SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
[X] Filed by Registrant
[ ] Filed by a Party other than the Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to S240.14a-11(c) or S240.14a-12
EMBRYO DEVELOPMENT CORPORATION
(Name of Registrant As Specified in its Charter)
MICHAEL LULKIN, SECRETARY, EMBRYO DEVELOPMENT CORPORATION
(Name of Person(s) Filing the Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
N/A
______________________________________________________________
2) Aggregate number of securities to which transaction applies:
N/A
______________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
N/A
________________________________________________________________
4) Proposed maximum aggregate value of transaction:
N/A
________________________________________________________________
(1) Set forth the amount on which the filing fee is calculated and state how
it was determined.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the Form or Schedule and date
of its filing.
1) Amount Previously Paid:
N/A
____________________________________
2) Form, Schedule or Registration Statement No.:
N/A
____________________________________
3) Filing Party:
N/A
____________________________________
4) Date Filed:
N/A <PAGE>
____________________________________
EMBRYO DEVELOPMENT CORPORATION
750 Lexington Avenue
New York, New York 10022
________________________________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 3, 1998
________________________________________
To the Stockholders of Embryo Development Corporation:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders
(the "Annual Meeting") of Embryo Development Corporation, a
Delaware corporation (the "Company"), will be held on April 3,
1998, at The Independent, 179 West Broadway, New York, New York
at 1:30 p.m., Eastern Standard time, and thereafter as it may
from time to time be adjourned, for the purposes stated below:
1. To elect four (4) directors to the Board of the Company
for a one (1) year term;
2. To ratify the appointment by the Board of Directors of
Holtz Rubenstein & Co., LLP to serve as the Company's
independent certified public accountants for the current
fiscal year;
3. To effect a reverse stock split of the Company's issued common
stock, par value $.0001 per share ("Common Stock"), on the basis of
one (1) new share of Common Stock for each nine (9) shares of
Common Stock outstanding and to effect a reverse stock split of
the Company's issued Series A Preferred Stock, par value $.0001
per share ("Preferred Stock"), on the basis of one (1) new share
Preferred Stock for each nine (9) shares of Preferred Stock
outstanding (the "Reverse Stock Split"); and
4. To transact such other business as may properly come
before the Annual Meeting or any adjournments thereof.
All Stockholders are cordially invited to attend the Annual
Meeting. Only those Stockholders of record at the close of
business on February 6, 1998 are entitled to notice of and to vote
at the Annual Meeting and any adjournments thereof. The stock
transfer books will not be closed. A complete list of stockholders
entitled to vote at the Annual Meeting will be available at the
Meeting.
Stockholders should note that the Company's By-Laws provide
that no proposals or nominations of Directors by Stockholders
shall be presented for vote at an Annual Meeting of Stockholders
unless notice complying with the requirements in the By-Laws is
provided to the Board of Directors or the Company's Secretary no
later than the close of business on the fifth day following the day
on which notice of the meeting is first given to Stockholders.
BY ORDER OF THE BOARD OF DIRECTORS
OF EMBRYO DEVELOPMENT CORPORATION
February 20, 1998 Michael Lulkin, Secretary
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE DATE
AND SIGN THE ENCLOSED FORM OF PROXY AND MAIL IT PROMPTLY IN THE
ENCLOSED ENVELOPE TO AMERICAN STOCK TRANSFER & TRUST COMPANY,
40 WALL STREET, NEW YORK, NEW YORK 10005.
EMBRYO DEVELOPMENT CORPORATION
750 Lexington Avenue
New York, New York 10022
PROXY STATEMENT
INTRODUCTION
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Embryo
Development Corporation, a Delaware corporation (the "Company"),
for use at the annual meeting of the Company's Stockholders to be
held at The Independent, 179 West Broadyway, New York, New York on April
3, 1998 at 1:30 p.m., Eastern Standard time, and at any
adjournments thereof (the "Annual Meeting").
The Annual Meeting has been called to consider and take action
on the following proposals: (i) to elect four (4) directors to the
Board of Directors of the Company for a one (1) year term, (ii) to
ratify the appointment of Holtz Rubenstein & Co., LLP as the
Company's independent certified public accountants, (iii) To effect
a reverse stock split of the Company's issued common stock, par
value $.0001 per share ("Common Stock"), on the basis of one (1)
new share of Common Stock for each nine (9) shares of Common Stock
outstanding and to effect a reverse stock split of the Company's
issued Series A Preferred Stock, par value $.0001 per share
("Preferred Stock"), on the basis of one (1) new share Preferred
Stock for each nine (9) shares of Preferred Stock outstanding (the
"Reverse Stock Split"), and (iv) to transact such other business as
may properly come before the Annual Meeting or any adjournments
thereof. The Company's Board of Directors has taken unanimous
affirmative action with respect to each of the foregoing proposals
and recommends that the Stockholders vote in favor of each of the
proposals. Only holders of record of common stock, $.0001 par value
(the "Common Stock") and Series A Preferred stock, $.0001 par
value (the "Series A Preferred Stock") of the Company at the close
of business on February 6, 1998 (the "Record Date") will be
entitled to vote at the Annual Meeting.
The principal executive offices of the Company are located at
750 Lexington Avenue, New York, New York 10022 and its telephone
number is 212-355-8484. The approximate date on which this Proxy
Statement, the proxy card and other accompanying materials are
first being sent or given to Stockholders is February 25, 1998.
The Company's Annual Report on Form 10-KSB for the fiscal year
ended April 30, 1997, including audited financial statements, and
Quarterly Reports on Form 10-QSB for the quarters ended July 31 and
October 31, 1997 are being sent to Stockholders together with this
Proxy Statement.
