ENTEST GROUP, INC. - FORM 10-Q

Attached files

file	filename
EX-31.1 - ENTEST GROUP, INC.	entb_ex31-1.htm
EX-32.2 - ENTEST GROUP, INC.	entb_ex32-2.htm
EX-32.1 - ENTEST GROUP, INC.	entb_ex32-1.htm
EX-31.2 - ENTEST GROUP, INC.	entb_ex31-2.htm

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended May 31, 2011

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission File No. 333-154989

ENTEST BIOMEDICAL, INC.

(Exact name of small business issuer as specified in its charter)

Nevada	26-3431263
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

4700 Spring Street, St 203, La Mesa, California 91942

(Address of Principal Executive Offices)

619 702 1404

(Issuer’s telephone number)

None

(Former name, address and fiscal year, if changed since last report)

Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

[ ] Large accelerated filer	[ ] Accelerated filer

[ ] Non-accelerated filer	[X] Smaller reporting company

APPLICABLE ONLY TO CORPORATE ISSUERS:

As of May 31, 2011, 20,686,501 shares of common stock were issued and outstanding.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes [ ] No [X]

Transitional Small Business Disclosure Format (Check One) Yes [ ] No [X]

PART I - FINANCIAL INFORMATION

Item 1. - Financial Statements

Entest BioMedical, Inc.
(A Development Stage Company)
Consolidated Balance Sheet

	As of			As of
	May 31,			August 31,
	2011			2010
	(Unaudited)
ASSETS
Current Assets
Cash	$	55,936		$	206
Trade accounts receivable, less allowance for uncollectible accounts
of $0 and $0 at August 31, 2010 and May 31, 2011, respectively		5,395			-
Inventory		7,986			-
Current Portion of Prepaid Expenses		66,206			54,200
Employee Receivable		4,349			1,396
Current Portion of Deposits		-			-
Due from Other		-			-
Total Current Assets		139,872			55,802

Property & Equipment (Net of Accumulated Depreciation)		17,471			-
Goodwill		405,000			-
Intangible Assets (Net of Accumulated Amortization)		2,024			-

Long Term Assets
Non Current Portion of Prepaid Expenses		23,389			28,400
Non Current Portion of Deposits		-			1,059
Total Long Term Assets		23,389			29,459

TOTAL ASSETS	$	587,756		$	85,261

LIABILITES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable	$	17,938		$	21,342
Notes Payable		141,774			156,566
Convertible notes payable, net of discount		26,002			-
Due to Affiliate/Other		58,000			-
Accrued Expenses		38,465			128,095
Total Current Liabilities		282,179			306,003

Long Term Liabilities
Notes Payable		86,120			-
Total Long Term Liabilities		86,120			-

TOTAL LIABILITIES		368,299			306,003

STOCKHOLDERS' EQUITY
Common Stock, $0.001 par value, 70,000,000 shares
authorized, 17,553,040 and 20,686,501 shares issued and
outstanding as of August 31, 2010 and May 31, 2011		20,684			17,553
Preferred Stock , $001 par value 5,000,000 shares authorized,
0 shares issued and outstanding as of August 31, 2010 and May 31, 2011		-			-
Additional Paid in Capital		1,491,992			537,415
Contributed Capital		274,162			15,104
Accumulated Deficit		(1,567,381	)		(790,814	)

Total Stockholders' Equity		219,457			(220,742	)

TOTAL LIABILITIES & STOCKHOLDERS' EQUITY	$	587,756		$	85,261

The Accompanying Notes are an Integral Part of these Financial Statements.

Entest BioMedical, Inc.
(A Development Stage Company)
Consolidated Statement of Operations
(Unaudited)

													Period from
													Inception
	For the						For the						(Aug. 22, 2008)
	Three Months Ended						Nine Months Ended						through
	May 31,						May 31,						May 31,
	2011			2010			2011			2010			2011

REVENUES
Total Revenues	$	110,455		$	-		$	195,258		$	-		$	195,258
TOTAL REVENUE		110,455			-			195,258			-			195,258

Cost of Revenue		39,040			-			53,532			-			53,532
GROSS PROFIT		71,415			-			141,726			-			141,726

COSTS AND EXPENSES
Research and Development		11,144			4,361			104,932			9,015			135,865
Rent Costs		34,488			12,300			74,108			36,900			131,508
General and Administrative		178,139			93,630			598,923			291,377			1,047,373
Incorporation Costs		-			-			-			-			408
Consultant's Expenses		33,872			11,091			120,731			27,202			367,201
Miscellaneous Expenses		-			-			-			-			78

Total Costs and Expenses		257,643			121,382			898,694			364,494			1,682,433

OPERATING LOSS		(186,228	)		(121,382	)		(756,968	)		(364,494	)		(1,540,707	)

OTHER INCOME AND EXPENSE

Other Income		97			-			99			-			99
Interest Expense		(5,439	)		(1,828	)		(19,698	)		(2,350	)		(26,773	)

LOSS BEFORE INCOME TAXES		(191,570	)		(123,210	)		(776,567	)		(366,844	)		(1,567,381	)
Income Taxes		-			-			-			-			-

NET INCOME (LOSS)	$	(191,570	)	$	(123,210	)	$	(776,567	)	$	(366,844	)	$	(1,567,381	)

BASIC AND DILUTED EARNINGS
(LOSS) PER SHARE	$	(0.009	)	$	(0.007	)	$	(0.040	)	$	(0.021	)

WEIGHTED AVERAGE
NUMBER OF COMMON
SHARES OUTSTANDING		20,434,036			17,553,040			19,620,953			17,536,167

The Accompanying Notes are an Integral Part of these Financial Statements.

