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, 1998
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: 1-13713
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 10, 1998
- --------------- ---------------------------------
Common Stock 6,995,000
<PAGE>
EMBRYO DEVELOPMENT CORPORATION
(A Development Stage Company)
FORM 10-QSB
QUARTERLY REPORT
For the Three Months Ended July 31, 1998
TABLE OF CONTENTS
------------------
Page to Page
-------------
Financial Statements:
Balance sheet..........................................1
Statements of operations...............................2
Statements of cash flows.............................3-4
Notes to financial statements........................5-8
Management's discussion and analysis
of financial condition and result
of operations.......................................9-11
Part II. - Other information.......................12-13
Signatures............................................14
<PAGE>
EMBRYO DEVELOPMENT CORPORATION
(A Development Stage Company)
BALANCE SHEET
(Unaudited)
July 31, 1998
<TABLE>
<S> <C>
ASSETS
-------
CURRENT ASSETS:
Cash and cash equivalents $ 106,317
Short-term investments 96,000
Accounts receivable 16,969
Interest receivable 2,167
Inventories 52,445
Prepaid legal fees 75,000
Prepaid expenses and other current assets 108,634
----------
Total current assets 457,532
PROPERTY AND EQUIPMENT, net of accumulated
depreciation of $16,324 16,306
LICENSED TECHNOLOGY, net of accumulated
amortization of $320,238 419,762
INVESTMENT IN UNCONSOLIDATED INVESTEE 283,892
OTHER ASSETS:
Due from unconsolidated investee 645,108
Cash in escrow 39,600
Deposits and other assets 81,867
------------
Total other assets 766,575
------------
Total assets $ 1,944,067
============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 179,060
------------
Total current liabilities 179,060
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.0001 par value; authorized 15,000,000
shares; 6,000,000 issued and outstanding 600
Common stock, $.0001 par value; authorized 30,000,000
shares; 6,995,000 issued and outstanding 700
Additional paid-in-capital 9,976,722
Unearned compensation (828,750)
Deficit accumulated during the development stage (7,182,595)
Notes due on common stock purchases (201,670)
-------------
Total equity 1,765,007
-------------
Total liabilities and stockholders' equity $ 1,944,067
============
</TABLE>
-1-
<PAGE>
EMBRYO DEVELOPMENT CORPORATION
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<TABLE>
THREE MONTHS ENDED Cumulative
JULY 31, During
1998 1997 Development
------ ------ Stage
(Unaudited) (Unaudited) (Unaudited)
----------- ----------- ------------
<S> <C> <C> <C>
REVENUES $ 25,714 $ 334,280 $ 1,261,468
---------- ---------- -----------
COSTS AND EXPENSES:
Cost of sales 20,141 231,550 1,100,764
General, selling
and administrative 233,746 468,126 4,432,702
Royalties - - 82,752
Research and development 71,662 41,436 989,357
Amortization 26,429 57,500 703,454
Equity loss of operations
of unconsolidated investee 97,524 - 464,268
Loss on write-off of licensed
technology - - 486,785
Interest income- related party (10,765) - (21,787)
Interest and other
(income)expense (4,885) (4,533) 410,721
------------ ---------- ------------
433,852 794,079 8,649,016
------------ ---------- ------------
LOSS BEFORE
MINORITY INTEREST $ (408,138) $(459,799) $(7,387,548)
MINORITY INTEREST IN NET
LOSS OF SUBSIDIARY - 43,662 204,953
------------ ----------- ------------
NET LOSS $ (408,138) $ (416,137) $(7,182,595)
=========== =========== ============
NET LOSS PER SHARE $ (.07) $ (.09) $ (1.63)
=========== ============ ============
WEIGHTED AVERAGE NUMBER OF
SHARES OF COMMON STOCK
OUTSTANDING 5,569,457 4,845,000 4,412,811
=========== ============ ============
</TABLE>
-2-
EMBRYO DEVELOPMENT CORPORATION
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<TABLE>
THREE MONTHS ENDED Cumulative
JULY 31, During
1998 1997 Development
---- ---- Stage
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (408,138) $ (416,137) $(7,182,595)
----------- ----------- ------------
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 28,577 70,097 1,353,788
Write-off of licensed technology - - 486,785
Minority interest in loss of subsidiary - (43,662) (204,953)
Equity loss in operations of
unconsolidated investee 97,524 - 464,268
Non-cash consideration - other 123,750 128,750 1,267,483
Non-cash consideration - research
and development - - 440,000
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Accounts receivable 17,137 (18,606) (96,666)
Interest receivable 615 (1,198) 26,015
Inventories 19,406 (29,954) (97,481)
Prepaid expenses and other
current assets 11,486 (30,586) (194,134)
Other assets (14,885) (75,501) (165,101)
Increase (decrease) in liabilities:
Accounts payable and
accrued expenses (94,473) 117,813 869,008
Customer deposits - - -
