UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-KSB/A



T

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the fiscal year ended October 31, 2007



£

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



| |                                                    | 
| | -------------------------------------------------- | 
| | VITRO DIAGNOSTICS, INC.                            | 
| | (Exact name of registrant as specified in charter) | 



|                                               |  |                          |  |                                  
|---------------------------------------------- |  | ------------------------ |  | ---------------------------------
|Nevada                                         |  | 1-17378                  |  | 84-1012042                       
|(State or other jurisdiction
of incorporation) |  | (Commission File Number) |  | (IRS Employer
Identification No.)



| |                                                | 
| | ---------------------------------------------- | 
| | 12635 E. Montview Blvd., Aurora, Colorado80045 | 
| | (Address of principal executive offices)       | 



| |                                                      | 
| | ---------------------------------------------------- | 
| | (720) 859-4120                                       | 
| | (Registrants Telephone Number, including Area Code) | 



Securities registered pursuant to Section 12(b) of the Exchange Act: None



Securities registered pursuant to Section 12(g) of the Exchange Act:



|                              
|------------------------------
|Common Stock, $.001 par  value
|(Title of each class)         



Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes £ No T



Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. T Yes £  No



Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-KSB. T



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). £ Yes T No



State issuer's revenue for its most recent fiscal year:  $9,100.



The aggregate market value of the 6,933,287 shares of voting stock held by non-affiliates of the Company at February 9, 2008, calculated by taking the last sales price of the Company's common stock of $.11 on February 9, 2008 was $762,662.



The number of shares outstanding of the issuers common equity as of February 9, 2008 was 13,931,681.



Documents incorporated by reference:  None

Transitional Small Business Disclosure Format (check one): £ Yes T No



---

EXPLANATORY NOTE



This amendment to the annual report on Form 10-KSB of Vitro Diagnostics, Inc. includes the cover page and the financial statements in their entirety.  It has not been updated to reflect any changes to the information in the Form 10-KSB that have occurred subsequent to filing of the original report.



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|                                                        |                                           |     |     
|------------------------------------------------------- | ----------------------------------------- | --- | ----
|VITRO DIAGNOSTICS, INC.                                 |                                          
|Index to Financial Statements                           |                                          
|                                                        |                                           |     |     
|                                                        |                                           |     | Page
|Report of Independent Registered Public Accounting Firm | F-2                                      
|Balance sheet at October 31, 2007                       | F-3                                      
|Statements of operations for the years ended            |                                          
|                                                        | October 31, 2007 and 2006                 | F-4
|Statement of changes in shareholders' deficit for       |                                          
|                                                        | the years ended October 31, 2007 and 2006 | F-5
|Statements of cash flows for the years ended            |                                          
|                                                        | October 31, 2007 and 2006                 | F-6
|Notes to financial statements                           | F-7                                      



F-1



---

Report of Independent Registered Public Accounting Firm



Board of Directors

Vitro Diagnostics, Inc.



We have audited the accompanying balance sheet of Vitro Diagnostics, Inc., as of October 31, 2007, and the related statements of operations, shareholders (deficit), and cash flows for the two years ended October 31, 2007 and 2006. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit.



We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the companys internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audits provide a reasonable basis for our opinion.



In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Vitro Diagnostics, Inc. as of October 31, 2007, and the results of its operations and cash flows for the two years ended October 31, 2007 and 2006, in conformity with accounting principles generally accepted in the United States of America.



The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note A, the Company has suffered significant losses since inception and has working capital and shareholders deficits at October 31, 2007, which raise substantial doubt about its ability to continue as a going concern. Managements plans in regard to this matter are also discussed in Note A. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.



SCHUMACHER & ASSOCIATES, INC.



Denver, Colorado
February 4, 2008



F-2



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|                                                             |                                                                |  |        |            
|------------------------------------------------------------ | -------------------------------------------------------------- |  | ------ | -----------
|VITRO DIAGNOSTICS, INC.                                     
|Balance Sheet                                               
|October 31, 2007                                            
|Assets                                                      
|Current assets:                                              |                                                                |  |       
|                                                             | Cash                                                           |  | $      | 12,739     
|                                                             | Accounts receivable                                            |  |        | 7,120      
|                                                             | Inventory, at cost                                             |  |        | 2,484      
|                                                             | Total current assets                                           |  |        | 22,343     
|Equipment, net of accumulated depreciation of $23,371        |                                                                |  | 14,174
|Patents, net of accumulated amortization of $14,903          |                                                                |  | 14,414
|Deferred costs                                               |                                                                |  | 18,535
|Other assets                                                 |                                                                |  | 5,193 
|                                                             | Total assets                                                   |  | $      | 74,659     
|Liabilities and Shareholders' Deficit                       
|Current liabilities:                                         |                                                                |  |       
|                                                             | Current maturities on note payable (Note E)                    |  | $      | 6,000      
|                                                             | Current maturities on capital lease obligation (Note E)        |  |        | 1,873      
|                                                             | Accounts payable                                               |  |        | 24,944     
|                                                             | Due to officer (Note B)                                        |  |        | 14,236     
|                                                             | Note payable and acrrued interest payable to officer (Note B)  |  |        | 203,633    
|                                                             | Accrued payroll expenses (Note B)                              |  |        | 1,005,999  
|                                                             | Lines of credit (Note D)                                       |  |        | 91,108     
|                                                             | Total current liabilities                                      |  |        | 1,347,793  
|Long-term debt (Note E):                                     |                                                                |  |       
|                                                             | Note payable, less current maturities                          |  |        | 20,874     
|                                                             | Capital lease obligation, less current maturities              |  |        | 12,071     
|                                                             | Total liabilities                                              |  |        | 1,380,738  
|Commitments and contingencies (Notes B, C, D, E, G, H and I) |                                                                |  | -     
|Shareholders' deficit (Note F):                              |                                                                |  |       
|                                                             | Preferred stock, $.001 par value; 5,000,000 shares authorized; |  |        |            
|                                                             | -0- shares issued and outstanding                              |  |        | -          
|                                                             | Common stock, $.001 par value; 50,000,000 shares authorized;   |  |        |            
|                                                             | 12,681,681 shares issued and outstanding                       |  |        | 12,682     
|                                                             | Additional paid-in capital                                     |  |        | 4,653,020  
|                                                             | Accumulated deficit                                            |  |        | (5,971,781)
|                                                             | Total shareholders' deficit                                    |  |        | (1,306,079)
|                                                             | Total liabilities and shareholders' deficit                    |  | $      | 74,659     



The accompanying notes are an integral part of these financial statements.



