Earth Science Tech, Inc. (OTC: ETST, Target Price: $4.12) INVESTMENT HIGHLIGHTS. INITIATING COVERAGE (June 28, 2017) Cannabis / Hemp CBD

Transcription

1 INITIATING COVERAGE () Earth Science Tech, Inc. (OTC: ETST, Target Price: $4.12) We initiate coverage on Earth Science Tech, Inc. (OTC: ETST, $0.94) with a price target of $4.12. Earth Science Tech is a biotechnology company focused on research, development, and sale of hemp derived CBD based nutraceuticals, pharmaceuticals and dietary supplements. CBD is one of the more than 85 cannabinoids identified in marijuana and hemp plants and is non-psychoactive with wide array of therapeutic benefits. Hemp derived CBD market is projected to grow at a CAGR of ~53% till 2020, positioning it as the fastest growing sub segment within the multi-billion-dollar legal cannabis and hemp market. The recent launch of new flavored CBD oil, organic chocolate CBD line, and pet CBD is expected to boost revenues this year. The JV partnership with Karmavore Superfoods and Forzagen provides ETST with an entry in the lucrative multi-billion dollar sports supplement market and food edibles. Further, the recent new formed wholly owned subsidiary of KannaBidioiD, Inc. diversifies ETST s presence in the niche recreational vape/smoke space. Heavy marketing push via presence in high profile magazines (Natural Awakenings) and web portals (MassRoots) is expected to yield strong order flow going forward. The product pipeline remains robust with series of CBD based nutraceutical being on of the two only CBD companies that recommended by the Institute of Natural Healing (INH) for cancer as well two CBD generic pharmaceuticals, two medical devices (MSN-2), and three patent pending products based off their application claims the benefit of ETST U.S. Provisional Application N. 62/061,577, filed October 8, 2014 and ETST U.S. Provisional Application No. 62/102,538, filed January 12, 2015 anticipated to be launched in 2H17 and early We see ETST as a speculative play on the burgeoning legal cannabis and hemp market targeting the fastest growing sub segment (hemp derived CBD). Going forward in FY17, we expect ETST to increase revenues approximately 350% to $2 million through new product launches, aggressive marketing initiatives and entry into new markets (sports supplement, recreational vape/smoke). INVESTMENT HIGHLIGHTS Large addressable market opportunity CBD pharmaceuticals and nutraceuticals is one of the fasted growing sectors in the legal cannabis industry. Clinical research studies have demonstrated that CBD nutraceuticals have the potential to treat arthritis, MS, chronic pain, PTSD, depression, epilepsy and a myriad of other illnesses and disorders. The North American legal cannabis market stood at ~$7 billion in 2016, with strong growth prospects. The market is expected to reach ~$22 billion by 2020, representing a CAGR of 25%. Eight states in the US have legalized the use of recreational marijuana (cannabis), while 29 states allow marijuana to be used for medicinal purpose. We believe favorable regulatory environment will provide further tailwind to ETST. However, recent stance by DEA that it considers CBD as a Schedule 1 substance has created some overhang. Strong product pipeline to fuel growth The product pipeline remains robust with series of CBD based nutraceutical, supplements as well pharmaceutical products anticipated to be launched in 2H17 and early The pipeline comprises three sports supplements to be launched in 2017, two CBD based pharmaceuticals drugs to be launched in 1Q/2Q18 and three CBD based nutraceuticals to be launched by the end of the calendar year New product launches to boost revenues The recent launch of new flavored CBD oil (Orange Blossom), organic chocolate CBD line, and pet CBD is expected to boost revenues this year. The initial sales of organic chocolates developed in partnership with Karmavore Superfood have been selling rapidly with great excitement and feedback from store owners and customers. The sample test studies conducted by ETST point to Orange Blossom being the best tasting CBD oil available, and the company foresee it being a huge hit. New strategic partnerships and aggressive marketing push to yield strong order flow The strategic partnerships with Karmavore Superfood, Forzagen and Smart Medicines will help ETST to diversify product offerings and accelerate entry in new markets. ETST is aggressively spending on marketing via presence in high profile magazines (Natural Awakenings), web portals (MassRoots), and one of the tow only CBD companies recommended by the Institute of Natural Healing (INH) for cancer.we believe these initiatives will help ETST reach more users, gain major brand recognition, and build early demand for its innovative new products. Initiate coverage with a price target of $4.12 We see ETST as a high risk and high reward play on the burgeoning legal cannabis and hemp industry, targeting the fastest growing sub segment (hemp derived CBD). The target of $4.12 assumes that the company is successful in executing its growth strategy revolving around new product launches, strategic partnerships and aggressive marketing campaigns. Key risk include any adverse regulatory stance that could materially damage company growth prospects. Stock Details (6/22/2017) OTC: Sector / Industry ETST Price target $4.12 Recent share price $0.94 Shares o/s (mn) 42.1 Market cap (in $m) 39.6 Cannabis / Hemp CBD 52-week high/low $3.95 / 0.30 Key Financials In 000s F2017E F2018E F2019E Revenues $2,034.7 $8,321.5 $22,003.7 EBITDA ($895.3) ($291.3) $2,266.4 EBIT ($915.6) ($332.9) $2,200.4 Net Income ($1,000.4) ($473.6) $2,059.6 EPS ($) ($0.02) ($0.01) $0.05 Key Ratios F2017E F2018E F2019E EBIT (%) (45.0) (4.0) 10.0 EBITDA (%) (44.0) (3.5) 10.3 Net margin (%) (49.2) (5.7) 9.4 P/Revenue (x) EV/Revenue (x) LTM Performance $4.00 $3.00 $2.00 $1.00 $0.00 May-16 Aug-16 Nov-16 Feb-17 May SeeThruEquity, LLC. Important disclosures appear at the back of this report. 1 P age