---------- --------- ------------
Total adjustments 189,137 117,153 4,149,012
---------- --------- ------------
Net cash operating activities - forward (219,001) (298,984) (3,033,583)
---------- ---------- ------------
INVESTING ACTIVITIES:
Purchase of short-term investments - - (847,000)
Proceeds from sale of short-term
investments 192,000 384,000 751,000
Purchase of investments in available-
for-sale securities - (151) (6,129,521)
Proceeds from sale of investments in
available-for-sale securities - - 6,129,521
Net cash paid for asset acquisition - - (200,588)
Purchase of licensed technology - - (450,000)
Purchase of property and equipment (1,190) (289,559) (1,027,997)
Divestiture of cash of subsidiary - - (77,794)
--------- ----------- -------------
Net cash investing activities -
forward 190,810 94,290 (1,852,379)
--------- ----------- -------------
</TABLE>
-3-
<PAGE>
EMBRYO DEVELOPMENT CORPORATION
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<TABLE>
THREE MONTHS ENDED Cumulative
JULY 31, During
1998 1997 Development
---- ---- Stage
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
Net cash - operating activities -
forwarded $ (219,001) $ (298,984) $ (3,033,583)
Net cash - investing activities -
forwarded 190,810 94,290 (1,852,379)
FINANCING ACTIVITIES:
Proceeds from issuance of debt - - 650,000
Proceeds from issuance of stock - - 120,000
Proceeds from issuance of subsidiary
stock to minority shareholder - - 150,000
Repayment of loans to unconsolidated
investee - - 258,821
Repayment of debt - - (550,000)
Proceeds of stock offering, net of
deferred costs - - 4,337,208
Due from unconsolidated investee - - 26,250
--------- ---------- -----------
Net cash financing activities - - 4,992,279
--------- ---------- -----------
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS (28,191) (204,694) 106,317
CASH AND CASH EQUIVALENTS at
beginning of period 134,508 280,199 -
--------- ----------- -----------
CASH AND CASH EQUIVALENTS at
end of period $ 106,317 $ 75,505 $ 106,317
========== =========== ============
</TABLE>
-4-
<PAGE>
EMBRYO DEVELOPMENT CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED JULY 31, 1998
1. Organization and Basis of Consolidation:
Embryo Development Corporation (the Company) is a Delaware Corporation
which was formed to develop, acquire, manufacture and market various bio-medical
devices. The accompanying financial statements include the accounts
of the Company and its subsidiary, Hydrogel Design Systems, Inc.(HDS) through
January 21, 1998. The assets, liabilites and operations of HDS after January
21, 1998 are not included in the financial statements of the Company as a
result of a reduction in ownership and voting interest. This investment is
being accounted for using the equity method of accounting subsequent to
January 21, 1998. HDS is engaged in the manufacture, marketing, selling
and distribution of hydrogel, an aqueous polymer-based radiation ionized
medical/consumer product.
Upon consolidation, all significant intercompany accounts and
transactions have been eliminated.
2. 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, 1998 and July 31, 1997. 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, 1998. The results of operations for the three
month periods ended July 31, 1998 and 1997 are not necessarily indicative of
the results to be expected for the full year.
3. Inventories:
Inventories at July 31, 1998 consist principally of finished goods,
which are stated at the lower of cost (first-in, first-out method) or market.
4. Investment in HDS:
As of July 31, 1998, the Company holds approximately 31.3% ownership of
the common stock of HDS which is accounted for using the equity method.
-5-
<PAGE>
EMBRYO DEVELOPMENT CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED JULY 31, 1998
(Continued)
4. Investment in HDS:(Cont'd)
Summarized financial information for HDS, which commencing January 21,
1998, the Company accounts for using the equity method, is as follows:
Summarized Financial Information:
July 31, 1998
--------------
Balance Sheet:
Current assets $ 697,000
Property, plant, and
equipment, net 1,733,000
Purchased technology 740,000
Other assets 61,000
------------
Total assets $3,231,000
============
Current liabilities $ 756,000
Long-term notes payable 1,623,000
Shareholders' equity 852,000
------------
Total liabilities and
stockholders' equity $ 3,231,000
============
Statement of Operations:
Revenue $ 137,000
============
Cost of sales $ 181,000
============
Net loss $ (293,000)
=============
In January 1997, the Company entered into a commitment to make available
to HDS a $500,000, 8% revolving line of credit as part of its investment
interest. In August, 1997, the Company increased the amount of the revolving
line of credit to $850,000. At July 31, 1998, borrowings under the revolver
approximated $552,000.