F-3



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|                                            |                                          |                                        |        |                     |           |        |            |          
|------------------------------------------- | ---------------------------------------- | -------------------------------------- | ------ | ------------------- | --------- | ------ | ---------- | ---------
|VITRO DIAGNOSTICS, INC.                    
|Statements of Operations                   
|                                            |                                          |                                        |        |                     |           |        |            |          
|                                            |                                          |                                        |        | For The Years Ended
|                                            |                                          |                                        |        | October 31,        
|                                            |                                          |                                        |        | 2007                |           | 2006  
|Product sales                               |                                          | $                                      | 9,100  |                     | $         | 1,640 
|Operating costs and expenses:               |                                          |                                        |        |                     |           |       
|                                            | Research and development                 |                                        |        | 268,735             |           |        | 173,037   
|                                            | Selling, general and administrative      |                                        |        | 110,118             |           |        | 246,232   
|                                            | Impairment of intangible assets (Note A) |                                        |        | -                   |           |        | 35,504    
|                                            |                                          | Total operating costs and expenses     |        |                     | 378,853   |        |            | 454,773  
|                                            |                                          | Loss from operations                   |        |                     | (369,753) |        |            | (453,133)
|Other income (expense):                     |                                          |                                        |        |                     |           |       
|                                            | Gain resulting from reinstatement of     |                                        |        |                     |           |        |           
|                                            |                                          | previously de-obligated grant (Note G) |        |                     | 54,401    |        |            | (54,401) 
|                                            | Interest income, officer loan (Note B)   |                                        |        | -                   |           |        | 20        
|                                            | Interest expense                         |                                        |        | (35,047)            |           |        | (28,679)  
|                                            |                                          | Loss before income taxes               |        |                     | (350,399) |        |            | (536,193)
|Provision for income taxes (Note C)         |                                          |                                        | -      |                     |           | -     
|                                            |                                          | Net loss                               |        | $                   | (350,399) |        | $          | (536,193)
|Basic and diluted net loss per common share |                                          | $                                      | (0.03) |                     | $         | (0.05)
|Shares used in computing basic and diluted  |                                          |                                        |        |                     |           |       
|                                            | net loss per common share                |                                        |        | 12,450,912          |           |        | 10,996,585



The accompanying notes are an integral part of these financial statements.



F-4



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|                                                   |                 |  |              |   |         |            |           |   |             |  |            |           |             |         |         |  |   |             |  |   |            
|-------------------------------------------------- | --------------- |  | ------------ | - | ------- | ---------- | --------- | - | ----------- |  | ---------- | --------- | ----------- | ------- | ------- |  | - | ----------- |  | - | -----------
|VITRO DIAGNOSTICS, INC.                           
|Statement of Changes in Shareholders' Deficit     
|                                                   |                 |  |              |   |         |            |           |   |             |  |            |           |             |         |         |  |   |             |  |   |            
|                                                   |                 |  |              |   |         |            |           |   |             |  |            |           |             | Loan to |         |  |   |             |  |  
|                                                   |                 |  |              |   |         |            |           |   |             |  |            |           |             | Officer |         |  |   |             |  |  
|                                                   |                 |  |              |   |         |            |           |   |             |  | Additional |           | to Exercise |         |         |  |   |             | 
|                                                   | Preferred Stock |  | Common Stock |   | Paid-in |            | Stock     |   | Accumulated |  |            |          
|                                                   | Shares          |  | Amount       |   | Shares  |            | Par Value |   | Capital     |  | Options    |           | Deficit     |         | Total  
|Balance, October 31, 2005                          | -               |  | $            | - |         | 10,620,555 |           | $ | 10,621      |  | $          | 4,550,081 |             | $       | (2,035) |  | $ | (5,085,189) |  | $ | (526,522)  
|                                                   |                 |  |              |   |         |            |           |   |             |  |            |           |             |         |         |  |   |             |  |   |            
|Common stock sold to an officer at                 |                 |  |              |   |         |            |           |   |             |  |            |           |             |         |         |  |   |             |  |   |            
|$0.064 per share (Note B)                          | -               |  |              | - |         | 312,500    |           |   | 312         |  |            | 19,688    |             |         | -       |  |   | -           |  |   | 20,000     
|Common stock sold to an officer at                 |                 |  |              |   |         |            |           |   |             |  |            |           |             |         |         |  |   |             |  |   |            
|$0.032 per share (Note B)                          | -               |  |              | - |         | 625,000    |           |   | 625         |  |            | 19,375    |             |         | -       |  |   | -           |  |   | 20,000     
|Common stock sold to an officer at                 |                 |  |              |   |         |            |           |   |             |  |            |           |             |         |         |  |   |             |  |   |            
|$0.056 per share (Note B)                          | -               |  |              | - |         | 357,143    |           |   | 357         |  |            | 19,643    |             |         | -       |  |   | -           |  |   | 20,000     
|Officer compensation charged against the           |                 |  |              |   |         |            |           |   |             |  |            |           |             |         |         |  |   |             |  |   |            
|loan to officer (Note B)                           | -               |  |              | - |         | -          |           |   | -           |  |            | -         |             |         | 2,055   |  |   | -           |  |   | 2,055      
|Interest accrued on officer's equity loan (Note B) | -               |  |              | - |         | -          |           |   | -           |  |            | -         |             |         | (20)    |  |   | -           |  |   | (20)       
|Net loss for the year ended October 31, 2006       | -               |  |              | - |         | -          |           |   | -           |  |            | -         |             |         |         |  |   | (536,193)   |  |   | (536,193)  
|Balance, October 31, 2006                          | -               |  |              | - |         | 11,915,198 |           |   | 11,915      |  |            | 4,608,787 |             |         | -       |  |   | (5,621,382) |  |   | (1,000,680)
|                                                   |                 |  |              |   |         |            |           |   |             |  |            |           |             |         |         |  |   |             |  |   |            
|Common stock sold to an officer at                 |                 |  |              |   |         |            |           |   |             |  |            |           |             |         |         |  |   |             |  |   |            
|$0.056 per share (Note B)                          | -               |  |              | - |         | 535,714    |           |   | 536         |  |            | 29,464    |             |         | -       |  |   | -           |  |   | 30,000     
|Common stock sold at $0.065 per share (Note F)     | -               |  |              | - |         | 230,769    |           |   | 231         |  |            | 14,769    |             |         | -       |  |   | -           |  |   | 15,000     
|Net loss for the year ended October 31, 2007       | -               |  |              | - |         | -          |           |   | -           |  |            | -         |             |         | -       |  |   | (350,399)   |  |   | (350,399)  
|Balance, October 31, 2007                          | -               |  | $            | - |         | 12,681,681 |           | $ | 12,682      |  | $          | 4,653,020 |             | $       | -       |  | $ | (5,971,781) |  | $ | (1,306,079)



The accompanying notes are an integral part of these financial statements.



