Rivulet Media, Inc. - Quarter Report: 2008 December (Form 10-Q)

aa5886183.htm

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

Quarterly Report under Section 13 or 15 (d) of

Securities Exchange Act of 1934

For Period ended December 31, 2008

Commission File Number 0-32201

BIO-MATRIX SCIENTIFIC GROUP, INC.

(Exact name of registrant as specified in its charter)

DELAWARE	33-0824714
(State of Incorporation)	(I.R.S. Employer Identification No.)

8885 Rehco Road, San Diego, California	92121
(Address of Principal Executive Offices)	(Zip Code)

(619) 398-3517

(Registrant's telephone number, including area code)

Check whether the registrant (1) has filed all reports required to be filed by

Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding

12 months (or for such shorter period that the registrant was required to file

such reports), and (2) has been subject to such filing requirements for the past

90 days. Yes x No o

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

There were 26,102,993 shares of Common Stock outstanding as of December 31, 2008.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

BIO-MATRIX SCIENTIFIC GROUP, INC. AND SUBSIDIARIES
(A Development Stage Company)
Condensed Consolidated Balance Sheet
	as of			as of
	December 31, 2008			September 30, 2008
	(unaudited)


ASSETS







CURRENT ASSETS
Cash	$	13,796		$	8,410
Securities Available for sale		10,000			550,000
Pre-paid Expenses		38,693			49,258


Total Current Assets		62,489			607,668

PROPERTY & EQUIPMENT (Net of Accumulated Depreciation)		538,868			538,868

Other Assets		25,507			21,307

TOTAL ASSETS	$	626,864		$	1,167,843



LIABILITIES AND STOCKHOLDERS' EQUITY


CURRENT LIABILITIES
Accounts payable	$	123,335		$	89,974
Notes Payable		336,809			111,459
Accrued Payroll		220,500			150,000
Accrued Payroll taxes		29,675			29,998
Accrued Interest		23,651			24,323
Accrued expenses		35,000			30,000
Current Portion of Convertible Note		143,400
Current Portion of Note to Affiliated party		1,000


Total Current Liabilities		913,370			435,754

LONG TERM LIABILITIES
Convertible Note (Less Current Portion)		360,000			503,400
Note to Affiliated Party (Less Curent Portion)					500,000

TOTAL LIABILITIES		1,273,370			1,439,154

STOCKHOLDERS' EQUITY
Preferred Stock ($.0001 par value)
20,000,000 shares authorized; 5,668,547 and 4,744,547		476			567
issued and outstanding as of September 30, 2008 and December 31, 2008
Series AA Preferred Stock ($0.001 par value)
100,000 shares authorized, 4852 issued and outstanding
as of September 30, 2008 and December 31, 2008
Common Stock, ($.0001 par value)
80,000,000 shares authorized; 24,870,869 and 26,102,993
shares issued and outstanding as of September 30, 2008 and December 31, 2008		2,610			2,488
Additional paid in Capital		7,686,148			7,631,648
Contributed Capital		499,000
Accumulated Other Comprehensive Income		(490,000	)		50,000
Deficit accumulated during the development stage		(8,344,736	)		(7,956,014	)


Total Stockholders' Equity (Deficit)	$	(646,502	)	$	(271,311	)


TOTAL LIABILITIES
& STOCKHOLDERS' EQUITY	$	626,864		$	1,167,843

The Accompanying Notes are an integral part of these Financial Statements.

BIO-MATRIX SCIENTIFIC GROUP, INC. AND SUBSIDIARIES

(A Development Stage Company)

Condensed Consolidated Statements of Operations

							From Inception
	3 Months Ended			3 Months Ended			(August 2, 2005)
	December 31, 2008			December 31, 2007			through
							December 31, 2008
	(unaudited)			(unaudited)			(unaudited)

REVENUES
Sales	$	-		$	-		$	-

Total Revenues		0			0			0

COSTS AND EXPENSES
Research and Development		43,628			34,307			701,535
General and administrative		257,204			225,275			3,672,408
Depreciation and amortization					334			2,668
Consulting and professional fees		62,300			142,237			3,820,832
Impairment of goodwill & intangibles								34,688


Total Costs and Expenses		363,132			402,153			8,232,131



OPERATING LOSS		(363,132	)		(402,153	)		(8,232,131	)

OTHER INCOME & (EXPENSES)


Interest Expense		(25,590	)		(3,659	)		(112,938	)
Interest Income								306
Other income								100
Other Expense								(74	)

Total Other Income & (Expenses)		(25,590	)		(3,659	)		(112,606	)

NET INCOME (LOSS)	$	(388,722	)	$	(405,812	)	$	(8,344,737	)



BASIC AND DILUTED EARNINGS (LOSS) PER SHARE		(0.015	)		(0.02	)


WEIGHTED AVERAGE NUMBER OF		25,257,809			23,335,098
COMMON SHARES OUTSTANDING

The Accompanying Notes are an integral part of these Financial Statements.

