10-K: Earth Science Tech Reports FY26 Results, Revenue Up 8%

Earth Science Tech, Inc. (ETST) announced its fiscal year 2026 results, showing an 8% increase in revenue to $35.7 million, driven by strong demand in its compounding pharmacy and telemedicine segments.

Summary

• Earth Science Tech, Inc. (ETST) reported revenue of $35,695,614 for the fiscal year ended March 31, 2026, an increase of 8% from $33,117,624 in the prior year.
• Gross profit for the fiscal year was $25,488,057, with a gross margin of 71%, down from 73% in the previous year.
• Net income available to common stockholders was $3,630,776, an increase from $3,253,635 in the prior year.
• Operating expenses increased by 6% to $22,179,531, largely due to a significant rise in advertising and marketing expenses.
• The company's cash position decreased to $796,797 from $1,473,228 in the prior year.
• The company repurchased 2,728,000 shares of its common stock for $471,410 during the fiscal year.

Sentiment

Score: 6

Explanation: StockSavvy.ai views this as a moderately positive filing, with revenue and net income growth indicating operational progress, though margin compression and increased marketing costs warrant attention.

Positives

• Revenue increased by 8% to $35,695,614 for the fiscal year ended March 31, 2026.
• Gross profit increased in absolute dollars to $25,488,057.
• Net income available to common stockholders increased by 12% to $3,630,776.
• Stockholders' Equity significantly improved, increasing to $7,040,764 from $3,851,111 in the prior year, largely due to net income.
• The company completed the construction of a residential property available for sale, with a capitalized cost of $371,684.
• The company made additional purchases of equipment totaling approximately $760,000 to expand operations.
• Total current liabilities decreased from $3,146,305 to $1,928,573.
• Long-term liabilities decreased from $69,305 to $0.

Negatives

• Gross margin decreased from 73% to 71% due to lower average selling prices and increased cost of goods sold.
• Advertising and marketing expenses increased significantly by 239% to $2,840,553.
• Cash and cash equivalents decreased to $796,797 from $1,473,228.
• Net cash provided by operating activities decreased to $1,940,863 from $4,372,390 in the prior year.
• The company's common stock is quoted on the OTCID Market, which may result in lower liquidity and less analyst coverage.

Risks

• The company operates in highly competitive markets and faces competition from large, well-established healthcare providers and traditional retailers with significant resources.
• Evolving government regulations and enforcement activities in the healthcare and pharmacy sectors could require increased costs or adversely affect results of operations.
• Security breaches, loss of data, and other disruptions could compromise sensitive information and expose the company to liability.
• The company may require additional capital to support business growth, and this capital might not be available on acceptable terms.
• The market price of the company's common stock may be volatile.
• The company's pharmacy business subjects it to additional healthcare laws and regulations beyond those faced by its telehealth business, increasing compliance complexity.
• Failure to comply with applicable healthcare and other governmental regulations could result in substantial penalties.
• The company's reliance on its affiliated healthcare provider network (MOC Teledoc) exposes it to risks related to provider recruitment, retention, clinical liability, and regulatory compliance.
• The company's compounding pharmacy operations rely on regulatory exemptions that are subject to strict and evolving FDA interpretation, particularly regarding drug shortages.
• The company may be unable to adequately protect its intellectual property rights, including those associated with MagneChef.
• The company has a history of net losses and anticipates increasing expenses, and may not be able to maintain profitability.

Future Outlook

The company believes its current cash flow from operations will be sufficient to fund its anticipated operating and capital requirements for the next 12 months and does not presently anticipate needing to raise additional dilutive financing.

