UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission
file number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices) (zip code)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Over the Counter Bulletin Board |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |
| ☒ | Smaller reporting company | |||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
As of November 14, 2022, there were Common and 1,000,000 Preffered shares of registrant’s common stock outstanding.
TABLE OF CONTENTS
| 2 |
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Earth Science Tech, Inc. & Subsidiaries
Consolidated Balance Sheets
| September 30, 2022 | March 31, 2022 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts
Receivable(net allowance of $ | $ | $ | ||||||
| Prepaid expenses and other current assets | ||||||||
| Inventory | ||||||||
| Total current assets | ||||||||
| Other Assets: | ||||||||
| Due from RxCompound | ||||||||
| Prepaid Acquisition Costs | ||||||||
| Total other assets | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| PPP Loan | $ | |||||||
| Accrued Settlement-Fox Rothchild | $ | |||||||
| Accrued Settlement-GHS | $ | |||||||
| Accrued Settlement-Steven Warm | $ | |||||||
| Convertible Promissory Note-Strongbow Advisors | $ | |||||||
| Convertible Note 1-VCMAJI Irrevocable Trust | $ | |||||||
| Convertible Note 2-VCMAJI Irrevocable Trust | $ | |||||||
| Issa Loan Advance | $ | |||||||
| Issa Revolving Note | $ | |||||||
| SBA EDIL Loan | $ | |||||||
| Accrued expenses | $ | $ | ||||||
| Accrued settlement | ||||||||
| Interest Payable-Conv Notes-GHS | ||||||||
| Interest Payable-Promissory Note-GHS | ||||||||
| Convertible Notes -GHS | ||||||||
| Promissory Note-GHS | ||||||||
| SBA Payable | ||||||||
| Due to RX Compound | ||||||||
| Note Payable-Mario Portella | ||||||||
| Interest Payable-Portella Note | ||||||||
| Notes payable - related party | ||||||||
| Total current liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Stockholders’ (Deficit) Equity: | ||||||||
| Common stock, par value $ per share, shares authorized; and shares issued and outstanding as of September 30, 2022 and March 31, 2022 respectively | ||||||||
| Preferred stock B par value $ per share authorized and outstanding as of September 30, 2022 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ (Deficit)Equity | ( | ) | ( | ) | ||||
| Total Liabilities and Stockholders’ (Deficit) Equity | $ | $ | ||||||
| F-1 |
Earth Science Tech, Inc. & Subsidiaries
Consolidated Statements of Operations
| For
the Three Months Ended September 30, 2022 | For
the Three Months Ended September 30, 2021 | For
the Six Months Ended September 30, 2022 | For
the Six Months Ended September 30, 2021 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of revenues | ||||||||||||||||
| Gross Profit | ||||||||||||||||
| Operating Expenses: | ||||||||||||||||
| Compensation - officers | ||||||||||||||||
| Officer compensation stock | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Loss on disposal of assets | ||||||||||||||||
| Litigation Expense | ||||||||||||||||
| Cost of legal proceedings | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other Income (Expenses) | ||||||||||||||||
| Other Income | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest Expense-Convertible Notes GHS | ( | ) | ( | ) | ||||||||||||
| Interest Expense-Promissory Note-GHS | ( | ) | ( | ) | ||||||||||||
| Portela Interest | ( | ) | ( | ) | ||||||||||||
| Int Exp-SBA Loan | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total other income (expenses) | ||||||||||||||||
| Net Profit/(Loss) before income taxes | ( | ) | ( | ) | ||||||||||||
| Income taxes | ||||||||||||||||
| Net Profit/(Loss) | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| F-2 |
Earth Science Tech, Inc. & Subsidiaries
Consolidated Statements of Stockholders’ (Deficit) Equity
For Three Months Ended September 30, 2022 and 2021
| Common Stock | Preferred Stock | Additional Paid-in | Accumulated | |||||||||||||||||||||||||
| Description | Shares | Amount | Shares | Amount | Capital | Deficit | Total | |||||||||||||||||||||
| Balance June 30, 2021 | $ | $ | $ | $ | ( | ) | ( | ) | ||||||||||||||||||||
| Common stock issued for cash | — | |||||||||||||||||||||||||||
| Common stock issued for services | — | |||||||||||||||||||||||||||
| Common stock issued for employee compensation | — | |||||||||||||||||||||||||||
| Common stock issued for Conversion on Note | — | |||||||||||||||||||||||||||
| Net Profit/(Loss) | ||||||||||||||||||||||||||||
| Balance September 30, 2021 | $ | $ | $ | $ | ( | ) | ( | ) | ||||||||||||||||||||
| Common stock issued for cash | — | |||||||||||||||||||||||||||
| Common stock issued for services | — | |||||||||||||||||||||||||||
| Common stock issued for officer compensation | — | |||||||||||||||||||||||||||
| Common stock issued for Conversion on Note | ||||||||||||||||||||||||||||
| Net Profit/(Loss) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance December 31, 2021 | $ | $ | $ | $ | ( | ) | ( | ) | ||||||||||||||||||||
| Common stock issued for cash | — | |||||||||||||||||||||||||||
| Common stock issued for services | — | |||||||||||||||||||||||||||
| Common stock issued for officer compensation | — | |||||||||||||||||||||||||||
| Common stock issued for Conversion on Note | — | |||||||||||||||||||||||||||
| Net Profit/(Loss) | ( | ( | ) | |||||||||||||||||||||||||
| Balance March 31, 2022 | $ | $ | $ | $ | ( | ) | ( | ) | ||||||||||||||||||||
| Common stock issued for cash | — | |||||||||||||||||||||||||||
| Common stock issued for services | — | |||||||||||||||||||||||||||
| Common stock issued for officer compensation | — | |||||||||||||||||||||||||||
| Common stock issued for Conversion on Note | — | |||||||||||||||||||||||||||
| Net Profit/(Loss) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance June 30, 2022 | $ | $ | $ | $ | ( | ( | ) | |||||||||||||||||||||
| Common stock issued for cash | — | |||||||||||||||||||||||||||
| Common stock issued for services | — | |||||||||||||||||||||||||||
| Common stock issued for officer compensation | — | |||||||||||||||||||||||||||
| Common stock issued for Conversion on Note | — | |||||||||||||||||||||||||||
| Preferred stock B issued for officer compensation | ||||||||||||||||||||||||||||
| Net Profit/(Loss) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance September 30, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||
| F-3 |
Earth Science Tech, Inc. & Subsidiaries
Consolidated Statements of Cash Flows
| For
the Six Months Ended September 30, 2022 | For
the Six Months Ended September 30, 2021 | |||||||
| Cash Flow From Operating Activities: | ||||||||
| Net Profit/(Loss) | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Increase/Decrease in prepaid expenses and other current assets | ( | ) | ||||||
| Increase in accrued settlement | ( | ) | ||||||
| Decrease/Increase in inventory | ||||||||
| Decrease in accounts payable | ||||||||
| Net Cash Used in Operating Activities | ( | ) | ( | ) | ||||
| Investing Activities: | ||||||||
| Purchases of property and equipment | ||||||||
| Net Cash Used in Investing Activities | ||||||||
| Financing Activities: | ||||||||
| Proceeds from issuance of common stock | ||||||||
| Proceeds from notes payable- related party | ||||||||
| Proceeds from Convertible Notes | ||||||||
| Intrinsic value of Conv Notes-Addtl Paid-in-Capital | ||||||||
| Net Cash Provided by Financing Activities | ||||||||
| Net Decrease in Cash | ( | ) | ||||||
| Cash - Beginning of period | ||||||||
| Cash - End of period | ||||||||
| F-4 |
EARTH SCIENCE TECH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(UNAUDITED)
Note 1 — Organization and Nature of Operations
Earth
Science Tech, Inc. (“ETST” or the “Company”) was incorporated under the laws of the State of Nevada on April
23, 2010 subsequently changed to the State of Florida on June 27, 2022. As of November 3, 2021, the Company entered into an agreement
that is currently pending to acquire RxCompoundStore.com, LLC (“RxCompound”) and Peaks Curative, LLC. (“Peaks”)
through the purchase of
RxCompound is a compounding pharmacy that has historically focused on men’s health, specifically medical products directed at ED such as Tadalfil, and Sildenafil Citrate (the generic names for Cialis and Viagra, respectively) and longevity. RxCompound is in process on obtaining a sterile compounding room expected to launch January 2023 to provide sterile products for injection.
Peaks is the telemedicine referral site facilitating asynchronous consultations for branded compound medications prepared at RxCompound. Peaks is in its final stages on upgrading its website after its soft launch to and increase product offering. Peaks full launch is anticipated for January 2023.
| F-5 |
Earth Science Foundation (“ESF”) is a favored entity of ETST, effectively being a non-profit organization on February 11, 2019, and is structured to accept grants and donations to those in need.
Note 2 — Summary of Significant Accounting Policies
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 subsidiary Earth Science Foundation, Inc. is a non-profit favored entity of the Company. After the conditions to closing have been met, RxCompoundand and Peaks will also be wholly owned subsidiaries of the Company.
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 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 since 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
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.
| 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’s expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives.
The Company considers the following to be some examples of important indicators that may trigger an impairment review: (i) significant under-performance or losses of assets relative to expected historical or projected future operating results; (ii) significant changes in the manner or use of assets or in the Company’s overall strategy with respect to the manner or use of the acquired assets or changes in the Company’s overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; (v) a significant decline in the Company’s stock price for a sustained period of time; and (vi) regulatory changes. The Company evaluates assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events. Impairment of changes, if any, are included in operating expenses.
