SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date earliest event reported) January 21, 1998
EMBRYO DEVELOPMENT CORPORATION
(exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
0-27028 13-3832099
_____________________________________________________________________
(Commission File Number) (IRS Employer Identification
Number)
750 Lexington Avenue, Suite 2750, New York, NY 10022
_____________________________________________________________________
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code:(212) 355-8484
(Former name or former address, if changed since last
report)
Item 5. Other Events.
______ ________________
On January 21, 1998, Hydrogel Design Systems, Inc. ("HDS") (a
company in which Embryo Development Corporation has an equity
interest) entered into a Settlement Agreement (the "Agreement")
with John and Janice Essmyer settling in all regards its
outstanding litigation. In connection with the Agreement, the
Essmyer's received a cash payment of $450,000 and a promissory note
from HDS in the amount of $950,000 which is due and payable upon
the earlier of the (a) initial public offering of securities of
HDS, (b) completion of a private financing by HDS in the aggregate
amount of at least $4,000,000, (c) the sale or transfer of all, or
substantially all of the assets of HDS, or (d) January 10, 2002.
In addition, the Essmyers surrendered their rights to the 150,000
shares of Embryo Common Stock formerly granted to them and John
Essmyer surrendered the 250,000 shares of HDS Common Stock formerly
issued to him. Further, the Agreement provides that the Essmyer's
will resume the sale of apnea monitoring equipment through
Alternative Designs Systems, Inc. (an entity controlled by the
Essmyers') and HDS will immediately satisfy all outstanding
payables incurred since February 6, 1997 with respect to
Alternative Design Systems, Inc. vendors while retaining all
accounts receivables and all inventory as of December 15, 1997.
On January 21, 1998, the Company's equity interest in HDS,
which previously represented a 50.04% majority common interest and
92.9% voting interest, was reduced to 41.8% common ownership as a
result of the Company surrendering all 15,000,000 shares of voting
Preferred Stock in exchange for 21,500 shares of Common Stock. The
exchange was done at the request of certain third party investors
of a Private Placement by HDS, under which HDS issued approximately
475,000 additional common shares. As of February 2, 1998, these
transactions resulted in the Company retaining approximately 41.8%
of the Common Stock of HDS. If the Private Placement is fully
subscribed, the Company's ownership will decrease to approximately
35.6% upon completion of the Private Placement.
As a result of the surrender of the voting Preferred Stock and
the issuance of additional Common Stock, the Company's ownership in
HDS was reduced to below 50% interest and therefore, the assets,
liabilities and operations of HDS after January 21, 1998 will not
be included in the financial statements of the Company.
Item 7. Financial Statements and Exhibits
______ __________________________________
(a) Financial Statements of Business Acquired - Not applicable.
(b) Pro Forma Financial Information
The following unaudited pro forma condensed financial
statements are filed with this report:
Pro Forma Condensed Balance Sheet as of October 31, 1997...Page F-1
Pro Forma Condensed Statements of Operations:
Year Ended April 30, 1997.............................Page F-2
Six Months Ended October 31, 1997.....................Page F-3
The Pro Forma Condensed Balance Sheet of Registrant as at
October 31, 1997 reflects the financial position of Registrant
after giving effect to the Company's reduced ownership of HDS to
below 50% as discussed in Item 5. and assumes the transaction took
place on October 31, 1997. The Pro Forma Condensed Statements of
Operations for the fiscal year ended April 30, 1997 and the six
months ended October 31, 1997 assume that the disposition occurred
on October 3, 1996 (inception of HDS), and are based on the
operations of the Registrant for the year ended April 30, 1997 and
the six months ended October 31, 1997.
The unaudited pro forma condensed financial statements have
been prepared by the Registrant based upon assumptions deemed
proper by it. The unaudited pro forma condensed financial
statements presented herein are shown for illustrative purposes
only and are not necessarily indicative of the future financial
position or future results of operations of Registrant, or of the
financial position or results of operations of Registrant that
would have actually ocurred had the transaction been in effect as
of the date or for the periods presented. In addition, it should
be noted that Registrant's financial statements will reflect the
transaction only from January 21, 1998, the Closing Date of the
Private Placement.
The unaudited pro forma condensed financial statements should
be read in conjunction with the historical financial statements and
related notes of Registrant.
(c) Exhibits - None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly authorized and caused the
undersigned to sign this Report on the Registrant's behalf.
