10-Q: Earth Science Tech Reports Mixed Q2, Revenue Up, Profit Down

Earth Science Tech, Inc. reported a 4% increase in revenue for the six months ended September 30, 2025, reaching $17.8 million, while net income attributed to shareholders decreased by 25% to $1.43 million.

Summary

• Revenue for the six months ended September 30, 2025, increased by 4% to $17,810,816, compared to $17,087,965 for the same period in 2024.
• Gross profit for the six months ended September 30, 2025, was $12,814,758, a 1% increase from $12,677,115 in the prior year, with gross margin decreasing from 74% to 71%.
• Net income attributed to shareholders for the six months ended September 30, 2025, was $1,431,861, a 25% decrease from $1,874,622 in the prior year.
• Basic and diluted earnings per common share increased to $0.005 for the six months ended September 30, 2025, from $0.003 in the prior year, despite lower net income, likely due to share repurchases.
• Total assets grew by 22.6% to $8,667,416 as of September 30, 2025, from $7,066,721 as of March 31, 2025.
• Cash and cash equivalents decreased by 16.2% to $1,235,374 as of September 30, 2025, from $1,473,228 as of March 31, 2025.
• The company completed several acquisitions on April 1, 2025, including 100% of Las Villas Health LLLC and Doconsultations LLC for $200,000 cash, and 80% of Magnefuse, LLC for $240,500 cash, contributing to increased goodwill and intangible assets.
• Magnefuse, LLC acquired the BBQraft brand from Crafted Elements, LLC on July 24, 2025, for $225,000, consisting of $180,000 cash and a 5% interest in Magnefuse valued at $45,000.
• The company repurchased and retired 2,560,296 shares of its common stock for $469,427.72 during the six months ended September 30, 2025.

Sentiment

Score: 5

Explanation: The company shows mixed results with revenue growth and significant asset expansion driven by acquisitions, but profitability and operating cash flow declined due to increased expenses and investment. Share repurchases are positive for shareholders, but the overall financial performance is tempered by reduced net income.

Positives

• Total revenue increased by 4% for the six months ended September 30, 2025, reaching $17,810,816.
• Significant revenue growth from newly acquired or developed segments: Peaks (telemedicine) revenue increased from $115,236 to $1,122,974, and new revenues from Villas Health ($227,144), Doconsultations ($305,706), Mister Meds ($317,240), MOC Teledoc ($40,700), and Magnefuse LLC ($108,244).
• Total assets increased by 22.6% to $8,667,416, indicating growth in the company's asset base.
• Stockholders' equity increased by 31.8% to $5,075,823, reflecting an improved financial position.
• Earnings per common share (basic and diluted) increased to $0.005 from $0.003, benefiting shareholders.
• The company actively pursued strategic acquisitions, including Las Villas Health, Doconsultations, and Magnefuse, expanding its operational footprint and product offerings.
• A share repurchase program is in place, with 2,560,296 shares repurchased for $469,427.72 during the period, which can enhance shareholder value.

Negatives

• Net income attributed to shareholders decreased by 25% to $1,431,861 for the six months ended September 30, 2025, compared to the prior year.
• Operating cash flow decreased significantly by 37% to $1,181,196 for the six months ended September 30, 2025, from $1,877,917 in the prior year.
• Cash and cash equivalents decreased by $237,854 during the six months ended September 30, 2025, resulting in a lower cash balance of $1,235,374 at period end.
• Cost of Goods Sold increased by 13% for the six months ended September 30, 2025, outpacing revenue growth and leading to a slight decrease in gross margin from 74% to 71%.
• Total expenses increased by 11% to $11,990,608, driven by substantial increases in advertising & marketing (+277%), depreciation and amortization (+248%), utilities (+528%), and salaries expense (+13%).
• RxCompound, a core pharmaceutical product segment, experienced a decrease in revenue from $16,972,729 to $15,688,808 for the six months ended September 30, 2025.

Risks

• The company is a smaller reporting company and is not required to provide specific risk factors under Item 1A of Form 10-Q.

