ENTEST GROUP, INC. - Quarter Report: 2010 February (Form 10-Q)

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, 2010

¨   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)

4700 Spring Street, St 203, La Mesa California, 91941

(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.

APPLICABLE ONLY TO CORPORATE ISSUERS:

As of   February 28, 2010  17,553,040  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

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

The Accompanying Notes are an Integral Part of these Financial Statements

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The Accompanying Notes are an Integral Part of these Financial Statements

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The Accompanying Notes are an Integral Part of these Financial Statements

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Entest BioMedical, Inc.

(A Development Stage Company)

Notes to Consolidated Financial Statements

As of February 28, 2010

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, 2009 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. The Company generated net losses of $489,557 during the period from August 22, 2008 (inception) through February 28, 2010. 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.

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Management plans to raise additional funds by obtaining governmental and non governmental grants as well as 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. 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 3 - RELATED PARTY TRANSACTIONS

Between December 4, 2009 and February 26, 2010, Bombardier Pacific Ventures (“Bombardier”), a company controlled by David Koos who is the Company’s Chief Executive Officer, made loans to the Company totaling $17,397. The total amount owed by the Company to Bombardier as of February 28, 2010 is $23,390. 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 three months ended February 28, 2010 David Koos, made loans to the Company totaling $580. These loans and any accrued interest are due and payable at the demand of David Koos and bear simple interest at the rate of 15% per annum.

NOTE 4 - INCOME TAXES

As of  February 28, 2010  the Company has a Deferred Tax Asset of  $190,714 completely attributable to net operating loss carry forwards of approximately $503,204  (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) $489,557 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 of Entest BioMedical, Inc. 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.

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NOTE 5 - STOCKHOLDERS' EQUITY

The stockholders' equity section of the Company contains the following classes of capital stock as of February 28, 2010:

Common Stock:

$0.001 par value, 70,000,000 shares authorized 17,553,040 shares issued and outstanding as of February, 28 2010.

Preferred Stock:

$0.001 par value 5,000,000 shares authorized 0 shares issued and outstanding as of February 28, 2010.

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 10-Q may contain forward-looking statements within the meaning of Section 21E or Securities Exchange Act of 1934 that are not historical facts and information. These statements represent the Company's expectations or beliefs, including, but not limited to, statements concerning future and operating results, statements concerning industry performance, the Company's operations, economic performance, financial conditions, margins and growth in sales of the Company's products, capital expenditures, financing needs, as well assumptions related to the forgoing. For this purpose, any statements contained in this Quarterly Report that are not statement of historical fact may be deemed to be forward-looking statements. These forward-looking statements are based on current expectations and involve various risks and uncertainties that could cause actual results and outcomes for future periods to differ materially from any forward-looking statement or views expressed herein. The Company's financial performance and the forward-looking statements contained herein are further qualified by other risks including those set forth from time to time in the documents filed by the Company with the Securities and Exchange Commission, including the Company's most recent Form 10-K for the year ended August 31, 2009. All references to” We”, “Us”, “Company” or the “Company” refer to Entest BioMedical, Inc.

Material Changes in Financial Condition:

As of February 28, 2010, we had cash on hand of $240 and as of August 31, 2009 we had cash on hand of $250.

The decrease cash on hand of approximately 4% is primarily attributable expenditures incurred in the operation of the Company offset by borrowings and sales of our securities.

As of February 28, 2010, we had prepaid expenses of $102,200 and as of August 31, 2009 we had prepaid expenses of $81,800.

The increase in prepaid expenses of approximately 24% is primarily attributable to the sale of 500,000 of our common shares for consideration of $50,000 of which $45,000 was deposited with Bio-Matrix Scientific Group, Inc (BMSN) to be applied to rental payments due to BMSN over the course of sublease agreement between BMSN and us offset by rental expenses incurred during the six months ended February 28, 2010.

.As of February 28, 2010 we had Deposits of $1,059 and as of August 31, 2009 we had Deposits of $0.

The increase in Deposits results from a deposit of $1,059 sent by the Company to San Diego Gas and Electric Company.

As of February 28, 2010 we had Accounts Payable of $8,848 and as of August 31, 2009 we had Accounts Payable of $2, 355.

The increase in Accounts Payable of approximately 275% is primarily attributable to an increase in outstanding obligations incurred in the course of business.

As of February 28, 2010 we had Notes Payable of $23,970 and as of August 31, 2009 we had Notes Payable of $0.

The increase in Notes Payable is attributable to $23,970 borrowed from our Chairman and CEO and a corporation controlled by our Chairman and CEO which was utilized to pay operational costs.

As of February 28, 2010 we had Accrued Interest expenses of $522 and as of August 31, 2009 we had Accrued Interest expenses of $0.

The increase in Accrued Interest expenses is attributable to interest accrued but not paid on amounts borrowed from our Chairman and CEO and a corporation controlled by our Chairman and CEO.

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Material Changes in Results of Operations

Revenues were -0- for the quarter ending February 28, 2010 and -0- for the same quarter ending February 29, 2009. Net losses were $108, 264 or the three months ended February 28, 2010 and $0 for the same period ended February 28, 2009,

This increase in Net Losses is primarily attributable to increases in research and development costs, compensation, consulting and rental expenses incurred by us.

Revenues were -0- for the six months ending February 28, 2010 and -0- for the six months ending February 29, 2009. Net losses were $234, 634 or the three months ended February 28, 2010 and $78 for the same period ended February 28, 2009,

This increase in Net Losses is primarily attributable to increases in research and development costs, compensation, consulting and rental expenses incurred by us.

Liquidity and Capital Resources

As of February 28, 2010 we had $240 cash on hand and current liabilities of $33,340 such liabilities consisting of Accounts Payable, Notes Payable, 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.

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 were not party to any material commitments for capital expenditures as of the end of the quarter ended February 28, 2010.

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 is reasonably likely to materially effect, the Company's internal controls over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

None.

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

N/A.

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.

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.

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