UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended July 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 33-92366
EMBRYO DEVELOPMENT CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 13-3832099
(State or other jurisdiction of (State or I.R.S. Employer
incorporation of organization) Identification Number)
750 Lexington Avenue, Suite 2750
New York, New York 10022
(Address of principal executive offices)
10022
(Zip Code)
(212) 355-8484
(Registrant's telephone number including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Class Outstanding at September 6, 1996
Common Stock 4,695,000
EMBRYO DEVELOPMENT CORPORATION
(A Development Stage Company)
FORM 10-QSB
QUARTERLY REPORT
For the Three Months Ended July 31, 1996
TABLE OF CONTENTS
Page to Page
Financial Statements:
Balance sheet..........................................1
Statements of operations...............................2
Statements of cash flows...............................3
Notes to financial statements........................4-5
Management's discussion and analysis
of financial condition and result
of operations........................................6-7
Part II. - Other information...........................8
Signatures.............................................9
<TABLE>
<PAGE>
EMBRYO DEVELOPMENT CORPORATION
(A Development Stage Company)
BALANCE SHEET
(Unaudited)
July 31, 1996
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS
Cash and cash equivalents $ 663,356
Investments in available-for-sale securities 758,695
Accounts receivable 23,755
Interest receivable 32,001
Inventories 31,401
Prepaid expenses and other current assets 110,479
Total current assets 1,619,687
INVESTMENTS IN AVAILABLE-FOR-SALE SECURITIES 1,549,089
PROPERTY AND EQUIPMENT, net of accumulated
depreciation of $2,101 23,098
LICENSED TECHNOLOGY, net of accumulated
amortization of $274,525 1,335,475
OTHER ASSETS 91,668
$ 4,619,017
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 34,111
Total current liabilities 34,111
COMMITMENTS
STOCKHOLDERS' EQUITY:
Common stock, $.0001 par value; authorized 30,000,000
shares; 4,695,000 issued and outstanding 470
Preferred stock, $.0001 par value; authorized 15,000,000
shares; 6,000,000 issued and outstanding 600
Additional paid-in-capital 8,403,638
Unearned compensation (1,818,750)
Deficit accumulated during the development stage (2,001,052)
Total equity 4,584,906
$ 4,619,017
</TABLE>
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<TABLE>
EMBRYO DEVELOPMENT CORPORATION
(A Development Stage Company)
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED Cumulative
JULY 31, During 1996 1995 Development
Stage
(Uuaudited) (Unaudited) (Unaudited)
<CAPTION>
<S> <C> <C> <C>
REVENUES $ 6,565 $ 35,000 $ 154,338
COSTS AND EXPENSES:
Cost of sales 5,077 - 97,127
General and administrative 321,876 42,750 759,302
Research and development 38,528 571,294
Amortization 57,500 41,429 274,525
Interest (income)expense (38,435) 284,500 453,142
384,546 368,679 2,155,390
NET LOSS $ (377,981) $ (333,679) $(2,001,052)
NET LOSS PER SHARE $ (.08) $ (.11) $ (.54)
WEIGHTED AVERAGE NUMBER OF
SHARES OF COMMON STOCK
OUTSTANDING 4,691,685 3,030,000 3,728,772
</TABLE>
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<TABLE>
EMBRYO DEVELOPMENT CORPORATION
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED Cumulative
JULY 31, During 1996 1995 Development
Stage
(Uuaudited) (Unaudited) (Unaudited)
<CAPTION>
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (377,981) $ (333,679) $(2,001,052)
Adjustments to reconcile net loss to net
cash(used in) pprovided by
operating activities:
Depreciation and amortization 58,667 311,429 816,627
Non-cash consideration - consulting 141,250 - 238,750
Non-cash consideration - research
and development - - 440,000
Changes in operating assets
and liabilities:
(Increase) decrease in assets:
Accounts receivable 2,005 - (23,755)
Interest receivable 624 - (32,001)
Inventories (9,125) - (31,401)
Prepaid expenses and other
current assets (25,035) (6,250) (110,479)
Other assets (20,002) - (91,668)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses (4,547) 33,500 34,111
Total adjustments 143,837 338,679 (1,240,184)
Net cash (used in) provided by
operating activities (234,144) 5,000 (760,868)
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (purchase) sale of investments 496,520 - (2,307,784)
Purchase of licensed technology - - (450,000)
Purchase of property and equipment (7,887) - (25,200)
Net cash (used in) provided by
investing activities 488,633 - (2,782,984)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt - 175,000 300,000
Proceeds fro issuance of stock - - 120,000
Repayment of debt - - (550,000)
Proceeds of stock offering, net of
deferred costs - (50,919) 4,337,208
Net cash provided by financing
activities - 124,081 4,207,208
NET INCREASE IN CASH AND CASH EQUIVALENTS 254,489 129,081 663,356
CASH AND CASH EQUIVALENTS at
beginning of period 408,867 245,000 -
CASH AND CASH EQUIVALENTS at end of period $ 663,356 $ 374,081 $ 663,356
</TABLE>
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EMBRYO DEVELOPMENT CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED JULY 31, 1996
1. Basis of Presentation:
The interim financial statements furnished reflect all adjustments which
are, in the opinion of management, necessary to present a fair statement of
the financial position and results of operations for the three month periods
ended July 31, 1996 and July 31, 1995. The financial statements should be
read in conjunction with the summary of significant accounting policies and
notes to financial statements included in the Company's Form 10-KSB for the
fiscal year ended April 30, 1996. The results of operations for the three
month periods ended July 31, 1996 and 1995 are not necessarily indicative of
the results to be expected for the full year.
