The Accompanying
Notes are an Integral Part of These Financial Statements.
The Accompanying
Notes are an Integral Part of These Financial Statements.
NOTE
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Bio-Matrix
Scientific Group, Inc. (“Company”) was organized October 6, 1998, under the laws of the State of Delaware as Tasco
International, Inc.
From
October 6, 1998 to June 3, 2006 its activities have been limited to capital formation, organization, and development of its business
plan to provide production of visual content and other digital media, including still media, 360-degree images, video, animation
and audio for the Internet.
On
July 3, 2006 the Company abandoned its efforts in the field of digital media production when it acquired 100% of the share capital
of Bio-Matrix Scientific Group, Inc., a Nevada corporation, (“BMSG”) for consideration consisting of 10,000,000 shares
of the common stock of the Company and the cancellation of 10,000,000 shares of the Company owned and held by John Lauring.
As
a result of this transaction, the former stockholder of BMSG held approximately 80% of the voting capital stock of the Company
immediately after the transaction. For financial accounting purposes, this acquisition was a reverse acquisition of the Company
by BMSG under the purchase method of accounting, and was treated as a recapitalization with BMSG as the acquirer. Accordingly,
the financial statements have been prepared to give retroactive effect to August 2, 2005 (date of inception), of the reverse acquisition
completed on July 3, 2006, and represent the operations of BMSG.
Through
its 58% owned subsidiary, Regen BioPharma, Inc., the Company intends to engage primarily in the development of regenerative medical
applications which we intend to license from other entities up to the point of successful completion of Phase I and or Phase II
clinical trials after which we would either attempt to sell or license those developed applications or, alternatively, advance
the application further to Phase III clinical trials
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, Bio Matrix
Scientific Group, Inc, a Nevada corporation and a wholly owned subsidiary (“BMSG”), Regen BioPharma, Inc., a Nevada
corporation and 58% owned subsidiary (Regen) and Entest BioMedical, Inc., (“Entest”), a Nevada corporation which was
a majority owned subsidiary 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. All estimates
are of a normal, recurring nature and are required for the fair presentation of the financial statements. 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.
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 June 30, 2014 consisted of Securities Available for Sale consisting of 10,000,000
shares of Entest Biomedical, Inc and a Note Receivable from Entest Biomedical, Inc. for $2,222 . The fair value of Securities
Available for sale as of June 30, 2014 were valued according to the Level 1 input. The carrying amount of the financial instruments
is equal to the fair value as determined by the Company. The fair value of the Note Receivable was valued according to Level 3
input.
H.
INCOME TAXES
The
Company accounts for income taxes using the liability method prescribed by ASC 740, “Income Taxes.” Under this method,
deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets
and liabilities using enacted tax rates that will be in effect in the year in which the differences are expected to reverse. The
Company records a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not
that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates
is recognized as income or loss in the period that includes the enactment date.
The
Company applied the provisions of ASC 740-10-50, “Accounting For Uncertainty In Income Taxes”, which provides clarification
related to the process associated with accounting for uncertain tax positions recognized in our financial statements. Audit periods
remain open for review until the statute of limitations has passed. The completion of review or the expiration of the statute
of limitations for a given audit period could result in an adjustment to the Company’s liability for income taxes. Any such
adjustment could be material to the Company’s results of operations for any given quarterly or annual period based, in part,
upon the results of operations for the given period. As of June 30, 2014 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.
All options and convertible debt outstanding has an anti-dilutive effect on the EPS, therefore Diluted Earnings per Share are
the same as basic earnings per share.
J.
ADVERTISING
Costs
associated with advertising are charged to expense as incurred. Advertising expenses were $0 and $0 for the year ended September
30, 2013 and the quarter ended June 30, 2014 respectively.
NOTE
2
.
RECENT ACCOUNTING PRONOUNCEMENTS
The
following accounting standards updates were recently issued and have not yet been adopted by us. These standards are currently
under review to determine their impact on our consolidated financial position, results of operations, or cash flows.