In August 1997, HDS entered into a one year management agreement with the
Company subject to automatic renewal each year. The management agreement
provides for an annual fee of the greater of $75,000 per annum or ten (10%)
percent of the gross sales generated by the Company's sales representatives
in consideration for Embryo providing HDS with administrative, marketing and
management services. General and administrative services have been reduced
by $18,750, -0- and $37,500 for the three months ended July 31, 1998 and
1997, and the cumulative period from inception (March 3, 1995) through July
31, 1998, respectively, as a result of the agreement. In May 1998, HDS
notified the Company that the agreement would not be renewed in August 1998.
-6-
<PAGE>
EMBRYO DEVELOPMENT CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED JULY 31, 1998
(Continued)
5. Stockholders' Equity:
a. Issuance of securities
On June 17, 1998, the Company issued options, to three (3) directors and
an employee, to purchase 1,650,000 shares of the Company's common stock at an
exercise price equal to the market price on the date of the grant ($.0938)
under the Incentive Stock Option Plan. In addition, an aggregate of 500,000
options which were granted to an officer under the terms of a prior
employment agreement were amended to have an exercise price of ($.0938), the
market price on the date of the amendment. These options were exercised in
June 1998 for an aggregate of 2,150,000 shares. The Company issued
promissory notes dated July 1, 1998 to the three (3) directors and an
employee in the aggregate of $201,670 for payment of the shares. The notes
mature in five (5) years, bear interest at 8%, and are secured by the related
securities.
b. Loss per share
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.
6. Litigation:
A consolidated Class Action complaint has been filed naming as
defendants the Company and others. The Class Actions assert that the
underwriter of the Company's initial public offering and other defendants
engaged in various violations of the federal securities laws. The Company
and others deny that they engaged in any improper conduct or any violations
of any federal securities laws and intend to vigorously defend the action.
Although the ultimate disposition of legal proceedings cannot be predicted
with certainty, management does not believe that they should result in a
materially adverse effect on the Company's financial position.
-7-
<PAGE>
EMBRYO DEVELOPMENT CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED JULY 31, 1998
(Continued)
7. Commitments:
In 1995, the Company entered into a four-year consulting agreement with
a licensor of medical devices. The agreement provides for an annual
consulting fee of $75,000. On June 22, 1998, notice was given to the
licensor to terminate the agreement effective July 22, 1998.
8. Subsequent Event - License Agreements:
In March 1995, the Company entered into seven license agreements for the
rights to manufacture and market seven medical devices. Each of the seven
agreements also provide for minimum payment obligations commencing 2 1/2 years
after the date of the agreements. On September 30, 1997, the agreements for
six (6) of the devices were amended to extend the date for the first minimum
payment obligation to March 31, 1998. In consideration for the extension,
the aggregate first minimum payment obligation increased from $150,000 to
$165,000. These payments have not been made as of July 31, 1998.
The Company did not make the minimum payments required under the
License Agreements with respect to six (6) of the devices including the
adjustable blood pressure cuff, a multi-function fluid communication control
system and stereoscopic fluoroscopy apparatus. The minimum payment
obligations with respect to the self-shielding needle were made in accordance
with the terms of the original agreement. On August 21, 1998, the Company
notified the licensor that it was terminating the agreements with respect to
these six (6) devices. The remaining unamortized cost of $486,785 for these
agreements was charged to operations in the year ended April 30, 1998.
9. Supplementary Information - Statements of Cash Flows:
The Company paid interest of $1,177, $1,026 and $5,577 for the three
months ended July 31, 1998 and 1997, and the cumulative period from inception
(March 3, 1995) through July 31, 1998, respectively.
The Company paid income taxes of $-0-, $2,961 and $14,276 for the three
months ended January 31, 1998 and 1997, and the cumulative period from
inception (March 3, 1995) through July 31, 1998, respectively.
In June, 1998, the Company issued an aggregate of 2,150,000 shares of
common stock in exchange for an aggregate of $201,670 in promissory notes
as payment for the shares.
-8-
<PAGE>
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 $278,472 at July 31, 1998.