VOTING REQUIREMENTS
As of February 6, 1998 (the "Record Date"), there were
outstanding 4,845,000 shares of Common Stock and 6,000,000 shares
of Series A Preferred Stock, par value $.0001 per share (the
"Preferred Stock"). Holders of shares of Common Stock and Preferred
Stock on the Record Date will be entitled to vote at the Annual
Meeting on Proposals One, Two and Three. The holders of Common
Stock and Preferred Stock are entitled to one vote on all matters
presented at the meeting for each share held of record. As of the
Record Date, the Company has approximately 124 holders of record
of its Common Stock and 1 holder of record of its Preferred Stock.
The presence in person or by proxy of holders of record of a
majority of the shares outstanding and entitled to vote as of the
Record Date shall be required for a quorum to transact business at
the Annual Meeting. If a quorum should not be present, the Annual
Meeting may be adjourned until a quorum is obtained. The nominees
to be selected as a Director named in Proposal One must receive a
plurality of the eligible votes cast at the Annual Meeting with
respect to such Proposal. Pursuant to the Company's Certificate of
Incorporation and the Delaware General Corporation Law, Proposal
Three requires the affirmative vote of the holders of a majority of
the outstanding shares of Common Stock on the Record Date, the
affirmative vote of the holders of a majority of the outstanding
shares of Series A Preferred Stock on the Record Date and the
affirmative vote of a majority of all shareholders entitled to
vote. The approval of all other matters to be considered at the
Annual Meeting requires the affirmative vote of a majority of the
eligible votes cast at the Annual Meeting on such matter.
The expense of preparing, printing and mailing this Proxy
Statement, exhibits and the proxies solicited hereby will be borne
by the Company. In addition to the use of the mails, proxies may
be solicited by officers and directors and regular employees of the
Company, without additional remuneration, by personal interviews,
telephone, telegraph or facsimile transmission. The Company will
also request brokerage firms, nominees, custodians and fiduciaries
to forward proxy materials to the beneficial owners of shares of
capital stock held of record and will provide reimbursements for
the cost of forwarding the material in accordance with customary
charges.
Proxies given by Stockholders of record for use at the Annual
Meeting may be revoked at any time prior to the exercise of the
powers conferred. In addition to revocation in any other manner
permitted by law, Stockholders of record giving a proxy may revoke
the proxy by an instrument in writing, executed by the Stockholder
or his attorney authorized in writing or, if the Stockholder is a
corporation, under its corporate seal, by an officer or attorney
thereof duly authorized, and deposited either at the corporate
headquarters of the Company at any time up to and including the
last business day preceding the day of the Annual Meeting, or any
adjournment thereof, at which the proxy is to be used, or with the
chairman of such Annual Meeting on the day of the Annual Meeting or
adjournment thereof, and upon either of such deposits the proxy is
revoked.
ALL PROXIES RECEIVED WILL BE VOTED IN ACCORDANCE WITH THE
CHOICES SPECIFIED ON SUCH PROXIES. PROXIES WILL BE VOTED IN FAVOR
OF A PROPOSAL IF NO CONTRARY SPECIFICATION IS MADE. ALL VALID
PROXIES OBTAINED WILL BE VOTED AT THE DISCRETION OF THE BOARD OF
DIRECTORS WITH RESPECT TO ANY OTHER BUSINESS THAT MAY COME BEFORE
THE ANNUAL MEETING.
None of the matters to be acted on at the Annual Meeting give
rise to any statutory right of a Stockholder to dissent and obtain
the appraisal of or payment for such Stockholder's shares.
PROPOSAL ONE
TO ELECT FOUR DIRECTORS TO SERVE FOR ONE YEAR AND UNTIL THEIR
SUCCESSORS HAVE BEEN DULY ELECTED AND QUALIFIED
Under the certificate of incorporation of the Company
("Certificate of Incorporation"), the Board of Directors of the
Company is required to be comprised of a minimum of one to a
maximum of ten directors, with all directors elected by the
stockholders each year at the annual stockholders meeting. The
Company's board presently consists of four (4) directors whose
terms expire at the Annual Meeting. Officers are elected annually
by and serve at the discretion of the Board of Directors.
The Board has nominated four (4) candidates to serve as
directors all of whom are currently directors. The names and
biographical summaries of the four (4) persons who have been
nominated by the Board of Directors to stand for election at the
Annual Meeting have been provided below for your information. The
Board of Directors has proposed that these persons be elected at
the Annual Meeting to serve until the next annual meeting of
stockholders. The Proxies will be voted for the election of the
four (4) nominees listed below as directors of the Company unless
otherwise specified on the form provided. The vote of a majority
of the capital stock, present and constituting a quorum at the
Annual Meeting, will be necessary to elect the directors listed
below. If, for any reasons, any of the nominees shall be unable or
unwilling to serve, the Proxies will be voted for a substitute
nominee who will be designated by the Board of Directors at the
Annual Meeting. Stockholders may abstain from voting by marking
the appropriate boxes on the enclosed Proxy. Abstentions shall be
counted separately and shall be used for purposes of calculating
quorum.
Biographical Summaries of Nominees for the Board of Directors
Matthew L. Harriton has served as the Chief Financial Officer
of the Company since January 1996. In April 1997, Mr. Harriton
became the Chief Executive Officer and a Director of the Company.
Prior to joining Embryo Development Corporation, Mr. Harriton's
professional experience included positions at CIBC Wood Gundy
Securities Corporation, Coopers & Lybrand, and The First Boston
Corporation. Mr. Harriton also serves as a director of Superior
Supplements, Inc., and Perry's Majestic Beer, Inc. both of which
are public companies. He is a graduate of Lehigh University and
received his M.B.A. from Duke University's Fuqua School of
Business.
Michael Lulkin has served as a Chairman of the Board of
Directors of the Company since March 1995. Since May 1995, Mr.
Lulkin has served as the general counsel for PDK Labs, Inc. Prior
to joining PDK Labs, Mr. Lulkin was engaged in the private practice
of law as a sole practitioner for over 13 years. He graduated from
State University of New York at Buffalo and received his J.D. from
Emory University School of Law.