BIO-MATRIX SCIENTIFIC GROUP INC. AND SUBSIDIARIES

(A Development Stage Company)

Condensed Consolidated Statements of Stockholders' Equity

From August 2, 2005 through December 31, 2008

	Series AA									Additional					Accumulated
	Preferred		Preferred				Common			Paid-in		Retained		Contributed	Other
	Shares	Amount	Shares		Amount		Shares	Amount		Capital		Earnings		Capital	Comprehensive	Total
															Income (Loss)


Shares issued to parent							25,000	35,921		0						35,921
Net Loss August 2, 2005																0
through September 30, 2005												(1,000	)			(1,000	)
Balance September 30, 2005							25,000	35,921		0		(1,000	)			34,921

Net Loss October 1, 2005																0
through December 31, 2005												(366,945	)			(366,945	)
Balance December 31, 2005							25,000	35,921		0		(367,945	)			(332,024	)

Recapitalization							9,975,000	(34,921	)	34,921						0
Stock issued Tasco merger							2,780,000	278		(278	)					0
Stock issued for services							305,000	31		759,719						759,750
Stock issued for Compensation							300,000	30		584,970						585,000
Net Loss January 1, 2006
through September 30, 2006												(2,053,249	)			(2,053,249	)
Balance September 30, 2006							13,385,000	1,339		1,379,332		(2,421,194	)			(1,040,523	)

Stock issued for services							100,184	10		112,524						112,534
Stock issued for Compensation							153,700	15		101,465						101,480
Stock issued in exchange for canceling debt							2,854,505	284		1,446,120						1,446,404
Net Loss October 1, 2006
through December 31, 2006												(466,179	)			(466,179	)
Balance December 31, 2006							16,493,389	1,649		3,039,441		(2,887,373	)			153,717

Stock issued for cash							500,000	50		124,950						125,000
Stock issued for services							359,310	36		235,042						235,078
Stock issued for Compensation							143,920	14		88,400						88,414
Stock issued in exchange for canceling debt							500,000	50		124,950						125,000
Net Loss January 1, 2007
through March 31, 2007												(515,624	)			(515,624	)
Balance March 31, 2007							17,996,619	1,800		3,612,783		(3,402,997	)			211,585

Stock issued for cash							240,666	24		60,142						60,166
Stock issued for services							406,129	41		222,889						222,930
Stock issued for Compensation							150,000	15		110,435						110,450
Stock issued in exchange for canceling debt							1,316,765	132		329,059						329,191
Net Loss April 1, 2007
through June 30, 2007												(718,955	)			(718,955	)
Balance June 30, 2007							20,110,179	2,011		4,335,308		(4,121,952	)			215,367

Stock issued for cash							1,200,000	120		299,880						300,000
Stock issued for services							1,253,000	125		404,125						404,250
Stock issued for Compensation							100,000	10		24,990						25,000
Stock issued in exchange for canceling debt							566,217	57		143,940						143,997
Net Loss July 1, 2007
through September 30, 2007												(751,989	)			(751,989	)
Balance September 30, 2007							23,229,396	2,323		5,208,244		(4,873,941	)			336,626
Stock issued for Cash
Stock issued for services							191,427	19		62,108						62,127
Net Loss October 1, 2007
through December 31, 2007												(405,812	)			(405,812	)
Balance December 31, 2007							23,420,823	2,342		5,270,352		(5,279,753	)			(7,059	)
Stock issued for cash			575,000		57					114,942						114,999
Stock issued for services			340,000		35		146,705	15		106,651						106,701
Net Loss January 1 2008
through March 31, 2008												(417,325	)			(417,325	)
Balance March 31, 2008			915,000		92		23,567,528	2,357		5,491,945		(5,697,078	)			(202,684	)
Stock issued for cash			2,154,850		215					672,172						672,387
Stock issued for services			1,421,725		142		232,000	23		613,439						613,604
Stock issued for accrued interest							31,245	3		17,293						17,296
Stock issued as dividend			1,075,087		108					(108	)					0
Net Loss April 1,2008
to June 30, 2008												(1,063,446	)			(1,063,446	)
Balance June 30, 2008			5,566,662		557		23,830,773	2,383		6,794,741		(6,760,524	)			37,158
Series AA Stock issued to Officer July 3, 2008	4,852
Stock issued for services July 8, 2008							905,000	91		769,159						769,250
Stock issued for Cash July 2, 2008			11,667		1					3,499						3,500
Stock issued for Cash July 25, 2008 (Warrant Exercise)			90,000		9					17,991						18,000
Stock issued for interest between July 30, 2008 and August 30, 2008							85,087	9		21,263						21,272
Stock issued for services September 3, 2008							50,000	5		24,995						25,000
Stock issued due to rounding			218				9
Net Loss July 1, 2008 to September 30, 2008												(1,195,491	)			(1,195,491	)
Accumulated other Comprehensive Income as of September 30, 2008															50,000	50,000
Balance September 30, 2008	4,852		5,668,547		567		24,870,869	2,488		7,631,648		(7,956,015	)		50,000	(271,311	)
Stock Retired in connection with Exchange for Common Shares December 2, 2008			(1,099,000	)	(109	)										(109	)
Stock issued in connection with Exchange for Preferred Shares December 2, 2008							1,099,000	109								109
Stock Issued for Interest on December 3, 2008							133,124	13		33,268						33,281
Stock issued for Cash December 31, 2008			66,670		7					6,660						6,667
Stock issued for services December 31, 2008			33,330		3					3,330						3,333
Stock issued for Cash December 31, 2008			75,000		8					11,242						11,250
Contributed capital														499,000		499,000
Net Loss October 1, 2008 to December 31, 2008												(388,722	)			(388,722	)
Accumulated other Comprehensive Income as of December 31, 2008															(540,000)	(540,000	)
Balance December 31, 2008	4,852		4,744,547		476		26,102,993	2,610		7,686,148		(8,344,737	)	499,000	(490,000)	(646,502	)

