Note
1 — Organization and Nature of Operations
Earth
Science Tech, Inc. (“ETST” or the “Company”) was incorporated under the laws of the State of Nevada on April
23, 2010, subsequently changed to the State of Florida on June 27, 2022. As of November 8, 2022, the Company is a holding entity set
to acquire companies with its current focus in the health and wellness industry. The Company is presently in compounding pharmaceuticals
and telemedicine through its wholly owned subsidiaries RxCompoundStore.com, LLC. (“RxCompound”), Peaks Curative, LLC. (“Peaks”),
and Earth Science Foundation, Inc. (“ESF”).
RxCompound
is a compounding pharmacy that has historically focused on men’s health, specifically medical products directed at ED such as Tadalafil,
and Sildenafil Citrate (the generic names for Cialis and Viagra, respectively) and longevity. Currently licensed to fulfill prescriptions
in the states of Florida, New York, New Jersey, Delaware, Colorado, Rhode Island, Pennsylvania, Nevada, and Arizona. RxCompound is in
the application process to obtain licenses in the remaining states in which it is not yet licensed to dispense prescriptions. Furthermore,
RxCompound recently obtained its hazardous room to compound hormonal creams within the month of December 2022 and is anticipated to have
its sterile compounding room operational early 2023 to provide sterile products for injection.
Peaks
is the telemedicine referral site facilitating asynchronous consultations for branded compound medications prepared at RxCompound. Peaks
is currently positioned to prescribe to all 50 states utilizing a third-party consultation service provider, but only able to fulfill
prescriptions within RxCompound’s licensed states. Peaks will be able to fulfill more states as RxCompound obtains pharmacy licenses
in additional states. Patients who order Peaks via monthly subscription will be automatically enrolled into Peaks’ Loyalty Program.
As a member of the loyalty program, members will receive credit to cover the costs on their Peaks facilitated online doctor consultations.
The Peaks membership enrollment will occur automatically once becoming a monthly subscriber and automatically renewed at the time of
the prescription renewal order. At the time of the renewal order, credits will be applied to cover the Peaks facilitated online doctor
consultation.
Peaks
plans to execute a marketing campaign within the states in which RxCompound is licensed to increase brand exposure and sales. This includes
over the counter (“OTC”) (non-prescription) products such as supplements and topicals. The OTC products will be custom manufactured
or fulfilled through partnered companies under Peaks brand and offered worldwide.
ESF
is a favored entity of ETST, effectively being a non-profit organization that was incorporated on February 11, 2019, and is structured
to accept grants and donations to help those in need of assistance in paying for prescriptions.
NOTE
2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of presentation
The
accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United
States of America (“US GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).
Principles
of consolidation
The
accompanying consolidated financial statements include all the accounts of the Company and its wholly owned subsidiaries RxCompound,
Peaks and ESF.
The
Company’s acquisition of RxCompound was consummated on November 8, 2022, along with Peaks; however, RxCompound completed its PCAOB
audit on February 3, 2023 (“Acquisition Date”). Operating results of subsidiaries have been consolidated according to their
acquisition dates. No inter-company transactions and balances were identified.
Going
Concern
The
financial statements have been prepared on a going concern basis, and do not reflect any adjustments related to the uncertainty surrounding
the Company’s recurring losses, working capital deficiency or accumulated deficit.
As
of March 31, 2023, the Company had $35,756 in cash to fund its operations. The Company does not believe its current cash balance will
be sufficient to allow the Company to fund its current liabilities of $1,307,285. The ability of the Company to continue as a going concern
is dependent on obtaining adequate capital to fund operating losses until it becomes profitable. These principal factors raise substantial
doubt concerning the Company’s ability to continue as a going concern. Management has financed the Company’s operations principally
through government loans, notes payable and equity finance.
The
Company as of November 8, 2022, became a holding entity set to acquire companies with its recent two acquisitions, RxCompound and Peaks
both operating in the health and wellness industry. The Company’s cash position may not be sufficient to pay its obligations and
support the Company’s daily operations. Management intends to raise additional funds by way of a public or private offering. Management
believes that the actions presently being taken to further implement its business plan and generate sufficient revenues may provide the
opportunity for the Company to continue as a going concern. While the Company believes in the viability of its strategy to generate sufficient
revenues by acquiring companies and in its ability to raise additional funds, there can be no assurances to that effect. The ability
of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and
generate sufficient revenues.
The
ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plan described in
the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial
statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Use
of estimates and assumptions
The
preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during
the reporting period. The areas requiring significant estimates are impairment of goodwill, provision for taxation, useful life of depreciable
assets, useful life of intangible assets, contingencies, and going concern assessment. The estimates and underlying assumptions are reviewed
on an ongoing basis. Actual results could differ from those estimates.
