The following section, Management’s Discussion and Analysis, should be read in
conjunction with Earth Science Tech Inc.’s financial statements and the related
notes thereto and contains forward-looking statements that involve risks and
uncertainties, such as statements of our plans, objectives, expectations and
intentions. Any statements that are not statements of historical fact are
forward-looking statements. When used, the words “believe,” “plan,” “intend,”
“anticipate,” “target,” “estimate,” “expect,” and the like, and/or future-tense
or conditional constructions (“will,” “may,” “could,” “should,” etc.), or
similar expressions, identify certain of these forward-looking statements. These
forward-looking statements are subject to risks and uncertainties that could
cause actual results or events to differ materially from those expressed or
implied by the forward-looking statements in this Report on Form 10-Q. The
Company’s actual results and the timing of events could differ materially from
those anticipated in these forward-looking statements as a result of many
factors. The Company does not undertake any obligation to update forward-looking
statements to reflect events or circumstances occurring after the date of this
Report filed on Form 10-Q.

The following discussion should be read in conjunction with our unaudited
consolidated financial statements and related notes and other financial data
included elsewhere in this report. See also the notes to our consolidated
financial statements and Management’s Discussion and Analysis of Financial
Condition and Results of Operations contained in our Registration Statement
filed on Form 10-12g and our Annual Report filed on Form 10-K for the fiscal
year ended March 31, 2020, as well as our Quarterly report filed on Form 10-Q
for the period ending December 31, 2020.


The Company offers high-grade full spectrum cannabinoid oil on the market. There
are 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. ETST formulates, markets and distributes the CBD oil used for its
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, 2019
and 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

Critical Accounting Policies and Estimates

The discussion and analysis of the Company’s financial condition and results of
operations are based upon the Company’s condensed financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States of America. The preparation of these financial statements
requires us to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses. In consultation with the Company’s
Board of Directors, management has identified the following accounting policies
that it believes are key to an understanding of its financial statements. These
are important accounting policies that require management’s most difficult,
subjective judgments.


Basis of Presentation

The Company’s accounting policies used in the presentation of the accompanying
consolidated financial statements conform to accounting principles generally
accepted in the United States of America (“US GAAP”) and have been consistently

Principles of Consolidation

The accompanying consolidated financial statements include all of the accounts
of the Company and its wholly owned subsidiaries. The subsidiaries include
Nutrition Empire, Inc., Cannabis Therapeutics, Inc., Earth Science
Pharmaceutical Inc.
, and a non-profit favored entity Earth Science Foundation.
(all intercompany balances and transactions have been eliminated on

Use of Estimates and Assumptions

The preparation of the condensed 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 periods.

The Company’s significant estimates and assumptions include the fair value of
financial instruments; the accrual of the legal settlement, the carrying value
recoverability and impairment, if any, of long-lived assets, including the
estimated useful lives of fixed assets; the valuation allowance of deferred tax
assets; stock-based compensation, the valuation of the inventory reserves and
the assumption that the Company will continue as a going concern. Those
significant accounting estimates or assumptions bear the risk of change due to
the fact that there are uncertainties attached to those estimates or
assumptions, and certain estimates or assumptions are difficult to measure or

Management bases its estimates on historical experience and on various
assumptions that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources.

Management regularly reviews its estimates utilizing currently available
information, changes in facts and circumstances, historical experience and
reasonable assumptions. After such reviews, and if deemed appropriate, those
estimates are adjusted accordingly. Actual results could differ from those

Carrying Value, Recoverability and Impairment of Long-Lived Assets

The Company follows Financial Accounting Standards Board (“FASB”) Accounting
Standards Codification (“ASC’) 360 to evaluate its long-lived assets. The
Company’s long-lived assets, which include property and equipment and a patent
are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable.

The Company assesses the recoverability of its long-lived assets by comparing
the projected undiscounted net cash flows associated with the related long-lived
asset or group of long-lived assets over their remaining estimated useful lives
against their respective carrying amounts. Impairment, if any, is based on the
excess of the carrying amount over the fair value of those assets. Fair value is
generally determined using the asset’s expected future discounted cash flows or
market value, if readily determinable. If long-lived assets are determined to be
recoverable, but the newly determined remaining estimated useful lives are
shorter than originally estimated, the net book values of the long-lived assets
are depreciated over the newly determined remaining estimated useful lives.