2 SUMMARY TABLE Exhibit 1. Summary Table (Pricing data as of June 22, 2017) Share data Balance Sheet (F16A) in $ mn Key personnel: Recent price: $0.94 Total assets: $0.5 CEO Dr. Michael Aube Price target: $4.12 Total debt: $0.06 COO Nickolas Tabraue 52-week range: Equity: $0.1 CMO Sergio Castillo Average volume:* 27,828 W/C: ($0.1) Chief Sales Officer Gabriel Aviles Market cap: $39.6 ROE: NA Book value/share: $0.00 ROA: % Cash/share $0.00 Current ratio: 0.8x Dividend yield: N/A Asset turnover: 1.0x Risk profile: High / Speculative Debt/Cap: 0.2% * 3-month average volume (number of shares) Estimates Valuation FY March Rev ($000) EBITDA ($000) EPS ($) EV/Rev (x) P/Rev (x) P/E (x) 2017E 2,034.7 (895.3) (0.02) 19.4x 19.5x NM 2018E 8,321.5 (291.3) (0.01) 4.7x 4.8x NM 2019E 22, , x 1.8x 19.2x 2020E 46, , x 0.9x 6.2x Source: SeeThruEquity Research INVESTMENT THESIS We initiate coverage on Earth Science Tech, Inc. (OTC: ETST, $0.94) with a price target of $4.12. Earth Science Tech is a biotechnology company focused on research, development, and sale of hemp derived CBD based nutraceuticals, pharmaceuticals and dietary supplements. CBD is one of the more than 85 cannabinoids identified in marijuana and hemp plants and is non-psychoactive with wide array of therapeutic benefits. Hemp derived CBD market is projected to grow at a CAGR of ~53% till 2020, positioning it as the fastest growing sub segment within the multi-billion-dollar legal cannabis and hemp market. The recent launch of new flavored CBD oil, organic chocolate CBD line, and pet CBD is expected to boost revenues this year. The JV partnership with Forzagen provides ETST with an entry in the lucrative multi-billion dollar sports supplement market. Further, the recent acquisition of Kannabidioid Inc. diversifies ETST s presence in the niche recreational vape/smoke space. Heavy marketing push via presence in high profile magazines (Natural Awakenings) and web portals (MassRoots) is expected to yield strong order flow going forward. The product pipeline remains robust with series of CBD based nutraceutical as well pharmaceutical products anticipated to be launched in 2H17 and early We see ETST as a speculative play on the burgeoning legal cannabis and hemp market targeting the fastest growing sub segment (hemp derived CBD). Going forward in FY17, we expect ETST to increase revenues approximately 350% to $2 million through new product launches, aggressive marketing initiatives and entry into new markets (sports supplement, recreational vape/smoke) SeeThruEquity, LLC. Important disclosures appear at the back of this report. 2 P age