Impairment
of Long-Lived Assets
The
Company tests long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the
assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds
the fair value.
Cash
and cash equivalents
Cash
and cash equivalents include all highly liquid debt instruments with original maturities of three months or less which are not securing
any corporate obligations. As of March 31, 2023, and March 31, 2022, the Company held a cash balance of $35,756 and $26,942, respectively.
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 has implemented ASC 606, Revenue from Contracts with Customers for revenue recognition by incorporating the necessary changes
in systems and processes. These changes included the development of new policies based on the five-step model provided in the new revenue
standard, ongoing contract review requirements, and gathering of information provided for disclosures. Revenue is recognized at the point
in time.
The
Company recognizes revenue from product sales or services rendered when control of the promised goods is transferred to our customers
in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods and services. To achieve this
core principle, we apply the following five steps: identify the contract with the client, identify the performance obligations in the
contract, determine the transaction price, allocate the transaction price to performance obligations in the contract and recognize revenue
when or as the Company satisfies a performance obligation.
Disaggregated
Revenue
The
Company disaggregates revenue from contracts with customers by category — core and non-core, as it believes it best depicts how
the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.
The
Company’s disaggregated revenue by category is as follows:
SCHEDULE
OF DISAGGREGATED REVENUE
| |
| | |
| |
| |
For the Years Ended | |
| |
March 31, 2023 | | |
March 31, 2022 | |
| |
| | |
| |
Core: | |
| | | |
| | |
Sale of Pharmaceutical products - RxCompound | |
$ | 44,099 | | |
$ | - | |
CBD Sales – Holding Company | |
| - | | |
| 14,123 | |
Total core revenue, net | |
| 44,099 | | |
| 14,123 | |
Non-Core: | |
| - | | |
| - | |
Services – Peaks | |
| 4,438 | | |
| - | |
Total revenue, net | |
$ | 48,537 | | |
$ | 14,123 | |
Inventories
The
Company has its inventories stated at the lower of cost (on first in, first out (FIFO) method) or market value basis. A reserve is established
if necessary to reduce excess or obsolete inventories to their realizable value. The stated cost is comprised of finished products. Reserves,
if necessary, are recorded to reduce inventory to market value based on assumptions about consumer demand, current inventory levels and
product life cycles for the various inventory items. These assumptions are evaluated annually and are based on the Company’s business
plan and from feedback from customers and the product development team. As of March 31, 2023 and March 31, 2022, the inventory reserves
were not material.
Cost
of Revenues
Components
of cost of revenues include product costs, shipping costs to customers and any inventory adjustments.
Shipping
and Handling
Costs
incurred by the Company for shipping and handling are included in costs of revenues.
Related
Parties
The
Company follows ASC 850-10, Related Parties, for the identification of related parties and disclosure of related party transactions.
Pursuant to Section 850-10-20, the related parties include: (a) affiliates of the Company (“Affiliate” means, with respect
to any specified person, any other person that, directly or indirectly through one or more intermediaries, controls, is controlled by
or is under common control with such person, as such terms are used in and construed under Rule 405 under the Securities Act); (b) entities
for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value
Option Subsection of Section 825-10-15, to be accounted for by the equity method by the investing entity; (c) trusts for the benefit
of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; (d) principal owners
of the Company; (e) management of the Company; (f) other parties with which the Company may deal if one party controls or can significantly
influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from
fully pursuing its own separate interests; and (g) other parties that can significantly influence the management or operating policies
of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other
to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
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. No expense was charged in the years ended March 31, 2023, and March 31, 2022.
Income
taxes
The
Company accounts for income taxes under ASC 740, Income Taxes. Under ASC 740, deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities
and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period, which includes the enactment date. Deferred tax assets are
reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of or all the deferred
tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on
the date of enactment.
ASC
740 contains a two-step approach to recognizing and measuring uncertain tax positions. This first step is to evaluate the tax
position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position
will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure
the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement. The Company
considers many factors when evaluating and estimating its tax positions and tax benefits, which may require periodic adjustments,
and which may not accurately anticipate actual outcomes.
The
Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained
on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated
financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized
upon ultimate settlement. As of March 31, 2023, 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 carryforwards (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 March 31, 2022. The change
in the valuation allowance for the years ended March 31, 2023, and 2022, was an increase of $0 and $0, respectively.
Internal
Revenue Code Section 382 (“Section 382”) imposes limitations on the availability of a company’s net operating losses
after certain ownership changes occur. The Section 382 limitation is based upon certain conclusions pertaining to the dates of ownership
changes and the value of the Company on the dates of the ownership changes. It was determined that an ownership change occurred in October
2013 and March 2014. The amount of the Company’s net operating losses incurred prior to the ownership changes are limited based
on the value of the Company on the date of the ownership change. Management has not determined the amount of net operating losses generated
prior to the ownership change available to offset taxable income after the ownership change.
