DELIVERED IN REAL-TIME BY GREAT VALUE INVESTING
Sharing the good news can push up the share price.

Facebook

 



U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 FORM 10-Q 

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

For the quarterly period ended November 30, 2017

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

For the transition period from

Commission File No. 333-154989 

  ENTEST BIOMEDICAL, INC.  
  (Exact name of small business issuer as specified in its charter)  

 

Nevada 26-3431263
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

 

  4700 Spring Street, St 304, La Mesa, California 91942  
  (Address of Principal Executive Offices)  
     
  (619)-702-1404  
  (Issuer’s telephone number)  
     
     
  None  
  (Former name, address and fiscal year, if changed since last report)  

 

Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒   No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ☐  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.

☐  Large accelerated filer ☐  Accelerated filer
☐  Non-accelerated filer ☒  Smaller reporting company

 

APPLICABLE ONLY TO CORPORATE ISSUERS: 

As of November 30, 2017 there were 49,170,472 shares of common stock issued and outstanding.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):

Yes ☐  No ☒

Transitional Small Business Disclosure Format (Check One)

Yes ☐   No ☒

 1 

 

 

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

 

ENTEST BIOMEDICAL, INC.         
Consolidated Balance Sheet         
          
          
   

As of November 30,

2017

(unaudited)

    

As of

August 31,

2017

 
ASSETS         
Current Assets         
Cash  834,510    86,559 
Accrued Interest Receivable  908    908 
Current Portion of Prepaid Expenses  8,045    58,652 
Accrued Rent Receivable  5,000    0 
Total Current Assets  848,463    146,119 
OTHER ASSETS         
Available for Sale Securities  233,800    190,050 
TOTAL ASSETS  1,082,263    336,169 
          
LIABILITIES AND STOCKHOLDERS' EQUITY         
Current Liabilities         
Accounts Payable  28,561    28,446 
Notes Payable  13,501    13,501 
Due to Other  8,000    8,000 
Accrued Expenses  229,733    269,398 
Total Current Liabilities  279,795    319,345 
TOTAL LIABILITIES  279,795    319,345 
          
STOCKHOLDERS' EQUITY         
Common Stock, authorized 500,000,000 shares as of August 31, 2017 and November 30, 2017; issued and outstanding 46,670,472 (par value $0.0001) as of August 31, 2017 and  49,170,472 as of November 30, 2017  4,911    4,661 
Preferred Stock ,par value  $0.0001  5,000,000 shares authorized,         
Series AA Preferred Stock, 100,000 shares authorized, 667 shares, par value $0.0001,  issued and outstanding at August 31, 2017 and as of November 30, 2017  0    0 
Series B Preferred 4,400,000 shares authorized, 728,009 (par value $0.0001) issued and outstanding  as of November 30, 2017 and 728,009 issued and outstanding as of August 31, 2017  73    73 
Series AAA Preferred, 300,000 shares authorized, $0.0001 par value 533 shares outstanding as of November 30, 2017 and as of August 31, 2017       0 
NonVoting Convertible Preferred ($1 par value) 3,000,000 shares  authorized as of November 30, 2017 and August 31, 2017 respectively, 1,001,533 and 1,026,533 issued and outstanding as of November 30,  2017 and August 31, 2017, respectively  1,001,533    1,026,533 
Additional Paid in Capital  7,887,405    7,191,000 
Contributed Capital  274,662    274,662 
Accumulated Deficit  (8,879,604)   (8,721,498)
Accumulated Other Comprehensive Income  228,800    185,050 
Total Stockholders' Equity Entest Biomedical, Inc.  517,780    (39,519)
Non Controlling Interest Zander Therapeutics Inc.  284,688    56,343 
Stockholders Equity  802,468    16,824 
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY  1,082,263    336,169 
          
The accompanying Notes are and integral part of these Financial Statements

 

 2 

 

  

ENTEST BIOMEDICAL INC.      
Consolidated Statement of Operations      
(unaudited)      
       
       
    

Three Months Ended

November 30,

2017

    

Three Months Ended

November 30,

2016

 
TOTAL REVENUE   0    0 
           
COSTS AND EXPENSES          
Research and Development   0    0 
Rent Costs   8,988    10,518 
General and Administrative   39,685    68,098 
Consultant's Expenses   124,099    123,157 
Total Costs and Expenses   172,772    201,773 
           
OPERATING LOSS   (172,772)   (201,773)
           
OTHER INCOME AND EXPENSE          
Rental income   15,000    15,000 
Gain on Write Off of Accounts Payable   0    65,092 
Interest Expense   (334)   (12,335)
TOTAL OTHER INCOME AND EXPENSE   14,666    67,757 
           
LOSS BEFORE INCOME TAXES   (158,106)   (134,016)
Income Taxes          
           
NET LOSS          
NET LOSS from continuing Operations   (158,106)   (134,016)
Less: (Net Income) Loss attributable to non controlling interest in Zander Therapeutics, Inc.   48,128    0 
NET LOSS available to common shareholders   (109,978)   (134,016)
           
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE FROM CONTINUING OPERATIONS   (0.002)   (0.003)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING   48,976,028    40,170,472 
           
The accompanying Notes are and integral part of these Financial Statements

 

 3 

 

 

