{"url_path":"/sec/etst/10-k/2026/item-7","section_key":"item-7","section_title":"Item 7 MANAGEMENT**’**S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-06-18","source_url":"https://www.sec.gov/Archives/edgar/data/1538495/0001493152-26-029160-index.html","accession_number":"0001493152-26-029160","cik":"0001538495","ticker":"ETST","issuer_name":"Earth Science Tech, Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1538495/0001493152-26-029160-index.html","primary_entity_key":"0001538495","primary_entity_name":"Earth Science Tech, Inc."},"word_count":2296,"has_tables":true,"body_markdown":"**ITEM\n7. MANAGEMENT**’**S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**\n\n \n\nThe\nfollowing discussion of our financial condition and results of operations for the years ended March 31, 2026, and March 31, 2025, should\nbe read in conjunction with our consolidated financial statements and the notes to those statements that are included elsewhere in this\nAnnual Report on Form 10-K. Our discussion includes forward-looking statements based upon current expectations that involve risks and\nuncertainties, such as our plans, objectives, expectations, and intentions. Actual results and the timing of events could differ materially\nfrom those anticipated in these forward-looking statements due to several factors. We use words such as “anticipate,” “estimate,”\n“plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,”\n“intend,” “may,” “will,” “should,” “could,” and similar expressions to identify\nforward-looking statements.\n\n \n\n**OVERVIEW**\n\n \n\nETST\noperates as a diversified holding company focused on the health and wellness sector. The Company’s principal operating strategy\nis to build a vertically integrated healthcare platform that combines compounding pharmacy operations, telemedicine platforms, clinical\nsupport, and direct-to-patient fulfillment. The Company’s healthcare operations are supported by investments in real estate and\nasset management activities and a consumer products business.\n\n \n\nThe\ncore of the Company’s value proposition is the seamless integration of patient care, from consultation to fulfillment. This is\nachieved through the synergy of specialized subsidiaries. The Company’s primary operating businesses include:\n\nHealth\nand wellness\n\n \n\n●RxCompoundStore.com:\nMulti-state (Florida based) sterile/non-sterile compounding for specialized therapies; providers\nand patients needing access beyond retail chains.\n\n   \n\n●Mister\nMeds: Multi-state (Texas based) sterile/hazardous compounding center; Texas patients and\nreferring clinicians; fast TX dispensing and hub for nearby states.\n\n   \n\n●Peaks\nCurative: Frictionless asynchronous consults funneling to licensed pharmacies; digitally\nengaged patients seeking convenience.\n\n   \n\n●DOConsultations:\nVirtual care brand for home-based therapies; patients wanting guided telehealth with ongoing\nfollow-up.\n\n   \n\n●\nVillas Health Care: Brick-and-mortar healthcare facility designed to expand patient access.\n\n \n\n19\n\n \n\n \n\nAsset\nManagement and Other\n\n \n\n●Avenvi:\nA diversified real estate company engaged in development, asset management, and financing.\nWith a growing portfolio of real estate holdings, Avenvi provides turnkey solutions from\ndevelopment to end-user financing. It also manages investment activities for ETST and oversees\nthe Company’s ongoing $10 million share repurchase program.\n\n   \n\n●MagneChef:\nA direct-to-consumer retail brand. Utilizing its patents and intellectual properties,\nthe company aims to develop new products that can be marketed and sold online. Currently,\nthe company has developed products for cooking. MagneChef is in the process of expanding\nits product line for new offerings that incorporate its intellectual property.\n\n \n\n**RESULTS\nOF OPERATIONS**\n\n \n\nThe\nfollowing tables set forth summarized cost of revenue information for the year ended March 31, 2026, and for the year ended March 31,\n2025, respectively.\n\n \n\n  \nFor the Year Ending March 31,  \n   \n  \n\n  \n2026  \n2025  \n$ Change  \n% Change \n\nRevenue \n$35,695,614  \n$ 33,117,624  \n$2,577,990  \n 8%\n\nCost of goods sold \n 10,207,557  \n 8,817,488  \n 1,390,069  \n 16%\n\nGross Profit \n 25,488,057  \n **24,300,136**  \n 1,187,921  \n 5%\n\n \n\nWe\ngenerated sales of $35,695,614 and gross profit of $25,488,057, representing a gross margin of 71% for the year ended March 31, 2026,\ncompared to product sales of $33,117,624 and gross profit of $24,300,136,    representing a gross margin of 73% for the\nyear ended March 31, 2025.