UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q/A

 

 

For the transition period from                    to                   

 

Commission File Number: 333-179280

 

Earth Science Tech, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Registrant’s telephone number including area code: (561) 757-5591

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes [X]  No [   ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files.  Yes [X]  No [   ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes [   ]  No [X]

Applicable Only to Corporate Issuers:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

 

 

EARTH SCIENCE TECH INC.

 

TABLE OF CONTENTS

 

 

PART 1 – FINANCIAL INFORMATION

 

ITEM 1.  FINANCIAL STATEMENTS

EARTH SCIENCE TECH INC.

Index to

 Condensed Consolidated Financial Statements

 

 

 

		December 31, 2014				March 31, 2014
		(Unaudited)				(Restated)
		(Restated)
Current Assets:
Cash		$	192,517			$	376,704
Prepaid expenses			195,074				350,000
Inventory			197,828				—
Deposits			66,661				178,250
Total current assets			652,080				904,954
Fixed Asset			53,783				—
Other Assets:
Patent			25,000				—
Total other assets			25,000				—
Total Assets		$	730,863			$	904,954

Current Liabilities:
Accounts payable and accrued liabilities		$	26,361			$	745
Due to related parties			—				166,511
Notes payable - related parties			59,558				38,605
Total current liabilities			85,919				205,861
Total liabilities			85,919				205,861
Commitments and Contingencies
Stockholders' Equity:			—				—
Preferred shares, par value $0.001 per share, 10,000,000 shares authorized; 5,200,000 and 0 shares issued and outstanding as of December 31, 2014 and March 31, 2014 respectively			5,200				—
Common stock, par value $0.001 per share, 75,000,000 shares authorized; 37,711,331 and 36,733,000 shares issued and outstanding as of December 31, 2014 and March 31, 2014 respectively			37,711				36,733
Additional paid-in capital			21,305,698				13,307,751
Accumulated deficit			(20,703,665	)			(12,645,391	)
Total stockholders' equity			644,944				699,093
Total Liabilities and Stockholders' Equity		$	730,863			$	904,954

See accompanying notes to unaudited condensed consolidated financial statements.

 

See accompanying notes to the condensed consolidated unaudited financial statements

 

See accompanying notes to the condensed consolidated unaudited financial statements

EARTH SCIENCE TECH, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements

December 31, 2014

(Unaudited)

 

Note 1 – Organization and operations

Earth Science Tech, Inc. ("Earth Science Tech", "ETST", or the “Company”) was incorporated under the laws of the State of Nevada on April 23, 2010.  ETST is a unique biotechnology company focused on cutting edge nutraceuticals and bioceuticals designed to excel in industries such as health, wellness, nutrition, supplements, cosmetic and alternative medicine to improve the quality of life for consumers worldwide. ETST is dedicated in providing natural alternatives to prescription medications that help improve common disorders and illnesses. ETST is focused on delivering nutritional and dietary supplements that help with treating symptoms such as: chronic pain, joint pain, inflammation, seizures, high blood pressure, memory loss, depression, weight management, nausea, aging and overall wellness. This may include products such as vitamins, minerals, herbs, botanicals, personal care products, homeopathics, functional foods, and other products. These products will be in various formulations and delivery forms including capsules, tablets, soft gels, chewables, liquids, creams, sprays, powders, and whole herbs.

On March 6, 2014, the Board of Directors of Ultimate Novelty Sports, Inc. approved the name change from Ultimate Novelty Sports, Inc. to Earth Science Tech, Inc.  The change in the name of the Company was approved by a majority vote of the Shareholders of the Company.  Subsequently, on May 28, 2014 the Financial Industry Regulatory Authority (“FINRA”) approved the name change of the Company to Earth Science Tech, Inc. as well as the new symbol change from UNOV to ETST.

On June 16, 2014, the Company formed a wholly-owned subsidiary, Ultimate Nutrition Technologies, Inc. Ultimate Nutrition Technologies, Inc. was incorporated under the laws of the State of Florida. The name was changed to Nutrition Empire, Inc. on June 23, 2014.

