ENTEST GROUP, INC. - Quarter Report: 2011 November (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 November 30, 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)

4700 Spring Street, St 304, 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.

APPLICABLE ONLY TO CORPORATE ISSUERS:

As of November 30, 2011 there were 23,543,817  shares of common stock were issued and outstanding.

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

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

PART I - FINANCIAL INFORMATION

Item 1. - Financial Statements

Entest Biomedical, Inc.

(A Development Stage Company)

Consolidated Balance Sheet

The Following Notes are an integral part of these Financial statements

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Entest BioMedical, Inc.

(A Development Stage Company)

Consolidated Statement of Operations

The Following Notes are an integral part of these Financial statements

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Entest BioMedical, Inc.

(A Development Stage Company)

Consolidated Statement of Cash Flows

(Unaudited)

The Following 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 November 30, 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, 2011 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.  ORGANIZATION AND DESCRIPTION OF BUSINESS

Entest BioMedical Inc. (the “Company”) was incorporated in the State of Nevada on September 24, 2008 as JB Clothing Corporation.  Until July 10, 2009, the Company’s principal business objective was the offering of active/leisure fashion design clothing.

On July 10, 2009 the Company abandoned its efforts in the field of active/leisure fashion design clothing when it acquired 100% of the share capital of Entest BioMedical, Inc., a California corporation, (“Entest CA”).

The Company’s current business consists of the development and commercialization of immunotherapeutic therapies for the veterinary market as well as the acquisition and operation of veterinary hospitals.

NOTE 3.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. BASIS OF ACCOUNTING

The financial statements have been prepared using the basis of accounting generally accepted in the United States of America. Under this basis of accounting, revenues are recorded as earned and expenses are recorded at the time liabilities are incurred. The Company has adopted an August 31 fiscal year-end.

B. PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Entest CA, the Company’s wholly owned subsidiary. Significant inter-company transactions have been eliminated.

C. USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

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D. DEVELOPMENT STAGE

The Company is a development stage company that devotes substantially all of its efforts in the development of its business.

E. CASH EQUIVALENTS

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

F. PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Maintenance and repairs are expensed in the year in which they are incurred. Expenditures that enhance the value of property and equipment are capitalized.

G. FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value is the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date.  A fair value hierarchy requires an entity to maximize the use of observable inputs, where available. The following summarizes the three levels of inputs required by the standard that the Company uses to measure fair value:

Level 1:  Quoted prices in active markets for identical assets or liabilities

Level 2:  Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities;  quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.

Level 3:  Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company’s financial instruments as of November 30 , 2011 consisted of $200,529 of Notes Payable, $103,791 of Convertible Notes payable (net of discount), $8,000 due to TheraCyte, Inc, and $4,349 of Employee Receivables.  The fair value of all of the Company’s financial instruments as of  November 30, 2011 were valued according to the Level 2 input. The carrying amount of the financial instruments is equal to the fair value as determined by the Company.

H. INCOME TAXES

The Company accounts for income taxes using the liability method prescribed by ASC 740, “Income Taxes.” Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the year in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date.

The Company applied the provisions of ASC 740-10-50, “Accounting For Uncertainty In Income Taxes”, which provides clarification related to the process associated with accounting for uncertain tax positions recognized in our financial statements. Audit periods remain open for review until the statute of limitations has passed. The completion of review or the expiration of the statute of limitations for a given audit period could result in an adjustment to the Company’s liability for income taxes. Any such adjustment could be material to the Company’s results of operations for any given quarterly or annual period based, in part, upon the results of operations for the given period. As of August 31, 2011 and 2010, the Company had no uncertain tax positions, and will continue to evaluate for uncertain positions in the future.

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The Company generated a deferred tax credit through net operating loss carry forward.  However, a valuation allowance of 100% has been established.

Interest and penalties on tax deficiencies recognized in accordance with ACS accounting standards are classified as income taxes in accordance with ASC Topic 740-10-50-19.