3 Company History Earth Science Tech Inc. is a unique biotechnology company focused on cannabinoid based nutraceuticals, pharmaceuticals and dietary supplements for use in the areas of health, wellness, sports and alternative medicine. It sells its products through its distributors, retail store, and through the Internet. ETST s flagship product is High Grade Hemp CBD oil, though the company also offers other product lines including recently launched flavoured oil (Orange Blossom), organic raw chocolates and CBD pet products. The company comprises of three wholly owned subsidiaries including 1) Cannabis Therapeutics Inc which offers broad line of cannabinoid-based pharmaceuticals, nutraceuticals as well as other products & solutions, 2) Earth Science Pharmaceutical Inc is engaged in manufacturing low cost medical devices and vaccines for protection against STIs (Sexually Transmitted Infections), and 3) Kannabidioid Inc. which manufactures and distributes vapes/eliquids and gummy edibles to target vape/smoke shops. With headquarters in Florida, USA, ETST has been led by Dr. Michael Aube since November Dr. Aube is himself a renowned scientist having conducted research on deciphering the mechanism of action of organochlorine on breast cancer cells in his doctorate studies. His previous work resulted in this scientific paper regarding breast cancer. ETST s management team consists of executives with deep experience in nutraceutical, dietary supplement field as well as retail corporate management. Business Analysis New Product Launches In May 2017, ETST announced the launch of Orange Blossom CBD oil, Hemp pet CBD product and organic chocolate line. The oil is based off ETST s Full Spectrum Industrial Cannabidiol (CBD) Hemp Oil mixed with natural strawberry flavoring, coconut Oil (MCT), and orange blossom honey sourced from Florida. The sample test studies, conducted by ETST point to Orange Blossom being the best tasting CBD oil available, and the company foresee it being a huge hit. ETST also launched its new organic raw chocolate line developed through a strategic JV with Karmavore Superfoods. The organic line will comprise Karmavore s CBD raw chocolate infused with ETST s Full Spectrum Industrial High Grade Hemp CBD Oil. ETST will help develop sales channels for Karmavore s products, while Karmavore will source its cannabis CBD-based ingredients from ETST. The initial sales of Kamavore Superfood s CBD infused chocolates under this JV have been selling rapidly with great excitement and feedback from store owners and customers. The addition of chocolate will enable ETST to include edibles to its product offerings which already boasts of oils, powder and veggie caps. ETST has already received pre-orders and expects the revenues to take off as new offerings will attract new accounts and large orders. We expect the launch of new flavored CBD oil, organic chocolate CBD line, and pet CBD to boost revenues this year. ETST is seeing traction in more opportunities to establish JVs such as Karmavore and Forzagen, which could further ramp us sales. Robust Product Pipeline SeeThruEquity, LLC. Important disclosures appear at the back of this report. 3 P age

4 ETST s subsidiary, Cannabis Therapeutics Inc., in JV with Smart Medicines GMP plans to launch two new Cannabinoid-based pharmaceutical drugs and three new advanced Cannabinoid-based nutraceutical products using ETST s existing CBD patent, IP and technology. The two new cannabinoid-based pharmaceutical drug formulations are expected to be completed by summer 2017, with non-prescription nutraceuticals being available for sale before the end of the year and the pharmaceutical-grade products being launched in 1Q/2Q The initial CBD-based nutraceutical products being developed will offer immune system strengthening and antioxidant benefits. The second nutraceutical product will seek to improve and protect brain and liver function. The final nutraceutical to be developed is a prophylactic that aims to prevent some of the more common causes of cancer to help reduce occurrence rates. Post the nutraceutical products, work will begin on a pharmaceuticals drug targeting depression, anxiety, and PTSD treatment. Once the mental illness drug formulation is finished, focus will be shifted toward developing a pharmaceutical-grade cancer treatment, with an emphasis on breast and brain cancers. Both of these pharmaceutical products will include CBD hemp oil and pure natural molecules, combined with generic drugs. Besides this, ETST plans to launch three sports supplements in JV in Karmavore Superfood. The company s subsidiary, Earth Science Pharmaceutical Inc., is preparing to launch its low cost medical device MSN-2 for protection against STIs such as chlamydia and gonorrhea. ETST will inaugurate the manufacturing facility for the MSN-2 medical device within 2Q17, and the initial product release for detecting Chlamydia is anticipated by 3Q17. The MSN-2 will be marketed only overseas during the beginning. The name and branding of the MSN-2 and dedicated e-commerce website will be ready by 4Q17. The clinical study to detect gonorrhea in the same sample provided by the MSN-2 should be completed by 4Q17, and by 1Q18 the service will test for both diseases in the one sample taken by MSN-2. New marketing initiatives to increase reach and brand exposure Earlier this year, Earth Science Tech featured in a half-page ad in Natural Awakenings magazine, a publishing outlet that reaches 4+ million consumers across the entire US, and several other countries. Additionally, the company s advertising statistics show that 80% of their readers make purchases based on advertisements they see in Natural Awakenings. Natural Awakenings has historically had very high ROI opportunities for its advertisers. Also in April 2017, ETST partnered with web portal, MassRoots, to build demand for its new product lines launching by 2Q17. MassRoots is one of the largest web portals within the cannabis industry, and over 1 million cannabis enthusiasts are registered with the platform. This is one of the best niche advertising locations for a cannabisbased product to reach. We believe these initiatives will help ETST reach more users, gain major brand recognition, and build early demand for its innovative new products Catering to the fastest growing sub segment of the cannabis industry SeeThruEquity, LLC. Important disclosures appear at the back of this report. 4 P age