On March 24, 2014, the Company issued 25 million shares to Majorca Group, LTD. See Note 5 below for details. As a result of the foregoing, there was a change in control of the Company on March 24, 2014.

Effective April 15, 2014, Dr. Issa El-Cheikh resigned as CEO, CFO, President, Secretary, Treasurer and Director of the Company. Harvey Katz was appointed as CEO, CFO, President, Secretary, Treasurer and Director of the Company.

Note 2 – Summary of Significant Accounting Policies

The accompanying unaudited condensed consolidated interim financial statements include the accounts of the Company, and its wholly owned subsidiary Nutrition Empire, Inc. (from June 16, 2014, inception) as of December 31, 2014.

The unaudited condensed consolidated interim financial statements have been prepared by the Company pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the "SEC"). The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments) which are, in the opinion of management, necessary to fairly present the operating results for the respective periods. Certain information and footnote disclosures normally present in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been omitted pursuant to such rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the Company's audited financial statements for the year ended March 31, 2014 contained in the Company's Annual Report on Form 10K/A filed with the SEC on July 16, 2014.

All intercompany balances and transactions have been eliminated in consolidation.

The preparation of 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 period.

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification ("Paragraph 820-10-35-37") to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U. S. GAAP), and expands disclosures about fair value measurements. To increase consistency  to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

Level 1 Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.

Level 2 Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.

Level 3 Pricing inputs that are generally observable inputs and not corroborated by market data.

 

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

The carrying amount of the Company's financial assets and liabilities, such as cash, prepaid expenses, deposits, accounts payable and accrued expenses approximate their fair value because of the short maturity of those instruments.

Transactions involving related parties cannot be presumed to be carried out on an arms-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.

It is not however practical to determine the fair value of advances from stockholders due to their related party nature.

The Company has adopted paragraph 360-10-35-17 of the FASB Accounting Standards Codification for its long-lived assets. The Company’s long-lived assets, which include office equipment, 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 acquired assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events.

The Company considers all highly liquid investments with a maturity of three months or less to be cash and cash equivalents.

 

Pursuant to Section 850-10-20 the 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.

The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting 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, 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.

The Company applies paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition.  The Company recognizes revenue when it is realized or realizable and earned.  The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.

The Company derives its revenues from sales contracts with its customer with revenues being generated upon rendering of services.  Persuasive evidence of an arrangement is demonstrated via invoice; service is considered provided when the service is delivered to the customers; and the sales price to the customer is fixed upon acceptance of the purchase order and there is no separate sales rebate, discount, or volume incentive.

Inventories are stated at the lower of cost or market using the first in, first out (FIFO) method.  Provisions have been made to reduce excess or obsolete inventories to their net realizable value.  The Company's inventory represents finished goods that are sold at our retail location via our website as of December 31, 2014.

Components of costs of sales include product costs, shipping costs to customers and any inventory adjustments.

The Company includes shipping and handling fees billed to customers as revenues and shipping and handling costs for shipments to customers as cost of revenues.

The Company follows ASC Topic 740 for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change.

The Company follows ASC Topic 260 to account for earnings per share. Basic earnings per common share (“EPS”) calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share calculations are determined by dividing net income 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.

There were no warrants issued and outstanding as of December 31, 2014 and 2013 respectively.

The Company evaluated all recent accounting pronouncements issued and determined that the adoption of these pronouncements would not have a material effect on the financial position, results of operations, or cash flows of the Company.

 

In May 2014, the FASB issued new accounting guidance regarding revenue recognition under GAAP. This new guidance will supersede nearly all existing revenue recognition guidance, and is effective for public entities for annual and interim periods beginning after December 31, 2016. Early adoption is not permitted. We are currently evaluating the impact of this new guidance on the Company's consolidated financial statements.