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 calculation is determined by dividing net results from operations by the weighted average number of common shares and dilutive
common share equivalents outstanding. During periods when common stock equivalents, if any, are anti-dilutive they are not considered
in the computation.
For
the year ended March 31, 2023, shares issuable upon conversion of convertible notes were anti-dilutive because of net loss and as
such, their effect has not been included in the calculation of diluted net loss per share. No dilutive common shares in the
comparative year.
Goodwill
Goodwill
represents the excess of the aggregate purchase price over the fair value of the net assets acquired in a purchase business combination.
Goodwill is reviewed for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the carrying
amount of goodwill may be impaired. In conducting its annual impairment test, the Company first reviews qualitative factors to determine
whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If factors indicate that
the fair value of the reporting unit is less than its carrying amount, the Company performs a quantitative assessment and the fair value
of the reporting unit is determined by analyzing the expected present value of future cash flows. If the carrying value of the reporting
unit continues to exceed its fair value, the fair value of the reporting unit’s goodwill is calculated and an impairment loss equal
to the excess is recorded. As of March 31, 2023, the Company recognized goodwill on the acquisition of its wholly owned subsidiaries;
RxCompoundStore.com, LLC. (“RxCompound”) and Peaks Curative, LLC. (“Peaks”).
Stock
Based Compensation
The
Company applies the fair value method of ASC 718, Compensation-Stock Compensation, in accounting for its stock-based compensation. These
standards state that compensation cost is measured at the grant date based on the value of the award and is recognized over the service
period, which is usually the vesting period, if any. The Company uses the Black-Scholes option pricing model to determine the fair value
of its stock, stock option and warrant issuance. The determination of the fair value of stock-based payment awards on the date of grant
using an option-pricing model is affected by the Company’s stock price, as well as assumptions regarding a few complex and subjective
variables. These variables include the Company’s expected stock price, volatility over the term of the awards, actual employee
exercise behaviors, risk-free interest rate and expected dividends. The company issued common stock for services provided by officers
and others, during the year ended March 31, 2023. However, no stock-based commitments were outstanding as at March 31, 2023 and 2022.
Cash
flows reporting
The
Company follows ASC 230 to report cash flows. This standard classifies cash receipts and payments according to whether they stem from
operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method
(“Indirect method”) as defined by this standard to report net cash flow from operating activities by adjusting net income
to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts
and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income
that do not affect operating cash receipts and payments. The Company reports separately information about investing and financing activities
not resulting in cash receipts or payments in the period pursuant to this standard.
Fair
Value
FASB
ASC 820, Fair Value Measurements and Disclosures (“ASC 820”) establishes a framework for all fair value measurements
and expands disclosures related to fair value measurement and developments. ASC 820 defines fair value as the price that would be received
to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820
requires that assets and liabilities measured at fair value are classified and disclosed in one of the following three categories:
Level
1 — Quoted market prices for identical assets or liabilities in active markets or observable inputs;
Level
2 — Significant other observable inputs that can be corroborated by observable market data; and
Level
3 — Significant unobservable inputs that cannot be corroborated by observable market data.
The
carrying amounts of cash, accounts payable and other liabilities, accrued expenses and settlement payable approximate fair value because
of the short-term nature of these items.
The
fair value of the Company’s debt approximated the carrying value of the Company’s debt as of March 31, 2023, and as of
March 31, 2022. Factors that the Company considered when estimating the fair value of its debt included market conditions, liquidity
levels in the private placement market, variability in pricing from multiple lenders and terms of debt.
Property
and equipment
Property
and equipment are stated at cost. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals
and betterments are capitalized. When property and equipment are retired or otherwise disposed of, the related cost and accumulated
depreciation are removed from the respective accounts, and any gain or loss is included in operations. During the year ended March
31, 2023, RxCompound added various equipment for its hazardous room, to compound hormonal creams. Depreciation on equipment is
charged using a straight line method over the estimated useful life of 5
years.
Recently
issued accounting pronouncements
We
have considered the impact of the following pronouncements:
In
February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which will require lessees to recognize almost all leases on their balance
sheet as a right-of-use asset and a lease liability. For income statement purposes, the FASB retained a dual model, requiring leases
to be classified as either operating or finance. Classification will be based on criteria that are largely similar to those applied in
current lease accounting, but without explicit bright lines. Lessor accounting is similar to the current model but updated to align with
certain changes to the lessee model and the new revenue recognition standard. This ASU is effective for fiscal years beginning after
December 15, 2018, including interim periods within those fiscal years. In January 2018, the FASB issued ASU 2018-01, which permits an
entity to elect an optional transition practical expedient to not evaluate land easements that exist or expire before the Company’s
adoption of Topic 842 and that were not previously accounted for as leases under Topic 840. On May 20, 2020, the FASB voted to delay
implementing the new lease standard for non-public organizations, making their new effective date the fiscal year starting after Dec.