On
January 31, 2013, the FASB issued Accounting Standards Update [ASU] 2013-01, entitled Clarifying the Scope of Disclosures about
Offsetting Assets and Liabilities. The guidance in ASU 2013-01 amends the requirements in the FASB Accounting Standards Codification
[FASB ASC] Topic 210, entitled Balance Sheet. The ASU 2013-01 amendments to FASB ASC 210 clarify that ordinary trade receivables
and receivables in general are not within the scope of ASU 2011-11, entitled Disclosure about Offsetting Assets and Liabilities,
where that ASU amended the guidance in FASB ASC 210. As those disclosures now are modified with the ASU 2013-01 amendments, the
FASB ASC 210 balance sheet offsetting disclosures now clearly are applicable only where reporting entities are involved with bifurcated
embedded derivatives, repurchase agreements, reverse repurchase agreements, and securities borrowing and lending transactions
that either are offset using the FASB ASC 210 or 815 requirements, or that are subject to enforceable master netting arrangements
or similar agreements. ASU 2013-01 is effective for annual reporting periods beginning on or after January 1, 2013, and interim
periods within those annual periods. The adoption of this ASU is not expected to have a material impact on our financial statements.
On
February 28, 2013, the FASB issued Accounting Standards Update [ASU] 2013-04, entitled Obligations Resulting from Joint and Several
Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date. The ASU 2013-04 amendments
add to the guidance in FASB Accounting Standards Codification [FASB ASC] Topic 405, entitled Liabilities and require reporting
entities to measure obligations resulting from certain joint and several liability arrangements where the total amount of the
obligation is fixed as of the reporting date, as the sum of the following:
The
amount the reporting entity agreed to pay on the basis of its arrangement among co-obligors.
Any
additional amounts the reporting entity expects to pay on behalf of its co-obligors.
While
early adoption of the amended guidance is permitted, for public companies, the guidance is required to be implemented in fiscal
years, and interim periods within those years, beginning after December 15, 2013. The amendments need to be implemented retrospectively
to all prior periods presented for obligations resulting from joint and several liability arrangements that exist at the beginning
of the year of adoption. The adoption of ASU 2013-04 is not expected to have a material effect on the Company’s operating
results or financial position.
On
April 22, 2013, the FASB issued Accounting Standards Update [ASU] 2013-07, entitled Liquidation Basis of Accounting. With ASU
2013-07, the FASB amends the guidance in the FASB Accounting Standards Codification [FASB ASC] Topic 205, entitled Presentation
of Financial Statements. The amendments serve to clarify when and how reporting entities should apply the liquidation basis of
accounting. The guidance is applicable to all reporting entities, whether they are public or private companies or not-for-profit
entities. The guidance also provides principles for the recognition of assets and liabilities and disclosures, as well as related
financial statement presentation requirements. The requirements in ASU 2013-07 are effective for annual reporting periods beginning
after December 15, 2013, and interim reporting periods within those annual periods. Reporting entities are required to apply the
requirements in ASU 2013-07 prospectively from the day that liquidation becomes imminent. Early adoption is permitted. The adoption
of ASU 2013-07 is not expected to have a material effect on the Company’s operating results or financial position.
Variety
of proposed or otherwise potential accounting standards are currently under study by standard setting organizations and various
regulatory agencies. Due to the tentative and preliminary nature of those proposed standards, the Company’s management
has not determined whether implementation of such standards would be material to its financial statements.
NOTE
3. OPTIONS AND WARRANTS
As
of June 30, 2014 the Company has no options or warrants outstanding.
NOTE
4. 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 $41,645,688 recognized upon the deconsolidation of Entest Biomedical, Inc., the Company generated net
losses of $18,136,615 (excluding $663,649 of Equity in Net Losses of Entest Biomedical, Inc. recognized) during the period from
August 2, 2005 (inception) through June 30, 2014. 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.
During
the quarter ended June 30, 2014 the Company incurred net borrowings of $12,094 such funds being borrowed from David Koos, the
Company’s Chairman and Chief Executive Officer.
NOTE
5. INCOME TAXES
As
of June 30, 2014
Deferred
tax assets:
|
|
|
|
Net
operating tax carry forwards
|
|
$
|
6,179,578
|
|
Other
|
|
|
-0-
|
|
Gross
deferred tax assets
|
|
|
6,179,578
|
|
Valuation
allowance
|
|
|
(6,179,578
|
)
|
|
|
|
|
|
Net
deferred tax assets
|
|
$
|
-0-
|
|
As
of June 30, 2014 the Company has a Deferred Tax Asset of $6,179,578 completely attributable to net operating
loss carry forwards of approximately $18,175,231 ( 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)
$18,136,615 attributable to Bio-Matrix Scientific Group, Inc. a Delaware corporation, BMSG and Regen.