On
June 4, 2019, the Company discontinued 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 $
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’s consolidated financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time, that these matters will have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.
Revenue recognition
The Company follows and implements 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 the Company’s ongoing net income, management did implement changes to the Company’s 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 the company’s clients in an amount that reflects the consideration to which management expect to be entitled in exchange for those goods and services. To achieve this core principle, management 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.
Inventories
The Company during did not hold any inventories during the period end September 30, 2022. Subsequently to the period ending September 30, 2022, the Company amended the Purchase Agreement consummating the merger, (see Note 8, Subsequent Events). The Company will have inventories stated at the lower of cost or market using the first in, first out (FIFO) method from its subsequently merged wholly owned subsidiaries RxCompound and Peaks moving forward. A reserve will be established if necessary to reduce excess or obsolete inventories to their net realizable value.
Cost of Sales
There were no components of costs of due to the Company not having any revenues during the period end September 30, 2022. Subsequently to the period ending September 30, 2022, the Company amended the Purchase Agreement consummating the merger, (see Note 8, Subsequent Events). The Company will include product costs and shipping costs to customers and any inventory adjustments from its subsequently merged wholly owned subsidiaries RxCompound and Peaks moving forward.
Shipping and Handling Costs
There were no shipping and handling fees billed due to the Company not having any revenues during the period end September 30, 2022. Subsequently to the period ending September 30, 2022, the Company amended the Purchase Agreement consummating the merger, (see Note 8, Subsequent Events). The Company will include shipping and handling fees billed to customers as revenues and shipping and handling costs for shipments to customers as cost of revenues once from its subsequently merged wholly owned subsidiaries RxCompound and Peaks moving forward.
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 carry 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 not more likely than not those 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
Interest
and penalties related to liabilities for uncertain tax positions will be charged to interest and operating expenses, respectively. The
Company has net operating loss carry forwards (NOL) for income tax purposes of approximately $
Internal Revenue Code Section 382 (“Section 382”) imposes limitations on the availability of a company’s net operating losses after certain ownership changes occur. The Section 382 limitation is based upon certain conclusions pertaining to the dates of ownership changes and the value of the Company on the dates of the ownership changes. It was determined that an ownership change occurred in October 2013 and March 2014. The amount of the Company’s net operating losses incurred prior to the ownership changes are limited based on the value of the Company on the date of the ownership change. Management has not determined the amount of net operating losses generated prior to the ownership change available to offset taxable income 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 September 30, 2022, the Company has no 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”) 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.
| F-9 |
The Company follows ASC 718 in accounting for its stock-based compensation to employees. These 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.
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.
Property and equipment
Property and equipment are 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 | ||
| Furniture and equipment | ||
| Computer equipment |
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 August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-15, Classification of Certain Cash Receipts and Cash Payments. The new standard will change the classification of certain cash payments and receipts within the cash flow statement. Specifically, payments for debt prepayment or debt extinguishment costs, including third-party costs, premiums paid, and other fees paid to lenders that are directly related to the debt prepayment or debt extinguishment, excluding accrued interest, will now be classified as financing activities. Previously, these payments were classified as operating expenses. The guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019, with early adoption permitted, and will be applied retrospectively. The Company does not expect that the adoption of this new standard will have a material impact on its consolidated financial statements.
In February 2016, the 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 granting 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 after December 15, 2019. Early adoption is permitted. The Company is currently evaluating the impact the adoption of this new standard will have on its Consolidated Financial Statements.
All other newly issued accounting pronouncements not yet effective have been deemed either immaterial or not applicable.
Intangible Assets
The
Company’s balance of intangible assets on the condensed consolidated balance sheet net of accumulated amortizations $
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.
On September 30, 2022, the Company had negative working capital, an accumulated deficit of $
Subsequently to the period ending September 30, 2022, the Company and the sellers amended the Purchase Agreement consummating the merger, (see Note 8, Subsequent Events). The Company is now a holding entity set to acquire companies in the health and wellness space currently in compounding pharmaceuticals and telemedicine through its wholly owned subsidiaries RxCompound and Peaks. The Company’s cash position may not be sufficient to pay its obligations and support the Company’s daily operations. Management intends to raise additional funds by way of a public or private offering. Management believes that the actions presently being taken to further implement its business plan and generate sufficient revenues may provide the opportunity for the Company to continue as a going concern. While the Company believes in the viability of its strategy to generate sufficient revenues by acquiring companies and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenues.
The condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
| F-11 |
Note 4 - Related Party Balances and Transactions
The
Seller and current owner of RxCompound and Peaks Curative is Mario Tabraue, the brother of the Company’s CEO, Nickolas S. Tabraue.
Although strictly speaking, the acquisition was negotiated in an arms-length transaction and both the Company and Mario Tabraue had separate
counsel, each of whom contributed to the acquisition agreement. The Company’s Board of Directors, the Company’s Management
and the Successor Receiver all concluded that the purchase price, consisting of million shares of ETST common stock and $
Note 5 – Stockholders’ Equity
During
the three months ended September 30, 2022, and 2021, the Company issued and common shares for an aggregate sales price of
$
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”) was 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 the 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 $
The
Award consisted of a sum for breach of contract against the Company in the amount of $
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 was protected from creditors and interference with its administration was 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 was 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.
| F-12 |
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.
The Company was 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 believed 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 entities.
| F-13 |
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 claims for fees for work he alleges
was performed. The Successor Receiver then issued his report evaluating Mr. Stevens fees claims and found that there were no outstanding
fees due. The court had set an evidentiary hearing that was scheduled and rescheduled for the court to consider the successor
receivers conclusions as well as the former receiver’s potential liabilities to the Company. The evidentiary hearing was later
canceled due to the Company settling with Stevens and his company Strongbow Advisors, Inc., Dubowsky law, and Fox Rothchild LLP. In the
settlement the Company has agreed to pay Fox Rothchild’s fees and expenses in an amount equal to $
On
August 30, 2021, the Company reached a settlement with Cromogen for $
On
May 31, 2022, Earth Science Tech, Inc., a Nevada corporation (the “Company”), exited receivership under the direction of
William A. Leonard Jr. of Crisis Management, Inc. (“Receiver”). The Company’s board of directors has resumed full control
of the Company pursuant to NRS 78.645(1). The exit was granted by the Eighth Judicial Court in Clark County Nevada. Through the receivership
process and Receiver, the Company has positioned itself for future success by (i) entering into settlement agreements with claimed creditors;
and (ii) negotiating the pending acquisition of two operating entities. The total receivership administrative fees and costs were $
Lease Agreements
On
August 31, 2021, the Company entered into an agreement with JCR Medical Equipment, Inc., a Florida Corporation to lease a
| F-14 |
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 one year or less, they are classified as current assets. If not, they are presented as non-current assets. Notwithstanding, these collections, the Company periodically evaluates the collectability of accounts receivable and considers the need to establish an allowance for doubtful debts based upon historical collection experience and specifically identifiable information about its customers. As of
As
of September 30, 2022, ROU Asset was $
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 $
General
and administrative expenses were $
Professional
fees were $
Other
income was $
Interest
expense was $(
| F-15 |
Note 8 — Subsequent Events
During
October 2022, Mr. Giorgio R. Saumat (“Saumat”) purchased $
On
October 25, 2022, the Company and Dr. Issa El-Cheikh entered into a Settlement and Release Agreement whereby the Company agreed to issue
shares of its restricted Common Stock to Dr.
Issa El-Cheikh in full satisfaction and complete cancellation of $
On
October 25, 2022, the Company and Mario Portela entered into a Settlement and Release Agreement whereby the Company agreed to issue shares of its restricted Common Stock to Mr.
Portala in full satisfaction and complete cancellation of the $
On or around October 24, 2022, and by virtue of the transactions contemplated in Item 1.01 above, Nickolas S. Tabraue and Mario G. Tabraue collectively cancelled shares of Company Series B Preferred stock and the Company reissued said shares to Saumat as partial consideration under the Settlement Agreement whereby the Acquired Debt was cancelled. Based on the rights and preferences set forth in the Series B Certificate of Designation, the share assignment results in Saumat having a controlling vote with respect to all matters requiring a shareholder vote.
On October 25, 2022, Nickolas S. Tabraue, the Company’s CEO and Director and Mario G. Tabraue, the Company’s President and Director have both agreed to defer receiving salary compensation until the Company is cashflow positive for 3 consecutive bi-week payroll periods. Once the Company has achieved cashflow positive status, the Company will renegotiate employment agreements with Nickolas S. Tabraue and Mario G. Tabraue.
On November 8, 2022, the Company, and the sellers of both RxCompound and Peaks (collectively, the “Target”) amended the Purchase Agreement for the Membership Units of the Targets, dated November 3, 2021 (“Agreement”). Pursuant to the terms of the Amendment, the parties modified the Purchase Price of the Agreement such that the Company agreed to issue a cumulative total of 53,700,000 restricted shares of its Common Stock in exchange for all outstanding Membership Units of the Targets. The Company’s acquisition of the Targets will be deemed closed upon the issuance of said shares.
| F-16 |
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
The following section, Management’s Discussion and Analysis, should be read in conjunction with Earth Science Tech Inc.’s financial statements and the related notes thereto and contains forward-looking statements that involve risks and uncertainties, such as statements of the Company’s plans, objectives, expectations, and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect,” and the like, and/or future-tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements in this Report on Form 10-Q. The Company’s actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of many factors. The Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Report filed on Form 10-Q.
