ENTEST GROUP, INC. - Quarter Report: 2019 February (Form 10-Q)

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended February 28, 2019

☐ 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

No. 911 Bao’an Book City 

Xinqiao Street Central Road, Bao’an District, Shenzhen, China

Indicate by check mark 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 ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Date File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  ☒   No ☐

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒  No ☐

As of April 29, 2019, there were 49,170,472 shares of the Company’s common stock, par value $0.0001 per share, issued and outstanding.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

ENTEST GROUP, INC.

INDEX TO UNAUDITED INTERIM FINANCIAL STATEMENTS

FOR THE PERIOD ENDED FEBRUARY 28, 2019

ENTEST GROUP, INC.

Balance Sheets 

(Unaudited)

The accompanying Notes are an integral part of these unaudited interim financial statements.

ENTEST GROUP, INC.

Statements of Operations

(Unaudited)

The accompanying Notes are an integral part of these unaudited interim financial statements.

ENTEST GROUP, INC.

Statements of Stockholders’ Deficit

For the Three and Six Months Ended February 28, 2019

(Unaudited)

The accompanying Notes are an integral part of these unaudited interim financial statements.

ENTEST GROUP, INC.

Statements of Stockholders’ Deficit 

For the Three and Six Months Ended February 28, 2018

(Unaudited)

The accompanying Notes are an integral part of these unaudited interim financial statements.

ENTEST GROUP, INC.

Statements of Cash Flows

(Unaudited)

The accompanying Notes are an integral part of these unaudited interim financial statements.

ENTEST GROUP, INC. 

Notes to the Unaudited Financial Statements 

As of February 28, 2019

NOTE 1. ORGANIZATION, DESCRIPTION OF BUSINESS, AND GOING CONCERN

Entest Group, Inc. (the “Company”or “Entest”) was incorporated in the State of Nevada on September 24, 2008 as JB Clothing Corporation. On July 12, 2009, the Company changed its name to Entest BioMedical, Inc. On February 12, 2018 the Company changed its name from Entest BioMedical, Inc. to Entest Group, Inc.

The Company’s current business strategy is to acquire an operating company seeking the perceived advantages of being a publicly held corporation. No assurance can be given that such an acquisition shall occur or, if such an acquisition were to occur, it would occur on terms and conditions beneficial to the Company or its shareholders.

Change of Control

On November 15, 2018, David Koos, Regen BioPharma Inc., Bostonia Partners Inc., Sherman Family Trust, Dunhill Ross Partners Inc., Bio-Technology Partners Business Trust (collectively, the “Sellers”) and Peiwen Yu (the “Buyer”) entered into a stock purchase agreement (the “SPA”), pursuant to which the Sellers agreed to sell and the Buyer agreed to purchase an aggregate of 23,733,334 shares of common stock, 667 shares of Series AA preferred stock, 534 shares of Series AAA preferred stock and 1,001,533 shares of Non-Voting Preferred Stock of Entest from the Seller for an aggregate purchase price of $325,000. The closing of the transactions contemplated by the SPA occurred on November 27, 2018. The purchase price was paid out of the Buyer’s personal funds.

As of the date of the transaction, Entest had 49,170,472 shares of common stock, 728,009 shares of Series B Preferred Stock, 667 shares of Series AA Preferred Stock, 534 shares of Series AAA Preferred Stock and 1,001,533 shares of Non-Voting Convertible Preferred Stock outstanding. The securities purchased pursuant to the SPA represent 48.3% of the outstanding shares of common stock, 90% of the outstanding shares of common stock assuming the conversion of the Non-Voting Convertible Preferred Stock on the execution date of the SPA and 94% of the voting power of Entest.

As contemplated by the SPA, in November 2018, David Koos resigned as Chairman, Chief Executive Officer, President, Acting Chief Financial Officer and Secretary of Entest and Peiwen Yu became as a director, Chief Executive Officer and President of Entest. Pursuant to the SPA, in November 2018, Mr. Koos also resigned as a director of the Company upon compliance by Entest with information statement delivery requirements pursuant to Rule 14f-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Going Concern and Liquidity Considerations

The accompanying unaudited interim financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has not generated any revenues since the change of control and disposition of its subsidiaries, and has an accumulated deficit of $10,047,087. These factors among others raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The continuing operations of the Company are dependent upon its ability to continue to raise adequate financing and to commence profitable operations in the future and repay its liabilities arising from normal business operations as they become due.