ENTEST BIOMEDICAL , INC.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited)
       
       
   Three Months Ended November 30
   2017  2016
Net Income (Loss)  $(158,106)  $(134,016)
Add:          
     Unrealized Gains on Securities   43,750    0 
Less:          
     Unrealized Losses on Securities   0    0 
Comprehensive Income attributable to Non Controlling Interest   0    0 
     Total Other Comprehensive Income (Loss)   43,750    0 
Comprehensive Income  $(114,356)  $(134,016)
           
The accompanying Notes are an integral part of these Financial Statements

 4 

 

 

ENTEST BIOMEDICAL, INC.      
Consolidated Statement of Cash Flows      
(unaudited)      
       
 
  

Three Months Ended

November 30,

2017

 

Three Months Ended

November 30,

2016

OPERATING ACTIVITIES          
Net (loss)   (158,106)   (134,016)
Adjustments to reconcile net loss to net cash used by operating activities:          
Increase (Decrease) in Additional paid in Capital   0    30,800 
Increase (Decrease) in Common Stock issued for expenses   0      
Increase (Decrease) in Preferred Stock issued for expenses   0      
Changes in Operating Assets and Liabilities          
(Increase) Decrease  in Prepaid Expenses   50,608    (69,111)
Increase (Decrease) in Accounts Payable   115      
(Increase) Decrease in Accrued Rental Income Receivable   (5,000)   (5,000)
Increase (Decrease) in Accrued Expenses   (39,665)   (51,159)
Net Cash Provided (Used) in Operating Activities   (152,048)   (228,486)
 FINANCING ACTIVITIES          
Common Stock of Subsidiary issued for cash   900,000      
Increase (Decrease) in Notes Payable   0    303,500 
Net Cash Provided by Financing Activities   900,000    303,500 
    Net (Decrease) Increase in Cash   747,952    75,014 
    Cash at Beginning of Period   86,559    859 
    Cash at End of Period   834,510    75,873 
           
The accompanying Notes are an integral part of these Financial Statements

 5 

 

 

Entest BioMedical, Inc.

Notes to Consolidated Financial Statements

As of November 30, 2017

(unaudited)

 

The accompanying unaudited interim condensed consolidated financial statements of Entest Biomedical, Inc. (“Entest” or “the Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the United States Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s annual report filed with the SEC on Form 10-K for the year ended August 31, 2017. In general, interim disclosures do not repeat those contained in the annual statements. In the opinion of management, all adjustments consisting of normal recurring adjustments necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.

NOTE 1.  ORGANIZATION AND DESCRIPTION OF BUSINESS

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

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

On June 18, 2015 the Company formed Zander Therapeutics, Inc. (“Zander”) , a Nevada corporation. Zander is a 59.2% owned subsidiary of the Company as of November 30, 2017.

The Company intends to engage primarily in the development of veterinary medical applications which we intend to license from other entities as well as develop internally.

NOTE 2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. BASIS OF ACCOUNTING

The financial statements have been prepared using the basis of accounting generally accepted in the United States of America. Under this basis of accounting, revenues are recorded as earned and expenses are recorded at the time liabilities are incurred. The Company has adopted an August 31 fiscal year-end. The Company recognizes revenue from services and product sales when the following four revenue recognition criteria are met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the selling price is fixed or determinable, and collectability is reasonably assured.

B. PRINCIPLES OF CONSOLIDATION

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

C. USE OF ESTIMATES

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

 6 

 

 

D. CASH EQUIVALENTS

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

E. PROPERTY AND EQUIPMENT

As of November 30, 2017 Property and Equipment consists of $0

F. FAIR VALUE OF FINANCIAL INSTRUMENTS

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

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

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

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

The Company’s financial instruments as of November 30, 2017 consisted of $13,501 of Notes Payable and $8,000 due to TheraCyte, Inc.. The fair value of all of the Company’s financial instruments as of November 30, 2017 were valued according to the Level 3 input. The carrying amount of the financial instruments is equal to the fair value as determined by the Company.

The Company has determined that there are no Level 1 or Level 2 inputs for determining the fair value of the Company’s financial instruments. Fair value was determined by the Company utilizing its own assumptions and estimation. There were no transfers between levels for the period presented.

G. INCOME TAXES 

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

The Company applied the provisions of ASC 740-10-50, “Accounting for Uncertainty in Income Taxes”, which provides clarification related to the process associated with accounting for uncertain tax positions recognized in our financial statements. Audit periods remain open for review until the statute of limitations has passed. The completion of review or the expiration of the statute of limitations for a given audit period could result in an adjustment to the Company’s liability for income taxes. Any such adjustment could be material to the Company’s results of operations for any given quarterly or annual period based, in part, upon the results of operations for the given period. As of November 30, 2017 the Company had no uncertain tax positions, and will continue to evaluate for uncertain positions in the future.

 7 

 

 

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.

H.  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. All convertible debt has an anti-dilutive effect on the EPS, therefore Diluted earnings per share are the same as basic earnings per share. 