The Accompanying Notes are an integral part of these Financial Statements.

Bio Matrix Scientific Group, Inc. and Subsidiaries

(A Development Stage Company)

Condensed Consolidated Statements of Cash Flow

							From August 2, 2005
							(Inception)
	3 Months Ended			3 months Ended			through
	December 31, 2008			December 31, 2007			December 31, 2008
	(unaudited)			(unaudited)			(unaudited)



CASH FLOWS FROM OPERATING ACTIVITIES

Net Income (loss)	$	(388,722	)	$	(405,812	)	$	(8,344,737	)
Adjustments to reconcile net loss to net cash (used in) provided
by operating activities:
Depreciation expense					334			2,667
Stock issued for compensation to employees								910,342
Stock issued for services rendered by consultants		3,333			62,128			3,314,547
Stock issued for interest		33,281						71,849
Changes in operating assets and liabilities:
(Increase) decrease in receivables					(282	)		0
(Increase) decrease in prepaid expenses		24,601			(11,047	)		(24,657	)
Increase (Decrease) in Accounts Payable		33,361			34,730			123,335
Increase (Decrease) in Accrued Expenses		60,469			56,375			324,737

Net Cash Provided by (Used in) Operating Activities		(233,677	)		(263,574	)		(3,621,917	)

CASH FLOWS FROM INVESTING ACTIVITIES


( Increase) Decrease in Deposits		(4,200	)					(25,507	)
Purchases of fixed assets					(17,473	)		(541,536	)
Additions to Securities Available for Sale								(500,000	)

Net Cash Provided by (Used in) Investing Activities		(4,200	)		(17,473	)		(1,067,043	)

CASH FLOWS FROM FINANCING ACTIVITIES

Preferred Stock issued for cash		15						297
Common stock issued for cash								1,472
Additional Paid in Capital		17,902						1,346,120
Principal borrowings on Notes and Convertible Debentures		225,350			121,010			1,156,265
Convertible notes					125,000			503,400
Contributed Capital		499,000						499,000
Increase (Decrease) in Bank Overdraft					(7,997	)		0
Net borrowings from related parties								1,195,196
Increase (Decrease) in Notes from Affiliated party		(499,000	)					1000

Net Cash Provided by (Used in) Financing Activities		243,267			238,013			4,702,750



Net Increase (Decrease) in Cash		5,390			(43,034	)		13,796

Cash at Beginning of Period		8,410			44,110			0


Cash at End of Period	$	13,796		$	1,076		$	13,796


Supplemental Cash Flow Disclosures:
Significant non-cash activities:
Stock issued to cancel debt								2,044,592
Preferred stock issued for stock dividend								108
Accumulated Other Comprehensive income (Loss)		(540,000	)					(490,000	)
Total		(540,000	)					1,554,700

The Accompanying Notes are an integral part of these Financial Statements.

BIO-MATRIX SCIENTIFIC GROUP, INC. AND SUBSIDIARY

(A Development Stage Company)

Notes to condensed consolidated Financial Statements

As of December 31, 2008

NOTE 1 - BASIS OF PRESENTATION

The interim financial statements included herein, presented in accordance with United States generally accepted accounting principles and stated in US dollars, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.

These statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein. It is suggested that these condensed consolidated interim financial statements be read in conjunction with the financial statements of the Company for the period ended September 30, 2008 and notes thereto included in the Company's 10-KSB 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 $8,344,737 during the period from August 2, 2005 (inception) through December 31, 2008. This condition raises substantial doubt about the Company's ability to continue as a going concern. The Company's continuation as a going concern is dependent on its ability to meet its obligations, to obtain additional financing as may be required and ultimately to attain profitability. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Management plans to raise additional funds through debt or equity offerings. Management has yet to decide what type of offering the Company will use or how much capital the Company will raise. There is no guarantee that the Company will be able to raise any capital through any type of offerings.