15, 2021. The Company adopted this transition provision and provided necessary disclosures.
In
August 2018, the FASB issued ASU 2018-13, “Changes to Disclosure Requirements for Fair Value Measurements”, which will improve
the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements. The standard removes, modifies,
and adds certain disclosure requirements, and is effective for fiscal years, and interim periods within those fiscal years, beginning
after December 15, 2019, (for “emerging growth company” beginning after December 15, 2020). The Company has adopted this standard
effective from January 1, 2021, and the adoption of this standard did not have any significant impact on the consolidated financial statements.
The
FASB recently issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470- 20) and Derivatives and Hedging
– Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s
Own Equity, to reduce complexity in applying GAAP to certain financial instruments with characteristics of liabilities and equity. The
guidance in ASU 2020-06 simplifies the accounting for convertible debt instruments and convertible preferred stock by removing the existing
guidance in ASC 470-20, Debt: Debt with Conversion and Other Options, which requires entities to account for beneficial conversion features
and cash conversion features in equity, separately from the host convertible debt or preferred stock. The guidance in ASC 470-20 applies
to convertible instruments for which the embedded conversion features are not required to be bifurcated from the host contract and accounted
for as derivatives. In addition, the amendments revise the scope exception from derivative accounting in ASC 815-40 for freestanding
financial instruments and embedded features that are both indexed to the issuer’s own stock and classified in stockholders’
equity, by removing certain criteria required for equity classification. These amendments are expected to result in more freestanding
financial instruments qualifying for equity classification (and, therefore, not accounted for as derivatives), as well as fewer embedded
features requiring separate accounting from the host contract. The amendments in ASU 2020-06 further revise the guidance in ASC 260,
Earnings Per Share, to require entities to calculate diluted earnings per share (EPS) for convertible instruments by using the if-converted
method. In addition, entities must presume share settlement for purposes of calculating diluted EPS when an instrument may be settled
in cash or shares. The amendments in ASU 2020-06 are effective for public entities for fiscal years beginning after December 15, 2021,
with early adoption permitted (for “emerging growth company” beginning after December 15, 2023). The Company has assessed
the impact this standard will have on the Company’s consolidated financial statements. No material adjustments were required.
Update
ASU 2021-10- Government Assistance (Topic 832)
In
November 2021, the FASB issued guidance which requires business entities to disclose information about certain government assistance
they receive. The amendments in this Update are effective for all entities within their scope for financial statements issued for annual
periods beginning after December 15, 2021. Early application of the amendments is permitted. An entity should apply the amendments in
this Update either (1) prospectively to all transactions within the scope of the amendments that are reflected in financial statements
at the date of initial application and new transactions that are entered into after the date of initial application or (2) retrospectively
to those transactions. We do not expect adoption of this standard to result in additional disclosures within our Consolidated Financial
Statements.
Intangible
assets
Intangible
assets consist of Peaks telemedicine platform, Holding Company’s web domains and goodwill recognized by RxCompound in stand-alone
Financial Statements under the push down approach. Intangible assets with finite lives are amortized over the estimated useful life of
five years and goodwill is amortized over the estimated life of 10 years. These assets are evaluated for impairment at least on an annual
basis and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. We assess recoverability
by determining whether the carrying value of such assets will be recovered through the undiscounted expected future cash flows. If the
future undiscounted cash flows are less than the carrying amount of these assets, we recognize an impairment loss based on the excess
of the carrying amount over the fair value of the assets.
Reclassification
No
restatement was made in comparative Consolidated Financial Statements. However, Certain amounts from the prior year have been reclassified
to conform to the current year presentation.
NOTE
3 – PROPERTY AND EQUIPMENT, NET
SCHEDULE
OF PROPERTY AND EQUIPMENT
| |
As of | | |
As of | |
| |
March
31, 2023 | | |
March
31, 2022 | |
| |
| | |
| |
Equipment – cost | |
$ | 150,082 | | |
$ | - | |
Less: Accumulated depreciation | |
| (6,869 | ) | |
| - | |
Property and Equipment,
Net | |
$ | 143,213 | | |
| - | |
Depreciation
expense for the years ended March 31, 2023, and March 31, 2022, was $6,869 and $0, respectively.
During
the year additions represented the Equipment acquired by RxCompound. It also obtained financing for TCA cleanroom Suite ($80,794) and
Medisca Equipment from New Lane Finance and Spenser Capital Group, Inc. Equipment was purchased from original suppliers; however, financing
was provided by the aforementioned lenders.