I.  BASIC EARNINGS (LOSS) PER SHARE

The Financial Accounting Standards Board (FASB) issued Accounting Standards Codification (ASC) 260, "Earnings Per Share", which specifies the computation, presentation and disclosure requirements for earnings (loss) per share for entities with publicly held common stock. ASC 260 requires the presentation of basic earnings (loss) per share and diluted earnings (loss) per share. The Company has adopted the provisions of ASC 260 effective from inception.

Basic net loss per share amounts is computed by dividing the net income by the weighted average number of common shares outstanding. Diluted earnings per share are the same as basic earnings per share due to the lack of dilutive items in the Company.

NOTE 4.  RELATED PARTY TRANSACTIONS

Between September 1, 2011 and November 30, 2011 , David R. Koos the Company’s Chairman and Chief Executive Officer, made loans to the Company totaling $8,400. These loans are due and payable at the demand of David R. Koos and bear simple interest at a rate of 15% per annum.

As of November 30, 2011 the Company remains personally indebted to David R. Koos in the principal amount of $37,361. These loans are due and payable at the demand of David R. Koos and bear simple interest at a rate of 15% per annum.

As of November 30, 2011 Bio Matrix Scientific Group, Inc.(“BMSN”), a majority shareholder of the Company , is indebted to the Company in the amount of $59,500. This amount is non interest bearing and is due at the demand of the Company.

NOTE 5.  INCOME TAXES

As of  November 30, 2011 the Company has a Deferred Tax Asset of $683,413 completely attributable to net operating loss carry forwards of approximately $1,952,610 (which expire 20 years from the date the loss was incurred) consisting of:

Realization of deferred tax assets is dependent upon sufficient future taxable income during the period that deductible temporary differences and carry forwards are expected to be available to reduce taxable income. A valuation allowance is recorded when it is “more likely-than-not” that a deferred tax asset will not be realized. In addition, the reverse acquisition in which Entest BioMedical, Inc. was involved in 2009 has resulted in a change of control.  Internal Revenue Code Sec 382 limits the amount of income that may be

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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 6.  COMMITMENTS AND CONTINGENCIES

On June 15, 2009, the Company entered into an agreement with BMSN  whereby the Company 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. the Company. currently pays monthly rent of $4,176 directly to the owner of the property  for the term indicated and rent prepaid to BMSN is carried as a receivable due to the Company.

This property is utilized as office space. The Company believes that the foregoing property is adequate to meet its current needs. While it is anticipated that the Company will require access to laboratory facilities in the future, the Company 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 the Company and Gregory McDonald  and  Pet Pointers, Inc., the Company pays on behalf of Gregory McDonald and Pet Pointers monthly rent of $7,526  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 the Company 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 the Company and Gregory McDonald on behalf of Pet Pointers, Inc., the Company pays on behalf of Gregory McDonald and Pet Pointers monthly payments of $1,500 to Anthony and Judi Marinelli towards the extinguishment of a total note of $78,000. These payments are payments the Company agreed to make on behalf of Gregory McDonald and Pet Pointers.

On January 4, 2011, as part of the asset purchase agreement with the Company and Gregory McDonald on behalf of Pet Pointers, Inc., the Company pays on behalf of Gregory McDonald and Pet Pointers an installment agreement due to the Franchise Tax Board in the amount of $11,405 with monthly payments of $400. These payments, are payments the Company agreed to make on behalf of Gregory McDonald and Pet Pointers.

On January 4, 2011, as part of the asset purchase agreement with the Company and Gregory McDonald on behalf of Pet Pointers, Inc., the Company pays on behalf of Gregory McDonald and Pet Pointers an installment agreement due to the Internal Revenue Service in the amount of $13,595 with monthly payments of $425. These payments are payments the Company agreed to make on behalf of Gregory McDonald and Pet Pointers.

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 BMSN . by 18KT.TV LLC (“Plaintiffs”) seeking to recover general damages from the Company. 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 Complaint also seeks similar damages from BMSN. 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.

There were no other legal proceedings against the Company with respect to matters arising in the ordinary course of business. The Company is not involved in any other litigation either as plaintiffs or defendants, and has no knowledge of any threatened or pending litigation against the Company.

