The following discussion of our financial condition and results of operations for the years ended
March 31, 2021and March 31, 2020should be read in conjunction with our consolidated financial statements and the notes to those statements that are included elsewhere in this Annual Report on Form 10-K. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. We use words such as "anticipate", "estimate", "plan", "project", "continuing", "ongoing", "expect", "believe", "intend", "may", "will", "should", "could", and similar expressions to identify forward-looking statements. OVERVIEW
We offer high-grade full spectrum cannabinoid oil to the market through our website and store front/clinic accounts. Through our positive results in studies on breast cancer and immune cells through the
University of Central Oklahoma, in addition to studies through DV Biologics that prove the Company's CBD oil formulation lowers cortisol and functions as a neuro-protectant, with positive result case studies through key health organizations. We formulate, market and distribute the CBD oil used through our studies to the public, offering the most effective quality of CBD on the market. Our favored division effectively became a non-profit organization on February 11, 2019and is structured to accept grants and donations to conduct further studies and help donate EST's effective CBD products to those in need. We expect to realize revenue from our consumer products business segment to fund our working capital needs. However, in order to fund our pharmaceutical product development efforts, we will need to raise additional capital either through the issuance of equity and/or the issuance of debt. In the event we are unable to fund our drug development efforts, we may need to curtail or delay such activity. RESULTS OF OPERATIONS
The following tables present a summary of the information on the cost of products for the year ended.
For the Years Ended March 31, 2021 2020 Revenue
$ 140,902 $ 526,139Cost of revenues 100,968 307,665 Gross Profit 39,934 218,474
We had product sales of
$140,902and gross profit of $39,934, representing a gross margin of 28% in 2021 compared with product sales of $526,139and gross profit of $218,474, representing a gross margin of 42% in 2020. The sales decreased in 2021 compared with 2020 is primarily due to the Covid-19 pandemic causing many of our store accounts to closing down and customers ordering less. 27 OPERATING EXPENSE A reconciliation from our net income (loss) to Adjusted EBITDA, a non-GAAP measure, for the years ended March 31, 2021and 2020 are outlined in the table below: Fiscal Year Ended March 31, 2021 and March 31, 2020 2021 2020 $ Change % Change Compensation - officers $ 208,750 $ 194,019 $ 14,7318 % Officer Compensation Stock $ - $ 142,590 $ (142,590 )(100 )% Marketing $ - $ 47,071 $ (47,071 )(100 )% General and administrative $ 228,790 $ 551,480 $ (322,690 )(59 )% Donations $ - $ - $ - - Loss on disposal of assets $ - $ - $ - - Patent Impairment Expense $ - $ - $ - - Professional fees $ 26,535 $ 30,991 $ (4,456 )(14 )% Bad Debt Expense $ - 31,211 $ (31,211 )(100 )% Cost of legal proceedings $ 105,773 $ 84,777 $ 20,99625 % Litigation Expense $ 3,763,200- $ 3,763,200100 % Research and development $ 9,000 76,113 $ (67,113 )(88 )% Total operating expenses $ 4,342,048 $ 1,127,041 $ 3,215,007285 % Loss from operations (4,302,114 ) (908,567 ) $ (3,377,106 )372 % Other Income (Expenses) Other Income $ 407 $ 26,351Interest expense $ (4,765 ) $ (4,765 )Interest Expense-Convertible Note 1-GHS $ (4,254 ) $ (39,117 )Interest Expense-Convertible Note 2-GHS $ (11,122 ) $ (79,330 )Interest Expense-Convertible Note 3-GHS $ (9,005 ) $ (92,002 )Interest Expense-Convertible Note 4-GHS $ (9,012 ) $ (91,326 )Interest Expense-Convertible Note 5-GHS $ (37,909 ) $ (8,071 )Interest Expense-Promissory Note-GHS $ (5,399 ) $ (3,426 )Interest income - - Total other income (expenses) (81,059 ) (291,686 ) Net loss before income taxes (4,383,173 ) 1,200,253 ) Income taxes - - Net loss $ (4,383,173 ) $ (1,200,253 )
Net loss per common share: Loss per common share – basic and diluted $ (0.08) $ (0.03)
For the year ended
March 31, 2021, the Company had a net loss from continuing operations of approximately $4,383,173compared to a loss from continuing operations of approximately $1,200,253for the year ended March 31, 2020. This increase in net loss is due largely to litigation expenses from the Cromogen litigation and receivership fees.
General and administrative costs represent bank costs, office costs, rent and administrative costs.