In support of the Company’s efforts and cash requirements, it may rely on advances from related parties until such time that the Company can support its operations or attains adequate financing through sales of its equity or traditional debt financing. There is no formal written commitment for continued support by shareholders or directors.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements and with the instructions to Form 10-Q and Article 8 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of the Company’s management, the accompanying unaudited financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of February 28, 2019 and the results of operations and cash flows for the periods presented. The results of operations for the period ended February 28, 2019 are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited interim financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended August 31, 2018 filed with the Securities and Exchange (the “SEC”) on November 28, 2018.

Reclassifications

Certain prior year amounts have been reclassified to conform with the current year presentation.

Recent Accounting Pronouncements

In October 2018, FASB issued ASU No. 2018-17, Consolidation - Targeted Improvements to Related Party Guidance for Variable Interest Entities (Topic 810). ASU No. 2018-17 guidance eliminates the requirement that entities consider indirect interests held through related parties under common control in their entirety when assessing whether a decision-making fee is a variable interest. Instead, the reporting entity will consider such indirect interests on a proportionate basis. This pronouncement is effective for public entities for fiscal years ending after December 15, 2019, with early adoption permitted. The Company does not expect the adoption to have a material impact on its consolidated financial statements.

NOTE 3. RELATED PARTY TRANSACTIONS

On July 3, 2018, Zander entered into a sublease agreement with Entest whereby Zander would sublet office space located at 4700 Spring Street, Suite 304, La Mesa, California 91942 from Entest on a month to month basis for $6,000 per month beginning July 5, 2018. On November 16, 2018 Zander Therapeutics Inc. and the Company agreed to terminate Zander’s sublease with the Company effective the rental period commencing November, 2018. David R. Koos, who served as Chairman and Chief Executive Officer of Zander as of that date also served as Chairman and Chief Executive Officer of Entest as of that date. Zander was under common control with Entest as of that date.

On November 16, 2018, Entest Group, Inc. and its then Chairman and Chief Executive Officer, David R. Koos, agreed to satisfy any and all unpaid interest resulting from accrued interest earned on Notes Payable to Koos by Entest from the beginning of time to November 30, 2018 by transferring to David R. Koos 3,000,000 shares of the Series M Preferred stock of Zander Therapeutics, Inc. owned by the Company.

Entest Group, Inc. and Blackbriar Partners (“BP”) agreed to satisfy any and all unpaid interest resulting from accrued interest earned on Notes Payable to BP by Entest from the Company’s inception to November 30, 2018 by transferring to BP 20,000 shares of the Series M Preferred stock of Zander Therapeutics, Inc. owned by the Company. BP is controlled by David Koos, as of that date, the Company’s then Chairman and Chief Executive Officer.

Entest Group, Inc. and the Bio Matrix Scientific Group, Inc. (“BMSN”) agreed to satisfy any and all unpaid interest resulting from accrued interest earned on Notes Payable to BMSN by Entest from the Company’s inception to November 30, 2018 by transferring to BMSN 5,000 shares of the Series M Preferred stock of Zander Therapeutics, Inc. owned by the Company. As of November 16, 2018, David R. Koos was the Chairman and Chief Executive Officer of the Company and BMSN.

Entest Group, Inc. and Regen Biopharma, Inc. (“RGBP”) agreed to satisfy any and all unpaid interest resulting from accrued interest earned on Notes Payable to RGBP by Entest from the beginning of time to November 30, 2018 by transferring to RGBP 250,000 shares of the Series M Preferred stock of Zander Therapeutics, Inc. owned by the Company.