NOTE 3.  RECENT ACCOUNTING PRONOUNCEMENTS

In June 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-10, which eliminated certain financial reporting requirements of companies previously identified as "Development Stage Entities" (Topic 915). The amendments in this ASU simplify accounting guidance by removing all incremental financial reporting requirements for development stage entities. The amendments also reduce data maintenance and, for those entities subject to audit, audit costs by eliminating the requirement for development stage entities to present inception-to-date information in the statements of income, cash flows, and shareholder equity. Early application of each of the amendments is permitted for any annual reporting period or interim period for which the entity's financial statements have not yet been issued (public business entities) or made available for issuance (other entities). Upon adoption, entities will no longer present or disclose any information required by Topic 915. The Company has adopted this standard. 

The following accounting standards updates were recently issued and have not yet been adopted by the Company. These standards are currently under review to determine their impact on the Company’s consolidated financial position, results of operations, or cash flows. 

In May 2014, FASB issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. The revenue recognition standard affects all entities that have contracts with customers, except for certain items. The new revenue recognition standard eliminates the transaction-and industry-specific revenue recognition guidance under current GAAP and replaces it with a principle-based approach for determining revenue recognition. Public entities are required to adopt the revenue recognition standard for reporting periods beginning after December 15, 2016, and interim and annual reporting periods thereafter. Early adoption is not permitted for public entities. The Company has reviewed the applicable ASU and has not, at the current time, quantified the effects of this pronouncement, however it believes that there will be no material effect on the consolidated financial statements.

In June 2014, FASB issued Accounting Standards Update (ASU) No. 2014-12 Compensation — Stock Compensation (Topic 718), Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. A performance target in a share-based payment that affects vesting and that could be achieved after the requisite service period should be accounted for as a performance condition under Accounting Standards Codification (ASC) 718, Compensation — Stock Compensation. As a result, the target is not reflected in the estimation of the award's grant date fair value. Compensation cost would be recognized over the required service period, if it is probable that the performance condition will be achieved. The guidance is effective for annual periods beginning after 15 December 2015 and interim periods within those annual periods. Early adoption is permitted. The Company has reviewed the applicable ASU and has not, at the current time, quantified the effects of this pronouncement, however it believes that there will be no material effect on the consolidated financial statements.

 8 

 

 

In August 2014, FASB issued Accounting Standards Update (ASU) No. 2014-15 Preparation of Financial Statements – Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern. Under generally accepted accounting principles (GAAP), continuation of a reporting entity as a going concern is presumed as the basis for preparing financial statements unless and until the entity's liquidation becomes imminent. Preparation of financial statements under this presumption is commonly referred to as the going concern basis of accounting. If and when an entity's liquidation becomes imminent, financial statements should be prepared under the liquidation basis of accounting in accordance with Subtopic 205-30, Presentation of Financial Statements—Liquidation Basis of Accounting. Even when an entity's liquidation is not imminent, there may be conditions or events that raise substantial doubt about the entity's ability to continue as a going concern. In those situations, financial statements should continue to be prepared under the going concern basis of accounting, but the amendments in this Update should be followed to determine whether to disclose information about the relevant conditions and events. The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company will evaluate the going concern considerations in this ASU, however, at the current period, management does not believe that it has met the conditions which would subject these financial statements for additional disclosure.

In January 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) 2016-01, which amends the guidance in U.S. GAAP on the classification and measurement of financial instruments. Changes to the current guidance primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the ASU clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The new standard is effective for fiscal years and interim periods beginning after December 15, 2017, and upon adoption, an entity should apply the amendments by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance is effective. Early adoption is not permitted except for the provision to record fair value changes for financial liabilities under the fair value option resulting from instrument-specific credit risk in other comprehensive income. The Company anticipates adoption in the fiscal year ending August 31, 2018. 

NOTE 4.  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 $8,879,604 during the period from August 22, 2008 (inception) through November 30, 2017. 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 primarily 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. During the quarter ended November 30, 2017 Zander Therapeutics, Inc. raised $900,000 through the sale for cash of equity securities.

NOTE 5.  NOTES PAYABLE  

As of November 30, 2017

Notes Payable:

David Koos ( See Note 6)  $100 
Dunhill Ross Partners, Inc.   850 
Blackbriar Partners (See Note 6)   8,000 
Regen Biopharma, Inc (See Note 6)   4,551 
Total  $13,501 

 

$1,000 lent to the Company by Blackbriar Partners is due and payable February 17, 2018 and bears simple interest at a rate of 10% per annum 

$7,000 lent to the Company by Blackbriar Partners is due and payable February 28, 2018 and bears simple interest at a rate of 10% per annum.

Blackbriar Partners is controlled by David R. Koos, the Company’s sole officer and director.

 9 

 

 

 

As of November 30, 2017 the Company remains indebted to David R. Koos , the Company’s sole officer and director, in the principal amount of $100 due and payable in whole or in part at the demand of David Koos and bearing simple interest at a rate of 15% per annum. 

Amounts due to Regen Biopharma Inc. as of November 30, 2017 are due and payable at the demand of the holder and bear simple interest at a rate of 10% per annum. David R. Koos , the Company’s sole officer, serves as Chairman and Chief Executive officer of Regen Biopharma, Inc. Harry Lander, President and Chief Scientific Officer of Regen Biopharma Inc. serves as President and Chief Scientific Officer of Zander Therapeutics, Inc. The Chief Financial Officer of Regen Biopharma, Inc. is Todd Caven who also serves as Chief Financial Officer of Zander Therapeutics, Inc .

