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EX-32.1 - Rivulet Media, Inc.biom_ex32-1.htm
EX-31.1 - Rivulet Media, Inc.biom_ex31-1.htm
EX-32.2 - Rivulet Media, Inc.biom_ex32-2.htm
EX-31.2 - Rivulet Media, Inc.biom_ex31-2.htm
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

Quarterly Report under Section 13 or 15 (d) of
Securities Exchange Act of 1934

For Period ended March 31, 2011

Commission File Number 0-32201

BIO-MATRIX SCIENTIFIC GROUP, INC.
(Exact name of registrant as specified in its charter)
 
DELAWARE
33-0824714
(State of Incorporation)
(I.R.S. Employer Identification No.)
   
4700 Spring Street, Suite 203, La Mesa, California
91942
(Address of Principal Executive Offices)
(Zip Code)

(619) 398-3517
(Registrant's telephone number, including area code)


Check whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes  o      No x

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

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934) (check one): Yes   o No   x

There were 72,189,747 shares of Common Stock outstanding as of  June 17, 2011.




 
 

 

PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
 
BIO-MATRIX SCIENTIFIC GROUP, INC.
A Development Stage Company
CONSOLIDATED BALANCE SHEET


   
March 31, 2011
   
September 30, 2010
 
   
(unaudited)
       
ASSETS
           
             
Cash
  $ 433     $ 306  
Prepaid Expenses
    39,925       40,425  
Employee Receivable
    0       1,396  
Cash in Escrow
    0          
                 
     Total Current Assets
    40,358       42,127  
PROPERTY & EQUIPMENT (Net of Accumulated Depreciation)
    538,869       538,869  
Other Assets
    4,200       26,566  
Investment in Entest
    41,898,162          
Total Assets
  $ 42,481,589     $ 607,562  
                 
 LIABILITIES AND STOCKHOLDERS' EQUITY
               
                 
Accounts Payable
    130,507       251,528  
Notes Payable
    112,869       247,669  
Accrued Payroll
    477,000       444,500  
Accrued Payroll Taxes
    23,780       27,298  
Accrued Interest
    129,579       145,426  
Accrued Expenses
    5,000       5,000  
Convertible Note Payable
    313,701       333,400  
Due to Shareholder
    0          
Due to Affiliate
    73,500          
Current portion, note payable to affiliated party
    1,000       1,000  
     Total Current Liabilities
    1,266,936       1,455,821  
                 
Total Liabilities
    1,266,936       1,455,821  
                 
Preferred Stock ($.0001 par value) 20,000,000 shares authorized; 1,963,821 issued and outstanding as of March  31, 2011 and September 30, 2010 respectively
    197       197  
Series B Preferred Shares ($.0001 par value) 2,000,000 shares authorized;  725,409 issued and outstanding as of March 31, 2011 and September 30, 2010
    73       73  
Common Stock ($.0001 par value 80,000,000 shares authorized; 72,189,747 and 70,404,033 shares issued and outstanding as of March 31, 2011 and September 30 , 2010 respectively
    7,218       7,040  
Additional Paid in Capital
    11,498,731       10,931,758  
Contributed Capital
    509,355       509,355  
Retained Earnings (Deficit) accumulated during the development stage
    29,837,878       (11,989,566 )
Equity in Earnings (Losses) of Entest BioMedical, Inc.
    (101,838 )        
Deficit attributable to noncontrolling interest in subsidiary
    (536,961 )     (307,116 )
                 
Total Stockholders' Equity (Deficit)
    41,214,653       (848,259 )
                 
Total Liabilities and Shareholders' Equity (Deficit)
  $ 42,481,589     $ 607,562  

The accompanying Notes are an integral part of these Financial Statements

 
2

 

BIO-MATRIX SCIENTIFIC GROUP, INC.
(A Development Stage Company)
Consolidated Statements of Operations
(Unaudited)

   
Quarter Ended
   
Quarter Ended
   
Six Months Ended
   
Six Months Ended
   
From Inception (August 2,2005)
 
   
March 31, 2011
   
March 31, 2010
   
March 31, 2011
   
March 31, 2010
   
to March 31, 2011
 
                               
REVENUES
  $ -     $ -     $ -     $ -     $ -  
                                         
COST AND EXPENSES
                                       
Research and Development
            128,254       51,286       172,749       1,255,171  
General and Administrative
    100,697       348,337       385,392       593,271       5,940,445  
Depreciation and Amortization
                                    2,668  
Consulting and Professional Fees
    5,290       27,656       32,236       55,385       4,779,258  
Impairment of Goodwill and Intangibles
                                    34,688  
                                         