Entest BioMedical, Inc.
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity
From August 22, 2008 (Inception) through May 31, 2011
(Unaudited)

												Accumulated
												Deficit
	Common						Additional			Contrib-		during the
							Paid-in			uted		Development
	Shares			Amount			Capital			Capital		Stage			Total

Beginning balances Aug. 22, 2008		-		$	-		$	-		$	-	$	-		$	-
Shares issued to parent		1,500			408			-			-		-			408
Net Loss August 22, 2008
through August 31, 2008		-			-			-			-		(408	)		(408	)

Balances August 31, 2008		1,500		$	408		$	-		$	-	$	(408	)	$	-
Recapitalization in connection with
reverse acquisition		(1,500	)		(408	)		408			-		-			-
		10,000,000			10,000			(10,000	)		-		-			-
Common Shares issued in Reverse
Acquisition		4,000,000			4,000			(4,000	)		-		-			-
Increases in Contributed Capital		-			-			-			485		-			485
Common Shares issued for Cash		1,000,000			1,000			99,000			-		-			100,000
Restricted Stock Award issued to
employee		2,000,000			2,000			(2,000	)		-		-			-
Restricted Stock Award
compensation expense for the
year ended August 31, 2009		-			-			24,725			-		-			24,725
Common Stock issued to
consultant		50,000			50			199,950			-		-			200,000
Net Loss year ended Aug. 31, 2009													(245,515	)		(245,515	)

Balances August 31, 2009		17,050,000		$	17,050		$	308,083		$	485	$	(245,923	)	$	79,695
Common Shares issued for Cash		500,000			500			49,500			-		-			50,000
Restricted Stock Award
compensation expense for the
3 months ended Nov. 30, 2009		-			-			98,916			-		-			98,916
Common Stock as Compensation		3,040			3			4,557			-		-			4,560
Increases in Contributed Capital		-			-			-			4,263		-			4,263
Restricted Stock Award
compensation expense for the
3 months ended February 28, 2010		-			-			76,359			-		-			76,359
Increases in Contributed Capital		-			-			-			10,356		-			10,356
Net Loss year ended Aug. 31, 2010		-			-			-			-		(544,891	)		(544,891	)

Balances, August 31, 2010		17,553,040		$	17,553		$	537,415		$	15,104	$	(790,814	)	$	(220,742	)
Common Shares issued for Cash		2,000,000		$	2,000		$	98,000		$	-	$	-		$	100,000
Restricted Stock Award
compensation expense for the
3 months ended Nov. 30, 2010		55,000			55			62,345			-		-			62,400
Common Stock as Compensation		-			-			-			-		-			-
Increases in Contributed Capital		-			-			-			-		-			-
Net Loss year ended Nov. 30, 2010		-			-			-			-		(243,526	)		(243,526	)

Balances, November 30, 2010		19,608,040		$	19,608		$	697,760		$	15,104	$	(1,034,340	)	$	(301,868	)
Common Shares issued for Cash		200,000		$	200		$	99,800		$	-	$	-		$	100,000
Common Shares issued for Debt		38,712			37			39,952			-		-			39,989
Common Stock issued to
consultant		19,383			19			59,622			-		-			59,641
Restricted Stock Award issued to
employee		145,766			146			284,655			-		-			284,801
Net Loss year ended Feb. 28, 2011		-			-			-			-		(341,471	)		(341,471	)

Balances, February 28, 2011		20,011,901		$	20,010		$	1,181,789		$	15,104	$	(1,375,811	)	$	(158,908	)
Common Shares issued for Cash		17,600		$	17		$	17,583								17,600
Common Shares issued for Debt		600,000			600			250,578								251,178
Restricted Stock Award issued to
employee		7,000			7			15,323			-		-			15,330
Issuance of Share Based
Compensation		50,000			50			(50	)		-		-			-
Common Stock as Compensation		-			-			10,000			-		-			10,000
Convertible debt discount issued
May 26, 2011		-			-			14,360			-		-			14,360
Convertible debt discount issued
May 31, 2011		-			-			2,138			-		-			2,138
Amortization of discount on
convertible note		-			-			271			-		(271	)		-
Increases in Contributed Capital		-			-			-			259,058		-			259,058
Net Loss year ended May 31, 2011		-			-			-			-		(191,299	)		(191,299	)

Balances, May 31, 2011		20,686,501		$	20,684		$	1,491,992		$	274,162	$	(1,567,381	)	$	219,457

The Accompanying Notes are an Integral Part of these Financial Statements.