Interest charges supported up to
NON-GAAP FINANCIAL MEASURES We use Adjusted EBITDA internally to evaluate our performance and make financial and operational decisions that are presented in a manner that adjusts from their equivalent GAAP measures or that supplement the information provided by our GAAP measures. Adjusted EBITDA is defined by us as EBITDA (net income (loss) plus depreciation expense, amortization expense, interest and income tax expense, minus income tax benefit), further adjusted to exclude certain non-cash expenses and other adjustments as set forth below. We use Adjusted EBITDA because we believe it more clearly highlight trends in our business that may not otherwise be apparent when relying solely on GAAP financial measures, since Adjusted EBITDA eliminates from our results specific financial items that have less bearing on our core operating performance. We use Adjusted EBITDA in communicating certain aspects of our results and performance, including in this Annual Report, and believe that Adjusted EBITDA, when viewed in conjunction with our GAAP results and the accompanying reconciliation, can provide investors with greater transparency and a greater understanding of factors affecting our financial condition and results of operations than GAAP measures alone. In addition, we believe the presentation of Adjusted EBITDA is useful to investors in making period-to-period comparison of results because the adjustments to GAAP are not reflective of our core business performance. Adjusted EBITDA is not presented in accordance with, or as an alternative to, GAAP financial measures and may be different from non-GAAP measures used by other companies. We encourage investors to review the GAAP financial measures included in this Annual Report, including our consolidated financial statements, to aid in their analysis and understanding of our performance and in making comparisons. 29 CASH FLOW & ASSETS
A summary of our changes in cash flow and assets for the years ended
March 31, 2021 March 31, 2020 ASSETS Current Assets: Cash $ 16,161 $ 30,723 Accounts Receivable(net allowance of
$101,404and $101,404respectively) $ 6,108 $ 38,933 Prepaid expenses and other current assets -
54 Inventory 21,739 63,348 Total current assets 44,008 133,058 Property and equipment, net 1,712 4,133 Other Assets: Patent, net - - Rou Asset 12,653 11,170 Deposits 6,191 6,191 Total other assets 18,844 17,361 Total Assets $ 64,564
LIABILITIES AND EQUITY
Current Liabilities: Accounts payable
$ 173,994$ 82,228 PPP Loan $ 31,750 $ - PPP Loan 2 $ 31,215 $ - Issa Loan Advance $ 49,980 $ - SBA EDIL Loan $ 106,800$ - Accrued expenses $ 234,319 $ 154,552Accrued settlement $ 3,994,523 $ 231,323
Interest Payable-Conv Notes-GHS 29,107
Interest Payable-Promissory Note-GHS 9,029
3,630 Convertible Note 1-GHS - 76,927 Convertible Note 2-GHS 62,055 88,596 Convertible Note 3-GHS 88,825 88,525 Convertible Note 4-GHS 88,894 88,894 Convertible Note 5-GHS 88,710 55,000 Promissory Note-GHS 30,000 30,000 Lease Liability-Current 12,653 11,170
Notes payable - related parties 59,558
59,558 Total current liabilities 5,091,412 980,351 Total liabilities 5,091,412 980,351 Commitments and contingencies Stockholders' (Deficit) Equity: Common stock, par value
$0.001per share, 75,000,000 shares authorized; 50,883,056 and 37,813,092 shares issued and outstanding as of March 31, 2021 and March 31, 2020 respectively 50,553
37,814 Additional paid-in capital 28,219,577 28,050,192 Accumulated deficit (33,296,878 ) (28,913,505 )
Total stockholders' (Deficit)Equity (5,028,848 ) (825,499 ) Total Liabilities and Stockholders' (Deficit) Equity $ 64,564
$ 154,55230 For the year ended March 31, 2021the Company had a net loss from continuing operations of approximately $4,383,173compared to a loss from continuing operations of approximately $1,200,253for the year ended March 31, 2020. This increase in net loss is due to the unprecedented pandemic hindering overall sales, Cromogen accrued settlement, and the receiver's company Strongbow Advisors, Inc.. Marketing expenses totaled $47,071for the twelve months ended March 31, 2021, a decrease of $195,648from $47,071for the twelve months ended March 31, 2020. This decrease primarily related to the Company reducing marketing costs and utilizing existing marketing materials. Research and development costs were totaled $0for the twelve months ended March 31, 2021, a decrease of $47,071from $47,071. The decrease is associated with the Company moving the HygeeTM medical device out of R&D phase and discontinuing CBD patent applications, (See Part I Note 2 Carrying value, recoverability and impairment of long-lived assets). The Company determined to suspend current R&D based on core needs of the business of the Company and the unprecedented pandemic leading to many stores closing down having the Company have no use
for any marketing material. Accrued expenses totaled
$234,319for the twelve months ended March 31, 2021, an increase of $79,767from $154,552for the period ended March 31, 2020. The Majority of the accrued expenses were $135,000of Michel Aube'ssalary that was never compensated under the management of the Reciever, $66,000of Nickolas Tabraue'ssalary Mr. Tabraueallowed to be accrued to ensure the rest of the employees and executive team were being compensated, and the remaining $33,000were of an accrued interest on related Notes Payable.