Total Costs and Expenses
    105,987       404,247       468,914       821,405       12,012,230  
                                         
OPERATING LOSS
    (105,987 )     (404,247 )     (464,914 )     (821,405 )     (12,012,230 )
                                         
OTHER INCOME & (EXPENSES)
                                       
                                         
Interest Expense
    (14,019 )     (26,726 )     (34,212 )     (58,170 )     (329,918 )
Interest Income
                                    306  
Other Income
    146,791               146,791               176,891  
Gain on deconsolidation of Entest BioMedical
    42,182,649               42,182,649               42,182,649  
Loss on sale of Available for Sale Securities
                                    (487,900 )
Other Expense
                                    (166 )
Other Losses attributable to  Entest BioMedical, Inc.
    (228,715 )             (228,715 )             (228,715 )
                                         
Total Other Income & (Expense)
    42,086,706       (26,726 )     42,066,513       (58,170 )     41,313,147  
                                         
NET INCOME (LOSS)
    41,980,719       (430,973 )     41,597,599       (879,575 )     29,300,917  
                                         
(NET INCOME) LOSS attributable to
                                       
noncontrolling interest
    112,525       41,293       229,845       94,047       536,961  
                                         
NET INCOME (LOSS)
    42,093,244               41,827,444               29,837,878  
Equity in NET INCOME (LOSS) of Entest BioMedical
    (101,838 )             (101,838 )             (101,838 )
                                         
NET INCOME (LOSS) available to Common Shareholders
    41,991,406       (389,680 )     41,725,606       (785,528 )     29,736,040  
                                         
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE
    0.589       (0.0077 )     0.58921       (0.0164 )        
                                         
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
    71,237,366       47,811,201       70,816,121       47,811,201          

The accompanying Notes are an integral part of these Financial Statements

 
3

 

BIO-MATRIX SCIENTIFIC GROUP, INC.
A Development Stage Company
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
 
   
For the Six Months Ended
   
For The Six Months Ended
   
From Inception
(August 2,2005)
 
   
March 31. 2011
   
March 31, 2010
   
to March 31, 2011
 
                   
CASH FLOWS FROM OPERATING ACTIVITIES
                 
Net Income (loss)
  $ 41,725,606     $ (785,528 )   $ 29,736,040  
Adjustments to reconcile net Income to net cash
                       
(used in) provided by operating activities:
                       
Depreciation expense
                    2,667  
Stock issued for compensation to employees
    71,440       179,835       1,186,342  
Stock issued for services rendered by consultants
    62,400       47,000       4,083,134  
Stock issued for prepaid expenses
            13,665       313,665  
Stock issued for interest
    6,821       30,269       138,547  
Changes in operating assets and liabilities:
                       
(Increase) decrease in prepaid expenses
    500       54,156       (39,925 )
Increase (Decrease) in Accounts Payable
    (121,021 )     (101,574 )     130,508  
Increase (Decrease) in Accrued Expenses
    13,135       (133,705 )     665,300  
Increase (Decrease) in Other Comprehensive Income
                    (50,000 )
(Increase) Decrease in Employee Receivable
    1,396               0  
Increase (Decrease) in Due to Affiliate
    73,500               73,500  
Non cash increase in Investment in Entest
    (42,000,000 )             (42,000,000 )
Loss attributable to Non Controlling interest in subsidiary
    (229,845 )     (94,047 )     (536,961 )
Equity in Loss of Entest
    101,838               101,838  
                         
Net Cash Provided by (Used in) Operating Activities
    (294,230 )     (789,929 )     (6,195,345 )
                         
CASH FLOWS FROM INVESTING ACTIVITIES
                       
( Increase) Decrease in Other Assets
    22,366       (1,059 )     (4,200 )
Purchases of fixed assets
                    (541,536 )
Purchase of Other Assets
                       
Preferred Stock retired
                       
Preferred Stock sold for cash
                       
(Additions) Decreases to Securities Available for Sale
                       
                         
Net Cash Provided by (Used in) Investing Activities
    22,366       (1,059 )     (545,736 )
                         
CASH FLOWS FROM FINANCING ACTIVITIES
                       
Preferred Stock issued for cash
                    339  
Common stock issued for cash
                    1,630  
Common Stock issued for Debt
    89,992       939,345       1,296,053  
Common Stock issued for Accrued Salaries
            304,500       424,500  
Common Stock issued for expenses
                       
Common stock issued in merger
                       
Additional paid in Capital
    336,498       5,000       2,017,417  
Principal borrowings on Convertible Debentures
    (19,699 )     (170,000 )     313,701  
Principal borrowings (repayments) on notes and
                       
