Rivulet Media, Inc. - Quarter Report: 2011 December (Form 10-Q)

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, 2011

Commission File Number 0-32201

BIO-MATRIX SCIENTIFIC GROUP, INC.

(Exact name of registrant as specified in its charter)

(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 [  ]

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.

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 [  ]   No   [X]

There were 72,189,747 shares of Common Stock outstanding as of December 31, 2011.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

The following Notes are an integral part of these Financial Statements

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The following Notes are an integral part of these Financial Statements

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The following Notes are an integral part of these Financial Statements

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BIO-MATRIX SCIENTIFIC GROUP, INC.

(A Development Stage Company)

Notes to condensed consolidated Financial Statements

As of December 31, 2011

NOTE 1. BASIS OF PRESENTATION

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

These statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein. It is suggested that these condensed consolidated interim financial statements be read in conjunction with the financial statements of the Company for the year ended September 30, 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.

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 a September 30, year-end.

B. PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Bio-Matrix Scientific Group, inc., a Delaware corporation, BMSG, a Nevada corporation and a wholly owned subsidiary, and Entest BioMedical, Inc., (“Entest”), which was a majority owned subsidiary under common control and a Nevada corporation up to February 3, 2011.  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.

D. DEVELOPMENT STAGE

The Company is a development stage company devoting substantially all of its efforts to establish a new business.

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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 December 31, 2011 consisted of $194,683 of Notes Payable, $363,701 of Convertible Notes payable (including discount attributable to beneficial conversion feature) and $59,500 due to Entest BioMedical.  The fair value of all of the Company’s financial instruments as of December 31, 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.

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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.

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.

NOTE 2. RECENT ACCOUNTING PRONOUNCEMENTS

In February 2010, the FASB issued ASU No. 2010-09, “Subsequent Events (ASC Topic 855), Amendments to Certain Recognition and Disclosure Requirements.” This Standard update requires a SEC Filer to (1) evaluate subsequent events through the date that the financial statements are issued or available to be issued, (2) defines “SEC Filer” as an entity that is required to file or furnish its financial statements with either the SEC or, with respect to an entity subject to Section 12(i) of the Securities Exchange Act of 1934, as amended, the appropriate agency under that Section, (3) not be bound to disclosing the date through which subsequent events have been evaluated, (4) note the definition of public entity is not longer defined nor necessary for Topic 855, (5) note the scope of the reissuance disclosure requirements is refined to include revised financial statements only. These Updates are effective for interim or annual periods ending after June 15, 2010. ASU No. 2010-09 has no effect on the Company’s financial position, statements of operations, or cash flows at this time.

 In January 2010, the FASB issued ASU No. 2010-08, “Technical Corrections to various Topics.” This Standard is being updated to eliminate outdated or inconsistent GAAP standards and to clarify the Boards original intent mainly with regards to derivatives and hedging. This is effective for the first reporting period (including interim periods) beginning after issuance. ASU No. 2010-08 has no effect on the Company’s financial position, statements of operations, or cash flows at this time.

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In January 2010, the FASB issued ASU No. 2010-06, “Improving Disclosures about Fair Value Measurements” related to ASC Topic 820-10.  This update requires new disclosures to; transfers in or out of Levels 1 and 2, activity in Level 3fair value measurements, Level of disaggregation, and disclosures about inputs and valuation techniques. This amendment will be effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. ASU No. 2010-06 has no impact on the Company’s results of operations, financial condition or cash flows.

In January 2010, the FASB issued ASU No. 2010-01, amends SFAS No. 168, “The FASB Accounting Standards Codification™ and the Hierarchy of Generally Accepted Accounting Principles.” This Standard codified in ASC 105 is being modified to include the authoritative and non-authoritative levels of GAAP. This amendment is effective for financial statements issued for interim and annual periods ending after September 15, 2009. ASU No. 2010-01 has no effect on the Company’s financial position, statements of operations, or cash flows at this time.