Entest Group, Inc. and Regen Biopharma, Inc. (“RGBP”) agreed to satisfy any and all rent prepaid by RGBP to Entest from the beginning of time to November 30, 2018 by transferring to RGBP 475,000 shares of the Series M Preferred stock of Zander Therapeutics, Inc. owned by the Company. As of November 16, 2018, David R. Koos was the Chairman and Chief Executive Officer of the Company and RGBP.

In November 2018, the Company divested itself of Entest BioMedical, Inc., a California corporation, for consideration consisting of $2,000 paid by an entity controlled by David R. Koos.

The Company recognized a loss of $6,947 on the disposition based on the difference between the Net Assets of the subsidiary and the consideration paid.

During the period ended February 29, 2019, the Company’s sole officer advanced to the Company an amount of $5,550 by issuing an unsecured and non-interest bearing loan that is payable on demand. As of February 29, 2019 and August 31, 2018, the balance of such loan was $5,550 and $0, respectively.

NOTE 4. STOCKHOLDERS’ EQUITY

Authorized Stock

The Company is authorized to issue an aggregate of 500,000,000 shares of common stock with a par value of $0.0001, 5,000,000 shares of preferred stock with a par value of $0.0001, and 3,000,000 shares of non-voting convertible preferred stock with a par value of $1.00. Each share of common stock entitles the holder to one vote on any matter on which action of the stockholders of the corporation is sought.

Series AA Preferred Stock

The Company is authorized to issue 100,000 shares of Series AA Preferred Stock at a par value of $0.0001 per share.

As of February 28, 2019 and August 31, 2018, 667 shares of Series AA Preferred Stock were issued and outstanding.

Series B Preferred Stock

The Company is authorized to issue 4,400,000 shares of Series B Preferred Stock at a par value of $0.0001 per share.

As of February 28, 2019 and August 31, 2018, 728,009 shares of Series B Preferred Stock were issued and outstanding.

Series AAA Preferred Stock

The Company is authorized to issue 300,000 shares of Series AAA Preferred Stock at a par value of $0.0001 per share.

As of February 28, 2019 and August 31, 2018, 534 shares of Series AAA Preferred Stock were issued and outstanding.

Non-Voting Convertible Preferred Stock

The Company is authorized to issue 3,000,000 shares of Non-Voting Convertible Preferred Stock at a par value of $1.00 per share.

On October 2, 2018, the Company amended Article 4 of its Articles of Incorporation to change the conversion features of the Company’s Non -Voting Convertible Preferred Stock. The Conversion Price changed from being equal to the greater of $0.01 per share or seventy percent (70%) of the lowest closing bid price of its shares of common stock (the “Closing Price”) on its principal trading market or exchange for the five (5) trading days immediately preceding written receipt by the corporation of the holder’s intent to convert to being equal to the greater of (i) $0.001 per share and (ii) seventy percent (70%) of the lowest Closing Price for the five (5) trading days immediately preceding written receipt by the corporation of the holder’s intent to convert.

As of February 28, 2019 and August 31, 2018, 1,001,533 shares of Non-Voting Convertible Preferred Stock were issued and outstanding.

Common Shares

The Company is authorized to issue 500,000,000 shares of Common Stock at a par value of $0.0001 per share.

As of February 28, 2019 and August 31, 2018, 49,170,472 shares of Common Stock were issued and outstanding.

NOTE 4. DECONSOLIDATION OF ZANDER THERAPEUTICS, INC.

On May 5, 2018, The Company declared the distribution on a pro rata basis as a dividend in kind of 3,000,000 of the common shares of Zander Therapeutics, Inc., par value $0.0001, currently owned by Entest Group, Inc. to:

(a) Holders of record of the outstanding common shares of the Company as of the record date, which is May 30, 2018.

(b) Holders of record of the shares of any outstanding series of the preferred shares of the Company as of the record date, which is May 30, 2018.

Shareholders of the Company shall receive one (1) share of common stock of Zander Therapeutics, Inc. for each 17 shares of the Company’s common and/or preferred stock held as of the record date for such dividend. The distribution of the 3,000,000 common shares of Zander Therapeutics, Inc. to the common and preferred shareholders of the Company occurred on June 11, 2018 (“Distribution Date”).