Convertible Debentures
    (134,800 )     (354,836 )     932,325  
(Increase) Decrease in Securities available for Sale
                       
Contributed Capital
                    509,353  
Net Borrowings From Related Parties
                    1,195,196  
Increase (Decrease) in Notes from Affiliated party
                    1,000  
                         
Net Cash Provided by (Used in) Financing Activities
    271,991       774,009       6,741,514  
                         
Net Increase (Decrease) in Cash
    127       (17,000 )     433  
                         
Cash at Beginning of Period
    306       17,750       0  
Cash at End of Period
  $ 433     $ 750     $ 433  

The accompanying Notes are an integral part of these Financial Statements
 
4

 


BIO-MATRIX SCIENTIFIC GROUP, INC. AND SUBSIDIARY
(A Development Stage Company)
Notes to condensed consolidated Financial Statements
As of March 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 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 September 30, 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. GOING CONCERN

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. Exclusive of a gain recognized by the Company as a result of the deconsolidation of Entest BioMedical, Inc. (“Entest”) on February 4, 2011 of $42,182,649 the Company generated net losses of $12,881,732 (including $536,961 in net losses attributable to non-controlling interest in Entest BioMedical, Inc.) during the period from August 2, 2005 (inception) through March 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. 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 offering securities for cash. Management has yet to decide what type of offering the Company will use or how much capital the Company will raise. There is no guarantee that the Company will be able to raise any capital through any type of offerings.

NOTE 3. INCOME TAXES

As of March 31, 2011
 
Deferred tax assets:
     
Net operating tax carry forwards
 
$
4,179,953
 
Other
   
-0-
 
Gross deferred tax assets
   
4,179,953
 
Valuation allowance
   
(4,179,953)
 
         
Net deferred tax assets
 
$
-0-
 
 
As of March 31 , 2011 the Company has a Deferred Tax Asset of $4,179,953 completely attributable to net operating loss carry forwards  of approximately $12,293,982  ( which expire 20 years from the date the loss was incurred) consisting  of

(a) $38,616, of Net Operating Loss Carry forwards acquired in the reverse acquisition of BMSG and
(b) $12,255,366  attributable to the Company, Bio-Matrix Scientific Group, Inc (BMSG), a wholly owned Nevada corporation which shares the name of the Company and  pre deconsolidation results of Entest BioMedical, Inc. a Nevada corporation which is approximately 49% owned by the Company as of  March 31, 2011.

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 of BMSG 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 the Company recorded a valuation allowance reducing all deferred tax assets to 0.

 
5

 

NOTE 4. RELATED PARTY TRANSACTION

Between  January 1, 2011 and  March 31, 2011  David Koos, the Company’s CEO, made loans to the Company totaling  S10,104  dollars. The total amount owed by the Company to Mr. Koos as of  March 31, 2011 is $28,964. The Company is also indebted as of March 31, 2011 to Bombardier Pacific Ventures, a company controlled by Mr. Koos, in the amount of $49,963. These loans and any accrued interest are due and payable at the demand of Mr. Koos and bear simple interest at the rate of 15% per annum.

NOTE 5. STOCK TRANSACTIONS

Transactions, other than employees' stock issuance, are in accordance with paragraph 8 of SFAS 123. Thus issuances shall be accounted for based on the fair value of the consideration received. Transactions with employees' stock issuance are in accordance with paragraphs (16-44) of SFAS 123. These issuances shall be accounted for based on the fair value of the consideration received or the fair value of the equity instruments issued, or whichever is more readily determinable.

On February 17, 2011 the Company  issued 1,785,714 common shares in satisfaction of $50,000 face value of convertible debentures

NOTE 6. STOCKHOLDERS' EQUITY

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

* Preferred stock, $ 0.0001 par value; 20,000,000 shares authorized:
1,963,821 Preferred shares issued and outstanding.
4,852 Series AA Preferred Shares issued and outstanding.
725,409 Series B Preferred Shares issued and outstanding.
 
* Common stock, $ 0.0001 par value; 80,000,000 shares authorized: 72,189,747 shares issued and outstanding.

NOTE 7. CONVERTIBLE DEBENTURES

On November 14, 2007 the Company sold a $50,000 face value convertible debenture (“Convertible Debenture”) for an aggregate purchase price of $50,000 to one purchaser.
 
Interest on the Convertible Debenture shall accrue at a rate of 12% per annum based on a 365 day year. The Company shall pay simple interest to the holder on the aggregate unconverted and then outstanding principal amount of this Convertible Debenture at the rate of 12% per annum, payable on the maturity Date, which is November 14, 2009.
 
