ITEM 1. BUSINESS
General Overview
We were incorporated in the State of Nevada on September 24, 2008 as JB Clothing Corporation. Until July 10, 2009, our principal business objective was the offering of active/leisure fashion design clothing.
On July 10, 2009 we abandoned our efforts in the field of active/leisure fashion design clothing when we acquired 100% of the share capital of Entest BioMedical, Inc., a California corporation, (“Entest CA”) from Bio-Matrix Scientific Group, Inc. (“BMSN”) 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 Mr. Rick Plote. On July 12, 2009, the Company changed its name to Entest BioMedical, Inc.
On June 18, 2015 Entest established Zander Therapeutics, Inc., a then wholly owned subsidiary. Zander was established to engage primarily in the development and commercialization of veterinary medical therapies which we intend to license from other entities as well as develop internally
The Company changed its name to Entest Group, Inc. on February 12, 2018.
On May 5, 2018, the Company declared the distribution on a pro rata basis as a dividend in kind of 3,000,000 of the common shares of Zander Therapeutics, Inc., par value $0.0001, currently owned by Entest Group, Inc
Shareholders of the Company received one (1) common share of Zander Therapeutics, Inc. for each 17 common and/or preferred shares of the Company held as of the record date. The distribution of the 3,000,000 common shares of Zander Therapeutics, Inc. to the common and preferred shareholders of the Company occurred on June 11, 2018.
As a result of the payment of the abovementioned property dividend, the Company’s percentage of ownership of Zander fell below 50% resulting in the deconsolidation of Zander and during the quarter ended November 30, 2018, the Company divested itself of its Zander stock.
On November 15, 2018, David Koos, Regen BioPharma Inc., Bostonia Partners Inc., Sherman Family Trust, Dunhill Ross Partners Inc., Bio-Technology Partners Business Trust (collectively, the “Sellers”) and Peiwen Yu (the “Buyer”) entered into a stock purchase agreement (the “SPA”), pursuant to which the Sellers agreed to sell and the Buyer agreed to purchase an aggregate of 23,733,334 shares of common stock, 667 shares of Series AA preferred stock, 534 shares of Series AAA preferred stock and 1,001,533 shares of Non-Voting Preferred Stock of Entest from the Seller for an aggregate purchase price of $325,000. The closing of the transactions contemplated by the SPA occurred on November 27, 2018.
As contemplated by the SPA, in November 2018, David Koos resigned as Chairman, Chief Executive Officer, President, Acting Chief Financial Officer and Secretary of Entest and Peiwen Yu became as a director, Chief Executive Officer and President of Entest.
Our principal executive offices are located at No. 911 Bao’an Book City, Xinqiao Street Central Road, Bao’an District, Shenzhen, China. Our telephone number is 86137 0963 1109. We do not have a corporate website.
Our Current Business
Our company currently does not have any operations and has not actively conducted any operations for the year ended August 31, 2019. Our company’s business plan for the next 12 months and beyond such time is to seek new business opportunities or to engage in a business combination with an unidentified company. The analysis of new business opportunities will be undertaken by or under the supervision of our company’s management. As of the date of this filing, our company has not entered into any definitive agreement with any party, nor have there been any specific discussions with any potential business combination candidate regarding business opportunities for our company. There can be no assurance that our company will be able to identify and acquire any business entity. Even if we successfully acquire a business entity, there is no assurance that we can generate revenue and become profitable.
Employees
As of August 31, 2019, we have no employees. Other than our sole officer and director who is donating their time to the development of our company and are able to fulfil part-time requirements. We have no employees, and do not foresee hiring employees in the near future. We will be engaging independent contractors as needed who, under our direction, will fulfill the requirements of engagements that exceed our officers' time constraints.
ITEM 1A.
ITEM 1A. RISK FACTORS
As a “smaller reporting company”, we are not required to provide the information required by this Item.
ITEM 1B.
ITEM 1B. UNRESOLVED STAFF COMMENTS
As a “smaller reporting company”, we are not required to provide the information required by this Item.
ITEM 2.
ITEM 2. PROPERTIES
Our principal executive office location and mailing address is No. 911 Bao’an Book City, Xinqiao Street Central Road, Bao’an District, Shenzhen, China. The office is provided by our sole officer and director, Mr. Peiwen Yu, free of charge.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
From time to time, we may become involved in litigation relating to claims arising out of our operations in the normal course of business. We are not involved in any pending legal proceeding or litigation and, to the best of our knowledge, no governmental authority is contemplating any proceeding to which we are a party and which would reasonably be likely to have a material adverse effect on our company. To date, our company has never been involved in litigation, as either a party or a witness, nor has our company been involved in any legal proceedings commenced by any regulatory agency against our company.
ITEM 4.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common shares were listed for quotation on the Pink Sheets of the OTC Markets under the symbol “ETNI”. Our shares were originally listed for quotation on August 11, 2009.
There is no established current public market for the shares of our common stock. There can be no assurance that a liquid market for our securities will ever develop. Transfer of our common stock may also be restricted under the securities or blue sky laws of various states and foreign jurisdictions. Consequently, investors may not be able to liquidate their investments and should be prepared to hold the common stock for an indefinite period of time.
Our shares are issued in registered form. Securities Transfer Corporation at 2901 Dallas Pkwy, Plano, TX 75093 (Telephone: (469) 633-0101) is the registrar and transfer agent for our common shares.
On December 16, 2019, the shareholders’ list showed 186 registered shareholders with 49,171,083 shares of common stock outstanding.
Dividend Policy
We have not paid any cash dividends on our common stock and have no present intention of paying any dividends on the shares of our common stock. Our current policy is to retain earnings, if any, for use in our operations and in the development of our business. Our future dividend policy will be determined from time to time by our board of directors.
Equity Compensation Plan Information
We do not have any equity compensation plans.