In June 2014, FASB issued Accounting Standards Update ("ASU") No. 2014-09, "Revenue from Contracts with Customers". The update gives entities a single comprehensive model to use in reporting information about the amount and timing of revenue resulting from contracts to provide goods or services to customers. The proposed ASU, which would apply to any entity that enters into contracts to provide goods or services, would supersede the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance throughout the Industry Topics of the Codification. Additionally, the update would supersede some cost guidance included in Subtopic 605-35, Revenue Recognition — Construction-Type and Production-Type Contracts. The update removes inconsistencies and weaknesses in revenue requirements and provides a more robust framework for addressing revenue issues and more useful information to users of financial statements through improved disclosure requirements. In addition, the update improves comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets and simplifies the preparation of financial statements by reducing the number of requirements to which an entity must refer. The update is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. This updated guidance is not expected to have a material impact on our results of operations, cash flows or financial condition.

In June 2014, the FASB issued ASU 2014-12, "Compensation - Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could be Achieved after the Requisite Service Period." This ASU provides more explicit guidance for treating share-based payment awards that require a specific performance target that affects vesting and that could be achieved after the requisite service period as a performance condition. The new guidance is effective for annual and interim reporting periods beginning after December 15, 2015. We do not expect the adoption of this guidance to have a material impact on the consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-15, "Presentation of Financial Statements - Going Concern", which requires management to evaluate, at each annual and interim reporting period, whether there are conditions or events that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date the financial statements are issued and provide related disclosures. ASU 2014-15 is effective for annual periods ending after December 15, 2016 and interim periods thereafter, Early application is permitted. The adoption of ASU 2014-15 is not expected to have a material effect on the consolidated financial statements, We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.

All other newly issued accounting pronouncements, but not yet effective, have been deemed either immaterial or not applicable.

Fixed assets are recorded at cost less accumulated depreciation. Depreciation is provided for on the straight line method over the estimated useful lives of the related assets as follows:

The cost of maintenance and repairs is charged to expense in the period incurred. Expenditures that increase the useful lives of assets are capitalized and depreciated over the remaining useful lives of the assets. When items are retired or disposed of, the cost and accumulated depreciation are removed from the accounts and any gain or loss is included in income.

Note 3 – Going Concern

The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As reflected in the accompanying condensed consolidated financial statements, the Company had an accumulated deficit at December 31, 2014, a net loss and net cash used in operating activities for the period then ended.   There is substantial doubt about the ability of the Company to continue as a going concern.

While the Company is attempting to generate sufficient revenues, the Company’s cash position may not be sufficient enough to 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 provide the opportunity for the Company to continue as a going concern.  While the Company believes in the viability of its strategy to generate sufficient revenues and in its ability to raise additional funds, there can be no assurances to that effect.  The ability of the Company to continue as a going concern is dependent upon the Company’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.

Note 4 – Related Party Transactions

On April 15, 2014 the Company entered into an Employment Agreement with its Chief Executive Officer Harvey Katz.  The Agreement calls for issuance of 100,000 common shares per quarter to compensate his services.  During the nine months ended December 31, 2014, the Company issued 300,000 common shares at fair value of $356,000 under said employment agreement (See Note 5).

Note 5 – Stockholders’ Equity

 

Upon formation the total number of shares for all classes of stock which the Company is authorized to issue preferred stock in the amount of ten million (10,000,000), par value $.001 per share and issue common stock in the amount of seventy-five million (75,000,000), par value $.001 per share.

Effective March 17, 2014 Company issued 700,000 shares to Royal Palm Consulting Service, LLC for services to be rendered  as described in a Consulting Agreement between the Company and  Royal Palm Consulting Service, LLC. The shares were valued at fair value of $350,000. The term of the agreement is for one year and shall terminate on March 17, 2015.  The Consultant agrees to serve as a consultant to assist the Company with bona fide consulting services in general corporate activities including, but not limited to the following areas; Business Development, Strategies and Planning as well as Research venues for product advertisement, Identify strategic partners and retail client development. All these shares were valued at $0.50 per share, being the cash price of immediately preceding share issuance to unrelated parties. As of December 31, 2014, the Company has amortized $262,500 and the remaining balance of $87,500 is recorded as a prepaid expense.