In January, 2010, the FASB issued ASU 2010-06, Improving Disclosures about Fair Value Measurements. The standard amends ASC Topic 820, Fair Value Measurements and Disclosures to require additional disclosures related to transfers between levels in the hierarchy of fair value measurement. The standard does not change how fair values are measured. The standard is effective for interim and annual reporting periods beginning after December 15, 2009. As a result, it is effective for the Company in the first quarter of fiscal year 2010. The Company does not believe that the adoption of ASU 2010-06 will have a material impact on consolidated its financial statements.

In June 2009, the FASB issued new guidance which is now part of ASC 105-10 (formerly Statement of Financial Accounting Standards No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles). ASC 105-10 replaces FASB Statement No. 162, "The Hierarchy of Generally Accepted Accounting Principles", and establishes the FASB Accounting Standards Codification as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with generally accepted accounting principles. ASC 105-10 is effective for interim and annual periods ending after September 15, 2009. The adoption of ASC 105-10 did not have a material impact on the Company’s financial statements.

In June 2009, the FASB amended ASC 810 (formerly Statement of Financial Accounting Standards No.167, Amendments to FASB Interpretation No. 46(R)).  The amendments include: (1) the elimination of the exemption for qualifying special purpose entities, (2) a new approach for determining who should consolidate a variable-interest entity, and (3) changes to when it is necessary to reassess who should consolidate a variable-interest entity.  ASC 810 is effective for the first annual reporting period beginning after November 15, 2009 and for interim periods within that first annual reporting period. The Company will adopt ASC 810 in fiscal 2010. The Company does not expect that the adoption of ASC 810 will have a material impact on its financial statements.

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In June 2009, the FASB amended ASC 860, (formerly SFAS No. 166, Accounting for Transfers of Financial Assets, an amendment to SFAS No. 140).  ASC 860 eliminates the concept of a “qualifying special-purpose entity,” changes the requirements for derecognizing financial assets, and requires additional disclosures in order to enhance information reported to users of financial statements by providing greater transparency about transfers of financial assets, including securitization transactions, and an entity’s continuing involvement in and exposure to the risks related to transferred financial assets. ASC 860 is effective for fiscal years beginning after November 15, 2009. The Company will adopt ASC 860 in fiscal 2010. The Company does not expect that the adoption of ASC 860 will have a material impact on its financial statements.

NOTE 3. PROPERTY AND EQUIPMENT

 Property and equipment as of December 31, 2011 consists of the following:

Depreciation expenses were $0 and $ 0 for the year ended September 30, 2011 and quarter ended December 31, 2011, respectively. With the exception of one computer which is fully depreciated, no property and equipment has yet to be utilized in production therefore no depreciation shall be recognized until usage commences.

NOTE 4. OPTIONS AND WARRANTS

As of December 31, 2011 the Company has no outstanding exercisable warrants or options.

NOTE 5. GOING CONCERN

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. Exclusive of a onetime non-cash gain of $42,182,649 recognized upon the deconsolidation of Entest., The Company generated net losses of $ 14,096, 202  (including $536,961 of Net Losses attributable to non-controlling interest in Entest and $319,900 in Equity in Net Losses of Entest) during the period from August 2, 2005 (inception) through December 31, 2011. This condition raises substantial doubt about the Company's ability to continue as a going concern. The Company's continuation as a going concern is dependent on its ability to meet its obligations, to obtain additional financing as may be required and ultimately to attain profitability. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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

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NOTE 6. INCOME TAXES

As of December 31, 2011

As of  December 31,  2011 the Company has a  Deferred Tax Asset of  $4,805,838 completely attributable to net operating loss carry forwards  of approximately $14,134,818  ( which expire 20 years from the date the loss was incurred) consisting  of

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

(b) $14,096,202 attributable to Bio-Matrix Scientific Group, Inc. a Delaware corporation, BMSG and Entest

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 7. RELATED PARTY TRANSACTIONS

Between October 1, 2011 and December 31, 2011 David R. Koos, the Company’s Chairman and CEO, made net loans to the Company totaling S21,308  dollars. The total amount owed by the Company to Mr. Koos as of  December 31, 2011 is $21,308. The Company is also indebted as of December 31, 2011 to Bombardier Pacific Ventures, a company controlled by Mr. Koos, in the amount of $36,281. These loans and any accrued interest are due and payable at the demand of Mr. Koos and bear simple interest at the rate of 15% per annum.