Recent Sales of unregistered securities
We did not sell any equity securities which were not registered under the Securities Act during the year ended August 31, 2019 that were not otherwise disclosed on our quarterly reports on Form 10-Q or our current reports on Form 8-K filed during the year ended August 31, 2019
Issuer Purchases of Equity Securities
We did not purchase any of our shares of common stock or other securities during our fourth quarter of our fiscal year ended August 31, 2019.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
As a “smaller reporting company”, we are not required to provide the information required by this Item.
ITEM 7.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our financial statements, including the notes thereto, appearing elsewhere in this annual report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to those discussed below and elsewhere in this Annual Report. Our audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.
Results of Operations
The Company has not conducted any active operations during the year ended August 31, 2019. No revenue has been generated by the Company within such period. It is unlikely the Company will have any revenues unless it is able to effect an acquisition or merger with an operating company, of which there can be no assurance. It is management’s assertion that these circumstances raises substantial doubt about the Company’s ability to continue as a going concern. The Company’s plan of operation for the next twelve months shall be to locate suitable acquisition candidates.
For the year ended August 31, 2019 compared with the year ended August 31, 2018
The following summary of our results of operations should be read in conjunction with our financial statements for the year ended August 31, 2019, which are included herein.
Our operating results for the year ended August 31, 2019 and the year ended August 31, 2018 and the changes between those periods for the respective items are summarized as follows:
The Company has not conducted any operations during the year ended August 31, 2019. Revenues from operations were $0 for the years ended August 31, 2019 and 2018
For the year ended August 31, 2019, operating expenses of $40,118, consisted of professional fees of $22,689 and general and administrative expenses of $17,429.
For the year ended August 31, 2019, other income of $231,736, consisted of a gain on write off of accounts payable of $23,629, gain on disposition of Zander Therapeutics, Inc. of $188,589, rental income of $22,000, loss on disposition of Entest Biomedical Inc. of $947, write off accrued interest receivable of $1,040 and interest expense of $495.
The net income for the year ended August 31, 2019 was $191,618.
For the year ended August 31, 2018, operating expenses of $1,520,899, consisted of professional fees of $310,020, general and administrative expenses of $261,295 and research and development expenses of $949,584.
For the year ended August 31, 2018, other income of $43,415 consisted of rental income of $66,000, gain on deconsolidation of Zander Therapeutics, Inc. of $10,034, gain on sale of securities of $30,000, interest income of $132, equity losses of Zander Therapeutics, Inc. of $61,428, and interest expenses of $1,323.
The net loss for the year ended August 31, 2018, was $1,477,848.
The increase in net income for the year ended August 31, 2019, as compared to the same period ended August 31, 2018, was primarily due to other income realized, from the ceasing of prior operations, disposition of subsidiaries and change of control during the first quarter ended November 30, 2018.
Liquidity and Capital Resources
Working Capital
The decrease in working capital deficit was primarily attributed to decreased liabilities from the disposition of prior operations and the change of control occurred in November 2018. As of August 31, 2019, our liabilities decreased $222,347, from $255,018, as of August 31, 2018, to $32,671. The decrease in liabilities is attributable to a decrease in notes payable of $19,601, a decrease of accounts payable and accrued liabilities of $206,943, a decrease of unearned rental income of $17,000 and an increase in due to related party of $21,197. As of August 31, 2019, our current assets decreased $9,307, from $9,307, as of August 31, 2018, to $0. The decrease is primarily attributed to the $8,000 in prepaid expenses and $1,040 accrued interest receivable at August 31, 2018.
Cash Flows
Cash Flow from Operating Activities
The net cash used in operating activities for the year ended August 31, 2019 was attributed to a net income of $191,618, increased due to an increase in expenses paid by a related party of $21,197, loss on disposition of Entest Biomedical Inc. of $947 and decreased by gain on write off of accounts payable of $23,629, gain on disposition of Zander Therapeutics, Inc. of $188,589 and a net change in operating assets and liabilities of $11,503.
The net cash used in operating activities for the year ended August 31, 2018 was attributed to a net loss of $1,477,484, increased due to an increase in gain attributable to deconsolidation of $10,034, gain lost in deconsolidation of $332,638 and decreased by equity in losses of Zander Therapeutics, Inc. of $61,428 and a net change in operating assets and liabilities of $268,627.
Cash Flow from Investing Activities
Net cash from investing activities was $1,937, for the year ended August 31, 2019, derived from proceeds from a net cash received for divestiture of Entest Biomedical Inc.
Net cash used by investing activities was $2,357, for the year ended August 31, 2018, derived from proceeds from a net gain on sale of securities received prior to deconsolidation.
Cash Flow from Financing Activities
Net cash from financing activities was $1,755, for the year ended August 31, 2019, derived from proceeds from contributed capital of $1,821 offset by repayment of bank overdraft of $66, compared to net cash from financing activities of $1,406,166, for the year ended August 31, 2018, derived from proceeds from common stock issued from subsidiary of $1,400,000, proceeds from note payable of $6,100 and proceed from bank overdraft of$66.
As of August 31, 2019 and 2018, we had cash of $0 and $267, respectively.
We believe that we will not be able to satisfy our cash requirements over the next twelve months. The Company seeks to acquire an operating company seeking the perceived advantages of being a publicly held corporation. No assurance can be given that such an acquisition shall occur or, if such an acquisition were to occur, it would occur on terms and conditions beneficial to the Company or its shareholders. The Company is also dependent upon the receipt of capital investment or other financing to fund its ongoing operations and to execute its business plan of seeking a combination with a private operating company. In addition, the Company anticipates that it will be dependent upon certain related parties to provide continued funding and capital resources. If continued funding and capital resources are unavailable at reasonable terms, the Company may not be able to implement its plan of operations.
Critical Accounting Policies and Estimates
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at dates of the financial statements and the reported amounts of revenue and expenses during the periods. Actual results could differ from these estimates. Our significant estimates and assumptions include depreciation, stock-based compensation and the valuation allowance relating to the Company’s deferred tax assets.
Recently Issued Accounting Pronouncements
Reference is made to the “Recent Accounting Pronouncements” in Note 2 to the Financial Statements included in this report for information related to new accounting pronouncement, none of which had a material impact on our consolidated financial statements, and the future adoption of recently issued accounting pronouncements, which we do not expect will have a material impact on our consolidated financial statements.