F-5



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|                                                  |                                                              |  |                     |           |  |          |          
|------------------------------------------------- | ------------------------------------------------------------ |  | ------------------- | --------- |  | -------- | ---------
|VITRO DIAGNOSTICS, INC.                          
|Statements of Cash Flows                         
|                                                 
|                                                  |                                                              |  | For The Years Ended
|                                                  |                                                              |  | October 31,        
|                                                  |                                                              |  |                     | 2007      |  |          | 2006     
|Cash Flows from operating activities:             |                                                              |  |                     |           |  |         
|                                                  | Net loss                                                     |  | $                   | (350,399) |  | $        | (536,193)
|                                                  | Adjustments to reconcile net loss to net cash used in        |  |                     |           |  |          |          
|                                                  | operating activities:                                        |  |                     |           |  |          |          
|                                                  | Depreciation and amortization                                |  |                     | 4,194     |  |          | 4,523    
|                                                  | Impairment of intangible assets (Note A)                     |  |                     | -         |  |          | 35,504   
|                                                  | Stock-based compensation                                     |  |                     | -         |  |          | -        
|                                                  | Interest income recognized on Officer's equity loan (Note B) |  |                     | -         |  |          | 2,035    
|                                                  | Services charged against Officer's equity loan (Note B)      |  |                     | -         |  |          | -        
|                                                  | Changes in current assets and current liabilities:           |  |                     |           |  |          |          
|                                                  | (Increase) in accounts receivable, inventories,              |  |                     |           |  |          |          
|                                                  | prepaid expenses and deposits                                |  |                     | (5,815)   |  |          | 26       
|                                                  | Increase in accounts payable, accrued expenses               |  |                     |           |  |          |          
|                                                  | and payroll taxes payable                                    |  |                     | 238,106   |  |          | 400,417  
|Net cash used in operating activities             |                                                              |  | (113,914)           |           |  | (93,688)
|Cash flows from investing activities:             |                                                              |  |                     |           |  |         
|                                                  | Payments for patents and deferred costs                      |  |                     | (6,910)   |  |          | (2,932)  
|Net cash used in investing activities             |                                                              |  | (6,910)             |           |  | (2,932) 
|Cash flows from financing activities:             |                                                              |  |                     |           |  |         
|                                                  | Proceeds from issuance of notes payable                      |  |                     | 94,561    |  |          | 36,348   
|                                                  | Principal payments on notes payable                          |  |                     | (6,000)   |  |          | (3,492)  
|                                                  | Repayments on lines of credit, net                           |  |                     | (311)     |  |          | 7,476    
|                                                  | Principal payments on capital lease                          |  |                     | (839)     |  |          | (2,560)  
|                                                  | Proceeds from sale of common stock                           |  |                     | 45,000    |  |          | 60,000   
|Net cash provided by financing activities         |                                                              |  | 132,411             |           |  | 97,772  
|                                                  | Net change in cash                                           |  |                     | 11,587    |  |          | 1,152    
|Cash, beginning of year                           |                                                              |  | 1,152               |           |  | -       
|                                                  | Cash, end of year                                            |  | $                   | 12,739    |  | $        | 1,152    
|Supplemental disclosure of cash flow information: |                                                              |  |                     |           |  |         
|                                                  | Cash paid during the year for:                               |  |                     |           |  |          |          
|                                                  | Interest                                                     |  | $                   | 20,822    |  | $        | 19,452   
|                                                  | Income taxes                                                 |  | $                   | -         |  | $        | -        



The accompanying notes are an integral part of these financial statements.



F-6



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VITRO DIAGNOSTICS, INC.

Notes to Financial Statements



NOTE A:

NATURE OF ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Nature of Organization



The Company was incorporated under the laws of Nevada on February 3, 1986.  From November of 1990 through July 31, 2000, the Company was engaged in the development, manufacturing and marketing of purified human antigens (Diagnostics) and the development of therapeutic products (Therapeutics) and related technologies.  The Companys sales were solely attributable to the sales of purified human antigens.



Following the transfer of its Diagnostics operations in August of 2000, the Company began devoting all efforts to its therapeutic drug development and related technologies.  A present target area for the Companys therapeutic products is the development and commercialization of stem cell technology for use in diabetes research and treatment.  The Company has been granted a patent for its proprietary technology related to the immortalization of human cells and subsequently expanded this technology to include patent-pending technology involving generation of stem cells with potential application to a variety of commercial opportunities including the treatment of degenerative diseases and drug discovery.



The Company also owns patented technology related to treatment of human infertility.  The Company has been granted three patents for its process to manufacture VITROPINTM.  VITROPINTM is a highly purified urinary follicle-stimulating hormone (“FSH”) preparation produced according to the Company’s patented purification process.  The Company has developed a prototype syringe for administration of fertility drugs called VITROJECTTM.



Basis of Presentation



The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. However, the Company has suffered significant losses since inception and has working capital and shareholders deficits at October 31, 2007, that raise substantial doubt about its ability to continue as a going concern. In view of these matters, realization of certain of the assets in the accompanying balance sheet is dependent upon continued operations of the Company, which in turn is dependent upon the Companys ability to meet its financial requirements, raise additional capital, and generate revenues and profits from operations.



The financial statements do not include any adjustments relating to the recoverability of assets and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. During the years ended October 31, 2007 and 2006, the then president and now chairman has loaned the Company funds for working capital on an as needed basis. There is no assurance that these loans will continue in the future. The Company plans to seek additional funding to maintain its operations through debt and equity financing. The Company is presently engaged in discussions with companies that have expressed interest in the commercialization of the Companys stem cell technology and the Companys fertility drugs. Management intends to pursue these and other opportunities with the objective of establishing strategic alliances to fund further development and commercialization of its key technologies. Also, the Company recently launched a new product line, VITROCELLTM, consisting of novel human cell lines for research and development. Management intends to pursue revenue generation from this product line and development of other related products to the fullest extent possible given its resources. There is no assurance that any of these initiatives will yield sufficient capital to maintain the Companys operations. In such an event, management intends to pursue various alternatives such as sale of its assets or merger with other entities. As described below (See: Subsequent Event) during the first quarter 2008, the Company raised $125,000 in working capital through a private placement of its securities together with a warrant to purchase additional common stock of the Company.  The Company intends to use this capital to accelerate development and commercialization of stem cell technology as described elsewhere in this report.