The Company considers the following to be some examples of important indicators
that may trigger an impairment review: (i) significant under-performance or
losses of assets relative to expected historical or projected future operating
results; (ii) significant changes in the manner or use of assets or in the
Company’s overall strategy with respect to the manner or use of the acquired
assets or changes in the Company’s overall business strategy; (iii) significant
negative industry or economic trends; (iv) increased competitive pressures; (v)
a significant decline in the Company’s stock price for a sustained period of
time; and (vi) regulatory changes. The Company evaluates assets for potential
impairment indicators at least annually and more frequently upon the occurrence
of such events. Impairment of changes, if any, are included in operating

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of three
months or less to be cash and cash equivalents.

Related Parties

The Company follows ASC 850 for the identification of related parties and
disclosure of related party transactions. Pursuant to this ASC related parties
include a) affiliates of the Company; b) entities for which investments in their
equity securities would be required, absent the election of the fair value
option under the Fair Value Option Subsection of Section 825-10-15, to be
accounted for by the equity method by the investing entity; c) trusts for the
benefit of employees, such as pension and profit-sharing trusts that are managed
by or under the trusteeship of management; d) principal owners of the Company;
e) management of the Company; f) other parties with which the Company may deal
if one party controls or can significantly influence the management or operating
policies of the other to an extent that one of the transacting parties might be
prevented from fully pursuing its own separate interests; and g) other parties
that can significantly influence the management or operating policies of the
transacting parties or that have an ownership interest in one of the transacting
parties and can significantly influence the other to an extent that one or more
of the transacting parties might be prevented from fully pursuing its own
separate interests.

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Commitments and Contingencies

The Company follows ASC 450 to account for contingencies. Certain conditions may
exist as of the date the consolidated financial statements are issued, which may
result in a loss to the Company, but which will only be resolved when one or
more future events occur or fail to occur. This may result in contingent
liabilities that are required to be accrued or disclosed in the financial
statements. The Company assesses such contingent liabilities, and such
assessment inherently involves an exercise of judgment. In assessing loss
contingencies related to legal proceedings that are pending against the Company
or unasserted claims that may result in such proceedings, the Company evaluates
the perceived merits of any legal proceedings or unasserted claims as well as
the perceived merits of the amount of relief sought or expected to be sought

If the assessment of a contingency indicates that it is probable that a material
loss has been incurred and the amount of the liability can be estimated, then
the estimated liability would be accrued in the Company’s consolidated financial
statements. If the assessment indicates that a potential material loss
contingency is not probable but is reasonably possible, or is probable but
cannot be estimated, then the nature of the contingent liability, and an
estimate of the range of possible losses, if determinable and material, would be

Loss contingencies considered remote are generally not disclosed unless they
involve guarantees, in which case the guarantees would be disclosed. Management
does not believe, based upon information available at this time, that these
matters will have a material adverse effect on the Company’s consolidated
financial position, results of operations or cash flows. However, there is no
assurance that such matters will not materially and adversely affect the
Company’s business, financial position, and results of operations or cash flows.

Revenue Recognition

The Company follows and implemented ASC 606, Revenue from Contracts with
Customers for revenue recognition. Although the new revenue standard is expected
to have an immaterial effect, if any, on our ongoing net income, we did
implement changes to our processes related to revenue recognition and the
control activities within them. These included the development of new policies
based on the five-step model provided in the new revenue standard, ongoing
contract review requirements, and gathering of information provided for


The Company recognizes revenue from product sales or services rendered when
control of the promised goods are transferred to our clients in an amount that
reflects the consideration to which we expect to be entitled in exchange for
those goods and services. To achieve this core principle, we apply the following
five steps: identify the contract with the client, identify the performance
obligations in the contract, determine the transaction price, allocate the
transaction price to performance obligations in the contract and recognize
revenues when or as the Company satisfies a performance obligation.