Dr. Daniel Durchslag, DDS,, has been practicing General,
Cosmetic and Sports Dentistry in Beverly Hills, CA, since 1980.
From 1973 until 1979, he was an Associate Professor and Director of
Clinics at the University of Southern California School of
Dentistry. He is a graduate of the University of Wisconsin and
Loyola University/Chicago College of Dental Surgery. He is
presently Team Dentist for the Los Angeles Raiders.
Andrew Fabrikant has served as a member of the Board of
Directors since February 2, 1998. Mr. Fabrikant is currently the
President of Fabrikant Fine Diamonds, an estate and diamond jewelry
business, a position he has held for the past five years. In
addition, for the past ten years Mr. Fabrikant has served as the
Managing Partner of The International Jewelers Exchange. He is a
graduate of Boston University.
The Board of Directors unanimously recommends a vote FOR the
election of Messrs. Lulkin, Harriton, Durchslag and Fabrikant.
Unless otherwise instructed or unless authority to vote is
withheld, the enclosed proxy will be voted FOR the election of the
above listed nominees.
Directors and Executive Officers
Certain information concerning the Directors and Executive
Officers of the Company is set forth below:
Name Age Position Held
___________________ ____ ______________________________
Matthew L. Harriton 33 Chief Executive Officer, Chief
Financial Officer and Director
Michael Lulkin 44 Chairman of the Board of
Directors and Secretary
Dr. Daniel Durchslag 52 Director
Dr. Lloyd Marks 45 Consultant
Andrew Fabrikant 33 Director
Biographical Summaries
See "Biographical Summaries of Nominees for the Board of Directors"
above for biographical summaries of Mr. Lulkin, Harriton, Durchslag
and Fabrikant.
Dr. Lloyd Marks has been a consultant to the Company since
March 31, 1995. Since 1994 he has been the chief of the division of
pediatric cardiology for the Children's Hospital of New Jersey and
the New Jersey Medical School. He is also an adjunct Professor of
Biomedical Engineering at the New Jersey Institute of Technology
and Drexel University. From 1986 to 1994 Dr. Marks served as a
professor of pediatrics at Temple University of Medicine and from
1983 to 1986 he served as an assistant professor at the State
University of New York at Stony Brook. From 1986 to 1994 he also
served as staff cardiologist and director of the cardiovascular
laboratory at St. Christopher's Hospital for Children. Dr. Marks
received his M.D. from the University of Michigan Medical School
and his B.S. in Electrical Engineering from Massachusetts Institute
of Technology.
All directors hold office until the next annual meeting of
stockholders and the election and qualification of their
successors. Officers are elected annually by the Board of Directors
and, subject to existing employment agreements, serve at the
discretion of the Board.
All directors are reimbursed by the Company for any expenses
incurred in attending directors' meetings. The directors receive no
other compensation for serving on the Board of Directors. The
members of the Board of Directors intend to meet at least quarterly
during the Company's fiscal year, and at such other times duly
called. The audit and compensation committees are comprised solely
of the independent directors.
Compliance with Section 16(a) of the Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires
the Company's directors and executive officers, and persons who own
more than ten percent (10%) of a registered class of the Company's
equity securities, to file with the Securities and Exchange
Commission ("SEC") initial reports of ownership and reports of
changes in ownership of common stock and other equity securities of
the Company. Officers, directors and greater than ten percent
stockholders are required by SEC regulation to furnish the Company
with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on its review of the
copies of such reports furnished to the Company during the year
ended April 30, 1997, all Section 16 (a) filing requirements
applicable to its officers, directors and greater than ten percent
beneficial owners were satisfied.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Summary Compensation Table
The following table shows all the cash compensation paid or to be paid by the
Company to the Chief Executive Officer:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Long Term Compensation
________________________
Annual Compensation Awards Payouts
_______________________________ ________ _________________
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Restricted All
Other Stock LTIP Other
Annual Awards Options/ Payouts Compensation
Name and Principal Position Year Salary($) Bonus($) Compensation($)($) SARs(#) ($) ($)
___________________________ ___ ________ ________ ______________ __________ _______ _______ ____________
Donn Gordon, CEO(2) 1997 $91,000 $13,650 $6,000(1) --- 100,000 0 0
1996 77,250 11,400 7,575(1) --- 100,000 0 0
1995 6,333 0 500(1) --- 0 0 0
Matthew L. Harriton, CEO 1997 $90,000 $ 0 $ 0 --- 100,000(3)0 0
____________________
(1) Represents auto allowance in accordance with March 1995 employment agreement
(2) Employment of Donn M. Gordon was terminated on March 31, 1997.
(3) Does not include 400,000 options granted in September 1997.
</TABLE>
Employment Agreements and Consulting Agreements
_______________________________________________
On March 31, 1995, the Company entered into a two (2) year
employment agreement with Donn Gordon to serve as the Company's
Chief Executive Officer. The agreement provided for Mr. Gordon
to receive a salary of $76,000 per annum the first year and
$91,000 per annum the second year, and for Mr. Gordon to devote
all of his time to the performance of duties to the Company. The
agreement also provided for the payment of a bonus to Mr. Gordon,
at the sole discretion of the Board of Directors, which will be
at least 15% of his base salary and the issuance of options to
purchase the aggregate amount of 200,000 shares of Common Stock,
100,000 of which were issued upon the completion of the
Company's initial public offering exercisable at the initial
public offering price of $5.00 and 100,000 of which were issued
on March 31, 1997 and are exercisable at $.5625. Mr. Gordon's
contract expired on March 31, 1997 and was not renewed by the
Company.
The Company has entered into a four (4) year consulting
agreement with Dr. Lloyd Marks which provides for compensation of
$75,000 per year. The agreement also provides for the issuance
to Dr. Marks of warrants to purchase 600,000 shares of the
Company's Common Stock at $3.00 per share from January 1, 1996
through December 31, 1999. The agreement requires Dr. Marks to
provide 12 hours of consulting services to the Company per month.