During the nine months ended December 31, 2014, the Company had sold 461,331 common shares for cash at $0.50 to $.75 per share for total proceeds of $299,000.

 

During the nine months ended December 31, 2014, the Company issued 300,000 common shares with fair value of $356,000 to Chief Executive Officer (See Note 4).

During the nine months ended December 31, 2014, the Company issued 117,000 common shares with fair value of $74,625 to non-related parties for services.

During the nine months ended December 31, 2014, the Company issued 50,000 common shares with a fair value of $115,000 to an employee for services rendered.

During the nine months ended December 31, 2014, the Company issued 50,000 common shares with fair value of $87,500 to a related parties for services which is recorded as a prepaid expense for consulting services.  The amount will be amortized over three months per a Consulting Agreement.

On June 6, 2014 the Company filed with the State of Nevada Articles of Amendment creating a Preferred A class of stock with 10,000,000 Preferred A shares having a par value of $0.001 per share.

On June 6, 2014 the Company filed with the State of Nevada a Certificate of Designation for the 10,000,000 Preferred A shares.  The preferred stock is non-dilutive and shall rank senior to all classes of common stock of the Company. The preferred stock has ten votes to the common stock per one share of preferred stock. The preferred stock carries a one for one conversion right for holders of the preferred stock into common stock. Conversion right will apply after one year has passed from issuance of the preferred stock.

 

During the nine months ended December 31, 2014 the Company issued 5,200,000 Preferred Class "A" stock with a fair value of $7,072,000 to our majority stockholder for services. The preferred stock is non-dilutive and shall rank senior to all classes of common stock of the Company. The preferred stock has ten votes to the common stock per one share of preferred stock. The preferred stock carries a one for one conversion right for holders of the preferred stock into common stock. Conversion right will apply after one year has passed from issuance of the preferred stock.

  

Note 6 – Subsequent Events

Subsequent to December 31, 2014, the Company issued 8,500 common shares with a fair value of $10,285 to non-related parties for services.

Earth Science Tech, Inc. ("the Company") is presently engaged in a legal controversy with one of its suppliers, Cromogen, Cromogen's principals and a related company. Cromogen did not perform in accordance with its contract for supplying hemp oil in terms of timing, quality and consistency in the opinion of the company as a result of which the company notified Cromogen. At the same time and because the commitment to arbitrate extends only to the companies involved, the company has filed a legal action in the courts of Florida in which the principals of Cromogen have been named as Defendants and wherein fraud is alleged in connection with Cromogen's representations regarding the formulation and quality of the hemp oil it supplied and damages sought accordingly. (It is to be noted that, although the lack of performance by Cromogen has engendered litigation, the company has secured alternative sources for hemp oil and will mitigate its damages to the extent possible as a practical and legal matter). Cromogen, under the terms of the contract, demurred and filed for arbitration. That arbitration, in its very early stages, is now pending in New York (as the contract provided). Cromogen is claiming alleged damages of a direct and consequential nature. The company has filed a counterclaim for damages sustained as a proximate result of deficient and defective performance.

 

Note 7 – Reclassification

Certain amounts from prior periods have been reclassified to conform to the current period presentation.

Note 8 - Restatement

The Company had restated the March 31, 2014 balance sheet, income statement and cash flow statement as originally presented in its financial statement filed with its 2014 10-K filed on July 16, 2014 to correct the common shares issued pursuant to the agreements with Officer and consultants and to properly record the value of common shares issued at fair value.