At any time subsequent to the expiration of a six month period since either of:
 
(i)           that Registration Statement, as amended, filed with the SEC on Form SB-2 relating to the sale of an aggregate of 17,195,263 shares of the common stock of the Company  by certain selling shareholders (the “Selling Shareholders Registration Statement”) has been declared effective by the SEC or
 
(ii)           the Selling Shareholder Registration Statement has been withdrawn by the Company, the holder may convert the Convertible Debenture, in whole but not in part, into the Company’s common shares at the conversion rate of $0.15 per Share.

Subsequent to any conversion, the holder  shall have the right, upon written demand to Company (“Registration Demand”), to cause Company, within ninety days of the Registration Demand, to prepare and file with the United States securities and Exchange Commission (“SEC”) a Registration Statement in order that the Conversion Shares may be registered under the Securities Act of 1933, as amended, and use its reasonable best efforts to cause that Registration Statement to be declared effective by the SEC. There is no penalty to the Company in the event the registration Statement is not declared effective by the SEC.
 
On November 30, 2007, the Company sold $75,000 face value convertible debenture (“Convertible Debenture”) for an aggregate purchase price of $75,000 to one purchaser.
 
Interest on the Convertible Debenture shall accrue at a rate of 12% per annum based on a 365 day year. The Company shall pay simple interest to the holder on the aggregate unconverted and then outstanding principal amount of this Convertible Debenture at the rate of 12% per annum, payable on the maturity Date, which is November 14, 2009.
 

 
6

 

At any time subsequent to the expiration of a six month period since either of:
 
(i)           that Registration Statement, as amended,  filed with the SEC on Form SB-2 relating to the sale of an aggregate of 17,195,263 shares of  the Company’s  common stock by certain selling shareholders (the “Selling Shareholders Registration Statement”) has been declared effective by the SEC or
 
(ii)           the Selling Shareholder Registration Statement has been withdrawn by the Company.
 
The holder may convert the Convertible Debenture, in whole but not in part, into the Company’s   common shares at the conversion rate of $0.15 per Share (“Conversion Shares”).
 
Subsequent to any conversion, the holder  shall have the right, upon written demand to the Company (“Registration Demand”), to cause the Company, within ninety days of the Registration Demand, to prepare and file with the United States securities and Exchange Commission (“SEC”) a Registration Statement in order that the Conversion Shares may be registered under the Securities Act of 1933, as amended, and use its reasonable best efforts to cause that Registration Statement to be declared effective by the SEC. There is no penalty to the Company in the event the registration Statement is not declared effective by the SEC.
 
On January 8, 2008, the Company sold $18,400 face value convertible debenture (“Convertible Debenture”) for an aggregate purchase price of $18,400 to one purchaser.  Interest on the Convertible Debenture shall accrue at a rate of 12% per annum based on a 365 day year.  The Company   shall pay simple interest to the holder on the aggregate unconverted and then outstanding principal amount of this Convertible Debenture at the rate of 12% per annum, payable on the maturity Date, which is December 28, 2009.
 
At any time subsequent to the expiration of a six month period since either of:
 
(i)           that Registration Statement, as amended,  filed with the SEC on Form SB-2 relating to the sale of an aggregate of 17,195,263 shares of  our common stock by certain selling shareholders (the “Selling Shareholders Registration Statement”) has been declared effective by the SEC or
 
(ii)           the Selling Shareholder Registration Statement has been withdrawn by the Company.
 
The holder may convert the Convertible Debenture, in whole but not in part, into our common shares at the conversion rate of $0.15 per Share (“Conversion Shares”).
 
Subsequent to any conversion, the holder shall have the right, upon written demand to the Company (“Registration Demand”), to cause the Company, within ninety days of the Registration Demand, to prepare and file with the United States securities and Exchange Commission (“SEC”) a Registration Statement in order that the Conversion Shares may be registered under the Securities Act of 1933, as amended, and use its reasonable best efforts to cause that Registration Statement to be declared effective by the SEC. There is no penalty to the Company in the event the registration Statement is not declared effective by the SEC.
 
On January 18, 2008, the Company sold $200,000 face value convertible debenture (“Convertible Debenture”) for an aggregate purchase price of $200,000 to one purchaser.  Interest on the Convertible Debenture shall accrue at a rate of 14% per annum based on a 365 day year.  The Company   shall pay simple interest to the holder on the aggregate unconverted and then outstanding principal amount of this Convertible Debenture at the rate of 14% per annum, payable on the maturity Date, which is January 12, 2010.
 
