its contract to supply high quality hemp oil toThe Nevada District Court found that the Company onwas in fact insolvent and ordered the appointment of the Receiver.
The Award consisted of a consistent and timely manner. In accordance withsum for breach of contract against the arbitration clause stipulated by the contract,Company in the arbitration proceeding, the Company filedamount of $120,265.00, a counterclaimsum for costs and affirmative defenses to Cromogen’s claims for damages. The Company also filed a legal action in the courts of Florida against Cromogen, its principals and related companies, wherein fraud is alleged in connection with Cromogen’s representations regarding the formulation and quality of the hemp oil supplied. The legal action in the Florida courts has been stayed by court order. The arbitration, is pending in New York City, as agreed in the contract. Cromogen has alleged damages of a direct and consequential nature. The Company filed a counterclaim for damages sustained as a proximate result of Cromogen’s deficient and defective performance. The Company made settlement offers to Cromogen. However, such offers have been rejected. Due to the arbitration administrator's rules, the arbitration proceeding has been on hiatus since the end of January 2016. As a result, no arbitration decision has been issued as of the date of this filing. Management has consulted with legal counsel and has recorded an estimated accrual based on the probability of an arbitration award and legal fees against the Company in the amount of $225,000 as$111,057.00 and a sum for the claim of December 31, 2015.
The Cromogen Litigation has been settled under an agreement that provides for monthly payments beginning after the first of the year in January 2022. The settlement agreement contains a lawsuitsignificant increase in Palm Beach County, Florida, for a claim against its former CEO, Dr. Harvey Katz and his administrative assistant, asserting various counts such as Breach of Contract, Unjust Enrichment, Negligence, Conspiracy and Conversion. On November 9, 2015the amount due from $450,000 if the Company and the plaintiffs entered into a settlement agreement and the Company agreed to make a totalshould default on its payment of $31,000 to Dr. Katz and his administrative assistant. obligations thereunder.
As part of the settlement agreement, 500,000impact of the receivership, the Court issued a Writ of Injunction or “Blanket Stay” covering the Company and its assets during the time that the Company is in receivership. As a result of the “Blanket Stay” the Company’s estate is protected from creditors and interference with its administration is prevented while the Company’s financial issues are being fully analyzed and resolved. As part of this process, creditors will be notified and required to provide claims in writing under oath on or before the deadline stated in the notice provided by the Receiver or those claims will be barred under NRS §78.675. The Blanket Stay will remain in place unless otherwise waived by the Receiver, or it is vacated by the Court or alternatively, lifted by the Court, upon a “motion to lift stay” duly made and approved by the Nevada District Court.
On November 7, 2019 the Receiver for Earth Science Tech, Inc., a Nevada corporation (the “Company”) filed a motion for preliminary injunction against Majorca Group Ltd. in the 8th Judicial District in Clark County, Nevada. The filing requests a show cause hearing whereby the Company will request the Court grants it motion to cancel certain shares and class of stock and to nullify certain amendments of the Articles of Incorporation. Specifically, the Company is asking that Majorca Group Ltd. be restricted from selling, transferring, converting, encumbering, hypothecating, obtaining loans against or in any fashion or in any way transferring their shares of common and preferred stock in the Company. Additionally the motion seeks a Freezing Injunction over any broker, bank, any financial institution, attorney, or agent holding shares of the Company'sCompany as well as any proceeds from shares of the Company.
On January 27, 2020 Earth Science Tech, Inc., a Nevada corporation (the “Company”) reached a confidential settlement with Majorca Group, Ltd (“Majorca”). The Receiver will withdraw its motion for injunction over the Majorca common stock previouslyand preferred shares. The Settlement Agreement provides that Majorca Group, Ltd. and all relevant parties will, within 10 days of execution of the settlement agreement, return 18,000,000 common shares and 5,200,000 Series A Preferred Stock held by Majorca for cancellation. The Series A Preferred Stock class will be cancelled completely. The remaining 6,520,000 common shares held by Majorca is subject to lockup agreement and thereafter, sales will be made only pursuant to a limited strict bleed-out agreement administered by a third party.