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Commitments

NOTE 7.  CONVERTIBLE NOTES

On May 20, 2011, the Company issued a convertible promissory note in the amount of $42,500 which was received May 26, 2011. The note bears an interest rate of eight percent (8%), matures on February 23, 2012 and may be converted after 180 days from execution of this note for shares of the Company’s common stock. The note may be converted at a forty two percent (42%) discount to the average of the lowest 3 closing bid prices of the common stock during the 10 trading days prior to the conversion date. The issuance of the note amounted in a beneficial conversion feature of $16,398 which  has been  amortized under the Interest Method. As of November 30, 2011 $12,000 of the principal amount due has been converted into $134,983 shares of the common stock of the Company.

On July 5, 2011, the Company issued a convertible promissory note  (the “Second Note”) in the principal amount of $ $37,500. The Second Note, which matures April 11, 2012, bears interest at the rate of 8% per annum. At any time after 180 days from the execution of the Second Note, the Second Note is convertible into shares of the Company’s common stock at the election of Asher at a conversion price equal to a 45% discount to the average of the 3 closing bid prices of the common stock during the 10 trading day period prior to conversion. The issuance of the note amounted in a beneficial conversion feature of $37,500 which is amortized under the Interest Method.

On August 29, 2011, the Company issued a convertible promissory note (the “Third  Note”) in the principal amount of $ $35,000. The Third Note, which matures May 25, 2012, bears interest at the rate of 8% per annum. At any time after 180 days from the execution of the Third Note, the Third Note is convertible into shares of the Company’s common stock at the election of Asher at a conversion price equal to a 45% discount to the average of the 3 closing bid prices of the common stock during the 10 trading day period prior to conversion. The issuance of the note amounted in a beneficial conversion feature of $35,000  which  is  amortized under the Interest Method.

On October 25, 2011, the Company issued a convertible promissory note in the amount of $32,500. The note bears an interest rate of eight percent (8%), matures on July 27, 2012 and may be converted after 180 days from execution of this note for shares of the Company’s common stock. The note may be converted at a fifty two percent (52%) discount to the average of the lowest 3 closing bid prices of the common stock during the 10 trading days prior to the conversion date. The issuance of the note amounted in a beneficial conversion feature of $7,634 which is amortized under the Interest Method

NOTE 8.  STOCKHOLDERS EQUITY

The stockholders' equity section of the Company contains the following classes of capital stock as of November 30, 2011:

Common Stock:

$0.001 par value, 70,000,000 shares authorized 23,543, 817 shares issued and outstanding as of  November 30, 2011.

Preferred Stock:

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$0.001 par value 5,000,000 shares authorized of 100,000 shares authorized is authorized as Series AA Preferred Stock, $001 par value of which 5,000 shares are issued and outstanding  as of  November 30,  2011.

NOTE 9.  STOCK TRANSACTIONS

On October 7, 2011 the Company issued 50,000 shares of common stock for services valued at $18,000.

On November 11, 2011 the Company issued 2,500,000 shares of common stock in connection with rights to receive future revenues of a Utah veterinary clinic

On November 22, 2011 the Company issued 18,333 shares of common stock for services valued at $4,583.

On November 28, 2011 the Company issued 134,983 shares of common stock in satisfaction of $12,000 principal amount of Convertible Notes Payable.

NOTE 10.  SUBSEQUENT EVENTS.

On December 12, 2011 the Company issued 258,824 shares of common stock in satisfaction of $11,000 principal amount of Convertible Notes Payable

On December 19, 2011 the Company issued 338,983  shares of common stock in satisfaction of $12,000  principal amount of Convertible Notes Payable

On December 26, 2011 an employee of the Company consented to the cancellation of 15,000 common shares previously issued as compensation.

On December 29, 2011 75,000 common shares previously issued to the company’s former Chief Financial Officer were returned for cancellation by the Company. Of that amount 40,000 are subject to forfeiture and are canceled pursuant to those forfeiture provisions at the company’s option and the company’s former Chief Financial Officer has consented to cancellation of the remaining 35,000 common shares.