At any time subsequent to the expiration of a six month period since either of:
 
(i)           that Registration Statement, as amended,  filed with the SEC on Form SB-2 relating to the sale of an aggregate of 17,195,263 shares of  our common stock by certain selling shareholders (the “Selling Shareholders Registration Statement”) has been declared effective by the SEC or
 
(ii)           the Selling Shareholder Registration Statement has been withdrawn by the Company.

The holder may convert the Convertible Debenture, in whole but not in part, into our common shares at the conversion rate of $0.25 per Share (“Conversion Shares”).
 
Subsequent to any conversion, the holder shall have the right, upon written demand to the Company (“Registration Demand”), to cause the Company, within ninety days of the Registration Demand, to prepare and file with the United States securities and Exchange Commission (“SEC”) a Registration Statement in order that the Conversion Shares may be registered under the Securities Act of 1933, as amended, and use its reasonable best efforts to cause that Registration Statement to be declared effective by the SEC. There is no penalty to the Company in the event the registration Statement is not declared effective by the SEC.
 

 
7

 

On January18, 2008, the Company sold $100,000 face value convertible debenture (“Convertible Debenture”) for an aggregate purchase price of $100,000 to one purchaser.   Interest on the Convertible Debenture shall accrue at a rate of 14% per annum based on a 365 day year.  The Company   shall pay simple interest to the holder on the aggregate unconverted and then outstanding principal amount of this Convertible Debenture at the rate of 14% per annum, payable on the maturity Date, which is January 12, 2010.
 
At any time subsequent to the expiration of a six month period since either of:
 
(i)           that Registration Statement, as amended,  filed with the SEC on Form SB-2 relating to the sale of an aggregate of 17,195,263 shares of  our common stock by certain selling shareholders (the “Selling Shareholders Registration Statement”) has been declared effective by the SEC or
 
(ii)           the Selling Shareholder Registration Statement has been withdrawn by the Company.
 
The holder may convert the Convertible Debenture, in whole but not in part, into our common shares at the conversion price of $0.25 per Share (“Conversion Shares”).
 
Subsequent to any conversion, the holder shall have the right, upon written demand to the Company (“Registration Demand”), to cause the Company, within ninety days of the Registration Demand, to prepare and file with the United States securities and Exchange Commission (“SEC”) a Registration Statement in order that the Conversion Shares may be registered under the Securities Act of 1933, as amended, and use its reasonable best efforts to cause that Registration Statement to be declared effective by the SEC. There is no penalty to the Company in the event the registration Statement is not declared effective by the SEC.
 
The Company shall agree to the granting of a Lien to the Holder against collateral which the Company owns or intends to purchase, namely:
 
Flow Cytometer (4 Color) (BD Facscanto)
Laboratory computer system/also for enrollments/storage tracking
Hematology Analyzer (celldyne 1800)(ABBOTT)
Laminar Flow Hood 4 ft ( Clean hood) (2)
Bench top centrifuges (2) refrigerated
Small equipment (lab set-up)
Microscope
Tube heat sealers (2 ea)
Barcode printer and labeling device
 
On February 15, 2008, the Company sold $50,000 face value convertible debenture (“Convertible Debenture”) for an aggregate purchase price of $50,000 to one purchaser. Interest on the Convertible Debenture shall accrue at a rate of 12% per annum based on a 365 day year.  The Company   shall pay simple interest to the holder on the aggregate unconverted and then outstanding principal amount of this Convertible Debenture at the rate of 12% per annum, payable on the maturity Date, which is February 15, 2010.
 
At any time subsequent to the expiration of a six month period since either of:
 
(i)           that Registration Statement, as amended,  filed with the SEC on Form SB-2 relating to the sale of an aggregate of 17,195,263 shares of  our common stock by certain selling shareholders (the “Selling Shareholders Registration Statement”) has been declared effective by the SEC or
 
(ii)           The Selling Shareholder Registration Statement has been withdrawn by the Company.
 
The holder may convert the Convertible Debenture, in whole but not in part, into our common shares at the conversion price of $0.10 per Share (“Conversion Shares”).
 
Subsequent to any conversion, the holder shall have the right, upon written demand to the Company (“Registration Demand”), to cause the Company, within ninety days of the Registration Demand, to prepare and file with the United States securities and Exchange Commission (“SEC”) a Registration Statement in order that the Conversion Shares may be registered under the Securities Act of 1933, as amended, and use its reasonable best efforts to cause that Registration Statement to be declared effective by the SEC. There is no penalty to the Company in the event the registration Statement is not declared effective by the SEC.

 On March 3, 2008 the Selling Shareholder’s Registration Statement was withdrawn by the Company.
 