The following discussion should be read in conjunction with the company’s unaudited consolidated financial statements and related notes and other financial data included elsewhere in this report. See also the notes to the Company’s consolidated financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in the Company’s Registration Statement filed on Form 10-12g and the Company’s Annual Report filed on Form 10-K for the fiscal year ended March 31, 2022, as well as the Company’s Quarterly report filed on Form 10-Q for the period ending June 30, 2022.
OVERVIEW
Subsequently to the period ending September 30, 2022, the Company and the sellers amended the Purchase Agreement consummating the merger, (see Note 8, Subsequent Events). The Company is now a holding entity set to acquire companies in the health and wellness space currently in compounding pharmaceuticals and telemedicine through its wholly owned subsidiaries RxCompound and Peaks.
RxCompound is a compounding pharmacy that has historically focused on men’s health, specifically medical products directed at ED such as Tadalfil, and Sildenafil Citrate (the generic names for Cialis and Viagra, respectively) and longevity. RxCompound is in process on obtaining a sterile compounding room expected to launch January 2023 to provide sterile products for injection.
Peaks is the telemedicine referral site facilitating asynchronous consultations for branded compound medications prepared at RxCompound. Peaks is in its final stages on upgrading its website after its soft launch to and increase product offering. Peaks full launch is anticipated for January 2023.
Earth Science Foundation (“ESF”) is a favored entity of ETST, effectively being a non-profit organization on February 11, 2019, and is structured to accept grants and donations to those in need.
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 of America. The preparation of these financial statements requires us to make estimates and judgments 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 the accounts of the Company and its wholly owned subsidiary Earth Science Foundation, Inc.
The Company will operate through its wholly owned subsidiaries that will provide products, marketing, and distribution. As of January 31, 2018, the Company created Earth Science Foundation, Inc., the Company’s favored entity, effectively being a non-profit organization on February 11, 2019, and is structured to accept grants and donations. Subsequently to the period ending September 30, 2022, the Company amended the Purchase Agreement consummating the merger, (see Note 8, Subsequent Events). The Company will consolidate the financial statements from its subsequently merged wholly owned subsidiaries RxCompound and Peaks moving forward.
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.
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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 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 since 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”) 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 frequently upon the occurrence of such events. Impairment of changes, if any, are included 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 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.
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During the period end September 30, 2022, the Seller and the owner of RxCompound and Peaks is Mario Tabraue, the brother of the Company’s CEO, Nickolas S. Tabraue. Although strictly speaking, the acquisition was negotiated in an arms-length transaction and both the Company and Mario Tabraue had separate counsel, each of whom contributed to the acquisition agreement. The Company’s Board of Directors, the Company’s Management and the Successor Receiver all concluded that the purchase price, consisting of 3 million shares of ETST common stock and $300,000, was a fair and reasonable purchase price and that, given the various liabilities that ETST may exit receivership owing and the various legacy issues and the associated risks, the value the two acquisition targets represent is in all likelihood substantially greater than the purchase price would otherwise suggest, although there is not an accurate method to determine its value to a company that is in the position that this Company finds itself. Subsequently to the period ending September 30, 2022, the Company and the sellers amended the Purchase Agreement consummating the merger, (see Note 8, Subsequent Events).
Commitments and Contingencies
The Company follows ASC 450 to account for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. This may result in contingent liabilities that are required to be accrued or disclosed in the financial statements. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time, that these matters will have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.
Revenue Recognition
The Company follows and implements 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 the Company’s ongoing net income, the Company did implement changes to the Company’s 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 the Company’s 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.
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Inventories
The Company did not hold any inventories during the period end September 30, 2022. Subsequently to the period ending September 30, 2022, the Company amended the Purchase Agreement consummating the merger, (see Note 8, Subsequent Events). The Company will have inventories stated at the lower of cost or market using the first in, first out (FIFO) method from its subsequently merged wholly owned subsidiaries RxCompound and Peaks moving forward. A reserve will be established if necessary to reduce excess or obsolete inventories to their net realizable value.
Cost of Sales
There were no components of costs of due to the Company not having any revenues during the period end September 30, 2022. Subsequently to the period ending September 30, 2022, the Company amended the Purchase Agreement consummating the merger, (see Note 8, Subsequent Events). The Company will include product costs and shipping costs to customers and any inventory adjustments from its subsequently merged wholly owned subsidiaries RxCompound and Peaks moving forward.
Shipping and Handling Costs
There were no shipping and handling fees billed due to the Company not having any revenues during the period end September 30, 2022. Subsequently to the period ending September 30, 2022, the Company amended the Purchase Agreement consummating the merger, (see Note 8, Subsequent Events). The Company will include shipping and handling fees billed to customers as revenues and shipping and handling costs for shipments to customers as cost of revenues once from its subsequently merged wholly owned subsidiaries RxCompound and Peaks moving forward.
Research and Development
Research and development costs will be 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.
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 shares of common stock outstanding during the year. Diluted loss per common share calculations is determined by dividing net results from operations by the weighted average number of common shares and dilutive common share equivalents outstanding. During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation.
As of September 30, 2022, 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. These 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.
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Property and Equipment
Property and equipment are 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.
Liquidity and Capital Resources.
For the Six-Month Period Ended September 30, 2022, versus September 30, 2021
During the six months ended September 30, 2022, net cash used in the Company’s operating activities totaled $(375,737) compared to $(20,831) during the three months ended September 30, 2021. During the six months ended September 30, 2022, net cash used in investing activities totaled $0 compared to $1,712 provided by investing activities during the six months ended September 30, 2021. During the six months ended September 30, 2022, net cash provided by financing activities totaled $350,000 compared to $28,175 from financing activities during the six months ended September 30, 2021.
On September 30, 2022, the Company had cash of $1,205, due from RxCompound of $303,057 and prepaid acquisition costs of $51,500 that comprised the Company’s total current assets totaling $355,762. The Company’s property and equipment at September 30, 2022 had a net book value of $0.
Convertible Note Issa issued 2/9/21 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 was subsequently canceled on October 25, 2022, through a settlement agreement, (See Note 8, Subsequent Events).
Revolving Promissory Note Issa El-Chelkh issued 1/28/22 for cash received $50,000 will accrue at a rate of 5% on a 360-day year. Maturity date January 23, 2023. The Revolving Promissory Note from Issa El-Chelkh’s $250,000 revolving credit agreement issued on August 31, 2021.
Revolving Promissory Note Issa El-Chelkh issued 4/1/22 for cash received $200,000 will accrue at a rate of 5% on a 360-day year. Maturity date January 23, 2023. The Revolving Promissory Note from Issa El-Chelkh’s $250,000 revolving credit agreement issued on August 31, 2021, now holds $0 in remaining credit.
Convertible Note Portela issued 2/3/22 for cash received $25,000, face amount $27,500 will accrue at a rate of 8% on a 360-day year. Maturity date is July 28, 2023. This note was subsequently canceled on October 25, 2022, through a settlement agreement, (See Note 8, Subsequent Events).
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Convertible Note VCAMJI IRREV. TRUST, C/O Giorgio R. Saumat, Trustee issued 6/10/22 for cash received $150,000 will accrue at a rate of 10% on a 360-day year. Maturity date is June 10, 2023.
Convertible Note VCAMJI IRREV. TRUST, C/O Giorgio R. Saumat, Trustee issued 7/02/22 for cash received $200,000 will accrue at a rate of 10% on a 360-day year. Maturity date is July 5, 2023.
On September 30, 2022, the Company had total liabilities of $2,383,335 with $829,348 in in a month-to-month payment plan, (See Note 6, Legal Proceedings). In addition, the current liabilities also include $677,500 from friendly creditors, all being large shareholders, $220,000 in a settlement convertible note, $102,956 in a SBA EDIL loan and $110,363 due to RxCompound currently in a pending acquisition transaction, (See Note 4, Related Party Balances and Transaction and Note 5, Stockholder Equity).
On September 30, 2022, the Company had a stockholder’s equity totaling $(2,027,573) compared to an equity of $(1,805,413) for the period ending September 30, 2021.
RESULTS OF OPERATIONS
For the Six Months Ended September 30, 2022, versus September 30, 2021
The Company’s revenue for the six months ended September 30, 2022, was $0 compared to September 30, 2021, revenue totaling $9,945. The decrease in revenue is primarily attributed to the Company transitioning out of CBD into a holding entity to acquire companies in the health and wellness space. Th Company currently has its first two pending mergers being in pharmaceutical compounding and telemedicine. (See Note 2, Overview)
The Company incurred operating expenses for the six months ended September 30, 2022, totaling $769,085, compared to $62,600 during the six months ended September 30, 2021. The increase in operating expenses can be attributed to the Company’s litigation, settlements, and general and administration expenses.
Officer compensation for the six months ended September 30, 2022, was $76,519 in cash and $4,500 in stock-based compensation compared to $15,212 in cash and $0 in stock-based compensation during the six months ended September 30, 2021. This increase is due its CEO, CFO and adding its new president atom its pending acquisition, (See 8-K filed on 4/26/2022).
The Company incurred general and administrative expenses of $155,941, during the six months ended September 30, 2022, compared to $37,509 during the six months ended September 30, 2021. This increase is due to the accrued receivership fees and cost, (please see Note 6, Legal Proceedings)
The Company paid professional fees of $9,200, during the six months ended September 30, 2022, compared to $900 during the three months ended September 30, 2021. This increase is due to SEC legal and period ending June 30, 2022, 10-Q audit review fee.