The Company has an employment agreement with Matthew
Harriton, the Company's Chief Executive Officer and Chief
Financial Officer. The agreement, as amended, provides for
annual compensation of $60,000 commencing on January 1, 1998 and
expires on December 31, 1998. The officer was also granted
options to purchase 400,000 shares of the Company's common stock
at an exercise price equal to the market price on the date of the
amendment ($.59) exercisable for a period of four (4) years.
Stock Option Plans and Agreements
_________________________________
Incentive Option and Stock Appreciation Rights Plan - As of
March, 1995, the Directors of the Company adopted and the
stockholders of the Company approved the adoption of the
Company's 1995 Incentive Stock Option and Stock Appreciation
Rights Plan ("Incentive Option Plan"). The purpose of the
Incentive Option Plan is to enable the Company to encourage key
employees and Directors to contribute to the success of the
Company by granting such employees and Directors incentive stock
options ("ISOs") as well as non-qualified options and stock
appreciation rights ("SARs").
The Incentive Option Plan will be administered by the Board
of Directors or a committee appointed by the Board of Directors
(the "Committee") which will determine, in its discretion, among
other things, the recipients of grants, whether a grant will
consist of ISOs, non-qualified options or SARs or a combination
thereof, and the number of shares to be subject to such options
and SARs.
The Incentive Option Plan provides for the granting of ISOs
to purchase Common Stock at an exercise price to be determined by
the Board of Directors or the Committee not less than the fair
market value of the Common Stock on the date the option is
granted. Non-qualified options and freestanding SARs may be
granted with any exercise price. SARs granted in tandem with an
option have the same exercise price as the related option.
The total number of shares with respect to which options and
SARs may be granted under the Incentive Option Plan is 2,000,000.
ISOs may not be granted to an individual to the extent that in
the calendar year in which such ISOs first become exercisable the
shares subject to such ISOs have a fair market value on the date
of grant in excess of $100,000. No option or SAR may be granted
under the Incentive Option Plan after March 15, 2005 and no
option or SAR may be outstanding for more than ten years after
its grant. Additionally, no option or SAR can be granted for more
than five (5) years to a shareholder owning 10% or more of the
Company's outstanding Common Stock.
Upon the exercise of an option, the holder must make payment
of the full exercise price. Such payment may be made in cash or
in shares of Common Stock (based on the fair market value of the
Common Stock on the date prior to exercise), or in a combination
of both. The Company may lend to the holder of an option funds
sufficient to pay the exercise price, subject to certain
limitations. SARs may be settled, in the Board of Directors'
discretion, in cash, Common Stock, or in a combination of cash
and Common Stock. The exercise of SARs cancels the corresponding
number of shares subject to the related option, if any, and the
exercise of an option cancels any associated SARs. Subject to
certain exceptions, options and SARs may be exercised any time up
to three months after termination of the holder's employment.
The Incentive Option Plan may be terminated or amended at
any time by the Board of Directors, except that, without
stockholder approval, the Incentive Option Plan may not be
amended to increase the number of shares subject to the Incentive
Option Plan, change the class of persons eligible to receive
options or SARs under the Incentive Option Plan or materially
increase the benefits of participants.
To date no options or SARs have been granted under the
Incentive Option Plan. No determinations have been made regarding
the persons to whom options or SARs will be granted in the
future, the number of shares which will be subject to such
options or SARs or the exercise prices to be fixed with respect
to any option or SAR.
Non-Qualified Option Plan -- As of March 1995, the Directors
and stockholders of the Company adopted the 1995 Non-Qualified
Stock Option Plan (the "Non-Qualified Option Plan"). The purpose
of the Non-Qualified Option Plan is to enable the Company to
encourage key employees, Directors, consultants, distributors,
professionals and independent contractors to contribute to the
success of the Company by granting such employees, Directors,
consultants, distributors, professionals and independent
contractors non-qualified options. The Non-Qualified Option Plan
will be administered by the Board of Directors or the Committee
in the same manner as the Incentive Option Plan.
The Non-Qualified Option Plan provides for the granting of
non-qualified options at such exercise price as may be determined
by the Board of Directors, in its discretion. The total number of
shares with respect to which options may be granted under the
Non-Qualified Option Plan is 2,000,000.
Upon the exercise of an option, the holder must make payment
of the full exercise price. Such payment may be made in cash or
in shares of Common Stock (based on the fair market value of the
Common Stock on the date prior to exercise), or in a combination
of both. The Company may lend to the holder of an option funds
sufficient to pay the exercise price, subject to certain
limitations. Subject to certain exceptions, options may be
exercised any time up to three months after termination of the
holder's employment or relationship with the Company.
The Non-Qualified Option Plan may be terminated or amended
at any time by the Board of Directors, except that, without
stockholder approval, the Non-Qualified Option Plan may not be
amended to increase the number of shares subject to the
Non-Qualified Option Plan, change the class of persons eligible
to receive options under the Non-Qualified Option Plan or
materially increase the benefits of participants.