Weighted
average remaining term was 5 years (approx.) and weighted average discount rate was 7%.
NOTE
4- LEASES
The
Company treats a contract as a lease when the contract conveys the right to use a physically distinct asset for a period of time in exchange
for consideration, or the Company directs the use of the asset and obtains substantially all the economic benefits of the asset. These
leases are recorded as right-of-use (“ROU”) assets and lease obligation liabilities for leases with terms greater than 12
months. ROU assets represent the Company’s right to use an underlying asset for the entirety of the lease term. Lease liabilities
represent the Company’s obligation to make payments over the life of the lease. A ROU asset and a lease liability are recognized
at commencement of the lease based on the present value of the lease payments over the life of the lease. Initial direct costs are included
as part of the ROU asset upon commencement of the lease. Since the interest rate implicit in a lease is generally not readily determinable
for the operating leases, the Company uses an incremental borrowing rate to determine the present value of the lease payments. The incremental
borrowing rate represents the rate of interest the Company would have to pay to borrow on a collateralized basis over a similar lease
term to obtain an asset of similar value.
The
Company reviews the impairment of ROU assets consistent with the approach applied for the Company’s other long-lived assets. The
Company reviews the recoverability of long-lived assets when events or changes in circumstances occur that indicate that the carrying
value of the asset may not be recoverable. The assessment of possible impairment is based on the Company’s ability to recover the
carrying value of the asset from the expected undiscounted future pre-tax cash flows of the related operations. The Company elected the
practical expedient to exclude short-term leases (leases with original terms of 12 months or less) from ROU asset and lease liability
accounts.
RxCompoundStore.com,
LLC entered into a lease arrangement on May 26, 2022, whereby the subsidiary obtained the possession of the property located at 8950
SW 74th Court Suite 101, Miami, FL, 33156. The lease requires monthly payments of $7,057 for a term of 36-months plus the single lump
sum payment of $40,000 upon execution in June 2022. The facility consists in two offices, a sterile compounding cleanroom, a cooking
room, a reception area, a fulfillment area, and storage for inventory. The lease agreement does not contain any significant residual
value guarantees or restrictive covenants but does contain a 3-year renewal option. The Company treated this lease arrangement as an
operating lease and recognized right of use asset and lease liability accordingly.
Supplemental
balance sheet information related to leases were as follows:
SCHEDULE
OF SUPPLEMENTAL BALANCE SHEET RELATED TO LEASES
| |
As of | | |
As of | |
| |
March
31, 2023 | | |
March
31, 2022 | |
| |
| | |
| |
Assets | |
| | | |
| | |
Right of
use asset, net | |
$ | 200,674 | | |
$ | - | |
| |
| | | |
| | |
Operating lease liabilities | |
| | | |
| | |
Current | |
| 68,188 | | |
| - | |
Non-current | |
| 96,743 | | |
| - | |
Total Lease Liabilities | |
$ | 164,931 | | |
$ | - | |
The
components of lease cost were as follows:
SCHEDULE
OF LEASE COST
| |
| | |
| |
| |
For
the Years Ended March 31 | |
| |
2023 | | |
2022 | |
| |
| | |
| |
Depreciation | |
$ | 15,436 | | |
$ | - | |
Interest on lease obligation | |
| 2,935 | | |
| - | |
Total lease cost | |
$ | 18,372 | | |
$ | - | |
Lease
term and discount rate were as follows:
SCHEDULE
LEASE TERM AND DISCOUNT RATE
| |
As of | | |
As of | |
| |
March
31, 2023 | | |
March
31, 2022 | |
| |
| | |
| |
Weighted
average remaining lease term - Operating leases | |
| 2.17
years | | |
| - | |
| |
| | | |
| | |
Weighted average discount
rate - Operating leases | |
| 10 | % | |
| - | |
NOTE
5 - INTANGIBLE ASSETS
Intangible
assets, consisted of the following:
SCHEDULE
OF INTANGIBLE ASSETS
| |
As
of | | |
As
of | |
| |
March
31, 2023 | | |
March
31, 2022 | |
| |
| | |
| |
Telemedicine
Platform | |
$ | 17,806 | | |
$ | - | |
Web
Domain | |
| 19,323 | | |
| - | |
Goodwill
– push down approach (A) | |
| 138,312 | | |
| - | |
Accumulated
Amortization | |
| (37,622 | ) | |
| - | |
Net
Balance | |
$ | 137,819 | | |
$ | - | |
(A) | Goodwill
- push down approach |
On
September 01, 2020, a shareholder acquired 100%
of the outstanding ownership of RxCompound and elected a push down accounting approach as of the date of the purchase date which
resulted in the recognition of the goodwill of $138,312
in the Balance sheet of RxCompound. The Holding Company elected to amortize Goodwill over 10
years, as per prior years’ policy, and charged an amortization expense of $13,831
in the year ended March 31, 2023.