The Company incurred costs of legal proceedings of $10,200 during the six months ended September 30, 2022, compared to $7,267 during the three months ended September 30, 2021.
The Company generated a net loss from continuing operations for the six months ended September 30, 2022, and 2021 of approximately $(228,360) and $3,318,989, respectively. As of September 30, 2022, and March 31, 2022, the Company had current assets of $355,762 and $76,942, respectively, which included the following as of September 30, 2022: cash and cash equivalents of approximately $1,205; amounts due from RxCompound of $303,057; and prepaid acquisition costs of $51,500; compared to; and the following as of March 31, 2022, cash and cash equivalents of approximately $26,942; amounts due from RxCompoundStore.com of $25,000; and prepaid acquisition costs of $25,000.
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The Company’s Plan of Operation for the Next Twelve Months
The Company’s auditors have expressed doubt as to the Company’s ability to continue as a going concern in part, because at September 30, 2022, the Company had negative working capital, an accumulated deficit of $(30,352,078) and a note payable that has passed its maturity date and although the holder has been willing to forbear on collection activities, there is no formal written forbearance agreement and the holder could commence collections at any time if it so wished. The Company believes this is unlikely given the relative size of the note valued at $109,558 compared with the value of the note holder’s 6,700,000 shares of Common Stock. One of the largest note holders being Issa El-Chelkh with a combined total note valued at $300,000 and VCAMJI IRREV. TRUST, C/O Giorgio R. Saumat, Trustee with a total note valued at $350,000, both are unlikely to convert due to the relationship with the Company and their maturity dates being 2023. Additionally, the Company’s Current Liabilities have historically exceeded the Company’s Current Assets; and as of September 30, 2022, that trend was continued with the Company’s Current Liabilities of $2,383,335 exceeding the Company’s Current Assets of $355,762 by $2,027,573. While this trend is certainly has not been part of the Company’s objectives, management does not see it as particularly significant because in considering the Company’s Current Liabilities, $677,500 of them are represented in a related party note held by a “friendly” creditor, a few who are also large shareholders, $829,348 are composed of Cromogen in the amount of $510,886; Fox Rothchild in the amount of 218,462; GHS in the amount of 80,000; and Steven Warm in the amount of $20,000, all in a month-to-month payment plan, (See Note 6, Legal Proceedings). Subsequently from period ending September 30, 2022, the Company has lowered its liabilities by approximately $868,915.61, (See Note 8, Subsequent Events).
Regardless of the forgoing issues, the Company will require additional debt or equity financing for its operations as currently conducted. The Company is currently in a pending transaction to enter compounding Schedules II and III controlled medications through its pending wholly owned subsidiary RxCompound and launching soon its pending wholly owned subsidiary Peaks telemedicine platform affiliated with doctors for online prescriptions to be fulfilled by RxCompound. Shortly after entering into the purchase agreement with RxCompound and Peaks (See Note 1, Organization and Nature of Operations). The Company plans to offer a wide selection of health and nutrition products online and through clinics and pharmacies. In particular, the Company intends to continue with its plans to move its compounding pharmacy to a larger facility thereby positioning itself to maximize efficiencies once the telemedicine platform is launched. In addition to the larger facility, the Company plans to build a sterile facility so that injectable products may be compounded and sold. The Company’s current product selection includes many high-quality ingredients to formulate and fulfill prescriptions when ordered and includes its proprietary Tadalafil Gummies.
Historically the Company has had a strong base of existing shareholders who are committed to its vision, they have historically demonstrated a willingness to purchase shares of stock when they are offered and friendly convertible notes. If these shareholders were to cease purchasing shares and notes when offered, if the Company were unable to secure other sources of debt or equity financing, or if the Company were unable to secure any or sufficient financing and on terms that are acceptable to it collectively, the Company would not be able to continue operations as currently planned. However, the Company does have sufficient resources over the short and long term with scaled back expenses and pending acquisition transaction, (See Note 4, Related Party Balances and Transactions) and operations as planned. Additional funding primarily allows the Company to expedite the Company’s business plan. During the periods ending September 30, 2022, and September 30, 2021, the Company has met its capital requirements through a combination of operating activities and through external financing through the sale of its restricted common stock and convertible notes. The Company intends to continue through friendly convertible notes.
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 under this item.
| 9 |
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 the Company’s reports filed under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company’s reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Although the Company’s management has not formally carried out an evaluation under the supervision and with the participation of the Company’s Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”), because of the relatively thin management structure that the Company currently maintains, the Company believes that the Company’s 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, the Company’s principal executive and principal financial and accounting officer concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) were not effective as of September 30, 2022.
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f). The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting 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 of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Changes in Internal Control and Financial Reporting
There were no other changes in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
| 10 |
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”) was 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 the 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.
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 was protected from creditors and interference with its administration was 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 was 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 provided 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 was initially going to be returned to treasury and then reissued to Nickolas S. Tabraue. However, the prior receiver never reissued the shares and claimed to have cancelled the shares completely as a class. However, that was not done either, the 5,200,000 shares were canceled by agreement with Majorca and as the articles of incorporation and / or a certificate of designation for the Series A Preferred Stock was not amended or canceled by amendment or in any other manner canceled, changed or eliminated as a class with such change recorded with the Nevada Secretary of State, it was therefore not canceled and instead simply returned to the treasury. The remaining 6,520,000 common shares held by Majorca is subject to lockup agreement and sales may only be made pursuant to a limited strict bleed-out agreement administered by a third party as part of what is commonly referred to in the financial services industry as a “10b-5 Plan”.
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 risen 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 was 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 the time and a wide number of outcomes is possible.
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The Company was 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 believed 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 entities.
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 claims for fees for work he alleges was performed. The Successor Receiver then issued his report evaluating Mr. Stevens fees claims and found that there were no outstanding fees due. The court had set an evidentiary hearing that was scheduled and rescheduled for the court to consider the successor receivers conclusions as well as the former receiver’s potential liabilities to the Company. The evidentiary hearing was later canceled due to the Company settling with Stevens and his company Strongbow Advisors, Inc., Dubowsky law, and Fox Rothchild LLP. In the settlement the Company has agreed to pay Fox Rothchild’s fees and expenses in an amount equal to $270,000. The Company was to pay $15,000 within 3 days from entry of the settlement order for court to approve the agreement with the remaining $255,000 being paid over 17 months as follows: $10,000 per month commencing May 1, 2022 then $16,538 per month commencing September 1, 2022 and continuing on the same day each succeeding month through November 1, 2022; then $16,849.85 per month (which includes 7.5% per annum interest component) commencing December 1, 2022 and continuing on the same day of each succeeding month through April 1, 2023; then $17,037.91 per month (which includes 12% per annum interest component) commencing May 1, 2023 provided however, if on or before October 1, 2022 Fox Rothchild irrevocably receives payments from behalf of the Company under the agreement totaling $230,000 (inclusive of the timely payment of $15,000 made 3 days after entry of settlement), then the Fox Rothschild fees shall be deemed satisfied in full. Lastly in the settlement agreement the Company agreed to pay to the order of Robert Stevens or his assigns (the “Holder”), the sum of US$220,000.00 within 3 days from entry of the settlement order, together with any interest as set forth herein, on April 24, 2023 (the “Maturity Date”), and to pay interest on the unpaid principal balance hereof at the rate of ten percent (10%) (the “Interest Rate”) per annum from the funding date hereof (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. This Note was issued with a 20% original issuance discount (“OID”).
On August 30, 2021, the Company reached a settlement with Cromogen for $585,885.90 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 was able to and decides to pay the settlement entirely prior to January 1, 2022 commencement, a $85,885.90 reduction would have taken place bringing the total settlement to $500,000. If the Company defaulted on Cromogen’s settlement, a confession of judgement would be executed for the amount of $970,000, representing the total amount of Cromogen’s unsecured claims, less any amount paid by the Company, plus costs and attorney fees incurred to obtain and enforce the judgement. As of the month of March Cromogen’s settlement terms were being renegotiated due to the Company extended review time taken by the Successor Receiver as well as continuing negotiations with Stevens. The Company renegotiated payment terms on April 27, 2022 amended settlement with Cromogen for $585,885 in a month-to-month payment plan that started June 1, 2022, having the initial payment of $45,000 then $10,000 each month followed with the final payment set on July 1, 2027. If the Company defaults on Cromogen’s settlement, a confession of judgement will be executed for $970,000, representing the total amount of Cromogen’s unsecured claims, less any amount paid by the Company, plus costs and attorney fees incurred to obtain the enforce of judgement. Subsequently to the period ending September 30, 2022, Cromogen’s balance has been satisfied, (See Note 8, Subsequent Events).
On May 31, 2022, Earth Science Tech, Inc., a Nevada corporation (the “Company”), exited receivership under the direction of William A. Leonard Jr. of Crisis Management, Inc. (“Receiver”). The Company’s board of directors has resumed full control of the Company pursuant to NRS 78.645(1). The exit was granted by the Eighth Judicial Court in Clark County Nevada. Through the receivership process and Receiver, the Company has positioned itself for future success by (i) entering into settlement agreements with claimed creditors; and (ii) negotiating the pending acquisition of two operating entities. The total receivership administrative fees and costs were $137,850.93 and paid in full within the month of August 2022.