Off-Balance Sheet Arrangements
As of August 31, 2019, we do not have any off-balance sheet arrangements.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a “smaller reporting company”, we are not required to provide the information required by this Item.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ENTEST GROUP, INC
Financial Statements
For the year end August 31, 2019 and 2018
Index to the Audited Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Entest Group, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheet of Entest Group, Inc. (the “Company”) as of August 31, 2019, and the related statements of operations, stockholders’ deficit, and cash flows for the year ended August 31, 2019, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of August 31, 2019, and the results of its operations and its cash flows for the year ended August 31, 2019, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has no revenues, has negative working capital at August 31, 2019, has incurred recurring negative cash flow from operating activities, and has an accumulated deficit which raises substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ Prager Metis CPAs, LLC
We have served as the Company’s auditor since 2019
Las Vegas, Nevada
December 18, 2019
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Entest Group, Inc. (FKA Entest Biomedical, Inc.)
Opinion on the Financial Statements
We have audited the accompanying balance sheet of Entest Group, Inc. (the “Company”) as of August 31, 2018 and the related statements of operations, stockholders’ equity, and cash flows for the year ended August 31, 2018, and the related notes and schedules (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of August 31, 2018, and the results of its operations and its cash flows for the year ended August 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 4 to the financial statements, the Company has no revenues, has negative working capital at August 31, 2018, has incurred recurring losses and recurring negative cash flow from operating activities, and has an accumulated deficit which raises substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 4. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ AMC Auditing
AMC Auditing
We have served as the Company’s auditor since 2012
Las Vegas, Nevada
November 19, 2018
ENTEST GROUP, INC.
Balance Sheets
The accompanying Notes are an integral part of these audited financial statements.
ENTEST GROUP, INC.
Statements of Operations
The accompanying Notes are an integral part of these audited financial statements.
The accompanying Notes are an integral part of these audited financial statement
ENTEST GROUP, INC.
Statements of Cash Flows
The accompanying Notes are an integral part of these audited financial statement
ENTEST GROUP, INC.
Notes to Financial Statements
August 31, 2019, and 2018
NOTE 1. ORGANIZATION, DESCRIPTION OF BUSINESS, AND GOING CONCERN
Entest Group, Inc. (the “Company” or “Entest”) was incorporated in the State of Nevada on September 24, 2008 as JB Clothing Corporation. On July 12, 2009, the Company changed its name to Entest BioMedical, Inc. On February 12, 2018 the Company changed its name from Entest BioMedical, Inc. to Entest Group, Inc.
The Company’s current business strategy is to acquire an operating company seeking the perceived advantages of being a publicly held corporation. No assurance can be given that such an acquisition shall occur or, if such an acquisition were to occur, it would occur on terms and conditions beneficial to the Company or its shareholders.
Change of Control
On November 15, 2018, David Koos, Regen BioPharma Inc., Bostonia Partners Inc., Sherman Family Trust, Dunhill Ross Partners Inc., Bio-Technology Partners Business Trust (collectively, the “Sellers”) and Peiwen Yu (the “Buyer”) entered into a stock purchase agreement (the “SPA”), pursuant to which the Sellers agreed to sell and the Buyer agreed to purchase an aggregate of 23,733,334 shares of common stock, 667 shares of Series AA preferred stock, 534 shares of Series AAA preferred stock and 1,001,533 shares of Non-Voting Preferred Stock of Entest from the Seller for an aggregate purchase price of $325,000. The closing of the transactions contemplated by the SPA occurred on November 27, 2018. The purchase price was paid out of the Buyer’s personal funds.
As of the date of the transaction, Entest had 49,170,472 shares of common stock, 728,073 shares of Series B Preferred Stock, 667 shares of Series AA Preferred Stock, 534 shares of Series AAA Preferred Stock and 1,001,533 shares of Non-Voting Convertible Preferred Stock outstanding. The securities purchased pursuant to the SPA represent 48.3% of the outstanding shares of common stock, 90% of the outstanding shares of common stock assuming the conversion of the Non-Voting Convertible Preferred Stock on the execution date of the SPA and 94% of the voting power of Entest.
As contemplated by the SPA, in November 2018, David Koos resigned as Chairman, Chief Executive Officer, President, Acting Chief Financial Officer and Secretary of Entest and Peiwen Yu became as a director, Chief Executive Officer and President of Entest. Pursuant to the SPA, in November 2018, Mr. Koos also resigned as a director of the Company upon compliance by Entest with information statement delivery requirements pursuant to Rule 14f-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Going Concern and Liquidity Considerations
The accompanying audited financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has not generated any revenues since the change of control and disposition of its subsidiaries and has an accumulated deficit of $10,064,508. These factors among others raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The continuing operations of the Company are dependent upon its ability to continue to raise adequate financing and to commence profitable operations in the future and repay its liabilities arising from normal business operations as they become due.
In support of the Company’s efforts and cash requirements, it may rely on advances from related parties until such time that the Company can support its operations or attains adequate financing through sales of its equity or traditional debt financing. There is no formal written commitment for continued support by shareholders or directors.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The audited financial statements have been prepared and presented in conformity with accounting principles generally accepted in the United States (“GAAP”) applicable to annual financial information and with the instructions to Form 10-K and regulation of the Securities and Exchange Commission (“SEC”). The annual financial information has been prepared on a basis consistent with prior years and includes all disclosures that are necessary and required by applicable laws and regulations.
The audited financial statements and notes are presented in accordance with accounting principles generally accepted in the United States of America (GAAP) and are presented in U.S. dollars. These annual financial statements include all adjustments that, in the opinion of management, are necessary in order to make the financial statements not misleading.
Reclassifications
Certain prior year amounts have been reclassified to conform with the current year presentation.