The Company recognizes its retail store revenue at point of sale, net of sales


Inventories consist of various types of nutraceuticals and bioceuticals at the
Company’s retail store and main office. Inventories are stated at the lower of
cost or market using the first in, first out (FIFO) method. A reserve is
established if necessary, to reduce excess or obsolete inventories to their net
realizable value.

Cost of Sales

Components of costs of sales include product costs, shipping costs to customers
and any inventory adjustments.

Shipping and Handling Costs

The Company includes shipping and handling fees billed to customers as revenues
and shipping and handling costs for shipments to customers as cost of revenues.

Research and Development

Research and development costs are expensed as incurred. The Company’s research
and development expenses relate to its engineering activities, which consist of
the design and development of new products for specific customers, as well as
the design and engineering of new or redesigned products for the industry in

Net Loss Per Common 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 year. Diluted loss per common share calculations are determined by
dividing net results from operations by the weighted average number of common
shares and dilutive common share equivalents outstanding. During periods when
common stock equivalents, if any, are anti-dilutive they are not considered in
the computation.

As of December 31, 2020 the Company had no warrants issued or outstanding.

Cash Flows Reporting

The Company follows ASC 230 to report cash flows. This standard classifies cash
receipts and payments according to whether they stem from operating, investing,
or financing activities and provides definitions of each category, and uses the
indirect or reconciliation method (“Indirect method”) as defined by this
standard to report net cash flow from operating activities by adjusting net
income to reconcile it to net cash flow from operating activities by removing
the effects of (a) all deferrals of past operating cash receipts and payments
and all accruals of expected future operating cash receipts and payments and (b)
all items that are included in net income that do not affect operating cash
receipts and payments. The Company reports separately information about
investing and financing activities not resulting in cash receipts or payments in
the period pursuant this standard.


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 over the service
period, which is usually the vesting period. The Company values stock-based
compensation at the market price of the Company’s common stock as of the date in
which the obligation for payment of service is incurred.

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.

Property and Equipment

Property and equipment is recorded at cost net of accumulated depreciation.
Depreciation is computed using the straight-line method based upon the estimated
useful lives of the respective assets as follows:

        Leasehold improvements    Shorter of useful life or term of lease

        Signage                   5 years

        Furniture and equipment   5 years

        Computer equipment        5 years

The cost of repairs and maintenance is expensed as incurred; major replacements
and improvements are capitalized. When assets are retired or disposed of, the
cost and accumulated depreciation are removed from accounts and any resulting
gains or losses are included in operations.

Liquidity and Capital Resources.

For the Nine-Month Period Ended December 31, 2020 versus December 31, 2019

During the nine months ended December 31, 2020, net cash used in the Company’s
operating activities totaled $(4,157,143) compared to $(974,479) during the nine
months ended December 31, 2019. During the nine months ended December 31, 2020,
net cash used in investing activities totaled $0.00 compared to $0.00 provided
by investing activities during the nine months ended December 31, 2019. During
the nine months ended December 31, 2020, net cash provided by financing
activities totaled $135,135 compared to $357,466 from financing activities
during the nine months ended December 31, 2019. During the nine months ended
December 31, 2020, net cash decreased $(155,826) as compared to the increase of
$(476,428) during the nine months ended December 31, 2019.

At December 31, 2020, the Company had cash of $10,032, accounts receivable of
$22,359, inventories of $43,703 and prepaid expenses of $0 that comprised the
Company’s total current assets totaling $103,243. The Company’s property and
equipment at December 31, 2020 had a net book value of $2,054.

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Promissory Note-GHS was initiated 2/28/19 for $30,000. Interest on the unpaid
balance will accrue at the rate of 8% per annum, calculated on the basis 365-day
year and actual days elapsed until the entire outstanding balance and all
interest ff accrued thereon has been repaid in full. Full payment on this Note
will be due and payable on or before November 28, 2019.This note is at default
and will continue accruing at the rate of 18%.

Convertible Note 2-GHS issued 4/2/19 for cash received $50,000, face amount
$55,000 will accrue at a rate of 10% on a 360-day year. Maturity date is
December 26, 2019.This note is at default and will continue accruing at the rate
of 10%. This note is at default and will continue accruing at the rate of 10%.

