SECURITIES AND EXCHANGE COMMISSION
                         WASHINGTON, D.C.  20549

                          REPORT ON FORM 10-KSB

      [X]  Annual Report pursuant to Section 13 or 15(d) of the
           Securities Exchange Act of 1934

      For the fiscal year ended April 30, 2001

               Transition Report pursuant to Section 13 or 15(d) of
               The Securities Exchange Act of 1934

     For the transition period from ___________________ to ___________________.

Commission File No. 0-27028
                    -------
                            EMBRYO DEVELOPMENT CORPORATION
                         ------------------------------------
                  (Exact name of registrant as specified in its charter)

        Delaware                                           13-3832099
   -----------------                                      ------------
  (State of or other jurisdiction                        (IRS Employer
   of incorporation or organization)                   Identification No.)

565 Fifth Avenue
New York, New York                                           10017
----------------------                                    ----------
(Address of Principal                                     (Zip Code)
   Executive Officers)

Registrant's telephone number, including area code:   (212) 808-0607

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

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

                       Common Stock, par value $.0001 per share
                      ------------------------------------------
                                  (Title of Class)


     Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act
of 1934 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.  Yes  X   No
                                                               ---
     Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of the Regulation S-B is not contained in this form, and no
disclosure will 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-KSB or any amendment to this Form 10-KSB. [X]

     Issuer's revenues for its most recent fiscal year were $-0-.

     The aggregate market value of the voting stock held by non-affiliates of
the Registrant, computed by reference to the closing price of such stock as
of July 27, 2001, was approximately $318,437.

     Number of shares outstanding of the issuers common stock, as of July 27,
2001, was 6,995,000.
                        DOCUMENTS INCORPORATED BY REFERENCE:  None.

<Page>


                                      PART I
                                     --------
Item 1.  BUSINESS.
         ---------
     Embryo Development Corporation, is a development stage Delaware corporation
(the "Company" or  "Embryo"), which was organized in March 1995 to develop,
acquire, manufacture and market various bio-medical devices. The Company had
licensed a patent for a product which was being developed to be sold in the
medical field. The Company has not derived any significant revenues since its
inception.  In addition, the Company holds patents for products in two (2)
distinct market segments; emergency medical equipment and peritoneal dialysis
warming devices.

     The Company was a licensee  to seven (7) license agreements (the "License
Agreements") and two (2) royalty sharing agreements (the "Royalty Sharing
Agreements") with Dr. Lloyd Marks which provided  for the exclusive license of
seven medical devices and the sharing of royalties of two (2) medical
devices, all of which had been developed by Dr. Marks ("Marks Medical Devices").
The Marks Medical Devices included  a self-shielding needle, adjustable blood
pressure cuff, a multi-function fluid communication control system and
stereoscopic fluoroscopy apparatus.  On August 21, 1998 the Company notified
Dr. Marks that it was terminating the License  agreements with respect to six
(6) of the devices as it could not make the minimum payments  required under
the agreements; these devices included the adjustable blood pressure cuff, a
multi-function fluid communication control system and  stereoscopic
fluoroscopy apparatus.    The minimum payment obligations with respect to the
self-shielding needle were made in accordance with the terms of the original
agreement and that License Agreement was retained and later amended as to the
minimum payment obligations on January 22, 1999. See "Certain Transactions".
In January, 2001, the license agreement for the seventh device, the
self-shielding needle, effectively terminated as the Company could not obtain
the necessary government approval within the required twenty-four (24) month
timeframe in the amended license agreement since the Company had halted
development of the device due to capital constraints.  The Company also could
not pay the licensor the required additional $250,000, under the terms of the
amended agreement, to extend the regulatory approval requirement.

     The termination of  the above  license agreements follows a determination
by management to conserve capital and that the seven products licensed could not
profitably be developed and commercially marketed by the Company at this time.
However, management of the Company believes its relationship with Dr. Marks
continues to be good.
                                     2
<Page>


In addition, Dr. Marks has given the Company a right of first refusal on any
devices he should develop in the future.

     The Company holds patents to five (5) other  medical devices and is the
exclusive licensee of one (1) medical device in the areas of emergency medical
equipment and peritoneal dialysis warming devices ("C.F. Medical Devices").
Two (2) of the devices, the Hot-Sack II(TM) and Hot-SackII+(TM), are used in
connection with the warming of peritoneal dialysis solution.  Four (4) of the
devices, Hot-Sack(R), Res-Q-Air(R), Therm-O-Drug(TM) and an electronic
stethoscope, are devices used for emergency rescue operations and by other
emergency medical technicians.  Three of the devices (Hot-Sack(R), Res-Q-Air(R)
and Therm-O-Drug(TM) have received all necessary regulatory approval
under the "510(k) review" process of the U.S. Food and Drug Administration
(" FDA")  and the Company believes that the additional two (2) products (Hot-
Sack II(TM) and Hot-Sack II+(TM) are covered by the FDA's approval of
Hot-Sack(R) or would independently qualify for 510(k) approval. The Company
has received minimal sales revenues from such product sales. In October, 1999,
the Company ceased sales on these medical products due to the relatively low
level of sales, capital constraints and price increases by the manufacturer.
The Company is presently evaluating the marketability of these patents and
exploring alternative means of production of these products.  However, even
if alternative means of production of these products is found, the Company
would still need to obtain additional capital to restart production, for which
there can be no assurance.

     The Company also holds a 12.7% minority investment interest in Hydrogel
Design Systems, Inc. ("HDS"), a privately held company engaged in the
manufacturing, marketing, selling and distribution of hydrogel materials.
Hydrogel is a product used in wound care as well as a component of a variety
of medical devices including cardiac defibrillator pads and various types of
electrodes. HDS was partially financed through a long-term note and security
agreement between HDS and Becton Dickinson Transdermal Systems, a division of
Becton Dickinson and Company, a customer of HDS and a manufacturer and
distributor of medical devices and diagnostic systems.  See "Certain
Transactions."


                                    3

<Page>



CF MEDICAL DEVICES
------------------
Emergency Medical Devices and Peritoneal Dialysis Devices

     The Company owns three (3) medical devices, Hot-Sack(R), Therm-o-Drug(TM)
and an electronic stethoscope, and is the exclusive licensee of one (1) medical
device, Res-Q-Air(TM), all of which are used in medical rescue operations by
ambulances and other emergency medical technicians. In addition, the Company
owns two (2) devices, Hot-Sack II(TM) and Hot Sack II+(TM), that are used in
the warming of peritoneal dialysis solution.  The Company has received
minimal revenues from sales of such products. In October, 1999, the Company
ceased sales on these medical products due to the relatively low level of
sales, capital constraints and price increases by the manufacturer.  The
Company is presently evaluating the marketability of these patents and
exploring alternative means of production of these products. However, even if
alternative means of production of these products is found, the Company would
still need to obtain additional capital to restart production for which
there can be no assurance.

Hydrogel Design Systems
-----------------------
     The major focus of HDS, in which the Company has a 12.7% minority
investment interest, is the manufacture of hydrogel materials, on an original
equipment manufacturer ("OEM") basis, for the manufacture of medical devices,
drug delivery products, wound care and cosmetics products. Hydrogel is
manufactured by introducing a polymer (solid) into water, creating a feed
mix. The feed mix is used to coat a web material (or scrim) and two outer
linings are applied creating sheets of hydrogel. These sheets are then
introduced to a high energy field, which is accomplished by using an electron
beam accelerator. The introduction of a high energy field causes the release
of hydrogen atoms which in turn causes carbon molecule covalent bonding. This
is commonly referred to as crosslinking. This creates longer chains of the
polymer in the gel which increases its molecular integrity, giving the gel
unique characteristics which make it useful in a variety of products. By
varying the percent of solids in the feed mix, the amount of crosslinking
(which is determined by the amount of energy introduced), the type of polymer,
scrim and lining used, a wide variety of gels with distinctly different
characteristics may be produced.

     The Company believes that HDS's proprietary mixing and beam operation
technology allow it to make superior quality products at competitive prices. HDS
currently provides product to several Fortune 500 companies, as well as
other, smaller companies. These customers are using the HDS hydrogel for
wound dressings, transdermal drug delivery systems and electrodes.

                                  4
<Page>


      HDS has an electron beam and is operating in leased space from the Company
in Langhorne, PA. The facility became operational in the fourth quarter of
calendar year 1997.

     Hydrogel and other electron beam accelerator processed products are being
marketed both through internal contacts with a few world-wide health
distributors and through its own internal sales force.

Sales and Marketing
-------------------
     The Company had marketed the C.F. Medical Devices through independent
distributors worldwide.  In October, 1999, the Company ceased sales on these
medical products due to the relatively low level of sales, capital constraints
and price increases by the manufacturer.

     Management will determine the appropriate marketing strategy for any
products which are developed in the future as these products come to market.


Manufacturing
-------------
     The Company's medical devices must be manufactured in compliance with
applicable regulatory requirements and at acceptable cost.  Many of the
Company's competitors rely on third party manufacturers to produce and
assemble some or all of the components of their products.  The Company's
success depends to a material degree upon its ability to contract with third
parties to manufacture the Company's proposed products according to the
Company's designs and specifications, in accordance with applicable regulations,
and at a unit cost to the Company that will permit the Company to market its
products at an acceptably competitive purchase price to its customers.

     Management believes, although there can be no assurance, that the Company
will be able to obtain sources of manufacturing supply for its products that
will satisfy the foregoing requirements, should manufactuting operations be
restarted.

Competition
-----------
     Competition in the medical device industry is intense.  There are many
companies and academic institutions that are capable of developing products of
similar design, and that have developed and are capable of developing
products based on other technologies, that are or may be competitive with the
Company's medical devices.  Many of those companies and academic institutions
are well-established, have substantially greater financial and other resources
than the Company, and have established reputations for success in the
development, sale and service of products.  These companies and academic
institutions may succeed in developing competing products that are more
effective than those of the Company or that receive FDA approval more
quickly than the Company's products.  The Company's ability to compete will
be dependent upon its ability to get products approved by regulatory authorities
and introduced to the market, including the arrangement of a distribution
network, and to provide products with advanced performance features, none of
which can be assured.  In addition, the Company must compete with other existing
and new technologies in the allocation of hospitals' capital spending budgets.

                                      5

Government Regulation
---------------------
     The majority of the Company's products are subject to regulation by, among
other governmental entities, the United States Food and Drug Administration
("FDA") and, to a lesser extent, correspondent state agencies.  If a device is
subject to FDA regulation, compliance with its requirements usually
constitutes compliance with state regulation. In order to ensure that medical
products distributed for human use in the United States are safe and
effective, the FDA regulates the introduction, manufacture, advertising,
labeling, packaging, marketing and distribution of and record-keeping for
such products.

     In manufacturing some of its products, the Company must comply with FDA
regulations and is subject to various other FDA record-keeping requirements and
to inspections by the FDA.  The Company believes that the manufacturing and
quality control procedures it will follow  will meet the requirements of
these regulations.  The FDA would have the authority, in addition to less
drastic remedies, to order the Company to cease production of its products and
to request that the Company recall products already sold by the Company.  The
FDA may conduct periodic inspections of the Company's facilities in order to
confirm regulatory compliance by the Company, but has not yet done so.  If
the FDA believes that its regulations and other guidelines have not been
followed, it may seek to implement extensive enforcement powers, which were
recently strengthened by the enactment of the Safe Medical Devices Act of
1990.  The FDA's powers include the ability to ban products from the market,
prohibit the operation of manufacturing facilities and effect recalls of
products from customer locations and impose monetary civil penalties.  The
Company believes that it is in substantial compliance with applicable FDA
regulations.

      Three (3) of the medical devices that the Company acquired from C.F. have
been approved by the FDA for commercial sale  under a review process known as
"510(k) review" and the Company believes that an additional two (2) products
(Hot-Sack II(TM) and Hot-Sack II+(TM) are covered by the FDA's approval of
Hot Sack(R) or would qualify independently for 510(k) approval.  In the
510(k) review process, a manufacturer is mandated to demonstrate that a proposed
product is "substantially equivalent" to another product that was in commercial
distribution in the United States before May 26, 1976, in which event the
review process can take anywhere from three months to more than one year
before FDA grants clearance of the 510(k) pre-market notification.  In cases
where there is no existing FDA-approved product "substantially equivalent" to
the new proposed product, the product is considered a "new" product.  The new

                                      6

<Page>

product requires a Pre-Market Application ("PMA") which is a lengthier and
more burdensome process and a process which will require FDA approval prior
to the product entering commercial distribution. On May 26, 1998 the Company
completed its 510(k) notification for its Self-Shielding Needle and submitted it
to the FDA. On June 22,1998 the Company received a request for additional
information from the FDA regarding the 510(k) submission.  On July 13, 1998
the Company responded to the FDA's request. Subsequently, the Company was
notified by the FDA that its application was rejected due primarily to
deficiencies in clinical studies and bench test data.  The Company made
design changes to the Self-Shielding Needle and performed a new clinical
study.  A new 510(k) submission was completed on October 16, 1998.
On October 26, 1998, the Company was notified by the FDA that the device
is considered a class III and requires a premarket approval application
(PMA).  The Company halted plans to complete the development of the
Self-Shielding Needle due to capital constraints. In January, 2001, the
license agreement for the  self-shielding needle, effectively terminated, as
the Company could not obtain the necessary government approval within the
required twenty-four (24) month timeframe in the  license agreement.  The
Company also could not pay the licensor the required additional $250,000,
under the terms of the amended agreement, to extend the regulatory
approval requirement.

     After clearance is given, the FDA has the power to withdraw the clearance
or require the Company to change the device or its manufacturing process or
labeling, to supply additional proof of its safety and effectiveness or to
recall, repair, replace or refund the cost of the medical device if
it is shown to be hazardous or defective.  The process of obtaining clearance
to market products is costly and time consuming and can delay the marketing and
sale of any of  the Company's products which may be developed in the future.

Health Care Industry
--------------------
     Legislation and regulations at both the federal and state levels may be
enacted which may change the methods by which health care providers, including
hospitals, physicians and home care dealers, are reimbursed for costs of
providing services to Medicare and Medicaid program beneficiaries.  Changes
may also be made by third-party payors in coverage policies for various
items.


Patents, Proprietary Rights and Trademarks
------------------------------------------
     The Company's policy is to file patent applications to protect technology,
inventions and improvements that are important to the development of its
business.  The Company also relies on trade secret protection for its
confidential and proprietary information.

                                      7
<Page>


     The Company  owns the patent for the Hot Sack and the exclusive license to
the Res-Q-Air, which has been issued a United States patent.  There can be no
assurance that future pending patent applications will be approved or that any
patents will provide competitive advantages for the Company's products or
will not be challenged or circumvented by competitors.  The Company also
relies on trade secrets and proprietary know-how which it seeks to protect,
in part, through confidentiality agreements with employees, consultants and
other parties.  There can be no assurance that these agreements will not be
breached, that the Company would have adequate remedies for any breach, or
that the Company's trade secrets will not otherwise become known to or
independently developed by competitors.  The Company also holds a registered
trademark on Hot-Sack(R) and on SmartMed(TM) which was used on products in
the past  and may be used on future products.


Product Liability Insurance
---------------------------
     Companies in the health care market are subject to lawsuits alleging
negligence, product liability and other legal theories, many of which involve
large claims and significant defense costs.  The Company could be subject to
claims alleging personal injuries resulting from the use of its products.
The Company has obtained product liability insurance since it has commenced
sales of its products.  However, there can be no assurance that such policies
will be sufficient to cover potential claims or the costs of any resulting
litigation or that a policy can be maintained in force at an acceptable cost
to the Company.  A successful claim against the Company in excess of the
Company's insurance coverage could have a material adverse effect upon the
Company's business and results of operations.  In addition, claims against
the Company, regardless of their merit or eventual outcome, also may have a
material adverse effect upon the Company's reputation.  The Company currently
has product liability coverage of $1,000,000 and a $9,000,000 excess liability
policy.