NOTE 6.  RELATED PARTY TRANSACTIONS

As of November 30, 2017 the Company remains indebted to David R. Koos , the Company’s sole officer and director, in the principal amount of $100 due and payable in whole or in part at the demand of David Koos and bearing simple interest at a rate of 15% per annum.

As of November 30, 2017 the Company remains indebted to Blackbriar Partners in the principal amount of $8,000 of which $1,000 is  due and payable February 17, 2018 and bears simple interest at a rate of 10% per annum and of which $7,000 is due and payable February 28, 2018 and bears simple interest at a rate of 10% per annum.

As of November 30, 2017 the Company remains indebted to Regen Biopharma, Inc. in the principal amount of $4,551 due and payable in whole or in part at the demand of the holder and bearing simple interest at a rate of 10% per annum. David R. Koos , the Company’s sole officer, serves as Chairman and Chief Executive officer of Regen Biopharma, Inc. Harry Lander, President and Chief Scientific Officer of Regen Biopharma Inc. serves as President and Chief Scientific Officer of Zander Therapeutics, Inc. The Chief Financial Officer of Regen Biopharma, Inc.is Todd Caven who also serves as Chief Financial Officer of Zander Therapeutics, Inc .

On October 1, 2014 Regen Biopharma Inc. entered into an agreement to sublease approximately 2,320 square feet of office space from the Company. Entest Biomedical Inc. is under common control with Regen Biopharma, Inc. as the Chairman and CEO of the Company also serves as the Chairman and CEO of Regen Biopharma, Inc. The sublease is on a month to month basis and rent payable to the Company by Regen Biopharma Inc is equal to the rent payable to the lessor by the Company and is to be paid in at such time specified in accordance with the original lease agreement between the Company and the lessor. On January 20, 2015 the sublease was amended retroactive to January 1, 2015 as follows:

 10 

 

 

The rent payable to Entest BioMedical, Inc. by the subtenant is equal to Five Thousand Dollars per month ($5,000) and is to be paid in at such time specified in accordance with the original lease agreement between the Entest BioMedical, Inc. (“Entest”) and the lessor. All charges for utilities connected with premises which are to be paid under the master lease shall be paid by Regen Biopharma, Inc. for the term of this sublease to the extent that such charges exceed the difference between the rent payable to the lessor by Entest under the master lease and the rent payable to Entest by Regen Biopharma, Inc.

On June 23, 2015 Regen Biopharma, Inc. ( “Regen”) entered into an agreement (“Agreement”) with Zander whereby Regen granted to Zander an exclusive worldwide right and license for the development and commercialization of certain intellectual property controlled by Regen (“ License IP”) for non-human veterinary therapeutic use for a term of fifteen years.

Pursuant to the Agreement, Zander shall pay to Regen one-time, non-refundable, upfront payment of one hundred thousand US dollars ($100,000) as a license initiation fee which must be paid within 90 days of June 23, 2015 and an annual non-refundable payment of one hundred thousand US dollars ($100,000) on July 15th, 2016 and each subsequent anniversary of the effective date of the Agreement.

The abovementioned payments may be made, at Zander’s discretion, in cash or newly issued common stock of Zander or in common stock of Entest BioMedical Inc. valued as of the lowest closing price on the principal exchange upon which said common stock trades publicly within the 14 trading days prior to issuance. 

Pursuant to the Agreement, Zander shall pay to Regen royalties equal to four percent (4%) of the Net Sales , as such term is defined in the Agreement, of any Licensed Products, as such term is defined in the Agreement, in a Quarter.

Pursuant to the Agreement, Zander will pay Regen ten percent (10%) of all consideration (in the case of in-kind consideration, at fair market value as monetary consideration) received by Zander from sublicensees ( excluding royalties from sublicensees based on Net Sales of any Licensed Products for which Regen receives payment pursuant to the terms and conditions of the Agreement).

Zander is obligated pay to Regen minimum annual royalties of ten thousand US dollars ($10,000) payable per year on each anniversary of the Effective Date of this Agreement, commencing on the second anniversary of June 23, 2015. This minimum annual royalty is only payable to the extent that royalty payments made during the preceding 12-month period do not exceed ten thousand US dollars ($10,000).

The Agreement may be terminated by Regen:

If Zander has not sold any Licensed Product by ten years of the effective date of the Agreement or Zander has not sold any Licensed Product for any twelve (12) month period after Zander’s first commercial sale of a Licensed Product.

The Agreement may be terminated by Zander with regard to any of the License IP if by five years from the date of execution of the Agreement a patent has not been granted by the United States patent and Trademark Office to Regen with regard to that License IP.

The Agreement may be terminated by Zander with regard to any of the License IP if a patent that has been granted by the United States patent and Trademark Office to Regen with regard to that License IP is terminated.

The Agreement may be terminated by either party in the event of a material breach by the other party.

On September 28, 2015 the Company issued 8,000,000 of its common shares to Regen in satisfaction of the license initiation fee.

During the quarter ended November 30, 2016 the Company paid $17,000 to Regen as a partial payment of the July 15th, 2016 liability.

 11 

 

 

On May 30, 2017 the “Company issued 83,000 shares of its Non Voting Convertible Preferred Stock (“ Shares”) to Regen in satisfaction of $83,000 of the July 15th, 2016 liability.