Convertible Note 3-GHS issued 5/15/19 for cash received $50,000, face amount
$55,000 will accrue at a rate of 10% on a 360-day year. Maturity date is
February 15, 2020. This note is at default and will continue accruing at the
rate of 10%.

Convertible Note 4-GHS issued 6/07/19 for cash received $50,000, face amount
$55,000 will accrue at a rate of 10% on a 360-day year. Maturity date is March
15, 2020
. This note is at default and will continue accruing at the rate of 10%.

Convertible Note 5-GHS issued 9/09/19 for cash received $50,000, free amount
$55,000 will accrue at a rate of 10% on a 360-day year. Maturity date is June 9,
. This note is at default and will continue accruing at the rate of 10%.


At December 31, 2020, the Company had total liabilities of $4,960,186 of which
$3,994,523 was held as a reserved for the settlement of its lawsuit with
Cromogen (See Part II Other Information, Item 1. Legal Proceedings).
Notwithstanding this reserve, the Company is optimistic, between its appeal of
the judgment confirming the arbitration award and being in receivership, that
the amount that it may ultimately be required to pay will be substantially less
that the reserve contingency currently carried in its liabilities and/or that
any payment that it may ultimately be required to pay may be structured by the
receiver so as not to unduly burden or interfere with the Company’s business
operations. Additionally, the Company’s legal expenses associated with the
Cromogen matter decreased from $18,665 at December 31, 2019 to $0 at December
31, 2020
as there was no activity in the matter due to the Company being in
receivership. The Company does not anticipate the costs of Cromogen litigation
to remain at the levels they have been over the last two quarters because all
that remains for the Company is the appeal. However, the anticipated decrease in
legal costs associated with the Cromogen matter may be offset by the expenses of
being in receivership where we will be responsible for the legal fees and costs
incurred by the receiver; and in any event, regardless of the increase in one
expense compared to the decrease in another, the Company believes that on
balance, the net benefit to it that will result from the receivership will
substantially outweigh the associated costs. The Company had no other long-term
liabilities, commitments or contingencies. Other than anticipated increases in
costs due to the expenses of being in receivership and the legal expenses
associated therewith; together with the overall increase in expenses associated
with a growing business and expanding operations, the Company does not
anticipate a relative increase in any other expenses. The Company’s management
is not aware of any other known trends, events or uncertainties which may affect
the Company’s future liquidity except for a certain amount of uncertainty
associated with being in receivership and to a certain extent, its dispute with

At December 31, 2020, the Company had a stockholders’ equity totaling
$(4,856,943) compared to an equity of $(825,799) for the period ending December
31, 2019


For the Three Months Ended December 31, 2020 versus December 31, 2019

The Company’s revenue for the three months ended December 31, 2020 was $23,929
compared to December 31, 2019 revenue totaling $97,447. The decrease in revenue
is primarily attributed to inventory constraints as well as available supply of
acceptable raw material the Company requires and the Covid-19 pandemic causing
major store accounts to close down.

The Company incurred operating expenses for the three months ended December 31,
totaling $89,366, compared to $226,954 during the three months ended
December 31, 2019. The decrease in operating expenses can be attributed to the
Company suspending its R&D activities to focus on expanding sales of current

Officer compensation for the three months ended December 31, 2020 was $52,048 in
cash and $0.00 in stock-based compensation compared to $49,788 in cash and
$49,788 in stock-based compensation during the three months ended December 31,

The Company incurred marketing expenses of $0 during the three months ended
December 31, 2020, compared to $13,327 during the three months ended December
31, 2019
. The decrease in marketing expenses can be attributed to the Company
reducing marketing costs and utilizing existing marketing materials.

The Company incurred general and administrative expenses of $30,818, during the
three months ended December 31, 2020, compared to $126,174 during the three
months ended December 31, 2019. The decrease in general and administration
expenses was due to many services being suspended due to the Covid-19 pandemic.