F-7



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VITRO DIAGNOSTICS, INC.

Notes to Financial Statements



Summary of Significant Accounting Policies



Use of estimates



The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.



Cash equivalents



For the purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.



Accounts Receivable



Accounts receivable consists of amounts due from customers.  The Company considers accounts more than 30 days old to be past due. The Company uses the allowance method for recognizing bad debts. When an account is deemed uncollectible, it is written off against the allowance. The Company generally does not require collateral for its accounts receivable. As of October 31, 2007, management believes no allowance for uncollectible accounts is necessary since all accounts receivable at October 31, 2007 were collected subsequent to October 31, 2007.



Inventory



Inventories, consisting of raw materials and VITROCELLTMproduct, are stated at the lower of cost (using the specific identification method) or market.



Research and development



The Companys operations are primarily in research and development (R&D).  These costs are expensed as incurred and are primarily comprised of costs for: salaries, overhead and occupancy, contract services and other outside costs, quality assurance and analytical testing.  Since R&D is expensed entirely, cost of sales for products sold is included in R&D, and finished goods inventory is not capitalized.



Property, equipment and depreciation



Property and equipment are stated at cost and are depreciated over the assets estimated useful lives using the straight-line method.  Depreciation expense totaled $1,262 and $1,591 for the years ended October 31, 2007 and 2006, respectively.



Upon retirement or disposition of equipment, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in operations.  Repairs and maintenance are charged to expense as incurred and expenditures for additions and improvements are capitalized.



Patents, deferred costs and amortization



Patents consist of costs incurred to acquire issued patents.  Amortization commences once a patent is granted.  Costs incurred to acquire patents that have not been issued are reported as deferred costs.  If a patent application is denied or expires, the costs incurred are charged to operations in the year the application is denied or expires.  The Company amortizes its patents over a period of ten years.  Amortization expense totaled $2,932 and $2,932 for the years ended October 31, 2007 and 2006, respectively.  Estimated aggregate amortization expense for each of the next five years is as follows:



F-8



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VITRO DIAGNOSTICS, INC.

Notes to Financial Statements



|                       |   |       
|---------------------- | - | ------
|Year ended October 31, |   |       
|2008                   | $ | 2,932 
|2009                   |   | 2,932 
|2010                   |   | 2,932 
|2011                   |   | 2,932 
|2012                   |   | 2,686 
|                       | $ | 14,414



The Companys patents and deferred costs consisted of the following at October 31, 2007:



|                                                                                                                                                                           |   |         
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | --------
|Patent                                                                                                                                                                     |   |         
|Immortalized cell lines and methods of making the same (1 patent)                                                                                                          |   | 29,317  
|This patent is for proprietary technology related to the immortalization of human cells, which could be used in the treatment of degenerative diseases and drug discovery. |   |         
|Less: accumulated amortization                                                                                                                                             |   | (14,903)
|                                                                                                                                                                           | $ | 14,414  



|                                                                                                                                                                                                                                                                                                                       |   |       
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ------
|Deferred costs                                                                                                                                                                                                                                                                                                         |   |       
|Immortalization of human cell lines (VITROPIN-VTM)                                                                                                                                                                                                                                                                      | $ | -     
|This patent application is a continuation on the above patent previously obtained by the Company that seeks to expand protection of its issued patent.  The patent application was also filed in the United Kingdom, Canada, Australia, New Zealand, Israel, and in the European Patent office. (see Impairment below) |   |       
|Stem Cells                                                                                                                                                                                                                                                                                                             |   | 18,535
|This patent application represents an advancement of the Company's cell immortalization platform that provides a competitive modern technology platform with wide application to commercial applications in research and cell therapeutics.                                                                            |   |       
|                                                                                                                                                                                                                                                                                                                       | $ | 18,535



Impairment and Disposal of Long-Lived Assets



The Company evaluates the carrying value of its long-lived assets under the provisions of Statement of Financial Accounting Standard (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.  Statement No. 144 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted future cash flows estimated to be generated by those assets are less than the assets carrying amount.   If such assets are impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.  Assets to be disposed of are reported at the lower of the carrying value or fair value, less costs to sell.



During the years ended October 31, 2007 and 2006, the Company completed balance sheet reviews that identified assets whose carrying amounts are not recoverable.  As a result of this review, the Company recorded asset impairment charges of $-0- and $35,504 during the years ended October 31, 2007 and 2006, respectively, for the write-off of deferred intellectual property costs as follows:



F-9



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VITRO DIAGNOSTICS, INC.

Notes to Financial Statements



|                                      |  |               |        |                                                   |   |                                |  |                  |        |                                |   |          |  |   |  
|------------------------------------- |  | ------------- | ------ | ------------------------------------------------- | - | ------------------------------ |  | ---------------- | ------ | ------------------------------ | - | -------- |  | - | -
|October 31, 2006                      |  | Original
Cost |        | Accumulated
Amortization
Through
October 31,
2006 |   | Book Value
Prior to
Impairment |  | Asset
Impairment |        | Book Value at
October 31, 2006
|Description                           |  |               |        |                                                   |   |                                |  |                  |        |                                |   |          |  |   |  
|Deferred Intellectual Property Costs: |  |               |        |                                                   |   |                                |  |                  |        |                                |   |          |  |   |  
|Immortalization of human cell lines   |  | $             | 35,504 |                                                   | $ | -                              |  | $                | 35,504 |                                | $ | (35,504) |  | $ | -



Income taxes



The Company has adopted the Statement of Financial Accounting Standards No. 109  Accounting for Income Taxes (SFAS 109).  SFAS 109 requires the use of the asset and liability method of accounting of income taxes.  Under the asset and liability method of SFAS 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.



Revenue recognition



The Company recognizes revenue in accordance with SEC Staff Accounting Bulletin (SAB) No. 104, "Revenue Recognition."  Under SAB 104, product revenues (or service revenues) are recognized when persuasive evidence of an arrangement exists, delivery has occurred (or service has been performed), the sales price is fixed and determinable and collectibility is reasonably assured.



Fair value of financial instruments



SFAS 107, Disclosure About Fair Value of Financial Instruments, requires certain disclosures regarding the fair value of financial instruments.  The carrying amounts of cash, accounts payable and other accrued liabilities approximate fair value due to the short-term maturity of the instruments. Based on the borrowing rates currently available to the Company for loans with similar terms and average maturities, the fair value of long-term debt approximates its carrying value.



