EARTH SCIENCE TECH, INC. The following section, Management's Discussion and Analysis, should be read in
conjunction with
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
OVERVIEW
The Company is a holding entity set to acquire companies with its current focus
in the health and wellness industry. The Company is presently in compounding
pharmaceuticals and telemedicine through its wholly owned subsidiaries
RxCompound 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 dispense in the state of
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 Smart Doctors consultation services, but only able to fulfill prescriptions within RxCompound's licensed states. Peaks will be able to fulfill more states as RxCompound obtains dispensing 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' strategy has been to launch the website within three phases to insure
efficiency and proper performance. Peaks launched its first Phase, Phase I, in
the month of
ESF is a favored entity of ETST, effectively being a non-profit organization
that was incorporated on
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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
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
Principles of Consolidation
The accompanying consolidated financial statements include all of the accounts of the Company and its wholly owned subsidiaries. The subsidiaries include Peaks and ESF (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 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.
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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
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
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Commitments and Contingencies
The Company follows ASC 450 to account for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. This may result in contingent liabilities that are required to be accrued or disclosed in the financial statements. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company's consolidated financial statements. If the assessment indicates that a potential 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.
Inventories
The Company did not hold any inventories during the period ended
Cost of Sales
Components of costs of sales include product and shipping costs to customers and any inventory adjustments.
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Shipping and Handling Costs
The Company accounts shipping and handling costs to customers as cost of revenue.
Research and Development
Research and development costs are expensed as incurred. The Company's research and development expenses relate to its engineering activities, which consist of the design and development of new products for specific customers, as well as the design and engineering of new or redesigned products for the industry in general.
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
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 standards state 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 services are received from non-employees in exchange for equity instruments based on the fair value of the equity instrument exchanged in accordance with ASC 505-50.
Property and Equipment
Property and equipment 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 Nine-Month Period Ended
During the nine months ended
Revolving Promissory Note
Revolving Promissory Note
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Convertible Note VCAMJI IRREV. TRUST issued
Convertible Note
Convertible Note VCAMJI IRREV. TRUST issued
On
On
RESULTS OF OPERATIONS
For the Nine Months Ended
The Company's revenue for the nine months ended
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The Company's current liabilities for the nine months ended
The Company incurred operating expenses for the nine months ended
Officer compensation for the nine months ended
The Company incurred general and administrative expenses of
The Company paid professional fees of
The Company incurred costs of legal proceedings of
The Company generated a net loss from continuing operations for the nine months
ended
The Company's Plan of Operation for the Next Twelve Months
The Company's auditors have expressed doubt as to the Company's ability to
continue as a going concern in part, because on
The Company's current liabilities have historically exceeded the Company's
Current Assets; and as of
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Regardless of the forgoing issues, the Company will require additional debt or
equity financing for its operations as currently conducted. The Company on
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 sufficient financing and on terms that are
acceptable to it, the Company would not be able to continue operations as
currently planned. Additional funding primarily allows the Company to expedite
the Company's business plan. During the periods ending
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