Basis of Consolidation
The consolidated financial statements for the year ended August 31, 2018, include the accounts of Entest CA, the Company’s wholly owned subsidiary. These financial statements also include the accounts of Zander up to June 10, 2018. Significant inter-company transactions have been eliminated. During the year ended August 31, 2019, the entities were deconsolidated (see Notes 3, 5 and 6).
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. The estimates and judgments will also affect the reported amounts for certain revenues and expenses during the reporting period. Actual results could differ from these good faith estimates and judgments.
Cash and Cash Equivalents
Cash and cash equivalents include cash in hand and cash in time deposits, certificates of deposit and all highly liquid debt instruments with original maturities of three months or less. The Company had $0 and $267 in cash at August 31, 2019 and 2018, respectively.
Fair Value Measurements
As defined in ASC 820” Fair Value Measurements,” fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability of those inputs. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement).
The Company's financial instruments consist of interest receivable, accounts payable, and due to related parties. The carrying amounts of these financial instruments approximate fair value due to either length of maturity or interest rates that approximate prevailing rates unless otherwise disclosed in these financial statements.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recorded to reduce the Company’s deferred tax assets to the amount that is more likely than not to be realized.
Basic and Diluted Net Income (Loss) per Common Share
We compute basic and diluted earnings (loss) per share amounts in accordance with ASC Topic 260, “Earnings per Share.” Basic earnings (loss) per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the reporting period. Diluted earnings (loss) per share reflects the potential dilution that could occur if stock options and other commitments to issue common stock were exercised or equity awards vest resulting in the issuance of common stock that could share in the earnings of the Company.
For the year ended August 31, 2019 and 2018, respectively, the following common stock equivalents were potentially dilutive.
For the year ended August 31, 2018, we excluded the computation of diluted net loss per share as the result of the computation was anti-dilutive, therefore, the diluted loss per share is the same as basic loss per share.
Recent Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02 (Topic 842) "Leases." Topic 842 supersedes the lease recognition requirements in Accounting Standards Codification (“ASC”) Topic 840 "Leases." Under Topic 842, lessees are required to recognize assets and liabilities on the balance sheet for most leases and provide enhanced disclosures. Leases will continue to be classified as either finance or operating. Topic 842 is effective for annual reporting periods and interim periods within those years beginning after 15 December 2018. Early adoption by public entities is permitted. Entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements, and there are certain optional practical expedients that an entity may elect to apply. Full retrospective application is prohibited. The Company does not anticipate this amendment to have a significant impact on the financial statements.
In June 2016, the FASB issued ASU No. 2016-13 "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. ASU 2016-13 is effective for annual reporting periods, and interim periods within those years beginning after 15 December 2019. The Company does not anticipate this amendment to have a significant impact on the financial statements.
In February 2018, the FASB issued ASU No. 2018-02, “Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income”. The amendments in this ASU address a narrow-scope financial reporting issue related to the tax effects that may become “stranded” in accumulated other comprehensive income (AOCI) as a result of the Tax Cuts and Jobs Act (TCJA). The amendments in ASU 2018-02 are effective for all entities for fiscal years beginning after 15 December 2018, and interim periods within those fiscal years. Early adoption is permitted, including adoption in any interim period, (1) for public business entities for reporting periods for which financial statements have not yet been issued and (2) for all other entities for reporting periods for which financial statements have not yet been made available for issuance. The amendments in ASU 2018-02 should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the TCJA is recognized. The Company does not anticipate this amendment to have a significant impact on the financial statements.
In August 2018, the FASB issued ASU 2018-13, Disclosure Framework -Changes to the Disclosure Requirements for Fair Value Measurement (Topic 820). ASU 2018-13 adds, modifies, and removes certain fair value measurement disclosure requirements. ASU 2018-13 is effective for annual and interim periods beginning after December 15, 2019. Early adoption is permitted. The Company is currently evaluating the effect of adopting this ASU on the Company’s financial statements.
The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the consolidated financial position, statements of operations and cash flows.
NOTE 3. RELATED PARTY TRANSACTIONS
On July 3, 2018, Zander entered into a sublease agreement with Entest whereby Zander would sublet office space located at 4700 Spring Street, Suite 304, La Mesa, California 91942 from Entest on a month to month basis for $6,000 per month beginning July 5, 2018. On November 16, 2018 Zander Therapeutics Inc. and the Company agreed to terminate Zander’s sublease with the Company effective the rental period commencing November, 2018. David R. Koos, who served as Chairman and Chief Executive Officer of Zander as of that date also served as Chairman and Chief Executive Officer of Entest as of that date. Zander was under common control with Entest as of that date.
On November 16, 2018, Entest Group, Inc. and its then Chairman and Chief Executive Officer, David R. Koos, agreed to satisfy any and all unpaid interest resulting from accrued interest earned on Notes Payable to Koos by Entest from the beginning of time to November 30, 2018 by transferring to David R. Koos 3,000,000 shares of the Series M Preferred stock of Zander Therapeutics, Inc. owned by the Company.
Entest Group, Inc. and Blackbriar Partners (“BP”) agreed to satisfy any and all unpaid interest resulting from accrued interest earned on Notes Payable to BP by Entest from the Company’s inception to November 30, 2018 by transferring to BP 20,000 shares of the Series M Preferred stock of Zander Therapeutics, Inc. owned by the Company. BP is controlled by David Koos, as of that date, the Company’s then Chairman and Chief Executive Officer.
Entest Group, Inc. and the Bio Matrix Scientific Group, Inc. (“BMSN”) agreed to satisfy any and all unpaid interest resulting from accrued interest earned on Notes Payable to BMSN by Entest from the Company’s inception to November 30, 2018 by transferring to BMSN 5,000 shares of the Series M Preferred stock of Zander Therapeutics, Inc. owned by the Company. As of November 16, 2018, David R. Koos was the Chairman and Chief Executive Officer of the Company and BMSN.
Entest Group, Inc. and Regen Biopharma, Inc. (“RGBP”) agreed to satisfy any and all unpaid interest resulting from accrued interest earned on Notes Payable to RGBP by Entest from the beginning of time to November 30, 2018 by transferring to RGBP 250,000 shares of the Series M Preferred stock of Zander Therapeutics, Inc. owned by the Company.