NOTE 3. INVESTMENTS

Investments are composed of available-for-sale equity securities as defined in SFAS No. 115—Accounting for Certain Investments in Debt and Equity Securities, or SFAS 115. At December 31, 2008 our investment portfolio consisted of 1,000,000 common shares of Freedom Environmental Services, Inc. Increases and decreases in fair value are recorded as unrealized gains and losses in Other Comprehensive Income. Realized gains and losses and declines in fair value judged to be other-than-temporary are included in the Consolidated Statement of Operations as a Gain/(loss) on sale of investment. The Company did not possess a portfolio of securities during the 2007 fiscal year.

As of December 31, 2008 Securities Available for Sale consisted of the following:

	Cost			Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Corporate securities			500,000		50,000		540,000		10,000

Total marketable securities		$	500,000	$	50,000	$	540,000	$	10,000

NOTE 4. WARRANTS AND OPTIONS

On December 31, 2008 the Company issued 75,000 units (“Units”), each unit consisting of one share of the Company’s Preferred Stock and one Preferred Stock Purchase Warrant (“Warrant”) exercisable for a period of three months from the date of issuance into one share of the Company’s Preferred Stock at $0.15 per share, for consideration consisting of $11,250.

On December 31, 2008 the Company issued 66,670 units (“Units”), each unit consisting of one share of the Company’s Preferred Stock and one Preferred Stock Purchase Warrant (“Warrant”) exercisable for a period of three months from the date of issuance into one share of the Company’s Preferred Stock at $0.10 per share, for consideration consisting of $6667.

Summary of the Company's warrants as of December 31, 2008 and 2007 and changes during the periods is as follows:

	2008				2007
			Weighted Average				Weighted Average
	Warrants		Exercise Price		Warrants		Exercise Price
	Preferred Stock				(Common)
Outstanding at Beginning of Period		11,667		0.35		200,000		4.5
Granted		141,670		0.13		0		0
Exercised		0		0.3
Expired Unexercised		-11667		0.3		200,000		4.5
Outstanding at End of period		141,670		0.13		0		0

The following table summarizes information regarding Preferred stock purchase warrants outstanding at December 31, 2008

	Exercise		Number	Weighted Average
	Price		Outstanding	Remaining Contract Life (Days)

		.10	66,670		93
		0.15	75,000		93
Total outstanding as of December 31 , 2008			141670		93

NOTE 5. INCOME TAXES

As of December 31 , 2008

Deferred tax assets:
Net operating tax carry forwards	$	2,84932,40
Other		-0-
Gross deferred tax assets		2,,849,320
Valuation allowance		(2,848,320)

Net deferred tax assets	$	-0-

As of December 31, 2008 the Company has a Deferred Tax Asset of $2,848,640 completely attributable to net operating loss carry forwards of approximately $8,380,353 ( which expire 20 years from the date the loss was incurred) consisting of

(a) $38,616, of Net Operating Loss Carry forwards acquired in the reverse acquisition and

(b) $8,344,737 attributable to Bio Matrix Scientific Group, Inc. a Nevada corporation (“BMSG”).

Realization of deferred tax assets is dependent upon sufficient future taxable income during the period that deductible temporary differences and carry forwards are expected to be available to reduce taxable income. The achievement of required future taxable income is uncertain. In addition, the reverse acquisition of BMSG has resulted in a change of control. Internal Revenue Code Sec 382 limits the amount of income that may be offset by net operating loss (NOL) carryovers after an ownership change. As a result, the Company has the Company recorded a valuation allowance reducing all deferred tax assets to 0.

NOTE 6. RELATED PARTY TRANSACTION

On September 29, 2008, the Company purchased 1,000,000 of the common shares of Freedom Environmental Services, Inc. (“FESI shares”) from Bombardier Pacific Ventures, Inc. (“Bombardier”) , a company controlled by David Koos , our Chairman and CEO, for consideration consisting of a Promissory Note (“Note”) in the principal amount of $500,000 issued by BMSN to Bombardier.

Pursuant to the terms and conditions of the Note, the entire principal amount of $500,000 together with accrued simple interest of 10% per annum, is due and payable to Bombardier on November 29, 2009.

As of December 31, 2008, the Company is indebted in the aggregate amount of $300,496 to Bombardier , exclusive of amounts owed due to the purchase of marketable securities described below. These amounts are callable at par plus any accrued and unpaid interest by the upon five days written notice, and bears simple interest at 15% maturing, for each amount lent, within one year of issuance.

NOTE 7. STOCK TRANSACTIONS

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

Common Stock

On December 2, 2008 the Company issued 1,099,999 shares of common stock to Preferred Shareholders in exchange for 1,099,000 shares of the Company’s Preferred Stock which was subsequently retired

On December 3, 2008 the Company issued 133,124 shares of common stock to holders of the Company’s Convertible Debentures in satisfaction of $ 26,263 of accrued interest and to prepay $7018 of interest.

Preferred Stock

On December 2, 2008 the Company issued 1,099,999 shares of common stock to Preferred Shareholders in exchange for 1,099,000 shares of the Company’s Preferred Stock which was subsequently retired

On December 31, 2008 the Company issued 33,330 shares of the Company’s Preferred for consideration consisting of services rendered valued at $3,333.