Entest BioMedical, Inc.
(A Development Stage Company)
Consolidated Statement of Cash Flows
(Unaudited)

							Period from
							Inception
							(Aug. 22, 2008)
	For the Nine Months Ended						through
	May 31,						May 31,
	2011			2010			2011

CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss)	$	(776,567	)	$	(366,844	)	$	(1,567,381	)
(Increase) Decrease in Trade Accounts Receivable		(5,395	)		-			(5,395	)
(Increase) Decrease in Inventory		(7,986	)		-			(7,986	)
(Increase) Decrease in Employee Receivable		(2,952	)		(1,396	)		(4,348	)
(Increase) Decrease in Due From Other		-			-			-
Increase (Decrease) in Accounts Payable		(3,405	)		16,413			17,940
(Increase) Decrease in Prepaid Expenses		(6,995	)		(8,100	)		(89,595	)
(Increase) Decrease in Deposits		1,059			(1,059	)		-
Increase (Decrease) in Accrued Expenses		(89,630	)		53,177			38,464
Stock issued as Compensation to Employees		203			179,835			204,764
Stock issued to Prepay Expenses		-			45,000			-
Stock issued as Compensation to Consultants		19			-			200,019
Net Cash Provided by (Used in) Operating Activities		(891,649	)		(82,974	)		(1,213,518	)

CASH FLOWS FROM FINANCING ACTIVITIES
(Increase) Decrease in Property and equip. additions (net)		(17,471	)		-			(17,471	)
(Increase) Decrease in Goodwill from acquisition		(405,000	)		-			(405,000	)
(Increase) Decrease in Intangible Assets (net)		(2,024	)		-			(2,024	)
Increase (Decrease) in Common stock issued for cash		2,217			50			3,717
Increase (Decrease) in Common stock issued for expenses		55			-			55
Increase (Decrease) in Due to Affiliate		58,000			-			58,000
Increase (Decrease) in Due to Shareholder		-			-			-
Increase (Decrease) in Notes Payable		97,329			124,072			253,896
Stock issued in Payment of Debt		637			-			637
Increase (Decrease) in Contributed Capital		259,058			4,263			274,161
Increase (Decrease) in Additional Paid In Capital		954,575			4,950			1,103,483
Net Cash Provided by Financing Activities		947,376			133,335			1,269,454

Net Increase in Cash		55,727			50,361			55,936

Cash at Beginning of Period		209			250			-

Cash at End of Period	$	55,936		$	50,611		$	55,936

SUPPLEMENTAL CASH FLOW INFORMATION

Interest Paid	$	26,782		$	-
Taxes Paid	$	-		$	-

The Accompanying Notes are an Integral Part of these Financial Statements.

Entest BioMedical, Inc.

(A Development Stage Company)

Notes to Consolidated Financial Statements

As of May 31, 2011

NOTE 1. - BASIS OF PRESENTATION

The interim financial statements included herein, presented in accordance with United States generally accepted accounting principles and stated in US dollars, have been prepared by Entest BioMedical, Inc. (“the Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.

These statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein. It is suggested that these condensed consolidated interim financial statements be read in conjunction with the financial statements of the Company for the period ended August 31, 2010 and notes thereto included in the Company's 10-K annual report. The Company follows the same accounting policies in the preparation of interim reports.

Results of operations for the interim periods are not indicative of annual results.

NOTE 2. – CURRENT BUSINESS OF THE COMPANY

On December 17, 2010 the Company entered into an Asset Purchase Agreement for the purchase of all the assets, tangible and intangible, of Pet Pointers, Inc., a California corporation doing business as McDonald Animal Hospital in Santa Barbara, California. The purchase price was $503,000 payable in cash, Company restricted stock, an earnout, and assumption of debt. The cash and stock was to be delivered by January 10, 2011. As at May 31, 2011 a portion of the cash is being held for payment, to be delivered upon completion of certain conditions of the contract.

NOTE 3. - GOING CONCERN

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company generated net losses of $1,567,381 during the period from August 22, 2008 (inception) through May 31, 2011. This condition raises substantial doubt about the Company's ability to continue as a going concern. The Company's continuation as a going concern is dependent on its ability to meet its obligations, to obtain additional financing as may be required and ultimately to attain profitability. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Management plans to raise additional funds by obtaining governmental and non-governmental grants as well as offering securities for cash. Management has raised $242,500 in the nine months ended May 31, 2011. There is no guarantee that the Company will be able to raise additional capital through offerings. Management can give no assurance that any governmental or non-governmental grant will be obtained by the Company despite the Company’s best efforts.

NOTE 4. - DEVELOPMENT STAGE

The Company is a development stage company that devotes substantially all of its efforts in the development of its plan to acquire veterinary hospitals and develop and commercialize stem cell based therapies, medical devices and medical testing procedures.

NOTE 5. - RELATED PARTY TRANSACTIONS

Between September 1, 2010 and May 31, 2011, Bombardier Pacific Ventures (“Bombardier”), a company controlled by David R. Koos who is the Company’s Chief Executive Officer, made loans to the Company totaling $7,438 and accrued interest in the amount of $7,636. This loan was reduced by a stock issuance of $87,909 (210,037 shares) on April 4, 2011. Accrued interest was reduced by $11,536 (27,563 shares) on April 4, 2011. The total amount owed by the company to David R. Koos as a loan balance is zero (-0-) and as an accrued interest due to balance of $1,228, as of May 31, 2011. This loan and accrued interest are due and payable at the demand of David R. Koos and bear simple interest at a rate of 15% per annum.