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.
Income
tax is calculated at the 34% Federal Corporate Rate.
NOTE
6. RELATED PARTY TRANSACTIONS
As
of June 30, 2014 the Company is indebted to David Koos, the Company’s Chairman and Chief Executive Officer, in the amount
of $183,731. 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 leaving
a balance of $59,500 of rental expenses prepaid to the Company as of that date. As of June 30, 2014 the amount due to Entest
is $0 This obligation bears no interest and is due and payable on the demand of Entest. Entest is considered a related party due
to the fact that the Chairman and CEO of the Company also serves as the Chairman and CEO of Entest.
NOTE
7. NOTES PAYABLE
|
|
June
30,
2014
|
|
September 30,
2013
|
|
|
|
|
|
|
|
|
|
Dunhill
Ross Partners, Inc. ( formerly Venture Bridge Advisors)
|
|
|
0
|
|
|
|
82,000
|
|
The
Sherman Family Trust
|
|
|
200,000
|
|
|
|
|
|
David
Koos (Note 6)
|
|
|
183,731
|
|
|
|
137,372
|
|
Notes
payable
|
|
$
|
383,731
|
|
|
$
|
219,372
|
|
Dunhill
Ross Partners, Inc. has provided a line of credit to the Company in the amount of $700,000 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 this line of
credit bears 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 David R. Koos are due and payable at the demand of Koos and bear simple interest at a rate of 15%
per annum.
All
amounts due to the Sherman Family Trust bear no interest and are due and payable, in whole or in part, at the option of the holder.
NOTE
8. STOCKHOLDERS' EQUITY
The
stockholders' equity section of the Company contains the following classes of capital stock as of June 30, 2014:
Preferred
stock, $0.0001 par value; 20,000,000 shares authorized:
2,063,821 Preferred
Shares, par value $0.0001, issued and outstanding.
With
respect to each matter submitted to a vote of stockholders of the Corporation, each holder of Preferred Stock shall be entitled
to cast that number of votes which is equivalent to the number of shares of Series B Preferred Stock owned by such holder times
one (1).
On
any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of the Preferred Stock shall
receive, out of assets legally available for distribution to the Company's stockholders, a ratable share in the assets of the
Corporation.
94,852
Series AA Preferred Shares, par value $0.0001, issued and outstanding.
With
respect to each matter submitted to a vote of stockholders of the Corporation, 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 (10,0000).
On
any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of the Series AA Preferred
Stock shall receive, out of assets legally available for distribution to the Company's stockholders, a ratable share in the assets
of the Corporation.
40,000
Series AAA Preferred Shares, par value $0.0001, issued and outstanding.
With
respect to each matter submitted to a vote of stockholders of the Corporation, 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 forty thousand (40,0000).
On
any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of the Series AA Preferred
Stock shall receive, out of assets legally available for distribution to the Company's stockholders, a ratable share in the assets
of the Corporation.
725,409
Series B Preferred Shares, Par Value $0.0001, issued and outstanding.
With
respect to each matter submitted to a vote of stockholders of the Corporation, each holder of Series B Preferred Stock shall be
entitled to cast that number of votes which is equivalent to the number of shares of Series B Preferred Stock owned by such holder
times two (2).
On
any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of the Series B Preferred
Stock shall receive, out of assets legally available for distribution to the Company's stockholders, a ratable share in the assets
of the Corporation.
Non
Voting Convertible Preferred Stock, $1.00 Par value, 200,000 shares authorized, 0 shares issued and outstanding
Each
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 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.
On
any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of the Non Voting Convertible
Preferred shall receive, out of assets legally available for distribution to the Company's stockholders, a ratable share in the
assets of the Corporation.
Common
stock, $ 0.0001 par value; 5,000,000,000 shares authorized: 2,951,045,145 shares issued and outstanding.
With
respect to each matter submitted to a vote of stockholders of the Corporation, each holder of Common Stock shall be entitled to
cast that number of votes which is equivalent to the number of shares of Common Stock owned by such holder times one (1).
