##### Table of Contents



UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-KSB
 þ
    
    ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934.
 For the fiscal year ended October 31, 2005
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934.
 Commission
file number: 0-17378
 VITRO DIAGNOSTICS, INC.
  Nevada
    
    84-1012042(State or other jurisdiction of
incorporation or organization)
    
    (I.R.S. Identification No.)
 12635 E. Montview Blvd., Aurora, Colorado
    
    80010(Address of principal executive offices)
    
    (Zip Code)
 (720) 859-4120
  None
  Common Stock, $.001 par value
 o
 þ o
 o
  o þ
     None
 o þ




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##### 



TABLE OF CONTENTS
 PART I
    
    
    
    
    3ITEM 1.
    
    BUSINESS
    
    
    3ITEM 2.
    
    DESCRIPTION OF PROPERTY
    
    
    8ITEM 3.
    
    LEGAL PROCEEDINGS
    
    
    8ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    8PART II
    
    
    
    
    8ITEM 5.
    
    MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
    
    
    8ITEM 6.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
    
    
    9ITEM 7.
    
    FINANCIAL STATEMENTS
    
    
    14ITEM 8.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
    
    
    14Item 8A.
    

Controls
and Procedures
    
    
    14PART III
    
    
    
    
    15ITEM 9.
    
    DIRECTORS AND EXECUTIVE OFFICERS
    
    
    15ITEM 10.
    
    EXECUTIVE COMPENSATION
    
    
    16ITEM 11.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
    
    
    20ITEM 12.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
    
    
    21PART IV
    
    
    
    
    21ITEM 13.
    
    EXHIBITS
    
    
    21ITEM 14.
    
    PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    22SIGNATURES
    
    
    
    
    24Certification Pursuant to Rule 13a-14(a) or 15d-14(a)Certification Pursuant to Rule 13a-14(a) or 15d-14(a)Certification Pursuant to Section 906
  Additional Information
 See
 Special Note Regarding Forward-Looking Statements
  2




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##### Table of Contents



PART I
 
 ITEM 1. BUSINESS
 History
  www.vitrodiag.com
 Narrative Description of Business
   Human Cell Lines and Related Products and Technology. See, Item 6. Managements Discussion and Analysis or
Plan of Operation .
  3
    Table of Contents         See, Item 6. Managements Discussion and Analysis or Plan of Operation .
 4




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in-vitro in-vitro
 Marketing and Distribution
  Fertility Drugs.
 Description of Products and Product Candidates.
 Ô
 
 5




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Ô
  Patents and Other Intellectual Property Protection
     Regulatory Approval
  6




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Competition
    Employees
   
 ITEM 2. DESCRIPTION OF PROPERTY
   7




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ITEM 3. LEGAL PROCEEDINGS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 PART II
 
 ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
  Fiscal Quarter Ended
    
    High
    
    Low2005January 31
    
    $
    0.15
    
    
    $
    0.07April 29
    
    
    0.48
    
    
    
    0.13July 29
    
    
    0.20
    
    
    
    0.07October 31
    
    
    0.15
    
    
    
    0.112004January 31
    
    $
    0.18
    
    
    $
    0.06April 30
    
    
    0.13
    
    
    
    0.07July 31
    
    
    0.07
    
    
    
    0.05October 31
    
    
    0.21
    
    
    
    0.03
   8




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Dividends
  
 ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
     Liquidity and Capital Resources
 October 31, 2005
  9




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10




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Results of Operations
 Year Ended October 31, 2005
        11




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Year Ended October 31, 2004.
    Recent Accounting Pronouncements
   Critical Accounting Policies and Estimates
  12




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Patents, Deferred Costs and Amortization
  Impairment and Disposal of Long-lived Assets
   RISK FACTORS
  Dependence on key personnel
 Effects of potential litigation
 Lack of liquidity in the Companys securities
 13




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Dependence on regulatory approvals
 
 ITEM 7. FINANCIAL STATEMENTS
  
 ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
    
 Item 8A. Controls and Procedures
  14




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PART III
 
 ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS
  Name
    
    Age
    
    PositionJames R. Musick, Ph.D
    
    
    59
    
    
    Chairman, Chief Operating Officer, Chief
Financial Officer, Secretary and DirectorJames T. Posillico, Ph.D.
    