Approximately $202,000 of current assets represents cash and marketable
securities. 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, 1998 reflects cash used in operating activities of approximately
$219,000. This use of cash is primarily attributable to general and
administrative expenses, product development and advertising and marketing
expenses. Net cash provided by investing activities approximated $191,000
representing the sale of investments which was used to fund current
operations. In addition, the cash and cash equivalents balance decreased by
$28,000, which was also used to fund current operations.
The Company expects to incur additional expenditures over the next 6
to 12 months for product development and to implement its sales and marketing
plans. The Company's management believes that the Company's investments,
reduction in general and administrative expenses, and anticipated paydown of
the HDS line of credit will be sufficient to fund its liquidity needs for the
next 12 months. Management believes the outstanding amount due from HDS of
$645,000 will be at least substantially repaid during the next (12) months
although it has been classified as a long-term asset based on the current
financial condition of HDS. In the event that no repayment can be made in
the next (12) months, the Company may have to look for alternative methods
of raising additional capital or liquidiating assets.
The Company was advised by The Nasdaq Stock Market that it failed to
meet the continued listing requirements of The Nasdaq SmallCap Market. The
Company is exploring various alternatives which would satisfy The Nasdaq
SmallCap Market continued listing requirements. There is, however, no
assurance that the Company will be successful in satisfying such
requirements. Failure to meet the requirements may result in the Company's
securities being traded on the OTC Bulletin Board. As a result, the price
of, and the volume of trading in, the Company's securities may be negatively
effected. The Company was advised in July, 1998 that the NASD had denied the
Company's submission for continued listing. The Company has filed an appeal
to that decision. A hearing on continued listing is expected to be held on
September 17, 1998. If the appeal is denied, the Company will make
application to be listed on the OTC-Bulletin Board.
-9-
<PAGE>
EMBRYO DEVELOPMENT CORPORATION
(A Development Stage Company)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Cont'd)
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, developing a marketing strategy for the C.F. Medical Devices
and the start-up of HDS. In March 1998, the Company decided not to make the
minimum payment obligations due on six (6) of the medical devices developed
by Dr. Lloyd Marks due to capital constraints. Accordingly, the unamortized
cost of these licenses of $487,000 was charged to operations in the year
ended April 30, 1998. In August 1998, the Company notified Dr. Marks that it
was terminating these six (6) license agreements due to financial
constraints.
The Company has not derived significant revenues since its inception
in March 1995. The total revenue earned from inception through July 31, 1998
is $1,261,468. This is a result of the sale of the C.F. Medical Devices of
approximately $526,000 and HDS sales of hydrogel and apnea monitor products
of approximately $735,000 which are included in the statement of operations
through January 21, 1998. 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 $7,182,595 as of
July 31, 1998. The Company expects to continue to incur operating losses
until such time it can generate significant revenues from the sale of its
products.
Plan of Operation
The Company intends to continue with the sales and marketing of its
emergency medical equipment and plans to aggressively market the Safety
Needle upon approval by the FDA. On May 26, 1998 the Company completed its
510(k) notification for its Safety Needle (due to regulatory restrictions and
liability issues the Safety Needle is now referred to as the Self-Shielding
Needle) and submitted it to the FDA. The notification was prepared with the
assistance of ACT Medical, Inc. a medical device consulting and manufacturing
firm located in Newton, MA. The Company's primary focus since inception has
been the development of the Self-Shielding Needle. The submission of the
510(k) notification was a critical step in the development process. On June
22,1998 the Company received a request for additional information from the
FDA regarding the 510(k) submission. On July 13, 1998 the Company responded
to the FDA's request. Subsequently, the Company was notified by the FDA that
its application was rejected due primarily to deficiencies in clinical
studies and bench test data. The Company is currently making design changes
to the Safety Needle and will then commence a new clinical study. When this
process is completed, a new 510(k) will be submitted to the FDA. Management
-10-
<PAGE>
EMBRYO DEVELOPMENT CORPORATION
(A Development Stage Company)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Cont'd)
Plan of Operation (Cont'd)
will begin to develop its long-term strategy regarding the sale and marketing
of the product. To further this effort, the Company intends to market the
product to both potential distributors and end users such as hospitals and
clinics.
Management believes that the Company's current cash and short term
investments totaling approximately $202,000 and the repayment of its
revolving line of credit, which is due in January 1999, from HDS will be
sufficient to fund the Company's operations for the next twelve (12) months
with a reduction in operating expenses. Management believes the outstanding
amount due from HDS of $645,000 will be at least substantially repaid during
the next (12) months although it has been classified as a long-term asset
based on the current financial condition of HDS. In the event that no
repayment can be made in the next (12) months, the Company will seek
alternative methods of raising additional capital.