\n\n \n\nThe\nincrease in product sales for the year ended March 31, 2026, was primarily driven by higher demand for compounded medications across\nthe Company’s platforms, including increased prescription volumes generated through the Company’s telemedicine channels and\ncustomer portals. Growth was supported by continued expansion of the Company’s integrated platform, which connects patient intake,\nprescribing, and fulfillment.\n\n \n\n20\n\n \n\n \n\nGross\nprofit increased in absolute dollars; however, gross margin decreased from 73% to 71%. The decline in gross margin was primarily attributable\nto lower average selling prices resulting from competitive market conditions and changes in product mix.\n\n \n\nAdditionally,\ncost of goods sold increased proportionally at a higher rate than revenue, driven by factors such as ingredient cost variability, fulfillment-related\ncosts, and pricing strategies implemented to support volume growth. Management continues to monitor pricing, supplier costs, and product\nmix in order to optimize margins while maintaining competitive positioning and supporting demand.\n\n \n\n**OPERATING\nEXPENSES**\n\n \n\n  \nFor years ended March 31,  \n   \n  \n\n  \n2026  \n2025  \n$ Change  \n% Change \n\nSalaries, wages and benefits \n 13,776,033  \n 14,115,643  \n (339,610) \n -2%\n\nOffice/General and Administrative Expenses \n 3,571,448  \n 4,154,838  \n (583,390) \n -14%\n\nBank Charges \n 1,006,026  \n 1,066,577  \n (60,551) \n -6%\n\nAdvertising & marketing \n 2,840,553  \n 836,860  \n 2,003,693  \n 239%\n\nLegal & Professional Fees \n 221,179  \n 305,932  \n (84,753) \n -28%\n\nInsurance \n 168,353  \n 180,281  \n (11,928) \n -7%\n\nOperating lease cost \n 180,753  \n 98,434  \n 82,318  \n 83%\n\nDepreciation and Amortization \n 284,396  \n 53,951  \n 230,445  \n 427%\n\nUtilities \n 130,790  \n 39,661  \n 91,129  \n 229%\n\nTotal operating expenses \n 22,179,531  \n$20,852,178  \n$1,327,353  \n **6****%**\n\n  \n    \n    \n    \n   \n\nOther income/expenses \n   \n   \n   \n  \n\nDividend Income \n 15,458  \n 9,141  \n 6,317  \n 69%\n\nNet realized gain on sale of investments \n 671,528  \n 300,162  \n 371,366  \n 124%\n\nUnrealized Gain/Loss of fair value changes of investments \n (957,118) \n (365,661) \n (591,457) \n 162%\n\nOther \n 67,194  \n -  \n 67,194  \n 100%\n\nInterest Expenses \n (16,327) \n (21,189) \n 4,862  \n -23%\n\nNet Income before taxes \n 3,089,261  \n 3,370,410  \n (281,149) \n -8%\n\nIncome Taxes \n (511,676) \n 116,776  \n (628,452) \n -538%\n\nNet Income \n 3,600,937  \n 3,253,635  \n 347,302  \n 11%\n\nNet loss attributed to non controlling interest \n -29,839  \n -  \n -29,839  \n -100%\n\nNet Income available to common stockholders’ \n$3,630,776  \n$3,253,635  \n 377,141  \n 12%\n\n \n\n21\n\n \n\n \n\nSalaries\nexpense decreased from $14,115,643 for the year ended March 31, 2025, to $13,776,033 for the year ended March 31, 2026.\n\n \n\nThe\ndecrease occurred despite the Company’s operational growth and expansion of its workforce and was primarily attributable to voluntary\nmodifications to compensation arrangements by the Company’s Chief Executive Officer, CEO, and Chief Operating Officer, COO, who\nelected to rescind portions of their previously agreed compensation and implemented interim compensation adjustments, approved by the\nBoard of Directors. These reductions more than offset increases in personnel costs associated with headcount growth during the period.\n\n \n\nSelling,\ngeneral and administrative expenses decreased from $4,154,838 for the year ended March 31, 2025, to $3,571,448 for the year ended March\n31, 2026. The decrease was primarily attributable to process improvements and efficiency initiatives implemented across the Company’s\noperations, as management continued to optimize administrative functions and cost structures. These improvements resulted in lower operating\noverhead, despite the Company’s continued growth during the period.\n\n \n\nInsurance\nexpense totaled $168,353 for the fiscal year ended March 31, 2026, compared to $180,281 for the fiscal year ended March 31, 2025. The\ndecrease was primarily attributable to the Company obtaining comparable insurance coverage at lower premium rates during the current\nfiscal year.