On June 15, 2009  Entest entered into an agreement with the Company  whereby Entest has agreed to sublease approximately 3,000 square feet of office space from the Company for a term of 3 years for consideration consisting of monthly rental payments of $4,100 per month.  Beginning October 2010 Entest has been paying rental expenses directly to the owner of the subleased space and is currently carrying a balance of  $59,500 of rental expenses prepaid to the Company.

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NOTE 8. NOTES PAYABLE

Both of Bio-Technology Partners Business Trust and Venture Bridge Advisors have provided lines of credit to the Company in the amount of $700,000 each or so much thereof as may be disbursed to, or for the benefit of the Company by Lender in Lender's sole and absolute discretion. The unpaid principal of these lines of credit bear simple interest at the rate of ten percent per annum. Interest is calculated based on the principal balance as may be adjusted from time to time to reflect additional advances or payments made hereunder. Principal balance and accrued interest shall become due and payable in whole or in part at the demand of the Lender.

All loans to the Company made by either of David R. Koos or Bombardier Pacific Ventures  are due and payable at the demand of Koos or  Bombardier and bear simple interest at a rate of 15% per annum.

The Amount Due to affiliate represents rent prepaid to the Company by Entest BioMedical pursuant to a sublease agreement entered into by and between the Company and Entest BioMedical on June 15, 2009.  Beginning October 2010 Entest has been paying rental expenses directly to the owner of the subleased space and as of the Company’s fourth fiscal quarter both of the Company and Entest BioMedical have agreed to void the terms and conditions of the sublease. $59,500 previously paid to the Company by Entest BioMedical to repay rental expenses is currently due and payable at the demand of Entest BioMedical. This amount accrues no interest.  

NOTE 9. STOCKHOLDERS' EQUITY

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

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

2,975,478 preferred shares issued and outstanding.

4,852 Series AA Preferred Shares issued and outstanding.

725,409 Series B Preferred Shares issued and outstanding.

* Common stock, $ 0.0001 par value; 80,000,000 shares authorized: 72,189,747 shares issued and outstanding.

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NOTE 10. CONVERTIBLE DEBENTURES

On November 14, 2007 the Company sold a $50,000 face value convertible debenture (“Convertible Debenture”) for an aggregate purchase price of $50,000 to one purchaser.

Interest on the Convertible Debenture shall accrue at a rate of 12% per annum based on a 365 day year. The Company shall pay simple interest to the holder on the aggregate unconverted and then outstanding principal amount of this Convertible Debenture at the rate of 12% per annum, payable on the maturity Date, which is November 14, 2009.

At any time subsequent to the expiration of a six month period since either of:

(i)           that Registration Statement, as amended, filed with the SEC on Form SB-2 relating to the sale of an aggregate of 17,195,263 shares of the common stock of the Company  by certain selling shareholders (the “Selling Shareholders Registration Statement”) has been declared effective by the SEC or

(ii)          the Selling Shareholder Registration Statement has been withdrawn by the Company, the holder may convert the Convertible Debenture, in whole but not in part, into the Company’s common shares at the conversion rate of $0.15 per Share.

Subsequent to any conversion, the holder  shall have the right, upon written demand to Company (“Registration Demand”), to cause Company, within ninety days of the Registration Demand, to prepare and file with the United States securities and Exchange Commission (“SEC”) a Registration Statement in order that the Conversion Shares may be registered under the Securities Act of 1933, as amended, and use its reasonable best efforts to cause that Registration Statement to be declared effective by the SEC. There is no penalty to the Company in the event the registration Statement is not declared effective by the SEC.

On November 30, 2007, the Company sold $75,000 face value convertible debenture (“Convertible Debenture”) for an aggregate purchase price of $75,000 to one purchaser.