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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 concerning industry performance, the Company's operations, economic performance, financial conditions, margins and growth in sales of the Company's products, capital expenditures, financing needs, as well assumptions related to the forgoing. For this purpose, any statements contained in this Quarterly Report that are not statement of historical fact may be deemed to be forward-looking statements. These forward-looking statements are based on current expectations and involve various risks and uncertainties that could cause actual results and outcomes for future periods to differ materially from any forward-looking statement or views expressed herein. The Company's financial performance and the forward-looking statements contained herein are further qualified by other risks including those set forth from time to time in the documents filed by the Company with the Securities and Exchange Commission, including the Company's most recent Form 10K for the year ended August 31, 2011. All references to” We”, “Us”, “Company” or the “Company” refer to Entest BioMedical, Inc.

Material Changes in Financial Condition

As of November 30, 2011, we had Cash on Hand of $13,651 and as of August 31, 2011 we had Cash on Hand of $43,901.

The decrease in Cash on Hand of approximately 68 %  is primarily attributable to expenses  incurred by the Company in the operation of its business primarily offset by funds received by the Company as a result of increased net borrowings.

 As of November 30, 2011, we had Trade Accounts Receivable of $2,268  and as of August 31, 2011 we had Trade Accounts Receivable of $3,135.

The decrease in Trade Accounts Receivable of approximately 27% is attributable to successful collection of $867  of delinquent payments due from a client of the McDonald Animal Hospital.

As of November 30, 2011 we had Due from an Affiliate of $59,500 and as of August 31, 2011 we had Due from an Affiliate of $0.

The increase in Due from an Affiliate is attributable to the reclassification of $59,500 of rental expenses prepaid to a shareholder of the Company to a  non interest bearing liability of the shareholder  due at the demand of the Company.

As of November 30, 2011 we had Prepaid Expenses of  $13,000  and as of August 31, 2011 we had Prepaid Expenses of $72,500.

The decrease in Prepaid Expenses of approximately 82% is primarily attributable to the reclassification of $59,500 of rental expenses prepaid to a shareholder of the Company to a  non interest bearing liability of the shareholder  due at the demand of the Company.

As of November 30, 2011 we had Property & Equipment (Net of Accumulated Depreciation) of $15,197 and as of August 31, 2011 we had Property & Equipment (Net of Accumulated Depreciation) of $ 17,293.

The decrease in Property & Equipment (Net of Accumulated Depreciation) of approximately 12% was due to depreciation expense recognized over the course of the quarter.

As of November 30, 2011 we had Rights to Future Revenue of $700,000 and as of August 31, 2011 we had Rights to Future Revenue of $-0-.

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The increase in Rights to Future Revenue is attributable to an agreement entered into by and between the Company and Titterington Veterinary Services, Inc (“Seller”), Dr. Ronald Titterington, DVM (“Titterington”) and Dr. Kathy Snell, DVM (“Snell”) to purchase:

1. All rights currently held by either of Seller, Titterington or Snell to the trade name “EMERALD VALLEY PET MEDICAL CENTER

2. Customer Lists of the Seller.

3. Any and all unencumbered intellectual property utilized in the operation of the business of the Seller

4. The obligation of Titterington to act as Veterinary Manager of the Seller, not to transfer ownership of the Seller,  and continue to operate the business of the Seller  for a term of seven years from the execution of this Agreement  (“Titterington  Covenant”).

5. 97% of all revenue received by the Seller as a result of the operation of its business during the term of the Titterington Covenant (“Buyer Revenue Share”)  

6. The obligation of Titterington and the Seller, at the request of the Buyer, to assist and participate in the Company’s  biotechnology research and development  activities to the extent permitted by applicable law during the term of the Titterington Covenant (Titterington Research Obligations) subject to mutually agreeable additional compensation.

Consideration for the assets purchased, Titterington Covent, Buyer Revenue Share and Titterington Research Obligations was:

The issuance to Titterington of 2,500,000 common shares of the Company valued as of the closing price of the last trading day immediately prior to issuance.