As a result of the payment of the abovementioned property dividend, the Company’s percentage of ownership of Zander fell below 50% resulting in the deconsolidation of Zander as of the Distribution Date. As of the Distribution Date all assets and liabilities attributable to Zander were derecognized by the Company. The Company recognized a $10,034 gain as a result of the deconsolidation. The Property dividend may be deemed to have occurred with a related party as the recipients were shareholders of Entest, including the then Chairman and Chief Executive Officer of Entest and Regen Biopharma, Inc. which was a company under common control with Entest.

The Company’s remaining shares of Zander, which consisted of 5,000,000 shares of Zander’s Series M Preferred Stock (“Zander M Stock”) were accounted for under the Equity Method as of the Distribution Date until November 29, 2018. The Zander M Stock was carried a Fair Value and the carrying value was increased by the Company’s proportionate share of earnings of Zander and decreased by cash dividends paid by Zander as well as the Company’s proportionate share of losses of Zander up to the carrying value. As of August 31, 2018, the carrying value of the Zander M Stock was decreased by the Company’s proportionate share of the losses of Zander and was 0. As of August 31, 2018, Entest beneficially owned 34.82% of the share equity of Zander.

During the quarter ended November 30, 2018, the Company divested itself of the Zander M Stock as satisfaction of $179,318 of interest accrued but unpaid owed by the Company and $9,270 of unearned rental payments made to the Company. As the Zander M Stock had a carrying value of $0, the Company recognized a gain of $188,589 on the disposition.

NOTE 5. DISPOSITION OF ENTEST BIOMEDICAL, INC., A CALIFORNIA CORPORATION

During the quarter ended November 30, 2018 the Company divested itself of Entest Biomedical, Inc., a California corporation and wholly owned subsidiary, for consideration consisting of $2,000 paid by an entity controlled by the Company’s then Chairman and Chief Executive Officer, David R. Koos, as full consideration for Entest Biomedical Inc. as well as any and all furniture, fixtures and equipment owned by the Company which has a carrying amount of $0.

The Company recognized a loss of $6,947 on the disposition based on the difference between the Net Assets of the subsidiary and the Consideration paid.

NOTE 6.  INCOME TAXES

The Company provides for income taxes under ASC 740, “Income Taxes.” Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax basis of assets and liabilities and the tax rates in effect when these differences are expected to reverse. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.

The income tax provision for the periods ended February 28, 2019 and 2018, consists of the following:

Net deferred tax assets consist of the following components as of February 28, 2019 and August 31, 2018:

On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act (the “Act”) resulting in significant modifications to existing law including lowering the corporate tax rate from 34% to 21%. In addition to applying the new lower corporate tax rate in 2018 and thereafter to any taxable income we may have, the legislation affects the way we can use and carry forward net operating losses previously accumulated and results in a revaluation of deferred tax assets and liabilities recorded on our balance sheet. The Company has completed the accounting for the effects of the Act during the period ended February 28, 2019. Given that current deferred tax assets are offset by a full valuation allowance, these changes will have no impact on the balance sheet.

As of February 28, 2019, the Company had approximately $10,060,734 of net operating loss (“NOL”) carry forwards, the tax effect of which is approximately $2,122,754. These carry forwards begin to expire in 2029. 

The NOL carry forwards are subject to certain limitations due to the change in control of the Company pursuant to Internal Revenue Code Section 382. The Company experienced a change in control for tax purposes in November 2018 (see Note 1). The Company has not performed a study to determine if the NOL carry forwards are subject to these Section 382 limitations.

NOTE 7 - EARNING (LOSS) PER SHARE

The following is a reconciliation of the numerator and denominator used in the basic and diluted earnings per share ("EPS") calculations.

For the three months ended February 28, 2019 and periods ended February 28, 2018, the convertible instruments are anti-dilutive and therefore, have been excluded from earnings (loss) per share.

For the six months ended February 28, 2019, diluted earnings per share is calculated using net income available to common stockholders divided by the diluted weighted average number of common shares outstanding during each period determined using the if-converted method.