On July 24, 2017 the Company issued 102,852 of its Non Voting Convertible Preferred Stock (“ Shares”) to Regen in satisfaction of $102,852 of liabilities incurred pursuant to the Agreement.

On February 28, 2016, the Company purchased from a third party 3,500,000 shares of the Series A Preferred stock of Regen Biopharma, Inc for consideration consisting of $5,000 cash and 500,000 shares of the Company’s Series B Preferred Stock.

During the quarter ended August 31, 2017, David R. Koos , the Company’s Chairman and Chief Executive Officer, satisfies a $500 Account Payable to an unrelated party on behalf of the Company. The Company is under no obligation to repay this amount to David R. Koos. 

NOTE 7.  INCOME TAXES

 

As of  November 30, 2017   
Deferred tax assets:     
Net operating tax carry forwards  $3,023,705 
Other   -0- 
      
Gross deferred tax assets   3,023,705 
Valuation allowance   (3,023,705)
Net deferred tax assets  $-0- 

 

As of  November 30, 2017  the Company has a Deferred Tax Asset of $3,023,705 completely attributable to net operating loss carry forwards of approximately $ 8,893,251(which expire 20 years from the date the loss was incurred) consisting of: 

(a) $ 13,647 of Net Operating Loss carry forwards acquired in the reverse acquisition of Entest BioMedical, Inc., a California corporation, and

(b) $ 8,879,604 of Net Operating Loss carry forwards attributable to Entest BioMedical, Inc.

Realization of deferred tax assets is dependent upon sufficient future taxable income during the period that deductible temporary differences and carry forwards are expected to be available to reduce taxable income. A valuation allowance is recorded when it is “more likely-than-not” that a deferred tax asset will not be realized. In addition, the reverse acquisition in which Entest BioMedical, Inc. was involved in 2009 has resulted in a change of control.  Internal Revenue Code Sec 382 limits the amount of income that may be offset by net operating loss (NOL) carryovers after an ownership change. As a result, the Company has recorded a valuation allowance reducing all deferred tax assets to $ -0-.

Income tax is calculated at the 34% Federal Corporate Rate.

 12 

 

 

NOTE 8.  ACQUISITION OF ENTEST CA

On July 10, 2009 the Company acquired 100% of Entest CA, a California corporation and wholly owned subsidiary of the Company, from BMSN for consideration consisting of (a) the issuance to BMSN of 10,000,000 newly issued common shares of Entest and (b) the return by Mr. Rick Plote of 10,000,000 shares of Entest’s common stock previously issued to him by Entest for cancellation.

NOTE 9.  ACQUISITION OF THE ASSETS OF PET POINTERS, INC.

On January 4, 2011 Entest CA acquired from Pet Pointers, Inc., a California corporation doing business as McDonald Animal Hospital (“Seller”), and Dr. Gregory McDonald DVM (“McDonald”) all the goodwill from McDonald and assets of Seller except cash and accounts receivables used in connection with the operation of a veterinary medical clinic located at 225 S. Milpas Street, Santa Barbara, CA 93103 (the "Business").

Consideration for the acquisition consisted of: 

I.$70,000 in cash
II.$210,000 of the Company’s common shares valued at the closing price per share as of January 4, 2011
III.Payment of no more than $78,000 to a creditor of the Seller to be paid in monthly installments of $1,500 per month
IV.Payment of no more than $25,000 to additional creditors of the Seller to be paid in monthly installments of $825 per month
V.Payment of $50,000 to McDonald on the first business day of the fourth month following the closing of the acquisition (“Closing”).

 

NOTE 10. DISPOSITION OF THE ASSETS OF PET POINTERS, INC.

On November 28, 2012 the “Company executed an agreement (“Agreement”) with Gregory McDonald ("McDonald"), Pet Pointers, Inc. ("Pet Pointer") whereby Mc Donald and Pet Pointer would acquire from the Company all assets (with the exception of cash and accounts receivable) utilized by the Company in the operation of the McDonald Animal Hospital, a full service veterinary clinic owned and operated by the Company and located in Santa Barbara, California (“McDonald Asset Sale”).

On October 10, 2012 a Complaint (“Complaint”) was filed in the Superior Court of the State of California against the Company and David Koos by McDonald, a former employee of the Company, alleging breach of contract and breach of the covenant of good faith and dealing in connection with the assumption of lease obligations by the Company in connection with the acquisition of the assets of Pet Pointers, Inc breach of contract and breach of the covenant of good faith and dealing in connection with an employment agreement enters into with McDonald inc connection with the Acquisition, breach of contract in connection with the Acquisition purchase agreement, breach of the covenant of good faith and dealing in connection with the Acquisition purchase agreement, implied indemnity in connection to amounts owed by McDonald to Anthony and Judi Marinelli, the Internal Revenue Service, and the California Franchise Tax Board, intentional misrepresentation, negligent misrepresentation , failure to pay wages and violations of Sections 2802, 203, and 2806 of the California Labor Code. The Complaint sought judgment for nominal damages, actual damages, compensatory damages, lost wages, compensation, expenses wage benefits and penalties pursuant to California Labor Code Sections 203 et al, 2802 and 2806, indemnification, accrued interest, punitive damages, costs of suit and attorney’s fees.