In an effort to strengthen the Company's position until a meaningful
revenue stream and positive cash flow can be achieved, management has
undertaken a significant cost reduction program. The program includes
payroll reductions, the termination of two consulting contracts, the
reduction of rental expense, the reduction of expenses related to the
development of the needle as it is substantially complete, and other
administrative expenses. These reductions account for more than a $325,000
savings in annual expenses. Additionally, the Company anticipates an
additional reduction of approximately $200,000 in cash outlay for
professional fees which represents non-recurring legal expenses.
The Company also has a 31.3% equity interest in its nonconsolidated
affiliate HDS. The manufacturing facility of HDS became fully operational in
late 1997. The Company anticipates that this investment will have a positive
effect on operations in the next twelve months.
However, no assurance can be made with respect to the viability of the
Company in the long term. Realization of the revenue potential of the Self-
Shielding Needle may require additional capital expenditures and other
expenses. Management anticipates that to meet such needs would require
raising additional funds from either the debt or equity markets.
Alternatively, the Company may need for the long term to consider
liquidating some of its assets to meet cash requirements. No assurances can
be made as to the success of these capital raising alternatives.
-11-
<PAGE>
PART II- OTHER INFORMATION
- -----------------------------------------
Item 1. - Legal Proceedings
- ---------------------------
The Company has been named as a defendant in a consolidated class
action pending before the U.S. District Court for the Eastern District of New
York. In a consolidated complaint, plaintiffs assert claims against the
Company and others under the Securities Act of 1933, the Securities Exchange
Act of 1934 and New York common and statutory law arising out of the November
1995 initial public offering of 1 million shares of the Company's common
stock. According to the complaint, the underwriter of the offering, Sterling
Foster & Co., Inc. ("Sterling Foster"), which is also a defendant,
manipulated secondary market trading in shares of the Company's common stock
following the offering and covered certain short positions it created through
such manipulation by purchasing shares of Company stock from persons who
owned such stock prior to the offering pursuant to an arrangement with such
persons that was not disclosed in the registration statement and prospectus
distributed in connection with the offering. The complaint seeks unspecified
damages. The Company has denied the material allegations of the consolidated
complaint and intends to vigorously defend this action.
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.
- -------------------------------------------
(A) Exhibits:
10.1+ Stock Option Agreement between the Company and Andrew
Fabrikant dated June 17, 1998.
10.2+ Stock Option Agreement between the Company and Dr.Daniel
Durchslag dated June 17, 1998.
10.3+ Stock Option Agreement between the Company and Matthew
Harriton dated June 17, 1998.
10.4+ Stock Option Agreement between the Company and Karen
Nazzareno dated June 17, 1998.
27. Financial data schedule (filed herewith).
+ Incorporated by reference to the Company's Form 10-KSB
dated April 30, 1998.
-12-
<PAGE>
(B) Reports on Form 8-K:
On May 8, 1998, the Company filed a report on Form 8-K, reporting under
Item 4, disclosing that the Company had changed independent auditors for the
fiscal year ending April 30, 1998.
-13-
<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/ Matthew L. Harriton
-------------------------
Matthew L. Harriton
President and Chief
Executive Officer
Chief Financial Officer
Dated: September 15, 1998
-14-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION THAT IS EXTRACTED FROM FORM
10-QSB FOR THE QUARTER ENDED JULY 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-END> JUL-31-1998
<CASH> 106,317
<SECURITIES> 96,000
<RECEIVABLES> 16,969
<ALLOWANCES> 0
<INVENTORY> 52,445
<CURRENT-ASSETS> 457,532
<PP&E> 32,630
<DEPRECIATION> 16,324
<TOTAL-ASSETS> 1,944,067
<CURRENT-LIABILITIES> 179,060
<BONDS> 0
0
600
<COMMON> 700
<OTHER-SE> 1,763,707
<TOTAL-LIABILITY-AND-EQUITY> 1,944,067
<SALES> 25,714
<TOTAL-REVENUES> 25,714
<CGS> 20,141
<TOTAL-COSTS> 20,141
<OTHER-EXPENSES> 98,091
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,177
<INCOME-PRETAX> (408,138)
<INCOME-TAX> 0
<INCOME-CONTINUING> (408,138)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (408,138)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
</TABLE>