Employees
----------
     As of July 27, 2001, the Company employed three (3) full time persons,
including one (1) in sales marketing and product development, and two (2) in
general administration and finance.  The Company has never had a work stoppage
and its employees are not represented by a labor organization.  The Company
considers its employee relations to be good.

Item 2.  PROPERTIES.
         -----------
     The Company's corporate headquarters are in New York City.   On February
10, 1999, theCompany entered into a sixteen (16) month lease commencing March 1,
1999, for office space which was personally guaranteed by an officer of the

                                       8

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Company. Commencing July 1, 2000, the Company has continued to rent the space
on a month to month basis.  See "Certain Transactions."   The Company
believes that these facilities are adequate to meet its current needs and that
suitable additional or alternative space will be available as needed in the
future on commercially reasonable terms.

     In addition, in February 1997, the Company leased a 16,500 square foot
facility in Langhorne , PA.  The lease is for a term of seven years with an
annual rent of $116,000 which increases to $119,000 per annum over the term
of the lease. The entire facility was  subleased to HDS for the full
rental amount through April 30, 1999.  On May 1, 1999, the amount of the
sublease to HDS was reduced to approximately 82% pro-rata share as the Company
began to utilize a portion of the premises.  In October, 1999, the Company
ceased use of this space and increased the amount of the sublease to the full
rental amount.  In February, 2000, the annual rent was increased to $123,000 as
per the escalation clause in the lease.


Item 3.  LEGAL PROCEEDINGS.
         ------------------
     The Company has been named as a defendant in a consolidated class action
pending before the U.S. District Court for the Eastern District of New York.
In a consolidated complaint, plaintiffs assert claims against the Company and
others under the Securities Act of 1933, the Securities Exchange Act of 1934
and New York common and statutory law arising out of the November 1995
initial public offering of 1 million shares of the Company's common stock.
According to the complaint, the underwriter of the offering, Sterling Foster &
Co., Inc. ("Sterling Foster"), which is also a defendant, manipulated
secondary market trading in shares of the Company's common stock following
the offering and covered certain short positions it created through such
manipulation by purchasing shares of Company stock from persons who owned such
stock prior to the offering pursuant to an  arrangement with such persons that
was not disclosed in the registration statement and prospectus distributed in
connection with the offering.  The complaint seeks unspecified damages.

     In November 1998, it was announced that Michael Lulkin, a director and
Chairman of the Board of Directors of the Company at the time of the Company's
initial public offering, had plead guilty to, among other things, conspiracy
to commit securities fraud.  The charges to which Mr. Lulkin plead were
premised on allegations that Mr. Lulkin, Sterling Foster, and others had
entered into an undisclosed agreement pursuant to which, upon conclusion of the
Company's initial public offering, they would (a) cause Sterling Foster to
release Mr. Lulkin and others who owned Embryo stock prior to the offering
from certain "lock up" agreements restricting them from selling such stock;
and (b) cause Mr. Lulkin and such other persons to sell their Embryo stock to
Sterling Foster at prearranged prices to enable Sterling Foster to use such
stock to cover certain short positions it had created.

                                    9
<Page>

     In August 1999, an agreement of principle was entered into providing for
settlement of the consolidated class action against the Company, Mr. Lulkin and
Steven Wasserman, who was also a member of the Company's Board of Directors at
the time of the Company's initial public offering. Under the agreement in
principle, all claims in the action against the Company, and against Mr.
Lulkin and Mr. Wasserman insofar as they were members of the Company's Board of
Directors, would be dismissed in exchange for a payment of $400,000, of which
$100,000 would need to be paid by the Company and $300,000 would be paid by an
insurance company under a directors and officers liability policy of
insurance.  In June 2001, definitive settlement documents were executed.The
settlement documents provide that  the Company would pay the foregoing $100,000
by remitting to the class representatives $25,000 and a note in the amount of
$75,000 payable in June 2003 with interest thereon at 7% per year.  The Company
has remitted the funds and note described above to the class representatives
to be held by them in accordance with the terms of the settlement agreement
and pending court review of the settlement.  The settlement is contingent upon,
among other things,  approval by the court.  There can be no assurance that the
settlement will be concluded.


Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
         ----------------------------------------------------
     No matters were submitted to the Company's shareholders for vote during the
last quarter of its fiscal year.



                                10

<Page>



PART II

Item 5.  MARKET FOR REGISTRANT'S COMMON
         EQUITY AND RELATED STOCKHOLDER MATTERS.
         ---------------------------------------
     The Company's securities commenced trading in the over-the-counter market
on the effectiveness of the Company's Initial Public Offering on November 18,
1995 in the form of Common Stock.  The Common Stock was  regularly quoted and
traded on the NASDAQ system through October 1998.

     The Company was advised by The Nasdaq Stock Market that it failed to meet
the continued listing requirements of The Nasdaq SmallCap Market.  The Company
submitted an application for continued listing.  The Company was advised in
July, 1998 that the NASD had denied the Company's submission for continued
listing.  The Company filed an appeal to that decision.  A hearing on
continued listing was held on September 17, 1998 whereby the appeal was
denied.  Effective October 21, 1998,  the Company's common stock is now listed
on the OTC-Bulletin Board.

     The following table indicates the high and low bid prices for the Company's
Common Stock for the period up to June 30, 2001 based upon information supplied
by the NASDAQ and OTC-Bulletin Board system.  Prices represent quotations
between dealers without adjustments for retail markups, markdowns or
commissions, and may not represent actual transactions.

Common Stock
------------
                                        Quoted Bid Price
                                         High     Low
                                        ------  ------
     1999 Calendar Year
     ------------------
     First Quarter                      1/16      .02
     Second Quarter                      .08      .02
     Third Quarter                       .10      .00
     Fourth Quarter                      .03      .00

     2000 Calendar Year
     ------------------
     First Quarter                       .42      .00
     Second Quarter                      .20      .09
     Third Quarter                       .09      .05
     Fourth Quarter                      .10      .00

     2001 Calendar Year
     ------------------
     First Quarter                       1/16     .00
     Second Quarter                      1/16     .05

                                  11
<Page>


     On July 27, 2001, the closing price of the Common Stock as reported on the
OTC-Bullletin Board  was $.0625  On July 27, 2001, there were 662 holders of
record of common stock.











                                 12
<Page>





Item 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
         FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
         -----------------------------------------------
Liquidity and Capital Resources
-------------------------------
     The Company had a net working capital deficit  of $(215,789) at April 30,
2001. Approximately $1,000 of current assets represents cash on hand.  The
Company remains in its development stage as it has not yet derived
significant revenues from the sale of its products.

     The Company's statement of cash flows for the year ended April 30, 2001
reflects cash used in operating activities of approximately $306,000. This
use of cash is primarily attributable to general and administrative expenses
and product development expenses. The cash and cash equivalents balance
decreased in the year ended April 30, 2001 by approximately $8,000, which
is attributable to the cash used to fund current operations.  In addition, a
net repayment of the HDS credit line of approximately $298,000 was used to
fund current operations.

     In August 1999, an agreement of principle was entered into providing for
settlement of a consolidated class action against the Company, Mr. Lulkin and
Steven Wasserman, who was also a member of the Company's Board of Directors at
the time of the Company's initial public offering.  Under the agreement in
principle, all claims in the action against the Company, and against Mr.
Lulkin and Mr. Wasserman insofar as they were members of the Company's Board
of Directors, would be dismissed in exchange for a payment of $400,000, of
which $100,000 would need to be paid by the Company and $300,000 would be
paid by an insurance company under a directors and officers liability policy
of insurance.  The settlement is contingent upon, among other things,  a
pproval by the court.  There can be no assurance that the settlement will be
concluded.  In the year ended April 30, 2000, the Company recorded a reserve of
$100,000 for this obligation.  In June 2001, definitive settlement documents
were executed.  The settlement documents provide that the Company would pay
the foregoing $100,000 by remitting to the class representatives $25,000 and
a note in the amount of $75,000 payable in June 2003 with interest thereon at 7%
per year.  The Company has remitted the funds and the note to the class
representatives to be held by them in accordance with the terms of the
settlement agreement and pending court review of the settlement.  The Company
recorded a long-term note payable in the amount of $75,000 at April 30, 2001.

     The Company expects to incur additional expenditures over the next 6 to 12
months for general and administrative expenses and to evaluate its future course
of operations.  The Company's management no longer believes that the Company's
cash on hand will be sufficient to fund the Company's operations for the next
twelve (12) months. However, management continues to believe that the
outstanding amount due from HDS, which has been extended and is due September
30, 2002, of approximately $451,000 will be at least partially repaid during

                                   13
<Page>


the next (6) months.  During the year ended April 30, 2001,  HDS repaid
approximately $299,000 of the outstanding receivable balance to the Company
and has continued to make additional payments subsequent to April 30, 2001.  In
addition, the Company's management has set up a reserve of approximately
$225,000 or approximately 50% of the outstanding balance at April 30,
2001, based upon anticipated probable collectibility of the balance. In the
event that no additional repayment or an insufficient repayment is made in
the next (6) months, the Company will seek alternative methods of raising
additional capital or the possible liquidation of assets.  To the
extent that the Company will not be able to collect the balance of its
investee receivable, its ability to continue operating will be dependent upon
its ability to successfully sell other assets of the Company or raise
additional capital.


Results of Operations
---------------------
     Since its inception, the Company's primary activities have consisted of
obtaining the exclusive license to seven (7) medical devices developed by Dr.
Lloyd Marks, developing a marketing strategy for the C.F. Medical Devices and
the start-up of HDS.  In March 1998, the Company decided not to make the
minimum payment obligations due on six (6) of the medical devices developed
by Dr. Lloyd Marks due to capital constraints.  Accordingly, the unamortized
cost of these licenses of $487,000 was charged to operations in the year ended
April 30, 1998. In August 1998, the Company notified Dr. Marks that it was
terminating these six (6) license agreements due to financial constraints.

     On January 22, 1999, the Company amended the Licensing Agreement dated
March 31, 1995 pertaining to the seventh device, for the manufacture and
marketing of the self-shielding needle.  The amendment eliminates the
"Minimum Payment Obligation" as defined in the original agreement.
The last such payment which was due on September 30, 1998 in the amount of
$50,000 was paid on January 26, 1999 upon execution of the amendment.

     In consideration for eliminating all future and any prior minimum payment
obligations on this invention and any other products or inventions currently or
previously licensed by the Company from the licensor, the Company agreed to
(a) increase the royalty on future sales from 8% to 10%; and (b) pay the
licensor a "cap" on minimum royalty payments of $450,000.  Such payments shall
be payable at the rate of $2,500 per month plus 10% of the proceeds received by
the Company from any capital raised which exceeds $600,000, and 10% of annual
pre-tax income until the aggregate "cap" payment is made.  The aggregate
royalty of $450,000 was charged to operations in the year ended April 30, 1999.

     In addition, if the Licensor terminates the agreement for any reason, the
maximum royalty shall be reduced by $125,000 and all information with respect to
the invention (the "Know-How") shall be returned to the licensor free and

                                 14
<Page>

clear of any liens.  If the Company terminates the agreement, the licensor
may acquire the Know-How for a reduction in the remaining balance due equal
to the lesser amount of $125,000 or the remaining balance due.  If the Company
does not obtain the necessary government approval to market the self-sheilding
needle within (2) two years, the agreement shall terminate unless the Company
pays the licensor an additional $250,000, which will extend the regulatory
approval requirement by (2) two additional years.

     On January 22, 2001, the agreement  effectively terminated as the Company
could not obtain the necessary government approval  since the Company had halted
development of the device due to capital constraints.  The Company also could
not pay the licensor the required additional $250,000, under the terms of the
amended agreement, to extend the regulatory approval requirement. The
remaining unamortized cost of $69,048 for this license agreement was charged to
operations in the year ended April 30, 2001.

     In October 1999, the Company ceased sales on the C.F. Medical products due
to the relatively low level of sales, capital constraints and price increases by
C.F.  The Company is presently evaluating the marketability of the licensed
technology relating to these products and exploring alternative means of
production of these products. However, even if alternative means of
production of these products is found, the Company would still need to obtain
additional capital to restart production, for which there can be no assurance.
At April 30, 2000, the unamortized amount of this technology approximated
$155,000, of which the Company has set-up a 100% reserve  based upon
anticipated marketability of these assets.

     The Company has not derived significant revenues since its inception in
March 1995. The total revenue earned from inception through April 30, 2001 is
$1,394,149. This is a result of the sale of the C.F. Medical Devices of
approximately $659,000 and HDS sales of hydrogel and apnea monitor products
of  approximately $735,000 which are included in the statement of operations
through January 21, 1998.  As a result of the Company's start-up expenses and
acquisition of licenses and royalty rights for the products in the development
stage, the Company had an accumulated deficit of $10,015,921 as of April 30,
2001.  The Company is attempting to reduce operating losses through reductions
in operating expenses until such time it can generate additional capital for
future operations.

Plan of Operation
------------------
      The Company had  temporarily halted plans to complete the development of
the Self-Shielding Needle due to capital constraints.  On January 22, 2001, the
license agreement effectively terminated as the Company could not obtain the
necessary government approval with the two (2) year term as required in the
agreement.  The  Company also determined that it could not pay the licensor
an additional $250,000 to extend the regulatory approval requirement.

                                  15
<Page>

      The Company also has retained a 12.7% investment, in its nonconsolidated
affiliate HDS, which is accounted for under the cost method commencing
January 31, 1999.  The manufacturing facility of HDS became fully operational in
late 1997.  The Company anticipates that the future operations of HDS could
allow HDS to repay its obligations to the Company in the future.

     However, no assurance can be made with respect to the viability of the
Company in the long term.    Management anticipates that to meet current
operating costs and to evaluate its future course of operations would require
raising additional funds from either the debt or equity markets.
Alternatively,  the Company may need to consider liquidating some of its assets
to meet cash requirements.  No assurances can be made as to the success of these
working capital raising alternatives.




                                16
<Page>






Item 7.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
         --------------------------------------------

        See financial statements following Item 13 of this Annual Report on Form
        10-KSB.

Item 8.  CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS
         ON ACCOUNTING AND FINANCIAL DISCLOSURE.
         ----------------------------------------------
         Changes in Registrant's Certifying Accountant

       (a) Moore Stephens, P.C., Registrant's former independent accountant
           previously engaged as the principal accountant to audit the
           Registrant's financial statements, was dismissed on April 10, 2000.
           On April 10, 2000, the Board of Directors of Registrant appointed
           Rothstein, Kass & Company, P.C. as independent auditors of
           Registrant for the fiscal year ending April 30, 2000.

       (b) During the two most recent fiscal years and interim period subsequent
           to April 30, 1999, there have been no disagreements with Moore
           Stephens, P.C., on any matter of accounting principles or
           practices, financial statement disclosure, or auditing scope or
           procedure or any reportable events.

      (c) Moore Stephens, P.C.'s report on the financial statements for the past
          two years was unqualified with an explanatory paragraph relating to
          Registrant's ability to continue as a going concern.

      (d) The Registrant requested that Moore Stephens, P.C. furnish it with a
          letter addressed to the SEC stating whether it agrees with the above
          statements.  A copy of Moore  Stephens P.C.'s  letter  to the  SEC,
          dated April 11, 2000, was filed as Exhibit 16.1 to the Form 8-K filed
          on April 13, 2000.





                                    17
<Page>



                                  PART III
                                  --------
Item 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
         PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT OF THE
         REGISTRANT.
         -----------------------------------------------------------------

         Directors and Executive Officers

          The names and ages of the directors, executive officers and
significant employees, and promoters of the Company are set forth below.
All of the directors are elected annually.