EMBRYO DEVELOPMENT CORPORATION
By: /s/ Matthew Harriton
_____________________
Matthew Harriton
President
Dated: February 2, 1998
PRO FORMA FINANCIAL INFORMATION
________________________________
EMBYRO DEVELOPMENT CORPORATION AND SUBSIDIARY
(A Development Stage Company)
PRO FORMA CONDENSED BALANCE SHEET
AT OCTOBER 31, 1997
(Unaudited)
<TABLE>
(a)
Pro Forma
Historical Adjustments Proforma
__________ ___________ ________
<S> <C> <C> <C>
Assets
CURRENT ASSETS:
Cash and cash equivalents $ 456,267 $ 226,145 $ 230,122
Investment in available-for-sale
securities 299,765 -0- 299,765
Accounts and interest receivable 119,198 99,353 19,845
Inventories 80,836 43,600 37,236
Prepaid expenses and other
current assets 219,382 33,050 186,332
Due from affiliate -0- (106,002) 106,002
_________ ________ _______
Total current assets 1,175,448 296,146 879,302
INVESTMENTS IN AVAILABLE-FOR-SALE
SECURITIES 250,000 -0- 250,000
PROPERTY, PLANT & EQUIPMENT, NET 1,714,234 1,697,634 16,600
LICENSED TECHNOLOGY, NET 1,047,975 -0- 1,047,975
INVESTMENT IN AND ADVANCES TO
AFFILIATE -0- (1,038,890) 1,038,890
OTHER ASSETS 101,645 16,848 84,797
__________ __________ __________
$4,289,302 $ 971,738 $3,317,564
========= ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued
expenses $686,064 $ 459,571 $ 226,493
Note payable 350,000 350,000 -0-
__________ __________ __________
Total current liabilities 1,036,064 809,571 226,493
NOTE PAYABLE 600,000 600,000 -0-
_________ _________ __________
Total liabilities 1,636,064 1,409,571 226,463
Total stockholders' equity 2,653,238 (437,833) 3,091,071
_________ _________ ___________
$4,289,302 $ 971,738 $3,317,564
========== ========= ===========
(a) To eliminate the assets and liabilities of HDS included in
the consolidated balance sheet as of October 31, 1997 and to
reflect the Company's 41.84% equity interest in HDS as of October
31, 1997.
</TABLE>
F-1
PRO FORMA FINANCIAL INFORMATION
_______________________________
EMBYRO DEVELOPMENT CORPORATION AND SUBSIDIARY
(A Development Stage Company)
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED APRIL 30, 1997
(Unaudited)
<TABLE>
(a)
Pro Forma
Historical Adjustments Proforma
__________ ___________ _________
<S> <C> <C> <C>
REVENUES $ 287,487 $ 115,307 $ 172,180
--------- --------- ---------
COSTS AND EXPENSES:
Cost of sales 237,839 106,319 131,520
General and administrative 1,814,174 285,623 1,528,551
Research and development 185,678 -0- 185,678
Amortization 230,000 -0- 230,000
Equity in operations of
affiliate -0- (116,468) 116,468
Interest (income) expense (133,729) 1,731 (135,460)
__________ _________ ___________
2,333,962 277,205 2,056,757
LOSS BEFORE MINORITY INTEREST (2,046,475) (161,898) (1,884,577)
MINORITY INTEREST IN NET
LOSS OF SUBSIDIARY 139,072 139,072 -0-
__________ _________ ___________
NET LOSS $(1,907,403) $(22,826)$(1,884,577)
=========== ========= ============
NET LOSS PER SHARE $ (.40) $ .00 $ (.40)
=========== ========= ============
WEIGHTED AVERAGE NUMBER OF
SHARES OF COMMON STOCK
OUTSTANDING 4,728,274 4,728,274 4,728,274
========== ========= ============
(a) To eliminate the operations of HDS for the period of
inception (October 3, 1996) to April 30, 1997 and to reflect the
Company's 41.84% share of the loss as if the transaction had been
completed on October 3, 1996.
</TABLE>
F-2
PRO FORMA FINANCIAL INFORMATION
_______________________________
EMBYRO DEVELOPMENT CORPORATION AND SUBSIDIARY
(A Development Stage Company)
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED OCTOBER 31, 1997
(Unaudited)
<TABLE>
(a)
Pro Forma
Historical Adjustments Proforma
__________ ___________ ________
<S> <C> <C> <C>
REVENUES $ 569,521 $ 493,752 $ 75,769
--------- --------- ----------
COSTS AND EXPENSES:
Cost of sales 460,382 397,983 62,399
General and administrative 984,892 332,350 652,542
Royalties 57,752 -0- 57,752
Research and development 87,977 -0- 87,977
Amortization 115,000 -0- 115,000
Equity in operations of
affiliate -0- (119,956) 119,956
Interest (income) expense 5,675 50,121 (44,446)
_________ _________ __________
1,711,678 660,498 1,051,180
LOSS BEFORE MINORITY INTEREST (1,142,157) (166,746) (975,411)
MINORITY INTEREST IN NET
LOSS OF SUBSIDIARY 65,881 65,881 -0-
___________ __________ __________
NET LOSS $(1,076,276) $(100,865)$ (975,411)
=========== ========= ============
NET LOSS PER SHARE $ (.22) $ (.02)$ (.20)
=========== ========= ============
WEIGHTED AVERAGE NUMBER OF
SHARES OF COMMON STOCK
OUTSTANDING 4,845,000 4,845,000 4,845,000
=========== ========== ==========
(a) To eliminate the operations of HDS for the entire period and
to reflect the Company's 41.84% share of the loss as if the
transaction had been completed on October 3, 1996.
</TABLE>
F-3