Entest Group, Inc. and Regen Biopharma, Inc. (“RGBP”) agreed to satisfy any and all rent prepaid by RGBP to Entest from the beginning of time to November 30, 2018 by transferring to RGBP 475,000 shares of the Series M Preferred stock of Zander Therapeutics, Inc. owned by the Company. As of November 16, 2018, David R. Koos was the Chairman and Chief Executive Officer of the Company and RGBP.
In November 2018, the Company divested itself of Entest BioMedical, Inc., a California corporation, for consideration consisting of $2,000 paid by an entity controlled by David R. Koos.
The Company recognized a loss of $947 on the disposition based on the difference between the Net Assets of the subsidiary and the consideration paid.
During the year ended August 31, 2019, the Company’s sole officer advanced to the Company an amount of $21,197 for the payment of operating expenses on behalf of the Company. As of August 31, 2019, and 2018, the Company was obligated to the officer, for an unsecured, non-interest bearing demand loan with a balance of $21,197 and $0, respectively.
NOTE 4. STOCKHOLDERS’ EQUITY
Authorized Stock
The Company is authorized to issue an aggregate of 500,000,000 shares of common stock with a par value of $0.0001, 5,000,000 shares of preferred stock with a par value of $0.0001, and 3,000,000 shares of non-voting convertible preferred stock with a par value of $1.00. Each share of common stock entitles the holder to one vote on any matter on which action of the stockholders of the corporation is sought.
Series AA Preferred Stock
The Company is authorized to issue 100,000 shares of Series AA Preferred Stock at a par value of $0.0001 per share.
As of August 31, 2019, and August 31, 2018, 667 shares of Series AA Preferred Stock were issued and outstanding.
Series B Preferred Stock
The Company is authorized to issue 4,400,000 shares of Series B Preferred Stock at a par value of $0.0001 per share.
As of August 31, 2019, and August 31, 2018, 728,073 shares of Series B Preferred Stock were issued and outstanding.
Series AAA Preferred Stock
The Company is authorized to issue 300,000 shares of Series AAA Preferred Stock at a par value of $0.0001 per share.
As of August 31, 2019, and August 31, 2018, 534 shares of Series AAA Preferred Stock were issued and outstanding.
Non-Voting Convertible Preferred Stock
The Company is authorized to issue 3,000,000 shares of Non-Voting Convertible Preferred Stock at a par value of $1.00 per share.
On October 2, 2018, the Company amended Article 4 of its Articles of Incorporation to change the conversion features of the Company’s Non -Voting Convertible Preferred Stock. The Conversion Price changed from being equal to the greater of $0.01 per share or seventy percent (70%) of the lowest closing bid price of its shares of common stock (the “Closing Price”) on its principal trading market or exchange for the five (5) trading days immediately preceding written receipt by the corporation of the holder’s intent to convert to being equal to the greater of (i) $0.001 per share and (ii) seventy percent (70%) of the lowest Closing Price for the five (5) trading days immediately preceding written receipt by the corporation of the holder’s intent to convert.
As of August 31, 2019, and August 31, 2018, 1,001,533 shares of Non-Voting Convertible Preferred Stock were issued and outstanding.
Common Shares
The Company is authorized to issue 500,000,000 shares of Common Stock at a par value of $0.0001 per share.
As of August 31, 2019, and August 31, 2018, 49,171,083 shares of Common Stock were issued and outstanding.
NOTE 5. DECONSOLIDATION OF ZANDER THERAPEUTICS, INC.
On May 5, 2018, The Company declared the distribution on a pro rata basis as a dividend in kind of 3,000,000 of the common shares of Zander Therapeutics, Inc., par value $0.0001, currently owned by Entest Group, Inc. to:
(a) Holders of record of the outstanding common shares of the Company as of the record date, which is May 30, 2018.
(b) Holders of record of the shares of any outstanding series of the preferred shares of the Company as of the record date, which is May 30, 2018.
Shareholders of the Company shall receive one (1) share of common stock of Zander Therapeutics, Inc. for each 17 shares of the Company’s common and/or preferred stock held as of the record date for such dividend. The distribution of the 3,000,000 common shares of Zander Therapeutics, Inc. to the common and preferred shareholders of the Company occurred on June 11, 2018 (“Distribution Date”).
As a result of the payment of the abovementioned property dividend, the Company’s percentage of ownership of Zander fell below 50% resulting in the deconsolidation of Zander as of the Distribution Date. As of the Distributio
Date all assets and liabilities attributable to Zander were derecognized by the Company. The Company recognized a $10,034 gain as a result of the deconsolidation. The Property dividend may be deemed to have occurred with a related party as the recipients were shareholders of Entest, including the then Chairman and Chief Executive Officer of Entest and Regen Biopharma, Inc. which was a company under common control with Entest.
The Company’s remaining shares of Zander, which consisted of 5,000,000 shares of Zander’s Series M Preferred Stock (“Zander M Stock”) were accounted for under the Equity Method as of the Distribution Date until November 29, 2018. The Zander M Stock was carried a Fair Value and the carrying value was increased by the Company’s proportionate share of earnings of Zander and decreased by cash dividends paid by Zander as well as the Company’s proportionate share of losses of Zander up to the carrying value. As of August 31, 2018, the carrying value of the Zander M Stock was decreased by the Company’s proportionate share of the losses of Zander and was 0. As of August 31, 2018, Entest beneficially owned 34.82% of the share equity of Zander.
During the quarter ended November 30, 2018, the Company divested itself of the Zander M Stock as satisfaction of $179,318 of interest accrued but unpaid owed by the Company and $9,270 of unearned rental payments made to the Company. As the Zander M Stock had a carrying value of $0, the Company recognized a gain of $188,589 on the disposition.