       Name                 Age                Position Held
    -------------------   -------          -------------------
     Matthew L. Harriton    37             President, Chief Executive Officer,
                                           Chief Financial Officer  and Director

     Dr. Daniel Durchslag   56             Director


     Background of Executive Officers and Directors
     ----------------------------------------------
     Matthew L. Harriton has served as the Chief Financial Officer of the
Company since January 1996.  In April 1997, Mr. Harriton became the Chief
Executive Officer and a Director of the Company, and assumed the position of
President.  Mr. Harriton also serves as President and Chief executive Officer of
Hydrogel Design Systems, Inc., in which the Company has a 12.7% minority
interest, since October 1996. Prior to joining Embryo Development
Corporation, Mr. Harriton's professional experience included positions at
CIBC Wood Gundy Securities Corporation from June 1994 until December 1995,
Coopers & Lybrand from September 1990 until May 1994,  and The First Boston
Corporation from June 1986 until May 1988.  He is a graduate of Lehigh
Universit and received his M.B.A. from Duke University's Fuqua School of
Business.

     Dr. Daniel Durchslag, DDS,, has been practicing General, Cosmetic and
Sports Dentistry in Beverly Hills, CA, since 1980.  From 1973 until 1979, he was
an Associate Professor and Director of Clinics at the University of Southern
California School of Dentistry.  He is a graduate of the University of
Wisconsin and Loyola University/Chicago College of Dental Surgery.  He is
presently Team Dentist for the Los Angeles Raiders.

                                 18
<Page>




     Each director of the Company is entitled to receive reasonable expenses
incurred in attending meetings of the Board of Directors of the Company.  In
June, 1998 Messr. Durchslag was granted options, (which were subsequently
exercised),  to purchase 250,000 shares of the Company's common stock, and
Mr. Harriton, the President and Chief Executive Officer of the Company was
granted options, (which were subsequently exercised)  to purchase 750,000
shares of the Company's common stock, all  at an exercise price equal to the
market price on the date of the grant ($0.0938) exercisable for a period of
[four (4)] years. The Directors receive no other compensation for serving on
the Board of Directors.  The members of the Board of Directors intend
to meet at least quarterly during the Company's fiscal year, and at such
other times duly called.






                                19

<Page>


Item 10.  EXECUTIVE COMPENSATION
---------------------------------
<TABLE>
<CAPTION>
                            SUMMARY COMPENSATION TABLE
                            --------------------------
                                                      Long Term Compensation
                                                      ____________________________
                       Annual Compensation                           Awards         Payouts
            _________________________________________________       ________     _________________

   (a)                        (b)  (c)        (d)         (e)          (f)       (g)         (h)    (i)
                                                                     Restricted                    All
                                                         Other          Stock               LTIP   Other
                                                         Annual        Awards    Options/  Payouts Compensation
Name and Principal Position  Year Salary($)  Bonus($)  Compensation($) ($)       SARs(#)   ($)     ($)
---------------------------  ---- ---------  --------  --------------- -------- ---------- -------- -----------

                          <c>  <c>        <c>       <c>             <c>        <c>        <c>    <c>
Matthew L. Harriton, CEO     2001 $60,000    $   -0-    0              ---         0          0      0
                             2000 $60,000    $   -0-    0              ---         0          0      0
                             1999 $60,000    $6,000     0              ---         750,000    0      0
</TABLE>
____________________
<TABLE>
<CAPTION>

                      OPTION/SAR GRANTS IN LAST FISCAL YEAR
                      -------------------------------------
   (a)                    (b)              (c)                    (d)           (e)
                                        % of Total Options
                  Number of Securities  Options/SARs Granted   Exercise or
                  Underlying Option/    to Employees in        Base Price    Expiration
  Name            SARs Granted (#)       Fiscal Year            (# Share)      Date
------------------------------------  ----------------------- -----------    -----------

                 <c>                <c>                    <c>            <c>
Matthew Harriton     0                  0                      N/A            N/A

</TABLE>

<TABLE>
<CAPTION>
                       AGGREGATED OPTION/SARs EXERCISES IN
                          LAST FISCAL YEAR AND FY-END
                             OPTIONS/SAR VALUES
                       ---------------------------------
(a)                     (b)            (c)             (d)              (e)
                                                 Number of             Value of
                                                 Securities Underlying Unexercised
                                                 Unexercised Options/  In-the-Money
                                                 SARs at FY-End (#)    Options/SARs at
               Shares Acquired       Value       Exercisable/          FY-End Exercisable
Name           on Exercise (#)       Realized($) Unexercisable         Unexercisable
------------------------------       ----------- ------------------    ------------------

                 <c>               <c>          <c>                   <c>
Matthew Harriton     0                $ 0          -0-0-                 -0-/-0-

</TABLE>

                                             20
<Page>






Employment Agreements
----------------------
     On January 1, 1997 the Company entered into a two (2) year employment
agreement with Matthew L. Harriton which provides for a base salary of $90,000
for the first year and $100,000 for the second year, with provisions for a
discretionary bonus.  The agreement also provides for the issuance to Mr.
Harriton of options to purchase 100,000 shares of the Company's Common Stock
at ($.65) per share. In September 1997, the Company amended the January 1, 1997
employment agreement.  The agreement, as amended, provides for annual
compensation of $60,000 effective January 1, 1998.  Mr. Harriton was also
granted options to purchase an additional 400,000 shares of the Company's
common stock at an exercise price equal to the market price on the date of
the amendment ($0.59) exercisable for a period of four (4) years.   In
June 1998, the options to purchase the aggregate of 500,000 shares of the
Company's common stock were repriced to an exercise price equal to the market
price in June of 1998 of $.0938. In January 1999, the Company renewed this
employment agreement for an additional two years. The agreement provides for
annual compensation of $60,000 effective January 1, 1999.  Mr.Harriton was
also granted rights to purchase 200,000 shares of HDS common stock from the
Company at a price of $1.00 per share for a period of two (2) years.  In
January 2001, this agreement was extended for a one (1) year term under the same
terms and conditions of the original agreement.  On June 26, 2001,
Mr. Harriton purchased 25,000 shares of HDS common stock from the Company at
a price of $1.00 per share.

Stock Option Plans and Agreements
----------------------------------
     Incentive Option and Stock Appreciation Rights Plan -- As of March, 1995,
the Directors of the Company adopted and the stockholders of the Company
approved the adoption of the Company's 1995 Incentive Stock Option and Stock
Appreciation Rights Plan ("Incentive Option Plan"). The purpose of the
Incentive Option Plan is to enable the Company to encourage key employees and
Directors to contribute to the success of the Company by granting such
employees and Directors incentive stock options ("ISOs") as well as
non-qualified options and stock appreciation rights ("SARs").

     The Incentive Option Plan is administered by the Board of Directors or a
committee appointed by the Board of Directors (the "Committee") which will
determine, in its discretion, among other things, the recipients of grants,
whether a grant will consist of ISOs, non-qualified options or SARs or a
combination thereof, and the number of shares to be subject to such options
and SARs.

     The Incentive Option Plan provides for the granting of ISOs to purchase
Common Stock at an exercise price to be determined by the Board of Directors or
the Committee not less than the fair market value of the Common Stock on the
date the option is granted. Non-qualified options and freestanding SARs may
be granted with any exercise price. SARs granted in tandem with an option
have the same exercise price as the related option.

                                 21
<Page>

     The total number of shares with respect to which options and SARs may be
granted under the Incentive Option Plan is 2,000,000.  ISOs may not be granted
to an individual to the extent that in the calendar year in which such ISOs
first become exercisable the shares subject to such ISOs have a fair market
value on the date of grant in excess of $100,000. No option or SAR may
be granted under the Incentive Option Plan after March 15, 2005 and no option or
SAR may be outstanding for more than ten years after its grant. Additionally,
no option or SAR can be granted for more than five (5) years to a shareholder
owning 10% or more of the Company's outstanding Common Stock.

     Upon the exercise of an option, the holder must make payment of the full
exercise price. Such payment may be made in cash or in shares of Common Stock
(based on the fair market value of the Common Stock on the date prior to
exercise), or in a combination of both. The Company may lend to the holder of an
option funds sufficient to pay the exercise price, subject to certain
limitations, or in its discretion, accept payment by non-recourse promissory
note. SARs may be settled, in the Board of Directors' discretion, in cash,
Common Stock, or in a combination of cash and Common Stock. The exercise of
SARs cancels the corresponding number of shares subject to the related
option, if any, and the exercise of an option cancels any associated SARs.
Subject to certain exceptions, options and SARs may be exercised any time up
to three months after termination of the holder's employment.

     The Incentive Option Plan may be terminated or amended at any time by the
Board of Directors, except that, without stockholder approval, the Incentive
Option Plan may not be amended to increase the number of shares subject to the
Incentive Option Plan, change the class of persons eligible to receive
options or SARs under the Incentive Option Plan or materially increase the
benefits of participants.

     As of June, 2001 options to purchase 1,650,000 shares of common stock, and
no SARs have been granted and exercised under the Incentive Option Plan and
otherwise. No determinations have been made regarding the persons to whom
options or SARs will be granted in the future, the number of shares which
will be subject to such options or SARs or the exercise prices to be fixed
with respect to any option or SAR.

     Non-Qualified Option Plan -- As of March 1995, the Directors and
stockholders of the Company adopted the 1995 Non-Qualified Stock Option Plan
(the "Non-Qualified Option Plan"). The purpose of the Non-Qualified Option Plan
is to enable the Company to encourage key employees, Directors, consultants,
distributors, professionals and independent contractors to contribute to the
success of the Company by granting such employees, Directors, consultants,
distributors, professionals and independent contractors non-qualified
options. The Non-Qualified Option Plan will be administered by the Board of
Directors or the Committee in the same manner as the Incentive Option Plan.

                                22
<Page>


     The Non-Qualified Option Plan provides for the granting of non-qualified
options at such exercise price as may be determined by the Board of Directors,
in its discretion. The total number of shares with respect to which options
may be granted under the Non-Qualified Option Plan is 2,000,000.

     Upon the exercise of an option, the holder must make payment of the full
exercise price. Such payment may be made in cash or in shares of Common Stock
(based on the fair market value of the Common Stock on the date prior to
exercise), or in a combination of both. The Company may lend to the holder of
an option funds sufficient to pay the exercise price, subject to certain
limitations. Subject to certain exceptions, options may be exercised any time up
to three months after termination of the holder's employment or relationship
with the Company.

     The Non-Qualified Option Plan may be terminated or amended at any time by
the Board of Directors, except that, without stockholder approval, the
Non-Qualified Option Plan may not be amended to increase the number of shares
subject to the Non-Qualified Option Plan, change the class of persons
eligible to receive options under the Non-Qualified Option Plan or materially
increase the benefits of participants.




                                 23
<Page>

Item 11. SECURITY OWNERSHIP OF CERTAIN
         BENEFICIAL OWNERS AND MANAGEMENT.
         ---------------------------------
     The following table sets forth certain information, as of  July 27, 2001
with respect to the beneficial ownership of the outstanding Common Stock by (i)
any holder of more than five (5%) percent; (ii) each of the Company's
officers and directors; and (iii) the directors and officers of the Company as
a group:

<TABLE>
<CAPTION>
                                     Percentage                    Percentage
                           Shares of    (%) of                        (%) of Total
Name and Address           Common       Common     Shares of          Combined
of Beneficial Owner        Stock Owned  Stock      Preferred Stock(2)   Vote(2)
------------------        ------------  -------    ----------------- --------------

                        <c>            <c>        <c>               <c>
M.D. Funding, Inc.(1)      --             --         6,000,000         46.2
5 Old Woods Drive
Harrison, NY 10528

Daniel Durchslag           250,000        3.6             ---           1.9
9400 Brighton Way
Suite 402
Beverly Hills, CA 90210

Matthew L. Harriton      1,250,000       17.9             ---           9.6
565 Fifth Avenue
New York, NY  10017

Karen Nazzareno            400,000        5.7             ---           3.1
565 Fifth Avenue
New York, NY  10017

All directors and officers
 as a group (2 persons)  1,500,000       21.4             ---          11.5

</TABLE>

  (1)M.D. Funding, Inc. is a corporation which is wholly-owned by Donna Field,
whose address is 5 Old Woods Drive, Harrison, NY 10528,  the beneficial owner of
such shares.  M.D. Funding, Inc. is not affiliated with any of the officers or
directors of the Company.

  (2)Holders of preferred stock are entitled to vote on all matters of the
Company submitted to a vote of stockholders with one share of preferred stock
equalling the same voting rights as one share of common stock.




                                    24
<Page>



Item 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
          -----------------------------------------------
     On March 31, 1995 the Company entered into seven (7) License Agreements
with Lloyd A. Marks for the exclusive license of seven (7) separate medical
devices.  The License Agreements provided for the following aggregate payments:

      (i)$230,000 paid to Dr. Marks, at the closing of the Company's initial
public offering;.

      (ii)issued to Dr. Marks of 400,000 shares of the Company's Common Stock;
and

      (iii)payment to Dr. Marks of 6% to 8% of the amount of the net sales of
the medical device.

     Each of the agreements also provides for minimum payment obligations
commencing 2 1/2 years after the date of the agreement.  The minimum payment
obligations are for each license as follows:



                     Agreement           Minimum Payment
                      Year                 Obligation
                    -----------         -----------------
                      9/30/97                 $25,000
                      3/31/98                 $25,000
                      9/30/98                 $50,000
                      3/31/99                 $50,000
                      9/30/99                $100,000
                      3/31/00                $100,000
                      3/31/01+               $200,000

     On September 30, 1997, the agreements for six (6) of the devices were
amended to extend the date of the first minimum payment obligation to March 31,
1998.  In consideration for the extension, the aggregate first minimum payment
obligation increased from $150,000 to $165,000.

     The Company did not make the minimum payment obligations required under the
License Agreements with respect to six (6) of the devices including the

                                  25
<Page>

adjustable blood pressure cuff, a multi-function fluid communication control
system and  stereoscopic fluoroscopy apparatus and on August 21, 1998, the
Company notified Dr. Marks that it was terminating the License agreements
pertaining to these devices.  The minimum payment obligations with respect to
the remaining device, the self-shielding needle, were made in accordance with
the terms of the original agreement.

     On January 22, 1999, the Company amended the Licensing Agreement dated
March 31, 1995 pertaining to the seventh device, for the manufacture and
marketing of the self-shielding needle.  The amendment eliminates the
"Minimum Payment Obligation" as defined in the original agreement.  The
last such payment which was due on September 30, 1998 in the amount of $50,000
was paid on January 26, 1999 upon execution of the amendment.

     In consideration for eliminating all future and any prior minimum payment
obligations on this invention and any other products or inventions currently or
previously licensed by the Company from the licensor, the Company agreed to
(a) increase the royalty on future sales from 8% to 10%;and  (b)pay the
licensor a "cap" on minimum royalty payments of $450,000.  Such payments shall
be payable at the rate of $2,500 per month plus 10% of the proceeds received by
the Company from any capital raised which exceeds $600,000, and 10% of annual
pre-tax income until the aggregate "cap" payment is made.  The aggregate
royalty of $450,000 has been charged to operations in the year ended April
30, 1999.

     In addition, if the Licensor terminates the agreement for any reason,
the maximum royalty shall be reduced by $125,000 and all information with
respect to the invention (the "Know-How") shall be returned to the licensor
free and clear of any liens.  If the Company terminates the agreement,
the licensor may acquire the Know-How for a reduction in the remaining
balance due equal to the lesser amount of $125,000 or the remaining balance due.
If the Company does not obtain the necessary government approval to market the
self-sheilding needle within (2) two years, the agreement shall terminate
unless the Company pays the licensor an additional $250,000, which will
extend the regulatory approval requirement by (2) two additional years.

     On January 22, 2001, the license agreement effectively terminated as the
Company could not obtain the necessary government approval with the two (2) year
term as required in the agreement.  The  Company also determined that it could
not pay the licensor an additional $250,000 to extend the regulatory approval
requirement.

     On March 31, 1995, the Company entered into two (2) royalty sharing
agreements with Dr. Marks covering two (2) medical devices he had previously
licensed to unaffiliated third parties.  The royalty sharing agreements provided
for the Company to pay Dr. Marks the aggregate amount of $20,000 paid at the
closing of the Company's initial public offering and the issuance of 50,000
shares of the Company's Common Stock.  The agreements provide for the
Company to receive from Dr. Marks 50% of all royalties he should receive on
each of these medical devices.