    
    60
    
    
    President, Chief Executive Officer and
DirectorErik D. Van Horn
    
    
    37
    
    
    Vice President
    JAMES R. MUSICK, Ph.D.
 JAMES T. POSILLICO, Ph.D.
 ERIK D. VAN HORN
 15




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Compliance with Section 16(a) of the Securities and Exchange Act of 1934
  
 ITEM 10. EXECUTIVE COMPENSATION
   Long term compensationSecuritiesYear ended
    
    
    Annual compensation
    
    
    underlyingName
    
    October 31,
    
    
    Salary
    
    
    optionsJames R. Musick, Chairman,
    
    
    2005
    
    
    $
    129,045
    (1)
    
    
    0Chief Operating Officer,
    
    
    2004
    
    
    
    57,708
    
    
    
    0
    (2)Chief Financial Officer
    
    
    2003
    
    
    
    57,708
    
    
    
    0James Posillico, President
    
    
    2005
    
    
    $
    105,000
    (1)
    
    
    500,000and Chief Executive Officer
    
    
    2004
    
    
    
    
    
    
    
    31,765
 (1)
 (2)
 Employment Contracts
  16




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##### Table of Contents




    
    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 VITROPIN, 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.
  
    
    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.
  17




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Compensation of Directors
  Option Grants For 2005
  Number of
    
    
    % of totalsecurities
    
    
    options grantedunderlying
    
    
    to employees
    
    
    Exercise
    
    
    ExpirationName
    
    options granted
    
    
    in fiscal year
    
    
    price/share
    
    
    date(1)James Posillico
    
    
    250,000
    
    
    
    50
    %
    
    $
    .17
    
    
    
    4/08/2015250,000
    
    
    
    50
    %
    
    $
    .08
    
    
    
    9/21/2015James Musick
    
    
    0
 
 (1) All of the options shown in the table are exercisable immediately. Year End Option Values
  Number ofsecuritiesunderlyingunexercised
    
    
    Value ofoptions
    
    
    unexercisedShares
    
    
    
    
    
    
    at fiscal year end
    
    
    in-the-moneyacquired
    
    
    Value
    
    
    exercisable/
    
    
    options atName
    
    on exercise
    
    
    Realized ($)
    
    
    unexercisable
    
    
    fiscal year endJames Posillico
    
    
    0
    
    
    
    0
    
    
    
    415,181/1,000,000
    
    
    $
    2,500
    (1)James R. Musick
    
    
    0
    
    
    
    0
    
    
    
    31,848/300,000
    
    
    $
    0
    (1)
 
 (1)
 18




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Stock Option Plan
      Equity
Compensation Plan Information
  Number ofsecurities remainingavailable for futureissuance underNumber of securities
    
    
    
    
    
    
    
    
    equityto be issued upon
    
    
    
    Weighted-average
    
    
    
    compensation plansexercise of outstanding
    
    
    
    exercise price of
    
    
    
    (excludingoptions, warrants
    
    
    
    outstanding options,
    
    
    
    securities reflectedPlan Category
    
    
    and rights
    
    
    
    warrants and rights
    
    
    
    in column(a))(a)
    
    
    
    (b)
    
    
    
    (c)Equity
compensation plans
approved by
security holders
    
    
    
    616,667
    
    
    
    $
    0.19
    
    
    
    
    0Equity compensation
plans not approved
by security holders
    
    
    
    1,920,962
    
    
    
    $
    0.16
    
    
    
    
    0TOTAL
    
    
    
    2,537,629
    
    
    
    
    
    
    
    
    
    0
 19




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##### Table of Contents



ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
   Name and Address of Beneficial Owner
    
    Number of Shares
    
    
    %Officers and DirectorsJames R. Musick(1) (2)
    
    
    2,317,403
    
    
    
    21.75
    %12635 E. Montview Blvd.,
Aurora, Colorado 80010Erik Van Horn(3)
    
    
    530,516
    
    
    
    4.84
    %12635 E. Montview Blvd.,
Aurora, Colorado 80010James T. Posillico(4)
    
    
    531,765
    
    
    
    4.77
    %5 Topping Way
Chester, New Jersey 07930Officers and Directors as a group(1) (2) (,3) (4)
    
    
    3,379,684
    
    
    
    29.35
    %(3 individuals)Other Beneficial OwnersRoger D. Hurst(5)
    
    
    1,122,096
    
    
    
    10.57
    %8100 Southpark Way, Unit B-1
Littleton, CO 80120The James R. Musick Trust
    
    
    1,830,414
    
    
    
    17.23
    %12635 E. Montview Blvd.
Aurora, Colorado 80010Lloyd Hansen
    
    
    1,140,000
    
    
    