On March 3, 2008, the Company sold $10,000 face value convertible debenture (“Convertible Debenture”) for an aggregate purchase price of $10,000 to one purchaser.   Interest on the Convertible Debenture shall accrue at a rate of 12% per annum based on a 365 day year.  The Company   shall pay simple interest to the holder on the aggregate unconverted and then outstanding principal amount of this Convertible Debenture at the rate of 12% per annum, payable on the maturity Date, which is March 3, 2010.
 

 
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At any time subsequent to the expiration of a six month period from March 3, 2008, the holder may convert the Convertible Debenture, in whole but not in part, into our common shares at the conversion rate of $0.15 per Share (“Conversion Shares”).
 
Subsequent to any conversion, the holder shall have the right, upon written demand to the Company (“Registration Demand”), to cause the Company, within ninety days of the Registration Demand, to prepare and file with the United States securities and Exchange Commission (“SEC”) a Registration Statement in order that the Conversion Shares may be registered under the Securities Act of 1933, as amended, and use its reasonable best efforts to cause that Registration Statement to be declared effective by the SEC. There is no penalty to the Company in the event the registration Statement is not declared effective by the SEC.
 
 On February 2, 2010 the Company issued 1,433,333 common shares in full satisfaction of a $100,000 face value of convertible debentures bearing interest at 14% per annum.
 
On February 10, 2010 the Company issued 3,000,000 shares of common stock in satisfaction of $30,000 owed by the Company to holders of the Company’s convertible debentures bearing interest at 12% per annum.
 
On March 31, 2010 the Company issued 4,000,000 shares of common stock in satisfaction of $40,000 owed by the Company to holders of the Company’s convertible debentures bearing interest at 12% per annum.

On February 17, 2011 the Company  issued 1,785,714 common shares in satisfaction of $50,000 face value of convertible debentures

NOTE 8. COMMITMENTS AND CONTINGENCIES

On August 3, 2005, BMSG entered into an agreement to lease a 14,562 square foot facility for use as a cellular storage facility at a rate of $18,931 per month. The lease is for a period of five years commencing on December 1, 2005 and expiring on November 30, 2010. The lease contains a renewal option enabling the Company to renew the lease for an additional five years. There are no contingent payments which the Company is required to make. As of November 30, 2010, the Company elected not to renew the lease and is currently utilizing 3,000 square feet of office space in La Mesa California at a rate of $4,176 per month.
 
On August 16, 2010 a  Complaint  (“Complaint”)  was filed  in the Superior Court of the State of California, County of San Diego Central Division  against the Company,  the Company’s Chairman,   Freedom Environmental Services, Inc. and the BMXP Holdings Inc.  Shareholder’s Business Trust, a Nevada Business Trust (collectively “Defendants”) by Princeton Research, Inc. and Jan Vandersande  (collectively “Plaintiffs”) seeking to recover general damages in excess of $25,000, punitive damages in excess of $25,000 and attorney’s fees. The Complaint alleges breach of fiduciary duty of loyalty, fraud and deceit in connection with the late distribution of  shares of the Company to beneficiaries  of the BMXP Holdings Inc.  Shareholder’s Business Trust. The Company is currently in the process of negotiating a potential settlement with the Plaintiffs.  At this time, it is not possible to predict the ultimate outcome of these matters,

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 Entest. by 18KT.TV LLC (“Plaintiffs”). The Complaint is seeking damages from the Company and Entest in excess of $125,000 and alleges breach of contract, unjust enrichment and breach of implied in fact contract by the Company and Entest in connection with agreements entered into with the plaintiffs by both the Company and Entest.

NOTE 9. DECONSOLIDATION OF ENTEST BIOMEDICAL, INC.

Effective February 4, 2011 the Company’s ownership of Entest BioMedical, Inc. fell to approximately 49%. and commencing February 4, 2011 the Company’s financial statements reflect the Company’s ownership of Entest under the equity method of accounting. A gain of $42,182,649 was recognized in accordance with ASC 810-10-40-5. Fair value of the Company’s investment in Entest BioMedical, Inc. resulting from deconsolidation was calculated utilizing Level 1 inputs in accordance with ASC 820.

NOTE 10. SUBSEQUENT EVENTS
 
On April 2011, the Company sold equipment resulting in a loss on sale of equipment of approximately $531,569.

 



 
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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 concern 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 10Kfor the year ended September 30, 2010. All references to” We”, “Us”,  “Company” or the “Company” refer to Bio-Matrix Scientific Group, Inc.