NOTE 6. DISPOSITION OF ENTEST BIOMEDICAL, INC., A CALIFORNIA CORPORATION
During the quarter ended November 30, 2018 the Company divested itself of Entest Biomedical, Inc., a California corporation and wholly owned subsidiary, for consideration consisting of $2,000 paid by an entity controlled by the Company’s then Chairman and Chief Executive Officer, David R. Koos, as full consideration for Entest Biomedical Inc. as well as any and all furniture, fixtures and equipment owned by the Company which has a carrying amount of $0.
The Company recognized a loss of $947 on the disposition based on the difference between the Net Assets of the subsidiary and the Consideration paid.
NOTE 7. INCOME TAXES
The Company provides for income taxes under ASC 740, “Income Taxes.” Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax basis of assets and liabilities and the tax rates in effect when these differences are expected to reverse. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.
The income tax provision for the years ended August 31, 2019 and 2018, consists of the following:
Net deferred tax assets consist of the following components as of August 31, 2019 and 2018:
On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act (the “Act”) resulting in significant modifications to existing law including lowering the corporate tax rate from 34% to 21%. In addition to applying the new lower corporate tax rate in 2018 and thereafter to any taxable income we may have, the legislation affects the way we can use and carry forward net operating losses previously accumulated and results in a revaluation of deferred tax assets and liabilities recorded on our balance sheet. The Company has completed the accounting for the effects of the Act during the year ended August 31, 2019. Given that current deferred tax assets are offset by a full valuation allowance, these changes will have no impact on the balance sheet.
At August 31, 2019 and 2018, the Company had $28,393 and $10,269,773 respectively of the U.S. net operating losses (the “U.S. NOLs”), which begin to expire beginning in 2029. NOLs generated in tax years prior to July 31, 2018, can be carryforward for twenty years, whereas NOLs generated after July 31, 2018 can be carryforward indefinitely.
The NOL carry forwards are subject to certain limitations due to the change in control of the Company pursuant to Internal Revenue Code Section 382. The Company experienced a change in control for tax purposes in November 2018 (see Note 1). Due to change of control, the Company will not be able to carryover approximately $10,050,000 of NOL generated before November 27, 2018 to offset future income.
NOTE 8 - SUBSEQUENT EVENTS
The Company has evaluated subsequent events through the date which the financial statements were available to be issued. All subsequent events requiring recognition as of August 31, 2019 have been incorporated into these financial statements and there are no subsequent events that require disclosure in accordance with FASB ASC Topic 855, “Subsequent Events.”
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
On April 9, 2019 (the “Effective Date”), Entest Group, Inc. (the “Company”) accepted the resignation of AMC Auditing, LLC (“AMC”) the Company’s prior independent registered public accounting firm, effective immediately. The change occurred in connection with AMC’s merger with Prager Metis CPAs, LLC (“Prager”). On the Effective Date, the board of directors of the Company approved the resignation of AMC and the appointment by the Company of Prager to serve as the Company’s independent registered public accounting firm effective April 8, 2019.
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures
Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), our company carried out an evaluation, with the participation of our company’s management, including our company’s Chief Executive Officer (our principal executive officer and our principal financial and accounting officer), of the effectiveness of our company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, our company’s CEO concluded that our company’s disclosure controls and procedures are not effective to ensure that information required to be disclosed by our company in the reports that our company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our company’s management, including our company’s CEO, as appropriate, to allow timely decisions regarding required disclosure, due to the material weaknesses identified below.
It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Report of Management on Internal Control over Financial Reporting
Management of our company is responsible for establishing and maintaining adequate internal control over financial reporting for our company. Our internal control system was designed, in general, to provide reasonable assurance to our company’s management and board regarding the preparation and fair presentation of published financial statements, but because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement to our company's annual or interim financial statements will not be prevented or detected.
In the course of management's assessment, management concluded that our internal control over financial reporting was not effective as of August 31, 2019. We have identified the following material weaknesses in internal control over financial reporting:
·
Segregation of Duties - As a result of limited resources, we did not maintain proper segregation of incompatible duties, namely the lack of an audit committee, an understaffed financial and accounting function, and the need for additional personnel to prepare and analyze financial information in a timely manner and to allow review and on-going monitoring and enhancement of our controls. The effect of the lack of segregation of duties potentially affects multiple processes and procedures
·
Maintenance of Current Accounting Records - We may from time to time fail to maintain our records that in reasonable detail accurately and fairly reflect the transactions of our company.
We are in the continuous process of improving our internal control over financial reporting in an effort to eliminate these material weaknesses through improved supervision and training of our staff, but additional effort is needed to fully remedy these deficiencies. Management has engaged a Certified Public Accountant as a consultant to assist with the financial reporting process in an effort to mitigate some of the identified weaknesses. Our company is still in its development stage and intends on hiring the necessary staff to address the weaknesses once revenue has been realized.
This annual report does not include an attestation report of our company’s registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit our company to provide only management's report in this annual report.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal controls over financial reporting that occurred during the year ended August 31, 2019 that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.
ITEM 9B.
ITEM 9B. OTHER INFORMATION
Except as provided above, there is no information to be disclosed in a report on Form 8-K during the fourth quarter of the year covered by this Form 10-K that has not been previously filed with the Securities and Exchange Commission.
PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
All directors of our company hold office until the next annual meeting of the security holders or until their successors have been elected and qualified. The officers of our company are appointed by our board of directors and hold office until their death, resignation or removal from office. Our directors and executive officers, their ages, positions held, and duration as such, are as follows:
Business Experience
The following is a brief account of the education and business experience during at least the past five years of each director, executive officer and key employee of our company, indicating the person’s principal occupation during that period, and the name and principal business of the organization in which such occupation and employment were carried out.
Peiwen Yu - President and Chief Executive Officer and Director
Mr. Yu has been Chairman of Guangdong Bokai Electric Industrial Co., Ltd. since March 2005. He also serves as Chairman of a number of private companies in China such as Lianjiang Bokai Wood Industry Co., Ltd. and Zhanjiang Bokai Tourism Development Co., Ltd. Mr. Yu earned a master’s degree in Business Administration from SUN YA-SEN UNIVERSITY in 2003 and a Bachelor of Administration Degree from the same institution.