                               26
<Page>

     On September 14, 1995, the Company acquired five (5) medical devices and
the exclusive licensing rights to one (1) medical device from C.F. Electronics,
Inc. (the "C.F. Medical Devices").  Two (2) of the acquired medical devices, the
Hot-Sack II(TM) and Hot-Sack II+(TM) are used in connection with the warming of
peritoneal dialysis solution.  Four (4) of the medical devices, Hot-Sack(R),
Res-Q-Air(R), Therm-O-Drug(TM) and an electronic stethoscope, are devices
used for emergency rescue operations and by other emergency medical technicians.
All of the medical devices acquired from C.F. have received all necessary
regulatory approvals and are in commercial distribution.

     In November, 1995, the Company completed a public offering of 1,000,000
shares of Common Stock at $5.00 per share for an aggregate of $5,000,000.
An additional 150,000 shares were sold for gross proceeds of $750,000 to the
underwriter to cover over-allotments.  In addition, the underwriter received
an option, for a nominal fee, to acquire 100,000 shares of Common Stock at an
exercise price of $6.75 per share.  The option expires in November 2001.

     Effective with the closing of the offering, the Company entered into a five
year consulting agreement with the underwriter.  The unamortized balance of the
consulting fee of $91,667 was fully charged to operations in 1997 as a result of
the termination of the underwriter's operations.

     In February 1996, the Company entered into two separate multi-year
consulting agreements.  As consideration for these services, the Company issued
225,000 shares of Common Stock to each of the parties.  The value of the Common
Stock granted ($1,800,000) is being charged to operations ratably over the lives
of the consulting agreements.

     In January 1997, the Company entered into a subscription agreement to
acquire 50.04% of the Common Stock and 15,000,000 shares of Preferred Stock for
a combined voting interest of 92.9% of Hydrogel Design Systems, Inc. (HDS). HDS
was formed in October 1996 to effect the asset acquisition described below. As
consideration for its interest, the Company paid $150,000 cash, 150,000
shares of its Common Stock and made available to HDS a $500,000 line of credit,
which was increased to $850,000 in August 1997.  The credit line, which expired
on January 31, 1999, was extended to January 31, 2001, in February 1999 due to
the financial condition of HDS, with no further cash advances allowed.  In
February 2001, the credit line was again extended through September 30, 2002,
under the same terms as the prior extension.

     On February 6, 1997 HDS, acquired substantially all of the assets of two
(2) related companies, Novatech, Inc. and Alternative Design Systems R & D
Group. In consideration for the payment of $150,000, and the issuance of 150,000
shares of the Company's Common Stock (subject to certain adjustments), the

                                    27

Company acquired certain rights and assets, including proprietary formulas and
methodology, necessary to manufacture, market, sell and distribute
Hydrogel and associated products. Hydrogel is a product used in the
manufacture of a variety of medical devices including, cardiac defibrillator
pads and various types of electrodes. HDS has also entered into a contract
for the purchase of manufacturing equipment for $600,000 which has
been financed through a long-term note and security agreement between HDS and
Becton Dickinson, a customer of HDS and a manufacturer and distributor of
medical devices and diagnostic systems.

     On January 21, 1998, the Company's equity interest in HDS, which previously
represented a 50.04% majority common interest and 92.9% voting interest, was
reduced to 45.6% common ownership as a result of the Company surrendering all
15,000,000 shares of voting Preferred Stock in exchange for 21,500 shares of
Common Stock.  The exchange was done at the request of certain third party
investors of a Private Placement by HDS, under which HDS issued approximately
475,000 additional common shares.    In February and April, 1998, the Private
Placement was completed and an additional 1,027,000 shares of HDS stock were
issued, thereby reducing the Company's ownership to 33.3%.  As a result of
the Company's reduced ownership in HDS and surrender of the voting Preferred
Stock, the assets, liabilities and operations of HDS after January 21, 1998 are
not included on a consolidated basis in the financial statements of the Company.
In January 1998, as a result of subsequent litigation between HDS and the
former owners of the entitities HDS acquired, the terms of the original
purchase were modified and the Embryo shares were returned to HDS.

     Between November 20, 1998 and January 31, 1999, the Company sold an
aggregate of 710,000 shares of the common stock of HDS for $710,000 reducing its
investment to an aggregate of 562,500 shares or 14.4% common ownership of
HDS.  As a result of this transaction, as of January 31, 1999, this
investment is no longer included as an equity investment in the financial
statements of the Company, but is reported at cost.  At April 30, 2001, the
Company holds approximately 12.7%  ownership of the common stock of HDS.

     In February 1997, HDS entered into a seven-year sublease with the Company,
which provides for minimum monthly rental payments of $9,625 and expires in
2004.  In May, 1999, the minimum  rental payment was reduced to $7,892 per
month due to a utilization of a portion of the premises by the Company.  In
October, 1999, the Company ceased use of this space and increased the amount of
the sublease to the original monthly amount of $9,625.  In February 2000, the
monthly rent was increased to $10,214 as per the escalation provision in the
sublease.

     In August 1997, HDS entered into a one-year management agreement with the
Company subject to automatic renewal each year.  The management agreement
provides for an annual fee of the greater of $75,000 per annum or ten (10%)
percent of the gross sales generated by the Company's sales representatives
in consideration for Embryo providing HDS with administrative, marketing and
management services.  In May, 1998, HDS notified the Company that the
agreement will not be renewed in August 1998.

                                      28
<Page>

     In June, 1998 the Company granted options to purchase 750,000 shares of the
Company's common stock to Matthew Harriton, President of the Company, options to
purchase 250,000 shares of common stock to each of Andrew Frabrikant and Dr.
Daniel Durchslag, Directors of the Company, and options to purchase 400,000
shares of common stock to Karen Nazzareno, an employee of the Company.  All
such options were granted under the Company's Incentive Stock Option Plan and
at the then market price of $.0938 per share.  Also, options to purchase
500,000 shares which were previously granted to Matthew Harriton, under the
terms of his prior employment agreement with the Company, were amended to change
the exercise price thereof to $.0938 per share and to allow for payment upon
exercise, in the same manner as under the Incentive Stock Option Plan.

     The above options were exercised in June, 1998 and an aggregate of
2,150,000 shares of common stock of the Company were issued.  Payment to the
Company of an aggregate amount of $201,670 was made by delivery by all such
persons  to the Company of non-recourse promissory notes, which are due in
five (5) years, bear interest at 8% per annum and are secured by the common
stock purchased.

     While the exercise of the options resulted in the issuance of 2,150,000
shares of common stock, the Company does not believe there has been a change of
control since the Company's Articles of Incorporation provide that the shares
of common stock vote together as one class with the shares of the Company's
preferred stock.  As of July 27, 2001, the holders of the preferred stock
held 46.2% of the voting power.

     Although the persons exercising the options may be deemed to operate as a
group, they disclaim they are operating as a group.   While no immediate changes
in the direction of the Company are presently contemplated, depending upon
future circumstances, the persons exercising the options may in the future
attempt to influence the direction of the Company.

     On February 10, 1999, the Company entered into a sixteen (16) month lease
commencing March 1, 1999, for office space which was personally guaranteed by an
officer of the Company. Commencing July 1, 2000, the Company has continued to
rent the space on a month to month basis.

     On June 26, 2001, the Company executed a long-term promissory note in the
amount of $75,000  in regard to the settlement of pending legal proceedings.
The note is due on June 26, 2003 and bears interest at 7% per year.

                                 29
<Page>

     M.D. Funding, Inc. may be deemed a parent of the Company as a result of its
control of the Company voting stock.  M.D. Funding, Inc. is a corporation
which is wholly owned by Donna Field, the beneficial owner of such shares.
M.D. Funding, Inc. is not affiliated with any of the officers or directors of
the Company.  See "Principal Stockholders."

                                  30
<Page>

                                  PART IV
                               ------------
Item 13. EXHIBITS AND REPORTS ON FORM 8-K
         -------------------------------
(a)(1)  Financial Statements.

     The following financial statements are included in Part II, Item 7:

     Index to Financial Statements and Schedules

  Report of Independent Certified Public Accountants           F-1

  Balance sheet as of April 30, 2001                           F-2

  Statements of operations for the years ended
       April 30, 2001 and 2000                                 F-3

  Statements of stockholders' equity (deficit) for the years
     ended April 30, 2001 and 2000                             F-4 - F-6

  Statements of cash flows for the years ended
    April 30, 2001 and 2000                                    F-7 - F-8

  Notes to financial statements                                F-9 - F-23



                                  31
<Page>



(a)(3)  Exhibits.

1.01*      Form of Underwriting Agreement.

1.02*      Form of Selected Dealers Agreement.

3.01*      Certificate of Incorporation of the Company.

3.02*      By-Laws of the Company.

4.01*      Form of Warrant Agreement by and among the Company and American
               Stock Transfer & Trust Company.

4.02*      Form of Underwriter's Share Purchase Option.  `

10.01*     March 1995 Bridge Loan Agreements.

10.02*     Consulting Agreement by and between Dr. Lloyd Marks and the Company
               dated as of March 31, 1995.

10.03*     Licensing Agreement by and between Dr. Lloyd Marks and the Company
               re:  SmartMonitor dated of March 31,1995.

10.04*     Licensing Agreement by and between Dr. Lloyd Marks and the Company
               re: Multi-Function Fluid Communication Control System dated as of
               March 31, 1995.

10.05*     Licensing Agreement by and between Dr. Lloyd Marks and the Company
               re:  Adjustable Blood Pressure Cuff and Method of Measuring Blood
               Pressure dated of March 31,1995.

10.06*     Licensing Agreement by and between Dr. Lloyd Marks and the Company
               re: Stereoscopic Fluoroscopy Apparatus dated of March 31,1995.

10.07*     Licensing Agreement by and between Dr. Lloyd Marks and the Company
               re: Adjustable Blood Pressure Cuff and Method of Using Same dated
               as of March 31,1995.

10.08*     Licensing Agreement by and between Dr. Lloyd Marks and the Company
               re: Multiple Cuff Blood Pressure System dated of March 31,1995.

                                   32
<Page>


10.09*     Licensing Agreement by and between Dr. Lloyd Marks and the Company
               re:  Safety Needle dated of March 31,1995.

10.10*     Royalty Sharing Agreement by Dr. Lloyd Marks and the Company re:
               Computer Assisted Admittance Plethysmography dated as of March
               31, 1995.

10.11*     Royalty Sharing Agreement by Dr. Lloyd Marks and the Company re:
               Method of and Apparatus of Detecting Cardiac Rhythm Disturbance
               dated as of March 31, 1995.

10.12*     Employment Agreement by and between Donn Gordon and the Company dated
                as of March 31, 1995.

10.13*     Asset Purchase Agreement by and between C.F. Electronics, Inc. and
               the Company dated September 14, 1995.

10.14*     Supply Agreement by and between C.F. Electronics, Inc. and the
               Company dated September 14, 1995.

10.15*     Supplier - Produced Finished Goods Purchase Agreement (the Company
               has filed a request seeking confidential treatment of this
               agreement).

10.16*     Consulting Agreement by and between the Company and David Meridor
               dated August 29 1995.

10.17*     Sublicensing Agreement by and between the Company and Advanced
               Technologies International, Ltd. dated July 1995.

10.18*     Distributorship Agreement by and between the Company and Medical
               Marketplace, Inc. dated July 25, 1995.

10.19**    Consulting Agreement by and between the Company and Stanley Krasnoff
               dated February 12, 1996.

10.20**    Consulting Agreement by and between the Company and Randolph K. Pace
               dated February 12, 1996.

10.21+     Asset Purchase Agreement by and between Hydrogel Design Systems,
              Inc. and Alternative Design Systems R & D Group dated February
              6, 1997.

                                          33
<Page>

10.22+     Asset Purchase Agreement by and between Hydrogel Design Systems,
               Inc. and Novatech, Inc. dated February 6, 1997.

10.23+     Employment Agreement by John Essmyer and Hydrogel Design
               Systems, Inc. dated February 6, 1997.

10.24+     Employment Agreement by Michael Periera and Hydrogel Design
               Systems, Inc. dated February 6, 1997.

10.25***   Employment Agreement by Matthew Harriton and the Company dated
               January 1, 1997.

10.26***   Equipment Financing Agreement by Becton Dickinson and Hydrogel
               Design Systems, Inc. dated January 24, 1997.

10.27+     Real Property Lease by and between the Company and Circon
               Corporation dated January 1997.

10.28++    Revolving Credit Agreement between Hydrogel Design Sytems, Inc.
               and the Company dated January 1997.

10.29++    Amended Revolving Credit Agreement between Hydrogel Design
               Systems, Inc. and the Company dated August 31,1 997.

10.30++    Management Agreement between Hydrogel Design Systems, Inc.
                and the Company dated August 31, 1997.

10.31++    Amendment No. 1 to Licensing Agreement by and between Dr.
               Lloyd Marks and the Company dated September 30, 1997.

10.32++    Loan Agreement and Promissory Note between Hydrogel Design
               Systems, Inc. And BH Funding, LLC dated October 1, 1997.

10.33++    Amendment #1 to Employment Agreement by Matthew Harriton
               and the Company dated September 16, 1997.

10.34vv    Stock Option Agreement between the Company and Andrew Frabrikant
                dated June 17, 1998.

10.35vv    Stock Option Agreement between the Company and Dr. Daniel Durchslag
                dated June 17, 1998.

                                       34
<Page>

10.36vv   Stock Option Agreement between the Company and Matthew Harriton
                dated June 17, 1998.

10.37vv   Stock Option Agreement between the Company and Karen Nazzareno
               dated June 17, 1998

10.38vvv  Amendment No. 1 to Licensing Agreement of Safety Needle by and
              between Dr. Lloyd Marks and the Company dated January 22,
              1999.

10.39#    Employment Agreement by Matthew Harriton and the Company dated
              January 1, 1999.

10.40#    Amendment #2 to Revolving Credit Agreement between Hydrogel Design
              Systems, Inc. and the Company dated February 1, 1999.

10.41     Amendment #3 to Revolving Credit Agreement between Hydrogel Design
              Systems, Inc. and the Company dated February 1, 2001.
              (filed herewith).

10.42     Promissory Note between  Sterling Foster Securities Litigation  Fund
              and the Company dated June 26, 2001 (filed herewith).

16+++     Letter from Holtz Rubenstein & Co., LLP re Change in Certifying
              Accountant dated May 7, 1998.

16.1##     Letter from Moore Stephens, P.C. re Change in Certifying Accountant
               dated April 11, 2000.

99v        Letter from the Nadaq SmallCap Market dated March 16, 1998.

27         Financial Data Schedule (filed herewith).

*          Incorporated by reference to the Company's Registration Statement on
               Form SB-2 No. 33-92366.

**         Incorporated by reference to the Company's Form S-8 dated March 8,
               1996.

***        Incorporated by reference to the Company's Form 10QSB dated January
               31, 1997.

                                             35
<Page>

+          Incorporated by reference to the Company's Form 10KSB  dated April
               30, 1997.

++         Incorporated by reference to the Company's Form 10QSB dated October
               31, 1997.

v          Incorporated by reference to the Company's Form 8-K filed on April
               16, 1998.

+++        Incorporated by reference to the Company's Form 8-K filed on May 8,
                1998.

vv         Incorporated by reference to the Company's Form 10KSB dated April 30,
               1998.

vvv        Incorporated by reference to the Company's Form 8-K filed on February
               12, 1999.

#          Incorporated by reference to the Company's Form 10KSB dated April 30,
               1999.

##         Incorporated by reference to the Company's Form 8-K filed on April
               13, 2000.


(B)Reports on Form 8-K.

     None.


                                        36

<Page>

                                         SIGNATURE

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Dated:  New York, New York
            August 9, 2001

                                      EMBRYO DEVELOPMENT CORPORATION


                                      By:   /s/ Matthew L. Harriton
                                            ------------------------
                                               Matthew L. Harriton
                              Chief Executive Officer, Chief Financial Officer
                                   Principal Accounting Officer and Director

     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement or Amendments thereto has been signed below by the
following persons in the capacities and on the dates indicated.