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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
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. MINE SAFETY DISCLOSURES
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS
| 13 |
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| EARTH SCIENCE TECH, INC. | ||
| Dated: November 14, 2022 | By: | /s/ Nickolas S. Tabraue |
| Nickolas S. Tabraue | ||
| Its: | CEO and Director | |
| Dated: November 14, 2022 | By: | /s/ Wendell Hecker |
| Wendell Hecker, | ||
| Its: | Chief Financial Officer | |
| 14 |
Exhibit 31.1
CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER PURSUANT TO RULE 13a-14
I, Nickolas S. Tabraue, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Earth Science Tech, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under the Company’s supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report the Company’s conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on the Company’s most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| EARTH SCIENCE TECH, INC. | ||
| Dated: November 14, 2022 | By: | /s/ Nickolas S. Tabraue |
| Nickolas S. Tabraue | ||
| Its: | CEO and Director | |
Exhibit 31.2
CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER PURSUANT TO RULE 13a-14
I, Wendell Hecker, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Earth Science Tech, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under the Company’s supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report the company’s conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on the Company’s most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| EARTH SCIENCE TECH, INC. | ||
| Dated: November 14, 2022 | By: | /s/ Wendell Hecker |
| Wendell Hecker, | ||
| Its: | Chief Financial Officer | |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Earth Science Tech, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Nickolas S. Tabraue, certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
| EARTH SCIENCE TECH, INC. | ||
| Dated: November 14, 2022 | By: | /s/ Nickolas S. Tabraue |
| Nickolas S. Tabraue | ||
| Its: | CEO and Director | |
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Earth Science Tech, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Wendell Hecker, certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
| EARTH SCIENCE TECH, INC. | ||
| Dated: August 15, 2022 | By: | /s/ Wendell Hecker |
| Wendell Hecker | ||
| Its: | Chief Financial Officer | |
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Consolidated Balance Sheets (Parenthetical) - USD ($) |
Sep. 30, 2022 |
Mar. 31, 2022 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Accounts Receivable, Allowance for Credit Loss, Current | $ 0 | $ 101,404 |
| Common Stock, Par or Stated Value Per Share | $ 0.001 | |
| Common Stock, Shares Authorized | 750,000,000 | |
| Common Stock, Shares, Outstanding | 59,051,966 | 53,851,966 |
| Preferred Stock, Par or Stated Value Per Share | $ 0.001 | |
| Preferred Stock, Shares Outstanding | 1,000,000 |
Consolidated Statements of Operations - USD ($) |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Short-Term Debt [Line Items] | ||||
| Revenue | $ 2,455 | $ 9,945 | ||
| Cost of revenues | 1,332 | 5,077 | ||
| Gross Profit | 1,123 | 4,868 | ||
| Operating Expenses: | ||||
| Compensation - officers | 45,269 | 9,500 | 76,519 | 15,212 |
| Officer compensation stock | 4,500 | 4,500 | ||
| General and administrative | 12,944 | 30,313 | 155,941 | 37,509 |
| Professional fees | 4,000 | 9,200 | 900 | |
| Loss on disposal of assets | 1,712 | |||
| Litigation Expense | 512,725 | |||
| Cost of legal proceedings | 10,200 | 7,500 | 10,200 | 7,267 |
| Total operating expenses | 76,913 | 47,313 | 769,085 | 62,600 |
| Loss from operations | (76,913) | (46,190) | (769,085) | (57,732) |
| Other Income (Expenses) | 10,417 | 3,408,636 | 558,025 | 3,408,930 |
| Other Income | ||||
| Interest expense | (5,646) | (4,397) | (11,244) | (5,588) |
| Int Exp-SBA Loan | (981) | (1,000) | (4,952) | (1,000) |
| Total other income (expenses) | 3,235 | 3,387,589 | 540,725 | 3,376,721 |
| Net Profit/(Loss) before income taxes | (73,678) | 3,341,399 | (228,360) | 3,318,989 |
| Income taxes | ||||
| Net Profit/(Loss) | (73,678) | 3,341,399 | (228,360) | 3,318,989 |
| Convertible Notes G H S [Member] | ||||
| Operating Expenses: | ||||
| Portela Interest | (14,289) | (25,621) | ||
| Promissory Note G H S [Member] | ||||
| Operating Expenses: | ||||
| Portela Interest | (1,361) | (2,707) | ||
| Convertible Notes Portela [Member] | ||||
| Operating Expenses: | ||||
| Portela Interest | $ (555) | $ (1,104) | ||
Consolidated Statements of Cash Flows - USD ($) |
6 Months Ended | |
|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Cash Flow From Operating Activities: | ||
| Net Profit/(Loss) | $ (228,360) | $ 3,318,989 |
| Changes in operating assets and liabilities: | ||
| Increase/Decrease in prepaid expenses and other current assets | (424,838) | 13,305 |
| Increase in accrued settlement | 273,462 | (3,408,637) |
| Decrease/Increase in inventory | 5,077 | |
| Decrease in accounts payable | 3,999 | 50,435 |
| Net Cash Used in Operating Activities | (375,737) | (20,831) |
| Investing Activities: | ||
| Purchases of property and equipment | 1,712 | |
| Net Cash Used in Investing Activities | 1,712 | |
| Financing Activities: | ||
| Proceeds from issuance of common stock | 28,175 | |
| Proceeds from notes payable- related party | ||
| Proceeds from Convertible Notes | 350,000 | |
| Intrinsic value of Conv Notes-Addtl Paid-in-Capital | ||
| Net Cash Provided by Financing Activities | 350,000 | 28,175 |
| Net Decrease in Cash | (25,737) | 9,056 |
| Cash - Beginning of period | 26,942 | 16,161 |
| Cash - End of period | $ 1,205 | $ 25,217 |
Organization and Nature of Operations |
6 Months Ended |
|---|---|
Sep. 30, 2022 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Organization and Nature of Operations | Note 1 — Organization and Nature of Operations
Earth Science Tech, Inc. (“ETST” or the “Company”) was incorporated under the laws of the State of Nevada on April 23, 2010 subsequently changed to the State of Florida on June 27, 2022. As of November 3, 2021, the Company entered into an agreement that is currently pending to acquire RxCompoundStore.com, LLC (“RxCompound”) and Peaks Curative, LLC. (“Peaks”) through the purchase of 100% of the outstanding equity securities both entities. Under the terms of the transaction, the Seller agreed to exchange one Hundred (100) RxCompound Units and One Hundred (100) Peaks Units in exchange for 3,000,000 shares of the Company’s common stock together with $ in cash. The transaction is structured in a way that allows the Buyer to raise the $300,000 cash component of the purchase price over time as it seeks and received additional funding. The cash component is managed separately, and under the terms of the Agreement, $ of every $ raised by the Company shall be held in escrow until the full $300,000 can be paid in full (unless the Seller waives and postpones the right to immediate payment as the Company is raising capital) at which time the parties will officially close the acquisition. The Company has until 12/31/2022 to raise the funds required to close the transaction. In addition to the Buyer’s payment of $300,000 as a condition to Closing, the Seller has its own deliverables that are conditions to Closing. Subsequently to the period ending September 30, 2022, the Company and the sellers amended the Purchase Agreement consummating the merger, (see Note 8, Subsequent Events). The Company is now a holding entity set to acquire companies in the health and wellness space currently in compounding pharmaceuticals and telemedicine through its wholly owned subsidiaries RxCompoundStore.com, LLC. and Peaks Curative, LLC.
RxCompound is a compounding pharmacy that has historically focused on men’s health, specifically medical products directed at ED such as Tadalfil, and Sildenafil Citrate (the generic names for Cialis and Viagra, respectively) and longevity. RxCompound is in process on obtaining a sterile compounding room expected to launch January 2023 to provide sterile products for injection.
Peaks is the telemedicine referral site facilitating asynchronous consultations for branded compound medications prepared at RxCompound. Peaks is in its final stages on upgrading its website after its soft launch to and increase product offering. Peaks full launch is anticipated for January 2023.
Earth Science Foundation (“ESF”) is a favored entity of ETST, effectively being a non-profit organization on February 11, 2019, and is structured to accept grants and donations to those in need.
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Summary of Significant Accounting Policies |
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Sep. 30, 2022 | |||||||||||||
| Accounting Policies [Abstract] | |||||||||||||
| Summary of Significant Accounting Policies | Note 2 — Summary of Significant Accounting Policies
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 subsidiary Earth Science Foundation, Inc. is a non-profit favored entity of the Company. After the conditions to closing have been met, RxCompoundand and Peaks will also be wholly owned subsidiaries of the Company.
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 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 since 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
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 frequently upon the occurrence of such events. Impairment of changes, if any, are included in operating expenses.
On June 4, 2019, the Company discontinued 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 Patents and took a corresponding write-off to “impairment expense.”
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.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time, that these matters will have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.
Revenue recognition
The Company follows and implements 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 the Company’s ongoing net income, management did implement changes to the Company’s 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 the company’s clients in an amount that reflects the consideration to which management expect to be entitled in exchange for those goods and services. To achieve this core principle, management 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.
Inventories
The Company during did not hold any inventories during the period end September 30, 2022. Subsequently to the period ending September 30, 2022, the Company amended the Purchase Agreement consummating the merger, (see Note 8, Subsequent Events). The Company will have inventories stated at the lower of cost or market using the first in, first out (FIFO) method from its subsequently merged wholly owned subsidiaries RxCompound and Peaks moving forward. A reserve will be established if necessary to reduce excess or obsolete inventories to their net realizable value.