The Company paid professional fees of $6,500, during the three months ended
December 31, 2020, compared to $1,000 during the three months ended December 31,
. The reduction in professional fees was due to timing and general cost

The Company incurred costs of legal proceedings of $0 during the three months
ended December 31, 2020, compared to $18,665 during the three months ended
December 31, 2019. The decrease in 2020 is a result of the Company being in
receivership with the additional fees and legal expenses through Strongbow and
the legal and professional advisors for the Receivership Estate, and expenses
through general and administration.

The Company incurred research and development expenses of $0.00 during the three
months ended December 31, 2020, compared to $18,000 during the three months
ended December 31, 2019. The decrease in 2020 is associated with the Company
moving the HygeeTMmedical 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 to preserve cash.

The Company generated a net loss from continuing operations for the three ended
December 31, 2020 and 2019 of approximately $110,793 and $180,896, respectively.
As of December 31, 2020 and March 31, 2020, the Company had current assets of
$76,094 and $189,708, respectively, which included the following as of December
31, 2020
: cash and cash equivalents of approximately $10,032; inventory of
$43,703; accounts receivable of $22,359 (net of $88,017 in allowances.) and
prepaid expenses of $0; Compared to; and the following as of March 31, 2020 cash
and cash equivalents of approximately $30,723; inventory of $63,348; accounts
receivable of $38,933 (net of $111,301 in allowances); and prepaid expenses of


The Company’s Plan of Operation for the Next Twelve Months.

The Company’s auditors have expressed doubt as to our ability to continue as a
going concern in part, because at December 31, 2020, the Company had negative
working capital, an accumulated deficit of $33,080,084 and a note payable that
has passed its maturity date and although the holder has been willing to forbear
on collection activities, there is no formal written forbearance agreement and
the holder could commence collections at any time if it so wished. We believe
this is unlikely given the relative size of the note valued at $59,558 compared
with the value of the note holder’s 6,700,000 shares of Common Stock.
Additionally, our Current Liabilities have historically exceeded our Current
Assets; and as of December 31, 2020 that trend was continued with our Current
Liabilities of $4,960,186 exceeding our Current Assets of $103,243 by
$4,856,943. While this trend is certainly has not been part of the Company’s
objectives, management does not see it as particularly significant because in
considering our Current Liabilities, $59,558 of them are represented in a
related party note held by a “friendly” creditor who is also a large
shareholder. In addition, the Current Liabilities also include the Accrued
Settlement amount of $3,994,523. As stated, we believe that the related party
note holder will continue to forgo immediate payment until we are in a better
cash position to make payment and will otherwise cooperate with the receiver in
structuring payment terms. Thus, while it is listed as a Current Liability, it
operates more closely as a long-term liability and may ultimately be negotiated
and converted into equity.

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The Accrued Settlement represents nearly half of our Current Liabilities and at
$3,994,523 its accrual represents a contingency reserve made for the unfavorable
arbitration award that was confirmed and reduced to a judgment in the Company’s
dispute with Cromogen (See Part II Item 1 Legal Proceedings.). So, while the
Company was not ultimately successful in its motion before the arbitration panel
or before the court in seeking to have the award recalculated (based upon the
mathematical error described.) However, the Company, nevertheless, continues to
have what it believes is more than one solid basis to successfully challenge the
award / judgment on appeal and the matter is now on appeal. Additionally, the
Company has since been put into receivership and with the appointment of the
receiver a Blanket Stay was ordered by the Court. As such, its assets are not be
subject to levy by any of the Company’s creditors. Further, if any of the
Company’s creditors fails to make their claim(s) for amounts they claim due in a
timely manner, after the receiver gives notice, those claims not timely made
will be barred from later collecting and those amounts would no longer be
recorded in the Company’s financial statements as Liabilities. The receiver has
a wide degree of discretion in restructuring the estate of the Company and in
how it manages the various creditors’ claims. In general, it may accept a claim,
deny the claim or accept a claim in part and deny it in part; and in so doing,
the receiver will consider the fairness to the parties affected, and the
reasonableness of each claim. This includes Cromogen’s claim, regardless of the
fact that its claim is based on a judgment. Thus, while we are ultimately
optimistic about our prospects for success on appeal, as stated we are in
receivership and as such, are afforded the protections of the Blanket Stay and
all of the tools available to the receiver in his capacity, no assurances can be
given that the appeal or the receiver’s decisions will be what we would view as
“beneficial.” Although, we are confident that we will emerge from receivership,
in any event, in a better position for our shareholders than we entered into it.