The following table contains information concerning the
grant of stock options to each of the executive officers of the
Company named above during the last fiscal year:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
______________________________________
<TABLE>
<S> <C> <C> <C> <C> <C>
(a) (b) (c) (d) (e)
% of Total Options
Number of Securities Options/SARs Granted Exercise or
Underlying Option/ to Employees in Base Price Expiration
Name SARs Granted (#) Fiscal Year (# Share) Date
__________________________________________________________________________________________
Donn Gordon 100,000 50% $.5625 3/31/01
Matthew Harriton 100,000 50% .65 1/01/01
</TABLE>
AGGREGATED OPTION/SARs EXERCISES IN
LAST FISCAL YEAR AND FY-END
OPTIONS/SAR VALUES
__________________
<TABLE>
<S> <C> <C> <C> <C>
(a) (b) (c) (d) (e)
Number of Value of
Securities Underlying Unexercised
Unexercised Options/ In-the-Money
SARs at FY-End (#) Options/SARs at
Shares Acquired Value Exercisable/ FY-End Exercisable
Name on Exercise (#) Realized($) Unexercisable Unexercisable
__________________________________________________________________________________
Donn Gordon 0 $ -0- 200,000/-0- $-0-/$-0-
Matthew Harriton 0 -0- 100,000/-0- -0-/-0-
</TABLE>
PRINCIPAL STOCKHOLDERS AND
STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth, as of the Record Date, certain
information with regard to the beneficial ownership of outstanding
shares of the Common Stock by (i) each person known by the Company to
beneficially own five percent or more of the outstanding shares of the
Company's Common Stock; (ii) each director and executive officer
individually; and (iii) all executive officers and directors of the
Company as a group.
<TABLE>
<S> <C> <C> <C> <C>
Percentage Percentage (%)
Shares of (%) of of Total
Name and Address Common Common Shares of Combined
of Beneficial Owner Stock Owned Stock Preferred Stock Vote
___________________ ___________ _____ _______________ ____
M.D. Funding, Inc.(1) -- -- 6,000,000 55.3
c/o Embryo Development
Corporation
750 Lexington Avenue
New York, NY 10022
Donna Field(1)(2) -- -- 6,000,000 55.3
c/o Embryo Development
Corporation
750 Lexington Avenue
New York, NY 10022
Michael Lulkin(4) -- -- -- --
c/o Embryo Development
Corporation
750 Lexington Avenue
New York, NY 10022
Lloyd Marks(3) 600,000 11.0 --- 5.2
27 Great Springs Road
Bryn Mawr, PA 19010
Daniel Durchslag -- -- --- --
9400 Brighton Way
Suite 402
Beverly Hills, CA 90210
Matthew L. Harriton(5) 500,000 9.35 -- 4.4
c/o Embryo Development
Corporation
750 Lexington Avenue
New York, NY 10022
All directors and officers 500,000 9.35 --- 4.4
as a group (3 persons)
(1) M.D. Funding, Inc. is a corporation which is wholly owned by Donna Field, the beneficial
owner of such shares. M.D. Funding, Inc. is not affiliated with any of the officers or directors of the Company.
(2) Includes 6,000,000 shares of Preferred Stock owned by M.D. Funding, Inc., a corporation wholly owned by
Ms. Field.
(3) Includes a warrant to purchase 600,000 shares of Common Stock at an exercise price of $3.00 per share
commencing January 1, 1996 through December 31, 1999.
(4) Does not include Class B Warrants to purchase 15,000 shares of Common Stock.
(5) Includes an option to purchase 100,000 shares of Common Stock at $.65 per share, as well as an
option to purchase 400,000 shares of Common Stock at $.59 per share granted in September 1997.
</TABLE>
CERTAIN TRANSACTIONS
On March 31, 1995 the Company entered into seven (7) License
Agreements with Lloyd A. Marks for the exclusive license of seven (7)
separate medical devices. The License Agreements provided for the
following aggregate payments:
(i) $230,000 paid to Dr. Marks, at the closing of the Company's
initial public offering;.
(ii) issued to Dr. Marks of 400,000 shares of the Company's
Common Stock; and
(iii)payment to Dr. Marks of 6% to 8% of the amount of the net
sales of the medical device.
Each of the agreements also provides for minimum payment
obligations commencing 2 1/2 years after the date of the agreement. The
minimum payment obligations are for each license as follows:
Agreement Minimum Payment
Year Obliation
__________ _______________
9/30/97 $25,000
3/31/98 $25,000
9/30/98 $50,000
3/31/99 $50,000
9/30/99 $100,000
3/31/00 $100,000
3/31/01+ $200,000
If the minimum payment obligations are not met, Dr. Marks has the
option to revoke the applicable license.
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. The payment due on one (1) of the
devices of $25,000 was made in accordance with the terms of the
original agreement.
On March 31, 1995, the Company entered into two (2) royalty
sharing agreements with Dr. Marks covering two (2) medical devices
he had previously licensed to unaffiliated third parties. The
royalty sharing agreements provided for the Company to pay Dr.
Marks the aggregate amount of $20,000 paid at the closing of the
Company's initial public offering and the issuance of 50,000 shares
of the Company's Common Stock. The agreements provide for the
Company to receive from Dr. Marks 50% of all royalties he should
receive on each of these medical devices.
On March 31, 1995, the Company entered into a consulting
agreement with Dr. Marks for Dr. Marks to provide consulting
services to the Company for a period of four (4) years. Dr. Marks
has agreed to provide the Company at least 12 hours per month of
consulting services in connection with the exploitation of the
License Agreement. The agreement provides for annual payments to
Dr. Marks of $75,000 per year and the issuance of a warrant to
purchase 600,000 shares of the Company's Common Stock at a purchase
price of $3.00 per share.
The Company has entered into a month to month lease with
Michael Lulkin, Chairman of the Board of Directors, for the
Company's headquarters at $5,000.00 per month.
In January 1997, the Company acquired 50.04% of the Common
Stock and 15,000,000 shares of Preferred Stock for a combined
voting interest of 92.9% of Hydrogel Design Systems, Inc. (HDS).
HDS was formed in October 1996 to effect an asset acquisition. As
consideration for its interest, the Company paid $150,000 cash,
150,000 shares of its Common Stock and made available to HDS a
$500,000 line of credit. In August 1997, the line of credit was
increased to $850,000.
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 3, 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.
General
_______
The Company believes that material affiliated transactions
between the Company and its directors, officers, principal
shareholders or any affiliates thereof have been and will be in the
future on terms no less favorable than could be obtained from
unaffiliated third parties.
