Big Red Flags from Bio-Matrix and Regen Biopharma

In a previous article warning investors against the dangers of over-the-counter stocks, we highlighted 8 patterns followed by many OTC companies that fail and consequently lose investors a great deal of money. One company we came across recently that ticks almost all of these 8 boxes is Bio-Matrix Scientific Group (OTCMKTS:BMSN) and their majority-owned subsidiary, Regen Biopharma.

About Regen Biopharma

Incorporated in 1998, Tasco International was involved in producing digital content and media until 2006 when it abandoned those efforts and became Bio-Matrix Scientific Group (OTCMKTS:BMSN). Investors who have been holding this stock since 2006 would have lost -99.77% of their money as of today. Bio-Matrix owns 98% of Regen Biopharma Inc, a company that is “focused on identifying undervalued regenerative medicine applications in the stem cell space”. The Company’s IP consists of US Patent 8,389,708 which was granted to Regen by a member of their advisory board, Weiping Min, and also the exclusive rights to certain RNAi patents from Benitec (ASX:BLT). Bio-Matrix has three employees and a current market cap of $17 million.

According to the last filed 10-K in January 2014, Bio-Matrix has $116,714 in cash and total liabilities of $1.3 million, $612 thousand of these liabilities which are “accrued payroll”. Accrued payroll increased by 98% in 2013, $351, 500 of which was back pay for the $290,000 yearly salary paid to the CEO, David Koos. General and administrative expenses for the year ending September 2013 were $1.3 million, while R&D spending totaled $9,509. The company has 2.95 billion shares outstanding and has issued almost 2 billion shares since December 2012 for indebtedness, accrued interest, accrued salaries, consulting services, etc. It should go without saying that the company also has no revenues.

In the latest 10-K and on LinkedIn, the CEO and Chairman of Bio-Matrix, David Koos, is also listed as the CEO, Chairman, President, and CFO of Entest Biomedical since 2009 to present:

David_Koos_LinkedIn

Entest Medical (OTCMKTS:ENTB) is an over-the-counter (OTC) company with 1.5 billion shares outstanding and a current share price of .0005. That equates to a current market cap of $576,000. If you bought shares in Entest exactly 1 year ago, you would have already lost -90% of your investment.

Entest_Chart

You may ask just who would invest in this “company” given the vast amount of conspicuous red flags observed in the 10-K, however as of December 2013, there were 463 investors still holding shares in Bio-Matrix. These investors should review our list of consistent patterns followed by OTC companies  that fail:

  1. Founded through reverse merger? Yes
  2. Possesses patent(s) that is offered as proof of potential? Yes
  3. Talks about an exciting opportunity as opposed to actual progress made? Yes
  4. Touted on stock boards? Yes
  5. Constructive criticism met with accusations of short selling? Yes
  6. Lack of significant (or any) revenues? Yes
  7. Identify other technology focus when all else fails? TBD
  8. Issuing shares until share price collapses? Well on its way

It goes without saying that having senior management who are affiliated with failed OTC companies in the past should be a big warning flag as well. While Bio-Matrix (OTCMKTS:BMSN) investors may believe they are investing in a disruptive technology company, in fact, it appears that this could not be farther from the truth.

Here at Nanalyze, we hold the lion's share of our investing dollars in a portfolio of 30 dividend growth stocks. Find out which ones in the Quantigence report freely available to Nanalyze subscribers. 

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