5 According to research reports, the North American legal cannabis market stood at ~$7 billion in 2016, with strong growth prospects. The market is expected to reach ~$22 billion by 2020, representing a CAGR of 25%. Eight states in the US have legalized the use of recreational marijuana (cannabis), while 29 states allow marijuana to be used for medicinal purpose. These numbers are expected to rise towards 40 states by 2020 as pending legislation in a number of states is expected to be put into practice in the next several years. However, cannabis still remains illegal at the federal level. If legalized federally, the market could grow to ~$50 billion in the next decade according to forecast by Cowen. CBD pharmaceuticals and nutraceuticals is one of the fasted growing sectors in the legal cannabis industry. Clinical research studies have demonstrated that CBD nutraceuticals have the potential to treat arthritis, MS, chronic pain, PTSD, depression, epilepsy and a myriad of other illnesses and disorders. Exhibit 2: Legal cannabis market projected to grow more than $22 billion by 2025 Source: Hemp Business Journal Exhibit 3: Status of Marijuana by State Source: Georgia Care Project SeeThruEquity, LLC. Important disclosures appear at the back of this report. 5 P age

6 FINANCIALS AND FUTURE OUTLOOK Recent Results ETST reported FY16 results on June 13, The Company reported revenues for FY16 at $452,158 compared to $469,446 for the same period ended March 31, Cost of revenues for FY16 was $223,165 compared to $341,913 for FY15 which resulted in a gross profit of $228,993 for FY16 compared to $127,533 for FY15. During FY16, total operating expenses stood at $1.3 million, down 1.5% YOY. The decrease in operating expenses was primarily due to lower cost of legal proceedings partially offset by higher marketing and G&A expenses. The interest expense stood at $2,391, lower compared to $4,765 in FY15. For FY16 net loss stood at $1.0 million compared to a loss of $1.2 million in the year ago period. F2017 and F2018 Outlook For F2017, we forecast revenues of $2.0 million, up 350% YOY primarily driven by new product launches, strong order flow amid aggressive marketing push and entry into new markets. ETST has recently launched a new flavored CBD oil, organic chocolate CBD line, and pet CBD products. The FY16 results were strong with gross margins at ~50.6% and gross profits increasing ~80% YOY. We expect gross margins to remain around ~50% in FY17 as well. We expect operating loss of ~$915,620 for FY17. For FY18, we expect the sales momentum to continue driven by new strategic partnerships, recent acquisitions (Kannabidioid Inc.) and robust product pipeline. The sales pipeline comprises two new Cannabinoid-based Pharmaceutical drugs, three new advanced Cannabinoid-based nutraceutical products as well as three new sports supplements. We model revenues at ~$8.3 million for FY18. This factors in new business from company s anticipated launch of MSN-2 medical device. We model gross margins of ~52% for FY18. We expect the company to turn profitable at the operating and net level in FY19. Exhibit 4: Estimated Forecast F2017E-F2021E (in 000s) F2017E F2018E F2019E F2020E F2021E Revenues $2,035 $8,321 $22,004 $46,107 $87,718 Y/Y Growth 350.0% 309.0% 164.4% 109.5% 90.2% Gross Profit $1,017 $4,327 $12,102 $26,281 $52,631 Margin (%) 50.0% 52.0% 55.0% 57.0% 60.0% EBIT -$916 -$333 $2,200 $9,221 $27,193 Margin (%) -45.0% -4.0% 10.0% 20.0% 31.0% EBITDA -$895 -$291 $2,266 $9,314 $27,280 Margin (%) -44.0% -3.5% 10.3% 20.2% 31.1% Net Income -$1,000 -$474 $2,060 $6,357 $18,936 Margin (%) -49.2% -5.7% 9.4% 13.8% 21.6% Source: SeeThruEquity Research SeeThruEquity, LLC. Important disclosures appear at the back of this report. 6 P age

