ENTEST GROUP, INC. - FORM 10-Q

Attached files

file	filename
EX-31.1 - ENTEST GROUP, INC.	entest_ex31-1.htm
EX-32.1 - ENTEST GROUP, INC.	entest_ex32-1.htm
EX-32.2 - ENTEST GROUP, INC.	entest_ex32-2.htm
EX-31.2 - ENTEST GROUP, INC.	entest_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 February 28, 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 March 29, 2011, 20,011,901 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]

ENTEST BIOMEDICAL, INC.

Form 10-Q

Table of Contents

	Page
PART I
Item 1. Financial Statements	3
Item 2. Management Discussion and Analysis of Financial Condition and Result of Operations	12
Item 3. Quantitative and Qualitative Disclosures About Market Risk	17
Item 4. Submission of Matters to a Vote of Security Holders	18

PART II
Item 1. Legal Proceedings	18
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	18
Item 3. Defaults Upon Senior Securities	21
Item 4. Reserved	21
Item 5. Other Information	21
Item 6. Exhibits	21

Signatures	22

PART I - FINANCIAL INFORMATION

Item 1. - Financial Statements

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

	As of			As of
	February 28,			August 31,
	2011			2010
	(Unaudited)
ASSETS
Current Assets
Cash	$	12,771		$	206
Trade accounts receivable, less allowance for uncollectible accounts
of $0 and $0 at August 31, 2010 and February 28, 2011, respectively		3,610			-
Inventory		24,045			-
Current Portion of Prepaid Expenses		65,112			54,200
Employee Receivable		24			1,396
Current Portion of Deposits		4,649			-
Due from Other		5,155			-
Total Current Assets		115,366			55,802

Property & Equipment (Net of Accumulated Depreciation)		19,568			-
Goodwill		405,000			-
Intangible Assets (Net of Accumulated Amortization)		2,218			-

Long Term Assets
Non Current Portion of Prepaid Expenses		23,388			28,400
Non Current Portion of Deposits		696			1,059
Total Long Term Assets		24,084			29,459

TOTAL ASSETS	$	566,236		$	85,261

LIABILITES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable	$	30,116		$	21,342
Notes Payable		249,848			156,566
Due to Affiliate / Other		64,649			-
Accrued Expenses		287,436			128,095
Total Current Liabilities		632,049			306,003

Long Term Liabilities
Notes Payable		93,095			-
Total Long Term Liabilities		93,095			-

TOTAL LIABILITIES		725,144			306,003

STOCKHOLDERS' EQUITY
Common Stock, $0.001 par value, 70,000,000 shares
authorized, 17,553,040 and 20,011,901 shares issued and
outstanding as of August 31, 2010 and February 28, 2011		20,010			17,553
Preferred Stock, $0.001 par value 5,000,000 shares authorized, 0 shares
issued and outstanding as of August 31, 2010 and February 28, 2011		-			-
Additional Paid in Capital		1,181,789			537,415
Contributed Capital		15,104			15,104
Accumulated Deficit		(1,375,811	)		(790,814	)

Total Stockholders' Equity		(158,908	)		(220,742	)

TOTAL LIABILITIES & STOCKHOLDERS' EQUITY	$	566,236		$	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						Six Months Ended						through
	February 28,						February 28,						February 28,
	2011			2010			2011			2010			2011

REVENUES
Total Revenues	$	84,803		$	-		$	84,803		$	-		$	84,803
TOTAL REVENUE		84,803			-			84,803			-			84,803

Cost of Revenue		14,492						14,492						14,492
GROSS PROFIT		70,311			-			70,311			-			70,311

COSTS AND EXPENSES
Research and Development		42,502			4,654			93,788			4,654			124,721
Rent Costs		27,168			12,300			39,620			24,600			97,020
General and Administrative		270,831			84,363			420,785			197,747			869,235
Incorporation Costs		-			-			-			-			408
Consultant's Expenses		62,883			6,454			86,859			16,111			333,329
Miscellaneous Expenses		-			-			-			-			78

Total Costs and Expenses		403,384			107,771			641,052			243,112			1,424,791

OPERATING LOSS		(333,073	)		(107,771	)		(570,741	)		(243,112	)		(1,354,480	)

OTHER INCOME AND EXPENSE

Other Income		2						2						2
Interest Expense		(8,401	)		(493	)		(14,259	)		(522	)		(21,334	)

LOSS BEFORE INCOME TAXES		(341,471	)		(108,264	)		(584,997	)		(243,634	)		(1,375,812	)
Income Taxes		-			-			-			-			-