The execution by the Company and Red Otter LLC of  a  Lease Agreement (“Buyer Lease”) by and between Red Otter LLC and the Company

The obligation of the Company  to directly pay (in regards to expenses incurred in connection with the Buyer Lease) or reimburse the Seller for certain  expenses (“Buyer Expense Obligation”) over the term of the Titterington Covenant.

The obligation of the Company to issue to Titterington that number of its common shares, valued as of the closing price of the last trading day immediately prior to issuance, which shall equal fifty percent of the Buyer Revenue Share less the Buyer Expense Obligation (“Bonus Shares”).  In any month where Bonus Shares are owed to Titterington and Buyer Revenue Share exceeded Buyer Expense Obligation in the month immediately preceding, Titterington may elect to receive a bonus in cash (“Bonus Cash”).

·

The making available to the Seller all assets purchased (“Assets”)  and the property which is subject of the Buyer Lease for utilization in the operation of the Seller’s business over the course of the Titterington Covenant

As of November 30, 2011, we had Intangible Assets (Net of Accumulated Amortization) of $1,634 and as of August 31, 2011 we had Intangible Assets (Net of Accumulated Amortization) of $1,828.

The decrease in Intangible Assets (Net of Accumulated Amortization) of approximately 11% is attributable to recognition of amortization for the period.

As of November 30, 2011 we had Accounts Payable of $39,472 and as of August 31, 2011 we had Accounts Payable of $27,564.

The increase in Accounts Payable of approximately 43% is primarily attributable to decreases in outstanding obligations of the Company incurred in the course of business.

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As of November 30, 2011 we had Notes Payable of $256,779 and as of August 31, 2011 we had Notes Payable of $239,054.

The increase in Notes Payable of approximately 7% is primarily attributable to approximately $23,700 received by the Company as a result of additional borrowings during the period offset by principal payments of $5,975 on existing Notes Payable.

As of November 30, 2011 we had Convertible Notes Payable (net of unamortized discount)  of $103,791 and as of August 31, 2011 we had Convertible Notes Payable (net of unamortized discount)  of $42,430.

 The increase in Convertible Notes Payable (net of unamortized discount) of 144% is attributable to :

The issuance of a convertible promissory note in the principal amount of $ $35,000 on August 29, 2011

The issuance of a convertible promissory note in the amount of $32,500 on October 25, 2011.

The recognition of $48,495 in interest expense attributable to amortization of beneficial conversion features on Convertible Notes issued.

Offset by:

The satisfaction of $16,583 of principal indebtedness of Convertible Notes through the issuance of 153,316 of the Company’s common shares.

As of November 30, 2011 we had Accrued Expenses of $96,954 and as of August 31, 2011 we had Accrued Expenses of $67,206.

The increase in Accrued Expenses of approximately 44%  is primarily attributable to the accrual of $7,102 of interest expense over the course of the quarter, the accrual of $25,500 of salaries accrued but unpaid over the course of the quarter offset by a decrease of $2,854 of accrued payroll tax liabilities .

Material Changes in Results of Operations

Revenues were $107,933 for the three months ended November 30, 2011 and -0- for the three months ended November 30, 2010.  Net losses were $196,366 for the three months ended November 30, 2011 and $243,526 for the same period ended 2010.

The decrease in Net Losses of approximately 30% is primarily attributable to revenues provide by the McDonald Animal Hospital and decreases in research and development expenses and general and administrative expenses offset by increases in rental expenses, consulting expenses, interest expenses and cost of revenue.

Liquidity and Capital Resources

As of  November 30, 2011 we had $13,651  cash on hand and current liabilities of $448,746 (exclusive of convertible debt discount attributable to a beneficial conversion feature) such liabilities consisting of Accounts Payable, Notes Payable, Convertible Notes Payable, Amounts due to Affiliates / Others and Accrued Expenses.