Interest on the Convertible Debenture shall accrue at a rate of 12% per annum based on a 365 day year. The Company shall pay simple interest to the holder on the aggregate unconverted and then outstanding principal amount of this Convertible Debenture at the rate of 12% per annum, payable on the maturity Date, which is November 14, 2009.

At any time subsequent to the expiration of a six month period since either of:

(i)           that Registration Statement, as amended,  filed with the SEC on Form SB-2 relating to the sale of an aggregate of 17,195,263 shares of  the Company’s  common stock by certain selling shareholders (the “Selling Shareholders Registration Statement”) has been declared effective by the SEC or

(ii)          the Selling Shareholder Registration Statement has been withdrawn by the Company.

The holder may convert the Convertible Debenture, in whole but not in part, into the Company’s common shares at the conversion rate of $0.15 per Share (“Conversion Shares”).

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Subsequent to any conversion, the holder  shall have the right, upon written demand to the Company (“Registration Demand”), to cause the Company, within ninety days of the Registration Demand, to prepare and file with the United States securities and Exchange Commission (“SEC”) a Registration Statement in order that the Conversion Shares may be registered under the Securities Act of 1933, as amended, and use its reasonable best efforts to cause that Registration Statement to be declared effective by the SEC. There is no penalty to the Company in the event the registration Statement is not declared effective by the SEC.

On January 8, 2008, the Company sold $18,400 face value convertible debenture (“Convertible Debenture”) for an aggregate purchase price of $18,400 to one purchaser.  Interest on the Convertible Debenture shall accrue at a rate of 12% per annum based on a 365 day year.  The Company   shall pay simple interest to the holder on the aggregate unconverted and then outstanding principal amount of this Convertible Debenture at the rate of 12% per annum, payable on the maturity Date, which is December 28, 2009.

At any time subsequent to the expiration of a six month period since either of:

(i)           that Registration Statement, as amended,  filed with the SEC on Form SB-2 relating to the sale of an aggregate of 17,195,263 shares of  our common stock by certain selling shareholders (the “Selling Shareholders Registration Statement”) has been declared effective by the SEC or

(ii)           the Selling Shareholder Registration Statement has been withdrawn by the Company.

The holder may convert the Convertible Debenture, in whole but not in part, into our common shares at the conversion rate of $0.15 per Share (“Conversion Shares”).

Subsequent to any conversion, the holder shall have the right, upon written demand to the Company (“Registration Demand”), to cause the Company, within ninety days of the Registration Demand, to prepare and file with the United States securities and Exchange Commission (“SEC”) a Registration Statement in order that the Conversion Shares may be registered under the Securities Act of 1933, as amended, and use its reasonable best efforts to cause that Registration Statement to be declared effective by the SEC. There is no penalty to the Company in the event the registration Statement is not declared effective by the SEC.

On January 18, 2008, the Company sold $200,000 face value convertible debenture (“Convertible Debenture”) for an aggregate purchase price of $200,000 to one purchaser.  Interest on the Convertible Debenture shall accrue at a rate of 14% per annum based on a 365 day year.  The Company   shall pay simple interest to the holder on the aggregate unconverted and then outstanding principal amount of this Convertible Debenture at the rate of 14% per annum, payable on the maturity Date, which is January 12, 2010.

At any time subsequent to the expiration of a six month period since either of:

(i)           that Registration Statement, as amended,  filed with the SEC on Form SB-2 relating to the sale of an aggregate of 17,195,263 shares of  our common stock by certain selling shareholders (the “Selling Shareholders Registration Statement”) has been declared effective by the SEC or

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(ii)          the Selling Shareholder Registration Statement has been withdrawn by the Company.

The holder may convert the Convertible Debenture, in whole but not in part, into our common shares at the conversion rate of $0.25 per Share (“Conversion Shares”).