Changes to Consolidated Balance Sheet

 

Changes to Consolidated Statement of Operations

 

		For the Year Ended March 31, 2014
		As Previously Reported				Adjustment				As Restated
Professional Fees		$	36,711			$	12,500,000			$	12,536,711

 

Changes to Consolidated Statement of Cash Flow

The Company had restated the December 31, 2014 balance sheet, income statement and cash flow statement as originally presented in its financial statement filed with its 2014 10-Q filed on February 23, 2015 to correct the common shares issued pursuant to the agreements with Officer and consultants and to properly record the value of common shares issued at fair value.

Changes to Consolidated Balance Sheet

Changes to Consolidated Statement of Operations

 

Changes to Consolidated Statement of Cash Flow

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Forward-Looking Statements and Associated Risks.

 

The following discussion should be read in conjunction with the financial statements and the notes to those statements included elsewhere in this Quarterly Report on Form 10-Q. This Quarterly Report on Form 10-Q contains certain statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Certain statements contained in the MD&A are forward-looking statements that involve risks and uncertainties. The forward-looking statements are not historical facts, but rather are based on current expectations, estimates, assumptions and projections about our industry, business and future financial results. Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors, including those discussed in other sections of this Quarterly Report on Form 10-Q.

BUSINESS:

GENERAL

The following is a summary of some of the information contained in this Document. Unless the context requires otherwise, references in this document to "Earth Science Tech," "ETST," or the "Company" are to Earth Science Tech, Inc.

DESCRIPTION OF BUSINESS

 

The Company was incorporated under the laws of the State of Nevada on April 23, 2010. The Company is a biotechnology company focused on delivering unique nutraceuticals, bioceutieals and dietary supplements in the areas of health, wellness, sports and alternative medicine, Our products include cannabidiol ("CBD") hemp oil and other dietary supplements. ETST maintains a website at www.earthseiencetechcom.

 

Formerly known as Ultimate Novelty Sports, Inc., we were consultants to health club managers and were providers of services to the athletic facility industry. We offered a full range of consulting services. In our dealings with these industry representatives we found that knowledgeable personnel and natural nutritional and dietary supplements were lacking in the industry. We therefore decided to enlarge our marketing to include nutritional and dietary supplements to these facilities as well as opening stand-alone retail stores offering nutritional products as well as personnel trained to answer any and all questions related to products promoting health and well-being. On March 06, 2014, the Board of Directors approved the name change from Ultimate Novelty Sports, Inc. to Earth Science Tech, Inc. The change in the name of the Company was approved by a majority vote of the Shareholders of the Company.

 

COMPANY OVERVIEW

ETST is a biotechnology company centered on unique nutraceuticals and bioceutieals designed to excel in industries such as health, wellness, nutrition, supplements, cosmetics and alternative medicine to improve the quality of life for consumers worldwide. ETST seeks to deliver non-prescription nutritional and dietary supplements that help with treating symptoms such as: chronic pain, joint pain, inflammation, seizures, high blood pressure, memory loss, depression, weight management, nausea, aging and overall wellness. This may include products such as CBD as a natural constituent of hemp oil, vitamins, minerals, herbs, botanicals, personal care products, homeopathies, functional foods and other products. These products will be in various formulations and delivery forms including capsules, tablets, soft gels, chewables, liquids, creams, sprays, powders, and whole herbs. Although, the Company has generated revenues it has incurred operating expenses and expenses associated with implementation of its business plan resulting in net operating losses for previously reported periods and accumulated deficit since inception. The Company is devoting substantially all of its efforts on generating revenues from consulting services and implementation of its business plan.

ETST is focused on researching and developing innovative hemp extracts and making them accessible worldwide. ETST plans to be a supplier of high quality hemp oil enriched with high-wade CBD. ETST's primary goal is to advance different high quality hemp extracts with a broad profile of cannabinoids and additional natural molecules found in industrial hemp and to identify their distinct properties.