    10.73
    %2646 S.W.
Mapp Rd, Ste. #304 Palm City, FL 34990
 
 (1)
    
    Includes 31,848 shares of common stock underlying an option immediately
exercisable.(2)
    
    Includes 1,730,414 shares held by The James R. Musick Trust, of which Mr.
Musick is a trustee and beneficiary.(3)
    
    Includes 330,516 shares of common stock underlying options immediately
exercisable .(4)
    
    Includes 531,765 shares of common stock underlying options immediately
exercisable.(5)
    
    Includes 10,386 shares owned by Compion and 3,000 owned by Compion
Management Services, Inc., companies in which Mr. Hurst is the sole shareholder 20




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Changes in Control
  
 ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
    
 PART IV
 
 ITEM 13.
    
    EXHIBITSThe following is a list of exhibits filed or incorporated by reference into this Report:No.
    
    Description1
    
    Not applicable.2
    
    Not applicable.3.1.1(1)
    
    Articles of Incorporation of the Company as filed March 31, 1986 with the
Nevada Secretary of State.3.1.2(2)
    
    Certificate of Merger of Domestic and Foreign Corporations as filed December
17, 1986 with the Nevada Secretary of State.3.1.3(3)
    
    Certificate of Amendment of Articles of Incorporation as filed February 6, 1987
with the Nevada Secretary of State.3.1.4(2)
    
    Certificate of Amendment of Articles of Incorporation as filed May 18, 1988
with the Nevada Secretary of State.3.1.5(4)
    
    Amended and Restated Articles of Incorporation of Vitro Diagnostics, Inc., as
filed July 20, 2001 with the Nevada Secretary of State3.2(3)
    
    Bylaws of the Company.4.1(3)
    
    Specimen certificate for Common Shares, $.001 par value per share.9
    
    Not applicable.10.1(5)
    
    Equity Incentive Plan dated October 9, 200010.2(6)
    
    Promissory note issued by Erik Van Horn to the Company dated May 7, 2002.10.3(6)
    
    Promissory note issued by the Company to James R. Musick dated August 23, 2002.10.4(6)
    
    Agreement for Liquidation of Shares between the Co. and World Wide Capital
Investors dated June 17, 2002.
 21




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No.
    
    Description10.5(7)
    
    Consulting Agreement between Sussex Avenue Partners, LLC and Vitro Diagnostics,
Inc. dated February 1, 2005.10.6(8)
    
    Executive Employment Agreement between the Company and James R. Musick dated
April 1, 2005.10.7(9)
    
    Executive Employment Agreement between the Company and James Posillico dated
April 1, 2005.11
    
    Not applicable.13
    
    Not applicable.14
    
    Not applicable.16
    
    Not applicable.18
    
    Not applicable.20
    
    Not applicable.21
    
    Not applicable.22
    
    Not applicable23
    
    Not applicable.24
    
    Not applicable.31.1
    
    Certification pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of
1934, as amended.31.2
    
    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 2002.99
    
    Not applicable.
 
 (1)
    
    Filed as an Exhibit to Form 10-KSB dated October 31, 2000.(2)
    
    Filed as an Exhibit to Form 10-KSB/A dated July 31, 2000.(3)
    
    Filed as an Exhibit to Registration Statement on Form SB-2, SEC File No. 33-59230
and incorporated herein by reference.(4)
    
    Filed as an Exhibit to Form 10-KSB for the year ended October 31, 2001.(5)
    
    Filed as an Exhibit to the definitive Proxy Statement on Schedule 14/A as filed
with the Commission on October 30, 2000 and incorporated herein by reference.(6)
    
    Filed as an Exhibit to Form 10-KSB for the year ended October 31, 2002.(7)
    
    Filed as Exhibit 10.7 to the Annual Report on Form 10-KSB for the year ended
October 31, 2004 and incorporated herein by reference.(8)
    
    Filed as Exhibit 10.1 to the current report on Form 8-K dated April 8, 2005 and
incorporated herein by reference.