During the nine months ended May 31, 2011, the President and CEO, David R. Koos made loans to the Company totaling $121,079 and accrued interest in the amount of $7,241. This loan was reduced through a cash payment in the amount of $6,000 on October 5, 2011, $4,000 on October 7, 2011 and $3,311.37 on November 1, 2011. The note was also reduced by a stock issuance of $144,888 (346,054 shares) on April 4, 2011. Accrued interest was reduced by $6,844 (16,346 shares) on April 4, 2011. Total amount owed by the Company to David R. Koos, both loan balance and accrued interest, as of May 31, 2011 is $13,007. These loans and any accrued interest are due and payable at the demand of David R. Koos and bear simple interest at the rate of 15% per annum.

NOTE 6. - INCOME TAXES

As of May 31, 2011

Deferred tax assets:
Net operating tax carry forwards	$	600,791
Other		-0-
Gross deferred tax assets		600,791
Valuation allowance		(600,791	)

Net deferred tax assets	$	-0-

As of May 31, 2011 the Company has a Deferred Tax Asset of $600,791 completely attributable to net operating loss carry forwards of approximately $1,581,028 (which expire 20 years from the date the loss was incurred) consisting of:

(a)

$ 13,647 of Net Operating Loss carry forwards acquired in the reverse acquisition of Entest BioMedical, Inc, a California corporation, and

(b)

$ 1,567,381 of Net Operating Loss carry forwards attributable to Entest BioMedical, Inc.

Realization of deferred tax assets is dependent upon sufficient future taxable income during the period that deductible temporary differences and carry forwards are expected to be available to reduce taxable income. A valuation allowance is recorded when it is “more likely-than-not” that a deferred tax asset will not be realized. In addition, the reverse acquisition in which Entest BioMedical, Inc. was involved in 2009 has resulted in a change of control. Internal Revenue Code Sec 382 limits the amount of income that may be offset by net operating loss (NOL) carryovers after an ownership change. As a result, the Company has recorded a valuation allowance reducing all deferred tax assets to $ -0-.

NOTE 7. - COMMITMENTS AND CONTINGENCIES

On June 15, 2009, Entest entered into an agreement with parent company Bio-Matrix Scientific Group Inc. (BMSN) whereby Entest has agreed to sublease approximately 3,000 square feet of office space from BMSN for 36 months commencing on June 30, 2009 and ending on June 30, 2012 for consideration consisting of monthly rental payments of $4,100 per month. Entest BioMedical Inc. currently pays monthly rent of $4,176 directly to CIF La Mesa, LP for the term indicated.

This property is utilized as office space. Entest believes that the foregoing property is adequate to meet its current needs. While it is anticipated that Entest will require access to laboratory facilities in the future, Entest believes that access to such facilities are available from a variety of sources.

On January 4, 2011, as part of the asset purchase agreement with Entest and Gregory McDonald / Pet Pointers, Inc., Entest pays on behalf of Gregory McDonald and Pet Pointers monthly rent of $7,320 (which adjusts to $7,576 in July, 2011) to Anthony Marinelli for the terms indicated in the Gregory McDonald / Pet Pointers lease. These payments are not obligations of the Company but, are payments Entest agreed to make on behalf of Gregory McDonald and Pet Pointers as part of the Asset Purchase Agreement.

On January 4, 2011, as part of the asset purchase agreement with Entest and Gregory McDonald on behalf of Pet Pointers, Inc., Entest pays on behalf of Gregory McDonald and Pet Pointers monthly payments of $1,500 to Anthony and Judi Marinelli towards the extinguishment of a total note of $78,000. These payments are not obligations of the Company but, are payments Entest agreed to make on behalf of Gregory McDonald and Pet Pointers as part of the Asset Purchase Agreement.

On January 4, 2011, as part of the asset purchase agreement with Entest and Gregory McDonald on behalf of Pet Pointers, Inc., Entest pays on behalf of Gregory McDonald and Pet Pointers an installment agreement due to the Franchise Tax Board in the amount of $11,405 with monthly payments of $400. These payments are not obligations of the Company but, are payments Entest agreed to make on behalf of Gregory McDonald and Pet Pointers as part of the Asset Purchase Agreement.

On January 4, 2011, as part of the asset purchase agreement with Entest and Gregory McDonald on behalf of Pet Pointers, Inc., Entest pays on behalf of Gregory McDonald and Pet Pointers an installment agreement due to the Internal Revenue Service in the amount of $13,595 with monthly payments of $425. These payments are not obligations of the Company but, are payments Entest agreed to make on behalf of Gregory McDonald and Pet Pointers as part of the Asset Purchase Agreement.

On February 3, 2011, a Complaint (“Complaint”) was filed in the U.S. District Court Middle District of the State of Pennsylvania against the Company, the Company’s Chairman and the Bio-Matrix Scientific Group Inc. by 18KT.TV LLC (“Plaintiffs”) seeking to recover general damages from Entest BioMedical, Inc. in excess of $125,000. The Complaint alleges breach of contract and unjust enrichment relating to an investor relations contract executed by the Company and Craig Fischer (on behalf of 18KT.TV LLC). The Compliant also seeks similar damages from Bio-Matrix Scientific Group Inc. and $50,000 in damages from David Koos (Chairman & CEO of both Entest BioMedical, Inc. and Bio-Matrix Scientific Group Inc.). The Company believes that the allegations in the complaint are without merit and intends to vigorously defend its interests in this matter. At this time, it is not possible to predict the ultimate outcome of these matters.