Executive equity compensation totaled
Professional fees totaled
$26,535for the twelve months ended March 31, 2021, a decrease of $4,456from $30,991for the prior period ended March 31, 2020. The reduction in professional fees was due to timing and general cost savings. The costs of legal proceedings totaled $105,773for the twelve months ended March 31, 2021, an increase of $20,996from $84,777for the prior period ended March 31, 2020. The increase is a result of the Receiver using the Company to fund the intervener litigation that was brought based on alleged lack of receivership transparency (See Item 3. Legal Proceedings and Note 8. Subsequent Events). Total Revenues - For the years ended March 31, 2021and 2020, the Company had total sales of $140,902and $526,139, respectively. While our revenues decreased, this was consistent with a corresponding decrease in our cost of goods sold from $100,968for the year ended March 31, 2021to $307,665for the year ended March 31, 2020; resulting in a Gross Profit of $39,934as of March 31, 2021compared to $295,013for the previous year ending March 31, 2020. The decrease in revenue is primarily attributed to inventory constraints as well as available supply of acceptable raw material the Company requires and the unprecedented pandemic.
Costs and Expenses – Costs of sales include the costs of manufacturing, packaging, warehousing and shipping our products. As we develop and market additional products, we expect our cost of sales to increase.
General and administrative expenses decreased from
$551,480for the year ended March 31, 2021, to $228,790for the year ended March 31, 2020. This decrease was due to the company not having sufficient funds for the receiver to pay his company Strongbow Advisors, Inc.. The Company had $16,161in Cash for the period ended March 31, 2021, compared with $30,723for the same period ended March 31, 2020. This decrease is primarily due to inventory constraints as well as available supply of acceptable raw material the Company requires and the unprecedented pandemic.
The Company had
The Company had
The Company had a Stockholder's Deficit of
$5,028,848for the period ended March 31, 2021, compared with $825,799of Stockholder's Equity for the same period ended March 31, 2020. This increase is primarily due to Cromogen's accrued settlement, and issuance of shares from the conversion of GHS Notes We are a smaller reporting company, as defined by 17 CFR § 229.10(f)(1). We do not consider the impact of inflation and changing prices as having a material effect on our net sales and revenues and on income from our operations for the previous two years or from continuing operations going forward. The Company achieved a gross margin percentage of 28% for the year ended March 31, 2021, a decrease of 14% from the gross margin percentage of 42% for the prior year ended March 31, 2020. The Company expects this gross margin percentage to be corrected marginally as it achieves greater economies of scale from higher volumes of sales and is consequently able to purchase inventory at lower prices, and acquiring other operating companies with high profit margin products. 31
CASH FLOWS FROM OPERATING ACTIVITIES
Operating Activities – For Completed Years
CASH FLOWS FROM INVESTING ACTIVITIES
In the past years
CASH FLOWS FROM FINANCING ACTIVITIES
During the year ended
March 31, 2021, the Company received $0in cash proceeds from sales of registered common stock, $60,524in cash proceeds from sales of registered shares through its effective S-1, and $50,000from convertible Promissory Note from Issa El-Cheikh. For the Year ended March 31, 2020, the Company received $421,819in cash from the issuance registered common stock
and convertible notes. FUTURE FINANCING
Private investors through standard notes, discounted registered shares.
STOCK BASED COMPENSATION
The Company follows ASC 718 in accounting for its stock based compensation to employees. This standard states that compensation cost is measured at the grant date based on the fair value of the award and is recognized at the time granted.
The Company accounts for transactions in which services are received from non-employees in exchange for equity instruments based on the fair value of the equity instrument exchanged in accordance with ASC 505-50.
RECENT ACCOUNTING POSITION STATEMENTS
January 2017, the FASB issued Accounting Standards Update No. 2017-04, Intangibles-Goodwill and Other, which simplifies the accounting for goodwill impairments by eliminating step 2 from the goodwill impairment test. Instead, if "the carrying amount of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit." The guidance is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted. The Company is currently evaluating the impact the adoption of this new standard will have on its Consolidated Financial Statements.
All the other accounting pronouncements newly issued and not yet entered into force were considered to be immaterial or not applicable.
OFF-BALANCE SHEET ARRANGEMENTS
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