7 Balance Sheet & Financial Liquidity We see the availability of liquidity as a key area to watch for ETST as the company continues to focus on aggressive expansion strategy as well heavy investments in R&D. ETST, in the past, has issued new equity and raised debt to fund its operations. ETST ended FY16 with cash and cash equivalent of $192,942 and $415,759 in current liabilities. The company recorded a net loss in The company s strategic moves are not yet complete, as ETST has stated that it has plans to aggressively spend on marketing, R&D and enter in new markets via JVs and acquisitions. ETST acquired a company, Kannabidioid Inc., in June 2017 and hence more acquisitions could be likely in future. Given the fact that company is in expansion mode, more capital raising cannot be ruled out in the near term. Going forward, company s ability to generate positive cash flows remains a key area to focus on SeeThruEquity, LLC. Important disclosures appear at the back of this report. 7 P age

8 VALUATION We decided to look at multiple valuation methods as part of determining a price target for ETST. The primary valuation method considered was discounted cash flow analysis (DCF), although we also included an analysis of companies in the industry examining revenues. DCF The DCF analysis runs through the end of fiscal 2022E (December 2022E). Key assumptions to the model include: 1) that revenue accelerates beginning in F2017E primarily driven by new product launches.; and 2) operating leverage and higher gross margin dollars will help drive profitability going forward. The valuation model assumes the company will start to generate FCFF starting in F2019E and will continue through F2022E. We assume that the company starts paying taxes from F2020E and the company uses working capital on balance in our forecast, reflecting an assumption of high growth. We assumed a weighted average cost of capital (WACC) of 14.1% and a terminal growth rate of 3%, arriving at a target of $4.12 using this analysis, as illustrated in the tables below. Exhibit 5: Discounted Cash Flow Analysis $ In Thousands F2017E F2018E F2019E F2020E F2021E F2022E EBIT (915.6) (332.9) 2, , , ,532.8 Less: Tax , , ,517.6 NOPLAT (915.6) (332.9) 2, , , ,015.2 Changes in working capital (24.9) (197.9) (415.1) (482.1) (656.8) (639.7) Depreciation & Amortization Capex (100.0) (50.0) (50.0) (50.0) (50.0) (50.0) FCFF (1,020.2) (539.2) 1, , , ,464.1 Discount factor PV of FCFE (921.4) (426.6) 1, , , ,595.4 Sum of PV of FCFE 28,992.0 Terminal cash flow 309,387.3 PV of terminal cash flow 144,185.0 Enterprise value 173,177.0 Less: Debt 59.6 Add: Cash Equity value 173,310.3 Shares Outstanding (mn) 42.1 Fair value per share ($) 4.12 Source: SeeThruEquity Research SeeThruEquity, LLC. Important disclosures appear at the back of this report. 8 P age

9 Exhibit 6: DCF Assumptions & Conclusions Summary Conclusions Key Assumptions DCF FV ($ per share) 4.12 Beta 1.5 Recent price ($ per share) 0.94 Cost of equity 14.2% Upside (downside) 338.5% WACC 14.1% Cost of debt (post tax) Terminal Growth Rate 8% 3.0% WACC (%) % 13.6% 14.1% 14.6% 15.1% Terminal growth rate (%) 2.00% $4.29 $4.04 $3.80 $3.59 $ % $4.48 $4.20 $3.95 $3.72 $ % $4.68 $4.38 $4.12 $3.87 $ % $4.91 $4.58 $4.29 $4.03 $ % $5.16 $4.80 $4.49 $4.20 $3.95 Source: SeeThruEquity 4.50% $5.44 $5.05 $4.71 $4.40 $ SeeThruEquity, LLC. Important disclosures appear at the back of this report. 9 P age