NOTE 8. STOCKHOLDERS' EQUITY

The stockholders' equity section of the Company contains the following classes of capital stock as of December 31, 2008:

* Preferred stock, $ 0.0001 par value; 20,000,000 shares authorized:

4,744,547 Preferred shares issued and outstanding.

4,852 Series AA Preferred Shares issued and outstanding

· Common stock, $ 0.0001 par value; 80,000,000 shares authorized: 26,102,993 shares issued and outstanding.

NOTE 9. COMMITMENTS AND CONTINGENCIES

On October 7, 2008, a Complaint (“Complaint”) was filed in the District Court of Clark County Nevada against the Company, the Company’s Chairman, and Freedom Environmental Services, Inc. (collectively “Defendants”) by Princeton Research, Inc. (“Princeton”) seeking to recover unspecified General damages in excess of $10,000, unspecified specific damages, an order from the court declaring that the defendants fraudulently conveyed assets from BMXP to the Company, attorney’s fees and cost of suit based on allegations that the sale of Bio Matrix Scientific Group, Inc., a Nevada corporation, to the Company as well as the name change and cessation of operations of Freedom Environmental Services, Inc constitute a breach of contract by , fraudulent conveyance by, and unjust enrichment of the Defendants. On November 11, 2008 the company filed a Motion to Dismiss or in the Alternative an Order requiring Princeton to provide a more definitive statement of the allegations contained in the Complaint. 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. Accordingly, the Company has not recorded any expense or liability for potential amounts associated with these claims.

NOTE 10. PREFERRED STOCK OFFERINGS

As an additional incentive to purchase the Units and not as a characteristic, right or designation of the Preferred Stock. The Company has also entered into agreements with the abovementioned recipient of Units whereby the Company has agreed to exchange, at any time subsequent to six months from issuance at the demand of the purchaser, any and all Preferred Shares owned by that purchaser through either the purchase of the Units or exercise of the Warrants into an equivalent number of shares of the company’s common stock.

On December 31, 2008 the Company issued 33,330 shares of the Company’s Preferred Stock for consideration consisting of services rendered valued at $3,333.

NOTE 11. LICENSE AGREEMENT

On October 23, 2008 The Regents of the University of California (“Regents”) and Entest Biomedical, Inc. (“Licensee”) ., a wholly owned subsidiary of the Company executed an Exclusive License Agreement (“ELA”) .

Pursuant to the ELA and subject to the limitations set forth in the ELA, The Regents granted to Licensee an exclusive license (the "License") under The Regents’ interest in Provisional Patent Application No. 61/030,316 entitled “SCREENING TEST FOR GESTATIONAL DIABETES MELLITUS” filed 02/21/2008 (UCLA Case No. 2007-523-1) (“Regents Patent Rights”) in jurisdictions where Regents' Patent Rights exist, to make, have made, use, sell, offer for sale and import Licensed Products (as “Licensed Products” is defined in the ELA) and to practice Licensed Methods (as “Licensed Methods” is defined in the ELA) in all fields of use to the extent permitted by law.

"Licensed Product", as defined in the ELA, means any article, composition, apparatus, substance, chemical, or any other material covered by Regents' Patent Rights or whose manufacture, use or sale would, absent the license granted under the ELA, constitute an infringement, inducement of infringement, or contributory infringement, of any claim within Regents' Patent Rights, or any service, article, composition, apparatus, chemical, substance, or any other material made, used, or sold by or utilizing or practicing a Licensed Method.

"Licensed Method", as defined in the ELA, means any process, service, or method which is covered by Regents' Patent Rights or whose use or practice would, absent the license granted under the ELA, constitute an infringement, inducement of infringement, or contributory infringement, of any claim within Regents' Patent Rights.

Pursuant to the ELA, Licensee shall be obligated Five thousand dollars ($5,000) beginning on the one-year anniversary date of the effective date of the ELA and continuing annually to pay to The Regents for sales by Licensee and sublicensees :

(i) an earned royalty of Six percent (6%) of Net Sales of Licensed Products or Licensed Methods.

(ii) a minimum annual royalty of Fifty thousand dollars ($50,000) for the life of Regents' Patent Rights, beginning one year after the first commercial sale of Licensed Product. The minimum annual royalty will be credited against the earned royalty due and owing for the calendar year in which the minimum payment was made.

(iii) pay to The Regents a license maintenance fee of on each anniversary date of the Effective Date. The maintenance fee will not be due and payable on any anniversary date of the effective date if on that date Licensee is commercially selling a Licensed Product and paying an earned royalty to The Regents on the sales of that Licensed Product.

Pursuant to the ELA, the Licensee is also obligated to:

(a) diligently proceed with the development, manufacture and sale ("Commercialization") of Licensed Products and must earnestly and diligently endeavor to market them within a reasonable time after execution of the ELA and in quantities sufficient to meet the market demands for them.