(9) Filed as Exhibit 10.2 to the current report on Form 8-K dated April 8, 2005 and
incorporated herein by reference. 
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  22




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Audit Fees
  All Other Fees
  23




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SIGNATURES
 th
 VITRO DIAGNOSTICS, INC./s/ James R. MusickJames R. Musick, Chairman
  Signatures
    
    Title
    
    Date/s/ James T. Posillico
    
    
    
    February 6, 2006James T. Posillico
    
    President, Chief Executive Officer,
and Director/s/ James R. Musick
    
    
    
    February 6, 2006James R. Musick
    
    Chairman, Chief Operating
Officer, Principal Financial and Accounting
Officer and Director
 24




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VITRO DIAGNOSTICS, INC.
 Index to Financial Statements
 PageIndependent auditors report (2004)
    
    F-2Independent auditors report (2005)
    
    F-3Balance sheet at October 31, 2005
    
    F-4Statements of operations for the years ended October 31, 2005 and 2004
    
    F-5Statement of changes in shareholders deficit for the two years ended October 31, 2005 and 2004
    
    F-6Statements of cash flows for the years ended October 31, 2005 and 2004
    
    F-7Notes to financial statements
    
    F-8
 F-1




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
      
 F-2




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Report of Independent Registered Public Accounting Firm
 
      
  F-3




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VITRO DIAGNOSTICS, INC.
 
 Balance Sheet
  AssetsCurrent assets:Inventory, at cost
    
    $
    3,815Total current assets
    
    
    3,815Equipment, net of accumulated depreciation of $20,518
    
    
    2,244Patents, net of accumulated amortization of $9,039
    
    
    20,278Deferred costs
    
    
    44,197Other assets
    
    
    5,193$
    75,727Liabilities and Shareholders DeficitCurrent liabilities:Bank overdraft.
    
    $
    360Current maturities on note payable (Note E)
    
    
    6,000Capital lease obligation (Note E)
    
    
    2,560Accounts payable
    
    
    27,990Due to officer (Note B)
    
    
    9,208Note payable to officer (Note B)
    
    
    68,800Accrued interest payable to officer (Note B)
    
    
    12,041Accrued salaries (Note B)
    
    
    378,315Lines of credit (Note D)
    
    
    83,943Total current liabilities
    
    
    589,217Long-term debt (Note E):Note payable, less current maturities
    
    
    13,032Total liabilities
    
    
    602,249Commitments and Contingencies (Notes A, B, G, and H)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;
10,620,555 shares issued and outstanding
    
    
    10,621Additional paid-in capital
    
    
    4,542,078Officer loan to exercise options, including $955 of accrued interest (Note B)
    
    
    (2,035
    )Common stock options - 2,637,629 outstanding
    
    
    8,003Accumulated deficit
    
    
    (5,085,189
    )Total shareholders deficit
    
    
    (526,522
    )$
    75,727
  F-4




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VITRO DIAGNOSTICS, INC.
 
 Condensed Statements of Operations
 For the Years EndedOctober 31,2005
    
    
    2004Product sales
    
    $
    17,973
    
    
    $
    929Operating costs and expenses:Research and development
    
    
    132,134
    
    
    
    100,307Stock-based compensation (Note F)
    
    
    115,000
    
    
    
    Selling, general and administrative
    
    
    174,150
    
    
    
    37,423Impairment of intangible assets (Note A)
    
    
    
    
    
    
    36,951Total operating costs and expenses
    
    
    421,284
    
    
    
    174,681Loss from operations
    
    
    (403,311
    )
    
    
    (173,752
    )Other income (expense):Interest income, officer loan (Note B)
    
    
    70
    
    
    
    134Interest expense
    
    
    (21,581
    )
    
    
    (13,240
    )Loss before income taxes
    
    
    (424,822
    )
    
    
    (186,858
    )Provision for income taxes (Note C)
    
    
    
    
    
    
    Net loss
    
    $
    (424,822
    )
    
    $
    (186,858
    )Basic and diluted net loss per common share
    
    $
    (0.04
    )
    
    $
    (0.02
    )Shares used in computing basic and diluted
net loss per common share
    
    
    10,443,632
    
    
    
    9,788,472
  F-5




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VITRO DIAGNOSTICS, INC.
 