        Signature                   Title               Date
     ---------------             -----------          ---------

   /s/ Matthew L. Harriton   Chief Executive Officer,  August 9, 2001
  ------------------------
       Matthew L. Harriton   Chief Financial Officer,
                             Principal Accounting Officer
                             and Director


   /s/ Daniel Durchslag      Director                  August 9, 2001
   --------------------
       Daniel Durchslag







                                 37
<Page>



                             EMBRYO DEVELOPMENT CORPORATION
                              (A DEVELOPMENT STAGE COMPANY)
                                   REPORT ON AUDIT OF
                                  FINANCIAL STATEMENTS
                                 ------------------------




      Independent auditors' reports                        F-1

      Balance sheet                                        F-2

      Statements of operations                             F-3

      Statements of stockholders' equity (deficit)         F-4 -F-6

      Statements of cash flows                             F-7 -F-8

      Notes to financial statements                        F-9 -F-23









                                38
<Page>






                              REPORT OF INDEPENDENT AUDITORS


To the Board of Directors and Stockholders of
   Embryo Development Corporation
   New York, New York


         We have audited the accompanying balance sheet of Embryo Development
Corporation [a development stage company] as of April 30, 2001, and the
related statements of operations, stockholders' equity (deficit), and cash flows
 for each of the two fiscal  years  then ended. 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 audits.

         We conducted our audits in accordance with auditing standards generally
accepted in the United States of America.  Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. 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 that 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 Embryo Development
Corporation [a development stage company] as of April 30, 2001, and the
results of its operations and its cash flows for each of the two fiscal
years then ended, in conformity with accounting principles  generally
accepted in the United States of America.  We express no opinion on the
cumulative period from inception [March 3, 1995] through April 30, 2001 as
shown in the cumulative columns on the statements of operations and the
statements of cash flows, nor on the statements of stockholders' equity for the
period from inception [March 3, 1995] through April 30, 1999.

         The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern.  As discussed in Note 1, the
Company is in the development stage and the Company's ability to continue in the
normal course of business is dependent upon the success of future operations.
The Company has a working capital deficit and an accumulated deficit, which
raise substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 1.
These financial statements do not include any adjustments that might result from
the outcome of this uncertainty.

                                         /s/ Rothstein, Kass & Company, P.C.
                                        ------------------------------------


Roseland, New Jersey
June 8, 2001










                                           F-1

<Page>

EMBRYO DEVELOPMENT CORPORATION
[A DEVELOPMENT STAGE COMPANY]
-------------------------------
<TABLE>

BALANCE SHEET AS OF APRIL 30, 2001.
-----------------------------------
Assets:
Current Assets:
   
                                                     <c>
   Cash                                                    $      974
   Prepaid Expenses and Other Current Assets                   19,811
                                                               ------
   Total Current Assets                                        20,785

  Property and Equipment - At Cost -
   Net of Accumulated Depreciation of $31,296                  10,076


 Investment in Unconsolidated Investee - At Cost               40,841

 Other Assets:
   Due from Unconsolidated Investee -
    Net of Reserve of $225,423                                225,423
   Interest Receivable                                         45,749
    Deposits                                                   95,176
                                                             --------
   Total Other Assets                                         366,348
                                                             --------
   Total Assets                                            $  438,050
                                                           ==========
Liabilities and Stockholders' Deficit:
Current Liabilities:
   Accounts Payable and Accrued Expenses               $      206,574
   Royalty Payable - Current Portion                           30,000
                                                          -----------
   Total Current Liabilities                                  236,574

Long-term Liabilities:
    Royalty Payable - Long-Term                               351,500
    Note Payable - Long Term                                   75,000
                                                          -----------
   Total Long-term Liabilities                                426,500
                                                          -----------
 Commitments and Contingencies

Stockholders' Deficit:
  Preferred Stock, $.0001 Par Value; Authorized 15,000,000
   Shares; 6,000,000 Issued and Outstanding,
   Liquidation Preference $600,000                                600

  Common Stock, $.0001 Par Value, Authorized 30,000,000
   Shares; 6,995,000 Issued and Outstanding                       700

   Additional Paid-in-Capital                               9,991,267

   Deficit Accumulated During the Development Stage       (10,015,921)

  Notes Receivable                                           (201,670)
                                                         --------------
   Total Stockholders' Deficit                               (225,024)

   Total Liabilities and Stockholders' Deficit           $    438,050
                                                        ==============
</TABLE>
                                        F-2


See Accompanying Notes to Financial Statements.
<Page>

EMBRYO DEVELOPMENT CORPORATION
[A DEVELOPMENT STAGE COMPANY]
--------------------------------

STATEMENTS OF OPERATIONS
-------------------------
<TABLE>



                                                                       Cumulative
                                                                    From Inception
                                                Years ended         March 3, 1995 to
                                                 April 30,             April 30,
                                            2 0 0 1   2 0 0 0           2 0 0 1
                                           --------  ---------     ------------------

                                      <c>         <c>           <c>
   Revenues                              $     870   $   43,526    $  1,394,149

 Costs and Expenses:
     Cost of Sales                             612       37,610       1,222,647
     General, Selling and Administrative   504,903      825,175       6,489,517
     Royalties                                 --           --          583,593
     Research and Development                1,350       26,428       1,091,377
     Amortization                           10,357      105,714         898,810
     Loss on Write-off of Licensed
      Technology                            69,048      155,357        711,190
   Loss on Write-off of Inventories            --        10,755         10,755
   Interest Income - Related Party         (35,915)     (59,684)      (151,804)
   Interest and Other [Income] Expense      (9,985)      (6,734)       421,651
  Equity Loss of Operations of Unconsolidated
     Investee                                  --            --        665,374
   Provision for Litigation Settlement         --       100,000        100,000
  Adjustment for Collectibility of Amount Due
  from Unconsolidated Investee            (149,335)       1,416        225,423
   Gain on Sale of Stock of Unconsolidated
    Investee                                   --           --        (653,510)
                                          ----------  ------------   ----------
     Total Costs and Expenses              391,035    1,196,037     11,615,023
                                          ----------  ------------  ----------
     Loss Before Minority Interest        (390,165)  (1,152,511)   (10,220,874)

     Minority Interest in Net
       Loss of Subsidiary                      --           --         204,953
                                          ---------- ------------- ------------
   Net Loss                             $( 390,165) $(1,152,511)  $(10,015,921)
                                        ==========  =============  =============

   Basic and Diluted Net Loss
    Per Common Share                     $    (.06) $      (.17)   $     (1.80)
                                         ========== ============   ============

   Weighted Average Number of Common Shares
    Used in Computing Basic and Diluted
    Loss per Common Share                 6,995,000   6,995,000      5,564,196
                                         ===========  ==========     =========

</TABLE>




                                              F-3

         See Accompanying Notes to Financial Statements.


<Page>

EMBRYO DEVELOPMENT CORPORATION
[A DEVELOPMENT STAGE COMPANY]
-------------------------------

STATEMENTS  OF STOCKHOLDERS' EQUITY (DEFICIT)
---------------------------------------------
<TABLE>


                                                                           Additional
                                    Common Stock       Preferred Stock      Paid-in
                                    Shares   Amount    Shares   Amount       Capital
                                  -----------------    ---------------    ------------

                               <c>       <c>      <c>       <c>      <c>
Issuance of Stock for Cash at
  Inception March 3, 1995:
       Common                     2,400,000  $240        --     $   --   $    108,936
       Preferred                        --     --    6,000,000    600          10,224
Issuance of Stock for Licensed
       Technology                   325,000    33        --         --        974,967
Issuance of Stock for Research
       and Development              125,000    12        --         --        374,988
Issuance of Stock in Connection
       with Subscription Agreement  180,000    18        --         --        539,982
Net Loss                                --     --        --         --            --
                                  --------  ------   ---------- -------   ------------
       Balance - April 30, 1995   3,030,000   303    6,000,000     600      2,009,097
Issuance of Stock in Connection
       with Initial
       Public Offering            1,150,000   115        --         --      4,337,093
Issuance of Stock in Connection
       with Consulting Agreements   510,000    51        --         --      2,039,949
Compensation Earned in
 Connection with Consulting
       Agreements                       --     --        --         --            --
      Net Loss                          --     --        --         --            --
                                  ---------   ----   ----------   ------    ----------
 Balance - April 30, 1996 -
       Forward                    4,690,000 $ 469    6,000,000   $  600    $8,386,139




</TABLE>




See Accompanying Notes to Financial Statements.

<Page>

EMBRYO DEVELOPMENT CORPORATION
[A DEVELOPMENT STAGE COMPANY]
---------------------------------

STATEMENTS  OF STOCKHOLDERS' EQUITY (DEFICIT)
---------------------------------------------
<TABLE>

                                                    Deficit
                                                  Accumulated
                                                  During the                   Total
                                     Unearned      Development      Notes    Stockholders'
                                    Compensation     Stage        Receivable   Equity

                                     ------------- -------------    ---------- -------------

                                 <c>            <c>           <c>         <c>
Issuance of Stock for Cash at
  Inception March 3, 1995:
      Common                         $     --      $       --     $    --    $  109,176
      Preferred                            --              --          --        10,824
Issuance of Stock for Licensed
      Technology                           --              --          --       975,000
Issuance of Stock for Research
      and Development                      --              --          --       375,000
Issuance of Stock in Connection
      with Subscription Agreement          --              --          --       540,000
Net Loss                                   --        (483,310)         --      (483,310)
                                      ----------   ------------   -------   ------------
      Balance - April 30, 1995             --        (483,310)         --      1,526,690

Issuance of Stock in Connection
      with Initial Public Offering         --             --           --      4,337,208
Issuance of Stock in Connection
      with Consulting Agreements     (2,040,000)          --           --            --
Compensation Earned in
 Connection with Consulting
      Agreements                         97,500           --           --         97,500
Net Loss                                   --      (1,139,761)         --     (1,139,761)
                                   --------------  ------------    -------   ------------
 Balance - April 30, 1996 -
    Forward                         $(1,942,500)  $(1,623,071) $       --  $   4,821,637

</TABLE>



                                                F-4



See Accompanying Notes to Financial Statements.

<Page>
EMBRYO DEVELOPMENT CORPORATION
[A DEVELOPMENT STAGE COMPANY]
-------------------------------

STATEMENTS  OF STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------

<TABLE>

                                                                           Additional
                                     Common Stock        Preferred Stock   Paid-in
                                     Shares  Amount      Shares   Amount   Capital
                                ---------------     ----------------   --------------

                                 <c>       <c>       <c>       <c>      <c>
Balance - April 30, 1996 -
       Forwarded                    4,690,000 $  469    6,000,000 $  600   $8,386,139

Issuance of Stock for Services          5,000      1          --      --       17,499
Issuance of Stock in Connection
  with Investment in Subsidiary       150,000     15          --      --       74,985
Compensation Earned in
Connection with Consulting
  Agreements                               --     --          --      --          --
Issuance of Stock by Subsidiary
  to Minority Holders                      --     --          --      --      (37,350)
Amortization of Unearned
 Compensation of Minority
   Holders-Subsidiary                      --     --          --      --        2,502
 Net Loss                                  --     --          --      --          --
                                    ----------  -------   --------  ------  ----------
  Balance - April 30, 1997          4,845,000    485     6,000,000    600   8,443,775

Compensation Earned in
 Connection with Consulting
  Agreements                               --     --          --      --          --
Issuance of Stock by Investee
 in Connection with
  Private Placement - April 1998           --     --          --      --    1,330,326
 Net Loss                                  --     --          --      --          --
                                    ----------  -------  -----------  -----  ---------
 Balance - April 30, 1998 -
   Forward                          4,845,000 $ 485      6,000,000  $ 600  $9,774,101
</TABLE>




See Accompanying Notes to Financial Statements.

<Page>

EMBRYO DEVELOPMENT CORPORATION
[A DEVELOPMENT STAGE COMPANY]
-------------------------------

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
--------------------------------------------
<TABLE>

                                                     Deficit
                                                  Accumulated
                                                  During the                     Total
                                    Unearned      Development      Notes      Stockholders'
                                  Compensation      Stage        Receivable      Equity
                                  ------------    ------------  -----------   -------------

                              <c>            <c>              <c>         <c>
 Balance - April 30, 1996 -
  Forwarded                      $(1,942,500)   $   (1,623,071)  $     --    $4,821,637

 Issuance of Stock for Services         --                --           --        17,500
 Issuance of Stock in Connection
   with Investment in Subsidiary        --                --           --        75,000
 Compensation Earned in
  Connection with Consulting
    Agreements                      495,000               --           --       495,000
Issuance of Stock by Subsidiary
 to Minority Holders                    --                --           --       (37,350)
Amortization of Unearned
 Compensation of Minority
  Holders-Subsidiary                    --                --           --         2,502
 Net Loss                               --          (1,907,403)        --    (1,907,403)
                                 ------------   ----------------  --------  ------------
  Balance - April 30, 1997       (1,447,500)        (3,530,474)        --     3,466,886

Compensation Earned in
 Connection with Consulting
  Agreements                        495,000               --           --       495,000
Issuance of Stock by Investee
 in Connection with
 Private Placement - April 1998        --                 --           --     1,330,326
 Net Loss                              --           (3,243,983)        --    (3,243,983)
                                 ------------    --------------   ---------  ------------
 Balance - April 30, 1998 -
   Forward                     $   (952,500)       $(6,774,457)  $     --    $2,048,229
</TABLE>

                                                F-5

See Accompanying Notes to Financial Statements.

<Page>

 EMBRYO DEVELOPMENT CORPORATION
[A DEVELOPMENT STAGE COMPANY]
---------------------------------

STATEMENTS  OF STOCKHOLDERS' EQUITY (DEFICIT)
--------------------------------------------
<TABLE>



                                                                            Additional
                                       Common Stock    Preferred Stock       Paid-in
                                     Shares   Amount   Shares    Amount      Capital
                                    ----------------   ------------------   ----------

                                 <c>       <c>      <c>       <c>        <c>
 Balance - April 30, 1998 -
  Forwarded                         4,845,000 $  485   6,000,000 $   600    $9,774,101

Exercise of Options July 1998
 with Notes Receivable              2,150,000    215         -        --       201,455
Compensation Earned in
 Connection with Consulting
 Agreements                               --      --        --        --           --
Amortization of Unearned
 Compensation of Minority
 Holders - Investee                       --      --        --        --         3,437
Issuance of Stock by Investee
 in Connection with Exercise
 of Options - January 1999                --      --        --        --        12,274
   Net Loss                               --      --        --        --           --
                                    ----------  ------  ---------  -------   -----------
   Balance - April 30, 1999         6,995,000  $  700   6,000,000 $   600  $ 9,991,267

Compensation Earned in
 Connection with Consulting
  Agreements                              --       --       --        --           --
 Net Loss                                 --       --       --        --           --
                                    ----------  ------- ---------- ------- ------------
 Balance - April 30, 2000           6,995,000  $  700   6,000,000 $  600   $ 9,991,267

Compensation Earned in
 Connection with Consulting
  Agreements                              --       --       --        --           --
 Net Loss                                 --       --       --        --           --
                                    ---------- --------- --------- -------  ------------
 Balance - April 30, 2001           6,995,000  $ 700    6,000,000 $  600   $ 9,991,267
                                    =========  ======== ========= ======== =============
</TABLE>


See Accompanying Notes to Financial Statements.