NOTE 8 - SUBSEQUENT EVENTS

Management has evaluated subsequent events through the date these financial statements were available to be issued. Based on our evaluation no material events have occurred that require disclosure.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

References to the “Company,” “us,” “our” or “we” refer to Entest Group, Inc. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed financial statements and related notes included herein.

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 SEC, including the Company’s Annual Report on Form 10-K for the year ended August 31, 2018.

Overview

The Company currently does not have any operations and has not actively conducted any operations for the quarter ended February 28, 2019. The Company’s business plan for the next 12 months and beyond such time is to seek new business opportunities or to engage in a business combination with an unidentified company. The analysis of new business opportunities will be undertaken by or under the supervision of the Company’s management. As of the date of this filing, the Company has not entered into any definitive agreement with any party, nor have there been any specific discussions with any potential business combination candidate regarding business opportunities for the Company. There can be no assurance that the Company will be able to identify and acquire any business entity. Even if we successfully acquire a business entity, there is no assurance that we can generate revenue and become profitable.

Results of Operations

The Company has not conducted any active operations during the quarter ended February 28, 2019. No revenue has been generated by the Company within such period. It is unlikely the Company will have any revenues unless it is able to effect an acquisition or merger with an operating company, of which there can be no assurance. It is management’s assertion that these circumstances may hinder the Company’s ability to continue as a going concern. The Company’s plan of operation for the next twelve months shall be to locate suitable acquisition candidates.

For the three months ended February 28, 2019 compared with the three months ended February 28, 2018

The following summary of our results of operations should be read in conjunction with our financial statements for the three months ended February 2019, which are included herein.

Our operating results for the three months ended February 28, 2019 and the three months ended February 28, 2018 and the changes between those periods for the respective items are summarized as follows:

The Company has not conducted any operations during the three months ended February 28, 2019. Revenues from operations were $0 for the three months ended February 28, 2019 and 2018.

For the three months ended February 28, 2019, operating expenses of $10,972, consisted of professional fees of $6,395, general and administrative expenses of $4,577 and other income and expenses of $0, resulting in a net loss of $10,972.

For the three months ended February 28, 2018, operating expenses of $424,610, consisted of professional fees of $84,091, general and administrative expenses of $50,519, and research and development expenses of $290,000. The other income of $14,802 was attributable to rental income of $15,000 and interest expense of $198. Net loss for three months ended February 28, 2018 was $409,808.

The decrease in net loss for the three months ended February 28, 2019, as compared to the same period ended February 28, 2018, was primarily due to the ceasing of prior operations, disposition of subsidiaries and change of control during the first quarter ended November 30, 2018.

For the six months ended February 28, 2019 compared with the six months ended February 28, 2018

Our operating results for the six months ended February 28, 2019 and the six months ended February 28, 2018 and the changes between those periods for the respective items are summarized as follows:

The Company has not conducted any operations during the six months ended February 28, 2019. Revenues from operations were $0 for the six months ended February 28, 2019 and 2018

For the six months ended February 28, 2019, operating expenses of $25,026, consisted of professional fees of $8,834 and general and administrative expenses of $16,192.

For the six months ended February 29, 2019, other income of $234,065, consisted of a gain on write off accounts payables of $23,629, gain on disposition of Zander Therapeutics, Inc. of $188,589, rental income of $28,000, loss on disposition of Entest Biomedical Inc. of $6,947 and interest expense of $495.

The net profit for the six months ended February 28, 2019 was $209,039.

For the six months ended February 28, 2018, operating expenses of $597,382, consisted of professional fees of $208,190, general and administrative expenses of $99,192 and research and development expenses of $290,000.

For the six months ended February 28, 2018, other income of $29,468 consisted of rental income of $30,000 and interest expenses of $532.

The net loss for the six months ended February 28, 2018, was $567,914.

The increase in net income for the six months ended February 28, 2019, as compared to the same period ended February 28, 2018, was primarily due to other income realized, from the ceasing of prior operations, disposition of subsidiaries and change of control during the first quarter ended November 30, 2018.