 Statement of Changes in Shareholders Deficit
 Loan toOfficerAdditional
    
    
    to ExercisePreferred Stock
    
    
    Common Stock
    
    
    Paid-in
    
    
    Stock
    
    
    Stock
    
    
    AccumulatedShares
    
    
    Amount
    
    
    Shares
    
    
    Par Value
    
    
    Capital
    
    
    Options
    
    
    Options
    
    
    Deficit
    
    
    TotalBalance, October 31, 2003
    
    
    
    
    
    $
    
    
    
    
    9,460,972
    
    
    $
    9,461
    
    
    $
    4,372,138
    
    
    $
    (8,651
    )
    
    $
    8,003
    
    
    $
    (4,473,509
    )
    
    $
    (92,558
    )Common stock options exercised,
$.075 per share (Note B)
    
    
    
    
    
    
    
    
    
    
    133,333
    
    
    
    133
    
    
    
    9,867
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,000Common stock options exercised,
$.04 per share (Note B)
    
    
    
    
    
    
    
    
    
    
    250,000
    
    
    
    250
    
    
    
    9,750
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,000Common stock sold to an officer at
$.10 per share (Note B)
    
    
    
    
    
    
    
    
    
    
    100,000
    
    
    
    100
    
    
    
    9,900
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,000Common stock sold to an investor at
$.08 per share (Note B)
    
    
    
    
    
    
    
    
    
    
    76,250
    
    
    
    77
    
    
    
    6,023
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,100Officer compensation charged against the
loan to officer (Note B)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,360
    
    
    
    
    
    
    
    
    
    
    
    6,360Interest accrued on officers equity loan (Note B)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (134
    )
    
    
    
    
    
    
    
    
    
    
    (134
    )Net loss for the year ended October 31, 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (186,858
    )
    
    
    (186,858
    )Balance, October 31, 2004
    
    
    
    
    
    
    
    
    
    
    10,020,555
    
    
    
    10,021
    
    
    
    4,407,678
    
    
    
    (2,425
    )
    
    
    8,003
    
    
    
    (4,660,367
    )
    
    
    (237,090
    )Common stock issued in exchange for
consulting services, $.20 per share (Note B)
    
    
    
    
    
    
    
    
    
    
    500,000
    
    
    
    500
    
    
    
    99,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,000Common stock sold to an officer at
$.20 per share (Note B)
    
    
    
    
    
    
    
    
    
    
    100,000
    
    
    
    100
    
    
    
    19,900
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,000Common stock options granted to officers
(Note F)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,000Officer compensation charged against the
loan to officer (Note B)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    460
    
    
    
    
    
    
    
    
    
    
    
    460Interest accrued on officers equity loan (Note B)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (70
    )
    
    
    
    
    
    
    
    
    
    
    (70
    )Net loss for the year ended October 31, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (424,822
    )
    
    
    (424,822
    )Balance, October 31, 2005
    
    
    
    
    
    $
    
    
    
    
    10,620,555
    
    
    $
    10,621
    
    
    $
    4,542,078
    
    
    $
    (2,035
    )
    
    $
    8,003
    
    
    $
    (5,085,189
    )
    
    $
    (526,522
    )
  F-6




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##### Table of Contents



VITRO DIAGNOSTICS, INC.
 
 Statements of Cash Flows
 For the Years EndedOctober 31,2005
    
    
    2004Cash flows from operating activities:Net loss
    
    $
    (424,822
    )
    
    $
    (186,858
    )Adjustments to reconcile net loss to net cash used in
operating activities:Depreciation and amortization
    
    
    4,580
    
    
    
    7,245Impairment of intangible assets (Note A)
    
    
    115,000
    
    
    
    36,951Interest income recognized on Officers equity loan (Note B)
    
    
    (70
    )
    
    
    (134
    )Services charged against Officers equity loan (Note B)
    
    
    460
    
    
    
    6,360Changes in current assets and current liabilities:(Increase) in accounts receivable, inventories,
prepaid expenses and deposits
    
    
    (1,128
    )
    
    
    (2,839
    )Increase in accounts payable, accrued expenses
and payroll taxes payable
    
    
    253,830
    
    
    
    67,709Net cash used in operating activities
    
    
    (52,150
    )
    
    
    (71,566
    )Cash flows from investing activities:Purchases of property and equipment
    
    
    (1,328
    )
    
    
    (601
    )Payments for patents and deferred costs
    
    
    (13,797
    )
    
    
    (6,121
    )Net cash used in investing activities
    
    
    (15,125
    )
    
    
    (6,722
    )Cash flows from financing activities:Proceeds from issuance of notes payable (Note B)
    
    
    34,261
    
    
    
    18,446Principal payments on notes payable
    
    
    (5,464
    )
    
    
    (5,705
    )Proceeds from line of credit, net
    
    
    15,098
    
    
    
    39,815Principal payments on capital lease
    
    
    (3,808
    )
    
    
    (3,180
    )Proceeds from common stock options exercised
    
    
    
    
    
    
    20,000Proceeds from sale of common stock
    
    
    20,000
    
    
    
    16,100Net cash provided by (used in) financing activities
    
    
    60,087
    
    
    
    85,476Net change in cash
    
    
    (7,188
    )
    
    
    7,188Cash, beginning of year
    
    
    7,188
    
    
    
    Cash, end of year
    
    $
    
    
    
    $
    7,188Supplemental disclosure of cash flow information:Cash paid during the year for:Interest
    
    $
    16,499
    
    
    $
    9,198Income taxes
    
    $
    
    
    
    $
    
  F-7




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##### Table of Contents



VITRO DIAGNOSTICS, INC.
 