Cost of Sales
There were no components of costs of due to the Company not having any revenues during the period end September 30, 2022. Subsequently to the period ending September 30, 2022, the Company amended the Purchase Agreement consummating the merger, (see Note 8, Subsequent Events). The Company will include product costs and shipping costs to customers and any inventory adjustments from its subsequently merged wholly owned subsidiaries RxCompound and Peaks moving forward.
Shipping and Handling Costs
There were no shipping and handling fees billed due to the Company not having any revenues during the period end September 30, 2022. Subsequently to the period ending September 30, 2022, the Company amended the Purchase Agreement consummating the merger, (see Note 8, Subsequent Events). The Company will include shipping and handling fees billed to customers as revenues and shipping and handling costs for shipments to customers as cost of revenues once from its subsequently merged wholly owned subsidiaries RxCompound and Peaks moving forward.
Research and development
Research and development costs are expensed as incurred. The Company’s research and development expenses relate to its engineering activities, which consist of the design and development of new products for specific customers, as well as the design and engineering of new or redesigned products for the industry in general.
Income taxes
The Company 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 carry 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 not more likely than not those 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, 2021, 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. The Company has net operating loss carry forwards (NOL) for income tax purposes of approximately $6,150,613. This loss is allowed to be offset against future income until the year 2039 when the NOL’s will expire. The tax benefits relating to all timing differences have been fully reserved for in the valuation allowance account due to the substantial losses incurred through September 30, 2022. There was no change in the valuation allowance for the periods ended September 30, 2022, and 2021.
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 September 30, 2022, the Company has no 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”) 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-based compensation to employees. These 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.
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.
Property and equipment
Property and equipment are 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:
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 August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-15, Classification of Certain Cash Receipts and Cash Payments. The new standard will change the classification of certain cash payments and receipts within the cash flow statement. Specifically, payments for debt prepayment or debt extinguishment costs, including third-party costs, premiums paid, and other fees paid to lenders that are directly related to the debt prepayment or debt extinguishment, excluding accrued interest, will now be classified as financing activities. Previously, these payments were classified as operating expenses. The guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019, with early adoption permitted, and will be applied retrospectively. The Company does not expect that the adoption of this new standard will have a material impact on its consolidated financial statements.
In February 2016, the 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.
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 granting 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 after December 15, 2019. Early adoption is permitted. The Company is currently evaluating the impact the adoption of this new standard will have on its Consolidated Financial Statements.
All other newly issued accounting pronouncements not yet effective have been deemed either immaterial or not applicable.
Intangible Assets
The Company’s balance of intangible assets on the condensed consolidated balance sheet net of accumulated amortizations $0 and $0 as of September 30, 2022, and September 30, 2021,
Reclassification
Certain amounts from the prior period have been reclassified to conform to the current period presentation.
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Going Concern |
6 Months Ended |
|---|---|
Sep. 30, 2022 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Going Concern | Note 3 — Going Concern
The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. On September 30, 2022, the Company had negative working capital, an accumulated deficit of $30,352,078. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
Subsequently to the period ending September 30, 2022, the Company and the sellers amended the Purchase Agreement consummating the merger, (see Note 8, Subsequent Events). The Company is now a holding entity set to acquire companies in the health and wellness space currently in compounding pharmaceuticals and telemedicine through its wholly owned subsidiaries RxCompound and Peaks. The Company’s cash position may not be sufficient to pay its obligations and support the Company’s daily operations. Management intends to raise additional funds by way of a public or private offering. Management believes that the actions presently being taken to further implement its business plan and generate sufficient revenues may provide the opportunity for the Company to continue as a going concern. While the Company believes in the viability of its strategy to generate sufficient revenues by acquiring companies and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenues.
The condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
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Related Party Balances and Transactions |
6 Months Ended |
|---|---|
Sep. 30, 2022 | |
| Related Party Transactions [Abstract] | |
| Related Party Balances and Transactions | Note 4 - Related Party Balances and Transactions
The Seller and current owner of RxCompound and Peaks Curative is Mario Tabraue, the brother of the Company’s CEO, Nickolas S. Tabraue. Although strictly speaking, the acquisition was negotiated in an arms-length transaction and both the Company and Mario Tabraue had separate counsel, each of whom contributed to the acquisition agreement. The Company’s Board of Directors, the Company’s Management and the Successor Receiver all concluded that the purchase price, consisting of million shares of ETST common stock and $300,000, was a fair and reasonable purchase price and that, given the various liabilities that ETST may exit receivership owing and the various legacy issues and the associated risks, the value the two acquisition targets represent is in all likelihood substantially greater than the purchase price would otherwise suggest, although there is not an accurate method to determine its value to a company that is in the position that this Company finds itself. Subsequently to the period ending September 30, 2022, the Company and the sellers amended the Purchase Agreement consummating the merger, (see Note 8, Subsequent Events).
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Stockholders’ Equity |
6 Months Ended |
|---|---|
Sep. 30, 2022 | |
| Equity [Abstract] | |
| Stockholders’ Equity | Note 5 – Stockholders’ Equity
During the three months ended September 30, 2022, and 2021, the Company issued and common shares for an aggregate sales price of $0 and $0 respectively.
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Commitments and Contingencies |
6 Months Ended |
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Sep. 30, 2022 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| Commitments and Contingencies | 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”) was 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 the 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.
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 was protected from creditors and interference with its administration was 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 was 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 provided 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 was initially going to be returned to treasury and then reissued to Nickolas S. Tabraue. However, the prior receiver never reissued the shares and claimed to have cancelled the shares completely as a class. However, that was not done either, the 5,200,000 shares were canceled by agreement with Majorca and as the articles of incorporation and / or a certificate of designation for the Series A Preferred Stock was not amended or canceled by amendment or in any other manner canceled, changed or eliminated as a class with such change recorded with the Nevada Secretary of State, it was therefore not canceled and instead simply returned to the treasury. The remaining 6,520,000 common shares held by Majorca is subject to lockup agreement and sales may only be made pursuant to a limited strict bleed-out agreement administered by a third party as part of what is commonly referred to in the financial services industry as a “10b-5 Plan”.
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 risen 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 was 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 the time and a wide number of outcomes is possible.
The Company was 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 believed 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 entities.
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 claims for fees for work he alleges was performed. The Successor Receiver then issued his report evaluating Mr. Stevens fees claims and found that there were no outstanding fees due. The court had set an evidentiary hearing that was scheduled and rescheduled for the court to consider the successor receivers conclusions as well as the former receiver’s potential liabilities to the Company. The evidentiary hearing was later canceled due to the Company settling with Stevens and his company Strongbow Advisors, Inc., Dubowsky law, and Fox Rothchild LLP. In the settlement the Company has agreed to pay Fox Rothchild’s fees and expenses in an amount equal to $270,000. The Company was to pay $15,000 within 3 days from entry of the settlement order for court to approve the agreement with the remaining $255,000 being paid over 17 months as follows: $10,000 per month commencing May 1, 2022 then $16,538 per month commencing September 1, 2022 and continuing on the same day each succeeding month through November 1, 2022; then $16,849.85 per month (which includes 7.5% per annum interest component) commencing December 1, 2022 and continuing on the same day of each succeeding month through April 1, 2023; then $17,037.91 per month (which includes 12% per annum interest component) commencing May 1, 2023 provided however, if on or before October 1, 2022 Fox Rothchild irrevocably receives payments from behalf of the Company under the agreement totaling $230,000 (inclusive of the timely payment of $15,000 made 3 days after entry of settlement), then the Fox Rothschild fees shall be deemed satisfied in full. Lastly in the settlement agreement the Company agreed to pay to the order of Robert Stevens or his assigns (the “Holder”), the sum of US$220,000.00 within 3 days from entry of the settlement order, together with any interest as set forth herein, on April 24, 2023 (the “Maturity Date”), and to pay interest on the unpaid principal balance hereof at the rate of ten percent (10%) (the “Interest Rate”) per annum from the funding date hereof (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. This Note was issued with a 20% original issuance discount (“OID”).
On August 30, 2021, the Company reached a settlement with Cromogen for $585,885.90 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 was able to and decides to pay the settlement entirely prior to January 1, 2022 commencement, a $85,885.90 reduction would have taken place bringing the total settlement to $500,000. If the Company defaulted on Cromogen’s settlement, a confession of judgement would be executed for the amount of $970,000, representing the total amount of Cromogen’s unsecured claims, less any amount paid by the Company, plus costs and attorney fees incurred to obtain and enforce the judgement. As of the month of March Cromogen’s settlement terms were being renegotiated due to the Company extended review time taken by the Successor Receiver as well as continuing negotiations with Stevens. The Company renegotiated payment terms on April 27, 2022 amended settlement with Cromogen for $585,885 in a month-to-month payment plan that started June 1, 2022, having the initial payment of $45,000 then $10,000 each month followed with the final payment set on July 1, 2027. If the Company defaults on Cromogen’s settlement, a confession of judgement will be executed for $970,000, representing the total amount of Cromogen’s unsecured claims, less any amount paid by the Company, plus costs and attorney fees incurred to obtain the enforce of judgement. Subsequently to the period ending September 30, 2022, Cromogen’s balance has been satisfied, (See Note 8, Subsequent Events).