Future Outlook

The company operates as a strategic holding company focused on value creation through acquisition, operational optimization, and management of its operating businesses. It aims to expand its telemedicine services nationwide through its healthcare provider network and ongoing pharmacy licensure expansion. MagneChef is in the process of expanding its product line for new offerings that incorporate its intellectual property, and has recently expanded into the premium American-made BBQ tool brand market. The company is evaluating the impact of ASU 2024-03 on its consolidated financial statement disclosures.

Management Comments

• Management contemplated the increase in marketing expenses as part of the strategic plan to increase sales in newly acquired business units.
• The increase in salaries expense is attributed to new businesses the company has acquired.
• The increase in interest expense is attributable to the company signing new leases.
• Management believes the company is not exposed to significant credit risk with respect to cash balances exceeding federally insured limits, as cash is maintained with high-credit-quality financial institutions.
• Management determined no allowance for credit losses was necessary as of September 30, 2025, based on its assessment of collectability and customer credit quality.

Industry Context

Earth Science Tech is actively expanding its footprint in the compounding pharmaceuticals and telemedicine sectors through strategic acquisitions and licensure expansion, aiming for nationwide service. Its diversification into real estate development and direct-to-consumer retail (including BBQ tools) suggests a multi-faceted growth strategy beyond its core healthcare offerings. The telemedicine market continues to grow, and the company's focus on developing its own healthcare provider network positions it to capitalize on this trend. The acquisition of Zoolzy.com indicates an expansion into the veterinary market, broadening its healthcare reach.

Comparison to Industry Standards

• No specific comparable companies, projects, or industry benchmarks were provided in the filing to assess results against global standards.

Corporate Governance

Legal Proceedings

• As of September 30, 2025, there were no pending or threatened legal actions that, in management's opinion, are expected to have a material adverse effect on the company's financial position, results of operations, or cash flows.

Related Party Transactions

• Compensation for CEO Giorgio R. Saumat is paid to Point96 Consulting, LLC, his solely owned LLC.
• Compensation for COO Mario G. Tabraue is paid to Tabraue Consulting, LLC, his solely owned LLC.
• These entities are considered related parties due to their ownership and control relationships with the individuals providing services to the company.

Stakeholder Impact

• Shareholders: Benefit from increased EPS due to share repurchases and growth in total assets and equity, but face reduced net income and operating cash flow.
• Employees: Increased salaries expense suggests growth in workforce or compensation, particularly with new acquisitions.
• Customers: Expansion of pharmacy licenses and telemedicine platforms aims to broaden access to services.
• Creditors: Total liabilities increased, but the company's equity also grew, maintaining a healthy balance sheet structure.
• Acquired Entities (Las Villas Health, Doconsultations, Magnefuse, BBQraft): Integrated into ETST's strategic holding structure, benefiting from centralized management and resources.

Next Steps

• RxCompound is actively pursuing licensure in the remaining U.S. states.
• Peaks aims to offer telemedicine services nationwide through its healthcare provider network and ongoing licensure expansion for both pharmacies.
• Mister Meds is currently applying for licensure in states not yet serviced by RxCompound.
• MagneChef is in the process of expanding its product line for new offerings that incorporate its intellectual property.
• The company is evaluating the impact of ASU 2024-03 on its consolidated financial statement disclosures.
• The company will continue its $5 million share repurchase program, managed by Avenvi.

Key Dates

Recommendation

The company exhibits a mixed financial performance with strong revenue growth and significant asset expansion driven by strategic acquisitions, which are positive long-term indicators. However, the decline in net income and operating cash flow, coupled with substantial increases in operating expenses, raises concerns about short-term profitability and efficiency. The share repurchase program is a positive for shareholder value. Given the ongoing investment in growth and the mixed financial results, a 'hold' recommendation is appropriate, suggesting investors monitor the company's ability to translate its expanded operations into sustainable profitability and improved cash flow in future periods.

Keywords

Pharmaceuticals, Telemedicine, Real Estate Development, Compounding Pharmacy, Acquisitions, Share Repurchase, Healthcare, Direct-to-Consumer Retail, Financial Performance, SEC Filing