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

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

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

On October 25, 2011, the Company issued a convertible promissory note in the amount of $32,500. The note bears an interest rate of eight percent (8%), matures on July 27, 2012 and may be converted after 180 days from execution of this note for shares of the Company’s common stock. The note may be converted at a fifty two percent (52%) discount to the average of the lowest 3 closing bid prices of the common stock during the 10 trading days prior to the conversion date. The issuance of the note amounted in a beneficial conversion feature of $7,634  which  is  amortized under the Interest Method.

On November 4, 2011 the Company entered into an agreement (“Agreement”) with Titterington Veterinary Services, Inc (“Seller”), Dr. Ronald Titterington, DVM (“Titterington”) and Dr. Kathy Snell, DVM (“Snell”) to purchase:

1. All rights currently held by either of Seller, Titterington or Snell to the trade name “EMERALD VALLEY PET MEDICAL CENTER

2. Customer Lists of the Seller.

3. Any and all unencumbered intellectual property utilized in the operation of the business of the Seller

4. The obligation of Titterington to act as Veterinary Manager of the Seller, not to transfer ownership of the Seller,  and continue to operate the business of the Seller  for a term of seven years from the execution of this Agreement  (“Titterington  Covenant”).

5. 97% of all revenue received by the Seller as a result of the operation of its business during the term of the Titterington Covenant (“Buyer Revenue Share”)  

6. The obligation of Titterington and the Seller, at the request of the Buyer, to assist and participate in the Company’s  biotechnology research and development  activities to the extent permitted by applicable law during the term of the Titterington Covenant (Titterington Research Obligations) subject to mutually agreeable additional compensation.

Consideration for the assets purchased, Titterington Covent, Buyer Revenue Share and Titterington Research Obligations was:

a)

The issuance to Titterington of 2,500,000 of the common shares of the Company  (“Purchase Shares”) valued as of the closing price of the last trading day immediately prior to issuance·

b)

The execution by the Company and Red Otter LLC of  a  Lease Agreement (“Buyer Lease”) by and between Red Otter LLC and the Company·

c)

The obligation of the Company  to directly pay (in regards to expenses incurred in connection with the Buyer Lease) or reimburse the Seller for certain  expenses (“Buyer Expense Obligation”) over the term of the Titterington Covenant.·

d)

The obligation of the Company to issue to Titterington that number of its common shares, valued as of the closing price of the last trading day immediately prior to issuance, which shall equal fifty percent of the Buyer Revenue Share less the Buyer Expense Obligation (“Bonus Shares”).  In any month where Bonus Shares are owed to Titterington and Buyer Revenue Share exceeded Buyer Expense Obligation in the month immediately preceding, Titterington may elect to receive a bonus in cash (“Bonus Cash”).

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e)

The making available to the Seller all assets purchased (“Assets”)  and the property which is subject of the Buyer Lease for utilization in the operation of the Seller’s business over the course of the Titterington Covenant

Pursuant to the Agreement:

Any and all obligations of the Company pursuant to (c) (d) and (e) listed above and any obligations of the Company pursuant to the Buyer Lease shall immediately terminate, at the option of the Company, if:

1.Over any three month period the Buyer Expense Obligations exceed the Buyer Revenue Share by 10%,

2.Over any one month period the Buyer Expense Obligations exceed the Buyer Revenue Share by 25%,

3.The Titterington Covenant is breached or

4.The Seller become the subject of a bankruptcy, receivership, conservatorship or insolvency proceeding

Pursuant to the Agreement:

Any and all obligations of the Seller, Titterington or Snell to the Company pursuant to the Agreement shall immediately terminate, at the option of Titterington on behalf of himself and all other selling parties, if:

1.Any Buyer Expense Obligation remains unpaid or not reimbursed  thirty days after  the date such expenses were  due to be paid or reimbursed pursuant to this Agreement and such breach is not cured within thirty days of written notice of such breach to the Company  by Titterington.  

2.Any Bonus Shares or Bonus Cash required to be issued pursuant to this Agreement are not issued within thirty days of the date such Bonus Shares or Bonus Cash were required to be issued provided written demand for such Bonus Shares or Bonus Cash has been made to  the Company  by Titterington.