As consideration to the Company for the assets acquired, McDonald and Pet Pointers provided to the Company a General release whereby McDonald and Pet Pointer waive, release and discharge the Company and their respective assignees, officers, directors, shareholders, boards, owners, employees, attorneys, agents, trustors, trustees, beneficiaries, heirs, successors, and representatives from all known and unknown claims, demands, causes of action, attorney's fees, costs, or expenses including: 

 13 

 

(1)All claims relating to the Complaint.
(2)Those owed by McDonald to Anthony and Judi Marinelli which the Company became obligated to pay on McDonald’s behalf pursuant to the asset purchase agreement entered into between the Company and Gregory McDonald and Pet Pointers, Inc on January 4, 2011.
(3)Those amounts owed by McDonald to the Internal Revenue Service which the Company became obligated to pay on McDonald’s behalf pursuant to the asset purchase agreement entered into between the Company and Gregory McDonald and Pet Pointers, Inc on January 4, 2011.
(4)Those amounts owed by McDonald to the California Franchise Tax Board which the Company became obligated to pay on McDonald’s behalf pursuant to the asset purchase agreement entered into between the Company and Gregory McDonald and Pet Pointers, Inc on January 4, 2011.

Assets disposed of pursuant to the Agreement include approximately $4,840 of Property Plant and Equipment net of accumulated depreciation as well as all inventory held at the McDonald Animal Hospital.

Assets disposed of pursuant to the Agreement also include 

(i)Essentially all intellectual property, including computer software, utilized in connection with the operation of the McDonald Animal Hospital
(ii)All telephone numbers, fax numbers, service marks, trademarks, trade names, fictitious business names, websites, business email addresses, vendor lists, promotional materials, vendor records and any and all business records including, but not limited to, such items stored in computer memories, microfiche, paper record or by any other means relevant to the operation of the McDonald Animal Hospital.
(iii)All customer lists, customer contacts, and any and all customer records that are related to the McDonald Animal Hospital.

As a result of the agreement, the Company recorded a non-cash pre-tax charge for the impairment of goodwill recorded in connection with the acquisition of the McDonald Animal Hospital of approximately $405,000 for the quarter ended November 30, 2012.

Pursuant to the Agreement, the Company is obligated to make payment of $13,000 within five days of the Closing of the Agreement as such term is defined in the Agreement.

Pursuant to the Agreement, the Company agrees to waive, release and discharge McDonald and Pet Pointer from all known and unknown claims, demands, causes of action, attorney's fees, costs, or expenses.

NOTE 11. COMMITMENTS AND CONTINGENCIES

 

On November 1, 2011, the Company entered into an agreement to lease approximately 2,320 square feet of office space beginning December 1, 2011 for a period of five years. 

Rent to be charged to the Company pursuant to the lease is as follows:

$2,996 per month for the period beginning December 1, 2011 and ending November 30, 2012

$3,116 per month for the period beginning December 1, 2012 and ending November 30, 2013

$3,241 per month for the period beginning December 1, 2013 and ending November 30, 2014

$3,371 per month for the period beginning December 1, 2014 and ending November 30, 2015

$3,506 per month for the period beginning December 1, 2015 and ending November 30, 2016

 

On November 27, 2016 the lease was extended until November 30, 2021

 14 

 

 

Rent to be charged to the Company pursuant to the extension is as follows:

$2,996 per month for the period beginning December 1, 2016 and ending November 30, 2017

$3,116 per month for the period beginning December 1, 2017 and ending November 30, 2018

$3,241 per month for the period beginning December 1, 2018 and ending November 30, 2019

$3,371 per month for the period beginning December 1, 2019 and ending November 30, 2020

$3,506 per month for the period beginning December 1, 2020 and ending November 30, 2021

 

This property is utilized as office space. The Company believes that the foregoing property is adequate to meet its current needs. While it is anticipated that the Company will require access to laboratory facilities in the future, the Company believes that access to such facilities are available from a variety of sources.

NOTE 12. STOCKHOLDERS EQUITY

The stockholders' equity section of the Company contains the following classes of capital stock as of November, 2017:

Common Stock:

 

$0.0001 par value, 500,000,000 shares authorized and 49,170,472 shares issued and outstanding as of November 30, 2017. 

Preferred Stock:

$0.0001 par value 5,000,000 shares authorized of which:

  (a) 100,000 are authorized as Series AA Preferred Stock of which 667 shares are issued and outstanding  as of  November 30, 2017  and
  (b) 4,400,000 are authorized as Series B Preferred Stock of which 728,009 shares are issued and outstanding as of November 30, 2017 and
  (c) 300,000  are authorized as Series AAA Preferred Stock of which 533 shares are issued and outstanding  as of  November 30 2017.

 

Upon any liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary (collectively, a “Liquidation”), before any distribution or payment shall be made to any of the holders of Common Stock or any other series of preferred stock, the holders of Series B Preferred Stock shall be entitled to receive out of the assets of the Company, whether such assets are capital, surplus or earnings, an amount equal to $0.10 per share of Series B Preferred Stock (the “Liquidation Amount”) plus all declared and unpaid dividends thereon, for each share of Series B Preferred Stock held by them.