On May 20, 2011, the Company entered into a convertible note agreement with Asher Enterprises, Inc., in the amount of $42,500 which was received May 26, 2011. The note bears an interest rate of eight percent (8%), matures on February 23, 2012 and may be converted after 180 days from execution of this note for shares of the Company’s common stock. The note may be converted at a forty two percent (42%) discount to the average of the lowest 3 closing bid prices of the common stock during the 10 trading days prior to the conversion date. The issuance of the note amounted in a beneficial conversion feature of $14,360 on the issuing date, which has been recorded as a discount to the carrying value of the note. As of May 31, 2011, the remaining discount balance amounted to $16,498. The value of the conversion feature, $16,498, is being amortized over the life of the loan (180 days) and the Company has expensed $271 of that amount as of May 31, 2011. As a result, the carrying value of the note as of May 31, 2011 amounted to $26,002 consisting of outstanding principal of $42,500 less the discount of $16,498.

Commitments

	2011		2012		2013		2014		2015
Office lease	$	50,112	$	25,056	$	-	$	-	$	-
Veterinary clinic lease		89,376		45,456		-		-		-
Marinelli Note		18,000		18,000		18,000		18,000		18,000
IRS installment agreement		5,100		5,100		5,100		5,100		5,100
FTB installment agreement		4,800		4,800		4,800		4,800		4,800
TOTAL	$	167,388	$	98,412	$	27,900	$	27,900	$	27,900

NOTE 8. - STOCK TRANSACTIONS

In the nine months ended May 31, 2011, the Company:

On October 12, 2010, the Company issued 2,000,000 shares of common stock at five cents per share, realizing $100,000.

On November 16, 2010, the Company made a Restricted Stock Award of 45,000 restricted common shares for services. An expense of $53,100 was recorded.

On November 30, 2010, the Company made a Restricted Stock Award of 10,000 restricted common shares for services. An expense of $9,300 was recorded.

On January 3, 2011, the Company issued 38,712 shares of common stock in satisfaction of $39,989 owed by the Company.

On January 3, 2011, the Company issued 3,000 shares of restricted stock to employees as consideration for services rendered. An expense of $5,640 was recorded.

On January 3, 2011, the Company issued 10,000 shares of restricted stock to employees as consideration for services rendered. An expense of $18,800 was recorded.

On January 3, 2011, the Company issued 25,000 shares of restricted stock to its CFO as consideration for services rendered. An expense of $47,000 was recorded.

On January 4, 2011, the Company issued 9,383 shares to a consultant for broker fees. An expense of $17,640 was recognized as part of the purchase agreement with Pet Pointers, Inc.

On January 14, 2011, the Company issued 102,766 shares of restricted stock as part of the purchase agreement with Pet Pointers, Inc. An expense of $193,200 was recognized.

On January 26, 2011, the Company sold 200,000 shares at fifty cents per share, realizing $100,000.

On February 4, 2011, the Company issued 10,000 shares to a consultant for services. An expense of $42,000 was recorded.

On February 4, 2011, the Company issued 5,000 shares to an employee. An expense of $21,000 was recorded.

On March 25, 2011, the Company issued 7,000 shares of restricted stock to multiple employees as bonuses. The expense of $15,330 was recorded.

On April 1, 2011, the Company issued 50,000 shares of restricted stock to Tammy Reynolds, the Company’s CFO as consideration for completion of her first year’s employment agreement. The issuance of these 50,000 shares is recognized in Common Stock and Additional Paid In Capital. Of this amount, 10,000 shares are vested on April 1, 2011. An expense in the amount of $10,000 was recorded into Additional Paid In Capital. The remaining 40,000 shares will vest over the next four years pro rata.

On April 1, 2011, Entest BioMedical, Inc. reached an agreement with its Chairman & CEO David Koos regarding salary reduction, accrued payroll and the repayment of debt owed by the Company to Mr. Koos. Under the terms of this arrangement, Mr. Koos will accept a reduction in salary from $25,000 per month to $10,000 per month, with half of this amount payable in restricted stock. Mr. Koos also agreed to cancel $259,058 in accrued payroll and an equal increase to contributed capital.

On April 4, 2011, the Company issued 600,000 shares of restricted stock to David Koos, CEO, in lieu of outstanding loans to Mr. Koos and to Bombardier, a company controlled by Mr. Koos. The loan balances and accrued interest were paid in the amount of $251,178.

On May 3, 2011, the Company issued 17,600 shares to Pet Pointers, Inc. in the purchase of their accounts receivable. An accounts receivable asset was booked in the amount of $17,600.

NOTE 9. - STOCKHOLDERS' EQUITY

The stockholders' equity section of the Company contains the following classes of capital stock as of May 31, 2011:

Common Stock:

$0.001 par value, 70,000,000 shares authorized 20,686,501 shares issued and outstanding as of May 31, 2011.

Preferred Stock:

$0.001 par value 5,000,000 shares authorized -0- shares issued and outstanding as of May 31, 2011.

NOTE 10. - SUBSEQUENT EVENTS

Events subsequent to August 31, 2010 have been evaluated through July 12, 2011, the date these statements were available to be issued, to determine whether they should be disclosed.