Material Changes in Financial Condition:

As of March 31, 2011 we had cash on hand of $433  and as of September 30, 2010  we had cash on hand of $306..

The increase in cash on hand of approximately 41% is primarily attributable to borrowings.

As of March 31, 2011 we had Employee Receivable of $0  and as of September 30, 2010  we had Employee Receivable of $1, 396.

The decrease in Employee Receivable of 100% is primarily attributable to   de-recognition of assets of Entest BioMedical, Inc. as a result of  the deconsolidation of Entest BioMedical, inc. on February 4, 2011.

As of March 31, 2011 we had Other Assets $4,200   and as of September 30, 2010  we had Other Assets of $26,566.

The decrease in Other Assets  of approximately 84%  is primarily attributable to the recognition of an expense of  $21,307 resulting from the loss of the Company’s security deposit (lease on former facility) as well as de-recognition of $1,059 in deposits attributable to Entest BioMedical, Inc..

As of March 31, 2011 we had an Investment in Entest of $41,898,162 and as of September 30, 2010 we had an Investment in Entest of $0.

The increase of 100% is attributable the recognition of a gain of $42,182, 649 resulting from the deconsolidation of Entest BioMedical, Inc. offset by equity of $101,838 in the net losses of Entest BioMedical for the period beginning February 4, 2011 and ending March 31, 2011.

As of March 31, 2011 we had Accounts Payable of $130,507 and as of September 30, 2010 we had Accounts Payable of $251,528.

This decrease of approximately 48% is primarily attributable to the elimination of $146,791 of payables attributable to the lease on our former facility as well as the de-recognition of $38, 975 of payables resulting from the deconsolidation of Entest BioMedical, Inc offset by liabilities incurred in the ordinary cost of business.

As of March 31, 2011 we had Notes Payable of $112,869  and as of September 30, 2010 we had Notes Payable of $247, 669.

This decrease of approximately 54% is primarily attributable to the de-recognition of $246,428 in Notes Payable attributable to Entest BioMedical, Inc. resulting from the deconsolidation of Entest BioMedical, Inc offset by additional net borrowings incurred by us  of approximately $21,750.

As of March 31, 2011 we had Accrued Payroll of $477,000  and as of September 30, 2010 we had Accrued Payroll of $444,500

This increase of approximately 7% is primarily attributable to increases in employee compensation which have accrued and have not yet been paid of approximately $150,000 offset by the de-recognition  of $235,558 of accrued payroll attributable to the deconsolidation of Entest BioMedical, Inc. .

As of March 31,2011 we had Accrued Payroll Taxes  of $23, 780 and as of September 30, 2010 we had Accrued Payroll Taxes  of $27,298.

This decrease of approximately 13% is primarily attributable to the de-recognition of Accrued Payroll Taxes attributable to Entest BioMedical, Inc. resulting from the  deconsolidation of Entest BioMedical, Inc.

As of March 31,2011 we had Accrued Interest of $129,579 and as of September 30, 2010 we had Accrued Interest of $145,426.


 
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This decrease of approximately 11% is primarily attributable to the reclassification of $30,301 in accrued interest on Convertible Notes outstanding as principal in connection with a change in ownership of $200,000 in face value of convertible notes with interest of $30,301 having been accrued, the payment of $6,821 of accrued interest by the issuance of issued 1,785,714 common shares in full satisfaction of $50,000 face value of convertible debentures and interest accrued thereon, as well as the de-recognition of  any accrued interest attributable to Entest BioMedical, Inc. resulting from the deconsolidation of Entest BioMedical, Inc.

As of March 31,2011 we had $73,500 Due to Affiliate and as of September 30, 2010 we had no such amounts due .

The amounts Due to Affiliate are attributable to the recognition of rent prepaid by Entest BioMedical, inc. to the Company recognized as a result of the deconsolidation of Entest BioMedical, Inc.

As of March 31, 2011 we had $313, 701 in Convertible Notes payable  and as of September 30, 2010 we had $333, 400 in  Convertible Notes payable.

This decrease of approximately 6% is primarily attributable to the issuance of issued 1,785,714 common shares in full satisfaction of $50,000 face value of convertible debentures and interest accrued thereon offset by the reclassification of $30,301 in accrued interest on Convertible Notes outstanding as principal in connection with a change in ownership of $200,000 in face value of convertible notes with interest of $30,301 having been accrued

Material Changes in Results of Operations

Revenues were -0- for the quarter ending March 31, 2011  and -0- for the same quarter ending March 31, 2010. Net Income was $41,991, 006 for the three months ended March 31, 2011  and the Company incurred net losses of $389,680 for the same quarter ending march 31, 2010 .