<Page>

EMBRYO DEVELOPMENT CORPORATION
[A DEVELOPMENT STAGE COMPANY]
---------------------------------------

STATEMENTS  OF STOCKHOLDERS' EQUITY (DEFICIT)
---------------------------------------------

<TABLE>

                                                        Deficit
                                                     Accumulated
                                                     During the                   Total
                                      Unearned       Development    Notes    Stockholders'
                                    Compensation       Stage      Receivable      Equity
                                   -------------     ------------ ---------- --------------

                              <c>                <c>          <c>         <c>
 Balance - April 30, 1998 -
  Forwarded                      $   (952,500)      $(6,774,457) $      --   $2,048,229
Exercise of Options July 1998
 with Notes Receivable                    --                --     (201,670)       --
Compensation Earned in
 Connection with Consulting
 Agreements                           435,000               --          --      435,000
Amortization of Unearned
 Compensation of Minority
 Holders - Investee                       --                --          --        3,437
Issuance of Stock by Investee
 in Connection with Exercise
 of Options - January 1999                --                --          --       12,274
 Net Loss                                 --         (1,698,788)        --   (1,698,788)
                                  -------------    --------------  --------- ------------
  Balance - April 30, 1999           (517,500)       (8,473,245)   (201,670)    800,152

Compensation Earned in
 Connection with Consulting
 Agreements                           367,500               --         --       367,500
 Net Loss                                 --         (1,152,511)       --    (1,152,511)
                                   -------------   --------------  --------- ------------
 Balance - April 30, 2000           $(150,000)       $(9,625,756) $(201,670) $   15,141

Compensation Earned in
 Connection with Consulting
 Agreements                           150,000               --         --       150,000
 Net Loss                                 --         (   390,165)      --      (390,165)
                                   ----------      -------------- ---------  ------------
 Balance - April 30, 2001         $       --        $(10,015,921) $(201,670)  $(225,024)
                                  ===========      ============== ========== ============
</TABLE>
                                                F-6

See Accompanying Notes to Financial Statements.

<Page>


EMBRYO DEVELOPMENT CORPORATION
[A DEVELOPMENT STAGE COMPANY]
-----------------------------

STATEMENTS OF CASH FLOWS
------------------------
<TABLE>
                                                                        Cumulative
                                                                       From Inception
                                                     Years ended      March 3, 1995 to
                                                      April 30,          April 30,
                                                  2 0 0 1   2 0 0 0        2 0 0 1

                                                 --------  ---------   ---------------

                                             <c>         <c>           <c>
Operating Activities:
   Net Loss                                     $( 390,165) $(1,152,511)  $(10,015,921)
   Adjustments to Reconcile Net Loss to Net
   Cash Used in Operating Activities:
  Depreciation and Amortization                     14,748      110,630      1,564,118
  Write-Off and Reserve of Licensed Technology      69,048      155,357        711,190
  Write-Off of Inventories                             --        10,755         10,755
  Gain on Sale of Stock of Unconsolidated Investee     --           --        (653,510)
  Adjustment for Collectibility of Amount Due from
   Unconsolidated Investee                        (149,335)       1,416        225,423
  Minority Interest in Loss of Subsidiary              --           --        (204,953)
   Equity Loss in Operations of Unconsolidated
   Investee                                            --           --         665,374
  Provision for Litigation Settlement                  --       100,000        100,000
  Non-Cash Consideration - Other                   150,000      367,500      2,096,233
  Non-Cash Consideration - Research and
   Development                                         --           --         440,000

   Changes in Assets and Liabilities:
   [Increase] Decrease:
     Accounts Receivable                             7,628        16,730       ( 79,697)
     Interest Receivable                           (16,134)      (16,178)       (17,567)
     Inventories                                       --         21,900        (55,791)
     Prepaid Expenses and Other Current Assets      (3,759)        9,567        (30,311)
     Other Assets                                      705       ( 3,831)      (243,218)

   Increase [Decrease]:
     Accounts Payable and Accrued Expenses          41,042        58,500        871,523
     Royalty Payable                               (30,000)      (30,000)       381,500
                                                  ---------     ---------   ------------
     Net Cash - Operating Activities - Forward    (306,222)    ( 350,165)    (4,234,852)
                                                  ---------    ----------   ------------
Investing Activities:
  Proceeds from Sale of Stock of
   Unconsolidated Investee                             --            --         710,000
  Purchase of Short-Term Investments                   --            --        (847,000)
  Proceeds from Sale of Short-Term Investments         --            --         847,000
  Purchase of Investments in Available-for-Sale
   Securities                                          --            --      (6,129,521)
   Proceeds from Sale of Investments in Available-
    for-Sale Securities                                --            --       6,129,521
   Repayment of Loans from Unconsolidated
    Investee                                        298,670          --         557,491
   Net Cash Paid for Asset Acquisition                 --            --        (200,588)
   Purchase of Licensed Technology                     --            --        (450,000)
   Purchase of Property and Equipment                ( 368)       (1,457)    (1,036,741)
   Divestiture of Cash of Subsidiary                   --            --         (77,794)
                                                   ----------    ---------   ------------
     Net Cash - Investing Activities - Forward   $  298,302   $   (1,457) $   ( 497,632)
                                                 -----------  ------------ --------------
</TABLE>

                         F-7

See Accompanying Notes to Financial Statements.

<Page>

EMBRYO DEVELOPMENT CORPORATION
[A DEVELOPMENT STAGE COMPANY]
---------------------------------

STATEMENTS OF CASH FLOWS
--------------------------

<TABLE>
                                                                         Cumulative
                                                                        From Inception
                                                Years ended            March 3, 1995 to
                                                 April 30,                  April 30,
                                             2 0 0 1    2 0 0 0             2 0 0 1
                                           ----------   -----------    ------------------

                                        <c>         <c>             <c>
 Net Cash - Operating Activities-Forwarded $ (306,222) $ (350,165)     $  (4,234,852)
                                           ----------  -----------     --------------
 Net Cash - Investing Activities-Forwarded    298,302      (1,457)         ( 497,632)
                                           ----------   -----------     --------------
 Financing Activities:
     Proceeds from Issuance of Debt               --          --             650,000
     Proceeds from Issuance of Stock              --          --             120,000
     Proceeds from Issuance of Subsidiary
      Stock to Minority Shareholder               --          --             150,000
     Repayment of Debt                            --          --            (550,000)
     Proceeds of Stock Offering,
      Net of Deferred Costs                       --          --           4,337,208
     Due from Unconsolidated Investee             --          --              26,250
                                          ------------  ------------    --------------
     Net Cash - Financing Activities              --          -            4,733,458
                                          ------------  ------------    --------------
   Net Increase [Decrease] in Cash and Cash
     Equivalents                              ( 7,920)   (351,622)               974

   Cash and Cash Equivalents -
    Beginning of Periods                        8,894     360,516                 --
                                           ----------   ------------    ---------------
   Cash and Cash Equivalents -
    End of Periods                            $  974    $   8,894         $      974
                                           ==========   ============    ================

</TABLE>




                               F-8

See Accompanying Notes to Financial Statements.

<Page>

EMBRYO DEVELOPMENT CORPORATION
[A DEVELOPMENT STAGE COMPANY]
NOTES TO FINANCIAL STATEMENTS
---------------------------------


[1] Organization and Nature of Operations

Embryo Development Corporation [the "Company"] is a Delaware Corporation which
was formed to develop, acquire, manufacture and market various bio-medical
devices throughout the United States.

In January 1997, the Company acquired a majority interest in Hydrogel Design
Systems, Inc. ["HDS"] which was a consolidated subsidiary of the Company until
January 21, 1998.  On that date, the Company's ownership of HDS dropped to
45.6%, and the investment was accounted for under the equity method.  In
January 1999, the Company's share of HDS dropped to 14.4% and is being
presented on the cost basis from then onward.  HDS is engaged in the
manufacture, marketing, selling and distribution of hydrogel, an aqueous
polymer-based radiation ionized medical/consumer product.

The Company is in the development stage, as defined in Statement of
Financial Accounting Standard No. 7, "Accounting and Reporting by Development
Stage Enterprises."  To date, the Company has generated minimal sales and
devoted its efforts primarily to various organizational activities,
including negotiating of license agreements inclusive of the Self-Shielding
Needle, developing its business strategy, hiring management personnel,
raising capital through an initial public offering which was completed in
November 1995 [See Note 5], and undertaking preliminary activities for the
commencement of operations.  In February 1997, HDS acquired certain assets
and the business of a group of companies engaged in the manufacture and
distribution of hydrogel and after-market apnea monitoring components.  HDS
has devoted substantial efforts to the establishment of a manufacturing
facility for its accelerator beam equipment used in the production of hydrogel,
which was completed during the year ended April 30, 1998, and in contacting
prospective customers of hydrogel and related accelerator beam products.  In
September 1995, the Company purchased certain assets and the on-going
business of a medical products division of an existing business [See Note 7].
The Company has not generated any significant revenue to date and is presently
evaluating the commercial value of the products obtained under its business
acquisitions license agreements.  There can be no assurance that the Company
will be successful in marketing any such products or licensing rights.

The accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America,
which contemplate continuation of the Company as a going concern.  The
Company has incurred cumulative losses of approximately $10,016,000, has a
working capital deficit of approximately $216,000,  and utilized cash of
approximately $306,000 for operating activities for the year ended April 30,
2001.  In January, 2001, the license agreement for the development of the
Self-Shielding Needle effectively terminated as the Company could not obtain
the necessary government approval within the required timeframe since the
Company had halted development of the device due to capital constraints
[See Note 4].  Management recognizes that the Company must generate
additional revenue to achieve profitable operations and to meet current
operating costs and evaluate its future course of operations. Management
anticipates that to meet these needs will require raising additional funds
from either the debt or equity markets.  Alternatively, the Company may need
to consider liquidating some of its assets to meet these requirements.

Management believes that the repayment of a portion of its revolving line of
credit from HDS will be sufficient to fund the Company's operations for the
next twelve (12) months.  Management believes the outstanding amount due from
HDS of approximately $451,000 will be at least partially repaid during the
next (12) months although it has been classified as a long-term asset based on
the current financial condition of HDS.    During the year ended April 30,
2001, HDS made a net payment of approximately $299,000 of the original
obligation and has continued to make payments subsequent to year end.  In
the event that no additional repayment or an insufficient repayment is made
in the next (6) months, the Company will seek alternative methods of raising
capital or the possible liquidation of assets.  To the extent that the Company
will not be able to collect the balance of its investee receivable, its
ability to continue operating will be dependent upon its ability to
successfully sell other assets of the Company or raise additioanl capital.

In an effort to strengthen the Company's position until a meaningful revenue
stream and positive cash flow can be achieved, management has undertaken a
significant cost reduction program.

                                  F-9
<Page>


EMBRYO DEVELOPMENT CORPORATION
[A DEVELOPMENT STAGE COMPANY]
NOTES TO FINANCIAL STATEMENTS, Sheet #2
---------------------------------------

[1] Organization and Nature of Operations [Continued]

No assurance can be made as to the success of these capital raising
alternatives or as to the success of the Company's future course of operations
which are undetermined at this time.  The accompanying financial statements
do not include any adjustments that might be necessary if the Company is unable
to continue as a going concern.

[2] Summary of Significant Accounting Policies

Principles of Consolidation - The accompanying financial statements include the
accounts of the Company and its subsidiary, Hydrogel Design Systems, Inc.
["HDS"] through January 21, 1998.  The assets, liabilities and operations of
HDS after January 21, 1998 are not included on a consolidated basis in the
financial statements of the Company as a result of a reduction in ownership,
voting interest and the lack of management control.  This investment was
accounted for using the equity method of accounting from January 21, 1998
through January 31, 1999 and accounted for using the cost method subsequent
to January 31, 1999.

Upon consolidation, all significant intercompany accounts and transactions have
been eliminated.

Depreciation and Amortization - Depreciation is computed principally by the
straight-line method over the estimated useful lives of the related assets.
Amortization of licensed technology is computed using the straight-line
method over the estimated useful life of the related technology [7 years].

The Company provides for depreciation for office equipment and fixtures over 3-7
years, the estimated useful lives.

Depreciation expense for the years ended April 30, 2001 and 2000 and the
cumulative period from inception [March 3, 1995] through April 30, 2001 amounted
to $4,391, $4,916 and $123,677, respectively.

Concentrations of Credit Risk - Financial instruments which potentially subject
the Company to concentrations of credit risk are cash and receivables from
related parties.  The Company routinely assesses the financial strength of
its customers and third party payors and believes that its accounts
receivable credit risk exposure is limited.  The Company places its cash
with high credit quality financial institutions.  The amount on deposit in
any one institution that exceeds federally insured limits is subject to
credit risk.  As of April 30, 2001, the Company had no funds with a financial
institution subject to credit risk beyond the insured amount.  The Company
does not require collateral or other security to support financial
instruments subject to credit risk.



                                F-10
<Page>

EMBRYO DEVELOPMENT CORPORATION
[A DEVELOPMENT STAGE COMPANY]
NOTES TO FINANCIAL STATEMENTS, Sheet #3
----------------------------------------

[2] Summary of Significant Accounting Policies [Continued]

Income Taxes - Deferred tax assets and liabilities are determined based on
differences between the financial reporting and tax bases of assets and
liabilities, and are measured using the enacted tax rates and laws that will
be in effect when the differences are expected to reverse. Valuation
allowances are established, when necessary, to reduce the deferred income tax
assets to the amount expected to be realized.

Research and Development Costs - Research and development costs are expensed as
incurred.

Use of Estimates - The preparation of 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.

Advertising - The Company charges advertising costs to expense as incurred.
Advertising costs approximated $-0-, $-0-, and $78,000 for the years ended April
30, 2001 and 2000, and the cumulative period from inception [March 3, 1995]
through April 30, 2001, respectively.

Impairment - Certain long-term assets [including licensed technology] of the
Company are reviewed at least quarterly to determine whether there are
indications the carrying value has become impaired, pursuant to guidance
established in Statement of Financial Accounting Standards ["SFAS"] No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of."  Management considers assets to be impaired if the carrying
value exceeds the future projected cash flows from related operations
[undiscounted and without interest charges].  If impairment is deemed to
exist, the assets will be written down to fair value.  Management also
reevaluates the periods of amortization to determine whether subsequent events
and circumstances warrant revised estimates of useful lives.

Earnings Per Share - The Financial Accounting Standards Board has issued
Statement of Financial Accounting Standards ["SFAS"] No. 128, "Earnings per
Share," which  requires a dual presentation of basic and diluted earnings per
share on the face of the statement of operations for all companies with
complex capital structures.  Diluted earnings per share reflects the amount of
earnings for the period available to each share of common stock outstanding
during the reporting period, while giving effect to all dilutive potential
common shares that were outstanding during the period, such as common shares
that could result from the potential exercise or conversion of securities
into common stock.



                                F-11
<Page>

EMBRYO DEVELOPMENT CORPORATION
[A DEVELOPMENT STAGE COMPANY]
NOTES TO FINANCIAL STATEMENTS, Sheet #4
----------------------------------------


[2] Summary of Significant Accounting Policies [Continued]

Earnings Per Share [Continued] - The computation of diluted earnings per share
does not assume conversion, exercise, or contingent issuance of securities that
would have an antidilutive effect on earnings per share (i.e., increasing
earnings per share or reducing loss per share).  The dilutive effect of
outstanding options and warrants and their equivalents are reflected in dilutive
earnings per share by the application of the treasury stock method which
recognizes the use of proceeds that could be obtained upon exercise of
options and warrants in computing diluted earnings per share.  It assumes
that any proceeds would be used to purchase common stock at the average
market price during the period. Diluted loss per common share is the same as
basic loss per common share for all periods presented.  Options and warrants
will have a dilutive effect only when the average market price of the
common stock during the period exceeds the exercise price of the options or
warrants.  Options and warrants disclosed in Note 12 may dilute earnings per
share in the future.

Stock Options and Similar Equity Instruments - On May 1, 1997, the Company
adopted the disclosure requirements of SFAS No. 123, "Accounting for Stock-Based
Compensation," for stock options and similar equity instruments [collectively
"Options"] issued to employees and directors, however, the Company will
continue to apply the intrinsic value based method of accounting for options
issued to employees prescribed by Accounting Principles Board ["APB"] Opinion
No. 25, "Accounting for Stock Issued to Employees" rather than the fair value
based method of accounting prescribed by SFAS No. 123.  SFAS No. 123 also
applies to transactions in which an entity issues its equity instruments to
acquire goods and services from non-employees.  Those transactions must be
accounted for based on the fair value of the consideration received or the
fair value of the equity instruments issued, whichever is more reliably
measurable.