On June 6, 2011, the Board of Directors of the Company authorized 100,000 shares of Series AA Preferred Stock with a par value of $0.001.

On June 9, 2011, the Company issued 5,000 shares of Series AA Preferred Stock to David Koos, the Company’s CEO as payment of Accrued Salary in the amount of $2,000.

On July 5, 2011, the Company entered into a second convertible note agreement with Asher Enterprises, Inc., in the amount of $37,500 which was received July 11, 2011. The note bears an interest rate of eight percent (8%), matures on April 11, 2012 and may be converted after 180 days from execution of this note for shares of the Company’s common stock. The note may be converted at a forty five percent (45%) discount to the average of the lowest 3 closing bid prices of the common stock during the 10 trading days prior to the conversion date. The issuance of the note amounted in a beneficial conversion feature of $47,425 on the issuing date.

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

CERTAIN FORWARD-LOOKING INFORMATION

Information provided in this Quarterly report on Form 10Q may contain forward-looking statements within the meaning of Section 21E or Securities Exchange Act of 1934 that are not historical facts and information. These statements represent the Company's expectations or beliefs, including, but not limited to, statements concerning future and operating results, statements concerning industry performance, the Company's operations, economic performance, financial conditions, margins and growth in sales of the Company's products, capital expenditures, financing needs, as well assumptions related to the forgoing. For this purpose, any statements contained in this Quarterly Report that are not statement of historical fact may be deemed to be forward-looking statements. These forward-looking statements are based on current expectations and involve various risks and uncertainties that could cause actual results and outcomes for future periods to differ materially from any forward-looking statement or views expressed herein. The Company's financial performance and the forward-looking statements contained herein are further qualified by other risks including those set forth from time to time in the documents filed by the Company with the Securities and Exchange Commission, including the Company's most recent Form 10K for the year ended August 31, 2010. All references to” We”, “Us”, “Company” or the “Company” refer to Entest BioMedical, Inc.

Material Changes in Financial Condition

As of May 31, 2011, we had Cash on Hand of $55,936 and as of August 31, 2010 we had Cash on Hand of $206.

The increase in Cash on Hand of approximately 27,053 % is primarily attributable to additional indebtedness incurred by the Company as well as fees generated by the McDonald Animal Hospital offset primarily by operating expenses incurred by the Company. The Company did not begin operating the McDonald Animal Hospital (a full service veterinary clinic) until January 4, 2011 when the business was acquired from Dr. Gregory McDonald, DVM and Pet Pointers, Inc.

As of May 31, 2011, we had Trade Accounts Receivable of $5,395 and as of August 31, 2010 we had Trade Accounts Receivable of $-0-.

The increase in Trade Accounts Receivable is attributable to amounts due to the Company by customers of the McDonald Animal Hospital for veterinary services rendered.

As of May 31, 2011, we had Inventory of $7,986 and as of August 31, 2010 we had Inventory of $-0-.

The increase in Inventory is attributable to inventory held by the McDonald Animal Hospital.

As of May 31, 2011 we had Prepaid Expenses of $89,595 and as of August 31, 2010 we had Prepaid Expenses of $82,600.

The increase in Prepaid Expenses of approximately 8% is primarily attributable to increases in prepayments of consulting services rendered to the Company offset by a decrease in prepaid rent of $4,100.

As of May 31, 2011 we had Employee Receivable of $4,349 and as of August 31, 2010 we had an Employee Receivable of $1,396.

The increase in Employee Receivable of approximately 210% is attributable to $4,349 paid by the Company on behalf of the former owner of the McDonald Animal Hospital for liabilities incurred by that business prior to its acquisition by the Company offset by the application by the Company of $1,396 of Employee Receivables towards bonus earned.

As of May 31, 2011 we had Deposits of $ 0 and as of August 31, 2010 we had Deposits of $1,059.

The decrease in Deposits of 100% is attributable to application of the Deposit towards utility expenses incurred

As of May 31,2011 we had Property & Equipment (Net of Accumulated Depreciation) of $17,471 and as of August 31, 2010 we had Property & Equipment (Net of Accumulated Depreciation) of $-0-.

The increase in Property & Equipment (Net of Accumulated Depreciation) was due to the equipment and furniture purchased in the acquisition of the business of the McDonald Animal Hospital.

As of May 31, 2011, we had Goodwill of $405,000 and as of August 31, 2010 we had Goodwill of $-0-.

The increase in Goodwill is due to the goodwill purchased in connection with the acquisition the business of the McDonald Animal Hospital.

As of May 31, 2011, we had Intangible Assets (Net of Accumulated Amortization) of $2,024 and as of August 31, 2010 we had Intangible Assets (Net of Accumulated Amortization) of $-0-.

The increase in Intangible Assets (Net of Accumulated Amortization) is attributable to the software acquired in connection with the acquisition the business of the McDonald Animal Hospital.

As of May 31, 2011 we had Accounts Payable of $17,938 and as of August 31, 2010 we had Accounts Payable of $21,342.

The decrease in Accounts Payable of approximately 16% is primarily attributable to decreases in outstanding obligations of the Company incurred in the course of business.

As of May 31, 2011 we had Notes Payable of $227,894 and as of August 31, 2010 we had Notes Payable of $156,566.