PROPOSAL TWO
TO RATIFY THE SELECTION OF THE FIRM OF HOLTZ RUBENSTEIN & CO.,
LLP AS INDEPENDENT PUBLIC ACCOUNTANTS FOR THE COMPANY
The Board of Directors upon recommendation of the members of the
Audit Committee, concluded that the continued engagement of Holtz
Rubenstein & Co., LLP as the Company's independent public
accountants for the 1998 fiscal year was in the best interests of
the Company. The Board of Directors recommends that Stockholders
ratify its choice of Holtz Rubenstein & Co., LLP.
The Board of Directors unanimously recommends a vote FOR the
ratification of the selection of Holtz Rubenstein & Co., LLP as
independent public accountants for the Company. Unless marked to
the contrary, proxies received from Stockholders will be voted in
favor of the proposed amendment.
PROPOSAL THREE
REVERSE STOCK SPLIT
____________________
General. The holders of the Company's Common Stock are being
asked to approve a one-for-nine reverse stock split of the Common
Stock of the Company and the holders of the Company's Series A
Preferred Stock are being asked to approve a one-for-nine reverse
stock split of the Series A Preferred Stock of the Company
(together, the "Reverse Stock Split") which may be considered a
modification or exchange of securities invoking the requirements
of Item 12 of Rule 14a-101 of the Securities Exchange Act of
1934. In compliance therewith, the Company has attached hereto
its Annual Report on Form 10-KSB for the year ended April 30,
1997 which is incorporated by reference herein.
The Board of Directors believes that it would be in the best
interests of both the Company and its stockholders to effect the
Reverse Stock Split of one share of newly issued share of Common
Stock ("New Common Stock") for each nine (9) shares of the
Company's presently issued and outstanding Common Stock and one
share of newly issued share of Series A Preferred Stock ("New
Series A Preferred Stock") for each nine (9) shares of the
Company's presently issued and outstanding Series A Preferred
Stock. This amendment has been adopted by the Board of Directors
subject to approval of the Company's stockholders. Approval will
require the affirmative vote of the holders of a majority of the
outstanding shares of Common Stock as well as the affirmative
vote of the holders of a majority of the outstanding shares of
Series A Preferred Stock. The Board of Directors reserves the
right, notwithstanding stockholder approval and without further
action by the stockholders, not to proceed with the Reverse Stock
Split, if, at any time prior to filing the amendment with the
Secretary of State of the State of Delaware, the Board of
Directors, in its sole discretion, determines that the Reverse
Stock Split is no longer in the best interests of the Company and
its stockholders.
The Company is authorized to issue 30,000,000 shares of
Common Stock, $.0001 par value, of which 4,845,000 shares were
issued and outstanding at the close of business on the Record
Date. As proposed and if effected, the Reverse Stock Split would
reduce the number of issued and outstanding shares of Common
Stock to approximately 538,334. The Company is authorized to
issue 15,000,000 shares of Preferred Stock, $.0001 par value, of
which 6,000,000 shares were designated as Series A Preferred
Stock, of which 6,000,000 shares are issued and outstanding at
the close of business on the Record Date. As proposed and if
effected, the Reverse Stock Split would reduce the number of
issued and outstanding shares of Series A Preferred Stock to
approximately 666,667. The proposed Reverse Stock Split would
not affect any stockholder's proportionate equity interest in the
Company. Neither the par value of the Common Stock or Preferred
Stock nor any rights presently accruing to holders of Common
Stock or Series A Preferred Stock would be affected by this
transaction.
To effect this one-for-nine reverse stock split of the
Common Stock of the Company and this one-for-nine reverse stock
split of the Series A Preferred Stock of the Company, shareholder
approval is sought to amend Article Fourth of the Company's
Certificate of Incorporation relating to the authorized capital
stock with the following:
"FOURTH: The total number of shares of stock which
the corporation shall have the authority to issue
is forty-five million (45,000,000) shares, thirty
million (30,000,000) of which shall be shares of
common stock, $.0001 par value per share, and
fifteen million (15,000,000) of which shall be
shares of preferred stock, $.0001 par value per
share.
Each nine (9) shares of the corporation's common
stock, $.0001 par value per share, issued and
outstanding as of the close of business on the
date of this Certificate of Amendment is filed
shall be converted into one (1) share of the
corporation's new common stock, $.0001 par value
per share, so that each share of the corporation's
common stock issued and outstanding is hereby
converted and reclassified. No fractional
interests resulting from such conversion shall be
issued, but in lieu thereof, stockholders who
ostensibly would be entitled to receive fractional
shares because they hold a number of shares not
evenly divisible by nine (9) will be entitled,
upon surrender to the Exchange Agent of
certificates representing such shares, to receive
one (1) additional share of common stock for any
fractional share they may be entitled to.
Each nine (9) shares of the corporation's Series A
Preferred Stock, $.0001 par value per share,
issued and outstanding as of the close of business
on the date of this Certificate of Amendment is
filed shall be converted into one (1) share of the
corporation's new Series A Preferred Stock, $.0001
par value per share, so that each share of the
corporation's Series A Preferred Stock issued
and outstanding is hereby converted and
reclassified. No fractional interests resulting
from such conversion shall be issued, but in lieu
thereof, stockholders who ostensibly would be
entitled to receive fractional shares because they
hold a number of shares not evenly divisible by
nine (9) will be entitled, upon surrender to the
Exchange Agent of certificates representing such
shares, to receive one (1) additional share of
Series A Preferred Stock for any fractional share
they may be entitled to.
The shares of Preferred Stock may be issued from
time to time in one or more series, in any manner
permitted by law, as determined from time to time
by the Board of Directors, and stated in the
resolution or resolutions providing for the
issuance of such shares adopted by the Board of
Directors pursuant to authority hereby vested in
it. Without limiting the generality of the
foregoing, shares in such series shall have such
voting powers, full or limited, or no voting
powers, and shall have such designations,
preferences, and relative participating, optional,
or other special rights, and qualifications,
limitations, or restrictions thereof, permitted by
law, as shall b e stated in the resolution or
resolutions providing for the issuance of such
shares adopted by the Board of Directors pursuant
to authority hereby vested in it. The number of
shares of any such series so set forth in such
resolution or resolutions may be increased (but
not above the total number of shares of Preferred
Stock) or decreased (but not below the number of
shares thereof then outstanding) by further
resolution or resolutions by the Board of
Directors pursuant to authority hereby vested in
it."