The increase from net losses of $389,680 to net income of $41,991, 006 was primarily attributable to:

 
(a)
A noncash recognized as a result of the deconsolidation of Entest BioMedical of $42,182,649
 
(b)
Other income of $146,791 recognized as a resulting from the confirmation in writing from the Company’s former landlord informing  the Company that no further payment is required to be made by the Company for outstanding rental liabilities resulting in the elimination of $146,791 of Payables owed by the Company
Partially offset by $338,044 of losses attributable to the Company and equity in Losses of Entest BioMedical, Inc.

Revenues were -0- for the six months ending March 31, 2011 and -0- for the same period ending March 31, 2010. Net Income was $41,725, 606 for the six months ended March 31, 2011 and the Company incurred net losses of $785,528 for the same period ending March 31, 2010.

The increase from net losses of $785,528 to net income of $41,725,608 was primarily attributable to:

 
(a)
A noncash recognized as a result of the deconsolidation of Entest BioMedical of $42,182,649
 
(b)
Other income of $146,791 recognized as a resulting from the confirmation in writing from the Company’s former landlord informing  the Company that no further payment is required to be made by the Company for outstanding rental liabilities resulting in the elimination of $146,791 of Payables owed by the Company
Partially offset by $603,834 of losses attributable to the Company and equity in Losses of Entest BioMedical, Inc.
 
Liquidity and Capital Resources

As of March 31, 2011, we had $433  cash on hand and current liabilities of $1,266,936  such liabilities consisting of Accounts Payable, Notes Payable, Accrued Payroll Taxes, Convertible Notes, Amounts due to Affiliated Party, Accrued Expenses  and Accrued Interest.
 
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.
 
At this time, we plan to fund our financial needs through equity private placements of common stock. (No plans, terms, offers or candidates have yet been established and there can be no assurance that the company will be able to raise funds on terms favorable to us or at all.) We cannot assure that we will be successful in obtaining additional financing necessary.  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 were not party to any material commitments for capital expenditures as of the end of the quarter ended March 31, 2011.


 
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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 David Koos, who is the Company's Principal Executive Officer/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/Principal Financial Officer 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

In connection with the evaluation of the Company's internal controls during the period commencing on January 1, 2011 and ending March 31, 2011, David Koos, who is both the Company's Principal Executive Officer and Principal Financial Officer has 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.

On August 16, 2010 a Complaint (“Complaint”) was filed in the Superior Court of the State of California, County of San Diego Central Division against the Company, the Company’s Chairman,   Freedom Environmental Services, Inc. and the BMXP Holdings Inc.  Shareholder’s Business Trust, a Nevada Business Trust (collectively “Defendants”) by Princeton Research, Inc. and Jan Vandersande  (collectively “Plaintiffs”) seeking to recover general damages in excess of $25,000, punitive damages in excess of $25,000 and attorney’s fees. The Complaint alleges breach of fiduciary duty of loyalty, fraud and deceit in connection with the late distribution of shares of the Company to beneficiaries of the BMXP Holdings Inc.  Shareholder’s Business Trust. The Company is in the process of negotiating a settlement agreement with the Plaintiffs with the intention of avoiding protracted disputes, uncertainties, and litigation with their attendant inconveniences and expenses.

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 Entest by 18KT.TV LLC (“Plaintiffs”). The Complaint is seeking damages from the Company and Entest in excess of $125,000 and alleges breach of contract, unjust enrichment and breach of implied in fact contract by the Company and Entest in connection with agreements entered into with the plaintiffs by both the Company and Entest.
 
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.

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

On February 17, 2011 the Company issued 1,785,714 shares of common stock (“Shares”) in satisfaction of $50,000 face value of convertible debentures.

The Offer and Sale of the Shares was exempt from the registration provisions of the Securities Act of 1933 (the “Act”), by reason of Section 4(2) thereof.  

The Shares were offered directly through the management. No underwriters were retained to serve as placement agents. 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


 
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Item 3. DEFAULTS UPON SENIOR SECURITIES

None.
 
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.
 
Item 5. OTHER INFORMATION

None.

Item 6. EXHIBITS
 
31.1
Certification of Chief Executive Officer
   
31.2
Certification of Acting Chief Financial Officer
   
32.1
Certification of Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act of 2002.
   
32.2
Certification of Acting Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002.
 
 



























 
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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.

 
Bio- Matrix Scientific Group, Inc.
 
a Delaware corporation
   
By:  
/s/ David R. Koos
 
David R. Koos 
 
Chief Executive Officer
 
Date: June 19,2011

  
 




 
 
 
 
 
 
 

 






















 
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