On May 31, 2022, Earth Science Tech, Inc., a Nevada corporation (the “Company”), exited receivership under the direction of William A. Leonard Jr. of Crisis Management, Inc. (“Receiver”). The Company’s board of directors has resumed full control of the Company pursuant to NRS 78.645(1). The exit was granted by the Eighth Judicial Court in Clark County Nevada. Through the receivership process and Receiver, the Company has positioned itself for future success by (i) entering into settlement agreements with claimed creditors; and (ii) negotiating the pending acquisition of two operating entities. The total receivership administrative fees and costs were $137,850.93 and paid in full within the month of August 2022.
Lease Agreements
On August 31, 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 that is a part of its 13,000/sq. ft. facility located at 10650 NW 29th Terrace Doral, FL 33172. JCR Medical Equipment, Inc. is part of the Company’s two-part acquisition plan described in the Company’s current report filed with the Commission on Form 8-K on September 10, 2021. The Company on or about November 3, 2021, entered into an agreement to acquire both RxCompound and Peaks. Subsequently to the period ending September 30, 2022, the Company is presently located at RxCompound’s location at 8950 SW 74th Court Suite 101, Miami, FL, 33156 after the Purchase Agreement being amended and consummating the merger, (see Note 8, Subsequent Events).
|
Balance Sheet and Income Statement Footnotes |
6 Months Ended |
|---|---|
Sep. 30, 2022 | |
| Balance Sheet And Income Statement Footnotes | |
| Balance Sheet and Income Statement Footnotes | 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 one year or less, they are classified as current assets. If not, they are presented as non-current assets. Notwithstanding, these collections, the Company periodically evaluates the collectability of accounts receivable and considers the need to establish an allowance for doubtful debts based upon historical collection experience and specifically identifiable information about its customers. As of
As of September 30, 2022, 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 $181,873 as of September 30, 2022 mainly represent, $126,410 in accrued payroll for the company’s CEO and CFO, and the remainder for of accrued interest on Notes Payable.
General and administrative expenses were $12,944 and $30,313 for September 30, 2022, and 2021 respectively. For the six months ended September 30, 2022, $2,297 in payroll taxes, $in employee compensation and the remainder were on miscellaneous expenses. .
Professional fees were $4,000 for the three months ended September 30, 2022.
Other income was $10,200 for the three months ended September 30, 2022.
Interest expense was $(5,646) and $(4,397) for three months ended September 30, 2022 and 2021. Interest expense for three months ended September 30, 2022 was mainly due to Convertible Notes Mario Portela ,Issa El-Chelkh, and VCMAJI Irrevocable Trust.
|
Subsequent Events |
6 Months Ended |
|---|---|
Sep. 30, 2022 | |
| Subsequent Events [Abstract] | |
| Subsequent Events | Note 8 — Subsequent Events
During October 2022, Mr. Giorgio R. Saumat (“Saumat”) purchased $625,624.40 of the Company’s debt (“Acquired Debt”) from various of the Company’s existing debt holders. Upon completion of the purchase, Saumat demanded repayment of the Acquired Debt by the Company. On October 24, 2022, the Company and Saumat entered into a settlement agreement whereby the Company agreed to issue shares of its restricted Common Stock and shares of its Series B Preferred Stock to Saumat in full satisfaction and the complete cancellation of any and all amounts due and owing under the Acquired Debt.
On October 25, 2022, the Company and Dr. Issa El-Cheikh entered into a Settlement and Release Agreement whereby the Company agreed to issue shares of its restricted Common Stock to Dr. Issa El-Cheikh in full satisfaction and complete cancellation of $155,791.21 due and owing to Dr. Issa El-Cheikh through various note instruments.
On October 25, 2022, the Company and Mario Portela entered into a Settlement and Release Agreement whereby the Company agreed to issue shares of its restricted Common Stock to Mr. Portala in full satisfaction and complete cancellation of the $27,500 convertible promissory note held by Mr. Portela.
On or around October 24, 2022, and by virtue of the transactions contemplated in Item 1.01 above, Nickolas S. Tabraue and Mario G. Tabraue collectively cancelled shares of Company Series B Preferred stock and the Company reissued said shares to Saumat as partial consideration under the Settlement Agreement whereby the Acquired Debt was cancelled. Based on the rights and preferences set forth in the Series B Certificate of Designation, the share assignment results in Saumat having a controlling vote with respect to all matters requiring a shareholder vote.
On October 25, 2022, Nickolas S. Tabraue, the Company’s CEO and Director and Mario G. Tabraue, the Company’s President and Director have both agreed to defer receiving salary compensation until the Company is cashflow positive for 3 consecutive bi-week payroll periods. Once the Company has achieved cashflow positive status, the Company will renegotiate employment agreements with Nickolas S. Tabraue and Mario G. Tabraue.
On November 8, 2022, the Company, and the sellers of both RxCompound and Peaks (collectively, the “Target”) amended the Purchase Agreement for the Membership Units of the Targets, dated November 3, 2021 (“Agreement”). Pursuant to the terms of the Amendment, the parties modified the Purchase Price of the Agreement such that the Company agreed to issue a cumulative total of 53,700,000 restricted shares of its Common Stock in exchange for all outstanding Membership Units of the Targets. The Company’s acquisition of the Targets will be deemed closed upon the issuance of said shares. |
Summary of Significant Accounting Policies (Policies) |
6 Months Ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | |||||||||||||
| Accounting Policies [Abstract] | |||||||||||||
| Basis of presentation | 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.
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| Principles of consolidation | Principles of consolidation
The accompanying consolidated financial statements include all of the accounts of the Company and its wholly owned subsidiary Earth Science Foundation, Inc. is a non-profit favored entity of the Company. After the conditions to closing have been met, RxCompoundand and Peaks will also be wholly owned subsidiaries of the Company.
All intercompany balances and transactions have been eliminated on consolidation.
|
||||||||||||
| Use of estimates and assumptions | 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 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 since 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.
|
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| Carrying value, recoverability, and impairment of long-lived assets | Carrying value, recoverability, and impairment of long-lived assets
Company follows Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC’) 360 to evaluate its long-lived assets. The Company’s long-lived assets, which include property and equipment 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 frequently upon the occurrence of such events. Impairment of changes, if any, are included in operating expenses.
On June 4, 2019, the Company discontinued 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 Patents and took a corresponding write-off to “impairment expense.”
|
||||||||||||
| Cash and cash equivalents | 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.
|
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| Related parties | 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.
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| Commitments and contingencies | Commitments and contingencies
The Company follows ASC 450 to account for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. This may result in contingent liabilities that are required to be accrued or disclosed in the financial statements. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time, that these matters will have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.
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| Revenue recognition | Revenue recognition
The Company follows and implements 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 the Company’s ongoing net income, management did implement changes to the Company’s 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 the company’s clients in an amount that reflects the consideration to which management expect to be entitled in exchange for those goods and services. To achieve this core principle, management 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.
|
||||||||||||
| Inventories | Inventories
The Company during did not hold any inventories during the period end September 30, 2022. Subsequently to the period ending September 30, 2022, the Company amended the Purchase Agreement consummating the merger, (see Note 8, Subsequent Events). The Company will have inventories stated at the lower of cost or market using the first in, first out (FIFO) method from its subsequently merged wholly owned subsidiaries RxCompound and Peaks moving forward. A reserve will be established if necessary to reduce excess or obsolete inventories to their net realizable value.
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| Cost of Sales | Cost of Sales
There were no components of costs of due to the Company not having any revenues during the period end September 30, 2022. Subsequently to the period ending September 30, 2022, the Company amended the Purchase Agreement consummating the merger, (see Note 8, Subsequent Events). The Company will include product costs and shipping costs to customers and any inventory adjustments from its subsequently merged wholly owned subsidiaries RxCompound and Peaks moving forward.
|
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| Shipping and Handling Costs | Shipping and Handling Costs
There were no shipping and handling fees billed due to the Company not having any revenues during the period end September 30, 2022. Subsequently to the period ending September 30, 2022, the Company amended the Purchase Agreement consummating the merger, (see Note 8, Subsequent Events). The Company will include shipping and handling fees billed to customers as revenues and shipping and handling costs for shipments to customers as cost of revenues once from its subsequently merged wholly owned subsidiaries RxCompound and Peaks moving forward.
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| Research and development | 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.
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| Income taxes | 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 carry 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 not more likely than not those 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, 2021, 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. The Company has net operating loss carry forwards (NOL) for income tax purposes of approximately $6,150,613. This loss is allowed to be offset against future income until the year 2039 when the NOL’s will expire. The tax benefits relating to all timing differences have been fully reserved for in the valuation allowance account due to the substantial losses incurred through September 30, 2022. There was no change in the valuation allowance for the periods ended September 30, 2022, and 2021.
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.
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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 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 September 30, 2022, the Company has no warrants that are anti-dilutive and not included in the calculation of diluted loss per share.
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| Cash flows reporting | 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.
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| Stock based compensation |
The Company follows ASC 718 in accounting for its stock-based compensation to employees. These 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.
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.
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| Property and equipment | Property and equipment
Property and equipment are 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:
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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| Recently issued accounting pronouncements | Recently issued accounting pronouncements
In August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-15, Classification of Certain Cash Receipts and Cash Payments. The new standard will change the classification of certain cash payments and receipts within the cash flow statement. Specifically, payments for debt prepayment or debt extinguishment costs, including third-party costs, premiums paid, and other fees paid to lenders that are directly related to the debt prepayment or debt extinguishment, excluding accrued interest, will now be classified as financing activities. Previously, these payments were classified as operating expenses. The guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019, with early adoption permitted, and will be applied retrospectively. The Company does not expect that the adoption of this new standard will have a material impact on its consolidated financial statements.