2. Inventories:
Inventories at July 31, 1996 consist principally of finished goods.
3. Investments in Available-for-Sale Securities:
Investments in available-for-sale securities consist of the following at
July 31, 1996:
Current:
Guaranteed by the U.S. Government:
Federal Farm Credit Notes $ 259,778
Federal Home Loan Notes 250,000
Corporate commercial paper 248,917
$ 758,695
Non-current:
Guaranteed by the U.S. Government:
Federal National Mortgage Notes $ 298,886
Federal Farm Credit Notes 250,000
U.S. Treasury Notes 1,000,203
$1,549,089
4. Stockholders' Equity:
Net loss per share was computed by dividing net loss by the weighted
average number of shares outstanding. Common stock equivalents have been
excluded as their effect would be anti-dilutive.
-4-
EMBRYO DEVELOPMENT CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED JULY 31, 1996
(Continued)
5. Supplementary Information - Statements of Cash Flows:
The Company paid interest of $-0- for the three months ended July 31,
1996 and 1995 and $25,698 cumulative during the development stage.
The Company paid income taxes of $5,030 and -0- for the three months
ended July 31, 1996 and 1995 and $5,322 cumulative during the development
stage.
In July 1996, the Company issued 5,000 shares of common stock to its
medical advisory board for services. The value of the common stock granted
($17,500) was charged to operations in July 1996.
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EMBRYO DEVELOPMENT CORPORATION
(A Development Stage Company)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Company had net working capital of $1,585,576 at July 31, 1996 which
is primarily due to the receipt of the proceeds from the public offering
which was completed in November 1995. Additionally, the Company has invested
approximately $1,500,000 of these proceeds in long-term investments. The
Company remains in its development stage as it has not yet derived
significant revenues from the sale of its products.
The Company's statement of cash flows for the three months ended July
31, 1996 reflects cash used in operating activities of approximately
$234,000. This use of cash is primarily attributable to general and
administrative expenses, Company start-up costs, and product development.
Net cash provided by investing activities approximated $489,000 representing
the sale of short-term investments which was used to fund operations and
increase the cash and cash equivalents balance by $254,000 as of July 31,
1996.
The Company expects to incur substantial expenditures over the next
12-15 months for product development and to implement its sales and marketing
plans. The Company's management believes that the net proceeds from the
offering which is held in short and long-term investments will be sufficient
to fund its liquidity needs for at least the next 12 months.
Results of Operations
Since its inception, the Company's primary activities have consisted of
obtaining the exclusive license to seven (7) medical devices developed by Dr.
Lloyd Marks and of developing a marketing strategy for the C.F. Medical
Devices.
The Company has not derived significant revenues since its inception in
March 1995. The total revenue earned from inception of $154,338 is primarily
a result of the sale of the C.F. Medical Devices. As a result of the
Company's start-up expenses and acquisition of licenses and royalty rights
for the products in the development stage, the Company had an accumulated
deficit of $2,001,052 as of July 31, 1996. The Company expects to continue
to incur operating losses until such time it can generate significant
revenues from the sale of its products.
-6-
EMBRYO DEVELOPMENT CORPORATION
(A Development Stage Company)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Plan of Operation
In May of 1996 the Company entered into contracts with two different
firms to commence final design and manufacture of the Safety Needle, one of
the medical devices developed by Dr. Lloyd Marks. Toward that end, the
Company will also implement the manufacture of prototypes for this medical
device and hold focus groups with various medical professionals to refine and
enhance the device. The Company anticipates the development of a marketing
strategy and seeking FDA approval for this device in the next nine (9)
months.
During the next nine (9) months, the Company will also continue to
conduct market research studies on the other six (6) medical devices it has
licensed from Dr. Marks in order to determine which of the devices are most
commercially marketable. The review will also include an analysis of the
most efficient way to market each of the devices. The Company will determine
if it is more efficient to license the products to third parties for
development or to develop and market the products itself. Within 15 months
the Company intends to implement the development and marketing of the most
commercially viable and potentially profitable medical devices. The Company
also intends to undertake clinical and beta tests to evaluate the products as
they are being developed. The Company may enter into discussions with
unaffiliated third parties that may be able to utilize, develop or market the
devices in either a cooperative joint venture or as a licensee. The
relationship may also assist the Company in the preparation of applications
to the Food and Drug Administration in order to receive approval to market
the devices in the United States.
The Company also will seek to increase revenues from the sale of the
C.F. Medical Devices primarily through increased advertising and
demonstrations to the appropriate interest groups. The Company is also
investigating the possibility of acquiring additional products which pertain
to the emergency medical sector.
The Company believes that the proceeds received from the offering will
provide sufficient capital to fund the Company's operations for the next 12
months.
-7-
PART II- OTHER INFORMATION
Item 1. - Legal Proceedings.
Not applicable.
Item 2. - Changes in Securities.
Not applicable.
Item 3. - Defaults Upon Senior Securities.
Not applicable.
Item 4. - Submission Of Matters To A Vote Of Security Holders.
Not applicable.
Item 5. - Other Information.
Not applicable.
Item 6. - Exhibits And Reports on Form 8-K.
Not applicable.
-8-<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EMBRYO DEVELOPMENT CORPORATION
By: /s/ Donn M. Gordon
Donn M. Gordon
Chief Executive Officer
By: /s/ Matthew L. Harriton
Matthew L. Harriton
Chief Financial Officer
Dated: September 6, 1996
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