NET INCOME (LOSS)	$	(341,471	)	$	(108,264	)	$	(584,997	)	$	(243,634	)	$	(1,375,812	)


BASIC AND DILUTED EARNINGS
(LOSS) PER SHARE	$	(0.017	)	$	(0.006	)	$	(0.030	)	$	(0.014	)

WEIGHTED AVERAGE
NUMBER OF COMMON
SHARES OUTSTANDING		19,794,710			17,553,040			19,223,704			17,527,590

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 February 28, 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	)

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 Six Months Ended						through
	February 28,						February 28,
	2011			2010			2011

CASH FLOWS FROM OPERATING ACTIVITIES

Net (loss)	$	(584,997	)	$	(243,634	)	$	(1,375,811	)
(Increase) Decrease in Trade Accounts Receivable		(3,610	)		-			(3,610	)
(Increase) Decrease in Inventory		(24,045	)		-			(24,045	)
(Increase) Decrease in Employee Receivable		1,373			-			(23	)
(Increase) Decrease in Due From Other		(5,155	)		-			(5,155	)
Increase (Decrease) in Accounts Payable		8,773			6,493			30,118
(Increase) Decrease in Prepaid Expenses		(5,900	)		(20,400	)		(88,500	)
(Increase) Decrease in Deposits		(4,286	)		(1,059	)		(5,345	)
Increase (Decrease) in Accrued Expenses		159,341			522			287,435
Stock issued as Compensation to Employees		146			179,835			204,707
Stock issued to Prepay Expenses		-			45,000			-
Stock issued in Payment of Debt		37			-			37
Stock issued as Compensation to Consultants		19			-			200,019
Net Cash Provided by (Used in) Operating Activities		(458,304	)		(33,243	)		(780,173	)


CASH FLOWS FROM FINANCING ACTIVITIES

(Increase) Decrease in Property and equip. additions (net)		(19,568	)		-			(19,568	)
(Increase) Decrease in Goodwill from acquisition		(405,000	)		-			(405,000	)
(Increase) Decrease in Intangible Assets (net)		(2,218	)		-			(2,218	)
Increase (Decrease) in Common stock issued for cash		2,200			50			3,700
Increase (Decrease) in Common stock issued for expenses		55			-			55
Increase (Decrease) in Due to Affiliate		64,649			-			64,649
Increase (Decrease) in Due to Shareholder		-			-			-
Increase (Decrease) in Notes Payable		186,376			23,970			342,943
Increase (Decrease) in Contributed Capital		-			4,263			15,103
Increase (Decrease) in Additional Paid In Capital		644,372			4,950			793,280
Net Cash Provided by Financing Activities		470,866			33,233			792,944


Net Increase in Cash		12,562			(10	)		12,771

Cash at Beginning of Period		209			250			-


Cash at End of Period	$	12,771		$	240		$	12,771

SUPPLEMENTAL CASH FLOW INFORMATION

Interest Paid	$	8,401		$	-
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 February 28, 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 February 28, 2011 a portion of the cash remains in escrow, 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 $1,375,812 during the period from August 22, 2008 (inception) through February 28, 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 $200,000 in the six months ended February 28, 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 develop and commercialize stem cell based therapies, medical devices and medical testing procedures.

NOTE 5. - RELATED PARTY TRANSACTIONS

Between September 1, 2010 and February 28, 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. The total amount owed by the Company to Bombardier as of February 28, 2011 is $87,909. These loans and any accrued interest are due and payable at the demand of Bombardier and bear simple interest at the rate of 15% per annum.

During the six months ended February 28, 2011 the President, David R. Koos, made loans to the Company totaling $86,254 and received partial payment totaling $13,311. Total amount owed by the Company to David R. Koos as of February 28, 2011 is $120,888. 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 February 28, 2011

Deferred tax assets:
Net operating tax carry forwards	$	527,994
Other		-0-
Gross deferred tax assets		527,994
Valuation allowance		(527,994	)

Net deferred tax assets	$	-0-

As of February 28, 2011 the Company has a Deferred Tax Asset of $527,994 completely attributable to net operating loss carry forwards of approximately $1,389,458 (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)	$ 1,375,811 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. The achievement of required future taxable income is uncertain. 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 with at a yearly interest rate of 10%. 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 at a yearly interest rate of approximately 4%. 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 at a yearly interest rate of approximately 4%. 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.

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 six months ended February 28, 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.

NOTE 9. - STOCKHOLDERS' EQUITY

The stockholders' equity section of the Company contains the following classes of capital stock as of February 28, 2011:

Common Stock:

$0.001 par value, 70,000,000 shares authorized 20,011,901 shares issued and outstanding as of February 28, 2011.