We believe that the United States Food and Drug Administration (FDA) currently considers non-THC hemp based cannabinoids, including CBD, to be "food based" and therefore saleable in all 50 states and more than 40 countries. Cannabinoids are natural constituents of the hemp plant and CBD is derived from hemp stalk and seed. Hemp oil is a dietary supplement that presents evidence of health and wellness benefits. According to research and ongoing studies in collaboration with Dr. Wei R. Chen, Assistant Dean of the College of Mathematics and Science at the University of Central Oklahoma, CBD has the potential to help a range of conditions and disorders.

 

 

Marketing nutraceuticals and bioceuticals correctly and effectively is one of the most important ways to increase revenue and attract new clients.  Our Customer acquisition, however, revolves around our ability to provide unique products to the market in the form of capsules, tablets, soft gels, chewables, liquids, creams, sprays, powders, and whole herbs.

Our common stock has been quoted on the OTC Bulletin Board since August 29, 2012, under the symbol “UNOV”. It is DTC eligible effective October 4, 2012.

On March 6, 2014, the Board of Directors of Ultimate Novelty Sports, Inc. approved the name change from Ultimate Novelty Sports, Inc. to Earth Science Tech, Inc (the ”Company”).  The change in the name of the Company was approved by a majority vote of the Shareholders of the Company.

 

On May 28, 2014 the Financial Industry Regulatory Authority (“FINRA”) approved the name change of the Company to Earth Science Tech, Inc. as well as the new symbol change from UNOV to ETST.

Revenue

The Company’s gross revenue for the three months ended December 31, 2014, was $14,251, compared to $800 for the same period in the Company’s fiscal 2013.  Cost of revenues for the three months ended December 31, 2014 was $15,416 compared to $0 for the same three month period ended December 31, 2013 which resulted in a gross loss of $1,165 for the period ended December 31, 2014 compared to a gross profit of $800 for the same three month period ended December 31, 2013.

Operating Costs and Expenses

Total operating costs for the three months ended December 31, 2014 were $7,593,889 compared to only $13,231 for the three months ended December 31, 2013. The higher operating costs were the result of an expansion in the Company’s activities associated with marketing activities and officer compensation. During the quarter ended December 31, 2014 we worked on more projects compared to the same period in our fiscal 2013.  In addition the Company issued 5,200,000 Preferred Class "A" stock with a fair value of $7,072,000 to our majority stockholder for professional services.  The Company also issued 100,000 common shares with a fair value of $231,000 to an officer and 50,000 common shares with a fair value of $115,000 to an employee.  As a result we have incurred an increase in professional fees and other operating costs.

 

Revenue

Our gross revenue for the nine months ended December 31, 2014, was $20,851 compared to $7,450, for the same period in our fiscal 2013.  Our cost of revenues for the same period ended December 31, 2014, was $19,998 (December 31, 2013: $900) resulting in a gross profit of $853 for December 31, 2014 (December 31, 2013: $6,550).

Operating Costs and Expenses

The major components of our expenses for the nine months ended December 31, 2014 and 2013 are outlined in the table below:

 

Total operating costs for the nine months ended December 31, 2014 were $8,055,794 compared to only $31,916 for the nine months ended December 31, 2013. The higher operating costs were the result of an expansion in the Company’s activities associated with marketing activities and officer compensation. In addition the Company issued 5,200,000 Preferred Class "A" stock with a fair value of $7,072,000 to our majority stockholder for professional services. The Company also issued 300,000 common shares with a fair value of $356,000 to an officer and 50,000 common shares with a fair value of $115,000 to an employee.   During the nine months ended December 31, 2014 we worked on more projects compared to the same period in our fiscal 2013. As a result we have incurred an increase in professional fees and other operating costs.

 

The table below, for the periods indicated, provides selected cash flow information:

Cash Flows from Operating Activities

 

Our cash used in operating activities of $258,846 for the nine months ended December 31, 2014 was primarily the result of an increase in inventory.

Cash Flows from Investing Activities

Our cash used in investing activities of $78,783 for the nine months ended December 31, 2014 was primarily the result of the buildout of our first retail location and the purchase of a patent.