NOTE
6- GOODWILL
Goodwill
represents the excess of the aggregate purchase price over the fair value of the net assets acquired in the business combinations. On
November 08, 2022 the Company acquired 100% of the outstanding equity shares of RxCompoundStore.com, LLC and Peaks Curative, LLC against
the share exchange consideration and recognized Goodwill.
SCHEDULE
OF GOODWILL
| |
As of | | |
| | |
As of | |
| |
March
31, 2023 | | |
Impairment | | |
March
31, 2023 | |
RxCompound and Peaks | |
$ | 2,164,480 | | |
$ | - | | |
$ | 2,164,480 | |
| |
| | | |
| | | |
| | |
Total | |
$ | 2,164,480 | | |
$ | - | | |
$ | 2,164,480 | |
The
Company conducted an impairment test as of March 31, 2023, and no indication of impairment was identified.
NOTE
7- ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts
payable and accrued expenses consisted of the following:
SCHEDULE
OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES
| |
As of | | |
As of | |
| |
March
31, 2023 | | |
March
31, 2022 | |
| |
| | |
| |
Accounts Payable | |
$ | 90,790 | | |
$ | 202,270 | |
Accrued Expenses (A) | |
| 115,400 | | |
| 311,610 | |
Accrued settlement (B) | |
| 310,947 | | |
| 585,886 | |
Total | |
$ | 517,137 | | |
$ | 1,099,766 | |
(A)
Accrued Expenses
As
of March 31, 2023, accrued expenses included
interest payable of $33,391, accrued payroll of $67,863, audit fees payable of $ 10,000 and other payables of $4,146.
(B)
Accrued Settlement
On
May 31, 2022, an Order was issued by the District Court for the settlement of claims of Chromogen ($ 585,885), William Leonard ($60,281),
Garman Turner Gordon LLP ($77,570), GHS ($85,000), Robert Stevens ($220,000) and Rothchild ($270,000).
As
of March 31, 2023, the company recognized unpaid accrued settlement of $90,947 and $220,000 against the claims of Rothchild and Strongbow
Advisors.
Prior
year’s claim of $585,886 of Cromogen has been settled through cash payment of $75,000 by the Company and remaining $510,886 was
settled by Giorgio R. Saumat. Subsequently, the Company issued 62,562,440 shares of common stock to Giorgio R. Saumat in exchange for
the claims settled by him.
NOTE
8 – DEBTS
Notes
payable and loans payable consisted of the following:
SCHEDULE
OF NOTES AND LOANS PAYABLE
| |
| | |
As
of March 31, 2023, | |
| |
| | |
| | |
Current | | |
Long-Term | |
Name | |
| | |
Total | | |
Maturities | | |
Maturities | |
| |
| | |
| | |
| | |
| |
SBA Loan Payable | |
| (1) | | |
$ | 209,175 | | |
$ | 4,767 | | |
$ | 204,408 | |
Revolving Promissory Note Payable | |
| (2) | | |
| 250,000 | | |
| 250,000 | | |
| - | |
Convertible Promissory Note Payable | |
| (3) | | |
| 350,000 | | |
| 350,000 | | |
| - | |
Equipment Finance | |
| Note-3 | | |
| 117,193 | | |
| 30,823 | | |
| 86,370 | |
| |
| | | |
$ | 926,368 | | |
$ | 635,590 | | |
$ | 290,778 | |
As
of March 31, 2022,
| |
| | |
| | |
Current | | |
Long-Term | |
Name | |
| | |
Total | | |
Maturities | | |
Maturities | |
| |
| | |
| | |
| | |
| |
SBA Loan Payable | |
| (1) | | |
$ | 106,800 | | |
$ | 106,800 | | |
$ | - | |
Revolving Promissory Note Payable | |
| (2) | | |
| 50,000 | | |
| 50,000 | | |
| - | |
Convertible Promissory Note Payable | |
| (3) | | |
| 410,313 | | |
| 410,313 | | |
| - | |
PPP Loan Payable | |
| (4) | | |
| 31,750 | | |
| 31,750 | | |
| - | |
Advance Payable | |
| (4) | | |
| 50,000 | | |
| 50,000 | | |
| - | |
Promissory Note Payable | |
| (4) | | |
| 44,429 | | |
| 44,429 | | |
| - | |
Notes payable – related parties | |
| (4) | | |
| 87,402 | | |
| 87,402 | | |
| - | |
| |
| | | |
| | | |
| | | |
| | |
| |
| | | |
$ | 780,694 | | |
$ | 780,694 | | |
$ | - | |
On
July 27, 2020, the Holding Company executed a secured loan with the U.S. Small Business Administration (SBA) under the Economic Injury
Disaster Loan program in the amount of $106,800. The loan is secured by all tangible and intangible assets of the Company and payable
over 30 years at an interest rate of 3.75 % per annum. Installment payments, including principal and interest, totaling $521.00 monthly,
will begin twelve (12) months from the date of the Note, with the first payments applied to accumulated accrued interest.