3.The Company fails to make available to the Seller for utilization in the operation of the Seller’s business over the course of the Titterington Covenant the Assets and the property which is subject of the Buyer Lease and such breach is not cured within thirty days of written notice of such breach to the Company by Titterington.

Pursuant to the Agreement:

Purchase Shares issued to Titterington are subject to the following restrictions:

In the event that the Company’s  obligations pursuant to the Agreement are terminated within a period of six calendar months from the execution of the Agreement as a result of the Buyer Expense Obligations exceeding  the Buyer Revenue Share by 10%, over any three month period, the Buyer Expense Obligations exceeding  the Buyer Revenue Share by 25%, over any one month period, the Titterington Covenant being breached or the Seller becoming  the subject of a bankruptcy, receivership, conservatorship or insolvency proceeding, the Purchase Shares shall be forfeited by Titterington  and ownership of the Purchase Shares shall be transferred back to the Company

Purchase Shares may not be sold, transferred, assigned, pledged or otherwise encumbered or disposed of by Titterington (“ Transfer Restriction”) except as follows:

Beginning upon the seventh calendar month subsequent to the execution of this Agreement, Titterington may sell each month either 1/84 of the original number of shares issued to Titterington, or that number of shares per calendar month valued as of the closing price of the last trading day immediately prior to issuance which shall equal  $8,333, whichever is greater.

Pursuant to the Agreement:

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With the exception of issuance of Purchase Shares, the terms of the Agreement shall automatically renew for a period of an additional seven years unless either of Company or Titterington shall have given written notice to the other of his desire not to renew.

On January 4, 2011 the Company issued a convertible promissory note dated December 19, 2011 in the amount of $37,500. The note bears an interest rate of eight percent (8%), matures on September 21, 2012 and may be converted after 180 days from execution of this note for shares of the Company’s common stock. The note may be converted at a fifty two percent (52%) discount to the average of the lowest 3 closing bid prices of the common stock during the 10 trading days prior to the conversion date.

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

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

Changes in Internal Controls over Financial Reporting

In connection with the evaluation of the Company's internal controls during the period commencing on September  1, 2011 and ending November 30, 2011, both the Company's Principal Executive Officer and Principal Financial Officer have determined that there were no changes to the Company's internal controls over financial reporting that have been materially affected, or is reasonably likely to materially effect, the Company's internal controls over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

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 BMSN 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.

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

On October 7, 2011 the Company issued 50,000 shares of common stock (“Shares”) for services.

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

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

On November 11, 2011 the Company issued 2,500,000 shares of common stock (“Shares”) in connection with rights to receive future revenues of a Utah veterinary clinic.

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

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

On November 22, 2011 the Company issued 18,333 shares of common stock (“Shares”) for services. The Shares were issued pursuant to Section 4(2) of the Securities Act of 1933, as amended. No underwriters were retained to serve as placement agents for the sale. The shares were sold directly through our management.  No commission or other consideration was paid in connection with the sale of the shares. There was no advertisement or general solicitation made in connection with this Offer and Sale of Shares.

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

On November 28, 2011 the Company issued 134,983 shares of common stock (“Shares”) in satisfaction of $12,000 principal amount of Convertible Notes Payable.

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.

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On December 12, 2011 the Company issued 258,824 shares of common stock (“Shares”) in satisfaction of $11,000 principal amount of Convertible Notes Payable

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.

On December 19, 2011 the Company issued 338,983 shares of common stock (“Shares”) in satisfaction of $12,000  principal amount of Convertible Notes Payable

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.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Reserved

None.

Item 5. Other Information

On January 4, 2011 the Company issued a convertible promissory note dated December 19, 2011 in the amount of $37,500. The note bears an interest rate of eight percent (8%), matures on September 21, 2012 and may be converted after 180 days from execution of this note for shares of the Company’s common stock. The note may be converted at a fifty two percent (52%) discount to the average of the lowest 3 closing bid prices of the common stock during the 10 trading days prior to the conversion date..

Item 6. Exhibits

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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.

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