Preferred Stock:

$0.001 par value 5,000,000 shares authorized -0- shares issued and outstanding as of February 28, 2011.

NOTE 10. - SUBSEQUENT EVENTS

Events subsequent to August 31, 2010 have been evaluated through March 29, 2011, the date these statements were available to be issued, to determine whether they should be disclosed.

On March 25, 2011—7,420 shares of common stock were issued to employees as a stock bonus.

On April 4, 2011 – Entest BioMedical 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. Additionally, Mr. Koos accepted 600,000 shares of newly issued restricted common stock in lieu $251,178.01 owed to Mr. Koos by Entest.

On April 6, 2011 – Entest BioMedical issued 50,000 shares of common stock to Tammy Reynolds, the Company’s CFO as completion of her first year’s employment agreement.

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

CERTAIN FORWARD-LOOKING INFORMATION

The following discussion should be read in conjunction with our condensed consolidated financial statements included elsewhere herein.

This Quarterly Report on Form 10-Q, including this Management's Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended, regarding future events and our future results that are subject to the safe harbors created under the Securities Act of 1933 and the Securities Exchange Act of 1934 (the "Exchange Act"). All statements other than statements of historical facts are statements that could be deemed forward-looking statements. These statements are based on current expectations, estimates, forecasts, and projections about the industries in which we operate and the beliefs and assumptions of our management. Words such as "expects," "anticipates," "targets," "goals," "projects," "intends," "plans," "believes," "seeks," "estimates," "continues," "endeavors," "strives," "may," variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances are forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements.

The Company, through its senior management, may from time to time make "forward looking statements" about matters described herein or other matters concerning the Company. You should consider our forward-looking statements in light of the risks and uncertainties that could cause the Company's actual results to differ materially from those which are management's current expectations or forecasts.

The Company disclaims any intent or obligation to revise or update any forward-looking statements for any reason.

Plan of Operation:

The Company intends to develop and commercialize therapies, medical devices and medical testing procedures. The Company’s current strategy is to develop and commercialize therapies, medical devices and medical testing procedures for the veterinary market. It is believed by the Company that any required regulatory approvals can be obtained much more rapidly with regard to products and services developed for the veterinary market and that the achievement of successful clinical trials and commercialization of such products and services may allow the company to enter into collaborations with larger pharmaceutical companies for the purpose of developing and commercializing these products and services for human usage.

The Company is currently focusing its efforts and allocating its resources towards:

(a) The development and commercialization of ImenVax, a therapeutic cancer vaccine for use in canines

(b) The acquisition of veterinary clinics

Principal Products and Services

The Company is currently focusing its research and development efforts toward the successful development and commercialization of the ImenVax family of canine cancer vaccines. It is anticipated by the Company that data collected from canine cancer treatment will provide support for eventual use of this therapy in humans and such therapy may be developed and commercialized by the Company in collaboration with larger and better capitalized pharmaceutical companies.

ImenVax™ I

ImenVax™ I, currently under development by the Company, is a therapeutic for canine cancer which utilizes the patient’s own tumor cells to induce the immune system to attack the remaining tumor cells. Tumor cells extracted from the patient are loaded into an implantable device where the tumor antigens are released to induce an anti-tumor response which kills the remaining tumors in the patient. The device is comprised of a chamber that includes a porous membrane wall that prevents the implanted cells from escaping the device but allows the tumor cells to survive and shed cancer antigens into the patient. The exposure of tumor specific antigens to the patient’s immune cells will stimulate anti-cancer immune responses.

ImenVax™ II

The Company is also developing a version of ImenVax™ called ImenVax™ II utilizing cell lines for sustained release of immunologically relevant cytokines for maximum anti-tumor immune responses. It is believed by the Company that this controlled release of cytokines will act as an adjuvant to be combined with patient’s tumor cells (antigens) within an implantable membrane encapsulation device.

ImenVax™ III

ImenVax™ III is a canine cancer vaccine under development by the Company which does not require tumor processing. ImenVax™ III treats existing tumors through stimulating immune responses to: a) kill tumor cells directly; b) indirectly kill tumor cells by cutting off the tumor blood supply; and c) block the ability of the tumor to suppress the immune system. ImenVax™ III’s primary mode of action is generated through trophoblasts derived from human placental tissue.

Veterinary Clinics

The Company is attempting to acquire currently existing veterinary clinics so that it may benefit from:

(a)	cash flow generated from operations during the development stage of the Company’s products and services,

(b)	utilization of the clinics for clinical testing,

(c)	utilization of the clinics as a distribution channel for the Company’s products and services.