On
April 01, 2021, RxCompound executed a secured loan with the U.S. Small Business Administration (SBA) under the Economic Injury Disaster
Loan program in the amount of $108,700. The loan is secured by all tangible and intangible assets of the Company and payable over 30
years at an interest rate of 3.75 % per annum. Installment payments, including principal and interest, totaling $530.00 monthly, will
begin twelve (12) months from the date of the Note, with the first payments applied to accumulated accrued interest.
Installment
payments due within a year have been classified under current liabilities.
Following
is the aggregate future long term SBA loan payments, as of March 31, 2023:
SCHEDULE
OF AGGREGATE FUTURE LONG TERM SBA LOAN PAYMENTS
| |
Amount | |
Loan Payments | |
| | |
Within year
1 | |
$ | 4,767 | |
Within year 2 | |
| 4,947 | |
Within year 3 | |
| 5,132 | |
Within year 4 | |
| 5,325 | |
Thereafter | |
| 189,004 | |
Total Loan Payments | |
| 209,175 | |
Less: Current portion | |
| (4,767 | ) |
| |
| | |
Non-Current portion | |
$ | 204,408 | |
(2)
Revolving Promissory Note
On
August 31, 2021, the Company issued a revolving promissory note of $250,000
to Great Lakes Holding Group, LLC. Proceeds were received in two installments of $50,000
(Jan 28, 2022) and $200,000
(April 01, 2022), respectively. Interest is charged at the rate of 5%.
Repayment of interest and principal will be made on or before January
01, 2024.
(3)
Convertible Promissory Note
The
Company issued two convertible notes to VCAMJI IRREV. TRUST, C/O Giorgio R. Saumat, Trustee against cash proceeds of $200,000 (July 10,
2022) and $150,000 (June 10, 2022) respectively. Interest is charged at the rate of 10% and both notes are expected to be settled by
June 27, 2023 and June 05, 2023, respectively. Convertible notes have been classified as related party balance.
The
Company analyzed the convertible notes payable based on the provisions of ASC 815-15 and determined that the conversion options of
the convertible notes qualify as embedded derivatives. However, the convertible feature was not beneficial for the holder since
issuance due to accumulated deficit and restriction on dividend payments. Accordingly, no derivative liability was recognized as of
March 31, 2023. The Company will perform this assessment at each year end.
(4)
Opening Debt Obligations:
All
other prior year’s debt obligations of Issa - EL Cheikh and Mario Portella have been settled through the issue of 16,300,000 and
2,750,000 shares of common stock, respectively. GHS Investments LLC balance was net settled through the cash payment of $85,000 only
and PPP Loan of $31,750 was waived off.
NOTE
9 – ACQUISITION AND RELATED TRANSACTIONS
On
or about November 3, 2021 the Company entered into an agreement for the purchase of RxCompoundStore.com, LLC and Peaks Curative, LLC
through the purchase of 100%
of the outstanding equity securities of both entities. The agreement was amended on
November 08, 2022, to incorporate share exchange consideration only. The Company’s acquisition of RxCompound was consummated
on November 8, 2022, along with Peaks; however, RxCompound completed its PCAOB audit on February 3, 2023, which was considered as
its acquisition date.
Subsidiaries
operating results were consolidated according to the above acquisition dates. Shortly after entering into the purchase agreement with
RxCompoundstore.com and Peaks Curative, the Company shifted from formulating and selling CBD products to formulating pharmaceutical products
and topicals for sale through its accounts and the telemedicine platform of Peaks Curative. Consequently, in
the year ended March 31, 2023, no revenue was recognized by the Holding Company but generated revenue of $48,537 through RxCompound
and Peaks.
As
consideration for the acquisition, an aggregate of 50,700,000 shares of the company’s Common Stock of the Earth Science Tech, Inc
were issued to the shareholders of subsidiaries in following proportion:
SCHEDULE
OF AN AGGREGATE SHARES OF THE COMMON STOCK
Shareholder
of Subsidiaries | |
| Shares
of
Common Stock | |
| |
| | |
Mario G. Tabraue | |
| 9,750,000 | |
Jose Rodriguez | |
| 19,750,000 | |
Mario Portela | |
| 17,000,000 | |
Adrian Raventons | |
| 2,000,000 | |
Frank Garcia | |
| 2,000,000 | |
Sam Garcia | |
| 200,000 | |
Total | |
| 50,700,000 | |
Pro
Forma unaudited financial information has been attached within the 10-K as Exhibit 99.3.