The increase in Notes Payable of approximately 45% is primarily attributable to approximately $96,018 of Notes Payable incurred as a result of the acquisition of the McDonald Animal Hospital, Inc .and approximately $259,966 in additional borrowings offset by $284,658 in principal repayments of Notes Payable.

As of May 31, 2011 we had Convertible Notes Payable (net of unamortized discount) of $26,002 and as of August 31, 2010 we had Convertible Notes Payable (net of unamortized discount) of $-0-.

The increase in Convertible Notes Payable (net of unamortized discount) is attributable to the issuance of a convertible promissory note to Asher Enterprises, Inc. in the amount of $42,500. The issuance of the Asher Note amounted in a beneficial conversion feature of $16,498 as of May 31, 2011, which has been recorded as a discount to the carrying value of the note.

As of May 31, 2011 we had Amounts Due to Affiliates/Other of $58,000 and as of August 31, 2010 we had Amounts Due to Affiliate/Other of $-0-.

The increase in Amounts Due to Affiliate/Other is attributable to $50,000 due to Dr. Gregory McDonald, DVM pursuant to the acquisition of the business of the McDonald Animal Hospital and $8,000 due and payable to TheraCyte, Inc. pursuant to an agreement entered into by and between the Company and TheraCyte, Inc.

As of May 31, 2011 we had Accrued Expenses of $38,465 and as of August 31, 2010 we had Accrued Expenses of $128,095.

The decrease in Accrued Expenses of approximately 70% is primarily attributable to the forgiveness of $259,058 of Salaries accrued but unpaid due to David Koos, the payment of $19,821 of accrued interest, and the payment of $51,287 in accrued taxes offset by the incurring of approximately $240,412 of expenses accrued but unpaid.

Material Changes in Results of Operations

Revenues were $110,455 for the three months ended May 31, 2011 and -0- for the three months ended May 31, 2010. Net losses were $191,570 for the three months ended May 31, 2011 and $123,210 for the same period ended 2010.

The increase in Net Losses of approximately 55% is primarily attributable to increases in Costs of Revenue, General and Administrative Expenses, Rental Expenses, Research and Development costs and Consulting Expenses offset by revenues provide by the McDonald Animal Hospital.

Revenues were $195,258 for the nine months ended May 31, 2011 and -0- for the nine months ended May, 2010. Net losses were $776,567 for the nine months ended May 31, 2011 and $366,844 for the same period ended 2010.

The increase in Net Losses of approximately 110% is primarily attributable to increases in Costs of Revenue, General and Administrative Expenses, Rental Expenses, Research and Development costs and Consulting Expenses offset by revenues provide by the McDonald Animal Hospital.

Liquidity and Capital Resources

As of May 31, 2011 we had $55,936 cash on hand and current liabilities of $282,179 (exclusive of convertible debt discount attributable to a beneficial conversion feature) such liabilities consisting of Accounts Payable, Notes Payable, Convertible Notes Payable, Amounts due to Affiliates and Others and Accrued Expenses.

We feel we will not be able to satisfy its cash requirements over the next twelve months and shall be required to seek additional financing.

We currently plan to raise additional funds primarily by obtaining governmental and non-governmental grants, offering securities for cash and acquiring existing vet clinics with the ability to generate cash flow to fund operations.

We have yet to decide what type of offering we will use or how much capital we will raise. There is no guarantee that we will be able to raise any capital through any type of offerings. We can give no assurance that any governmental or non-governmental grant will be obtained by us despite our best efforts. We cannot assure that we will be successful in obtaining additional financing necessary to implement our business plan. We have not received any commitment or expression of interest from any financing source that has given us any assurance that we will obtain the amount of additional financing in the future that we currently anticipate. For these and other reasons, we are not able to assure that we will obtain any additional financing or, if we are successful, that we can obtain any such financing on terms that may be reasonable in light of our current circumstances.

On January 4, 2011 Entest BioMedical, Inc. (“Entest CA”), a California corporation and our wholly owned subsidiary, acquired from Pet Pointers, Inc., a California corporation doing business as McDonald Animal Hospital (“Seller”), and Dr. Gregory McDonald DVM (“McDonald”) all the goodwill from McDonald and assets of Seller except cash and accounts receivables used in connection with the operation of a veterinary medical clinic located at 225 S. Milpas Street, Santa Barbara, CA 93103 (the "Business").

Consideration for the acquisition consisted of:

I. $70,000 in cash

II. $210,000 of our common shares valued at the closing price per share as of January 4, 2011

III. Payment of no more than $78,000 to a creditor of the Seller to be paid in monthly installments of $1,500 per month

IV. Payment of no more than $25,000 to additional creditors of the Seller to be paid in monthly installments of $825 per month

V. Payment of $50,000 to McDonald on the first business day of the fourth month following the closing of the acquisition (“Closing”)

We are also obligated to make payment to McDonald of that number of shares of common stock of the Company’s common stock valued at the closing bid price of the trading day immediately prior to issuance which shall equal $70,000 upon completion of the first calendar year during the Employment Period (as such period is defined in the employment agreement entered into between McDonald and Entest CA dated December 31, 2010) in which the Business generates gross sales in excess of $700,000.