\n\n \n\nLease\ncost totaled $180,753 for the fiscal year ended March 31, 2026, compared to $98,434 for the fiscal year ended March 31, 2025. The increase\nwas primarily attributable to a new lease entered into during the fiscal year ended March 31, 2026.\n\n \n\nMarketing\nexpenses totaled $2,840,553 for the year ended March 31, 2026, an increase of $2,003,693 from $836,860 for the year ended March 31, 2025.\nThe increase was primarily attributable to expanded digital marketing initiatives, including higher spending on social media platforms\nand search engine advertising, aimed at driving online sales growth, increasing customer acquisition, and supporting higher prescription\nvolumes across the Company’s telemedicine and e-commerce channels.\n\n \n\nBank\ncharges were $1,006,026 during the twelve months ended March 31, 2026, and $1,066,577 during the twelve months ended March 31, 2025.\n\n \n\n22\n\n \n\n \n\nLegal\nand professional fees totaled $221,179 for the year ended March 31, 2026, a decrease of $84,753 from $305,932 for the year ended March\n31, 2025. The decrease was primarily attributable to lower legal and consulting costs incurred during the period, including reduced reliance\non external professional services compared to the prior year.\n\n \n\nManagement\nis not aware of any pending or threatened legal proceedings that would have a material adverse effect on the Company’s financial\nposition, results of operations, or cash flows.\n\n \n\nFor\nthe year ended March 31, 2026, the Company had a net income of approximately $3,600,000 compared to a net income of approximately $3,250,000\nfor the year ended March 31, 2025.\n\n \n\nWe\nare a smaller reporting company, as defined by 17 CFR § 229.10(f)(1). We do not consider the impact of inflation and changing prices\nas having a material effect on our net sales and revenues and on income from our operations for the previous two years or on continuing\noperations going forward.\n\n \n\n**INTEREST\nEXPENSE**\n\n \n\nInterest\nexpense was $16,327 during the fiscal year ending March 31, 2026, compared with $21,189 during fiscal year ending March 31, 2025.\n\n \n\n**INCOME\nTAX**\n\n \n\nEstimated\ntaxes were calculated using the 2026 federal tax rate of 21%. We account for income taxes under the asset and liability method, which\nrequires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included\nin the financial statements. Under this method, we determine deferred tax assets and liabilities based on the differences between the\nfinancial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences\nare expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period\nthat includes the enactment date.\n\n \n\n**BALANCE\nSHEETS & CASH FLOWS STATEMENTS**\n\n \n\n  \nAs of March 31, \n\n  \n2026  \n2025 \n\nASSETS: \n   \n  \n\nCurrent Assets \n    \n   \n\nCash \n$796,797  \n$1,473,228 \n\nAccounts Receivable, net \n 356,054  \n 129,064 \n\nEquity securities at fair value \n 1,360,040  \n 645,438 \n\nInventory \n 682,059  \n 503,938 \n\nLong lived assets, available for sale \n 371,684  \n - \n\nPrepaid Expenses and other current assets \n 154,480  \n 358,837 \n\nTotal Current Assets \n 3,721,114  \n 3,110,505 \n\nNon-Current Assets \n    \n   \n\nProperty and Equipment, net \n 1,517,888  \n 1,384,110 \n\nRight of use asset, net \n 95,317  \n 172,429 \n\nIntangible assets, net \n 208,170  \n 96,885 \n\nDeferred tax asset, net \n 772,294  \n - \n\nGoodwill \n 2,654,554  \n 2,302,792 \n\nTOTAL ASSETS \n$8,969,337  \n$7,066,721 \n\nLIABILITIES AND EQUITY: \n    \n   \n\nLiabilities \n    \n   \n\nAccounts Payable \n$681,925  \n$492,352 \n\nAccrued Expenses and other current liabilities \n 1,150,442  \n 2,322,022 \n\nOperating lease obligations \n 96,206  \n 121,851 \n\nCurrent portion of long-term debt- other \n -  \n 30,592 \n\nShort-term business loans \n -  \n 179,488 \n\nTotal Current Liabilities \n 1,928,573  \n 3,146,305 \n\nLong-Term Liabilities \n    \n   \n\nLease Liability \n -  \n 37,878 \n\nLoans and Obligations \n -  \n 31,427 \n\nTotal Long-Term Liabilities \n -  \n 69,305 \n\nTotal Liabilities \n 1,928,573  \n 3,215,610 \n\nStockholders’ Equity \n    \n   \n\nPreferred stock, par value $0.001 per share, 1,000,000 shares authorized; 1,000,000 and 1,000,000 shares issued and outstanding as of March 31, 2026, and March 31, 2025, respectively \n 1,000  \n 1,000 \n\nCommon stock, par value $0.001 per share, 300,000,000 shares authorized; 291,324,607 shares issued and outstanding as of March 31, 2026, and 295,347,903 issued and 294,302,607 outstanding as of March 31, 2025 \n 