Subsequent to any conversion, the holder shall have the right, upon written demand to the Company (“Registration Demand”), to cause the Company, within ninety days of the Registration Demand, to prepare and file with the United States securities and Exchange Commission (“SEC”) a Registration Statement in order that the Conversion Shares may be registered under the Securities Act of 1933, as amended, and use its reasonable best efforts to cause that Registration Statement to be declared effective by the SEC. There is no penalty to the Company in the event the registration Statement is not declared effective by the SEC.

On January18, 2008, the Company sold $100,000 face value convertible debenture (“Convertible Debenture”) for an aggregate purchase price of $100,000 to one purchaser.   Interest on the Convertible Debenture shall accrue at a rate of 14% per annum based on a 365 day year.  The Company   shall pay simple interest to the holder on the aggregate unconverted and then outstanding principal amount of this Convertible Debenture at the rate of 14% per annum, payable on the maturity Date, which is January 12, 2010.

At any time subsequent to the expiration of a six month period since either of:

(i)           that Registration Statement, as amended,  filed with the SEC on Form SB-2 relating to the sale of an aggregate of 17,195,263 shares of  our common stock by certain selling shareholders (the “Selling Shareholders Registration Statement”) has been declared effective by the SEC or

(ii)          the Selling Shareholder Registration Statement has been withdrawn by the Company.

The holder may convert the Convertible Debenture, in whole but not in part, into our common shares at the conversion price of $0.25 per Share (“Conversion Shares”).

 Subsequent to any conversion, the holder shall have the right, upon written demand to the Company (“Registration Demand”), to cause the Company, within ninety days of the Registration Demand, to prepare and file with the United States securities and Exchange Commission (“SEC”) a Registration Statement in order that the Conversion Shares may be registered under the Securities Act of 1933, as amended, and use its reasonable best efforts to cause that Registration Statement to be declared effective by the SEC. There is no penalty to the Company in the event the registration Statement is not declared effective by the SEC.

The Company shall agree to the granting of a Lien to the Holder against collateral which the Company owns or intends to purchase, namely:

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On February 15, 2008, the Company sold $50,000 face value convertible debenture (“Convertible Debenture”) for an aggregate purchase price of $50,000 to one purchaser. Interest on the Convertible Debenture shall accrue at a rate of 12% per annum based on a 365 day year.  The Company   shall pay simple interest to the holder on the aggregate unconverted and then outstanding principal amount of this Convertible Debenture at the rate of 12% per annum, payable on the maturity Date, which is February 15, 2010.

At any time subsequent to the expiration of a six month period since either of:

(i)           that Registration Statement, as amended,  filed with the SEC on Form SB-2 relating to the sale of an aggregate of 17,195,263 shares of  our common stock by certain selling shareholders (the “Selling Shareholders Registration Statement”) has been declared effective by the SEC or

(ii)           The Selling Shareholder Registration Statement has been withdrawn by the Company.

The holder may convert the Convertible Debenture, in whole but not in part, into our common shares at the conversion price of $0.10 per Share (“Conversion Shares”).

Subsequent to any conversion, the holder shall have the right, upon written demand to the Company (“Registration Demand”), to cause the Company, within ninety days of the Registration Demand, to prepare and file with the United States securities and Exchange Commission (“SEC”) a Registration Statement in order that the Conversion Shares may be registered under the Securities Act of 1933, as amended, and use its reasonable best efforts to cause that Registration Statement to be declared effective by the SEC. There is no penalty to the Company in the event the registration Statement is not declared effective by the SEC.

On March 3, 2008 the Selling Shareholder’s Registration Statement was withdrawn by the Company.

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

At any time subsequent to the expiration of a six month period from March 3, 2008, the holder may convert the Convertible Debenture, in whole but not in part, into our common shares at the conversion rate of $0.15 per Share (“Conversion Shares”).

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Subsequent to any conversion, the holder shall have the right, upon written demand to the Company (“Registration Demand”), to cause the Company, within ninety days of the Registration Demand, to prepare and file with the United States securities and Exchange Commission (“SEC”) a Registration Statement in order that the Conversion Shares may be registered under the Securities Act of 1933, as amended, and use its reasonable best efforts to cause that Registration Statement to be declared effective by the SEC. There is no penalty to the Company in the event the registration Statement is not declared effective by the SEC.