Our company believes that Mr. Yu’s professional background experience gives him the qualifications and skills necessary to serve as a director and officer of our company.
Term of Office
Our directors are appointed for a one-year term to hold office until the next annual general meeting of our stockholders or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board.
All officers and directors listed above will remain in office until the next annual meeting of our stockholders, and until their successors have been duly elected and qualified. There are no agreements with respect to the election of Directors. We have not compensated our Directors for service on our Board of Directors, any committee thereof, or reimbursed for expenses incurred for attendance at meetings of our Board of Directors and/or any committee of our Board of Directors. Officers are appointed annually by our Board of Directors and each Executive Officer serves at the discretion of our Board of Directors. We do not have any standing committees. Our Board of Directors may in the future determine to pay Directors’ fees and reimburse Directors for expenses related to their activities.
Employment Agreements
There are no written employment agreements with our officers and directors.
Family Relationships
There are no family relationships between any of our directors, executive officers and proposed directors or executive officers.
Involvement in certain legal proceedings.
To the best of our knowledge, none of our directors or executive officers has, during the past ten years:
1.been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences);
2.had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;
3.been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;
4.been found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
5.been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
6.been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26)), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29)), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
Section 16(a) Beneficial Ownership Reporting Compliance
Our common stock is not registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Accordingly, our executive officers and directors and persons who own more than 10% of a registered class of our equity securities are not subject to the beneficial ownership reporting requirements of Section 16(1) of the Exchange Act.
Code of Ethics
On November 11, 2009 we adopted a Code of Ethics pursuant to Section 406 of the Sarbanes-Oxley Act of 2002 which was filed as Exhibit 14.1 to our Annual Report on Form 10-K filed on November 17, 2009.
Board and Committee Meetings
Our board of directors held no formal meetings during the year ended August 31, 2019. All proceedings of the board of directors were conducted by resolutions consented to in writing by all the directors and filed with the minutes of the proceedings of the directors. Such resolutions consented to in writing by the directors entitled to vote on that resolution at a meeting of the directors are, according to the Nevada General Corporate Law and our Bylaws, as valid and effective as if they had been passed at a meeting of the directors duly called and held.
Nomination Process
As of August 31, 2019, we did not effect any material changes to the procedures by which our shareholders may recommend nominees to our board of directors. Our board of directors does not have a policy with regards to the consideration of any director candidates recommended by our shareholders. Our board of directors has determined that it is in the best position to evaluate our company’s requirements as well as the qualifications of each candidate when the board considers a nominee for a position on our board of directors. If shareholders wish to recommend candidates directly to our board, they may do so by sending communications to the president of our company at the address on the cover of this annual report.
Audit Committee
Currently our audit committee consists of our entire board of directors. We do not have a standing audit committee as we currently have limited working capital and minimal revenues. Should we be able to raise sufficient funding to execute our business plan, we will form an audit, compensation committee and other applicable committees utilizing our directors’ expertise.
Audit Committee Financial Expert
Currently our audit committee consists of our entire board of directors. We do not currently have a director who is qualified to act as the head of the audit committee.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The particulars of the compensation paid to the following persons:
(a)
our principal executive officer;
(b)
each of our two most highly compensated executive officers who were serving as executive officers at the end of the years ended August 31, 2019 and 2018 and
(c)
up to two additional individuals for whom disclosure would have been provided under (b) but for the fact that the individual was not serving as our executive officer at the end of the years ended August 31, 2019 and 2018, who we will collectively refer to as the named executive officers of our company, are set out in the following summary compensation table, except that no disclosure is provided for any named executive officer, other than our principal executive officers, whose total compensation did not exceed $100,000 for the respective fiscal year:
___________
(1)Mr. Yu was appointed president, CEO and a director on November 15, 2018.
(2)Mr. Koos resigned all officer positions on November 15, 2018 and as a director on November 21, 2018.
(3)Does not include $88,000 in salary accrued but unpaid during prior periods paid to David Koos during the fiscal year ended August 31, 2018.
There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. Our directors and executive officers may receive share options at the discretion of our board of directors in the future. We do not have any material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that share options may be granted at the discretion of our board of directors.
Grants of Plan-Based Awards
During the fiscal year ended August 31, 2019 we did not grant any stock options.
Option Exercises and Stock Vested
During our fiscal year ended August 31, 2019 there were no options exercised by our named officers.
Compensation of Directors
We do not have any agreements for compensating our directors for their services in their capacity as directors, although such directors are expected in the future to receive stock options to purchase shares of our common stock as awarded by our board of directors.
No compensation was paid to non-employee directors for the year ended August 31, 2019.
Pension, Retirement or Similar Benefit Plans
There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. We have no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of the board of directors or a committee thereof.
Indebtedness of Directors, Senior Officers, Executive Officers and Other Management
None of our directors or executive officers or any associate or affiliate of our company during the last two fiscal years, is or has been indebted to our company by way of guarantee, support agreement, letter of credit or other similar agreement or understanding currently outstanding.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth, as of December 16, 2019, certain information with respect to the beneficial ownership of our common and preferred shares by each shareholder known by us to be the beneficial owner of more than 5% of our common and preferred shares, as well as by each of our current directors and executive officers as a group. Each person has sole voting and investment power with respect to the shares of common and preferred stock, except as otherwise indicated. Beneficial ownership consists of a direct interest in the shares of common and preferred stock, except as otherwise indicated.
Common Stock
____________
(1)
Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of shares of common stock actually outstanding on December 16, 2019. As of December 16, 2019 there were 49,171,083 shares of our company’s common stock issued and outstanding.
Series B Preferred
_________
(1)
As of December 16, 2019 there were 728,073 Series B Preferred shares issued and outstanding.
Series AA Preferred
_________
(1)
As of December 16, 2019 there were 667 Series AA Preferred shares issued and outstanding.
Series AAA Preferred
_________
(1)
As of December 16, 2019 there were 534 Series AAA Preferred shares issued and outstanding.