On January 19, 2021, one of the Company’s largest shareholders served and filed a notice of motion and motion to intervene against Robert L. Stevens and Strongbow Advisors, Inc. (individually or collectively referred to as “Receiver”) this action was later joined by additional shareholders representing approximately 33% of the issued to the plaintiffs as compensation were returned toand outstanding shares of the Company at that time. This motion to intervene, at its heart, was based upon and cancelledresulted from, what the interveners saw as, a lack of transparency by the Receiver. What was filed was initially based upon concerns of Mr. Stevens’ lack of transparency. However as the matter progressed in court, additional concerns have arisen and on February 4, 2016 (see note 8). August 27, 2021, Stevens and Strongbow were discharged and removed and William Leonard was appointed to replace them as Receiver, by the Nevada District Court. Mr. Leonard is currently reviewing various matters, including past invoices presented by Stevens, as well as his conduct during the time he acted as Receiver for the Company as well as others that the prior Receiver had a prior relationship with that have derived benefits from working with the prior Receiver. The outcome of this review is uncertain at this time and a wide number of outcomes is possible.
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The Company had an Employment Agreementis now optimistic that it will be able to emerge from receivership under the new receiver, in a reorganized position that will allow it to proceed with the acquisitions of the three entities. Combined, these entities present a larger opportunity to realize the synergies that they have among themselves and in so doing, the Company believes it will be possible for shareholder value to increase at a faster rate than would otherwise be possible with only its former CEO which calledCBD business and licensing of its medical device, Hygee, The Company has executed a joint letter of intent with three entities involved in the durable medical equipment, retail sales and compounding pharmacy businesses with the objective of negotiating the final terms of a transaction that will result in the Company’s acquisition of these entities.
On August 30, 2021, the Company reached a settlement with Cromogen for issuance$585,885.90 in a month to month payment plan starting January 1, 2022, having the initial payment of $50,000 worth$45,000 and $10,000 each month followed with the final payment set on December 1, 2026. If the Company is able to and decides to pay the settlement entirely prior to January 1, 2022 commencement, a $85,885.90 reduction will take place having the settlement be $500,000. If the Company defaults on Cromogen’s settlement, a confession of restricted common shares per quarter as compensationjudgement will be executed for his services which was terminated on May 10, 2015. Asthe amount of December 31, 2015, accrued cost$970,000, representing the total amount of legal proceeding includes $11,250 relatedCromogen’s unsecured claims, less any amount paid by the Company, plus costs and attorney fees incurred to obtain the remaining payment on this settlement.
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 are not required to provide the information under this item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
During the ninethree months ended December 31, 2015September 30, 2021, the Company issued 856,3330 shares of its common sharesstock for cash at $0.32 per share for total proceeds of $272,874. The issuances$0, in transactions that were exempt from registration pursuant to Section 4(a)(2) of the Securities Act.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None
ITEM 4. MINE SAFETY DISCLOSURES.
None
ITEM 5. OTHER INFORMATION.
Departure of Directors and Director of Company. Mr. Pavlik was terminated because he refused to rescind certain matters related to a corporate opportunity that he entered into with a competitor on January 13, 2016 and that corporate opportunity created a conflict of interest with the Company.
None
ITEM 6. EXHIBITS
| 31.2 | Certifications of | |
| 32.1 | Certifications of | |
| 32.2 | Certifications of |
| 101.INS | Inline XBRL Instance Document | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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 thereuntohereunto duly authorized.
RECEIVER FOR EARTH SCIENCE TECH, INC. CASE NO. A-18-784952-C Crisis MANAGEMENT, Inc. | ||
| Dated: November 16, 2021 | By: | /s/ William A. Leonard Jr. |
| Crisis Management, Inc. | ||
| Its: | Receiver | |
| EARTH SCIENCE TECH, INC. | ||
| Dated: November 16, 2021 | By: | /s/ Nickolas S. Tabraue |
| Nickolas S. Tabraue, under the supervision and direction of William A. Leonard Jr. and Crisis Management, Inc., receiver for Earth Science Tech, Inc. Case No. A-18-784952-C | ||
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