291,324  \n 295,348 \n\nAdditional Paid in Capital \n 30,826,352  \n 31,480,143 \n\nAccumulated Deficit \n (24,108,199) \n (27,738,975)\n\nTreasury Stock, at cost (0 and 1,045,296 shares at March 31, 2026, and March 31, 2025, respectively) \n -  \n (186,405)\n\nTotal Stockholders’ Equity \n 7,010,477  \n 3,851,111 \n\nNon-Controlling Interest \n 30,287  \n - \n\nTotal Equity \n 7,040,764  \n 3,851,111 \n\nTOTAL LIABILITIES AND EQUITY \n$8,969,337  \n$7,066,721 \n\n \n\n23\n\n \n\n \n\nA\nsummary of our changes in cash flows & Statement of Financial Position for the years ending March 31, 2026, and 2025, is provided\nbelow:\n\n \n\nThe\nCompany had $796,797 in Cash as of March 31, 2026, compared to $1,473,228 as of March 31, 2025.\n\n \n\nThe\nCompany had $682,059 inventory and $356,054 in accounts receivable as of March 31, 2026, compared to $503,938 and $129,064 as of March\n31, 2025.\n\n \n\nEquity\ninvestments are reported at fair value, totaling $1,360,040 as of March 31, 2026, and $645,438 as of March 31, 2025.\n\n \n\nThe\nCompany completed construction of a residential property during the period, which is currently available for sale, at a total capitalized\ncost of $371,684.\n\n \n\nAs\nof March 31, 2026, the Company made additional purchases of equipment of approximately $760,000, to expand its operations.\n\n \n\nThe\nCompany had $681,925 in Accounts Payable as of March 31, 2026, compared to $492,352 as of March 31, 2025.\n\n \n\nThe\nCompany had approximately $1,150,000 in accrued expenses and other current liabilities as of March 31, 2026, compared to approximately\n$2,320,000 as of March 31, 2025.\n\n \n\nTotal\ncurrent liabilities decreased from $3,146,305 to $1,928,573.\n\n \n\nLong\nterm liabilities decreased from $69,305 as of March 31, 2025, to $0 as of March 31, 2026.\n\n \n\nThe\nCompany had a Stockholders’ Equity of $7,040,764 as of March 31, 2026, compared to $3,851,111 of Stockholders Equity as of March\n31, 2025. This improvement is primarily due to net income available to common stockholders of approximately $3,630,000.\n\n \n\n24\n\n \n\n \n\n**STATEMENT\nOF CASH FLOWS**\n\n \n\n  \nFor the Years Ending March 31, \n\n  \n2026  \n2025 \n\nNet cash provided by operating activities \n$1,940,863  \n$4,372,390 \n\nNet cash used in investing activities \n (1,904,377) \n (1,881,350)\n\nNet cash used in financing activities \n (712,917) \n (1,715,533)\n\nNet increase (decrease) in cash and cash equivalents \n (676,431) \n 775,507 \n\nCash and cash equivalents at beginning of the period \n 1,473,228  \n 697,721 \n\nCash and cash equivalents at end of the period \n$796,797  \n$1,473,228 \n\n \n\n**CASH\nFLOWS FROM OPERATING ACTIVITIES**\n\n \n\nThe\nCompany’s net cash provided by operating activities was $1,940,863 for the twelve months ended March 31, 2026, compared to $4,372,390\nfor the twelve months ending March 31, 2025.\n\n \n\n**CASH\nFLOWS FROM INVESTING ACTIVITIES**\n\n \n\nDuring\nthe twelve months ending March 31, 2026, and March 31, 2025, the Company used $1,904,377 in investing activities and $1,881,350, respectively.\n\n \n\n**CASH\nFLOWS FROM FINANCING ACTIVITIES**\n\n \n\nNet\nCash used in financial activities during the twelve months ended March 31, 2026, was $712,917, primarily due to the repurchase of the\nCompany’s stock.\n\n \n\nDuring\nthe Fiscal Year ending March 31, 2026, the Company repurchased $471,410 of its common stock and 4,023,296 shares were retired during\nthe fiscal year ending March 31, 2026.\n\n \n\n**FUTURE\nFINANCING**\n\n \n\nThe\nCompany believes its current cash flow from operations will be sufficient to fund its anticipated operating and capital requirements\nfor the next 12 months, and we do not presently anticipate needing to raise additional dilutive financing.\n\n \n\n**STOCK\nBASED COMPENSATION**\n\n \n\nThe\nCompany did not issue any stock-based compensation during the fiscal year ended March 31, 2026.\n\n \n\n**RECENT\nACCOUNTING PRONOUNCEMENTS**\n\n \n\nThe\ncompany has assessed the impact of recent pronouncements on the preparation of Consolidated Financial Statements, and their impact has\nbeen disclosed in note 2.\n\n \n\n**OFF-\nBALANCE SHEET ARRANGEMENTS**\n\n \n\nThe\nCompany does not have any off-balance sheet arrangements, as defined in Item 303 of Regulation S-K, that have or are reasonably likely\nto have a current or future material effect on the Company’s financial condition, results of operations, liquidity, capital expenditures,\nor capital resources."}