Cash Flows from Financing Activities

 

Our cash provided by financing activities of $153,442 for the nine months ended December 31, 2014 was primarily the result of common stock issued for cash $299,000, proceeds from notes payable related parties of $20,953 less the repayment of advances from related parties of $166,511.

 

We anticipate that additional funding will be required in the form of equity financing from the sale of our common stock.  However, we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock or through a loan from our directors to meet our obligations over the next twelve months.  We do not have any arrangements in place for any future equity financing.

Recent Accounting Pronouncements

See Note 2 to the Financial Statements.

 

Off Balance Sheet Arrangements

As of December 31, 2014, we did not have any significant off-balance-sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we have conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as of the end of the period covered by this report.  Based on this evaluation, our principal executive officer and principal financial officer concluded as of the evaluation date that our disclosure controls and procedures were not effective due to the company’s failure to properly value stock transactions and not having the staff with the proper financial statement knowledge. The material information required to be included in our Securities and Exchange Commission reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms relating to our company, particularly during the period when this report was being prepared.

Additionally, there were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the evaluation date.  

 

PART II – OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

We are presently engaged in a legal controversy with one of our suppliers, Cromogen, Cromogen's principals and a related company. Cromogen did not perform in accordance with its contract for supplying hemp oil in terms of timing, quality and consistency in the opinion of the Company as a result of which the Company notified Cromogen. At the same time and because the commitment to arbitrate extends only to the companies involved, the Company has filed a legal action in the courts of Florida in which the principals of Cromogen have been named as Defendants and wherein fraud is alleged in connection with Cromogen's representations regarding the formulation and quality of the hemp oil it supplied and damages sought accordingly. Cromogen, under the terms of the contract, demurred and filed for arbitration. That arbitration, in its very early stages, is now pending in New York (as the contract provided). Cromogen is claiming alleged damages of a direct and consequential nature. The Company has filed a counterclaim for damages sustained as a proximate result of deficient and defective performance.

ITEM 1A. RISK FACTORS.

We are 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.

Other than disclosed below, there were no unregistered sales of the Company's equity securities during the quarter ended December 31, 2014 that were not previously disclosed in a current report on Form 8-k.

During the three months ended December 31, 2014, the Company issued 10,000 common shares with fair value of $20,000 to non-related parties for services.

During the three months ended December 31, 2014, the Company issued 50,000 common shares with fair value of $87,500 to a related parties for services.

During the three months ended December 31, 2014, the Company issued 50,000 common shares with a fair value of $115,000 to an employee for services.

During the three months ended December 31, 2014, the Company issued 100,000 common shares with fair value of $231,000 to an officer for services.

 

The securities issued pursuant to the Transaction Documents were not registered under the Securities Act of 1933, as amended (the "Securities Act"), but qualified for exemption under Section 4(a)(2) of the Securities Act. The securities were exempt from registration under Section 4(a)(2) of the Securities Act because the issuance of such securities by the Company did not involve a "public offering," as defined in Section 4(a)(2) of the Securities Act, due to the insubstantial number of persons involved in the transaction, size of the offering, and manner of the offering and number of securities offered. The Company did not undertake an offering in which it sold a high number of securities to a high number of investors. In addition, the Investor had the necessary investment intent as required by Section 4(a)(2) of the Securities Act since they agreed to, and received, the securities bearing a legend stating that such securities are restricted pursuant to Rule 144 of the Securities Act. This restriction ensures that these securities would not be immediately redistributed into the market and therefore not be part of a "public offering." Based on an analysis of the above factors, the Company has met the requirements to qualify for exemption under Section 4(a)(2) of the Securities Act.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

As of December 31, 2014 the Company had $59,558 of notes payable outstanding from a related party in default.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS

 

The following documents are filed as a part of this report or are incorporated by reference to previous filings, if so indicated:

*	Filed herewith.

 

**

XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of Earth Science Tech Inc. and in the capacities and on the dates indicated.