 Notes to Financial Statements
 NOTE A:
    
    NATURE OF ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Nature of Organization
   
 Summary of Significant Accounting Policies
 Use of estimates
  F-8




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##### Table of Contents



VITRO DIAGNOSTICS, INC.
Notes to Financial Statements
 Cash equivalents
  Inventory
 
 Property, equipment and depreciation
   Patents, deferred costs and amortization
  Year ended October 31,2005
    
    $
    2,9322006
    
    
    2,9322007
    
    
    2,9322008
    
    
    2,9322009
    
    
    2,932$
    14,660
  F-9




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##### Table of Contents



VITRO DIAGNOSTICS, INC.
Notes to Financial Statements
 PatentMethod for purifying FSH (3
patents)
    
    $
    These patents detail methods to manufacture highly purified FSH
from various sources including human cells and animal extracts
of pituitary glands. (See impairment below)Immortalized cell lines and methods of making the same (1
patent)
    
    
    29,317This patent is for proprietary technology related to the
immortalization of human cells, which could be used in the
treatment of degenerative diseases and drug discoveryLess: accumulated
amortization
    
    
    (9,039
    )$
    20,278
 Deferred costsMethod for purifying FSH, continuation-
in-part
application
    
    $
    This patent application is a continuation on the above patents
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, and in the
European Patent office. (See impairment below)Immortalization of human cell lines
(VITROPIN-V)
    
    
    34,090This 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 officeStem Cells
    
    
    10,107This 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 therapeuticsMulti-dose syringe driver
(VITROJECT)
    
    
    Patent application for a device designed to administer injections
more easily and economically. (See impairment below)
    
    $
    44,197
 Impairment and Disposal of Long-Lived Assets
  F-10




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##### Table of Contents



VITRO DIAGNOSTICS, INC.
Notes to Financial Statements
  October 31, 2004
    
    
    
    
    
    AccumulatedAmortization
    
    
    Book Value
    
    
    
    
    
    
    Book Value atOriginal
    
    
    Through
    
    
    Prior to
    
    
    Asset
    
    
    October 31,Description
    
    Cost
    
    
    April 30, 2003
    
    
    Impairment
    
    
    Impairment
    
    
    2004Deferred Intellectual Property Costs:Multi-dose syringe driver
    
    $
    36,951
    
    
    $
    
    
    
    $
    36,951
    
    
    $
    (36,951
    )
    
    $
    
 Income taxes
  Revenue and cost recognition
  Fair value of financial instruments
  Net loss per share
  Stock-based compensation
  F-11




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##### Table of Contents



VITRO DIAGNOSTICS, INC.
Notes to Financial Statements
  Recent accounting standards
   NOTE B: RELATED PARTY TRANSACTIONS
 Indebtedness to officer
  Notes payable
  F-12




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##### Table of Contents



VITRO DIAGNOSTICS, INC.
Notes to Financial Statements
 Date of
    
    
    
    
    
    Interest
    
    Accrued
    
    Date ofNote
    
    Principal
    
    Rate
    
    Interest
    
    Maturity
    
    Collateral
    
    StatusAugust 23, 2002
    
    $
    20,000
    
    
    
    10.00
    %
    
    $
    5,900
    
    
    August 23, 2003
    
    Lein on FSH patent
    
    DefaultMay 15, 2003
    
    
    10,000
    
    
    
    10.00
    %
    
    
    2,458
    
    
    May 15, 2005
    
    None
    
    DefaultSeptember 2, 2003
    
    
    10,000
    
    
    
    10.00
    %
    
    
    2,167
    
    
    August 15, 2005
    
    None
    
    DefaultOctober 14, 2004
    
    
    10,000
    
    
    
    10.00
    %
    
    
    1,042
    
    
    Demand
    
    None
    
    OpenJanuary 14, 2005
    
    
    2,200
    
    
    
    10.00
    %
    
    
    174
    
    
    Demand
    
    None
    
    OpenApril 29, 2005
    
    
    500
    
    
    