Concentrations of credit risk



Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of temporary cash investments and cash equivalents, and trade accounts receivable.  As of October 31, 2007 and 2006, the Company had no amounts of cash or cash equivalents in financial institutions in excess of amounts insured by agencies of the U.S. Government.  Trade receivables are from customers in one geographic location, principally Northern California, USA.  The Company does not require collateral for its trade accounts receivable.



Net loss per share



The Company reports net loss per share using a dual presentation of basic and diluted loss per share. Basic net loss per share excludes the impact of common stock equivalents.  Diluted net loss per share utilizes the average market price per share when applying the treasury stock method in determining common stock equivalents.  Common stock options outstanding at October 31, 2007 were not included in the diluted loss per share as all 705,864 options were anti-dilutive.  Therefore, basic and diluted losses per share at October 31, 2007 and 2006 were equal.



F-10



---

VITRO DIAGNOSTICS, INC.

Notes to Financial Statements



Stock-based compensation



Through October 31, 2006, the Company accounted for its stock-based compensation plans under the recognition and measurement principles of Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations, and accordingly, recognized no compensation expense related to the stock-based plans.  The Company has accounted for stock issued to non-employees in accordance with the provisions of SFAS No. 123.  SFAS 123 requires the fair value based method of accounting for stock issued to non-employees in exchange for services.



Companies that elect to use the method provided in APB 25 are required to disclose pro forma net income and pro forma earnings per share information that would have resulted from the use of the fair value based method.  The Company has elected to continue to determine the value of stock-based compensation arrangements under the provisions of APB 25.  Pro forma disclosures have been included in Note F.



Effective November 1, 2006, the Company adopted Statement No. 123R, Share-Based Payment (SFAS 123R), which requires companies to measure and recognize compensation expense for all stock-based payments at fair value. SFAS 123R is being applied on the modified prospective basis.



Under the modified prospective approach, SFAS 123R applies to new awards and to awards that are outstanding on November 1, 2006 that are subsequently modified, repurchased, cancelled or vest. Under the modified prospective approach, compensation cost recognized after October 31, 2006 includes compensation cost for all share-based payments granted prior to, but not yet vested on, November 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123R, and compensation cost for all shared-based payments granted subsequent to November 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123R. Prior periods are not restated to reflect the impact of adopting the new standard.



Recent accounting standards



On July 13, 2006 the FASB posted to its website the Financial Interpretation No. 48, Accounting for Uncertainty in Income Taxes, (FIN 48). FIN 48, creates a single model to address uncertainty in income tax positions. FIN 48 clarifies the accounting for income taxes by prescribing the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. It also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition and, clearly scopes income taxes out of FASB Statement No. 5, Accounting for Contingencies.  FIN 48 applies to all tax positions related to income taxes subject to FASB Statement No. 109, Accounting for Income Taxes, (FAS 109). This includes tax positions considered to be "routine" as well as those with a high degree of uncertainty.  FIN 48 is effective for fiscal years beginning after December 15, 2006.  The Company does not expect the adoption to have a material impact on the Company's financial statements.



There were various other accounting standards and interpretations issued during 2007 and 2006, none of which are expected to have a material impact on the Company's consolidated financial position, operations or cash flows.



NOTE B:

RELATED PARTY TRANSACTIONS



Indebtedness to officer



During the past four fiscal years, the Companys president paid $14,236 in expenses on behalf of the Company, which remained unpaid as of October 31, 2007.  The balance of $14,236 is included in the accompanying financial statements as Due to officer.



F-11



---

VITRO DIAGNOSTICS, INC.

Notes to Financial Statements



Notes payable



During the period from August 23, 2002 to October 31, 2007 the president loaned the Company a total of $168,150 through various notes that had also accrued interest in the amount of $35,483.  These notes and the accrued interest were consolidated into a single note of $203,633 that matures on October 31, 2008 and pays interest on the unpaid principle at a rate of 10% per annum.  This note is collateralized by a first lien on the FSH patents owned by the Company, the same collateral that had secured a prior note between the Company and the officer.



Employment agreements and accrued compensation



Effective April 8, 2005, the Board of Directors of the Company appointed James T. Posillico, PhD, as its President and Chief Executive Officer. Simultaneously, James R. Musick resigned as President and CEO and was appointed Chairman of the Board of Directors, Chief Operating Officer and Secretary.  Dr. Musick retained his position as Chief Financial Officer of the Company.



In conjunction with their appointments, the Company entered into employment agreements with both Dr. Posillico and Dr. Musick. Each agreement provides for an initial term of three years and is automatically renewable for an additional three-year period unless either party gives notice to the other that the agreement will be terminated.



The agreements with both officers provide each with a base salary of $180,000 per annum for the first year, $250,000 per annum for the second year, and $300,000 per annum during the third year. The agreement also provides that if the Company obtains financing of $3 million or more during the first two years of the agreement, the base salary would automatically increase to $300,000 per annum effective with the closing of the financing. Both officers have agreed to accrue salary until such time as the Company obtains sufficient working capital.



The agreement with Dr. Posillico also provided for the grant of stock options as follows:



·

Options to purchase 250,000 shares of the Company's common stock at a price of $.17 per share, exercisable for a period of ten years, immediately vested;



·

Options to purchase 500,000 shares of the Company's common stock at a price of $.17 per share, vesting upon the achievement of a strategic alliance to commercialize the Company's fertility drug technology, completion of a successful financing in an amount not less than $3 million to commercialize VITROPINTM, or the sale or out-license of the Company's drug technology to a third party;



·

Options to purchase an additional 500,000 shares of the Company's common stock at a price of $.17 per share, vesting upon achievement of a strategic alliance to commercialize the Company's beta islet technology by a third party, the successful financing of the commercialization of this technology, or the sale or out-license of the technology to a third party;



·

Options to purchase an additional 150,000 shares of the Company's common stock at a price of $.17 per share, vesting at such time as the Company reports cumulative product sales of $125,000 during any one year as reported in any financial statement filed with the Securities and Exchange Commission on Form 10-QSB or 10-KSB; and



·

Options to purchase an additional 150,000 shares of the Company's common stock at market price, vesting at such time as the Company reports cumulative product sales of $250,000 during any one year as reported in any financial statement filed with the Commission on Form 10-QSB or 10-KSB.



F-12



---

VITRO DIAGNOSTICS, INC.

Notes to Financial Statements



The agreement with Dr. Musick provides for the grant of stock options as follows:



·

Options to purchase 150,000 shares of the Company's common stock at a price of $.17 per share, vesting at such time as the Company reports cumulative product sales of $125,000 during any one year as reported in any financial statement filed with the Securities and Exchange Commission on Form 10-QSB or 10-KSB; and



·

Options to purchase an additional 150,000 shares of the Company's common stock at market price, vesting at such time as the Company reports cumulative product sales of $250,000 during any one year as reported in any financial statement filed with the Commission on Form 10-QSB or 10-KSB.