10 Peer Group Analysis We also evaluated ETST using a relative valuation analysis with its peer group. When comparing ETST to its peer group we examined price-to-sales (P/S) and Enterprise Value-to-Sales (EV/S) ratios. The below companies are in the business of selling hemp derived CBD products including nutraceuticals, pharmaceuticals and others. The valuations of companies in this industry appear to be heavily influenced by the large market potential of cannabis-based products. ETST currently has CBD based nutraceuticals products but does not have pharmaceutical products approved for sale by the FDA in the market. In our view, the key area to watch out for ETST will be sales execution in the nutraceuticals and supplement space. Further, robust outlook issued by the company, management s execution capability as well as the overall market sentiment toward the cannabis industry will also influence valuations. As illustrated in Exhibit 7 below, ETST trades at significant discount to its peer group on a P/S sales basis and on an EV/Sales basis. Given the expectation of high growth (ETST is set to grow its revenues significantly) and expanding margins, we believe the discount is unwarranted. Exhibit 7: Peer Analysis $ In million TCKR Name Price Shares Market Cap EV Next Year P/Sales EV/Sales GWPH GW Pharmaceuticals $ $ 2,560.9 $ 2,197.0 $ x 20.9x AXIM AXIM Biotechnologies $ $ $ $ x 59.7x INSY Insys Therapeutics $ $ $ $ x 3.2x ZYNE Zynerba Pharmaceuticals $ $ $ $ - NM NM MJNA Medical Marijuana Inc* $ ,557.3 $ $ $ x 33.9x CVSI CV Sciences Inc* $ $ 21.5 $ 23.2 $ x 1.9x CNAB United Cannabis Corporation* $ $ 53.9 $ 54.4 $ x 77.7x ACB Aurora Cannabis C$ C$ C$ C$ x 5.4x Peer Group Average 29.2x 29.0x ETST Earth Science Tech Inc $ $ 39.6 $ 39.5 $ x 4.7x *LTM sales figures Peer Group Average Sources: Capital IQ, SeeThruEquity Research Estimates as of June 22, % -83.6% RISK CONSIDERATIONS SeeThruEquity, LLC. Important disclosures appear at the back of this report. 10 P age

11 Limited operation history and operates in a new industry ETST has a limited operating history and may not succeed. The company is subject to all risks inherent in a developing business enterprise. The likelihood of its continued success will need to be considered in light of the problems, expenses, difficulties, complications, and delays frequently encountered in the competitive and regulatory environment in which it operates. As a new industry, there are not established entities whose business model ETST can follow. Similarly, there is limited information about comparable companies available for potential investors to review in making a decision about whether to invest in the company. Financial resources We see access to liquidity as a key area to watch for ETST. The company does not generate cash from its operating activities, and will require substantial capital to bring planned products to market. The company ended FY16 with cash of $192,942 and current liabilities of $415,759. Regulatory risk Continued development of the medical marijuana market is dependent upon continued legislative authorization of marijuana at the state level. Any number of factors could slow or halt the progress Hemp based CBD are often confused with marijuana based CBD which remains Illegal under Federal Law Hemp based CBD are often confused with marijuana based CBD which remains Illegal under Federal Law. Although ETST does not sell any marijuana based CBD products, but it s products are could often be confused as being illegal by federal/state authorities and also by consumers. Competitive industry The company is involved in a highly competitive industry where it may compete with numerous other companies who offer alternative methods or approaches, who may have far greater resources, more experience, and personnel perhaps more qualified than the company does. Such resources may give ETST s competitors an advantage in developing and marketing products similar to it. There can be no assurance that ETST will be able to successfully compete against these other entities. Going Concern We note that ETST included an explanatory paragraph in FY15 annual report stating that there is risk the company will be able to continue as a going concern. While the Company is attempting to generate sufficient revenues, the Company's cash position may not be sufficient to pay its obligations and support the Company's daily operations. As noted above, ETST does not generate free cash flow and will require external financing to build its business. Dilution risk The company may need to increase its liquidity and capital resources in future periods. The management may require issuing further capital for the same. This may result in significant dilution for existing shareholders. Management Team Dr. Michael Aube, Chief Executive Officer and Chief Scientific Officer SeeThruEquity, LLC. Important disclosures appear at the back of this report. 11 P age