[3] Investment in HDS

In January 1997, the Company entered into a subscription agreement to acquire
1,251,000 shares of HDS common stock and 15,000,000 shares of HDS Series A
preferred stock.  HDS was formed to effect the asset acquisition described in
Note 7B.  As consideration for its interest, the Company contributed $150,000 in
cash, 150,000 shares of its common stock, and the commitment to make
available to HDS a $500,000, 8% revolving line of credit.

At April 30, 1997, the Company's ownership of HDS represented 50.04% of the
 common stock and 92.9% of total voting shares.

On January 21, 1998, the Company's equity interest in HDS, was reduced to 45.6%
common ownership as a result of the Company surrendering all 15,000,000 shares
of voting preferred stock in exchange for 21,500 shares of common stock.  The
exchange was done at the request of certain third party investors of a
Private Placement by HDS, under which HDS issued approximately 475,000
additional common shares.  In February and April 1998, the Private Placement
was fully subscribed, and the Company's ownership decreased to approximately
33.3% of common interest.

As a result of the surrender of the voting preferred stock and the issuance of
additional common stock, the Company's ownership in HDS was reduced to below 50%
interest and therefore, the assets, liabilities and operations of HDS after
January 21, 1998 were not included on a consolidated basis in the financial
statements of the Company subsequent to January 21, 1998.

Approximately $287,000 of the loss applicable to minority interest for the
period May 1, 1997 through January 21, 1998 was in excess of minority interest
in capital, and accordingly has been charged to the Company's operations.


                                F-12
<Page>

EMBRYO DEVELOPMENT CORPORATION
[A DEVELOPMENT STAGE COMPANY]
NOTES TO FINANCIAL STATEMENTS, Sheet #5
----------------------------------------


[3] Investment in HDS [Continued]

Between November 20, 1998 and January 31, 1999, the Company sold an aggregate of
710,000 shares of the common stock of HDS for $710,000.  The Company previously
held a total investment of 1,272,500 shares of HDS which represented 33.3%
common ownership.  As a result of this transaction, the Company held 562,500
shares or 14.4% common ownership of HDS.  On January 31, 1999, as a result of
this transaction, the ownership decreased below 20% and the Company changed
the accounting for this investment from the equity method to the cost method.

Summarized financial information for HDS, which prior to January 21, 1998 was
consolidated, commencing January 21, 1998 through January 31, 1999 was accounted
for using the equity method, and subsequent to January 31, 1999 is being
accounted for on the cost method, is no longer presented due to the reduction of
the investment, which is currently reported at cost.  As of April 30, 2001, the
Company holds approximately 12.8% ownership of the common stock of HDS.

In January 1997, the Company entered into a commitment to make available to HDS
a $500,000, 8% revolving line of credit as part of its investment interest.  In
August 1997, the Company increased the amount of the revolving line of credit
to $850,000.  At April 30, 2001, borrowings under the revolver approximated
$451,000 including accrued interest.

In February 1997, HDS entered into a seven-year sublease with the Company, which
provides for minimum monthly rental payments of $9,625 and expires in 2004
[See Note 6D].  In May 1999, these payments were reduced to $7,892 per month
due to utilization of a portion of the premises by the Company.  In October,
1999, the Company ceased use of this space and increased the amount of the
sublease to the original monthly amount of $9,625.  On February 1, 2000, the
monthly rent was increased to $10,214 as per the escalation provision in the
sublease.

In August 1997, HDS entered into a one-year management agreement with the
Company subject to automatic renewal each year.  The management agreement
provided for an annual fee of the greater of $75,000 per annum or ten (10%)
percent of the gross sales generated by the Company's sales representatives
in consideration for the Company providing HDS with administrative, marketing
and management services.  General and administrative expenses have been reduced
by $-0-, $-0- and $43,750 for the years ended April 30, 2001 and 2000 and for
the cumulative period from inception [March 3, 1995] through April 30, 2001,
respectively.  On May 4, 1998, HDS notified the Company that the agreement
would not be renewed effective August 1998.

In January 31, 1999, all amounts under the revolver became due.  The Company
requested payment from HDS for an aggregate of $667,000 which represented all
monies due inclusive of interest under the revolver and all monies due under
the terms of the management agreement.  HDS was unable to make the required
payment due to its current financial condition.  The original line of credit
which expired on January 31, 1999 was extended to January 31, 2001.  The terms
of the extension prohibit any future cash advances on the credit line and
provide for repayment of an amount equal to 50% of any cash flow from
operations in excess of $500,000 annually to be paid within 45 days of the
fiscal year end of HDS, with any remaining outstanding balance due on January
31, 2001.


                               F-13


<Page>

EMBRYO DEVELOPMENT CORPORATION
[A DEVELOPMENT STAGE COMPANY]
NOTES TO FINANCIAL STATEMENTS, Sheet #6


[3] Investment in HDS [Continued]

On January 31, 2001, the credit line extension expired.  The Company requested
payment from HDS for an aggregate of $516,000, the outstanding balance.  HDS was
unable to make the required payment due to its current financial condition.
On February 1, 2001, the Company agreed to extend the maturity date
by twenty (20) months to September  30, 2002 under the same terms and
conditions as the prior extension granted on January 31, 1999.  The Company's
management has set up a reserve of approximately $225,000 or approximately
50% of the outstanding balance at April 30, 2001 of approximately $451,000,
based upon anticipated probable collectibility.   Approximately $299,000 of
the original obligation  was collected during the year ended April 30, 2001
and HDS has continued to make additional payments subsequent to April 30, 2001.

[4] License Agreements

In March 1995, the Company entered into seven license agreements for the rights
to manufacture and market seven medical devices.  Each of the seven agreements
also provide for minimum paymentobligations commencing 2 1/2 years after the
date of the agreements.  On September 30, 1997, the agreements for six (6) of
the devices were amended to extend the date for the first minimum payment
obligation to March 31, 1998.  In consideration for the extension, the aggregate
first minimum payment obligation increased from $150,000 to $165,000.

The Company did not make the minimum payments required under the License
Agreements with respect to six (6) of the devices including the adjustable blood
pressure cuff, a multi-function fluid communication control system and
stereoscopic fluoroscopy apparatus.  The minimum payment obligations with
respect to the self-shielding needle were made in accordance with the terms of
the original agreement through March 31, 1998.  On August 21, 1998, the Company
notified the licensor that it was terminating the agreements with respect to
these six (6) devices.  The remaining unamortized cost of $486,785 for these
agreements was charged to operations in the year ended April 30, 1998.

On January 22, 1999, the Company amended the License Agreement dated March 31,
1995 pertaining to the seventh device, for the manufacture and marketing of the
self-shielding needle.  The amendment eliminated the "Minimum Payment
Obligation" as defined in the original agreement.  The last such payment
which was due on September 30, 1998 in the amount of $50,000 was paid on
January 26, 1999 upon execution of the amendment.

In consideration for eliminating all future and any prior minimum payment
obligations on this invention and any other products or inventions currently or
previously licensed by the Company from the licensor, the Company agreed to
(a) increase the royalty on future sales from 8% to 10%, and (b) pay the
licensor a maximum royalty of $450,000.  Such payments shall be payable at the
rate of $2,500 per month plus 10% of the proceeds received by the Company from
any capital raised which exceeds $600,000, and 10% of annual pre-tax income.
The aggregate royalty of $450,000 was charged to operations in the year ended
April 30, 1999.  At April 30, 2001, the remaining unpaid balance is $381,500,
which is included in current and long-term liabilities.

In addition, if the Licensor terminates the agreement for any reason, the
maximum royalty shall be reduced by $125,000 and all information with respect to
the invention [the "Know-How"] shall be returned to the licensor free and
clear of any liens.  If the Company terminates the agreement, the licensor
may acquire the Know-How for a reduction in the remaining balance due equal
to the lesser amount of $125,000 or the remaining balance due.  If the Company
does not obtain the necessary government approval to market the
self-shielding needle withing two (2) years, the agreement shall terminate
unless the Company pays the licensor an additional $250,000, which will extend
the regulatory approval requirement by two (2) additional years.


                               F-14

<Page>

EMBRYO DEVELOPMENT CORPORATION
[A DEVELOPMENT STAGE COMPANY]
NOTES TO FINANCIAL STATEMENTS, Sheet #7
---------------------------------------

[4] License Agreements [Continued]

On January 22, 2001, the agreement effectively terminated as the Company could
not obtain the necessary government approval since the Company had halted
development of the device due to capital constraints.  The Company also
determined that it could not pay the licensor an additional $250,000 to
extend the regulatory approval requirement.  The remaining unamortized cost
of $69,048 for this license agreement was charged to operations in the year
ended April 30, 2001.

In March 1995, the Company also entered into royalty sharing agreements under
which it is entitled to 50% of the royalties received by the licensor under
license agreements for two medical devices. Consideration under these
agreements consisted of the issuance of $20,000 in notes and 50,000 shares
of the Company's common stock.  The royalty sharing agreements are in effect
over the lives of the underlying agreements.  In addition, the Company has the
right to license the patents for the products in the event the underlying
licenses are terminated.

The common stock issued under these agreements was valued at $3 per share.

The medical devices underlying five of these license and royalty sharing
agreements were deemed to be in the development stage, and accordingly, the
consideration paid ($440,000) was charged to operations [research and
development] in the period ended April 30, 1995.  The consideration for the
remaining four agreements ($1,160,000) was recorded as licensed technology.  At
April 30, 1998, the unamortized cost of $486,785 for three of these
agreements was charged to operations as the minimum royalty payments were not
made and the agreements were effectively terminated on August 21, 1998.

[5] Stockholders' Equity

[A] Capitalization - The Company's authorized capitalization consists of
30,000,000 shares of common stock and 15,000,000 shares of preferred stock.
All stock has a $.0001 par value.  Each share of common and preferred has one
vote in all matters.  In the event of any liquidation, holders of the issued and
outstanding shares of preferred stock will be entitled to receive, prior to any
distribution to the holders of common stock, the sum of $.10 per share.

[B] Initial Capitalization - In March 1995, the Company issued 2,400,000 shares
of common stock and 6,000,000 shares of preferred stock ["Founders' Stock"] for
an aggregate amount of $120,000.

[C] Subscription Agreements - In March 1995, the Company entered into
subscription agreements in connection with a bridge loan in the aggregate amount
of $300,000, [the "Bridge Loan"].  In connection with the Bridge Loan, the
Company issued the aggregate amount of 180,000 Bridge Units, each Bridge
Unit consisting of one share of common stock and one Class B Warrant.  Each
Class B Warrant entitles the holder to acquire one share of common stock at an
exercise price of $10 per share. The warrants expired in November, 1999.  The
promissory notes issued in connection with the Bridge Loan were repaid with
interest at 8% on November 22, 1995, with the proceeds from the public offering.
The 180,000 shares of the Company's common stock represented a financing cost of
$540,000 [$3 per share] which was amortized in full upon the successful
completion of the public offering.

[D] Public Offering - In November 1995, the Company completed a public offering
of 1,000,000 shares of common stock at $5.00 per share for an aggregate of
$5,000,000.  An additional 150,000 shares were sold for gross proceeds of
$750,000 to the underwriter to cover over-allotments.  In addition, the
underwriter received an option, for a nominal fee, to acquire 100,000 shares
of common stock at an exercise price of $6.75 per share.  The option, which
was to expire in November 2001, has been cancelled as the underwriter ceased
operations in 1997.

Effective with the closing of the offering, the Company entered into a
consulting agreement with the underwriter.  The underwriter ceased operations in
1997, and the unamortized balance of the consulting fee ($91,667) was charged to
operations in the year ended April 30, 1997.

                               F-15

<Page>

EMBRYO DEVELOPMENT CORPORATION
[A DEVELOPMENT STAGE COMPANY]
NOTES TO FINANCIAL STATEMENTS, Sheet #8
----------------------------------------

[5] Stockholders' Equity [Continued]

[E] Issuance of Securities - In July 1996, the Company issued 5,000 shares of
common stock to its medical advisory board of services.  The value of the common
stock granted ($17,500) was charged to operations.

In May 1996, the Company issued a five-year warrant, exercisable at any time,
for the purchase of 100,000 shares of common stock of the Company at $6 per
share.  The warrant was issued in connection with the termination of a
sublicensing agreement.

On June 17, 1998, the Company issued options, to three (3) directors and an
employee, to purchase 1,650,000 shares of the Company's common stock at an
exercise price equal to the market price on the date of the grant ($.0938)
under the Incentive Stock Option Plan (See [G] below).  In addition, an
aggregate of 500,000 options which were granted to an officer under the
terms of a prior employment agreement were amended to have an exercise price
of ($.0938), the market price on the date of the amendment.  These options
were exercised in June 1998 for an aggregate of 2,150,000 shares.

The Company received promissory notes dated July 1, 1998 to the three (3)
directors and an employee in the aggregate of $201,670 for payment of the
shares.  The notes mature in five (5) years, bear interest at 8%, and are
secured by the related securities.

[F] Consulting Agreements - In February 1996, the Company entered into two
separate multi-year consulting agreements.  As consideration for these
services, the Company issued 225,000 shares of common stock to each of the
parties.  The value of the common stock granted ($1,800,000) was charged
to operations ratably over the lives of the consulting agreements which
ranged between four and five years.

In August 1995, the Company entered into a three-year consulting agreement for
services related to the development of strategic sales and marketing plans in
the United States, and internationally.  The agreement, which initially
provided for a monthly consulting fee of $5,000, was amended in March 1996,
at which time the Company issued 60,000 shares of common stock in lieu of the
monthly consulting fee.  The value of the common stock granted ($240,000) was
charged to operations ratably over the remaining life of the consulting
agreement which was thirty-two months.

[G] Stock Option Plans  - The Company has adopted a Non-Qualified Option Plan
[the "Plan"] covering 2,000,000 shares of common stock of the Company.  Options
under the Plan are granted at terms set by the Board of Directors at the time of
issuance.

The Company has also adopted an Incentive Option and Stock Appreciation Rights
Plan [the "Incentive Option Plan"] covering 2,000,000 shares of the Company's
common stock.  Incentive stock options under the Incentive Option Plan are
granted at an exercise price [not less than the fair market value] at the date
of grant.  Non-qualified options and freestanding stock appreciation rights may
also be granted with any exercise price.

[H] Loss Per Share - Loss per share was computed by dividing net loss by the
weighted number of shares outstanding.  Potential common shares of 100,000 have
been excluded as their effect would be anti-dilutive.

[I] Reserved Shares - Common shares reserved at April 30, 2001 are as follows:

Incentive Stock Option Plan                         350,000
Non-Qualified Stock Option Plan                   2,000,000
Other                                               100,000
                                                 ----------
Total                                             2,450,000
                                                 ==========

                               F-16

<Page>

EMBRYO DEVELOPMENT CORPORATION
[A DEVELOPMENT STAGE COMPANY]
NOTES TO FINANCIAL STATEMENTS, Sheet #9
---------------------------------------


[6] Commitments and Contingencies

[A] Litigation - The Company has been named as a defendant in a consolidated
class action pending before the U.S. District Court for the Eastern District of
New York.  In a consolidated complaint, plaintiffs assert claims against the
Company and others under the Securities Act of 1933, the Securities
Exchange Act of 1934 and New York common and statutory law arising out of
the November 1995 initial public offering of 1 million shares of the Company's
common stock.  According to the complaint, the underwriter of the offering,
Sterling Foster & Co., Inc. ("Sterling Foster"), which is also a defendant,
manipulated secondary market trading in shares of the Company's common stock
following the offering and covered certain short positions it created through
such manipulation by purchasing shares of Company stock from persons who
owned such stock prior to the offering pursuant to an  arrangement with such
persons that was not disclosed in the registration statement and prospectus
distributed in connection with the offering.  The complaint seeks unspecified
damages.