All of the options that are subject to vesting expire ten years from the date of vesting. Further, each of the options would terminate ninety days from the date the employee's employment with the Company is terminated. All of the options are intended to be granted as "incentive stock options" under the Company's Equity Incentive Plan of 2000, although the Plan must be amended and approved by the shareholders to increase the amount of common stock reserved under the Plan in order to provide for some of the options.



The Agreement also provides that if the Employee is terminated without cause or the employee resigns with good reason, the Company shall pay Employee one (1) years base salary at the rate prevailing for employee immediately prior to such termination as severance pay, payable in accordance with Companys policy.  Employee shall also be entitled to receive benefits to which he was entitled immediately preceding the date of termination for a period of twelve (12) months from date of termination.  Resignation with good reason includes resignation following a change in control, as defined in the agreement.



On May 19, 2006, Dr. Posillico resigned his position as the Companys president/CEO.  At the time of his resignation, Dr. Posillico held options to purchase 2,131,765 shares of the Companys common stock.  All of these options expired on August 19, 2006.



Dr. Musicks salaries totaled $279,167 and $220,833 for the years ended October 31, 2007 and 2006, respectively.  Dr. Musicks accrued salaries totaled $773,315 as of October 31, 2007.  Dr. Musicks salary is allocated as follows: 70% to research and development and 30% to administration.



Dr. Posillicos salaries totaled $-0- and $95,833 for the years ended October 31, 2007 and 2006, respectively.  Dr. Posillicos accrued salaries totaled $200,833 as of October 31, 2007.  All of Dr. Posillicos salary is allocated to administration.



Accrued payroll taxes on the above salaries totaled $31,851 at October 31, 2007.



Officer loan



During May 2002, the Companys Board of Directors approved a $14,000 loan to the vice president of the Company.  The loan was used to exercise options to purchase 200,000 shares of the Companys common stock.  The loan carried a five percent interest rate and matured on May 8, 2004.  The Company was holding stock certificates in the name of the officer, totaling 116,700 shares of common stock, as collateral for the loan.  As of July 31, 2006, the vice president had earned adequate compensation to allocate against the entire balance due on the loan and related accrued interest.



F-13



---

VITRO DIAGNOSTICS, INC.

Notes to Financial Statements



Common stock sales



During November 2006, the Company sold 535,714 shares of its common stock to an officer of the Company for $30,000, or $.056 per share.



During August 2006, the Company sold 357,143 shares of its common stock to an officer of the Company for $20,000, or $.056 per share.



During May 2006, the Company sold 625,000 shares of its common stock to an officer of the Company for $20,000, or $.032 per share.



During February 2006, the Company sold 312,500 shares of its common stock to an officer of the Company for $20,000, or $.064 per share.



The Board of Directors approved the above stock sales.  The Board of Directors consisted of two members until May 19, 2006, and one member subsequent to May 19, 2006.  The stock transactions were recorded at fair value, which was determined to be 80% of the quoted market price on the day prior to the sale of stock, due to the restricted nature of the shares.



Other



The president has personally guaranteed all debt instruments of the Company including all credit card debt.



NOTE C:

INCOME TAXES



A reconciliation of the U.S. statutory federal income tax rate to the effective rate is as follows:



|                                                                   |                |       |         |      
|------------------------------------------------------------------ | -------------- | ----- | ------- | -----
|                                                                   | October 31,   
|                                                                   | 2007           |       | 2006   
|Benefit related to U.S. federal statutory graduated rate           | -34.00%        |       | -34.00%
|Benefit related to State income tax rate, net of federal benefit   | -3.06%         |       | -3.06% 
|Accrued officer salaries                                           | 30.59%         |       | 23.39% 
|Net operating loss for which no tax benefit is currently available | 6.47%          |       | 13.67% 
|                                                                   | Effective rate | 0.00% |         | 0.00%



The primary components of temporary differences that give rise to the Companys net deferred tax assets are as follows:



|                                                |             |           |      |   |          
|----------------------------------------------- | ----------- | --------- | ---- | - | ---------
|                                                | October 31,
|                                                | 2007        |           | 2006
|Net operating loss and tax credit carryforwards | $           | 1,313,146 |      | $ | 1,290,199
|Accrued officer salaries                        |             | 371,505   |      |   | 264,609  
|Deferred tax asset (before valuation allowance) |             | 1,684,651 |      |   | 1,554,808





F-14



---

VITRO DIAGNOSTICS, INC.

Notes to Financial Statements



At October 31, 2007, deferred taxes consisted of a net tax asset of $1,684,651, due to operating loss carryforwards and other temporary differences of $4,561,869, which was fully allowed for in the valuation allowance of $1,684,651.  The valuation allowance offsets the net deferred tax asset for which there is no assurance of recovery.  The changes in the valuation allowance for the years ended October 31, 2007 and 2006 totaled $129,843 and $198,691, respectively.  Net operating loss carryforwards will expire in various years through 2027.



The valuation allowance will be evaluated at the end of each year, considering positive and negative evidence about whether the asset will be realized.  At that time, the allowance will either be increased or reduced; reduction could result in the complete elimination of the allowance if positive evidence indicates that the value of the deferred tax asset is no longer impaired and the allowance is no longer required.



Should the Company undergo an ownership change as defined in Section 382 of the Internal Revenue Code, the Companys tax net operating loss carryforwards generated prior to the ownership change will be subject to an annual limitation, which could reduce or defer the utilization of these losses.



NOTE D:

LINES OF CREDIT



The Company has a $12,500 line of credit of which $1,382 was unused at October 31, 2007.  The interest rate on the credit line was 16.75% at October 31, 2007.  Principal and interest payments are due monthly.



The Company also has six credit cards with a combined credit limit of $88,000, of which $8,010 was unused at October 31, 2007.  The interest rates on the credit cards range from 15.24% to 29.99% as of October 31, 2007.



NOTE E:

LONG-TERM DEBT



Note Payable



During August 2003, the Company converted liabilities owed to its attorney into a promissory note.  The note carries a 10 percent interest rate and is payable at the rate of $500 per month.  As of October 31, 2007, the Company owed $26,874 on the note, which is due and payable upon receipt by the Company of outside capital in excess of $50,000.  Future maturities of the note are as follows:



|                       |   |       
|---------------------- | - | ------
|Year ended October 31, |   |       
|2008                   | $ | 6,000 
|2009                   |   | 6,000 
|2010                   |   | 6,000 
|2011                   |   | 6,000 
|2012                   |   | 2,874 
|                       | $ | 26,874



Capital Lease Obligation



On July 26, 2007, the Company entered into a capital lease agreement to acquire laboratory equipment.  The Company is obligated to make 3 monthly payments of $25 and 60 monthly payments of $382 under the lease.  Future maturities of the capital lease obligation are as follows:



F-15



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VITRO DIAGNOSTICS, INC.