(b) endeavor to obtain all necessary governmental approvals for the Commercialization of Licensed Products.

Unless otherwise terminated by operation of law or by acts of the parties in accordance with the terms of the ELA, the ELA remains in effect for the life of the last-to-expire patent or last to be abandoned patent application in Regents' Patent Rights, whichever is later.

NOTE 12. CONTRIBUTED CAPITAL

Contributed capital as of December 31, 2008 consists of $499,000 realized as a result of the extinguishment of $499,000 of debt due to Bombardier (See Note 6)

NOTE 13. SUBSEQUENT EVENTS

On January 5, 2009, the Company entered into a Letter of Intent (“LOI”) with NeoCells, Inc. (“NCI”) and its parent, ViviCells International, Inc. (“VCII”) regarding the following contemplated transactions:

(a) formation of a joint venture between the Company and NCI for cryogenic storage of cellular specimens processed by the Company .

(b) a marketing relationship to be established between the Company and NCI

(d) transfer of NCI’s pre-acquisition inventory of stored Cord Blood specimens to the Company

(e) Potential acquisition of equity control of the Company by VCII

The transactions contemplated by the LOI are subject to the execution of one or more definitive agreements upon mutually acceptable terms and conditions. The provisions of the LOI are non binding on all parties with the exception of provisions regarding termination of duties to negotiate in good faith, non disclosure of confidential information, disclaimer of liabilities and choice of governing law and venue. No assurance can be given that any of the contemplated transactions will not occur within the timeframes specified by the LOI nor can any assurance be given that any of the contemplated transactions will occur at all.

On January 7, 2009 50,000 preferred shares of the Company were issued to a consultant as consideration for services rendered.

On January 7, 2009 100,000 common shares were issued to a consultant as a bonus for services rendered (“Bonus Shares”). As a condition of the issuance of the Bonus Shares, recipient agreed:

not to offer to sell, sell, transfer, pledge or otherwise dispose of the Bonus Shares prior to January 10, 2010 (“Restricted period”)

in the event that, prior to the expiration of the Restricted Period, the recipient shall decline to provide if requested to provide, or is unable to provide if requested to provide, consulting services to the Company of a nature that have been customarily provided by that recipient to the Company the Bonus Shares shall be forfeited.

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 10KSB for the year ended September 30, 2008. All references to” We”, “Us”, “Company” or the “Company” refer to Bio-Matrix Scientific Group, Inc.

Material Changes in Financial Condition:

As of December 31, 2008, we had cash on hand of $13,796 and as of September 30, 2008 we had cash on hand of $8,410 .

The increase in cash on hand of approximately 64% is primarily attributable to increases in Notes Payable.

As of December 31, 2008 we had Securities Available for Sale of $10,000 as of September 30, 2008 we had Securities Available for Sale of $550,000

The decrease in Securities Available for Sale of approximately 98% is primarily attributable to a decrease in fair value recorded as an unrealized loss.

As of December 31, we had prepaid expenses of $38,693 and as of September 30, 2008 we had prepaid expenses of $49,258.

The decrease in prepaid expenses of approximately 21% is primarily attributable to the recognition of expenses of approximately $20,000 of a prepaid 12 month Contract entered into on March 21, 2008 partially offset by the payment of $7018 of prepaid interest to two Convertible Note Holders.

As of December 31, 2008 we had Other Assets of $25,507 and as of September 30, 2008 we had Other Assets of $21,307.

The increase in Other Assets of approximately 20% is attributable to a security deposit on additional office space.

As of December 31, 2008 we had Accounts Payable of $123,335 and as of September 30, 2008 we had Accounts Payable of $89,974.

The increase in Accounts Payable of approximately 37% is primarily attributable to payables incurred in relation to services provided by contractors.

As of December 31, 2008 we had Notes Payable of $336,809 and as of September 30, 2008 we had Notes Payable of $111,459.

The increase in Notes Payable of approximately 200 % is attributable to increased borrowing to cover operational costs.

As of December 31, 2008 we had Accrued Payroll of $220,500 and as of September 30, 2008 we had Accrued Payroll of $150,000.

The increase in Accrued Payroll of approximately 47% is primarily attributable to increases in employee compensation which have accrued and have not yet been paid.

As of December 31, 2008 we had Accrued Expenses of $35,000 and as of September 30, 2008 we had Accrued Expenses of $30,000.

The increase in Accrued Expenses of approximately 17% is primarily attributable to an expense incurred yet not paid as of December 31, 2008 of $5,000 incurred pursuant to the Company’s license agreement with the Regents of the University of California

On December 21, 2008 Bombardier modified the Promissory Note with BMSN. Bombardier agreed to accept $1,000 en lieu of the original $500,00 payment owed by the Company to Bombardier for the purchase of FESI shares. This resulted in a decrease of $499,000 of the amount due pursuant to the Note as of December 31, 2008, a decrease of approximately 99% from September 30, 2008.