Reasons for the Proposed Stock Split. The Company's Common Stock
is traded on The Nasdaq SmallCap Market ("Nasdaq"). On August 22,
1997 the U.S. Securities and Exchange Commission approved new
listing requirements for Nasdaq. Under the new listing
requirements, in order to qualify for continued quotation of
securities on Nasdaq, the Company, among other things, must have
(i) a minimum bid price of $1.00 per share (the " Minimum Bid
Requirement"); (ii) a public float of at least 500,000 shares
which shall have a market value of at least $1,000,000 (the
"Capital/Market Value Requirement"); (iii) 300 round lot holders;
(iv) at least two (2) registered and active market makers; and
(v) either (a) $2,000,000 in net tangible assets, (b) a market
capitalization of at least $35,000,000, or (c) net income of
$500,000. On February 6, 1998, the Company's Common Stock had
a closing bid price of $0.156 per share.
On December 29, 1997, the Staff of Nasdaq advised the
Company that the Company failed to satisfy the Minimum Bid
Requirement and the Capital/Market Value Requirement with respect
to its shares of Common Stock. The Company was then provided 90
days to comply with either of such requirements in order to
continue the listing of its Common Stock on Nasdaq. Failure to
do so would result in delisting the Company's shares of Common
Stock.
The Board of Directors believes that a Reverse Stock Split
will, among other things, enable the Company to meet the Minimum
Bid Requirement as well. Furthermore, a relatively low stock
price may affect not only the liquidity of the Company's Common
Stock, but also its ability to raise additional capital through
the sale of equity securities. Thus, the Company believes that
the expected increase in trading price is expected to be
attractive to the financial community, the investing public, and
to users of the Company's services.
The Board of Directors is hopeful that a decrease in the
number of shares of Common Stock outstanding, as a consequence of
the proposed Reverse Stock Split, and the anticipated
corresponding increase price per share will stimulate interest in
the Company's Common Stock and possibly promote greater liquidity
for the Company's Common stockholders with respect to those
shares presently held by them. However, the possibility does
exist that such liquidity could be adversely affected by the
reduced number of shares which would be outstanding if the
proposed Reverse Stock Split is effected.
If, in the future, the Company is unable to satisfy either
the Minimum Bid Requirement or the Capital/Market Requirement,
trading, if any, in the Company's securities would be conducted
in the over-the-counter market in what are commonly referred to
as the "pink sheets", or the NASD Electronic Bulletin Board. As
a result, an investor may find it more difficult to dispose of,
or to obtain accurate quotation as to the price of, the
securities of the Company. In addition, if the securities are
removed from Nasdaq, they could be subject to rules that impose
additional sales practice requirements on broker-dealers who sell
such securities.
Management of the Company is not aware of any present
efforts of any persons to accumulate Common Stock or to obtain
control of the Company, and the proposed Reverse Stock Split is
not intended to be an anti-takeover device. The amendment is
being sought solely to enhance the image of the Company, its
corporate flexibility, and to price the Common Stock in the price
range that would meet the Minimum Bid Requirement and be more
acceptable to the brokerage community, and to investors
generally.
The Company's Board of Directors has approved a reverse
stock split of the Series A Preferred Stock so that the holders
of the Series A Preferred Stock will not obtain increased voting
power as a result of the reverse stock split of the Company's
Common Stock.
Exchange of Stock Certificates. If the Reverse Stock Split is
approved by the Company's stockholders, the Company will instruct
its transfer agent to act as its exchange agent (the "Exchange
Agent") and to act for holders of Common Stock and Series A
Preferred in implementing the exchange of their certificates.
Commencing on the effective date of the Reverse Stock Split
(the "Effective Date"), stockholders will be notified and
requested to surrender their certificates representing shares of
Common Stock and Series A Preferred to the Exchange Agent in
exchange for certificates representing New Common Stock and New
Series A Preferred. One share of New Common Stock will be issued
in exchange for each nine (9) presently issued and outstanding
shares of Common Stock and one share of New Series A Preferred
Stock will be issued in exchange for each nine (9) presently
issued and outstanding shares of Series A Preferred Stock.
Beginning on the Effective Date, each certificate representing
shares of the Company's Common Stock will be deemed for all
corporate purposes to evidence ownership of shares of New Common
Stock and each certificate representing shares of the Company's
Series A Preferred Stock will be deemed for all corporate
purposes to evidence ownership of shares of New Series A
Preferred Stock.
Liquidation of Fractional Shares. No scrip or fractional
certificates will be issued in connection with the Reverse Stock
Split. Stockholders who ostensibly would be entitled to receive
fractional shares because they hold a number of shares of Common
Stock not evenly divisible by nine (9) will be entitled, upon
surrender to the Exchange Agent of certificates representing such
shares, to receive one (1) additional share of New Common Stock
for any fractional share they may be entitled to. Additionally,
stockholders who ostensibly would be entitled to receive
fractional shares because they hold a number of shares of Series
A Preferred Stock not evenly divisible by nine (9) will be
entitled, upon surrender to the Exchange Agent of certificates
representing such shares, to receive one (1) additional share of
New Series A Preferred Stock for any fractional share they may be
entitled to. Stockholders may now hold "odd lots" as a result of
the Reverse Stock Split and as such may be subject to increased
transaction costs on the sale of their Common Stock or Series A
Preferred Stock, respectively.
Stockholders are encouraged to surrender their certificates
to the Exchange Agent for certificates evidencing whole shares of
the Common Stock or Series A Preferred Stock due them for
fractional interests.