    10.00
    %
    
    
    25
    
    
    Demand
    
    None
    
    OpenMay 4, 2005
    
    
    2,000
    
    
    
    10.00
    %
    
    
    100
    
    
    Demand
    
    None
    
    OpenAugust 14, 1005
    
    
    5,000
    
    
    
    10.00
    %
    
    
    104
    
    
    Demand
    
    None
    
    OpenSeptember 16, 2005
    
    
    2,500
    
    
    
    10.00
    %
    
    
    31
    
    
    Demand
    
    None
    
    OpenOctober 3, 2005
    
    
    3,000
    
    
    
    10.00
    %
    
    
    25
    
    
    Demand
    
    None
    
    OpenOctober 18, 2005
    
    
    3,600
    
    
    
    10.00
    %
    
    
    15
    
    
    Demand
    
    None
    
    Open$
    68,800
    
    
    
    
    
    
    $
    12,041
  Employment agreements and accrued salary
     
    
    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 VITROPIN, or the sale or out-license of the Companys drug
technology to a third party;
 F-13




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##### Table of Contents



VITRO DIAGNOSTICS, INC.
Notes to Financial Statements
 
    
    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.
  
    
    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.
   Officer loan
  F-14




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##### Table of Contents



VITRO DIAGNOSTICS, INC.
Notes to Financial Statements
 Common stock sales
   NOTE C: INCOME TAXES
  October 31,2005
    
    
    2004U.S. federal statutory graduated
rate
    
    
    34.00
    %
    
    
    29.60
    %State income tax rate, net of federal
benefit
    
    
    3.06
    %
    
    
    3.26
    %Net operating loss for which no tax benefit
is currently
available
    
    
    -37.06
    %
    
    
    -32.86
    %Effective rate
    
    
    0.00
    %
    
    
    0.00
    %
    NOTE D: LINES OF CREDIT
   F-15




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##### Table of Contents



VITRO DIAGNOSTICS, INC.
Notes to Financial Statements
 NOTE E: LONG-TERM DEBT
 Note Payable
  Year ended October 31,2006
    
    $
    6,0002007
    
    
    6,0002008
    
    
    6,0002009
    
    
    1,032$
    19,032
 Capital Lease Obligation
  Year ended October 31,2006
    
    $
    2,717Less: imputed
interest
    
    
    (157
    )Present
value of net minimum lease payments
    
    $
    2,560
  NOTE F: SHAREHOLDERS EQUITY
  Incentive plans
   F-16




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##### Table of Contents



VITRO DIAGNOSTICS, INC.
Notes to Financial Statements
  Options Outstanding
    
    
    Options Exercisable
    
    
    Weighted AverageNumber of
    
    
    Exercise Price
    
    
    Number of
    
    
    Exercise Price
    
    
    Exercise PriceShares
    
    
    Per Share
    
    
    Shares
    
    
    Per Share
    
    
    Per ShareBalance at October
31,
2003
    
    
    789,197
    
    
    $
    .04 to $.81
    
    
    
    789,197
    
    
    $
    .04 to $.81
    
    
    $
    0.14Options
granted
    
    
    31,765
    
    
    $0.17
    
    
    
    31,765
    
    
    $0.17
    
    
    $
    0.17Options
exercised
    
    
    (383,333
    )
    
    $
    .04 to $.075
    
    
    
    (383,333
    )
    
    $
    .04 to $.075
    
    
    $
    0.05Options
expired
    
    
    
    
    
    $0.00
    
    
    
    
    
    
    $0.00    
    
    $
    Balance at October
31,
2004
    
    
    437,629
    
    
    $
    .08 to $.81
    
    
    
    437,629
    
    
    $
    .08 to $.81
    
    
    $
    0.21Options
granted
    
    
    2,100,000
    
    
    $
    .08 to $.22
    
    
    
    500,000
    
    
    $
    .08 to $.17
    
    
    $
    0.17Options
exercised
    
    
    
    
    
    $0.00    
    
    
    
    
    
    $0.00    
    
    $
    Options
expired
    
    
    
    
    
    $0.00    
    
    
    
    
    
    $0.00    
    
    $
    Balance at October
31,
2005
    
    
    2,537,629
    
    
    $
    .08 to $.81
    
    
    