Notes to Financial Statements



|                                            |   |        
|------------------------------------------- | - | -------
|Year ended October 31,                      |   |        
|2007                                        | $ | 75     
|2008                                        |   | 4,587  
|2009                                        |   | 4,587  
|2010                                        |   | 4,587  
|2011                                        |   | 4,587  
|2012                                        |   | 3,823  
|                                            | $ | 22,246 
|Less: imputed interest                      |   | (8,227)
|Present value of net minimum lease payments | $ | 14,019 



The president of the Company has personally guaranteed the lease obligation.



NOTE F:

SHAREHOLDERS DEFICIT



As of October 31, 2007, the Companys Articles of Incorporation authorized the issuance of up to 50,000,000 shares of $.001 par value common stock and up to 5,000,000 shares of $.001 par value preferred stock. During October 2007, the Company sold 230,769 shares of its common stock to an investor for $15,000, or $.065 per share.  As of October 31, 2007, there were 12,681,681 shares of common stock issued and outstanding and there were no preferred shares issued or outstanding.  The terms and preferences of the authorized preferred stock may be determined at the discretion of the Companys board of directors.



Incentive plans



Effective December 2, 2000, the Companys Board of Directors adopted an Equity Incentive Plan (the Plan), which replaced the Companys 1992 Stock Option Plan.  The purpose of the Plan is to attract and retain qualified personnel, to provide additional incentives to employees, officers, consultants and directors, and to promote the Companys business.  The Plan authorizes total awards of up to 1,000,000 shares of the Company's common stock. Awards may take the form of incentive stock options, non-qualified stock options, restricted stock awards, stock bonuses and other stock grants. If an award made under the Plan expires, terminates, is canceled or settled in cash without the issuance of all shares of common stock covered by the award, those shares will be available for future awards under the Plan. Awards may not be transferred except by will or the laws of descent and distribution. No awards may be granted under the Plan after September 30, 2010.



The Plan is administered by the Company's Board of Directors, which may delegate its authority to a committee of the Board of Directors. The Board of Directors has the authority to select individuals to receive awards, to determine the time and type of awards, the number of shares covered by the awards, and the terms and conditions of such awards in accordance with the terms of the Plan. In making such determinations, the Board of Directors may take into account the recipient's current and potential contributions and any other factors the Board of Directors considers relevant. The recipient of an award has no choice regarding the form of a stock award. The Board of Directors is authorized to establish rules and regulations and make all other determinations that may be necessary or advisable for the administration of the Plan. All options granted pursuant to the Plan shall be exercisable at a price not less than the fair market value of the common stock on the date of grant. Unless otherwise specified, the options expire ten years from the date of grant. The following schedule summarizes the changes in the Companys stock option plan:



F-16



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VITRO DIAGNOSTICS, INC.

Notes to Financial Statements





|                                                                   |                     |  |                          |  |                            |  |                           |           |                          |                    
|------------------------------------------------------------------ | ------------------- |  | ------------------------ |  | -------------------------- |  | ------------------------- | --------- | ------------------------ | -------------------
|                                                                   |                     |  |                          |  | Weighted                   |  |                           |           | Weighted                
|                                                                   | Options Outstanding |  | Average                  |  |                            |  | Average                  
|                                                                   | Number of
Shares    |  | Exercise Price
Per Share |  | Remaining
Contractual
Life |  | Aggregate
Intrinsic
Value |           | Exercise
Price
Per Share
|Balance at October 31, 2006                                        | 805,864             |  | $.08 to $.81             |  | 7.73 years                 |  |                           |           |                          | $           0.30   
|                                                                   |                     |  |                          |  |                            |  |                           |           |                          |                    
|Options granted                                                    | -                   |  | $0.00                    |  |                            |  |                           |           |                          | $                 -
|Options exercised                                                  | -                   |  | $0.00                    |  |                            |  |                           |           |                          | $                 -
|Options expired                                                    | (100,000)           |  | $0.08                    |  |                            |  |                           |           |                          | $           0.08   
|                                                                   |                     |  |                          |  |                            |  |                           |           |                          |                    
|Balance at October 31, 2007
(including options subject to vesting) | 705,864             |  | $.08 to $.81             |  | 5.98 years                 |  | $                         | -         |                          | $           0.19   
|                                                                   |                     |  |                          |  |                            |  |                           |           |                          |                    
|Exercisable at October 31, 2006                                    | 505,864             |  | $.08 to $.81             |  | 6.65 years                 |  |                           |           |                          | $           0.30   
|                                                                   |                     |  |                          |  |                            |  |                           |           |                          |                    
|Exercisable at October 31, 2007                                    | 405,864             |  | $.08 to $.81             |  | 4.89 years                 |  | $                         | 26,160.00 |                          | $           0.19   



Stock options - employees



During February 2006, the Company granted its two officers options to purchase 400,000 shares of the Companys common stock.  The options carried an exercise price of $.08 per share, which was equal to the traded market value of the common stock on the grant date.  All of the options vested on the grant date.  The weighted average exercise price and weighted average fair value of these options on the grant date were $.08 and $.071, respectively.



Pro forma information regarding net income and earnings per share is required by SFAS 123 as if the Company had accounted for its granted stock options under the fair value method of that Statement.  The fair value for the options granted during the quarter ended April 30, 2006 was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions:



|                               |         
|------------------------------ | --------
|Risk-free interest rate        | 4.59%   
|Dividend yield                 | 0.00%   
|Volatility factor              | 94.72%  
|Weighted average expected life | 10 years



The Black-Scholes options valuation model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable.  In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility.  Because the Companys stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in managements opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its stock options.  However, the Company has presented the pro forma net loss and pro forma basic and diluted loss per common share using the assumptions noted above.



F-17



---

VITRO DIAGNOSTICS, INC.