On February 2, 2010 the Company issued 1,433,333 common shares in full satisfaction of a $100,000 face value of convertible debentures bearing interest at 14% per annum.

On February 10, 2010 the Company issued 3,000,000 shares of common stock in satisfaction of $30,000 owed by the Company to holders of the Company’s convertible debentures bearing interest at 12% per annum.

On March 31, 2010 the Company issued 4,000,000 shares of common stock in satisfaction of $40,000 owed by the Company to holders of the Company’s convertible debentures bearing interest at 12% per annum.

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

On December 19, 2011, the Company issued a convertible promissory  note in the amount of $50,000 which was funded on  December 22, 2011. The note bears an interest rate of eight percent (8%), matures on September 19, 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 five percent (45%) 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 $40,909  which  is  amortized under the Interest Method.

At December 31, 2011, the following convertible debentures remain outstanding:

(a)

$230,301 bearing simple interest at 14% per annum convertible into the Company’s common stock at $0.025 per share.

(b) $83,000 bearing simple interest at 12% per annum convertible into the Company’s common stock at $0.025 per share.

(c) $50,000 bearing simple interest at 8% per annum convertible into the Company’s common stock after 180 days from execution at a forty five percent (45%) 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.

 Convertible Debentures described in (a) and (b) are currently due and payable. The holders have not made a demand for payment

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NOTE 11. LOSS ON DISPOSAL OF EQUIPMENT

During the quarter ended June 30, 2011 the Company disposed of production, laboratory  and cleanroom equipment such disposal resulting in cash proceeds to the Company of $7,300 and resulting in the recognition of a Loss on Disposal of Equipment of $510,780.

NOTE 12. COMMITMENTS AND CONTINGENCIES

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

On June 29, 2011 the Company and BMXP Holdings Inc.  Shareholder’s Business Trust entered into a settlement agreement with the Plaintiffs (“Settlement”) whereby litigation was dismissed with prejudice and a general release of claims  was granted to the Defendants by the Plaintiffs and to the Plaintiffs by the Defendants.

Pursuant to the Settlement, the Plaintiffs will be granted one year to exclusively identify for the Company companies suitable for merger with or acquisition by the Company (“Target Companies”) provided however that the Company may also identify Target Companies over the term of the Settlement.

In the event that the Company completes a merger or acquisition of a Target Company identified by the Plaintiffs (“Transaction”) , the Plaintiffs shall be compensated in accordance with the terms and conditions of that Transaction.

In the event that the Company completes a merger or acquisition of a Target Company that is not identified by the Plaintiffs within one year from June 27, 2011 or in the event controlling interest in the Company is sold within one year from June 27, 2011  then Plaintiffs shall be entitled to receive the greater of:

In the event that an acquisition, merger or sale as contemplated under the Settlement is not completed within one year from June 27, 2011 the Plaintiffs shall receive $30,000 from the Company.

On February 3, 2011, a Complaint (“Complaint”) was filed in the U.S. District Court Middle District of the State of Pennsylvania against the Company, the Company’s Chairman and Entest. by 18KT.TV LLC (“Plaintiffs”). The Complaint is seeking damages from the Company and Entest in excess of $125,000 and alleges breach of contract, unjust enrichment and breach of implied in fact contract by the Company and Entest in connection with agreements entered into with the plaintiffs by both the Company and Entest.

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On  October 24,2011 a  Complaint  (“Complaint”)  was filed  in the Superior Court of the State of California, County of San Diego Central Division  against the Company,  the Company’s Chairman,  and American Stock Transfer and Trust Company LLC by Rick Plote. The Complaint seeks damages from the defendants jointly and severally of no less than $615, 000 and alleges breach of written agreement, breach of written guarantee and fraud in connection with the defendant’s failure to transfer 4,000,000 common shares of the Company beneficially owned by the company’s Chairman and CEO and pledged by the Company’s Chairman to secure payment of a promissory note issued by an unaffiliated third party.  