Material Changes in Results of Operations

Revenues were -0- for the quarter ending December 31, 2008 and -0- for the same quarter ending December 31, 2007. Net losses were $ 388,722 for the three months ended December 31, 2008 and $405,812 for the same period ended December 31, 2007, a decrease of approximately 4%.

This decrease in Net Losses is primarily attributable to a decrease in consulting and professional expenses from $142,237 incurred in the three months ended December 31, 2007 to $62,300 incurred in the three months ended December 31, 2008, a decrease of approximately 56%. We attribute this primarily to higher accounting consulting and professional accounting fees incurred during the quarter ended December 31, 2007 as compared to the quarter ended December 31, 2008. This decrease was partially offset by increases in General and Administrative expenses primarily attributable to higher salaries, increases in Research and Development expenses primarily attributable to payments to outside contractors and increased Interest Expenses attributable to increases in Convertible Notes payable from November 14, 2007 to March 4,2008 as well as substantial increase in outstanding Notes Payable.

Liquidity and Capital Resources

As of December 31, 2008, we had $13,796 cash on hand, $10,000 of securities available for sale and current liabilities of $913,370 such liabilities consisting of Accounts Payable, Notes Payable, Accrued Payroll Taxes, Accrued Expenses and Accrued Interest.

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

At this time, we plan to fund our financial needs through operating revenues (which cannot be assured) and, if required, through equity private placements of common stock. (No plans, terms, offers or candidates have yet been established and there can be no assurance that the company will be able to raise funds on terms favorable to us or at all.) We cannot assure that we will be successful in obtaining additional financing necessary 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.

Over the next 12 months and if we are successful in obtaining necessary licenses (as described below), we anticipate opening our stem cell bank and marketing our disposable stem cell / tissue management instruments

On December 22, 2007 we submitted our registration to the FDA under the Public Health Service Act to satisfy the regulatory requirements involving the storage of stem cells and other tissue. These regulatory requirements apply to all establishments engaged in the recovery, processing, storage, labeling, packaging, or distribution of any Human Cells, Tissues, and Cellular and Tissue-Based Products (HCT/Ps) or the screening or testing of a cell or tissue donor. We have obtained our Biologics License for accepting blood for storage as a blood bank and anticipate filing for a Tissue Bank License from the Department of Health Services of the State of California in order that we may accept adipose and other tissue specimens for short and long term storage.

We do not, at this time, plan any additional research and development on our line of medical instruments. We are currently anticipating the granting of utility patents covering our line of medical instruments, the granting of which cannot be assured. Upon, and dependent upon, the granting of these utility patents we anticipate sourcing a manufacturing facility to produce our line of medical instruments.

Over the next twelve months and if we are successful in obtaining the necessary additional financing and obtaining equipment and necessary additional professional staff, we anticipate purchasing the following significant laboratory equipment:

In the event that we are successful in obtaining the amount of the additional financing that we require on acceptable terms, we currently anticipate that we will need to add the following additional employees during the twelve month period thereafter:

Title	Estimated Annual Compensation
Director of Labs		$	120,000
Director of Quality & Assurance		$	75,000
Adm. Director		$	75,000
Dir. Of Engineering / Production		$	85,000
Lab Tech		$	65,000
Lab Tech		$	65,000
Customer Service Representative.		$	45,000
Director of Market & Sales		$	100,000
Facility Manager / Receiving & Shipping		$	60,000
Support Staff		$	50,000
Total		$	740,000

The Company cannot assure that it will be successful in obtaining additional financing necessary to implement its business plan. The Company has not received any commitment or expression of interest from any financing source that has given it any assurance that it will obtain the amount of additional financing in the future that it currently anticipates. For these and other reasons, the Company is not able to assure that it will obtain any additional financing or, if it is successful, that it can obtain any such financing on terms that may be reasonable in light of its current circumstances.

We have not undertaken any efforts to recruit any persons to fill any of the positions shown above. We may face protracted difficulties in recruiting individuals with sufficient experience and skills needed to fill these positions and we cannot assure that we will be successful in obtaining the necessary persons at the compensations levels shown above or that we will not incur significant additional expenses to attract, relocate, and retain any persons that we recruit.

These time frames and our objectives are subject to change as we review and re-evaluate market conditions and opportunities.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

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

Changes in Internal Controls over Financial Reporting

In connection with the evaluation of the Company's internal controls during the period commencing on October 1, 2008 and ending December 31, 2008, David Koos, who is both the Company's Principal Executive Officer and Principal Financial Officer has determined that there were no changes to the Company's internal controls over financial reporting that have been materially affected, or is reasonably likely to materially effect, the Company's internal controls over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

On October 7, 2008, a Complaint (“Complaint”) was filed in the District Court of Clark County Nevada against the Company, the Company’s Chairman, and BMXP (currently named Freedom Environmental Services, Inc.) (collectively “Defendants”) by Princeton Research, Inc. (“Princeton”) seeking to recover unspecified General damages in excess of $10,000, unspecified specific damages, an order from the court declaring that the defendants fraudulently conveyed assets from BMXP to the Company, attorney’s fees and cost of suit based on allegations that the sale of BMSG to the Company as well as the name change and cessation of operations of BMXP constitute a breach of contract by , fraudulent conveyance by, and unjust enrichment of the Defendants. 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 December 2, 2008 the Company issued 1,099,999 shares of common stock to Preferred Shareholders in exchange for 1,099,000 shares of the Company’s Preferred Stock which was subsequently retired

The offer and sale of the shares was exempt from the registration provisions of the Securities Act of 1933, as amended, by reason of Section 4(2) thereof.