If, upon any Liquidation, the assets of the Company shall be insufficient to pay the Liquidation Amount, together with declared and unpaid dividends thereon, in full to all holders of Series B Preferred Stock, then the entire net assets of the Company shall be distributed among the holders of the Series B Preferred Stock, ratably in proportion to the full amounts to which they would otherwise be respectively entitled and such distributions may be made in cash or in property taken at its fair value (as determined in good faith by the Board), or both, at the election of the Board. 

Non Voting Convertible Preferred Stock having a $1.00 par value:

3,000,000 shares authorized of which 1,001,533 shares are issued and outstanding as of  November 30, 2017 .

Non Voting Convertible Preferred Stock shall convert at the option of the holder into shares of the corporation’s common stock at a conversion price equal to the greater of $0.01 per share or seventy percent (70%) of the lowest Closing Price for the five (5) trading days immediately preceding written receipt by the corporation of the holder’s intent to convert.

“CLOSING PRICE" shall mean the closing bid price for the corporation’s common stock on the Principal Market on a Trading Day as reported by Bloomberg Finance L.P.

“PRINCIPAL MARKET" shall mean the principal trading exchange or market for the corporation’s common stock.

“TRADING DAY” shall mean a day on which the Principal Market shall be open for business.

 15 

 

 

NOTE 13. INVESTMENT SECURITIES

On February 28, 2017 the Company purchased 3,500,000 of the Series A Preferred shares of Regen Biopharma, Inc.for consideration consisting of $5,000 and 500,000 shares of the Company’s Series B Preferred stock.

The Series A Preferred shares of Regen Biopharma, Inc. described above constitute the Company’s sole investment securities as of November 30, 2017.

As of November 30, 2017:

 3,500,000   Series A Preferred shares of Regen Biopharma, Inc 
                  
 Basis    Fair Value    Total Unrealized Gains     Net Unrealized Gain or (Loss) realized during the quarter  ended November 30, 2017 
$5,000  $233,800  $228,800   $43,750 

 

NOTE 14. STOCK TRANSACTIONS

Common Shares

On September 8, 2017 the Company issued 2,500,000 Common Shares in connection with a conversion of 25,000 Non Voting Convertible Preferred Shares.

Common Shares of Zander Therapeutics Inc.

On October 30, Zander issued 900,000 of its common shares for consideration of $900,000.

Preferred Shares of Zander Therapeutics

 

On September 14, 2017 Zander Therapeutics Inc. filed a CERTIFICATE OF DESIGNATION (“Certificate of Designations”) with the Nevada Secretary of State setting forth the preferences rights and limitations of a newly authorized series of preferred stock designated and known as “Series AA Preferred Stock” (hereinafter referred to as “Series AA Preferred Stock”). 1,000,000 of Zander’s authorized preferred stock is designated as Series AA Preferred Stock. With respect to each matter submitted to a vote of stockholders of Zander, each holder of Series AA Preferred Stock shall be entitled to cast that number of votes which is equivalent to the number of shares of Series AA Preferred Stock owned by such holder times ten thousand (10,000).

On any voluntary or involuntary liquidation, dissolution or winding up of Zander, the holders of the Series AA Preferred Stock shall receive, out of assets legally available for distribution to Zander's stockholders, a ratable share in the assets of Zander.

On September 15, 2017 Zander issued 200 of its Series AA Preferred Shares to David Koos, Zander’s Chief Executive Officer, for Services.

 16 

 

 

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

CERTAIN FORWARD-LOOKING INFORMATION 

Information provided in this Quarterly report on Form 10Q may contain forward-looking statements within the meaning of Section 21E or Securities Exchange Act of 1934 that are not historical facts and information. These statements represent the Company's expectations or beliefs, including, but not limited to, statements concerning future and operating results, statements concerning industry performance, the Company's operations, economic performance, financial conditions, margins and growth in sales of the Company's products, capital expenditures, financing needs, as well assumptions related to the forgoing. For this purpose, any statements contained in this Quarterly Report that are not statement of historical fact may be deemed to be forward-looking statements. These forward-looking statements are based on current expectations and involve various risks and uncertainties that could cause actual results and outcomes for future periods to differ materially from any forward-looking statement or views expressed herein. The Company's financial performance and the forward-looking statements contained herein are further qualified by other risks including those set forth from time to time in the documents filed by the Company with the Securities and Exchange Commission, including the Company's most recent Form 10K for the year ended August 31, 2017. All references to” We”, “Us”, “Company” or the “Company” refer to Entest BioMedical, Inc and its majority owned subsidiary Zander Therapeutics, Inc.

 

As of November 30, 2017 we had Cash in the amount of $834,510 and as of August 31, 2017 we had Cash in the amount of $86,559.

 

The increase in Cash of approximately 864.09% is primarily attributable to the sale for cash by Zander Therapeutics, Inc. of 900,000 of its common shares for consideration of $900,000.

 

As of November 30, 2017 we had Current Portion of Prepaid Expenses of $8,045 and as of August 31, 2017 we had Current Portion of Prepaid Expenses of $58,652.

 

The decrease of 86.28% is attributable to the expensing of $50,604 for services rendered during the quarter ended November 30, 2017 which had been prepaid by the Company during the quarter ended August 31, 2017.

 

As of November 30, 2017 we had Accrued Rent Receivable of $5,000 and as of August 31, 2017 we had Accrued Rent Receivable of $0.