Non-Voting Convertible Preferred
_________
(1)
As of December 16, 2019 there were 1,001,533 Non-Voting Convertible Preferred shares issued and outstanding.
Changes in Control
We are unaware of any contract or other arrangement or provisions of our Articles or Bylaws the operation of which may at a subsequent date result in a change of control of our company. There are not any provisions in our Articles or Bylaws, the operation of which would delay, defer, or prevent a change in control of our company.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Except as disclosed herein, no director, executive officer, shareholder holding at least 5% of shares of our common stock, or any family member thereof, had any material interest, direct or indirect, in any transaction, or proposed transaction since the year ended August 31, 2019, in which the amount involved in the transaction exceeded or exceeds the lesser of $120,000 or one percent of the average of our total assets at the year-end for the last three completed fiscal years:
On July 3, 2018, Zander entered into a sublease agreement with Entest whereby Zander would sublet office space located at 4700 Spring Street, Suite 304, La Mesa, California 91942 from Entest on a month to month basis for $6,000 per month beginning July 5, 2018. On November 16, 2018 Zander Therapeutics Inc. and the Company agreed to terminate Zander’s sublease with the Company effective the rental period commencing November 2018. David R. Koos, who served as Chairman and Chief Executive Officer of Zander as of that date also served as Chairman and Chief Executive Officer of Entest as of that date. Zander was under common control with Entest as of that date.
On November 16, 2018, Entest Group, Inc. and its then Chairman and Chief Executive Officer, David R. Koos, agreed to satisfy any and all unpaid interest resulting from accrued interest earned on Notes Payable to Koos by Entest from the beginning of time to November 30, 2018 by transferring to David R. Koos 3,000,000 shares of the Series M Preferred stock of Zander Therapeutics, Inc. owned by the Company.
Entest Group, Inc. and Blackbriar Partners (“BP”) agreed to satisfy any and all unpaid interest resulting from accrued interest earned on Notes Payable to BP by Entest from the Company’s inception to November 30, 2018 by transferring to BP 20,000 shares of the Series M Preferred stock of Zander Therapeutics, Inc. owned by the Company. BP is controlled by David Koos, as of that date, the Company’s then Chairman and Chief Executive Officer.
Entest Group, Inc. and the Bio Matrix Scientific Group, Inc. (“BMSN”) agreed to satisfy any and all unpaid interest resulting from accrued interest earned on Notes Payable to BMSN by Entest from the Company’s inception to November 30, 2018 by transferring to BMSN 5,000 shares of the Series M Preferred stock of Zander Therapeutics, Inc. owned by the Company. As of November 16, 2018, David R. Koos was the Chairman and Chief Executive Officer of the Company and BMSN.
Entest Group, Inc. and Regen Biopharma, Inc. (“RGBP”) agreed to satisfy any and all unpaid interest resulting from accrued interest earned on Notes Payable to RGBP by Entest from the beginning of time to November 30, 2018 by transferring to RGBP 250,000 shares of the Series M Preferred stock of Zander Therapeutics, Inc. owned by the Company.
Entest Group, Inc. and Regen Biopharma, Inc. (“RGBP”) agreed to satisfy any and all rent prepaid by RGBP to Entest from the beginning of time to November 30, 2018 by transferring to RGBP 475,000 shares of the Series M Preferred stock of Zander Therapeutics, Inc. owned by the Company. As of November 16, 2018, David R. Koos was the Chairman and Chief Executive Officer of the Company and RGBP.
In November 2018, the Company divested itself of Entest BioMedical, Inc., a California corporation, for consideration consisting of $2,000 paid by an entity controlled by David R. Koos.
The Company recognized a loss of $947 on the disposition based on the difference between the Net Assets of the subsidiary and the consideration paid.
During the year ended August 31, 2019, the Company’s sole officer advanced to the Company an amount of $21,197 for the payment of operating expenses on behalf of the Company. As of August 31, 2019, and 2018, the Company was obligated to the officer, for an unsecured, non-interest bearing demand loan with a balance of $21,197 and $0, respectively.
Director Independence
We currently act with one director, Peiwen Yu. We have determined that we do not have an independent director, as that term is used in Rule 4200(a)(15) of the Rules of National Association of Securities Dealers.
Currently our audit committee consists of our entire board of directors. We currently do not have nominating, compensation committees or committees performing similar functions. There has not been any defined policy or procedure requirements for shareholders to submit recommendations or nomination for directors.
From inception to present date, we believe that the members of our audit committee and the board of directors have been and are collectively capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The aggregate fees billed for the most recently completed fiscal year ended August 31, 2019 and for fiscal year ended August 31, 2018 for professional services rendered by the principal accountant for the audit of our annual financial statements and review of the financial statements included in our quarterly reports on Form 10-Q and services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for these fiscal periods were as follows:
Audit Fees: Aggregate fees billed for professional services rendered for the audit of the Company's annual financial statements.
Audit Related Fees: Aggregate fees billed for professional services rendered for assurance and related services that were reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit Fees” above. During the year ended August 31, 2019 these fees were primarily derived from review of financial statements in the Company's Form 10Q Reports.
All services listed were pre-approved by the Board of Directors, functioning as the Audit Committee in accordance with Section 2(a) 3 of the Sarbanes-Oxley Act of 2002.
Our board of directors has considered the nature and amount of fees billed by our independent auditors and believes that the provision of services for activities unrelated to the audit is compatible with maintaining our independent auditors’ independence.
PART IV
ITEM 15.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)Financial Statements
(1)Financial statements for our company are listed in the index under Item 8 of this document.
(2)All financial statement schedules are omitted because they are not applicable, not material or the required information is shown in the financial statements or notes thereto.
(b)Exhibits
____________
* Filed herewith.
** Furnished herewith
ITEM 16. FORM 10-K SUMMARY
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.
ENTEST GROUP, INC.
Dated December 19, 2019
By:
/s/ Peiwen Yu
Peiwen Yu
President, Chief Executive Officer and Director
(Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Dated: December 19, 2019
/s/ Peiwen Yu
Peiwen Yu
President, Chief Executive Officer and Director
(Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)