NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).

Principles of consolidation

The accompanying consolidated financial statements include all the accounts of the Earth Science Tech, Inc. and its wholly owned subsidiaries RxCompound, Peaks, Avenvi, Mister Meds, Villas Health, DOConsultations, and majority owned subsidiary Magnechef (collectively, the “Company”). All intercompany transactions have been eliminated during consolidation.

Use of estimates and assumptions

The preparation of 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 areas requiring material estimates are impairment of goodwill, provision for taxation, useful lives of depreciable assets, useful lives of intangible assets, recoverability of inventory and long-lived assets available for sale, commitments and contingencies, and going concern assessment. The estimates and underlying assumptions are reviewed on an ongoing basis. Actual results could differ from those estimates.

Impairment of Long-Lived Assets

The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is assessed based on the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. If the carrying amount exceeds the asset’s fair value, an impairment loss is recognized in the amount of the excess. No impairment losses were recognized for the years ended March 31, 2026, and 2025.

Cash and cash equivalents.

Cash and cash equivalents include all highly liquid financial instruments with original maturities of three months or less, As of March 31, 2026, the Company’s cash balance exceeded federally insured limits by approximately $142,450. The Company maintains its cash with high-credit-quality financial institutions and has not experienced any losses in such accounts. Management believes the Company is not exposed to significant credit risk with respect to these balances.

Accounts Receivable.

Accounts receivable are carried at their contractual amounts, less an estimated allowance for credit losses. Management estimates the allowance for credit losses using a loss-rate approach based on historical loss information, adjusted for management’s expectations about current and future economic conditions, as the basis to determine expected credit losses. Management exercises significant judgment in determining expected credit losses. Key inputs include macroeconomic factors, industry trends, the creditworthiness of counterparties, historical experience, the financial conditions of the customers, and the amount and age of past due accounts. Management believes that the composition of receivables at year-end is consistent with historical conditions as credit terms and practices and the client base has not changed significantly. Receivables are considered past due if full payment is not received by the contractual due date. Past due accounts are generally written off against the allowance for credit losses only after all collection attempts have been exhausted. As of March 31, 2026, and 2025, the Company had not recorded an allowance for credit losses, as management determined that no reserve was necessary based on its assessment of the collectability of outstanding balances and the credit quality of its customers.

Revenue recognition

In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, the Company recognizes revenue when it satisfies performance obligations, by transferring promised goods or services to customers, in an amount that reflects the consideration to which the Company expects to be entitled in exchange for fulfilling those performance obligations. Revenue for product sales is recognized at point of sale i.e. upon shipment. Revenue for services is recognized upon completion of the contracted service i.e. in-person and telemedical doctor consultations. There are no material contract assets or contract liabilities.

Equity securities

The Company accounts for its equity securities in accordance with ASC 321, Investments – Equity Securities, as amended by ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities. Equity securities with readily determinable fair values are measured at fair value, with changes in fair value recognized in earnings in the period in which they occur.

The following summarizes the aggregate cost and fair value of the Company’s equity securities as of March 31, 2026, and 2025:

 SCHEDULE OF EQUITY INVESTMENTS

Disaggregated Revenue

In accordance with ASC 606, the Company disaggregates revenue from contracts with customers by category as it believes it best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

The Company’s disaggregated revenue by category is as follows:

 SCHEDULE OF DISAGGREGATED REVENUE 

 SCHEDULE OF ACCOUNTS RECEIVABLE

Inventory

Inventory is stated at the lower of cost or net realizable value. Cost is determined using the first-in, first-out (FIFO) method.

The Company evaluates inventory for excess and obsolescence based on factors such as current inventory levels, estimated product life cycles, historical and forecasted customer demand, and input from the product development team. When necessary, a reserve is recorded to reduce the carrying value of inventory to its estimated net realizable value. These estimates and assumptions are reviewed at least annually and updated as needed based on the Company’s business plans and market conditions.

Long lived asset available for sale

As of March 31, 2026, the Company classified a residential property as a long-lived asset held for sale with a carrying value of $371,684, which is presented within current assets in the accompanying consolidated balance sheet.

Prior to year-end, management committed to a plan to sell the property, which was available for immediate sale in its present condition.

Subsequent to March 31, 2026, the Company entered into a binding agreement to sell the property with an expected gain on the sale.

Cost of goods sold

Components of cost of goods sold include product costs, consumables, testing and shipping costs to customers and any inventory adjustments.

Shipping and Handling

Costs incurred by the Company for shipping and handling are included in costs of revenue.