Federal Income Tax Consequences. The Reverse Stock Split should
not result in the recognition of gain or loss (except in the case
of additional shares received for fractional shares as described
below). The holding period of the shares of New Common Stock and
New Series A Preferred Stock will include the stockholders'
respective holding periods for the shares of Common Stock and
Series A Preferred Stock exchanged therefore, provided that the
shares of Common Stock and/or Series A Preferred Stock were held
as a capital asset. The adjusted basis of the shares of New
Common Stock and New Series A Preferred Stock will be the same
as the adjusted basis of the Common Stock and Series A Preferred
Stock exchanged therefore, reduced by the basis applicable to the
receipt of additional shares in lieu of fractional shares
described below.
A stockholder who receives additional shares in lieu of
fractional shares will be treated as if the Company would issue
additional shares to him. Such stockholder should generally
recognize gain or loss, as the case may be, measured by the
difference between the number of additional shares received and
the basis of his old Common Stock or old Series A Preferred Stock
applicable to such fractional shares had they actually been
issued. Such gain or loss shall be a capital gain or loss (if
such stockholder's Common Stock or Series A Preferred Stock was
held as a capital asset), any such capital gain or loss shall
generally be long-term capital gain or loss to the extent such
stockholder's holding for his Common Stock or Series A Preferred
Stock exceeds twelve months.
No Dissenter's Rights. Under Delaware law, stockholders are not
entitled to dissenter's rights of appraisal with respect to the
Reverse Stock Split.
OTHER PROPOSED ACTION
The Board of Directors does not intend to bring any other
matters before the meeting, nor does the Board of Directors know
of any matters which other persons intend to bring before the
meeting. If, however, other matters not mentioned in this Proxy
Statement properly come before the Annual Meeting, the persons
named in the accompanying form of Proxy will vote thereon in
accordance with the recommendation of the Board of Directors.
Stockholders should note that the Company's By-Laws provide that
no proposals or nominations of Directors by Stockholders shall be
presented for vote at an Annual Meeting of Stockholders unless
notice complying with the requirements in the By-Laws is provided
to the Board of Directors or the Company's Secretary no later
than the close of business on the fifth day following the day on
which notice of the meeting is first given to Stockholders.
STOCKHOLDER PROPOSALS AND SUBMISSIONS
If any Stockholder wishes to present a proposal for inclusion in
the proxy materials to be solicited by the Company's Board of
Directors with respect to the 1998 Annual Meeting of
Stockholders, that proposal must be presented to the Company's
secretary prior to December 15, 1998.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING,
PLEASE SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY. YOUR VOTE IS
IMPORTANT. IF YOU ARE A STOCKHOLDER OF RECORD AND ATTEND THE
ANNUAL MEETING AND WISH TO VOTE IN PERSON, YOU MAY WITHDRAW YOUR
PROXY AT ANY TIME PRIOR TO THE VOTE.
EMBRYO DEVELOPMENT CORPORATION
February 20, 1998 By: _________________________
Michael Lulkin, Secretary
Embryo Development Corporation
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PLEASE CLEARLY INDICATE A RESPONSE BY CHECKING EITHER THE PROXY
(THE "PROXY") [FOR] OR [AGAINST] BOX NEXT TO EACH OF THE THREE (3)
PROPOSALS
The undersigned hereby appoint(s) Mr. Michael Lulkin
with the power of substitution and resubstitution to vote any and
all shares of capital stock of Embryo Development Corporation,
(the "Company") which the undersigned would be entitled to vote as
fully as the undersigned could do if personally present at the
Annual Meeting of the Company, to be held on April 3, 1998 at
1:30 P.M. Eastern Standard time, and at any adjournments thereof,
hereby revoking any prior proxies to vote said stock, upon the
following items more fully described in the notice of any proxy
statement for the Annual Meeting (receipt of which is hereby
acknowledged):
1. ELECTION OF DIRECTORS
_____________________
VOTE
___ FOR ALL nominees list below EXCEPT as marked to the
contrary below
___ WITHHOLD AUTHORITY to vote for ALL nominees listed below
(INSTRUCTION: To withhold authority to vote for any
individual nominee strike a line through the nominee's name below.)
___ ABSTAIN
Michael Lulkin, Matthew Harriton, Dr. Daniel Durchslag,
Andrew Fabrikant
2. RATIFY APPOINTMENT
__________________
___ FOR HOLTZ RUBENSTEIN & CO., LLP
___ WITHHOLD AUTHORITY
___ ABSTAIN
3. REVERSE STOCK SPLIT
___________________
___ FOR Reverse Stock Split
___ WITHHOLD AUTHORITY
___ ABSTAIN
THIS PROXY WILL BE VOTED AS SPECIFIED ABOVE; UNLESS OTHERWISE
INDICATED, THIS PROXY WILL BE VOTED FOR ELECTION OF THE FOUR (4)
NOMINEES NAMED IN ITEM 1, AND HOLTZ RUBENSTEIN & CO. LLP AS
AUDITOR IN ITEM 2.
In his discretion, the Proxy is authorized to vote upon such
other business as may properly come before the meeting.
Please mark, sign date and return this Proxy promptly using
the accompanying postage pre-paid envelope. THIS PROXY IS
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF EMBRYO DEVELOPMENT
CORPORATION.
Dated: ______________
_____________________
Signature
__________________________
Signature if jointly owned:
__________________________
Print name:
Please sign exactly as the name
appears on your stock certificate.
When shares of capital stock are
held by joint tenants, both should
sign. When signing as attorney,
executor, administrator, trustee,
guardian, or corporate officer,
please include full title as such.
If the shares of capital stock are
owned by a corporation, sign in the
full corporate name by an
authorized officer. If the shares
of capital stock are owned by a
partnership, sign in the name of
the partnership by an authorized
officer.
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE
ENCLOSED ENVELOPE.