    937,629
    
    
    $
    .08 to $.81
    
    
    $
    0.23
 Stock options  employees
    Risk-free interest rate
    
    
    2.34
    %Dividend yield
    
    
    0.00
    %Volatility factor
    
    
    124.78
    %Weighted average expected life
        
    10 years
 F-17




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##### Table of Contents



VITRO DIAGNOSTICS, INC.
Notes to Financial Statements
   Risk-free interest rate
    
    
    3.00
    %Dividend yield
    
    
    0.00
    %Volatility factor
    
    
    109.79
    %Weighted average expected life
    
    5 years
  For the Years EndedOctober 31,2005
    
    
    2004Net loss, as reported
    
    $
    (424,822
    )
    
    $
    (186,858
    )Pro forma net loss
    
    $
    (499,072
    )
    
    $
    (191,146
    )Basic and diluted net loss per common
share, as reported
    
    $
    (0.04
    )
    
    $
    (0.02
    )Pro forma basic and diluted net loss
per common share
    
    $
    (0.05
    )
    
    $
    (0.02
    )
 NOTE G: COMMITMENT
  F-18
    Table of Contents   VITRO DIAGNOSTICS, INC.
Notes to Financial Statements
 NOTE H: LETTER OF INTENT
    F-19




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##### Table of Contents



EXHIBIT INDEX
 No.
    
    Description1
    
    Not applicable.2
    
    Not applicable.3.1.1(1)
    
    Articles of Incorporation of the Company as filed March 31, 1986 with the
Nevada Secretary of State.3.1.2(2)
    
    Certificate of Merger of Domestic and Foreign Corporations as filed December
17, 1986 with the Nevada Secretary of State.3.1.3(3)
    
    Certificate of Amendment of Articles of Incorporation as filed February 6, 1987
with the Nevada Secretary of State.3.1.4(2)
    
    Certificate of Amendment of Articles of Incorporation as filed May 18, 1988
with the Nevada Secretary of State.3.1.5(4)
    
    Amended and Restated Articles of Incorporation of Vitro Diagnostics, Inc., as
filed July 20, 2001 with the Nevada Secretary of State3.2(3)
    
    Bylaws of the Company.4.1(3)
    
    Specimen certificate for Common Shares, $.001 par value per share.9
    
    Not applicable.10.1(5)
    
    Equity Incentive Plan dated October 9, 200010.2(6)
    
    Promissory note issued by Erik Van Horn to the Company dated May 7, 2002.10.3(6)
    
    Promissory note issued by the Company to James R. Musick dated August 23, 2002.10.4(6)
    
    Agreement for Liquidation of Shares between the Co. and World Wide Capital
Investors dated June 17, 2002.
 22




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##### Table of Contents



No.
    
    Description10.5(7)
    
    Consulting Agreement between Sussex Avenue Partners, LLC and Vitro Diagnostics,
Inc. dated February 1, 2005.10.6(8)
    
    Executive Employment Agreement between the Company and James R. Musick dated
April 1, 2005.10.7(9)
    
    Executive Employment Agreement between the Company and James Posillico dated
April 1, 2005.11
    
    Not applicable.13
    
    Not applicable.14
    
    Not applicable.16
    
    Not applicable.18
    
    Not applicable.20
    
    Not applicable.21
    
    Not applicable.22
    
    Not applicable23
    
    Not applicable.24
    
    Not applicable.31.1
    
    Certification pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of
1934, as amended.31.2
    
    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 2002.99
    
    Not applicable.
 
 (1)
    
    Filed as an Exhibit to Form 10-KSB dated October 31, 2000.(2)
    
    Filed as an Exhibit to Form 10-KSB/A dated July 31, 2000.(3)
    
    Filed as an Exhibit to Registration Statement on Form SB-2, SEC File No. 33-59230
and incorporated herein by reference.(4)
    
    Filed as an Exhibit to Form 10-KSB for the year ended October 31, 2001.(5)
    
    Filed as an Exhibit to the definitive Proxy Statement on Schedule 14/A as filed
with the Commission on October 30, 2000 and incorporated herein by reference.(6)
    
    Filed as an Exhibit to Form 10-KSB for the year ended October 31, 2002.(7)
    
    Filed as Exhibit 10.7 to the Annual Report on Form 10-KSB for the year ended
October 31, 2004 and incorporated herein by reference.(8)
    
    Filed as Exhibit 10.1 to the current report on Form 8-K dated April 8, 2005 and
incorporated herein by reference.(9)
    
    Filed as Exhibit 10.2 to the current report on Form 8-K dated April 8, 2005 and
incorporated herein by reference. 23