The shares were offered directly through the management. No underwriters were retained to serve as placement agents. No commission or other consideration was paid in connection with the sale of the shares. There was no advertisement or general solicitation made in connection with this Offer and Sale of shares.

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

The offer and sale of the shares was exempt from the registration provisions of the Securities Act of 1933, as amended, by reason of Section 4(2) thereof.

As an additional incentive to purchase the Units and not as a characteristic, right or designation of the Preferred Stock the Company has also entered into agreements with the abovementioned recipient of Units whereby the Company has agreed to exchange, at any time subsequent to six months from issuance at the demand of the purchaser, any and all Preferred Shares owned by that purchaser through either the purchase of the Units or exercise of the Warrants into an equivalent number of shares of the company’s common stock.

The net proceeds, which are $11,250, will be utilized general working capital purposes. No underwriters were retained to serve as placement agents for the sale. These Units were sold directly through our management. No commission or other consideration was paid in connection with the sale of the Units. There was no advertisement or general solicitation made in connection with this offer and sale of the Units. The offer and sale of the Units was exempt from the registration provisions of the Securities Act by reason of Section 4(2) thereof. Management made its determination of the availability of such exemption based upon the facts and circumstances surrounding the offer and sale of the Units, including the representations and warranties made by the purchaser and the fact that a restrictive legend was placed on the securities comprising the Units and restrictive legends will be placed on, and stop transfer orders placed against, the certificates for any Common Shares which may be issued in accordance with the abovementioned agreements with the Unit holder.

On December 31, 2008 the Company issued 33,330 shares of the Company’s Preferred Stock for consideration consisting of services rendered .

The offer and sale of the shares was exempt from the registration provisions of the Securities Act of 1933, as amended, by reason of Section 4(2) thereof.

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

The net proceeds, which are $6,667, will be utilized general working capital purposes. No underwriters were retained to serve as placement agents for the sale. These Units were sold directly through our management. No commission or other consideration was paid in connection with the sale of the Units. There was no advertisement or general solicitation made in connection with this offer and sale of the Units. The offer and sale of the Units was exempt from the registration provisions of the Securities Act by reason of Section 4(2) thereof. Management made its determination of the availability of such exemption based upon the facts and circumstances surrounding the offer and sale of the Units, including the representations and warranties made by the purchaser and the fact that a restrictive legend was placed on the securities comprising the Units and restrictive legends will be placed on, and stop transfer orders placed against, the certificates for any Common Shares which may be issued in accordance with the abovementioned agreements with the Unit holder.

On January 7, 2009 50,000 Preferred Shares of the Company were issued to a consultant as consideration for services rendered.

The offer and sale of the shares was exempt from the registration provisions of the Securities Act of 1933, as amended, by reason of Section 4(2) thereof.

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

On January 7, 2009 100,000 common shares were issued to a consultant as a bonus for services rendered (“Bonus Shares”). As a condition of the issuance of the Bonus Shares, recipient agreed:

not to offer to sell, sell, transfer, pledge or otherwise dispose of the Bonus Shares prior to January 10, 2010 (“Restricted period”)

On January 12, 2009, the Company issued 1,300,000 Common Shares and 25,000 Preferred Shares (collectively “Shares”) for total consideration of $105,000. There was no advertisement or general solicitation made in connection with this offer and sale of Shares. The offer and sale of these Shares was exempt from the registration provisions of the Securities Act by reason of Section 4(2) thereof and Rule 506 of Regulation D thereunder. Management made its determination of the availability of such exemption based upon the facts and circumstances surrounding the offer and sale of these Shares, including the representations and warranties made by the purchasers and the fact that restrictive legends were placed on, and stop transfer orders placed against, the certificates for these Shares.

The net proceeds, which are $105,000, will be utilized general working capital purposes. No underwriters were retained to serve as placement agents for the sale. These Shares were sold directly through our management. No commission or other consideration was paid in connection with the sale of the Shares.

Item 3. DEFAULTS UPON SENIOR SECURITIES

None.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

Item 5. OTHER INFORMATION

None.

Item 6. EXHIBITS

31.1	Certification of Chief Executive Officer

31.2	Certification of Acting Chief Financial Officer

32.1	Certification of Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Certification of Acting Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

In accordance with the requirements of the Exchange Act, the Company caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Bio- Matrix Scientific Group, Inc.
	a Delaware corporation

By:	/s/ David R. Koos
	David R. Koos
	Chief Executive Officer
	Date: January 30, 2009