NOTE
10 – COMMITMENTS AND CONTINGENCIES
Legal
Matters:
The
Company received an email on February 9, 2023, from the Autorité des Marchés Financiers (“the AMF”) with a
complaint, in French, dated January 23, 2023. The Complaint alleges that the Company’s former CEO, Dr. Michele Aube, improperly
raised capital for the Company and is claiming Forty Thousand Dollars in damages. Dr. Aube resigned in 2019. On May 23rd, 2023, the Company
agreed not to raise any new capital in Quebec and pay Seven Thousand, Four Hundred and Seven Dollars in administrative penalty to the
AMF.
Status
of prior year’s outstanding claims have been disclosed in NOTE 7.
Employment
and Consulting Agreements:
The
Company is a party to an employment agreement with its CFO $750 bi-weekly. The agreement is cancelable by either party giving thirty
days’ notice. The Company’s CEO and President will not receive compensation until the Company is cash flow positive for 3
consecutive bi-week payroll periods. Once the Company has achieved cash flow positive status, the Company’s Board of Directors
will renegotiate the CEO and President’s agreement. However, unpaid salary has been disclosed under accrued expenses.
No
consulting agreement was signed during the years ended March 31, 2023, and March 31, 2022.
Rental:
During
the year ended March 31, 2023, RxCompound entered into lease arrangement for the property located at 8950 SW 74th Court Suite 101, Miami,
FL, 33156. Terms of the contract have been disclosed in NOTE 04 – LEASES.
NOTE
11 – EQUITY
Common
stock:
The
Company has authorized 750,000,000 shares of $.001 par value common stock. As of March 31, 2023, and March 31, 2022, the Company had
282,611,083 and 53,851,966 shares, respectively, of common stock issued and outstanding.
During
the year ended March 31, 2023, the Company issued 87,246,677 shares of common stock against cash proceeds of $564,200.
Common
stock issued for officer’s compensation and debt settlement were 3,500,000 and 85,612,440 (shareholder-wise breakdown has been
disclosed in NOTE 7).
On
July 15, 2022, the company issued 1,700,000 shares to Mario Alexander Portela, Jose Damian Rodriguez and Steven Warm (for receiver’s
services).
In
connection with the Acquisition of RxCompound and Peaks, the Company issued 50,700,000 shares of common stock to the existing shareholders
of subsidiaries (shareholder-wise breakdown has been disclosed in NOTE 9).
During
the year ended March 31, 2022, the Company issued 1,000,000 common shares for cash consideration
of $1,000.
On
June 04, 2021, the Company issued 2,300,000 shares of Common Stock at a price of $0.01225 per share in conversion of the Convertible
Promissory Note dated April 2, 2019, for the principal debt amount of $19,982.84 and interest of $8,192.16 totaling $28,175.00 pursuant
to the exemption provided by 3(a)9 of the Securities Act of 1933, as amended. Like the other notes purchased by GHS, the notes were originally
issued as “not in a public offering” under the exemption provided by Section 4(2) of the Securities Act of 1933, as amended.
Preferred
Stock:
On
April 21, 2022, the Company amended its Articles of Incorporation to include Preferred Stock - Series B Preferred, authorized 1,000,000
shares.
As
stock-based compensation, the Company issued 500,000 shares of Series B Preferred to Nickolas Tabraue, and 500,000 shares of Series
B Preferred Stock were issued to Mario Tabraue.
In
October 2022, both Nickolas S. Tabraue and Mario G. Tabraue transferred their Series B Preferred Stock to Giorgio R. Saumat through a
settlement agreement, see October 28, 2022, filed 8-K – Item 1.01.
NOTE
12 – RELATED PARTY TRANSACTIONS
Parties
are considered to be related if one party has the ability to control or exercise significant influence over the other party in making
financial and operating decisions. Transactions with related parties have been disclosed in debt, acquisition and officer’s compensation
notes.
NOTE
13 – SUBSEQUENT EVENTS
The
Company has evaluated subsequent events through June 16, 2023, which is the date the financial statements were issued, and has concluded
that no such events or transactions took place which would require adjustment to or disclosure in the financial statements, except for
the following:
On
June 03, 2022, Promissory Note was issued to Robert Stevens against accrued settlement of $220,000. Maturity date was May 29, 2023; however,
its payment terms were rescheduled on the date of maturity. Parties agreed on the payment of $15,000 upon execution of amended terms,
followed by a 41-month period of installment payments of $5,000, commencing from September 01, 2023.