In February 2016, the 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.
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 granting 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 after December 15, 2019. Early adoption is permitted. The Company is currently evaluating the impact the adoption of this new standard will have on its Consolidated Financial Statements.
All other newly issued accounting pronouncements not yet effective have been deemed either immaterial or not applicable.
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| Intangible Assets | Intangible Assets
The Company’s balance of intangible assets on the condensed consolidated balance sheet net of accumulated amortizations $0 and $0 as of September 30, 2022, and September 30, 2021,
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| Reclassification | Reclassification
Certain amounts from the prior period have been reclassified to conform to the current period presentation. |
Summary of Significant Accounting Policies (Tables) |
6 Months Ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | |||||||||||||
| Accounting Policies [Abstract] | |||||||||||||
| Schedule of Property Plant and Equipment |
|
Organization and Nature of Operations (Details Narrative) - USD ($) |
3 Months Ended | 6 Months Ended | |||||
|---|---|---|---|---|---|---|---|
Nov. 03, 2021 |
Sep. 30, 2022 |
Jun. 30, 2022 |
Mar. 31, 2022 |
Dec. 31, 2021 |
Sep. 30, 2021 |
Sep. 30, 2022 |
|
| Stock Issued During Period, Value, New Issues | $ 10,000 | $ 10,000 | |||||
| Rx Compound Store LLC and Peaks Curative LLC [Member] | |||||||
| Business Combination, Contingent Consideration Arrangements, Description | Under the terms of the transaction, the Seller agreed to exchange one Hundred (100) RxCompound Units and One Hundred (100) Peaks Units in exchange for 3,000,000 shares of the Company’s common stock together with $300,000 in cash. The transaction is structured in a way that allows the Buyer to raise the $300,000 cash component of the purchase price over time as it seeks and received additional funding. The cash component is managed separately, and under the terms of the Agreement, $0.50 of every $1.00 raised by the Company shall be held in escrow until the full $300,000 can be paid in full (unless the Seller waives and postpones the right to immediate payment as the Company is raising capital) at which time the parties will officially close the acquisition. The Company has until 12/31/2022 to raise the funds required to close the transaction. | ||||||
| Stock Issued During Period, Shares, New Issues | 300,000 | ||||||
| Stock Issued During Period, Value, New Issues | $ 300,000 | ||||||
| Share Price | $ 0.50 | ||||||
| Rx Compound Store LLC and Peaks Curative LLC [Member] | Buyer [Member] | |||||||
| Share Price | $ 1.00 | ||||||
| Rx Compound Store LLC and Peaks Curative LLC [Member] | |||||||
| Equity Method Investment, Ownership Percentage | 100.00% | ||||||
Schedule of Property Plant and Equipment (Details) |
6 Months Ended |
|---|---|
Sep. 30, 2022 | |
| Signage [Member] | |
| Property, Plant and Equipment [Line Items] | |
| Property, Plant and Equipment, Useful Life | 5 years |
| Furniture and Fixtures [Member] | |
| Property, Plant and Equipment [Line Items] | |
| Property, Plant and Equipment, Useful Life | 5 years |
| Computer Equipment [Member] | |
| Property, Plant and Equipment [Line Items] | |
| Property, Plant and Equipment, Useful Life | 5 years |
Summary of Significant Accounting Policies (Details Narrative) - USD ($) |
6 Months Ended | |||
|---|---|---|---|---|
Jun. 04, 2019 |
Sep. 30, 2022 |
Sep. 30, 2021 |
Dec. 31, 2021 |
|
| Accounting Policies [Abstract] | ||||
| Legal Fees | $ 27,000 | |||
| Income Tax Examination, Likelihood of Unfavorable Settlement | greater than 50% | |||
| Unrecognized Tax Benefits | $ 0 | |||
| Operating Loss Carryforwards | $ 6,150,613 | |||
| Net operating loss carry forwards expiration date | the year 2039 when the NOL’s will expire | |||
| Valuation Allowance, Deferred Tax Asset, Increase (Decrease), Amount | $ 0 | |||
| Finite-Lived Intangible Assets, Accumulated Amortization | $ 0 | $ 0 | ||
Going Concern (Details Narrative) - USD ($) |
Sep. 30, 2022 |
Mar. 31, 2022 |
|---|---|---|
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
| Retained Earnings (Accumulated Deficit) | $ 30,352,078 | $ 30,123,718 |
Related Party Balances and Transactions (Details Narrative) - Rx Compound Store LLC and Peaks Curative LLC [Member] shares in Millions |
6 Months Ended |
|---|---|
|
Sep. 30, 2022
USD ($)
shares
| |
| Restructuring Cost and Reserve [Line Items] | |
| Stock Issued During Period, Shares, Acquisitions | shares | 3 |
| Stock Issued During Period, Value, Acquisitions | $ | $ 300,000 |
Stockholders’ Equity (Details Narrative) - Common Stock [Member] - USD ($) |
3 Months Ended | |
|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
| Sale of Stock, Number of Shares Issued in Transaction | 0 | 0 |
| Sale of Stock, Consideration Received Per Transaction | $ 0 | $ 0 |
Commitments and Contingencies (Details Narrative) |
3 Months Ended | 6 Months Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
May 31, 2022
USD ($)
|
Apr. 27, 2022
USD ($)
|
Aug. 30, 2021
USD ($)
|
Jan. 19, 2021
USD ($)
|
Jan. 27, 2020 |
Jan. 11, 2019
USD ($)
|
Sep. 30, 2022
USD ($)
|
Sep. 30, 2021
USD ($)
|
Sep. 30, 2022
USD ($)
|
Sep. 30, 2021
USD ($)
|
Jun. 02, 2022
USD ($)
|
Jan. 02, 2022
USD ($)
|
Aug. 31, 2021
ft²
|
|
| Litigation settlement expense | $ 512,725 | ||||||||||||
| Area of Land | ft² | 1,000 | ||||||||||||
| William A. Leonard Jr. [Member] | |||||||||||||
| Administrative Fees Expense | $ 137,850.93 | ||||||||||||
| Settlement Agreement [Member] | |||||||||||||
| Litigation settlement expense | $ 270,000 | ||||||||||||
| Litigation settlement amount awarded from other party | $ 15,000 | ||||||||||||
| Loss contingency settlement agreemnt terms, descripition | the agreement with the remaining $255,000 being paid over 17 months as follows: $10,000 per month commencing May 1, 2022 then $16,538 per month commencing September 1, 2022 and continuing on the same day each succeeding month through November 1, 2022; then $16,849.85 per month (which includes 7.5% per annum interest component) commencing December 1, 2022 and continuing on the same day of each succeeding month through April 1, 2023; then $17,037.91 per month (which includes 12% per annum interest component) commencing May 1, 2023 provided however, if on or before October 1, 2022 Fox Rothchild irrevocably receives payments from behalf of the Company under the agreement totaling $230,000 (inclusive of the timely payment of $15,000 made 3 days after entry of settlement), then the Fox Rothschild fees shall be deemed satisfied in full | ||||||||||||
| Litigation settlement amount | $ 220,000.00 | ||||||||||||
| Settlement agreement date | April 24, 2023 | ||||||||||||
| Litigation settlement percentage | 10.00% | ||||||||||||
| Debt interest rate | 20.00% | ||||||||||||
| Strongbow Advisors, Inc. [Member] | |||||||||||||
| [custom:DescriptionOfConfidentialSettlement] | 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 | ||||||||||||
| Cromongen Biotechnology Corporation [Member] | |||||||||||||
| Loss Contingency, Damages Sought, Value | $ 3,994,522 | ||||||||||||
| Increase in accrued settlement | 120,265 | ||||||||||||
| [custom:CostsAndFeesAmount] | 111,057 | ||||||||||||
| [custom:ConversionValue] | $ 3,763,200 | ||||||||||||
| Litigation settlement expense | $ 585,885 | $ 585,885.90 | |||||||||||
| [custom:LitigationSettlementInitialPayments-0] | $ 10,000 | $ 10,000 | $ 45,000 | $ 45,000 | |||||||||
| [custom:ContingencyExpectedTrialCommencement] | 85,885.90 | ||||||||||||
| Gain (Loss) Related to Litigation Settlement | 500,000 | ||||||||||||
| Litigation Settlement, Amount Awarded to Other Party | $ 970,000 | ||||||||||||
| Majorca Group, Ltd [Member] | |||||||||||||
| [custom:DescriptionOfConfidentialSettlement] | 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 provided 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 was initially going to be returned to treasury and then reissued to Nickolas S. Tabraue. However, the prior receiver never reissued the shares and claimed to have cancelled the shares completely as a class. However, that was not done either, the 5,200,000 shares were canceled by agreement with Majorca and as the articles of incorporation and / or a certificate of designation for the Series A Preferred Stock was not amended or canceled by amendment or in any other manner canceled, changed or eliminated as a class with such change recorded with the Nevada Secretary of State, it was therefore not canceled and instead simply returned to the treasury. The remaining 6,520,000 common shares held by Majorca is subject to lockup agreement and sales may only be made pursuant to a limited strict bleed-out agreement administered by a third party as part of what is commonly referred to in the financial services industry as a “10b-5 Plan | ||||||||||||
| JCR Medical Equipment Inc [Member] | |||||||||||||
| Area of Land | ft² | 13,000 | ||||||||||||