Competitive business conditions and Entest's competitive position in the industry and methods of competition

The animal health pharmaceutical and biologics industries in which we intend to compete are highly competitive and characterized by rapid technological advancement. Many of our competitors have greater resources than we do. Also, The companion animal healthcare industry (e.g. veterinary hospitals and veterinarians) although highly fragmented is also highly competitive.

We intend to be competitive by acquiring veterinary hospitals to serve as distribution channels for the products and services we produce. We also intend to be competitive by utilizing the services and advice of individuals that we believe have expertise in this field in order to concentrate our resources. By concentrating our resources on projects in which products and services have the greatest potential, we believe we can secure a competitive advantage on products that we develop and commercialize.

To that effect, we have established a Scientific Advisory Board of (the Advisory Board) comprised of individuals who we believe have a high level of expertise in their professional fields and who have agreed to provide counsel and assistance to us in (a) determining the viability of proposed projects (b) obtaining financing for projects and (c) obtaining the resources required to initiate and complete a project in the most cost effective and rapid manner. The members of the Advisory Board have also agreed to act as consultants on a project by project basis in addition to other services they may provide under any other contractual obligations to us.

Sources and availability of raw materials and the names of principal suppliers

The supplies and materials required to conduct our operations are available through a wide variety of sources and may be obtained through a wide variety of sources.

Material Changes in Financial Condition:

As of February 28, 2011, we had Cash on hand of $12,771 and as of August 31, 2010 we had Cash on hand of $206.

The increase in Cash on hand of approximately 6,100% is primarily attributable to additional borrowings by the Company and $100,000 deposited by a shareholder with the Company in exchange for stock.

As of February 28, 2011, we had Accounts Receivable on hand of $3,610 and as of August 31, 2010 we had Accounts Receivable on hand of $-0-.

The increase in Accounts Receivable is attributable to the acquisition of Pet Pointers, Inc. dba McDonald Animal Hospital assets and reflects the amounts due to the Company by various clients.

As of February 28, 2011, we had Inventory on hand of $24,045 and as of August 31, 2010 we has Inventory on hand of $-0-.

The increase in Inventory is attributable to the acquisition of Pet Pointers, Inc. dba McDonald Animal Hospital assets and reflects the amounts of inventory items purchased by the Company.

As of February 28, 2011, we had Prepaid Expenses of $88,500 and as of August 31, 2010 we had Prepaid Expenses of $82,600.

The increase in Prepaid Expenses of approximately 7.14% is primarily attributable to increase in prepayment of services of $21,290 offset by a decrease in prepaid rent of $4,100 and a decrease in prepaid services of $11,290.

As of February 28, 2011, we had Employee Receivables of $24 and as of August 31, 2010 we had Employee Receivables of $1,396.

The decrease in Employee Receivables of approximately 98% results from an employee balance being offset with a performance bonus in the amount of $1,396 and increased with an employee purchasing veterinary services on credit for $24.

As of February 28, 2011, we had Deposits of $5,345 and as of August 31, 2010 we had Deposits of $1,059.

The increase in Deposits of approximately 404% results from net deposits of $4,649 in an escrow account regarding the acquisition of a veterinary hospital in Santa Barbara, California and reduced by San Diego Gas and Electric deposit hold released for $363.

As of February 28, 2011, we had Due from Other of $5,155 and as of August 31, 2010 we had Due from Other of $-0-.

The increase in Due from Other is due to Schubach Aviation charging us twice for services which is in the process of being corrected.

As of February 28, 2011, we had Property & Equipment (Net of Accumulated Depreciation) of $19,568 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 Pet Pointers, Inc. dba McDonald Animal Hospital assets.

As of February 28, 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 the acquisition of Pet Pointers, Inc. dba McDonald Animal Hospital assets.

As of February 28, 2011, we had Intangible Assets (Net of Accumulated Amortization) of $2,218 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 due to the software purchased in the acquisition of Pet Pointers, Inc. dba McDonald Animal Hospital assets.

As of February 28, 2011, we had Accounts Payable of $30,116 and as of August 31, 2010 we had Accounts Payable of $21,342.

The increase in Accounts Payable of approximately 41% is primarily attributable to an increase in outstanding obligations incurred in the course of business.

As of February 28, 2011, we had Notes Payable of $342,943 and as of August 31, 2010 we had Notes Payable of $156,566.

The increase in of approximately 119% is attributable to increased borrowings utilized to pay operational costs and from the debt assumed in the purchase of Pet Pointers, Inc. dba McDonald Animal Hospital assets.