Salaries Expense

Salaries expense is the aggregate cost associated with all employees, including named executives, pharmacists, administrative staff and technicians involved in fulfillment.

Income taxes

The Company accounts for income taxes under ASC 740, Income Taxes. Under ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period, which includes the enactment date. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of or all the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Earnings per share

The Company follows ASC 260 to account for earnings per share. Basic earnings per common share calculations are determined by dividing net results from operations by the weighted average number of shares of common stock outstanding during the reporting period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted. Diluted earnings per share is calculated using the weighted average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents, if any, using the treasury stock method.

For the years ended March 31, 2026, and 2025, basic and diluted earnings per share are the same because the Company had no potentially dilutive securities outstanding during those periods.

Goodwill

Goodwill represents the excess of the aggregate purchase price over the fair value of the net assets acquired in a purchase business combination. Goodwill is reviewed for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the carrying amount of goodwill may be impaired. In conducting its annual impairment test, the Company first reviews qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If factors indicate that the fair value of the reporting unit is less than its carrying amount, the Company performs a quantitative assessment, and the fair value of the reporting unit is determined. If the carrying value of the reporting unit exceeds fair value, an impairment loss equal to the excess is recorded.

Fair Value

FASB ASC 820, Fair Value Measurements and Disclosures (“ASC 820”) establishes a framework for all fair value measurements and expands disclosures related to fair value measurement and developments. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 requires that assets and liabilities measured at fair value are classified and disclosed in one of the following three categories:

Level 1 — Quoted market prices for identical assets or liabilities in active markets or observable inputs,

Level 2 — Significant other observable inputs that can be corroborated by observable market data; and

Level 3 — Significant unobservable inputs that cannot be corroborated by observable market data.

As of March 31, 2026, and 2025, all the Company’s investments were classified as Level 1 and were measured at fair value using quoted market prices in active markets.

The fair value of the Company’s debt approximates its carrying value as of March 31, 2026. Factors that the Company considered when estimating the fair value of its debt included market conditions, liquidity levels in the private placement market, variability in pricing from multiple lenders and terms of debt.

Property and equipment

Property and equipment are stated at cost. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and betterments are capitalized. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation on property and equipment is charged using a straight-line method over the estimated useful life of 5 years. An estimated useful life of 20 years is used for buildings.

Recently issued accounting pronouncements

In 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which updates the guidance for capitalizing internal-use software costs by introducing a principles-based recognition threshold that focuses on management authorization and committed funding and the probability of project completion and intended use, with explicit consideration of development uncertainty. The ASU also enhances related disclosures for capitalized software and does not change the guidance for software to be sold, leased, or otherwise marketed. ASU 2025-06 is effective for fiscal years beginning after December 15, 2027, and for interim periods within those fiscal years, with early adoption permitted and multiple transition options available. The Company has not early adopted this guidance and is evaluating its impact on capitalization policies, expense recognition timing, and related disclosures; the impact is not expected to be material to the consolidated financial statements but will require additional disclosures.

In 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income (Topic 220): Expense Disaggregation Disclosures, which requires public business entities to present in the notes a tabular disaggregation of each relevant income-statement expense caption within continuing operations into specified natural categories (including purchases of inventory, employee compensation, depreciation, intangible-asset amortization, and depletion/DD&A), with reconciling “other” and related narrative descriptions, and to disclose total selling expenses and the Company’s definition of “selling expenses.” The ASU is disclosure-only and does not change recognition, measurement, or presentation on the face of the income statement. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and for interim periods within those fiscal years beginning after December 15, 2027, with early adoption permitted. The Company has not early adopted this guidance and is evaluating its impact, which is not expected to be material to the consolidated financial statements but will result in additional footnote disclosures.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires public entities to disclose significant segment expenses and other segment items on an interim and annual basis and provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. The ASU does not change how a public entity identifies its operating segments, aggregates them, or applies the quantitative threshold to determine its reportable segments. The new disclosure requirements are also applicable to entities that account and report as a single operating segment entity. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. The Company adopted the guidance for the annual reporting period ended December 31, 2024. There was no impact on the Company’s reportable segments identified.

Intangible assets

Intangible assets consist of a telemedicine platform, web domains, patents, designs and software. These intangible assets are considered to have finite useful lives and are amortized on a straight-line basis over estimated useful lives ranging from five years to twenty years.

The Company reviews intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If such indicators exist, the Company compares the carrying amount of the asset to the expected undiscounted future cash flows. An impairment loss is recognized if the carrying amount exceeds the asset’s fair value. No impairment losses were recognized for the years ended March 31, 2026, and 2025.