12 Dr. Michel Aubé has wide-ranging expertise in the life sciences. As a microbiologist he furthered his graduate studies at Laval University, earning a Master s degree in Cell Biology and Molecular Physiology as well as a PhD in Physiology-Endocrinology. In addition, he created and taught three postdoctoral courses in Immunology. His scientific research in Sexually Transmitted Infections (STIs), Cancer and Stem Cell biology has been published in several prestigious medical journals. Dr. Aubé has received a number of Awards for Excellence from the Network for environmental health research and childhood diseases. Nickolas S. Tabraue, President and COO Mr. Nickolas Tabraue is an industry veteran having 9 years of professional experience in the nutraceutical, dietary supplement field, as well as retail corporate management. Mr. Tabraue is well versed in his skills and knowledge of supplements, retail management, and customer service. His management experience at The Vitamin Shoppe encompassed the management of four different locations, one being the company s highest volume and another included the restructuring of a non-performing high volume store achieving high operating levels in operations, service, inventory compliance, and sales. Sergio Castillo, CMO Sergio Castillo, who moved to Miami when he was only 16, is a current marketing consultant for few firms including Cloud Accounting, La Familia Media, Fresh Press Miami, Goodlife Miami, as well as Abdon Entertainment. He started his first company in 2008 called Goodlife Miami, LLC. In 2010, his second company was started named Fresh Press, LLC. His third company was founded in 2012, called La Familia Media, LLC. As the time passed, he s learned everything it takes to run the marketing for many successful companies, and how he takes his expertise into the field of medicinal marijuana. Gabriel Aviles, Chief Sales Officer Mr. Gabriel Aviles has extensive knowledge in the holistic health, herbal supplements and health food industry. Mr. Aviles specializes in developing and distributing science based nutritional products in the Alternate Medicine and Health Food industry. Mr. Aviles has a strong interest in distributing all natural, herbal, botanicals and alternative medicine type products throughout Florida and other markets. Mr. Aviles has extensive experience as a professional health and supplement advisor as well as food/nutrition adviser. Mr. Aviles is focused on advising and educating consumers on health and wellness issues according to what supplement is best suited for each individual s need. He has a Bachelor of Science (BS) in Alternative and Complementary Medicine and Medical Systems. Some of his interests include Alternative Medicine, Bio Chemistry, Biology, Music, Business, Nutrition, Human Anatomy, History, and Martial Arts. FINANCIAL SUMMARY SeeThruEquity, LLC. Important disclosures appear at the back of this report. 12 P age

13 Exhibit 8. Income Statement Figures in $000 unless specified FY17E FY18E FY19E FY20E FY21E Revenue $2,034.7 $8,321.5 $22,003.7 $46,107.4 $87,718.4 YoY growth 350.0% 309.0% 164.4% 109.5% 90.2% Cost of sales $1,017.4 $3,994.3 $9,901.7 $19,826.2 $35,087.4 Gross Profit $1,017.4 $4,327.2 $12,102.0 $26,281.2 $52,631.0 Margin 50.0% 52.0% 55.0% 57.0% 60.0% Operating expenses $1,933.0 $4,660.0 $9,901.7 $17,059.8 $25,438.3 EBIT ($915.6) ($332.9) $2,200.4 $9,221.5 $27,192.7 Margin (45.0%) (4.0%) 10.0% 20.0% 31.0% EBITDA ($895.3) ($291.3) $2,266.4 $9,313.7 $27,280.4 Margin (44.0%) (3.5%) 10.3% 20.2% 31.1% Other income/ (expense) ($84.8) ($140.8) ($140.8) ($140.8) ($140.8) Profit before tax ($1,000.4) ($473.6) $2,059.6 $9,080.7 $27,051.9 Tax , ,115.6 Net income to Common ($1,000.4) ($473.6) $2,059.6 $6,356.5 $18,936.4 Margin (49.2%) (5.7%) 9.4% 13.8% 21.6% EPS (per share) ($0.02) ($0.01) $0.05 $0.15 $0.45 Source: SeeThruEquity Research. Exhibit 9. Balance Sheet Figures in $000, unless specified FY17E FY18E FY19E FY20E FY21E Current assets $525.5 $1,381.3 $4,409.0 $11,604.4 $31,528.8 Other assets $200.6 $209.0 $193.0 $150.7 $113.0 Total assets $726.1 $1,590.3 $4,602.0 $11,755.1 $31,641.8 Current liabilities $1,670.0 $3,007.8 $3,959.9 $4,756.5 $5,706.9 Other liabilities $0.0 $0.0 $0.0 $0.0 $0.0 Shareholders equity ($943.9) ($1,417.5) $642.1 $6,998.6 $25,934.9 Total liab and shareholder equity $726.1 $1,590.3 $4,602.0 $11,755.1 $31,641.8 Source: SeeThruEquity Research Exhibit 10. Cash Flow Statement Figures in $mn, unless specified FY17E FY18E FY19E FY20E FY21E Cash from operating activities ($1,004.9) ($629.9) $1,710.5 $5,966.6 $18,367.3 Cash from investing activities (100.0) (50.0) (50.0) (50.0) (50.0) Cash from financing activities 1, Net inc/(dec) in cash (104.9) , , ,317.3 Cash at beginning of the year , ,685.3 Cash at the end of the year , , ,002.5 Source: SeeThruEquity Research About Earth Science Tech, Inc SeeThruEquity, LLC. Important disclosures appear at the back of this report. 13 P age