Liquidity and Capital Resources

Working Capital

The decrease in working capital deficit was primarily attributed to decreased liabilities from the disposition of prior operations and the change of control occurred in November 2018. As of February 28, 2019, our liabilities decreased $238,728, from $255,018, as of August 31, 2018, to $16,290. The decrease is liabilities is attributable to a decrease in notes payable of $19,601, a decrease of accounts payable and accrued liabilities of $207,677, and a decrease of unearned rental income of $17,000. As of February 28, 2019, our current assets decreased $8,267, from $9,307, as of August 31, 2018, to $1,040. The decrease is primarily attributed to the $8,000 in prepaid expenses at August 31, 2018.

Cash Flows

Cash Flow from Operating Activities

The net cash used in operating activities for the six months ended February 28, 2019 was attributed to a net profit of $209,039, increased due to an increase in expenses paid by a related party of $5,550 and loss on disposition of Entest Biomedical of $6,947, and decreased by gain on write off of accounts payable of $23,629, gain on disposition of Zander of $188,589 and a net change in operating assets and liabilities of $13,277.

The net cash used in operating activities for the six months ended February 28, 2018 was attributed to a net loss of $567,914, increased by a net change in operating assets and liabilities of $176,704.

Cash Flow from Investing Activities

Net cash from investing activities was $1,937, for the six months ended February 28, 2019, derived from proceeds from a net cash received for divestiture of Entest Biomedical.

We did not use any funds for investing activities during the six months ended February 28, 2018. 

Cash Flow from Financing Activities

Net cash from financing activities was $1,755, for the six months ended February 28, 2019, derived from proceeds from additional paid in capital offset by bank overdraft, compared to net cash from financing activities of $1,400,000, for the six months ended February 28, 2018, derived from proceeds from common stock issued from subsidiary.

As of February 28, 2019 and August 31, 2018, we had cash of $0 and $267, respectively.

We believe that we will not be able to satisfy our cash requirements over the next twelve months. The Company seeks to acquire an operating company seeking the perceived advantages of being a publicly held corporation. No assurance can be given that such an acquisition shall occur or, if such an acquisition were to occur, it would occur on terms and conditions beneficial to the Company or its shareholders. The Company is also dependent upon the receipt of capital investment or other financing to fund its ongoing operations and to execute its business plan of seeking a combination with a private operating company. In addition, the Company anticipates that it will be dependent upon certain related parties to provide continued funding and capital resources. If continued funding and capital resources are unavailable at reasonable terms, the Company may not be able to implement its plan of operations.

Critical Accounting Policies and Estimates

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at dates of the financial statements and the reported amounts of revenue and expenses during the periods. Actual results could differ from these estimates. Our significant estimates and assumptions include depreciation, stock-based compensation and the valuation allowance relating to the Company’s deferred tax assets.

Recently Issued Accounting Pronouncements

Reference is made to the “Recent Accounting Pronouncements” in Note 2 to the Financial Statements included in this report for information related to new accounting pronouncement, none of which had a material impact on our consolidated financial statements, and the future adoption of recently issued accounting pronouncements, which we do not expect will have a material impact on our consolidated financial statements.

Off-Balance Sheet Arrangements

As of February 28, 2019, we do not have any off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under 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 Procedure.

Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act that is designed to provide reasonable assurance that information we are required to disclose in the reports that we file or submit under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedure include, without limitations, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Pursuant to Rule 13a-15(b) under the Exchange Act, we carried out an evaluation, under the supervision and with the participation of Peiwen Yu, our Principal Executive Officer/Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Our Principal Executive Officer/Principal Financial Officer has concluded that our disclosure controls and procedures were not effective at this reasonable assurance level as of the period covered by this report.

Changes in Internal Controls over Financial Reporting

In connection with the evaluation of the Company’s internal controls during the period commencing on December 1, 2018 and ending on February 28, 2019, Peiwen Yu, 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 are reasonably likely to materially effect, the Company’s internal controls over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

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

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

(a) Exhibits required by Item 601 of Regulation S-K.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.