NOTE 13. DECONSOLIDATION OF ENTEST BIOMEDICAL, INC.

Effective February 4, 2011 the Company’s ownership of Entest BioMedical, Inc. fell to approximately 49%. and commencing February 4, 2011 the Company’s financial statements reflect the Company’s ownership of Entest under the equity method of accounting. A gain of $42,182,649 was recognized in accordance with ASC 810-10-40-5. Fair value of the Company’s investment in Entest BioMedical, Inc. resulting from deconsolidation was calculated utilizing Level 1 inputs in accordance with ASC 820. As of December 31, 2011, the Company’s ownership of Entest is approximately 42%.

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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

CERTAIN FORWARD-LOOKING INFORMATION

Information provided in this Quarterly report on Form 10Q may contain forward-looking statements within the meaning of Section 21E or Securities Exchange Act of 1934 that are not historical facts and information. These statements represent the Company's expectations or beliefs, including, but not limited to, statements concerning future and operating results, statements concern industry performance, the Company's operations, economic performance, financial conditions, margins and growth in sales of the Company's products, capital expenditures, financing needs, as well assumptions related to the forgoing. For this purpose, any statements contained in this Quarterly Report that are not statement of historical fact may be deemed to be forward-looking statements. These forward-looking statements are based on current expectations and involve various risks and uncertainties that could cause actual results and outcomes for future periods to differ materially from any forward-looking statement or views expressed herein. The Company's financial performance and the forward-looking statements contained herein are further qualified by other risks including those set forth from time to time in the documents filed by the Company with the Securities and Exchange Commission, including the Company's most recent Form 10Kfor the year ended September 30, 2011. 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, 2011 we had cash on hand of $10,385 and as of September 30, 2011  we had cash on hand of $331.

The increase in cash on hand of approximately 3,000% is primarily attributable to borrowings.

As of December 31, 2011 we had Notes Payable of $194,683 and as of September 30, 2011 we had Notes Payable of $169,575.

This increase of approximately 15% is primarily attributable to additional net borrowings incurred by us  of approximately $25,108.

As of December 31, 2011 we had Accrued Payroll of $702,000 and as of September 30, 2011 we had Accrued Payroll of $627,000

This increase of approximately 12% is primarily attributable to increases in employee compensation which have accrued and have not yet been paid of approximately $75,000.  

As of December 31, 2011 we had Accrued Interest of $163,523  and as of September 30, 2011 we had Accrued Interest  of $154,930.

This increase of approximately 5% is primarily attributable to an increase in interest accrued yet unpaid on Notes and Convertible Notes  issued by the Company

As of December 31, 2011 we had $324,551  in Convertible Notes payable  and as of September 30, 2011 we had $313, 701  in  Convertible Notes payable.

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This increase of approximately 3 % is primarily attributable to the issuance by the Company of a convertible promissory note in the amount of $50,000 which was funded on  December 22, 2011 for  which a beneficial conversion feature of $40,909 was recognized  which  is  amortized under the Interest Method.

Material Changes in Results of Operations

Revenues were -0- for the quarter ending December 31, 2011 and -0- for the same quarter ending 2010. Net Losses were $213,673  for the three months ended December 31, 2011  and the Company incurred net losses of $265,800 for the same quarter ending in  2010 .

The decrease in Net Losses of approximately 20% is primarily attributable to :

(a)

A decrease in general and Administrative Expenses for the Quarter ended December 31, 2011 as compared to the same  Quarter ended in 2010

(b)

Incurrence of $51,286 of Research and Development costs in the Quarter ended December 31, 2010

(c)

Recognition of $117,320 of losses attributable to non-controlling interest in Entest BioMedical Inc. during the Quarter ended December 31, 2010

Offset by higher interest and consulting expenses and recognition of equity in the Net Losses of Entest BioMedical Inc. during the Quarter ended  December 31, 2011.