On
any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of the Common Stock shall
receive, out of assets legally available for distribution to the Company's stockholders, a ratable share in the assets of the
Corporation.
NOTE
9. CONVERTIBLE DEBENTURES
At
June 30, 2014, the following convertible debentures remain outstanding:
(a)
$80,701 in aggregate convertible debt bearing simple interest at 12% per annum convertible into the Company’s
common stock at $0.025 per share.
(b)
$17,000 in aggregate convertible debt bearing no interest convertible into the Company’s common stock at share and
convertible into common shares of the Company at a conversion price per share equal to 55% (the “Discount”) of the
lowest closing bid price for the Company’s common stock during the five trading days immediately preceding a conversion
date, as reported by Bloomberg.
Convertible
Debentures described in (a) and (b) are currently due and payable. The holders have not made a demand for payment
As
of June 30, 2014 the Aggregate Amount of Convertible Debentures outstanding was $97,701 and the Aggregate Amount of Unamortized
discount was $0.
NOTE
10. COMMITMENTS AND CONTINGENCIES
On
April 12, 2013 a complaint (Complaint) was filed in the U.S. District Court Southern District of the State of new York against
the Company, the Company’s Chairman and Does 1-50 by Star city Capital, LLC (“Plaintiff”) alleging securities
fraud, common law fraud, negligent misrepresentation, breach of fiduciary duties and breach of contract in connection with the
issuance of. The Plaintiff is also request declaratory relief from the Court.
The
action arises from the issuance and subsequent cancellation of 103,030,303 of the company’s common shares in satisfaction
of $17,000 of convertible indebtedness of the Company held by the Plaintiff. The Plaintiff alleges that a cancellation notice
sent by them to the Company’s transfer agent was meant to instruct the Transfer Agent simply to cancel the physical certificate
in order that an equivalent number of shares may be transferred via DWAC to the Plaintiff’s stockbroker for the benefit
of the Plaintiff. DWAC is the acronym for Deposit/Withdrawal At Custodian. The DWAC transaction system run by The Depository Trust
Company (a.k.a. DTC or CEDE & CO) permits brokers and custodial banks, the DTC participants, to request the movement of shares
to or from the issuer’s transfer agent electronically. A DWAC results in the crediting or debiting of shares to or from
DTC’s book-entry account on the records of the issuer maintained by the transfer agent.
The
Company believes that the cancellation notice sent by the Plaintiff clearly represents a cancellation of the conversion notice
itself.
The
convertible indebtedness held by the Plaintiff is convertible at Holder’s demand into the common shares of the Company’s
stock at a conversion price per share equal to 55% (the “Discount”) of the lowest closing bid price for the Company’s
common stock during the 5 trading days immediately preceding a conversion date, as reported by Bloomberg (the “Closing Bid
Price”); provided that if the closing bid price for the common stock on the date in which the conversion shares are deposited
into Holder’s brokerage account and confirmation has been received that Holder may execute trades of the conversion shares
( Clearing Date) is lower than the Closing Bid Price, then the purchase price for the conversion shares would be adjusted such
that the Discount shall be taken from the closing bid price on the Clearing Date, and the Company shall issue additional shares
to Purchaser to reflect such adjusted Purchase Price(“Reset”). The Company and the Plaintiff had agreed on a limitation
on conversion equal to 9.99% of the Company’s outstanding common stock. There can be no assurance that a subsequent conversion
notice for the same amount of indebtedness issued by the Plaintiff would convert into 103,030,303 of the company’s common
shares.
On
August 21, 2012 the Company entered into a settlement funding agreement with Princeton Research, Inc. and Jan Vandersande (collectively
the “PRI Parties”) which obligates the Company to pay the PRI Parties $1,000 a month over thirty months.
NOTE
11. INVESTMENT SECURITIES
As
of the quarter ending June 30, 2012 the Company reclassified 10,000,000 common shares of Entest (“Entest Shares”)
as Securities Available for Sale from Securities Accounted for under the Equity Method. The Entest Shares are the Company’s
sole Investment Securities as of June 30, 2014.
NOTE 12.
SUBSEQUENT EVENTS
On July
1, 2014 the Company issued 45,000,000 shares of its common stock for consideration of $100,000.