As of February 28, 2011, we had Due to Affiliate / Other of $64,649 and as of August 31, 2010 we had Due to Affiliate of $-0-.

The increase in Due to Affiliate / Other is attributable to $50,000 due to Dr. McDonald for the purchase of Pet Pointers, Inc. dba McDonald Animal Hospital, $4,649 being held in escrow regarding the same purchase and for $10,000 due and payable to TheraCyte, Inc. pursuant to an agreement entered into between the Company and TheraCyte, Inc.

As of February 28, 2011, we had Accrued Expenses of $287,436 and as of August 31, 2010 we had Accrued Interest Expenses of $128,095.

The increase in Accrued Expenses of approximately 124% is attributable to an increase in salaries accrued but not paid of $141,558 due to David R. Koos our Chairman and CEO, an increase in interest accrued but not paid of approximately $9,000 due to Note holders, a decrease in interest accrued from a partial payment made of $1,441 and from an increase in accrued federal and state payroll taxes of approximately $6,414.

Material Changes in Results of Operations

Revenues were $84,803 for the three months ended February 28, 2011 and -0- for the three months ended February 28, 2010. Revenues were $84,803 for the six months ended February 28, 2011 and -0- for the six months ended February 28, 2010. Net losses were $341,471 for the three months ended February 28, 2011 and $108,264 for the same period ended 2010. Net losses were $584,997 for the six months ended February 28, 2011 and $243,634 for the same period ended 2010.

This increase in Net Losses of approximately 215% is primarily attributable to increases in research and development costs, increases in compensation, consulting and interest expenses incurred by us as well as an increase from the purchase and operations of Pet Pointers, Inc. dba McDonald Animal Hospital.

Liquidity and Capital Resources

As of February 28, 2011 we had $12,771 cash on hand and current liabilities of $632,049 such liabilities consisting of Accounts Payable, Notes Payable, amounts due to Dr. McDonald for the purchase of Pet Pointers, Inc., Accrued Expenses and Amounts due to TheraCyte, Inc.

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

We currently plan to raise additional funds by obtaining governmental and non-governmental grants as well as offering securities for cash. 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.

We are also attempting to acquire currently existing veterinary clinics so that we may benefit from cash flows generated from operations during the development stage of our products and services.

On January 4, 2011, Entest BioMedical, Inc. (“Entest CA”), a California corporation, wholly owned subsidiary of Entest BioMedical, Inc. a Nevada corporation, 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 acquire one or more additional veterinary clinics in the near future or at all.

We were not party to any material commitments for capital expenditures as of the end of the quarter ended February 28, 2011.

Off-Balance Sheet Arrangements:

We do not have any off-balance sheet arrangements.

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 management of the Company carried out an evaluation, under the supervision of the Company's Principal Executive Officer 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 management has 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

There were no changes to the Company's internal controls over financial reporting that have been materially affected, or are reasonably likely to materially affect, 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 October 7, 2010 the Company sold 2,000,000 common shares (“Shares”) to an individual investor for consideration consisting of $100,000.

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.

The proceeds were applied towards working capital and towards the purchase of the business of an existing veterinary clinic in Santa Barbara, California.

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 November 17, 2010 the Company issued 45,000 common shares (“Shares”) to contractors and consultants as consideration for services rendered.

On November 30, 2010 the Company issued 10,000 common shares (“Shares”) to a consultant as consideration for services rendered.

On January 3, 2011 the Company issued 25,000 common shares (“Shares”) to its CFO as consideration for services rendered.

On January 3, 2011 the Company issued 13,000 common shares (“Shares”) to employees as consideration for services rendered.

On January 3, 2011 the Company issued 38,712 common shares (“Shares”) in satisfaction of $39,989 of principal and interest indebtedness.

On January 4, 2011 the Company issued 9,383 common shares (“Shares”) to a consultant for services rendered.

On January 4, 2011 the Company issued 102,766 common shares (“Shares”) for the purchase of Pet Pointers, Inc. dba McDonald Animal Hospital.

On January 26, 2011 the Company sold 200,000 common shares (“Shares”) to an individual investor for consideration consisting of $100,000.

The proceeds were applied towards working capital.

On February 4, 2011 the Company issued 10,000 common shares (“Shares”) to a consultant for services rendered.

On February 4, 2011 the Company issued 5,000 common shares (“Shares”) to a consultant for services rendered.

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: April 13, 2011

ENTEST GROUP, INC. - FORM 10-Q - April 13, 2011

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ENTEST GROUP, INC. Reports