In November 1998, it was announced that Michael Lulkin, a director and Chairman
of the Board of Directors of the Company at the time of the Company's initial
public offering, had plead guilty to, among other things, conspiracy to commit
securities fraud.  The charges to which Mr. Lulkin plead were premised on
allegations that Mr. Lulkin, Sterling Foster, and others had entered into an
undisclosed agreement pursuant to which, upon conclusion of the Company's
initial public offering, they would (a) cause Sterling Foster to release Mr.
Lulkin and others who owned the Company stock prior to the offering from
certain "lock up" agreements restricting them from selling such stock; and (b)
cause Mr. Lulkin and such other persons to sell the Company stock to Sterling
Foster at prearranged prices to enable Sterling Foster to use such stock to
cover certain short positions it had created.

In August 1999, an agreement in principle was entered into providing for
settlement of the consolidated class action against the Company, Mr. Lulkin
and Steven Wasserman, who was also a member of the Company's Board of
Directors at the time of the Company's initial public offering.  Under the
agreement in principle, all claims in the action against the Company, and
against Mr. Lulkin and Mr. Wasserman insofar as they were members of the
Company's Board of Directors, would be dismissed in exchange for a payment of
$400,000, of which $100,000 would need to be paid by the Company and $300,000
would be paid by an insurance company under a directors and officers liability
policy of insurance.  The settlement is contingent upon, among other things,
approval by the court.  There can be no assurance that the settlement will be
concluded.  In the year ended April 30, 2000, the Company  recorded a reserve of
$100,000 for this obligation (See Note 13A).

[B] Employment Agreements - In January 1999, the Company renewed an employment
agreement with an officer.  The two-year agreement provides for annual
compensation of $60,000 effective January 1, 1999.  The officer was also
granted rights to purchase 200,000 shares of HDS common stock from the
Company at a price of $1.00 per share for a period of two (2) years.  In
January, 2001, this agreement was extended for a one (1) year term under the
same terms and conditions of the original agreement.

In 1995, the Company granted a former officer an option to purchase 100,000
shares of the Company's common stock  exercisable commencing March 1997, at an
exercise price equal to the fair market value at March 31, 1997 ($.5625).
These options were exercisable over a four-year period and expired in
March 2001.

[C] Consulting Agreement - In 1995, the Company entered into a four-year
consulting agreement with the licensor of the medical devices discussed in
Note 4.  The agreement provided for an annual consulting fee of $75,000.  In
addition, the consultant was issued warrants to purchase 600,000 shares of the
Company's common stock at an exercise price of $3 per share.  On June 22, 1998,
notice was given to the licensor to terminate the agreement effective July
22, 1998.  The warrants expired in November 1999.


                                F-17

<Page>

EMBRYO DEVELOPMENT CORPORATION
[A DEVELOPMENT STAGE COMPANY]
NOTES TO FINANCIAL STATEMENTS, Sheet #10
-----------------------------------------

[6] Commitments and Contingencies [Continued]

[D] Operating Leases - On February 14, 1997, the Company entered into a
seven-year operating lease for premises to be used for offices and
manufacturing.  The lease provides for monthly minimum lease payments of
$9,625.  The lease contains a five-year renewal option and provides that the
Company shall pay for insurance, taxes and maintenance.  In addition, the lease
contains an escalation clause based upon increases in the consumer price
index for years four through seven.  In February, 2000, the fourth year
of the lease,  the monthly minimum lease payment was increased to $10,214.
Effective February 14, 1997, the Company entered into a seven year sub-lease
with HDS which provides for minimum monthly rental payments of $9,625 to be
received, and expires in 2004.  On May 1, 1999, the minimum rental
payment on the sub-lease with HDS was reduced to $7,892 due to utilization of
a portion of the premises by the Company. In October 1999, the Company ceased
use of this space and increased the amount of the sublease to the original
monthly amount of $9,625.  In February 2000, the monthly rent was increased
to $10,214 as per the escalation provision in the sublease.

In April 1998, the Company along with other co-tenants entered into a fourteen
month lease for office space with an entity controlled by the former Chairman of
the Company.  The Company's portion of the monthly lease payment amounted to
$3,600.  At April 30, 1998, the total lease payments of $50,400 were held in
escrow by the landlord's attorney.  The Company vacated the premises March 1,
1999 and the total lease payments of $50,400 are included in operations in the
year ended April 30, 1999.

On February 10, 1999, the Company entered into a sixteen (16) month lease for
office space commencing March 1, 1999.  The lease provides for minimum monthly
lease payments of $5,085 and is personally guaranteed by an officer of the
Company.  In June 2000, the lease was extended on a month to month basis
under the same terms and conditions.

Aggregate rent expense approximated $185,356, $176,526 and $885,253 for the
years ended April 30, 2001 and 2000, and the cumulative period from inception
[March 3, 1995] through April 30, 2001, respectively.  Rental income from the
sub-lease amounted to approximately $124,330, $106,838, and $375,543 for the
years ended April 30, 2001 and 2000, and the cumulative period from inception
[March 3, 1995] through April 30, 2001, respectively.

Minimum annual rentals under the leases are as follows:

Year ending                              Rent       Sub-Lease
 April 30,                              Expense       Income
------------                          ----------   ------------
    200 $                             $122,568       $ 122,568
    2003                               122,568         122,568
    2004                                91,926          91,926
                                     ---------       ---------
    Totals                           $ 337,062       $ 337,062
                                    ==========       =========

[E] Product Liability Insurance - The Company has obtained product liability
insurance since it has commenced sales of its products.  However, there can be
no assurance that such policies will be sufficient to cover potential claims
or the costs of any resulting litigation or that a policy can be maintained in
force at an acceptable cost to the Company.  A successful claim against the
Company in excess of the Company's insurance coverage could have a material
adverse effect upon the Company's business and results of operations. In
addition, claims against the Company, regardless of their merit or eventual
outcome, also may have a material adverse effect upon the Company's reputation.

                                F-18
<Page>

EMBRYO DEVELOPMENT CORPORATION
[A DEVELOPMENT STAGE COMPANY]
NOTES TO FINANCIAL STATEMENTS, Sheet #11
----------------------------------------

[7] Business Combinations

[A] In September 1995, the Company entered into an agreement to purchase certain
assets and the ongoing business of the Medical Division of C.F. Electronics,
Inc. ["CF"].  Under the agreement, the Company acquired the rights to CF's
medical products for consideration of $450,000 which was capitalized as
licensed technology, of which $45,000 was paid upon closing and the balance
($405,000) was paid on December 12, 1995 from the proceeds from the public
offering.  The Company also purchased CF's finished goods inventory and
demonstration equipment.

In addition, the Company entered into a five year "Supply Agreement" with CF,
which provides for CF to supply the Company with certain products at a price
equal to CF's cost [as defined] plus 10%.  The Agreement provides for minimum
payments to CF during its first two years.

In October, 1999, the Company ceased sales of  these medical products due to the
relatively low level of sales, capital constraints and price increases by CF.
The Company is presently evaluating the marketability of these rights and
exploring alternative means of production of these products.  At April 30,
2001, the unamortized amount of the technology approximated $155,000, of which
the Company has recorded a 100% reserve based upon anticipated marketability of
these rights.

[B] On February 6, 1997, HDS acquired certain assets from a group of entities
for an aggregate purchase price of $150,000 in cash and 150,000 shares of the
Company common stock [valued at $75,000].  Assets acquired include property
rights and technical data, machinery and equipment, and inventory.  The
Company shares vest on the second anniversary date of the agreement only if HDS
has earned $500,000 in cumulative gross revenue derived from the sale of certain
products during the two (2) year period.  If, on the vesting date, the fair
market value of the shares is less than $900,000, the parties may demand that
HDS purchase all of the shares at an aggregate purchase price of $900,000 in
either cash and/or marketable securities.  Expenses of approximately $51,000
were incurred in connection with this acquisition.  This acquisition has been
accounted for by the purchase method.

In January 1998, as a result of subsequent litigation between HDS and the former
owners, the terms of the original purchase were modified.  The Company shares
were returned to HDS for a cash payment of $450,000 and a long-term promissory
note in the amount of $950,000.

[8] Income Taxes

Income taxes have been recorded under SFAS No. 109, "Accounting for Income
Taxes."  Deferred income taxes reflect the net tax effects of (a) temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes, and
(b) operating loss carryforwards.  The tax effects of significant items
comprising the Company's net deferred tax asset as of April 30, 2001 are as
follows:




                                F-19
<Page>

EMBRYO DEVELOPMENT CORPORATION
[A DEVELOPMENT STAGE COMPANY]
NOTES TO FINANCIAL STATEMENTS, Sheet #12
----------------------------------------



[8] Income Taxes [Continued]

Deferred Tax Assets:
  Net Operating Loss Carryforward                              $2,569,000
  Tax Basis of Intangible Assets in Excess of Book Basis          100,000
                                                               ----------
  Total                                                         2,669,000


Deferred Tax Asset                                              2,669,000
Valuation Allowance                                            (2,669,000)
                                                               -----------
  Net Deferred Tax Asset                                      $       --
                                                             =============

The valuation allowance of $2,669,000  represents  an increase of $173,000  over
the preceding year. Net operating loss carryforwards of approximately $6,426,000
expire beginning in 2011.


A reconciliation between the statutory federal income tax rate and the effective
rate of income tax expense for the year ended April 30, 2001 and 2000 follows:

                                              2 0 0 1              2 0 0 0
                                            ----------            --------
  Statutory Federal Income Tax Rate            (34) %               (34)%
  State Income Taxes, net of Federal Effect    ( 6) %               ( 6) %
  Valuation Allowance and Other                  40 %                 40%
                                            -----------         ---------
  Effective Income Tax Rate                      --                 --
                                            ===========         ==========

[9] Major Customers

Customers accounting for 10% or more of revenue for the years ended April 30,
2001 and 2000 are as follows:
                                                April 30,
                                             2001       2000
                                           ------    -------
  Customer A$                                --$      13,135
  Customer B$                                --$      10,523
  Customer C$                                --$       6,587
  Customer D$                                --$       5,599
  Customer E$                                --$       4,400






                                F-20
<Page>

EMBRYO DEVELOPMENT CORPORATION
[A DEVELOPMENT STAGE COMPANY]
NOTES TO FINANCIAL STATEMENTS, Sheet #13
----------------------------------------


[10] Fair Value of Financial Instruments

In assessing the fair value of these financial instruments, the Company has used
a variety of methods and assumptions, which were based on estimates of market
conditions and risks existing at that time.  For certain instruments,
including cash and due from unconsolidated investee it was estimated that the
carrying amount approximated fair value for the majority of these instruments
because of their short maturities.

[11] Supplementary Information - Statements of Cash Flows

 Cash paid during the periods for:
                                                               Cumulative
                                                                   from
                                                                 Inception
                                                                  March 3,
                                             Years ended          1995 to
                                               April 30,         April 30,
                                            2 0 0 1   2 0 0 0     2 0 0 1
                                            -------   --------   --------
Interest - Net of Capitalized Interest      $  3,125  $  3,184   $ 13,166
                                           =========  ========   ========
Income Taxes                                $    --   $   --     $ 14,276
                                           =========  ========   ========

HDS financed the acquisition of $600,000 of manufacturing equipment with a note
payable.  Additionally, $12,500 of interest expense was capitalized during the
year ended April 30, 1997.

In June 1998, the Company issued an aggregate of 2,150,000 shares of common
stock in exchange for an aggregate of $201,670 in promissory notes as payment
for the shares.









                                F-21
<Page>

EMBRYO DEVELOPMENT CORPORATION
[A DEVELOPMENT STAGE COMPANY]
NOTES TO FINANCIAL STATEMENTS, Sheet #14
------------------------------------------

[12] Stock Options and Warrants


A summary of common stock options and warrants is as follows:

                                                             Weighted Average
                                                      Common   Exercise Price
                                                      Shares    Per Share
                                                     ------- ----------------
Options and Warrants Outstanding at March 31, 1995      --       $   --
    Granted                                          780,000        4.62
    Exercised                                           --           --
    Canceled                                            --           --
                                                     ------- ---------------
Options and Warrants Outstanding at April 30, 1995   780,000        4.62
    Granted                                          300,000        4.10
    Exercised                                           --           --
    Canceled                                            --           --
                                                     ------- ---------------
Options and Warrants Outstanding at April 30, 1996 1,080,000        4.47
    Granted                                          200,000        3.33
    Exercised                                           --           --
    Canceled                                        (100,000)       6.75
                                                   --------- ---------------
Options and Warrants Outstanding at April 30, 1997 1,180,000        4.09
    Granted                                          450,000         .55
    Exercised                                           --           --
    Canceled                                            --           --

Options and Warrants Outstanding at April 30, 1998 1,630,000        3.11
    Granted                                        1,650,000       .0938
    Exercised                                     (2,150,000)      .0938
    Canceled                                            --           --
                                                  ----------- -------------
Options and Warrants Outstanding at April 30, 1999 1,130,000        4.22
  Granted                                               --           --
  Exercised                                             --           --
  Canceled                                          (930,000)       4.42
                                                  ----------- -------------
Options and Warrants Outstanding at April 30, 2000   200,000        3.28
  Granted                                               --           --
  Exercised                                             --           --
  Canceled                                          (100,000)        .56
                                                  ----------- -------------

Options and Warrants Outstanding at April 30, 2001   100,000    $   6.00
                                                  ==========  ==============
At April 30, 2001, all options and warrants were exercisable.





                               F-22


EMBRYO DEVELOPMENT CORPORATION
[A DEVELOPMENT STAGE COMPANY]
NOTES TO FINANCIAL STATEMENTS, Sheet #15
-----------------------------------------

[12] Stock Options and Warrants [Continued]


No compensation expense was recorded for the years ended April 30, 2001 and
2000.

Had compensation cost been determined on the basis of fair value pursuant to
SFAS No. 123, the net loss and the net loss per common share for the years ended
April 30, 2001 and 2000 and cumulative from inception March 3,1995 to April
30, 2001 would have been as follows:

                                                                   Cumulative
                                                                from Inception
                                                                March 3, 1995 to
                                          April 30,                April 30,
                                      2 0 0 1   2 0 0 0             2 0 0 1
                                     --------  --------        --------------
Net Loss:
  As Reported                     $(   390,165) $ (1,152,511)    $(10,015,921)
  Pro Forma                       $(   390,165) $ (1,152,511)    $(10,257,281)

Net Loss Per Common Share:
  As Reported                        $   (.06)    $    (.17)      $     (1.80)
  Pro Forma                          $   (.06)    $    (.17)      $     (1.84)


Generally, stock options and warrants are exercisable upon granting and expire
four years from the date of the grant.

The fair value of each option granted is estimated on the grant date using an
option pricing model which took into account as of the grant date, the exercise
price and the expected life of the option, the current price of the
underlying stock and its expected volatility, expected dividends on the stock
and the risk-free interest rate for the expected term of the option.



[13] Subsequent Events

[A] Litigation - In June 2001, definitive settlement documents were executed in
regard to the litigation described in Note 6A. The settlement documents  provide
that the Company would pay the foregoing $100,000 by remitting to the class
representatives $25,000 and a note in the amount of $75,000 payable in June
2003 with interest thereon at 7% per year.  The Company has remitted the funds
and note described above to the class  representatives to be held by them in
accordance with the terms of the settlement agreement and pending court
review of the settlement.

[B] Note Payable - In conjunction with the litigation settlement as described in
Notes 6A and 13A, the Company recorded a long-term note payable in the amount of
$75,000 at April 30, 2001.  The note was executed on June 26, 2001, is due on
June 26, 2003 and bears interest at 7% per year.

[C] Employment Agreement - On June 26, 2001, an officer exercised an option,
granted under the terms of  an employment agreement dated January 1, 1999, to
purchase 25,000 shares of HDS common stock from the Company at a price of
$1.00 per share.



                              F-23