Regardless of the forgoing issues, the Company will require additional debt or
equity financing for its operations as currently conducted. However, the Company
believes its margins are sufficiently high that management feels, it could
curtail a number of other costs and expenses, if necessary, that would enable it
to continue its operations on a more limited basis – selling industrial
hemp-based CBD and full-spectrum oils. However, the research and development we
intend to pursue will require additional funding such that in order to maintain
our operations at their current level (building for expansion, R&D, and the
roll-out of our MSN-2 Device), we will require additional debt or equity
financing in addition to the grants we have been able to secure. If we are
unable to secure such additional financing, we would not be able to continue our
operations as we have historically, with the research and development and
accelerated product launches. As mentioned , our increase in marketing has
provided us with additional sales opportunities that we believe will
significantly increase our sales in the current year; and with our margins at
approximately 41.17% together with increasingly larger inventory turns, our
working capital would build quickly, if we are: a.) not continuing to fund R&D
and having to meet other expenses nor b.) having to meet the R&D and other
expenses with proceeds from additional financing; in each case, at an expense
rate that is faster than our sales allow. This would then allow us to sustain
operations without additional funding over the next 12 months if we were to
reduce our operations and focus only on CBD and full-spectrum precuts; at which
point, we could then begin with R&D and other expenses.

Alternatively, we could raise additional funds to meet the anticipated R&D and
other expenses while we allow the sales from our existing products to become
self-sustaining. This last path is our currently intended path to additional
revenue. In fact, our receiver intends to assist us in raising additional funds
to meet our obligations and to fund expansion of our business and operations.
Among the financing possibilities presented by the receiver are the sale of
Receivers’ Certificates, an existing shareholder rights offering, and a
combination of debt and registered equity placed with an institutional investor.
The proceeds from any financing will be used to meet the expenses of the
receiver’s ongoing fees and costs associated with the administration of the
estate, meeting creditors allowed claims and working capital for the Company’s
ongoing operations, expansion and pursuit of its business plan.

Historically we have been able to fully fund operations from a combination of
operations and through additional sales of our common stock; and even though we
are in receivership, we have no reason to believe that we will not be able to
continue doing so since we have a strong base of existing shareholders who are
committed to our vision for the Company, they have historically demonstrated a
willingness to purchase shares of stock when they are offered and the receiver
intends to offer and in fact, has an additional exemption available to it that
may be more desirable to them. If these shareholders were to cease purchasing
shares when offered, if we or our receiver were unable to secure other sources
of debt or equity financing, or if we or our receiver were unable to secure any
or sufficient financing and on terms that are acceptable to us collectively, we
would not be able to continue operations as currently planned. Rather, we would
need to curtail our research and development, scale back operations and only
focus on meeting the CBD and full-spectrum sales. But even then, if we curtailed
operations, depending on whether we continued to incur unforeseen expenses, the
receiver’s costs of administration of the estate were larger than expected or we
otherwise generally incurred higher than expected expenses, we may not have
sufficient capital to meet our current operating needs (including the receiver’s
costs of administration of the estate). However, we do have sufficient resources
over the short and long term with scaled back expenses and R&D so that after
several turns of inventory we believe we would then be able to meet the costs of
administration and resume our R&D and operations as planned. Additional funding
primarily allows us to meet the additional costs associated with the receiver’s
administration of the estate and to expedite our business plan. During the
periods ending December 31, 2019 and June 30, 2018 the Company has met its
capital requirements through a combination of operating activities and through
external financing through the sale of its restricted common stock and
convertible notes. We intend to continue the sales of our common stock and
believe that by becoming a fully reporting company we have been able to attract
additional investors, at smaller discounts to the current market price and from
generally higher market prices, which is resulting in less dilution to existing
investors than was the case while we were not a reporting company subject to the
reporting requirements of the Securities Exchange Act of 1934, as amended.


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