Liquidity and Capital Resources

As of December 31, 2011, we had $10,385  cash on hand and current liabilities of $1,606,294   such liabilities consisting of Accounts Payable, Notes Payable, Accrued Payroll Taxes, Convertible Notes payable net of unamortized discount, Amounts due to Affiliated Party, Accrued Expenses  and Accrued Interest.

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

At this time, we plan to fund our financial needs through equity private placements of common stock. (No plans, terms, offers or candidates have yet been established and there can be no assurance that the company will be able to raise funds on terms favorable to us or at all.) We cannot assure that we will be successful in obtaining additional financing necessary.  We have not received any commitment or expression of interest from any financing source that has given us any assurance that we will obtain the amount of additional financing in the future that we currently anticipate.  For these and other reasons, we are not able to assure that we will obtain any additional financing or, if we are successful, that we can obtain any such financing on terms that may be reasonable in light of our current circumstances.

We were not party to any material commitments for capital expenditures as of the end of the quarter ended December 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.

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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, 2011 and ending December 31, 2011, David Koos, who is both the Company's Principal Executive Officer and Principal Financial Officer has determined that there were no changes to the Company's internal controls over financial reporting that have been materially affected, or is reasonably likely to materially effect, the Company's internal controls over financial reporting.  

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

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

On June 29, 2011 the Company and BMXP Holdings Inc.  Shareholder’s Business Trust entered into a settlement agreement with the Plaintiffs (“Settlement”) whereby litigation was dismissed with prejudice and a general release of claims  was granted to the Defendants by the Plaintiffs and to the Plaintiffs by the Defendants.

Pursuant to the Settlement, the Plaintiffs will be granted one year to exclusively identify for the Company companies suitable for merger with or acquisition by the Company (“Target Companies”) provided however that the Company may also identify Target Companies over the term of the Settlement.

In the event that the Company completes a merger or acquisition of a Target Company identified by the Plaintiffs (“Transaction”) , the Plaintiffs shall be compensated in accordance with the terms and conditions of that Transaction.

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In the event that the Company completes a merger or acquisition of a Target Company that is not identified by the Plaintiffs within one year from June 27, 2011 or in the event controlling interest in the Company is sold within one year from June 27, 2011  then Plaintiffs shall be entitled to receive the greater of:

In the event that an acquisition, merger or sale as contemplated under the Settlement is not completed within one year from June 27, 2011 the Plaintiffs shall receive $30,000 from the Company.

On February 3, 2011, a Complaint (“Complaint”) was filed in the U.S. District Court Middle District of the State of Pennsylvania against the Company, the Company’s Chairman and Entest by 18KT.TV LLC (“Plaintiffs”). The Complaint is seeking damages from the Company and Entest in excess of $125,000 and alleges breach of contract, unjust enrichment and breach of implied in fact contract by the Company and Entest in connection with agreements entered into with the plaintiffs by both the Company and Entest.

The Company believes that the allegations in the complaint are without merit and intends to vigorously defend its interests in this matter. At this time, it is not possible to predict the ultimate outcome of these matters.

On  October 24,2011 a  Complaint  (“Complaint”)  was filed  in the Superior Court of the State of California, County of San Diego Central Division  against the Company,  the Company’s Chairman,  and American Stock Transfer and Trust Company LLC by Rick Plote. The Complaint seeks damages from the defendants jointly and severally of no less than $615, 000 and alleges breach of written agreement, breach of written guarantee and fraud in connection with the defendant’s failure to transfer 4,000,000 common shares of the Company beneficially owned by the company’s Chairman and CEO and pledged by the Company’s Chairman to secure payment of a promissory note issued by an unaffiliated third party.  

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

No unregistered sales of equity securities were conducted by the Company during the period beginning October 1, 2011 and ending December 31, 2011.

Item 3. DEFAULTS UPON SENIOR SECURITIES

None.

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

None.

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Item 5. OTHER INFORMATION

On December 19, 2011, the Company issued a convertible promissory  note in the amount of $50,000 which was funded on  December 22, 2011. The note bears an interest rate of eight percent (8%), matures on September 19, 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 five percent (45%) 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 $40,909  which  is  amortized under the Interest Method.

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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