14 Earth Science Tech Inc. is a unique Biotechnology company focused on cannabinoid based nutraceuticals, pharmaceuticals and dietary supplements for use in the areas of health, wellness, sports and alternative medicine. It sells its products through its distributors, retail stores and through the Internet. The company comprises of three wholly owned subsidiaries including Cannabis Therapeutics Inc., Earth Science Pharmaceuticals Inc. and Kannabidioid Inc. For more information, visit SeeThruEquity, LLC. Important disclosures appear at the back of this report. 14 P age

15 Contact Ajay Tandon SeeThruEquity (646) Disclosure This research report has been prepared and distributed by SeeThruEquity, LLC ( SeeThruEquity ) for informational purposes only and does not constitute an offer, solicitation or recommendation to acquire or dispose of any investment or to engage in any transaction. This report is based solely on publicly-available information about the company featured in this report which SeeThruEquity considers reliable, but SeeThruEquity does not represent it is accurate or complete, and it should not be relied upon as such. All information contained in this report is subject to change without notice. This report does not constitute a personal trading recommendation or take into account the particular investment objectives, financial situation or needs of an individual reader of this report, and does not provide all of the key elements for any reader to make an investment decision. Readers should consider whether any information in this report is suitable for their particular circumstances and, if appropriate, seek professional advice, including tax advice. This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties, many of which are beyond the company s control. Actual results could differ materially and adversely from those anticipated in such forward-looking statements as a result of certain industry, economic, regulatory or other factors. SeeThruEquity is not a FINRA registered broker-dealer or investment adviser and does not provide investment banking services. SeeThruEquity does not accept or receive fees or other compensation for preparing its research reports. SeeThruEquity has not been retained or hired by the company featured herein or by any other party to prepare this report. In some but not in all instances, SeeThruEquity and/or its officers, directors or affiliates may receive compensation from companies featured in its reports for non report-related services which may include charges for presenting at SeeThruEquity investor conferences, distributing press releases and performing certain other ancillary services. The company featured in this report paid SeeThruEquity its standard fee described below for distributing a press release on this report. Such compensation is received on the basis of a fixed fee and made without regard to the opinions and conclusions in its research reports. The fee to present at SeeThruEquity conferences is no more than seven thousand dollars, and the fee for distributing press releases is no more than fifteen hundred dollars. The fees for performing certain other ancillary services vary depending on the company and service provided but generally do not exceed five thousand dollars. In no event is a company on which SeeThruEquity has issued a report required to engage it with respect to these non report-related services. SeeThruEquity and/or its affiliates may have a long equity position with respect to a non-controlling interest in the publicly traded shares of companies featured in its reports, and follows customary internal trading restrictions pending the release of its reports. SeeThruEquity s professionals may provide verbal or written market commentary that reflects opinions that are contrary to the opinions expressed in this report. This report and any such commentary belong to SeeThruEquity and are not attributable to the company featured in its reports or other communications. The price and value of a company s shares referred to in this report may fluctuate. Past performance by one company is not indicative of future results by that company or of any other company covered by a report prepared by SeeThruEquity. This report is being disseminated primarily electronically and, in some cases, in printed form. An electronic report is made simultaneously available to all recipients. The information contained in this report is not incorporated into the contents of our website and should be read independently thereof. Please refer to the Disclosures section of our website for additional details. Copyright SeeThruEquity, LLC. No part of this material may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of SeeThruEquity, LLC SeeThruEquity, LLC. Important disclosures appear at the back of this report. 15 P age