Management Comments

• The increase in product sales for the year ended March 31, 2026, was primarily driven by higher demand for compounded medications across the Companys platforms, including increased prescription volumes generated through the Companys telemedicine channels and customer portals. Growth was supported by continued expansion of the Companys integrated platform, which connects patient intake, prescribing, and fulfillment.
• Management continues to monitor pricing, supplier costs, and product mix in order to optimize margins while maintaining competitive positioning and supporting demand.
• The decrease in salaries expense occurred despite the Companys operational growth and expansion of its workforce and was primarily attributable to voluntary modifications to compensation arrangements by the Companys Chief Executive Officer, CEO, and Chief Operating Officer, COO, who elected to rescind portions of their previously agreed compensation and implemented interim compensation adjustments, approved by the Board of Directors.
• The decrease in selling, general and administrative expenses was primarily attributable to process improvements and efficiency initiatives implemented across the Companys operations, as management continued to optimize administrative functions and cost structures.
• The Board believes that the revised compensation structure for Board meetings remains sufficient to ensure the ongoing dedication and oversight of its members leading into the July 2026 Annual Meeting of Shareholders.

Industry Context

StockSavvy.ai notes that Earth Science Tech's results reflect a growing trend in the healthcare sector towards integrated platforms combining pharmacy, telemedicine, and direct-to-patient fulfillment, aiming to improve efficiency and patient access. The significant increase in marketing spend aligns with industry efforts to acquire customers in a competitive digital health landscape.

Comparison to Industry Standards

• The company's gross margin of 71% is within the typical range for compounding pharmacies, which can vary significantly based on product mix and operational efficiency. However, it is slightly lower than the previous year's 73%, indicating potential pricing pressures or increased cost of goods sold.
• The substantial increase in marketing expenses (239%) is a common strategy in the digital health and direct-to-consumer sectors to drive customer acquisition, but it also impacts profitability. Competitors in the telemedicine space often invest heavily in marketing to gain market share.
• The company's focus on vertical integration, from consultation to fulfillment, is a strategic approach seen in other innovative healthcare companies aiming to control the customer experience and potentially reduce costs compared to fragmented models.
• The decrease in average selling prices, as noted by management, is a trend observed across various healthcare services due to increased competition and evolving reimbursement models.

Corporate Governance

Legal Proceedings

• As of March 31, 2026, there were no pending or threatened legal actions that, in management's opinion, are likely to have a material adverse effect on the Company's financial condition, results of operations, or cash flows.

Related Party Transactions

• The Company pays compensation for services provided by two officers to their solely owned LLCs, Point96 Consulting, LLC and Tabraue Consulting, LLC.
• The Company leases office space under a short-term operating lease from an office of the Company from Zoolzy, LLC, an entity controlled by an officer of the Company, under a sub-lease agreement. Lease payments of $64,094 were made during the year ended March 31, 2026.

Stakeholder Impact

• Shareholders: The increase in net income and equity is positive, but margin compression and increased marketing costs may impact future profitability. The share repurchase program may benefit shareholders by reducing the number of outstanding shares.
• Employees: The company has 77 employees, and its relationship with them is considered good. No union representation.
• Management: CEO and COO voluntarily rescinded their amended employment agreements and waived variable compensation, demonstrating fiscal discipline.
• Creditors: The decrease in total liabilities and the company's belief that current cash flow is sufficient for the next 12 months suggest a stable position for creditors.

Next Steps

• Management will continue to monitor pricing, supplier costs, and product mix to optimize margins.
• The company will continue to expand its integrated platform connecting patient intake, prescribing, and fulfillment.
• The company is evaluating options for the reorganization of segments for the year ended March 31, 2027.
• The company's Board of Directors will continue to provide strategic oversight and will hold its Annual Meeting of Shareholders in July 2026.

Key Dates

Recommendation

The company shows revenue and net income growth, which is positive. However, the declining gross margin, significant increase in marketing expenses, and reduced cash position suggest caution. The company's reliance on OTC markets and the inherent risks in the healthcare sector warrant a 'hold' recommendation until sustained profitability and margin improvement are demonstrated.

Keywords

Earth Science Tech, ETST, Form 10-K, Annual Report, Healthcare, Compounding Pharmacy, Telemedicine, Health and Wellness, Financial Results, Revenue Growth, Operating Expenses, Net Income, Stock Repurchase