Although we have acquired the Business, no assurance can be made that the Business shall generate sufficient cash flow to fund our operations nor can any assurance be made that we can one or more additional veterinary clinics in the near future or at all.

On May 20, 2011, the Company entered into a Securities Purchase Agreement with Asher Enterprises, Inc. (“Asher”) for the sale of a Convertible Promissory Note (the “Note”) in the principal amount of $42,500. The Note, which is due on February 23, 2012, bears interest at the rate of 8% per annum. At any time after 180 days from the execution of the Note, the Note is convertible into shares of the Company’s common stock at the election of Asher at a conversion price equal to a 42% discount to the average of the 3 closing bid prices of the common stock during the 10 trading day period prior to conversion.

The conversion price is reduced when the Company issues or grants i) any shares of its common stock, or ii) any warrants, rights or options (not including employee stock option plans), whether or not immediately exercisable, or iii) other securities convertible into or exchangeable for common stock, in each case for consideration (or with a conversion price) per common share less than the conversion price in effect immediately prior to the issuance or sale of such securities or instruments, or without consideration. Upon the issuance or sale of such equity securities, the conversion price shall (until another such issuance or sale) be reduced to the price equal to the price (or conversion price) of any such securities or instruments.

At any time during the period beginning on the issue date and ending on the 120th day following the issue date, the Company has the option to redeem this note and pay the note holder 140% of the unpaid principal and accrued interest. At any time during the period beginning on the 121st day from the issue date and ending on the 180th day following the issue date, the Company has the option to redeem this note and pay the note holder 150% of the unpaid principal and accrued interest.

On July 5, 2011, the Company entered into a second Securities Purchase Agreement with Asher for the sale of a Convertible Promissory Note (the “Second Note”) in the principal amount of $ $37,500. The Second Note, which matures April 11, 2012, bears interest at the rate of 8% per annum. At any time after 180 days from the execution of the Second Note, the Second Note is convertible into shares of the Company’s common stock at the election of Asher at a conversion price equal to a 45% discount to the average of the 3 closing bid prices of the common stock during the 10 trading day period prior to conversion.

At any time during the period beginning on the issue date and ending on the 120 th day following the issue date, the Company has the option to redeem this note and pay the note holder 140% of the unpaid principal and accrued interest. At any time during the period beginning on the 121st day from the issue date and ending on the 180th day following the issue date, the Company has the option to redeem this note and pay the note holder 150% of the unpaid principal and accrued interest.

We were not party to any material commitments for capital expenditures as of the end of the quarter ended May 31, 2011.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As a smaller reporting company, as defined by Rule 229.10(f) (1) of Regulation S-K, we are not required to provide the information required by this Item. We have chosen to disclose, however, that we have not engaged in any transactions, issued or bought any financial instruments or entered into any contracts that are required to be disclosed in response to this item.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company's Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. The Company's disclosure controls and procedures are designed to provide a reasonable level of assurance of achieving the Company's disclosure control objectives. The Company's Principal Executive Officer and Principal Financial Officer have concluded that the Company's disclosure controls and procedures are, in fact, effective at this reasonable assurance level as of the period covered.

Changes in Internal Controls over Financial Reporting

In connection with the evaluation of the Company's internal controls during the period commencing on March 1, 2011 and ending May 31, 2011, both the Company's Principal Executive Officer and Principal Financial Officer have determined that there were no changes to the Company's internal controls over financial reporting that have been materially affected, or is reasonably likely to materially effect, the Company's internal controls over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On March 25, 2011 the Company issued 7,000 common shares (“Shares”) to employees as consideration for services rendered.

The Shares were issued pursuant to Section 4(2) of the Securities Act of 1933, as amended. No underwriters were retained to serve as placement agents for the sale. The shares were sold directly through our management. No commission or other consideration was paid in connection with the sale of the shares. There was no advertisement or general solicitation made in connection with this Offer and Sale of Shares.

A legend was placed on the certificate that evidences the Shares stating that the Shares have not been registered under the Act and setting forth or referring to the restrictions on transferability and sale of the Shares.

On April 1, 2011, the Company issued 50,000 common shares (“Shares”) to Tammy Reynolds, the Company’s Chief Financial Officer as consideration for services.

On April 4, 2011, the Company issued 600,000 common shares (“Shares”) to David Koos, the Company’s Chief Executive Officer, in satisfaction of $251,178 owed by the Company to David Koos and Bombardier Pacific Ventures, Inc.

On May 3, 2011, the Company issued 17,600 common shares (“Shares”) to Pet Pointers, Inc. as consideration for the purchase of accounts receivable valued at $17,600.

On June 9, 2011, the Company issued 5,000 shares of Series AA Preferred Stock (“Shares”) to David Koos in satisfaction of $2,000 of accrued salaries owed to him by the Company.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Reserved

None.

Item 5. Other Information

None

Item 6. Exhibits

31.1	Certification of Chief Executive Officer

31.2	Certification of Chief Financial Officer

32.1	Certification of Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act of 2002

32.2	Certification of Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002

SIGNATURES

In accordance with the requirements of the Exchange Act, the Company caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Entest BioMedical, Inc.
	a Nevada corporation

By:	/s/ David R. Koos
	David R. Koos
	Chief Executive Officer
	Date: July 12, 2011

Attached files

ENTEST GROUP, INC. Reports

Also read