 

The increase in Accrued Rent Receivable is attributable to rental income earned by but unpaid to the company by Regen Biopharma, Inc. for the month ended November 30, 2017. Regen Biopharma, Inc. is under common control with the Company.

 

As of November 30, 2017 3,500,000 shares of the Series A Preferred stock of Regen Biopharma, Inc. was determined by us to have a Fair Value of $233,800 and as of August 31, 2017 those shares were determined by us to have a Fair Value of $190,050.

 

This increase of 23% is attributable to an unrealized gain of $43,750 recognized by the Company with regard to 3,500,000 shares of the Series A Preferred stock of Regen Biopharma, Inc during the quarter ended November 30, 2017.

As of November 30, 2017 we had Accrued Expenses of $229,733 and as of August 31, 2017 we had Accrued Expenses of $269,398.

 

The decrease in Accrued Expenses of approximately 14% is attributable to the payment to David R. Koos of $40,000 of previously accrued salary during the quarter ended November 30, 2017 offset by the accrual of $334 of interest expenses incurred during the quarter ended November 30, 2017.

 17 

 

 

Material Changes in Results of Operations

 

Revenues from continuing operations were $0 for the three months ended November 30, 2017 and -0- for the three months ended November 30, 2016.  Net Losses from continuing operations were $158,106 for the three months ended November 30, 2017 and $134,016 for the same period ended 2016.

 

The increase in Net Losses of from continuing operations of approximately 17.9% is primarily attributable the write off of $65,092 of Accounts Payable by the Company during the quarter ended November 30, 2016 , such payables being effectively uncollectible by the creditors due to the expiration of the statute of limitations imposed upon such collection activity pursuant to relevant statute offset by decreases in Rental , Interest and General and Administrative expenses incurred during the quarter ended November 30, 2017 as compared to the same period ended 2016

 

Liquidity and Capital Resources

 

As of November 30, 2017 we had $834,510 in cash on hand and current liabilities of $279,795 such liabilities consisting of Accounts Payable, Notes Payable, Amounts due to Others and Accrued Expenses. We feel we will be able to satisfy our cash requirements over the next twelve months .

 

We currently plan to raise additional funds primarily by offering securities for cash.

 

There is no guarantee that we will be able to raise any capital through any type of offerings. 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.

 

As of January 6, 2018 we are not party to any binding agreements which would commit Entest to any material capital expenditures.

 

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 Procedure. 

 

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 September 1, 2017 and ending on November 30, 2017, 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.

 18 

 

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings. 

 

None.

 

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

 

Common Shares

 

On September 8, 2017 the Company issued 2,500,000 Common Shares (“Shares”)in connection with a conversion of 25,000 Non Voting Convertible Preferred Shares.

 

The Shares were issued pursuant to Section 4(a) (2) of the Securities Act of 1933, as amended (the “Act”). No underwriters were retained to serve as placement agents for the sale. The shares were sold directly through our management. No commission or other consideration was paid in connection with the sale of the shares. There was no advertisement or general solicitation made in connection with this Offer and Sale of Shares. A legend was placed on the certificate that evidences the Shares stating that the Shares have not been registered under the Act and setting forth or referring to the restrictions on transferability and sale of the Shares.

 

Common Shares of Zander Therapeutics Inc.

 

On October 30, Zander issued 900,000 of its common shares (“Shares”) for consideration of $900,000.

 

The Shares were issued pursuant to Section 4(a) (2) of the Securities Act of 1933, as amended (the “Act”). No underwriters were retained to serve as placement agents for the sale. The shares were sold directly through our management. No commission or other consideration was paid in connection with the sale of the shares. There was no advertisement or general solicitation made in connection with this Offer and Sale of Shares. A legend was placed on the certificate that evidences the Shares stating that the Shares have not been registered under the Act and setting forth or referring to the restrictions on transferability and sale of the Shares.

 

Preferred Shares of Zander Therapeutics

 

On September 15, 2017 Zander issued 200 of its Series AA Preferred Shares (“Shares”) to David Koos, Zander’s Chief Executive Officer, for Services.

 

The Shares were issued pursuant to Section 4(a) (2) of the Securities Act of 1933, as amended (the “Act”). No underwriters were retained to serve as placement agents for the sale. The shares were sold directly through our management. No commission or other consideration was paid in connection with the sale of the shares. There was no advertisement or general solicitation made in connection with this Offer and Sale of Shares. A legend was placed on the certificate that evidences the Shares stating that the Shares have not been registered under the Act and setting forth or referring to the restrictions on transferability and sale of the Shares.

 

The proceeds from securities mentioned above sold for cash consideration will be utilized for general corporate purposes.

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Reserved

 

None.

 

Item 5. Other Information

 

None

 

 19 

 

 

Item 6. Exhibits

31.1 Certification of Chief Executive Officer  
31.2 Certification of Chief Financial Officer  
10.1 Form of Agreements for sale of Zander Shares*  

 

* incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K dated October 25, 2017

 20 

 

 

SIGNATURE

  

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

 

ENTEST BIOMEDICAL, INC    
     
By: /s/ David R. Koos    
  David R. Koos    
  Chief Executive Officer    
Dated: January 6, 2018    

 

 21