Notes to Financial Statements





|                                                         |                                 |           |      |   |          
|-------------------------------------------------------- | ------------------------------- | --------- | ---- | - | ---------
|                                                         | For the Years Ended
October 31,
|                                                         | 2007                            |           | 2006
|Net loss, as reported                                    | $                               | 350,399)  |      | $ | (536,193)
|                                                         |                                 |           |      |   |          
|Stock-based employee compensation, as reported           | $                               | -         |      | $ | -        
|                                                         |                                 |           |      |   |          
|Stock-based employee compensation, fair value            | $                               | -         |      | $ | (28,400) 
|                                                         |                                 |           |      |   |          
|Pro forma net loss                                       | $                               | (350,399) |      | $ | (564,593)
|                                                         |                                 |           |      |   |          
|Basic and diluted net loss per common share, as reported | $                               | (0.03)    |      | $ | (0.05)   
|                                                         |                                 |           |      |   |          
|Pro forma basic and diluted net loss per common share    | $                               | (0.03)    |      | $ | (0.05)   



NOTE G:

COMMITMENTS AND CONTINGENCIES



Reinstatement of Previously De-Obligated Grant Funds



The Company had previously filed an appeal with the National Institute of Child Health and Human Development requesting reinstatement of $48,518, the amount previously de-obligated from a research grant received from the NIH during 2001.  This was based on the Companys position that it had fulfilled the financial reporting requirements to finalize the grant and other information included in the Companys appeal.  During March 2007, the Company received notification of the success of its appeal and full re-instatement of the de-obligated funds.  As a result of the reinstatement of the de-obligated funds, the Company recognized a gain of $54,401 related to the removal of the previously recorded contingent liability.



NOTE H:

CONSULTING AGREEMENT



On August 20, 2007, the Company entered into a Consulting Agreement with Mr. Joe Nieusma of Superior Toxicology & Wellness (Superior).  Under the terms of the agreement, Superior will provide services including, but not limited to:



·

The development and funding of the Companys current business plan;



·

The launch of products targeting applications in the development and discovery of new drug and biological products; and



·

The marketing and sales of all existing and proposed products and technology that are now available, or will be available for commercial distribution during the term of the agreement.



In exchange for the above services, the Company will pay Superior $50 per hour capped at a maximum of 240 hours for the six month term of the agreement.  In addition, the Company has agreed to issue Mr. Nieusma the following stock bonuses to be paid in shares of the Companys common stock:



F-18



---

VITRO DIAGNOSTICS, INC.

Notes to Financial Statements





a.

100,000 shares upon the sale of stem-derived human beta islets as evidenced by issuance of a commercial invoice;



b.

100,000 shares upon the submission of a validation package to the United States Food and Drug Administration requesting approval of the use of Vitros stem cell-derived human beta islets for safety and efficacy testing and the use of this data within applications submitted for marketing approval of new drugs and biological products; and



c.

100,000 shares upon the receipt of $100,000 or more in capital funding of the Company based upon Vitros current business plan or subsequent versions thereof.



Compensation for the successful sale of Vitros products, patent licenses or other revenue-generating event shall be based on industry standards and include a gross sales commission of 15% in addition to the compensation described above.



NOTE I:

SUBSEQUENT EVENT



Office Lease



The Company entered into a month to month operating sub-lease agreement on January 1, 2008.  The sub-lease term commenced January 1, 2008 and expires Jun 30, 2008.  Rent payments of $1,007 are payable under the lease on or before the first of each month.



Common Stock and Warrant Purchase Agreement



On January 31, 2008 (the "Closing Date"), Vitro Diagnostics, Inc., which we refer to as the Company, completed a private placement of 1,250,000 shares of its common stock and warrants to purchase 1,000,000 additional shares of common stock to three investors (the "Investor"). The securities were sold as units (the "Units") at a price of $0.10 per Unit, with the Investor purchasing an aggregate of 1,250,000 Units for gross proceeds of $125,000. Each Unit consisted of one (1) share of common stock and eight-tenths (8/10) of one Class A Warrant for a total of 1,250,000 shares of common stock and 1,000,000 Class A Warrants. The transaction was not registered under the Securities Act of 1933, as amended, which we refer to as the 1933 Act. The sales were made pursuant to a Common Stock and Warrant Purchase Agreement dated January 31, 2008. The Class A Warrants grant the Investor the right to purchase one (1) share of common stock and one-half (1/2) B Warrant at an exercise price of $0.25 per share. The Class A Warrants are exercisable immediately and remain exercisable for a period of 90 days from the Closing Date. The Class A Warrants must be exercised if the Company demonstrates the distribution of stem cell-derived beta islets to potential customers not later than April 15, 2008. Each Class B Warrant grants the Investor the right to purchase one (1) share of common stock and one (1) Class C Warrant at an exercise price of $0.25 per share. The Class B Warrants are exercisable upon the exercise of the Class A Warrants and remain exercisable for a period of seven months from the Closing Date. The Class B Warrants must be exercised if the Company can demonstrate sales of stem cell-derived beta islets in an amount of at least $30,000 for the three months ended July 31, 2008. Each Class C Warrant grants the Investor the right to purchase one (1) share of common stock at an exercise price of $0.25 per share. The Class C Warrants are exercisable upon the exercise of the Class B Warrants and remain exercisable for a period of ten months from the Closing Date and must be exercised if the Company can demonstrate sales of stem cell-derived beta islets in an amount of at least $100,000 for the three months ended October 31, 2008. The private placement was conducted by the Company's officers and directors and no underwriting discounts, commissions, or finders' fees were paid. The Company has agreed to pay a financing fee to the Investor in connection with offering equal to 2% of the aggregate purchase price of the securities to cover the Investor's legal fees arising from the transaction.



F-19



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SIGNATURES



Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has caused this amended Report to be signed on its behalf by the undersigned thereunto duly authorized in Aurora, Colorado on the 15th day of February 2007.



|                  |  |     |                         | 
|----------------- |  | --- | ----------------------- | 
|                  |  |     | VITRO DIAGNOSTICS, INC.
|                  |  |     |                        
|                  |  |     |                         | 
|February 15, 2008 |  | By: | /s/ James R. Musick     | 
|                  |  |     | James R. Musick         | 
|                  |  |     | Chairman                | 



Pursuant to the requirements of the Security Exchange Act of 1934, as amended, this amended Report has been signed by the following person in the capacities and on the dates indicated.



|                    |                                            |                                         | 
|------------------- | ------------------------------------------ | --------------------------------------- | 
|Signatures          | Title                                      | Date                                   
|                    |                                            |                                        
|/s/ James R. Musick |                                            | President, Chairman of the Board, Chief | 
|James R. Musick     | Executive Officer, Principal Financial and | February 15, 2008                      
|                    | Accounting Officer                         |                                        









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Exhibit Index



|     |  |                                                                                                                         
|---- |  | ------------------------------------------------------------------------------------------------------------------------
|No.  |  | Description                                                                                                             
|31.1 |  | Certification pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended.            
|32   |  | Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.